Committee (8th Day)
I remind the Committee that if there is a Division in the Chamber while we are sitting, the Committee will adjourn as soon as the Division Bells are heard and will resume after 10 minutes.
Clause 86: Exercise of local authority functions
189: Clause 86, page 54, line 11, leave out “The Secretary of State may by order” and insert “Member authorities may agree to”
It is a pleasure to start what I hope will be the last day of Committee stage of the Bill. In moving Amendment 189, I shall speak also to Amendments 190, 191, 192, 196, 197 and the Question whether Schedule 6 shall stand part of the Bill.
This group returns to the theme of where the role of the Secretary of State should end and where that of local authorities should begin. I also have a number of probing amendments, because I want to explore the Government’s intentions. Amendment 189, on which Amendment 191 is essentially consequential, addresses the astonishing provision in Clause 86(1) that the Secretary of State would be allowed to seize the local authority’s right to exercise its own functions and transfer that right to an economic prosperity board. I am afraid that I cannot see what justification there could be for central government to step in and mix functions around in this way. I agree that it may be useful and appropriate, if economic prosperity boards are to be established, for participating local authorities to pool their sovereignty, as it were. That is why my amendment allows local authorities to decide for themselves when and how to transfer functions to be exercised by an economic prosperity board.
I will listen to and read the response by the noble Baroness to this amendment with great interest, because at the moment I fail to see how the role of the Secretary of State in this matter is correct. Noble Lords will realise that this is certainly a matter to which we shall have to return, unless the Government reconsider their position. Until they do, I have a further question.
Amendment 190 narrows the meaning of “functions” to those relating to economic development and regeneration. Will the noble Baroness be prepared to accept that tighter definition and, if not, why not? If economic prosperity boards are to help local authorities focus their economic development goals and address their needs, I can see no reason why unrelated functions of local authorities should be exercisable by the economic prosperity board. I would welcome clarity on the definition of “functions” from the Government, because at the moment the Bill does not really contain any assurance to those who are concerned that this new tier of quasi-democratic regional government will not accumulate powers and functions that it does not and should not need.
Amendment 192 is to ensure that economic prosperity boards cannot levy taxes or charges. In Amendment 196, I propose to delete a paragraph of Schedule 6 which I believe bolsters that viewpoint. I have done so to uphold the simple maxim that there should be no taxation without representation. I am afraid that, in my opinion, that semi-appointed, Secretary of State-beholden body does not fall into that category. I am sure that the Minister will appreciate this opportunity to reassure noble Lords that economic prosperity boards will not have these inappropriate powers.
Amendment 197 deletes the paragraph from Schedule 6 that amends the Local Government (Overseas Assistance) Act 1993, which would allow economic prosperity boards as well as local authorities to provide assistance to overseas bodies. I am aware that that Act precludes direct financial assistance, but I raise the issue as an example of the potential waste and duplication inherent in creating another tier. Will local authorities and economic prosperity boards compete for foreign influence? For example, will they both assist the same overseas body? If local authorities are able to do these things anyway, why should these new, quasi-elected bodies be able to muscle in and duplicate that work? The same is true of so many of the functions and provisions that are transferred to economic prosperity boards by virtue of the schedule, which I have signalled my opposition to standing part of the Bill. Is the duplication of all those powers necessary to help local authorities to share their expertise, which is the fundamental point of this part of the Bill?
I want to use these amendments to tease out how the Government see the practicalities of economic prosperity boards. They tell us that the aim is to provide welcome assistance to local authorities helping struggling communities in this recession. They are not intended to form embryonic regional governments, apparently. I argue that, if the functions conferred on economic prosperity boards are not strictly necessary for the exercise of the former option, we run the risk of helping to create the latter.
We have that amendment in the group, together with Amendments 190A and 191A. I apologise to the Committee; I have a prior commitment that means that I am not able to stay for long this afternoon. I will read every word in Hansard, and will read between the lines as well.
From this side of the Committee, we had made clear our opposition to economic prosperity boards for reasons of democracy—the transfer of local authority functions to a body that will not consist of directly elected representatives—so I do not want to go through those arguments again. The amendments signal that opposition, but also probe some detail.
Our first amendment is Amendment 189A. The transfer of a function to an economic prosperity board would require the consent of the local authority whose function is being transferred. I am aware that the Minister will argue that the transfer will be voluntary, but would like to delve under that a little. What if one local authority in an EPB area is willing to see the transfer but another is not regarding the same function? Clause 86(1) states that the function is,
“exercisable in relation to an area within an EPB’s area to be exercisable by the EPB in relation to the EPB’s area”.
Does that mean that the Government would agree to a patchwork, as it were, within the EPB’s area so that different entities exercise the same functions within it?
Amendment 190A would provide for functions not just of a local authority but of a regional development agency to be transferred to the EPB. If that were the design of the EPB, I might see a bit more argument for it. The RDAs exercise the functions. I suppose that this is not far away from the noble Baroness’s Amendment 190, which seems to be what is in the Government’s sights in this design.
Amendment 191A takes us to Clause 86(2), which provides that an order can be made by the Secretary of State if she,
“considers that the function can appropriately be exercised by the EPB”.
My amendment would change that to a function “best” exercised by the EPB. Grammatically, perhaps that should have been “better” exercised; I am not sure. However, the point is to probe what “appropriately” means in that context. Perhaps one knows it when one sees it, but we might not all have the same perceptions. It is important that the Government put it on the record. From a query in a meeting with the Minister a couple of weeks ago she will be aware that this is exercising me, as it were. It is appropriate for the Government to explain what they mean by the drafting.
I have two amendments in the group—Amendments 190B and 192B—and I shall speak to one or two others as well. Following my noble friend’s comments about lasting the course depending on how long we go on, I may have to leave depending on the progress in the Chamber. I nearly said council chamber; it would certainly make a rather fine one.
Amendment 190B follows what underlies Conservative Amendment 190, spoken to by the noble Baroness, Lady Warsi, which would restrict the functions of an economic prosperity board to economic development and regeneration. My problem with her amendment is not that it is too restrictive but that it is not restrictive enough. Regeneration can cover a multitude of things. It can certainly cover new schools, which are vital for the regeneration of communities, and housing, which is often at the heart of regeneration schemes, as well as various other things. My amendment, along with that of the noble Baroness, is intended to probe the kind of functions that the Government think that the EPBs ought to have. I suggest specifically, for the purposes of probing, that they should not be functions relating to a council’s status as a local housing authority or a planning authority, whether we are talking about making plans, development control or anything else, and that the planning power should not be transferred to an EPB. It is particularly important that anything that an EPB does should be subject to the normal planning system otherwise there will be a risk of it falling into disrepute. People will say, “These boards just get on with their schemes. They give themselves planning permission and do not listen to anybody, and the normal checks and balances in the planning system are not there”.
Will the EPB have a role as an education authority providing new schools, perhaps? What about its functions relating to the promotion of tourism, which is a crucial part of regeneration in large parts of the country? What about environmental health functions or licensing functions—those ought to remain firmly with the licensing authorities, with their quasi-judicial functions—and, indeed, anything else that the local authority does not want to transfer? The local authority should be able to place conditions or limitations, including time limits, on the transfer of powers to the EPB. Unless it is very clear what the EPB can do and that local authorities can constrain it, we will be setting up a new quasi-local authority. If, as the Government might say, it is meant to be another way of local authorities working in partnership with perhaps a stronger base which gives more certainty and would be less easy to dismantle, nevertheless local authorities must continue to have the power to restrict the use of what are their own functions. If not, as I said, we will just be setting up another quasi-local authority.
Amendment 192B refers to funding and states:
“Provision under this section may not require or permit an EPB to levy a precept on the council tax”.
It is clear that the funding of EPBs will come mainly from the constituent local authorities. Setting up new departments to do things that some of the constituent local authorities had previously done, running them and administering them will need buildings, offices, telephones and all the rest of it and that will have to be paid for by the local authorities. Who decides how much each local authority contributes towards the EPB? The hope is that it will be done by agreement: the EPB will say that something is reasonable, there will be negotiations with the constituent local authorities about what is reasonable and a compromise acceptable to all will be reached. The normal way in which organisations of this type fund themselves is by a process of negotiation and agreement with the constituent authorities. However, if the EPB has the ability to levy—whether it is technically a levy on the precept on the council tax or simply an imposition on each constituent authority on whatever basis—it takes levying council tax one step away from democratic accountability, because a council will have to pay the money whether it likes it or not. At the moment, each precepting authority can precept on the council tax, but each local authority is more or less master of what it spends, raises and precepts.
This amendment is designed to probe this important matter so that we can hear what the Government have to say. I shall be interested in the Minister’s answer.
I hope noble Lords will not have withdrawal symptoms after today, since I sincerely hope we will finish this afternoon. I am grateful for the amendments in this group because they allow me to clarify issues that have been raised and to reassure noble Lords.
The amendments tabled by the noble Baroness, Lady Warsi, are about the functions of the EPB and the role of the Secretary of State. Amendments 189, 190A, 190B, 189A, 190 and 191A, which include those tabled by the noble Baroness, Lady Hamwee, seek clarification on the role of the Secretary of State—indeed, the first amendment removes the Secretary of State’s power to make a statutory order—and the intention that the functions relate to economic development and regeneration, which is what EPBs are all about. The suggestion made by the noble Baroness, Lady Hamwee, and the noble Lord, Lord Tope, is similar to that made by the noble Baroness, Lady Warsi, in that they would make the Secretary of State’s power in relation to functions exercisable only,
“at the request of the local authority in question and with the agreement of the EPB”.
I shall not reiterate anything I have said in previous debates on the purposes and functions of the EPB, not least because the Chief Whip is sitting beside me. We debated them thoroughly. We want to create an opportunity for local authorities to acquire significant benefits. I think we all agree that we want more opportunities to tackle economic issues at the sub-regional level, which best reflects real economic markets. I think the noble Baroness, Lady Warsi, agrees with that.
We have already encouraged local authorities to work together by introducing MAAs, and EPBs would bring further advantages by creating a coherent legal body—a single conversation—that would provide a clear framework for joint decision-making. It is interesting that the Conservative Party seems to have reached a similar conclusion. In its recent Green Paper on localism, it proposes that local authorities should be able to set up business-led enterprise partnerships, sub-regional bodies,
“that truly reflect natural economic divisions”,
which would be signed off by the BERR Secretary of State. I leave that for the Committee to consider.
Much of the process of passing functions to EPBs is alluded to in the amendments, so let me reiterate briefly what that process is, and in particular reassure the noble Baroness, Lady Warsi. Any functions which will be transferred to the EPB from constituent local authorities—the “when” and the “how”, as she put it—will indeed be decided by the authorities concerned and set out in the scheme which they draw up. The legal definition of a function is any legal power or duty, and we are looking at some very important powers. Any transfer of functions should be clearly set out by the statutory order establishing the EPB.
Amendment 189 would remove the functions from the order creating the EPB and would allow member authorities to “agree” to transfer functions. Nothing divides us on that. I absolutely agree that member authorities should first agree the functions that they would like to share with the EPB to achieve their objectives of greater prosperity. However, in all seriousness, because it is a major undertaking, it should be done by statutory order. It is a proportionate and proper use of the Secretary of State’s powers. This also provides an opportunity for the proposal to be scrutinised. As I said last week, these will be affirmative orders whereby Parliament could make its views felt. Finally, the functions cannot be changed without a thorough process involving consultation with all partners, as the Bill provides for in Clauses 95 to 97. There is a security blanket around that issue.
In our previous sitting, the noble Lord, Lord Greaves, was concerned about an EPB gradually accreting additional functions over time. That is another strong argument for functions being exercisable only by the EPB by order of the Secretary of State. Amendment 189A suggests that the functions ought to be conditional,
“at the request of the authority in question and with the agreement of the EPB”.
I agree entirely that is exactly what we have aimed to provide in the Bill.
