My Lords, I have been invited to represent the House at the opening by Her Majesty the Queen of the fourth Session of the Scottish Parliament in Edinburgh on Friday 1 July. Accordingly, I seek leave of absence from your Lordships' House on that day.

To ask Her Majesty’s Government what arrangements they are considering to allow the courier industry to operate as normally as possible during the traffic arrangements for the 2012 Olympics.

My Lords, I beg leave to ask the Question standing in my name on the Order Paper. In so doing, I declare my interest as president of the Despatch Association.

My Lords, arrangements for couriers and traffic regulation during the Games are the devolved responsibility of Transport for London, but the Department for Transport is taking a keen interest in this area to ensure that the UK and London keep moving next summer.

My Lords, I thank the noble Earl for an encouraging reply—more encouraging, I might say, than the courier industry has received thus far from the Olympic delivery committee. Might the Government be able to persuade the Olympic delivery committee, which is in charge of the arrangements, that the courier industry is not the freight industry, which seems to be its only concern? The courier industry’s service is used and relied on by most of commerce and by other organisations. It offers a valued service of 24-hour or same-day delivery. If that is not available during the Olympic Games, many businesses may suffer.

My Lords, yesterday I had a meeting with officials from TfL in order better to understand its plans for helping to deliver a successful Olympics and Paralympics. TfL’s structured programme of consultation with the larger trade associations began some time ago. It is not my role to tell TfL what to do, as it is the competent authority. However, I did mention the desirability of allowing all responsible trade associations to be able to engage with TfL, including the Institute of Couriers and the Despatch Association. I also said that the courier industry is slightly different from the freight industry, a point which the officials well understood.

My Lords, does the Minister agree that it is not the ODA but LOCOG which will be responsible for administration at the time of the Games and that if anybody should be working with the transport industry, which of course they should, it should be LOCOG?

My Lords, my noble friend is nearly right. On 9 February 2011, responsibility for the 2012 Games travel demand management, Olympic and Paralympic route networks and road freight management programmes in London transferred to TfL.

My Lords—

My Lords, does the Minister agree with me that licensed black taxis should be allowed to use the Olympic lanes during the Games? If they do not do so, a lot of them will have to put their business on hold for the six weeks of the Games.

My Lords, I am not absolutely sure of the answer to the noble Baroness’s question, but I am quite sure that TfL has taken this into consideration. Very few routes will be unavailable to cars.

My Lords, the trouble with giving way is that one’s question is then addressed by the previous speaker. Could I just offer to the Minister a word of encouragement and warning? I am hot-foot back from the Olympic site this morning. Everyone who goes there is enormously encouraged by the preparations for the Games, which I am certain will be hugely successful when they occur. But perhaps I may give the Minister this word of warning: I had the misfortune many years ago to introduce the London bus lanes and left out the interests of the black cab trade. I still bear the scars to this very day, so I warn him lest he bear such scars.

My Lords, part of the reason why we are in such a good position with the Games is the good planning put in place by the previous Administration. With regard to the use of black cabs, noble Lords will understand that the primary route for getting to the Games should be public transport—buses, the underground and railway systems.

My Lords, given the role of the runner Pheidippides in bringing the news of the battle of Marathon to Athens, could my noble friend see whether there was any way, since he gave his name to the race, that the name of Pheidippides could be worked into the process that he has been recently defending?

My Lords, that is an extremely interesting question which I am sure my officials will love researching to enable me to write to my noble friend.

My Lords, can the Minister assure us that there will be no roadworks in London during the 2012 Olympics?

My Lords, when I had my discussions with the TfL officials I was very impressed with the number of different problems they have considered, and I am sure that they will do everything they can to minimise all roadworks where they could cause a problem.

My Lords, when the noble Earl has his next meeting with TfL officials, if he has any spare time, can he tell them that there was not exactly dancing and singing in the streets at the news of the vastly inflated salaries that they are being paid and the fact that there are now more than 360 TfL officials being paid six-figure salaries?

My Lords, I was impressed enough with the TfL officials to think that future meetings would not be necessary on my part.

My Lords, could the noble Earl impress upon the people organising the transport that some people cannot use buses or the underground because they are disabled and they use taxis instead and that these are a very important component of transport?

My Lords, the noble Countess makes an important point. The blue badge scheme has been provided for and there will be dedicated parking places for blue badge users. However, they will have to be booked in advance.

To ask Her Majesty’s Government why No. 10 Downing Street and the Foreign and Commonwealth Office did not fly the European flag on Europe Day.

No. 10 Downing Street and the Foreign and Commonwealth Office take a straightforward approach; they fly the union flag at all times, with limited exceptions mainly for the patron saints’ days for England, Scotland, Wales and Northern Ireland.

My Lords, this is a change of policy. In what way do such silly gestures serve our national interest?

The noble Lord speaks of silly gestures, but the idea that flying flags is any indication of the policy of commitment, in our case to the European Union, is frankly absurd. If we flew the flag for every relationship with every multilateral organisation, we would be for ever hoisting flags and taking them down again. There is frankly no relationship between our activist and forward position on the European Union—we are playing a major part, as demonstrated by the Prime Minister over the weekend—and the actual flying of flags, which is not the intention of 10 Downing Street.

I thank my noble friend the Minister for his renewed commitment to Europe, which he has just expressed. Is it not a pity that we do not fly the European flag a little bit more? The only European flags within the vicinity of this place and Whitehall are on the Slovenian embassy and the former headquarters of the Conservative Party, which is now the European Commission and the European Parliament. That historical irony could now be built on if the Government were bold enough to fly the European flag alongside the union flag, which is the routine of all other member states.

Some departments and some public institutions do fly the flag if they wish to do so. I repeat to my noble friend that the flying of flags is not connected with the very strong policy we have in relation to the European Union, in which we are paying a very active part and dare I say a slightly more successful part in some areas than was the case under the previous Government.

My Lords, would the Minister accept that the flag that is being talked about should not be referred to as a European Union flag? It is also the flag of the Council of Europe, and it was its flag long before it was adopted by the European Union. In view of the fact that later this year we assume the presidency of the Council of Ministers of the Council of Europe, will he make sure that we do not cause unnecessary offence during our presidency?

Of course one will make sure of that. I do not think I said “European Union flag”; if I did, it was certainly a slip of the tongue because rather than talking about the European flag, I was referring to the union flag of this union in which we live.

My Lords, given the growing anger of the British people with our EU membership, do the Government agree that they were, for once, rather wise not to fly the Union flag on Europe Day? Do the Government also agree that the British people are not fools, so they can clearly see that the riots in Greece—and soon elsewhere—are caused entirely by the euro and by the failing project of European integration? Would it not be better to get rid of the wretched flag altogether, especially as it has no legal status whatever?

The noble Lord is making the same mistake as others in associating the hoisting and waving of flags with policy, which is a quite different issue. He also raises broader questions about the position of Greece and the eurozone. Undoubtedly there are major problems, and my right honourable friend the Prime Minister and other right honourable friends have been taking a very active part in working to see that the eurozone system is at least able to stay together for the time being to buy time in order that longer-term solutions can be put in place. It is in our interests that the eurozone should prosper and not undermine the European economic system.

My Lords, in so far as our own national flag can be flown upside down as a sign of disaster, is it not possible that we could apply the same rule to the Union flag and perhaps resolve everyone’s difficulties?

I am not too expert on the art of flags. Indeed, there is a complicated word that I have forgotten to describe the whole philosophy of flag flying. I am sure one of your Lordships will know it. As to flying flags upside down, I think I would recognise when the union jack is upside down but I am not sure I would recognise whether the round stars of the European Union were upside down or the right way up.

My Lords, the Minister assures us today, as he has throughout the passage of the European Union Bill in this House, that this is a pro-EU Government. Will he now persuade his Prime Minister to make for the first time a major speech explaining our interdependence with the European Union and the eurozone, and how the stability of our banks and our prospects for economic growth depend on it, instead of saying that we simply will not pay a penny? Is it not time that the Government started to fly the flag for our membership of the European Union in a real sense when they talk to the media in this country?

I do not know where the noble Lord has been these past few days. My right honourable friend the Prime Minister needs no persuading and has made his position absolutely clear. As he pointed out in the other place the other day, the conclusion statement from the last European Council meeting included, at his behest, the crucial words:

“All necessary measures fully consistent with international standards must be rapidly taken to address any possible banking vulnerabilities brought to light by these stress tests”,

and by the developments over the situation in Greece. My right honourable friend is perfectly well aware of the vital importance of maintaining economic stability in Europe and the recovery of the economies in difficulties. No persuasion is required.

My Lords, does the Minister not recognise that what he has just recounted is quite different from the kind of major speech that the noble Lord, Lord Liddle, has called for? Is it not true that the Minister has given the impression that we are wonderfully clear of any problems because the eurozone crisis is a matter for the Europeans and that all we are concerned about is not paying any money?

I seem to be finding difficulty in communicating today because I have just given the opposite impression in great detail. I quoted my right honourable friend; I quote many other Ministers and I could quote myself ad nauseam. We are all extremely concerned with the stability of the eurozone. Going back 10 years, I admit it is perfectly true that some of us might not have thought that the idea of the eurozone was going to be perfect sweetness and roses all the way and there has been some proof of that. However, now it is here we have to make this work and see that the southern countries of Europe can overcome their terrible economic difficulties. It is utterly in our interests to do so, as my right honourable friends have said again and again. There is no such alternative impression.

I speak as a former European Union commissioner.

Hear, hear.

Thank you for that. Many people will regard the action of the Government as rather small-minded and counterproductive. How do the Government see their way to advancing the interests of this country, rather than diminishing it? Is the Government’s attitude not to be deplored?

The noble Lord was a very distinguished commissioner, as we all know, but on this matter he is again associating No. 10’s wish to fly the flags that I described with a symbolism far beyond the reality. The reality is that decisions about flags are one matter and our policy, commitment, strategy and the centrality of the European Union in our foreign policy are another, to which we give the greatest possible importance and adherence.

To ask Her Majesty’s Government what events they are planning to mark the centenary of the Parliament Act 1911.

My Lords, the Government have no current plans to mark the centenary of the Parliament Act.

I am sorry that that is the Minister’s Answer. On 18 August 1911, there was an historic Act that changed the face of Parliament. While we are celebrating all this year the Armada, the Battle of Trafalgar, the Battle of Waterloo and the wives of Henry VIII, is it not time that we thought of the magnificent achievements of the last century in health, education and the extension of democracy? Is it not time that somehow this House and this Parliament were able to celebrate the more recent achievements of Parliament?

My Lords, I am all in favour of celebrating the achievements of Parliament and indeed of the last century and the many changes that took place. I am not entirely convinced that the Parliament Act was a victory for this House. In fact, it marked the time when we lost considerable power out of the foolishness of our predecessors. However, for those who wish to celebrate, I understand that on Saturday 16 July, from 7 pm to 11 pm, BBC Parliament will show a continuous programme on the causes and effects of the Parliament Act 1911.

My Lords, is the noble Lord aware that in 1911 Lloyd George and many other Liberals were totally opposed to an elected House of Lords on the grounds that it would be much more reactionary on social reform by including, as he put it, people like glorified grocers? Apologies if there are any noble Lords who fulfil that description. Therefore, is not the Government’s proposed legislation on the House of Lords a totally inappropriate sequel to the Parliament Act?

No, my Lords, I could not possibly agree with that. I am surprised by what the noble Lord says, with all his knowledge about Lloyd George. You have only to read the preamble to the 1911 Act to understand that those who passed it clearly wished and hoped fervently for an elected House in due course.

On the issue of a preamble—I am sure that its words are constantly in the forefront of the noble Lord’s mind—is it not the case that it is a massive misconception to believe there was any reference in it to an elected House? What was anticipated was a more popular House—a much broader concept than an elected House. Is it not the case that 47 years later, with the Life Peerages Act 1958, that was greatly achieved? It created a balance of gender, geography, ethnicity and background which is so necessary for a reviewing Chamber.

My Lords, I agree with the noble Lord that the passing of the 1958 Act was a significant moment and a significant improvement in the selection of Members of this House. I have no idea whether it was influenced in any way by what happened in 1911. All I know is that at the previous general election all three main parties stood on a manifesto in favour of an elected House.

My Lords, will the noble Lord give an assurance that the Government are not using the opportunity provided by the centenary to plan on using the Act for that purpose in the event that they were stupid enough to bring forward a Bill in, say, 2013-14?

My Lords, that was a very complicated formulation. I think the noble Lord was asking whether we would use the Parliament Act to pass a new Parliament Act. I have said before—no doubt I shall be asked this many times—that the Parliament Act is part of a process when the two Houses disagree over a piece of legislation. There is no such legislation before the two Houses and no disagreement. Therefore, at the moment there is no prospect of using the Parliament Act. However, if such a Bill were brought forward, the Parliament Act would be available.

My Lords, could we not be constructive on this? Could we not commemorate the Act by unveiling a plaque in this House to commemorate the wonderful achievements, as Members of this House, of the Earl of Oxford and Asquith and Earl Lloyd George?

My Lords, if my noble friend were to put forward a proposal to the House authorities, I am sure that the appropriate committee would consider it most seriously. However, 1911 was an interesting year for Acts that we rarely think about. The Geneva Convention Act was passed in 1911, the Official Secrets Act was passed in 1911 and the Factory and Workshop (Cotton Cloth Factories) Act was also passed in 1911.

My Lords, I do not want to be accused of driving a wedge between the two parties of the coalition, but will the noble Lord confirm what he appeared to say in answer to the noble Lord, Lord Roberts of Llandudno? There was, in his Answer, a sense of sadness and nostalgia at the passing of the Parliament Act, which diminished the powers of this House. The noble Lord is a leading member of the Government. Is it the Government’s position that they regret the passing of the Parliament Act?

My Lords, the Government’s position is that we have no current plans to mark the centenary of the Parliament Act. In answer to the Question from my noble friend Lord Roberts of Llandudno, I wondered whether it was appropriate for this House to celebrate the passing of the Act when it removed so much power from us, which might well have been used exceptionally wisely over the succeeding 100 years.

My Lords, after their rip-roaring performances in last week’s debate, would it not be appropriate to commission a production of Gilbert and Sullivan’s “Iolanthe”, with starring performances from my noble friend Lord McNally and the noble Baroness, Lady Boothroyd?

My Lords, I am sure that another outing by my noble friend Lord McNally would be a show-stopper.

My Lords, I am sure that one of the tasks of the newly appointed Joint Committee will be precisely to look at the workings and applicability of the Parliament Act. Might it not be a good idea, to mark the centenary of the Parliament Act with further tangible House of Lords reform, to ask the Joint Committee also to undertake an immediate report on the Steel Bill, which would help the House and Government decide on the best course of action when the House returns in October? I understand that the noble Lord’s Bill might be debated then.

I am all for debate on that Bill. We should let the Joint Committee do its work. It has its terms of reference. If it feels the need to look at the Parliament Act, it should do so.

To ask Her Majesty’s Government what is their reaction to the views, recently reported by the media, of senior serving officers about the overstretch of the Armed Forces as a result of involvement in current military operations.

My Lords, the vital expertise of military personnel is fundamental in the decisions made by the Government in operational matters. There are a number of fora at which Ministers and military chiefs routinely discuss operational issues, and the three service chiefs will retain the right of open access to the Defence Secretary and to the Prime Minister. At all levels of the MoD, service personnel and policy staff interact on a daily basis.

My Lords, will the Minister confirm that the Prime Minister and the Government are satisfied with the professional military advice of the chiefs of staff on current and future operations? While there can be every expectation that operations over in Libya will continue as long as is necessary, is it not inevitable that shortages of manpower, equipment and finance mean that other commitments may be adversely impacted?

My Lords, I can give the noble and gallant Lord the confirmation that he has asked for. I cannot praise the chiefs enough. They are showing very strong leadership at a difficult time and when we are fighting two wars. As regards the noble and gallant Lord’s second question, as recent events have demonstrated, we are still capable of making a major contribution to NATO operations. In Libya we are the third largest contributor after the United States and France, while maintaining our efforts in Afghanistan and meeting our other standing commitments.

My Lords, in the Statement yesterday on the structure and management of the Ministry of Defence, the Government said that service chiefs would run their individual service and also be accountable for their budgets and delivering strategy. Under the new regime, with greater accountability by service chiefs, are the Government saying that service chiefs will not be allowed to speak out on concerns about the overstretch of the Armed Forces if they believe the resources they have been given do not enable them to implement the strategy commitments they have been told to deliver?

My Lords, as I said, the chiefs have the right, whenever they want, to talk to the Secretary of State for Defence and to the Prime Minister—that is the proper way to do it.

My Lords, can my noble friend confirm that with regard to Libya, whatever resources are necessary to see the matter through to a successful conclusion will continue to be made available?

My Lords, I can confirm that. The Treasury has agreed to meet these costs from the reserves and, as the Chief of the Defence Staff has said, we can sustain this operation as long as we choose. On that I am absolutely clear.

My Lords, will the Minister confirm that it is a very widely held view in the Armed Forces and elsewhere—and I know him to be a thoughtful Minister on this—that we cannot go on with the assumption that there is no need to review the White Paper on defence? Frankly, both foreign policy and defence issues have changed so much in recent times that not to revisit it would be a disservice to our Armed Forces.

My Lords, the SDSR was based on a thorough, realistic assessment of the threats we face now and could face in the future. It ensures that we can continue to conduct operations today while preparing our future force. Our rapid and highly effective contribution to the NATO mission to protect the Libyan people is testament to the flexibility and professionalism of our Armed Forces and proof that the UK has the capability to project power and influence at very short notice.

My Lords, following the question that has just been asked, would the Minister accept that Britain’s ability to resource recent and additional deployments—deployments that would not have been possible a few months later—draws into question the very plans that have been discussed? Is there not now a very good reason why they ought to be reviewed again in light of the increasingly unstable international position?

My Lords, the Government will continue to provide sufficient resources to achieve operational success in Libya, Afghanistan and elsewhere. We are quite clear that we can manage what we are being asked to do in Afghanistan and Libya at the present time.

My Lords, last week we welcomed back 16 Air Assault Brigade after its third tour in Afghanistan. One of its officers told me that our kit in theatre is now the envy of US forces—specifically the lightweight helmet, body armour, small rucksack and even boots. Given that each day the MoD unfortunately seems to be getting a kicking on procurement issues, will my noble friend take back to Main Building a good news story, for once?

I am very grateful to my noble friend and I entirely agree with him. I know that he was able to inspect with me the latest equipment and clothing issued to troops, including the advances in personal protection, that were on display in Portcullis House earlier this year. This is a good news story, and there is no doubt that these advances, such as those that my noble friend mentioned, are helping to save many lives in theatre.

My Lords, this is a substantial group of amendments that includes several government amendments. Perhaps I can put our amendments into some context and address the issues raised by the other amendments in this group.

