Local Government Bill — [1st Allotted Day]

House of Commons, 5 March 2003.

New Clause 10 — Local Retention of Rates

Nick Raynsford (Labour, Greenwich and Woolwich)

I beg to move, That the clause be read a Second time.

Michael Martin (Speaker, Glasgow Springburn)

With this it will be convenient to discuss Government amendments Nos. 19 to 23.

Nick Raynsford (Labour, Greenwich and Woolwich)

New clause 10 will provide for local authorities to retain some or all of the growth in business rate revenue for their areas. The proposals will allow us to introduce a scheme along the lines that the Chancellor announced in his 2002 pre-Budget report. The scheme will increase the incentives for business and local authorities to work in partnership, to maximise local economic growth and regeneration, while at the same time governing additional resources to address local priorities.

Any scheme introduced will generate additional revenues from increases in the tax base generated by local authorities successfully encouraging growth and not from increasing the tax on existing business. The money raised would be genuinely additional to local authorities and they will be free to decide how to spend it. The scheme will allow local authorities to keep only revenues associated with any growth in the business rate tax base and will not replace the current business rate pooling system. The business rate pool acts to reduce the unfairness of business rates and to ensure that revenues are distributed more equitably.

New clause 10 provides for a scheme in England, with rules set by the Secretary of State, and for Wales, with rules set by the National Assembly for Wales. The provision also allows the Secretary of State to implement arrangements for sharing the retained rates revenue between different tiers of authority. That will allow us to balance the need to furnish incentives to encourage business development with providing additional resources to the tier of authority that faces increased cost following business development. It is not the Government's intention that the new scheme should serve to reward only authorities that are already doing well, at the expense of declining areas. We are looking at a range of options to get the best distributional fit, with each local authority receiving an incentive that is relevant to them, while keeping the scheme as simple as practical.

We have also made it clear that local authorities will not bear the downside risk of a declining business rate tax base. We are considering options that will allow local authorities to benefit from the scheme, even though they are in economic decline, should they manage to slow the pace of that decline.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

On that point, will the right hon. Gentleman explain how on earth the Government will be able to measure relative economic decline and whether the actions of a local authority have managed to slow it?

Nick Raynsford (Labour, Greenwich and Woolwich)

The hon. Gentleman anticipates what I am about to say. We shall be consulting on the options, including the distributional consequences, in the summer. These are important issues and it is right that they should be considered by a range of people. We certainly expect there to be full and thorough consultation before detailed arrangements are put in place. There are technical points and issues of fairness that need to be addressed, as the hon. Gentleman rightly highlighted.

The provision is sensible and will allow for a new introduction—a new arrangement that will incentivise local authorities and help to build a better relationship between local authorities and business.

Amendments Nos. 19 to 23 are all consequential. I commend the provisions to the House.

Philip Hammond (Conservative, Runnymede and Weybridge)

If my interpretation is correct, new clause 10, as the Minister for Local Government and the Regions has presented it, is an attempt to give local communities a stake in economic development in their areas. However, we should make it clear that, although the phrases "economic regeneration" and "economic development" were used in the ministerial statement published last week and in the Treasury document, we are actually talking about new buildings—new physical development and infrastructure.

The provision takes a new and interesting approach to fighting nimbyism by recognising the contribution to that syndrome of a lack of immediate fiscal benefit to the community from new developments. The Government are taking an interesting initiative, which is broadly welcome.

However, the new clause is only a small beginning. Will the Minister explain whether the Government intend to extend the principle? If I correctly interpreted the real underlying purpose of the provision, which the Minister may not have heard because he was busy conferring with his colleagues, and it gives communities that suffer the burden of new development some fiscal stake in the benefits from that development, are the Government considering extending that principle to council tax receipts? Could new housing development add to the fiscal benefits enjoyed by a community? That might make it easier for the Government to secure the support, or at least the acquiescence, of local communities in their attempt to impose the housing objectives that the Deputy Prime Minister has outlined over the past few weeks.

Regulations will determine the detail of the measure, and I was expecting the Minister to be rather more forthcoming in his opening remarks. I was expecting to be scratching through my notes with a blue pen because the Minister had answered the questions that I had intended to put to him. The House is being asked to add the new clause while knowing almost nothing at all about the detail of the proposals.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I might be anticipating the hon. Gentleman's speech, but does he agree that it is probably not appropriate to make this tax change using secondary legislation?

Philip Hammond (Conservative, Runnymede and Weybridge)

The hon. Gentleman will remember that the Minister gave a pledge on Second Reading that the Government intended to make draft regulations available to the Committee before the regulation-making powers in the Bill were considered. The Minister has made no apology to the House for the fact that there are no draft regulations in this case, although we are of course considering the new clause for the first time. Indeed, I place on record the fact that, by and large, the Minister lived up to the commitment he made on Second Reading, and the Committee received a continuous supply of draft regulations, which greatly informed and enlightened the debates on those regulation-making powers.

John Bercow (Conservative, Buckingham)

My hon. Friend will know that I was not one of that privileged, small group of hon. Members who were considered suitable to serve on the Committee, and I am anorakishly but legitimately concerned about the opportunity for all right hon. and hon. Members to debate such matters on the Floor of the House. Does he agree in that context that we need to know whether the regulations will be subject to the affirmative procedure or to its negative counterpart?

Philip Hammond (Conservative, Runnymede and Weybridge)

My hon. Friend—who would, indeed, have been a fine addition to the strength of Standing Committee A—takes a great interest in the distinction between the negative and affirmative procedures, and it would be extremely useful if the Minister could clarify that point in responding to this short debate.

We are dealing with a slight gap in the armament of scrutiny, as we have had the benefit of the regulations only in relation to other parts of the Bill. The Minister talks about a consultation exercise in the summer, but it is simply not good enough that the House is being asked to agree to the new clause without any draft regulations or explanatory notes and, therefore, any indication of the Government's intentions. Are we talking about 5, 50 or 95 per cent.? Once again, we are being asked to vote for a pig in poke in agreeing to the new clause. Will the Government make anything available before the Bill is considered in the other place?

I should like to pick up two points from the very limited information that we have at the moment, which consists of the Treasury's pre-Budget statement, last week's ministerial statement, which repeated a chunk of it, and the Minister's contribution today, which repeated a chunk of that. It is clear that local authorities will retain a portion of new non-domestic business rates, but the statement refers to growth in the business tax base. It is not clear to me whether the Minister is contemplating that only a portion of that growth in the tax base attributable to new buildings will be included in any percentage to be retained, or whether he expects that revaluation increases—perhaps representing a general uplift in an area's economic tone—will be included in the amount from which a proportion will be retained.

I should like to understand a little more about the phrase "additional increases", which was used in the Treasury statement and, I think, repeated in the Minister's statement. I understand the term "additional non-domestic rates"; I understand the term "increases in non-domestic rates", but I do not understand the term "additional increases in non-domestic rates". I suspect that the Minister has in mind that there will be an amount of increase that the local authority must first achieve without receiving any retained percentage, and that only the addition above that increase will attract the retained percentage. Those are the kinds of things that we need to understand if we are to make an informed judgment about what the Minister proposes. Without draft regulations or any statement of Government intention, it is simply not possible for us to form a clear opinion.

Nevertheless, on the face of it, any empowerment of local authorities to keep even a portion of the non-domestic rate is welcome, and, I might say, in stark contrast to the Government's approach on capital receipts, which reduces the flexibility of local authorities. On a closer reading of the ministerial statement, however, I have one or two concerns about how straightforward the process will be.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

Before the hon. Gentleman moves to a detailed analysis of this proposal, will he clarify that, in principle, the Conservatives are in favour of part of the increase in the business rate being kept locally? Can he explain how that is consistent with previous Conservative policies? It may be, but, for the benefit of the House, will he elaborate the exact Tory position?

Philip Hammond (Conservative, Runnymede and Weybridge)

The hon. Gentleman and I have had these enjoyable exchanges on many occasions during proceedings on this and other Bills. It is our position that increasing local autonomy is right, and that genuinely community-based local government is the right approach. To the extent that it can be prudently done within the overall fiscal framework, the maximum possible autonomy should be accorded to local authorities.

The phrase in the Minister's short written statement of 25 February that has given me concern is the following:

"We are looking at a range of options to get the best distributional fit, with each local authority receiving an incentive that is relevant to them, whilst keeping the scheme as simple as practical."—[Official Report, 25 February 2003; Vol. 400, c. 9WS.]

Anyone who has looked at a Government scheme relating to local government finance will know that "as simple as practical" must have a different meaning from the one that it would have to the layman. Could what at first looks like a welcome devolution of power back to local authorities, to allow them to keep a tiny fraction of their non-domestic rate income, be a complex system of specifically tailored incentives to local authorities to deliver on a specific Government agenda—in this case, facilitating the development of business property and infrastructure in the area? If that is how it works in practice, with different targets, thresholds and criteria for different councils, it will effectively be another piece of ring-fencing whereby local authorities get an additional slice of money only if they comply with a specific Government agenda and deliver on specific Government targets. The Minister shakes his head to imply that that is wholly wrong, but we simply do not know, because he has told us virtually nothing about this measure. We need to know how it will work, and how we can know that it will be fair and not just another mechanism for redistribution to the Government's favoured authorities.

John Bercow (Conservative, Buckingham)

It certainly appears that the fog of confusion descending on this subject is becoming deeper by the moment. If moneys are to be shuffled back and forth in an uncertain way and in accordance with a labyrinthine formula, what assessment has my hon. Friend made of the principles on which calculations of entitlement to interest will be made?

Philip Hammond (Conservative, Runnymede and Weybridge)

I can tell my hon. Friend with absolute honesty that I have made no assessment at all of that matter.

John Bercow (Conservative, Buckingham)

Has the Minister?

Philip Hammond (Conservative, Runnymede and Weybridge)

I suspect that the Minister, with the substantial resources available to him, is also not in a position to make any such assessment, precisely because we lack many of the relevant details about how the scheme will work.

Let me pick up on something that the Minister said in his brief contribution at the outset of this debate. To paraphrase, he said that this was genuinely new additional money and was not intended to interfere with the existing pooling system for national non-domestic rates. I do not profess to be an expert on local government finance. Indeed, one of the Minister's predecessors many years ago once remarked to me that only one person in his Department genuinely understood local government finance, and he was about to retire.

John Bercow (Conservative, Buckingham)

It is like the Schleswig-Holstein question.

Philip Hammond (Conservative, Runnymede and Weybridge)

As my hon. Friend says, it is like the Schleswig-Holstein question, often posed and never resolved.

The Minister says that this additional money will not interfere with the pooling system. I presume, however, that there is only one pot, and money that does not go into that pot because it is effectively top-sliced to the retaining local authority will not be there for distribution to other local authorities. That could have several consequences. The amount of NNDR received by all other local authorities that do not achieve the Government's threshold may be reduced, and Government grant, under the formula grant process, may be increased to make up the gap. If that is the case, perhaps the Minister could say so clearly. If that is not the case, taking anything out of the NNDR pot must reduce the amount for redistribution to other authorities.

The only other alternative is that there are no other authorities, and the so-called incentive scheme is so structured—or tailored, as the Minister calls it—that every authority gets to retain a slice of its NNDR, in which case the effect may be minimised, although that will make it difficult to see the benefits of the scheme. Can the Minister give a pledge, here and now, that grant will make up the shortfall in the NNDR pot available for redistribution as a result of top-slicing for retention by local authorities? The grant that is retained will therefore be genuinely additional to the total amount of money—council tax receipts, plus formula grant, plus NNDR redistributed—that that authority would have received had it not been for the top-slicing that the scheme involves. If the Minister can give that assurance, he clearly has the details of the scheme in his mind, if not on a piece of paper. Why has he not been able to share those details with the House?

I turn to a specific question, which I apologise for asking, as it is the kind of question that one would ask properly in Committee. When the Government introduce new clauses on Report, however, we must ask such questions on the Floor of the House. Proposed new subsection (3B) of subsection (4) of the new clause, which inserts new words into section 99 of the 1988 Act, refers to

"rules that may be prescribed under paragraph (a) of subsection (3)".

I take that to mean subsection (3) of section 99. I have obtained the intranet print of the Local Government Finance Act 1988, and, although I find subsection (3) in it, I find no paragraph (a). Is that a typographical error? Does it mean to refer to the proposed new subsection (3A) to be inserted by the new clause? Perhaps the Minister will clarify that specific point when help comes to hand.

The principle of local retention is welcome, but it must be a genuine additional resource and not just a redistribution from one authority to another. The Government have said that no authority will suffer from negative business rate growth, but they have not said that none will suffer from the reduced size of the total NNDR pot for redistribution. Will the Minister give that assurance today?

The Treasury document and the ministerial statement have sounded alarm bells, and we need to see the regulations before we know whether their sounding is justified. I hope that the Minister will be able to explain why he cannot provide even an indicative outline of the Government's intentions in the way that he has done for some other clauses. Will he make a commitment today that such an outline will be available when the Bill reaches the other place?

We will not oppose the new clause, but I hope that a substantive debate on the issues will be possible in the other place or, if for any reason that is not possible, when the regulations are laid. I still hope that we will be able to persuade the Government that the provision should involve a small first step to devolution of financial autonomy back to local authorities. The rest of the Bill certainly does not deliver that.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

The new clause puts me in a bit of a quandary. I want local authorities to have extra autonomy for their spending and local taxation, so allowing local authorities to retain part of the growth in the business rate is clearly a welcome step. However, the sheer complexity of the scheme that is likely to emerge from the consultation is mind-boggling, and not just in terms of working out how the increase will be measured but, as the Minister has acknowledged, in terms of working out how we will assess the relative economic decline of an area that does not have a growing business rate tax base. We will also have to assess whether there had been a reduction in the pace of that decline because of local authority action. All that shows just how complex the proposal is.

We should give credit to the hon. Member for Runnymede and Weybridge (Mr. Hammond). He talked about how the policy would sit alongside the pooling of the uniform business rate. If the Minister answers the hon. Gentleman's question in the affirmative and if it appears that grant will be paid back into the pool to compensate for any loss of rate proceeds, the grant side of the scheme will also be complex. One can imagine the regulations that will have to be introduced. We now realise why they were not ready for consideration by the House today.

We should be worried about complexity in taxation matters. The Government have made the whole tax system far more complicated, and that has put huge extra compliance burdens on businesses and individuals. The provision will place an extra compliance burden on local authorities, and we must try to work out whether the extra financial autonomy that will be gained as a result of this timid devolution of financial power is worth the extra complexity. The House and local authorities will have to consider that balance. Our conclusions will depend on their assessment of whether the proposal is a sensible way forward.

Because of the complexity, I wonder where on earth the scheme came from. As the hon. Member for Runnymede and Weybridge pointed out, it appeared in the Chancellor's pre-Budget report, so does that mean that it came out of No. 11 Downing street and the Treasury? It is a fiendishly complicated and clever scheme of the type that the Chancellor is very good at dreaming up. Did a certain Ed Balls help the Chancellor to dream up the scheme in the back of a cab or in a pub? It has that sort of feel. It does not appear that the policy has gone through rigorous analysis in the civil service. It is rather bizarre.

I am glad that the Government are committed to consulting widely with the Local Government Association and many other stakeholders. The consultation will have to be pretty extensive and involve the consideration of detailed proposals. I hope that we will have an early sight of any draft regulations before we scrutinise them in the House.

As I said in an intervention on the hon. Member for Runnymede and Weybridge, I am concerned that, because we know so little about the proposal's eventual form, the House will be asked to provide primary legislative agreement and will be able to consider the detail only in a Statutory Instrument Committee. The proposal will probably involve hundreds of millions of pounds, and the figure is likely to grow over the years. Therefore, one would normally expect to debate such a matter in a proper Standing Committee. Since I became a Member of the House, I have had the fortune or misfortune to serve on more than seven Finance Bill Committees. They consider tiny and minor tax changes, and we spend hours in a full Standing Committee debating the merits of tax change that is worth just a few million pounds. Although the Minister pumps this up as a major tax change, he says that it will be suitable for consideration in a Statutory Instrument Committee. I have problems with that, so I hope that he will try to convince me that this is the right route for the House to take.

I also want to probe the logic behind the Government's proposal. It seems that the Conservatives have now changed their position, so we can now all agree that it is right that local authorities have, to an extent, more control over business rates in their areas. Would it, therefore, not be logical to go further than the Government propose? Ever since the Government nationalised the business rate, Liberal Democrats have argued that there is a case for denationalisation and for handing back the control of rates to local authorities. We would do that fully and completely and not in the partial and minor way envisaged by this proposal.

Will the Minister reflect on our suggestion? He may try to keep his counsel, but he will know that the Government have set up the balance of funding review. That review is relevant to the debate, because it will examine how much of a local council's budget should be raised through local taxes and how much should come from central Government grant. The presumption is that the review will try to shift the balance so that more of a local authority's revenue comes from local taxes. Clearly, this proposal would be a small step in that direction.

Philip Hammond (Conservative, Runnymede and Weybridge)

And the 55 per cent. council tax rises.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

The hon. Gentleman refers to the huge rises in council tax, and he is right. Unfortunately, they may be part of the shift, though not a very welcome one. It is such an unfair tax.

However, before I am called to order, Mr. Speaker, I shall move on to the point that I was about to make. The Government have set up the review and, if they wish to change the balance, surely the business rate is one of the ways they could do that. Businesses are often in two minds about such a suggestion. In the past, they were worried that some local authorities would behave unwisely, levy too high a business rate and undermine economic activity. I presume that is why the Tories nationalised the business rate. I suspect that the proposal is framed in such a complex manner in an attempt to avoid that problem.

Other business people—and sometimes the same business person in the same conversation—will argue that, since the business rate was nationalised, their links with the local authority have been weakened. The dialogue between businesses and local authorities has been significantly reduced. That is certainly the experience in Kingston, the borough containing my constituency. Although local authorities have tried to overcome the problem of reduced dialogue, the fact that we no longer have a locally raised business tax has got in the way of an important partnership.

The Government talk about building up that partnership. Given the logic of that and of this provision, will the Minister tell us whether the Government have contemplated going even further to the full denationalisation of the business rate? It could be a local business rate that is based on properties or, as the Liberal Democrats propose, it could be based on land values. I commend our proposal because by widening the tax base to include undeveloped land, we would reduce the business rate burden on existing businesses.