Perhaps I may clarify the process for transferring functions to an EPB, as that will take care of some of the issues raised by the noble Baroness, Lady Hamwee, about the outcome possibly being fragmentary. There will be one statutory order to create an EPB to set out its working arrangements and functions. This will be designed to put into law the scheme prepared by the local authorities. All local authorities will agree the functions that their EPB will have through the preparation of the scheme. As part of this process they can, if they wish, decide that certain conditions should apply to the exercise of those functions. They may also decide that functions should be made exercisable by the EPB instead of by the authorities, or concurrently with them. They will be able to decide to take part of those functions—perhaps the strategic functions—or leave the remaining functions in that policy area with the local authorities. It is entirely up to the local authorities and they should have as much flexibility as possible.
The noble Lord, Lord Greaves, raised a similar point in Amendment 190B. It would create a presumption that certain functions could not be passed to an EPB unless individual authorities agreed otherwise. Exactly; there must be a collective agreement whereby the EPB and its objectives, as defined by the local authority, focus on certain activities, programmes and policies. Therefore there will be agreement that the respective and necessary functions be transferred.
The noble Lord asked about powers. It does not make sense for each local authority to make separate decisions without reference to the other authorities involved. It simply would not work. It would serve neither the form nor the functions of the EPB.
Amendments 190, 191 and 191A are concerned with ensuring that functions passed to EPBs are the right ones, as is absolutely correct—for example, that an EPB’s functions relate to economic development. Amendments 190 and 191 would make this explicit in Clause 86(1). We have had correspondence with the Delegated Powers and Regulatory Reform Committee about that, so I hope that I can reassure the Committee on this point. It is precisely our intention that this should happen. I set out in my letter to the DPRRC that Clauses 86(2) and (5), 94(1) and 97(1) should all be read together. When they are, they make it clear that any functions conferred on an EPB will have to relate to economic development and regeneration.
Amendment 191 asks the Secretary of State to consider not only that a function can be appropriately exercised by the EPB but that it can best be exercised by an EPB. The noble Baroness has pressed me on the definition of “appropriateness”, which I will come to. There is also concern that the clause may be designed to protect local authorities from having functions taken from them that are indeed better exercised at local level. However, the amendment would give the Secretary of State rather more power. It is perfectly reasonable for the Secretary of State to talk about the appropriateness of who exercises what functions, but it is absolutely right for the local authorities to decide whether a particular function is best passed to the EPB.
On the question of appropriateness, it will be entirely up to the local authority concerned to decide what its functions should be in the EPB in order to achieve economic prosperity within the objectives that it has set itself. One thinks immediately of investment functions, business development skills training, and possibly joblessness and worklessness issues. A local authority may feel that it cannot realistically plan for the proper expansion of jobs and employment without having more affordable housing, key worker housing or whatever. It will be up to the local authorities that are working through the EPB to decide what is necessary; we are placing no conditions on that. “Appropriate” relates to economic development and regeneration, and it is entirely up to local authorities to decide what is appropriate.
Noble Lords will know that the RDAs do not have clearly defined legal functions, so Amendment 190A would mean any activity carried out by an RDA. We had a lively debate on RDA delegation last week, so I will not repeat those arguments, but our objection is the same. By doing what the amendment suggests, we would cut across existing arrangements and these tiers of government working together organically. It would certainly also undermine parts of the regional arrangements that we are putting in place.
The amendments on taxes, charges and the levy are very important, and I am very grateful to have the opportunity to put my remarks about them on the record. I reassure noble Lords, although they do not need to be told this, that it is a fundamental tenet of our law that no tax can be raised without express provision being made in primary legislation. No such provision is included in the Bill. The local authority functions that can be exercised by an EPB by virtue of an order made under Clause 87 could not include the power to tax. The same principle applies to a combined authority.
As the noble Lord, Lord Greaves, said, under Clause 87 the costs of an EPB will need to be met by its constituent councils, and he described the process that will be followed. It will be a matter of agreement and negotiation in the light of a local authority’s commitment and the sort of EPB that it might want. The basis on which the amount payable will be determined is entirely a matter for its agreement, and it will be set out in the scheme. No provision in the Bill would enable an EPB to raise a levy from its constituent councils. It could not require them to make particular payments to the EPB, which would in turn have to be taken into account by the councils when they set council tax. Again, this would not be possible without express provision in the Bill, and there is no such provision in the Bill because we do not want it. I hope that the noble Lord is reassured about that.
We also had a question from the noble Baroness, Lady Warsi, and the noble Lord, Lord Hanningfield, in Amendment 196 about whether combined authorities should be able to raise a levy. I have already said that the Bill does not provide for EPBs to have precepting or levying powers. But, as a combined authority would take on functions that would otherwise be exercised by an integrated transport authority—a later group of amendments deals with that—it is necessary for the former to adopt the levying powers which Passenger Transport Authorities, which date back to the 1960s, and their successor bodies, ITAs, already hold and have held for many years.
The PTAs were levying bodies for many years in order to allow them to deliver and invest in public transport in their area. The Local Transport Act 2008 provides for ITAs also to be levying bodies, a principle which was agreed by this House last year. I should make it clear, however, that paragraph 75 of Schedule 6 to this Bill limits any levy for a combined authority to expenses that are attributable to transport functions.
Moving further into Schedule 6, paragraph 83 would apply the Local Government (Overseas Assistance) Act 1993 to EPBs and combined authorities, which is the subject of an amendment by the noble Baroness, Lady Warsi, and the noble Lord, Lord Hanningfield. I hope that I can provide an assurance that this provision is not a means by which EPBs or combined authorities would be able to open overseas offices or spend council taxpayers’ money on overseas projects. It is simply a means by which they can provide advice and non-financial assistance to overseas bodies that carry out similar functions, which may in turn be reciprocated.
The noble Baroness also opposes the whole of Schedule 6 standing part of the Bill. The consequential amendments contained in this schedule are essential to allow EPBs and combined authorities to operate effectively. Schedule 6 applies various aspects of local government law to EPBs and combined authorities. As these bodies are made up of local government representatives and will be able to exercise certain local authority powers, as decided by the councils involved, it is clearly appropriate that they should be subject to many of the same rules and procedures that govern the local authorities themselves. In applying this law to EPBs and combined authorities, we are again following the precedent established by the Local Transport Act 2008 in relation to ITAs.
The consequential amendments in Schedule 6 will ensure that EPBs and combined authorities are accountable in the ways that we want, which we shall cover in a later amendment—for example, by applying rules on open meetings to them and rules on political representation. We have applied only those aspects of local government law that are relevant and appropriate to the functions which EPBs and combined authorities will have and have not applied anything that will unduly restrict their freedom to structure themselves as the constituent local authorities wish. I hope that that reassures the noble Baroness. Indeed, I hope that the Committee is reassured by those explanations and that noble Lords will not feel it necessary to press their amendments.
People used to say, “Never ask questions unless you know the answers”, but I do, I am afraid. I did not get all the answers that I was expecting from the Minister on these amendments. Having heard what she said—and I shall read it carefully in Hansard—I am increasingly alarmed and a little frightened about what the implications of these bodies might be. I have three quick points. When she was talking about housing there seemed to be an assumption that if a major housing regeneration were part of a regeneration of an area, which it often is, that function ought to be handed over to the EPB. I do not understand why we cannot have a body at sub-regional level—a group of councillors working together on regeneration—but with the district councils or unitary councils at a more local level still carrying out the housing functions as part of that regeneration. Clearly, that could happen, but the assumption of what the Minister said is that it would not and that if there were a big regeneration it would all go to the EPB.
I can reassure the noble Lord about that. It definitely could happen because only part of the function relating to housing could be taken away. If those local authorities forming an EPB thought it relevant and important, there is no reason at all why the housing authorities should not retain most of what they do. I cannot speculate because I do not have a specific instance in mind but I can reassure the noble Lord that it would not mean all or nothing in terms of housing.
I am grateful for that; I could have forecast that answer, but I am interested in the fact that things are being put in these terms. So far as planning is concerned, I do not think I had an assurance that development control functions would not be passed to the EPB. That is the further question I ask—can that just be clarified?
The Minister said, on the one hand, that councils will not be forced to do anything—that if they transfer their powers it will be their decision—but, on the other hand, that we cannot have a system with different councils in the same EPB transferring different functions, so everything has to be uniform. The two do not tie together. Either everything is uniform or each council has the ability to decide for itself which functions to transfer. When an EPB is set up, everyone may well agree on the system but, as time goes by, councils may wish to change the system and withdraw functions from it. There may be those dreadful old fashioned things called local elections, and a different group of councillors might have a majority on the council, have a different view and want to change things, yet it seems that they will not be able to do that.
That leads to my final point, which is on money. It is clear that it will be difficult for a council to leave an EPB—it is locked in—particularly a district council in a two-tier area. It will require the agreement of a majority of the other people. However, if the Minister is saying that the EPB has no power to levy money from councils, what is to prevent a council that has a change of control and gets a party in that wants nothing more to do with the EPB because of the political and public debates that have taken place—because the EPB has suddenly become unpopular in that area, for some reason—saying, “We’re not paying any more money. Sorry—we may be a member of the EPB and unable to pull out of it, but there’s no more brass”? One clearly hopes that people negotiate, come to agreements and reach compromises on such matters, but the real world is not always like that. Sometimes there are major political schisms, even at local level, that result in a breakdown of negotiation as a means of achieving compromise and people simply say, “No more”. What happens then?
I will indulge myself with one general political point, which is that the Minister made an extremely good case for the Government ensuring that local authorities can get back into the business of building housing as part of the economic regeneration programme.
I wrote down what I thought was the correct interpretation and summary of what the Minister said—that the arrangements rely on good will and good sense. However, taking my first amendment as an example, I see nothing to prevent local authority A binding or blocking local authority B because the Secretary of State thinks that that would be the appropriate way to do things. I understand the intentions behind what she explained, but I find it hard to identify the provisions pinning all that down in the legislation. I have no doubt that we will come back to this at the next stage.
I have two points. First, the point made by the noble Lord, Lord Greaves, on the transfer of powers is valid. If there is a true commitment to localism, different priorities clearly exist at different times depending on the make-up of the council. It is essential that that flexibility be maintained for local authorities in terms of which powers it hands over to economic prosperity boards at any one time.
Secondly, I am heartened by the comments made by the Minister on the functions of the economic prosperity boards, specifically in relation to their use to levy tax. I was also heartened by how she addressed my concerns about non-financial and financial support that economic prosperity boards could give as part of Schedule 6. However, it is important that I look at the Minister’s response in detail, especially the reference to the Green Paper, to ensure that there is consistency.
I apologise for the fact that I may not be here for the rest of this sitting. I have other commitments that, unfortunately, were scheduled long before this Committee day. However, my noble friend Lord Hanningfield will be leading for my party for the rest of the Committee, and my noble friend Lord Bates will assist. At this stage, however, I beg leave to withdraw the amendment.
Amendment 189 withdrawn.
Amendments 189A to 192A not moved.
Clause 86 agreed.
Clause 87: Funding
Amendments 192B and 192C not moved.
Clause 87 agreed.
Clause 88 agreed.
Clause 89: Change of name
Amendment 192D not moved.
Amendment 193 had been withdrawn from the Marshalled List.
Clause 89 agreed.
Clause 90: Changes to boundaries of an EPB’s area
Amendments 193A to 193F not moved.
Clause 90 agreed.
Clause 91: Dissolution of an EPB’s area
Amendments 194 to 194B not moved.
Clause 91 agreed.
Clause 92: Review by authorities: new EPB
Amendments 194C and 194D not moved.
Clause 92 agreed.
Clause 93: Preparation and publication of scheme: new EPB
Amendments 194E and 194F not moved.
Clause 93 agreed.
Clause 94: Requirements in connection with establishment of EPB
Amendments 194G to 194J not moved.
194K: Clause 94, page 57, line 32, leave out “and”
Prequential; I am grateful. I also speak to Amendments 194L, 194P, 194AK and 194AP, all of which are the same four amendments, adding to the things to which the Secretary of State must have regard when establishing or changing an EPB, or establishing or changing a combined authority.
The Bill says that,
“the Secretary of State must have regard to the need—
(a) to reflect the identifies and interests of local communities, and
(b) to secure effective and convenient local government”,
both of which are desirable but not necessarily democratic. Either could be carried out undemocratically. My amendment would add the requirement that the Secretary of State should have regard to the need,
“to promote local democracy and the involvement of local people in local democratic arrangements and decision-making”,
“to promote economic, social and environmental sustainability”.
