Report (4th Day)

Local Democracy, Economic Development and Construction Bill [HL] – in the House of Lords at 6:15 pm on 22nd April 2009.

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Clause 85: EPBs and their areas

Amendment 168A

Moved by Baroness Hamwee

168A: Clause 85, page 58, line 5, after "order" insert "at the request of all the principal local authorities for the local government area concerned"

Photo of Baroness Hamwee Baroness Hamwee Spokesperson for Communities and Local Government 6:20 pm, 22nd April 2009

My Lords, the amendment starts a long group to which I shall speak, but the point is relatively short. I have two amendments in this group. They may seem inconsistent, but they reflect that we have in principle objections to the visions regarding economic prosperity boards. If they are to stay, the amendments would make them less unpalatable.

The order in which the amendments are taken may seem to go against what we seek to achieve, but it would not have won the sympathy of the House if I had sought to table something like, "Before Clause 85, Clauses 85 to 117 shall not apply". I did not attempt to do that. Your Lordships will be familiar with committees and boards where one has a vote, a debate, and then a vote on an amendment to the proposition and even if the amendment is accepted the amended proposition, not commending itself may be voted on as well.

As it perhaps a little unusual in this House I thought that I should preface my remarks in that way. We object to economic prosperity boards and combined authorities because what is proposed involves the transfer of local authority functions to new bodies that may not consist wholly of elected representatives and will not consist of people directly elected for the particular task. The Bill has at many points highlighted how we differ from the Government on our views of what representative democracy is. Here we will have the Secretary of State making an order.

I appreciate that if there is to be a transfer of local authority functions it needs an order—that shows how serious the matter is—to establish a body with a majority of it appointed from councils, or, to put it another way, a minority who will not be elected. Who will those people be? We do not suggest that councillors have a monopoly of wisdom on those matters—far from it. Many people have experience to offer but there are also many ways in which to involve those people without creating a new organisation of which they will become board members. The principle of elections in the conduct of local authority functions is important. Those councillors who are members will not have been elected directly for the task. I see some drawbacks in that situation in that whereas in some economic prosperity boards the councillors may see the EPB as their prime activity and priority, in others it will be something that has to be dealt with and not a priority.

The second concern is that funding will go to the new bodies and it would be extraordinary if that were not to be at the expense of direct local authority funding. Local authorities will be told that that is where the money is going and so they should sign up to the EPBs. I have not caught up with the detail of the Budget announcements today, but I was not surprised to hear the noble Lord, Lord Smith, refer earlier this afternoon to the arrangements for Greater Manchester. That is a Budget announcement. We have a Bill to deal with and we must address the Bill, not what the Government are doing outside the legislative framework.

We have been told—my amendments are an attempt to write the subject into the Bill, because it is not there—that all of this is voluntary. Even if that is so technically, the facts will be different. We have referred at earlier stages of the Bill to the likely—forgive the pun—peer pressure from some authorities on other authorities that are reluctant to join in and sign up to an EPB. I have referred to the likely arrangements over funding. It is all very well to say that membership may be voluntary, but once an authority is a member, how is it to cease being a member in the real world?

Furthermore, it is most unclear what the remit of EPBs will be in the future. We will be content to see organic growth after clearer debate about their role. Jobcentre Plus functions and benefits functions have both been floated as possibilities. Partnerships succeed when the partners buy in and have a hand in the design of the structure. These proposals seem to have been designed without full involvement. Councillors from district councils to whom I have spoken over the past few weeks have been unaware of the proposals. Understandably, they have made comments about the Government fiddling with structures and processes in areas that they do not understand rather than supporting outcomes from existing structures or boosting existing structures.

I therefore suggested privately to Ministers that the place for all of this would be in the draft Community Empowerment Bill, whose arrival seems not yet to have been signalled, but which we have been told is in the programme. That draft Bill, which would be subject to pre-legislative scrutiny, could take evidence and in the best way of scrutiny have what are in effect round-table discussions about the scope and functioning of EPBs. That would also provide an opportunity to assess whether multi-area agreements, which are already possible, have shortcomings and whether there are things that should be put on a statutory basis within the EPB proposals.

In short, we object to the transfer of local authority functions away from those who are elected. We do not think that the Government have yet taken with them local authorities outside the cities for which EPBs seem to have been designed. Our Amendment 168A would make it explicit that this would be voluntary and voluntary for all. Most of our other amendments in the group would delete the proposals for EPBs entirely, which is our preference. There are other amendments in the group. Amendment 168B, tabled by the noble Lord, Lord Hanningfield, makes the same underlying point about EPBs needing to be voluntary. I have expressed some scepticism as to whether they can truly be voluntary, although I am curious about the use of the term "reaffirmed" by local authorities, because I cannot see that the arrangements will be affirmed in the first place. The Government have tabled amendments to Clause 95. Perhaps on a slightly more positive note, I will welcome those. I beg to move.

Photo of Lord Hanningfield Lord Hanningfield Shadow Minister, Transport 6:30 pm, 22nd April 2009

My Lords, we have tabled Amendment 168B in this group. Its purpose is to seek an assurance from the Government very much in line with what the noble Baroness, Lady Hamwee, talked about; that is, the voluntary status of EPBs. We have been considering this legislation for a while now, and Members on these Benches first viewed EPBs with an immense amount of suspicion. However, that view has changed considerably during the passage of the Bill, and a lot of that is the result of assurances from the noble Baroness.

At first sight, we were worried that the Government were planning to put the Secretary of State at the centre of local authorities' business. We were concerned that, having failed with many regional approaches, the Government were coming back with a new attack on the independence of local authorities. As we have discussed several times, we are unhappy with some of the planning arrangements set out in this legislation, and we are concerned that this might be an additional element. However, I have read carefully the responses of the noble Baroness to questions in Committee and I have some hope that the Government may have got the message. I shall be interested to hear her response. She has said that there is no question of local authorities being coerced into forming EPBs, and she admitted that they might not necessarily be suitable for every area. In a letter dated 19 March, a copy of which I understand has been placed in the Library, she seemed to make it implicit that it is intended that the Secretary of State would exercise order-making powers only with the full consent of the local authorities involved. Perhaps she would reaffirm that point today.

I also had a useful meeting with the Minister after the Committee stage at which she was at pains to emphasise that EPBs would be voluntary creations for local authorities, and that the powers granted to the Secretary of State in this Bill are no more than those required to establish the legal framework necessary for them to function. I hope that she might also reaffirm that today so that we can it can be read in the Official Report.

The crucial test will be to see whether the Government can keep to these commitments in practice. Indeed, the noble Baroness, Lady Hamwee, expressed some doubts about that. As everyone knows, my view is that local authorities know what is best for their own areas and that when it is possible to do so, they know which other authorities they want to work with in order to solve problems. Thus, as long as the Minister can confirm that EPBs are going to allow local authorities to operate in that way, we can accept that there needs to be a legislative framework to set them up—but if, and only if, local authorities want them. Again, I hope that the noble Baroness can give us a reassurance on this point.

Photo of Baroness Andrews Baroness Andrews Parliamentary Under-Secretary, Department for Communities and Local Government, Parliamentary Under-Secretary (Department for Communities and Local Government)

My Lords, I am pleased to have the opportunity to offer the reassurances being sought by the noble Lord. I am grateful to him and to the noble Baroness, Lady Hamwee, along with the noble Lord, Lord Tope, for the fact that we have been able to talk about these issues outside the Chamber in order to get to the heart of what we are trying to do. If we still disagree on either the necessity or the purpose, it would not be because we have not attempted to understand the position and we shall have to disagree on the principle. I am pleased that the noble Lord, Lord Hanningfield, said that we have got the message. Indeed, the amendments I am bringing forward in this group make it perfectly clear that we understand the voluntary nature of these organisations, which may not have been as clear as it should have been. I shall expand a little on that.

In Committee we established that significant benefits could be gained and major opportunities exploited by tackling economic issues at the sub-regional level. Many examples of this were given from across the country. By working with real economic markets, one can have a real influence on the way in which services can be offered. We went on talk about maximising the benefits of how sub-regional is working already using the MAA model because in so many instances, it offers the greatest benefit. In many areas, that will be sufficient. However, our case is that where there is a strong economic case for even closer joint working, an EPB could make that possible. It could take the intention a step further by creating a legal body at the sub-regional level. I was pleased to hear the agreement of the noble Lord, Lord Hanningfield, to that in principle when he said that as long as EPBs are mostly composed of elected members, they could be a recipe for success. So the first reassurance I can give him is that they will indeed be composed largely of elected members and that any non-elected members will be there only at the behest of the local authorities involved. Unfortunately, that may not satisfy the noble Baroness, Lady Hamwee, but I shall address that point in more detail later in my remarks.

I have also made it clear that we accept that EPBs will not be appropriate for all or even many areas, but in those places where partnership working has already made a mature contribution, there are some additional benefits to be had which we should not deny to local authorities. Those benefits are principally delivered by the creation of a legal personality, a legal body that can hold budgets, secure more direct management of economic programmes and serve the area as a whole. Furthermore, it could conduct a single conversation with government departments about what the area needs, which programmes are relevant, how they can be managed, what can be delegated and what can be achieved.

The noble Baroness, Lady Hamwee, and the noble Lord, Lord Tope, have made it perfectly clear that they are sceptical about EPBs; the noble Baroness has rehearsed the argument again today. Before I turn to the argument, I should say that I think that theirs may be a minority voice because the LGA itself considers this to be a positive step. The principle of statutory bodies at the sub-regional level was certainly supported in the 2008 consultation, so long as they are voluntary. That is the stage we have reached in the debate, and I want to reiterate the point because it is where the democratic argument turns in the issues we are debating. I still hope to be able to persuade the noble Baroness that we are on the same side.

I understand that there is a lack of conviction that EPBs are not truly voluntary, and not least is that the reason for bringing forward our amendments, which should make the voluntary nature of EPBs stronger, clearer and thus indisputable. Following our discussions in Committee, I have taken the opportunity to remove any possibility, however remote, that a non-unitary district could ever be included in a scheme for an EPB without the district council concerned having given its explicit consent. That is achieved through government Amendments 168R and 168S, and Amendments 168AH and 168AJ, which make the same change for combined authorities. Further, Amendment 168M will ensure that any authority, including a non-unitary district whose area as a result of any changes to an EPB would be added or removed from it, must also give its consent to the change. Thus, in two-tier areas, both the county and the district will have to give their consent for an area to be included in a scheme for an EPB, while Amendment 168AD makes the same change for combined authorities. At this very fundamental level, therefore, I hope that the noble Baroness is reassured that we are genuinely serious that EPBs are not only voluntary for authorities, but are also seen to be so.