I hope that the Minister will explain why he is taking a partial route. We are minded to support the new clause because it will give a little extra financial autonomy to local authorities, but we want to see the details before we sign up to it in the other place and agree to the regulations that will follow.

Nick Raynsford (Labour, Greenwich and Woolwich)

We have had a useful debate on an important issue. I appreciate the generally positive response of the hon. Members for Runnymede and Weybridge (Mr. Hammond) and for Kingston and Surbiton (Mr. Davey). I agree with the hon. Member for Runnymede and Weybridge that it is right to explore ways in which we can give greater freedom and flexibility to local government. In fact, that is one of the great themes running through the Bill. Therefore I was a bit disappointed at his churlish remarks about other freedoms, such as borrowing, trading and levying charges on discretionary charges, all of which are included in the Bill. The hon. Gentleman's Government took more from local government than any other in recorded history. He should surely recognise and acknowledge this Government's steps to give greater discretion to local authorities. However, I welcome a sinner who even partially repents and I am delighted that he feels able to support, at least in principle, our proposal to allow some measure of local discretion over additions in value, created through either development or local authority actions, to enhance the non-domestic rate base.

Philip Hammond (Conservative, Runnymede and Weybridge)

The Minister emphasises the word "additions". I hope that he will say what is meant by additional increases. He also refers, however, to actions that are due to the local authority. Will some Government official determine which bits of economic growth are due to the work of the local authority and which are due to the work of the market?

Nick Raynsford (Labour, Greenwich and Woolwich)

I will deal with those matters. Let me start with the philosophic principle behind the policy. We do not believe that those areas where there is an increase in the non-domestic rate base should automatically get the full benefit; nor do we think that those areas that have a much harder task to retain industry and investment and to attract new investors should not get the benefit, because they face far greater difficulties. It is right to have a regime that genuinely rewards additional increases to non-domestic ratepayers but does not penalise those authorities that succeed in stemming decline when an authority would otherwise face economic problems. The issue is difficult and we have not yet finalised our proposals.

We have not published regulations because the scheme is in its early stages. I am grateful to the hon. Member for Runnymede and Weybridge for his kind remarks about our willingness to try to make regulations available on all other matters covered by the Bill, but the scheme's proposals have just been made, following the Chancellor's announcement, and we intend to hold a full and thorough consultation, beginning in the summer, on how it will operate. The scheme will inevitably be complex. Difficult issues need to be addressed and we want to ensure that there is a full debate.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I agree that areas that are experiencing a relative economic decline with a falling business rate tax base should not be penalised and that the system should be asymmetric, but I cannot get my head around trying to measure different speeds of decline and what actions have been taken by whom—the market or the local authority—to change those speeds of decline. I understand why the Government want to help those areas, but is that the right mechanism?

Nick Raynsford (Labour, Greenwich and Woolwich)

It is the right way to help those areas. Authorities should have an incentive. The hon. Gentleman mentioned the importance of creating closer links between business and local authorities. We are keen to do that in many ways. He knows that the business improvement district arrangements are a specific attempt to create closer links between business and local authorities. We believe that the incentive scheme will do exactly that. It would be perverse, however, as I think he acknowledged, if those authorities that have a much harder task to attract new investment and to expand their non-domestic rate base were prevented from benefiting from the scheme, especially if any huge effort that they put into encouraging good relations with business and attracting new investment is offset by a general trend of decline in the area's economic prospects.

We want a scheme that allows such efforts to be rewarded. I accept that that will be difficult. A baseline will need to be established which is founded on principles that will be the subject of full consultation. It will need to reflect the starting point against which any increases or reductions can be measured. The mechanisms will need to be agreed and the measurements will also be the subject of fairly detailed discussion.

Philip Hammond (Conservative, Runnymede and Weybridge)

Can the Minister clarify whether he means a growth in the tax base, by which I mean the base of property, some of which may be empty, that has rateable value, or growth in the rates received? In other words, does an empty factory that is filling up and starting to pay rates count as growth?

Nick Raynsford (Labour, Greenwich and Woolwich)

The hon. Gentleman raises an interesting question. We relate growth to the rate base. We do not want short-term variations, as a result of premises being empty for a short time, to distort the arrangements. There will clearly need to be rules to govern what should happen if there is a significant increase in the tax base but no overall increase in the rates derived.

Before I go into the detail, let me explain how we will ensure that information about the proposals is made available in the most comprehensive way to help discussion. We will provide notes for consideration in the other place, setting out our broad policy intent. They will outline a number of options on the scheme's detail. They will not take the form of a draft set of regulations because it would be premature to draft regulations before the consultation is complete, especially as the consultation is designed to tease out some of the complexities that may have to be addressed and to enable us to reach the right formulation. We intend to provide Members of the other place with more detailed information about our policy. I hope that the hon. Gentleman will recognise that that is in keeping with the spirit that we have adopted throughout the Bill's consideration.

The hon. Member for Runnymede and Weybridge asked whether we would extend the principle to the council tax. The answer is no, because the council tax is raised in such a way that the local authority receives the revenue raised. It would be bizarre to have an incentive when there is no question of them not receiving whatever council tax is due to them. The scheme is a response to his Government's action to ensure that non-domestic rates are not locally available other than in exceptional circumstances. As I said, we want to provide an incentive to local authorities to attract additional investment. The scheme will give them an additional bonus and it would be inappropriate to apply it to council tax.

The hon. Gentleman also asked whether regulations would be made by affirmative or negative resolution. We intend to make them by negative resolution but, to pick up on what the hon. Member for Kingston and Surbiton said about statutory instruments, that will only take place after a full discussion that is based on the consultation. That will allow the issues to be examined in great detail not just by Members of Parliament, but by a wider public. We all recognise that it is important to have full consultation on the scheme.

Philip Hammond (Conservative, Runnymede and Weybridge)

I am disappointed that the Minister said that the regulations will be made by negative resolution. Can he assure us that if they are laid before the House and are prayed against by the Opposition he will use his influence with the business managers to ensure that a proper debate on such a negative resolution is held?

Nick Raynsford (Labour, Greenwich and Woolwich)

I know that the Opposition tend to pray against almost any regulations, but it would be right and proper to have a full debate on those particular regulations. I would use any influence that I may have to assist with that aim, as there is every reason to debate those important matters. I hope that the hon. Gentleman will approach the matter in the spirit of constructive engagement that has characterised previous exchanges, and will seek to improve the scheme and ensure its effective implementation.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I do not understand why the Government do not want to introduce the regulations using the affirmative procedure. Is there a reason why they cannot take that route, as it would appear to be the most appropriate one, even though there may have been prior consultation with groups outside the House?

Nick Raynsford (Labour, Greenwich and Woolwich)

I do not believe that it would be appropriate or precedented. I repeat that there should be a full discussion during the course of the consultation. I extend to the hon. Member for Kingston and Surbiton the undertaking that I gave to the hon. Member for Runnymede and Weybridge—if Opposition Members are concerned about the detail of the regulations and would like an opportunity for debate, I shall certainly use my influence to ensure that that is possible.

May I move on to the important issues raised by the hon. Member for Runnymede and Weybridge? He asked for clarification of our intention that there should be growth in the tax base. He is right that the key is growth in the non-domestic rate base. If that were just the result of a general uplift, as I have suggested, it would just be a buckshee gain for authorities that may have done nothing at all or even have pursued policies that worked against business investment in their areas. That would not be fair or appropriate if other authorities with much greater difficulties put huge effort into trying to attract business to their areas. Equally, if the scheme was limited to areas of new development, areas that have great difficulty in attracting new development would be penalised, so it must take account of authorities' ability to maintain investment and retain and enhance businesses that might otherwise have left their areas. The scheme would certainly not be restricted to new development, although that would obviously qualify, as it would bring additional rate value to the area.

I should make it clear that the increases are additional—it is not a question of simply top-slicing the existing national non-domestic rate. A baseline will be important in ensuring that we are talking only about additions that are available under the scheme. If the whole national non-domestic rate pot was treated as a basis for the scheme and top-sliced, irrespective of whether there had been enhanced value, that would diminish the value of the scheme. The aim is to establish an agreed baseline; to continue with the national non-domestic rate and pooling arrangements, as I have already said; and to allow the additional value achieved through the kind of initiatives that I have described to be reflected in the scheme, permitting authorities to retain that additional value.

Philip Hammond (Conservative, Runnymede and Weybridge)

I am not entirely sure how the scheme will work. My understanding is that all national non-domestic rates went into the pot for redistribution, so I am not sure how the Minister will ensure that the pot is the same size after he has allowed some authorities to retain some non-domestic rates. Will he explain that again for those of us who have not been quick enough to grasp it the first time? Is he saying that there will be an annual ratchet? Does a local authority that scores a bit of additional tax base and retains 10 or 20 per cent. accumulate a certain sum forever, or does the ratchet mean that next year it has to run further up the escalator to get anything? Finally, is the Minister saying that there will be no losers, and that every authority will either be in the same position or will be a winner?

Nick Raynsford (Labour, Greenwich and Woolwich)

The answer to the last question is yes. I have already said that there is no intention to penalise authorities. This is an incentive scheme designed to give an additional benefit to authorities that have either successfully enhanced their non-domestic rate base through positive initiatives or have been able to stem the decline in that base through effective partnership with the private sector.

The hon. Gentleman asked some interesting questions about the period for which the benefit lasts. We are discussing those issues ourselves at present, and they will be the subject of consultation. There are some interesting policy issues. When there is a revaluation, a rebasing will obviously be needed. If an authority has the prospect of getting the benefit immediately after a new revaluation, but would lose it if the addition came before the revaluation, that would be a perverse incentive. We certainly do not want perverse incentives to affect the timing of schemes to attract new development. Our aim is to ensure that there is a reasonable time in which authorities can derive benefit from the addition, but clearly it cannot be indefinite, as that would involve a curious change in the tax base over a period of years. If any increase accumulated at any point in time there would never be any rebasing. We believe that there must be a rebasing; there must be a period in which authorities can secure the benefit; there must not be scope for perverse incentives. All of that, as hon. Members will understand, will be the subject of full consultation.

Philip Hammond (Conservative, Runnymede and Weybridge)

As the Minister attempts to answer my questions, it is becoming apparent that the scheme will be an incredibly complex mechanism. Can he give the House an order-of-magnitude figure for the sums of money we are talking about? I would caution him against going down a complicated route if, in fact, we are talking about small sums of money. Can he give us an idea of the budgeted figure for the total amount of retained national non-domestic rates?

Nick Raynsford (Labour, Greenwich and Woolwich)

The hon. Gentleman is making the mistake of assuming that the scheme has already been worked out in fine detail. I have made it clear to the House that it is an exciting proposal introduced by the Chancellor towards the end of last year. It has considerable benefits and advantages, which Opposition Members recognise, and we are keen to ensure that there is a full and thorough consultation during which the scheme can be discussed, refined and improved before we introduce regulations giving effect to it. There is no rush—we are not rushing to introduce the scheme in the near future, and do not anticipate it being in force before 2005, so there is plenty of time for the full discussion and debate that we should rightly have. If we had not proposed the scheme now, and if there is not an appropriate legislative vehicle in the next couple of years, that opportunity may have been lost. It was therefore right to make provision for it in the Bill. At the same time, we accept that the scheme is in its early infancy and needs to be developed and refined.

As with all matters of local government finance, we will need to establish an appropriate balance between fairness and complexity. If the scheme becomes too complex, it simply will not be worth the candle. On the other hand, if it is seen as rough justice and some of the downsides that we talked about earlier seemed likely to happen, that would undermine confidence in the scheme. That is why we will need arrangements that give the incentives that I described and give a local authority a reward for a reasonable period, but do not produce a distortion over time or perverse incentives. Those are the kind of issues that we will need to explore in the consultation.

Philip Hammond (Conservative, Runnymede and Weybridge)

I understand the need for consultation and the fact that these are complex matters, but I find it alarming that the Chancellor is proposing a scheme of incentivisation, apparently without any idea of what sum has been budgeted to pay for it, so the Minister can give the House not the faintest idea whether we are talking about £10 million, £100 million or £1 billion across all local authorities. Could that rather casual approach to the public finances be the reason why the Chancellor will have to borrow £24 billion in the coming year and £35 billion the year after?

Nick Raynsford (Labour, Greenwich and Woolwich)

The hon. Gentleman is in danger of getting away from the subject of the Bill. As a result of the prudent management of the country's public finances, we are able, uniquely among major developed countries, to undertake the substantial investment in public services that the Government are delivering. It is sad that the Opposition are committed to a 20 per cent. cut in public service expenditure, which would decimate the public services that we are discussing.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

This seems to be a little debate about some new power that may never be used, as it is such a dog's breakfast. Let me pose another problem to the Minister, so that it can be considered even before the consultation document is written. The business rate tax base could suffer from a cyclical effect: some businesses could come into an area, pay rates for two or three years, and then move out. There is a degree of variability within a particular valuation period, adding further complexities to those that we have discussed. There is a final complexity with which the Minister failed to deal in response to an intervention from the hon. Member for Runnymede and Weybridge (Mr. Hammond) with respect to the central pot. Although it may not be top-sliced, it will lose additional funds because they will go into the scheme under discussion.

Nick Raynsford (Labour, Greenwich and Woolwich)

If the hon. Gentleman thinks about it, he will realise that if there is an appropriate mechanism—I shall not anticipate what precisely that might be, because as I said, these are issues that need to be discussed and finalised following consultation—to avoid the short-term cyclical effects that he describes, and to ensure that there is genuine reward for effort to achieve an increase in the tax base without short-term fluctuations, that will make the scheme simpler. If it followed all the short-term movements that he describes, it would be an inherently more complex scheme. The contradiction that he thinks he has found does not exist. It is possible to have a scheme that is relatively straightforward—not totally simple; I accept that these are complex matters—which removes unnecessary complexity and which has the advantages that I described.

The hon. Member for Runnymede and Weybridge asked about section 3A(a) of the Local Government Finance Act 1988. I am pleased to tell him that there is a section 3A(a), and I shall read it to him. It states:

"The Secretary of State may by regulations make provision as regards any financial year—

(a) that a billing authority must estimate at a prescribed time in the preceding financial year and in accordance with prescribed rules whether there is a deficit or surplus in its collection fund for the year and, if so, the amount of the deficit or surplus".

Philip Hammond (Conservative, Runnymede and Weybridge)

Does the Minister happen to know when that was inserted into the Local Government Finance Act 1988? Alarmingly, given that we have to depend on these things, the intranet edition of that Act was prepared on 20 September 2000, so I must assume that the provision to which the Minister refers was inserted subsequently.

Nick Raynsford (Labour, Greenwich and Woolwich)

I shall ensure that the hon. Gentleman gets a full answer to that question. I can assure him that section 3A(a) exists.

The hon. Member for Kingston and Surbiton began by saying that he was in a bit of a quandary. That is a normal place for Liberal Democrats to be. Let me reassure him that he just about got there in the end, recognising that the measure is positive and deals with devolving greater financial responsibility to local authorities. We do not agree that there is a case for devolving the entire national non-domestic rate to local determination, for a number of reasons that we can explore on another occasion. We have already debated the matter.

The balance of funding review that we are initiating soon will look at a range of issues, and I have no doubt that some people may wish to raise the issue in that context. No doubt the hon. Gentleman and his colleagues will continue to press the matter, but there are not just serious technical issues relating to fairness because of the considerable disparity in the non-domestic rate values area by area; there are genuine worries on the part of business, which is not at all attracted by the idea of relocalisation. I have stressed that we are keen to encourage good working relationships between local authorities and business, and we see our proposals as one way of achieving that. I hope that the necessary new clause and the appropriate amendments will be added to the Bill.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause 14 — Standards Committees and Monitoring Officers: Delegation

"Delegation by monitoring officers

Chris Leslie (Labour, Shipley)

I beg to move, That the clause be read a Second time.

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

With this it will be convenient to discuss Government amendments Nos. 31 and 32.

Chris Leslie (Labour, Shipley)

New clause 14 is an important proposal concerning standards committees and monitoring officers in local authorities and makes two important changes in the regime governing the conduct of local councillors introduced in part 3 of the Local Government Act 2000.

The first important change allows standards committees of local authorities to create sub-committees. That is necessary because if standards committees are to consider reports of alleged misconduct, it would be fairer and more consistent with human rights for a small tribunal—say, between three and five people—to constitute the tribunal, rather than the full standards committee.

Philip Hammond (Conservative, Runnymede and Weybridge)

I do not disagree that a smaller committee may be convenient, but I would be fascinated to know where in the Human Rights Act or the European convention on human rights the Minister finds any reference to the size of the tribunal.

Chris Leslie (Labour, Shipley)

I am glad that the hon. Gentleman asks me that. Article 6 of the European convention on human rights states that everyone is entitled to a fair hearing. Some standards committees have 19 members, so there is a risk that such a tribunal would be too large and the case would turn into a show trial. A large tribunal could be intimidating to some members whose case was being considered. Case law suggests that we should make sure that the opportunity for a fairer hearing for those cases is available. We need to make the change in primary legislation so that the regulations can follow.

The second change allows monitoring officers of local authorities—those in local councils who will do the job of investigating—to delegate the function of carrying out the investigation. The provision is needed because monitoring officers can have other responsibilities in local authorities, especially smaller local authorities—for example, they may be the local council's principal legal adviser. On occasions monitoring officers may, therefore, have been involved in the very matters to be investigated, possibly having given informal advice earlier to a councillor under investigation. To avoid conflicts of interest, the new clause provides an explicit power for a monitoring officer to delegate those functions to another person.

David Winnick (Labour, Walsall North)

In recognising the importance of what the new clause proposes on standards committees and monitoring officers, may I ask whether such provision is not all the more necessary in view of the scandal at Westminster? What steps, if any, are the Government taking to get Lady Porter to pay the £26.5 million that the House of Lords has stated that she owes to the London borough of Westminster? Is it not essential that the Government regard that notorious scandal, and Lady Porter's refusal to pay despite her huge fortune, as a matter of concern?

Chris Leslie (Labour, Shipley)

My hon. Friend tempts me to discuss that case in general terms, but, sadly, I do not think that it would be appropriate for Ministers to take on the role of the Standards Board for England and the auditors in respect of that case. As he will know, it is for Westminster city council to pursue any financial matters on its doorstep. We shall see how the council manages to do that job.

