My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.

Moved accordingly, and, on Question, Motion agreed to.

House in Committee accordingly.

[The LORD SPEAKER in the Chair.]

moved Amendment No. 1:

Oh!

No, I am not offering, but if the Government want my advice on anything at any time, it is freely available.

As this is the beginning of the Committee stage, I remind noble Lords that I am an elected member of Pendle Borough Council in Lancashire.

The amendment is in some ways a probing amendment, although it is suddenly and unexpectedly topical following the Statement on the constitution on Monday, when the Government announced all sorts of interesting things. We are clearly embarking as a House, a Parliament and a country on another major debate about constitutional affairs. That is something that I personally and the Liberal Democrats generally very much welcome. However, the interesting thing about the Statement on Monday was how little it said about the issues covered by the amendment; in fact, it had nothing at all to say about them. I think that it was the noble Baroness, Lady Morgan, who noted that the Statement did not mention devolution once. Devolution and decentralisation to local government do not seem to be seriously on the Government’s agenda, although there are some rather minor aspects of them in the Bill.

It seems to me and many people in my party that the time has come to take a long, hard look at just how much power can be devolved from the centre, from the regions and from unelected bodies—partnerships, quangos, et cetera—to local government. Of course nobody is saying that partnerships are not important and that local government should not take part in partnerships—of course it should—but where does the locus of power, of decision-making and of authority lie as set out in legislation? Local government has been stripped of powers over the years by what might be kindly called an evolutionary process. It is time to take a long, hard look at just how much power can be returned to local government and provided to it in areas for which it traditionally has not had responsibility. This amendment sets out one way of doing that.

The precise details of the devolution commission—the standing commission that I am suggesting—are not perhaps vital now. What is important is the principle that there should be a free-standing autonomous body which is representative not just of central government but of local government and which is responsible for looking at issues outside the traditional framework of government and Whitehall departments.

People at the centre have a vested interest in maintaining powers there—that is where they are and that is what they do—and they may be suspicious of anybody else trying to do these things, particularly if powers are devolved to a range of authorities in different parts of the country that might make different decisions. There might be a diversity of provision, which is anathema to people who want uniformity. Clearly, there have to be standards and minima beyond which people cannot go, but the degree to which local government is now in a stranglehold of detailed rules, regulations and targets is a scandal.

The Bill perhaps goes a little way towards relieving that, but it is only a little way. Something much more fundamental is required. The amendment is therefore more than a probing amendment; it is a challenging amendment. It challenges the Government to say whether they agree with it and what their vision is for local government.

I will briefly refer, if I may, to the Green Paper The Governance of Britain, which was published on Monday. On page 10, the first bullet point in paragraph 7 says that,

“power remains too centralised and too concentrated in government”.

I am not quite sure what the second part of that means, but if the Government believe that,

“power remains too centralised and too concentrated”,

at the centre, what will they do to release it? Are they seriously going to let go?

On page 49, paragraph 169 talks about local communities. Some of this stuff was in the White Paper and some of it is in the Bill. The Green Paper talks about “empowering”—I use the Government’s words in the hope that they might understand—and “engaging” citizens and neighbourhoods and devolving more power directly to the people. A number of interesting ideas are set out. Again, on the next two pages, a requirement is placed on local authorities to,

“consult and involve local people”.

An odd thing about these pages is that the word “new” keeps cropping up. There is nothing new about all this; many local authorities have been doing it in different ways very successfully. Later in Committee I will talk about one or two of the ways in which we do it in Pendle. The Green Paper talks of examining,

“new ways in which to strengthen the ability to influence local decisions … and a new provision for local communities”,

to look after local budgets and so on. Again, that is nothing very new in some places.

The point is that the Government are absolutely right to be looking very hard indeed at the relationship between government and Parliament, which is what most of the Green Paper is about. They are also absolutely right to be looking at the way in which people living in streets and communities can get involved in local decision-making. But somewhere in between—at regional level and local authority level—there is a great void in the Government’s thinking and proposals. Unless they are prepared to have democratically elected local authorities that have real powers, can achieve things and can raise funds to achieve those things, then all the local engagement in the world is no use. It is a complete waste of time engaging with a local authority whose powers have been emasculated and whose ways of working are subject to the stranglehold of detailed rules and regulations from on top.

Let us have a bonfire of all those regulations. Let us have a sustained and serious devolution of powers from the centre to local authorities over a period of years. It is no good trying to have a big bang; you need to do it slowly, steadily and evolutionarily, and get a new culture. Until you do that, all that local involvement will do is produce immense frustration because people will get involved but nothing will happen. I therefore have great pleasure in begging to move the amendment.

I support my noble friend’s amendment because it goes to the heart of the issue that we on these Benches have with the Bill; namely, the relationship between central and local government.

I think that the Government have now come to quite a good analysis of some of the problems of the democratic deficit, centralisation and so on that face our country; the problem is the inadequacy or insufficiency of the actions that they are taking to deal with those problems. The White Paper and the Bill are fundamentally prescriptive on the nature of the relationship between local councils and their citizens, a theme that was very much picked up in Tuesday’s Green Paper on governance, which contains a lot about the rights of citizens to challenge their councils in various ways and hold them to account. We absolutely agree with that.

However, what is not in the paper or the Bill is any sense of what the relationship between central and local government should be like. Local government feels that it is very much at the whim of central diktat. In the Bill, executive arrangements are forced on to local councils regardless of whether they want them or how badly they are performing. Councils’ financial freedoms are increasingly curtailed. The amount of ring-fenced or specific grant for local authorities is increasing annually, currently at about 60 per cent. Not only are local councils raising a very small amount of money themselves—about 25 per cent—but about 60 per cent of their total spend can be spent only in ways determined by central government.

We hear only today from Hazel Blears at the LGA conference that citizens are now to determine how further parts of the budget are spent. That may or may not be a good idea; I do not know because I have not seen the details. However, the fact that a Minister goes to a meeting and tells the local government sector, “This is how it’s going to be”, without discussing whether it is practical or desirable or whether anything like it has already been done, demonstrates an attitude that indicates that certain parts of government have not quite got the idea of devolution. They seem to be saying, “We will devolve only where we think it is a good idea and where you, local government, cannot do any harm”. Actually, devolution means allowing local councils to make choices. Sometimes they will be wrong. Devolution means allowing people to try things and to make mistakes occasionally.