I turn now to the arguments advanced by the noble Baroness this evening, and put by the noble Lord, Lord Greaves in Committee, that EPBs will not be voluntary since by force of circumstances authorities will have no choice because of the way the funding flows. It is hard to argue counterfactual evidence, but we have taken significant steps to ensure that these bodies are voluntary. I have outlined that point. They represent choices for authorities based on a distinct local appreciation of the benefits that they would bring.

We have also provided other safeguards. For example, there is a requirement that authorities must use a review to gather evidence that an EPB would be beneficial for the area. If that evidence cannot be produced, there can be no EPB, even if the Government would wish to have one for some other reason. Furthermore, the Secretary of State must consider that the creation of an EPB is likely to improve the exercise of statutory functions relating to economic development, regeneration and economic conditions in the area. Again, that has to be based on evidence.

I would also argue, on the basis of commonsense, that there is no point in coercing local authorities into these types of arrangements because they are about partnerships and fundamentally working together for common aims and common good. You cannot generate a willingness among partners to work together if they do not want to work together, and partnership working must be in place before the EPB is created if it is to stand a chance of working properly.

Photo of Lord Greaves Lord Greaves Spokesperson for Environment, Food and Rural Affairs, Spokesperson for Communities and Local Government

My Lords, I was not going to intervene but the noble Baroness paid me the compliment of reminding me of what I said in Committee. Is she denying that that kind of financial coercion occurs at the moment, because in my part of the world it certainly does?

Photo of Baroness Andrews Baroness Andrews Parliamentary Under-Secretary, Department for Communities and Local Government, Parliamentary Under-Secretary (Department for Communities and Local Government)

My Lords, the noble Lord gave examples of that in Committee. I am saying that there is self-interest in these arrangements but one cannot generalise about localities. My argument holds that partnership working serves interests. There is a mutual interest at stake here and an EPB will be a serious undertaking. Given the changes that we have made to the Bill, it is highly unlikely that anyone could be coerced if there was not a real interest in being a part of such a partnership.

On the issue of local authorities leaving EPBs—I shall try not to provoke the noble Lord again—there is a balance to be struck between allowing for flexibility and a recognition that we are trying to provide something that will serve for the long term. Difficult, long-term problems cannot easily be tackled effectively without some degree of commitment, stability and permanence, and EPBs are designed to be one of a range of options that operate at different points on this spectrum. We appreciate that significant alternatives such as MAAs will be available and it will be up to local authorities to determine whether, for their particular needs and partnerships, flexibility is, frankly, more important than having a robust governance arrangement. The noble Lord, Lord Hanningfield, discussed these kinds of issues outside the Chamber. As I have said, EPBs are designed to be stable and should be created only where there is a strong commitment to joint working and a clear economic case, so we would expect local authorities to have made every effort to resolve differences that arise between them before seeking to withdraw from the EPB.

But, of course, circumstances, people and situations change, and, in some instances, local authorities may no longer feel that the economic development of an area is being well served by the EPB. Therefore, there is a process within the Bill for local authorities to leave an EPB or for an EPB to be dissolved. This process involves one or more of the local authorities conducting a new review and preparing a revised EPB-free scheme as it would obviously be important to consider how the area was going to be affected by the change and how the functions carried out by the EPB would be exercised if it no longer covered a particular area.

A withdrawal would be a symptom of a major breakdown between the local authorities. In those instances, there would be a legitimate role for the Secretary of State in determining whether the proposed change to the EPB was beneficial for the area, although it is clear that if there are irreconcilable differences within an EPB it would be in the interests of the area as a whole for the boundaries to be altered or for the EPB to be dissolved altogether. So there are safeguards built in.

Amendments 168A, 168D, 168G, 168Y and 168AA, tabled by the noble Baroness, Lady Hamwee, and the noble Lord, Lord Tope, require that a number of the Secretary of State's order-making powers in this part could be exercised only following a request from principal local authorities. For the many reasons that I have advanced already, these amendments are unnecessary, but particularly so in relation to what I am about to say. There are only four instances in which the Secretary of State will make an order under this Bill: to create an EPB or combined authority and to set out the conditions under which the body would operate; or to amend an existing EPB or combined authority. In each of those situations, the Secretary of State may exercise one or more of the specific order-making powers provided to her, depending on the circumstances.

But the key point is this: no order can be made without one or more of the local authorities having first prepared and published a scheme that proposes using those powers. That restriction on the Secretary of State's powers is contained in Clauses 96(1), 99(1), 107(1) and 110(1). They all provide that the Secretary of State must have regard to a scheme before making an order to either establish or change one of these bodies. It follows logically that without having a scheme to regard to, the Secretary of State may not exercise her order-making powers.

Furthermore, the Secretary of State has no power under any circumstances to require that a scheme is prepared. So it is simply not possible for the Secretary of State to exercise any of her order-making powers in this part without one or more of the local authorities having made a request, in the form of a published scheme, that she does so.

I hope that I can give the noble Lord, Lord Hanningfield, further reassurances in regard to his Amendment 168B. The amendment would require local authorities not only to consent to the scheme for a new EPB before it is submitted to the Secretary of State but also to consent to the order that is produced from that scheme before it can be laid. The amendment provides an opportunity for me to put assurances on the record. I can assure the noble Lord that the Secretary of State would make only minor deviations from the scheme when making that statutory order because she would have to have regard to the scheme. The deviations would be necessary to ensure that the EPB worked effectively. The order would not contain any more significant changes unless they were agreed by all of the local authorities involved.

I hope that what I have said and the amendments that I have tabled will assure noble Lords that the bodies really are for the local authorities to choose to pursue and in no way for the Secretary of State to dictate.

The noble Baroness, Lady Hamwee, raised the issue of democratic accountability and the fact that these local authority bodies are not directly elected for the task. As I have said, I believe EPBs are a helpful option, but there are various precedents for local authorities pooling functions. In previous debates I have mentioned that integrated transport authorities and joint waste authorities exist to allow local authorities to set up a single entity. I know that EPBs are, admittedly, a significant extension because they allow a greater range of functions to be pooled, but they are the same principle.

As the noble Baroness said, democratic accountability is an absolutely fundamental issue. We take it very seriously and that is why we have provided in the legislation that there will be bodies that are completely controlled by the authorities concerned. They will have at least a majority of local authority members; other members will be there only because the local authorities want them and choose them; and all voting members will be councillors unless those councillors decide for themselves otherwise.

The noble Lord, Lord Hanningfield, raised issues of bureaucracy with me outside the Chamber and I should like to put on the record my response to his concerns. He was concerned that this could lead to additional layers of bureaucracy. We expect and want the opposite to happen. By working closely together within a formal structure, local authorities will be able to pool and streamline their activities across the sub-region and engage more effectively. For example, local authorities could second existing economic development staff to the EPB, providing for reduced duplication of tasks.

The noble Baroness, Lady Hamwee, referred to the Budget Statement today. I will not go into much detail about this, but in Committee we discussed the delegation of functions and powers, and today we have seen in the Budget Statement the announcement that Greater Manchester and the Leeds city region are indeed to become city region pilot areas. It outlined new powers that have been agreed with them and provides a process for developing new approaches to sub-regional working. All I will say is that the city region process is not the same as the process of working towards an EPB, but it illustrates that we are serious in our attempt to facilitate sub-regional working, and the EPBs would be an option as a legal personality for those local authorities if it was felt that that would facilitate those ambitions.

I have laid Amendment 168AU in this group, which replicates the one that was laid by the noble Baroness, Lady Warsi, and the noble Lord, Lord Hanningfield, in Committee. It will allow the Secretary of State to issue guidance to integrated transport authorities about the process of establishing a combined authority. That is appropriate, as ITAs are one of the bodies that could initiate the creation of a combined authority under Clause 105.

Photo of Baroness Hamwee Baroness Hamwee Spokesperson for Communities and Local Government 6:45 pm, 22nd April 2009

My Lords, I omitted to thank the Minister for the time and effort that she put into discussions at all stages of the Bill, including between Committee and Report. I know she did not mention that in order to prompt me, but I am grateful for the prompt.

She told us that the Local Government Association supports the proposals so long as they are voluntary, which is exactly my point. The government amendments about non-unitary districts do not answer my points, which I do not want to repeat, about whether in practice the arrangement will be voluntary. Bringing authorities together—she used the term "coerce", which is not quite the one that I would use, but if she characterises what I am saying in that way, so be it—and then calling it a partnership is not my understanding of how a partnership should grow organically.

These arrangements are clearly, as I have said before, part of the Government's city region agenda. I do not for a moment suggest that they are not serious—the Minister has just referred to the announcements about Greater Manchester and Leeds—but we are saying that the design is not uniformly appropriate. The publication of the scheme, to which she referred, does not answer my concern. She said that it was at the request of one or more local authorities. Exactly, and my amendments are to require the request of all the local authorities.

We and the Government have a different understanding of the terms "partnership" and "voluntary". I therefore wish to test the opinion of the House.

Division on Amendment 168A

Contents 43; Not-Contents 93.

Amendment 168A disagreed.

Division number 1 Local Democracy, Economic Development and Construction Bill [HL] — Report (4th Day)

Aye: 41 Members of the House of Lords

No: 91 Members of the House of Lords

Ayes: A-Z by last name

Tellers

Nos: A-Z by last name

Tellers

Amendment 168B not moved.

Amendment 168C

Moved by Baroness Hamwee

168C: Clause 85, leave out Clause 85

Division on Amendment 168C

Contents 43; Not-Contents 89.

Amendment 168C disagreed.

Division number 2 Local Democracy, Economic Development and Construction Bill [HL] — Report (4th Day)

Aye: 41 Members of the House of Lords

No: 87 Members of the House of Lords

Ayes: A-Z by last name

Tellers

Nos: A-Z by last name

Tellers

Clause 86 : Constitution

Amendments 168D and 168E not moved.

Clause 87 : Constitution: membership and voting

Amendment 168F not moved.

Clause 88 : Exercise of local authority functions

Amendments 168G and 168H not moved.

Clause 89 : Funding

Amendment 168J not moved.

Clause 90 : Accounts

Amendment 168K not moved.

Clause 91 : Change of name

Amendment 168L not moved.

Clause 92 : Changes to boundaries of an EPB's area

Amendment 168M

Moved by Baroness Andrews

168M: Clause 92, page 61, line 30, leave out "unitary"

Amendment 168M agreed.

Amendment 168N not moved.

Clause 93 : Dissolution of an EPB's area

Amendment 168P not moved.

Clause 94 : Review by authorities: new EPB

Amendment 168Q not moved.

