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Lords Chamber

Volume 709: debated on Wednesday 22 April 2009

House of Lords

Wednesday, 22 April 2009.

Prayers—read by the Lord Bishop of Ely.

Economy: Quantitative Easing

Question

Asked By

To ask Her Majesty’s Government what discussions they have had with the Governor of the Bank of England on the effectiveness of quantitative easing.

My Lords, the Chancellor of the Exchequer and the Governor of the Bank of England discussed the use of the asset purchase facility for monetary policy purposes at a meeting on 5 February. The Chancellor stated this fact in his open letter to the governor on 3 March. Since then, the Chancellor has continued to have regular meetings with the governor to discuss a wide range of issues.

My Lords, I thank my noble friend, but does he accept that in current economic circumstances quantitative easing is likely to have an even greater impact on the economy than some of the helpful measures in the Budget? Does he agree that something like one-third of the amount initially said to be going out in quantitative easing—namely, £75 billion—has been spent so far? Is there a danger that the Governor of the Bank of England is being rather slow in handling this matter, or is it simply that the methods that he has chosen are not suitable? In the circumstances, it is urgent for industry and the banks that this is done well and properly in terms of amounts and the method of doing it. I hope that the Minister can assure us that it is not the governor who decides this but the Government.

My Lords, I welcome my noble friend’s support for the Budget measures announced earlier today in the other place. Those measures complement the monetary policy that is being pursued, of which quantitative easing is now an important part in the context of low interest rates where the price of money can no longer be as effective in determining money nominal demand as was the case when interest rates were higher—hence the Bank of England, through the Monetary Policy Committee, is now also targeting the quantity of available money through the creation of central bank reserves in a non-sterilised fashion. It will take time to determine whether this works, as the governor has always said that it would, which is why he is phasing this in over time, with a target of £75 billion over a three-month period. We are seeing some very positive benefits. We have seen long gilt yields fall to low levels. We have seen a tightening of credit spreads. We have seen a reduction of LIBOR and an increased appetite on the part of banks to extend credit. The early signs of quantitative easing are encouraging but, by its very nature, it is a strategy that it is hard to measure over a very short period.

My Lords, does the Minister agree that it is crucial to distinguish between interest rate policy concerned with the price of money and monetary policy concerned with the supply of money? For the past 10 years, we have had only the policy from the Bank of England that is concerned with very short-term interest rates. The change to concern with the supply of money is welcome, but is it not the case—the noble Lord will correct me if I am wrong—that in the whole of this massive document there is no attempt to forecast what is going to happen to the supply of money? This is crucial if we are to understand what is happening in the economy.

My Lords, what is crucial is that the conduct of monetary policy continues to be focused on managing inflation to a 2 per cent target, which was restated by my right honourable friend in the other place in the Budget speech earlier today, and that the control of monetary policy and the achievement of that inflation goal lies in the hands of the MPC. It was the MPC that advised the Government that the limitations of interest rate movements in affecting money aggregate demand were severely diminished by the fact that interest rates are now at a level that we have not seen for 350 years, as a result of which the MPC had to reach out for what the governor described as unconventional methods—that is to say, quantitative easing. I should add that we are not alone in this; the Swiss are engaging in quantitative easing and the Americans are engaged in both quantitative and qualitative easing.

My Lords, the Minister said that there are positive benefits to this policy and that the Government envisage that £75 billion will be created over three months. Now that we are some way into the three months, have the Government yet formed a view about what might happen at the end of the period? Will the £75 billion be it, or might we see another £75 billion or £50 billion in the succeeding three months?

My Lords, this is a matter on which we will take advice from the Monetary Policy Committee and the governor.

My Lords, while I support the principle, in theory at least, of quantitative easing, I agree with what my noble friend Lord Higgins said. Is not an inflation target the end, while money is the means by which the inflation target is achieved? Is it not therefore regrettable that, when the Government restated the inflation target when it gave the Bank of England independence, they abolished all monitoring ranges for money, because money is actually how you determine inflation?

My Lords, the belief that money measurement is the key to economic management was much more strongly held in the 1970s and 1980s than it is now. Let us remember that since the Government gave the Monetary Policy Committee responsibility for targeting inflation and setting interest rates, we have had a truly extraordinary period of continuing low inflation. It is to the credit of the mechanism and the Bank of England that that has been achieved without a lot of gobbledegook about different forms of monetary measurement.

My Lords, the Minister told the House that it is the Government’s policy fully to fund their borrowing requirement and for the monetary authorities, if they think fit, to inject liquidity into the economy by buying back gilts. Would it be practicable in the converse situation for the monetary authorities to overfund the Government’s borrowing requirement, as may be necessary before too long?

My Lords, that is a possibility, but it is not under contemplation at all in economic management at the moment. It will clearly be necessary at some point in the future to reverse the impact of quantitative easing, which we will do through increases in interest rates, allowing existing bonds to mature and selling stock from the APF back into the marketplace.

Unemployment

Question

Asked By

To ask Her Majesty’s Government what is the latest quarterly figure for total unemployment in the United Kingdom; and what is the latest monthly total number of claimants of unemployment benefit.

My Lords, those figures in fact conceal considerable increases of 177,000 in the quarterly figure from the previous quarter and 73,700 in claimant numbers at the end of March as opposed to February. Does the Minister believe that we can expect similar increases over the months to come—say, the next 18 months—as many people expect in spite of whatever the Government may do, or does he believe that the recession will be short-lived and that the green shoots are already sprouting or are about to sprout?

My Lords, I say at the start that I do not think that the Answer was meant to conceal any figures. It was meant to be a direct response to the Question. The data are in the public domain and are published by the Office for National Statistics. We know that these are tough times and that these figures are challenging. We are very clear about that. I think that today my right honourable friend the Chancellor of the Exchequer said that, although his projection is that the economy will begin to turn up at the end of the year, unemployment is unlikely to come down within that timeframe but will increase for some while. We cannot stop people falling out of work; what we can do and are doing as a Government is to support people back into work as quickly as possible to ensure that we do not replicate the mistakes of the past where we had cycles of worklessness and the deprivation that that entailed.

My Lords, of course unemployment is very bad for the people who are experiencing it and we want to eradicate it, but can the Minister tell the House how many people are in the employment market today compared with 1997?

My Lords, indeed I can, as it happens. My noble friend makes a very important point about what has happened in the labour market. At the beginning of 2008, the claimant count was at its lowest level for 30 years and employment was at an historic high. Currently, 29.267 million people are in employment. In 1997, the figure was some 3 million lower and, going back to the recessions of the early 1990s, it was 4 million lower.

My Lords, we may not be able to see green shoots but we can certainly see a green plant on the Labour Back Benches. Did the Minister notice in the figures today the very chilling increase in the redundancies total? The number has more than doubled over the past year, with an increase of 40 per cent in the past quarter alone. In construction, there has been a fourfold rise in the figures. They are a very chilling forward indicator of unemployment. Can he draw these figures to the attention of any of his ministerial colleagues who might be in danger of suffering another embarrassing attack of green shoot-itis?

My Lords, the noble Lord is right to say that in the figures that were recently announced there was an increase in the number of redundancies. Again, I am sure that he heard the Budget speech earlier. With the extra support announced in the Budget today, the Chancellor is building on the support given to business in the Pre-Budget Report and what has flowed from that, and there are also the issues that my noble friend Lord Myners has just talked about. However, I remind the noble Lord that, despite the challenges of redundancy levels and the total claimant count, something like 10,000 jobs are still coming into Jobcentre Plus offices each working day and many more are arising. Although there were around 363,000 new claims for JSA, in the past month 275,000 people flowed off JSA, so it is a dynamic situation.

My Lords, does my noble friend agree that at a time of increasing and perhaps inevitably rising unemployment the key is to ensure that the right training schemes are available, particularly for the emerging new economy, and that the statements made today and at other times are very important in that respect? Perhaps we should also remind ourselves that one of the successes which is not referred to very often is that, both now and over the past few years, the unemployment rate in this country has been significantly lower than the rates for all our major European competitors? That shows the success of the economy as well. But training is the key.

My Lords, my noble friend is right about the data on our comparative position. I think that we have the second highest employment rate in the G7 and the second lowest unemployment rate. He is also absolutely right about the importance of training and support. It is why today’s Budget allocated an additional £1.7 billion to Jobcentre Plus, so that it can continue its strong programmes of support, plus a £1.2 billion package of support for young people between the ages of 18 and 24 who have been claiming jobseeker’s allowance for 12 months or more.

My Lords, in view of the fact that this morning the Chancellor forecast that the economy would, incredibly, grow by 3.5 per cent in 2011—in other words, at a faster rate of growth than at any time during the Brown boom years, before the Brown bust—when does the Minister expect unemployment to fall?

We do not, my Lords, and neither have previous Governments. However, we are in the business of ensuring that there is the infrastructure and capacity in the system to support people as they fall out of work, to prevent them falling out of work where we can by supporting the business community, and to help them get back into work as quickly as possible when they do fall out.

My Lords, in concluding this short exchange of views, perhaps my noble friend will bring some noble Lords opposite back to reality by reminding them where the unemployment crisis began. It began with the irresponsibility of the banks, the financial sector and the big six audit companies which took £600 million in fees for auditing the banks but between them could find nothing out of order to report. That is the cause of the current unemployment.

My Lords, my noble friend makes some interesting observations, particularly on auditing firms. He is quite right that the UK economy is suffering from what economies across the globe are suffering from. We know that that was generated in particular by a banking crisis and irresponsible actions. That is why my noble friend Lord Myners has said today and previously that it was very important for the banking system to be stabilised at a macro level so that the economy could expand as a result.

Graves

Question

Asked By

To ask Her Majesty’s Government what considerations led the Ministry of Justice not to proceed with the proposal to permit the re-use of graves.

My Lords, the Government announced in June 2007 that the case for re-using old graves had been accepted in principle. The matter is being kept under review.

My Lords, I thank the Minister for his reply, but this is a country where there are widespread conurbations and a shortage of green space. On 2 April the Parliamentary Under-Secretary of State wrote to the chairman of the Churches Funeral Group explaining that,

“after careful consideration, the Government has concluded that this is not the most appropriate time for taking these matters forward”.

Why, after eight years of discussion, is there a shortage of parliamentary time for legislation, or is there a more fundamental reason?

My Lords, this remains a sensitive issue; that should not be a surprise to the House. Research indicates that a good proportion of individuals when asked are concerned and doubtful about the issue. I hope that the right reverend Prelate and others in the House agree that on issues such as this, it is important to take people with you to try to achieve consensus—

My Lords, the noble Lord has said that the Government are keeping the position under review. What is there to review? What is likely to change? Does he not accept that people are likely to go on dying in London at roughly the same rate and that some of them will want to be buried in London? Why cannot the Government make the only sensible decision now?

My Lords, I need to tell the noble and learned Lord that in London they can. London local authorities, after the passing of the London Local Authorities Act 2007, can disturb existing remains in the grave to create space for new interments, provided that various qualifications are met: that they have complied with earlier Acts; that they have given notice of their intentions to the family—if the family says no, that is the end of the matter for a generation—where the remains are in consecrated ground, that they have obtained a faculty from the Consistory Court; and that the family does not object to the proposed disturbance of the remains. In London, that can happen now.

My Lords, if the Government can, after eight years, find a way to resolve that in London, why cannot they resolve it in the rest of the country, especially in the other big conurbations where there are similar problems?

My Lords, it was resolved in London by way of a Private Act. Other local authorities are absolutely entitled to bring Private Bills to Parliament and carry them through, so it is not a matter for the Government in that regard.

My Lords, from what he has said, I think that the Minister would agree that graves are not just a piece of ground but a place of pilgrimage for many people. I would be grateful if he could assure us that when this matter is reviewed, a mechanism will be in place to consult families for any such re-use of graves.

My Lords, I agree absolutely with the noble Lord. This is a sensitive issue that needs to be handled delicately. A possible scheme would require prior local consultation for a reasonable period. It would also have to give direct descendants and religious organisations the power to prevent the re-use of individual graves for at least a generation. What families feel is vital.

My Lords, forgive me for saying this, but has the Minister considered the medieval practice of burying people in shrouds? Medieval graveyards were used for 1,000 years and re-used without a problem. I will pay money to anyone who can produce a tombstone previous to about 1670 in a graveyard. Surely the public can be persuaded to follow the wisdom of their predecessors.

My Lords, I am sure that we can learn a lot from the Middle Ages, but I am not sure that we can in this regard.

My Lords, do the Government have a policy to support or even promote environmentally compatible burials outside traditional burial grounds or crematoria? If so, what form does that policy take?

My Lords, that is obviously a consideration. As the noble Lord knows, a case has been recently before the court that touches on the question that he raises. As I understand it, there is a reserved judgment from the Divisional Court. We would like to see the results of that case before commenting.

My Lords, could not one part of the solution to this problem be to persuade more people to be cremated? What is the Government’s policy in that regard?

My Lords, I do not agree with the noble Lord. How people deal with relations of theirs who have died should be their choice, frankly. If the Government were to interfere, they really would be a bullying Government. As the House knows, we are not that. I should tell the noble Lord that 70 per cent of people choose to have their relatives cremated at the moment, and about 30 per cent are buried.

Sri Lanka

Question

Asked By

To ask Her Majesty’s Government what measures they are taking with the international community to bring about a ceasefire in Sri Lanka.

My Lords, my right honourable friend the Prime Minister telephoned President Rajapaksa on 20 April to call for a renewed pause in fighting to allow civilians to leave. Since the UK first called for a ceasefire in January, the EU, the US, France and others have joined us in making similar calls. The Foreign Secretary and I remain actively engaged with our international counterparts and the United Nations in pressing for a renewed pause in the fighting.

My Lords, I thank the noble Lord for that reply. Surely the UN has a duty to protect trapped civilians in this kind of circumstance, so what more can be done to secure a ceasefire so that aid can be got in and people led to safety? Should not the alleged atrocities on both sides be subject to investigation under international humanitarian law? Unless these grievances are addressed in full, there will be no peace in Sri Lanka in the future.

My Lords, I certainly think that the UN is conscious of its responsibilities in this area. The Secretary-General dispatched his chief of staff to visit Colombo in recent days precisely to try to secure improved UN access to the civilians caught up in this fighting. Secondly, I completely agree with the noble Baroness that it is enormously important that this conflict, which has been taking place in the shadows due to the limited international presence, should be fully investigated and that, if war crimes have been committed, they should be identified.

My Lords, the Tamils are an ancient people and the conflict, which has ethnic as well as religious overtones, is not a modern one. Will the Government be as vociferous as possible in repudiating the language used by the President of Sri Lanka in describing this as a “war on terror”? Many people in this House and beyond regard that as a very unfortunate piece of modern jargon, coined by the former President of the USA.

My Lords, I share the view that “the war on terror” is a much abused and overused phrase. Obviously, this is a quarrel that has ancient roots. It is also an extremely violent quarrel, with appalling things being done by both sides.

My Lords, I declare a personal interest in Sri Lanka. Is it not most important that the leaders of the LTTE call not only for a ceasefire but for an immediate halt to all suicide bombings, in so far as that lies within their control? Secondly, will the Sri Lankan Government be encouraged in talks to construct a framework that will result in a degree of autonomy for the Tamil north and to ensure that Tamils will not be excluded from employment anywhere in Sri Lanka just because they are Tamils?

My Lords, my right honourable friend the Prime Minister spoke to President Rajapaksa on Monday and asked that there be humanitarian access and a pause in hostilities. He also asked that a cross-party UK delegation be allowed to visit and is dispatching a DfID Minister tomorrow to assess the humanitarian situation. As he said in another place today, the key to a solution is, as the noble Lord said, political. This conflict will not be ended by military means and it is extraordinarily important that, once this phase of conflict comes to an end, a comprehensive political framework is indeed put in place to ensure rights for Tamils and a degree of self-government of their own affairs.

My Lords, the Minister has referred to the conversation with President Rajapaksa twice. Just now he said that President Rajapaksa has invited an all-party parliamentary mission. Have any steps been taken to consult the leaders of the Opposition about putting together the mission so that it is ready to go when arrangements are made at that end? The Minister also mentioned the UN’s consciousness of its responsibilities. Now that 122,000 people have escaped from the no-fire zone, is it possible for UNICEF, the WHO and so on to gain access to those refugees? What steps are being taken at the UN to mobilise resources to deal with the crisis?

My Lords, the noble Lord rightly brings to our attention the immediate humanitarian situation. The events of the past few days have been hard for the UN humanitarian agencies on the ground in Sri Lanka to follow, as they have been for those of us much further away, but those events have been extraordinary, as the success of the Sri Lankan military in piercing the Tamil Tiger cordon around the civilians has led to a massive exodus of people. There is a dispute about exactly what numbers have exited and there are huge concerns about collateral damage to civilians, with potential violence by both sides. My right honourable friend Des Browne visited New York on Monday to lobby hard for a strengthened UN humanitarian and, if possible, Security Council response. As to the noble Lord’s first question, I spoke with both the Prime Minister and the Foreign Secretary this morning about what would be the appropriate arrangements to begin to identify such a cross-party delegation.