There are two points here. The first point is about democracy and involvement. I tabled the amendment because of the Government’s emphasis in the early parts of the Bill on exactly that kind of process. It is a tongue-in-cheek amendment, really—a cheeky amendment—because the whole concept of an economic prosperity board and involving local people in local democratic arrangements and decision-making are not compatible. The economic prosperity boards will not be the kinds of bodies that lend themselves to the involvement of local people in local democracy. It is taking decision-making a step further away from local democracy, in so far as local democracy involves elections and people making decisions, making it more indirect and remote.
Moreover, people will find it very difficult indeed to get involved in the structures themselves and to become members of them, unless they are members of a small, local, privileged elite who are lucky enough to be co-opted as the new-style aldermen on these bodies, if they have them. Membership of them will be impossible for most people, because they will have to become leader of their local council before they can be a member. Being leader of the council is not open to a lot of people, whereas being an ordinary councillor is. That is the real difference. I put that forward as an example of how the two parts of the Bill conflict. I will listen with interest to what the Minister says, but I do not believe that there is anything she can possibly say that will satisfy me and make me believe that my amendment is in any way compatible with the organisation that is being set up.
The second point is important and goes back to the fear, which we discussed on regional structures, that the Government at a regional and sub-regional level are putting more emphasis on the economic to the exclusion of social and environmental sustainability. There is a real fear that environmental sustainability and social sustainability are being pushed back, and that all that will really matter in the future is economic advancement and sustainability. Economic advancement and sustainability are extremely important in the present economic circumstances of the country, but there is a real danger that that will be used to push back the real advances that have been made in recent years in the other fields. I beg to move.
I will have a go. I am grateful to my noble friend for his encouragement.
The noble Lord raises a very important point, and I am happy to try to reassure him and to ensure that the Committee knows that both parts of the Bill are not merely compatible but are interdependent.
The amendments that the noble Lord has listed would require the Secretary of State to have regard to the need to promote local democracy and the involvement of local people before creating or amending an EPB or combined authority. If we cast our minds back to those three glorious days at the beginning of the Committee stage when we went into the local democracy clause in extraordinary detail, the noble Lord will know that we are taking this issue very seriously indeed, as he has always done. I am sure that he knows that EPBs and combined authorities are listed under Clause 2(3)(j) as connected authorities for the purpose of the duty to promote democracy. The challenge that he has posed is why they need to be there when, as he suggests, they are not particularly democratic bodies.
I dispute that, however, because those local authorities that come together to form an EPB will be serving the local community. They will have elected members on them and will be part of the local democratic organisation. They must show what they are about and how they work. They must show why certain people are on them and how their work will benefit the local community. That is the sort of thing that we are asking local authorities to drive at through the duty to promote democracy. How they arrive at their decisions is the sort of thing that I said that I would take away and think about in terms of the noble Lord’s suggestion and in terms of decision-making.
The EPB will make decisions, so it is important that it is as transparent and open as possible and that people know how they might put themselves forward as possible members. Although there will be a majority of elected members, there will also be space for other people representing local interests. I see no reason why local activists—whether from the employment sector or whatever—should not be considered for that sort of role and, importantly, influence what goes on. They could legitimately be included here and there will be lots of opportunities for people to be involved.
More than that, although the noble Lord did not allude to this, consequential amendments in paragraph 18 of Schedule 6 will have the effect of applying Part 5A of the Local Government Act 1972 to EPBs and combined authorities. That means that meetings will need to be open, and papers and minutes will be available for inspection by members of the public, so they will be completely transparent.
In addition, by virtue of paragraph 91 of Schedule 6, EPBs and combined authorities will be best value authorities and therefore subject to the duty to involve. Those measures and the fact that at least a majority of members of an EPB will be elected councillors will give the Secretary of State sufficient confidence that they will indeed promote local democracy and the involvement of local people, without having to consider that separately before they are created.
On the need for the Secretary of State to have regard to the need to promote economic, social and environmental sustainability, there is no doubt that EPBs will have a strong focus on economic issues. The Secretary of State will already be required under Clause 94 to consider the evidence and the likelihood that an EPB will improve the exercise of statutory functions relating to economic development and regeneration and economic conditions.
Very early on in our debates, I said that to pose a challenge between economic growth and economic and social sustainability is a false dichotomy. Throughout our legislation, we write about sustainable economic development because we are in the business of sustainability. It does not make human sense not to be. We have covered social sustainability in Clause 94 by the need for the Secretary of State to have regard to the interests and identities of local communities, and the need to secure effective and convenient local government before making a statutory order. That makes it clear that it has to be a major consideration.
In terms of environmental sustainability, EPBs will be expected to follow national and regional policy. The regional strategy, for example, has sustainable development at its core. PPS1, our major piece of planning architecture, is on sustainable development and will include policies designed to contribute to tackling climate change. We can take confidence from that. The noble Lord may also wish to know that the combined authorities will be under a duty to take into account policies and guidance on climate change and environmental protection when carrying out their transfer functions under Section 8 of the Local Transport Act 2008.
I hope that the noble Lord will agree that EPBs will not in any way run counter to our ambitions to promote local democracy, more transparency and more involvement, to nurture cohesive communities and to protect and enhance the natural environment. I hope that he will change his mind from where he was when he spoke to previous amendments.
We have to accept that there are occasions when we just disagree. We disagree about what the words in the Bill mean in terms of the kinds of bodies that will be created and how they will work. I do not believe that what the Minister said about them will happen in practice. I do not in any way accuse her of bad faith. There is no harm in disagreeing. We argue about matters and discuss them in these Committees at great length in the hope that by the end we all see the error of each other’s ways or the error of our own ways and we will come to an agreement or a compromise. That is a useful process, but sometimes we disagree.
The Minister said that it was a false dichotomy to consider, on one hand, economic growth, sustainability or development and, on the other, environmental and social sustainability. These general concepts come down to making lots and lots of practical decisions. I do not know whether it is a dichotomy, false or otherwise, but decisions have to be made and often there is a choice. Is the choice to make a decision on jobs or economic growth, knowing the effect that it will have on the environment? Is it in the interests of an area to have a more super-duper transport system, bigger or faster roads, or even railways, even though there will be some environmental damage? You try to look at the issue as a whole and try to put a proposal together as a package, but you still have choices to make.
The purpose of the bodies to be set up under the Bill has an effect on the decisions that are made. It does not sweep away everything in one direction or the other, but it moves the centre of gravity and moves the position further along the spectrum in one way or another. There is no point pretending that this is not the case. Everything in this Bill and recent Bills, such as the then Planning Bill, has been to push economic issues more strongly than environmental and social issues. That is what has happened, and I am glad that the noble Lord, Lord Graham, agrees with me.
That is fine. It can be a good thing or a bad thing, but there is no point denying that that is happening. It may be the right thing to do in the country’s present economic circumstances. Let us understand that and I want to keep the balance.
I am unhappy about the intention of securing,
“effective and convenient local government”,
in this Bill, when referring to the new boards. Those are precisely the words in the Local Government Act 1972 in relation to reorganising local government. They are the words used in relation to setting up parish councils and parish reviews. These words are usually used, in my experience, in relation to democratically elected local authorities. Here they are used in relation to non-democratic or indirectly democratic, non-elected boards. This is another of the little things that confirms my view that unelected quasi-local authorities that are fundamentally undesirable are being created. However, I beg leave to withdraw the amendment.
Amendment 194K withdrawn.
Amendment 194L not moved.
Clause 94 agreed.
Clause 95 agreed.
Clause 96 : Preparation and publication of scheme: existing EPB
Amendment 194M not moved.
Clause 96 agreed.
Clause 97 : Requirements in connection with changes to existing EPB arrangements
Amendments 194N and 194P not moved.
Clause 97 agreed.
Clause 98 : Combined authorities and their areas
Amendments 194PA to 194T not moved.
Clause 98 agreed.
Clause 99 : Constitution and functions: transport
Debate on whether Clause 99 should stand part of the Bill.
I am dealing with Clause 99 with Amendment 197A, which deletes a number of paragraphs from Schedule 6, because I wish to raise a number of specific transport issues. I seek some answers from the Minister. I am leader of Essex County Council, and I am the transport spokesman for the Conservatives in the House of Lords.
As I understand the Bill, Clause 99 allows the functions and powers of PTEs—passenger transport executives—and ITAs—Integrated Transport Authorities—to be transferred to combined authorities. PTEs are local government bodies responsible for co-ordinating public transport in large urban areas. Currently, as far as I am aware, they are in Greater Manchester, Merseyside, South Yorkshire, Tyne and Wear, the West Midlands and West Yorkshire. They are administered in turn by ITAs, formerly known as PTAs—Passenger Transport Authorities—which are made up of councillors representing the areas served by the PTEs. I hope that I have managed to steer noble Lords through this alphabet soup of organisations; it is quite complicated.
On the Local Transport Act 2008, the Government accepted the Opposition’s amendments that stipulated that each ITA must include at least one elected representative from each authority represented on the ITA. Members not appointed from among locally elected councillors are able to vote on only those matters that the ITA permits them to vote on. We had considerable discussion about those issues during the passage of that Act. The Government accepted that important nod in the direction of democratic accountability in the Local Transport Act, and they seem now to be trying to dilute it even further by transferring the functions of the ITAs to the new combined authorities.
Why is this clause necessary? Do the Government believe that PTEs are not currently carrying out their functions satisfactorily? What is so superior about combined authorities that the Government feel that they could perform transport roles better than the PTEs and ITAs? Will the Minister detail by way of explanation and example what a combined authority could achieve that an ITA could not? I ask that question with some genuine curiosity because I have not been able to think of any reasons. I hope that the noble Baroness will be able to enlighten me. What specific powers do the Government envisage will be transferred from PTEs and ITAs to combined authorities? By what criteria will the Secretary of State determine which of those powers will be transferred from PTEs and ITAs to combined authorities?
During the passage of the then Local Transport Bill, the Government went to great lengths to reform the functions and structures of PTEs and ITAs. How will this Bill impact on that recent legislation and vice versa? Is it not too soon to decide that the existing schemes are not working? In fact, they have not really been established yet. Why do they need to be changed? The composition of ITAs was subject to much debate during the passage of the Local Transport Bill. Will the composition of the new combined authorities reflect that discussion? Will they be formed in the way that the ITAs now exist?
I have asked a series of questions that I hope the Minister can answer because I looked at these provisions and am confused about their purpose and unconvinced about their necessity. I ask the Government to explain to the Committee how Clause 99 fits the aims of the Bill to strengthen local democracy and help local communities deal with the problems of today. I do not see how these parts fulfil some of those aims.
I am happy to have this opportunity to put the noble Lord’s mind at rest about the issues he raised about ITAs and the notion of the combined authorities. He clearly intends his amendment to probe the Government on this matter because its effect would be to prevent combined authorities being accepted.
I shall rehearse a little of the Local Transport Act 2008. Allowing the establishment of ITAs was a significant step that allowed local authorities to pool responsibilities and powers at a sub-regional level, where that was in their wider interest. As the noble Lord said, there are six ITAs. They came into being on 9 February, when they replaced the Passenger Transport Authorities in the West Midlands, Greater Manchester, West Yorkshire, Merseyside, South Yorkshire and Tyne and Wear. Several other parts of the country are reviewing their existing transport governance arrangements at the moment, including considering whether establishing a new ITA might be the right way forward.
It seems that the noble Lord thinks that we are going to subsume all ITAs into EPBs. I reassure him that we will have combined authorities only in so far as the EPB and the ITA agree that it makes sense for the economic development purposes to be served. The noble Lord asked what benefits that would bring. In some areas—travel-to-work areas or EPBs that may cover several districts or even more than one county—there is no doubt that the investment that may be needed to stimulate local economies, skills, FE colleges and so on would have transport implications. There may well be a compelling case for bringing the ITA and the EPB together to make sure that all that could be integrated so that, if there is a challenge to a bit of the transport system, it can be addressed as part of serving the wider economic imperative for economic prosperity.