Clause 95 : Preparation and publication of scheme: new EPB

Amendments 168R and 168S

Moved by Baroness Andrews

168R: Clause 95, page 62, leave out line 42

168S: Clause 95, page 63, line 1, leave out subsection (6)

Amendments 168R and 168S agreed.

Amendment 168T not moved.

Clause 96 : Requirements in connection with establishment of EPB

Amendment 168U not moved.

Clause 97 : Review by authorities: existing EPB

Amendment 168V not moved.

Clause 98 : Preparation and publication of scheme: existing EPB

Amendment 168W not moved.

Clause 99 : Requirements in connection with changes to existing EPB arrangements

Amendment 168X not moved.

Clause 100 : Combined authorities and their areas

Amendments 168Y and 168Z not moved.

Clause 101 : Constitution and functions: transport

Amendments 168AA and 168AB not moved.

Clause 102 : Constitution and functions: economic development and regeneration

Amendment 168AC not moved.

Clause 103 : Changes to boundaries of a combined authority's area

Amendment 168AD

Moved by Baroness Andrews

168AD: Clause 103, page 66, line 30, leave out "unitary"

Amendment 168AD agreed.

Amendment 168AE not moved.

Clause 104 : Dissolution of a combined authority's area

Amendment 168AF not moved.

Clause 105 : Review by authorities: new combined authority

Amendment 168AG not moved.

Clause 106 : Preparation and publication of scheme: new combined authority

Amendments 168AH and 168AJ

Moved by Baroness Andrews

168AH: Clause 106, page 68, leave out line 34

168AJ: Clause 106, page 68, line 35, leave out subsection (6)

Amendments 168AH and 168AJ agreed.

Amendment 168AK not moved.

Clause 107 : Requirements in connection with establishment of combined authority

Amendment 168AL not moved.

Clause 108 : Review by authorities: existing combined authority

Amendment 168AM not moved.

Clause 109 : Preparation and publication of scheme: existing combined authority

Amendment 168AN not moved.

Clause 110 : Requirements in connection with changes to existing combined arrangements

Amendment 168AP not moved.

Clause 111 : Incidental etc provision

Amendment 168AQ not moved.

Clause 112 : Transfer of property, rights and liabilities

Amendment 168AR not moved.

Clause 113 : Consequential amendments

Amendment 168AS not moved.

Clause 114 : Orders

Amendment 168AT not moved.

Clause 115 : Guidance

Amendment 168AU

Moved by Baroness Andrews

168AU: Clause 115, page 72, line 35, at end insert—

"( ) an ITA;"

Amendment 168AU agreed.

Amendment 168AV not moved.

Clause 116 : Amendments relating to EPBs and combined authorities

Amendment 168AW not moved.

Clause 117 : Interpretation

Amendment 168AX not moved.

Clause 127 : Duty to have regard to improvement targets

Amendment 168AY not moved.

Amendment 169

Moved by Lord Rosser

169: After Clause 134, insert the following new Clause—

"Central-local partnership

(1) The Secretary of State shall convene an annual meeting with representatives of central and local government ("the central-local partnership") for the purpose of reaching an agreement to comply with—

(a) a framework of principles for how central and local government work together to serve the public,

(b) common priorities and a shared programme of objectives for giving effect to these principles, and

(c) such partnership arrangements as are necessary to give effect to the relationship.

(2) The Secretary of State shall take such steps as are required to ensure the attendance at the annual meeting of representatives of government departments with responsibilities for partner authorities subject to the duty to cooperate under section of the 104 of the Local Government and Public Involvement in Health Act 2007 (c. 28) (application of chapter: partner authorities).

(3) For the purposes of this section, "representatives of local government" will be any body of which formal notice has been given to the Secretary of State as having authority to enter into agreement on behalf of local authorities in England.

(4) In reaching agreement under subsection (1), the Secretary of State and representatives of local government shall consult representatives of such persons as appear to have an interest in the promotion of well-being in local authority areas, including representatives of the voluntary sector.

(5) The Secretary of State shall make an annual report to Parliament on the operation of the central-local partnership."

Photo of Lord Rosser Lord Rosser Labour 7:14 pm, 22nd April 2009

My Lords, I have discussed my amendment with the Local Government Information Unit and, as I understand it, there have also been discussions between the LGIU and my noble friend the Minister. Perhaps I should say before I go any further that I am not an adviser or consultant, paid or unpaid, to any local government organisation or body. I just happen to consider that the issues that my amendment raises have both substance and merit.

In the 2007 Green Paper, The Governance of Britain, the Government proposed a concordat between central and local government. The Green Paper went on to say that the Secretary of State for Communities and Local Government should work with the Local Government Association to,

"establish for the first time an agreement on the rights and responsibilities of local government, including its responsibilities to provide effective leadership to the local area and to empower local communities where possible".

The concordat was duly agreed and signed in December 2007 by Sir Simon Milton for the Local Government Association and Hazel Blears, the Secretary of State for Communities and Local Government. It appears to have represented an agreement between key players rather than one based on consultation within the wider local government arena and with the national and local stakeholders involved.

I believe that there have been two previous documents along broadly similar lines. The December 2007 concordat replaced the agreement for the conduct of central-local relations of July 2002. Under the December 2007 concordat, meetings of the central-local partnership provided for under the 2002 agreement, which ceased in early 2006, would be renewed, and this partnership is responsible for monitoring the concordat and is also able to revise it in future.

The main elements of the concordat, which is more a statement of intent, are an acknowledgement of a joint responsibility to meet public expectations; a partnership in improving services with a set of shared objectives and a presumption that powers are best exercised at the lowest effective and practical level; an assertion of central government responsibilities to act in the national interest, and local government responsibilities for service performance, promoting prosperity and well-being and cohesion; definitions of reciprocal rights and responsibilities; a partnership in using taxpayers' money well and a commitment to ensure that public services are properly funded; and greater flexibility for local councils in their funding.

Under the concordat there are a number of commitments for the future. The LGA and Government will work together to encourage all councils to make effective use of the well-being power, introduced by the Local Government Act 2000, and to conduct a growing share of the business of government. Government will reduce appraisal and approval regimes, ring-fencing of funds for specific purposes, and the volume of central guidance.

There will be a shared commitment to lead the changes in behaviour and practice from central government departments, agencies and offices as well as councils and local partners which will be required by local area agreements. Emphasis will be given to the objective of giving councils greater flexibility in their funding to facilitate the autonomy referred to in the European Charter of Local Self-Government. There is also a reference in the concordat to a commitment to co-operation on a new relationship between businesses and councils and to increasing local democratic accountability of key public services and, in particular, police and health services.

It is not entirely clear what has actually happened since the signing of the concordat in December 2007. It certainly does not appear to have made a big impact on local councillors, let alone the electorate. A survey of just under 500 councillors in English authorities between 28 August and 5 September last year showed that just 56 per cent had heard about the concordat; 35 per cent had not heard about it; and, curiously, as many as 9 per cent of local councillors surveyed did not know whether they had heard about it. Of the 56 per cent who had heard about the concordat, 71 per cent said that they did not know very much about it, and only 2 per cent said they knew a great deal about it. Some 76 per cent agreed that it was right for central and local government to agree common priorities, objectives and partnership arrangements, with 57 per cent agreeing that the negotiation of a central-local agreement must be made a formal statutory requirement, and just 27 per cent disagreeing. The purpose of this amendment is to put the arrangements on a statutory footing.

A key reason for this approach is that the concordat does not appear to be working as it was intended. It is not clear what progress has actually been made towards progressing the package of intentions and future commitments in the concordat to which I have referred. It is not clear if any meetings have been convened since December 2007 between Government and the LGA with this objective. In response to a Written Parliamentary Question in the other place on the operation of the concordat, the Minister said that,

"significant progress had been made, including: the signing of 150 local area agreements across all of England".—[Hansard, Commons, 2/2/09; col. 959W]

However, as I have already set out, the intentions of the concordat cover rather more than local area agreements, and on the other aspects there was the written equivalent of silence in the Parliamentary Answer.

Indeed, on the same day there was an Answer to a further Written Parliamentary Question in the other place asking on what dates the central-local partnerships had met since December 2007, what arrangements had been made for regular meetings and what arrangements had been made for monitoring the operation of the central-local concordat. The reply referred to a number of meetings between government Ministers and LGA group leaders on different topics over the past year under the umbrella of the central-local partnership. However, it went on to say:

"We are currently considering the future role and terms of reference of the Central-Local Partnership. One of the roles of a renewed Central-Local Partnership is to monitor the operation of the Central-Local Concordat, and to revise it for the future as necessary".—[Hansard, Commons, 21/7/08; col. 762W.]

That is not exactly an answer that would lead one to believe that the signing of the concordat had led to the implementation of any significant changes or developments at all. Yet, in the survey that I just referred to, 87 per cent of the councillors who had heard of the concordat felt that the central-local partnership should bring all relevant government departments to the table with the Local Government Association on a regular basis, with only 6 per cent disagreeing; and 74 per cent felt that the implementation of the concordat should be monitored independently, for example by a parliamentary committee, with just 12 per cent disagreeing. My amendment also addresses the issue of monitoring by providing for the Secretary of State to make an annual report to Parliament on the operation of the central-local partnership.

A broad statutory arrangement to meet, consult and establish agreement would ensure clarity and continuity as the basis of a sustainable partnership between central and local government. The concordat, which was a government proposal in their Green Paper, should be a practical and dynamic expression of the relationship between the spheres of central and local government. In reality, the concordat has an essentially informal status. One of the results of that is the lack of impact it has had on local councillors.

My amendment does not enshrine the concordat itself in legislation as its format is liable to change and there is a need for flexibility. Indeed, my amendment allows for procedures to enable flexible working. Under my amendment there is provision for an annual meeting, and the central-local partners would agree the principles under which they operate. There is a case for enacting a statement of principles to ensure that local government is given the weight necessary for recognition of its constitutional position, commanding the attention of the courts, the Government, the Civil Service and local authorities.

The reasons for embodying the concordat process—it is talking about the concordat process in legislation—is to ensure that it is a transparent process open to parliamentary, local government and public scrutiny, that it has an effective agenda, and that it meets. This is not legislation for the sake of legislation. The survey to which I referred showed that there is broad support for central and local government representatives to get around the table. If that is going to make a difference, central-local partnership meetings need to happen with a degree of regularity and those involved need to be called to account for the progress they are making.

At present, the very informality of the concordat reduces the likelihood that the agreed set of principles will be tackled. Since I first tabled the amendment—which was originally intended for Committee stage, which seems an eternity ago—there has been a meeting of the central-local partnership, in February 2009. I do not know whether it is a coincidence or whether my amendment has led to questions being asked about what has happened to the concordat. Suggestions have been made to me that this may have been the only meeting to have been recognised as a formal central-local partnership meeting to have taken place under the December 2007 agreement. I understand that the meeting was to discuss matters of considerable urgency related to the current economic situation and that it was not a meeting to look at some of the more fundamental long-term issues covered by the concordat.