The Bill does not do anything to address the growth of that part of the public sector that is not covered by democratic institutions—quangos, in other words. Quangos are now outspending local government and in some respects have a more profound effect on local areas than local councils do. However, there is no real sense of how a devolutionary agenda might be used to influence the way in which quangos work.

My noble friend’s amendment provides a framework to carry forward the Lyons review and the general devolutionary sentiment that is now current in all three major political parties. It is a chance to explore not just how the relationship between central and local government and citizens works, but also the fundamental relationship between local authorities and the Government. Paragraph 179 of Tuesday’s Green Paper mentions the development of a concordat between central and local government. My noble friend’s amendment would provide a framework for moving that proposal forward.

I rise to add to the probing. The Statement and the Green Paper were clear in their analysis and description of what the Government meant by devolution. For example, there was strong mention of London and city regions, but scant reference to the structure of local government as it exists today. There was also the reference to a concordat—a nice vague word—and a page and a half on regions and responsibility.

It seems clear that the Bill is an enabling mechanism to make it possible to end with a structure that is regional in England, with devolution in Scotland, Wales and Northern Ireland. That structure goes over all those institutions, including local government, that might be aspiring to some kind of independence, and reaches down into something called communities.

There is no definition of “community” in any government document produced to date. I know when I go to the village in which I live in North Yorkshire that it is a community—one of about 300 souls. It is a real community. However, when I come to Westminster, where is my community? Is it Westminster? Is it London? What is it?

There are many references to local people and to their rights, which are described in a way that means that what they are supposed to do is to hold administrators to account. According to this Green Paper, it does not really matter whether the people in the local government structure that we know today are elected.

Under the new dispensation, it is not clear whether the Prime Minister minds that there was a referendum in the north-east that rejected the proposal for an elected regional assembly. He may prefer to have appointed regional bodies. Therefore, I believe that this Bill is an enabling mechanism to increase centralisation and central control. It has nothing in it to make it at all likely that local democracy will be revived in the way that the majority of noble Lords would wish.

I support the amendment tabled by my noble friend Lord Greaves. I became interested in devolution when conducting research on comparative economic development across Europe and looking at the role of regional redevelopment and regeneration. It became clear that the parts of Europe where there was considerable regional devolution were moving forward faster—Barcelona could be an example. That was because the local authority had the power to go to the market to raise money in bonds and to go ahead with ideas of its own volition as distinct from always having, as in this country, to go hat in hand to the Treasury to say, “Please Sir, may we do this?”.

Time and again, as in the Green Paper published earlier this week, we see the statement that we need more devolution because we are a centralised country. Indeed, we are the most centralised country in Europe—in the whole world, I think—in terms of governance and economy. Everyone used to pour scorn on France. One used to say that one always knew what the schools were studying at a particular hour of the day because that was laid down centrally. In the 1980s, France went for major devolution under Mitterand and the provinces now have a considerable element of autonomy to do their own thing. In the comparative development of provincial France, again, it was this power to do their own thing that I judged gave the provinces considerable advantages over the English regions. The Länder in Germany have considerable statutory powers to do their own thing. We should remember that this type of governance was set up on British advice in the post-war period to prevent the centralised state from abusing power. We deliberately created the Länder system to do this.

I feel strongly about two issues. I have already referred to one, which is economic devolution. It seems an insult to local democracy that we now have in this country a Government at the centre who dictate to local government not only what it may spend, as my noble friend Lady Scott made clear, but, through the capping system, what it should tax. What greater insult is there to a country, which is sometimes regarded as being the mother of democracy and whose democracy was built on the tenet of “no taxation without representation”, that the Government are telling us what we may tax at a local level? In a form of stealth tax and through the squeeze imposed by limits on what local government may spend on social services, the Government frequently pass on unpopular decisions, such as those affecting the care of the elderly. That is dictated through these mechanisms.

Another issue is capital. I have already referred to the fact that in other countries metropolitan authorities can go to the market and raise money through bonds. That is not allowed in this country, where no local authority can raise money directly from the market. In America, the states and cities have their own credit rating; an equivalent process could happen here for local authorities. Devolution is extremely important and economic devolution is an important part of that process.

Secondly, I wish to consider the degree to which the Government have devolved authority to quangos. We are again seeing the giving of power to academies to do their own thing—to opt out of the national curriculum. What is the academy? It is a group of people who can raise £2 million towards the cost of a new building and then can have a governance role in relation to the whole school and decide its ethos. Not only is the academy totally unaccountable to any democratic organisation, but it is put outside the bounds of the community. On these Benches, we feel strongly that education should be community oriented and should serve the local community. Enabling people to set up a school outside the bounds of any form of local accountability is an insult to local democracy.

I support the amendment of my noble friend Lord Greaves. I cast my mind back to when the Labour Government came to power in 1997. They wanted to devolve more to local government, but recognised that many councils were not in a good enough state to take on more power at that time. They created the Improvement and Development Agency in order to raise standards throughout councils, with a view—I believed—to devolving a lot more power to them.

Subsequently, it is hard to see what has happened. The Improvement and Development Agency has been working for some eight years. Either it has substantially improved the vast majority of councils, in which case the time has come to devolve power to those councils—which is certainly what should happen—or, perhaps, the Minister thinks that councils have not substantially improved, despite the efforts of the Improvement and Development Agency, in which case something is fundamentally wrong. That, too, could well be the case, because of the opaqueness of the finance system and the lack of connection between voters and their councils. Either way, the suggestion in my noble friend’s amendment is absolutely right: this needs a fundamental look. The reaction in the Bill to these issues, which takes us nearer to the French préfet system of local councils feeling like, and being regarded as, an administrative wing of central government, travels in exactly the wrong direction.

My noble friend Lady Scott mentioned the announcement made by the Minister, Hazel Blears, on giving people power over some of the local spend. It is hardly a new idea. I declare an interest as a former south Somerset district councillor and a Somerset county councillor. The Minister will be aware that the power is already there; we did it in both places. In south Somerset we devolved budgets to a very local level, giving parish councils and local residents the power to say how they would like money to be spent in their area. It is not simply a question of voting on it, but of having a debate to which people are entitled to come and ask questions in their locality. They should not have to travel to some remote and hostile council building at unsuitable times of the day. It is not a simple mechanism whereby you have a referendum on how money should be spent and tick box A, B or C. There is a lot more than that involved.

