Local Audit and Accountability Bill [Lords]

Debate between Andy Sawford and Huw Irranca-Davies

Tuesday 17th December 2013 Commons Chamber

[Huw Irranca-Davies (Ogmore) (Lab)]

It strikes me that the same argument could apply, in principle and in practice, to the internal drainage boards, which work in partnership with the Environment Agency. They are worried that being included in the referendum provision could lead to their being unable to do the essential drain clearing that helps with flood alleviation. My hon. Friend is making his point well. Does he agree that this could also apply to the internal drainage boards?

[Andy Sawford]

My hon. Friend is absolutely right. This group of amendments on levies would have significant implications for internal drainage boards. There was a specific amendment on them, but it has now been withdrawn. However, the other amendments will affect the boards just as they will affect other bodies that apply levies. I know that my hon. Friend considers this to be an important matter; he is an expert on matters affecting our rural communities and, in particular, on flooding. If a local authority felt the need to take urgent action—or, indeed, long-term action—on flood defences, I think we would all be concerned if that ability were to be undermined by the provisions in the Bill. I will return to that issue in more detail later.

Leeds city region has written a letter to the Deputy Prime Minister to raise concerns about the clause, and it gives us a new insight that we did not have in Committee. The city region is concerned that including levies within the ambit of a calculation to hold a referendum on annual increases in council tax could result in it having to hold

“up to 60 referendums, with the Combined Authority not being in a position to know whether its investment programme was affordable until all referendums had been passed.”

Is the Minister aware of that concern, and does he recognise those possible implications? A critical element of the Leeds city deal is the local contribution fund. The Leeds city region believes that the Bill, as it stands, will make the fund “impossible to deliver”, because it could trigger up to 60 referendums a year and the authority might have to conduct such referendums over a period of five years.

In Committee, the Minister said that the figures provided thus far did not make a compelling argument for treating city deals differently. Does he agree, however, that these new figures from Leeds city region should make us think again and support a clause that does not require the Secretary of State to make exemptions but, rather, merely permits him to do so?

The Minister might well be proved right; this might not become an issue. Leeds city region clearly believes that it will, however. If that were to happen, would it not be in everyone’s interests if the Secretary of State could make a judgment to exempt the levies? It would be in the Government’s interest, in terms of their good faith in negotiating the city deal. It would also be in the interests of the city regions around the country, particularly Leeds city region, which has expressed so much concern.

If a council tax referendum were lost and the levying body refused to reduce its levy, what would the Minister expect a local authority to do? Under the Bill as it stands, a levying body would not have to abide by the result of a referendum, should one be triggered and subsequently lost. In effect, therefore, the financial risk would be on the local authority regardless of whether the increase in council tax was a direct result of its financial decisions. That cannot be fair.

The provisions are retrospective. The Minister told us on Second Reading and in Committee—his noble friend Baroness Hanham told their lordships—that the provisions are not retrospective. They clearly are. The Local Government Association is absolutely clear in its analysis of the effect, as are Labour Members. Clause 41(15) allows the Secretary of State to apply changes retrospectively. He will be able to impose a different referendum limit on authorities where their council tax increase for 2014-15 would have been excessive under the new definition, but not under the current definition. This is not fair on those authorities that have taken decisions in good faith based on the legislation in place at the time. There is no difference in principle between Labour Members and the Government on the intention to protect citizens and residents of our local councils from excessive council tax increases. Indeed, councils such as Hackney have been freezing their council tax for many years and setting an example, as other Labour councils have done, but we would not want to see an unfair retrospective provision that undermines the plans that local authorities have put in place.

There is clearly a risk of perverse outcomes that will put growth-generating investment at risk. Levying bodies are, by statute or local agreement, able to recover some or all of their costs by charging local authorities a fee for infrastructure or services. Local government in England is subject to a variety of different levying arrangements covering significant and regionally important issues such as transport, drainage—the point my hon. Friend the Member for Ogmore (Huw Irranca-Davies) made—and a wide range of other local issues. There is enormous scope for perverse outcomes in our communities from these provisions.

There are a number of examples where the extension of council tax referendums will cause instability and uncertainty—not just the Leeds example, but many other areas around the country where plans have been made on a different basis from the legislation that is now being proposed. On integrated transport, the implications in west Yorkshire, for example, are that if the referendums were lost, it would put at risk £750 million of investment and 20,000 new jobs; these are very significant consequences.

Under the Bill’s provisions, an internal drainage board that needed to take emergency action to manage flood risk may be denied the capacity to do so by the outcome of a referendum. These boards may also be unable to support wider central Government objectives because the changes might limit their ability to levy funding to invest in flood defences. Participants in the work that Sir Michael Pitt did a few years ago in response to some of the most severe flooding we have seen in this country were left scratching their heads as to how, at a time of public sector financial constraint, we would meet the challenge of ensuring that there are effective flood defences. We know that some of the poorest and most vulnerable people are the most exposed to flood risk around the country. There are issues with insurance, for example. One of the sensible ways in which we were able to take this forward was through the drainage boards and the work they were able to do. That could now be undermined.

[Huw Irranca-Davies]

My hon. Friend illustrates the point very well. It is only a couple of years ago that we had extensive flooding in the south-west of England. One of the consequences of that was the need to do emergency work very rapidly on the drainage channels there. The levies paid through IDBs are very well supported by those communities that need them for flood alleviation.

[Andy Sawford]

My hon. Friend has considerable expertise in this and he is right. If a drainage board needed to take emergency action, clearly it would not be in the interests of communities—the very people who, during a cost of living crisis caused by the Government, we agree we want to protect from excessive council taxes—to leave them exposed to flood risk if we know that we can take emergency action to address that.

There are issues with pension authorities, particularly in some metropolitan counties and in London, which operates the legacy pension schemes of the Greater London Council. As with the rest of the local government pension scheme, there is little control over the costs of these, which are increasing with each successive valuation. Indeed, more levying bodies may be created in the future as a consequence of the pension governance reforms that the Department is considering.

In short, these proposals have not been thought through. We do not disagree with the fundamental intention behind them—to keep council tax down—but we do disagree about how they are being introduced, without further thought or consultation, and particularly about some of the issues that arise from retrospection as it affects drainage boards and city deals. We would urge the Government to go back to the drawing board. With the leave of the House, we will seek to press amendment 18 to a vote.