I was told yesterday that a series of meetings have been arranged between the LGA and individual Ministers which started last month and will run through to next month, with most being listed as introductory. That would seem to add weight to the view that not a lot has happened since December 2007. The parties to the concordat—the Local Government Association and the Secretary of State for Communities and Local Government—agreed in the last paragraph of the concordat that they would come together regularly in a renewed central-local partnership, which would also be responsible for monitoring the operation of the agreement and revising it as necessary. I question whether that has been done, although I have no doubt that my noble friend will address that particular point when he responds. If the concordat is to have an impact, it should be transparent and the players accountable to Parliament and to those with a stake in local government for implementing and reviewing its provisions, with a clear process under which the operation of the concordat and the central-local partnership can be discussed and tested by Parliament as well as being open to local government and public scrutiny.

My amendment, which I hope my noble friend will respond to sympathetically, achieves these objectives and will enhance and strengthen the quality and effectiveness of the central-local partnership. I beg to move.

Photo of Lord Patel of Bradford Lord Patel of Bradford Government Whip, Government Whip 7:30 pm, 22nd April 2009

My Lords, the proposed new clause would place the relationship between central and local government on a legislative footing through an annual meeting and requirement to reach agreement on a set of principles. I understand clearly why my noble friend has moved the amendment and I would like to say for the record that I am grateful for his decision to do so at this stage of the Bill. He has been extremely patient. We agree with many of the sentiments expressed about the need to have the strongest relationship possible between central and local government and especially the need for a framework for principles on how those partners should work together and for a set of common priorities and shared programme of objectives to give effect to them.

As my noble friend clearly outlined, the central-local concordat was signed just over a year ago. We would say that it has the effect of all that this new clause describes. The difference, of course, is that it is not driven to do this by legislation. Indeed, I would contend not only that it does not need to have that status but that the amendment could be counterproductive to what should be an organic and flexible arrangement.

It may be helpful if I provide a little background. The central-local concordat, as my noble friend said, was jointly signed on 12 December 2007 by the Secretary of State for Communities on behalf of the Government and by the chair of the Local Government Association, Sir Simon Milton, on behalf of local government. It established a formal agreement on the reciprocal rights and responsibilities of local and central government and a framework of principles for how central and local government work together to serve the public.

However, it must be judged within a wider context. It stands within a clear and robust set of commitments that reinforce a new relationship with local government, which started with our 2006 White Paper Strong and Prosperous Communities, through the initial concordat proposals in the Ministry of Justice Green Paper in 2007, to implementation of many of the policies under the Local Government and Public Involvement in Health Act 2007. It cannot, therefore, be set apart from all the changes that have been made to reinforce the right balance between local and central government—everything from the bonfire of targets and the creation of the highly successful local area agreements to the three-year funding settlement that has brought stability to local government funding.

Indeed, the central-local partnership, which acts as an overarching framework for ongoing dialogue between central and local government, has strong roots. As my noble friend will be aware, it has been in existence since the initial framework for partnership agreement was signed in 1997 by Sir Jeremy Beecham and the then Secretary of State for Environment, Transport and the Regions, the right honourable John Prescott. It is one of the mechanisms by which views can be frankly exchanged between central and local government. In recent times, the partnership has come together at key junctures in central-local relations; indeed, it has done so, for example, to discuss the empowerment White Paper. As my noble friend said, it met recently on 24 February to discuss the economy. It was hoped that some of the important issues raised by my noble friend were to be discussed then, but the economy was so important that the meeting was unable to follow up the issues around the concordat, as it had wished. However, a number of actions from this meeting are being followed up. A key number of activities will be followed up on the business issues, and commitments have been made to look at businesses at this difficult time. The meeting was fruitful.

It is this opportunity to share information and judgment that is the great benefit of the CLP, bringing together government at the national and local level in a flexible and action-focused way to do all that we can together to best meet the needs of the country. The CLP offers a number of routes to achieve this, such as subject-specific meetings with government Ministers and local government representatives as required, time-limited working groups, informal events and meetings between the Secretary of State for Communities and Local Government and the chairman of the LGA, including LGA office holders.

There is nothing to be gained by putting such a process into a legislative framework. It has to work because the partners involved want it to work and make it work for them. Indeed, to commit to a specific timetable of high-level, formal meetings would be counterintuitive, given that some issues may need to be dealt with quickly and may not require such high-level, across-the-board input.

However, my noble friend raises some key questions about the partnership's future role and how it will develop. Because of the urgent need to the focus on the economy, as I said, the meeting on 24 February did not provide the opportunity to discuss that. However, I reassure him that the Secretary of State for Communities and Local Government and the new chairman of the LGA, Councillor Margaret Eaton, have agreed that it would be appropriate to take stock of progress on the concordat and to address some of the shortcomings that my noble friend has highlighted. His points will be a useful record of the shortcomings when that happens.

My noble friend also raises an important issue about knowledge of the concordat. I am happy to confirm that we will act to raise awareness of those issues. I stress that the signing of the concordat at the end of 2007 was the beginning rather than the end of the journey. However, the concordat clearly offers an opportunity to do more. Local and central government are committed to developing that partnership in this way and to continue to raise the profile of the agreement with government colleagues. I can also confirm and again reassure my noble friend, I hope, that, subject to LGA agreement, the Secretary of State for Communities and Local Government is committed to greater public recording of the activity of the central-local partnership, such as notification that formal meetings are taking place and publication of the notes of such meetings, which would also be laid in the Libraries of both Houses. I hope that this goes some way to further reassure the noble Lord of the Government's commitment to the central-local partnership and to address his particular concerns regarding the reporting of the operation of the partnership to Parliament.

I hope that I have reassured the noble Lord that his new clause would not provide the answers that he seeks but would instead reduce the flexibility of the current arrangements and impose a potentially burdensome process on both central government and local authorities. I also hope that, with the reassurances that I have given that the Secretary of State and the chairman of the LGA will take stock of progress on the concordat, and our commitments to greater public recording of its activities and raising the issue of knowledge of the concordat, the noble Lord will withdraw his amendment.

Photo of Lord Rosser Lord Rosser Labour

My Lords, I thank my noble friend for that reply. He has made some helpful comments on the record. Obviously I do not share the view that my amendment is somehow burdensome, bureaucratic or cumbersome. It would provide for convening an annual meeting with representatives of central and local government and it talks about how you would comply with the framework of principles that are enshrined within the concordat. I would hardly regard that as particularly burdensome.

I repeat that the last paragraph of the concordat—signed, as has been said, by Councillor Sir Simon Milton and the right honourable Hazel Blears MP—says:

"The partners to this agreement will come together regularly in a renewed Central-Local Partnership. One of the roles of that partnership will be to monitor the operation of this agreement, and to revise it for the future as necessary".

That was in December 2007. I suggest that that has not yet happened. I inferred that from my noble friend's comments about there not being time to do it at the February meeting because the economy was discussed. That raises the question of what happened to prevent the meeting from being fitted in between December 2007 and February 2009.

Anyway, I take it from my noble friend's helpful comments that at least tabling the amendment and having this debate, with a few questions being asked, may have prompted some action by the parties concerned to see that the concordat and the central-local partnership work. In the light of that, I beg leave to withdraw my amendment.

Amendment 169 withdrawn.

Clause 136 : Adjudicator's power to make corrections

Amendment 169ZA

Moved by Baroness Hamwee

169ZA: Clause 136, page 81, line 29, leave out "remove" and insert "correct"

Photo of Baroness Hamwee Baroness Hamwee Spokesperson for Communities and Local Government

My Lords, I shall also speak to Amendments 169A to 169D. These amendments take us to the part of the Bill that deals with construction contracts. I am grateful to my noble friend Lord Tope for dealing with the matter in Committee; I was unable to be there and am sorry to have missed it.

Taking the amendments a little out of order, I will first address Amendment 169A, which is in the same form as the amendment that was tabled in Committee and came to us from the RICS. A long letter from the Minister picked up a variety of points that were raised in Committee and reference was made to this amendment. He pointed out that since the RICS briefing to support the amendment in Committee there had been a High Court judgment in the Linnett v Halliwells case, which spells out—I am dealing with adjudicators' costs—that it is not just the referring party to whom the adjudicator can look for payment of his fees and expenses.

The RICS feels that the matter needs to be addressed by tweaking the legislation, if I can put it that way. It makes the point that the High Court judgment is a first-instance judgment, which is subject to appeal, and that it may not apply in Scotland, when it would be desirable for there to be consistency across England, Wales and Scotland. The provision in the Bill, which I seek to amend, concerns the parties to a dispute. The Linnett v Halliwells case is about the adjudicator. As drafted, there would be no power to allocate fees and the provision in the Bill, as a consequence, bans positive cost clauses allowing the adjudicator to allocate costs fairly, which the RICS says is a matter of contract and not primary legislation.

The RICS has referred me to the Scheme for Construction Contracts (England and Wales) Regulations 1998, which apply in default and have the same effect as the amendment would have. It is concerned that, where a contract has adopted that scheme, it would be knocked out under the current Section 108A. It also says that the case has already had an adverse effect, with injunctions being sought in order to avoid the issue, which overloads the courts and is not desirable. It is not only the RICS that has concerns about the situation. I hope that the Minister will be able to give me some assurances about how the Government intend to address those concerns.

The other amendments were all drawn to our attention by the Law Society of Scotland. I will deal with them perhaps so briefly as to be telegraphic. These are such technical areas that one would need to write quite an essay in order for them to be clearer to those who are listening than I probably will be in my casual way. Amendment 169ZA would delete the word "remove" and insert the word "correct" in Clause 136, which provides for a new provision in the 1996 Act to allow for the correction of a,

"decision so as to remove a clerical ... error".

The Law Society of Scotland was concerned that that might mean that the error was removed and a gap left.

Amendment 169B would delete subsection (4) of new Section 110B to be inserted into the 1996 Act under Clause 139. This measure deals with interim payments under building contracts. I understand that the practice is for cumulative applications for interim payments and that the effect of the new provision is that a failure by the potential payer every month to redispute the item would mean that it would be due if the payee issued a notice. The Law Society of Scotland says that the introduction of a payee notice system in default of the payer's notice may be desirable, which is what is provided, but that new subsection (4) goes too far. Therefore, the society seeks its removal.

Amendment 169C deals with a withholding made by a payee. The amendment would ensure that a payer may issue a notice only on the grounds that would be available under Section 111 of the 1996 Act. It could not be used by the payer to change the sum otherwise due—for instance, where the payer misses the timescale for the issue of a payer notice.