Our amendments set out the requirement for relevant authorities to approve and publish a pay policy statement which, in addition to the measures already in the Bill, must set out an authority’s policies on remuneration of its lowest-paid employees and the relationship between the remuneration of its chief officers and the rest of its workforce. As Will Hutton set out in his report on fair pay in the public sector, published on 15 March, there is value in ensuring that decisions about senior pay are taken in the context of similar decisions on lower-paid staff. Such an approach broadens the debate beyond discussion about salary amounts of top earners and into whether the pay of those individuals is justified.

These measures, therefore, further increase local democratic accountability and transparency over how decisions on pay are made, and embody the commitment given by Ministers to reflect on the measures in the light of Hutton’s report. The measures seek to minimise the potential burden on authorities and ensure that decisions on pay remain ones for individual employers to take locally.

The opposition amendments would take those measures beyond the scope of pay accountability. Our intention, through the provisions in the Bill and our amendments, is to bring greater accountability and transparency to an authority’s approach to remuneration of its own employees. We do not seek to prescribe what the approach should be by requiring authorities to publish a list of numbers, or by roaming about on other matters such as local decisions around recruitment or engagement with providers—which would be the effect of the opposition amendments. Our Amendment 101, in its requirements relating to the remuneration of the lowest-paid employees, is broader than the Opposition’s proposal and will lead to the publication of policies in a rounder way than by focusing on policies relating to total salary costs and numbers of staff, which is what Amendment 101A would achieve.

Amendment 101 would require authorities to disclose their policies on the relationship between remuneration of their chief officers and the rest of their employees, including the lowest paid. We do not feel it necessary to require authorities to break down their policies in this regard in the way proposed in Amendment 101A. Indeed, Will Hutton, in his report on fair pay in the public sector, highlights that, in seeking to measure pay dispersion using a pay multiple, comparison between top and lowest pay is not the most effective approach. As we have made clear, charities, voluntary organisations and businesses—particularly small businesses—have repeatedly called for the amount of regulation and red tape surrounding local government contracts to be reduced. I am sure that noble Lords opposite agree with that general principle. In this context, it is not appropriate to use this Bill to impose further duties on authorities to have policies relating to the pay of those who work for an organisation with which it contracts.

Nothing in the Bill limits the extent of information that an authority may include in its pay policy statement. Authorities may take the local view to include any other policies as they think fit. This could include policies on contracting staff where they have developed them locally. We will undertake to make this clear in guidance rather than set it out in the Bill.

I am grateful to my noble friend Lord True for his work in submitting Amendment 105. Perhaps I can reassure him and other noble Lords that local authorities must always abide by relevant employment legislation when carrying out their duties as employers. This obligation extends to the formation of their policies on pay. Pay policy statements are intended to be an articulation of such policies. The measures that we are introducing do not take precedence over employment law. A pay policy statement could not be lawfully used by relevant authorities to sanction matters that are not in line with their existing legal duties and obligations. Similarly, any changes to policies included in a published pay policy statement, which must be approved by a full council, must also adhere to requirements placed on authorities as employers under employment legislation. We can undertake to reinforce this position in guidance, to which authorities must have regard. We believe that this will achieve the aims of the amendment without it being necessary to remind authorities of their duties as employers as set out in the Bill. I hope that I have assisted the Committee in its consideration of this matter. I beg to move Amendment 99.

My Lords, first, I thank the noble Lord for introducing the government amendments. Indeed, I thank the Government for bringing forward the proposals, which build on the debate in the other place. I see that he has taken the opportunity to get his retaliation in first on our amendments. I will speak to Amendments 101A, 101B, 102A and 108B.

When these matters were addressed on Report in another place, the Minister, Andrew Stunell, said that Will Hutton’s report,

“made some clear recommendations, particularly about the benefit of setting decisions on senior pay in the context of the pay of the rest of a body’s work force”—

meaning the median earnings, and I accept that point. He continued:

“We are sympathetic to that idea, particularly the potential for linking lower pay with senior pay”—

so the Minister in the other place focused on low pay as well. He went on to say that he did,

“not think it would be helpful to use the Bill to address the pay of contracting bodies”,

which is consistent with what the noble Lord just said. However, he then went on to state,

“That does not prevent a local authority from developing a local policy to ensure that bodies with which it contracts are open about their rates of pay as a matter of contract”.—[Official Report, Commons, 17/5/11; cols. 210-11.]

Although significant growth in executive pay is largely a private sector phenomenon, we support the thrust of greater transparency. We also support the Government’s approach to tackling this in the manner provided, rather than as in the other two options set out in the impact assessment. As the fair pay report also concludes, evaluating these by benchmarking off the salary of the Prime Minister is a nonsense, particularly if you add in the benefits that the Prime Minister gets, which include a central London flat with access to rather a large garden, not to mention the odd country estate. A more realistic figure of his remuneration might be in excess of £0.5 million a year. However, the report also concludes that putting in limits of fixed multiples of lowest pay would, in a sense, be unfair as well.

My Lords, perhaps I can speak briefly to Amendment 105 but before doing so, I pray the indulgence of the Committee if the debate is prolonged, as I have amendments to the Education Bill in Grand Committee. I mean no offence if I have to withdraw at some point. I should also say in preamble that, having seen the news yesterday on the transparency of Transport for London and given the matters we will be considering in Clause 206, I wonder whether “a relevant authority” might include Transport for London within the meaning of these clauses.

I am grateful for my noble friend’s remarks, but my concern is about politically inspired resolutions put to local authorities, particularly in the run-up to elections. I accept that the wording of my amendment may not be correct. I am not someone who has argued for extensive regulation but we have seen, even from such an august person as the Secretary of State, that public comment on the level of senior officers’ pay attracts the attention—often very approving attention—of the press. My fear is that, notwithstanding the niceties of employment law and the effective risk of constructive dismissal, in the approach to an election it would be unbearably tempting for a minority party in a local authority to lay a resolution calling, say, for the reduction of chief officers’ pay by 10, 15 or 20 per cent. Why stop there? “Vote for us and we will cut senior officers’ pay”.

In those circumstances it is politically quite difficult for the governing party in a local authority to resist such a proposal if put as a resolution to a council. Any member of a council can put forward a resolution just as any noble Lord can put forward a proposal here. Clause 23(4) makes it absolutely clear that, including after the beginning of the financial year in which a senior officer’s pay statement has been laid, it is perfectly in order for a local authority to seek to change that pay statement. So while I am not calling more regulation down on the heads of local authorities, I warn my noble friend that there is an extremely high risk in the six months before elections of competitive resolutions being laid to reduce the pay of members in authority, which might have pernicious effects and could, in some cases, be contrary to employment law.

Having asked my noble friend to consider the matter, I am grateful for the consideration he has given so far and I am reassured by some of the things he has said on the point, but I hope that, in considering any guidance, he will take very seriously the points that have been made. It would be a great pity to see a rash of resolutions coming out of local authorities asking the impossible of senior officers, who are in most cases distinguished public servants doing their best for local people.

My Lords, I understand the noble Lord’s point, but I have to say that it would be a huge infraction on the responsibilities and rights of elected members of councils to indicate what might go on a council agenda and what might not. That is going much too far. Although I expect members to behave responsibly, if they are irresponsible, it would be the task of those answering such a resolution to make the case. We ought to have the self-confidence to do that, so I do not think, with all respect to the noble Lord, that his amendment should progress.

I seek some assurances from the Minister, to see whether I have understood him correctly, apart from anything else. Later—many, many hours later—we will come to the question of the community infrastructure levy and whether or not it should be a material consideration in determining planning matters. There will, I think, be quite strong views about that. I wonder, having heard the Minister, whether it will be permissible for councils to take into account the factors referred to in my noble friend’s amendment as a material consideration in the awarding of contracts. If I understood him correctly, the noble Lord indicated that that would be permissible, although it should not be prescribed, and I can understand that position. Perhaps he will confirm or disabuse me of that notion.

I also ask the noble Lord whether he has a view on the living wage, which has been espoused—I think before an election but certainly after an election, to revert to the point of the noble Lord, Lord True—by no less a person than the Mayor of London, who has adopted the concept initiated by his predecessor of promoting the living wage. Does he accept that it is right for councils, if they choose, to adopt such a policy in respect of their own authorities and to seek to reflect that in the conditions upon which they let contracts?

My Lords, this has been a short but very useful debate on a very important aspect of local government policy. I assure noble Lords that the guidance which will be issued will take note of issues raised in this debate. While we may not agree on all aspects, there appears to be a good deal of consensus that the Government’s approach on senior pay is to be welcomed as, indeed, are the requirements of our amendments for a pay policy statement. I am grateful to the noble Lord for lending his support to that concept.

Our amendments build on that approach and will increase accountability for local decisions about the lowest paid in the local government workforce. I say local decisions deliberately. The Government are quite clear that these decisions on pay and reward must remain ones for local determination. I hope that noble Lords opposite will acknowledge that the Government have fulfilled our commitment to reflect on discussions around low pay in the other place and brought forward appropriate amendments, as, indeed, we do today.

The Government did not undertake at that time to consider measures to increase duties on local authorities with regard to their relationship with bodies with whom they can contract. We believe such proposals would be burdensome. Charities, the voluntary sector and business have called for regulation around contracting to be reduced. There is general consensus that in order to achieve greater participation of the voluntary sector and small businesses in local government contracting, we need to make the process of contracting as simple as possible.

Before we conclude, I thank the Minister for what he said. We accept that from the Government’s perspective, they have fulfilled the obligation they made in the other place. As I said in speaking to my amendments, I do not think they have fulfilled it as fully as we would have liked, but when can we expect to see the guidance in this area? That would help our deliberations and could potentially preclude a return visit to this matter on Report.

In respect of the contribution by the noble Lord, Lord True, who is no longer in his place—I understand he has to be elsewhere—competitive resolutions are not quite the environment I would have expected. It is certainly not how we conduct politics in Luton, but it raises all sorts of interesting questions, not for debate now, about people addressing those resolutions on a predetermined basis.

I understand exactly what the noble Lord is referring to, but I hope it has expedited this debate to the advantage of the Committee. I cannot give an answer on when the guidance will be available. If I am able to get that information, I will write to the noble Lord.

My Lords, I expect your Lordships will be familiar with the provisions of the Local Democracy, Economic Development and Construction Act 2009, and specifically all the requirements laid down in Chapter 1. On the off-chance that all its details do not immediately spring to mind, perhaps I might be forgiven for outlining the relevant chapter.

The duties referred to relate to the promotion of democracy, and the Act sets out a number of issues upon which councils have a duty to promote understanding. They include the democratic arrangements of authorities: that is,

“(a) the functions of the authority;

(b) the democratic arrangements of the authority;

(c) how members of the public can take part in those democratic arrangements and what is involved in taking part”.

The duty also includes:

“a duty to promote understanding of the following among local people—

(a) how to become a member of the principal local authority;

(b) what members of the principal local authority do;

(c) what support is available for members of the principal local authority”.

This is obviously designed to encourage greater participation and greater willingness on the part of people to stand for election and to serve as elected councillors.

In addition, the Act requires councils to promote the understanding of and information about a range of other organisations with which local councils are connected: for example, monitoring boards, courts boards and youth offending teams. The Act also requires councils to promote understanding among local people about the magistracy:

“(a) the functions of a lay justice;

(b) how a member of the public can become a lay justice;

(c) what is involved in being a lay justice”.

These are fairly simple tools with which to promote the involvement of people in local governance—using the term broadly—with both local authorities and, as I have indicated and as the Act makes clear, a range of other local institutions that impinge upon the life of the community and are very often dependent on the voluntary participation of members of that community. They are examples of engagement with society which any Government, including the present one, would presumably wish to encourage very strongly. I therefore do not understand why this Bill seeks to remove that duty. This Bill purports to be about localism and local government, about involving people in the decisions affecting their lives and those of their community, about encouraging wider civic responsibility, so why does this clause remove a basic, not particularly elaborate or expensive, duty to promote exactly that? What is this clause doing in this Bill?

My Lords, the noble Lord began by suggesting that we might not remember the provisions of the local democracy and everything else Bill. Some of us in this House remember it only too vividly. The noble Lord had the good fortune, if I might say so, not to have been a Member of the House then, but I remind your Lordships that we spent many, many hours on this part of that Bill.

The short answer to the noble Lord’s question as to why my noble friends and I rejoice at this clause is prescription. We spend many hours in this House, including on this Bill, complaining about central government prescribing in detail to local government what it should and should not do, what it can and cannot do, and even more particularly how it should do it. That is what Part 1 of the Local Democracy, Economic Development and Construction Bill did in enormous detail. I am sure my noble friend Lord Greaves will remind us exactly how many pages, words and possibly even letters it took to do this. That Bill started in your Lordships’ House and we spent a long time trying to improve that part of it, arguing that it was not the business of central government to prescribe exactly what local government should do and how they should do these things. Of course we should promote democracy. Of course we should encourage all these things. All good local authorities of whatever political control are already doing that. They have been doing it, in most cases very successfully, for many years and will carry on doing so whether there is an Act of Parliament requiring them to do so or not. So I, for one, rejoice at this clause, and this might be one of the few times I say that during this Committee.

My Lords, I underline what my noble friend has just said. I am sorry that the noble Baroness, Lady Andrews, is not here to take part in the discussion today because she was the Minister who had to take this nonsense through the House. She did it with great composure and good manners, although I am not sure what she secretly thought about it. The other Minister involved was the noble Lord, Lord Patel of Bradford, who is here. Perhaps he can tell us whether he is quite as appalled that this duty is going as the noble Lord, Lord Beecham, suggested.

I regret to say that I, too, am extremely familiar with the Local Democracy, Economic Development and Construction Act 2009, particularly this part of it, and it is seriously flawed. As an explanation of local democratic involvement, it completely missed out the voluntary sector, local partnerships and so on, which some of us tried to put in but failed. As my noble friend said, it is extremely prescriptive. If it is localism, it is top-down localism of the kind that we are criticising in this Bill, and it is very pleasant to see that this Bill is getting rid of a bit of that.

The effect that this part of the Act has had since it was passed appears to have been zero in most parts of the country. I am not aware of any authority having done anything significant as a result of this legislation, and in two-tier areas it set up a ridiculous bureaucratic system of exchange of information. Again, I have no idea how many councils have actually been carrying out this duty, but I suspect that a lot of them have just been ignoring the legislation because it was fairly useless. So I, too, rejoice that this duty is going, and I wish that the spirit behind this clause was more prevalent in some other parts of this Bill.

My Lords, I will not please you all but I thank noble Lords who have taken part in this debate. This clause removes the duty on principal local authorities in England and Wales to provide information to people about how local government systems work. This might include providing information on the role of councillors, councils, relevant public bodies, civic roles and so forth. As has been indicated, it was part of the Local Democracy, Economic Development and Construction Act 2009. My noble friend Lord Greaves has not heard much about it is because the duty has not yet commenced and therefore its repeal will have no significant impact on authorities. We therefore wish to remove it from the statute book as it would constitute, if it were to be enacted, an unnecessary burden on local authorities.

The Government are committed to enhancing local democracy, but they also want to guard against adding costly burdens to local authorities. Many authorities are already doing lots of good work to provide information to people about local government systems without having a duty placed on them to do so.

My Lords, I entirely agree with noble Lords who reject the notion of overprescription in this or any other part of the Bill. However, removing a duty to promote democracy altogether sends an unfortunate signal. I note that the noble Lord, Lord Greaves, seemed to admit that he wanted to add to prescription when the Bill was originally debated because he wanted to include bodies to which reference is not made, which is a slight inconsistency.

In my defence, I should say that there are two lines of attack for Governments, although I should not use that phrase at the moment. The first is that the whole thing should not exist. The second is that if it does exist, we should try to improve it, which is our view on a lot of this Bill. If this was such a wonderful thing, why did the previous Government spend two years after the Bill was enacted not commencing this part?

The noble Lord will be aware that, no doubt for good reasons, I was not a member of the previous Labour Government and I cannot answer for them. They did not do everything that we would have wished in local government. Perhaps this matter did not achieve the priority that some of us would have liked. In replying, the Minister is right to point out possible costs of the detailed guidance that his civil servants are so ready to produce. Of course, that does not mean that that degree of prescription is unnecessarily desirable and that the costs will necessarily have been incurred.

If we want to encourage participation in local government and voter turnout, the people standing for election or seeking to serve their community as magistrates need encouragement and information. The community as a whole needs to be informed about what its local authority can and cannot do, and how it might be influenced. Much of the Bill is about those processes going on in different ways at different levels. The duty would have reinforced the thrust of the Bill. With respect, I still do not see why it is being removed.

I note that the noble Lord, Lord Shipley, is not in his place. Perhaps his two colleagues have taken him to one side because he subscribed to my amendment.

My Lords, I would never presume to take my noble friend Lord Shipley to one side, not least because he is considerably larger than me. My noble friend is not able to be with us for a short time because he is attending the Economic Affairs Committee of the House.

Indeed, but had he been here, I assume he would have supported the amendment to which he has ascribed his name, and with his long experience of local government—including as leader of the council in which we both serve—I would have thought that might carry some weight with his colleagues, but apparently not.

However, I hope it will be recognised that all of us have a responsibility in public and political life to encourage greater participation. If we are not going to do it under the auspices of a duty, let us at least in our various capacities endeavour to do it more broadly, because local democracy needs that kind of support.

Lord Beecham: This is another example, and I think I can anticipate the response that I am likely to receive from the noble Lords, Lord Tope and Lord Greaves, and the Minister. I would invite them to think a little more carefully about this, and, again, I would accept in advance criticisms about the degree of prescription. It does not seem to be necessary or desirable for Government to lay down how things should be done, as opposed to setting out, in some areas, what should be done. In this instance, we are faced with a less satisfactory alternative to the process of petitioning, which would require public petitions to be dealt with in a systematic and proper way, including consideration at a meeting of an authority, holding an inquiry, commissioning of research, giving a written response. These are a variety of ways of dealing with public petitions, and for that matter holding officers of the council to account.

The Bill proposes a different method, which I consider to be less satisfactory and which I believe the noble Lords may also consider unsatisfactory, which is the system of local referendums. We will debate it later today, no doubt. This is a much more elaborate system in a different context, because in that case one is seeking the opinion of a community on a simple proposition, subject to a referendum with little authority, given that there will hardly be a significant threshold to call a referendum, let alone in respect of turnout. This is a much more elaborate and expensive way of doing things than dealing with petitions properly and encouraging them to come forward.

Again, I do not understand why the Government feel it necessary to remove these provisions, accepting, again, that the prescriptive element is otiose and could be dispensed with. Petitions are a better way for the public to draw attention to matters with which they are concerned, and for the public to get a response to those concerns in a reasonably structured way. It is true that in some councils there is a process for public petitions—certainly, in my council there is, and no doubt others as well—but it is not universal, and it is not something which is sufficiently developed. In terms of local accountability and transparency, petitioning is a good method, and preferable to the alternative which is enshrined in the Bill. I ask the Government to reconsider this clause. Even if local referendums remain, which will be debated later, and perhaps a view taken on report, it is not mutually exclusive, and the petitioning process could be left as it now stands in the Bill.