Essentially, it will be something for local choice and will have to be shown to be genuinely beneficial because nobody wants reorganisation for the sake of it. I assure the noble Lord that EPBs are a big step forward but, if there are additional benefits to be gained by allowing authorities not only to set up overlapping sub-regional arrangements but to bring in a single body that can take forward transport and economic development together, that is an option that they might want to consider. I assure the noble Lord that it does not alter the workings of the ITA. If the local authority comes to the conclusion that there is an argument for changing the composition, it will be able to make that judgment, but there is nothing that will require it to do so. I will write to the noble Lord and make sure that I have answered all his questions.
Another point came up during the passage of the transport Bill. I approve of Integrated Transport Authorities, and the Government agreed that they should be composed mainly of elected members, but we would be totally against having road charging imposed upon a county that did not want it. If counties want it, that is fine. They can have a referendum. It would be wrong to have a majority of an integrated body voting for road charging within a local authority that did not want it. That is what concerns us: losing the local democracy of that authority. It is up to that authority to choose the various things it wants. We do not want anything created which could impose it upon an authority that was against it.
Again, let me offer some assurances. It is up to local authorities. There is no reason why they should change their constitution at all; they will not be required to. The powers that cover road charging are essentially inherited. There is no way that the combined authorities will introduce congestion charging and road pricing in an underhand way.
The ITAs were granted powers over local charging schemes by the Local Transport Act, as the noble Lord knows. The Bill provides no extra powers on transport; it merely provides for those functions and powers that are already available to ITAs to be carried out in tandem with other economic development activities. If they choose to go down the road that he suggested, it is entirely up to them. I am happy to put that on the record. I know that there was some concern after Second Reading that this might somehow open the door to congestion charging. That is absolutely not the case. I hope I can reassure the noble Lord about that.
We are looking to enable any local authorities that want to opt for an EPB to consider at the same time whether, in order to deliver that powerful economic objective, it would serve their purposes to bring the ITA on board and have an integrated approach to economic development at a sub-regional level. It is simply there as a facility that can be considered if the local authority so chooses.
I wonder whether my noble friend agrees with me on two points. We are here debating the difference between two joint authorities and where the functions lie. This is not about local councils or local democracy, but about whether local councils work together, combining their powers to work in a joint arrangement, or not. Whether it is an ITA, an EPB or some combined body is entirely up to the local authorities. As a former leader of Greater Manchester, someone who still bears the scars of the congestion charge debate there, I say that it is important that we think about transport. That is the strength of ITAs against PTEs. PTEs have fewer powers than the ITAs did because they do not have road traffic but highways traffic, which is actually taking powers from local councils. If we are getting a body that wants to look at the economic prosperity of an area, the link between transport, access to work, access to employment and all these issues is really important.
As much as I loved our PTE in Greater Manchester, it concentrated on public transport. I want to ensure that we have a functioning local public transport service. There is nothing wrong with that. I do not want to worry about bus stops. One of the functions of the PTE—or the ITA, now—is to worry about the location of bus stops. That is an important matter, particularly if it wants to put one outside your House, but it is something I am happy for someone else to do. However, but if we are talking about transport strategy, its integration with the economy and the wider role of a city region, people have to see bigger pictures. That is why there may be a combined authority that takes a limited number of functions from the ITA and leaves bus stops and all the rest of it to it.
Both the Minister and the noble Lord, Lord Smith of Leigh, made the argument for why Essex should not be in the eastern region: the travel-to-work patterns and so on relate to London and the south-east, not to Norfolk. That is another point, and I will take note of it.
It is not quite in London, but it is more related to London than it is to Norfolk. I am sorry; that is a diversion. The Minister said that she would outline in writing to me some of the fears that I expressed in the original amendment. I accept her offer so that we can clarify the matter and look at it on Report.
Clause 99 agreed.
Clause 100 : Constitution and functions: economic development and regeneration
Amendments 194U and 194V not moved.
Clause 100 agreed.
Clause 101 : Changes to boundaries of a combined authority’s area
Amendments 194VA to 194Z not moved.
Clause 101 agreed.
Clause 102 : Dissolution of a combined authority’s area
Amendments 194ZA to 194AB not moved.
Clause 102 agreed.
Clause 103 : Review by authorities: new combined authority
Amendments 194AC and 194AD not moved.
Clause 103 agreed.
Clause 104 : Preparation and publication of scheme: new combined authority
Amendments 194AE and 194AF not moved.
Clause 104 agreed.
Clause 105 : Requirements in connection with establishment of combined authority
Amendments 194AG to 194AL not moved.
Clause 105 agreed.
Clause 106 agreed.
Clause 107 : Preparation and publication of scheme: existing combined authority
Amendment 194AM not moved.
Clause 107 agreed.
Clause 108 : Requirements in connection with changes to existing combined arrangements
Amendments 194AN and 194AP not moved.
Clause 108 agreed.
Clause 109 : Incidental etc provision
Amendment 194AQ not moved.
Clause 109 agreed.
Clauses 110 and 111 agreed.
Clause 112 : Orders
Amendments 195 and 195A not moved.
Clause 112 agreed.
Clause 113 : Guidance
Amendment 195B not moved.
Clause 113 agreed.
Clause 114 agreed.
Schedule 6 : EPBs and combined authorities: amendments
Amendments 196 to 197A not moved.
Schedule 6 agreed.
Clause 115 agreed.
Clause 116: Multi-area agreements
197B: Clause 116, page 67, line 24, leave out paragraph (b)
In moving Amendment 197B, I shall speak to Amendments 197C, 197D, 198A and 198B to 198K.
We have moved to Part 7, which deals with multi-area agreements. All the amendments in this large group relate to concerns about the provisions for them in the Bill. I will try to resist the temptation to make a speech more properly made at Second Reading on the nature of multi-area agreements and so forth. Speaking personally, and with a little experience, on the whole I favour them. If done properly and correctly, they offer a great opportunity. That said, we need to stress and recognise that they must be voluntary and we therefore have some concerns in this part of the Bill as we creep towards some statutory provisions which start to question the voluntary nature of such agreements.
We also need to recognise that partnerships, by their very nature if they are to be successful, are organic and need to grow over time. Some areas, my own included, have a long record of partnerships. They have matured and there is a feeling of trust that is necessary to make them work. In other areas, that is not so. That is a brief background to my view about multi-area agreements in general.
I turn now to the specific amendments. There are a lot of them and I will try to get them all right. Amendments 197B, 197C and 198G each relate to targets. Targets have become an obsession: there is frequent reference to targets in these clauses. The amendments also question the reference to improvement targets. Of course improvement targets are always desirable and everyone strives for improvement. I happen to be a member of the executive of a local authority that is not only graded by the Audit Commission as excellent, but is also improving strongly, so I am probably the last person to question the need—
We are excellent and improving strongly. There is nothing better than that. That is for the London Borough of Sutton, and I thank the noble Lord for the prompt.
However, in the current climate and, more particularly, in the climate in which local authorities are heading in the next year or two, it will always be desirable to seek improvement, but I question whether that is realistic and whether including that in the Bill recognises the reality of matters as they are.
Amendment 198G in this little group refers to Clause 120, which is detailed about targets and the Secretary of State's involvement. If they are to be voluntary and locally based, why do we need such a degree of involvement from the Secretary of State? Clause 120 deals with provisions for submission to the Secretary of State, but it does not actually say that the Secretary of State's approval is required or under what terms the Secretary of State may decide not to give her or his approval. I assume that if an agreement is required to be submitted to the Secretary of State, the Secretary of State will say something about it, but perhaps they just receive it for their greater education and benefit. I am sure that the Minister can clarify that.
Amendment 197D relates to Clause 117. We have discussed economic prosperity boards for some considerable time and expressed our misgivings, to put it no more strongly, that they are in effect quasi-local authorities. Sooner or later that is what they will turn into. Then we get to Clause 117, which has the heading “Local authorities” and states that,
“the following is a local authority for the purposes of this Part”—
I accept that qualification—and an economic prosperity board is specified in paragraph (f) as a local authority. That reinforces the misgivings that we expressed on an earlier part of the Bill.
Amendment 198A requires consultation of all the local authorities in an MAA area. At the moment, the Bill refers to consultation with representatives of local government—I assume that in England that is intended to be the LGA; is that correct?—and others considered appropriate. Again, perhaps the Minister will explain more fully what might be considered appropriate. We would feel reassured if it said in the Bill that all local authorities in an MAA area would explicitly be consulted.
Amendments 198B, 198E, 198F and 198H are fairly self-explanatory. We suggest that the Secretary of State should be invited, not directed. That is clear. Amendment 198C allows local authorities to request a direction, or an invitation, from an initial MAA to extend it to a revision of an MAA. That is desirable. To be honest, I struggled a little with Amendment 198D, but again it is based on concerns expressed throughout our discussions about the position of non-unitary district councils, which continue to seem to be rather the poor relation in all this.
Amendments 198J and 198K leave out statutory requirements for what should and must be a voluntary agreement. If it is a voluntary agreement, maybe there should not be enforced co-operation. That is a long list of amendments, each one of which deserved a fuller explanation, but in view of the time constraints that we are all under, I beg to move Amendment 197B. I look forward to the Minister’s response.
I have three amendments in this group, two of which are probing. They are all along similar lines to those of the noble Lord, Lord Tope. The Minister might be surprised that there were only three amendments, and I hope that she will be relieved when I explain that we have finally come to a part of the Bill that does not upset us as much as some other parts. We have already made our position clear on economic prosperity boards—that we are not particularly in favour of them, and we would rather have them looking more like MAAs. By that, I mean that if local authorities wish to combine for particular purposes, and it is not enforced—this is along the lines suggested by the noble Lord, Lord Tope—they should be free to do so. In fact, I had to leave Committee for a while earlier because I had a long-arranged meeting with Kent to talk about transport issues. That is the sort of thing that MAAs should be about.
There is no need for any kind of prescription. Most local authorities will want to work through MAAs and work with authorities that have similar problems. That is why, like the noble Lord, Lord Tope, we are concerned about some of the issues in the Bill. I suggest that MAAs, as envisaged here, seem to be little more than a mechanism for implementing improvement targets. In common with the noble Lord, Lord Tope, I ask the Minister to comment on that.
Amendment 201 is designed to emphasise our belief that MAAs should be voluntary, along the lines suggested by the noble Lord, Lord Tope. If they are truly voluntary, they would be more openly embraced by local authorities, which would spend more time considering the values of working on common problems with their colleagues.
I have refrained from tabling amendments to Part 7 which would replicate earlier concerns expressed by us throughout the Bill as to the overbearing role of the Secretary of State. That is not because we are now reconciled to the Secretary of State’s role, but because we feel that we have made the point. I hope that the noble Baroness and the Government are reflecting on that before we get to further stages of this legislation. She could reassure me further by accepting the amendment and by ensuring that the Bill will make clear that MAAs are there for the purpose of helping local authorities better to achieve their targets, rather than tying them into agreements that they simply do not wish to have.
On the matter of targets, I have tabled two probing amendments—Amendments 199 and 200—which depend on one another. By tabling them I do not wish Members of the Committee to think that I am calling for local authorities to ignore improvement targets deliberately, but the Bill seems particularly inflexible. Must all improvement targets be paid equal regard? Does not the nature of a target allow for discretion? Will the Minister furnish the Committee with a likely example of improvement targets so that we can better understand what is being set up in the agreements?
As I said, this is a probing amendment, asked in the spirit of curiosity so that we can have more details of the Government’s version of an MAA to consider.
Sprinkled throughout this group is a series of clause stand parts, which I tabled with the idea that it would enable us to go through clause by clause to winkle out what they all mean. The noble Baroness will be pleased to learn that I shall not do that and do not want to add a great deal to what my noble friend Lord Tope and the noble Lord, Lord Hanningfield, said.
The purpose of tabling the clause stand parts was to ask the big question: why is Part 7 necessary? That is the fundamental question. My noble friend said we are favour of multi-area agreements in general. I have an exciting document, Pennine Lancashire Multi Area Agreement. Perhaps I should declare an interest as a member of an authority whose leader signed the document in a recent ceremony at No. 10 Downing Street. Clearly, it was thought by the Government to be of some importance. There are lots of interesting things in it referring to government action 1, 2 and so on. It will be interesting to see what all those actions are. I shall not tell the Committee everything that is in the document, but there is some interesting stuff such as reinstating railway lines and services and things like that.