Finally, Amendment 169D would ensure that the entitlement of a party exercising a right to suspend performance for non-payment to recover reasonable costs and expenses was treated as an implied term. That would be achieved by inserting two additional subsections.

I appreciate the work that has gone into getting the changes to the 1996 legislation to this point and I know that the Government have undertaken considerable consultation. Clearly, that is not the end of the process. There would have to be a change to the scheme to which I referred and it will take a little while for these changes to come into effect even if work starts next month. It might be helpful if the Minister could give the House some idea of how long that is likely to take and what will follow from the primary legislative changes. This will not be the end of the discussion and there will be further opportunities for all those concerned in the industry to ensure that the practical arrangements are those that they feel they can operate, as well as to pick up some of the points of principle to which I have referred. I beg to move.

Photo of Lord Brett Lord Brett Government Whip, Government Whip 7:45 pm, 22nd April 2009

My Lords, the amendments in this group cover the three areas in Part 8; namely, adjudication, payment and suspension. I will deal with them in that order, starting with adjudication. The noble Baroness has proposed Amendment 169ZA, which would apply to Clause 136 and is known in the trade as the "slip rule". The amendment is unnecessary and it is based on a very narrow reading of the clause. For example, if an error is created by adding 7+7 and getting the answer 13, simply removing the 13 does not solve the problem. It is resolved only when a correct answer—in this case, 14—is inserted. I hope therefore that the noble Baroness will understand why we are resisting this amendment.

More substantially, she has tabled Amendment 169A, which concerns the adjudicator's ability to award his or her fees and expenses. Since Committee stage, we have discussed the issues around this amendment with the Construction Umbrella Bodies Adjudication Task Group. We have also had the opportunity to fully consider a recent and very relevant High Court case, to which the noble Baroness referred—the Linnett v Halliwells case—and how this would work in Scotland.

Rather than follow the suggestion put forward by the noble Baroness in her amendment, we are minded to simply "carve out" contractual agreements which allow the adjudicator to award his fees and expenses. We believe that such an amendment will have a not dissimilar effect to the amendment that the noble Baroness is proposing. We will look at this further and think how to move forward on this when the issue comes before another place. I will ensure that noble Lords are made aware of any such developments. Therefore, I hope that the noble Baroness will understand why we are resisting this specific amendment while recognising the problem lying behind it that she has raised.

I move on to payment and the new amendments concerning the statutory payment framework. The 1996 Act requires that certain notices are issued in advance of the final date by which payment must be made which communicate the amount, with reasons, of the intended payment. These are what are known as the "payment" and "withholding" notices. Their lack of effectiveness in communicating what would be paid at the final date for payment was the prime reason for the review of the 1996 Act.

The noble Baroness's Amendment 169B would remove the ability of the payee's application to stand as the statutory payment notice in default. We think this is founded on a misconception and a concern that a payee's application will sometimes be a cumulative statement showing the amount up to the date of its issue. The noble Baroness is concerned that, on a cumulative basis, month one could see a £1,000 application. In the event £500 is paid, but £500 is withheld because of a disagreement about unsatisfactory workmanship. Month two sees a £2,000 application—that being the cumulative amount under the contract—of which only £1,000 would be payable if all of the first payment had been made. We believe the noble Baroness fears that the payer could become liable to pay £1,500 in this example if the payer did not again issue a withholding notice for the disputed £500. We do not believe this will be the case. The revised Act is quite clear that a statutory payment notice must, in relation to every payment provided for by the contract, state the sum considered to be due at the payment date in respect of the payment and the basis on which that sum is calculated. In short, any type of cumulative notice would not be adequate to serve as a statutory payment notice if it did not adequately differentiate between what was currently payable and what had been paid to date. In such a case the payee would have to issue a separate notice claim setting out what was due and why in respect of the month two payment; that is, £1,000.

Our reason for persisting with the position as set out in the Bill is that in many cases the application will meet the definition and otherwise qualify as a payment notice such that it would be unreasonable in those cases to require the payee to issue a separate notice. Other than in an inadequate cumulative notice scenario, any separate notice would probably be identical to the application and it would inevitably take a little time for the payee to realise that the payer payment notice had not been issued—for example, that it was not stuck in the post—and this would result in an extension of the payment period. Extending payment periods is something we are keen to avoid in this legislation. I therefore hope that the noble Baroness will withdraw the amendment.

Amendment 169C relates to the ability of the payer to revise the amount set out in the statutory payment notice before it becomes payable at the final date for payment. Its purpose, it seems, is to limit the grounds on which the payer may amend that payment notice. I believe that we need to look at what we are doing across all the revised payment framework to understand why we have reached the position we have. We are requiring that the amount set out in the payment notice, as revised, becomes the sum payable at the final date for payment, which is not necessarily the case under the 1996 Act; allowing the payee to issue the payment notice should the parties agree that in their contract—under the 1996 Act only the payer can do so; and introducing a fall-back provision which allows the payee to issue the statutory payment notice in default.

Together these measures put the payee in a considerably stronger position than is currently the case. While what is ultimately payable as a matter of the parties' contract is unaffected, the payee has certainty that the sum in the notice will become payable at the final date for payment. So allowing the payer to amend the amount payable within a contractually agreed period, on whatever grounds, simply balances that off and gives him or her an appropriate opportunity to ensure that he or she does not overpay. Given that explanation, I hope that the amendment will be withdrawn.

That brings us to suspension. Clause 141 has drawn almost universal support from the industry and very little adverse comment. I apologise to noble Lords as I have moved on to the next amendment, which I did not intend to do. Therefore, I simply ask the noble Baroness to withdraw her amendment.

Photo of Baroness Hamwee Baroness Hamwee Spokesperson for Communities and Local Government

My Lords, can the noble Lord answer my question about timing?

Photo of Lord Brett Lord Brett Government Whip, Government Whip

My Lords, I apologise to the House. The noble Baroness is correct that there has been extensive consultation, and that will continue. There will have to be a lead-in time. We are looking at a period of 18 months to allow for extensive consultation to continue—a very broad consensus has emerged on the contents of this legislation—to ensure that everyone is satisfied with how the legislation will operate when it is introduced.

Photo of Baroness Hamwee Baroness Hamwee Spokesperson for Communities and Local Government

My Lords, our procedural rules do not allow me to test colleagues on whether they have followed the fine detail of the noble Lord's response, for which I thank him. As regards Amendment 169A, I hope that the Government will consult the industry on the new version given that there will be a relatively short time before the change is made if the Commons accepts the amendment which the Government bring forward. I do not refer to this situation as an example but one sometimes finds that, as regards a lot of consultation, a decision is made to do something at the last minute and the opportunity is not taken to ensure that that responds to the points that have been raised. However, I am grateful for the noble Lord's response. If there is anything more that he feels it would be helpful to convey in writing on the relevant amendment to reassure the Law Society of Scotland, I hope that he will drop me a note about that, which can be passed on. I beg leave to withdraw the amendment.

Amendment 169ZA withdrawn.

Clause 137 : Adjudication costs

Amendment 169A not moved.

Amendment 169AA

Moved by Lord Borrie

169AA: After Clause 138, insert the following new Clause—

"Conditional payment provisions: insolvency of third party payer

In the Housing Grants, Construction and Regeneration Act 1996 (c. 53), in section 113 (prohibition of conditional payment provisions), omit the following—

(a) in subsection (1), "unless that third person, or any other person payment by whom is under the contract (directly or indirectly) a condition of payment by that third person, is insolvent",

(b) subsection (2),

(c) subsection (3),

(d) subsection (4), and

(e) subsection (5)."

Photo of Lord Borrie Lord Borrie Labour

My Lords, I move Amendment 169AA and speak to the other amendments with which it is grouped, which stand in my name. In Grand Committee, I moved and spoke to a larger number of amendments to Part 8 dealing with construction contracts. The noble Baroness, Lady Hamwee, also referred to Part 8. The noble Baroness will agree with me that Part 8 is a discrete part of the Bill, bearing little or no relationship to any of the other parts of the Bill to which the House has devoted a great deal of time in debate.

In Grand Committee, the range of amendments that I proposed were designed to clarify the most important Housing Grants, Construction and Regeneration Act 1996 provisions for the adjudication of disputes between the various parties to a construction contract and to try to achieve greater fairness—a most important matter—for the small and medium-sized enterprises that are typically the subcontractors in construction contracts. They are the plumbers, the glaziers, the heating and electrical contractors and others, with quite a small number of employees in each case.

At this Report stage, I have sought to narrow down my amendments to those which concern insolvency. Other broader amendments to Part 8 may well be introduced by my honourable friends in another place, but I am concentrating on insolvency, which is hardly inappropriate at this time of recession, when only too many firms, not only in the construction industry, are faced with that difficult problem, either for themselves or from people who may owe them money.

The risks and consequences of insolvency are currently a major problem for small and medium-sized enterprises in all industries. A couple of weeks ago, the Sunday Times said that 120 small firms go bust every day and that thousands more are teetering on the brink of bankruptcy. The construction industry may have more than its fair share of problems. A subcontractor's cash flow will come to an abrupt halt if there is insolvency somewhere along the supply chain and he does not get paid. According to PricewaterhouseCoopers, there are now eight insolvencies every day in UK construction.

My three amendments are meant to alleviate this problem only to some small degree, but I hope that they will contribute. First, on Amendment 169AA, the 1996 Act imposed an excellent general prohibition on payments in the construction industry being made conditional on the receipt of payments from others. Unfortunately, the 1996 Act provided an exception whereby, for example, a main contractor may legally refuse payments to his supply chain subcontractors if an insolvent client or customer ceases to pay, even though the work undertaken by the subcontractors had been fully performed in all respects. My amendment seeks to remove that exception, which I will describe as an injustice. It so happens that it will bring our law into line with that of Australia and New Zealand.

At the earlier stage of the Bill in Grand Committee, the Government sought to argue that the 1996 exception was a compromise, but in truth it was inserted by the Department of the Environment, which was then the responsible department for the construction industry, with a threat to withdraw the whole legislation on construction if the exception was not agreed to. It is true in theory that a subcontractor can take out credit insurance against the main contractor becoming insolvent; though he cannot do so in relation to the risk of the client's insolvency. Today, not only in the construction industry, insurance is increasingly difficult to obtain and is virtually unobtainable across whole areas of industry because of the recession.