My Lords, I do not want to disappoint the noble Lord, Lord Beecham, and I will not do so. Once again, I rejoice at this clause and very much wish it to stand part of the Bill, unlike my noble friend, Lord Shipley, and the noble Lord, Lord Beecham. We spent many hours—I have a recollection that it was probably many days—on this part of the Bill. We discussed pages and pages in extraordinary detail, debating how to collect, submit, and process petitions. When the Bill started in your Lordships’ House, the debate seemed to be based entirely on the premise that a petition to a local council was of the same format and standing as a petition to Parliament. In fact, all of us who have been councillors will have seen petitions to councils, and know that they are not usually the most formal documents you are likely to come across. They are of their nature at their best, because they are collected by and within the local community and do not have any formal standing or, often, any formal wording, as was originally suggested in the Bill.

We asked for evidence during all of this that local authorities were not dealing properly with petitions. I find it hard to believe that there can be a local authority of any size in the country that does not receive petitions. I wanted evidence that they were not dealing with them properly. The one merit of our hours of debate was that we discovered that quite a lot of local authorities, including the local authority of the then Secretary of State, did not adequately describe their procedure for dealing with petitions on their websites. The fault was not so much with the procedures of the council as with the adequacy of their websites. My own authority, and I am sure many others, improved their websites considerably as a result. That was a useful outcome, but it justified neither the hours that we spent on it nor the fact that it was all laid down in such prescriptive detail in a Bill.

The other useful factor of the debate was that it addressed the rather more modern issue of e-petitions, to which some local authorities probably had not then given sufficient attention. As a result of the Bill, and subsequently the Act, some authorities, including my own, probably gave them more consideration and put them on their websites.

We do not need an Act of Parliament to do that; we do not need pages and pages of prescription to do that; it is quite simply good practice, which could, possibly was and certainly should have been disseminated by the Local Government Association, in which the noble Lord, Lord Beecham, played such a leading part. I shall not disappoint the noble Lord: I once again rejoice at this clause.

My Lords, I cannot resist adding just a little bit to what has been said. I went back to the Local Democracy, Economic Development and Construction Act when I saw Clause 29 stand part on the Marshalled List. There are in it 10 pages of detailed, prescriptive instructions to local authorities about how to receive petitions. Our discussions on that part of the Bill were extremely long, and I hold my hands up and say I was largely responsible for that. I remember my noble friend Lord Tope, having arrived back from one of his European trips, coming into the Moses Room, where we were discussing the Bill in Committee, and saying, “Good heavens! You’re not still on petitions, are you?”. But we were. I again pay tribute to the two then Ministers, including the noble Lord, Lord Patel, who is in his place, for making some effort to improve that part of the Bill. I think that it was 14 or 15 pages when it started off, and we at least got it down to 10.

My view is that very few authorities have taken petitions through this system, and that most petitions to local authorities since the legislation came into operation have continued to be dealt with as they always have been. I do not think that my own council has had a single one. We have had one or two that appeared to qualify. In those cases, we have suggested that the petitioners do what everybody else does and just go along to the area committee, talk to the petition in the normal way, and get it dealt with within days rather than the weeks and weeks of bureaucratic procedure set out in that part of the Bill. So I, too, rejoice that this nonsense has gone. I agree entirely with the noble Lord, Lord Beecham, that we are getting a bigger and more dangerous nonsense, which we will discuss later on today.

My Lords, I am delighted to respond once more to further rejoicing. I thank the noble Lords for their contributions.

At present, local authorities are required to make, publish and comply with a scheme for the handling of petitions made to the authority. It must include centrally prescribed information, and the scheme and any subsequent changes to it must be approved by a meeting of the full council. Local authorities are also required to provide a facility for making electronic petitions to the authority.

The current legislation means that local authorities must respond to a petition in a certain way and must hold a full council debate if it is signed by the number of people specified in the council’s petition scheme. Senior officers can also be called to account and are required to take part in a public meeting if a petition meets a signature threshold. Petitioners can request that the council’s overview and scrutiny committee reviews the council’s response to the petition if it feels it is not adequate. The prescription and cumbersome bureaucracy this has piled on local authorities is unjustifiable. I am not aware of any evidence that the service received by local people has improved, yet unlike the previous matter it has already resulted in a burden of £4.2 million across the sector, as well as money spent on set-up costs.

I thank the Minister for this reply. His council’s example is one that many councils follow and would have followed without the legislation and if the legislation goes will continue to follow it. However, that does not necessarily mean that all councils will do that. This ought to be the general practice. The Minister referred to consideration at a meeting or referral to an overview and scrutiny committee. These are examples of good practice which ought to be universal not optional. Again, taking the point about overprescription in terms of the details of how things are to done, I am sorry that the principle of a universal approach to enhancing local democracy, which the Minister and his noble friends will undoubtedly endorse, will suffer as a result of the removal of this duty. It is of a piece with the inconsistent approach that the Government are adopting in this Bill which, as the noble Lord, Lord Greaves, has confirmed, we will be discussing later and in a form which is certainly worse than the worst allegations that could be made about the section which the Government propose to amend and delete from the 2009 Act.

My Lords, this is a different matter. We are now on to a substantive issue which the Government seek to introduce into the law of the land and to bind into the practice of local authorities.

I understand that John Major as Prime Minister was a great devotee of the novels of Trollope, regularly reading them, and I think his predecessor Harold Macmillan was much the same. I am wondering whether the present Secretary of State, Mr Pickles, has become a devotee of Dickens. He seems to be metamorphosing into a fusion of Dickens’ characters—a combination of Wackford Squeers, Mr Bumble and Gradgrind, leavened by a dash of Mr Pickwick. However, he is now developing, and has for some time developed, an obsession with waste and refuse collection. This seems to add Boffin, the golden dustman, to the cast list of Dickens’ characters which he is absorbing into his persona. I have never understood the Secretary of State's obsession with this issue. He has, to put it mildly, irritated local politicians of all parties, including the then chairman of the relevant board of the Local Government Association, Paul Bettison—a leading member of the Conservative Party and a leading figure in Conservative local government circles—by suggesting that charge and waste reduction schemes should not be implemented. He has, of course, opined many times about the number of refuse collections that should take place nationally.

First, this obsession seems inappropriate in any event for a Secretary of State. Secondly, one has to ask: what is a specific provision on a particular service doing in a Bill about localism? The Bill makes considerable play of giving councils a power of general competence and talks about the role of local government generally and of local communities, while Ministers frequently refer to the need to avoid prescription—we have heard that more than once this afternoon already. What could be more prescriptive than banning local authorities from a proposal to deal with waste problems, especially since the prescription that the Secretary of State would apply takes no notice of differences in localities or the implications for environmental issues such as recycling?

It is not as if the proposals about charging schemes were prescribed in their turn or as if councils had to embark on such policies. That would have been equally wrong because, again, different circumstances apply to different places. Even within an individual authority, there are areas where particular schemes would be appropriate and others where they are clearly not. It is obviously a matter for local decision but this Secretary of State, in his obsessive regard to this topic, seems to be intent on ruling out something that not many authorities have actually chosen to do. That is their choice. I do not think that many have gone in for those schemes so, again, the question has to be asked: why is this being inserted into the Bill? If it is to be a matter of political debate, should it not be debated rather than prescribed?

Noble Lords opposite have rejoiced at the abolition of prescription in the two areas which we have debated so far this afternoon. I hope they will join me in rejecting this considerable area of prescription that the Secretary of State wishes to impose on local government with absolutely no warrant at all, on the basis of evidence or of the public good.

My Lords, the noble Lord is persuasive in his arguments by suggesting that what is happening here is that the Government are removing the freedoms of local authorities, but it is not quite like that. The freedoms that he is talking about are very prescriptive and if he reads the particular part of the Climate Change Act, he will discover that. These waste reduction schemes are all nonsense, really. I keep using that word but I remember that this is another part of a Bill where I made a nuisance of myself in your Lordships’ House by detaining the House for probably too long while it was being debated and discussed.

The Bill refers to schemes relating to the amount of waste, the size and type of the containers and the frequency of collections. There was what was colloquially known at the time as the chip-in-bin scheme, where a chip in a bin would in some magic way measure the amount of waste being provided. There was the big bin and little bin scheme, where if you had a little bin you were okay and got it for free, but if you had a big bin you had to pay more for it, which affected large families. There was the pound-a-sack scheme, where you had to go and buy approved sacks for a pound each and fill them up—a scheme which was reported to have worked extremely well in Maastricht, but probably nowhere else. There was also a frequency of collection scheme, where you had a weekly collection, but if you wanted it more frequently you had to pay—the pay per day scheme. So these four schemes took on an iconic quality as far as the last Government were concerned, but they have never been brought into effect because they are not the way to go about it.

Rather unusually, what the Secretary of State is doing is championing a waste collection service that is a universal free service. That is what he is championing and I thought the Labour Party used to believe in such things. But not now, it wants the chips-in-bins and the pound-per-sacks schemes and all the rest of it. I am delighted to see this go. I wish we had been able to persuade the last Government that we should not have wasted all that time on legislation that was never introduced.

My Lords, Clause 30 removes powers that enable local authorities to run pilot waste reduction schemes. We announced our intention to remove these powers in June 2010. We believe that rewards rather than penalties are the best way to encourage people to reduce the amount of waste they produce. We wish to see local authorities helping householders to do the right thing with their waste, rather than punishing them for doing the wrong thing. We also consider that schemes which include fines based on the weight of residual waste left out by householders are likely to result in fly-tipping and other anti-social behaviour.

This Government are clear that rewarding householders for recycling or for reducing waste is to be encouraged; we want to help them to do the right thing. Removing these powers in the Climate Change Act will free up local authorities to use their broader well-being powers or general powers of competence, as appropriate, to provide rewards for waste reduction. Since their introduction there has been little appetite for using the Climate Change Act powers. No local authority has yet applied to take up a charge-and-reward scheme and no schemes will be dismantled as a result of their removal.

This clause simply removes Sections 71 to 75 of Part 5 and Schedule 5 from the Climate Change Act 2008. This will remove the provisions for waste reduction schemes but have no wider effect on the powers of, or burdens upon, local authorities. It is interesting that Royal Assent was on 26 November 2008, two and a half years ago, and no one has sought to bring this in. I therefore beg to move that these clauses stand part of the Bill.

My Lords, this is another case of local authorities having the power to do anything they like except what the Secretary of State decides they should not do. It is on a simple point of principle that this amendment is moved. I regret very much that the Minister and his noble friends do not seem to grasp the inconsistency inherent in their position, but so be it.

My Lords, I beg leave to repeat a Statement being made in another place by my right honourable friend Mr David Willetts.

“With permission, I would like to make a statement on the higher education White Paper. It sets out how our reforms will build on the changes to student support announced last year. We will put higher education back on to a sustainable financial footing. We will put students at the heart of the system, improving the academic experience, with universities and colleges more accountable to their students than ever before. We will also take steps to improve social mobility without compromising academic excellence or institutional autonomy.

We inherited an enormous deficit which required difficult decisions. We could have reduced student numbers, or spending per student, or provided less help with living costs. However, these options would have been unfair to students, to universities and to the country. Instead we are introducing a pay-as-you-earn system that provides more support for students, does not require reductions in student numbers and increases the cash flowing into higher education. We estimate there could be a cash increase in funding for higher education of around 10 per cent by 2014-15. Our reforms ensure that no first-time undergraduate will have to pay fees up front and asks them to contribute to the cost of their education only once they earn more than £21,000.

This increase in the repayment threshold—up from £15,000 under the current system—means that graduates will benefit from smaller monthly repayments than under the current system. For example, someone earning £20,000, the median starting salary for graduates, repays £38 a month under the system we inherited from the previous Government. In future they will pay nothing. At the moment, a graduate earning £36,000, the median salary for all graduates, pays £158 a month. Under our scheme, that falls to £113 a month. Our reforms also recognise that for many people higher education does not mean a full-time, residential degree. Some students want to work or take care of their family while studying. To support them, many part-time students and distance learners will become entitled to loans to cover their full tuition costs for the first time.

I can announce today that my right honourable friend the Secretary of State for Health and I have agreed that, for undergraduate medical and dentistry students starting their course in autumn 2012, the NHS bursary will be increased in years 5 and 6 to cover the full costs of tuition. For graduate entrants starting in autumn 2012, access to student loans will be made available so that there are no additional up-front tuition costs. We will consider arrangements for subsequent years. More information is being placed in the Libraries of both Houses.

These changes to higher education funding enable us to put financial power in the hands of learners. To make that effective we need to liberalise the system of quotas we inherited from the previous Government so that more students can go to universities that offer a good-quality, good-value student experience. The White Paper therefore proposes unconstrained recruitment of the roughly 65,000 high-achieving students who score the equivalent of AAB grades or above at A-level. Quotas for these students will be abolished and funding will go to whichever university offers them a place they accept. In addition, we will create a flexible margin of about 20,000 places to reward universities and colleges that combine good quality with value for money and with average tuition charge, after waivers, at or below £7,500 per year. This adds up to around 85,000 student places—roughly one in four places for new entrants—contestable between institutions in 2012-13. We aim to expand this further year after year.

We will also extend the scope for employers and charities to offer sponsorship for extra places, provided they do not create a cost liability for government and provided, of course, there is fair access for all applicants, regardless of ability to pay, and no sacrifice of academic standards.

These reforms put students in the driving seat. Putting this power to best effect means not just liberalising the quotas regime; prospective students also need to know far more about the academic experience on offer. We will therefore transform the information available to them about individual courses at individual institutions. Each institution will make available key items of information such as contact hours and job prospects. Information will also be available to outside bodies such as Which? to produce their own comparisons. It will lead universities to match their excellence in research with a high-quality academic experience.

We also want our universities to work with business to improve the job prospects of their graduates by providing the knowledge and skills that employers value. The sandwich course, which gives students practical experience of work, declined under the previous Labour Government. We want to reverse that. We have therefore asked Professor Sir Tim Wilson, who made the University of Hertfordshire one of our most business-friendly universities, to review how we can make England the best place in the world for university-industry collaboration. We want our universities to work with business across their teaching and research activities to promote better teaching, employer sponsorship, innovation and enterprise.

Student choice is more real if, as well as liberalising quotas and transforming information, there is a greater diversity of institutions to choose from. We will therefore remove the barriers to more provision from the Open University, further education colleges and private providers. We will simplify the regime for obtaining degree-awarding powers. We will also review the artificial barriers to smaller higher education institutions taking the title “University”.

We want students from a wide range of backgrounds to benefit from these reforms. We are increasing maintenance grants and loans for nearly all students. We are introducing a national scholarship programme and we will strengthen the Office for Fair Access to make sure institutions fulfil their outreach and retention obligations for people from disadvantaged groups. This will not be at the expense of institutional autonomy. The Director of Fair Access will continue to have a duty to protect academic freedom, including an institution’s right to decide who to admit and on what basis.

In order for universities and academics to focus on educating their students, we will strip back the burden of excessive regulation and form filling. We will explore whether it is possible to reduce costs associated with corporation tax returns. HMRC has today announced its consultation on the possibility of introducing a relief to remove some of the VAT barriers which currently deter institutions from sharing costs. We will reduce burdens from information collection. We will give power to students to trigger quality reviews where there are grounds for concern, yet cut back the burden of automatic review for high-performing institutions. The Higher Education Funding Council for England will be the lead regulator, taking on a new role as consumer champion for students and promoter of a competitive system.

We are now inviting people to comment on our proposals as part of a broad consultation. Subject to parliamentary time, this will be followed by a higher education Bill next year, to make the necessary legislative changes to deliver these reforms. This White Paper offers universities the prospect of more funding provided that they attract students. At the same time it saves money for the Exchequer by asking graduates to pay back more as their earnings increase.

Our universities already transform people’s life chances, and we expect them to do even more. We will protect their autonomy and reduce the regulatory burdens they face. Above all our proposals benefit students by driving universities to focus on the student experience. They will have real choice, with better information and a wider range of institutions to choose from. I commend this White Paper to the House”.

My Lords, that concludes the Statement.

My Lords, I thank the Minister for repeating the Statement on higher education made earlier today in another place. This White Paper is the third policy initiative in higher education in recent months, but instead of bringing forward policies to enhance and extend a higher education system which is the envy of the world, the White Paper is nothing more than a hastily put-together rescue package for the department, sheltering behind some vacuous notions of competition and quality.

The truth is that, having taken the disastrous decisions to cut teaching budgets, to cut funds for investing in research, to cut science funding by 10 per cent in real terms over the CSR period, to curtail overseas student visas and to open the way to make university three times more expensive for students than it is at present, the Government have created a funding hole in the higher education budget estimated to be at least £600 million and perhaps as much as £1 billion.

We do not believe that the measures outlined today will put higher education back on a sustainable financial footing. It is surely just wishful thinking to assert that privatising higher education and switching to a higher education voucher system—one of only four in the world—will ensure that student demand is satisfied, that teaching and learning quality is maintained or improved and that research activity is preserved.

The simple truth is that this White Paper has one limited aim, which is to drive down the cost to the public purse of running our higher education system. The direct effect will be to reduce the unit of resource for teaching and hence reduce quality and further reduce the flow of good, qualified graduates into the workplace at the very time we need them most.

In the Statement the Minister mentioned that the Government wanted to take steps to improve social mobility, but the only mechanism mentioned is the plan to strengthen the Office for Fair Access. On demand, the White Paper says that the Government adhere to the Robbins principle, but it is “Subject to expenditure constraints”. I really do not think the Government can have it both ways. Either all students with the aptitude who wish to enter higher education may do so, or they may not. Can the Minister confirm that the Robbins principle is now defunct?

On social inclusion, children within the wealthier sections of society are three times more likely to go to university. Very few pupils on free school meals get three As so they are effectively excluded from applying for the selective universities. How exactly will the proposals in the White Paper boost the number of those from disadvantaged backgrounds going to university, when this is a requirement on institutions, not on HEFCE? There are also regional differences. For example, pupils in north-east schools are far less likely to go to university than those living in the south-east. Can the Minister point to measures that will redress this imbalance?

I turn to some of the more detailed comments. As the Minister said, universities will be able to expand the number of students they take who have AAB grades or better. It is well known that 50 per cent of those who get AAB grades or better are actually from private schools or grammar schools. In practice, virtually all students with AAB grades on entry can already get a university place. This proposal therefore ignores the many equally talented would-be students who do not go down the traditional A-level route, and ignores those from disadvantaged backgrounds. I am advised that the Institute of Physics has already warned that this measure may deter study of the sciences or maths at A-level. Is this a fair outcome?

The Government are going to cut student places at most universities. The places will be put into a central pot from which universities will have to bid for any extra places they want to offer. On what criteria can these bids be judged, other than by their value or cheapness? Of course, in future years, the Government can put more and more places into the central pot, depending on budgetary pressures at that time. It may be worth pointing out that this approach was tried in the early 1990s and resulted in a near-catastrophic reduction in funding per student. We fear that that might be the case this time around.