Throughout the country, people are taking to multi-area agreements and are working hard to put them together. No doubt, we will have more as time goes on. If they are happening now and people are being summoned to Downing Street to sign them as if they are such a good thing, why do the Government already want to change the system before it has even got going? We have a multi-area agreement in what used to be called east Lancashire and is now called Pennine Lancashire. It will take some time for it to develop and for us to assess whether it is a sensible idea or whether having the MAA and the institutions that will follow, including a new development company, will be worth while, but the Government want to legislate already.
This was sold as voluntary. Local authorities did not dream it up; they were told that a new idea had come from above. The Government had talked to people in the local government world, so how about this idea? People thought it seemed like a good idea so they said, “Let’s do it”. It was sold as voluntary, but there is now some suspicion that its voluntary nature will not be maintained. In their briefing papers, the Government say that it can be maintained and that new voluntary MAAs can be set up if that is what people want. Two kinds of MAAs—voluntary and statutory—will be set up under Part 7. I understand that there will be multi-area agreements and multi-area agreements with duties. The multi-area agreements with duties will be statutory. In my simple way, I believe that if you agree a document with partners and sign it, you are under a duty to do something about it. It does not require a statutory framework in which the Secretary of State penalises you for not doing something. There is a conceptual problem .
Two lots of multi-area agreements—some statutory and some voluntary—is a recipe for confusion. They should at least be called different things. We all know what will happen. The people who want to set up voluntary agreements will be told, “No, there is a new, chrome-plated better one now under Part 7 which can be statutory and that is what we want you to do”. If people say that they would rather be voluntary, they will be told, “You can be voluntary, but you won’t get all the resources and money that you would get if you were statutory”. We all know that in the real world that is how the Government get their way on all these things. If this is passed as it stands, I do not believe that in five or 10 years’ time there will be any voluntary multi-area agreements. They will all have been turned into chrome-plated multi-area agreements with duties. All the undesirable elements, such as the powers of the Secretary of State to which the noble Lord, Lord Hanningfield, referred, will effectively be imposed on people.
It is the same old thing. They will say, “You can be poor if you want. You can be the paupers of local authorities. We don’t mind, it’s your decision, but if you want the resources to do something useful you must do it the way we want which is the statutory way”. I do not think that any of this is necessary. I agree with the noble Lord, Lord Hanningfield, that the proposal is not actively damaging in the way in which economic prosperity boards are damaging, in my view, but it is totally unnecessary. It is happening already. I have the proof here. The Government ought to be summoning people in five years’ time from Pennine Lancashire and all the other 20-odd places that have these documents to ask how MAAs are going. If they are not working, the Government can then legislate. They should not be legislating before MAAs have even started.
I hope that I can put the noble Lord’s mind at rest in response to his concerns. We have reached Clause 116 and there is a sort of warmth creeping around the Committee. We are not now accused of doing damage, so there is a conditional welcome. Terrific. MMAs are voluntary. They are shared agreements between groups of local authorities and partners to deliver improvement targets—I shall come to that point in a minute—particularly in relation to economic development. They help to increase the co-ordination of policies that have an impact on growth at a level that reflects the boundaries of the local economy. The noble Lord asked the bold but necessary question: why do we need Part 7 at all? Why are we thinking about changing the system that has only just been set up?
The Committee knows that MAAs have certainly proved increasingly popular among local authorities as a tool for improving economic prosperity. In July last year, we signed the first wave of MAAs with local authorities in seven sub-regional partnerships. Three further MAAs were signed last month. There are seven other local partnerships actively developing an MAA and one or two others considering the potential for one. I took the trouble to look at the sort of flexibilities and freedoms that the MAAs are beginning to negotiate, particularly in the light of what my noble friend said last week about the slow progress. I was struck by the commitment that local authorities are putting into multi-area agreements and the complexities that are clearly inherent in any system that seeks to achieve a better deal on flexibility for a local area. Whether we are talking about skills, employment, investment or any policy that can make a difference on the ground, it is a serious process. I understand a little more than I did last week about why it is a complex process and why it is slightly slower than we had hoped, but it is heartening to see all the work that is going into it.
I want to try to convince the noble Lord, Lord Greaves, on this point. In bringing forward this legislation, we are responding to the wishes of MAAs. We are not creating statutory MAAs; they will remain voluntary. The majority of existing MAA partnerships has told us that agreements would have greater weight if they were put on a statutory footing similar to that of local area agreements. They are voluntary agreements with certain statutory powers, in particular, to make partnerships. This message came out clearly in responses to our consultation paper on the SNR last year. For example, the Association of Greater Manchester Authorities suggested that, once signed, MAAs should have the same status as LAAs and other partnerships, such as Tyne and Wear, said that a duty to co-operate should apply to MAAs. Consultees argued that doing this would strengthen local collaboration and bind partners more firmly into an agreed set of actions. Local authorities want that extra facility to ensure that partners place greater store on achieving those targets and on the contribution they are making to that end.
Essentially, the partnerships are looking for one thing: they should have a duty to co-operate in developing targets to be set out in the agreement and to have regard to them in exercising their functions. MAAs want to be more effective. That is how they see the greater effectiveness coming. They see that as a way of securing a higher level of commitment from local partners to the targets set out in the agreement, and Part 7 delivers that. MAAs are intended to complement rather than replace the existing model for MAAs. There is no requirement on any MMA to take that road. It is entirely up to local people to decide the right thing to do. It gives them a further bit of engine power to bring their partners on board as a statutory requirement. Part 7 therefore brings forward legislation that allows local authorities to establish an MAA with statutory duties, to be referred to as MAAs with duties, to provide local authorities and partners to be placed under a duty to co-operate in developing the MAA and to have regard to the targets within the MAA that relate to their functions.
I shall come to specific points, but in relation to the targets themselves, we must remember that this is in the context of having a bonfire of targets, which are being reduced from more than 1,200 to 198. With reference to improvement targets, I seem to remember a Methodist hymn that we used to sing about getting better every day in every way. It would be foolish to abandon the principle of the objective of constant improvement. Indeed, as socialists we believe in the perfectibility of human beings, so we could hardly move away from an improvement target. We can always get better in everything we do.
Amendments 199 and 200 seek clarification on targets, and I can assure the noble Lord that Clause 125 does not specify that each local and partner authority must have regard to every target in the agreement—that would be over the top—but that they must have regard to every improvement target that relates to that body in the agreement. We have simply followed the wording of the 2007 Act. With that explanation, I hope that the Committee will understand why I cannot accept Amendments 197B, 197C and 198G, which remove the reference to targets. I hope that it is equally clear that we must resist Amendments 198J and 198K, which would remove the duty to co-operate: the very duty that local authorities are seeking.
Let me also reassure the Committee that the decision to proceed with an MAA with duties would come from the local authorities within the area concerned. The Government cannot direct local authorities to go down that route without a proposal from them; it is their decision. In addition, these provisions do not allow the Secretary of State to impose an ongoing duty to co-operate in respect of an MAA. Any agreement would need to specify the period for which it would apply. They also provide flexibility by allowing partners to submit proposals to the Secretary of State for revising any agreement, including changes to improvement targets set out in the agreement. We are not providing any restrictions on the area that could be covered by an MAA. This means that no area would automatically be precluded from entering an agreement, although we would expect any chosen area to reflect a functional economic area.
Given that the intention behind this legislation is to bring MAAs on to the same statutory footing—I use that in the limited sense in which I have been describing these extra powers—it is only logical that the legislation broadly follows the provisions for LAAs as set out in Part 5 of the Local Government and Public Involvement in Health Act 2007. There is one crucial difference, however, because, unlike the LAAs, the Secretary of State will not have the power to direct that a draft MAA be prepared unless a proposal has been received from a group of local authorities that wish to work together in this way. Therefore, the MAA with duties remains voluntary at inception.
Why does the Secretary of State need a power to direct at all? It is simply a formal mechanism. It provides the trigger for the duty for local authorities and partners to co-operate: the duty that local authorities have asked us for. The alternative would in fact be more burdensome. If we were to impose an undefined, open-ended duty to co-operate, it would weigh far heavier on authorities and their partners. With that explanation, I hope that the questions raised in Amendments 198B, 198C, 198E, 198H and 198F are satisfied.
Amendment 198A relates to consultation. The amendment would require the Secretary of State to consult all local authorities for the areas covered by the MAA in question before making an order changing the list of partner authorities. The amendment is not necessary because consultation with all local authorities via their representatives is already assured, in Clause 122, and the Secretary of State can consult individual authorities or groups of authorities as appropriate. Given the linkages with the list of LAA partners, it is likely that any changes to the lists of partner authorities for both MAAs and LAAs would be made in unison, and it is appropriate that the consultation requirements are the same.
I need to deal specifically with Amendment 197D, which would remove economic prosperity boards and combined authorities established under Part 6 from the list of local authorities set out in Clause 117. We have included EPBs and combined authorities on this list because both bodies will, in our opinion, be potentially important complementary mechanisms for delivering sub-regional collaboration among the constituent local authorities. MAAs and EPBs are different in form and function. MAAs articulate shared commitments between local and central government to delivering shared ambitions in the form of local and sub-regional targets. While the local authorities concerned may create governance arrangements—the noble Lord, Lord Smith, talked about his joint committees, for example—to support the delivery of targets, MAAs are not legal entities in themselves; they are not corporate or legal bodies and they cannot therefore employ staff or hold budgets. Local authorities already negotiate through MAAs flexible arrangements, protocols and agreements with Whitehall departments for the delivery of certain objectives—on the delivery of skills training or worklessness programmes, for example—but MAAs are not a mechanism for establishing robust sub-regional delivery arrangements, and there is a limit to what they will be able to achieve.
It may well be that the evolving MAAs will continue to be the preferred choice for many areas, but, as I said, some groups of authorities may look positively for a more powerful arrangement for sub-regional working through an economic prosperity board. It is perfectly possible for an EPB to coexist with an MAA: the former providing a strong governance arrangement, while the latter articulates the targets for the area. In some instances, the EPB and the MAA could agree that the EPB as the delivery body would take over the delivery of some or all MAA targets. But whatever the relationship might be, the EPB could be a significant tool for the local authorities for delivering their ambitions as a whole. That is why it is included in Clause 117.
Amendment 198D would require that local authorities requesting the Secretary of State to give a direction for the preparation and submission of a draft MAA include all local authorities for the proposed area, including non-unitary district councils. That is not in Clause 119. I have confirmed my willingness to consider again the role of district councils in agreeing an EPB scheme that covers their area where the whole county is covered.
District council involvement in MAAs is very different from the question of EPBs for the important reason that MAAs will be time-limited voluntary agreements to deliver targets, while EPBs will be corporate bodies with specific functions. EPBs have wider and more long-term implications for the economic development functions of a district council.
Clause 119 is drafted in this way to prevent the situation in which one district council in a large, complex two-tier area prevents the other local authorities in the area proceeding to an MAA. While there may be situations in which a non-unitary district council does not wish to be party to an agreement and to any targets set out in it, we do not believe that that should prevent other local authorities within the sub-region working together to deliver agreed targets. In such a scenario, we believe that the MAA covering the proposed area should proceed but that the district council concerned should not be bound by any targets to which it has not agreed. That is absolutely right and proper. The provisions achieve that. They require each district to be consulted in the formulation of the agreement but to be bound only by the targets to which it signs up. That is fair and logical in terms of what the MAA will be trying to do.
That said, it is clear that the views of other local authorities in the area will be relevant factors in the Secretary of State’s decision whether to issue a direction. If one or more district councils in an area voiced strong opposition to an agreement, it would clearly be material to the consideration of any such request for a Secretary of State direction, particularly if such an area were key to the delivery of the ambitions for the functional economic area.
