Localism Bill

Debate between Lord Kennedy of Southwark and Lord Shutt of Greetland

Monday 10th October 2011 Lords Chamber

[Lord Kennedy of Southwark]

The amendment moved by the noble Lord, Lord Lucas, raises a significant issue. I can clearly see the point that he is making. If the Government are not minded to accept it, I hope that the noble Lord will be able to give us some insight into the Government’s thinking on how they intend to deal with this problem. My noble friend Lord Beecham raised a significant point about residential property, which is probably just as important as the point about commercial property.

[Lord Shutt of Greetland]

My Lords, I thank noble Lords who have spoken on this amendment, particularly the noble Lord, Lord Lucas, who moved it. The amendment would give authorities the power to reduce the liability for empty property rates. Our ability to take action on empty property rates needs to be balanced against the costs involved, the targeted support that we already provide on business rates and the overriding need to reduce public expenditure and support the economy generally by reducing the deficit. This Government have already doubled small business rate relief for two years, which will benefit about half a million rate payers, with about one-third of a million paying no rates at all for that period. We are also taking powers through this Bill to waive £175 million of backdated business rates demands levied on businesses, including some in ports.

Unfortunately, in taking these matters into consideration, support for empty property rate measures is currently simply unaffordable. While the Government have no immediate plans for reform, we are certainly keeping this matter under review. However, the Bill does give local authorities powers to provide discounts on business rates bills as they see fit, provided they fund the relief themselves. So authorities will be able to reduce bills in the way suggested by the amendment.

I hope that the noble Lord is willing to withdraw the amendment, but I assure him that the matter is under review. It is quite interesting, because I have within the papers here a note about the reliefs. In 2007-08, 2008-09, 2009-10 and 2010-11, changes were made.

[Lord Shutt of Greetland]

My Lords, I am delighted that the noble Lord has made those comments. I think that the officials had difficulties with this, and quite frankly so did I. I sought out the Local Government Finance Act 1998, but I am afraid that it has been amended, because the reference that he makes is not there. Immediately before speaking, I tried to check this myself, because I had some doubt about this. The whole area is under review, as it seems to have been for four years on the trot, because Chancellors and local government people have changed the position. So it is still the fact that the area is under review, but it is one that does impact on the economy. Having heard what the noble Lord said in his latter remarks, clearly, we will need to reflect further. But I cannot make any commitments at this stage. Perhaps a few tender words here and there might help us to understand exactly what he is about.

[Lord Kennedy of Southwark]

Can the Minister give the House an indication that he will come back before Third Reading? I would not want the noble Lord, Lucas, to have to come back again on Third Reading on this matter.

[Lord Shutt of Greetland]

I will certainly use my best endeavours to see that we can write to the noble Lord and that copies are placed in the Library so that other noble Lords with an interest can see the results of that.

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[Lord Kennedy of Southwark]

I shall be brief. The amendment moved by the noble Lord, Lord Greaves, raises important concerns. The other amendments in the group seek a process to deal with these concerns. Without these amendments or something else, it is all rather open to interpretation, which is not a good place for us to be. I agree with the comments of the noble Baroness, Lady Hamwee, about the sense of unease.

The amendments in the names of the noble Lords, Lord Greaves and Lord Tope, and my noble friend Lord Beecham, are absolutely right. They make provision for a consultation process with the users of a service, their representatives and residents of the area. If the noble Lord, Lord Shutt, is unable to accept these amendments, will he tell the House when he responds how he squares that with his previous remarks about localism? I genuinely feel that the Bill is confused. In some cases it gives power to the local community, in some cases it takes it back. There is a lot of regulation. It is all a bit confused here. I would be grateful if the noble Lord could address that point in particular.

[Lord Shutt of Greetland]

I thank the noble Lords who have spoken to this set of amendments. I have notes on these amendments and will do my best to deal with them. Frankly, I am not certain that there is an absolute assurance, but let us see how we go with these amendments.

Amendment 197EZA would give the Secretary of State a power to specify in regulations a service value threshold above which an expression of interest may be rejected. It further provides that this threshold will be set at or above the level at which a full, open tendering process is required to take place by any Act or regulations. I understand that the intention here is to focus the right on those contracts where it is perceived that community groups might have a greater advantage in the procurement process. However, it is worth being clear that while only contracts valued at more than £156,000 must currently comply fully with processes set out in the public procurement regulations, procurement below this level will still be subject to requirements of openness, transparency, freedom to provide services and non-discrimination.

Furthermore, it is not right to limit the range of services open to challenge in this way. It is not true that the voluntary sector delivers only small-value services. The right ensures that good ideas for improving any services get a fair hearing and gives those groups the opportunity to go for it. A threshold that prevents consideration of ideas for better or more innovative delivery of higher-cost service contracts seems unnecessary, given the safeguards that I have already mentioned, and a shame.

