Local Government (Finance) Bill: Consideration Stage

Executive Committee Business – in the Northern Ireland Assembly at 11:45 am on 25th January 2011.

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Photo of William Hay William Hay Speaker 11:45 am, 25th January 2011

I call the Minister of the Environment to move the Consideration Stage of the Local Government (Finance) Bill.

Moved. — [The Minister of the Environment (Mr Poots).]

Photo of William Hay William Hay Speaker

Members will have a copy of the Marshalled List of amendments detailing the order for consideration. The amendments have been grouped for debate in my provisional grouping of amendments selected list.

There are two groups of amendments, and we will debate the amendments in each group in turn. The first debate will be on amendment Nos 1 and 2 and amendment Nos 4 to 13, which deal with delegated powers in the Bill and some technical changes. The second debate will be on amendment No 3, which aims to prevent the Department from reducing mid-year the amount of rates support grant awarded to a council.

Once the debate on each group is completed, any further amendments in the group will be moved formally as we go through the Bill, and the Question on each will be put without further debate. The Questions on stand part will be taken at the appropriate points in the Bill. If that is clear, we shall proceed.

Clauses 1 to 23 ordered to stand part of the Bill.

Clause 24 (Security for money borrowed, etc.)

Photo of William Hay William Hay Speaker

We now come to the first group of amendments for debate. With amendment No 1, it will be convenient to debate amendment No 2 and amendment Nos 4 to 13. The amendments deal with delegated powers and technical changes to the Bill.

Members will note that amendment No 4 is a paving amendment for amendment No 6; amendment No 5 is a paving amendment for amendment No 12; and amendment Nos 8, 9, 10 and 11 are consequential to amendment No 7.

Photo of Edwin Poots Edwin Poots DUP

I beg to move amendment No 1: In page 8, line 27, leave out “made subject to negative resolution”.

The following amendments stood on the Marshalled List:

No 2: In page 8, line 29, at end insert

“(10) An order shall not be made under subsection (9) unless a draft of the order has been laid before, and approved by resolution of, the Assembly.” — [The Minister of the Environment (Mr Poots).]

No 4: In clause 27, page 9, leave out lines 33 to 35. — [The Minister of the Environment (Mr Poots).]

No 5: In clause 27, page 9, leave out lines 40 and 41. — [The Minister of the Environment (Mr Poots).]

No 6: In clause 27, page 10, line 5, at end insert

“(9A) A council shall give the Department such information for the purpose of the calculation mentioned in subsection (5), at such time and in such form as the Department may determine.” — [The Minister of the Environment (Mr Poots).]

No 7: In clause 32, page 12, line 9, leave out “chairman” and insert “chairperson”. — [The Minister of the Environment (Mr Poots).]

No 8: In clause 32, page 12, line 10, leave out “vice-chairman” and insert “vice-chairperson”. — [The Minister of the Environment (Mr Poots).]

No 9: In clause 32, page 12, line 12, leave out “chairman or vice-chairman” and insert “chairperson or vice-chairperson”. — [The Minister of the Environment (Mr Poots).]

No 10: In clause 39, page 14, line 28, leave out “chairman” and insert “chairperson”. — [The Minister of the Environment (Mr Poots).]

No 11: In clause 39, page 14, line 29, leave out “chairman” and insert “chairperson”. — [The Minister of the Environment (Mr Poots).]

No 12: In clause 43, page 16, line 20, at end insert

“(2) Regulations and orders under this Act may contain such incidental, supplementary, consequential, transitory or saving provisions as the Department thinks necessary or expedient.” — [The Minister of the Environment (Mr Poots).]

No 13: In schedule 1, page 18, line 18, at end insert

“The Deregulation and Contracting Out (Northern Ireland) Order 1996 (NI 11)

5A. In Schedule 4 (restrictions on disclosure of information), in the definition of ‘chief financial officer’ in paragraph 7(3), for ‘148(1) of the Local Government Act (Northern Ireland) 1972’ substitute ‘42 of the Local Government Finance Act (Northern Ireland) 2011’.” — [The Minister of the Environment (Mr Poots).]

Photo of Edwin Poots Edwin Poots DUP

A number of these amendments arise from recomm­endations that the Environment Committee made at Committee Stage. I thank Committee members for their helpful recommendations and their timely scrutiny of the Bill.