I was speaking about the second important change that the new clause makes. Such changes are known as section 66 regulations, under the Local Government Act 2000, and many locally elected councillors who serve on standards committees, including a number of independent members who have given up their time to do so, have been waiting for some time for changes to complete the standards regime process and allow cases that can be best dealt with locally to be handled at local council level.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

One problem that local authorities experience with standards committees is dealing with an awful lot of trivial, silly and frivolous complaints, often made on partisan grounds, from people in all parties. Will the new clause help to reduce the number of such complaints? If not, when will the Government tackle that problem?

Chris Leslie (Labour, Shipley)

As the hon. Gentleman knows, claims and counter-claims in politics are, I am afraid, inherent in the nature of the business. There is obviously a need to ensure strong guidelines for dealing with frivolous or vexatious claims, especially if they can be dismissed very quickly. Nationally, the Standards Board for England has been carrying quite a burden in terms of the number of complaints, many of which are very minor, if not irrelevant. The board is setting up processes to ensure that it can quickly dispatch its business and clear people against whom spurious allegations have been made.

Introducing regulations to ensure that a national standards board no longer considers every single complaint and allowing complaints to be quickly delegated to a local level, where they can be dealt with equally speedily by the local standards committees, is the best way of proceeding. I do not think that it would be possible to write into primary legislation some definition of spurious allegations, as the matter is very complex, but it is best and most appropriate that local standards committees can make that judgment.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

Is not part of the problem the fact that various councillors and members of the public can make such allegations cost-free? As they stand to lose nothing, there is almost an incentive in some areas for people to make vexatious claims. The situation may be difficult, but if the Government are prepared to consider complex powers on local retention of rates, they should put their mind to this matter, which is causing real problems and wasting a lot of office time and taxpayers' money.

Chris Leslie (Labour, Shipley)

I hear what the hon. Gentleman is saying, but the tribunals in such cases are not the same as industrial tribunals, where the complainants themselves may have an expectation of compensation in making a complaint against some wrong that was done personally to them. Although cost awards might be appropriate in such cases, I do not believe that they are appropriate in the more civil situation in which complaints are made on the basis of standards and ethics, whether at a national or local level. I believe that we can strike the right balance by giving guidance to standards committees, so that they can dispatch their business efficiently. Indeed, the Standards Board for England is likely to issue guidance across the board on the questions involved, not least of which is whether monitoring officers can delegate functions to other officers.

As I said, local councils are eager for the local arrangements to come into effect. They now have strong standards committees with independent members, and these workable rules will allow them to get on with the job appropriately should the circumstances arise. I hope that the new clause and amendments will be agreed to.

Philip Hammond (Conservative, Runnymede and Weybridge)

I shall be brief.

We agree that most cases of misconduct are best resolved at local level. To the extent that the new clause seeks to remove impediments to the underlying intentions framed in the Local Government Act 2000, it is welcome. That prompts the question of why it was tabled on Report rather than being included in the original Bill or tabled in Committee. Will the Minister clarify that point, which is not a last-minute one, as concern has been expressed about it for some time?

There is also concern that the need to correct deficiencies arising from an Act that was passed only two years ago highlights the dangers of excessive legislative load, inadequate time for parliamentary draftsmen and the curtailed scrutiny and consideration that Bills often receive. I fear that the consequence of that lack of time will be that the Government will have to introduce an increasing number of measures to correct defects in legislation passed only relatively recently.

I am grateful to the Minister for giving me his interpretation of article 6 of the European convention on human rights and the way in which it militates towards a smaller rather than a larger tribunal. He spoke about a tribunal of three or four people and cited the example of a committee of 19 as excessive in terms of that article. It might be reassuring if he would confirm that he does not regard 12 members as excessive for a properly constituted tribunal in the terms of article 6. It could have serious ramifications for our legal system if he feels that 12 is excessive,. I look forward to his comments.

I must again take a few moments of the time of the House to make a couple of drafting points of the type that would have been made in Committee if the same provisions had been considered there. New section 82A(4) to the Local Government Act 2000, as set out in the new clause, provides that where the

"person nominated . . . is an officer of the relevant authority"

he will be afforded

"such staff, accommodation and other resources as are, in the officer's opinion, sufficient to allow those functions to be performed."

Where a third party is nominated to carry out the functions, however, subsection (5)(c) provides that he will be afforded

"such staff, accommodation and other resources as are reasonably necessary for the person's performance of the functions."

The criterion of being "reasonably necessary" is a rather better one than is provided in subsection (4). It is an objective criterion and I cannot see any obvious reason why a local government officer should be deemed able to determine the resources that he needs for himself, apparently without any qualification of reasonableness, while a third party is afforded only those resources that are reasonably necessary. Perhaps the Under-Secretary would like to examine that with a view to ascertaining whether, when the Bill reaches the other place, it could be amended to apply the "reasonably necessary" criterion in both cases. I have no other substantial points to make about the new clause.

David Winnick (Labour, Walsall North)

I support the new clause, which is necessary. I work on the assumption that most local government business is conducted honestly and I have no reason to believe otherwise. Clearly, a monitoring system is essential; I wish that one had existed previously. If such arrangements had been in place some years ago, the scandal at Westminster council could have been avoided. It is no good the hon. Member for Runnymede and Weybridge (Mr. Hammond) disliking remarks that reflect badly on his party; they cannot be avoided.

Philip Hammond (Conservative, Runnymede and Weybridge)

It is not a question of my disliking the hon. Gentleman's comments. I should simply be grateful if he extended their scope to include all the scandals in Labour-controlled authorities in the past 20 or 30 years.

David Winnick (Labour, Walsall North)

It is up to Conservative Members to do what they consider appropriate; I am dealing with a specific issue.

If we believe that councillors' behaviour should be above board, it is essential to provide some guidelines. We know the district auditor's findings for Westminster council: 250 council properties in eight marginal wards were sold purely to try to obtain Conservative votes. That was unlawful, and that is what the district auditor found.

Andrew Turner (Conservative, Isle of Wight)

Will the hon. Gentleman give way?

David Winnick (Labour, Walsall North)

In a moment.

The most important point is that the House of Lords found last year that Westminster council's conduct was unlawful. The highest court in the land concluded that Lady Porter's actions were unlawful. The sum involved is £26.5 million plus interest. When the issue was raised with the Conservative Government, the then Prime Minister and other Ministers said that they did not want to make a judgment or any comments until the legal process had been exhausted. That has happened. It is unfair that councillors can be surcharged, albeit small amounts, when the former leader of Westminster council can get away with not paying £26.5 million.

Philip Hammond (Conservative, Runnymede and Weybridge)

On a point of order, Mr. Deputy Speaker. We are discussing an amendment to an Act that was passed in 2000, long after the events that the hon. Gentleman describes. Are they relevant to the debate?

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

That is not a point of order for the Chair. However, I say to the hon. Member for Walsall, North (David Winnick) that we are considering changing structures, and not individual cases. I believe that he has made the point that he wanted to make and gone far enough down that road.

David Winnick (Labour, Walsall North)

I am grateful for your guidance, Mr. Deputy Speaker. I shall give way shortly to the hon. Member for Isle of Wight (Mr. Turner), who wanted to intervene earlier, but I want to make the point that if the structures had been in place at the time, the scandal that I mentioned would probably not have occurred. I therefore do not understand why the hon. Member for Runnymede and Weybridge is so upset. I should like him to condemn from the Dispatch Box Lady Porter's refusal to pay the money involved.

Andrew Turner (Conservative, Isle of Wight)

My comments may be superfluous in view of your guidance, Mr. Deputy Speaker. I merely wanted to say that if the structures had been in place in the 1940s, Herbert Morrison might not have vowed to build the Tories out of London.

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

Order. Hon. Members are straying further and further from the new clause. We should revert to it.

David Winnick (Labour, Walsall North)

I simply ask my hon. Friend the Under-Secretary to condemn what occurred and say whether he is reasonably satisfied that the new arrangements would prevent the sort of scandal that happened in Westminster. Preventing such scandals is essential for maintaining standards in public life. I also hope that the Conservative spokesman will condemn Lady Porter's refusal to pay the money involved. It is a simple request and I hope that it will be fulfilled.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

The Local Government Association has considered the new clause and given it cross-party support. That is relevant to our debate and decision on it.

I was disappointed by the Under-Secretary's reply to my intervention. He said that the provisions will not tackle the problem of vexatious complaints and that he is not minded to deal with that. He should reconsider.

There is no problem with the specific proposals and I add my support to the comments of the hon. Member for Runnymede and Weybridge (Mr. Hammond). Proposed new section 82A(4) refers to staff being sufficient "in the officer's opinion". I, too, believe that that should be subject to a reasonableness test. Officers might decide that they wanted a suite of accommodation and a range of support staff. Although an officer's decision could probably be reviewed, the process would be costly and time-consuming. It would be much simpler if we added the word "reasonable" in the appropriate place to ensure a balance and that taxpayers' money is not wasted.

Andrew Turner (Conservative, Isle of Wight)

Does the hon. Gentleman remember that, in Committee, the Under-Secretary implied that reasonableness was built into almost any provision in any legislation? I am not sure whether he is currently operating on that basis. If so, it prompts the question of why "reasonable" appears in some places but not in others.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

Indeed. That is why the hon. Member for Runnymede and Weybridge and I made that point. The hon. Member for Isle of Wight (Mr. Turner) will have noted that the phrase "reasonably necessary" appears in proposed new section 82A(5)(c). There appears to be some confusion among those who drafted the Bill and in the Minister's thinking. That is a small point and we do not want to press the new clause to a Division because of it, but I hope that the Minister will accept it and ensure that the measure is corrected before it appears on the statute book.

Robert Syms (Conservative, Poole)

I endorse the comments of the hon. Member for Kingston and Surbiton (Mr. Davey). Sub-committees are sensible because they can deal fairly speedily with any allegations against someone. People are busy, and convening a full committee can prove difficult. I therefore believe that the new clause may speed up justice in the case of a complaint. That is sensible.

The point about vexatious and frivolous complaints is significant. There are approximately 20,000 councillors in Britain but, given that number, scandals are rare. All parties have occasionally been touched by scandal, but few councillors are locked up in jail. Some are, but most are honest and diligent.

Under the current structure, party political groups tend to level complaints on a tit-for-tat basis. For example, a row happens in the council chamber and a complaint is made to the monitoring officer or the standards committee. I had experience of local government a few years ago and I have contacts today. I am always surprised by the frivolity of the complaints. One party starts, the other responds and the complaint keeps going. Guidance should include a reporting system to enable us to identify frivolous or vexatious complaints. They waste much time and effort in local government, which has many better things to do.

I am sure that monitoring officers will be pleased that they can delegate their functions. Some find themselves in the political position of being bombarded by complaints from various groups. They will be pleased to pass on their responsibilities when they can do that.

Matthew Green (Liberal Democrat, Ludlow)

The hon. Gentleman mentioned spurious complaints by councillors from both sides. I know of at least a couple of councils where senior officers used the threat of reports to the monitoring officer to try to keep their councillors going down the route that they would like. I am afraid that we see far too much of that officer-led situation in councils. Is the hon. Gentleman aware of any similar circumstances?

Robert Syms (Conservative, Poole)

I was not aware of that, although the hon. Gentleman makes a good point.

This sours relationships in local government and takes up an awful lot of time. The Minister said that the national committee has many frivolous matters referred to it. That should be made clear. Even if there were not to be a system of fines, there should at least be some system of monitoring and naming people who level frivolous or vexatious complaints, especially if they have a track record of levelling complaints that are not upheld.

Chris Leslie (Labour, Shipley)

We have covered a large number of issues in a short time, which I welcome. In response to my hon. Friend the Member for Walsall, North (David Winnick), I agree that there were several serious cases historically that led to the Government taking a strong decision to make structural changes in relation to improving standards and ethics in all levels of public life, not least in local government. Several cases gave grounds for laying the foundations for some of those changes. In the case of Lady Porter, it was the auditor who concluded that there had been scandalous misconduct in that authority. That is well known and on the record. My hon. Friend made the point extremely forcefully.

David Winnick (Labour, Walsall North)

The Minister will know that that decision has been upheld by the House of Lords, the highest court in the land. As I said, Lady Porter owes £26.5 million plus interest, and she is obviously finding outlets in various parts of the world so as not to have to pay the money owing to the London borough of Westminster.

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

Order. May I repeat to the Minister what I said to the hon. Gentleman when he addressed the House—that I would rather he did not pursue that matter any further?

Chris Leslie (Labour, Shipley)

The matter stands on the record, then, Mr. Deputy Speaker.

The hon. Member for Runnymede and Weybridge (Mr. Hammond) raised a number of issues. First, he asked why these changes were not anticipated at an earlier stage, perhaps in Committee. We have here a completely new regime for identifying misconduct, carrying out investigations, conducting hearings, imposing sanctions and so forth. The regulations governing the regime need to provide for fairness and efficiency across the wide variety of circumstances that might arise in each different local authority. That makes the regulation process somewhat complex. The need for the changes that we propose was identified following extensive consultation that we undertook, particularly last summer. We tabled the amendments in response to issues that were identified by the Standards Board for England and by monitoring officers and standards committees around the country.

The hon. Gentleman asked me to clarify whether 12 people were too many for a tribunal or, indeed, a jury. It was certainly not my intention to suggest that that number was excessive. I was trying to explain in a more sophisticated manner that it is important locally that standards committees have the opportunity to set up sub-committees so that the nature of the tribunal can most appropriately reflect the nature of the allegation in question.

The hon. Gentleman made a well-spotted point in noting that the new clause contains differing descriptions of the resources that can be allocated to monitoring officers who are undertaking an investigation and those that can be allocated to people who are delegated the function as a third person and who will have the resources that are "reasonably necessary" rather than simply sufficient to perform the function. That provision is there because it would not be right to give someone who is not an employee of an authority the automatic right to specify what resources the authority should provide. A situation involving a council employee, with the normal constraints in respect of ensuring that they have the necessary resources, differs from that involving somebody, say, from a neighbouring authority having a blanket right. That was the rationale behind the different phrases in the new clause, but I shall certainly look at that issue again to check that it does not give rise to any problems.

I am grateful to the hon. Member for Isle of Wight (Mr. Turner) for helpfully pointing out that, in general, the reasonableness test under the Wednesbury principle should also apply to any activities and judgments of public officials. That point was also raised by the hon. Member for Kingston and Surbiton (Mr. Davey).

The hon. Member for Poole (Mr. Syms) made some important points about spurious or frivolous cases. It is important in any political situation that we allow complaints to go forward and that we do not put hurdles in their way. Although he may feel that too many cases concern allegations that are not well founded, some are genuinely and earnestly made, and we should not inhibit them. However, we also have to strike the right balance in ensuring that spurious complaints that are proved to be such can be dismissed quickly. In terms of inter-party banter, the public are pretty sophisticated and well able to make their own judgments about such allegations.

These are important provisions for raising standards in the ethical structures in local government and I hope that they can stand part of the Bill.

Question put and agreed to.

Clause read a Second time, and added to the Bill

New Clause 3 — Use of Housing Capital Receipts—Reserved Portion

Philip Hammond (Conservative, Runnymede and Weybridge)

I beg to move, That the clause be read a Second time.

Michael Martin (Speaker, Glasgow Springburn)

With this it will be convenient to discuss the following:

New clause 6—Empty homes—

'.—(1) The information obtained in relation to council tax on empty homes shall not be used to require the owner of an empty property that is in reasonable repair to give up the freedom to enjoy and manage that property as the owner wishes.

(2) Any amount raised by levying Council Tax on an empty home will be retained by the billing Authority and there shall be no substitution of any grant, subsidy or money due from central Government as a result of such a change.'.

New clause 7—Housing Revenue Account—

'.—The Secretary of State shall make an annual report to Parliament on the operation of section 90 (under which a local housing authority is required to pay to the appropriate person an equivalent amount of the Housing Revenue Account subsidy in which a negative figure occurs) stating—

(a) for each local housing authority—

(i) the amount involved, and

(ii) the amount by which rents in that authority would rise because of the operation of this clause; and

(b) to which local housing authorities he has made payments as a result of their Housing Revenue Accounts being in deficit and how much their rents are reduced because of the operation of that section.'.

New clause 16—Repayment of overhanging debt—

'The Secretary of State shall make an annual report to Parliament detailing—

(a) the amounts paid or contemplated to be paid pursuant to sections 40 and 41; and

(b) the effects of such payments on rents in relation to the voluntary transfers of council housing'.

Amendment No. 43, in page 5 [Clause 11], leave out lines 38 and 39.

Amendment No. 44, in page 5, line 38 [Clause 11], leave out

'equal to the whole or any part'

and insert

'up to a maximum of 50 per cent.'.

Amendment No. 4, in page 48, line 31 [Clause 92], leave out subsection (1).

Amendment No. 35, in page 48, line 34 [Clause 92], leave out subsection (2).

Amendment No. 36, in page 73, line 12 [Clause 125], leave out '92(1)'.

Philip Hammond (Conservative, Runnymede and Weybridge)

This group of new clauses and amendments addresses one of the key issues of the Bill, which was discussed in some depth in Committee—at least, in as much depth as the timetable motion permitted. The Government say that the Bill is about delivering freedoms and flexibilities to local authorities, but their actions on capital receipts, the associated debt and local authority housing grant demonstrate exactly the opposite as far as prudent, debt-free authorities are concerned. In fact, the whole approach of the first part of the Bill, mirroring the Government's conduct of their own finances, is to abandon prudence, to punish debt-free authorities and to encourage borrowing, while increasing the power of the Secretary of State in the allocation of funding by expropriating the capital receipts of local authorities from right-to-buy sales, as clause 11 seeks to do.

The Select Committee that considered the Bill in draft—one of the early examples of the draft Bill procedure—recommended that clause 11 be deleted. The Government have rejected that recommendation, which represents an early defeat for the concept of consideration of Bills in draft. We have seen draft regulations in relation to clause 11, and they have been much discussed. We know that the Government intend to sequester 75 per cent. of the capital receipts that local authorities receive from right-to-buy sales and 50 per cent. of those obtained from other transactions. The Government use language such as "pooling" and redistribution. Their notes on the clause talk about taking this money in order to redistribute it. However, nobody reading the Bill will find any reference to redistribution or pooling; they will find that the 75 per cent. tax on local authority capital receipts has to be

"paid to the Secretary of State".