My Lords, the Minister cannot fail to be aware of the Tamils demonstrating outside these buildings. Does he agree that it is understandable that they are anxious about what is happening to their friends and relations whom they have left behind in Sri Lanka? Will he tell the House what Her Majesty’s Government are doing to inform the leaders of the demonstrations what the Government can do—there is not an awful lot except talk—and try to reassure them that we are doing our best?

My Lords, a potential human tragedy is unfolding outside the building at the moment. A young man is now in an advanced stage of a hunger strike and we are extremely concerned about his health. We have sought through the MPs who represent significant numbers of Tamils, including some of those outside at the moment, to communicate with them. We have intensive contacts with leaders of the Tamil community and we have tried to inform them both of what we are doing and of the situation on the ground, but in this situation the interpretation of events has become highly polarised and partisan, with fundamental disagreements about what is happening on the ground in Sri Lanka.

Industry and Exports (Financial Support) Bill

First Reading

The Bill was brought from the Commons, read a first time and ordered to be printed.

Perpetuities and Accumulations Bill [HL]

Motion to Refer to Second Reading Committee

Moved By

Motion agreed.

Disabled People (JCHR Report)

Motion to Refer to Grand Committee

Moved By

To move that the Report of the Joint Committee on Human Rights on the United Nations Convention on the Rights of Persons with Disabilities: Reservations and Interpretative Declaration (12th Report, HL Paper 70) be referred to a Grand Committee.

Motion agreed.

European Communities (Definition of Treaties) (United Nations Convention on the Rights of Persons with Disabilities) Order 2009

Motion to Refer to Grand Committee

Moved By

Motion agreed.

Business Rate Supplements Bill

Second Reading

Moved By

My Lords, over the past 10 years, we have seen the relationship between local and central government profoundly change. Long gone are the days of diktats to local government from Whitehall, and the past few years have seen a massive reduction of targets for local authorities and a recognition that they work most effectively when they work in partnership with local service providers, the third sector and business in doing what is right for their area.

We in central government have progressively provided local authorities with the tools they need to do what is right and appropriate for their local needs and aspirations and encouraged closer understanding and working with business and enterprise in strengthening the local economy and the local community. This Bill is another power for the local authority tool kit to build stronger foundations for the future.

It is a short Bill, but it is significant. During its passage through the Commons, I am delighted to say that it received extensive debate with three evidence sessions and six scrutiny sessions during its consideration in Public Bill Committee. It has been supported in principle, even where some of the detail has been challenged. I know that noble Lords will be delighted to hear that it reaches our House in pristine condition, unamended by either government or opposition amendment. What this means is that the other House has concluded that this Bill will work, which is something that we in this House always look for. It arrives with a degree of cross-party consensus that will not only create an effective mechanism to part fund the vital Crossrail funding package in London, but will also offer opportunities for economic initiatives in other parts of the country if local authorities and businesses together want to take ideas forward. I should stress that working together is what will take those new ideas forward.

What does the Bill do? It has been welcomed because it will provide a discretionary power for local authorities to use, in consultation with local partners, to promote the economic development of their area. The Bill strikes an important balance between providing true flexibility at the local level and reassurances and safeguards for those who may be liable to pay the supplement. The idea has an authoritative history and a distinguished pedigree of consultation. Perhaps I may take a moment to explain the background and how we came to legislate for such a power.

In March 2007, Sir Michael Lyons published his inquiry into local government and stated that,

“the purpose of local government is to take responsibility for the well-being of an area and the people living there, and to promote their interests in the future. In doing so, it should both reflect the distinctive identity and aspirations of the people and the area, and safeguard and promote their well-being and prosperity”.

A key part of this role is to support and encourage the economic development of the local area. The inquiry identified the need for local authorities to have a greater flexibility to raise revenue to invest in their local areas. In his final report, Sir Michael concluded and recommended that a new flexibility should be introduced for local authorities to set a supplement on the current national business rate.

The inquiry also recognised the success of business improvement districts as a way for local areas to raise funds and invest in projects supported by business. I know that BIDs have many fans around the House. However, it also noted that BIDs tend to be limited to tightly defined geographical areas and to deal with short-term and specific issues, and thus do not provide a mechanism for long-term development. As we will be discussing BIDs and BRS at different stages of the Bill, perhaps I should explain for the record that business improvement districts are small-scale agreements between local businesses, working together to raise funds to improve their area in ways such as improved security, street cleaning and the promotion of town centres. The framework for BIDs was set out in the Local Government Act 2003 and is another example of the evolution of the relationship between national and local government. BID schemes enjoy wide cross-party support across English local authorities and more than 70 are currently in operation, a quarter of which are in London.

The Bill builds on partnership and the practical success of BIDs and is in the same vein of local authorities and businesses working together to invest in the future economic development of their communities. However, BIDs are designed to do different things. They are typically local in design, whereas the business rate supplement will function at a different spatial level and enable local authorities to invest in larger scale, longer term projects. The Bill reflects those key differences.

We responded positively to the recommendations of Michael Lyons’s report through the Budget 2007.We stated that a local government supplement has the potential to support local economic development, but we also emphasised the need to provide safeguards: first, the need to build in credible accountability to ratepayers and real protections for businesses, particularly small to medium-sized enterprises, that might be disproportionately affected.

The other context is that progress has been made since then towards regional and sub-regional working. In July 2007 the Government published their review of sub-national economic development and regeneration, which stated that BRS has the potential to be a key tool for local authorities to invest in long-term economic development with a strong local voice for businesses. It also proposed that they should be introduced—I stress this—only when they can command support from all those affected.

Following the recommendations of both the Lyons inquiry and the SNR, in October 2007, along with the Pre-Budget Report, the Government published Business Rate Supplements: A White Paper. That is the basis for the Bill; it sets out the foundations on which it is built. It strikes that balance of local flexibility with a strong voice for business and strong safeguards to protect the business community. We published guidance in January which explained how it sits alongside other partnerships between local authorities and businesses, which are designed as a package coherently to enable local leaders to work together to promote economic and social development.

I know that in the course of our short debate today many noble Lords may raise the issue of timing—why now?—pointing out, although I do not think that it needs to be pointed out, that we are in a difficult economic situation, which the Budget response today was designed to address as strongly as possible. I would argue that if the idea was timely in 2007, it is now urgent. I understand that there are concerns, but this is not another tax on business; far from it. This is about releasing investment for mutual benefit across the community. There has never been more relevant a time to plan and anticipate the better use of our future resources. The timing is right, even if it is difficult.

The Mayor of London said recently that the introduction of this Bill was necessary despite the economic downturn. It is necessary because the future will not take care of itself. We are clearly in a unique period of global and national economic turbulence. That fact underlines the need for active government, an active public sector, to protect the poorest, to correct flaws in the market and to exert the leverage to secure a proper role in the contribution required, in partnership, from the private sector for our mutual benefit. In times such as these we need to use foresight and to plan for the future because the alternative is simply to let the recession run its course, leaving the market to devise the upturn. That will not do because the future is going to be a different country.

We are strengthening the foundations for the upturn; the Budget today was the latest step in that and the Bill is a part of it. We understand that business is facing very tough times. We have introduced a number of measures, both short and long term, to protect homes, jobs and businesses, and to help businesses through these very difficult times. I remind noble Lords—I am sure that they do not need reminding—of how we have done this across a wide variety of agency. We have secured billions of additional finance for businesses, allowing them to spread the payment of their business taxes over a longer period; we have taken measures to help improve the cash flow for small to medium-size businesses; since the November Pre-Budget Report, HMRC has agreed the deferral of more than £1.7 billion in business taxes, including deferrals in VAT, corporation tax and PAYE, which will benefit more than 96,000 businesses across the UK.

Recently, we went further. On 31 March the Chancellor announced that many business ratepayers will be able to defer the payment of 60 per cent of the increases in their rates bill due in 2009-10 over the following two years. The deferral scheme will apply where rates bills have increased as a result of the annual adjustment and the phasing out of transitional relief.

To help small businesses that have found it particularly difficult to secure loans, we have introduced the government enterprise finance guarantee, which will enable banks to provide an additional £1.3 billion of credit to SMEs that have viable business plans but cannot access normal commercial credit because of the current economic conditions. We have also introduced the working capital scheme, which will secure up to £20 billion of working capital credit lines for companies, and the capital finance scheme, a new £75 million fund to help viable small businesses with high levels of existing debt.

Taken together, all those schemes will enable viable businesses to borrow money during the credit crunch, thereby ensuring that sound businesses survive the current recession. We are rebuilding the financial system for the future in many different ways as well, not least with the Bank of England’s cuts in interest rates over the past six months, which control inflation and ease the cost of borrowing. This is real help that we are giving to struggling businesses, which has been acknowledged: John Walker, the national policy chairman of the Federation of Small Businesses, stated last November that many of the measures in the PBR,

“such as giving businesses longer time to pay bills and offsetting losses, will give small businesses a welcome breather from the taxman and allow them to concentrate on sustaining their business, supporting their staff and growing the economy in the long term”.

We are doing this because we know that businesses need assistance to weather the storm.

These measures are designed to prepare our country for the future in terms of economic development, which is where BRS comes in. It is vital that local communities have the tools in place to enable them to invest, and BRS does just that by enabling authorities and businesses to raise additional revenue to invest in local economies.

During these difficult financial times, we cannot afford to be so risk-averse that essential investment is sidelined because of short-term concerns. There is also a risk that we retreat to a centralist position, removing local discretion and flexibility where there are tough choices to be made and failing to put in place for the future the skills and work opportunities to guarantee a strong recovery. Investing in Crossrail, for example, is a graphic illustration of faith in the future; it is essential to building on opportunity and building recovery. No doubt there will be other projects in the coming years that will do the same for different parts of the country.

We accept that local authorities are key to driving local prosperity. They set out their clear vision for economic, social and environmental development, and local area agreements are the framework for driving that prosperity. It is only right that we provide local authorities with as many tools as we can to enable them to do what they need to.

I shall set out what the Bill does, and does not, do. Clauses 1 to 3 set out who may levy the supplement and the strict conditions that we have built in about how the money raised may be used. Clauses 4 to 10 set out the details of the development of a BRS prospectus, consultation and the conditions on which a ballot may be held.

Clauses 11 to 17 explain the details relating to liability, the rates that may be charged and reliefs. Clauses 18 to 23 set out the details of the administration of BRS, such as collection and enforcement, while the remainder of the Bill to Clause 32 sets out how regulations may be used, the guidance and the ultimate power of the Secretary of State to intervene and cancel a BRS.

I want to make it clear that this is not a measure that in any sense treats businesses as cash cows; it is a mechanism to raise funds to support economic projects that will benefit all. Before I discuss the details of the Bill, though, it is worth reflecting on some of the main concerns that have been raised, such as: who will pay? How will they benefit? What control does business have over a BRS? What flexibilities are built in? How, on the whole, will this fit in and promote partnership?

The Bill is proportionate to what is needed to safeguard the interests of business. It reflects a fundamental fairness, linked to the ability to contribute. It sets out that at any one time, the total amount levied through the BRS in an area may not exceed 2p per pound of rateable value. That is the upper limit. Local authorities can decide, after consultation with local business, to set a lower rate or to phase in different rates. Nor can a BRS be levied on businesses which occupy properties with a rateable value of less than a value prescribed by regulations. In accordance with their White Paper commitment, the Government will use this power to exempt properties in England with a rateable of £50,000 or less. That threshold exempts the vast majority of smaller business. Based on the latest figures from 2007, more than 90 per cent of business properties in England will not have to pay the supplement. That is a key point in understanding that the Bill will not devastate smaller businesses, despite recent reports to the contrary in the press.

The Bill is built on fundamental democratic principles. Let me set out the role of businesses and ballots in the proposed BRS projects. The involvement of business in decisions about projects will be in proportion to its financial contribution. Where businesses are providing more than a third of the money for a project, they will have a vote on the future of that project. Where they are contributing a small minority share of the funds, they will be consulted in the same way as others, including the communities affected by the project. We believe that it is not right for businesses to be able to block projects when they are contributing a relatively minor element of the funding.

How will the funds be used? The Bill makes provision for upper-tier local authorities—that is, county councils, district councils where there is no county council and, in London, the GLA—to levy a maximum of 2p in the pound of rateable value on the business rate. I assure noble Lords that those funds do not go to the Exchequer but are retained and used by local authorities to fund projects aimed at economic development of their local area.

The Bill allows local authorities and their partners to be genuinely innovative. This is not simply about investing in bricks and mortar; it is about schemes which are believed, jointly, to contribute to the economic development of an area. That might be achieved through the construction of new transport links or business parks. It might be possible and useful to raise the standing of an area in terms of attracting new investment or people with new skills through an international advertising campaign. As long as there is a clear link between the BRS project and economic development, local areas may fund projects which are appropriate to their area.

This approach is about funding what is right for an area. It is about additionality—it has to go beyond what is already planned or in existence. The Bill enshrines this principle in Clause 3, which clearly states that not only must funds be spent only on that which BRS identifies in its prospectus but they can be used only to fund expenditure which the authority,

“would not have incurred had it not imposed the BRS”.

That is vital to making the link with economic development and the specific purpose of the project. It does not mean that a BRS project has to be completely new, stand-alone project. The BRS may fund something additional that expands a project already under development, but it must go beyond the current proposals and therefore it must be able to be proved that they would not exist if the BRS were not part of the funding stream. This is therefore not about plugging funding gaps. The Bill clearly states that those funds raised through the BRS may support additional expenditure only on projects which support economic development. Those revenues cannot be diverted into funding services such as housing or education, which we would expect, and indeed are the duty of, a local authority to provide.

In addition, any levying authority which wishes to support a project through the BRS must consult local business which could be subject to the levy before it is charged. We see this as a genuine exercise in partnership, whereby the early conversations about what might be possible are conducted on an equal basis between local authorities and business. They must set out in a clear prospectus the details of the levy, such as its level, duration and the economic evidence of the benefits of the project to be funded.

In practical terms, these plans will hardly be developed in isolation. Local businesses have to be an integral part of any project and we do not anticipate any proposal coming out of the blue. Indeed, where businesses will contribute in excess of one-third of the total costs of a project, we think it absolutely right that those businesses that will pay the BRS should have a vote on whether the BRS goes ahead.

The scheme is based on strong partnership working. Local authorities will work with local businesses when creating and devising possible projects, and decisions will be taken in partnership. This builds on the excellent relationship between chambers of commerce and local authorities, which were evidenced in Committee in the other place. This is not a new burden; I reassure noble Lords that the Bill does not force local authorities to levy a BRS. The Bill does not impose a new duty; it is fundamentally discretionary in its design and is to be used when the time is right for individual local authorities. That is why we have been keen not to constrain levying authorities too tightly. There are other, built-in flexibilities—for example, authorities can raise the rateable value threshold for liability above £50,000, so that more businesses are exempt; they could introduce a taper above £50,000; alternatively, they may wish to phase in the BRS over a number of years to take advantage of the flexibilities that are needed in development projects. Levying authorities will also be able to decide whether empty properties should be exempt from liability and whether bid levies should be offset against liability for BRS. All that flexibility is consistent with our overall approach to BRS. It is not the role of central government to prescribe exactly how each BRS should function; it is properly a matter for a local authority working in consultation with local business.

I shall say a few words about Crossrail. The Mayor of London has announced plans to levy a BRS to support the funding of the Crossrail project. The Bill works for London, but it works for the whole economy; it was designed and works for authorities across England and Wales. London is the leading example of this new principle and new power. It will allow the Mayor of London to make real his commitment to funding a key part of the Crossrail project and boost economic recovery and long-term growth. As Mayor Johnson said:

“Crossrail is vital to London and the UK, providing an enormous boost to the economy and, in the tough economic times ahead, creating thousands of jobs linked to its construction. Crossrail has been a dream for many years”—

a dream shared by many noble Lords—

“and these arrangements now give the project the momentum that will make it become a reality”.

For those very reasons, it is right that we do not place a limit in the Bill that only London may benefit from these provisions. We must ensure that all areas of the country have the chance to use this power if it is right for them to do so, when it is right for them to do so. It will enable them to plan for the future. It is not a duty but a power to be used as local authorities and business see fit. London is the leading example of the principle of how it can contribute to future prosperity; the GLA and the mayor have engaged and consulted business on this important project. Sir Michael Snyder, deputy chairman of the Policy and Resources Committee of the City of London Corporation, said last December:

“Crossrail is critical to the future of London's economy and it is essential that we continue to make major improvements to our transport infrastructure during these challenging times”.

The project is supported by the wider business community in London and, as such, the funding package of which BRS is a key component is an explicit part of the Crossrail deal.

I look forward to our debates on this Bill. I commend the Bill to the House; it comes with the support of the other place, unamended, because of the recognised benefit that it will bring and the opportunities for local communities to make real their ambitions and designs for economic development for their area. It is pragmatic and flexible and achieves the right balance between enabling local authorities and business to work together to build on a partnership to realise those ambitions without constraining them through over-rigid frameworks. It is voluntary. I hope that it will be an integral part of this country’s development as we move from recession to recovery and prosperity for all. I beg to move.

My Lords, I thank the noble Baroness for the characteristic care and thoroughness with which she has gone through and introduced the Bill to us today. I also thank her for the way she and her team have made available to us information we have requested and helped in our understanding of this important piece of legislation. I am grateful for that. I also place on the record my interests as a director and member of three businesses, which pay business rates in the north-east of England. I put that on the record for your Lordships to be aware of.