All the amendments in the group are technical in nature. Amendment Nos 1 and 2 concern the level of Assembly control stipulated in relation to one of the delegated powers in the Bill. Clause 24 makes provision for security for money borrowed by a council and for the appointment by the High Court of a receiver in the event of a default. Subsection (8) provides that an application to appoint a receiver may not be made unless the amount owed is £10,000 or more. As it stands, subsection (9) enables my Department to change that amount by means of an Order, subject to negative resolution. The Committee, acting on advice from the Examiner of Statutory Rules, has recommended that such an Order be subject to the affirmative procedure.

The reason for that is that an Order under clause 24(9) would bring about a direct amendment of the Bill in respect of a jurisdiction of the High Court and should, therefore, attract a higher level of Assembly scrutiny than the negative resolution procedure currently provided for. I agree with the Environment Committee’s recommendation. Amendment No 1 will remove from subsection (9) the words that state that an Order for that purpose should be subject to negative resolution. Amendment No 2 will provide for such an Order to be subject to draft affirmative procedure. Those two amendments need to be considered in tandem, and I urge Members to support them.

Amendment No 4 is linked to amendment No 6 as they are both concerned with the means of collecting information from councils for the calculation of the rates support grant. Clause 27 makes provision for the rates support grant by bringing forward the existing provision for the resources element of the general grant for the local government miscellaneous provisions. As in the 2002 Order, clause 27(5) gives my Department the power to make regulations, subject to draft affirmative procedure, on how the grant is to be calculated. The current regulations for the general grant, which were made under the 2002 Order, include a pro forma of the information that councils need to provide for the grant calculation.

The purposes of amendment Nos 4 and 6 is to allow the means of requesting information used in the calculation of this grant to be sought by departmental determination rather than by means of a pro forma stipulated in regulations. That will allow technical updates to accounting practices that do not affect the calculation of the grant to be taken forward promptly via departmental determination and rather than through the draft affirmative subordinate legislative route. I had emphasised that the formula and calculation of the rates support grant will not be influenced by the amendment. Its purpose is to enable my Department to reflect any technical updates to accounting practices in a timelier manner and to avoid unnecessary draft affirmative legislation.

Amendment No 6 will add a new subsection, shown in the Marshalled List as subsection (9A), to clause 27, which gives my Department power to seek this information from councils via determination. As a consequence, amendment No 4 to subsection (5C) is needed to remove my Department’s ability to regulate in the matter. I urge Members to support those amendments.

Amendment No 5 is a technical amendment that is linked to amendment No 12. With your permission, Mr Speaker, I will give the background to both of those amendments simultaneously. It is customary to provide that subordinate legislation made under any of the enabling powers in a Bill may contain any incidental, supplementary, consequential, transitory or saving provisions. Currently, the Bill only makes that provision regarding regulations under clause 27 in respect of the rates support grant. I recommend that it should extend to all regulations or Orders made under the powers in the Bill.

Amendment No 5 to clause 27 is technical and does not change the provision that the rates support grant regulations may include such incidental, supplementary, consequential, transitory or saving provision as considered expedient or necessary. Instead, it simply moves the provision to clause 43, where it will apply to all regulations and Orders made under the powers in the Bill. The amendment to clause 43 is tabled as amendment No 12.

Amendment Nos 7 to 11 were recommended by the Environment Committee in the interests of gender-neutral drafting. Those amendments are technical in nature and do not involve any change of policy. Part 3 of the Local Government Finance Bill updates the legislative framework concerning payments to councillors, the greater part of which currently sits in Part V of the Local Government Act (Northern Ireland) 1972.

Clause 32 provides for the payment of allowances to the chairman and, where applicable, vice-chairman of the council. The terms “chairman” and “vice-chairman” were used in clause 32 as they refer to the offices established under sections 11 and 13 of the Local Government Act (Northern Ireland) 1972. The terms were preserved in the Bill, as introduced, in order to maintain a connection with the 1972 Act. During Committee Stage, the Environment Committee noted the use of the terms in clause 32 and recommended that the Bill should be amended to replace them with gender-neutral terms. That proposal will not change the provision permitting a council to pay allowances to its chair or vice-chair. As the Assembly is committed to the use of gender-neutral language in the drafting of legislation, I accept the Environment Committee’s recommendation. I have tabled amendment Nos 7 to 9 accordingly to amend all the references in clause 32 to “chairman” and “vice-chairman”.