The amendment to which I wish to speak, as distinct from move, Amendment 169CA, arises—I will put as little technical stuff in here as possible—from a decision of this House in its judicial capacity in 2007 in the case of Melville Dundas v Wimpey. It was a majority decision of three to two judges or Law Lords, and it involved a major residential development contract in Glasgow. The majority judgment was to the effect that a payer could avoid his obligation to make payment, even though the final date for payment under the contract had passed, on the ground that the payee had subsequently gone into insolvency, provided that there was a clause in the building construction contract providing for that eventuality. According to the majority of the Law Lords, the contractual clause can override Section 111 of the 1996 Act, under which the payer would have been bound to make payment after the final date for payment of the sum due under the contract unless he had given an effective notice of intention to withhold payment.

The Bill seeks to put that majority judgment of the House of Lords in its judicial capacity into statutory form and thereby to entrench the majority judgment in statute. The minority of two Law Lords gave what many in the construction industry feel were very strong dissenting judgments. They said that Section 111 of the 1996 Act should prevail over any contrary contractual provisions, and the purpose of my amendment is to do just that; to ensure that Section 111, requiring payments of a notified sum due, takes precedence over any contrary contractual clause.

Unless that is achieved, the payer may well be tempted, and indeed encouraged, not to discharge payment at the final date of payment, which is what he is supposed to do, whenever he suspects that the payee may be in a weak financial position. Where the payer suspects that the payee is in a precarious cash flow position, the payer will not pay—or will be tempted not to pay—and instead will wait and see if the payee goes into insolvency, thereby increasing the possibility and probability that such insolvency will occur. In other words, it is as if the majority judgment of the House of Lords in its judicial capacity has actually encouraged people to behave in that way.

The majority judgment in that case left the law in a most unsatisfactory position, which the Bill as it stands would entrench. I found the minority judgment of the noble and learned Lord, Lord Neuberger, particularly persuasive. He made the point that Section 111 of the 1996 Act prohibits an employer from withholding payment after the final date for the payment of the sum due under the contract unless he is given effective notice to withhold payment. The noble and learned Lord, Lord Neuberger, went on to say that, in so far as the contract permits the withholding of payment after the final date of payment without any withholding notice being given because of the payee's later insolvency, the contract, in the words of the noble and learned Lord, Lord Neuberger, would be,

"purporting to permit that which Section 111 prohibits".

That seems to be a most powerful point made by that noble and learned Lord.

The second of my three amendments renders ineffective:

"Any contractual provision ... which seeks to exclude or oust the provisions" of Section 111 of the 1996 Act. My final amendment, Amendment 169E, concerns insolvency, as do all my amendments. The incidence of insolvency in the construction industry has been greater than in any other—four times that in the financial services sector. There is, therefore—and I need to make this point, because I know some of the arguments of Her Majesty's Government—a special case for a separate regime providing protection against insolvency in the construction industry. In many other countries in Europe, North America and Australia there are, although they differ, specific statutory provisions protecting firms in the construction industry from insolvency. I make this point for the benefit of my friends in the Opposition: the Conservative spokesman and progenitor of the 1996 Act, Sir Michael Latham, not only favoured such a provision in his pre-Act report of 1994, but in his review of 2004.

Many people abroad and distinguished people such as Sir Michael Latham in this country have considered the matter and believe that there should be special provision. The 1996 Act already gives a special statutory right in construction to suspend work in the event of non-payment on the due date. If they do not pay you, you stop work. Most importantly, the payment or credit period is frequently very lengthy in the construction industry. The period allowed before payment is required may be three months after you finish the work. It would be helpful—and this is what my amendment seeks—to give the payee a pre-emptive strike; that is to request a security, charge or bank guarantee at any time and to exercise his right to suspend his obligations under the contract to stop work if that security is not forthcoming.

The Government say that compelling the payer to provide security will be expensive. Of course you have to pay to get a bank guarantee, a charge or whatever, but have the Government fully considered how expensive it is for the payee to finance the provision of plant, equipment, work and materials over the perhaps increasingly lengthy payment or credit periods that are common in the construction industry?

The Government response to amendments of this kind and others in Grand Committee was that there was no case for special provision to be made for insolvencies in the construction industry. However, the whole of the adjudication procedure first introduced in the 1996 is peculiar to the construction industry, and the Government wish to preserve—although I do not—the surviving payment obligation, the "only when paid" provision that my Amendment 169AA would abolish. The Government are not being consistent on this matter. The Conservative Government in their 1996 Act made special provision for the construction industry. There is a case for that; it has been done in other countries in the world, and all that I suggest in these amendments is that some special provisions be made for the construction industry, particularly in the field of insolvency, which is now so important.

Photo of Baroness Hamwee Baroness Hamwee Spokesperson for Communities and Local Government 8:15 pm, 22nd April 2009

My Lords, perhaps I may say a word about Amendment 169E. The noble Lord referred to the right to suspend the credit period. That is a very different remedy, if that is the right term in this context, from the arrangement in the proposed new section. I readily acknowledge that I have little experience of construction contracts; I have a bit, but not very much. For a party to a contract of any kind to be able at any time unilaterally to change its terms—which is how I read the right to "request" security, although the proposed new subsection (2) turns it into a requirement—when that was not a term that was negotiated when the contract was being put into place, I find interesting. As a point of principle, bluntly, I am against that, although I do not for a moment want to minimise the problems in the industry that the noble Lord described. I am far from convinced that this is a proper proposal to put into legislation.

Photo of Lord Berkeley Lord Berkeley Labour

My Lords, I support the amendments in the name of my noble friend. I spent some 20 or 30 years in the construction industry in the days when clients tended to pay and contractors had big companies with lots of assets. They tended to pay their subcontractors within a reasonable time. There were problems, and Sir Michael Latham, as my noble friend said, is probably responsible for more improvements to the industry than anyone else. He has done awfully well.

The noble Baroness said that the amendment of my noble friend Lord Borrie could involve a party changing a contract unilaterally, but when you are faced with doing work and not being paid for three months, it is quite a problem. Someone has to work out an equitable balance between the risk and reward. For me, clients are paying later and later; sometimes the companies responsible for commissioning contracts and subcontracts are themselves £100 companies which may be doing the management, but can do nothing to help the chain, and you get more and more sub-sub-sub-subcontractors. Without going into the detail, my noble friend has raised some important issues in these amendments, and if he is persuaded to withdraw them, I hope that it will be on the basis that further discussions will take place between him and Ministers.

Photo of Lord Brett Lord Brett Government Whip, Government Whip

My Lords, I suspect that we agree on many of the issues raised by the three amendments but not on how to address them. To summarise, they would delete the insolvency exception to the prohibition of the so-called "pay when paid" clause, overturn the decision of this House in its judicial capacity in respect of the Melville Dundas v George Wimpey case, and introduce a statutory right for a construction firm working under a contract covered by the 1996 Act to receive adequate security in respect of the contract. My noble friend pointed out that the construction industry is unique in that the "pay when paid" clauses are prohibited by statute. The exception is for insolvency, as he said, and it is there for a good reason. It continues to allow construction firms the same protection from the risks of insolvency as exists in other industries.

The decision of the House of Lords in respect of the Melville Dundas v George Wimpey case was indeed technical and there was a 3:2 split judgment, but its effect is that a creditor under a construction contract, as Wimpey had become, should not be disadvantaged compared with a creditor under any other form of commercial relationship.

Finally, my noble friend suggests that we introduce an amendment which provides a statutory right for a firm in a construction supply chain to receive adequate security in respect of the contract. Where no security is forthcoming, he suggests that the payee may suspend performance until it is. In such a case, of course, a payer would have to pay an additional sum reflecting the extra costs which the payee incurred in stopping the work. That appears to us to come pretty close to a double jeopardy. Disregarding that point, by making it a statutory right for a payee in a construction supply chain to demand such security, we would create a very uneven playing field between firms in the construction industry and businesses in other industries which have no such statutory right.

That brings me to the heart of the issue so far as concerns the Government. Our objection to the amendments is not technical or one of detail; it is on the grounds of broad principle. SMEs exist throughout construction supply chains. We accept that the construction industry faces difficulties in the current economic downturn, but so do other sectors and specific firms in sectors which are perhaps less immediately impacted upon. However, importantly, a great number of the industry's customers are themselves small businesses. Manufacturing or retail businesses seeking to extend premises are but one example.

It is a feature of UK insolvency law that it applies uniformly, and it is important that we do not create the position where the insolvency regime as regards parties to a construction contract is radically different from that which applies more generally across the economy. The clauses in this part of the Bill work to respect that principle, as I briefly outlined earlier. Each of the amendments put forward by my noble friend seeks to a greater or lesser degree to create a different position for the construction industry.

We accept that the issue is important but we believe that the only correct way of dealing with it is on a pan-economic basis. In the other place earlier today, we made a number of very relevant announcements. A number of specific measures are being introduced to help businesses across the economy by supporting their cash-flow situation. We announced that HMRC will continue its business support service for as long as it is needed and that the service is to be expanded to allow businesses expecting to make losses to offset those against tax bills due on profits from the previous years which they are unable to pay.

The 2008 Pre-Budget Report announced that the rate of corporation tax for small companies would remain at 21 per cent for 2009-10 to help small businesses during the rest of the recession. We also announced a top-up trade credit insurance scheme to help UK businesses to maintain their finances. The scheme will be available to the 14,000 businesses across the economy that already use trade credit insurance and will mitigate disruption to the supply chain and cash flow of the 250,000 companies with which they do business if their credit limits are reduced.

We will also work to ensure that the regulations and procedures for dealing with troubled companies work to facilitate company rescues where appropriate. It was announced in the Budget that the Insolvency Service will consult on providing for new funding for companies in company voluntary administration—CVAs—or for administration to provide absolute priority status to allow firms in difficulties to access the funding that they need to get back on track. Extending to medium and larger companies the moratorium on creditor action against small companies trying to agree a CVA will also give them breathing space to reach agreement with creditors.

Pan-economy measures such as those are the most effective and equitable way of dealing with insolvency and the issues surrounding it. That is not to say that we will not do anything for the construction industry. As noble Lords will be aware, some £3 billion of capital spending, which was brought forward in the 2008 Pre-Budget Report, and today's announcements on funding for housing and energy efficiency in buildings are examples of how we are providing assistance. However, that is for another discussion.

On the basis that we do not believe that it is right to create a position where the construction industry is treated differently from other sectors of the economy in the case of insolvency—

Photo of Lord O'Neill of Clackmannan Lord O'Neill of Clackmannan Labour

My Lords, before my noble friend leaves that point, perhaps I may intervene. I declared an interest in this matter during the previous debate. I am the president of the Specialist Engineering Contractors' Group, which takes in the second tier of contractors. My noble friend makes a point about the exceptionalism of the construction industry and says that this insolvency provision would be specific to that industry. Can he give me an example of any other industry where contracts are agreed and are then open to being reneged upon at any stage, even when one gets close to payment? The work is done, a price has been agreed and people are then able to walk away from that price. The construction industry has a degree of exceptionalism which insolvency has nothing to do with. In these amendments, we are trying address issues of force majeure by large contractors against, in the main, other large contractors, although sometimes small contractors are involved. We are trying to address an abuse, and it cannot be swept aside on some kind of superficial argument relating to exceptionalism, because exceptionalism is the nature of the construction industry's contractual arrangements.