The proposal to offer loans to students attending private universities shows that the Government have no real concern for the health of the public universities, which are an integral part of the nation’s infrastructure in a way that private institutions are not. There is surely a lesson to be learnt here from the United States, where private universities got rich at the expense of the Government, despite a shocking record on student achievement and employability.

The Government’s higher education plans are unfair, unnecessary and unsustainable. The proposals in the White Paper are a direct response to the black hole in the Government’s higher education budget that was caused by their earlier policy decisions. To encourage economic growth, most of Britain’s competitors are increasing funding for their higher education and research budgets. The Government’s proposal will mean that English universities will have among the highest fees of any public university system in the industrialised world, while being among the worst in terms of public funding. At heart, this White Paper is about depressing demand for higher education and about putting unreasonable competitive pressures on many of our most-admired public institutions. It is already clear that a whole generation of students may suffer because of the Government’s miscalculations and their need to find ways to restrict access to the higher education that people want.

My Lords, that address by the noble Lord on behalf of the Opposition was rather extraordinary. He started off by making allegations that this White Paper was allegedly “hastily put together”—I think that those were his words. I can assure him that it took a considerable amount of time, and haste certainly did not come into it. As the noble Lord will know, we were hoping to get this out somewhat earlier but, in our desire to get these things right, it was delayed until this day. That is often the way with these things.

The noble Lord then made allegations of cuts to higher education. Yes, we have had to cut the amount of money from the public purse going to higher education. We have had to make reductions in a large number of other departments, but again, as my noble friends and my right honourable friends in another place have done on many occasions, I have to remind opposition Members: whose fault is that? We inherited a deficit of quite stupendous proportions and we had to address that before we could even begin to start—we had to tackle the debt. We therefore had to find some sustainable way of funding higher education, which is a public good, and we have come up with a scheme that in effect, as was made clear in the Statement, will by 2015 increase by some 10 per cent the amount of money available to higher education.

That must be a good thing, but we have to ask the serious question as to who should be paying for higher education as a whole. I got the impression—and I should be very interested to hear from the noble Lord or one of his noble friends whether this is the case—that it is now the policy of the party opposite that all the funding should come from the taxpayer and none from those who benefit from it. Under the scheme that we are proposing, a great deal of money will come from the students who benefit from the higher education they receive. However, in addition—because in the end we will get back only a certain amount of the money—a great deal is coming from the public purse. There is a balance between the public benefit we get and the private benefit that the individual students get. I was rather surprised by the tone of the noble Lord’s response, which seemed to suggest that all funding should come from the taxpayer. That was how I understood it and I imagine how it was supposed to be understood by most people listening to it. The noble Lord’s party did not do that when it was in government and I would be interested to know whether that policy has changed.

The noble Lord then asked a number of detailed questions. I will look at those in due course but I will comment on one or two of them. He pointed out regional differences in terms of access to universities. That is unfortunate. We have to look at the schools. Again I am grateful for everything that my right honourable friend Mr Michael Gove is doing in the Department for Education to improve education. It is by improving education before students get to universities that we will improve access to the universities. It is not by magically saying, “You must take in X, Y or Z, however badly educated they have been”. We must get it right at an earlier level, and that is exactly what my right honourable friend is addressing in the various reforms that he is bringing to education.

The noble Lord then talked about plans to allow universities to attract more of the AABs or equivalent. I think he slightly misunderstood what was set out in the Statement. We know that most people who achieve AAB or above, or the equivalent, will go to university, but we want the universities to be able to compete as to how many they can get. There should be no artificial cap on the numbers, and that is what the White Paper sets out.

I was rather saddened by the noble Lord’s attack on the private sector within education, which includes principally the private universities but also other institutions offering degrees. They offer a valuable service and we should not back away from that. We should continue to support them and I am very glad that my right honourable friend has found a means of doing that.

Lastly, the noble Lord alleged that the whole scheme was designed to depress demand for access to higher education. That is not the case. The Government are still committed to encouraging as many people as possible to go to university within the current restraints on the public purse—and we know whose fault that is. The noble Lord will know that things have changed a great deal over the years since he and I were at university, when about one in eight of us went to university. If we go back to our parents’ generation, the proportion was probably about 2 per cent—of course, it depends on the age of your parents. Now the percentage is in the high 40s. We believe that is a good thing, but obviously it does change the way one has to think about how university should be paid for.

There are other, more detailed points that the noble Lord put to me. I will look at precisely what he said later and, if necessary, write to him.

My Lords, I thank my noble friend for repeating the Statement, which has been extremely useful. It clears up a degree of uncertainty that there has been around universities for a very long time. As the noble Lord said, it has taken a long time for the White Paper to come to us, rather than a short time. I also welcome a number of other aspects of it. The opening up of the university system and the creation of a far greater diversity of routes for higher education are thoroughly good things for this country. As many noble Lords around the House will know, I have for a long time advocated the facilitation of the part-time route so that those who want to earn and learn can do so and have access to support equivalent to that for full-time undergraduates. That is extremely important. The Minister will know that one or two minor issues arise here and I will raise them with him in due course. However, on the whole I think that this is a thoroughly worthwhile development. I also welcome the reintroduction of sandwich courses.

Can the Minister provide clarification about the AAB issue, which the noble Lord, Lord Stevenson, raised? At the moment, as I recall, we provide somewhere in the region of 350,000 undergraduate places every year. As I understand it, 65,000 of those places are going to be put into a pot to be bid for by any university, according to what students want to do, and a university will then be allowed to exceed its quota if an AAB student wants to attend. The other 20,000 places are for institutions that charge less than £7,500 per year. This is not creating new places; they are existing places. In effect, as I said, 65,000 places are being taken out of the pot at one end and 20,000 at the other end. I worry about that slightly. The noble Lord is quite right that the problem is that our secondary schools perhaps do not produce enough AAB students. However, there is a real problem here. There was an experiment by King’s College in which medical students worked with local secondary schools in south-east London, bringing forward pupils who were not achieving at that level. However, by the time those pupils had been through the degree course, they achieved just as highly as the others, which shows what potential there is. Universities need to have flexibility in that sense. There is a danger that we shall expand the universities taking the top-achieving students, thus depriving some of the lower-achieving students. I confess that that worries me.

Finally, the noble Lord, Lord Stevenson, referred to the cost. As the White Paper says, the Government reckon that by 2014-15 the scheme is going to cost more. As the Minister will know, the cost of loans is going to be very considerable, and it looks as though the Government may well end up spending more on the loan scheme than they are putting in at the moment in direct grants.

My Lords, I am very grateful for the comments of my noble friend Lady Sharp, particularly regarding the fact that the White Paper has cleared up uncertainty, and for her emphasis that we—or, rather, my honourable friends in another place and in BIS—have taken time over it. I am also grateful for what she said about the need for diversity in higher education. We should always remember that higher education is not just hallowed colleges in Oxford or Cambridge but a whole range of different things. I was grateful that she mentioned part-time students at the Open University and matters of that sort. I think that something like a third of all students are part time, although I shall have to check that figure. I was trying to find it in my briefing pack but could not. I was also grateful for what she said about the fact that we want to put more emphasis on sandwich courses. We will certainly look to see what Sir Tim has to say about that.

On the AAB cohort which we were talking about and which I mentioned in the Statement, the figure that I have is of the order of 300,000 students coming in each year, not 350,000, but we will not quibble about 50,000.

Oh!

Well, we will try not to quibble about 50,000 but I can see the odd accountant sitting opposite me. Of those, 65,000 are AAB students. We are not creating new places for them but we are allowing the HE institutions to compete for them. Therefore, the University of X might want to expand certain courses by bringing in more of those students, but that would mean, by definition, that the University of Y might lose out. However, we think that it is necessary to bring in that element of competition. The 20,000 places that I added to that are not for AAB students but for those where universities offer value for money with their courses coming in on average, after waivers and so on, at or below £7,500. Again, it will be open to universities to compete for those places. It is not a question of creating new places at this stage. However, if matters were to become more contestable, we would certainly want to look at that in the future, and, as I made clear in the Statement, we aim to expand the scheme further year after year.

I noted what my noble friend said about the cost of loans. Obviously loans are expensive but they would be considerably more expensive if they were not arranged by the Government. The Government can, after all, borrow at considerably cheaper rates than individuals.

My Lords, I am grateful to the Minister for repeating the Statement made in the other place. He will be aware of widespread concerns about the damage that these reforms pose to the position of the humanities in higher education. I wonder whether he shares those concerns and if so, what he will do about them. If he does not share those concerns, why not?

I simply do not accept those concerns, as was made clear in the debate we had some six months ago when we debated the original announcement about student loans. It will be up to the universities to attract the right students. Those students will bring the money with them that will pay for the courses.

My Lords, I thank the Minister for introducing the Statement. It will obviously take time to absorb the details. I declare an interest as the principal of Jesus College, Oxford, and say that from the perspective of those of us in the higher education sector the Government’s approach seems slightly schizophrenic. On the one hand we hear about creating a market, liberalising the university sector and deregulating, but on the other hand we hear of increasing constraints imposed on us in reporting, access and the level of fee that we can charge. As I said, there is a slightly schizophrenic approach.

I have a particular question to ask the Minister. If, as he has indicated, the aim is to place the student in the driving seat to create a market where student choice and wishes determine the outcome, that leaves open the question of where the university sector will end up. We know from the report from the Royal Society a couple of years ago that this country suffers from a serious shortage of students educated in engineering, the natural sciences and mathematics. Do the Government have a view on what proportion of students should study STEM subjects? If so, why are they leaving it to the market and student choice? Students may well choose to study subjects that do not require such a rigorous entry as mathematics, physics, chemistry and engineering, and universities may well choose to teach subjects that are cheaper to lay on. Do the Government have any view about the provision for STEM graduates, or is that simply a matter for the market?

I accept what the noble Lord, Lord Krebs, said, and obviously much in this White Paper needs to be discussed. After all, it offers up the idea of consultation on a number of subjects, which is a matter that we will take on board. He then suggested that we had a slightly schizophrenic approach. I remember being castigated on many occasions by my late noble kinsman Lord Russell on the question of academic freedom and attacks that the previous Conservative Government were allegedly making on institutions. We are very anxious, as we make clear in the Statement, to preserve academic freedom and to leave the decision-making to universities. Obviously, when public money is involved—and considerable amounts are involved—it is right that we should make our views known.

The noble Lord then talked about the STEM subjects. He gave an example of the shortage of engineers and asked what our approach should be. We have to be very wary of government setting down specific targets for this or that number of engineers. The noble Lord will remember that the former Soviet Union produced a very large number of engineers, no doubt at the sort of central direction that some noble Lords opposite might like—but look where it got them. I seem to remember the expression, “Upper Volta with rockets”. That is not a route that we would want to go down. What we are setting out is probably a better approach.

My Lords, I, too, thank the Minister for his Statement and for the further thinking that the Government are clearly doing following the earlier Statements and papers on higher education. Perhaps I should begin my question analogically. In honour of the millennium, I was offered finance to pay for a stained glass window in the cathedral over which I then presided. Alarmed that I had already commissioned an artist, the donor asked me whether I had gone for three competitive quotes for the window as he had done in the previous year when he was repairing his garage roof—in other words, economics came before creativity. Value for money in higher education is obviously crucial, but can the Minister assure us that the pursuit of enterprise, competition and, indeed, a focus on business will not lead to utility triumphing over a liberal education, removing breadth of curriculum and marginalising not only the arts and humanities but other less obviously utilitarian disciplines?

My Lords, in the debate before this Statement, the noble Lord opposite castigated my right honourable friend Mr Pickles as a Gradgrind figure. We obviously want to be wary of aiming just for value for money, but we have to be very careful to make sure that public money is spent appropriately. I do not think, bearing in mind what I said about preserving academic freedom and the ability of higher education institutions to decide for themselves how to do things, that the approach we are setting out does that in any way at all. We want to make sure that any public money is spent appropriately.

Does my noble friend agree that the practice of cross-subsidisation must now end? It may have been acceptable, when it was just government money, to take £5,000 from the money provided for a humanities course and give it to a student doing an engineering course. Now, when we are asking a humanities graduate to pay £9,000, it is surely totally unacceptable to take half that money and spend it on an engineering student.

Again, I want to leave this as a matter for the higher education institutions themselves. It is up to them; they do not have to charge the same amount for each student if those students are doing different courses. If students are doing a humanities subject, there is no reason why the institutions should not charge less than for other, more expensive subjects. It must be a matter for them.

I, too, thank the Minister for repeating the Statement. I will respond to a couple of points that he made in reply to my noble friend Lord Stevenson. We do not deny the deficit; our counteraccusation to Her Majesty’s Government is that they are dealing with the deficit too far, too fast. Of course, we have not retreated to the position that all funding should come from taxpayers; we recognise the challenge of expanding higher education—indeed, we introduced student fees. This is about the level of them. I share the welcome given by the noble Baroness, Lady Sharp, to support for part-time students, and I hope that we will see an expansion of sandwich courses—and that response from business.

In the beginning, when the Government responded to the Browne report and put the figure of £9,000, there was a lot of confidence that not all universities would rise to that figure. Yet currently more than 80 per cent of universities have indicated their intention to charge £9,000. I was interested in the response to the previous speaker that there might be a variation, but the current public position is charging £9,000. Will that be a deterrent to potential graduates when they see the potential size of their loan increasing so much—figures of £40,000 are not exaggerated? I know the response will be that there is no upfront payment. Nevertheless, people will see a loan that eventually has to be repaid.

I am very grateful for the noble Lord’s admission on behalf of his party that it does not deny the deficit. I am also grateful that he has recognised that funding must come from the beneficiaries of education as well as from the taxpayer—from both sides.

The noble Lord turned to the Browne report which, as noble Lords will remember, did not recommend a maximum. However, we felt that it was probably right to fix it at £9,000, particularly as the noble Lord, Lord Browne, suggested that he did not see why universities could not provide a good education for a figure of, I think he said, round about £8,000. The noble Lord, Lord Young, says that the reports are that virtually all institutions are going for the maximum of £9,000. We will not know the final figure until it has all been confirmed next month, but I can assure him that although a lot of them are going for £9,000, that does not mean that everything in that university, that institution, will be £9,000. There might be different rates for different courses and, as the noble Lord knows, there are a number of waivers, and they will be offering bursaries and other things that will help to bring the cost down, particularly for some of the less well off.

The noble Lord also asked the very valid question: are we worried that the perceived level of debt might put off a number of individuals because they see themselves ending up with a debt of £27,000-plus? That is a genuine fear and we must address it. That is why only last week my right honourable friends Vince Cable and David Willetts sent a letter setting out what we are doing to get information across. They have set up a new independent task force on student finance information, headed by Martin Lewis and Wes Streeting, a former president of the National Union of Students, to try to get the information over that it should not be looked at as a debt but, in effect, as a sort of graduate tax, except that it is not a graduate tax; you start paying only when you start earning above a certain amount and you pay at quite a low rate over a long period of time. It is not the burden that people have when taking on other forms of debt.

If I heard the Minister aright, he said that the purpose of strengthening the role of OFFA would be to ensure that the universities fulfilled their obligations about outreach. That will create no difficulties for the universities because I am convinced that all the universities I know want to widen the area of society from which they draw children of talent. However, he also said, if I heard him correctly, that there will be no interference in the academic freedom to make that selection on the basis of merit. Can he therefore assure us that the quotas that have been talked about for students to be drawn from different areas of society or different backgrounds in education will not now be pursued?

My Lords, I am very grateful for that intervention from the noble Lord, who speaks with considerable authority as a former master of University College, Oxford. I must add that I have enjoyed his hospitality there on a number of occasions; I declare that as an interest. I am also grateful that he welcomes the fact that there is encouragement to fulfil greater opportunities for outreach, which is what all institutions should be doing. I also stress that there will be no interference in academic freedom. As I said earlier, I bear on my back scars from the late Lord Russell about alleged attacks on academic freedom, and I do not want to reincur them. Quotas are not the right way to set about this. Each institution in discussions with OFFA, after it has proposed a level of fees above £6,000, should look at what it can do to try to improve fair access to all areas of society.

My Lords, I, too, thank the Minister for the Statement. I want to ask two specific questions. The first is on simplifying the regime for obtaining degree-awarding powers and making sure that the qualifications and assessment process for FE colleges and private providers will be the same as it is for universities. One of the strengths of the sector at the moment is the qualification assessment basis, and it would be a shame if it were lost in a diversification of the sector. Secondly, I declare an interest as I was bursar of a Cambridge college for a decade. I am delighted to hear that HMRC is consulting on changing the VAT regime. I am slightly concerned that the Statement refers to “some of the VAT barriers”. That has been a considerable issue to higher education institutions over the years. It has cost them a lot in administrative terms, and the accountancy profession has earned an enormous amount of money by advising universities. Can we be assured that there will be real change in the VAT regime for universities?

I shall be very brief, bearing in mind the time. I think I had better write to the noble Baroness about what we want to do about simplifying degree-awarding powers. As for HMRC’s consultation on VAT, I am always very wary of ever making any commitment that involves the Treasury, so again I think it would be wise if I wrote to my noble friend on that matter.

My Lords, Amendment 109A, which is on its own, is a long and apparently complex amendment, but it need not take us too long. It is about open space and what happens when open space is disposed of by local authorities. The amendment seeks to amend the Local Government Act 1972 to return it to something like its original form before it was amended in 1980.

The substance of this amendment comes from concerns raised by the Open Spaces Society, which argues that protections are insufficient, particularly around publicity, consultations and the requirement to consider objections. It is about urban open space in particular, which is precious and increasingly recognised as vital to life in towns and cities. The coalition agreement and government promises have made proposals for new designations and protections for green spaces in urban areas, although we have not yet seen the details. It would be a good time to strengthen protections for existing open space in these areas.

When we discussed a related amendment, Amendment 24, the Minister suggested that we might have a meeting to discuss the technicalities and see what substance the Government thought there might be in these proposals. Does she agree that perhaps we can discuss this amendment at the same time? On that basis, I beg to move.

My Lords, I am grateful to the noble Lord for moving this amendment. We were not quite clear what was behind it but he has been very clear about the thrust of the amendment. We support its general direction, which is about protecting open space, particularly urban open space. I do question the use of the phrase “equally advantageous to the public”. I do not know if that is an existing term used in other legislation, but one of the requirements of the amendment is that it must be “not less in area”—understood; that is quite easy to determine—and is “equally advantageous to the public”. There will not necessarily be a single approach by the public as to the advantage of a particular piece of open space: it might be the tranquillity of the view or the opportunity for some recreation pursuits or indeed somewhere to walk the dog, whereas an alternative piece of open space may not be able to satisfy people in the same proportion or mix. I am sure that that issue could be overcome but I would be grateful if the noble Lord, when responding to the Minister, might expand a little on that test; the Minister may also have some views on that. However, I do see the thrust and the benefit of this amendment.