I heard what the Minister said about the Bill arriving in pristine condition in this place. It was an interesting presentation of the facts. The reality is, as I would argue from these Benches, that it probably owes more to the voracity of the Government Whips Office than necessarily to the voracity of the arguments presented. Our position is very clear on this. We are very supportive of Crossrail, which is a major infrastructure project, and of the enabling legislation that allows that, but we take exception to taking something that is exceptional and making it normative across the whole of the country. That is the basis of the argument that we will present.

Despite a great deal of constructive and positive debate in another place, the Bill enters your Lordships’ House unchanged from its original form. That is very disappointing. I hope that as the Bill passes through the House, and as the productive and informative debates we are sure to have in Committee take place, a degree of consensus will be reached so that some meaningful changes, which are going to help businesses and economic development, can be effected.

We are opposed to the Bill in principle. The current economic maelstrom means that many businesses are experiencing great difficulties and are under enormous pressure to stay viable as they attempt to ride out the perfect storm of the current economic crisis. Clause 1(2) allows upper-tier local authorities to levy a local supplement on business rate,

“to raise money for expenditure on a project that the authority is satisfied will promote economic development in its area”.

The Minister presented it as a key tool of economic development; it is simply something to put into the toolkit. We see it in its context as being no more than a key tool of the Treasury to bring in extra resources from already hard-pressed businesses to support projects, which could, should, and are already being funded through other government initiatives. We believe in businesses contributing to new infrastructure and that it is important to encourage economic development within local areas. Nevertheless, the Government’s figures show that if every local authority levies this charge, supplementary business rates could go up to £597 million a year based on 2007 rateable values. That figure could be even higher after the 2010 revaluation. That is an extra £600 million of taxes.

It is somewhat ironic that we are debating this additional tax measure in the House today, because in the other place the Chancellor of the Exchequer is seeking to present ideas which, if not designed to save the world, are certainly trying to save some businesses. Yet at the very same time, here we are at the other end of the House debating a measure to enable local authorities to apply more tax to more businesses which are already struggling.

In that context, businesses face being hit next year by an army of new taxes on not only two but four sides. By April 2010, businesses will be burdened with a rates revaluation that uses April 2008 as the snapshot, a time when retail rents were artificially high. That will take many shops out of business rate relief altogether. They will also be hit by the new empty property hike, which will bring further increases.

This year, the Government have deferred the rises resulting from the end of transitional relief. If firms fill out an application form, two-thirds of the proposed 5 per cent increase in business rates, scheduled to be levied from the beginning of April, can be deferred—but only deferred—into next year. Nevertheless, while we welcome this deferral, its postponement is not a cut. Even though it is only a form to fill in, it will mean that many businesses are unaware of the rules and therefore will not claim the relief to which they are entitled. The bill will therefore go up. In 2010-11, rates will rise by a further £335 million. The year after that, they will rise by £320 million. The deferral will therefore mean that, next year, another two components will be added to the raft of new taxes which businesses are facing in the present climate. A cursory walk along any high street or through any shopping centre will show the catastrophic effect that these taxes and the current economic crisis are having on businesses. It is all well and good talking about new projects of economic development, but what about helping economic development by helping small, viable businesses, which are already employing people, to keep going under the present conditions?

The enacting of the Bill will therefore mean that struggling businesses will be saddled with yet another load of taxation as business rate supplements are introduced. It appears that, at a time of economic recession, these measures are a lethal cocktail that poses a real threat to businesses across the country. That is the basis of our opposition.

In case there is any doubt as to the serious nature of these taxes, I remind the House that the rates bill is the third largest expenditure for many small businesses, coming after wages and rents. This is why we on these Benches are particularly worried that the Business Rate Supplements Bill, despite its honourable intentions and relevance in the City of London, will turn into a stealth tax reaching across the nation. That is in addition to the possibility of the community infrastructure levies that have been announced, and the congestion charging and workplace parking levies that have been talked about. They have all been taken into account in business improvement district levies as well: just another load of taxation when we can afford it least. These can all add up to a toxic burden of taxation at a very difficult time.

In addition, the Government's decision to cut funding to local councils under the local authority business growth incentive scheme, from £1 billion over the past three years to just £150 million over the next two years, means that local authorities are heavily laden. One cannot let that pass without spotting a connection between the local authority business growth incentive scheme being cut while there is a nice bit of enabling legislation in the Bill that could potentially add £600 million to plug the gap. The Government have simply shifted the burden of debt directly on to local businesses.

The increased financial pressure may mean that councils are tempted into using the supplementary business rate simply to replace lost funding. The Lyons inquiry, referred to by the Minister and which we have studied and support, specified that the supplement should be used for additional purposes,

“additional, with any new revenues available to spend on new infrastructure or projects rather than taken into account in central government grant allocations",

which have already been made. Does the Minister agree that any other use would be utterly inappropriate? It is unacceptable to use it instead to pass on costs to local taxpayers which are already being levied centrally. We will look for assurances from the Government that the principle of additionality will be maintained. To this end, we will also seek reassurance from the Government that they have looked into the possibility of “crowding out”, which the business rate supplements scheme may introduce.

An example of a use to which we are told the business rate supplements could be put is to establish centres of excellence focusing on training in particular industries. Three centres of excellence are established in the north-east: the centre of excellence for life sciences in Newcastle; the centre for progress innovation on Teesside; and the centre of excellence for new and renewable energy in Blyth. All these are funded by the regional development agency. One North East has done a terrific job in instigating these initiatives. That is exactly the type of long-term investment in skills and technology that we should be encouraging and which Government should be leading. However, One North East has seen its budget cut from £277 million last year to £207 million next year. One is piecing together pieces of a jigsaw and a picture is emerging of something that is less than the high ideals and lofty ambitions that the Minister has presented. It would be interesting to hear the Minister comment on the ongoing funding of those three centres of excellence as she mentioned centres for enterprise. Would it be appropriate for them to be supplemented? Would they qualify for additionality purposes or would they be exempt? It would be interesting to have the Minister’s comments on that on the record.

We fully support a business rate supplement with regard to Crossrail. Crossrail will cost an estimated £15.9 billion, including contingency, and a business rate supplement will be a necessary part of this and is expected to finance and repay £3.5 billion of borrowing while Crossrail is under construction. Crossrail will form a major part of London’s regeneration and should in turn pass on economic benefits that will help the rest of the country. The scheme has been discussed and consulted on within London. Business rate payers have had their say, as have voters at the relevant election where this was a key issue. The funding package has been agreed and it is important that a business rate supplement should support this scheme so that it can develop and bring all the benefits we hope to see.

Nevertheless, we believe that this is a unique project and should not be the catalyst for a nationwide business rate supplement scheme. On 11 March in another place, it was suggested, at col. 345 of Hansard, that perhaps the Bill could be limited in scope to just the Greater London Authority in order to make sure that the Crossrail project is secured and fully funded, and that the debate about the application of the business rate supplements nationwide should be taken out of the context of the Bill and debated another day. Given that the nature of the recession is directly relevant to how a business rate supplement will be perceived and how it will work, this seems a very sensible idea. I should be interested to hear the Minister’s response on whether that idea of decoupling the debates into two elements—the funding of Crossrail and the nationwide aspect—could be contemplated in the context of our discussion in Committee.

However, if the Bill is to go forward, it is important that some fundamental changes are made to improve it to create more effective legislation. Given the debates that occurred in another place, the Minister will not be surprised to hear that one of the areas we will be pushing on is making sure that businesses have a vote on the imposition of business rate supplements. The Bill requires that a ballot must be held only where the supplement constitutes more than one-third of the funding, or the initial prospectus states that the levying authority thinks that a ballot is required. In contrast, the Lyons inquiry—the Minister and I have quoted that liberally—recommended that the local business community should have,

“a strong voice in the final decision on whether there should be a supplement”.

We are unconvinced that there are any safeguards in place that will ensure that that voice is heard and acted on. Does the Minister agree that there is a very strong argument for a mandatory ballot, as already occurs in business improvement districts? The Minister, in her opening remarks, talked about those districts’ success. We argue that it is very much the essence of their success that they have been collaborative and that ballots have taken place.

Furthermore, it is clear that a business vote would improve relations between local government and businesses. Confident in the knowledge that they can only deploy a vote, businesses are likely to be more open to new and innovative ideas. In return, business acumen can be deployed to make sure that only the most worthy projects are selected and that the funds are well managed. Moreover, a mandatory vote would mean that projects qualifying for the business rate supplement would be defined not by fixed, prescriptive and complex rules, but rather by the merit of being the projects on which local authorities and businesses have agreed. Have the Government given any more thought to this very important issue?

We welcome the Government’s consultation on the draft statutory guidance, particularly as it relates to the prospectus. This is particularly important to assess how the relationship between levying authorities and businesses in running any project that is funded or partly funded by business rate supplements is envisaged as working. The Lyons inquiry recommended that the process of levying the business rate supplement would have to be,

“transparent, so that business and other local taxpayers understand how much money is being raised and what it is being spent on”.

We agree, and it is important that businesses are involved not just from the ballot when a project is selected, but that they should be an integral part of the process, receiving regular updates and communication about how the project is going, how money has been raised and how it has been spent. In Committee, we will probe the composition of the governing bodies of the business rate supplement bodies, where there are projects of this nature. Who will be involved? Is the representation of the business community mere tokenism, or is it being given a real voice, with its expertise being drawn upon?

When do the Government hope to publish the results of their consultation exercise? Can the Minister assure the House that the sanctions applying to the levying authority, which were called for in another place, will be included and, furthermore, that businesses will be involved in the decision-making process before decisions are made and not just informed of the conclusion?

As this Bill progresses through the House, we will debate both its merits and flaws. Nevertheless, I will also mention the alternatives that we on these Benches have proposed. We take exception to the very heart of the Bill, and we suggest that a scheme that gave local councils a direct financial incentive to boost economic activity and development in their areas would be preferable to one which simply ensured higher taxation. The idea is that where the level of business rates increases in a given area over a period, the local authority would be able to keep the proceeds of that growth, which is an indicator of economic growth in an area, and spend it on local projects. That would heavily incentivise local authorities to make sure that they provide the support and services to local businesses to ensure that there is economic and employment growth.

I also offer some proposals to change the detail of the Bill in order to improve it. As the Bill creates an enabling power to levy a business rate supplement, does the Minister think that, given the current significant economic crisis, it might be sensible also to create an enabling power for a business rate discount? Why should not a local area, which is perhaps suffering in the economic downturn, be able to propose that the level of business rates is cut rather than increased? That would attract businesses and new investment into the area. That is another way of doing it. It does not have to be a new project, but allowing there to be a ballot on discounting business rates would be highly innovative and would lead to economic regeneration faster than anything else. If people look puzzled about that concept, it was entirely at the heart of the regeneration which the previous Conservative Government introduced in terms of urban regeneration projects and enterprise zones. It was all based on freeing up local authorities from planning restrictions and business rates. That is what led to the resurgence of regeneration in urban areas across the country. That whole idea of cutting business rates as a means of trying to engender economic regeneration should be considered more seriously than it has been.

At the moment, no business with a rateable value of less than £50,000 will be liable for a business rate supplement. Does the Minister take the point that this figure must be subject to revaluation or risk being out of date in future economic situations? In a similar vein, does she agree that the exemption provided by small business rate relief should be made automatic, rather than involving time-consuming paperwork which means, according to the Local Government Association, that less than half of the 870,000 firms eligible for this rebate have claimed the benefit of that discount? That would of course be added to by the complexity of delaying or postponing the business rate increase above 2 per cent this year.

Furthermore, this Bill makes no attempt to address the business rate tax hikes on the port industry which have resulted in unexpected tax bills backdating to 2005. After the Government were defeated on this issue in this House before the Recess, it was to be hoped that they might be in a position to rethink this tax. Does the Minister admit that it will have the corollary effect of making some firms unexpectedly technically insolvent? Already we are seeing businesses close around the country and jobs lost needlessly because of the way in which this taxation has been introduced. Rather than extending the business rates supplements and new tax into these areas, why not use funding to deal with the injustice which is already there, which has been voted on in this House and on which the Government have been defeated?

There are many other issues still to be covered; for example, clarifying the relationship between business improvement districts and business rate supplement schemes. I look forward to the discussions that we will have on this Bill over the coming few weeks. I am sure that they will be positive, productive and constructive. Perhaps we may even make some changes to the Bill to ensure that it leaves this House in rather better shape than it arrived.

My Lords, I, too, thank the Minister for her introduction to the Bill. I should declare two interests. I am one of three Members of your Lordships’ House who are joint presidents of London Councils, the organisation of London boroughs. I am also the trustee of a charity, the Rose Theatre in Kingston, which has a rateable value that is well over the anticipated threshold. It is also in a BID area.

The lobbying which I and no doubt other noble Lords have received—I should like, through the medium of Hansard, to thank the organisations that have contacted us—has inevitably had particular regard to the current economic position. I hope that during our debates on the Bill we can take both an immediate and a longer view. Unless a future Mayor of London does a volte-face on Crossrail or the plug is pulled on the project in terms of other funding, this legislation will have to remain on the statute book for many years. I have read that Mayor Johnson has said that because of the length of time required for the Crossrail funding, he does not want the London boroughs themselves to be able to levy a business rate supplement until 2035 at the earliest—a term to which not even Mayor Livingstone aspired.

Well, my Lords, I have debated it in public a number of times with Mayor Livingstone. But perhaps I had better not be diverted.

Let me say a word about Crossrail. It has perhaps achieved the status of a holy grail or panacea—I do not know which. I hope it will achieve everything that is claimed for it. I do not oppose Crossrail, but it is a pity that our transport thinking has not moved on. I have been struck by the benefits of Crossrail, as described, for parts of London which are not on the route. Those benefits really amount to better jobs in central London to which outer London residents can travel.

It is important to be clear about the benefits for Crossrail and for any other project involving the BRS. If those benefits are not spelt out clearly and debated robustly, consultation on a project will be a sham. It is important, too, that if the BRS is used in different parts of the country, there is some consistency in the way in which the benefits are assessed.

From these Benches we support the Bill, which is not surprising because we support autonomy, flexibility and discretion for local authorities. I have been quite tempted to ditch my notes and instead respond to a great deal of what the noble Lord, Lord Bates, said. However, I shall leave most of that to my noble friend Lord Tope and simply say that the noble Lord’s speech demonstrated to me, as his colleagues’ speeches have done in the past, the difference in the views which our respective parties take of the role of taxation.

The LGA does not want to use the term which both speakers so far have used and which I wrote down—“toolkit”. The LGA recently published a list of terms which it thinks we should not use and which it says are jargon. It says that the synonym for toolkit is “guidance”. That puzzles me a bit. The LGA does not like the word “mechanisms” either, so I cannot use that for the business rate supplement. I shall just say that raising the supplementary rate can be very useful.

The current focus on the economy should not distract us from considering whether the power should be limited to projects which will promote economic development. I should put on the record that that does not mean that I do not agree about the concept of additionality. It is important that the power is used for additional projects. However, in 2035—or, I hope, much sooner—there may be a wish that local businesses share with their local authorities to undertake business projects with other objectives, and it would be a pity if primary legislation were required to allow that to happen. The Minister talked about flexibility, and this is a bit more flexibility that I would like to see in the Bill.

There would obviously be safeguards in making every business rate supplement subject to a ballot and of course in the question of whether the local authority can gather together all the necessary funding. It will probably be important to hold on to the picture of how any project is financed in the whole, because the business rate supplement will be a very important part—possibly the catalyst—for something much bigger.

I think that describing a business vote on a ballot as a business veto, as was done in the Commons, is rather offensive to business because it implies that businesses are always negative and unconstructive. The local authority, central government and private sector funders can say no to funding the project in question, so why not the majority of businesses? I accept that Crossrail is different—it has been debated at length and in detail, including in legislation, before reaching this stage.

It is not surprising that the business sector has a concern. It is facing a plethora of charges. One has to be quite an anorak to fathom out the differences between the criteria for the different charges which might be applied to business. I shall not go into the use of the community infrastructure levy as against this rate, and so on. I simply observe that the workplace parking levy must be the subject of very much wider debate than I had realised, given that it is so often mentioned in the material that has come our way.

I am concerned that the BRS might exacerbate the confusion in many people’s minds about which sphere of government receives normal rates given the way in which national rates are collected locally. The British Retail Consortium says that the issue is that it is a property-based contribution, but even from these Benches we would not realistically expect the Government to countenance direct taxation by local authorities. We will pay attention to the prospectus in our discussions. It will require a lot of preparation, which will be a good thing because that should in itself be a form of consultation. It will need to deal not just with a decision in principle but with how the project is to be delivered. The Bill is silent on delivery and, as we have discussed before, project management is not a skill that is in wide supply.

Local authorities will have to be very serious about proposals. They will not incur the preparation costs lightly. As I said, I am one of the joint presidents of London Councils. I am glad to see the noble Lord, Lord Graham of Edmonton, in his place. London Councils is seeking commitments from the Government that, as billing authorities, the London boroughs will be able to recoup the additional costs of administering, collecting and enforcing the BRS on behalf of the Greater London Authority. They will incur set-up costs now. They will also bear the costs of modifications to software systems, leading the way for local authorities which may wish to set up a BRS in the future.