Clearly, these moneys will not be available to the surrendering local authority, but what assurance do we have that they will represent net additional money at all? The Treasury, as we all know, has its own little local difficulties. It is far from apparent to me that when the Treasury and the Office of the Deputy Prime Minister formulate the overall local authority finance settlements for next year and the two subsequent years, all the money that has been skimmed off in this way will be treated as an additional resource, rather than as a substitute resource for money that would otherwise have been made available to areas in need, from central Government funding.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

The hon. Gentleman and I agreed on many aspects of this issue in Committee, but can he clarify whether, compared with the previous regime, the change that the Government propose will hit only debt-free authorities? The previous regime—it was a Conservative one—prevented many local councils from keeping their own capital receipts. Under the Conservatives, non-debt-free authorities had to pay them to the centre.

Philip Hammond (Conservative, Runnymede and Weybridge)

I am grateful to the hon. Gentleman for his expression of general support. Indeed, I am glad about that because he has added his name to new clause 3, so we would expect him to support it. He is right, of course, that the principal burden of clause 11 falls on the 34 debt-free authorities.

Nick Raynsford (Labour, Greenwich and Woolwich)

It falls on 18 authorities.

Philip Hammond (Conservative, Runnymede and Weybridge)

In saying that, the Minister is arguing that it is debt-free authorities with housing stock that the provision hits most substantially. However, it is my understanding that it will impact on indebted local authorities, to the extent that the Government do not choose—as they are empowering themselves to do through other provisions in the Bill—to pay off their debts for them.

Nick Raynsford (Labour, Greenwich and Woolwich)

The hon. Gentleman tries to draw a distinction between debt-free authorities that have housing stock, and those that do not. How can housing authorities that do not have any housing stock possibly benefit from capital receipts from house sales?

Philip Hammond (Conservative, Runnymede and Weybridge)

Of course they cannot benefit from capital receipts from housing sales—I was merely trying to contend with the Minister's constant chuntering from a sedentary position. I referred to 34 authorities and he replied with 18, and I was perhaps second-guessing some rationale for his figure. My understanding is that 34 debt-free local authorities will be particularly affected by these measures, but if the Minister has a different view, he will doubtless make his point in due course.

The Government argue that not all local authorities in receipt of capital receipts have chosen to reinvest them in housing assets, and to a limited extent that is true. That is called local decision making, but the power in the Bill is a power to tax local authorities, not an obligation to pool and to redistribute, over and above existing housing capital funding.

Peter Luff (Conservative, Mid Worcestershire)

As one of those who did not have the privilege of serving on this Bill in Committee, I wonder whether my hon. Friend can explain a little about the retrospective nature of the Bill's provisions. Wychavon district council, which is in my constituency, sold its housing stock some five or six years ago and repaid all its debts. It now has a substantial cash balance. Does he have any concerns about the Bill's implications for authorities such as Wychavon?

Philip Hammond (Conservative, Runnymede and Weybridge)

My hon. Friend raises an interesting point. [Interruption.] The Minister is chuntering from a sedentary position again. He seems to have an obsession with saying what I am about to say before I can say it.

Nick Raynsford (Labour, Greenwich and Woolwich)

I am trying to help the hon. Gentleman.

Philip Hammond (Conservative, Runnymede and Weybridge)

I am grateful to the Minister for his assistance. I do not think that clause 11 will pose any threat to those receipts, but I draw the attention of my hon. Friend the Member for Mid-Worcestershire (Mr. Luff) to the concern of many local authorities with positive capital balances that changes in the funding formula, and in the general tenor of the Government's approach to local authority finance, present the constant threat that unjust account will be taken of those capital funds, in such a way that the grant funding available to those authorities will be reduced.

The existing system of housing capital funding is itself being scrapped, of course—a point that I shall return to in a moment. The Government's second argument is that the stock that is being sold was originally financed centrally. Well, perhaps it was, but many debt-free authorities have received negative housing subsidy for years. It is their tenants' rent and their council tax payers' tax that has, over generations, built up the equity that exists in the housing stock that they are disposing of today—through investment, improvements, maintenance of stock, and repayment of debt.

So both the Government's arguments fail. If one believes in local democracy and the freedoms for local authorities that Ministers laughably proclaim this Bill is about, reinvestment of capital receipts from right to buy should be a local decision. The equitable ownership of the assets lies with the local community, not with the Secretary of State. The sequestration of one community's assets, even if for redistribution to another, is the antithesis of responsible and empowered local government. It is just another crude attempt by the Government to reinforce the clear thrust of their local government finance policy: to snatch from those authorities wicked enough to be prudent, well run, low taxing and debt free, in order to bail out the hopeless, the feckless and the profligate. That policy will result in average band D council taxes for the coming financial year on the homes of ordinary hard-working families in England exceeding £1,000 for the first time—a point which my hon. Friend the Member for Brentwood and Ongar (Mr. Pickles) has made.

Debt-free local authorities currently have the freedom to reinvest—or not, as they choose—their receipts from capital disposals. They, of course, will bear the brunt, but I should be grateful if the Minister would touch on the complex issue of how this measure impacts on indebted authorities. I am ready to stand corrected, but my understanding is that the notional income from set-aside receipts offsets the notional cost of the underlying debt that financed the assets that gave rise to those receipts. The Government seem to be recognising that problem in this Bill by taking powers to themselves to clear local authority debt; indeed, we shall be discussing overhanging debt in a moment. However, it appears that a local authority that has debt will have its receipts not set aside—blocked, in essence—but sequestered by the Government. It will be dependent on the largesse of the Secretary of State to clear its paper indebtedness, at least. Perhaps the Minister will clarify how that process works when he winds up the debate.

As ever, in Committee we approached this issue in the spirit of constructive compromise. We tabled amendments that recognised the Government's agenda, while resisting the extent of the asset grab that they proposed. We tried to reduce, or to limit, the percentage of the capital receipt that could be taken by the Secretary of State. We tried to ring-fence part of the local authority receipt for reinvestment in housing and regeneration within that local authority area, thus addressing one of the Government's principal purported concerns. I am afraid to say, however, that all that was in vain. The Government proved determined to attack the freedoms of debt-free authorities, and to undermine the right to buy from all sides. That is demonstrated in this Bill, which allows deduction of local authority housing and regeneration investment before the tax is calculated for other capital receipts, but not for right-to-buy receipts.

If we set clause 11 in the wider context, it is apparent that the Government are putting together a system whereby they sequestrate 75 per cent. of capital receipts from right to buy. At the same time, the right to buy itself comes under attack, in the form of a reduction in discounts, and in a clear policy agenda that seeks to limit the opportunities for ordinary hard-working families to benefit from right to buy.

Secondly, there is the introduction of a discretionary grant system, whereby the Secretary of State will pay off local authorities' indebtedness where he sees fit. Thirdly, we are all aware of the abolition of the local authority social housing grant—a measure that was well trailed but that all local authorities, without exception, understood was intended to come in on 1 April 2004. With some horror, local authorities have become aware—although they have yet to receive the courtesy of direct information from the Office of the Deputy Prime Minister—that local authority social housing grant will, in fact, be withdrawn on 1 April 2003. They became aware of that by being copied in on a letter from officials in the Office of the Deputy Prime Minister to the Housing Corporation on 8 February 2003, just three weeks before they were required by law to have set their budgets. That has caused chaos. It smacks of political vindictiveness or fiscal panic on the part of the Office of the Deputy Prime Minister. The Minister is shaking his head, so no doubt he will be defending the Office of the Deputy Prime Minister's lamentable performance in communicating with local authorities about the abolition of local authority social housing grant on 1 April 2003. Taken together, all those facts add up to a very curious idea of freedom and flexibility.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

The hon. Gentleman has probably seen today's written ministerial statement by the Under-Secretary of State, Office of the Deputy Prime Minister, on the local authority social housing grant. Does the hon. Gentleman agree that this episode suggests a degree of incompetence in the Office of the Deputy Prime Minister that is extremely worrying? It is clear that local authorities did not expect the grant to be phased out until April 2004. Does the hon. Gentleman agree that the announcement that it will be phased out in 2003 has, in many areas, left plans for developing more affordable homes in utter chaos?

Philip Hammond (Conservative, Runnymede and Weybridge)

The hon. Gentleman is right. The announcement left councils reeling just a couple of weeks before they were due to present their budgets. There has been no clear indication of what the transitional arrangements are to be. There has been an indication that there will be transitional arrangements, but no information has been offered to allow individual authorities to assess which of their schemes will be eligible for the arrangements and which will not. That has led to what I can only describe as outrage among local authorities. The offence has been compounded by the utter discourtesy of the Office of the Deputy Prime Minister in copying in local authorities on an e-mail from an official to the Housing Corporation. There was no effort to follow that up by direct communication with the local authorities. When I contacted the office of the Minister responsible for housing immediately after this fiasco had become known to me, I was told that there would be no chance of any direct communication in the following week—the week when the House was in recess—and that the earliest that any communication would be made would be in the week the House resumed. To my knowledge, nothing has yet gone out to local authorities.

George Young (Conservative, North West Hampshire)

My hon. Friend may know that Test Valley borough council is one of the many councils to have been caught up in this. The council has written to the Office of the Deputy Prime Minister. Does my hon. Friend agree that the only satisfactory transitional arrangement would be one that put the local authority back in the position it thought it was in before the communication went out?

Philip Hammond (Conservative, Runnymede and Weybridge)

My right hon. Friend is right. A number of local authorities have suggested to the Office of the Deputy Prime Minister that the only fair transitional arrangement will be one that recognises all projects that were in local authorities' financial statements and plans at or around 10 February. From the financial information that I have seen on the amount of money available for transitional arrangements, it is clear to me that the Government will not allow anything like all of those projects to slip under the wire.

Matthew Green (Liberal Democrat, Ludlow)

In the information on the transitional arrangements—which has been placed in the Library today—it is clear that, instead of the £500 million provision that had been expected for this year, debt-free authorities will find that their provision has been graciously increased from £175 million to £275 million. Instead of a year, they are being given an extra three months—up to 30 June—to get schemes, together with their planning permission, through. That will allow some schemes to go ahead, but the statement by the Under-Secretary of State, Office of the Deputy Prime Minister, says:

"We do however need to ensure that the funding limits are not exceeded. If the total claims submitted by 30 June exceed the money available, the Housing Corporation will prioritise schemes with the Government Offices in terms of their contribution to the regional housing priorities."

In other words, if the limit is exceeded in my area, it will be the Government office for the west midlands that decides who will get the go-ahead.

Philip Hammond (Conservative, Runnymede and Weybridge)

I am grateful to the hon. Gentleman, who is absolutely right. I have not seen that statement, and I query why it should be necessary for Ministers to table, only this morning, written ministerial statements that are obviously relevant to today's debate. When that sort of thing happens, hon. Members do not have the opportunity to examine them and discuss them with local authorities. I know from copied correspondence that I have seen that many local authorities have already invested substantial amounts of money and time in projects that will certainly not clear the hurdle that the hon. Gentleman has just informed us has been set in the written ministerial statement. That is a very serious matter. Not only its substance but the way in which it has been handled do no credit at all to the Office of the Deputy Prime Minister. The Minister for Local Government and the Regions is not, of course, directly responsible for such matters; I am sure that he would have handled them in a way that was not so grossly discourteous to local authorities. He will know that this debacle has done a great deal of damage to the relationship between his Department and local authorities.

Michael Jack (Conservative, Fylde)

Does my hon. Friend feel that, because of the state of the public finances, the actions that have been taken smack of late intervention by the Treasury? Virtually no analysis has been done of the effect of these proposals on councils, which can only move at a certain pace with future housing developments. The whole approach destroys any idea of legitimate expectations.

Philip Hammond (Conservative, Runnymede and Weybridge)

My right hon. Friend is right. As he points out, local authorities have been placed in an impossible position. They have been planning, spending, making progress with projects and preparing their budgets, only to find that many of their activities have been put under a shadow on very short notice and without any official notification.

The signals from Government are utterly confusing. At the beginning of February, we heard the Deputy Prime Minister batting on about the need to build more affordable housing. In some areas, the need to build more affordable housing and to develop sustainable communities is desperate. At the same time, local authorities—which believed that they had been doing precisely the bidding of the Government in negotiating with their registered social landlords and in working up schemes to provide precisely such affordable and sustainable housing developments—have found that the rug has been pulled from under them without even the courtesy of a phone call. They have been left to pick up the pieces and, in many cases, the costs that they have already incurred.

The Government have given us a curious idea of what freedom and flexibility mean. They seem to mean that the Government take one's assets, cut off one's entitlement to grant funding for one's social housing programme, and replace that funding with grants that are at the discretion of the Secretary of State. At worst, that is open to any kind of gerrymandering; at best, it represents a huge increase in bureaucracy and a loss of local autonomy and accountability, as local authorities are forced to supplicate at the altar of the Deputy Prime Minister for funding for regeneration and social housing schemes.

Clause 11 hands the Government an £800 million pork barrel that is financed by council tenants and council tax payers. That may be why the hon. Member for Dagenham (Jon Cruddas), who I am pleased to see is here, was able to vote with the Government in favour of clause 11, even though his own local authority—Barking and Dagenham—will be the single biggest loser, losing £12 million of capital receipts. Perhaps he has been given an assurance that the Secretary of State's largesse will extend to Barking and Dagenham, and his council will not be out of pocket. So much for the Secretary of State's open-minded and objective approach to funding decisions.

2.30 pm

Andrew Turner (Conservative, Isle of Wight)

Does my hon. Friend agree that the Minister's body language may tell us more than his words? [Interruption.] He is now trying to appear open and wise. When my hon. Friend makes a point with which the Minister disagrees, he smiles like a crocodile and shakes his head vigorously. However, when my hon. Friend makes a point with which the Minister cannot in honesty disagree, such as the remark about the promises to the hon. Member for Dagenham (Jon Cruddas) or about the Treasury's intervention in the social housing grant, the Minister hunches up, buries his nose in his papers and scribbles notes.

Philip Hammond (Conservative, Runnymede and Weybridge)

I do not have the expertise that my hon. Friend obviously possesses in the analysis of Ministers' body language. This particular Minister's body language is usually smiling, and I find it difficult to read anything into that, although I have discovered that smiling does not necessarily indicate agreement with or approval of what is being said. I look forward to my hon. Friend's continued interpretation, as I may find it helpful.

New clause 3 is a further attempt at compromise, following the attempts that we made in Committee and that were rejected by the Government. I am delighted that the Liberal Democrats have decided to support the new clause. It proposes that the Secretary of State should pay a mandatory special grant for social housing provision and repairs to housing stock, equivalent to 50 per cent. of what is received under the provisions of clause 11. Effectively, new clause 3 provides that 25 per cent. of right-to-buy receipts would remain in the hands of the local authority, with no restrictions on its use; 37.5 per cent. would come back to the authority in a ring-fenced special grant to be spent on social housing and repairs to stock; and 37.5 per cent. would go to the Secretary of State for redistribution, if he is generous, or to be swallowed up into the Chancellor's black hole, if he is ungenerous. More than half the receipts would remain with or return to the local authority. That is a compromise position that any reasonable Government would accept. Unless the Minister will accept it, all we have on offer from him is a set of transitional arrangements that reject the arguments in principle against this centralising measure.

During the debate in Committee, we touched on the question of receipts other than in the form of cash—in particular, in the form of nomination rights. For example, a local authority might transfer assets to a registered social landlord in exchange for nomination rights to the tenancies in those assets. The Opposition amendment in Committee proposed that such receipts should be excluded from the sequestration process.

The Bill would require local authorities to value such nomination rights and pay a levy to the Secretary of State, in cash, on receipts that have not been received in cash. That would present serious problems for local authorities. To the Minister's credit, he recognised that that was not the Government's intention, but he did not accept the amendment because he noticed many loopholes and possibilities for evasion by local authorities of his taxing plans. He said:

"I cannot give the hon. Gentleman an absolute guarantee that we will be able to produce revised regulations in time for Report stage, but that is only because of the considerable number of other pressures under which we are working."

There is obviously too much legislation. He continued:

"I undertake to write to the hon. Gentleman, setting out our thoughts on how we might address this conundrum and I will copy that letter to all Committee members."—[Official Report, Standing Committee A, 28 January 2003; c. 145.]

I am wary of accusing the Minister of not having written to me, because I did so once before and returned to my office to find the letter on the doormat. However, I have not received a letter, and I have spoken to some hon. Friends who are also not aware of having received one. I see from the body language of the hon. Member for Kingston and Surbiton (Mr. Davey) that he has not received one either—[Interruption.] Well, I see it from his raised eyebrow language.

We needed to see how the Government intended to deal with the issue before we returned to the subject on Report. In the absence of any revised draft regulations, we needed at least to have the Minister's thoughts set out for us. If he has not been able to set them out in writing, perhaps he will take a little extra time and trouble to set them out in detail when he replies to the debate.

The second issue that I wish to raise with the Minister is the situation relating to new towns. Currently, the sale of stock transferred originally from the Commission for the New Towns or English Partnerships to new town local authorities is subject to a clawback, equivalent to 75 per cent., to English Partnerships. The Minister will know that there was a debate last week in Westminster Hall to which his colleague, the Under-Secretary of State, Office of the Deputy Prime Minister, the hon. Member for Harrow, East (Mr. McNulty), responded. In that debate, I raised the following question. The Government's response to the Select Committee's report on new towns, their problems and future, states:

"English Partnerships will discuss with the individual local authorities the issue of assets and liabilities, including clawback. In some circumstances, and with the agreement of the Treasury, English Partnerships might waive clawback or transfer the right to receive clawback to the respective local authority."

I asked the Under-Secretary how that process interfaces with the arrangements that are now being put in place for the Secretary of State to take 75 per cent. of all capital receipts, and I wish to put the same question to the Minister. The irony is that the new towns have long campaigned for the abolition of clawback on the basis that it would give them equal treatment with all other authorities. They will have equal treatment, but only by subjecting all other authorities to the clawback under which the new town authorities have laboured for so long.