The Minister also mentioned the idea that councillors might be given a budget. Again, this is hardly new: Liberal Democrat authorities up and down the country have operated very successfully, in consultation with local organisations, the system of a small budget that can pump-prime schemes. These are not new ideas. The Government’s direction of travel quite reverses what it set out to do some 10 years ago. I would be interested to hear from the Minister just what has happened to the concept of improving councils. The goal when the IDA was established was quite short term: councils would be so improved that they would then be in a state to receive back those powers that had been taken away by the previous Conservative Administration.

We are having quite a long debate on this first amendment, but perhaps we can get some of the issues out of the way in this more general discussion. I make no apology that during the Committee and later stages of this Bill I will be using my knowledge and position as Leader of Essex County Council. I will not keep repeating that, but I shall be speaking a lot because I am on the Conservative Front Bench. And, yes, I know that some of your Lordships pay council tax in Essex.

I remind people that Essex is a very large local authority. We are approaching the size of Northern Ireland and our domestic product is bigger than that of five European countries and eight states of the United States. We do not need regionalism when we have counties operating at that sort of size. Essex is a region in its own right—I want to make that statement right from the start. Therefore, we are rather disappointed to have regional Ministers appointed this week, when we would much rather—as with the general tone of the debate—devolve things.

Some noble Lords might know that I have been instrumental in setting up a dining club called the Chamberlain Group, which is very much supported by three friends of local government, Nick Raynsford, David Curry and Alan Beith. We are trying, all-party-wise, to get more general support for local government. I have tried since becoming a Member of this House, and we have some good and loyal friends here today. I was interested to note at Second Reading that, while the Bill is so thick and the health bit only thin, most of the debate—almost two-thirds—was on the little health bit rather than generally on local government. That disappointed me, because we have a mammoth bit of local government.

Like most of the noble Lords who have spoken today, I think that the Bill has not gone far enough. That is why I give a cautious welcome to the amendment. Personally, I am not that keen on commissions. They normally take 10 years to report and I would rather something happened more quickly. Perhaps the noble Lord, Lord Greaves, might reply with a timetable for when the commission will report, because a long commission will do no good. I would rather one Government or another do something now.

I would like to give an instance of something we did in Essex, with Radio Five Live, just for localism. I am keen on that. We talk a lot about localism, but we do not do it. In a pilot project with Radio Five Live, we allocated £50,000 to two wards in the middle of Braintree for a project that the community would like. In a period of about seven weeks, the community itself came up with 10 ideas, such as projects for the scouts, a day centre for the elderly, a school and the street scene. Then there was a hustings and the community voted. Within that short time of seven weeks more people voted for a project than in this year’s local election—something like 36 or 37 per cent, rather than 29 per cent. What they voted for was interesting: an improved walk along the canal. They voted for a quality-of-life project. They did not vote for the others, they voted for a walk and for seats along the canal. The local community did that. I would love to do more, but unfortunately the Essex budget cannot give £50,000 all over the place.

That was an interesting idea and we ought to pursue such ideas. Please let communities make some of their own decisions about what they would like. Do not let things always be from the top. Even in a large authority like mine, I want local people to decide what they want from the money raised through the council taxes and government resources. So, I give a cautious welcome to the amendment, because it is in the right spirit, although I am not so sure that I want a commission. I want people just to get on with it now.

The tenor of the debate is interesting. The noble Baroness, Lady Sharp, more than once used “insult”, but it was an insulting speech that she made. Her inference was that the Government, by ignorance or malice, are producing legislation that not only fails to take into account the need of the people but is inhibiting good people from doing good work at a local level. I do not subscribe to that view at all.

I do not have as much experience in local government as many of those who have spoken, but I have some. After many years, I have come to the conclusion that a rosy picture is painted of what is wanted by the people—the ratepayer, the foot-soldier or those who are led. In many instances, it is the leaders who are irritated; they want more power, in the belief that that is populist. I do not think that that is necessarily so. In practice, I have sadly come to the conclusion that I have misled myself, and others have misled themselves, into believing that the people are full of ideas and they are simply waiting to be stimulated by an invitation from those who are in charge.

This Government have recognised faults from the past, some of which were their own, and are making a genuine attempt to improve the situation. I would be interested to hear from the Minister whether the ideas in the amendment are practical and realistic. If they are not, we have to take account of that. If they are, I very much hope that she will give a nod in the right direction. Sadly, we should not delude ourselves too much that the people of any local community in this country are being stifled from putting forward their ideas. In any community there are good people—politically, socially and environmentally—who take an interest in how their community is governed, managed and financed, but the vast majority are, if I can use the word kindly, apathetic. They are simply willing to be led by those who are elected. We all know about the decline in the number of people who vote in elections. I very much hope that the Minister can be helpful to the House, but the tenor of the speech of the noble Baroness, Lady Sharp, was an insult to the Government and I resent it.

I thank the noble Lord, Lord Greaves, for his kind words. I am delighted to be back at the Dispatch Box representing my department, which has one of the most important and challenging jobs in government. It is a privilege to be able to represent those policies. I thank him for his kind words about my restoration to health. I should also like to say how nice it is to see the noble Baroness, Lady Scott, back on the Front Bench. I send our sympathies for her recent bereavement.

This has been an interesting debate. In fact, it has been a sort of Second Reading debate, although I shall forgo the opportunity to make my own Second Reading speech, which I missed at the appropriate time. The issues that the noble Lord, Lord Greaves, opened up, which noble Lords around the House have responded to, are the right issues and go to the heart of the Bill. While I am grateful for the welcome that he and others gave to certain parts of the Bill, I am still a bit mystified. I hope that we will explore how it is that we are so much in tune with so much of what has been said by noble Lords about the need to let go and why it is that in this Bill we are indeed letting go of power. That is the whole purpose of the Bill. It is about rebalancing the relationship between local and central government. I urge the noble Viscount, Lord Eccles, who disputes this, to stay with us during our deliberations so that we can explore what that will mean.