The London boroughs should be able to recoup the costs they incur from the consultation process, which should be fully funded by the levying authority. They have made it clear to me that while they support the construction of Crossrail, they are disappointed that they will not be able to levy a local BRS for local priorities. They are keen that the Government should undertake to review the operation of the BRS in London in the future. It has to be said that the London boroughs are as big as many of the authorities that will qualify as levying authorities. It is also particularly urgent that consultation on secondary legislation and powers is published as soon as possible. Much of the detail on how the boroughs will have to administer the rate will be covered in secondary legislation and in regulations. The time becomes shorter and shorter for them to assess and react to these. It would be much the best thing if that exercise could stop while the Bill is undergoing its legislative stages.

If the use of the BRS is to evolve it is necessary that the Bill permits evolution. I have no doubt that the noble Lord, Lord Best, will explain the Local Government Association’s views. I am sure that he will not agree with all that I am saying, particularly with regard to ballots, but we all agree that there should be a statutory commitment to consultation. By that I mean consultation with both local authorities and the business sector on whether the 2p limit will always be the appropriate one. The LGA tells us that 2p would raise about 5 per cent of the total raised by the main business rate. I assume that the association has worked that out on the basis of all the local authorities applying it.

The type of projects may evolve. I came to the Bill thinking mainly about capital projects, but even with capital projects, the prospectus must address the revenue costs; but there could be revenue projects. I am intrigued as to how that might work. Reference has been made to business improvement districts. BIDs are often—perhaps even usually—revenue projects. Clearly, we will have to debate the relationship between the BRS, BIDs, and—to the extent possible within the scope of the Bill, which is quite limited—the contribution by property owners as well as occupiers to BIDs.

As I said, we will support the Bill. I hope that we can make improvements to it and I hope that if we are successful in doing so, that will be considered in a reflective manner by the House of Commons. The problems on the issue of financial privilege became very stark during the progress of the Planning Bill last year. The Minister says that the Bill reaches us in pristine condition. The House of Commons ran out of time, so I am not sure that her claim is as strong as she presented it. Without wishing to tread on toes, I make a plea that if we make changes, they are not knocked back simply because it came to us in its original state.

Even an improved Bill will not answer the charge, on which point I will end, that local taxation is in need of wider reform than this useful, but quite narrow Bill.

My Lords, I declare my interest as president of the Local Government Association—an unremunerated post. In that capacity, I welcome the Bill with the extra power that it introduces for local authorities to raise additional revenue to assist in local economic development. Although the majority of local authorities are currently Conservative-controlled, the LGA seeks to work on the basis of consensus and speaks for local government across the political spectrum. If there is one issue on which local government politicians unite, it is on the need to empower local authorities to devolve from central to local government. That theme is the policy of all the main political parties at national level as well.

The Bill is one modest step in the direction of decentralisation and devolution and it should prove a useful instrument to assist in economic development—not, I fear, in the short term, but in the medium and longer term. However, two particular bones of contention remain for the LGA, on which local government hopes to see the Bill improved. First, local government would like more flexibility on the 2p limit, which is hard-wired into primary legislation, so that it could be changed later through regulation alone. Secondly, it is felt that councils should not be forced to hold a ballot on the business rate supplement but, as the bodies with local knowledge of local accountability, should take the decision directly on whether the BRS would be appropriate to local circumstances.

Let me elaborate on those two points. The Bill builds a limit of 2p in the pound into primary legislation. The Minister mentioned the report from Sir Michael Lyons back in March 2007. The Lyons report recommended a limit of 4p. It stated that a balance needed to be struck between providing flexibility to enable a real difference to be made and ensuring that tax limits remain within acceptable limits. It noted that a lower limit would provide less revenue and less flexibility. The 2p limit would raise a relatively modest sum in the totality of public finances of about £600 million, as the noble Lord, Lord Bates, said, which is about 5 per cent, or perhaps a bit less, of the £19.5 billion that has been raised by the main business rate.

It is clear that, in the current economic climate, attempts to increase the limit to anything more than 2p would be entirely inappropriate. Local government accepts this; the 2p limit in the Bill is perfectly acceptable at the moment for local authorities and, it is believed, for business. However, the amendment that I shall move when the Bill reaches Committee would ensure that the Secretary of State consults at five-yearly intervals on whether the limit is still appropriate. This would ensure that when the economy recovers, which it surely must one day, projects funded by the BRS become more attractive. There will be no more need for primary legislation, and changes could be made more quickly.

This proposal recognises that central and local government must be mindful of the circumstances in which businesses find themselves, so we envisage consultations to seek views from local authorities and the business sector. If, following consultation, the Secretary of State concludes that the upper limit should be varied, this could be done simply through regulation.

The LGA believes that councils should not be obliged to hold a ballot but should be allowed to respond to local circumstances if appropriate. This reflects the conclusions of the Lyons inquiry report, which recommended strong consultation with business rather than a ballot. I therefore hope that this valuable new measure will not be inhibited from achieving its full potential in the future, or undermined or diluted by arrangements for ballots that overrule councils’ own decision-making role. With these thoughts, I wish the Bill well.

My Lords, I, too, declare an interest. I am leader of Wigan Council and chairman of the Association of Greater Manchester Authorities and I may at some stage seek to implement the provisions of the Bill when it becomes an Act. I, too, welcome the Bill, but I recognise that it is a small step towards improving local government finance and that there is a lot more still to be done.

I remind your Lordships that the Bill is necessary. Twenty-one years ago, the infamous Local Government Finance Act 1988 introduced the poll tax and the system of the national business rate. That was a grave mistake because it stopped businesses engaging with local authorities for many years. The noble Lord, Lord Best, complained about what is coming in the future: the 2010 review. All the unwieldiness and the problems of changing the system are down to the 1988 Act. If the CBI wants more understanding of business rates, we can do no better than to have them determined at a local level from day one. The system has also made councils very reliant on a single tax, which these days is the council tax, so it has helped to undermine confidence in that tax.

This is a limited Bill, but I welcome the way in which the Government have thought about introducing at least part of the Lyons report and have given local authorities the opportunity to “place-shape”, to use the words of Sir Michael Lyons. We want to improve the quality of life in our boroughs and we can do that by working with key stakeholders in the community. Businesses are obviously important. The supplementary business rate will give us the opportunity to achieve these objectives, which I welcome.

I recognise that there are major concerns with the Bill. I will not repeat the words of the noble Lord, Lord Best, who preceded me. I am not sure that 2p should be written into the Bill, but I agree with him that there should be a process whereby the figure could be reviewed at a certain time. It may go up to 4p in line with the Lyons report.

When we reflect on the various communications that we received from organisations, we see that there is a lack of confidence in local authorities among the business community. That is probably more true nationally than locally. It is important that local authorities think about how they can be successful in consulting businesses. I am long in the tooth as a local politician, but as a young chairman of finance I implemented one of the earliest consultations when we had to consult local businesses on the level of rates. We were still able to set the business rate but we had to consult about it. I remember the meetings that we had with the local business communities as meetings of two halves. In the first half, the business community berated me for wanting to spend too much money and therefore putting up the business rates. In the second half of the meeting, it berated me for not spending enough money on its pet projects, which it wanted to see implemented.

We have moved a long way from the 1980s and we are in a position to have that communication. In most areas, including my own—both at the local Wigan level and at the wider Manchester level—we have significant partnerships with business. We are talking all the time about issues and trying to work together to improve our local economies. That could be the basis of going forward.

The implication seems to be that we are trying to sneak in some kind of local authority schemes and get them funded by business. The message needs to be that these are schemes that local authorities and the business community together believe are important to improve the local area. We should be able to think about making them joint developments rather than seeing them as developments for one side or the other. Local authorities must recognise that they cannot always spend as much money as they may like. I think that, in their recent response to the recession, local authorities of all political persuasions have shown that they understand the way in which these things work.

The noble Lord, Lord Bates, started off by announcing his background from the north-east, but then he seemed to want a scheme that would be applicable only to London. I come from Manchester. Why can we not have a scheme in Manchester if there is one in London? Why should this be limited to what London wants? We want an opportunity to bring significant economic improvements to our area. Significantly, we have just done something that no other city region, including London, has done: we had a group of independent economists look at the Manchester economy and tell us face-to-face what needs to be done. A key thing that was identified was that skill levels are not good enough if we want to drive our economy forward. That is accepted by local authorities and by business. Using an appropriate supplementary business rate, we could drive forward a scheme that would really improve the local economy.

I was delighted with the part of the Budget today in which the Chancellor announced that the Manchester city region was to be a pilot area for economic improvements. I pay tribute to the work done behind the scenes by my noble friend Lady Andrews and I thank her for her support. I welcome this opportunity, as do local business communities. I spoke earlier today, albeit on another matter, with the chief executive of the Manchester Chamber of Commerce. She said, “We support the Bill, but don’t start it until the economy begins to improve”. We can all share those sentiments.

My Lords, I start by declaring an interest as chairman of the British Olympic Association. Unsurprisingly, I will address the subject of the sports and fitness industries during my remarks. However, the Minister will be pleased to learn that I, too, support the Bill in principle. Indeed, I never thought that I would hear the case for a new tax made so eloquently. For 10 years I was the Member of Parliament for Lewisham East and I believe that allowing the Greater London Authority to introduce a levy on business rate payers to ensure that Crossrail is finally brought into life is commendable. It is difficult to see alternative funding mechanisms being implemented on the timeline required and necessary to ensure that Crossrail’s financing package is signed off. I have long believed that the economic benefits from Crossrail, as outlined by the Minister, will be substantial both for Londoners and for the rest of the UK. Estimates have been made ranging from £20 billion to £36 billion as a contribution to GDP over six years through faster journey times, job growth and increased productivity.

However, this support does not come without some concerns about the Bill. No one welcomes additional burdens on business, particularly if we do not emerge from this recession as fast as the Chancellor, speaking in another place today, would hope. Nevertheless, it is incumbent on us to balance the cost-benefit analysis involved. In this context, I echo the key findings of the Greater London Authority, which supports the Bill, for the following reasons. The authority recognises the long-term benefits of Crossrail to business, which will far outweigh the costs to it of the BRS. As has been pointed out, all of London’s boroughs will benefit from Crossrail and there are important medium-term benefits which should create demand for up to 14,000 jobs during its construction. This will make it an important source of employment at a time when London’s job market is likely to remain difficult. The authority makes a further compelling point, which is that getting on with Crossrail’s construction sends an important signal to the world about the intention to continue to invest for the long term. Delay would reveal a lack of self-confidence in maintaining London’s status as a leading global city.

That said, I share the views expressed by the noble Baroness, Lady Hamwee, who has deep-seated reservations about the fact that the detail of the Bill lies in secondary legislation in the form of regulations that have yet to be published and that a significant amount of that detail will focus on how the boroughs are to administer the new business rate. Perhaps the Minister will be able to provide greater clarity on when these documents will be made public, because, in the tempered words of London Councils, “This is not ideal”.

However, it will not surprise your Lordships to learn that my principal concern relates to sport and recreation, whose role I am pleased to see is recognised in Clause 13(4). In Canary Wharf today, the International Olympic Committee’s Co-ordination Commission met for the fourth time with the London Organising Committee of the Olympic Games; indeed, I have just returned from there. The Olympic Games and Paralympic Games bring more to a host city than a summer of glorious sport. They are a catalyst for the youth of this country, a catalyst for the elite sportsmen and sportswomen of future generations and a catalyst for a sports legacy that should reach every community in the land. I am therefore concerned about the effect that this could have on a unique entity—the Olympic Park following completion of the 2012 Games. The facilities there are a central part of the legacy that we are all working so hard to foster and it is important that we do not undermine the work that is being done to inspire a generation of young people to take up sport by increasing costs to the businesses and facilities covered by the authority of the proposed special purpose vehicle.

More generally, and in principle, although it would appear that sport has no problem with the Bill, a number of additional issues may have an effect on sport which I hope we will be able to consider in Committee. As noble Lords will be aware, under Clause 13(4) community amateur sports clubs—CASCs for short—would receive an exemption under the provisions of the Bill. While I welcome any measure that benefits CASCs and boosts the CASC scheme, I am concerned about those sports clubs that are not registered as CASCs and are not exempt by the de minimis threshold in the Bill, but which nevertheless provide a valuable service to local communities. It is important that their contribution is recognised in the tax system, particularly because last year the Government recognised the promotion of amateur sport as a charitable purpose. Let us not forget that the excellent work done by the Central Council of Physical Recreation in its 2007 sports club survey found that more than half of the UK’s amateur sports clubs were either operating at a deficit or only just breaking even. We must remain committed to easing the regulatory burden on them, not increasing it, and, if necessary, counteract the effects of this Bill by launching a parallel CASC registration initiative.

The negative impact that this measure could have on sports clubs would undermine the valuable role that they play in achieving government targets, not only in encouraging more people to be actively involved in sport and recreation but also more widely in improving public health and education, fostering community cohesion and tackling anti-social behaviour and social exclusion. To us in the British Olympic Association, who are working closely with the Central Council of Physical Recreation, which represents sport and recreational governing bodies the length and breadth of the country, the sports legacy for this country from the Olympic Games is as important as the regeneration legacy.

The challenges that we face have been clearly set out by the Fitness Industry Association, which, in its briefing to us today on these health issues, stated:

“A BRS, coupled with the expected rise in the Uniform Business Rate … has the potential to inflict a significant and negative impact on public and private health and fitness facilities and to impede Government and community efforts to bring about a healthier, more active population. The Foresight Report”,

to which it refers,

“estimates that, based on current trends, the UK will experience a virtual ‘obesity time-bomb’ in which 60% of adult men, 50% of adult women and 25% of all children will be, not simply overweight, but obese by 2050”.

As a result, there is understandable concern that some of the key businesses that offer the facilities needed to address these issues will face disproportionately high rate increases. It cannot be right to increase the tax burden on those organisations and businesses offering the facilities that are needed to address the challenge of delivering a sports legacy for the Games and for the country at large. It is my view that nothing should be done to jeopardise public health campaigns and overall health and sports objectives. That may lead me to introduce a “cardiovascular amendment” to the Bill to provide special BRS relief for public and private organisations that facilitate opportunities to be physically active.

In conclusion, I give my thanks to Ministers who have already provided some relief on the subject that I have been discussing through the community amateur sports clubs initiatives. I hope that we can, in considering the Bill, go significantly further. At this point in our journey, we have a long road to travel.

My Lords, I declare my interests in this debate. I am chief executive of a non-profit-making pressure group, London First, which, with subscriptions from businesses, universities and colleges, pursues its mission to make London the best city in the world in which to do business. I want to make it absolutely clear that I am not a paid advocate for any individual business and that my views are my own.

I share the ambitions of the Government’s Department for Business, Enterprise and Regulatory Reform in pursuing an environment in which business can thrive, only I do so with an insight into the immediate hopes, fears, opportunities and challenges facing business leaders. In regard to this Bill, I find myself in the unusual position of supporting higher taxes on both the property and the occupier community, because doing so ultimately promises them and society greater benefits.

I apologise for labouring both my interests and my perspective. I do so because this is the first time I have spoken on a Bill in the House since an Opposition spokesman from another place suggested that Members who draw on their professional expertise in this House might somehow be committing an offence. I am grateful that his more considered colleagues in this House have a better understanding of the value that temporal and spiritual experience bring to our proceedings. Now more than ever, this House and this Parliament need to understand how their decisions will impact on the economy and I hope to bring value to the House in this regard.

The Bill broadly enables local businesses and local government to come together to fund a central infrastructure for the benefit of all. Given the pressure on public spending for much of the next decade, a mechanism such as the supplementary business rate, empowering local authorities to raise money from businesses in order to invest in the infrastructure they say they need, is a good thing.

The question is: how is it to be done?

Infrastructure spend brings immediate activity and therefore jobs, as well as building capacity for the long term. This is surely welcome in an economic downturn and provides grist to the mill of Sir Rod Eddington’s report, which was categorical in making the case for infrastructure investment to support the economy. However, we must be conscious that the SBR is but one part of a number of rating challenges facing businesses at the worst possible time in the economic cycle.

As the noble Lord, Lord Bates, has described, when rates bills fall onto the desks of finance directors next April, an SBR levy might be accompanied by an uplift in rates and an absence of empty property rate relief, as well as—in London in particular—the sharp effects of revaluation due to the valuation having been taken in April 2008 at the peak of the market. It is a shame that the Chancellor has not taken the opportunity to reintroduce empty property rate relief, the logic for the removal of which has disappeared. However, the Government have indicated that transitional arrangements will be put in place for the revaluation. It is vital that these measures effectively alleviate the strain of the rates burden at this crunch time.

For London, the Bill will enable the current mayor to fulfil the commitment of his predecessor in providing part of London’s funding contribution for Crossrail. This is essential London infrastructure that will bring benefits to London and London businesses in excess of the costs, so I strongly support the Bill—though not without reservations.

I sympathise with the views of those who feel that there should have been a discrete bill for Crossrail’s funding or who feel that every project should require a ballot so that businesses can be confident that money raised will be appropriately invested, but we are where we are. We desperately need the capacity that Crossrail will provide, and, starting now, it will provide much needed countercyclical investment in London.