My Lords, I thank both noble Lords for those short contributions—short, I suspect, because I have indicated that I would be happy to have discussions with the noble Lord about this. This amendment has appeared quite late on in proceedings. I do not quite understand its place in the Bill. I think it has found its way in by a devious route. It would be more helpful for the House to see exactly what lies behind the anxiety of the Open Spaces Society about this.

In acceding to speaking to the noble Lord about it, I have to say that we have particular reservations about paragraph (c). As the noble Lord, Lord McKenzie, has just pointed out, that requires a council to provide land in exchange for that appropriated or disposed of unless they can provide reasons under subsection (2) of the proposed new section. This is a difficult area. In order to provide an alternative piece of land, it is possible that the local authority would have to compulsorily purchase another bit of land in order to fulfil this obligation. So we would have considerable doubts and that is one area that I would expect to have a sharp discussion on. Having said that, I am happy to talk about this and come back to it at a later stage if the noble Lord will withdraw his amendment for the moment.

My Lords, I am grateful to the Minister for that reply and I will, of course, withdraw the amendment on that basis. I am not sure what she meant by “devious route”. This appeared on the agenda. It consisted of me sitting at my computer and typing out the amendment and then taking it to those excellent and helpful people in the Public Bill Office who give advice on exactly how things can be done and whose office is one staircase below mine. So it was not very devious at all. This is a good moment to pay tribute and thank the people in the Public Bill Office who are extremely helpful to all of us in putting amendments down.

“Equally advantageous” and “exchanged land” are not alien concepts. Similar language is fairly frequently used as far as open space is concerned in relation to planning applications, particularly where people wish to develop on a common. I would have to check the Commons Act 2006 and the Planning Act 2008 to see what the exact wording is. I am not suggesting the wording in this amendment is perfect but I am putting it forward to get the problem discussed. I am grateful to the Minister for agreeing to do that and on that basis I am happy to withdraw the amendment.

My Lords, Amendment 110, in my name, introduces a significant group of amendments on the fundamental issue of passing on European fines to local authorities generally. I must admit that I have some grave reservations about the generality of Clause 31 and Part 2 in totality. Amendment 110 is a probing amendment by which I hope to receive adequate clarification of and assurance from the Minister on the Government’s intentions with regard to Wales. However, other amendments in this group may well need to be pressed or at least the option kept open to return to these issues on Report if an adequate response is not forthcoming from the Government.

The basic question behind my amendment is whether these fines can be imposed on Welsh authorities. Clause 36 is quite explicit that Part 2 powers concerning European fines apply only to local government in England. I flagged up at Second Reading the fact that I understood from the Welsh Local Government Association that a letter was sent to a Midlands MP by the Local Government Minister Greg Clark confirming that, under the Bill, the fines apply only to England. Is that the case? If the intention is to apply fines to Welsh local government, by what mechanism is this going to be achieved? There is the possible scenario that Westminster Ministers might impose fines on Welsh local authorities in Wales over the heads of Assembly Ministers.

There are valid reasons to be fearful of the dangers that might arise if central government can pass European fines willy-nilly on to local government when a local authority might not have caused the problem generating the fines or where it might genuinely believe that it was acting in line with UK or devolved government policy in pursuing the action that might have led to the fines. Other amendments deal with these more general issues. Amendment 114A proposes a framework of arbitration that is certainly worth consideration. If no satisfactory response is forthcoming, there will be an opportunity to vote on the clause stand part to delete these European aspects from the Bill.

I do not resile from the concept that if any local authority has behaved in a totally cavalier manner and has through its actions brought fines and penalties on the UK, it is right that those who act in that way might be open to suffer the consequences. However, fines are usually imposed through the system of courts with a proper system of checks and balances to ensure fair play. The Government of Wales have recognised that in rare circumstances the question of such fines might arise, but they understandably feel that the responsibility for passing on any fines to local governments in Wales should be with Welsh Ministers and that they themselves should need to be persuaded that such an action is appropriate.

There are constitutional and practical reasons for the Government of Wales’ approach. In constitutional terms, the National Assembly has full responsibility for local government in Wales and should take any umbrella responsibility on matters such as these. In practical terms, the Assembly has responsibility for ensuring the financial settlements for local government in Wales and so should be involved in any discussion. Furthermore, issues that could generate fines, such as non-compliance on issues such as air quality or waste, are within the responsibility of the Assembly. There is also a need for any passing on of fines to be seen as reasonable and proportionate. Local government in Wales may feel that its circumstances will be better understood by those in Cardiff Bay compared with those in the Treasury in London.

Finally, there is the general question that it is inappropriate to punish local authorities when they are not party to direct discussion with the EU on such matters. They do not have a direct voice in negotiations with the EU in a way that influences EU law. If the National Assembly has the responsibility to implement any such fines in Wales, can we have an assurance that the UK Government would not block Welsh government Ministers from having a direct interface with the EU on such matters? At the end of the day, it would probably be fairer if all these matters were not in this Bill. I beg to move.

My Lords, as well as speaking to Amendments 110A and 186B, I shall speak particularly to Amendments 114A and 115A. Before doing that I should declare some interests that I have not previously needed to declare. I am a member of the Local Government Association’s European and International Programme Board. I have been a member of that and its predecessor bodies for more years than I care to remember. I am also a member of the Committee of the Regions, the EU body established in 1994 under the Maastricht treaty to be the voice of regional and local government in the European Union. Since the Greater London Authority has some interest in these matters as well, I should mention that I was a member of that authority for its first eight years of life and chaired the European sub-committee of the Metropolitan Police Authority.

Amendments 110A and 186B would make sure that any fine could be passed on to a council only in respect of an EU instrument that has been specifically designated by both Houses of Parliament through affirmative resolution so that Ministers would not have carte blanche to pass down any fine. The amendment, which happens to come first on the list, is fairly limited and restrictive.

The substantive amendments before us are Amendments 114A and 115A, tabled by my noble friend Lady Eaton. First, I need to pass on her apologies. She was keen to introduce these amendments but she cannot be here. Today is the first day of the Local Government Association’s annual conference in Birmingham, at which my noble friend has to make what she describes as her farewell speech as the outgoing chair of the LGA. She has therefore asked me to speak on her behalf, which I thought was a very brave decision. I said that I will gladly do so but that I will remain responsible for the words that I use. Therefore, any concern expressed should come only to me.

In the measured terms that we customarily use in your Lordships’ House, it is rather hard for me to express the surprise—the shock, even—anger and concern that were felt in the local government world over all this. The surprise was because the first the LGA knew—this must have been the first any local authority knew—of this being an issue of concern, or indeed an issue at all let alone a proposal, was when the Bill was published. I understand that there had been no prior warning, no prior discussions, no attempts to see whether the problem, if indeed there was a prospective problem, could be resolved in a more satisfactory way than by the inevitably rather blunt instrument of legislation tucked away in Part 2 of a very substantial Bill. I regret that, because it is not generally the way in which any Government in this country have worked on these matters. I do not know how or why it came about, but that was apparently the first that the LGA, and indeed local government generally, knew of such matters.

For that reason, local government and many other organisations would much rather remove Part 2 of the Bill altogether. That was why my noble friends and I put down clause stand part debates for all of Part 2. It remains my view that it would be better if this part was not in the Bill at all. If the Government foresee difficulties and problems of this nature, they should discuss them with the LGA and other interested bodies and find a more satisfactory way of resolving them. I suspect that we are not going to lose Part 2, but I still urge the Government to do that.

My noble friend Lady Hanham was, like me, a member of the Committee of the Regions for many years, and she will be familiar with the practice adopted a few years ago by the European Commission which it chooses to call, in true Eurospeak, “systematic dialogue”. “Systematic dialogue” is more or less what it says; they meet and discuss with representatives of local government and regional government throughout the European Union any issues of concern, issues that are coming up and so on. That ought to be the good practice adopted in this country, and I hope, regardless of the outcome of our discussions on this Bill, that government will undertake to do as we used to do some years ago—I remember going to some of the meetings myself—and discuss issues such as this with local government representatives so that this part of the Bill never needs to be used. I think we would all accept that if we ever get to the stage when government is imposing or passing on EU fines, something somewhere along the line has failed to work. We should not get to that stage, and I therefore hope that the Government will agree to work with the LGA in a spirit of systematic dialogue, of willing co-operation, to try to ensure that that does not happen.

My first contention is therefore to remove Part 2 altogether. If that is not to happen, and the Government insist that this issue needs to be dealt with in this way, through legislation, we need to look at how that is done. The concerns of the LGA and other bodies are that these proposals are unfair, unworkable, dangerous to council budgets and unconstitutional.

I want to deal today with what is described as unconstitutional. The issue is that the Minister, under this legislation, is set to act as judge and jury in this matter, and to be not only the final arbiter but the only arbiter in determining what fines are passed on, in what proportions, how, in what way, and so on. That cannot be right, and more importantly perhaps, it cannot be sensible. It is hard to imagine anything being more open to judicial proceedings because it is so arbitrary and unfair. If we are to proceed with Part 2, we have to look for a system of arbitration that is, first, seen to be entirely independent of the Minister—in other words, the arbiters should not be appointed by him or act as an advisory body—and is, secondly, fair and accepted by both sides.

My Lords, I shall speak to Amendments 111 to 114. Part 2 makes it possible for a Minister to require a local authority to make a payment in relation to an EU financial sanction imposed on the UK by the Court of Justice of the European Union if the Minister is satisfied that the authority caused or contributed to the infraction of EU law. The amendments in my name, Amendments 111 to 114, would amend Clause 31, which among other things sets out the requirement for the Secretary of State to publish a statement of policy setting out the general principles on how the power to pass on all or part of the EU financial sanction will be exercised and the amounts determined. Many of the points that I am going to cover were covered also by the previous speaker. For that reason, there is quite a bit that we have in common.

Amendment 111 would amend Clause 31(4) to require the policy statement also to contain details of the arrangements for the appointment, constitution and operation of an independent review panel. Amendment 112 would require the Minister to take into account relevant determinations of the independent review panel when exercising his functions under this part of the Bill. Amendment 113 would make an EU financial sanction notice subject to the new clause as introduced by Amendment 117. Amendment 114 would determine the relevance of any determination issued by the independent review panel.

Amendment 117 would insert a new clause into the Bill to allow local and public authorities which have received an EU financial sanction notice to refer the notice to an independent review panel, as mentioned by the noble Lord, Lord Tope. The new clause sets out the grounds on which such a referral can be made and provides that the independent review panel may review any finding of fact on which the financial sanction notice was based. These grounds include if a Minister,

“failed to exercise a power conferred by an enactment, and that failure contributed to the infraction of EU law (whether directly or indirectly or by impeding any local or public authority in its attempts to comply with EU law)”,

or,

“did not follow the procedures set out in this Part or in the warning notice before giving the financial sanction notice”,

or,

“ought to have exercised any discretion under this Part or the warning notice differently”.

The new clause requires the independent review panel to determine the validity of the grounds of the referral and to provide a copy of its determination to the Minister who issued the EU financial sanction notice and the local or public body which received it. These amendments stem from the significant amount of concern, already mentioned, that has arisen from the provisions in this part of the Bill since it was first published last December. Throughout the Bill’s passage these concerns have been voiced by Parliamentarians of all parties and are shared by the Mayor of London, the London Assembly, London Councils and the Local Government Association.

Understandably, the main area of concern has focused on the ability of a Minister to pass on a fine without any form of judicial or independent oversight. The need for independent oversight is particularly vital when one considers the complexity of the factors leading up to any infraction, not least in the area of air quality—I must here declare an interest in that where my home is in London is the most polluted air in the whole of the UK—and the fact that it is more than likely that one of the parties responsible for any breach will be the Government themselves. This concern was voiced eloquently by Jeremy Smith, barrister and former Secretary-General of the Council of European Municipalities and Regions, in the Municipal Journal in February. He said:

“There is, however, a wider point of concern about Part 2 of the Bill. There is no independent decision-maker. The minister takes the decision to make the local authority pay—even though central government may be partly or largely responsible for the infraction in the first place, for example, through delayed action, poor drafting, or for myriad other reasons. This means the minister may be simultaneously prosecutor, judge, jury—and co-defendant. This is surely not a healthy legal precedent … Therefore, Part 2 of the Localism Bill needs fundamental rethinking. If there is to be a claw-back provision at all, it should not be ministers who decide, since central government is almost certainly an interested party. The process should be for the minister to refer the matter to the High Court, or independent arbitrator, to determine any fair apportionment of the Article 260 fine imposed by the ECJ. The independent decision-maker can then take into account every party’s share of responsibility”.

The complexity of any infraction process and the need for independent oversight has been reinforced by my noble friend Lord Attlee in this House only recently. In response to an Oral Question from the noble Lord, Lord Berkeley, on air quality during the 2012 Games and who is responsible for this matter, my noble friend Lord Attlee responded:

“Everyone is responsible: the Government, the mayor, TfL, LOCOG, the ODA and, most importantly, individuals who make their own transport decisions”.—[Official Report, 23/5/11; col. 1583.]

While I thank my noble friend Lord Attlee for his frank assessment of a complex situation, his words highlight not only the difficulty any Minister would have in apportioning responsibility, and a subsequent fine, for any infraction but also the fact that the Government will, in almost all instances, be an interested party, as I mentioned previously.

It is for this reason that I believe these amendments provide us with a way of building in the safeguards that are so vital to making this part of the Bill acceptable both to your Lordships’ House and the broader community of local government beyond; a community that we must remember has no role in negotiating the very European legislation which could, if these clauses remain unchecked, be presenting them with a very substantial bill. Such a bill would be unpalatable at the best of times, let alone in the current financial landscape.

These amendments do not undermine the principle of this part of the Bill—a principle which was first outlined by the Government in Defra’s consultation documents on the natural environment White Paper last summer—but they begin to build in the safeguards that will be necessary for the relevant stakeholders to have confidence in the process outlined in the policy statement. It is vital, therefore, that local or public authorities have the ability to refer any EU financial sanction notice to an independent review panel; a panel to whose written determination the Minister must have regard. I understand that the Government have already been in discussions with the GLA, the LGA and London Councils on the formulation of a draft policy statement and I hope that these amendments will facilitate further discussions on getting that statement right. It is vital that any arrangements for,

“the appointment, constitution and operation of the independent review panel”,

as provided for by Amendment 111, are sufficiently transparent and robust to garner the support of those who will be subject to this regime. I hope that the Minister will view these amendments as a helpful way of building consensus, something which your Lordships’ House likes to achieve. They are essential if all parties are to have confidence in this part of the Bill.

My Lords, first, I declare an interest as the vice-president of the Local Government Association. I decided to table Amendments 115 and 116 in this group because there is such widespread fear, some of which we have heard about today, in many local authorities and in other areas that this clause relating to the imposition of EU fines could be used as a mechanism for the Government to unload their own responsibilities onto those same authorities. That fear is absolutely understandable.

In her amendments the noble Baroness, Lady Gardner, suggests an ingenious mechanism for operating the system. Yet I am sure she would agree that, like other suggestions that have been made—for example, by the noble Lord, Lord Tope—it is a mechanism and no more. That leaves open the basic principles upon which the mechanism would operate. It is a bit like establishing a court of law without establishing the laws upon which it will base its judgment.

To my mind, those principles are very clear. Some people, in addressing this problem, have been arguing that EU fines should never be payable by local authorities. I find that a rather strange argument. In so far as it is prompted by the fear that a future Government might seek to use the legislation to pass their own responsibilities onto local authorities, it is, as I said, understandable but the solution is not the mere deletion of the clause. For local authorities the upside of the Bill is that, at long last, they get the powers that they should have. I totally agree with that but if they have the rights and the powers, they must surely accept the responsibilities that go with them. It must be right that if a local authority does something which, in part or in whole, results in the imposition of an EU fine it should, to that same extent, bear the responsibility. That is all this amendment calls for.

The amendment is merely a clear statement of the principle upon which the mechanisms for deciding the issue will operate. If I might be clear again: it merely says that if it can be proved,

“beyond reasonable doubt that the infraction of EU law has arisen, wholly or in part, as a direct result of the actions of the local … authority … that … authority should be responsible to that extent”.

In terms of proving “beyond reasonable doubt”, would the noble Baroness accept that the arbitration procedure would be a legitimate forum within which that burden of proof would need to be discharged or is she suggesting some other mechanism, including the courts, by which that test would be applied?

I am not suggesting the detailed mechanism now. I agree with the noble Lord that we have to get this clear but I am just trying to clarify the issue. I agree that the phrase “beyond reasonable doubt” actually does no more than bring with it a number of legal arguments and problems. Because this is a difficult thing to prove, if the Minister were to indicate, for example, that she would support such an amendment subject to those words being deleted, I would be happy to omit them.

My Lords, like many other noble Lords I share the concerns expressed about these provisions. I want to start by asking the Government to give us an absolute assurance that they are confident that legally an EU fine levied on a member state can then be passed on to a local authority. I am not entirely sure that that is the case and would appreciate being given some comfort that it is true. My personal preference would be to see these clauses deleted, because I am not sure that the Government entirely realise what a can of worms they are opening. The noble Baroness, Lady Greengross, talked about where it is clear who is to blame, but EU fines would be levied only for a huge infraction—for example, in connection with air quality. It is almost inconceivable that it would be easy to point a finger and say that a particular person or organisation was responsible.

In fact, a large number of organisations would be responsible. Seeing the noble Lord, Lord Berkley, reminds me of the situation within the rail industry, where there are hundreds of people employed to do nothing but allocate blame. Every time a train is late, they go into a little huddle and work out whether it was the fault of Network Rail or the operator. When I am stuck on a train, I do not much care. This Bill is supposed to connect people with local politicians. We could have a situation where legal arguments drag on for years and cost millions of pounds while arbitrators try to sort out exactly who is responsible for the air quality of London. In that case, who will pay the fine? The public will look with bemusement while this goes on and they will rightly ask, “Why on earth did you not spend that money trying to deal with air quality rather than have this huge legal battle?”. I hope that the Government will think carefully about exactly what they are trying to do here.

Finally, it is a great pity that the whole dialogue and ethos of fining goes against everything we should be trying to do in terms of relationships between central and local government. It should be about looking at the best ways of resolving problems, not about allocating blame in this way and certainly not about allocating fines.

My Lords, a number of us mentioned this matter at Second Reading. One of the longest lists of noble Lords spoke in that debate and addressed the problem of these EU fines. I do not want to repeat what has already been said, but the most important factor we are dealing with is that the Secretary of State is an interested party, whether he or she likes it or not. Therefore, it cannot rest with the Secretary of State to decide how to deal with this EU fine if it emerges. It has never happened yet, but it may one day. It was my noble friend Lord Teverson, I think, who said the Secretary of State was not just judge and jury, but prosecutor and executioner. That puts it extremely well.