Member of the Committee also opened up the debate that was begun by the publication of the Prime Minister’s Statement on governance. That underpins much of what we are doing in the Bill. It opens an even wider canvas, creating new possibilities. The noble Baroness, Lady Miller of Chilthorne Domer, is right that of course some of the ideas that we are exploring are not new. Good councils make innovative progress and decisions. We want to give—I use that word deliberately—an enabling framework for local authorities to use their imagination and innovative ability to pass on power beyond the town hall in a way that has not been done before. I cannot think of a shorthand way of saying that. I cannot pre-empt the nature of the concordat described in the Statement, or the dimensions of the debate, except to say that it is a serious debate about what has been called the new politics and localism. Certainly, Members of this House here today are surely going to see this for the major and innovative opportunity it is. It has been welcomed as such. It is our responsibility to ensure that we have that debate and try to resolve some of those issues. Statements that my honourable friend Hazel Blears has made today about giving assets and community control in various ways are very exciting. This is the first time that any Government have approached the notion of what else local communities want in this way. Let us not underestimate or misrepresent the significance of what this means.

I am grateful to everyone who has spoken and to the Minister for a great deal of what she has said, quite a lot of which I think will be talked about in the Committee in the next two or three weeks. She is using the right words. She said that our challenge is to let go. The purpose of the amendment was to challenge the Government to seriously let go. We do not believe that they are doing that, which I think will colour a great deal of the rest of the debate.

I am grateful for the comments made by the noble Viscount, Lord Eccles, who has a long and distinguished career of support for local government, and my noble friend Lady Miller of Chilthorne Domer. Ten years ago, Pendle Council looked at seriously decentralising decision-making in Pendle, at the same time involving people from parish councils and local organisations, and citizens. We looked at and then based our system heavily on the South Somerset model, and I pay tribute to the pioneering role which it took.

One reason why I am not in London on a Monday is that on Monday evenings, the NAG meets in my ward. The Minister may think that that is an appropriate name for a body with which I am associated. It is the neighbourhood action group, associated with a neighbourhood management project, which comes because we are a housing market renewal pathfinder and that is how it is financed. That NAG, in an area with no more than 5,000 electors—there are probably 7,000 or 8,000 people at the very most—has an annual budget of £100,000, give or take a bit, for local schemes, grot spots and small local improvements. It effectively makes the decisions by consensus because it consists of councillors, council officers, residents, people from other local agencies, et cetera.

The idea that this is in some way revolutionary is not true. To be able to do this, you must have the money to devolve to this kind of scheme. If you have not got the money because you have been capped or are having 3 per cent cashable efficiency savings every year, it is rather difficult. We can do it because of the housing market renewal pathfinder. We could not do it otherwise. Some of the schemes which have been set up, which I suspect are models for what the Government are doing in their neighbourhood management pathfinders, are there only because extra funding is being provided, and mainstreaming these things is very difficult.

The noble Lord, Lord Hanningfield, asked about a timetable. It seems to me that what is required is an evolutionary process. I agree with him that what we want is action now but we need a process, a system, a culture and means of delivery which is going to significantly remove controls, bonfire regulations and enhance the powers of local authorities. That cannot be done with a big bang; there has to be some process of doing it over years and I have put one forward. What I propose is much more radical than anything that appears in the Bill. It is on the agenda now. The Minister said very helpfully that what I am proposing does not go far enough. I will think about those words and come back and remind her when I am proposing more. I tabled the amendment to try to put the issue on the agenda, but the Prime Minister has done a much better job of that than I could. The Pandora’s box is open and the discussions on the concordat are going to be absolutely vital. I say to the Local Government Association, “You now have this on the agenda. Be much bolder than you have been before. Think bold, demand bold things and challenge the Government to—in the words of the Minister—let go”.

I am very grateful to the people who have taken part in this debate. Many of the themes will come back as we discuss the detailed amendments in the Bill. At this stage I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 1 agreed to.

Clause 2 [Invitations and directions for proposals for single tier of local government]:

moved Amendment No. 2:

The amendment seeks to insert “relevant”, but relevant to whom? The answer should be “relevant to local communities”. The noble Baroness is right: we are in a bizarre situation. I considered whether we should have a go at some wholesale amendments to these clauses, because they seem not to relate to real life—or, at any rate, life as of the beginning of July 2007—but it would certainly be easier to wait until we have heard the explanation.

The noble Baroness, Lady Hanham, referred to the announcement which we are led to expect will come towards the end of this month; she did not mention the application for judicial review which is to be heard in September. I hope that by Report the Government can replace these clauses with what they actually mean and tell the world where, if at all, they propose to go forward beyond the current stage. It is okay for us as legislators to grapple with all this as something of a waste of time, but it is not right to have on the statute book the holding out of some sort of lollipop—but not quite giving it—to those authorities, some of which might be disappointed by the announcement we are about to have, and others might be thinking of change in the future. These clauses do not say what the Government are proposing. They may say what the Government were proposing some while ago, but they are completely out of date.

I support my noble friend. I returned this morning from a local government conference in Birmingham, which is continuing today. Over the past two days there has been nothing talked about but the chaos in some authorities awaiting decisions which they hope to receive over the next few weeks. I hope the Minister will refer to that in her reply because it is of considerable concern. I have been asked by authorities to put them out of their misery or tell them where they are going.

I totally support what my noble friend has said. I believe there are some benefits in the unitary system in some places, and thought needs to be given to that, but we must not be obsessed about structure; the real concern is about function. In the debate on Amendment No. 1, there was reference to what local government does and how it serves our communities; to keep talking about function is a big distraction. We need to get on and deliver locally.

This has been a grave mistake by the Government. If they intended to do something they should have done it in a different way. For us to be debating this issue now, months and months after it was initiated, is totally wrong. I hope that any future Government will not do it in this way. We have a lot to learn from this and I hope the Minister will be able to give a positive reply to the short debate.

I tabled objections to Clauses 2 and 3 stand part in the belief that we needed a short debate about general issues in the restructuring proposals. It is clear that the noble Baroness, Lady Hanham, has taken advantage of her amendment—I did not understand what it meant specifically—to initiate such a debate now. I shall not, therefore, pursue the stand part discussion later; which might be helpful to the Committee, as long as I can have my tuppenceworth now.