Will the clawback waiver by EP actually operate and, if so, will the receipt that the local authority obtains be subject to the clause 11 sequestration process? If so, English Partnerships will give, only for the Secretary of State to take away. That would be a meaningless exercise. If what the Government said in their response to the Select Committee's report stands, and the new towns are exempt from the process by the waiver of clawback in specified cases, it represents a large and partisan hole in the Bill. After all, all but one of the new town authorities are controlled by the Labour party. I would be concerned if the Government were introducing a different regime for the new towns compared with all other authorities, effectively exempting some Labour-controlled authorities from the pain that they are inflicting on all other authorities. I look forward to the Minister's response on that issue.

New clause 6 is an attempt to probe the Government on the recently announced power of forced letting. It seeks to prevent information from council tax records being used as a base for a programme of forced lettings of empty property. I have two questions for the Minister. Will there be an appeal mechanism for anybody whose property is subjected to the proposed enforced letting process? Will a person who does not wish to become a landlord have the right to require the local authority to compulsorily purchase a property identified for compulsory letting?

The Government's proposals on compulsory letting represent a massive infringement of the rights of private property. The Government and Labour Members are very keen on the human rights agenda, but they cannot pick and choose from it. One of the rights guaranteed by the European convention is the right to private property. Will the Minister confirm that the Government have received specific advice that the compulsory letting of private property with no option to require its compulsory purchase would not breach rights under the convention?

Edward Davey (Liberal Democrat, Kingston and Surbiton)

Will the hon. Gentleman say more about why the Conservatives are so against compulsory leasing, when previous Conservative Governments have introduced legislation to promote compulsory purchase? Will he explain the difference, as he sees it?

Philip Hammond (Conservative, Runnymede and Weybridge)

I hope that all hon. Members would find any notion of compulsion slightly unsavoury, as I do. It is always better if these things can be done without compulsion. Clearly, however, compulsory purchase powers will be needed in some cases. The owner of a property may require a local authority to acquire the property, but that is different from the owner being legally required to become a landlord when he does not want to, and having no option to require the local authority to purchase the property. The distinction is clear. I hope that the Minister will explain the Government's intentions in the matter.

New clause 6(2) would establish that empty home receipts should go to local authorities rather than directly to the Government. At present, £160 million in such receipts goes to the Government, and the new clause would bring the procedure into line with what the Government propose in respect of second homes. It would also bring the procedure into line with the incentive system that the Government have extolled in relation to new clause 10.

New clause 7 relates to clause 90, which deals with negative housing revenue account surplus. The explanatory notes say that the subject is "not well understood". That is masterly understatement. The Minister will do well to find anyone who understands the concept at all, although my right hon. Friend the Member for North-West Hampshire (Sir George Young) may be one of the few in the House who qualifies.

Clause 90 requires a local authority to pay any negative housing revenue account subsidy to the Secretary of State. The notes say that that represents no change, and that it is required simply to deal with changes in the treatment of rent rebates.

Nick Raynsford (Labour, Greenwich and Woolwich)

indicated assent.

Philip Hammond (Conservative, Runnymede and Weybridge)

The Minister, in his customary helpful fashion, confirms that.

Members of Parliament are required to be suspicious, and new clause 7 therefore would require the Secretary of State to report to Parliament about the amounts paid in negative housing revenue account subsidy to him by each local authority. That would allow the House to see what the distribution effect is and, I hope, corroborate the Minister's assertion that nothing has changed.

New clause 16 addresses clauses 40 and 50. As part of its centralising approach, the Government must deal with the question of local authority indebtedness, in respect of stock whose sale receipts are to be sequestered by the Secretary of State. This is a matter for indebted, not debt-free, authorities. Currently, indebted authorities have to set those receipts aside, but the Government are proposing a tortuous system: the Secretary of State will take the receipts, and then the loans will be repaid, on behalf of the local authorities, by the Secretary of State. However, as I understand it, that repayment will remain at the Secretary of State's discretion.

The powers to make the regulations appear later in the Bill. They are framed specifically to give the Government the power to make different regulations applicable to different types of authorities, or to authorities in different areas or regions. That strikes me as an especially dangerous power for the Government to have. Again, it is the antithesis of genuinely local government and proper local financial controls. It would give the Secretary of State huge power, and the ability to exercise largesse towards favoured local authorities.

New clause 16 would force the Secretary of State to report to Parliament the amounts paid under clauses 40 and 41, and to assess any effects on rents in respect of transferred properties. For example, local authorities that discover that the Secretary of State is not likely to clear their debts may have to hold out for a higher price so that they can continue to service outstanding indebtedness. I hope that the Minister will respond to that point.

Liberal Democrat amendments Nos. 43 and 44 are essentially another way to address the iniquity of clause 11. I hope that the hon. Member for Kingston and Surbiton (Mr. Davey) will throw his weight behind new clause 3, and not find it necessary to press amendments Nos. 43 and 44 separately. However, if he does press the amendments, we will support him in any vote that is held.

Amendments Nos. 4 and 35 deal with clause 92. The clause limits the effect of section 24(3) of the Housing Act 1985 so that it applies only to Wales, but clause 92(2) allows the Welsh Assembly to abolish it for Wales also. I assume that that is a gesture to the principle of devolution. However, the Government say that the proposal is about enabling authorities to comply with the Government's rent restructuring policies in England. The amendments have been tabled to give the Minister an opportunity to explain the policies in a little more detail, and to explain why clause 92 is needed.

My understanding of section 24(3) of the 1985 Act is not that uniform rentals—or fixed percentages for public-sector rents by comparison with private-sector rents—have to apply across the country, but that there should be an equivalence of proportionality, in a local authority area, between public sector and private sector rents across different types of dwelling. That is surely sensible. Wages in the labour market in an area are linked to local market conditions, and local private sector housing market rents are also a function of the local market conditions. My intuition is that it is appropriate to have a consistent relationship between public sector and private sector rents in an area. I readily accept that that relationship might have to be very different in areas of high demand and high prices from what it should be in areas of low demand and low prices.

In the constituency of my right hon. Friend the Member for Haltemprice and Howden (David Davis), for example, registered social landlord rents are notorious for being higher than market rents. In many other areas—and my own constituency is one of them—RSL rents obviously have to be substantially lower than comparable private sector rents if the affordable housing market is to function. However, it is not clear why the Government need to use clause 92 to remove section 24(3) of the Housing Act 1985 in relation to England, and to give the Welsh Assembly the power to remove that section in respect of Wales.

Amendment No. 36 is a consequential amendment that does not need to be discussed.

The combined effect of the sequestration of capital receipts under clause 11, the power of the Secretary of State to distribute them as largesse to favoured authorities, changes in the local authority social housing grant, the arrangements for discretionary repayment by central Government of overhanging debt, and the Government's meddling with the formula funding grant, as well as the general thrust of their policy in respect of local authority financing—all those factors undermine the autonomy of debt-free authorities and give the lie to the Government's claim that the Bill is about freedoms and flexibilities. It is about increasing central Government control and the patronage power of the Secretary of State. It is about penalising the prudent to bail out the profligate. It is about disempowering local communities and undermining true financial accountability. It is about politically motivated hostility towards the freedom that right to buy gives ordinary working families. It is about transferring receipts from local authorities and the south-east—where most right-to-buy receipts arise and where affordable housing is desperately needed.

Clause 11 is bad. The Select Committee that considered the draft Bill recommended that is should be scrapped but the Government refused. New clause 3 makes a bad clause less bad and I commend it to the House.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I agreed with much of what was said by the Member for Runnymede and Weybridge (Mr. Hammond), so I will speak for fewer than the 45 minutes taken by him. As we support and can unite behind new clause 3—which addresses some of the problems created by new clause 11 and the pooling of capital receipts—and one or two other amendments tabled by Conservative Members, we shall not press our amendments to a vote.

The Government shifted their position on pooling significantly in Committee and in respect of the local authority social housing grant—today, they have changed position again. One might say that that shows flexibility on their part but to those of us who have witnessed the charade, the Government's incompetence is exceptionally worrying. It is a shame that the hon. Member for Harrow, East (Mr. McNulty) is not in his place, because it is increasingly clear that he is not getting a grip on issues that are his responsibility. Debt-free authorities—having worked within a particular framework for many years and managed their assets properly—are now being penalised. Under pressure from arguments in Committee, the Government have brought forward a transitional arrangement package. It does not go nearly far enough, but it shows that the Government know they got it wrong.

Equally, the sustainable communities plan contained the mistake of proposing that local authority social housing grant should be abolished from April. The Government realised the damaging effect that that would have on many housing authorities—including those of the right hon. Member for North-West Hampshire (Sir G. Young) and my hon. Friend the Member for Ludlow (Mr. Green).

Matthew Green (Liberal Democrat, Ludlow)

Shropshire district council has a £4 million social housing programme for next year, using the last of its capital, which it must try to rush through in three months, including planning permission. If too many councils throughout the country do the same, it will still be at the discretion of the region to decide whether they may proceed or to prioritise something else. If that happens, it will be a scandal.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I am grateful to my hon. Friend. The Government say that they are thinking about long-term strategies for sustainable communities, but they present policies that fall apart under initial scrutiny. A few weeks after announcing them, the Government try to patch up their collapsing framework. I hope that the Minister can assure the House that his Department's continual mistakes are not repeated.

New clause 3 seems to address the problems of clause 11 and is offered to the Government as a compromise. In Committee, my hon. Friend the Member for Guildford (Sue Doughty) made a powerful speech outlining that the likely effect of the proposals on her debt-free authority and others would be to prevent them from dealing with the key issue—recognised by the Government in their sustainable communities statement—of a shortage of affordable housing. New clause 3(2)(b) will ensure that grants repaid to authorities could be used to secure social housing. We explored that issue in great detail in Committee and the Government admitted that that was the case. New clause 3 enables the Government to put into practice their intention, so loyal Labour Members should support it.

New clause 6 is a bit of a curate's egg. I can support the second part but subsection (1) is bizarre, in that it goes against what was said by Conservative Members on the Select Committee that examined the problem of empty homes— when that matter was the responsibility of the then Department for the Environment, Transport and the Regions—and reported on the need to improve the quality of information. We are passionate about that issue because there are more empty homes in every region of this country than there are homeless people in every region of this country. If that huge resource were used properly, the homeless problem could be tackled quickly, cheaply and in a sustainable way.

The Select Committee said that there was a need to improve the accuracy of data on empty homes, particularly in housing investment programme returns, and to use geographical information systems to enhance the quality of information—something on which the Government are now moving. The Committee reported also a problem about the way in which council tax data could be used. The Information Commissioner took one view and Poole borough council obtained counsel's opinion that council tax data could be used for the purpose. The Committee sought clarification and called on the Government to end the confusion and bring forward legislation.

The Government have done so in the form of the Bill, but I wonder where the hon. Members for Mole Valley (Sir P. Beresford), for Epsom and Ewell (Chris Grayling), for Vale of York (Miss McIntosh) and for Leominster (Mr. Wiggin) are to be found, because they agreed to the Select Committee's report, in direct conflict with new clause 3. I hope that Conservative Front-Bench Members will sort out their position.

The Conservatives may say that new clause 6 is tightly drawn because it relates the use of such data only to the notion of compulsory leasing, a proposal that was aired in the sustainable communities plan, which we shall have to debate on another occasion. We support the Government on those proposals, provided that there are appropriate safeguards, such as those for compulsory purchase.

Philip Hammond (Conservative, Runnymede and Weybridge)

What safeguards would the hon. Gentleman propose?

Edward Davey (Liberal Democrat, Kingston and Surbiton)

It would be completely wrong for there to be no safeguards and I shall give the hon. Gentleman an example. Recently, I discussed with Jonathan Ellis, the chief executive of the Empty Homes Agency, the profile of people who leave their properties empty. The picture is mixed. Some of those people are extremely wealthy; they have a huge property portfolio and have never quite got round to dealing with it. They are absentee landlords and they simply do not bother. Others, however, are elderly and do not have enough money to maintain their property. They may be asset rich but they are income poor. They do not want the hassle of getting involved with bureaucracy. Other elderly people may be sick; they may suffer from dementia and have gone into a care home so they did not get round to putting their property to rights and letting it.

Such cases must be managed appropriately and the legislation must ensure that no local authority could treat such owners insensitively.

Nick Raynsford (Labour, Greenwich and Woolwich)

indicated assent.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I am glad that the Minister agrees.

Such provisions should not, however, prevent us from adopting a public policy whereby empty properties are used to tackle homelessness. The Conservatives should agree. They may point out, rightly, that many empty properties are in the state sector, but that is true of only 10 per cent. of empty homes in London and the south-east. Of course, even that is too much and the problem needs to be tackled. We need to hold the Government and local authorities to account for that.

In my constituency, however, 90 per cent. of empty homes are in the private sector. Yes, local authorities could do a better job by using voluntary agreements. They could promote best practice and provide grants to repair and renovate homes so that they could go back on the market. Local authorities could act in partnership with private letting companies to ensure that owners receive a rental income. However, there is a question that the hon. Member for Runnymede and Weybridge will have to face up to, because it is not covered in new clause 6. If best practice is adopted and there is an empty property strategy, if grants are offered and people are given support to use their assets, is there to be no backstop? If a person has a property that is desperately needed, should not the community take measures to put it back into useful possession? It would be difficult, even on libertarian grounds, to argue against that.

Philip Hammond (Conservative, Runnymede and Weybridge)

We already have a well established procedure for compulsory purchase of property where it is required for a public policy purpose. The Government are significantly extending the scope of such procedures. My view, however, is that compulsory purchase is a different order of imposition on the rights of private property than compulsory leasing. Compulsory leasing requires an individual to finance the capital cost of an asset, of which the Government then dictates the use. That seems quite different from compulsorily purchasing a property where it is required for a public policy purpose.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I am grateful to the hon. Gentleman for giving me an early opportunity to put right the Conservatives' flawed economic logic. The point is that the property owner will keep the asset, so that must be less damaging than compulsory purchase. We have not yet seen the final proposals, so the hon. Gentleman may have a point, but the idea currently being debated by the Empty Homes Agency and others is that the rental income will be shared with the owner. Indeed, it will all go to the owner once the state's costs have been met; for example, the costs of repair, renovation and administration. The proposals could be extremely beneficial for property owners. This is potentially a win-win situation.

Philip Hammond (Conservative, Runnymede and Weybridge)

If it was in their interest, owners could do those things themselves.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

In many circumstances, people have neither the competence nor the capability to do that for a variety of reasons. I look forward to future debates with the hon. Gentleman when I can give him some concrete examples. I urge him to talk to the Empty Homes Agency, which has commissioned a MORI poll of the type of people whom we are discussing so that we have a true profile. That information will be important in getting the measure right.

It is important to safeguard people's property rights, but it is wrong that there should be whole streets where properties are left empty—there is one such street in my constituency in an area of highly priced properties—when there are such huge homelessness and housing problems. [Interruption.] The hon. Member for Runnymede and Weybridge keeps saying "Compulsory purchase". That is the illiberal position. The Liberal position is to go for compulsory leasing.

Philip Hammond (Conservative, Runnymede and Weybridge)

If the hon. Gentleman would accept that there must be an option for a person who is compulsorily required to lease to require the authority to purchase his property, he may overcome my objection. Would he support such a safeguard?

Edward Davey (Liberal Democrat, Kingston and Surbiton)

That is a sensible proposal in principle and I hope that the Government will give it serious consideration. We might need a different regime to ensure that the system was slightly quicker than some of the compulsory purchase procedures, but the House should debate such matters to ensure that we get the legislation right. I hope that Conservative Members will at least agree that it is vital to use such resources, especially where there is high demand for housing and we need to tackle homelessness.

New clauses 7 and 16 require reports on housing revenue accounts and overhanging debt. We have no problem with that and I shall not rehearse the detailed and technical arguments with which we dealt in huge detail in Committee. We have some concerns about the way that the Government are going about housing revenue account reforms. As some of the money could go to the Secretary of State and would not be ploughed back into housing in local authorities, it is important to monitor the Government's policy. New clause 7 would do that, so we support it.

There were fierce debates in Committee about the Government's overhanging debt proposals. Following the views of the Select Committee and of the Chartered Institute of Public Finance and Accountancy, I argued that, in effect, the Government were giving local authority tenants an extra incentive to opt for a housing transfer. There was some discussion of how the analysis was to be carried out and the Minister has written to me about that issue. However, I am still not convinced that an extra bribe is not being proposed. The Liberal Democrats are not against stock transfer. In many cases, it is appropriate and we have argued for it, but the key public policy issue is that stock transfer decisions should be based on a level playing field for different types of landlord. We fear that the Government's proposals will skew the balance in favour of stock transfer simply because they have failed to win some stock transfers.

The Government's analysis is wrong. Where stock transfers were lost, it was not because there was no bribe, but because the actual proposal did not make sense and tenants were right to vote against it. Where the proposals are put to tenants in a way that makes sense to them, they vote for them. I suggest that new clause 16 is right and that the clauses on housing issues are wrong.

I said that I would touch on the local authority social housing grant because it is crucial to these issues. I want to reiterate the shock and anger in many communities. People have been labouring away—whether in public sector housing authorities, registered social landlords or other stakeholders—to try to put together proposals, often with private developers, to build affordable housing on the back of the promise that local authority social housing grant will be part of the financial package. Suddenly, the Deputy Prime Minister told the House in the middle of February that those people could not have the grant on which all their work had been done and on the basis of which their money had been invested. That was an absolute catastrophe.

We are not over-emphasising the problem: affordable homes will not be built, and we are experiencing one of the biggest crises in respect of the shortage of affordable homes probably in the past 100 years. So not enabling proposals that are already halfway down the pipeline to go through seems not only wrong, but to go completely against the thrust of the Government's policy.

Matthew Green (Liberal Democrat, Ludlow)

Is not the reality that the Government are effectively saying that they are not interested in those affordable homes because they are not in their priority areas? The reality is that South Shropshire will need 1,400 affordable homes by 2011. With the abolition of that scheme, one of the main ways of delivering that will have gone, and the regional body will say that places around Birmingham, or somewhere like it, have priority and people in South Shropshire should not have any social housing funds. Rural areas have very real needs, and the fear is that they will not receive the funding that they used to get because they are not one of the Government's priorities.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

My hon. Friend makes an excellent point. The problem is that the Government are trying to centralise housing policy over the regions and pick certain areas, and they do not like some areas. They are taking money from all debt-free authorities of whatever political persuasion, and they are taking the local authority social housing grant away from them, too. The Government are trying to control the nation's housing policy from Whitehall, and that cannot be right.