Amendment Nos 10 and 11 also relate to gender-neutral drafting. Clause 39 provides for payments regarding public appeals and re-enacts without amendment the current provision of section 115(1A) of the Local Government Act (Northern Ireland) 1972. Amendment Nos 10 and 11 will replace the references to “chairman” in clause 39 with “chairperson” for the purposes of gender-neutral drafting and will not impact on a council’s powers to make payments in connection with public appeals. I urge Members to accept amendment Nos 7 to 11 so that the Bill may achieve consistency.

I already explained the background to amendment No 12 in my introduction of amendment No 5. However, I will summarise by reminding Members that amendment No 12 is technical and does not affect the level of Assembly scrutiny or any regulations or Orders made under the powers in the Bill. It is simply a general provision that any regulations or Orders made under the Bill may include such incidental, supplementary, consequential, transitory or saving provisions as considered expedient or necessary.

The last amendment in this group, amendment No 13, is the addition of the Deregulation and Contracting Out (Northern Ireland) Order 1996 to the schedule of minor and consequential amendments. It will ensure that the definition of the term “chief financial officer” in that Order will refer to the Local Government Finance Act (Northern Ireland) 2011. That will not impact on policy; it is merely a matter of updating a legislative reference. I ask all Members to support these amendments.

Photo of Cathal Boylan Cathal Boylan Sinn Féin 12:00 pm, 25th January 2011

Go raibh maith agat, a Cheann Comhairle. Thank you, Mr Deputy Speaker. Ar son an Choiste Comhshaoil, ba mhaith liom fáilte a chur roimh an Bhille um maoiniú rialtais áitiúil.

On behalf of the Environment Committee, I welcome the Consideration Stage of the Local Government Finance Bill. The Bill may not seem particularly important or relevant to the ordinary person on the street. However, having gone through a detailed scrutiny of it, I can say with confidence that the Bill has the potential to impact on every citizen in the North, because it gives local authorities more powers to handle their finances.

The main aim of the Bill is to modernise the current legislative framework for local government finance and councillors’ remuneration. It will allow district councils to have greater freedom to manage their financial affairs without having to obtain consent from the Department. However, that, of course, is a double-edged sword, and with more powers must come more responsibility.

The robustness of the audit process exercised the Committee on several occasions during Committee Stage. Before I go into detail on the amendments, I will bring your attention, a LeasCheann Comhairle, to the Committee’s recommendation that, in conjunction with the implementation of the Bill, the audit process should be reviewed and, if necessary, strengthened. We would welcome a commitment from the Minister today that that will take place.

The Bill was referred to the Committee on 28 April 2010, and, to ensure that there was enough time to scrutinise the Bill fully and effectively, the Committee sought an extension to December 2010. Even with the officials’ constructive approach and the good working relationship between the Department and the Committee, it took us almost all that time to scrutinise the Bill in depth. The Committee’s detailed scrutiny led to five recommendations, and I am pleased to report that the Minister has taken on board all except one of the Committee’s recommendations for amendments. I thank the Minister for listening to the Committee and for taking those recommendations on board. However, I urge him to reconsider the reconsider the Committee’s amendment, which I will explain in detail in the debate on the next group of amendments.

Before I talk about the amendments in detail, I wish to mention a very significant issue that is relevant to the Bill. The Committee is keen to see the inclusion of social clauses in public procurement contracts, and it questioned the Department about including the necessary legislation in the Bill. However, the Committee was delighted to learn that the restrictions to social clauses are being dealt with through subordinate legislation and that work on that is already under way. The Committee urges the Department to progress that rapidly.

I will now comment on the first group of amendments. The 12 amendments in this group have all been tabled by the Minister. However, as I mentioned, the Committee several of those amendments were recommended to improve the Bill. First, the Committee wanted to see the level of Assembly scrutiny raised to the highest level should the Department choose to exercise its powers to substitute a different sum of money for the amount at which a receiver may be appointed. The amount is currently set at £10,000, but the Bill gives the Department power to alter that. The Committee felt that, because it would directly amend the Bill in respect of the jurisdiction of the High Court, it was important that a decision to change it should come before the Assembly to be affirmed. Amendment Nos 1 and 2 make the necessary changes, and, on behalf of the Committee, I welcome the Minister’s amendments to clause 24 accordingly.