Were this amendment to succeed, and a district council decided to exclude itself from the request to the Secretary of State, it could in effect block the rest of the authorities in the area from taking advantage and going forward as they would want to into an MAA with duties. A possible alternative might be to redefine the area of the MAA to exclude the area of the district council, but in many cases that would not be workable and would have a negative impact on the ability of the agreement to deliver, especially if there were a hole in the middle of the economic area. I hope that my assurances have addressed the noble Lord’s concerns and that he understands why the amendment is not necessary.
I am getting towards the end. I think that Amendment 201 may be the final amendment. It would allow any local authority to withdraw from an MAA at any time as part of any revision proposal. I understand that noble Lords are concerned that local authorities may find themselves tied into commitments that they no longer feel able to achieve. However, this amendment is not appropriate. MAAs with duties are responding to a desire for a more robust and sustainable partnership to achieve shared objectives. If local authorities that had signed up were able to walk away from an MAA, that could undermine its stability and purpose. I return to the point that MAAs are time-limited agreements, typically for three to five years, so local authorities would not be signing up for indefinite, intolerable commitments. MAA targets are voluntary at the outset for all local authorities.
The Bill allows an MAA to be revised with the Secretary of State’s approval. Such a revision proposal could include changes to improvement targets specified in an agreement and the removal of targets, but that would be a proper adjustment, whereas giving local authorities the freedom simply to walk away from obligations that they have entered into is different. That is why I think the Bill is right in this respect. I hope I have addressed all the amendments. I shall have to read Hansard tomorrow to make sure. If I have not, I will do so in writing.
I have two or three points for the Minister. I am very pleased that she said the targets are voluntary and will not be imposed. We note that and will underline it lots of times in Hansard. Will MMAs be able to set their own targets? As the Minister knows, because she has worked with Essex a lot, we have to agree our LAA targets with government. We are happy to do that because we have debates and arguments, but in the end there is a compromise.
How will the MAA targets be agreed? I hope that they will be agreed by the partners. Are we going to have to agree those targets with government? Who will agree them? Will it be the constituent bodies in MAAs? That is a very important point. If they are going to be voluntary, they should be agreed not by the Secretary of State or by the government offices, as it happens.
Secondly, I am disappointed because I imagine MAAs and officials from one part or another being able to deliver projects. That is the cheapest way to do it. What concerns me about the EPBs is that they will set up a great bureaucracy like the RDAs. We could deliver the RDA money in local authorities much better than RDAs deliver the projects that they do. One does not want to see a great bureaucracy around the EPBs, because that would be a mistake. In the MAAs, I can see one authority helping to deliver a project and another authority delivering it, a little like the authority in Kent to which I talked this afternoon. That would be the cheapest way of doing it, rather than setting up new bureaucracies. That is where I see a better future for the MAAs than the EPBs. The EPBs could have 50 employees and not do very much at all. When we are trying to cut down bureaucracy and deliver projects, it must be the right way to do it. I was disappointed to hear that the MAAs would not deliver things. Of course we have to deliver things and improve on things. That can be done by seconding or using various authorities. That is the point that I hope the Minister will clarify, because I see MAAs as being able to deliver things.
In a minute, I will follow up the point made by the noble Lord, Lord Hanningfield. I was fascinated by the explanation given by the noble Baroness of what socialism was all about and how it was all to do with the perfectibility of human beings. From my perspective, she got that rather more from her Methodism than from her socialism, but I was wondering, in all this discussion of socialism, whether she was speaking collectively on behalf of the Government. That would be interesting to know, but I do not expect her to answer that.
The noble Lord, Lord Hanningfield, made an important point. The MAA may or may not, in the Minister’s phrase, be a “robust delivery vehicle”. There is no reason why it cannot be associated with a robust delivery vehicle. The point that some of us would make is that if a delivery vehicle is required that is not there at the moment, either because it does not cover a large enough area or because there is nothing that can carry out the scale of investment and development that is required among any of the existing local authorities, it can be created. Local authorities can create companies that can carry out development, which can be robust and purely voluntary, and do not have to go cap in hand to the Secretary of State—perhaps “cap in hand” is the wrong phrase. They do not have to keep giving pieces of paper to the Secretary of State to sign and say, “Yes, we agree with this and we do not agree with that”. That is certainly what the people who have set up the multi-area agreement in Pennine Lancashire have in mind. In a different context, I might argue whether it was desirable to set up such a delivery vehicle. That is what they intend to do and that is what will happen.
At a purely district level in Pendle, we have set up a joint venture company between the council and a major local developer, which is a pretty robust delivery vehicle. You can already see some of the impressive results of that delivery vehicle in Nelson. It is designed at a district level. It is possible to set up these things at the moment and to achieve development, and it will be possible for multi-area agreement authorities to do so collectively, jointly and voluntarily if that is what they want to do. It seems to me that an EPB is a more bureaucratic, legalistic, entrenched and difficult way of doing it, as the noble Lord, Lord Hanningfield suggested.
The Minister will be pleased to learn that this is the last time that I shall stand up to say anything in this Committee. I genuinely thank her and her colleague the noble Lord, Lord Patel of Bradford, for their tolerance and forbearance in the face of an overt attempt to point out the dangers of the Bill and the idiocies of parts of it. We do not apologise in any way for doing that; it is what the Committee is for. It has performed a useful function, and done what it should have done. We have discovered that we disagree on some things, and on others have discovered that our aims are the same but we disagree on some of the details, mechanisms and so on. I hope that we will find a meeting of minds on some of these issues on Report. Where we disagree, we will continue to disagree, but at least we will not spend so much time over it as we have established the lines of engagement.
I genuinely thank both the Ministers. They have found some of us to be a total irritation in this Committee, but that is what we are here for: to ensure that this legislation is not nonsense and is not dangerous.
I shall reply to that point. My excursion into socialism and/or Methodism is prompted by the fact that I feel demob happy because my noble friend Lord Brett is taking the next three groups of amendments to the last part of the Bill. I am glad that he is doing that. I know that my noble friend Lord Patel has not done this, but I am sure that I have shown signs of irritation, which I regret. That is not what Ministers should do when faced with the scrutiny process. I am grateful to Members of the Committee for taking the time to go into the Bill and do their job. I am perfectly content with that, and I look forward to Report.
On the questions of the noble Lord, Lord Hanningfield, as I follow the making of MAAs, albeit at a distance, I can tell him that the process is very much the same as for LAAs. The targets are voluntarily agreed by the partners and the local authorities. They then enter that process of negotiation, which he will understand, having been involved in an Essex LAA. There is a process of mediation and negotiation with government offices, and they are necessarily signed off by the Secretary of State. However, the process is more focused because, in the MAAs, there may be fewer targets than in LAAs generally. Again, if the noble Lord would benefit from my explaining the process in more detail, I would be happy to do so, and to share some of our examples of the sorts of protocols and agreements on flexibilities and so on that are sought.
I join in the general expressions of good will, and start by thanking the Minister for reminding me of my Methodist upbringing as well. I shall try to resist the temptation to stray into a debate on the nature of socialism. I merely recognise that it is possibly the first time that that word has been used in this place for a number of years. In my Methodist upbringing, all the Methodists I knew were Liberals, and that was in the days when it was all right to call yourself a socialist.
That was a very large group of amendments. We have covered a lot of ground—indeed, a whole Part of the Bill—and have all expressed at least general support for multi-area agreements. I think that the Minister herself said that she would need to read Hansard to know and understand what she had or had not said. That certainly applies to the rest of us. I thank her very much for her full reply to those amendments. I shall certainly read Hansard carefully. Even more importantly, my absent friend Lady Hamwee will read it especially carefully. We will consider what we may wish to do further at a later stage.
In the mean time, I join in the general thanks to the Minister and the noble Lord, Lord Patel, for their patience and tolerance throughout our consideration of the Bill. If there have been occasional moments of irritation on the part of the Minister, we on this side of the Committee simply put that down to the recognition that we were right and that that part of the Bill was clearly wrong. It is understandable that anyone would feel irritated at being put in that position. With that, I beg leave to withdraw the amendment.
Amendment 197B withdrawn.
Amendment 197C not moved.
Clause 116 agreed.
Clause 117 : Local authorities
Amendment 197D not moved.
Clause 117 agreed.
Clause 118 : Partner authorities
Amendments 198 and 198A not moved.
Clause 118 agreed.
Clause 119 : Proposal for multi-area agreement
Amendments 198B to 198D not moved.
Clause 119 agreed.
Clause 120 : Direction to prepare and submit draft multi-area agreement
Amendments 198E to 198H not moved.
Clause 120 agreed.
Clause 121 : Preparation of draft multi-area agreement
Amendments 198J and 198K not moved.
Clause 121 agreed.
Clauses 122 to 124 agreed.
Clause 125 : Duty to have regard to improvement targets
Amendments 199 and 200 not moved.
Clause 125 agreed.
Clauses 126 and 127 agreed.
Clause 128 : Preparation of revision proposal
Amendment 201 not moved.
Clause 128 agreed.
Clauses 129 to 131 agreed.
Clause 132 : Interpretation
Amendment 202 had been withdrawn from the Marshalled List.
Clause 132 agreed.
Clause 133 : Requirement for construction contracts to be in writing
Amendment 203 had been withdrawn from the Marshalled List.
203A: Clause 133, page 75, line 21, leave out subsection (2)
We come to Part 8. Some of us would have liked to have reached this point a little earlier, but this is the eighth day in Committee, so there is a certain symmetry to reaching Part 8. Part 8 is a discrete part of the Bill; it does not have a great deal of connection with all the parts of the Bill that we have dealt with so far. I make no complaint about that because if Her Majesty’s Government think, as they surely do, that some improvements can be made to the Housing Grants, Construction and Regeneration Act 1996, this is a convenient vehicle and that is fine with me. Indeed, I take the view, as my noble friend the Minister will appreciate, that Part 8 can be improved further by my amendments to what I will now call the construction Act 1996. My noble friend the Minister will be aware that behind these amendments lies a great deal of skill and energy of the Specialist Engineering Contractors’ Group, which is really an umbrella body for a number of significant trade associations in the construction industry, which comprises some 60,000 firms in total.
The 1996 Act has been very helpful for the construction industry. It introduced a right of adjudication as a speedy and inexpensive method of resolving disputes, ostensibly on a temporary basis, but in many cases provided a sticking and more lasting settlement. Unfortunately, over the 10 years since then, bespoke procedures have commonly been inserted in construction contracts. Apart from the minimum of eight adjudication requirements set out in the statute, contract procedures can prevail.
Freedom of contract is a fine concept, which is especially valid when parties to the contract are of similar bargaining strengths and each is advised by a lawyer who is well able to seek their way through every aspect of the contract. However, in the construction industry, most smaller and medium-sized enterprises, including subcontractors, do not have that facility. Fairness between all parties—major contractors, subcontractors, SMEs in their thousands—suggests that the statutory scheme of adjudication, which the 1996 Act introduced, should be a mandatory, self-contained scheme that cannot be overridden by contractual provisions that diverge from the scheme.
The Government have recognised that bespoke adjudication procedures, devised no doubt by major contractors on a take-it-or-leave-it basis for other contracting parties, can result in abuse. For example, it has been decided that the Bill in Clause 135 should ban any clause requiring the party referring a dispute to adjudication to pay the other side’s legal costs, even when the decision is in his favour. We are hardly likely to have the convenient vehicle of primary legislation frequently enough—every year or two—to cope with some of the other abuses that may arise.
Surely it would be better to have a standard procedure as provided by the principal amendment in this group, Amendment 204A. Greater fairness and clarity would be achieved. I understand that that small but vital member of the Commonwealth, New Zealand, has introduced construction contracts whereby all are subject to adjudication procedure. Perhaps we should follow that, as we have done in other matters, such as the parliamentary ombudsman scheme which we are now so proud of. We may not even remember that it originated from somewhere else in the Commonwealth.
My other amendments in this group are consequential on that basic proposition of having one mandatory adjudication scheme. One of the amendments bans contractual provisions that require a party to provide security for any costs incurred by the other party. That is similar to the provision in Clause 135 that the Government themselves are dealing with, and disallows provision for costs made after giving notice of intention to go to adjudication. That is because allocation of costs is inappropriate to an adjudication system where there are no winners or losers. In any case, a clause enabling people to give notice after they intend to go to adjudication providing for costs could easily be abused.