I should qualify and expand my declaration of interest on the previous amendment. I said that I was a member of Pendle Council; I should remind the House that Burnley and Pendle together put forward an excellent bid for a unitary authority but the Government did not approve it. This was not because of the quality of the bid but because of the problem with the rest of Lancashire. If some authorities within Lancashire were to escape the clutches of the county council, what would happen to the rest? It is absolutely clear that that is why the decision was made. This raises further issues to which I shall come in a minute.

My first point concerns the way in which this whole exercise has pre-empted the passing of the legislation. The noble Baroness, Lady Hanham, referred to this in moving the amendment, as did my noble friend Lady Hamwee. It is a scandal that this should have happened. Without going back too far, I can remember times in the past—perhaps 25 or 30 years ago—when the Government were trying to increase council house rents, for example, and were telling local authorities to put them up before the legislation had gone through Parliament. That was a great scandalous issue at the time and some authorities said that they would not do it. Nowadays, the Government announce what they are going to do regardless of the legislation, and everyone lies down and does it. The whole culture has changed. But it is still wrong and should not have happened. As the noble Baroness, Lady Hanham, said, the way in which it has happened has increased the difficulties and caused more confusion.

My second point relates to the timescale. Some authorities, knowing that this might be coming up, had been planning for a long time. However, a timescale of effectively no more than about two months—if you take out the Christmas break—in which to decide whether to put in a bid and to carry out the detailed work necessary behind it was, frankly, ridiculous. It was an absolute shambles. It would have been perfectly easy for the Government to have announced in last September or October that they were going to consider bids, to get the legislation through and to do it. They may say that that would have increased the uncertainty, but at least it would have given people more time to plan, to put in good bids and to talk to other people; it would have given the authorities in a county time to talk to each other and to try to find a consensus, instead of fighting the pitched battles which are taking place in some areas.

The third point, as raised by the noble Baroness, Lady Hanham, is that the Government have no strategic view about unitary authorities. They started off with a strategic view and said that unitary authorities were good—just as the previous Government did with the changes from the 1992 Act—but, as time has gone on, it has been watered down. I think there were 25 bids originally, 16 were shortlisted and we are told that about eight might be approved. We shall wait and see.

Is unitary government the best system or not? Is there a general presumption that the two-tier system has had its day? I think that the two-tier system set up under the Local Government Act 1972 worked very well in many counties for quite a long time, but in much of the country it is no longer working well for all kinds of reasons that I will not go into now. It is certainly not working well in Lancashire.

A strategic view across England really is needed. If the Government think that this round under the Bill will close the issue down, they are wrong. It will not close the issue down at all; all it will do is put it off for another five or 10 years until it is raised once more and then we will have to go through the whole thing again. Certainly, in a county such as Lancashire, the present situation is frankly not tenable. It certainly will not be tenable under local area agreements and things will have to change. The uncertainty has not been removed; it is there all the time. It has been there now for the past 10 years, it is still there and it will remain until it is properly resolved.

I agree that we are talking about functions rather than structures but we are also talking about communities. It seems that some of the bids being considered in terms of communities are far too large for the geographical area of the unitaries. I am not suggesting that in some cases counties will not make good unitaries. In some of the more compact counties where the districts are traditionally weak—places such as Shropshire or even Cornwall, which is not very compact but has a real sense of community—the unitary model might work. But would it work in North Yorkshire, which extends from the North Sea coast at Scarborough and Filey to within a few miles of Morecambe on the west coast, takes in two national parks and a vast tract of the north of England? The idea that North Yorkshire County Council without districts would be a satisfactory local authority redefines what is meant by local authorities and local government. The fact that that such an idea is being taken seriously indicates a serious flaw in the system.

There is no strategic view. What is the ideal size for a unitary? We are being told that some bids were not really big enough, yet they are bigger than some of the existing unitaries; for example, in Lancashire and the north-east. Are we looking for compact unitaries such as Blackpool or Blackburn, or are we looking for great big sprawling counties such as North Yorkshire or Cumbria? There is no overall strategic view. I do not think a satisfactory solution can be found until a decision is made. I may not agree with that decision but at least one has to be made as to whether we are looking for compact authorities on perhaps the metropolitan borough model, for which I would be looking, or something much bigger.

The present proposals are a mishmash. They do not really make any revolutionary change to local government; they do not make much change at all; they involve change in just a few parts of the country. Even within the present proposals—we have Exeter, Norwich, and Ipswich on the one hand and North Yorkshire, Cumbria and a unitary Somerset on the other—there seems to be no idea of what it is we are looking for in terms of local government. I would be very happy if the Government withdrew this part of the Bill even though it would upset some of the people who are well on the road towards unitary status and cause real problems in those areas. Whatever happens with this, it is not going to go away; it will come back and if we are preserved long enough we will all be here discussing the same thing in a few years’ time.

I rise to make one or two remarks in view of the fact that my noble friend will not be objecting to Clause 2 standing part of the Bill. I invite the Minster to address the specific point of why the process of beginning the formation of unitary councils was started in advance of this legislation. We have had the two-tier system for a long time. While it is right that it should be reviewed from time to time there was actually no tearing hurry. I can see no reason, unless the Minister can give me one, why it was not possible to put the legislation in place and then move forward to the specifics. That would have been more logical in terms of the parliamentary process and would also have avoided some of the problems we now face where local authorities are out there and are more or less to guess why one proposal or another has found favour.

My noble friend has just mentioned the Lancashire example. He believes that it was the effect on the remainder of the county which proved to be the stumbling block. Yet in East Anglia, where I live, both Ipswich and Norwich have moved forward to be considered as unitaries, despite the same issues being raised by the rest of the county. Local authorities are left trying to operate in a sphere that they do not understand. Had we had the legislation first we could at least have debated the principles of unitary authorities and set out some ground rules under which we could operate.

The debates on the Bill in another place raise more questions than answers. For example, Mr Woolas, who was in charge of the Bill at the time, argued that one of the ways in which bids will be measured is the effect that they will have on council tax. Anyone who knows anything about local government knows that council tax is not really related to how much local authorities are spending or whether they offer value for money. It is such a complicated system. Council tax is a pretty imperfect way of measuring anything. To determine whether a unitary bid should be favoured simply on the basis of how it affects the council tax is bizarre. It is certainly not clear from what the Minister said what will happen if a proposal is based on some promise made by a council that it will keep the council tax at a particular rate. What if it does not? Will it be capped? How will this work?