I will now skip to amendment Nos 7 to 11, which have been tabled by the Department on the Committee’s recommendation. Mindful of the Executive’s commitment to draft their legislation in gender-neutral terms, the Committee was concerned to see reference to “chairman” and “vice-chairman” in the Bill. Although members recognise the validity of the Department’s rationale that this is in keeping with local government legislation, it called on the Department to make the necessary changes to bring the legislation into the twenty-first century. On behalf of the Committee, I therefore welcome these five amendments that achieve that.

Amendment Nos 4 and 6 were brought during Committee Stage of the Bill, and the Department explained that they will allow the information it requires to calculate the rates support grant by determination rather than pro forma. Officials assured the Committee that this would not affect the formula, the calculation of the rates support grant or the elements to be taken into account of in the calculation, but they would allow the Department sufficient flexibility to adjust the new accounting practices without having to bring subordinate legislation to the Assembly for approval each time. On the basis of that assurance, the Committee accepted the amendments. On behalf of the Committee, I support amendment Nos 4 and 6.

I turn to amendment Nos 5 and 13, as one is consequential to the other. The Committee was advised of these amendments during Committee Stage and accepted that they were to allow for the addition of a further Statutory Instrument to schedule 1. I support amendment Nos 5 and 13 on behalf of the Committee accordingly.

Amendment No 12 was also brought by the Department during Committee Stage, and the Committee accepted the Department’s explanation for its inclusion. The Committee understands that it is common practice for primary legislation to contain a provision to allow orders and regulations to be made in order to include such incidental, supplementary, consequential, transitory or saving provisions as may be required. However, in the Bill as drafted, that only applied to a single clause. The amendment broadens that to apply it to the entire Bill. Therefore, on behalf of the Committee, I also accept amendment No 12. That concludes the Committees’ position on the amendments in group 1.

Photo of Danny Kinahan Danny Kinahan UUP

I am also pleased to speak at this Consideration Stage, especially as the Bill’s intent is to make life easier for councils in managing their finances. I will be very brief. My biggest concern with these eases is around asking for extra or stronger auditing of councils. There will have to be some hand-holding of councils, which all interpret things in different ways at the moment, to ensure that they fully understand how to make the most of this new freedom and of the controls and the risk element that comes with it. I do not want the Department to be seen to be heavy handed or to be the regulator or the punisher, although it will have its position in the audit. We need very strong guidance to help councils make the most of these new regulations.

I fully support amendment Nos 1 and 2, which require draft affirmative resolution to be brought if we wish to change the figure of £10,000 above which a receiver should be involved. Amendments Nos 4 and 6 are technical amendments, which relate to the rates support grant and its determination. It is good that the Department says that it will talk to councils and will have the power, through this Bill, to determine the grant. However, the report states that in-year cuts in the rates support grant or the resources grant were unique or exceptional, yet we know that, in the Budget this year, there will be a reduction of £1·2 million in the resources grant. Those grants are incredibly important to the councils. Therefore, I ask the Minister and Department to make sure that councils know of those matters well in advance.

We fully agree with amendment Nos 7 to 11, which deal with gender-neutral drafting. We also fully support amendment Nos 5, 12 and 13, which are technical.

Photo of Stephen Farry Stephen Farry Alliance

Thank you very much, Mr Deputy Speaker — I am sorry; Mr Speaker. I demoted you there by accident. I declare an interest as a member of North Down Borough Council. We regard the amendments in this group as being largely technical, although we obviously strongly welcome the gender-neutral language and wonder why it was written any other way in the first place. We give our full support to the amendments in this group, and there is probably little more to be said at this stage. We will have more to say about the second group of amendments.

Photo of Willie Clarke Willie Clarke Sinn Féin

Go raibh maith agat, a Cheann Comhairle. I declare an interest as a member of Down District Council. Sinn Féin supports the first group of amendments.

The main aim of the Bill is to allow councils greater flexibility to manage their financial affairs without having to go continually to the Department, which is time-consuming for the Department and councils. Having to do that brings a great deal of uncertainty to the rolling out of council plans. With that responsibility comes a greater scrutiny role, which the Chairperson mentioned. Greater audit powers may be required, and, as Danny Kinahan said, we need strong guidance for councils in that regard.