I have put my name to the amendments moved and spoken to most eloquently by the noble Baroness, Lady Greengross, and to the longer amendment tabled by my noble friend Lady Gardner. Both recognise, first, that there can be no allocation until there is responsibility, and, secondly, that it cannot be the Minister who does that; there has to be a process of arbitration. We are in the middle of a negotiation outside this House between local authorities, led to some extent by the Greater London Authority and the London boroughs and the department. What we hope to hear from my noble friend on the Front Bench is exactly what is happening there; what stage have these negotiations reached? Are we in the process of getting some sort of reasonable settlement? Clearly in Committee like this we do not take a final decision when we are, as the Romans said, “in medias res”. We are in the middle of the affair, so we need to know what the Government have in mind and what negotiations have been going on, where they have got to and when they expect to reach a reasonable conclusion.

I share the view of the noble Baroness, Lady Greengross, that the solution is not to delete the whole part of the Bill. I heard what my noble friend Lord Tope said on this, but the fact is, bluntly, if there is a serious infraction of a European directive, whether on air quality, water quality or whatever else, is it to fall solely upon taxpayers in general, even if it is perfectly possible to point the finger at the individual authority? At Second Reading, I quoted the example of a directive on waste and the position if a particular local authority was consistently failing to comply. Is it really being seriously suggested that the general body of taxpayers should contribute to the fine?

Of course, the purpose of all these things, as my noble friend Lady Scott said, is to encourage authorities and everybody else to comply with the regulations. That is what is intended but, as I asked in my Second Reading speech, as regards the problem of Heathrow, who is responsible for the air pollution? Noble Lords will have seen reports in the press today of the increase in stacking over Heathrow in the four stacking areas, which is materially adding to air pollution in London. They said it is because Heathrow has been forbidden to expand. I and I think most noble Lords actually support that. Successive Governments and parties have taken that decision, but who is going to pay if it leads to an EU fine? It seems unfair that the whole body of taxpayers should pay.

There has to be some reasonable, fair, proportionate solution and it is my understanding that that is what the discussions are trying to find. I hope that my noble friend on the Front Bench is going to be able to help us. I am sure I am not the only one who received a paper from the Greater London Authority with a document saying “possible policy statement text” with a summary and a number of key principles. It says:

“The use of these provisions must be fair, reasonable and proportionate. There will be an Independent Review Panel. There will be no surprises, and authorities will have opportunities to make representations. Decisions must be evidence-based and transparent”.

It goes on:

“Authorities will not be held responsible for breaches that were not within their power to avert and will only be fined if they have demonstrably caused or contributed to the fine and can afford to pay”.

I find it rather a difficult document to absorb but it sets out a substantial flow chart, which I am sure other noble Lords have seen, that shows the number of stages—opportunities for appeal, occasions when notice must be given and so on—whereby an authority might become liable. We need to know more about this. However, I am inclined to agree with those who say that it is not sufficient simply to send it all away. We must recognise that if there is a fine, there must be some mechanism for dealing with the matter.

I refer briefly to Amendment 117A in my name, which was suggested to me by one of the big water authorities. These are now private undertakings and have expressed concerns as to whether Clause 36 applies to them. It is a question of whether a water authority that was found, for instance, to have breached the urban waste water treatment directive—possibly as a result of the discharge of sewage into the Thames—would be liable to having a fine imposed on it. I understand that the Government are quite sympathetic to this and that it is not the intention that private undertakings should bear any part of this. Part of the reason for this, which was explained to me by the water companies, is that they are already subject to stringent regulatory controls by the Government. If they comply with those controls, they should be within the law. If they fail to comply, it is open to the regulators to take proceedings against them to make them comply.

Thames Water, for example, has long been concerned about the amount of sewage that can periodically overflow and run into the Thames, with discharges the whole way along. As a result, Thames Water is now planning—work is well under way—to establish a long sewage pipeline under the Thames, for most of its length, which will eventually discharge into the sewage treatment plant at Beckton. This is a huge project, which involves lengthy tunnelling and must avoid all the other tunnels that pass under the Thames. Thames Water is doing what it feels is justified. Therefore, it feels it would be a monstrous infraction to have to pay an EU fine because of a breach of the water directive. I hope my noble friend will be able to give me some comfort on that.

My Lords, I support the two amendments in the name of the noble Baroness, Lady Eaton. She has to be at the LGA conference today, which will miss its usual presidential address because I am here. I was much convinced by the noble Lord, Lord Tope, and the noble Baroness, Lady Scott, who said that we should avoid this whole issue. It will get us into an awful lot of trouble and legal hot water. However, I suspect that that will not prove an acceptable course of action and there will have to be an apportionment of blame to decide who the polluter is when the polluter must pay. That leads us to worry that that apportionment of blame cannot be undertaken by the Secretary of State at the Department for Communities and Local Government or Defra. They would be parties to the case and it would offend natural justice if they were the ones to decide how blame should be apportioned.

I declare an interest as chief executive of London First, a not-for-profit business membership organisation that includes developers, infrastructure providers and others who may have an interest in the practical implications of the Bill.

As a general point of principle, it is unreasonable to transfer the financial sanctions that emanate from European law to a subsidiary body unless that body has been given adequate powers and resources to meet the law and, furthermore, the UK Government have fully discharged their own obligations. Fairly attributing responsibility for who has infringed the law and the extent to which they have done so is not simple, as other noble Lords have already pointed out. Therefore, I support Amendment 117, which would introduce an independent panel to determine such matters. However, the amendment still leaves the final decision about who will pay the fine with the UK Government. I should like to see the powers of the panel taken a step further, with it being given the power to make this decision. The legitimacy to do so would be derived from its independence, which is not something that the UK Government can claim to have.

In London, this has been raised as a matter of particular concern in the context of the air quality and waste water directives by the GLA, local authorities and private organisations that exercise public functions. Who, for example, is to blame for poor air quality at Marble Arch? Is it the GLA, Westminster City Council, taxi firms or the bus companies? These are complex issues that require independent consideration and a panel with the power to determine who should pay the fine.

While on the subject, I am also concerned about the provisions in this part of the Bill that relate to EU fines, which would allow the UK Government to transfer liability to local and public authorities that exercise a public function. This is an issue addressed by the noble Lord, Lord Jenkin, in Amendment 117A, which I support. The problem is that, for the purpose of the Bill, public authorities include private organisations that are already subject to existing government legislation and the power of independent regulators. Private organisations may also be subject to contractual obligations, including financial penalties, for providing services outsourced by the public sector.

In relation to EU fines, private organisations should not be held accountable for something that it is not wholly, or even largely, in their power to achieve. It is the UK Government who negotiate with the EU. It is their role to ensure that EU directives are transposed effectively into UK law, and that the right policy and regulatory framework is in place to achieve that. I would welcome any reassurances that Ministers can provide on that matter.

My Lords, I support all those who have spoken so far to express concern about this group of amendments. I thought it would be interesting to examine just how many of these directives, infraction proceedings, reasoned opinions, pilots and so on are likely to be in place at any one time. I start with those relating to transport. In a Written Answer on 7 June the noble Earl, Lord Attlee, said that 21 transport proceedings under Article 258 are currently unresolved. We do not yet know how many of those will result in a fine. One hopes that very few or none will, but that is the kind of number that we are talking about in transport. Therefore, one could suggest that there would be several hundred across the whole Government. Perhaps the Minister will be able to tell us how many are at stake across government.

The next thing I am concerned about is who this should apply to. The noble Lord, Lord Jenkin, mentioned private water companies and he is quite right. It would be useful to look at some examples. I have two examples. The first is the Channel Tunnel, which I spent 15 years helping to build years ago. The Commission has a pilot, which is the first stage of these proceedings, against the British and French Governments alleging failure to implement European legislation. The two Governments subcontract, if that is the right word, the regulation of the Channel Tunnel to something called the intergovernmental commission, which is actually part of government, which is meant to regulate the infrastructure manager in order to comply with the legislation. In the first stage of that situation, the Government would have to fine themselves. They would then have to fine the intergovernmental commission. Perhaps the intergovernmental commission would then pass it on to the private sector infrastructure manager. It sounds a little complicated to me and I do not think that it would work legally. The same could be applied to Network Rail, which is in the private sector, if the Government decided to follow the line suggested by the noble Baroness, Lady Kramer.

The figures are big. Many speakers have talked about the air pollution problem in London. The figure I have heard from the Commission is that the likely size of fine could be £300 million. Whether it was the present mayor—it could not be the previous mayor even though he came from a different party—the present TfL, the Government or whoever else, £300 million is a very big figure. We should bear this in mind when we talk about how this should be resolved.

The other example I have is an interesting one because it applies to most local authorities in this country. It is the first stage in the complaint from the Commission that local authorities are not complying with the green vehicle procurement rules. The directive—2009/33—came into force on 4 December 2010 and it,

“requires the public sector to use its purchasing power to promote clean and energy-efficient vehicles. Every time they purchase a vehicle for public transport services, they must take into account energy consumption”,

and so on. The obligation extends to all purchases of road transport vehicles by public authorities or transport operators. There are many experts in your Lordships’ House who know how many local authorities there are in this country—in England anyway, and Wales if Wales is included in it. However, working out a £300 million or £200 million fine between all those local authorities and then allowing each one to take this arbitration route, which I hope will be implemented unless the clause is lost completely, is just unthinkable.

I shall be interested to hear from the Minister how the Government will deal with that kind of failure to comply with the green vehicle procurement rules which apply to every local authority. How do they propose to apportion the fine even before it gets to arbitration? How much would this arbitration cost each time it was used? We all know who is going to pay for it. It will be the taxpayer in the end or the local authority ratepayer, depending on whose side you are on or who gets legal aid. With this kind of enormous scope for potential failure, before one starts apportioning blame, the whole thing should be scrapped.

My Lords, as this is the first time I have spoken in Committee, I should declare that I am a landlord, a landowner, I have been a councillor in Norfolk for a number of years, and I am chairman of my parish.

When I first saw these provisions, I did wonder who on earth had dreamt them up. It is all too easy and tempting to blame Brussels, but in this instance, I do not think we can. I do not know of any other EU country that is bringing in similar provisions. Here I am confused. If it came from the British Government, which I think it did, why does it apply only to English councils? Why the urgency? What have English councils done, or rather, not done, that merits these provisions?

We all know that Britain gold-plates all EU directives so that Britain complies, or rather, overcomplies, with all directives, unlike some member states. Why are these provisions necessary? After all, Britain has never been fined by the EU. Are the Government worried that we are about to be fined? If so, given that we gold-plate all EU directives, it must be that we face a possible fine for something we have signed up to that has been impossible to deliver. In that case, why penalise local authorities? After all, they were not party to the negotiations with the EC. This makes me wonder whether a fine will apply to things that have happened, or rather, have not happened, in the past. Will these fines be retrospective or will they apply only to future events and future non-compliance? The EU treaty quite clearly states that only Governments are liable for any fines. Here we have provisions that allow the Secretary of State to lay off the blame and the fine onto local authorities.

If the Government persist with Part 2 of the Bill—I hope that they do not—and they are successful in pinning the blame on local authorities, the big question is how local authorities are going to find the money. We know that local government finance is already under tremendous strain. To have to pay an EU fine might mean cutting front-line services. That cannot be the right answer and I do not believe that would be acceptable. After all, local authorities already have big enough trouble cutting their budgets. To do so again to pay an EU fine would be untenable.

How are local authorities going to find this extra money to pay the fine? They could increase council tax, but again that would be unacceptable. Why should households be penalised for something that is totally out of their control? Anyway, any increase in council tax can now be challenged. The only other source of income that local authorities have is from the central government grants. That would be like robbing Peter to pay Paul. There are provisions in the Bill that require the Minister to take account of the effect of any fine on a local authority’s finances. So presumably, if a local authority is strapped for cash—and they all are—then no doubt central government will end up picking up the tab. Here we have a situation where the Government pass on their fine from the EU to local authorities which they, the Government, may well end up having to fund themselves.

Why bother with all these procedures: the Secretary of State publishing a statement of policy and then determining how the amounts are to be paid; apportioning the blame across various local authorities; giving warning notices; issuing a final EU financial sanction notice; the appeal process; the protracted legal battles between local authorities and the Government; and perhaps an independent arbitration system to ensure the Minister is not, as other noble Lords have said, judge, jury, executioner and co-defendant? There is all this protracted bureaucracy and legal wrangling when, at the end of the day, the final bill will probably be picked up by central government anyway. All because in the past the Government have signed up to something with the EU that they cannot deliver, because if they could deliver, we would already have gold-plated regulations.

Therefore, rather than squabbling among ourselves, would it not be better if the Government concentrated their efforts and firepower on challenging any fine, if and when one is imposed? They should renegotiate with Brussels, if necessary, and, in future, ensure that Britain does not sign up to anything that is not in our interests or that we cannot deliver. As things stand, I cannot see the point of all this. It is a clear case of cutting off one’s nose to spite one’s face.

My Lords, I wanted to speak briefly to Amendment 110 and to make a few other comments, but it would be a brave Ulsterman who would take on the noble Lord, Lord Wigley, on a Welsh amendment. However, I assure him that I want merely to talk about the principle here. Although the Bill does not apply specifically to Northern Ireland, the Northern Ireland Local Government Association has asked me to raise some matters of principle, because if the principle is established in the Bill that local authorities will or could be liable for EU fines, sooner or later it will have national significance. While some EU directives may often have specific geographical implications, others have wider national implications.

I do not have a problem with the principle that the polluter pays, but it has to be understood that local government throughout the United Kingdom is not a universal picture. Local authorities in Northern Ireland have far fewer powers than those in the rest of the United Kingdom. They also raise most of their own money—more than 80 per cent—by rates. Consequently, they do not have a large central government grant, as is the case in England. Therefore, it is not possible for the Government simply to reduce the grant that local authorities in Northern Ireland receive in order to take the money off them, because they do not get it in the first place. If you impose a fine on a Northern Ireland local authority, you impose it directly on the ratepayer. That has to be understood.

The other matter is that the powers of local councils vary considerably. The Department of the Environment in Northern Ireland is largely responsible for local government, but other groups and public bodies will perhaps share policy implementation with local councils. Air and water pollution have been talked about. Local councils obviously have or could have an environmental health role in this, but other public bodies might be responsible for other aspects, including water pollution, sewage and so on.

The Northern Ireland Local Government Association, in consultation with other local government bodies, including the LGA, has expressed concern—not only because they have not been consulted about the measures, but because, although the Bill does not directly affect them at present, they believe that sooner or later it will. That is because EU fines have a national implication, as well as a local one. It was, I think, the noble Lord, Lord Berkeley, who said that he was not aware that EU fines had started to be imposed. I can assure him that they have, because I know, at home, our Department of Agriculture is being fined very heavily over issues concerning mapping. Grants were being distributed on the basis of maps, and now we have armies of planners who, as a result of not having much to do during the recession, are poring over aerial maps, because in the designation of fields, the boundaries of areas of rough ground may have become unclear. Brussels is now saying that people have been double claiming and doing all sorts of things. I can assure the noble Lord that fines are being imposed, exemplary damages are being applied, and the fines are vastly in excess of the amount of money that may have been inappropriately spent or given to a particular claimant. The Government are being fined millions of pounds above that. We are talking about substantial issues.

I should like to say that it was not me who suggested that the British Government had not been fined.

I beg your pardon; I may have picked up a comment from someone else.

When the Government are finalising what they are going to do on this issue, they need to take into account the significant regional disparities. One understands that the Government are trying to establish the point that the polluter pays. However, the big issue with all this is that we send representatives to Brussels—and I do not know whether the late-night hospitality and the all-night sessions are to blame—decisions can be forced through at 4 am and our representatives keep putting their hands up to approve them. Then, five or six years later, they blame Brussels for enforcing those decisions when it is they who have agreed to them. I have to say: beware the late-night hospitality. We should pick representatives who are good at doing this at night. In a negotiation, I fear that the officials will know full well that a certain Minister has to get away to an event somewhere else, perhaps at 1 pm the following day, and know that if they push for a decision at 3 am or 4 am, the Minister will put their hands up and agree to anything. I seriously suggest that we be careful what we agree to, because it comes back to haunt us many years later.

I accept that the provision in the Bill does not apply to Northern Ireland, and it is not entirely clear as to whether it applies even to Wales. The Minister may answer that this is an England-only Bill, but while local government is a reserved or devolved matter in certain areas, EU fines are, of course, a national issue or a reserved matter. The interface where these issues collide is not entirely clear to me, and I sincerely hope that the noble Baroness will take this into account when she replies.

My Lords, it is probably rash of me to intervene in a debate that has so far been dominated largely by great gurus of local government, another of whom is yet to speak. However, it must have become obvious, at least to my Front Bench, that I am one of those who become more rash, rather than more cautious, as the years advance. I have endlessly declared my wife as an interest, in respect of Braintree District Council. I hasten to add that she has not told me to say anything about this issue. The council is well conducted—and I say that not just because she told me that. However, I support the noble Lord, Lord Tope, and say that the concern is confined not just to his Benches. That has admirably been made clear, but having geared myself up to speak, I decided that I would do so—albeit very briefly.

First, the noble Lord, Lord Tope, was right to say that this issue should have been discussed with local authorities, not just bounced out with the publication of the Bill. Secondly, I have every sympathy with what my noble friend Lord Jenkin said—whether or not something like this survives, the Secretary of State should not be judge, jury, prosecutor and executioner. That leads to my interest in some of the amendments in the group, including that of my noble friend Lady Gardner of Parkes. I noted that the noble Lord, Lord Best, who knows as much about all this as anyone, said—although he did not use this phrase—that the Government were opening a can of worms. The whole of the rest of the debate has demonstrated that it is indeed a can of worms, not least in the speeches of my noble friend Lord Cathcart and the noble Lord, Lord Empey. It may be too late to put the lid back on it, but my noble friends ought to contemplate whether they can squeeze it down a bit or at least make it a more palatable lot of worms.

I do not have much more to say, but I have two questions that link with the points made in recent speeches. I want to put them very directly. First, as was initially raised in uncertain terms by the noble Lord, Lord Wigley, just where does this stand in relation to the devolved Administrations? Since the noble Lord spoke, I have checked Clause 213 on the extent of the Bill. If I read that correctly, this lot does extend to Wales; but it does not extend to Scotland and, as we have just heard, it does not extend to Northern Ireland. Therefore a fine from the European Union would be imposed on the United Kingdom Government. We are the members of the European Union, not Scotland, even if it would like to be, or Wales, even if it would like to be, or Northern Ireland—I do not know whether it would or not. That means that in certain circumstances the United Kingdom Government could be fined, but if the fine related to a local authority in Scotland, the European Union could do nothing about it. Only an English council could have a knock-on fine under these proposals. If I got that wrong, I would be glad to be told; but that appears to me to be the meaning of the Bill and I do not think it is satisfactory.

Secondly, as was touched on by my noble friend Lord Cathcart, is this or is this not retrospective? I could just about understand it if councils knew what they were getting into when they made a decision that might lead to this risk. However, unless I have read the Bill wrongly, this is a backward-looking proposal. A fine could be imposed that related to something that had already happened, in circumstances in which a local authority had no reason to suppose that there would be a penalty. Most of us would regard that situation as deeply unsatisfactory, and I do not regard it as satisfactory on anything that I have heard today.