Nevertheless, as I have mentioned, it is clearly a difficult time to be increasing the financial burden on business. The SBR will be with us for many decades and many economic cycles. Anything that the Mayor of London can do to vary the quantity or the timing of the SBR on its introduction at this economically fragile time will be welcome, and I know that he is considering the extent of flexibility available to him.

A further issue, which was touched on earlier, is the way in which the SBR affects businesses in business improvement districts, or BIDs, where occupiers already pay a levy to support local improvement measures. There is a strong case for some offset measure to ensure that businesses contributing to BIDs do not in effect pay double. In London, the mayor has resisted this step, but we have found common ground over reducing the impact by broadening the way that BIDs are funded. It has long been argued by London First, the British Property Federation and others that BIDs should have the power to decide whether or not to include property owners, as well as occupiers, as contributors to their funding. To date, many property owners have contributed voluntarily to BIDs, but other property owners who have not contributed have also benefited from their activities. The Bill represents an opportunity to rectify that imbalance and to help to reduce the immediate burden on occupiers. I hope that government amendments will be brought forward to that end, which will attract wide support.

It is always a thorny issue debating the finer points of legislation concerning the structure of taxation. As I mentioned in my opening remarks, I sympathise with a number of the critics of the form of the Bill but, as is so often the case, I fear that the perfect is the enemy of the good. Subject to the observations I have made, this Bill is the good.

My Lords, I welcome the Bill. I have been involved in Crossrail for a number of years, and the Bill is a way of plugging quite a big financial hole. I shall come back to that.

It is a good idea that the Bill is much wider than Crossrail alone. Having read Clause 3, I think it could be used for energy projects, be they wind farms, waste-generating stations or nasty coal-fired power stations—if anyone wanted to do that—or road, rail, airports or ports. As the noble Lord, Lord Bates, said, it could cover centres of excellence too, as well as my noble friend Lord Smith’s skill improvements scheme, so it is to be welcomed.

I still worry slightly about who pays and who decides. It will be important for businesses to be balloted. Taking into account the whole of the Greater London area, some businesses will think that it is a very good idea to have something while others will ask what good it does them. I will come back to that.

On a more general principle, in the past decade or two we have seen people who live where transport links have been suddenly improved, be they rail or road, enjoying pretty enormous capital gains on their properties. I know that it is politically unacceptable to change anything to do with domestic valuation or rates, but some businesses might ask why they should pay while residents do not.

It is good that small businesses will be exempt. I do not have much of a view on the 2p maximum, except when we look at the example of Crossrail. As many noble Lords have said, it is an essential element of the project funding. It is under the 30 per cent but it is still quite high. If a project such as Crossrail is being promoted through a hybrid Bill, the Standing Orders say that a financing plan which is credible or definite has to be in place before the Bill even starts its passage through either House. Some of us might have questioned whether that was the case regarding the BRS. Even though it may have been in the plan, there was no legislation at the time to allow it to be raised.

However, the Crossrail Bill received Royal Assent and we are all wondering what will happen next. Clearly this will plug the gap. Whether it is essential to the funding of Crossrail, we can debate. The Treasury could always find more money if it wanted to, even now, or it could ask local business ratepayers to do it instead. This is what is in the plan and I shall not question it very much.

What worries me comes out of the briefing from Transport for London and the Mayor of London about the economic benefits of Crossrail, which many noble Lords have probably received. There are lots of maps. The mayor is trying to show that even though Crossrail goes east-west, there are just as many benefits in the north and south of London as there are at the east and west. I find it difficult to accept that those who own a large business at the top end of the Northern line will benefit in the same way as those who own a large business in Paddington or Southall, for example, which are on the new line. It is extraordinary. I wondered how the GLA would organise this but it is clear from the example in the briefing that it is expecting the various contributions to be between £150 million and £200 million each year if the levy is set at 2p in the pound of rateable value for properties over £50,000. That clearly covers the whole of the Greater London area, so it looks to me as if there will be 2p on every business within the Greater London area.

I may have got this wrong but I have seen nothing in the Bill to allow the authority to charge different amounts in different areas. If that is the case, perhaps my noble friend can explain how this would work. I cannot imagine many businesses from the north and the south voting for it. It could be that because the proportion of finance for the project is less than 30 per cent, there will not be a ballot, but that would be even more difficult and extremely divisive.

There are an awful lot of questions to be answered here, particularly in relation to Crossrail. It could happen equally in places such as Manchester. For example, the noble Lord, Lord Smith, might want to see the tram extended where it would benefit; some businesses might want to contribute but others might say, “Why should we?” Individual boroughs in London might get together and those on the east-west route might say, “Let’s club together and do it on these routes”. The ones a little further out might do a bit less and it might be difficult getting agreement from all the boroughs but, to me, it would seem a great deal more equitable. I worry about this aspect of Crossrail. I still cannot understand how the sum of 2p, even if it is raised over the whole Greater London area, will achieve the £3.5 billion that is clearly needed.

To conclude with something that is relevant to Crossrail in particular, I have been involved over the years with the Channel Tunnel—building the tunnel and the rail link. I have also been involved in Crossrail, and I declare an interest as chairman of the Rail Freight Group. I am not talking about freight now, but I have been involved in it. I have found when a project is being developed that there is a need for much consultation—and many noble Lords have mentioned that. What has happened up to now with Crossrail is that the Minister responsible, who has normally been the Minister responsible for railways or transport in general, has chaired a stakeholder group with local authority groups, meeting once every six months or so. The parties involved will go through issues, which could include issues like this—technical issues and other things. On the Channel Tunnel, the Department of Transport led the process, with the Department of the Environment and some planning input as well. There now seems to be a bit of a hiatus; the Bill has Royal Assent, the staff are all changing at Crossrail and Ministers are not going ahead with meetings. It might be an idea if Ministers considered restarting some of those meetings with stakeholders and local authorities and the three departments or ministries concerned, so that all the stakeholders involved can get an overview of what is happening and explain any concerns that they have. It makes a great difference having a Minister there who is prepared to listen and answer questions. On the whole, projects go much more smoothly when that happens.

In conclusion, I very much welcome the Bill. There are a few changes that could be made, which may be beneficial. More than that, I will be pleased to hear from my noble friend how the issue of how much different businesses might be charged in different areas, depending on the benefit they receive, could be dealt with. That is one of my main worries.

My Lords, this has been a useful, interesting and on the whole positive debate, which we from these Benches welcome. We particularly welcome the contribution from the noble Baroness, Lady Valentine, not just for what she had to say but for the important role that she and London First have played for a number of years and continue to play in helping business and local government to speak together, better to understand where each is coming from and going to. That is a crucial role and we welcome it. I also look forward to the Minister’s replies to the questions that the noble Lord, Lord Berkeley, asked about Crossrail; some of them have interested me, too, coming as I do from a London borough.

I was grateful to my noble friend for saying that she would leave it to me to respond to the noble Lord, Lord Bates, speaking from the Conservative Front Bench. I could do so at great length, but I shall resist that temptation, not least because I think that we will be discussing these matters at each stage of the Bill. The points on which we agree—and there were some—will become clear, just as our different approach will become clear.

One comment that I would make on the noble Lord’s speech in general is that he painted an alarmist view of the dreadful things that local government would do once it was armed with this power to levy additional tax on poor, long-suffering businesses. I sat here thinking, “Does he know something that I don’t?”. The majority of local authorities that will have this power are currently Conservative-controlled and I am sure that he will expect even more of them to be Conservative-controlled by the time the Bill is enacted. Therefore, I worry that he knows something that I do not know and that the effects of the Bill will be far more damaging than the Minister will suggest or, indeed, than I believe they will be.

Before I go further, I should declare my own interest again, as this is the start of the process on the Bill. I am a member of the council in the London Borough of Sutton; indeed, I am a member of the executive. It is not quite an interest, but at the time of the 1988 Act to which the noble Lord, Lord Smith of Leigh, referred, I was leader of the council. I remember well the Conservative Government nationalising the business rate. What I remember best is our first statutory consultation meeting with the business rate payers after the Act was enacted. We had always had consultation meetings with business rate payers before the business rate was set, as I imagine most local authorities did. We told them why it was necessary to be whatever it was; they told us why it was too much and we then had a general discussion on what the council was and should be doing.

At the first statutory meeting—the ratepayers were not required to attend, but they did—I explained to them first that the council no longer set the business rate. I said that, although the council would continue to collect it, it would not keep their money and that the amount that we got when it was redistributed from the national pool would bear no relation whatever to what they had contributed—nor, indeed, would there be any great benefits directly from any increase in the business rate. They looked at me and asked, “What is the point in having the consultation?”. It was rather bizarre that we were statutorily required for the first time to have a consultation on something over which evidently we had no power at all.

The noble Lord, Lord Smith of Leigh, is right to refer to the damage that that part of the Act did. What he forgot to say is that the Labour Party, committed at that time to denationalisation of the business rate, has now been in power for 12 years and has done absolutely nothing about it. Indeed, I regret very much that through those 12 years, and even now, the Government, like their predecessor, have failed completely to tackle the whole thorny issue—and it is a thorny issue—of local taxation generally, of which this is an important part. In arguing for the return of the business rate, I would not wish to be thought to be saying that it is necessarily the best form of business taxation at a local level, but it is what we have now.

I declared my interest as a councillor for a London borough that is just about the most distant one from Crossrail. Perhaps I may say, therefore, that my commitment and my party’s commitment to Crossrail, and now to this method of helping to fund it, is absolute; I have no qualification whatever to make about that. However, I know that many of the local businesses in the London Borough of Sutton—I suspect that this might be so in other outer London boroughs north and south, too—will not be consulted or have a vote on it. Personally, I do not think that that should be the case. I suspect that, if they were asked, they would be a little cynical about the suggested £13 million of benefits that will come to the borough in 2026. If asked, they might say that they saw the economic benefits from extending the Croydon Tramlink into our borough being of much more immediate and direct benefit than Crossrail. I say that by way of comment, not in any way to reduce my commitment or my council’s commitment to the funding of Crossrail. It is vital that that goes ahead. I certainly would not want to do anything that might damage that funding.

I understand why the current Mayor of London opposes extending this power to London boroughs, as he is fearful that, among other things, this funding might be damaged. In any event, this is not the right time for London boroughs to be imposing a further supplementary rate on top of the GLA supplementary rate, which we know will come, and the other measures that have been referred to. However, as several speakers including my noble friend have said, we are talking about the period up to 2035. We all hope that the economic downturn will “upturn” some time before 2035. Some of us still have a faint hope that, at some time before 2035, some Government will be brave enough to reform local taxation generally. But I have always been an idealist. Maybe it will happen, maybe it will not.

In introducing the Bill, the Minister rightly said that the power will be there when the time is right. The time must become right at some stage before 2035 for London boroughs. The object of this, which I wholly support, is to improve local economic development. London borough councils working in partnerships with their businesses—that is enormously important—are the drivers of local economic improvement. As my noble friend said, all London boroughs, some more than others, are major players in the local area. They are not the local parish council. Surely there is a case for them, too, to have the power, with proper qualification, to levy a supplementary business rate when the time is right, which I readily accept is not in the immediate future. Unless that is in the Act, however, it will never be there if and when the time ever becomes right. If and when local businesses, councils and people are all in agreement on the use of a supplementary businesses rate to help to fund a particularly important project that benefits all, they will be unable to do so unless that power is there. I regret that.

I referred to partnership, which is the key to the Bill. Times have changed beyond recognition from the situation in the 1980s that perhaps led to the nationalisation of the business rate. I remember well that, even in my own council, in those days business did not understand local government and much of local government did not understand business. We did not understand why we behaved and worked as we did, and many had not realised that we very much shared common interests. That situation has changed pretty well everywhere in the country; certainly, it has long since changed in all good areas. Any good local authority will be working in partnership with its business community.

I am therefore a little sorry to see that the briefings for the Bill have become, in a way, a little polarised. We have the Local Government Association on the one hand saying, “No ballots! We must not have a ballot”, and the CBI and the business community saying on the other hand, “We must have a ballot”. I hope that we can make this debate a little less polarised. A ballot, whether it is statutorily required or not, will come at the end of a process. It will not come at the beginning, or even in the middle, before we even get to having a project or proposal that may, or may not, go to ballot. A local authority—the levying authority, to be more precise—should have been working with its business community to identify what the project is, to reach agreement that it will genuinely benefit the local economy, and consequently those businesses, and to produce the prospectus on which that ballot will be held. By the time we get to that stage, the businesses will possibly not need that assurance because they will have been part of the process.

I accept that we are not yet in that position. Many businesses in all parts, probably including my own borough, do not yet trust local government—or government generally—enough to proceed on that basis. During the passage of the Bill, we will return to the need to give businesses that reassurance, but I hope that, when we do so, it will be just that: a reassurance that, if it is necessary, it will be at the end of the formative process that I have described.

The issue that had not been raised until the noble Baroness, Lady Valentine, spoke was that of giving BIDs the opportunity to levy from property owners. I know that this was debated in the other place. I do not need now to rehearse the arguments, but I believe that the Local Government Minister said that the Government understand the point, that they are working on a number of issues that, quite properly, need to be resolved and that they hope to take this forward during the Bill’s progress through this House. In her reply, I hope that the Minister will give us the Government’s view and will be able to reassure us that they will bring forward proposals to achieve that. Where they exist, BIDs have been enormously successful. I am a strong supporter of them. This overdue measure is widely supported and this Bill should be used as an opportunity to make it possible.

In opening, my noble friend said that we will support this Bill in the vein of critical friends and that we will seek to improve it. I do not know the superlative to pristine, but whatever it is we will seek to ensure that when this Bill leaves this House it is improved and even more—I have no other word—pristine than when it arrived.

My Lords, I am truly delighted by the response offered to the Bill. I knew that I should not have used the word “pristine”: it certainly got me into serious trouble almost before I began. Clearly, we will have some interesting debates. It has been an excellent debate so far, as usual demonstrating a wealth of expertise and commitment, and a genuine diversity of approach across the House. Noble Lords have been able to support the principle of the Bill by and large.

I am very pleased by the language that has been used. This Bill has been described as modest and useful, which means that it is in with a good chance. My noble friend Lord Smith, the noble Lord, Lord Best, and the noble Baroness, Lady Hamwee, used those terms. The noble Baroness, Lady Valentine, described it as a good thing. I am delighted by those approaches. It does not mean that we will not have intense scrutiny, which I welcome. But there has been an understanding about what the Bill is about, which was not least exemplified in the words of the noble Lord, Lord Bates, in relation to Crossrail. In his summing up, the noble Lord, Lord Tope, did the Bill a great service in describing the nature of partnership and the way in which partnership fundamentally informs and will make a success of BRS. That was a useful description.

Partnership was described not least by my noble friend Lord Smith with all his experience of promoting partnership. The noble Baroness, Lady Valentine, has already had tribute paid to her role in bringing business together, as has the role of the LGA in its ambitions of working with local government. Crossrail has commanded unanimous support, which is a very important part of the success of this Bill as it goes through the House. The noble Lords, Lord Bates and Lord Moynihan, introduced a very interesting perspective, to which I will turn in due course. The noble Baroness, Lady Valentine, and my noble friend Lord Berkeley, raised detailed questions which I will answer.

In this Bill we are trying to achieve a balance of interest and outcomes, and the importance of additionality. I was particularly intrigued by the invitation by the noble Lord, Lord Tope, to answer the noble Lord, Lord Bates. I always look forward to the Opposition answering each other’s arguments and leaving me out of the picture completely. I am very happy for that to continue. Essentially, I say to the noble Lord, Lord Bates, that, as demonstrated by his response, we have a slightly different take on the Bill. I want to emphasise the principles again; first, the exceptional nature of what we would see BRS as offering. It is normative in the sense that it is in the Bill and will be there as an opportunity. Certainly, it will be an exceptional opportunity for those local authorities which want to take it up. That is partly my response to the fears raised by the noble Lord, Lord Moynihan, in relation to the leisure and sport industries and the interests that they represent. The £50,000 rateable value limit will certainly put many fears to rest because most of those organisations will certainly fall within the 90 per cent that are excluded by the Bill.

This money goes to local authorities in partnership with business to develop local significant projects which have been jointly agreed, designed, devised and expressed in the prospectus, so this is very much local funding done on a joint basis. Therefore, it is about responding to the needs of the local community. In developing BRS, therefore, the Government have been mindful of the need to balance these greater freedoms to raise revenue locally with the need to protect business interests. I particularly welcome noble Lords applauding this celebration of local autonomy, and the power which it gives local authorities.

I agree with the noble Lord, Lord Tope, that it is regrettable that the debate has become polarised between the 2p rate and the extent of the ballots. I hope that we can enable people outside to understand that there is common ground on the balance that we are seeking to achieve, and that we shall get that balance right. I believe that the Bill strikes the right balance, which is reflected in the support which it has by and large received. Indeed, all the business representatives who gave evidence to the Commons Public Bill Committee supported the principle of BRS. It is interesting to note that the director-general of the British Chambers of Commerce said that people in several parts of the country spoke of the need for more local determination and to raise additional revenue from the business community. That attempt to balance rights and interests underpins the credibility of the Bill because it is very clear that an explicit benefit has to be proved in the prospectus of whatever project emerges, as the noble Baroness, Lady Hamwee, said, which has to be owned by the people involved. That has to be balanced with the need to protect smaller businesses from paying the supplement.