I joined the Committee for the Environment relatively late in the Bill’s Committee Stage, so most of the Committee work had already been carried out — luckily enough, says the Chairperson. One of the main issues that I raised came about when a NILGA delegation gave a presentation: social clauses regarding procurement by council. When councils carry out major procurement for the likes of leisure centres, headquarters and stuff like that, meaningful apprenticeships and job opportunities should be given to the long-term unemployed from the area. I am glad to hear that the subordinate legislation will deal with that, and I look forward to it coming through the Committee.

Finally, amendment Nos 7 to 11 deal with the gender-neutral terms in the legislation. That has to be welcomed, because the titles “chairman” and “vice-chairman” are not appropriate in this day and age in relation to equality for our female colleagues who are councillors, MLAs or whatever. If women are to be encouraged into politics, a neutral atmosphere needs to be provided. When I became my council’s chairman, I wanted to be known as the chairperson. That caused a great deal of difficulty, which was all down to dinosaur local government legislation. As I say, we need to promote a good neutral environment for women in council chambers. Sinn Féin supports the amendments.

Photo of Edwin Poots Edwin Poots DUP

I thank Members for the issues that they raised during the debate. I will cover them quite quickly. The issue of audit is always available for review. Audit procedures need to be effective, efficient and understandable so that councils know exactly where they stand, what they are permitted to do and so forth. On some occasions, there has been a degree of confusion, which has not always led to best practice. Sometimes, there have been attempts to resolve issues in a very ham-fisted way, so audit procedures need to be reviewed constantly. Should matters arise, we would be quite happy to look at those issues.

We are finalising the consultation document on the social clauses introduced by the subordinate legislation, and it will be issued in the near future. I am very keen that local authorities are able, as far as possible, to use local businesses, so long as they provide and demonstrate value for money. However, sometimes, only very small savings — a few pence or a few pounds — can be achieved in the process. Ultimately, that leads to the loss of local jobs, which does not benefit local communities, so we will look at all that to see whether we can move the issue forward.

My officials have been working on supporting councils in the early stages of the new financial regime, and we will continue to work with our local government counterparts to ensure that councils are assisted, and, where necessary, we will offer further assistance with the introduction of the new financial regime. So, we are very happy to address the matter raised by Mr Kinahan, and I thank Members for their support for the amendments thus far.

Question, That amendment No 1 be made, put and agreed to.

Amendment No 2 made: In page 8, line 29, at end insert

“(10) An order shall not be made under subsection (9) unless a draft of the order has been laid before, and approved by resolution of, the Assembly.” — [The Minister of the Environment (Mr Poots).]

Clause 24, as amended, ordered to stand part of the Bill.

Clauses 25 and 26 ordered to stand part of the Bill.

Clause 27 (Rates support grant)

Photo of William Hay William Hay Speaker

We now come to the second group of amendments for debate. There is only one amendment — amendment No 3 — which aims to prevent the Department from reducing mid-year the amount of rates support grant awarded to a council.

Photo of Cathal Boylan Cathal Boylan Sinn Féin

I beg to move amendment No 3: In page 9, line 26, at end insert

“and shall not be reduced during the financial year in question”.

I shall explain the Committee’s reasons for tabling amendment No 3. On 23 July 2010, during Committee Stage, the Department announced that the rates support grant was to be cut. For those more familiar with the old terminology, that refers to the resource element of the general grant. The Minister was at pains to stress that it was not a common occurrence and that it was not something that he took lightly. Nonetheless, 18 councils in receipt of a rates support grant received an in-year cut of 5·9%. The impact on councils varied, but, in total, it amounted to £1·1 million being taken out of the local government economy overnight. Not all councils receive the rates support grant, which is calculated using a formula in order to support councils whose wealth per capita falls below the national average. Consequently, only councils that are already under financial pressure receive it.

The problem does not lie in the formula. Indeed, based on submissions to the Committee, it would be fair to say that councils are generally happy with the present statutory formula under current local government arrangements. The problem lies with the fact that the grant can be cut during the financial year. As anyone here who has been a councillor knows fine well, an in-year reduction in funds is very difficult for a council to manage. Once a council has struck its rate for the year, it cannot go back to its citizens to ask for more until the following year. This was a clear case of the Department changing the goalposts mid-game, which the Committee believed was not acceptable or fair. Members certainly recognised that the Department’s budget was under pressure at the time, but the in-year monitoring-round process gives more flexibility than councils have.