This amendment also risks discouraging growth and partnership. For example, a consortium of Holy Cross Centre Trust, Mind and Camden Volunteer Centre won a £2 million contract to deliver mental health daycare services. Would this consortium not be able to challenge? Or take the example of Hackney Community Trust, which started off as a small social enterprise delivering local community transport and has expanded into a highly successful social enterprise. At what point would we say “Sorry, you have grown too much, so your ideas no longer deserve a fair hearing”?

Finally, it could also limit opportunities for larger charities and communities of interest to challenge for higher value services. Nobody would argue, for example, that Age UK does not represent the interests of older people. Yet if Age UK wanted to challenge to deliver the meals on wheels service alongside other services in a large authority area, this amendment could prevent it from doing so. It would be inflexible to set a threshold for service value above which an expression of interest could be rejected, and we would not want to reduce the scope of services that could be challenged.

Amendments 197EA and 197EB would enable relevant authorities to carry out a service review instead of a procurement exercise following the acceptance of an expression of interest. Amendments 197EC and 197ED would require relevant authorities to consult widely in carrying out such a review. We have introduced the community right to challenge to ensure relevant bodies with good ideas for how they can deliver services differently or better get a fair hearing and a chance to compete to run the service. These amendments would put at risk both of these aims.

It is unclear what a service review would constitute under these amendments, and the authority would not be compelled to take any action as a result. Many of you will have received the briefing from 10 leading voluntary and community sector groups, including ACEVO, NCVO, NAVCA and Locality, which states:

“Giving local authorities the choice whether or not to respond to an Expression of Interest with a procurement exercise would negate the right to challenge entirely, by effectively allowing local authorities to ignore Expressions of Interest”.

We are supportive of authorities reviewing their services and consulting widely as part of that activity. This is what good authorities will be doing regularly anyway. But that should not detract from or obstruct these important new rights for communities and I do not agree that they should be watered down in this way.

Having said that, if a local authority and any groups that had submitted an expression of interest can agree together that a service review is the most appropriate course of action, there is nothing to stop those groups withdrawing their formal interest and working with the authority to conduct such an exercise. Leaving the power in the hands of the community group ensures that the right is protected but gives the flexibility—where there is a good and proactive local authority—that noble Lords are requesting.

Amendments 197EC and 197ED impose an onerous duty and go beyond, for example, the best value duty consultation requirement, where the duty is to consult representatives of people who may be affected. Contacting every individual resident and service user would constitute a significant new burden. Again, good authorities already engage a wide range of service users and their representative groups as part of the commissioning and engagement process, and should be designing and commissioning services that best meet the needs of their communities.

Amendment 197FA seeks to enable relevant authorities, when assessing bids in a procurement exercise, to apply any criteria they consider appropriate relating to how they might promote or improve the social, economic or environmental well-being of their area as a result of the procurement. This amendment is unnecessary as it is already possible for relevant authorities to apply such criteria within the limits of procurement law. Any criteria applied beyond these limitations could be unlawful and subject to legal challenge.

Amendment 197FAA would require relevant authorities carrying out a procurement exercise following the acceptance of an expression of interest to consider,

“whether it would be appropriate to include particular restrictions on or requirements of persons bidding in response to the exercise”.

I can reassure noble Lords that this amendment is not necessary to ensure that a local authority can control the identity of the service contractor to which it lets the contract during the life of that contract. It is already standard practice for public contracts to contain a term that any purported transfer by the service contractor of its performance of the contract to another person will lead to termination of the contract.

Local authorities will want to retain control over the identity of the person providing services and will already do that in their service contracts. Even if that were not the case, EU procurement law is strict about a change of identity of the contractor. The substitution of a new contractual partner for the one to which the contracting authority initially awarded the contract could be regarded as a change to an essential term of the public contract in question. This could trigger a new procurement exercise.

We have not sought in these provisions to tell relevant authorities how they should design contracts, and nor should we. We have heard many times in these debates that we should be less prescriptive in what we ask of authorities, while ensuring power is really pushed down to communities. A local authority may already impose restrictions or conditions that apply to all persons bidding, as long as such restrictions or conditions are lawful and do not discriminate between bidders. Any attempt by a local authority commissioning a service to impose conditions or restrictions on some but not all persons bidding in the procurement exercise would risk being unlawful as being discriminatory.