We are finding—this affects my hon. Friend's part of the country—that the Government sometimes put ceilings on the number of affordable houses that can be built. The councils and communities in those areas would be prepared to see more houses built, but that is being stopped by central Government. That seems to be nonsense.

I hope that the Government will not leave this issue, especially the local authority social housing grant, at the statement that we received today from the Minister. Frankly, so far as we can tell from the statement, the available grant will be cut by £225 million next year, so fewer affordable homes will be built. That is why I refer the Minister to early-day motion 824, which my hon. Friends and I tabled last night. We did not realise that we would have such an effect—a written ministerial statement being produced the very next day. Obviously, we have more influence than even we had imagined. Unfortunately, the ministerial statement does not go as far as our early-day motion, so I hope that the Minister will look at it again.

My final remarks relate to new clause 6, on empty homes, the first part of which I have been very critical. I shall end on a more consensual note by telling the hon. Member for Runnymede and Weybridge that the second part of new clause 6 is very laudable, and he will know that not only do we support it, but the Local Government Association supports it. The hon. Gentleman would like local authorities to be able to keep the council tax receipts where they decide to get rid of discounts on empty homes. That seems very sensible—it has been Liberal Democrat policy for many years.

The Government might say, "Well, we've gone some way. We have given councils the power to end the discounts on empty homes. Isn't that a good thing?" Well, I am afraid that that is only half the cake. Allowing local authorities to keep the revenue that they thereby raise would enable them to get a much greater hold on the housing issues in their areas. However, siphoning off that revenue not only gives poor incentives to local authorities, but prevents that policy from having an even more powerful effect on the housing situation. If the Minister does not like the first half of new clause 6, I hope that he will see some merit in the second half.

I have spoken for longer than I had intended, so I shall simply end my speech by saying that new clause 3 would make a major improvement to the Bill and it therefore deserves the support of not only Conservative Members and the Liberal Democrats, but other hon. Members on both sides of the House.

Nick Raynsford (Labour, Greenwich and Woolwich)

We have had a long debate, with two speeches—one lasting about 45 minutes, the other 25 minutes. It would be nice to think that I could get through this quickly because my analysis of the two contributions is that they were both erroneous, but the hon. Member for Kingston and Surbiton (Mr. Davey) was slightly less wrong than the hon. Member for Runnymede and Weybridge (Mr. Hammond). If one speech was only half the length of the other, there is clearly some merit in keeping comments short.

Let me try to focus on the various issues. This is a complex range of housing matters. New clause 3 mirrors a number of amendments tabled by the Opposition in Committee. Like them, it would remove significant resources—some £600 million—from the funds that will be allocated to all authorities on the basis of their housing needs. The amendments tabled by the Liberal Democrats would either remove the power to make regulations requiring housing capital receipts to be pooled, or limit the pooling rate to 50 per cent. In other words, they are not quite as wrong the Conservatives, but their proposal is still unsatisfactory because it would reduce the amount available for distribution to authorities in need.

We have always taken the view—interestingly, so did the previous Government when the right hon. Member for North-West Hampshire (Sir George Young) was the relevant Minister—that it is right that a proportion of the proceeds from the sale of council housing through the right to buy should be recycled, so that it can be used in areas of greatest need. That is a fundamental principle of housing capital finance, but the amendments tabled by today's Conservative party would overturn that principle. If the amendments were passed, the very authorities that we want to help would be penalised—those with high housing need, but low capital receipts.

I believe strongly that all authorities should have access to the funding that they need to meet national housing priorities, such as affordable housing and decent homes, and pooling three quarters of housing receipts is an element in the process by which we can achieve that; removing £600 million from the national mechanism is not.

The hon. Member for Runnymede and Weybridge claimed that this was a centralising measure, interfering with local authority freedom. On the contrary, it simply applies the same principles that were the fundamental element of the previous Government's policy, but it does so consistently to every authority, rather than allowing a different logic to apply uniquely and paradoxically to debt-free authorities.

The proof of the pudding has to be in the total sums available. I put it to the hon. Gentleman that, far from reducing local authority freedom, the Government are in the business of increasing investment and allowing local authorities to do a great deal more. In 1997–98, we inherited £900 million capital investment in housing; in 2002–03, we are investing £2.5 billion in housing—about two and half times more. That is possible partly because we make proper use of the available receipts, which otherwise would not be applied.

Matthew Green (Liberal Democrat, Ludlow)

The Minister will accept that there may be years when the amount that the Government put into housing, or the amount collected back from capital receipts, is not enough to meet all the housing need throughout the country. The Bill is a centralising measure because somebody in the centre, at regional or national level, will decide what the priorities are for giving out what grant there is. I accept that there may be much more money going into housing, but if it does not meet total need, someone will still be making decisions on priorities—and that someone will not be the local council.

Nick Raynsford (Labour, Greenwich and Woolwich)

Housing is a national issue, and it is absurd to suggest that it should be left entirely to individual local councils to decide whether there should be policies to meet housing need in their areas. In Committee, I cited an example of the Liberal Democrats making a great fuss about the failure of a Conservative council in Surrey to use its money for housing investment—yet they still attack the Government's proposals to ensure that money is used for housing. I have to say here on the Floor of the House, as I said in Committee, that it is typical of the Liberal Democrats to look both ways. First they say that they want money invested in housing, because housing is a priority, but when the Government do something to achieve that, they complain that we are centralising.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

rose—

Nick Raynsford (Labour, Greenwich and Woolwich)

On that note, I give way to the hon. Gentleman.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I am surprised that the Minister has brought that example up again, because we soundly defeated him in argument when he brought it up in Committee. My colleagues in Surrey, who were arguing against the Conservatives running the council, were speaking to the local people, because they wanted them to exercise their democratic choice at the next council elections to get rid of the Conservative administration that was mishandling the resources available to it. That is called local democracy. If the Government are to push a model in which everybody, on every issue throughout the country, should always look towards Westminster and Whitehall for a solution, they are advancing a centralised model that Stalin would have been proud of.

Nick Raynsford (Labour, Greenwich and Woolwich)

As usual, the hon. Gentleman does his case no good by overstating it. The Bill is designed to ensure that there is a larger pot of money available to enable local authorities to respond to housing need in their areas. By no stretch of the imagination can it be compared to the behaviour of the former Russian dictator whose death 50 years ago is the cause of a certain amount of newspaper comment at the moment. On reflection, the hon. Gentleman will realise that that is not a very appropriate parallel.

As hon. Members will know, because we made the announcement in Committee, we have put in place generous transitional arrangements to assist debt-free authorities—a move that was largely welcomed in Committee, albeit slightly grudgingly by some Members.

New clause 3 is to some extent unworkable. For example, I assume that the reference to special grant means a special grant under section 88B of the Local Government Finance Act 1988, which, as hon. Members will know, requires an affirmative resolution of the House. If the receipt concerned were received at the end of the financial year, there simply would not be time to go through that procedure to comply with the time scale in the new clause. I therefore hope that new clause 3 will be withdrawn.

Philip Hammond (Conservative, Runnymede and Weybridge)

It ill behoves the Minister to talk about the time scale at the end of the financial year when he has just abolished local authority social housing grant with zero notice to local authorities. Moreover, if this is all about redistribution, why does the Bill not explicitly ring-fence the receipts in the hands of the Secretary of State so that they have to be redistributed as additional money, and cannot simply be lost in the big pot?

Nick Raynsford (Labour, Greenwich and Woolwich)

The hon. Gentleman will remember that we debated that matter in Committee, and I gave clear assurances that the money would be used for housing. Those assurances are on the record, and I am happy to repeat them today. It is not necessary to make additional amendments to legislation.

New clause 6 is an odd combination of two rather different proposals, as the hon. Member for Kingston and Surbiton pointed out. First, it seeks to limit what a local authority can do with council tax information concerning empty homes. The second, unrelated provision seeks to ensure that the extra money raised from removing or reducing the discount on long-term empty homes is kept by the billing authority.

I am surprised by the official Opposition's apparent commitment to supporting the freedom of the owner of an empty property to enjoy keeping the property empty. Most people on both sides of the House recognise that there is a problem with empty property, and that we need to take more effective action to bring it into use.

The hon. Member for Kingston and Surbiton made several valid points about the work of the Empty Homes Agency, and about action to incentivise the owners of empty properties to bring those properties into use. However, he went on to say that some owners were inexperienced or nervous about letting their properties, and some may be keeping properties empty out of inertia. It is therefore entirely right and proper, as the Select Committee has said, for there to be mechanisms to identify people in that position, to ensure that local authority empty property agencies, where they exist—and many local authorities run empty property units—can advise people about what can be done to bring properties into use, perhaps by putting them in touch with a local housing association that may be able to help with letting.

The provisions in the Bill are simply about using information already held by local authorities to get empty homes back into use. That is a wholly sensible and admirable proposal, which was supported by the Select Committee and has also had support from all parts of the House, so I am surprised that the Conservative party now appears to oppose it.

I agree about the importance of safeguards for council tax information, but that information cannot be used to remove the freedoms of a property owner—to require them to take tenants or to sell to someone who would occupy the property, for example. The hon. Member for Runnymede and Weybridge mentioned the reference in the communities plan to propose measures to encourage empty properties to be brought into leasing. It says:

"We plan to do more to make better use of long-term empty properties in high demand areas. We will consult during the Spring on giving local authorities powers to lease long-term empty properties to improve them and bring them back into use".

There will be full opportunity to discuss those provisions, which are not related to the Bill. The Bill is purely about information available to local authorities to enable action to be taken in line with the Select Committee's recommendation to bring the number of empty properties down. I would have thought that everyone would welcome that.

Philip Hammond (Conservative, Runnymede and Weybridge)

The Minister says that he will consult in the spring about powers for local authorities to lease properties compulsorily, but there is no provision in the Bill to give effect to that. On new clause 10, however, he said that he needed to put the power relating to something that he intended to consult on in the summer into the Bill now, because otherwise there might not be another opportunity to get that power on to the statute book for a couple of years.

Nick Raynsford (Labour, Greenwich and Woolwich)

The hon. Gentleman may not be aware that my noble Friend Lord Rooker, the Minister for Housing and Planning, is preparing a piece of legislation that would provide a good opportunity for such provision. To the best of my knowledge, and I speak with some authority, there is no more local government legislation in the pipeline. As for retaining the extra money from removing or reducing the discount, we had a full debate in Committee on that question when we considered Opposition amendments to clause 75.

As the Under-Secretary of State, my hon. Friend the Member for Shipley (Mr. Leslie), said at the time, we believe that there should be no financial benefit to a local authority from a decision on whether to charge full council tax on long-term empty homes. The decision should be taken entirely on housing grounds and not because of potential additional financial benefits to the authority, which could provide a perverse incentive. That would be particularly problematic in areas where there may be very low demand and genuine difficulties for people in letting property. In such cases, we believe that an authority should take decisions on the merits of the case without a potential distorting financial incentive.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

What I do not understand about that argument is that it seems to suggest that local authorities cannot be trusted to work out the housing needs in their area and the best policies to tackle them. Although the Minister talks about freedoms and flexibilities and says that this is a decentralising Bill, he is preventing local authorities from enjoying that revenue when they are taking sensible decisions.

Nick Raynsford (Labour, Greenwich and Woolwich)

On the contrary, the policy gives local authorities the freedom to be able to reduce, and even eliminate entirely, the discount on long-term empty homes if they think that that is the right thing to do. We believe that local authorities should base their decision on a proper estimate of the impact of that withdrawal of subsidy and whether it would achieve the desired effect. That gives local authorities the freedom and the choice, and not a perverse incentive. As the hon. Gentleman will recognise, it would require the virtue of the Archangel Gabriel in some cases for local authorities to forgo potential revenue which, if it were available, they might be tempted to use in particular circumstances.

Geoffrey Clifton-Brown (Conservative, Cotswold)

The Minister's argument would hold some sway were it not totally inconsistent with his policy on abolishing the discount on second homes. What is the difference between the two aspects? The only difference is that abolishing the discount on second homes could raise £60 million, whereas abolishing the discount on empty homes could raise £160 million. Is it the case that the Government simply do not trust local authorities to use that money?

Nick Raynsford (Labour, Greenwich and Woolwich)

No, that is not the case. As the hon. Gentleman knows, there is a fundamental difference, because, in areas with substantial numbers of second homes, real concern exists that many local people on modest incomes are priced out of the market. In some tourist areas, such as the west country or the Lake district, where there is a shortage of affordable housing, house prices get pushed up by the presence of many second home owners. That has serious consequences for local people in need.

It is an explicit provision of our arrangement to ensure that local authorities can use the revenue that they get from removing or reducing the discount—we must have the 10 per cent. discount to ensure that those properties can be identified as second homes—to meet local needs. The Liberal Democrats pressed us to insist that that money should be used for housing, but we said that it is better to give local authorities the freedom to decide what they should use it for. I therefore remind the hon. Member for Kingston and Surbiton that his is not the only party that supports giving freedom to local authorities and trusts them to take the decision.

Geoffrey Clifton-Brown (Conservative, Cotswold)

Will the Minister at least concede that, if councils abolish some or all the discount on empty homes, they should be reimbursed for the costs of levying that council tax? Otherwise, there will be a perverse incentive not to reduce the discount on empty homes at all.

Nick Raynsford (Labour, Greenwich and Woolwich)

No. The position is that a property that is a second home has qualified for the 50 per cent. discount. Under the new arrangement, the authority will be free to decide whether to reduce that discount to anything between 50 per cent. and 10 per cent. It will have discretion as to the level of reduction. Any revenue received from that decision will accrue to that authority and to other precepting authorities when there is a county as well as a district. A fair distribution will therefore exist between different tiers of government. That is a quite separate issue from a purely housing policy-based decision as to whether it is appropriate to give an incentive to someone to bring an empty property back into use by charging the full council tax.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

Can the Minister confirm that the final decision on this matter will come when we see the regulations? Will he therefore assure the House that he will keep this aspect under review and possibly ensure that regulations will allow some variations, so that we can see whether he is right or we are right?

Nick Raynsford (Labour, Greenwich and Woolwich)

I can happily give the hon. Gentleman the assurance that the policy will be kept under review. Obviously, we keep all policies under review. Our firm view, however, is that the right way forward is that which I have set out, and that is the way in which we intend to proceed.

The requirement in new clause 7 for annual reports on the operation of clause 90 and its effects on local authority rents would achieve no substantive benefit but it would impose an unnecessary administrative burden. Housing revenue account subsidy has operated as a redistributive system for more than a decade. Like other things, it dates back to the previous Government, as it was introduced by the Local Government and Housing Act 1989. It therefore seems doubly bizarre that the Conservatives are now changing the position that they adopted when in government. Redistribution has been achieved up to now by offsetting assumed housing revenue account surpluses against rent rebates. That depended, however, on housing benefit being included in the HRA, which was highly controversial and deeply unpopular with many tenants.

In response, we took a decision to remove housing benefit from the housing revenue account, but after rent rebates are removed from the HRA, the old redistribution system will not be possible, so the new, more transparent mechanism in clause 90 is needed. For the vast majority of authorities, the clause will simply replicate the outcome of the current redistribution mechanism. The only authorities whose resources will be affected are the 18 English housing authorities that currently have an assumed HRA surplus greater than their expenditure on rent rebates.

I have mentioned the figure of 18, so I now owe an apology to the hon. Member for Runnymede and Weybridge. He suggested that there were 34 debt-free authorities, but I intervened to suggest that the figure might be 18. I apologise—I was incorrect, because I was thinking of the other group. In fact, the number of debt-free authorities with housing stock is 35. I hope that that puts the record straight.

The authorities that have an assumed HRA surplus greater than their expenditure on rent rebates are currently required to transfer the excess to their general funds, thereby effecting a transfer from council tenants to general council tax payers. In future, subject to transitional arrangements, these amounts will be pooled, thus stopping the current subsidy of council tax by council tenants. That subsidy has caused considerable anger to council tenants.

Assumed HRA surpluses and deficits for the purposes of clause 90 are calculated on the basis of assumptions about an authority's rent levels and expenditure on its stock. Contrary to the views expressed by Conservative Members, there is no link between an assumed HRA surplus and good performance or political make-up. Local authorities that had the good fortune of low investment needs and, therefore, little debt while being able to command high rents have tended to end up in assumed surplus. Likewise, deficits generally occur when investment needs and, therefore, debt levels, are higher than can be funded from reasonable rents however efficient the council is and however well it manages its affairs.

The proportion of authorities rated excellent and good by the Audit Commission under the comprehensive performance assessment is about 50 per cent. for all three main political parties. Similarly, comparable proportions of both deficit and surplus authorities equally achieve good or excellent ratings. I stress that list in case the Opposition parties are tempted to indulge in any mischief making on this point. In addition, there will be no adverse impact on council rent payers. Clause 90 will not make any difference to council rents for any authority, as we have now put in place a national framework for affordable social rents based upon the size, location and condition of properties.

The new clause is not necessary because totals of HRA surpluses collected and HRA subsidy paid to authorities in deficit will be approved by Parliament as part of our request for resources. The figures will also be recorded in the annual accounts of the Office of the Deputy Prime Minister and be open to scrutiny by both Parliament and the National Audit Office. Additionally, the start of consultation on the annual general determination of HRA subsidy has always been announced in the House and the papers made available. Copies of the final determination of HRA subsidy are also made available to the House. That will continue. There is therefore no need for the further report suggested by the new clause.

Andrew Turner (Conservative, Isle of Wight)

The Minister suggested that the provision would have no effect on rent levels. However, will he confirm that the framework that he is proposing involves guidance, will not be mandatory on local authorities and that an authority, such as Sunderland, that has a large HRA surplus could use the surplus to subsidise rents? Or will the framework be more mandatory and will authorities such as Sunderland not be allowed to retain the surplus to subsidise rents?

Nick Raynsford (Labour, Greenwich and Woolwich)

The hon. Gentleman is getting a little confused. The purpose of the rent restructuring framework is to ensure broad consistency across the country that will take account of the size and attraction of particular properties. It will also take account of the local housing market in different areas. The aim is to do that over time, because we cannot make sharp adjustments to issues that impact on the viability of housing organisations and people's budgets. The programme is being phased in over 10 years, and it is designed to ensure that there is a more coherent framework of rents across the country.