Photo of Lord Brett Lord Brett Government Whip, Government Whip

My Lords, in the sections of Part 8 of the Bill which we discussed in Committee and which are not subject to amendments at this stage, we have sought to strengthen considerably the position of the smaller players. I recall that in that discussion it was pointed out that some 99 per cent of all players active in this sector are small and medium-sized enterprises. Unfortunately, at the moment, incidences of insolvency may be greater in the construction industry than in other industries. The Government are attempting, through stimulus, to ease our way through a very difficult situation. We are seeking, in as short a period as possible, to arrive at the situation where we do not have the degree of insolvencies that we are seeing at the moment in the construction or, indeed, any other industry. Unless we are unduly pessimistic that there will be no change whatever over a very long period, this is not the time to introduce a measure such as this, as it would be bound to give rise to argument in other sectors in terms of seeking government financial support. I do not think that the argument is superficial, as my noble friend suggested; I believe it is considerable and pertinent, and therefore I hope that noble Lords will understand why the Government are resisting these amendments.

Photo of Lord Borrie Lord Borrie Labour

My Lords, I am most grateful for the speech made by my noble friend Lord Berkeley. With his familiarity with the construction industry, I think that his key point is the increasingly lengthy periods of credit that are expected. Of course, the larger contractor can lean on the smaller sub-contractors on the matter of when payment is due. It provides the answer to the point made by the noble Baroness, Lady Hamwee. I can understand her basic gut feeling that it is not really desirable to give by statute a right at any time to demand this or that kind of costly security. I have made the point that the sub-contractor, too, has a great many costs in providing plant, material and equipment and so on out of his own pocket until there is sufficient good will and he receives payment. Therefore, there is a great deal of inequity in the relationships between the contractual parties. To rely on what was originally in the contract without bearing in mind who may have had the greater bargaining strength in making the terms of the contract would be to run against reality.

I am grateful for the intervention of my noble friend Lord O'Neill of Clackmannan. He said an extremely odd thing when dealing with my first amendment, which I moved. He made the point, in defence of the existing law, that it is perfectly okay not to pay someone who has done work for you if your client has become insolvent. That provision is allowed by existing law, yet most of the time my noble friend says that we should not have differences between the construction industry and other industries. In what other industry is it possible to ask for work to be done and for equipment and goods to be supplied but then not pay because one has not been paid by the client?

There is no general provision of that sort, yet there is a special provision in the Housing Grants, Construction and Regeneration Act 1996. It does not matter that there was a Conservative Government in 1996 and there is a Labour Government now. Whatever type of Government, they have in a number of ways allowed special provision for the construction industry. It is not an adequate answer to any of my amendments that I want special provision for the construction industry. If other industries are suffering then no doubt a case can be made for them. It is probably rude to say that it is a bit rich for my noble friend to criticise my first amendment, which is based on trying to get rid of an anomaly applying to the construction industry, when most of his argument is that we should not make special provision for that industry. Of course, at the end of the day—by which I mean at the end of this day—I will not push my amendment to a vote. However, I hope that I might have some honourable friends elsewhere who will wish to pursue the matter further. I beg leave to withdraw the amendment.

Amendment 169AA withdrawn.

Clause 139 : Notices relating to payment

Amendment 169B not moved.

Clause 140 : Requirement to pay notified sum

Amendments 169C and 169CA not moved.

Clause 141 : Suspension of performance for non-payment

Amendments 169D and 169E not moved.

Clause 142 : Repeals

Amendment 170

Moved by Baroness Andrews

170: Clause 142, page 86, line 16, leave out paragraph (a)

Amendment 170 agreed.

Schedule 7 : Repeals

Amendment 170ZA

Moved by Baroness Andrews

170ZA: Schedule 7, page 133, leave out lines 3 to 15

Amendment 170ZA agreed.

Clause 144 : Commencement: general

Amendment 170A

Moved by Baroness Hamwee

170A: Clause 144, page 86, line 36, after "2" insert "other than section 16"

Photo of Baroness Hamwee Baroness Hamwee Spokesperson for Communities and Local Government 8:30 pm, 22nd April 2009

My Lords, I shall also speak to Amendment 170B. These amendments are to the commencement clause of the Bill but they deal with Clause 16 and apply preconditions before what will then be Section 16 can be brought into effect. Clause 16 is in the part of the Bill dealing with petitions and allows for a petition requiring an officer to be called to account by a local authority at a public meeting; in other words, it allows for a public petition requiring a council officer to be called to account. We debated Clause 16 in Committee and I can do no better than to quote from the speech of the noble Lord, Lord Hanningfield, on 28 January. He said that he supported my proposal to leave out Clause 16 and added:

"Officers are appointed to serve the whole council; they are not there to second-guess the political will of either the administration or anybody else. This is very dangerous territory".

He then told us of an occasion when council officers had hung an effigy from the roof of the council chamber, the officer having said things that he should not have about the waste programme. He continued:

"I endorse what has been said: it is the members who take the decisions, obviously with officer guidance—but it is exactly the same as in Parliament. We are getting into very dangerous territory here".—[Official Report, 18/1/09; col. GC 128.]

I can do no better than cite that, but I will do a little more. After Committee, I was contacted by SOLACE, the Society of Local Authority Chief Executives. It used what I thought was a very apt phrase, saying that,

"it is important that accountability matches responsibility".

I hope that I can remember that phrase to use on other occasions, because it is very telling. The society stated that the process,

"should avoid overly formalising the requirements. To do so would distort the locally responsive ways in which arrangements develop. Waiting for a formal hearing assists no one—and the proposals risk being an analogue answer in a digital age ... Officers are responsible for explaining both operational and strategic decisions but only elected members are responsible for explaining the political reasoning that led to these decisions ... We make a plea that public sector staff be entitled to respect. Enhanced accountability must not equate to 'open season' on public sector staff. Discussions about local sector services are good, kangaroo courts are bad".

Following Committee, my noble friends and I tabled a number of Questions for Written Answer on the subject of such petitions. I must pay tribute to Tim Oliver in our Whips' Office, who came up with more questions to illustrate the complex issues raised than I would have thought possible—and, perhaps, than the noble Baroness would have thought she would ever have to answer on a single subject.

I shall not go through the dozens of Answers, but just pick out three points. I asked about the total number of officers whom the Government expect to be covered by the clause. The Minister answered that the relevant officers—the term used in the clause—would depend on local authorities' own administrative arrangements and decisions. I absolutely accept that, but in response to another Question the Minister said that the Government did not expect that authorities would choose to specify that junior staff were relevant officers. She was of course not able to say that junior staff would not be relevant officers.

I asked whether officers who were subject to such a petition might be accompanied or represented by an adviser—a trade union representative or anyone else. The answer was that the clause builds on existing practice, whereby overview and scrutiny committees can require officers to attend a meeting of the committee to give evidence. What is provided in the clause seems entirely different. The answer was that authorities' existing procedures in relation to officers' attendance at overview and scrutiny meetings will therefore apply, but how can they? That is not about a petition about an issue that an O&S committee is considering; it is about an individual. That is an entirely different situation.

Finally, my noble friend Lord Tope asked whether the provision would constitute a change in the employment contract of relevant officials. The answer was that the provisions in the clause merely involve the O&S committee exercising its existing powers at the request of members of the public. The term in the clause is not "request"; we are talking about a requirement on the authority, so it is not an equivalent situation.

The conditions in the amendment, which would have to be met before Clause 16 came into force, are intended to highlight our central concerns. First, local authorities should be consulted on the detailed operation of the provisions—the detail will be extremely important. Secondly, representatives of officers who may come under the clause should also be consulted on the detailed operation of the provisions and their impact. I am not aware that there has been any discussion with council officers or their representatives about what in my experience would be a novel arrangement. Thirdly, representatives of members of the Civil Service should be consulted. It has occurred to us that they may be seconded to a local authority and become subject to this—I am hearing confirmation behind me that that is precisely what happens. It is good that there is secondment—movement—between the sectors, but I wonder whether the Government have actually thought about the implications of this for their own civil servants. Finally, the clause should not come into force until,

"an Act of Parliament has been passed imposing on members of the Civil Service and others advising or assisting ministers an equivalent procedure requiring them to be called to account by a committee of either House of Parliament on a petition submitted by members of the public".

If I say goose and gander, that may make the point. I know that the Minister's instinct is to agree that it is for politicians to carry the can. She said as much in response to a point made by my noble friend Lord Greaves. Her instinct was to defend her own officials, which is an entirely proper and admirable instinct.

The Bill has been about democracy, the term used in the title, and we have said on many occasions that it is not democracy, or representative democracy, as we understand it. The Minister has said that Clause 16 is not an attempt to subvert officers or to place them in the front line in matters that are properly for councillors, but that is what the clause does; it blurs lines of accountability and plays to the tabloid agenda of "all council officers bad". That is not an agenda to which we on these Benches subscribe. There may be occasions when officers do not live up to the standards that the council expects of them, but calling them to account at the behest of members of the public in the way in which the clause anticipates is not a healthy or proper way in which to continue to improve council services. I beg to move.

Photo of Baroness Warsi Baroness Warsi Shadow Minister (Community Cohesion), Communities and Local Government 8:45 pm, 22nd April 2009

My Lords, we made it clear in Grand Committee that we have reservations about Clause 16. The noble Baroness, Lady Hamwee, quite rightly expressed those concerns again today. We said then, and we say now, that officers are appointed to serve the whole council. They are not there to second-guess the will of the administration. It remains our view that the Government did not think through the implications of the clause carefully enough before bringing the Bill to the House.

We had a full discussion of this clause in Grand Committee and the Minister has written a helpful letter to her noble friend Lord Graham of Edmonton. My noble friend Lord Hanningfield and I subsequently added our names to the Government's Amendment 170, which improved the clause. I am afraid that I must signal my unease at Amendments 170A and 170B, in the name of the noble Baroness, Lady Hamwee, which would make Clause 16 practically unworkable.

As I say, we have reservations about the clause, but we cannot support an amendment that would make the operation of the Bill conditional on new primary legislation as proposed in new paragraph (iv) in Amendment 170B. The paragraph, should it ever come about, appears to be more about tit-for-tat point-scoring than anything else. I have great sympathy with the noble Baroness's arguments against Clause 16, but it would not be responsible of us to support the amendment.