My second major point in relation to balance is that the Bill does not give local authorities unfettered access to businesses’ profits. It includes numerous protections for business rate payers. As I said, it gives them a real say in whether the supplement should be levied, not least because we are requiring a double lock which will guarantee support as 50 per cent of all qualifying businesses will have to agree to give their support in a ballot, and they will have to represent more than 50 per cent of rateable value among businesses. That is genuine fairness in terms of proven support.

The noble Lord, Lord Best, on behalf of the LGA, referred to the 2p rate. We are aware that the LGA has taken a particular stance on that. The 2p limit allows local authorities to raise what we think is a significant and meaningful sum towards projects while safeguarding business. The national upper limit provides an important safeguard for business in terms of the maximum that they may be required to pay. We shall return to that issue in Committee when we discuss the noble Lord’s amendment. Alongside that we have had the beginnings of a debate about the ballot. The noble Lord, Lord Bates, and other noble Lords asked why there should not be a ballot in all cases. There have indeed been strong calls from the business sector for a vote in all cases. However, again, this contrasts sharply with the position of the Local Government Association, which takes the opposite view entirely and would like the local ballot to be left to local discretion. Once again, the Government find themselves in the middle, trying to balance the interests of both parties.

Requiring a ballot where the supplement will support more than one-third of the total cost of the project strikes the right balance. It will ensure that where the BRS is contributing a relatively large proportion, or all, of the funding needed for a project, that business will get a vote. However, in the circumstances where it is contributing a smaller package, we do not believe that it would be desirable. There will be a robust consultation process, but we think that it would create additional uncertainty, greater delay and confusion about whether complex and large projects can be agreed and can go ahead. I say to noble Lords, in particular the noble Lord, Lord Bates, that although we have not specified it in the Bill, there is nothing to stop local authorities choosing to introduce a ballot on any BRS if they were to so choose.

Noble Lords have addressed additionality and how money is spent, which are important. As the noble Baroness, Lady Hamwee, said, this could be about revenue-raising projects as well as capital-raising projects. The noble Lord, Lord Bates, put forward some very interesting examples. I reiterate that in Clause 3 we have provided that the projects must be specific to what the prospectus says, and they can take place only if they are funded additionally and for the purpose specified. The examples that the noble Lord gave of the RDAs and the centres of excellence are interesting, but we do not see this as a substitute for projects that can be funded in other ways. My sense is that those options would have been exhausted, or a decision would have been arrived at that the RDA might be a contributing partner, for example. Certainly, every case would be taken on its merits in terms of the local conditions. I am sure that there will be many opportunities for us to discuss that in Committee.

The noble Lord, Lord Moynihan, raised some interesting issues in relation to community amateur sports clubs. The noble Lord will know that registered sports clubs are eligible for 80 per cent relief from national non-domestic rates, and they will get exactly the same relief in the Bill. Billing authorities can top up the mandatory 80 per cent relief, and if they do so they will have to make sure that it is systematic across both ordinary relief and this levy. Obviously, I agree with everything that he said about the contribution of sport and about the legacy that we want to see and, we would not wish to inhibit that in any way. I foresee the possibility of a project under BRS that would bring the boroughs, the sports community and sports industries together to conceive of something specific and part of that legacy. I would have thought that there is a lot of comfort to be got from the £50,000 rateable value limit in relation to those businesses and charities. I will read the noble Lord’s speech in more detail, as he may have raised other issues.

My noble friend Lord Berkeley and the noble Lord, Lord Tope, talked about Crossrail, and asserted that there will be differential benefits for different parts of London. The whole of London’s economy and the areas surrounding London will benefit from Crossrail in the long run. It is a London project but, my goodness, its benefits are not confined to London. We know how much London drives not just the economy of the south-east but the country as a whole. Its impact will be felt in reducing congestion and enabling faster journeys. That will free up many routes, not just across London. It will contribute to the build-up of jobs in London as well.

The Mayor of London’s briefing suggests that every London borough is projected to benefit by at least £14 million by 2026 in terms of wider economic employment and transport benefits for local residents. There are some variations within that, but I look to the expertise on London across the House to see whether a test will be applied to that.

On the question of my noble friend Lord Berkeley, we estimate that the BRS will raise about £177.9 million a year. That would bring in less than a third of the total cost of Crossrail, and that is why a ballot will not apply in that case. I shall look in more detail at his other questions.

One fundamental and important question raised was: why not limit the Bill to London? We heard a conclusive argument as to why not from my noble friend Lord Smith, who asked why other areas should be denied the potential benefits of the Bill. I cannot think of a better counterargument, because that is the point of creating an opportunity in the Bill for areas outside London. If and when the time is ripe and the partnerships agree and want to work on something exceptional that crosses different local authorities, why should they not have this opportunity? Is it not more undemocratic to deny them that chance and construct something for London alone? I suspect that if we had constrained the Bill to London, I would be here making an altogether much weaker case. We are very mindful of the potential use of BRS more widely as local authorities move towards subnational organisation. Indeed, there were splendid examples of progress on that in today’s Budget.

I was also very pleased that so much attention was paid to the nature of consultation. The noble Lord, Lord Bates, talked about the importance of transparency. That was absolutely right. The issue, as the noble Baroness, Lady Hamwee, said, is about the need to take the whole funding package, whereby everyone is clear about their roles and responsibilities, particularly funding responsibilities within the package, and the need for the prospectus to be absolutely clear about the expectation, the additionality, the cost benefits and the responsibilities. That will be an extremely serious part of our debate on the detail of the Bill. My noble friend Lord Smith also referred to that. Underpinning that is the idea that this is not something that will be done to local businesses; they will be involved in this and will benefit from it. The consultation process before each BRS is levied is an extremely important part of the whole argument.

I am winding up, but I should address the issue raised by the noble Baroness, Lady Valentine, about BIDs. There was much discussion in another place about the possible impact of BRS on BIDs, but she raised a wider issue. This was also raised by Nick Raynsford in another place. Perhaps I may deal first with the notion of offsets; the decision to offset BIDs against BRS is accomplished in the Bill. That will depend very much on the specific circumstances of the project. Clause 16 leaves the decision to local discretion. As for the wider issue about whether property owners should be included in BIDs to strengthen the role and to spread the weight, since the Commons considerations we have received further representations on the issue. It is now clear that there is widespread support for BIDs and we are keen to ensure that they continue to flourish. We are giving further consideration to the representations on the interaction between BIDs and BRS, and I hope that in Committee I can come forward with more detail on that and keep the noble Baroness fully informed.

I believe that I have taken care of most of the substance of the arguments that have been made, but I shall read Hansard tomorrow to make sure. The issue of implementation and the timing of regulations was raised by the noble Lord, Lord Moynihan, and the noble Baroness, Lady Hamwee. We intend to consult shortly on the policy that will underpin the regulations. Even if we do not have the regulations in front of us, we will have the substance of the regulations to enable us to have an intelligent debate, and we can do that as soon as possible. We aim to issue the consultation paper on our proposals for secondary legislation very soon. With that in mind, I hope that we will be able to proceed before, if not during, Committee stage with a map in front of us of what implementation will look like.

I am extremely grateful to everyone who has spoken in this debate. I am very grateful for the welcome that noble Lords across the House have given to the Bill and for the intelligence and thoughtfulness with which they have responded. I very much look forward to our later debates on the detail.

Bill read a second time and committed to a Grand Committee.

Borders, Citizenship and Immigration Bill [HL]

Third Reading

My Lords, before the House begins the Third Reading of the Bill, it may be helpful for me to say a few words about Third Reading amendments. In line with the guidance recommended by the Procedure Committee and agreed by the House, the Public Bill Office has advised the usual channels that two amendments on the Marshalled List for Third Reading today fall outside the guidance given in the Companion and set out by the Procedure Committee. These are Amendments 3 and 4 in the name of the noble Lord, Lord Ramsbotham. On the basis of the Public Bill Office’s advice, the usual channels have agreed to recommend to the House that the amendments should not be moved. As ever, this is ultimately a matter for the House as a whole to decide.

Clause 39 : Exceptions to application of this Part

Amendment 1

Moved by

1: Clause 39, page 29, line 6, leave out “prior to” and insert “after”

My Lords, I shall speak also to Amendment 2 and wish to clarify the amendment which I moved on Report and which was voted on and has resulted in Clause 39.

When I spoke on Report, I made it clear that those whom we wished to help were those who were coming to the end of their journey towards citizenship and who were already on limited leave to remain and were poised to apply for indefinite leave to remain. As line 6 is currently worded, as a result of my previous amendment, applications submitted before the commencement of Part 2 would be assessed under current arrangements. Of course, that is exactly what would happen anyway. The concern is for applications due to be submitted just after Part 2 comes in, which, without a period of grace, could be caught in the new citizenship process. Amendment 1 would therefore give, as I always intended, this period of grace after the commencement and not before it.

Amendment 2 deals with the other problem caused by the defective amendment, which referred to an application made by any person for “limited leave to remain”. This should have been an application for indefinite leave to remain, a much later part of the process. A close reading of Hansard would underline the fact that I spoke to this effect on Report. I only regret that the amendments did not reflect what I was saying or what the House voted on. I hope that this clarifies the situation and that these amendments will be accepted and incorporated into the Bill, as the House voted for. I beg to move.

My Lords, the amendment clearly provides that a person who is currently en route to citizenship and is within 12 months of making an application for indefinite leave to remain should continue on that path. I rise only to support the amendment and to say that I hope that, since we discussed the matter on Report, the noble Lord, who also replied then, has satisfied himself that what we are doing now fully complies with the judgment in the case of HSMP Forum Ltd—a matter that I raised both in Committee and on Report but which I am pretty certain has not been dealt with in the voluminous correspondence that we have had from Ministers. It would be useful to have on the record that the Minister has taken advice and that the Government are completely satisfied that the amendment and Clause 39 fully comply with the terms of the judgment in HSMP.

I gave the noble Lord, Lord Brett, a few minutes notice on my next point, which is that the amendment obviously implies that the route to “indefinite leave to remain” is still there following the coming into effect of Part 2, as it allows the person to make the application within 12 months. There will be changes in the rules consequent to the passing of the Bill and we want an assurance from the Minister on the record that by having the amendment in the Bill the route to ILR will be maintained.

My Lords, I heard what the noble Baroness, Lady Hanham, said and I accept that the amendment is technical and consequential on the first vote. On the question of the HSMP judgment referred to by the noble Lord, Lord Avebury, UKBA officials are currently analysing the details to determine the wider impact, if any, on the UKBA. It would be wrong to prejudge the outcome of that analysis.

On the ILR route, I understand that the intention of the amendments is that someone can apply under the existing naturalisation requirements in Section 6 of the British Nationality Act and that a migrant who has ILR in the UK will be deemed to have permanent residence. Their conditions will not change from what they are at present. That is my understanding. I am happy to accept the amendment but I must record that we intend to return to this issue in the other place.

Amendment 1 agreed.

Amendment 2

Moved by

2: Clause 39, page 29, line 7, leave out “limited” and insert “indefinite”

Amendment 2 agreed.

Clause 57 : Duty regarding the welfare of children

Amendments 3 and 4 not moved.

Clause 59 : Extent

Amendment 5

Moved by

5: Clause 59, page 46, line 31, leave out “55” and insert “55”

My Lords, I shall also speak to the three other amendments in the group. They are consequential on an amendment to Clause 52 on Report, now renumbered as Clause 55. I understand that the Minister is content to let them pass. I beg to move.

My Lords, as we are discussing the “Extent” clause, I wonder whether I may be permitted to take this opportunity to raise matters that were to be pursued by my noble friend Lord Wallace, who has asked me to apologise for his unavoidable absence. He spoke in Committee about the power in this clause to extend any provisions in the Bill apart from “Part 1 or section 55” to the Channel Islands and the Isle of Man. On Monday he wrote to the Minister summarising his concerns that we did not think had been dealt with either in Committee or in the subsequent correspondence.

The Government’s attention was disproportionately concentrated on the land border between the Republic and Northern Ireland as a route for illegal migration into the United Kingdom, which the Minister justified by arguing that the numbers involved in the two routes were very different from each other. We pointed out that an increasing number of illegal immigrants are clustered around the Channel ports in France. Considering the experience of Italy and Greece—the former starting 20 years ago and the latter about 10 years ago—it would be surprising if the Channel Islands remained immune from irregular migration, particularly as other methods of entry are increasingly effectively tackled. The Minister pointed out that people arriving at the Channel Islands would have already been checked by another EU country when they entered the common travel area and promised to write to my noble friend about the scale of involvement of the Crown dependencies with the EU on those matters. I do not think that he has done so, because all the ministerial correspondence has been copied to noble Lords who spoke in those debates and I am not aware of any letter on that subject.

On the other hand, we have all had copies of a letter from the Chief Minister of the States of Jersey raising the fundamental point that the constitutional relationship between the UK and Jersey is being altered by the Bill and that that their people’s rights under Article 1 of the ICCPR and Articles 2 and 3 of Protocol 4 to the ECHR are being infringed. The letter from the Chief Minister said that those concerns were to be addressed by the proposal by the Government for a Memorandum of understanding, which is yet another of the loose ends being left by the Bill. It would be useful if the Minister could say something on the record about those matters.

My Lords, the amendments proposed by the noble Lord, Lord Kingsland, are minor and technical changes required as a result of new Clause 55. The Government support the amendments to ensure that the Bill is internally consistent and coherent when it leaves this House, although I have to say again that the retention of Clause 55 will be considered again in the other place.

In response to the point made by the noble Lord, Lord Avebury, about the noble Lord, Lord Wallace, I am sorry that my letter to the noble Baroness, Lady Hanham, on 30 March did not completely cover all those points. We had a discussion outside the Chamber and I believed that we had covered them. There are complexities. The build-up of people coming into Crown dependencies is a real possibility. Indeed, it is part of the reason why we propose what we do for the common travel area. It is difficult for me to give an answer on the Floor now, because the issue is complex, but I am happy to cover the detail of that inquiry in a dedicated letter to him, if I may. I am content with the amendment.

Amendment 5 agreed.

Clause 60 : Commencement

Amendment 6

Moved by

6: Clause 60, page 47, line 1, leave out “51 (Common Travel Area)” and insert “51 (entry otherwise than by sea or air: immigration control)”

My Lords, we need Amendments 6 and 9; they make technical changes as a result of Clause 51 being inserted into the Bill on Report. I beg to move Amendment 6.

Amendment 6 agreed.

Amendments 7 and 8

Moved by

7: Clause 60, page 47, line 1, leave out from “section” to “comes” in line 8 and insert “55 (fresh claim applications)”

8: Clause 60, page 47, line 36, leave out subsection (12)

Amendments 7 and 8 agreed.

Schedule: Repeals

Amendment 9

Moved by

9: The Schedule, page 49, leave out lines 4 to 6

Amendment 9 agreed.

Amendment 10

Moved by

10: The Schedule, page 49, leave out lines 11 to 15

Amendment 10 agreed.

A privilege amendment was made.

Motion

Moved by

My Lords, I beg to move that the Bill do now pass and put on record my thanks to all Members of the House for the work that they put in to scrutinising the Bill, however painful it may have been to me at times. The debate has been useful. We have had some important debates on the future of the UK Border Agency or border force and our nationality and immigration laws; I hope that they will be taken account of in another place as it considers the Bill.

It may be helpful to the House if I take this opportunity to follow up my commitment on the future role of the chief executive of the UK Border Agency and the Director of Border Revenue. I can assure the House that under current arrangements for the UK Border Agency the Director of Border Revenue will always be its chief executive, which is an issue that we discussed at some length.

In respect of the new children’s duty, which is something very good that has come out of our discussion and into which we all want to claim input, I commit to the House that the UK Border Agency will continue to review and update how it collates and updates its statistics and guidance. We can do better and we are putting in a lot of effort to do better to underpin the new duty to safeguard and promote the welfare of all the children with whom UKBA comes into contact. I have asked the agency to set up a round-table discussion involving representatives of the major children’s charities to examine what information is currently available on children who are detained, what periods are involved and the reasons for their leaving detention. I am grateful for the House’s indulgence in letting me record those points.

My Lords, I thank both Ministers. Some of our debates have been long and some have been complex; many of them have resulted in copious letters. Some of the issues that arose as a result of those letters will now have to be dealt with in the other place, since they have not been dealt with here, but, none-the-less, we are grateful for the courtesy of ensuring that the answers, if not available in this House, will be available subsequently. I also thank the Bill team that has helped the Ministers. My noble friend Lord Marlesford may want to intervene briefly before the debate comes to an end, but I look forward to seeing how the Bill ends up in the other place.