Councils have put in bids without knowing any of these basic ground rules. Had we had the legislation first, we could have at least established some of those rules. I would like the Minister to address that issue.

I want to draw attention to a particular situation. What is proposed is also affecting people who are funded by local government. I declare an interest as chairman of the Bowes Museum in County Durham. We receive 25 per cent of our annual revenue from a county grant. Of course we have been approached by the county and the Teesdale District Council, which seek to know what way forward we support. This has to be done in advance of the legislation. If you are an institution you handle the matter carefully. People are being set against one another in County Durham because there are different schools of thought about what might or might not be the right way. But what is really happening is that people are second-guessing the Government. They know that that is where their money comes from so they are very chary of upsetting central government and they are second-guessing how they are supposed to reply to the request for proposals. This is having a very deleterious effect on County Durham.

The issues that have been raised in the debate go far beyond the technical amendment. I am happy to address the range of issues, which have been about the process in which we have been engaged—the relationship between the invitation process and the legislative requirement and the current ways in which things are being worked out as part of the consultation process.

Several questions have been asked. Why did the Government pre-empt legislation in the way that they did? Is there an element of retrospection here? Why was it a general invitation rather than an invitation to relevant authorities—although it is not clear from what the noble Baroness said what “relevant” might mean? Then we have had a set of questions about the process of bids being made against the criteria that have been set. I want to set some minds at rest.

I have had to abandon my speaking notes as they are too narrow for the event. But I will start with what it is that we did. Two years ago, almost to the day, the then Secretary of State opened a conversation with local government about the improvements that it wanted to see. It is true that most of that conversation was framed around the benefits that improved working would bring, either as enhanced two-tier authorities or as unitary authorities. They spoke about the some of the benefits of avoiding duplication, which we do not need to rehearse. It was a long conversation, and was followed up by the invitation process, which was facilitated by the general powers of the Secretary of State—it did not need legislation. The invitation process led to a consultative process, of which we are now at the second stage, with the Secretary of State looking at the bids that have come forward. It has been a long, careful and thorough process.

If we had started with legislation, which we did not need to do, questions such as those asked by the noble Lord, Lord Hanningfield, about whether we could not speed up the process, would have been much louder and much more insistent. We have been driven in this process by what we know must be a better way of doing things than the way in which we have restructured local government historically, which has been extremely protracted and debilitating. Yes, it has put pressure on local authorities to think about what they want, but, my goodness, it has meant that they have had to do their thinking and come forward with many proposals for improving what they do, which they would have been thinking about anyway. It is about functions; it is about services; it is not about structure.

However, there was no way in which we would have wanted to curtail the process of discussion in legislation; it was just that this was a way of enabling local authorities to move ahead speedily while allowing sufficient time for them to consider the invitation to develop and submit proposals, for a full period of consultation by the Secretary of State, and for proposals to be implemented as soon after commencement as possible in order for the new unitary authorities to be up and running by May 2009. The overwhelming message that we received from local government was that it wanted this process to be over quickly and not drag on for years, as it had in the 1990s. It was part of the devolutionary principle that we did it in this way.

The noble Baroness mentioned retrospection. There is nothing retrospective about the Bill. A retrospective provision makes valid something which was not valid or lawful at the time when it was done. The Bill provides that an invitation issued or a consultation carried out not using the powers of the Bill can lead to unitary proposals to be implemented by it. I am sure that we will have the debate again when we discuss Clause 21, but I reassure noble Lords about the matter because I know that the House takes it very seriously. I have dealt with the wide-ranging prerogative and common-law powers of the Secretary of State which enable the invitation to proceed without legislation.

The way in which the invitation was made to local authorities was raised. If we had said that it was available only to some, we would have been in even worse trouble. We always made it clear that it was unlikely that there would be more than a small number of proposals which would eventually find favour. Originally, we said eight, but, because of the high quality of submissions and the good value for money that they offered, we have confirmed that 16 proposals will go through to consultation.

There was nothing loose or sloppy about the way in which this was done. The criteria set out in the invitation made absolutely clear what we were looking for, and what local authorities should look for by way of consultation. I cannot account for the nature of local politics, but it was inevitable that there would be anxieties in areas where proposals would be inimical to local politics, geography and history, but it is not the process that was at fault.

The 16 proposals which have come forward for consultation are being extremely carefully considered according to all the processes that we have set up and the guidance that we have given to local authorities. Local authorities have been in no doubt, not least once the primary consultations were made, that it is an iterative process. Those local authorities have consulted long and hard with Ministers and officials during the past few months. They have not been left to work out what to do; it has been clear.

A question was asked about the role of Parliament. We have made provision for affirmative orders when the proposals come forward for implementation. Each will be subject to a vote of both Houses of Parliament.

The noble Lord, Lord Greaves, raised criteria in relation to the size of communities. We have said nothing about size; we have said nothing about who should qualify. We have said only that they should meet the criteria set out in the invitation. Those are the sole conditions that we have imposed. We have tried to make that as clear as possible.

I hope that I have addressed most of the issues that were raised by noble Lords in this short debate. I hope that noble Lords will feel that the amendment, as well as the objection to the clause standing part of the Bill, can be withdrawn.

Will the Minister clarify one point? Early on in her response, she said that the invitation was issued and that there was no need for a Bill to do it. I was not clear from what she said whether that extended to the Secretary of State’s conclusion and the subsequent orders. I was left wondering by much of what she said why there is a need for this part of the Bill at all. Will she expand on that?

It is because we need the power for implementation. The clause enables us to take the process forward and introduce the orders. It is about implementation.

We will return to this matter at a latter stage, because I think that I am now more confused than the noble Baroness, Lady Hamwee. If this clause is required only for implementation, why does it start by stating that the Secretary of State “may invite”? This is not implementation; this is setting out the road along which the unitary authorities will be developed. If it can be done under general powers, Clause 2 is not needed in the way in which it is being proposed. The Bill does not state that Clause 2 is required for implementation; it states that it is required for the whole legislation, because it starts with the power of the Secretary of State to invite or direct. That is the gate through which they go. Whether the Secretary of State has opened that gate and bolted it after the horse has gone through it beforehand is a completely different matter. She may have thought that she was doing that under general powers, but that is not what the Bill says.