From what the noble Lord, Lord Best, said the other day, we know that this clause was one of the top three targets of the Local Government Association, which is why he is here today, no doubt. He was very kind, and rightly so, to my noble friend Lady Hanham on the Front Bench for having been so conciliatory on its other two main targets—one was the issue of mayors, the other I cannot remember. I urge my noble friend to be conciliatory on this one as well.

My Lords, I am afraid that I am a local government novice rather than a local government guru. However, I want to add a few words because in some of the last speeches there was a dangerous drift, I thought, towards implying that this was all the fault of Brussels and I think that has to be countered quickly. As a Londoner, I am very grateful that there is an EU air quality directive. The Mayor of London and his draft air quality strategy assess that PM10 particulates play a part in the premature deaths of more than 4,000 people per year here in London. In fact, if you look at the impact on heart disease, it is probably closer to 8,000 people. If we had that number of premature deaths from food poisoning, I would guess that there would be a very big response. The fact that it comes from air poisoning seems to have drifted past an awful lot of British Governments. As a Londoner, I suspect that many of us are reasonably concerned about that.

I agree with all the arguments that the Government cannot possibly turn around and pass these fines off to other authorities to act as judge and jury. That is against natural justice and it is important that we say so. However, this whole conversation that we have had today has made it clear that arbitration is complex, expensive and protracted; the wisdom of Solomon would rarely be adequate to make sure that proper allocation followed. In those circumstances, this strikes me as a classic piece of the gold-plating that we mention when we talk about how our country handles directives from Brussels. Going back to the original proposition, to simply eliminate this clause would be the far cleaner way in which to act. The Government have often said that they do not expect us to ever get any EU fines, in which case the argument is even stronger for simply eliminating all of this rather than following the gold-plating strategy that seems to be under consideration.

My Lords, I speak to Amendments 117ZA and 117ZB, to Amendments 110A and 114A, to which we have added our name, and to the other amendments in this group. This has been a fascinating debate but there seems to be one very clear strand that I think that pretty much everyone who has spoken has signed up to, which is that, if these provisions proceed, the Secretary of State cannot be the final decision-maker in respect of these fines. I am on the side of those who hope that these provisions go in their entirety. I will just touch upon the point raised by the noble Lords, Lord Wigley, Lord Empey and Lord Newton. According to the Notes to the Bill, my understanding is that these provisions relate to England only, so it seems to me entirely reasonable to ask the Minister whether there is going to be any proposition that will extend them somehow to Wales, Northern Ireland and Scotland. If the answer is no, then I say good luck to Wales, Northern Ireland and Scotland. Nevertheless, how do you address the point that the noble Lord, Lord Newton, made, that you could have an EU penalty that, you might argue, is the responsibility of a number of local authorities, some in England, some not, so that under these provisions an English authority would be forced to cough up and authorities in Wales and Northern Ireland would not have to? If that is the proposition, that is simply a nonsense and cannot be right.

If I may say to the noble Earl, Lord Cathcart, I think this issue around gold-plating of EU directives is, frankly, a myth. Every time an exercise is done to try to identify where that happens, the answer pretty much always comes back that it is very difficult to identify. I agree with the noble Baroness, Lady Kramer, that this is not about laying blame at the feet of Brussels. As I said a moment ago, I am on the side of those who believe that we should remove these provisions from the Bill in their entirety, along with the noble Lord, Lord Tope, the noble Baroness, Lady Scott, and others, for the reasons that the LGA touched upon; namely, that they are,

“unfair, unworkable, dangerous for local economies, and unconstitutional”.

The noble Lord, Lord Tope, spoke to that, and other noble Lords made the point that it is the UK Government who have EU obligations, not local authorities. If there is an issue about recalcitrant local authorities, surely it has to be addressed by more effective regulation by powers of intervention that central government could take, not by this nonsense of trying to apportion fines on some basis with all the complexities and problems that noble Lords have identified today.

My understanding is—and the LGA briefing touches upon this—that the concerns are particularly around air quality, public procurement, services and waste. As a start, can the Minister confirm that those are the particular areas that the Government are concerned with? Can he also tell us at what stage potential infraction proceedings have reached over these various areas or others that might be under way? My noble friend Lord Berkeley gives instances of several hundred in relation to transport. If we cannot get these clauses out of the Bill, and if we are to try to work out the best process to deal with this, it is worth reflecting on what I understand to be the process leading to infraction proceedings and the raising of a penalty.

Looking at the more formal arrangements in Articles 258 and 260, it has to start with an informal letter of inquiry from the Commission, then a formal letter presenting an opportunity to respond to an alleged breach of Community law, followed by reasoned opinion, which is the 41 notice from the Commission advising a member state that it is in breach of its obligations, followed, if there is no satisfactory response, by an application of the Commission to the ECJ for a formal ruling.

Following that, if there is a determination that there is a breach, there will be a letter requesting information on the steps taken to put an end to the infringement. If there is failure to comply, there will be formal notice that the member state has failed to comply, following by a reasoned opinion, which is the formal determination by the Commission that the member state has failed to comply with the ECJ judgment, followed by a financial penalty.

Therefore, the process is extensive, and there are a number of occasions when member states can challenge the existence of a breach or attempt to rectify it. Indeed, is it not the case that, even before these processes occur, there will in practice be opportunities to discuss with officials any suggested breaches of the treaty, with an iterative process to try to reconcile matters? This can extend over many months, if not years. Is it not the case that they are not clear-cut issues and that compromises may have to be reached along the way? That is why it seems fundamentally unacceptable that under the Government’s proposals an authority will be formally engaged with an EU financial sanction only when it has become a reality.

I shall run through some of the amendments in a moment. I do not think that any of them separately encompasses what we now consider to be a robust fallback position in removing these provisions, but I believe that in aggregate they present a cocktail of suggestions which I hope the Minister will digest, as he has time to do between now and Report.

In our view, any retention of these provisions—our preference is for them to be removed and we will not give up on that yet—must include safeguards which make it clear that the consequences of a failure of transposition of directives into UK law can never be visited on local authorities. There must be a requirement for the Government to use all the powers at their disposal to ensure compliance with ECJ rulings, whether they are powers relating to regulation or powers of intervention. Perhaps on that latter point the Minister would write to me setting out what powers the Government have over the various areas of concern and the extent to which they have been deployed to date or are planned to be deployed to avoid or mitigate any EU breach.

There must be a statutory opportunity for authorities whose actions or inactions are considered by Ministers to have potentially contributed to a breach to be notified at an early point, and certainly before the start of the processes set out in Article 258, with a right for such authorities to be kept up to date with developments and negotiations, and to be able to make representations to government about the conduct of such negotiations and to be given an opportunity to rectify any contributory breaches. There must be protections for authorities which do not wilfully and deliberately set aside a power or responsibility and where they have taken all reasonable steps to bring about compliance. There must also be a right for authorities affected to have access to some form of independent review, judicial or otherwise—and there seems to be strong support for that—which assesses not only whether the proposed levying of the fine received by the UK is fair but whether the processes and engagement leading up to the end result have been appropriate and consistent with the principles that I have set out.

The collection of amendments before us covers much of that ground and, as I said, provides some of the key ingredients for a fallback position. While we will continue to argue for the removal of these clauses, we will consider supporting a fallback position if it is sufficiently robust. The onus is now on the Minister and his colleagues to take note of the mind of the Committee, although I suggest that it is pretty clear. I believe that he has a decent time to do that before Report and I urge him to do so.

My Lords, I entirely endorse the observations made by my noble friend Lord McKenzie. I was happy to ascribe my name to the amendments moved by the noble Baroness, Lady Eaton, and indeed I congratulate her on tabling them. I think the Committee would wish to join me in congratulating her on her tenure of office, which ends this week, as chairman of the Local Government Association. She has been a very distinguished representative of local government. She has been quite unafraid to express the views of the local government family to Governments of all three political colours over the past few years, and we look forward to her playing an even greater role in your Lordships House than she has felt able to pursue so far because of a slight feeling of a conflicted position.

My noble friend Lord McKenzie referred to the position of Wales and Northern Ireland, and he seems to be absolutely right. I obviously have every sympathy with the noble Lords, Lord Wigley and Lord Empey. One would not wish to see these fines imposed on either Wales or Northern Ireland, or indeed on Scotland. However, it would be ridiculous if they were excluded from and England were included in certain situations. For example, if the Tweed or the Severn were polluted from the north or the west of the relevant borders, the Welsh or Scottish authority involved might be exempt and an English authority held liable. That would seem quite absurd.

My noble friend Lord Berkeley and the noble Earl, Lord Cathcart, asked about the number of potential breaches. Noble Lords may recall—although probably not—that at Second Reading I referred to a Written Question and Answer in relation to this matter. The Question was what estimate the Government have made,

“of the potential liability of the United Kingdom to pay fines to the European Union; and what proportion they anticipate would fall to be paid by local authorities under the provisions of the Localism Bill”.

The Answer from the noble Lord, Lord Sassoon, was:

“The United Kingdom has never incurred a financial penalty under Article 260 of the Treaty on the Functioning of the European Union”—

or under the former articles—

“and no such fines are anticipated”.

I suggested at Second Reading that it was a little curious that in that case there should be provision in the Bill at all. However, the Answer went on:

“In the event of such a financial penalty, it is not possible to anticipate what proportion would fall to local authorities under powers proposed in the Localism Bill”.—[Official Report, 24/5/11; col. WA 419.]

Therefore, it could be a very large or a very small sum. In that context, I ask the Minister to indicate whether it is correct, as the Local Government Association believes, that the Government are considering fines relating to four specific EU laws so that councils could be forced to pay up to £1.2 billion in fines. It is alleged that the UK is facing a potential £300 million EU fine for breaches of air-quality targets. Is that correct?

Furthermore, a slightly worrying feature of the fines proposal is the reference to the breach being “caused or contributed to” by a local authority. A contribution can go from a small proportion to a very large one. What is the Government’s thinking about the situation that would arise if it were not wholly the responsibility of an individual local authority or a number of local authorities? In those circumstances, how would the fine be apportioned and who would determine it? Presumably, on the basis of the Bill as it stands, it would be the Secretary of State.

I recall money being lost to the United Kingdom, and particularly to the region from which the noble Lord, Lord Shipley, and I come, not through the fault of local authorities but through the negligence of civil servants who failed, for example—this was in the days of the previous Government—to transmit bids for EU funding in sufficient time for the money to be allocated and received. The money went missing but unfortunately there was no question of the local authorities fining the Government for that negligence. It seems that this is a one-way street. When it comes to money being lost to the UK, only local authorities seem to be scheduled to be in the firing line.

There are real problems here with the processes. The noble Earl, Lord Cathcart, talked about Ministers signing up successive Governments to regulations, and he was right to say that. In particular, Governments have signed up to these regulations without consulting local government, upon which under the Bill and indeed perhaps more generally responsibilities would lie. The position now seems to be that if the Bill goes through unamended local authorities will be faced with decisions made on the basis of targets, deadlines and laws dating back more than 10 years—again without any consultation along the way.

My Lords, I thank the Committee for the time, effort and thought that has been put into the amendments on these clauses. I particularly welcome some of the sensible comments of the noble Lord, Lord McKenzie of Luton, after he gave me his fairly firm strictures. We welcome such constructive contributions. I have taken on board the strictures of the Committee and I accept that there is much more that we need to do on these clauses. I also believe that the House is well placed to find a solution. Given the significance of these provisions, I intend to give a full reply. However, I will avoid getting involved in a debate about the EU or the desirability of any particular directive. On any relevant points that I do not answer, I will write in due course.

The basic principle is, I think, sound. The aim is to encourage authorities not to incur fines for the UK in the first place and, in the unprecedented circumstances that the UK is fined for an infraction, to achieve compliance quickly. We do not want to pay escalating fines to Europe. As many noble Lords have pointed out, we have never incurred fines for an infraction and do not see these provisions as a prelude to being more relaxed about infraction proceedings or fines. My noble friend Lord Tope, in his speech, accepts that it is very unlikely that EU fines will be incurred. The whole point of the policy is to avoid the fines in the first place.

My noble friends Lady Gardner of Parkes and Lady Scott of Needham Market, the noble Baroness, Lady Valentine, and others raised the issue of the air quality directive and the difficulty of apportioning liability to certain types of directive. The amendment of my noble friend Lord Tope deals with this problem in conjunction with the amendment of my noble friend Lady Gardner, although I have to caution that it may have unintended consequences in this respect, so further consideration is required. The noble Lord, Lord McKenzie, asked whether these clauses are aimed at just a few specific EU directives. I go back to my point that that is not the case; they are about avoiding problems in the first place.

I understand that point. My specific question was whether those four areas that I identified are of particular concern at the moment, and in respect of those areas, how far, if at all, the early stages of infraction proceedings have got.

My Lords, I think I will be able to give the noble Lord some comfort later in my speech. The noble Lord, Lord Berkeley, rather exaggerated the spectre and size of related fines. He will recognise that most EU states are experiencing difficulties with the air quality directive, particularly in respect of NOx, but I will not weary the Committee with the technical reasons for that.

We should focus much more on preventing fines. I am therefore very interested in the amendment proposed by my noble friend Lord Tope and by the noble Lord, Lord McKenzie of Luton, on the Benches opposite. Taken together, as the noble Lord, Lord McKenzie, suggested, these would target and give a very clear warning only to authorities that are putting us at risk of a fine from Europe and just for the specific breach in question. That also deals with the point raised by the noble Lord, Lord Berkeley, about the potentially very large numbers. Actually, the numbers directed would be very small. This would involve a parliamentary process. The issues or any culpability could be clearly debated here and in the other place. In considering the merits of these amendments, we need to ask whether naming specific authorities could result in a greater desire on their part to comply and avoid any fine. This, as the Committee is aware, is the Government’s overriding aim.

Listening to the debate it seems to me that noble Lords believe that a particular advantage of the amendments is that prior to a directive being designated, all concerned can concentrate on solving the problem rather than taking legal advice and protecting their position. That deals with the point raised by my noble friend Lady Scott of Needham Market. In other words, the meter is not running until the designation order has been approved. As such, noble Lords may consider that these amendments deal with the issue of retrospectivity raised by my noble friends Lord Cathcart and Lord Newton of Braintree and the noble Lord, Lord McKenzie. However, I make it clear that the Bill’s clauses would have to apply to existing directives, not just new ones.

We must also ensure that the mechanism used as a last resort to recoup any fines works, otherwise there will be no incentive to avoid a fine.

My noble friend has been very reassuring on general retrospection and I think I understand the point about existing directives, but in respect of an existing directive, would the potential fine apply only from the date of the designation under an amendment along the lines that he appears to be discussing, because if it applies backwards it remains retrospective?

My Lords, I believe that that is the intention of my noble friend’s amendment; the meter would run only from when the directive was designated.

The process must be fair, reasonable and proportionate. I therefore warmly welcome the draft policy statement from the Greater London Authority, mentioned by my noble friend Lord Jenkin, arising from discussions with the Government. A copy has been placed in the Library and I would welcome any comments on it. I was also very interested to see the amendments of my noble friend Lady Gardner of Parkes.

I am sorry; my noble friend is clearly doing his best, but the draft statement was obviously drawn up after the discussions had got so far with the department. Are those discussions still going on?

My Lords, I will be delighted to deal with the noble Lord’s point later in my speech.

I was very interested to see the amendments tabled in the name of my noble friend Lady Gardner of Parkes. In considering the merits of these, we would need to be certain that any panel would provide additional value on top of the existing availability of judicial review. Amendment 114A, tabled by my noble friends Lady Eaton and Lord Tope and the noble Lords, Lord Beecham and Lord McKenzie, would take this a step further. I do not feel, however, that arbitration is appropriate. This is not just about deciding between disputing parties on a breach of contract; it is a complex matter that involves myriad decisions, including on the apportionment of resources and most importantly on the ability to pay. It is not appropriate for a single unelected individual to make such decisions, any more than it would be for them to decide the local government finance settlement.

The noble Lord, Lord Beecham, made a point about the revenue support grant. I go back to my point that it is not about raising money; it is about avoiding the fines in the first place.

The Minister mentioned ability to pay. If a council has no money, does that mean that the Government will not have to pay?

Not quite, my Lords, but the decision-making process will have to ensure that what the council pays is affordable. It may hurt them, but there is no intention to bankrupt a local authority, which I think would concern noble Lords. There has to be an affordable fine. However, if an amendment similar to the one tabled by my noble friend Lady Gardner of Parkes were put in place, it would be hard for Ministers to ignore its advice without making themselves vulnerable to judicial review. I am very grateful for the clear way in which my noble friend explained her amendments.

I welcome the tone of the speech by the noble Baroness, Lady Greengross, and I can confirm that we will make clear in the policy statement our commitments to the principles of fairness, reasonableness, proportionality and no surprises. This is why I find the draft document from the Greater London Authority so helpful. Unfortunately, the amendment, which seeks to put tougher tests on culpability by using the criminal standard of law, causes some real practical difficulties. Unfortunately, the European Court of Justice proceedings are based on civil standards of proof. Rather than rerunning the European procedures here in the UK to the higher test, it is better to use a court’s finding to focus on quickly achieving compliance.

My noble friend Lord Jenkin of Roding seeks to ensure that the Government cannot designate any private company. I agree that we should not penalise companies for their private services and functions. I believe that this amendment needs further consideration. We need to ensure clarity as to who is to be covered by these provisions.

Finally, to the noble Lord, Lord Wigley, whose amendment we are debating, I suggest that there is no need for his amendment. Clause 36 sets out that the powers apply only to English authorities exercising public functions in England.

As I flagged up at Second Reading on 7 June, the Minister in another place said that this is likely to come into force in other parts of the United Kingdom. If that is the Government’s intention—and as the noble Lords, Lord Newton and Lord Empey, and others have said, it would have implications if it did not and it has implications if it does—at what stage would we know conclusively that this part of the Bill was not going to be changed to include us? If it is to be changed, can it be changed in time for us to table amendments as necessary on Report to deal with the consequences of this being applicable to Wales, Scotland or Northern Ireland?

I am coming to that. The noble Lord, Lord Wigley, asked whether the Government will give an assurance that the UK Government would not stop the Welsh Assembly Government from negotiating with the EU. The UK Government recognise that the devolved Administrations will have an interest in European policy-making in relation to devolved matters, notably when action by them may be required for implementation. The UK Government will involve the devolved Administrations as fully as possible in discussions about the formulation of the UK’s policy position on all EU and international matters that touch on devolved matters.

The noble Baroness, Lady Scott of Needham Market, asked whether we are confident of our legal position. Parliament is sovereign and can give powers to Ministers to pass on EU fines in accordance with the law as passed by Parliament.

The noble Lord, Lord Berkeley, asked about the number of transport directives in difficulty. I cannot confirm his numbers. However, he will be aware that many problems are relatively minor and easily dealt with and some of these matters are progressing faster than others.