My Lords, before we close, I thank the Minister for the statement that he has just made about the two amendments that I could not move. They were discussed in Committee but, unfortunately, through the many and various changes to the programming it was impossible for me to be in the House when they were moved on Report. They are both important. If I may make one correction to what was said, I am very glad that there is a round table to discuss statistics, but I notice that that is with the charities. However, this does not just affect the charities; all sorts of other people need the statistics. That includes local government, social services, healthcare, education and the UKBA itself. It is essential that the round table approaches the problem of what data everyone needs to enable them to process what is required and then establishes a means of making those data available. I also thank the Minister for a most useful meeting on Monday night on behalf of my noble friends Lady Howe and Lord Listowel, who were both there. It was a useful way of moving ahead and I am most grateful that the statement that has been made resulted from it.

My Lords, on the assumption that we shall hear one or two more words from the Minister, can he give us any information on the much needed and long awaited simplification Bill, which will bring together these numerous statutes bearing on immigration and asylum?

My Lords, it would be a pity if this Bill left the House without it being recorded that at least some of us feel that it is not doing all that we hoped that it would. When the scandal of the Pakistan student visas broke over Easter, I was astonished to hear Mr Phil Woolas, the Minister of State for Borders and Immigration, claim on the radio that the Conservatives were opposing the e-Borders system. We have been urging such a system for years, yet the system as designed does not deal with the problem. It will not deal with it even when it comes into force in two years’ time.

The passport system in this country is still extremely leaky. The Government opposed my only amendment, which would have made it necessary for applicants for British passports to declare what other nationality of passport they held or acquired. The Minister admitted in his Second Reading speech that there were a number of other passport-related issues. He said that,

“some issues need to be looked at closely”.—[Official Report, 11/2/09; col. 1208.]

We have heard no more from him on that. I will not go through them.

I have a final, very general point to make. The Home Office is crucial to the defence of the borders of the realm and it needs to be under much stronger political control than it is at present. Her Majesty’s Secretary of State for the Home Department is one of the great offices. It has been occupied in the past by major political figures. One only has to think of names such as Gladstone, Morrison, Butler and Jenkins. No one is under any illusion that the Home Office is an easy department for Ministers to control. To be effective, the Secretary of State must be a big fish in the turbulent Westminster and Whitehall waters. Now, we have only a minnow, and a naughty minnow at that. I suggest that in his remaining months in office the Prime Minister finds from the admittedly rather limited pool of talent on the government Front Bench in another place someone who can take over the Home Office and start to put serious reforms into place for the control of our borders.

My Lords, I briefly place on record my view that the Bill does not adequately address the problem of non-European Union citizens arriving in the Republic of Ireland and then moving freely into the United Kingdom through the common travel area. Until Her Majesty’s Government get the agreement of the Republic of Ireland to apply the same controls of entry into the Republic of Ireland that now apply at airports and ports in the United Kingdom, the gap will still exist.

My Lords, I, too, thank the Minister and the noble Lord, Lord Brett, for the extreme courtesy with which they have examined everything that we have had to say on this Bill and for the meetings outside the Chamber, including those that we had with the Bill team, which have been enormously useful in clarifying some of the issues in the Bill.

The Minister mentioned in particular what he had done in relation to children. We can be reasonably proud of that. I certainly hope that it will enable us finally to ratify the international Convention on the Rights of the Child. It would be useful if the Minister could say a final word on that subject.

As the Minister implied at the end of his remarks, there is an enormous amount of work still to be done when the Bill goes to another place. We have just talked about loose ends that have been left by the proceedings in Committee and before that have not been fully resolved. We have an enormous task in front of us, but this is part of the general phenomenon of putting more and more matters of substance into secondary legislation and guidance. We are simply part of that process. On the whole, however, we can be very grateful to the Minister for the care that he has taken in responding to every point that has been raised by the Opposition on this Bill.

My Lords, I spoke on the Bill at an early stage and made the plea that we as a nation should attempt at least to treat our borders as meeting places rather than barriers. The Bill has been significantly improved during its progress through this House, not least by the general spirit that seems to reflect a desire around the House for us to move towards that kind of understanding of our relationship with our borders and with those who seek to enter this country, especially those who seek citizenship.

We must encourage the Minister and the Government, as the Bill proceeds to the other place, to honour that spirit. The Bill is in a better condition now than when it first came to us, but—this is my final plea to the Minister—as it is reviewed in the other place in the light of what this House has decided, the Government should reflect not only the letter of what we have done but the spirit in which we have done it. I thank the Minister and those who have responded courteously to me and others when we have asked these questions. Our questions have been heard, which also reflects the spirit in which the debate has been conducted. I want to acknowledge and affirm that spirit while retaining a degree of anxiety about whether this country is not still governed by a spirit of hostility rather than hospitality when it comes to those who seek to share our life and all that we hold prime and dear in this country of ours.

My Lords, I thank noble Lords for their kind words. The noble Baroness, Lady Hanham, and a couple of other noble Lords thanked the Bill team. I also thank it for its very hard work. I know that it tried very hard to answer all the questions that had been asked. The noble Baroness talked about the copious number of letters that have been written. I do not think that I have ever written or signed off such immensely long letters before. Some important points were made. They have been very useful and I am glad that they are now being put on the record so that they can be seen. I absolutely agree that there are issues that will need to be addressed.

I thank the noble Lord, Lord Ramsbotham, for his input. I know that changing the times of some of the debates meant that he could not be here for some of the substantive discussions. I know that he has a great interest in this area, as does the noble Baroness, Lady Howe, and the noble Earl, Lord Listowel. I absolutely take the point about the charities. This will be done not only with them but with a whole raft of organisations and agencies that need to be involved. It was brought home to me that, when children are put into local authority care, it is no longer recorded that they are immigrants. Therefore, if the children go missing, the statistics are not recorded. This is exactly the sort of thing that we have to get right. I absolutely agree that we have to resolve this.

The noble Lord, Lord Hylton, touched on the simplification Bill. The Bill that we have been discussing is a small Bill, but it raises a couple of issues that I was keen to get through before the summer, but we can see the complexity. That is why the simplification Bill has taken so long, but I absolutely agree that it is required. This is not the only area that needs simplification, but the draft Bill is planned for the autumn and we will be able to move forward from there.

The noble Lord, Lord Marlesford, talked about the scandal of Pakistani student visas. I do not think that he was in the House when I talked about the incident in the north-west and how much we have done in the past two years. We have done a huge amount. As I say, it was an area that I identified when I did my study in July 2007. This has been tightened up dramatically. The changes that we have made are significant and we now have a good handle on this. The situation is getting better all the time. I am glad for the support for e-Borders. It will make a huge difference, which I am glad about.

We have tightened up on passports. I would be stupid to say that we are right in every area—I do not believe that. We have work to do. We must do it and I am in dialogue with the people involved. It is not precisely my area, but I know that we need to tighten up some things there.

On what was said about my right honourable friend Jacqui Smith, I have worked for many people in my life and I have been very impressed by her. All sorts of extraordinary things are said about the Home Office. I had never been in the Home Office, but I had been in the MoD and the Navy. I went there expecting some appalling establishment, but was very pleased by the quality of the people there. There are some excellent people, some good people and one or two bad people, as in every other place in which I have ever worked in my life. Overall, I am rather impressed by what goes on there and I do not believe for one second that it deserves the bad press that it gets. It has some good people who are working very hard on what are sometimes almost intractable problems. I think that they do very well.

I could not agree more with the noble Lord, Lord Kilclooney, about the risk posed by the CTA loophole. I am sure that we will come back to that after the Bill is considered again in the other place. We have only to look at the risk that we face. That really worries me, which is why we may need to adjust this and do it slightly differently if we can. I really worry about that.

I thank the noble Lord, Lord Avebury, for his point about children. I understand that we have basically satisfied the requirements of the UNCRC, but I absolutely agree that there is more to do. We should be proud of what we have done in this House in that area because it is quite a step forward. I am very pleased with that.

Bill passed and sent to the Commons.

Local Democracy, Economic Development and Construction Bill [HL]

Report (4th Day)

Clause 85: EPBs and their areas

Amendment 168A

Moved by

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

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

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

We object to economic prosperity boards and combined authorities because what is proposed involves the transfer of local authority functions to new bodies that may not consist wholly of elected representatives and will not consist of people directly elected for the particular task. The Bill has at many points highlighted how we differ from the Government in our views of what representative democracy is. Here we will have the Secretary of State making an order.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Amendment 168B not moved.

Amendment 168C

Moved by

168C: Clause 85, leave out Clause 85

Clause 86 : Constitution

Amendments 168D and 168E not moved.

Clause 87 : Constitution: membership and voting

Amendment 168F not moved.

Clause 88 : Exercise of local authority functions

Amendments 168G and 168H not moved.

Clause 89 : Funding

Amendment 168J not moved.

Clause 90 : Accounts

Amendment 168K not moved.

Clause 91 : Change of name

Amendment 168L not moved.

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

Amendment 168M

Moved by

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

Amendment 168M agreed.

Amendment 168N not moved.

Clause 93 : Dissolution of an EPB’s area

Amendment 168P not moved.

Clause 94 : Review by authorities: new EPB

Amendment 168Q not moved.

Clause 95 : Preparation and publication of scheme: new EPB

Amendments 168R and 168S

Moved by

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

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

Amendments 168R and 168S agreed.

Amendment 168T not moved.

Clause 96 : Requirements in connection with establishment of EPB

Amendment 168U not moved.

Clause 97 : Review by authorities: existing EPB

Amendment 168V not moved.

Clause 98 : Preparation and publication of scheme: existing EPB

Amendment 168W not moved.

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

Amendment 168X not moved.

Clause 100 : Combined authorities and their areas

Amendments 168Y and 168Z not moved.

Clause 101 : Constitution and functions: transport

Amendments 168AA and 168AB not moved.

Clause 102 : Constitution and functions: economic development and regeneration

Amendment 168AC not moved.

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

Amendment 168AD

Moved by

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

Amendment 168AD agreed.

Amendment 168AE not moved.

Clause 104 : Dissolution of a combined authority’s area

Amendment 168AF not moved.

Clause 105 : Review by authorities: new combined authority

Amendment 168AG not moved.

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

Amendments 168AH and 168AJ

Moved by

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

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

Amendments 168AH and 168AJ agreed.

Amendment 168AK not moved.

Clause 107 : Requirements in connection with establishment of combined authority

Amendment 168AL not moved.

Clause 108 : Review by authorities: existing combined authority

Amendment 168AM not moved.

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

Amendment 168AN not moved.

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

Amendment 168AP not moved.

Clause 111 : Incidental etc provision

Amendment 168AQ not moved.

Clause 112 : Transfer of property, rights and liabilities

Amendment 168AR not moved.

Clause 113 : Consequential amendments

Amendment 168AS not moved.

Clause 114 : Orders

Amendment 168AT not moved.

Clause 115 : Guidance

Amendment 168AU

Moved by

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

“( ) an ITA;”

Amendment 168AU agreed.

Amendment 168AV not moved.

Clause 116 : Amendments relating to EPBs and combined authorities

Amendment 168AW not moved.

Clause 117 : Interpretation

Amendment 168AX not moved.

Clause 127 : Duty to have regard to improvement targets

Amendment 168AY not moved.

Amendment 169

Moved by

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

“Central-local partnership

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

(a) a framework of principles for how central and local government work together to serve the public,(b) common priorities and a shared programme of objectives for giving effect to these principles, and(c) such partnership arrangements as are necessary to give effect to the relationship.(2) The Secretary of State shall take such steps as are required to ensure the attendance at the annual meeting of representatives of government departments with responsibilities for partner authorities subject to the duty to cooperate under section of the 104 of the Local Government and Public Involvement in Health Act 2007 (c. 28) (application of chapter: partner authorities).

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Amendment 169 withdrawn.

Clause 136 : Adjudicator’s power to make corrections

Amendment 169ZA

Moved by

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

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

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

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

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

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

“decision so as to remove a clerical … error”.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Amendment 169ZA withdrawn.

Clause 137 : Adjudication costs

Amendment 169A not moved.

Amendment 169AA

Moved by

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

“Conditional payment provisions: insolvency of third party payer

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

(a) in subsection (1), “unless that third person, or any other person payment by whom is under the contract (directly or indirectly) a condition of payment by that third person, is insolvent”,(b) subsection (2),(c) subsection (3),(d) subsection (4), and(e) subsection (5).”

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

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

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

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

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

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

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

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

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

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

“purporting to permit that which Section 111 prohibits”.

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

The second of my three amendments renders ineffective:

“Any contractual provision … which seeks to exclude or oust the provisions”

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Amendment 169AA withdrawn.

Clause 139 : Notices relating to payment

Amendment 169B not moved.

Clause 140 : Requirement to pay notified sum

Amendments 169C and 169CA not moved.

Clause 141 : Suspension of performance for non-payment

Amendments 169D and 169E not moved.

Clause 142 : Repeals

Amendment 170

Moved by

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

Amendment 170 agreed.

Schedule 7 : Repeals

Amendment 170ZA

Moved by

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

Amendment 170ZA agreed.

Clause 144 : Commencement: general

Amendment 170A

Moved by

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

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

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

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

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

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

“it is important that accountability matches responsibility”.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Amendment 170B not moved.

Amendment 171

Moved by

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

Amendment 171 agreed.

Amendment 171A not moved.

Amendment 172 had been retabled as Amendment 170ZA.

In the Title

Amendment 173 not moved.

Report received.

Postal Services Bill [HL]

Committee (4th Day)

Clause 34 : USP access conditions

Amendment 87B

Moved by

87B: Clause 34, page 18, line 42, leave out from “it” to end

Our amendments in this group would ensure that any USP access condition imposed under subsection (1)(a) was accompanied by an appropriate assessment of costs. As the drafting stands, an access condition could be imposed, including one with price controls, without a transparent and relevant set of accounts being drawn up specifying the different costs of the relevant matters. This form of drafting is repeated in Clause 44 for a general access condition.

Our first amendment in this group would insist that an access condition contained both the access requirement and the relevant accounting separation. Access conditions are, as the independent Hooper review made clear, a particular area of contention between the various stakeholders. It would be extremely unhelpful for the sector in general, and especially the relationship between the regulator and the universal service provider, if it was felt that access conditions had been based on anything other than clear and transparent figures.

In conversations about this drafting, various parties, including Ofcom, indicated that they welcomed the flexibility that the either/or gave them, because the relevant accounting separation might have already been required under Clause 35 and to repeat the requirement would be unnecessarily burdensome. As a result, I have tabled the second of my amendments to take account of that possibility. There is also the possibility that Ofcom might think that an accounting separation of access matters was needed but not a requirement to give access or to impose price controls. In this case, surely Clause 35 gives it enough power to impose the necessary accounting standards. I beg to move.

While I think that I understand the driving logic behind the amendments to create a binding connection between the requirement to impose an access condition and the requirement for a transparent level of accounting disclosure and clear financial information, the Government believe that these two amendments, in practice and in course, would provide no additional regulatory benefit but, perversely, could risk an increased regulatory burden on Royal Mail and possibly a delay in implementation.

Under Clause 34 as drafted, Ofcom may impose a USP access condition for either access to Royal Mail’s postal network or accounting separation relating to access, or both elements together. Amendment 87B would join these elements, thereby reducing Ofcom’s flexibility under Clause 34 to impose an access condition without having also to impose a related accounting separation condition.

Amendment 88A would allow for an accounting condition under Clause 35 to be sufficient to satisfy Clause 34(1)(b). Amendment 88A presupposes that a condition under Clause 35 has been imposed and is sufficient to cover the access being required under Clause 34. Again, that has the potential to constrain Ofcom and could mean delaying the imposition of an access condition pending imposition of an accounting condition under Clause 35. It would also mean that Royal Mail had to be subject to both a USP access and a USP accounting condition rather than just a USP access condition alone.

The Bill rightly requires Ofcom to act in a proportionate manner when imposing any regulatory conditions. That applies equally to accounting conditions, whether they are imposed under the powers set out in either of the two clauses that we are discussing. We believe that this will ensure that there will be no unnecessary repetition of accounting conditions. I hope that this explanation is clear and I invite the noble Lord to consider withdrawing his amendment.

I have listened carefully to what the Minister has said. I shall consult further in the light of the explanation that he has given. In the mean time, I beg leave to withdraw the amendment.

Amendment 87B withdrawn.

Amendment 88

Moved by

88: Clause 34, page 18, line 42, at end insert “on commercial terms”

I think that I can do away with declaring an interest. It should be evident by now that I have an interest in Post Office matters from my previous employment.

Amendment 88 is, from the point of view of running the Royal Mail, one of the most important things that we will be looking at, putting aside the other major parts of the Bill. It is important because of the history of the last eight to 10 years, when the Royal Mail was not allowed to act on a commercial basis, and because of the way in which the whole thing was sorted out in the early days. I was going to bore the Committee; I have put down about 10 references that I have made in the House to the whole business of pricing. However, it is getting a bit late, so I will not go through them all, but I might pick up one or two of them.

Many of the problems of today stem from the fact that our Government got it terribly wrong in allowing Postcomm to misinterpret its brief and to favour the route for competition. It is not surprising that establishing competition for Royal Mail involves setting up a comparable network to Royal Mail. The Royal Mail network currently involves daily collections from 115,000 pillar boxes, 11,500 post offices and daily delivery to 28.4 million addresses with fewer than 3,000 delivery exemptions. It has a workforce of around 167,000, 69 mail centres, 1,400 delivery offices and one national hub. It has around 31,000 vehicles, two trains and 42 flights a day.