I hope that noble Lords will feel able to withdraw their amendments. Yet, I understand the concerns that many noble Lords have about the Trojan horse issue—whether employees, a charity or someone else is challenging just with the idea of someone else coming in on the exercise. Clearly, all that has been proposed is a community right, and it is all about communities. The question comes when the community has challenged—I suspect that the community will have done that because of dissatisfaction—and the authority then says, “Well, we had better have a procurement exercise”. Certainly, if that exercise is beyond the EU figures there is no question that the exercise will be open. People will have put work in, as will have the community bodies and so forth. However, I do not see circumstances in which that procurement exercise can somehow be limited, because that would be outside the law of the land because of our involvement with the European Community. We must be careful not to kid ourselves about that.

However, having said that, everything in these proposals is about the community’s right. In my view, the community would be exercising that right because it thinks that it can do things better and that the service that it is getting would be better in the future than it received in the past.

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[Lord Kennedy of Southwark]

I am pleased that the noble Lord understood the concerns raised on this important group of amendments, spoken to by the noble Lord, Lord Greaves. Is there nothing that the Minister can offer us in terms of looking at this further? Perhaps he may agree to consult with colleagues and come back at Third Reading.

[Lord Shutt of Greetland]

What I will say is this: I have been giving some thoughts regarding guidance, to which there has been reference all along. Guidance will be given and notes will be available from the department, but there may be circumstances where that guidance will be, “This is something on which you make your own mind up”. I am sure that the department will cull the debate and look at where offers ought to be made. Certainly, if guidance is required, guidance will be given. However, there will be instances where, because we are talking about localism, local people and people on local authorities will be making their own minds up.

[Lord Kennedy of Southwark]

Before the noble Lord sits down, can I ask whether there is any possibility of guidance being available by Third Reading, even in draft?

[Lord Shutt of Greetland]

It is extremely unlikely that the noble Lord will get it as quickly as that, but I believe that it will be available before 31 March.

Localism Bill

Debate between Lord Kennedy of Southwark and Lord Shutt of Greetland

Wednesday 7th September 2011 Lords Chamber

[Lord Kennedy of Southwark]

My Lords, the amendment proposed by my noble friend Lady Hollis is most interesting and has considerable merit. She has considerable experience in the local government and social housing sectors. Where tenants want to make major improvements or improve other amenities, I can see the case for this being financed by an increase in the rent paid on the property. My noble friend makes compelling points in particular regarding fuel poverty and green energy and also dealing with the issue of housing benefit. If the Government are not able to accept the amendment, will the noble Lord at least agree to take it away and reflect on it? It could be explored further and perhaps introduced at another time following discussion with relevant departments.

[Lord Shutt of Greetland]

My Lords, I thank the noble Baroness and the noble Lord for their contributions. It is more complicated than I thought. The amendment is clearly about additional facilities requested by the tenant, yet the points made by the noble Baroness have been about solar panels and, basically, energy. Clearly the amendment is about any form of enhancement required by a tenant. All I would say on the detail is that my noble friend Lady Hanham has shown me a letter that she wrote to the noble Baroness, Lady Hollis, on 9 August offering to discuss this matter. She may not have got the letter or something may have gone wrong, but this offer has not yet been taken up. My noble friend Lady Hanham would be happy to discuss the matter and that could well be a helpful way forward. I cannot give a commitment on where that would lead, but I think it would be a good thing if that offer were taken up.

I cannot accept the amendment because it would allow landlords complete freedom to charge rents above the target rent for particular properties in order to fund the cost of additional facilities. This would lead to an unacceptable rise in the housing benefit bill. There are two types of landlord to whom the amendment could apply: local authority landlords and housing associations. Both sectors are able to exercise some flexibility over rent setting but are subject to important constraints. In the case of local authority landlords, there is the “limit rent”, which is the maximum that the Department for Work and Pensions is willing to pay in housing benefit. This cap is vital to control the welfare bill. For housing associations, a direction on rent is set each year by the regulator in order to achieve a degree of consistency in rent levels across the sector and to protect the housing benefit bill. Noble Lords may not be aware of this, but for two-thirds of all tenants in council and housing association properties, the rent comes from housing benefit. So it clearly would be significant.

The noble Baroness’s amendment would remove an important control by Government over rents, which they will largely pay for. While this could pay for some improvements, it would result in uncontrollable increases in the housing benefit bill that we can ill afford. Furthermore, there would be no assurance that the taxpayer was obtaining value for money from the additional public expenditure. For this reason, I must reject the amendment. Councils and housing associations can charge affordable rents of up to 80 per cent of market rents as part of an agreement with the Homes and Communities Agency to build new homes. The extra rent must be used entirely to fund the new homes, which will produce a housing benefit saving as they are still at rents below those charged in the market.

I hope that, in the circumstances, the noble Baroness, Lady Hollis, will take up the offer from my noble friend Lady Hanham and that on this occasion she will not press her amendment.