My noble friend Lord Cathcart talked about gold-plating, but we cannot be infracted for doing additional things. He also made the important point, which the noble Lord, Lord Berkeley, touched on, about the effect of any fines. As I said previously, the Secretary of State has to take into consideration the effect on a local authority of fines, and any arrangements that were put in place as a result of the solution that we devise would obviously have to have that effect.

My noble friend Lord Newton of Braintree and the noble Lords, Lord McKenzie and Lord Wigley, asked about the extent of these clauses. England and Wales are one legal jurisdiction, which is why the extent is England and Wales. However, the application of the clauses is to English authorities, but we are in discussions with devolved Administrations about how the clauses may be relevant to their areas for reserved matters, and we will be prepared to look at their requests very carefully indeed.

I had actually decided not to intervene, because it seemed almost unfair. There is nothing more certain, I would judge, than that if the UK Government approach the Scottish Government—I do not know about the Welsh—and say, “We have this policy and if we get a fine that applies either north of the border or across the border, will you pay your share?”, they will tell us to get stuffed.

My noble friend Lord Jenkin asked where we are in negotiations with outside bodies. He is of course, correct in what he surmises. However, your Lordships and another place will have to decide what is to be done in the end. In conclusion, I would like the opportunity to consider, in consultation with ministerial colleagues, those suggested amendments which could provide a way forward and a solution.

While I am clear that putting the decision-making in the hands of a single unelected individual is not helpful, I am very willing to take away the other suggestions from noble Lords. I believe that together we can develop good solutions in time for Report. While I cannot accept a veto, I am very happy to continue discussions with outside bodies and noble Lords in order to develop this good solution before Report. In the light of what I have said, I hope that the noble Lord will feel able to withdraw his amendment.

Will the Minister explain his last reference to the different types of organisations that might be covered, which the noble Lord, Lord Jenkin, and I raised, be they water companies or railway companies? Is the Minister going to write to noble Lords who have spoken with more detailed responses to all these things, or is he going to recommend that we put down amendments on Report about which should be covered and which should not?

My Lords, I am very happy to enter into detailed discussions with any noble Lord.

Noble Lords will be grateful for the response that the Minister has made because he has indicated that this is very much open and there is scope for a lot of further detailed discussion. Can I be clear that included in that discussion will be issues around the point at which local authorities will be notified of possible infraction proceedings and the opportunity to engage in the iterative, informal discussions and negotiations that go on before we get to an Article 258 situation? Any review and assessment of the outcome would cover that early engagement and its legitimacy as well as just looking at the divvying up of the fine that may result at the end of the day. Can we have the opportunity to engage with the Minister along the way so that we will have no surprises when we come to Report?

My Lords, the noble Lord will know that infraction proceedings are a very long process, even after the Lisbon process, which, I understand, makes it a little shorter. The designation procedure suggested by the noble Lord, Lord Tope, would provide a very clear signal. One of the questions that my noble friend would have to answer—and we can do this offline—is: at what point would you designate a local authority? I would suggest that it would be after you get to a difficult stage in negotiations with the EU. I would be very happy to discuss that point with the noble Lord.

I know the Minister has gone through a lot this evening on this. It is not just a question of designating so that you know that you are potentially in the frame; it is an opportunity for a local authority to engage with the Government, who are obviously responsible for the negotiations. Since it is a negotiation, and a deal is often struck at the end of the day, where that deal is struck could affect a particular local authority or group of local authorities in ways that are different from the way others are affected. Therefore, that chance to impact on that process early seems vital if people are going to be assured that there is a reasonable process going forward. It is not just being designated; it is being designated at a point where you can engage with the ongoing pre-formal process of the infraction proceedings.

My Lords, the noble Lord makes an important point, but the amendment tabled by the noble Lord, Lord Tope, deals with it because until the directive has been designated, the Government can deal and negotiate freely with the Commission and with the affected local authorities to try to find a solution to the problem. Most of the time, we will be able to achieve compliance relatively easily. I hope we will never get to a situation where we cannot achieve compliance.

Before the noble Lord, Lord Wigley, tells us what he is going to do with his amendment, which, as we were reminded just now, is the one we are supposed to be debating, I thank the Minister for his conciliatory response to us tonight and for recognising—indeed, after nearly two hours, he could hardly fail to recognise—that the clauses as drafted are not quite perfection and that more needs to be done. We are, of course, very willing to engage in constructive discussions to try to find a solution and a way through this. I think he will have heard many times during this debate that to have the Secretary of State as prosecutor, judge, jury and executioner is simply not acceptable to your Lordships, and he has made the point that a single unelected arbiter is not acceptable to the Government. Therefore we need to find some solution: an arbitration that is seen to be fair on all sides. That is perhaps where we should concentrate.

As my final word on this subject, I ask the Government to consider seriously the can of worms that others have referred to and which has been spoken of many times in this debate. I suspect that the Government did not fully recognise it when drafting this Bill. Given all the potential difficulties that are implied in all this, should the situation ever arise, is it really worth pursuing Part 2? I think it has been said on all sides of the Committee that our preference would be not to have Part 2.

Hear, hear!

I think that came from all sides of the Chamber. The Government have perhaps recognised that shadow mayors are not to be pursued. It may be time that they should also have the courage to consider whether Part 2 is worth all the trouble that it may potentially cause and whether the best solution to the dilemma we have spent the past two hours debating might be just not to pursue it at all.

My Lords, inspiration has arrived regarding one of the questions asked by the noble Lord, Lord McKenzie. He asked at what point local authorities would be notified that there is an infraction proceeding. They are made aware via relevant departments from the outset of formal proceedings—so, from an Article 258 letter of formal notice.

My Lords, I shall not detain the Committee very long in winding up this fairly substantial debate. I thank the Minister for the movement that he has indicated in response to representations on the generality of the problems arising with local government. The concerns of the Welsh Local Government Association are very similar to those of the LGA and the extent that Part 2 can be amended between now and Report to meet those concerns will be equally as welcome in Wales as elsewhere, if the Act, as it will be, is to be applicable in Wales.

I concur entirely with what the noble Lord, Lord Tope, said a moment ago about doing away with Part 2 in its entirety. That would avoid all the problems, but judging from the comments made by the Minister in responding to the debate, it seems that there is still an intention to have a Part 2, albeit amended. If that is the case, I hope that the message will be taken loud and clear from this Chamber that the Minister made it clear that by virtue of Section 36, the Act will apply in England only as things stand now. That will be heard particularly by my good friend Mr Alex Salmond and by others as well, as will the comments of the noble Lord, Lord Newton, about the response if there were attempts to take money from local authorities in Wales, Scotland and Northern Ireland in relation to this Bill. I entirely understand that noble Lords from England will feel that there would be inequity if that was the case, and that is why I suspect that at some point in time we will find a formula that brings in Wales, Scotland and Northern Ireland.

If that is the case, it needs to be in the Bill. It needs to have an opportunity to be discussed and debated and to have all the opinions from those three areas brought on board before a final conclusion is reached in relation to the legislation. I very much hope that between now and Report, if there is to be movement away from what the noble Lord said—that it does not apply, as it presently stands, to the two nations of Wales and Scotland and to the Province of Northern Ireland—that can be made known to us in good time so that there can be discussion, if necessary, and discussion with the authorities in the devolved Administrations so that on Report we can address this in a way that will be acceptable, at least in terms of debate, discussion and parliamentary process, by those who have to live with the consequences. I beg leave to withdraw the amendment.

My Lords, we have just been through a very important debate that has taken a good two hours. I sense that the House is absolutely exhausted, so I will try to be very brief in moving Amendment 118. I will speak also to Amendment 118ZA. Since the latter is the smaller, I will address it very quickly now.

This arose because my colleague and expert lawyer, the noble Baroness, Lady Hamwee, looked at the Bill and realised that there was a serious question in the wording of Clause 38(7), which refers to business rate supplements and makes various amendments. It says:

“The amendments made by this section do not apply in relation to a BRS imposed before the date this section comes into force”.

That is an important date because on one side of the date of raising a business rate supplement there is in many cases no requirement for a ballot, and various other conditions are different, and on the other side of that benchmark the conditions are entirely different. It is absolutely necessary that any authority affected by business rate supplement rules knows when that date occurs. I apologise if we have made a mistake, but neither the noble Baroness, Lady Hamwee, nor I can find any definition to determine when “this section comes into force”. This is an attempt to do that by replacing those words with the word “enacted”. It seems that if this clause should pass and become part of the Bill in its final form there has to be some clarity from the Government. This is a technical issue but it could lead to an awful lot of confusion and litigation if it is not clarified.

Amendment 118 covers the issue of tax increment financing. I will take a moment or two to explain what tax increment financing is. I am sure many Members of this House are very aware of it but there might be one or two who are not. I will then explain why I have raised this in this Bill and at this point. Tax increment financing was first used in the 1950s by California and is now part of the framework statutes of every state of the United States bar Arkansas, as well as of various continental countries, in various forms. Essentially it is a mechanism that recognises that where regeneration takes place or where there is new infrastructure, land values consequently rise. Therefore, business rates associated with that increase in land values are attributable to the existence of the project. In effect, it allows the relevant local authority or other body to borrow against that predicted increase in the business rates that results from the construction and existence of the project.

In this country we have a great problem in building infrastructure. People often use the example of the London Tube system and the Jubilee line. We get the cost upfront—in the case of the Jubilee line, about £3.5 billion—but there is a huge benefit at the far end when the project is complete. The increase in benefit to landowners around the various stations on the Jubilee line is estimated at about £13 billion. In other words, huge value is created, but we rarely find any mechanism to let us capture that value in order to get the financing to build the project in the first place. This happens on a small scale as well as a large scale. Knowing the cash that is coming out at the end, are we going to take the steps to allow us to find a mechanism to tap that in order to get the project built?

In the United States, this is not often used on large-scale projects. It is used typically on small, local regeneration projects in blighted areas, but it need not be limited to that application. The Deputy Prime Minister, Nick Clegg, announced in September 2010 that the coalition would at some point allow local authorities to use tax increment financing to finance infrastructure projects. In a sense, this is a probing amendment to find out where on earth we are in this process. I speak partly as a Londoner because I know that so many infrastructure projects are necessary in this city, but it has to apply to the whole of the country.

This issue is relevant because of the various new clauses in the Bill that apply to the business rate supplement. I am conscious that a review is under way of local government revenue-raising powers and that tax increment financing is likely to be discussed as part of that. However, a problem arises from Clause 38 because of the new constraints that are applied to local authorities in raising business rate supplements— notably that a ballot is now necessary for every business rate supplement. Under the existing rules, no ballot is necessary if the business rate supplement provides less than one-third of the total cost of the project.

Crossrail was passed through a special hybrid Bill but the business rate supplement plays a significant part in the financing for it. Had all the businesses in London that are covered by this rate been balloted, they would not have passed the business rate supplement because many of them do not benefit from the existence of Crossrail. I am sure that this will be true on a small scale as well. It will become very difficult to achieve a business rate supplement when many businesses will look at the project that is very beneficial to the community but say that it does not benefit them directly. The joy about tax increment financing, if that were to be the basis on which businesses were balloted, is that you pay it only if you have benefited. You will pay a tax increment levy only if you have seen the increase in property values that comes because the project has been created. That, presumably, is something that businesses capture through rent or through the sale of property or in various other ways, but it is in their interest to make sure that the project happens.

That is why I have raised the matter in this context, although there is a more general Bill to come. It seemed to me that if we were going to see in this Bill new difficulties for using business rate supplements, we at least ought to have some discussion of mechanisms that would be put in place to give confidence to local authorities that they could proceed with infrastructure projects, regeneration and other necessary developments. They would then have some assurance that mechanisms would be coming their way that would allow them to achieve that. At a time when we talk about the importance of economic growth, infrastructure is perhaps more important than ever, so there is an urgency in clarifying this issue. That is why I have brought forward the amendment. I beg to move.

My Lords, we understand why the smaller of the amendments has been introduced tonight. Doubtless the Minister will be able to give satisfaction on the date that these provisions enter into force for the reasons the noble Baroness has outlined. We also understand better now why she has attached tax increment financing to these provisions. As she said, a ballot is now required in all circumstances, whatever the level of funding, and there may be difficulties in securing that in the future.

Tax increment financing is about raising more money upfront by committing revenues which would not have arisen but for the project going ahead. We accept and support the importance of focusing at this time on tax increment financing when capital resources for local authorities are especially tight and the private-sector nervousness about the state of the economy means fund raising is extremely difficult. The noble Baroness will be aware that the previous Government set up a working party to examine this and an enlarged group has been working with the coalition Government. What I am not sure about is the grafting of these provisions on to the Business Rate Supplements Act 2009, which is about levying a supplement on the NNDR. It involves consultation arrangements and a ballot of those existing ratepayers affected. In concept, TIF is about ring-fencing additional business rates and almost hypothecating those to fund a borrowing arrangement. The current position is set out in the local growth document which the Government issued recently. That talks about introducing new borrowing powers to allow tax increment financing. It will be interesting to hear from the Minister what the mechanism is for those borrowing powers to be introduced to facilitate tax increment financing. I do not think grafting it on to the Business Rate Supplements Act provisions will be the right way to achieve it. It looks as though the Government already are focused on changes to borrowing arrangements which will facilitate it and obviously, subject to the detail of that, it is a principle and a project which we would support because it is important to get this source of funding under way at the current time.

My Lords, I want to add a word from the perspective of English core cities. The proposals around tax increment financing put by the eight largest English cities to Government three to four years ago have gradually been working their way through a number of committees, particularly in the Treasury. In the past 12 months added impetus has been given to tax increment financing. I hope that what my noble friend Lady Kramer is proposing here does not cause any delay to the move forward with the Government’s proposals because tax increment financing is urgently needed to enable cities, in particular, and all councils to be able to borrow against future business rate income growth. At present local councils have the power to borrow prudentially, but prudential borrowing requires there to be an income stream guaranteed to enable that borrowing to proceed. Tax increment financing enables borrowing to be made against future growth and projections of that business rate income, as my noble friend Lady Kramer rightly pointed out.

These are not separate issues and they can sit happily together but we are looking for some clarity from Government that tax increment financing as a principle will go ahead as speedily as the Deputy Prime Minister announced that it would last year. Local authorities are waiting for the powers to be implemented and it could well be a further 18 months to two years before those powers come forward. They are urgently needed. Otherwise infrastructure funding that requires a capital investment based on borrowing on the markets needs to be progressed. Without it that investment will not take place. I look forward to my noble friend the Minister clarifying the speed with which tax increment financing can be introduced and how then that proposal lies with this proposal in the name of my noble friend Lady Kramer.

My Lords, the noble Lord, Lord Shipley, is quite right to refer to the support for the principle from the core cities and also, in general, from the Local Government Association. I endorse that. To help me understand the implications of this measure, can the Minister refer back to the point that she raised about this being more acceptable to business ratepayers because they will benefit from the projects that are being financed through this mechanism as opposed to something like Crossrail where they may not have done? This does not necessarily constitute an objection to the proposal, but I wonder whether that is right. The rates are borne by the occupier of business premises. The value effectively goes to the owner and they are not necessarily the same. We have had over many years in local government finance the position where property owners contribute little to the regeneration of cities and the like. The financial burden falls on the tenants through the rents and they also pay the rates. I wonder whether she is not being a little optimistic in assuming that the occupiers of premises that may benefit from these developments will be as enthusiastic as she might suppose, although, as I say, that does not vitiate the validity of the proposal as a means of financing investment.

My Lords, I hope I can be helpful on this but, while thanking all noble Lords who have spoken, I revert to the point that my noble friend Lady Kramer made in her initial remarks about this being a probing amendment.

The Government have committed to introduce tax increment financing but we should not pre-empt the outcome of the local government resource review that will conclude in July. The review is looking at both local retention of rates and tax increment financing as we need to make sure that tax increment financing proposals are consistent with our wider proposals on business rates retention. The amendment appears to increase the rates liability of businesses, whereas tax increment financing, as generally understood, does not increase the business rates that would otherwise be levied but uses those rates to repay the borrowing that helped to deliver a piece of infrastructure. The business rate supplement and proposals for tax increment financing are two separate models that are structured differently. Rather than integrate them, there is no reason why they could not be used alongside each other to facilitate the funding of infrastructure to support economic growth.

The amendment seems to create two types of business rate supplement. The first type is a traditional business rate supplement of up to a 2p levy on business rates payers within an authority area that occupy property rated above £50,000 for an economic development project. The second type is a business rate supplement for where tax increment financing has delivered some infrastructure project of up to a 2p levy within an authority area but is restricted to the increases in rateable value of properties rated above £50,000 as a result of some infrastructure that has been implemented by tax increment financing.

The amendment appears to be defective in a number of ways. There is no definition of tax increment financing. The amendment would also create some practical concerns. The tuppence maximum will apply to the area, so in London the proposal could not apply as the tuppence limit reached by the Crossrail business rate supplement has been dealt with. Applying the increase to the rateable value to adjust the impact of the tax increment financing project would require a second ratings list to be set up for all properties with rateable values both prior to and after the tax increment financing project delivery. A consequent increase in administrative costs is highly subject to challenges over the extent of any rateable value increase as a result of the tax increment financing project or other factors—refurbishment of a property, for example.

The tax increment financing scheme does not increase the business rates that would otherwise be levied but uses those rates generated by the infrastructure to repay borrowing. Under existing arrangements, 100 per cent of business rate revenues collected by local authorities are pooled for redistribution to local authorities in England. By considering options to enable councils to retain their locally raised business rates, the current local government resource review provides an opportunity for significant changes in the way in which councils are funded. Such an approach could help to set free many local councils from dependency on central government funding and provide incentives for them to promote economic growth. The review is considering how we could manage the distributional impacts of any new arrangements. More deprived councils will continue to receive support.

Last September, the Deputy Prime Minister announced that the Government were committed to take legislation to allow for tax increment financing. Then, the local growth White Paper, issued in November, set out the Government’s intention to carry out a resource review. The terms of reference for the resource review were published in a Written Ministerial Statement by the Secretary of State on 17 March 2011. The resource review will look at local retention and tax increment financing in the round and will conclude in July. The aim is then to move as quickly as possible towards implementation, taking into account the need for primary legislation.

I appreciate the spirit of Amendment 118ZA, which aims to ensure that any business rate supplement where the levy raises less than one-third of the overall project cannot be imposed between Royal Assent and the commencement order without a ballot. However, we do not think that bringing forward commencement of that part is necessary as we are not aware of any proposals for any new business rate supplement planned to be imposed—that would fund less than one-third of the overall project—as we have not seen an initial prospectus or consultation. The business rate supplement for Crossrail has already been imposed and would not be affected by the amendment. I should like to offer reassurance that the Government will bring into force the proposed change that will ensure a ballot for all future business rate supplements regardless of whether it funds more or less than one-third of overall costs.

Clause 38 will come into force following a commencement order to be made by the Secretary of State. We will look to make that commencement order for a date no earlier than two months after Royal Assent in line with convention that legislation is brought into force earlier only where necessary and in exceptional circumstances. I trust that that is a fair response to the noble Baroness and that she will feel able to withdraw her amendment.