One final aspect of this collection of amendments is in proposed new Section 108(6), which enables easy enforcement of debts irrespective of counterclaims, as is the case where a cheque is dishonoured. The cheque must be paid, irrespective of some counterclaim that it is feasible someone may have. I have argued the main point of the amendments. I beg to move.
I shall speak to Amendment 204B, which stands in the name of my noble friend Lady Hamwee. The amendment has been suggested by the Royal Institution of Chartered Surveyors to remedy what it sees as some unintended consequences in Clause 135. The purpose of that clause is to eliminate what have been known as the Bridgeway v Tolent clauses in construction contracts. The clauses made the referring party responsible for all costs of the adjudication, including the legal costs of the other side, regardless of the merits of the case. This was thought to be a disincentive to using adjudication to resolve disputes.
Clause 135 introduces a new Section 108A into the Housing Grants, Construction and Regeneration Act 1996. It is maintained that the Bill will make void the allocation of fees and expenses between parties as contained in current standard contract forms. Unless the parties reach an agreement after the notice of intention to refer the dispute, the adjudicator will no longer be able to allocate fees and expenses between the parties.
The amendment would remedy that situation. Without the amendment, the mischief of the Bridgeway v Tolent clauses will prevail, and there will be an absence of agreement on costs in proposed new Section 108(2). Without the default provision in the amendment, the referring party will have to pay the adjudicator’s fees and expenses, even if it has won. These costs are a significant consideration, particularly to small and medium-sized enterprises, and they will have to be met from the principal sum claimed, thus discounting a sum of money to which the referring party had entitlement.
The noble Lord, in moving his amendment, referred to the 1996 Act, from which these proposals arise as a review. He also pointed out the Specialist Engineering Contractors’ Group, described it and said that it was the motivator behind the amendments. It has to be said, both in 1996 and since, that there has continued to be widespread consultation within the construction industry. While it is true that the amendments have the support of one of the organisations in that industry, it is equally true that when the review commenced there were a number of organisations that thought that an amendment was not required, and they were rather larger in number.
Equally, others have made their view known subsequently, having seen how far the Government have got in their review, that they do not wish the issue to be taken further. They have indicated reluctance to see the Government take matters further as set out in the amendments. I offer that not as a representative view of government policy, but simply to point out that we move on the basis of consultation and responses, and there has been quite widespread consultation. The responses are not universal, as noble Lords might expect, but there is substantial support for some parts of the Government’s proposals rather than others.
The noble Lord is concerned that the Government’s proposals to revise the adjudication provisions of 1996 do not go far enough. He would like to see the introduction of a single statutory scheme that applies to all the commercial arrangements covered by the 1996 Act. That Act intentionally covers a wide range of contracts between a number of organisations in the construction supply chain. It applies to the main contractor’s contract with the subcontractor—that is the one we tend to hear about a lot, and we have heard something about it today. It equally applies to a construction client’s contract with the main contractor or with his architect, just as it can apply to a sub-contractor’s contract with a further sub-contractor to that body.
Whatever we introduce must work in a fairly broad range of commercial relationships. Therefore, it will have to command the respect of a wide part of the industry. Following extensive consultation, we have introduced provisions elsewhere to deal with the key issues that have come to light in the decade or so since the operation of the 1996 Act—the application of the Act to oral and partly oral contracts being precisely such a point. Given that, I continue to believe that the flexible approach is the right approach; it strikes a sensible balance and is the approach most able to cope with a broad range of commercial relationships.
SMEs exist in large numbers throughout the construction supply industry as the noble Lord indicated. ONS data show that some 99.9 per cent of firms in the construction contracting sector are SMEs. The Bill directly addresses the interest of the broad range of SMEs in the construction supply chain.
We will be moving on to payment issues, but in terms of adjudication we are taking specific measures to address the key issues which have been raised with us by the industry during our review. The first is the ability of a party with greater clout to use the costs of the adjudication process as a barrier by, for example, requiring that the weaker party pays all the costs of the adjudication, irrespective of where they arise. We have prevented the use of such clauses.
The second concerns the problems caused by the current requirement that all the non-trivial terms of the contract have to be in writing for the 1996 Act to be in place. We are removing that restriction. Given those changes, Introducing a single statutory adjudication scheme would be something of a legislative sledgehammer to crack a nut. Having said that, there is support—and it is perhaps wider than we have heard it voiced today, but not universal—for the introduction of a single scheme for adjudication. That would not be unreasonable. Therefore, we have made an offer to the industry that we will conduct a thorough review of the existing adjudication scheme set out in secondary legislation when we make amendments to this secondary legislation as a consequence of the changes we are making to the 1996 Act.
The Construction Umbrella Bodies Adjudication Task Group, comprising representatives from all the key sectors of the industry, is meeting this month to decide whether or how to take forward this approach. That shows the Government’s desire to meet the broad wishes of the industry to be flexible and not to set our face against the proposal, but on this occasion to seek to ensure that that proposal carries rather greater support than it has in the discussions so far. Therefore, we must resist the amendment.
I declare an interest as president of the Specialist Engineering Contractors’ Group. My noble friend laid great stress on the concept of consensus across the industry. He also pointed out that 99.9 per cent of the businesses involved in the construction industry are SMEs. I get the impression that a number of organisations comprise a relatively small part of the industry compared with the number of SMEs—the people who have not been properly looked after in this respect. What does he mean by consensus? Is it the agreement of a group of trade associations or the majority of businesses in an industry? At the moment, I get the impression that a number of small trade associations are quite well represented in terms of their influence in the industry, but the businesses affected, the SMEs, constitute a far bigger majority but have only one umbrella organisation looking after them. Therefore, the consensus is not well defined.
In my international experience, “consensus” is not well defined. In the United Nations, where I spent a number of years, consensus was described as the point at which no one changes their opinion but recognises that they have agreed as far as possible. That became the consensus. The truth is that there will always be contrary views.
As I have said, 99 per cent of the companies in the industry are SMEs. That is about 250,000 firms. With all due respect to the noble Lord, I understood him to say that the SEC Group represents some 60,000 firms. Sixty thousand into 250,000 suggests that there are one or two other groups outside that area, so we would look at more than those companies. I mentioned that several organisations have commented and given the Government the benefit of their views which, as I said, did not always conform by any means with the views of the SEC Group. They included the National Specialist Contractors Council, the Construction Clients’ Group, the Federation of Master Builders, the British Property Federation, the National Federation of Builders, the UK Contractors Group and the Civil Engineering Contractors Association. There is a very broad group, which is why the Government, having held that consultation, and given that the contracts cover many of the participants from those organisations, are of the view that resisting the amendments at this stage is the correct course of action, and I ask the noble Lord to withdraw his amendment.
I am sorry that my noble friend has taken that view particularly strongly in the last few moments. When I made the point that the Bill was very welcome in that it banned clauses that tried to allocate responsibility for legal costs when there was no fault on the part of that party, I mentioned other similar clauses that typically existed and asked how they were to be dealt with except by some future legislation, which I suggested was unlikely to be just a year or two off and was much more likely to be at least a decade away. Unfortunately, the Minister has left it at that.
As far as I understood the Minister, he has not indicated much, if any, support for the notion that a standard scheme for all could be devised with fairness for all in mind and that that would be much better than trying to deal ad hoc with abuses, as and when they arise, some of which cannot be foreseen by him, by me or by anyone else. It is a pity that he has taken that view. Of course I must consider fully at this stage what he has been saying, and withdraw my amendment.
I shall respond to the noble Lord on the question of cost allocation, which he discussed in the latter part of his contribution. As well as trying to prohibit all adjudication costs, the noble Lord’s proposed new Section 108 seeks to prohibit any provision requiring a party to provide security for the other party’s adjudication costs. In our view, this extra limb is simply not necessary, as such a provision would be an agreement on the allocation of costs and should already be caught. In any case, such a provision cannot exist in the absence of an agreement on the allocation of costs. I am sorry if my robust response seemed to be too robust, but I made the point, which I repeat, that the matter is to be discussed at the Construction Umbrella Bodies Adjudication Task Group meeting this month. The Government wait to see whether there will be consensus, or whatever other collective noun the noble Lord wants to use, at that meeting to ask the Government to review this matter further. So the matter is not absolutely closed.
The noble Lord reminded me of the amendment tabled by the noble Baroness, Lady Hamwee, which I have not addressed. I shall now do so. The noble Baroness is concerned that, in the absence of a cost-sharing agreement, not allowing the adjudicator to recover his costs from both parties will act as a disincentive to adjudication. At the moment, the referring party may be disinclined to refer a dispute to adjudication, as he alone would be responsible for the costs. Likewise, there may be some reluctance on the part of the adjudicator to proceed if he is concerned that he may not get paid because he cannot look to both parties for payment.
The noble Baroness would like to introduce an amendment that provided for the adjudicator to award his costs where the parties have not addressed the issue in a valid agreement: in other words, where they have not entered into an agreement after a dispute has arisen about costs. Interestingly, the draft Bill that the Government published in June 2008 contained a provision broadly similar to that now proposed. However, it was overwhelmingly rejected by the industry because, among other reasons, it was complicated. We found that the original provision had to address other issues beyond the narrow cost-awarding power and, in doing so, it became necessarily complicated. Given the scale of this rejection by stakeholders, the Government decided to keep the policy simple and transparent.
I therefore resist the noble Baroness’s amendment. However, we accept that it is current industry custom and practice for the adjudicator to award his fees and expenses and we will write to the noble Baroness to see if we can identify a way forward. I hope that, with that, the noble Lord will withdraw his amendment.
I thank the Minister for that reply. I do not have to withdraw my amendment, as I have not formally moved it. Can the Minister give some indication of when we may expect to receive that letter? I ask because we will now, of course, be considering possible amendments on Report. It is clearly in everybody’s interests that we know what the Minister has to say while there is still time to consider what action people may wish to take on Report.
Amendment 203A withdrawn.
Clause 133 agreed.
Clause 134 : Adjudicator’s power to make corrections
Amendment 204 had been withdrawn from the Marshalled List.
Amendment 204A not moved.
Clause 134 agreed.
Clause 135 : Adjudication costs
Amendment 204B not moved.
Clause 135 agreed.
Clause 136 : Determination of payments due
Amendment 205 had been withdrawn from the Marshalled List.
205A: Clause 136, page 76, line 16, at end insert “, and
(c) any entitlement, the issue of any certificate, notice or decision, or on the occurrence of any event under another contract”
I shall also speak to the other amendments in this group, which are all concerned with payment procedures. It is commonly understood in the construction industry that many small firms suffer through poor payment practices. SMEs are mainly, of course, the subcontractors in the supply chain; they are the heating and electrical contractors, the plumbers, glaziers and others. One hardly needs a crystal ball to assert that, at a time of recession like this, SMEs are at greater risk than ever, whether in this industry or otherwise.
My amendments to Clauses 137 and 138 would simplify the whole procedure. That in itself would be a great boon to small enterprises which do not have ranks of advisers to support them. It would make the procedure fairer to all parties, and there would be less bureaucracy by enabling the payee—the person who has been doing the work and supplying the goods—and only the payee to issue the initial payment notice. This is, after all, what other industries do. The payer does not give the initial payment request. As I understand it, and I hope that this conforms with the advice given to the Minister, well known organisations such as the Chartered Institute of Building and the Royal Institution of Chartered Surveyors also take this view that the payee and only the payee should issue the initial payment requirement.
If the payer, as the Government propose as an alternative, is the most likely person to give the initial notice, a challenge to that payment request could be made only by going to adjudication. Of course, under the scheme proposed by my amendments, when the payee issues the initial invoice, as it were, on the payment due, the payer may wish to challenge that. He may wish to say, “This is not what was agreed”, “The work has not been done properly” or, “The goods delivered are defective”. The payer, as the Bill allows, may also wish to issue a notice to pay less than the notified sum.
However, we say in these amendments that it is sensible to impose some kind of limit and that the payer’s notice that the payment should be less than the amount notified must be issued not later than 14 days after the payment due date. Without such a limit, which Clause 138 does not require, SMEs would find it difficult to manage their cash flow effectively, because the payer could issue a notice of reduced payment at the last moment before the final date for payment. I beg to move.