The Minister has made an effort to satisfy us, but it will not do. I proposed “a relevant authority” because only a limited number of authorities were going to be interested. If there were never going to be a limited number of authorities, which would then be the “relevant authorities”, the legislation should have been implemented on the basis of unitary proposals across the country and not just 16 local authorities. When we get down to the detail, we see that the criteria reduce the number even lower than 16. We are told that, for money reasons as much as anything else, they will be reduced yet again.

This part of the Bill is not at all satisfactory. We will move on to discuss the power of the Secretary of State to direct and the consultation, which looks to us to be pretty paltry. We will get there, but, for today, I shall withdraw the amendment, although I assure the Minister that this is not the last that we will hear of it. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

moved Amendment No. 3:

If we are talking about a limited number of applications or responses to the invitation, which of those still in contention—although that word might not be particularly felicitous—require type C to be included? When this issue was raised in the Commons, the then Minister talked about districts in Norfolk, Suffolk and Cambridgeshire that I believe are not in contention; indeed, I think that he went on to say that they were not. If there is now no need for a type C model, leaving that model in the Bill adds to confusion. Perhaps we will hear that there is a need.

I can give a swift answer to that, but the intention of the amendment is obviously to limit the kind of unitary proposals that councils will be able to bring forward. As the noble Lord, Lord Hanningfield, said, the type C proposal on county boundaries is the issue. We have proceeded on the assumption that there is no such case as proposed in the amendment for restricting the options open to councils. Part of the devolutionary approach is to allow as much choice as possible for local authorities, but the noble Baroness, Lady Hamwee, is absolutely right that in the 16 proposals there is none involving type C proposals to cross existing boundaries.

I remind the Committee that my noble friend Lord Hunt, who did such a splendid job while I sat silently coughing beside him, told the House at Second Reading that we have no plans for a further round of restructuring. He also said that the Bill provides for a process under which further invitations to councils could be made if that made sense. There may be circumstances—we are not sure that there would be—where it would be appropriate to invite a council to make a proposal. This is an attempt to cover all eventualities; a council should have as much flexibility as possible to put forward whatever proposal it sees fit. The whole Bill is drafted to enable us to respond to the proposals put forward by local authorities, which understand their areas best. We feel that they should have the flexibility to frame any unitary solution that they might want. The only proviso that we have made is that any new unitary should use existing district boundaries as building blocks.

The Bill as it stands will allow local authorities to bring forward a wide range of options. They will not be constrained in how they may best administer the local government function. Where the three types are set out, in the type C proposal one might indeed have a combination of whole districts and/or counties that are adjoining, so that they can cross existing county boundaries.

Concerns were indeed expressed in the other place about historic boundaries and the meanings that communities quite rightly attach to them. Fears were raised that a type C proposal might be undermined by the lack of local support that it received. I know that your Lordships are thinking about such issues, but I restate that as part of a devolutionary approach it is not for us to restrict proposals; we must allow choices. As cross-boundary working continues to increase, it might be that this is the best solution for one area, and it should be open to areas to put that forward if possible. I am not sure whether the noble Lords involved in the amendment would actually want to limit proposals on this option, or whether that would be wise in allowing scope for local authorities.

I have to confess to being more confused now than I was to start with. I understand why, in its original form, the Bill contained a type C proposal. It would be rare that one would work across county boundaries, but across the country I can think of authorities that might conceivably have wanted to form unitary boundaries, so I see why the type C option was there to start with. My confusion comes from the fact that Mr Woolas, in the debate in another place, made it clear that the Bill would apply only to the current round of bids and that amendments would be brought forward. Therefore, if there are no type C bids in the current proposals, I cannot understand why there is still a need for these provisions in the Bill.

From what the Minister has just said, it seems that the Government want to keep the flexibility in the legislation for future type C proposals. In that case, I do not understand what the assurance by Mr Woolas that the Bill would relate only to the current tranche actually means. My confusion is over the point that he made about the Bill. Does it refer only to the current set of proposals, or is it intended that the Bill will be used as a framework for future unitary proposals?

At Second Reading, my noble friend Lord Hunt made it clear that we are in no way anticipating a future round of invitations. Yet we have to allow for the eventuality that there may need to be an invitation following from changes being made. We do not want to close off that option; it is quite right to provide some flexibility for that in the Bill. Since we are allowing for the other two types, surely it is sensible to allow for the type C proposal. I do not want to make a meal of this. It is not overcomplicated; it is just common sense.

Like the noble Baroness, Lady Scott, I am more confused. I am totally against changing county boundaries; the unitaries that were created in Berkshire are all called “Bracknell Forest, Berkshire” et cetera. Say that a unitary was created between Yarmouth and Lowestoft. I suppose that that could be done across Norfolk and Suffolk, but some people in that unitary would live in Norfolk and some in Suffolk. That would be crazy; the idea is quite ridiculous. We do not often say that about government proposals, but it is more ridiculous than most things that I have heard to have a unitary across two counties.

I am confused because there does not seem to be a bid that I would consider ridiculous in this round, so this provision is not very good at all. People who live in Romford, which went into London in 1964, still think that they live in Essex—and, in a way, would like to come back into it. People have a lot of natural affinity with their counties. We are going to have to come back to this at a later stage. I will not pursue it today, but there is a fundamental flaw in keeping this in the Bill. I will certainly come back to it to try to put it right.

Clearly, I would not want noble Lords to struggle with confusion on this issue. I shall write to noble Lords and set out some of the circumstances in which we think that this may be an outside option that, in future, given the expansion of unitaries, for example, we might want to consider.

Inserted in the Bill in the other place was the limitation of 25 January 2008 on any invitation or direction, which leaves another six months. As we understand it, all the invitations have been issued and all the applications have been made. Does the Minister anticipate someone coming out of the blue with a new application that might cover type C?

No. The invitation process that we set out is very clear. All that we are saying is that in the process of restructuring there may be outcomes that will potentially require an invitation to tidy something up or allow for an eventuality. We do not want to close off those options. The 2008 limitation applies only to directions.

I shall just add to the mix of questions on the points on which it would be helpful to have further clarification from the Minister when she writes. She may have just covered this point, but I shall ask just in case. Is she saying that the Government mean, and would therefore be open to the proposal, that in Clause 3 the time limit on directions could be extended to invitations other than the invitations that might need to flow from the current group of proposals?