New clause 16 relates to the Government's policy of ensuring that all social housing is decent by 2010, and in particular the contribution that the transfer of local authority housing to registered social landlords makes towards that. The policy was set out in the housing statement, "The Way Forward for Housing" published in December 2000 and reaffirmed last month in the plan for building sustainable communities that was announced by my right hon. Friend the Deputy Prime Minister. The new clause would require the Secretary of State to report to Parliament annually on two matters. The first would be the amount of any payments made, or likely to be made, under clauses 40 and 41. Those payments are in respect of overhanging debt that may arise when an authority transfers its housing to a registered social landlord. The second would be the effect of such payments on the rents of those properties that are being transferred.

Clauses 40 and 41 allow the Secretary of State to assist one or more English local housing authorities to meet debt liabilities through a direct payment either to the public works loans commissioners or to the local authority on the condition that it is transferred to a non-PWLC lender. They confer similar powers on the National Assembly for Wales in relation to the debts of Welsh authorities. The policy driver for clauses 40 and 41 is assisting individual authorities that transfer their housing stock to a registered social landlord and need assistance to meet outstanding housing debt liabilities when the receipt is insufficient to cover them.

The amendments appear to suggest that something is not being disclosed in relation to those payments—or perhaps there is a belief that we are giving favourable treatment to authorities that transfer their housing stock and for which we make an overhanging debt payment. Neither is the case. All authorities are treated on a fair basis. It is for a local authority to choose whether it wishes to retain or transfer its stock based on a rigorous option appraisal involving tenants and other stakeholders.

If an authority or its tenants choose to retain their stock, the Government, through the housing revenue account subsidy, continue to ensure that a local authority can meet the cost of servicing its housing attributable debt. In other words, HRA subsidy continues. However, when a local authority transfers all its housing stock, it is inappropriate and, frankly, stupid for it to remain in receipt of ongoing housing revenue account subsidy. That is nonsensical. In such cases, we make an overhanging debt payment. Different authorities are not treated differently. Those that keep their stock continue to get subsidy; those that have no stock no longer get subsidy and the overhanging debt is written off. We do not select the authorities; that is the result of local choice that is possible because the Government have made a commitment to make housing transfer and a decent home available to all tenants.

When the payment is made, it is common practice for the Office of the Deputy Prime Minister to include reference to both the payment and its amount in the press notice accompanying the housing transfer. Once a transfer takes place, details of it, including the number of dwellings, the sale price, private finance and overhanging debt payment, are also included on the website and are freely available from the ODPM. Overhanging debt payments were originally recorded in the Treasury's annual accounts, but from 2002–03 they will be recorded in the annual accounts of the ODPM and reported to Parliament through that route. So payments are open to the scrutiny of Parliament and the National Audit Office.

New clause 16 would also require that the effect of an overhanging debt payment on the rents of the transferred stock should be reported. That again misses the point of the Government's rent restructuring policy, which was introduced after much consultation, and the justifications for it have been set out many times. In consenting to all housing transfers, it is a condition that the new landlord will have determined rents in line with rent restructuring policy and methodology and will meet the 2012 target. How that is delivered will have been part of the development of the transfer proposal on which tenants will have voted. Whether or not there is to be an overhanging debt payment will not have an impact on that process.

Whether the transfer is of all, or only part, of an authority's housing stock, the delivery of restructured rents by 2012 across all social housing remains the priority. So where there is a partial transfer with overhanging debt, it is our intention that there should be no impact from the transfer on the rents of those tenants who remain with the authority. Therefore, a report to Parliament on the impact of the overhanging debt payments on rents would be nugatory because in all cases there would be nothing to report. I hope that the hon. Member for Runnymede and Weybridge will not press the new clause to a Division.

Amendments Nos. 4, 35 and 36 relate to the Government's policy of encouraging authorities to restructure rents, as I have set out. The Government inherited a social rents policy that was a total shambles. In some areas, rents charged by neighbouring councils for similar properties varied by huge amounts and housing associations often charged more than half as much again for similar properties in the same area. In time, our rent restructuring policy will produce a coherent pattern of rents for social housing across England. By contrast, the Opposition's policy would make the situation even more chaotic.

If social rents were allowed to approach market levels, some housing providers in areas of low demand would be unable to operate, while in areas of high demand such as London, those on modest incomes would be priced out of the market altogether. Amendments Nos. 4, 35, and 36 would delete clause 92, which seeks to remove an obstacle to the policy of rent reform. The amendments would undermine that rent reform and restructuring policy and are therefore undesirable.

The hon. Member for Runnymede and Weybridge asked whether a local authority could look at the relationship between public and private rents in its area. The relevant legislation does not explicitly refer to an authority having regard only to its own area, so local authorities can look at a much wider area. However, we believe that that is undesirable because it inhibits the scope of rent restructuring policy, which is why we are introducing change. As for the position in Wales, he rightly identified the fact that we wish to give the National Assembly for Wales scope to reach a decision on its own merits within the Principality.

The hon. Gentleman also raised the issue of nomination rights. I apologise for the fact that he has not received a letter. I tried to ensure that all the commitments were followed up, so I shall certainly pursue that. However, I took up the issue because there was a potential anomaly and conflict with existing policy, as nomination rights are not taken into account when calculating the level of receipt. My noble Friend Lord Rooker has since agreed that, when an authority's contribution to pooling is calculated, any consideration or reduction of the receipt in respect of nomination rights will be excluded. However, I shall write to the hon. Gentleman and put that on the record.

Philip Hammond (Conservative, Runnymede and Weybridge)

Will the Minister answer my question about a possible clawback for English Partnerships and the way in which that relates to clause 11?

Nick Raynsford (Labour, Greenwich and Woolwich)

I will write to the hon. Gentleman on that issue. I urge him and the hon. Member for Kingston and Surbiton not to press their amendments to a vote.

Philip Hammond (Conservative, Runnymede and Weybridge)

As usual, I greatly enjoyed the Minister's reply to the points that he thought that I was going to make. In many cases, however, he did not address the points that I did make. The key provision in this group of amendments is new clause 3, which deals with issues raised by clause 11. Clause 11 is a centralising measure—it gives the lie to the Government's claim that the Bill delivers freedom and flexibilities to local authorities and it is the antithesis of good accountable local government. New clause 3 is a sensible compromise and has the support of both Conservative and Liberal Democrat Members. The Government have rejected it because they are bent on the redistribution of assets of prudent, debt-free local authorities. I urge my hon. Friends to support new clause 3.

New Clause 8 — Council Tax and Regional Bodies

Geoffrey Clifton-Brown (Conservative, Cotswold)

I beg to move, That the clause be read a Second time.

Sylvia Heal (Deputy Speaker, Halesowen and Rowley Regis)

With this it will be convenient to discuss amendment No. 3, in page 71, line 11 [Clause 120], after 'authority (', insert 'but not'.

Geoffrey Clifton-Brown (Conservative, Cotswold)

The purpose of the new clause is to probe the Government's intention for funding the various regional bodies that they are introducing. The Under-Secretary has already funded the shadow regional assemblies—the so-called regional chambers—out of central Government funds. If he can tell me that no provision in part 6 seeks to fund any regional bodies, I shall withdraw the new clause now. Unless he can give me that assurance, I shall continue to press the matter. Will the Under-Secretary give way?

Chris Leslie (Labour, Shipley)

I shall intervene. Part 6 has no tax-raising mechanisms save for revenues from forgone discounts or changes to valuation bands at some point in the future. There are no direct mechanisms whereby regional bodies could gain. However, part 6 affects revenue and such mechanisms cannot therefore be ruled out for the future.

Geoffrey Clifton-Brown (Conservative, Cotswold)

"Such mechanisms cannot be ruled out for the future." We must therefore assume that the Government have a gleam in their eye and council tax will be used in future as a mechanism for funding various regional bodies. We already know from the Planning and Compulsory Purchase Bill that eight shadow assemblies or chambers will be set up by the late spring. All eight regions will have those so-called indirectly elected bodies. They are likely to constitute the regional planning body, which will have substantial powers to draw up regional spatial strategy. It presumably needs substantial funding to operate them. We will have regionalisation to that extent, whether we like it or not.

We know from the Deputy Prime Minister's community statement that a regional housing body will be established to draw up a regional housing strategy. Another stratum of regional bodies will therefore require funding. Furthermore, the Regional Assemblies (Preparations) Bill, which is in another place, will provide for the possibility not only, God forbid, of regional referendums, but of directly elected regional assemblies, if people vote for them. Those regional bodies will require considerable funds, and that is what the new clause probes. It would be interesting if the Minister could indicate the sums that the Government are already providing to fund these shadow regional assemblies, chambers—call them what you will—in the north-east, for example, where the concept is most advanced.

Amendment No. 3 would reverse the thrust of clause 120 so that, although the Secretary of State will be able to provide powers to designate different local authorities for different purposes, he will not be able to do it purely on a regional basis. It seems grossly unfair that a whole class of local authority should be singled out on a regional basis for different treatment in relation to council tax.

Will the Minister clarify the stage that funding for the regional bodies has reached, the size of the budget that is set aside for the next year or two, and whether it is intended that there should be a regional council tax or any separate precept to pay for them?

Matthew Green (Liberal Democrat, Ludlow)

We support the new clause, although for an entirely different reason—namely, that council tax should be scrapped. It is a completely inappropriate means of raising revenue for councils or for regional bodies. When the regional bodies finally emerge from the weak state that the Government propose into the fully-fledged system of regional government that we hope for, they will need tax-varying powers. Scotland has the ability to raise extra tax or, indeed, to lower it; Wales does not, but should have. One of the oddities involved is that it may turn out that all the English regions, Scotland and London have the power to raise money in one way or another—although the London system is inappropriate—while Wales is left as the only part of the country that cannot. The Government may find themselves in difficulties with their Welsh MPs in that regard.

Overall, council tax is an iniquitous, inappropriate and non-progressive form of taxation that should be abolished and replaced with levels of local income tax. I am sure that that system will increasingly develop in the future.

Geoffrey Clifton-Brown (Conservative, Cotswold)

I seek clarification of the Liberal Democrats' policy. Are they saying that they would have a local income tax to raise money for local authorities as well as a regional income tax to raise money for the regions? Have they undertaken any proper costings as to how much those two taxes would put on the average taxpayer's bill?

Matthew Green (Liberal Democrat, Ludlow)

The money would only replace money that is currently raised by council tax, so overall it would not add any extra burden of taxation. Such a tax would be based on ability to pay rather than on a fixed asset. Council tax is a particular burden on pensioners, for example, who are on fixed low incomes but have to pay more each year. Council tax has no buoyancy. It has to be raised every year, unlike income tax; with the latter, if the economy goes up there is a general shift up in revenues. Council tax is completely non-progressive. We have proposed that in the forthcoming Budget the Chancellor could introduce a 50p band for income tax across the country and use that to knock £100 off every council tax bill.

Sylvia Heal (Deputy Speaker, Halesowen and Rowley Regis)

Order. I hope that the hon. Gentleman will continue his remarks in relation to the amendment.

Matthew Green (Liberal Democrat, Ludlow)

Thank you for bringing me back on course, Madam Deputy Speaker. I was getting rather too enthused about our alternative Budget. However, the reality is that the money that would be raised through a local income tax, or through a regional form of income tax, would merely replace money that is currently raised through council tax.

I should point out to the Conservatives that such a system works in America, where several different tiers of income tax are raised at state, county and national levels. Indeed, such a system is also used in parts of Europe. This is not rocket science, and my understanding is—

Sylvia Heal (Deputy Speaker, Halesowen and Rowley Regis)

Order. I am sure that the hon. Gentleman is about to draw his comments back to the new clause.

Matthew Green (Liberal Democrat, Ludlow)

I thank you for your guidance, Madam Deputy Speaker, but in a way they are directly related. In supporting the Conservatives, we are seeking to ensure that the council tax is not the mechanism used to fund regional bodies. I am explaining what should be used instead, so I hoped that, on that ground, it was in order to go down that route for a while.

Our support for the Conservatives' new clause is based on an entirely different reason from theirs; it is clear that they would not want to establish the ability to raise, or to vary, taxation at a regional level. In our view, the council tax definitely should not be used as the vehicle to raise such funding; in fact, it should be scrapped at a local level as well.

Geoffrey Clifton-Brown (Conservative, Cotswold)

The hon. Gentleman is being very generous in giving way. Does he not accept that there will be an increase in the overall burden of taxation? His party strongly supports regional bodies, but we say that they are an unnecessary tier of bureaucracy. In any event, they are expensive and will have to be paid for. Does he accept that there will be an increase in the burden of taxation to pay for them?

Matthew Green (Liberal Democrat, Ludlow)

Regional bodies exist, and they are currently paid for out of central Government funds through the passing down of national taxation. We want such decisions to be taken at a regional level by democratically elected regional assemblies. The hon. Gentleman assumes that if a new tax exists, it has to be higher; however, it can be simply a replacement for another form of taxation, and that is what we want to see.

In conclusion, we will support the Conservatives' new clause, and on amendment No. 3, we are in broad sympathy with their reasons for probing the Government. We are happy for central Government to make regulations applying to individual councils in order to vary matters, but we do not want them to take blanket decisions that apply to entire regions. For that reason, we are happy to support the Conservatives' amendment. Overall, and perhaps for entirely different reasons—particularly in respect of new clause 8—we lend them our support.

Robert Syms (Conservative, Poole)

I rise to support new clause 8. My hon. Friend the Member for Cotswold (Mr. Clifton-Brown) has been clever in tabling it to tease out the Government's position; indeed, the Minister's intervention was very interesting in that regard. In talking about regional government and its architecture, the Government, whenever they propose such a case, have always said that it should involve moving powers downward from central Government, rather than upwards from local government. If there is a case for financing regional government, I doubt whether the council tax should be used. I hope that the Minister will be a little more explicit on that issue in winding up the debate.

The Government have been honest in the sense that, before we get to regional referendums, there will be a boundary review to examine the structure of local government, so that people know what form of local government they will have. Before we have such referendums, it would be equally fair of the Government to set out in explicit terms how the funding of these regional bodies will be covered. Regardless of the different opinions that exist on both sides of the House, once such bodies come into existence, there will come a point when they will need some form of independent finance. However, the Government have not said a lot about that. In setting up another tier of Government, costs are inevitable, even if one is trying to get rid of the county councils, as is the Government's will. We therefore need a little more clarity about what the Government hope to do in this regard.

Council tax is appropriate for local government, although I will not stray into that argument, Madam Deputy Speaker. As the hon. Member for Ludlow (Matthew Green) has said, a number of models exist in other parts of the world such as the United States and Germany. Those models may be more appropriate for this kind of funding.

This shortened debate is important. The Minister will understand that, on this side of the House, we are not great enthusiasts for regional government. We are concerned that the Government have a stealth policy towards local government: they keep pushing powers to the regions and employing more people there, but without there being any great demand for that, from my constituents anyway. The Government ought to be more explicit about the sort of deal that people will get. Financing will be critical in whether or not people will support regional bodies.

Chris Leslie (Labour, Shipley)

I am glad that the hon. Member for Poole (Mr. Syms) found my earlier intervention interesting. Let me elaborate on it, because I am concerned about new clause 8 and amendment No. 3. Let us be clear about what the new clause will do. It would make it impossible for anything in part 6 of the Bill to allow the raising of revenue for any regional body. However, part 6 does not contain foundation revenue-generating instruments; it simply contains a number of measures that amend existing council tax provisions. The effects of new clause 8 would not be straightforward. For example, the new clause would mean that any revenues that were generated or changed because of alterations to the revaluation cycle would not be able to go towards regional bodies. However, other parts of council tax revenue would be able to go towards regional bodies, which is rather curious. Highlighting technical flaws in a new clause is sometimes a Minister's last refuge, but there are more substantive issues that I would like to raise.

Matthew Green (Liberal Democrat, Ludlow)

I am sure that the Minister is just about to raise those substantive issues, but this may be a good time for him to let us know what the Government's thinking is on the possible future need to raise money regionally. Without making any commitments, can he tell us what the likely mechanism will be, so that people can have some preparation time?

Chris Leslie (Labour, Shipley)

The hon. Gentleman will recall from his late-night reading of the White Paper, "Your Region, Your Choice: Revitalising the English Regions", that funding and decision-making powers will not be taken away from local government but from Whitehall. I commend the White Paper to all hon. Members; it will make that point clear, even to the hon. Member for Cotswold (Mr. Clifton-Brown). Funding and decision-making powers will be devolved to elected regional assemblies, should they be set up. Funding for programme expenditure would come from revenues that had already been determined and decided by central Government, rather than being raised wholly from local council tax payers. In that respect, hon. Members on the Conservative Benches have set a hare running in the wrong direction. I hope that what I have said usefully corrects their view.

Geoffrey Clifton-Brown (Conservative, Cotswold)

My hon. Friend the Member for Poole (Mr. Syms) raised an important point. If the Government are setting up a mechanism to discover whether people want referendums on elected regional assemblies—with all that that would involve in sorting out the different tiers of local government—people are entitled to know what those regional assemblies are likely to cost, and whether council tax, or something else, is to be the mechanism for that. I hope that the Minister will be able to answer those points in the best possible spirit.

Chris Leslie (Labour, Shipley)

We have not yet passed legislation to create regional assemblies. A Bill is going through the House that will enable referendums to be held on the establishment of elected regional assemblies. However, legislation on how those assemblies would operate and the programmes that they would undertake has yet to come.

The White Paper suggests that a precept on council tax could be levied for the administrative running costs of elected regional assemblies, but not for the programmed expenditure. We anticipate that about 5p a week would be the typical levy on a band D council tax payer. That small amount would go towards the administrative running costs of an elected regional assembly. However, we should not rule out other possible precepting capabilities for a regional assembly. If local people choose in a referendum to have a regional assembly, and if they wish to see revenue generated for regional expenditure, who are we to stop them?

Geoffrey Clifton-Brown (Conservative, Cotswold)

The Minister has just said something very significant. On top of the new council tax band D bills of more than £1,000 that will be imposed, he has just said that he expects a regional council tax precept to be around 5p a week. Is he saying that £25 a year will be added to those huge increases—[Interruption.] If my maths is right, 5p a week is £25 a year—

Robert Syms (Conservative, Poole)

It is £2.50.

Geoffrey Clifton-Brown (Conservative, Cotswold)

I got the decimal point in the wrong place. Even so, the principle would be established that a precept could be put on the council tax to pay for the running costs of regional bodies. Could the Minister confirm that?

