Combined Authorities (Consequential Amendments) Order 2014

Lord McKenzie of Luton Excerpts

Monday 24th March 2014 Grand Committee

[Lord Shipley (LD)]

My Lords, I strongly welcome these draft orders, and the fact that the north-east draft order is on its way, making four orders in total, with the potential for more to come in the months ahead. As we have heard, combined authorities are important on the grounds of geography and scale because they reflect natural regions and travel-to-work areas. In terms of scale, so many councils are comparatively small that investment and risk management are much more difficult for them, so pooling with neighbours is a much better way in which to proceed.

I noted that the leader of Manchester City Council has said that this Government have devolved more in three years than the previous Government did in 13 years. He is right. The importance of this devolution is that it is essential to help to drive growth outside London and the south-east effectively. Combined authorities, working closely with their LEPs, will be responsible for regeneration and economic development, and for strategic transport investment and management, as the Minister confirmed. That is a hugely welcome change. I have been involved in the first and second waves of city deals, which have been very important in increasing the understanding that councils have with their LEPs in terms of their leadership role in promoting economic development. I have no doubt at all that the creation of combined authorities will help enormously with that process.

I would like to raise one important issue of principle with the Minister, which concerns the membership of the combined authority. I listened carefully to what the Minister had to say earlier. I understand that the overview and scrutiny committees will be politically balanced so that minority parties in councils will have representation in the governance of the combined authority. Can the Minister say, either now or at a later date in writing, a little more about how proportionality will work, whether an opposition member will be required to chair them and how agendas will be constructed to ensure that debate is not stifled by individual party political interest? That is a very important issue and there have been a lot of discussions around it.

There is a strong case for saying that minority parties should have access to the main deliberations of the combined authorities. However, it would help significantly to know now that the Government understand the issue and are prepared to ensure that the rights of minority parties are guaranteed in the orders when they are finalised, either now or at a later date. In terms of principle, it is important, as my noble friend Lord Storey said, that the public have confidence that this is not to be the creation of a one-party state.

[Lord McKenzie of Luton (Lab)]

My Lords, I thank the Minister for introducing these important orders in a clear and comprehensive way. As the noble Lords, Lord Shipley, Lord Alton and Lord Storey, said, and as would have been clear from the debate in the House of Commons, we thoroughly support these orders. Indeed, why would we not, given that the authorities involved are largely Labour and that the primary legislation from which they spring—the Local Democracy, Economic Development and Construction Act—was legislation of the previous Government? We acknowledge that the work of the noble Lord, Lord Heseltine, has spurred the coalition Government to take the opportunities that that legislation offers, and we acknowledge the Government’s current commitment to localism. I am bound to say that those of us who spent many hours ploughing through the Localism Bill and its detail will recall that it seemed to us then to be as much about power for the Secretary of State as about freedoms for local government, but it would be wrong to be too churlish on this occasion.

As for growth, of course we welcome the improvement in the economy. We will have to see how sustainable it is and how much of it genuinely comes from a rebalancing of the economy, a point touched upon by the noble Lord, Lord Alton. We agree that local authorities working together in the interests of their communities can be a real engine for growth, particularly outside London. As my honourable friend Andy Sawford put it when this matter was debated in the Commons:

“The new combined authorities will bring many benefits, including the strong and visible collective leadership of an area with democratic accountability and an influential and unified voice. That leadership will be able to have a single conversation with the Government, national agencies and business leaders and to align decision making and economic growth at a strategic level”.—[Official Report, Commons, 18/03/14; col. 707.]

As the noble Lord, Lord Shipley, said, combined authorities should enable more effective engagement with LEPs and facilitate delivery of city deals.

The issue that York is currently a non-constituent council in the West Yorkshire Combined Authority was the subject of some discussion in the other place, particularly following an earlier intervention from my right honourable friend Hilary Benn. We took it from the Minister’s reply in another place that the current problem is that combined authorities require whole local authority areas that share the same boundaries. The Minister undertook to consult in the next few weeks about how the legislation could be changed to address that problem. Perhaps the Minister could add a little more about the propositions that are being developed in that regard.

We welcome the commitment to see the combined authorities brought within the VAT refund scheme, which is another matter that was discussed in the other place.