Competitors would have to consider whether they could mirror or match that infrastructure, which gives the Post Office such a unique position. As we heard the other night, Royal Mail is really the only potential provider for the universal service. Those sorts of resources are necessary if the UPS is to be provided. Therefore, what we are looking at is the fact that competition has baulked at making such a substantial capital investment, despite all the fluffy talk about the investment that competitors could make. Instead, the competitors have concentrated on part-sorting mail and trunking it to Royal Mail offices for completion in sortation and delivery by Royal Mail.

This access work has been carried out at prices for Royal Mail that have allowed exceptional profits for competitors. In fact, there is a subsidy provided by Royal Mail. Nobody has done the work. Even Hooper could not reach a conclusion on how you do this costing to get a commercial basis. This subsidy is often talked about as 2p an item. You are talking about millions of items a day. Because of a law that the Labour Government introduced, the competitors are enjoying this subsidy from Royal Mail, which delivers at a loss while having to maintain that infrastructure. That is why I mentioned the infrastructure earlier; it is quite a costly operation.

No one can say with accuracy how much Royal Mail has lost because of this misguided Postcomm policy, but I should think around £100 million a year for the competitors has been a nice little feather bed. I have just looked up some of my comments from eight years ago; all this was accurately prophesied. As I say, Richard Hooper could not come to a conclusion in his report. He just left the matter for further examination by Ofcom.

My Amendment 88 seeks to guarantee the position for the future. If access is carried out on commercial terms, services are purchased at their value rather than through a subsidy. Royal Mail is currently unable to compete for access work, not because of inefficiency but because the regulator has established a system of pricing that is completely unfavourable to it. Richard Hooper’s report recognised that the system of access pricing with Postcomm’s headroom regulation is unlike any other system of access offered by other European postal providers.

The access headroom regulation prevents Royal Mail from lowering the price that it can charge retail customers for its bulk end-to-end service without also lowering the access price by the same proportion. This means that any cost savings made on upstream activity cannot be passed on to retail customers without the business then losing revenue by also having to lower the access price. With the lowering of the access price to competitors, those competitors can pass the savings on to their own customers and retain contracts. The only additional efficiency being provided is that created by Royal Mail, which, in turn, gains no benefit. In regulatory terms, this would be characterised as a perverse outcome, yet Postcomm has sat on this perversion and no one has seen fit to address it—notwithstanding the fact that the House of Lords has been told on many occasions that what was going on was not only morally wrong but commercially daft when you think of Royal Mail’s position. If my amendment is accepted by the Government, such an outcome would have to be addressed by the regulator.

Amendment 96 in this group deals with information about performance conditions, which is important when you consider the amendment about commercial charging. The new clause says:

“(1) Any information about performance condition is a condition that OFCOM may impose requiring a postal operator to do one or more of the following—

(a) publish information about the extent to which it is providing specified postal services in accordance with specified standards;

(b) publish annually an independently audited performance report; and

(c) provide specified information (at such times and in such manner as OFCOM may direct) to other postal operators and users of postal services about the service provided by that postal operator.

(2) The reference in subsection (1)(b) to an independently audited performance report is to a report that—

(a) contains information about the postal operator’s performance in complying with any regulatory conditions; and

(b) is audited for accuracy by a person who is independent of both OFCOM and the postal operator.

(3) Any information about performance condition may require the postal operator to meet the costs of the audit required by subsection (1)(b)”.

The new clause would provide the public with information about the performance of postal operators.

As the Bill stands, it is only the universal service provider—we have all agreed in this House that, although it has not been written in the Bill, we are talking about Royal Mail—that is obliged to publish information and audited performance details. Many noble Lords will be anxious for Royal Mail to compete on a level playing field. Indeed, I note that the Parliamentary Labour Party brief issued by the Secretary of State on 26 February in support of First Reading was entitled “A Level Playing Field for the Royal Mail”. The noble Lord, Lord Hunt, reminded me the other day that that term is correct terminology for these Europeans. Is it too much to hope that the Government will move beyond such pieties in order to implement the measures necessary to secure a level playing field?

The Bill asks very little of a postal company that competes with Royal Mail. Clause 45 is entitled “Consumer protection conditions”. Ofcom decides which are appropriate from the following:

“(a) to assume specified liability in respect of specified loss of or damage to specified postal packets,

(b) to establish and maintain procedures, standards and policies with respect to consumer protection matters,

(c) to make payments relating to qualifying consumer expenses of the National Consumer Council or the Office of Fair Trading”.

Those requirements are all necessary and useful, but they are hardly sufficient. Along with that, Clause 46 indicates that Ofcom may require postal operators to provide a “redress scheme”, which is clearly to allow for some consumer protection in the case of failure in the service offered. In total, the conditions that Ofcom may impose are minimal. At no point does the customer or independent observer have an opportunity to compare an audited performance of these firms with that of Royal Mail. I hope that the Government will take this amendment in hand.

Much has been made of the term “transparency”, not least in Richard Hooper’s report. We should be clear that, to date, what is being spoken about as transparency is merely the exchange of information between the regulator and Royal Mail. None of us will see this material unless we work with the regulator, Royal Mail management or limited circles of government. Such transparency is merely about reducing friction between the regulator and Royal Mail management on the provision of Royal Mail data; it is nothing larger than that. Broader transparency would allow the customer and independent observers to actively compare and contrast the performance of postal operators. I hope that there is more substance to the Government’s commitment to transparency than has so far been suggested. I beg to move.

My noble friend, as always, has put his finger on the pulse. He has described in some detail the difficulties that Postcomm created for Royal Mail. Indeed, I must join him in saying that I welcome the demise of Royal Mail, even if my noble friend who speaks from the Front Bench has not. He mentioned that it is difficult to estimate the costs. In fact, when the Business and Enterprise Select Committee interviewed Mr Crozier, he said that the loss per item was about 2p. The chairman of the committee went on to ask, “You said you lost 2p per item. For the record, how many items are we talking about?”. Mr Crozier replied, “About 5 billion”. At 2p per item, they are losing roughly £100 million.

It seems absolutely ridiculous that people whom I would term predators are cherry-picking the items they want and taking business away from the Post Office. The Post Office will then have to subsidise that to the tune of £100 million. That does not make any commercial sense whatever. It is no wonder that one can get into problems. That is why this amendment is very important. We hope that Ofcom will adopt a different policy. It is important that the phrase “on commercial terms”, which my noble friend suggests, is included in the Bill. A public service should not subsidise the people to whom I have referred.

Repeated interviews with Postcomm and its appearances before the Select Committee in the other place have always indicated that it seemed to be more interested in competition than in the provision of a universal service; in other words, it had its priorities the wrong way round. Therefore, we should not allow Ofcom to make the same mistake that Postcomm did.

I am not suggesting for one moment that Ofcom is the same animal as Postcomm. A lesson has been learnt in that regard. As we have discussed on many occasions, we opened up this market far earlier than others did. Indeed, my noble friend has asked on many occasions when the French intend to open up their market. Some of the competitors that are mooted to take a 30 per cent stake, such as TNT, had their markets liberalised only in March this year. Another competitor reported to have shown an interest in taking up a shareholding, Deutsche Post, is now losing money. That just proves that we were too far ahead of the game. However, it was not just a matter of being ahead of the game but of putting conditions on Royal Mail that should not have been imposed on it. It was absurd to impose on it losses running into billions of pounds.

We shall listen to the Minister’s reply, but we should press the amendment at some stage. I hope that his mind is not completely on Chelsea at the moment. I am sorry that I cannot give him any good news in that regard.

Is it still nil-nil? Thank you. Sometimes the Opposition are invaluable. At least my noble friend knows that Chelsea is not losing at the moment, but anything can happen. But, coming back to losing, we no longer want—

Until about 9.45 or 9.50 pm; I estimate another 15 minutes. By the time the Minister has replied to the amendment, we shall have the result. I return to the serious matter of Royal Mail and what happened to it under Postcomm. We are trying to ensure that if Royal Mail is obliged to deliver certain items, it should do so on a commercial basis. It should make a profit rather than subsidise predatory competitors. I am pleased to support my noble friend’s amendment.

I will try to be brief. We agree with the principle of Amendment 88 in the name of the noble Lord, Lord Clarke. Certainly, since any access condition will impact on contracts between Royal Mail and other postal operators, the noble Lord is right that care should be taken to maintain conditions that take account of commercial realities.

Amendment 96 goes a little wider and I am afraid that we have reservations about it. It seems to impose a potentially substantial burden on postal operators who might have nothing to do with the universal postal service at all. We fully appreciate the benefits of transparency. However, it is one thing to expect the universal service provider, which will just have been bailed out by the taxpayer to the tune of several billion pounds, to be transparent about how it is maintaining the UPS, it is quite another to demand that private companies open themselves up to criticism about how they operate their businesses when they are providing services that have no impact on the UPS.

In the dying moments at Stamford Bridge, I, too, will try to be brief. However, I shall try to address the amendments and the points that have been made in the debate because, to my mind, they are central to a fundamental ambition of the Bill. I have come to be aware of and appreciate the interest and expertise of my noble friend Lord Clarke in this area. I hope that by the end of the debate he may be persuadable that it is possible to create a regime that is both fair and transparent, underpins the universal service and allows for productive competition. It is not the view of the Government that those things are in conflict.

I begin with Amendment 88. I am grateful to my noble friend Lord Clarke for allowing me the opportunity to provide further clarity on USP access conditions and the Government’s position and to explain why the proposed new regulatory regime is adequate to the task at hand. The amendment seeks to introduce an additional threshold of “on commercial terms” on any USP access condition. The amendment risks creating additional regulatory burdens and may constrain the nominated company’s management—in this case Royal Mail—in its ability to run the business. While I fully appreciate and understand his concerns around cross-subsidisation, particularly unfair cross-subsidisation, it is difficult to see what meaning “commercial terms” could have in relation to Clause 34(1)(b), which deals with accounting separation relating to access. Furthermore, the amendment would create uncertainty, as “commercial terms”, which is not defined, could be interpreted widely and increase the possibility of either legal challenge or judicial review.

Clause 34 improves on current postal regulation by clearly setting out, and for the first time bringing on to a statutory basis, the grounds that Ofcom must have regard to when imposing a USP access condition. Clause 34 and concurrent competition law powers provide the tools through which Ofcom can ensure that access prices are not set too high or indeed too low. I am conscious that it is late, but I will digress to make a specific point. This exemplifies one of the central findings of the Hooper review, which was not that there is not a case for a transparent, accurately costed wholesale pricing regime, but that it did not currently exist, and it needs to exist on terms that are fair and transparent. The noble Lord is right to point out that Hooper did not do that transparent cost analysis. However, he was not asked to do it and nor was the review team equipped to conduct it. Its commissioning by Ofcom was central to his report.

Although I welcome my noble friend’s sentiments, the amendment risks creating uncertainty without adding materially to the safeguards provided by the Bill. He can rest assured that the Bill gives Ofcom the necessary powers to establish the cost of access at Royal Mail on fair terms and to ensure that access prices are set appropriately and are subject to Ofcom’s explicit primary statutory duty to secure the provision of the universal postal service. The noble Lord, Lord Hoyle, raised by way of example the question of the precise and accurate nature of the costs, the losses and the subsidisation. One of the ambitions of this new regime must be a fair, accurate and transparent wholesale access regime that preserves and funds the universal service and stimulates not parasitic but purposeful competition.

My noble friend also tabled Amendment 96, which he is proposing should be inserted after Clause 44. The amendment would give Ofcom the discretionary power to require any postal operator to publish information about its performance. In doing so, it mirrors Clause 33, which requires the nominated universal service provider, if Ofcom imposes any designated USP condition, to publish details of performance.

As the noble Lord opposite observed, the amendment has the potential to significantly increase the regulatory burden on what may be very small businesses, while achieving little more than is already allowed for in the regulatory powers of Ofcom in Schedule 8 to the Bill. One has to bear in mind that these operators are already in active competition with one another and, indeed, with the Royal Mail. If customers of these alternative operators are dissatisfied with the level of service, they are able to change providers with relative ease.

I should direct my noble friend Lord Clarke’s attention to Schedule 8, paragraph 3. There we have set out the powers for Ofcom to require postal operators to provide all the information that Ofcom considers necessary to carry out comparative overviews of the quality and prices of postal services. That overview must be carried out with a view to publication and in the interest of users of postal services, whom he referred to.

We are satisfied that this Bill as it stands provides the necessary powers for Ofcom either to ask for any information they might require on performance conditions, or to require other operators to publish such information if it can show that to do so is objectively justifiable and proportionate. Given these explanations, I hope that my noble friend Lord Clarke will not only see fit to withdraw his amendment but think again about the balance between preservation of the universal service and fairly priced access to wholesale competition.

I thank my noble friend for that quite conciliatory and helpful reply to this short debate. My noble friend Lord Hoyle drew attention not only to the situation at Stamford Bridge, but to the number of times that the unfairness of the current Postcomm regime has been raised in this House. On his first point about Chelsea, he should have been watching the famous Arsenal last night, who scored four goals. Unfortunately the other team scored four as well.

Seriously, I shall not go into my earlier comments, but in my innocence I actually believed that when you put a case showing that something was wrong, people would take action. I turned up at meetings, not only of Postwatch, but Postcomm, and I argued the case. Now, after all this time we are told that the Hooper review cannot answer the questions that my noble friend Lord Hoyle and I have been asking for a number of years.

I am pleased that the noble Lord, Lord De Mauley, agrees with the principle of my amendment. He suggested, and the Minister picked it up, that Amendment 96 could be unfair to smaller organisations. The problem with all this unfairness is that if you put an obligation on Royal Mail, it should be fair to put the same obligation on its competitors, because that has caused a lot of the upset for at least the past eight years, probable longer. It has to be seen to be fair. I quickly looked up Schedule 8, paragraph 3, which does give food for thought, and there could be some merit in my noble friend Lord Carter’s comment that he might consider it possible to create a fair system. However, if the outcome does not make it clear that the role of the regulator is not the role of the promoter of competition, but is the watchdog to see that the competition meets the requirements of the Bill, that would be worth looking at.

I am glad that he understands my concern, because it is getting to the point where, because of Postcomm’s interference and biased approach, money has been drained; it is like shovelling £1 coins down the drain. I am prepared to look at the possibility of finding a better way of expressing what I have tried to do in Amendment 96. It is essential that we try to get this as clear as we can. I have said many times during the passage of the Bill that clarity, transparency and accountability must be the watchwords if we are producing legislation that we hope will resolve some of these problems. Ultimately, someone should do the work on the costs on the final mile. Hooper’s team could not do it and they said that they were not asked to do it. There was a bit of a slip-up there if that is the reasoning on which the charging regime is being based.

You cannot compare going from Chadford and Moretonhampstead in a nice little van to deliver a letter to the next village—I think it is called Gidleigh; I went there once on a visit—with the final mile of someone going to South End Close in Hampstead, where there are 14 blocks of flats with 140 steps in each block. Someone needs to work out whether there is some measurement that will take into account the various weighting factors required for a fair pricing policy for the final mile. It will not be easy but it is possible. These days, there are ways of weighing up all the differences between a rural area, an urban area and a densely populated area, such as the Abbey Estate in Abbey Road, where I used to live. In North End in Hampstead, you walk down a lovely leafy lane to Northstead or North End Avenue. It can be done and someone needs to do it properly.

I am sure that the Government are prepared to look at the possibility of getting a proper pricing policy with proper guidance regarding Ofcom’s responsibilities. With proper consultation, that should be possible. However, for tonight, I beg leave to withdraw the amendment.

Amendment 88 withdrawn.

Amendment 88A not moved.

Amendment 88B

Moved by

88B: Clause 34, page 19, line 18, leave out “might” and insert “is likely to”

In working my way through the various conditions that the Bill allows Ofcom to impose, one of the most important concerns has been whether it requires Ofcom to show that the condition is necessary. Unlike in Clause 44, which imposes general access conditions, Ofcom does not have to show that a USP access condition is necessary—merely that it is appropriate for the promotion of efficiency, effective competition or the conferring of significant benefits on the users of postal services. I should be interested to hear from the Minister what sort of burden of proof there is on a requirement to be “appropriate”.

The vagueness continues in subsection (4), when Ofcom must consider whether to impose a price control. The drafting seems to make it appropriate as long as there is the possibility of the universal service provider having the ability to fix prices at an excessively high level or impose a price squeeze.

We frequently have debates in this House over the words “may” and “must”, and even “must” and “shall”. I am afraid that I am now including “might” in the list of potentially ambiguous modal verbs, but I look forward to hearing the Minister explain, in particular, whether subsection (4) will have any reference to the intent of the USP. I beg to move.

My most recent example of negotiating on “must”, “may”, “shall” or “would” was with the German telecommunications Minister in a European Council meeting, where, rather to my chagrin, he outnegotiated me in English on the wording of the telecoms framework. Let us hope that we can do better on this one.

I shall try to give some clarification. As we understand it, Amendments 88B and 88C seek to increase the threshold—or at least question whether the threshold is correct—that needs to be reached before Ofcom may impose access price controls on Royal Mail.

These amendments challenge whether the Bill contains the appropriate checks and balances in the various su