Photo of Baroness Andrews Baroness Andrews Parliamentary Under-Secretary, Department for Communities and Local Government, Parliamentary Under-Secretary (Department for Communities and Local Government)

My Lords, we are revisiting Clause 16 thanks to the ingenuity of the noble Baroness, Lady Hamwee. I am very happy to say again, very briefly, why this is an important clause. Amendments 170A and 170B in effect seek to remove it from the Bill by making the commencement contingent on a range of factors, including, most notably and unusually, a further Act of Parliament. We had an extensive debate on the clause, and I absolutely respect the noble Baroness's concern that it may blur lines of accountability between the members and officers of local authorities. We are certain that it does not, and I am glad to have the support of the noble Baroness, Lady Warsi, on that. But I do understand that we disagree on the matter and I recognise that her views are sincerely and properly held. If I thought that she was right, I would be supportive of them because these are important issues.

I am happy to place on the record why I do not believe that it is the case. Officers will continue to be accountable to members as the employers. Members will be democratically accountable to the public. Officers will not be directly accountable to members of the public. Direct accountability is a matter for elected members. To be clear, this clause is about members of the public having a direct influence to call for officers to provide evidence at an overview and scrutiny committee which is open to the public. It does not give members of the public any rights or powers over the officers concerned—it does not interfere in lines of responsibilities. The noble Baroness said that this matter was about individuals. However, I disagree: it is about issues. Petitions are about issues. We expect that a petition will call for an issue to be debated and an officer to be invited to come and explain why certain decisions have been taken. It does not give members of the public direct access or the right of direct access to officers. Officers remain accountable to elected members.

Let me state again that these provisions build on existing practice. Principal local authorities have overview and scrutiny committees, made up of members, who hold the authorities' decision makers to account. Those committees already meet in public. Under Section 21(13) of the Local Government Act 2000, any officer of the authority can already be required to give evidence at a meeting of the overview and scrutiny committee, to inform their scrutiny of the council's decisions and performance. Clause 16 provides that for certain officers, if enough people sign a petition—and that threshold will be set by the council itself; we are not telling councils where the bar should be placed—the overview and scrutiny committee will have to exercise its power to require an officer to give evidence. Clause 16 provides that authorities should specify in their petition scheme, so that everyone knows, which officers could be required to give evidence by a petition, but that the list must include the senior officers specified in Clause 16(5). We know that in practice, overview and scrutiny committees already call senior officers to give evidence, so we do not expect authorities to specify that junior officers should be among those defined as "relevant" under Clause 16(4).

Although that does not completely answer the point that the noble Baroness raised in her Written Question to me, I hope that it is sufficient to place on the record that we would not expect that to happen. Clause 16 is entirely in line with the principle that local government should be as transparent as possible, and that officers are accountable to elected members. The noble Baroness quoted SOLACE, and there was nothing in that quotation that I felt I could disagree with. SOLACE said that we must not create an open season on officers and that we must avoid over-formalising requirements and other matters that, were I to read Hansard tomorrow morning I would certainly agree with.

In its response to our consultation paper on improving accountability, SOLACE noted that senior officers regularly attend public meetings to explain council decisions and to answer questions from the public. That is what we mean by established practice: by allowing members of the local community to make use of petitions to influence the way in which scrutiny takes place. For the first time, citizens will be able to call in their petitions for O and S committees to consider the issues that are important to them and to ask for evidence on those issues from key officers to inform their examination. Petitions signed by the public will be able to trigger a meeting where elected members on the O and S committees examine evidence provided by officers who are accountable to those members as their employers. As meetings of the O and S committees are held in public, it will be open to anyone with an interest in the issue to attend and hear what an officer has to say.

We have also built in necessary and important conditions and safeguards. First, local authorities are obviously best placed to consider the detail of how these provisions should work in the broader context, taking into account local circumstances and the petition scheme. Subsection (3), as I have said, provides that the authority's petition scheme must specify how many signatures will be needed to require an officer to attend a public hearing. Secondly, it will be for authorities to determine which of their officers are liable to be called to give evidence in this way. A further question to which the noble Baroness drew attention was whether Clause 16 would allow for anyone called to be represented by a legal adviser or trade union representative. The clause builds on existing practice and therefore principal local authorities' existing procedures in relation to officers' attendance at O and S committees would apply. These may entitle the officer to be accompanied or represented by a legal adviser, trade union representative, member of the local authority or other person. I propose to put all these questions and responses, which have been scattered through Hansard over the past four weeks or so, into a bundle and then place them in the Library so that Members can consult them all together.

Clause 16 requires as a minimum that petition schemes provide that the head of the paid service—the chief executive—and the most senior officers can be required to provide information on their activities at public meetings of an O and S committee, but it must be fair. This is exactly where I agree with SOLACE. The procedure must be fair so that officers are not exposed to inappropriate public scrutiny of their private lives. This must not be a kangaroo court and they must not be exposed to harassment or bullying. There is a paramount requirement that any petition, including one calling for an officer to give evidence, that is vexatious, abusive or otherwise inappropriate will be excluded from the process anyway by Clause 14(1)(b), and from the requirement for the local authority to respond in the first place. Any petition that looks as if it is an opportunity for personal abuse or attack would never get near an O and S committee. To further safeguard officers, Clause 16(2)(d) provides that grounds for attendance at an O and S committee must relate to their specific job and cannot relate to personal circumstances or character. Guidance under the Local Government Act 2000 is already in place to cover the way in which O and S committees should conduct themselves when questioning an officer so that they are not put under undue pressure or the scope is too wide.

I understand fully the concern of the noble Baroness that there should not be any unintended consequences, but I believe that we have something here that is responsible, that builds on practice and can generate confidence in the way councils carry out their work. The only innovation introduced by the provisions is the ability of local people genuinely to influence the scope and process of examination. I have to say also that I do not think that the noble Baroness's concerns are shared by the bodies that one would expect to demonstrate concern if there was an issue. In Grand Committee, for example, we discussed the fact that CIPFA had concerns about Clause 16. My officials have since met representatives from CIPFA and have explained that the meetings at which officers would give evidence are meetings of the O and S committee which can be attended by members of the public. On the basis that this builds on current practice, CIPFA confirmed that it no longer believes that Clause 16 blurs the accountability of officers and elected members. We have agreed to work together with the body to produce guidance on the clause. Moreover, I do not need to remind her that the Local Government Association itself has not supported the amendment. In fact, it would like to see the provisions in Clause 16 extended to cover employees of other local public bodies.

Very briefly, I know that the noble Baroness will understand why I cannot accept her amendment. In terms of its content, I believe that we have met the consultation requirements that we make arrangements for extending these provisions to civil servants. On the first requirement, local authorities have been consulted about the provisions. This was done during the consultation process known as "Communities in Control". Welsh Ministers also intend to consult on the petitions provisions before they commence them in Wales. In addition, we are committed to working closely with the local government sector and the trade unions when developing guidance. The second condition is that we should consult the representatives of those officers who may come under the requirements of Clause 16; again, I believe that we have met that. Officials have met representatives from UNISON, SOLACE and CIPFA and we are committed to continuing those dialogues. The third condition is somewhat surreal because it requires the Government to consult with representatives of members of the Civil Service who may be seconded to local government at some point and who one day may work for local government. That is quite difficult for us to take on board, but essentially we have already held a public consultation on the provisions which I believe would cover future practice as well. On the role of civil servants, I do not want to rehearse at this hour what arrangements there are to call public servants to account before Select Committees, for example, but there are well worked out public practices for this.

I respect why the noble Baroness has brought back this issue. I hope that I have reassured her as to the intentions, the practices and the outcomes that this clause will generate. I am sure that Clause 16 in no way undermines the accountability of members for local decision making. I hope she will understand why I cannot accept her amendment.

Photo of Baroness Hamwee Baroness Hamwee Spokesperson for Communities and Local Government 9:00 pm, 22nd April 2009

My Lords, I am grateful to the two speakers; it is helpful to have their views and responses on the record. I cannot remember whether the noble Baroness, Lady Warsi, said that it would be "irresponsible"—but that is what she meant—to make the operation of the Bill unworkable but I am dealing with only one clause. I do, indeed, intend to make it unworkable—that is absolutely the objective—but only the clause, not the whole Bill.

I would say to the noble Baroness that it is not tit for tat. The provisions in the amendment are to illustrate the reasons for our opposition to the clause. If there was any tit for tat around this, it came from the Local Government Association. It was quite clear when it proposed an amendment—which was not one that I or my colleagues wished to pursue—that if this provision were to apply to local authorities, it should apply to other authorities as well. It was a reaction to that. It was not a case of, "We think it is a good thing and let us extend it". I recall its briefing supporting the proposed amendment very well.

As to the issue of a new Act of Parliament, I am not the first to propose this. The noble Viscount, Lord Astor, and the noble Lord, Lord Trefgarne, tabled an amendment proposing that the Bill being promoted by my noble friend Lord Oakeshott of Seagrove Bay on taxation of Members of this House,

"shall not come into force until an Act of Parliament has been passed imposing equivalent requirements to those contained in this Act upon members of the House of Commons".

So there is not the amount of novelty in my amendment that might have been apparent.

It is suggested that Clause 16 is about issues and not individuals. The Minister said that there would be "no right of access", I think is the term she used, for members of the public to an officer. But if it is only about issues, it is for the overview and scrutiny committee, surely, to decide which officers to call. If the clause is about only the senior officers being required within the category, it should say so. Nor is the clause about evidence; calling to account is qualitatively different from giving evidence.

Picking up on the points in my amendment, the Minister assures us that there has been consultation on the detail but, given her comments about the guidance that has been issued and hoping that there will be consultation on the draft guidance, I assume that there has not been consultation on the detail to the extent that I anticipated.

The reference in my amendment to either House of Parliament is not intended to be a right for members of the public; it is a right for Select Committees, which is quite different. Clause 16 is not about issues; it is about calling an officer, identified by name or description, to account at a public meeting. This is a matter of principle and I wish to test the opinion of the House.

Division on Amendment 170A

Contents 34; Not-Contents 60.

Amendment 170A disagreed.

Division number 3 Local Democracy, Economic Development and Construction Bill [HL] — Report (4th Day)

Aye: 32 Members of the House of Lords

No: 58 Members of the House of Lords

Ayes: A-Z by last name

Tellers

Nos: A-Z by last name

Tellers

Amendment 170B not moved.

Amendment 171

Moved by Baroness Andrews

171: Clause 144, page 87, line 7, leave out "30" and insert "(Joint overview and scrutiny committees)"

Amendment 171 agreed.

Amendment 171A not moved.

Amendment 172 had been retabled as Amendment 170ZA.

In the Title

Amendment 173 not moved.

Report received.