The Committee was informed that the Minister told councils recently that, due to the severe financial challenges facing his Department, he cannot rule out further in-year cuts in future years. That could lead to some councils that are in receipt of the highest support grants losing millions of pounds, result in rates going up by as much as 25% and put ratepayers in those districts at a distinct disadvantage. The Committee, therefore, felt that the opportunity should be taken to prevent such a decision being taken again. Members fully acknowledged that the Department has to cut its cloth accordingly and, indeed, acknowledged the necessity for that in its recent scrutiny of the budget proposals. However, that should be done at the start of the year, allowing councils to strike their rates accordingly. The amendment will mean that once the rates support grant has been agreed, it will be ring-fenced, and the councils will be able to budget in the certain knowledge that that will not be altered during the year.

Photo of Peter Weir Peter Weir DUP

At the start, I should declare an interest as a member of North Down Borough Council. However, other Members might have an even greater interest because, directly speaking, the rates support grant does not financially aid north Down in any way. One can draw conclusions on whether I have an interest in the matter or not.

I will oppose the amendment. However, I do not do so without sympathy towards it. I and others have been in the position of looking at finance and setting rates at council level, and, understandably, we do not want a situation in which something is imported in the middle of the rates process that could affect it. Consequently — I am sure that the Minister will agree — we should, as far as possible, avoid any situation in which there is an in-year cut; it is not something that would be embraced by the Minister of the Environment or any other Minister, because it is not good practice.

However, there is a distinction between what is broadly good practice and what should be a legislative requirement. The problem with the amendment is that it ring-fences that to prevent it ever happening from a legislative point of view. That is not the case with any other part of the Minister’s budget or with pretty much any other Minister’s budget. The amendment would put us in a unique situation in which one aspect of the budget could not be touched but any other aspect is open to be changed in-year. As we have seen from experience, there can be circumstances whereby a financial tsunami hits Northern Ireland, and we could end up in a situation in which we are overwhelmed by circumstances and in which action needs to be taken quite swiftly.

Perhaps a more likely situation is that we may yet get hit by another, unannounced, cut from George Osborne that is simply imposed on the Executive and through which £100 million, £200 million or £300 million is suddenly dragged back and taken out of the Budget. That has happened with the emergency Budget, and it could happen again. Consequently, Ministers — the Environment Minister no less than any other — may well be faced with having to make in-year cuts in circumstances that would not be welcomed by the Minister or, indeed, by any Minister. That would have to be faced up to and the Minister, when deciding his budget, would have to look at all the aspects of the Department and identify areas for cuts.

Are we saying that, if there are to be cuts, the support for local government will be sacrosanct and, for example, the road safety budget will not be ring-fenced but the resources grant cannot be cut by a penny? Are we to say that environmental protection is to be completely open to any degree of in-year monitoring or in-year cuts but we cannot touch local government? Are we to say that the money for waste support and similar issues can be taken away but we must legislate for and ring-fence this one aspect so that it cannot come out of the budget? That, to my mind, is not a logical position.

As I said, any Minister will strive to avoid that situation. However, some circumstances can be entirely outside a Minister’s control and can overtake events. Although I think that it is good practice to not have in-year cuts, it is a step too far to legislate for that. That is why, on reflection, I believe that the amendment is unwise and we are better to not have such a rigid position but to give a little bit of flexibility to the Department, the Minister and the Executive. It is not even the case that bits of health spending or education spending are so ring-fenced that they cannot be touched from a resource point of view, so it is beyond me why this is being put in a unique position, which would be the case if the amendment went through. Consequently, although I understand the sentiments behind the amendment and its practical implications, it does not merit support, so I oppose it.

Photo of William Hay William Hay Speaker 12:30 pm, 25th January 2011

The Business Committee has arranged to meet immediately upon the lunchtime suspension. I propose, therefore, by leave of the Assembly, to suspend the sitting until 2.00 pm. The next Member to speak to the Bill after Question Time will be Danny Kinahan.

The sitting was suspended at 12.30 pm.