The noble Lord has characterised the payment framework set out in the Bill as being ineffective by not improving the lot of SMEs in the construction supply chain. As with adjudication, he is concerned that the Bill does not go far enough. I have to repeat that there has been wide consultation, and there has not been a consensus among every organisation offering views. On this issue, perhaps the SEC Group finds itself in a smaller minority than on the adjudication issues.
As we said earlier, 99 per cent of firms in construction are SMEs. The main contractor is not always a large firm and the subcontractor is not always a small firm. The legislation will be effective in improving cash flow for SMEs in all sectors of the construction industry. The noble Lord’s amendments suggest two main changes to statutory payment. They create a position whereby only a payee can issue the statutory payment notice and introduce a statutory period within which a notice amending that amount can be revised.
The position under the 1996 Act is that only the payer may issue the statutory payment notice. This Bill removes that restriction and allows the payer, the payee or a third party—for example, an architect working for a customer—to issue the notice. We leave it for the parties to agree in contract who should issue the notice. The reason for doing this is to be permissive by allowing a broad range of commercial practices to continue unburdened by legislation. We do not prevent the payee-led process suggested by the noble Lord—far from it; we are expressly allowing it. However, in addition we are allowing others to use processes which reflect their own commercial logic should they see fit.
The second main change which the noble Lord seeks is the introduction of a statutory period within which a notice amending the amount in the payment notice may be revised. His amendment suggests that this should be within nine days of the issue of the payment notice. The Bill leaves the timing of this notice as a matter for contract. I will put freedom-of-contract considerations to one side and set out why I believe that the practical effect of such an amendment may be detrimental—indeed, it would be detrimental. Introducing a statutory period within which a sum due can be revised would have the following effects as people sought to protect their own cash flow situation by ensuring they did not overpay. People would simply extend payment periods to take account of the time taken away from them by statutory intervention. They can also be extremely conservative in their valuation of work undertaken.
While this intervention may provide the payee with greater certainty of what will arrive in his or her bank account on the final date for payment, it will do so at the expense of extending payment periods and reducing the amount of cash which is actually flowing. The objective of the review of the Construction Act which was announced in the 2004 Budget was to identify what improvements could be made to prevent unreasonable delays in payment. These amendments would have the direct effect of actually increasing delays in payment.
The noble Lord raised complexity and the search for a simpler system. Legislation needs to be crafted to incorporate a number of possible scenarios, but the underlying process is a simple one. A payment notice is served, setting out the sum considered to be due; that sum can be revised; and the sum becomes payable. This underlying process will be incorporated into contracts. Contracts will clearly set out who is responsible for issuing the payment notice. I cannot see any complexity in that.
Again, the Government are trying to come forward with improvements that are appreciated across the industry. I entirely agree with the noble Lord that the industry is in difficulty in the present economic circumstances, although not uniquely so. I hope, in the light of my response, that the noble Lord will feel able to withdraw the amendment.
I do not find the Minister’s answers entirely satisfactory. He used the word “permissive”. I felt that the provision in the Bill is too permissive in allowing the payer, the payee or somebody else to issue a notice. Of course, I will look at Hansard carefully to see what the Minister has said, but I did not hear an explanation as to why construction should be different from every other industry and profession, where bills are sent out by the person who has done the work or supplied the goods. That simplicity seems to be lacking in the Government’s scheme. However, as I say, I must look at Hansard carefully. In the mean time, I beg leave to withdraw the amendment.
Amendment 205A withdrawn.
Clause 136 agreed.
Amendment 206 had been withdrawn from the Marshalled List.
206A: After Clause 136, insert the following new Clause—
“Conditional payment provisions: insolvency of a third party payer
In the Housing Grants, Construction and Regeneration Act 1996 (c. 53) in section 113 (prohibition of conditional payment provisions), omit the following—
(a) in subsection (1), “unless the third person, or any other person payment by whom is under the contract (directly or indirectly) a condition of payment by that third person, is insolvent”,(b) subsection (2),(c) subsection (3),(d) subsection (4), and(e) subsection (5).”
There are only two amendments in this group. They have insolvency in common, but they are actually quite different. I am not complaining about the grouping, but I must deal with them separately.
First, on Amendment 217A, SMEs are concerned—especially, I repeat, in difficult economic times like these—that perhaps considerable sums, or sums which mean a lot to them and that they are due, may be left owing to them if the payer goes into insolvency. In this new clause, firms would have a right to request adequate security for payment. Failure to provide such would give the payee the right to suspend performance of his contract. In other words, this would give a pre-emptive strike to, let us say, a subcontractor who, for some reason, is anxious to ensure that he will be paid for the work done and is seeking security to that end.
Amendment 206A deals with an entirely different problem of insolvency. Generally, the 1996 Act outlawed any arrangements by which the paying party, usually the main contractor, makes payment conditional on receipt of payment from somebody else—some other player upstream. Unfortunately, the 1996 Act continues to allow a contractor to refuse payment to his supply chain if money was not forthcoming because of a client’s insolvency. Amendment 206A would end that. My view is simple. I ask the Minister whether he agrees or disagrees with the statement that a contractor should not be allowed to refuse payment for work that has been properly done just because there is insolvency up the line and the contractor will not be paid by the client. Most respondents to the Government’s consultation on this in 2005 favoured what I propose in Amendment 206A. I beg to move.
The noble Lord seeks in both his amendments to protect firms from the effects of insolvency elsewhere in the supply chain. This is a laudable aim, but in seeking to provide this protection for some we must be sure that we do not disadvantage other businesses, be they in construction or other industries. We accept that the construction sector faces difficulties, but it is not alone in that. Other sectors are in the same position.
On the point that he makes about the 1996 Act and the reflected view that he now suggests requires us to make these changes, we have consulted the industry extensively on whether there is a better solution than the compromise we currently have in the 1996 Act that would deliver a fairer result for all. There is no clear evidence that the removal of the current insolvency exception will achieve this, so the Government’s view is that the only sensible option is to maintain the status quo.
Amendment 217A raises the question of the impact of insolvency which we believe has to be seen on a broader front rather than a narrow one. We therefore have difficulty with the proposal. Both the amendments impact on insolvency. He suggests that we delete the insolvency exception to the prohibition of the so-called “pay-when-paid” clause. Let us be clear that that insolvency exception was a significant part of the compromise that marked the introduction of the 1996 Act. The construction industry is unique in that pay-when-paid clauses are prohibited by statute. The exception is there for good reason. It is to continue to allow construction firms the same protection from the risks of insolvency as businesses in other industries. We need to maintain a level playing field across business sectors.
Further, the noble Lord suggests that after Clause 139 we introduce an amendment which provides a statutory right for a firm in a construction supply chain to receive adequate security in respect of the contract. Where no security is forthcoming, he suggests that the payee may suspend performance until it is. In such a case, the payer will have to pay the payee an additional sum reflecting the extra costs which the payee incurs in stopping work. That is a situation that appears to be uncomfortably close to double jeopardy.
It is, of course, open to that firm to request such a guarantee during the normal course of business. By making it a statutory right, we would again be creating an uneven playing field between firms in the construction industry and businesses in other industries who have no such statutory right. The practical effect in the case of insolvency is that non-construction creditors could be severely prejudiced and as unsecured creditors there would be fewer assets left to satisfy their claims. Although we share the desire of the noble Lord and those in the industry to look for a fairer solution than the one that we currently have in the extensive consultation neither a better solution nor a consensus to adopt a solution similar to that set out in the noble Lord’s amendment was forthcoming. On that basis, I ask him to withdraw the amendment.
I do not find my noble friend’s answers entirely satisfactory because he does not seem to have taken account of what is happening in other countries—in North America, Australia and other parts of Europe. I will read what he has said with care, but I felt that his answer to my Amendment 217A was not satisfactory.
Amendment 206A withdrawn.
Clause 137 : Notices relating to payment
Amendment 207 had been withdrawn from the Marshalled List.
Amendment 207A not moved.
Amendment 208 had been withdrawn from the Marshalled List.
Amendment 208A not moved.
Amendment 209 had been withdrawn from the Marshalled List.
Amendment 209A not moved.
Amendment 210 had been withdrawn from the Marshalled List.
Amendment 210A not moved.
Clause 137 agreed.
Clause 138 : Requirement to pay notified sum
Amendment 211 had been withdrawn from the Marshalled List.
Amendment 211A not moved.
Amendment 212 had been withdrawn from the Marshalled List.
Amendment 212A not moved.
Amendment 213 had been withdrawn from the Marshalled List.
Amendment 213A not moved.
Amendment 214 had been withdrawn from the Marshalled List.
Amendment 214A not moved.
Amendment 215 had been withdrawn from the Marshalled List.
Amendment 215A not moved.
Amendment 216 had been withdrawn from the Marshalled List.
Amendment 216A not moved.
Clause 138 agreed.
Clause 139 agreed.
Amendment 217 had been withdrawn from the Marshalled List.
Amendment 217A not moved.
Clause 140 agreed.
Schedule 7 agreed.
Clause 141 agreed.
Clause 142 : Commencement: general
218: Clause 142, page 80, line 41, at end insert—
“(d) sections (Local freedoms) and (Honorary titles) (local freedoms and honorary titles) come into force at the end of the period of two months beginning with the day on which this Act is passed.”
This was part of a series of amendments arising from a schedule that I was pleased to speak to at the time. To refresh the memory of the Committee, they dealt with the Guild of Freemen and the rights, especially of women, to succeed to membership of local guilds. They also dealt with the important question of the honorary freedom given to individuals. I was delighted then, and I repeat my thanks to the Minister and her colleagues for being so helpful, understanding and supportive of this matter. I am sure that the amendment will improve the situation of local democracy—which is what it is all about—in the way that we want. Therefore, it gives me great pleasure to move the amendment.
I intervene only momentarily and not to reopen the excellent debate that we had on Tuesday 3 February, to which the noble Lord, Lord Graham of Edmonton, just referred. It was an admirable debate and, very properly, the noble Lord expressed his pleasure and thanks to the noble Baroness, Lady Andrews. It would have been perfectly in order, since we are in Committee, for me to have intervened and expressed my thanks to her at that stage, but it always seemed to me to be a trifle impolite to intervene after the noble Lord—in this case the noble Lord, Lord Graham of Edmonton—had thanked her, having moved the lead amendment.
I seek now to express my warm thanks to the Minister. She indicated towards the end of the debate on 3 February that she was prepared to accept all the amendments tabled by the noble Lord, Lord Graham of Edmonton, all of which I also supported. I thank the Minister for having accepted those amendments. As will have been clear from what the noble Lord, Lord Graham of Edmonton, said, they have given great pleasure to very many people; not least people in the Cinque Ports, whose right to create honorary freemen had been taken away. That right will now be restored through this legislation when it is passed.
The noble Baroness, Lady Andrews, indicated several times over the past two years that if a suitable legislative opportunity arose, she would support the proposals, helping, among others, the people in the Cinque Ports. She has been as good as her word, and I thank her for that. I also ask her to pass on warm thanks to her officials, both in her private office and elsewhere in her department. Will she also pass on thanks to her lawyers, who have been of great assistance in preparing for these matters? As a lawyer, I have noticed that we do not very often get many thanks, so it gives me very great pleasure to offer thanks to her lawyers. In court, I found it appropriate on one or two occasions to thank my opponents; but I did not find it possible to thank them all. I thank the lawyers for the advice that they have given the noble Baroness.
Noble Lords have been extremely generous, and I will certainly pass on the thanks of both noble Lords for the exceptional work of the policy officials and the lawyers. Noble Lords will appreciate that it was quite a challenge to look at the legislation and to make sense of it in the way that was needed. I am very pleased that we were able to do so. I pay tribute to the persistence and the assiduity of the noble Lords in question. It has been a long journey, but I am so pleased that we have made it in this Bill.
Amendment 218 agreed.
Clause 142, as amended, agreed.
Clauses 143 and 144 agreed.
In the Title:
219: In the Title, line 3, after “tenants;” insert “to make provision about local freedoms and honorary titles;”
Amendment 219 agreed.
Title, as amended, agreed.
Bill reported with amendments.
Committee adjourned at 6.30 pm.