Chris Leslie (Labour, Shipley)

Of course I can confirm that. It is in the White Paper and has therefore been in the public domain for some time. If the Conservative party has only just noticed that, I congratulate it. It would be only £2.50 a year, and I cannot see that as too onerous. We should also remember that there are already many precepting authorities for the council tax, many of which are regional bodies. That brings me to the point that the new clause could stop longstanding regional bodies operating. For example, regional flood defence committees levy a precept on local councils. Under the new clause, they would be bereft of funding, because they would no longer be able to precept local authorities to raise revenue. Other regional environmental, planning, arts and tourism bodies would be affected, even those on which Conservatives serve. I challenge the hon. Member for Cotswold (Mr. Clifton-Brown) to confirm that he intends that the new clause should deprive regional flood defence committees and coastal defence committees of the revenue that they need to stave off potential natural disasters that could affect many people. That expenditure is extremely important and those constituents who have been afflicted by floods and disasters would be most surprised at the import of the new clause.

In any case, regional chambers already exist, many of them with Conservative members. For example, 41 Conservatives sit in regional chambers in the south-east and 30 in the south-west. Those chambers derive some of their revenue from local authorities, but the new clause would prevent that. It would mean that it was Conservative policy to put an end to those voluntary regional chambers, and would be a significant constraint on the freedom of local government to contribute to them.

Geoffrey Clifton-Brown (Conservative, Cotswold)

indicated assent.

Chris Leslie (Labour, Shipley)

The hon. Gentleman is nodding and it seems to be his deliberate intention to restrict the ability of local authorities to contribute to voluntary regional chambers, even though they perform useful functions. We also hope that they will embark on the scrutiny process for regional development agencies, before elected regional assemblies are set up. That will be important work.

Andrew Selous (Conservative, South West Bedfordshire)

The Minister is being disingenuous if he thinks that just because Conservatives serve on regional bodies, we think that they are the most appropriate way to serve our constituents. Conservative representatives will serve on whatever bodies currently exist, but that is not to say that we think that they are the most appropriate.

Chris Leslie (Labour, Shipley)

That may well be the case. Conservative members do serve in regional chambers, but I was seeking to establish whether that was official Conservative party policy. We know that the Conservatives are opposed to elected regional assemblies and that they would not give people the choice in a referendum to establish them. However, are Conservatives opposed even to the establishment by local authorities of voluntary regional chambers? The hon. Member for Cotswold was nodding about something before. Will he confirm that the Conservatives oppose regional chambers?

Geoffrey Clifton-Brown (Conservative, Cotswold)

I shall deal with that later.

Chris Leslie (Labour, Shipley)

I look forward to that.

I believe that new clause 8 would place a significant constraint on local government, but it is not untypical of the general policies pursued by the Conservative party when in government. In any case, part 6 of the Bill contains no specific provisions relating to precepting, apart from discounts on council tax banding. It is clear that the new clause would have a detrimental effect.

Geoffrey Clifton-Brown (Conservative, Cotswold)

The Minister challenges me to say whether the Opposition are in favour of funding the voluntary regional chambers, but it would be helpful if he estimated the costs being incurred by those bodies—in the north-east, for example—and said where the funding comes from. Is any council tax precept being levied to fund those bodies at present?

Chris Leslie (Labour, Shipley)

There is no precept as such, but local authorities are free to contribute whatever they like towards regional chambers. New clause 8 would prevent, constrain, inhibit and stop authorities from being able to contribute freely to the perfectly reasonable activities of regional chambers. Local authorities would not be able to use council tax to raise resources for regional bodies. I challenged the hon. Member for Cotswold to say whether or not Opposition policy is to scrap regional chambers, but his refusal to answer speaks for itself.

Andrew Turner (Conservative, Isle of Wight)

Will the Minister explain what he understands is meant by the word "tax" in new clause 8?

Chris Leslie (Labour, Shipley)

New clause 8 has a number of drafting deficiencies. It is not for me to point them all out. The word "tax" could well mean precept, but it could also mean revenue for those regional bodies. If the hon. Gentleman has a different opinion, perhaps the new clause should have been drafted more precisely. However, the vagaries of the new clause are precisely what caused me to try to gauge from the hon. Member for Cotswold's remarks whether the Opposition were opposed to regional chambers. Again, answer came there none.

The hon. Member for Ludlow (Matthew Green) supported new clause 8 for entirely different reasons. I hope that the clarifications that I have given will cause him to reconsider.

Matthew Green (Liberal Democrat, Ludlow)

They will not.

Chris Leslie (Labour, Shipley)

That is very alarming. If the Liberal Democrats are also saying that council tax revenues should not be used to support regional bodies, they may find themselves in the same pickle as the hon. Member for Cotswold, who said that he would not allow council tax revenues to be used for regional bodies such as flood defence committees. I know that the hon. Member for Ludlow does not like the concept of council tax, but we have no alternative to it at present. The new clause would have a very significant effect, and I urge the hon. Gentleman to reconsider his position.

Matthew Green (Liberal Democrat, Ludlow)

We shall not change our minds on this matter because we believe that council tax should not be used to raise revenue for any bodies, even local councils. Instead, there should be a local income tax.

Chris Leslie (Labour, Shipley)

Presumably, therefore, the extension of that rather dubious logic is that the hon. Gentleman will oppose any changes to council tax because he disagrees with the tax in principle.

Matthew Green (Liberal Democrat, Ludlow)

indicated assent.

Chris Leslie (Labour, Shipley)

Will he also refuse to countenance the use of council tax in any local government revenue plans in the future? Will he shun that appalling mechanism for raising revenue? I do not think that that is the position of the Liberal Democrat party. Surely there must be some strand of pragmatism among its members? The party will need it if, God forbid, there is ever a Liberal Democrat Government, at some indeterminate point in the future, who want to change the system. The hon. Gentleman must work in the system as it exists at present.

I am most concerned about the love and enthusiasm for local income tax exhibited by the hon. Member for Ludlow. I would not want to pre-empt the Government's funding review because we accept that there are significant issues around how local government should raise revenue and around making sure that it is tied to local accountability and principles. While not ruling out options which that review might examine, I caution against the hon. Gentleman's enthusiasm for local income tax. There may be a lot of income in Kingston and Surbiton that could be taxed, but there is less in other Liberal Democrat authorities such as Liverpool—which may find raising revenue through a local income tax extremely difficult. I only speculate because it would not be right to address that particular issue, which is for debate another day.

Council tax does relate to wealth, albeit capital wealth, and, as many hon. Members will remember, it is more progressive than the poll tax. There are certainly ways in which it could be improved. The Bill makes provision for banding and revaluation, which we believe are the mechanisms that should be used to make sure that council tax is more relevant and up to date—and that it relates more to ability to pay. New clause 8 is wrong in its conception, design and drafting and would have a significantly detrimental effect on some regional bodies—some of which do extremely important work. We need to know whether the movers of the new clause propose to scrap regional chambers and to stop funding regional and coastal flood defence from council tax.

Geoffrey Clifton-Brown (Conservative, Cotswold)

Occasionally when one moves a probing amendment or new clause, one strikes gold. On this occasion, it is clear that we have exposed a huge new revenue-raising power for emerging regional bodies. The part of the Bill to which the new clauses apply is anyway far-reaching. It provides for a mandatory revaluation cycle, and gives the power to change the number of council tax valuation bands and introduce transitional arrangements. There was a lengthy debate in Committee about how to enforce the payment of council tax by some of the poorest people in this country by distress of their assets. Where their assets are insufficient to cover the costs of that distress, the outstanding debt can be the subject of an attachment to earnings order.

We have suddenly discovered that all the new powers in the Bill can be used to raise money for emerging regional bodies.

Desmond Swayne (Conservative, New Forest West)

Shocking.

Geoffrey Clifton-Brown (Conservative, Cotswold)

My hon. Friend is absolutely right. That purpose is not in itself shocking but it is not transparent. I pressed the Minister several times to state the costs being incurred by the transitional regional bodies but he did not give me one example. I pressed him in respect of the north-east but still he did not give me one example. I have given examples of regional planning and housing bodies—all of which will have staff, expensive buildings and a budget. How will they be funded?

Chris Leslie (Labour, Shipley)

I suspect that the hon. Member for New Forest, West was describing the hon. Gentleman's contribution. The hon. Gentleman is well aware of the millions of pounds raised from council tax precepts towards perfectly reasonable expenditure on regional flood and coastal defence committees, which the new clause would prevent. Does the hon. Gentleman really intend that those regional bodies should be bereft of that funding? Does he say that existing regional chambers should also be wound up and be bereft of funding?

Geoffrey Clifton-Brown (Conservative, Cotswold)

With great respect to the Minister, who is a pretty straightforward man, he is equivocating. He will still not give us a clear answer as to how much money is likely to be raised through those mechanisms, and for what regional bodies. He has now introduced to the argument the fact that we might have regional arts bodies, regional tourism bodies or regional flooding bodies. How many more regional bodies are we to have? That council tax could be used as a mechanism to fund all those regional bodies in performing functions that are currently paid for from general taxation. We can thus conclude only that there will be an additional tax-raising power for all the functions that those regional bodies will have and which do not currently exist. The Minister has still told us nothing about that.

We have still not had straightforwardness as to how much of that regional council tax will fund the elected regional assemblies to be set up under the Regional Assemblies (Preparations) Bill that is currently in another place. It is all very well for the Government to say that the Bill does not give the detail for each region; I realise that that information will be separate from the Bill. Nevertheless, the Bill is the paving measure that will give rise to those elected regional assemblies, if we ever get as far as a referendum and a positive vote in favour of them.

Chris Leslie (Labour, Shipley)

I repeat that we envisage that elected regional assemblies might levy a precept of about 5p a week from a band D taxpayer. To aid the hon. Gentleman, that amounts to £2.50 a year, not £25. However, before we even get to elected regional assemblies there are existing regional bodies that receive revenue from precepts. Is the hon. Gentleman saying that the new clause will stop that, or not? I have asked him about four times and I should appreciate an answer.

Geoffrey Clifton-Brown (Conservative, Cotswold)

When will the Government be straightforward about their proposals? They are making the decisions; the job of the Opposition is merely to probe them as to their intentions, not to state our policy. We want to know something about the costs of those regional bodies and how they will be funded. Will they be funded from council tax?

I shall give the Minister some figures so that we can see whether we are in the same ballpark. We already know about the costs for the new Parliament building in Edinburgh and the Assembly building in Wales, and that when public sector buildings are needed for the new regional bodies, significant costs will be involved. The abolition of Humberside alone cost £80 million. Extrapolate from that the cost of abolishing all county councils and the sum would run into billions.

As we advance towards elected regional assemblies, we are entitled to know what sort of sums the Government have in mind and how those bodies are to be funded. Will they be funded in full by the regional council tax or will there be other tax-raising powers?

We could continue to press the Government and embarrass them further. Suffice it to say that very large sums are involved and it is not clear that the functions taken over by those regional bodies will cease to be undertaken by somebody else—for example, the Minister's Department. Would the departmental budget then be reduced? It would have been useful had the Minister told us about that. Perhaps he will intervene again. If he plans to raise all that money for regional bodies through the regional council tax, will his departmental budget be reduced in lieu? As taxpayers, we are entitled to answers. The Minister shakes his head, but we, as taxpayers in general, are entitled to answers to those questions.

How many more regional bodies will be set up? The Minister has already referred to regional arts boards, regional tourism boards and regional flooding boards. How many more? Regional planning bodies and regional housing bodies do not yet exist. How much will they cost? How many buildings will be needed to house all those functions? We have not heard a single word from the Minister about the costs of those regional bodies. Council tax payers throughout the land who are likely to have to fund the cost of those bodies are entitled to some answers.

There has been a singular paucity, indeed a complete lack, of answers from the Government. Taxpayers can only conclude the worst. We may have been told that the amount will be only 25p a week in the first instance, but, by golly, in a year or two that amount will escalate many, many times.

The Minister laughs, but council taxpayers up and down the land will not laugh when they begin to get increased council tax bills of well over £1,000 for a band D house this year. They will not be laughing; they will be pointing an accusing finger at the Government because those increases are very significant.

We have heard no answers from the Government this afternoon. I respect the Minister, but it is fairly typical of the Government that they have failed to give us any answers. The only mechanism that we can use to protest vigorously is to press this matter to a vote, and I ask the House to accept new clause 8.

New Clause 13 — Employment Rights of Local Authority Employees

Andrew Selous (Conservative, South West Bedfordshire)

I beg to move, That the clause be read a Second time.

It is a great pleasure to move this new clause, which has support in all parts of the House. It is a modest but necessary measure as far as local authority employees are concerned. As I said, there is something in this clause that all Members should feel able to support.

The new clause will ensure that the children of local authority employees do not have parentless weekends. The new clause would mean that local authorities would not be able to force their employees with school-age children to work on both a Saturday and a Sunday. Our constituents would be amazed to learn that legislation is not already in place to prevent that from happening.

The evidence showing the need to do something about the problem comes from many sources, not least from the Joseph Rowntree Foundation/National Centre for Social Research report that was published in December 2002 entitled "Happy Families? Atypical Work and Its Influence on Family Life". Among other things, it showed that 20 per cent. of working parents with dependent children work on both Saturday and Sunday and that three quarters of them wish that they did not have to work at weekends.

I am, of course, aware that local authorities have to provide many vital services seven days a week. Local authority care homes immediately spring to mind, and tidy tips, some libraries and leisure centres seek to open seven days a week. There is nothing whatever in the new clause that would prevent local authorities from running services seven days a week. It would not put a barrier in the way of a local authority asking any of its staff to work on either a Saturday or a Sunday. However, it is entirely reasonable not to allow local authorities to force their employees with children at school to work on both Saturday and Sunday. If authorities were allowed to do that, the children would not see their parents at the weekend.

I have spoken to local authorities in my area and to the East of England Local Government Conference. They have told me that they do not believe that the new clause would create a serious problem for the running of authorities and that it would have only a minimal impact. However, it is necessary, given that 3 million parents work on both Saturday and Sunday. We know from recent events in Stoke-on-Trent, where plans to provide refuse services on Saturday and Sunday were withdrawn by the council, and in Richmond, which recently ran into difficulties with the provision of library services because of the way in which it imposed on its staff, that we need to address the issue.

Alistair Burt (Conservative, North East Bedfordshire)

I have listened to my hon. Friend's argument with interest. Does he not agree that it is a curious feature of modern life that, whereas the many enjoy much more choice, they occasionally do so at the expense of the few? Does he share my hope that, if this modest measure were adopted, private enterprise might see the lesson and introduce, of its own volition, similar provisions to ensure that people in the private sector who work on Saturday and Sunday and whose children endure parentless weekends might enjoy a freedom similar to the one that he is suggesting?

Andrew Selous (Conservative, South West Bedfordshire)

This new clause relates to local authorities, but I am sympathetic to the general point that my hon. Friend makes. He made the valid point that we need to be aware of the costs imposed on the employees who provide the services that we expect from local authorities on Saturday and Sunday. I am fully conscious of the fact that many local authority services have to be provided seven days a week, but this modest but necessary measure would provide some protection to local authority employees and prevent them from being pressed to work on both Saturday and Sunday.

Paul Goodman (Conservative, Wycombe)

Has my hon. Friend received support from Labour Members for his proposal given that trade unions must be extremely concerned about the problems that he so eloquently describes?

Andrew Selous (Conservative, South West Bedfordshire)

As I said, the new clause is supported by all parties and hon. Members on both sides of the House. I should have thought that a Labour Government would want to be associated with it. Indeed, there is an onus on anyone who opposes it to justify why local authority employees with children, whom they would not otherwise see, should be forced to work on both Saturday and Sunday. I hope that the Minister will address that. Although it is up to me to make the argument for the new clause, it is up to the Government to justify the forced working of parents of school-age children on Saturdays and Sundays.

Martin Smyth (UUP, Belfast South)

Would it not be strange for the House, which voted for family-friendly hours and mid-term breaks to allow us to be with our children, to vote against the proposal? It is not even limited to the nuclear family, but covers the broader spectrum of family life in which children need adults and adults need children.

Andrew Selous (Conservative, South West Bedfordshire)

The hon. Gentleman makes a valid point and is right. People outside this place look at the conditions that we grant ourselves. Those who work for local authorities are entitled to request and require us to extend the same protections and principles to them in their important work.

David Cairns (Labour, Greenock and Inverclyde)

As a non-parent, I have some sympathy with the new clause, although I suspect that more formal consultation will be needed before the Government accept it. However, I look forward to hearing what the Minister has to say. I am genuinely curious to know why the hon. Gentleman has limited the new clause to children of school age. In developmental psychological terms, surely the forming of the bond between parent and child is most important in the years up to the age of seven.

Andrew Selous (Conservative, South West Bedfordshire)

I understand that point. It is not that I think that the time that parents and young children spend together is unimportant, but those children who attend primary and secondary schools have fixed hours when they have to be in school. Their only opportunity to see their parents is on a Saturday or Sunday. If the House and the Government intend to deny those children and parents the time to be together as a family on one day a week, that is a sorry state of affairs. I look to the Minister to give us some comfort on that.

Matthew Green (Liberal Democrat, Ludlow)

We support the new clause. It will be interesting to hear the reasons against it. Frankly, we have a 24/7 society and, unfortunately, some people have to work at weekends so that the rest of us can enjoy the ability to make choices on Saturday and Sunday. The House would never consider sitting through the weekend. We can all choose what we want to do. No doubt many of us hold our surgeries and carry out constituency work, but we can choose whether to see our children. I am delighted to be the father of a six-week-old child, although I unfortunately missed the chance to serve on the Committee because I wanted to spend time with my child immediately after the birth.

Geoffrey Clifton-Brown (Conservative, Cotswold)

Paternity leave.

Matthew Green (Liberal Democrat, Ludlow)

Indeed.

It is important for the development of children that their parents should have the right to spend—awful word—quality time with them during the week, not just a snatched half hour in the evening when children are tired and their parents probably are too. The new clause is worthy of support. As the hon. Member for South-West Bedfordshire (Andrew Selous) made clear, Members who oppose it will have to come up with interesting reasons for doing so, as most of us would struggle to argue with its worthwhile aims.

The rest of the debate is in Hansard.