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[Baroness Stowell of Beeston]

The noble Lord raises a couple of points there. The point that I am getting to with the overview and scrutiny committee is that it would be made up of representation from the various authorities that make up membership of the combined authority. The scrutiny committee that will hold the combined authority to account will be made up not of the chairman or the leaders of the different local authorities but of people from the different parties represented in that local authority. So there will be a variety of political parties represented on the scrutiny committee that holds the combined authority to account.

As to access to meetings of the combined authority, I was going to come on to that, because it was a point that my noble friend Lord Storey also raised. They will be subject to exactly the same transparency requirements as local authorities. So, yes, the meetings of combined authorities will be open to the public; this is a statutory requirement. Their minutes will be published in exactly the same way as local authority minutes will be published—and, indeed, they will be subject to the requirements of the Freedom of Information Act in exactly the same way as local authority meetings are at this time. I hope that before I sit down I will be able to confirm that the scrutiny committees will also be open to scrutiny in the same way.

The noble Lord, Lord McKenzie, referred to West Yorkshire and York in particular. He acknowledged there that we are seeking what we describe as a legislative reform order to amend primary legislation on combined authorities to enable a council that is not contiguous with other members of the combined authority but which is in the same functional economic area to become a constituent council of that combined authority if it wishes. As a first step, we will be consulting on proposals for such a legislative reform order, which will be an opportunity for those with views on this to put them to government.

The noble Lord, Lord McKenzie, also referred, I think, to the combined authorities’ ability to reclaim VAT. I confirm that they will not be disadvantaged by VAT legislation. Last week, the Government launched a consultation on the proposal to add Greater Manchester and these proposed combined authorities to the existing VAT refund scheme for local authorities, which can be achieved through secondary legislation. The consultation closes on 18 April and, following that, if the Government decide to proceed, parliamentary approval will be sought to give effect to this and to enable established combined authorities to recover VAT, just as the constituent local councils can.

The noble Lord, Lord McKenzie, also sought confirmation that local authorities and the ITAs that will be abolished would not be subjected to any disadvantage around tax arrangements. I will see whether the answer to that emerges, but if it does not, I will write to the noble Lord. I can confirm that there will be no disadvantage. I am nearly at the point where I might be able to avoid a letter, which would be great.

Going back to the point that I was talking about previously, I confirm to the noble Lord, Lord Alton, and all noble Lords, that the scrutiny committee will be open to the public, as will be the combined authority meetings.

Several noble Lords mentioned devolution and localism more generally. The Localism Act 2011 devolved powers not only to local authorities but to local communities. We are interested in discussing with local authorities what more can be done to empower them to deliver economic growth and take their communities forward. We certainly hope that more of the combined authorities will come forward. As my noble friend Lord Shipley said, the combined authority covering local authorities in the north-east will be with us very shortly. I hope that I have been able to address all the key issues that have been raised.

[Lord McKenzie of Luton]

I may be able to avoid the Minister having to write. I am not sure that she dealt with the point about funding and whether the opportunity runs beyond the existing opportunities in relation to transport funding. In particular, given what is effectively a recent change, as levying bodies, presumably these are the very sorts of levies that have to be taken into account by individual local authorities in judging whether or not their council tax increases are excessive. Within the overall constraints—whether we agree with them or not—that the Government have imposed, there is an effective cap, subject to referendums, on what the combined authorities would charge in their constituent authorities. Should that not be an argument for perhaps some relaxation in relation to prudential borrowing for so long as it could be funded through the levy mechanism?

[Baroness Stowell of Beeston]

The noble Lord is right to say that I had omitted to respond to him on that important point. We are absolutely clear that levies should be included in the regime for the consideration of council tax levels. Levies will therefore be caught by the council tax referendum policy. We are absolutely clear that local people should be able to have their say on any proposed excessive increase in council tax, whether caused through a levy on the council or by any other reason. Certainly in Leeds, where this has been a particular debate, we are confident that the measures proposed in that area would be possible without an increase above 2%. If a combined authority wanted to propose an increase above 2%, it would be open to it to conduct a referendum.

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[Baroness Stowell of Beeston]

My noble friend raises some very important points. As a point of principle, I or one of my ministerial colleagues would be happy to write to the combined authorities, and I will discuss with them the precise detail to put in such a letter.

[Lord McKenzie of Luton]

The exchange has prompted a thought. Presumably the combined authority will have to have an audit panel, subject to the constraints or requirements of the recent Act.

[Baroness Stowell of Beeston]

Yes, it will. I commend these orders to the Grand Committee.