I am not saying that. I was saying that the timescale imposed was only on directions. These two things are separate.

I am pleased that the Minister will clarify this matter, but I am sure that we will come back to it, because the whole thing is most unsatisfactory. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 4 and 5 not moved.]

[Amendment No. 6 had been withdrawn from the Marshalled List.]

[Amendment No. 7 not moved.]

moved Amendment No. 8:

I support Amendment No. 8. I shall speak to the clauses stand part questions in their place and not as they are grouped with this amendment, as the grouping is too wide.

So we are dealing simply with Amendment No. 8. That is fine. I can give the noble Baroness a fairly short response. I understand the intention behind the amendment: she seeks to find out whether a proposal for a county unitary could result in a new authority—a fresh start—rather than an existing county council that simply absorbed the functions of the constituent district councils. The Bill provides for exactly that—for the implementation of a new county council. It is effective through Clause 11(3)(e) and Clause 11(5)(a). I do not have anything else to tell her, but I hope that that answers the question.

I am grateful to the Minister for the clarity of her reply. Some people will be reassured by that and others will be disappointed, but the important thing is clarity and that we understand what the arrangements will be for the new county authorities. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

moved Amendment No. 9:

We support the spirit of the amendment. While there is a strong case for unitary councils in many areas, the drive should come from local people. Indeed, the Minister in an earlier speech made mention of the fact that this process started from a devolutionary point of view, so it seems right that the drive should come from local areas and that the Secretary of State should then invite those areas to come forward with proposals. A power to direct runs completely counter to the devolutionary spirit.

The use of the power to direct raises constitutional as well as practical issues. It has always been understood that directions would be issued only where bodies had failed in their duty in such a way that there was no other way out. Directions have been seen as instruments of last resort, in cases of failure. They have also been used to secure administrative arrangements, such as ensuring that accounts are written in accordance with Treasury rules. They have been increasingly used—sometimes not very successfully—for issuing policy directions, which again have tended to be general rather than particular. Is there a relevant precedent for the use of the power to direct as it is included in this Bill?

I hope I can reassure noble Lords that the power to direct is not as sinister as they have made it sound. It is necessary because Amendments Nos. 9, 14, 17 to 21, 23 and 55 to 57 are all about the same thing: they remove the Secretary of State’s power to direct any principal authority to make a proposal under Clause 2, the proposal for unitary reform of local government.

We are certain that the power of directions contained in the Bill is necessary simply to ensure that we are able to bring the present round of restructuring to an orderly conclusion. We need the power so that we can deal with the eventuality which might arise in the immediate follow-up to the current round of restructuring where some residual areas may need to have unitary local government in order for one of the unitary proposals currently on the table to work. It is necessary to see that as a possibility—it may never arise—but in our initial invitation we covered the eventuality. We made clear that assessing the proposal against the criteria must include consideration of the residual area. Our assessment might be that the original unitary proposal meets all five criteria and should be implemented, but only if the residual area were also to be made unitary. For example, we might accept the original proposal but combine that with a direction to the council for the residual area to put forward its own unitary proposal. I want to stress that in practice the need for the power of direction may never arise. We are absolutely clear; we intend that it is available only to complete the current round of restructuring. There is now a third limitation on the Secretary of State’s power to issue such a direction: it can be given only where the Secretary of State believes that it would be in the interests of effective and convenient local government.

We are clear that the direction-making power that we have is appropriate, proportionate and specifically tailored for the purposes for which it might be needed. It would not be right or helpful at all to local authorities to remove the power as the amendments seek to do. I hope on that basis the noble Baroness will withdraw her amendment.

The Minister is saying that if a local authority decides to seek unitary authority for a county or district council and it cannot make the situation work without involving a district, a county or a few wards, the Minister will direct that it will be brought together under a new unitary authority, presumably jammed in to the proposals that the council puts forward. It seems to me that that is a recipe for disharmony. Most of Clauses 2 and 3 are a recipe for disharmony and if the Minister has received the letters we have had—and I am sure that he has—he will understand how much agitation and angst there is over these proposals by some people who do not want them and find themselves scooped up within in them.

The Minister said that if there are areas left over, “untidy ends” is what I think it is called, the direction will be made that those have to be put right. If that work cannot be done voluntarily and amicably, no amount of direction by the Secretary of State is ever going to make that work. Therefore, I remain of the view that direction should not be part of the Bill. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

moved Amendment No. 10:

I always enjoy may/shall debates and it has come early in the Bill. Amendments Nos. 10, 11 and 13—I think the noble Baroness was referring to them—remove the Secretary of State’s ability in future to specify the type of proposal invited to place greater emphasis on the choice that local authorities have and the type of proposal. We are at one with the noble Baroness in recognising that choice is important and because we are committed to a devolutionary approach, except in exceptional circumstances, we would not expect to seek to restrict an invitation in any way.

If I can address the specific point: the clause enables us to deal in future with something that might arise, and it is entirely pragmatic and right that we should do so. I have stated several times already this morning that we have no current plans for further rounds of restructuring, but there may be cases in the future where the provisions in the clause would be required; for example, to make sense of a boundary change and where the ability to offer a particular choice would be very important. If I may explain, there may be an existing unitary authority which was too tightly bounded because of growth. There would be a strong case for the boundary of the unitary to be expanded and maybe to join the neighbouring shire district. That is obviously a hypothetical case, but a way of achieving that would be to invite a type C proposal for the new unitary. We could leave the invitation open, but if the local debate had already been focused on the merger of the unitary and the neighbouring district, specifying a type C proposal might avoid any unnecessary concerns or worries about what was expected.

We are trying to cover eventualities in the most clear and harmonious way possible, which is why the clause is crafted in the way it is.

I was just considering the relationship of these clauses with later clauses, such as Clause 8 which refers to the power of the Boundary Commission. I will consider what the noble Baroness has said and perhaps come back at the next stage if I feel that there is a potential conflict between the powers of the Boundary Commission and the powers kept by the Secretary of State. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 11 to 13 not moved.]

I suggest that now is a convenient moment to adjourn the Committee stage and begin again at 2.28 pm. I beg to move that the House do now resume.

Moved accordingly, and, on Question, Motion agreed to.

House resumed.