Local Government (Structural Changes) (Supplementary Provision and Amendment) Order 2023

Baroness Pinnock Excerpts

Monday 23rd January 2023 Grand Committee

[Baroness Pinnock (LD)]

My Lords, I start by reminding the Committee of my interests in the register: I am a vice-president of the Local Government Association and a serving councillor on Kirklees Council. I thank the Minister for her opening remarks explaining this statutory instrument. As she explained, these are consequential changes from the creation of the new unitary local authorities of Somerset, North Yorkshire, Cumberland, and Westmorland and Furness.

The key issues that I want to ask a few questions about relate to pension funds and housing capital finance. Of course, the changes proposed have to be made to ensure an equitable division of liabilities for pension funds and capital finance debt. My questions relate to the way in which these decisions are being made. Will they be transparent? Are the external auditors of the existing local authorities involved and, if not, why not? External auditors can often make independent assessments, particularly of pension liabilities, and are able to advise councils. I think that their advice would be helpful.

I have a further question on the creation of the two local authorities in Cumbria and the manner in which the transfer of their pension funds will be agreed. The Minister explained that it has been agreed that Westmorland and Furness council will administer pension funds on behalf of the two new councils. According to the Explanatory Memorandum, this council will determine the proportions of transferred pension fund assets and liabilities. My understanding is that Westmorland and Furness must take advice from the other new unitary council, Cumberland, but I would like more information about that, because nothing creates more of an argument between councils than questions of who has to take on liabilities.

The two councils may be able to make an amicable agreement, but what if they are not able to do so? The Explanatory Memorandum says,

“In coming to a fair determination on these matters, the Order provides that Westmorland and Furness must take advice from an actuary”—


that is good—

“and consult Cumberland Council.”

If I were a member of Cumberland council, I would want a bit more than being consulted. I would want to be sure that there was proper agreement between the two councils and not just consultation.

Can the Minister say whether there is an opportunity in this process for, in this instance, Cumberland council to appeal to the Government if there is no agreement on the way in which pension fund liabilities are divided between the two authorities? As the Minister is aware, pension fund values can fluctuate significantly across even a few years, and liabilities can suddenly become very large if there is a new actuarial assessment, so budgetary provision for pension funds can make a significant call on a councils’ funding arrangements. This is why I am raising these points, and I hope the Minister can give me reassurance on them.

There is a similar argument in relation to how the debt finance from housing capital funds is to be passed on from, in this case, the existing district councils to the new unitary council and across all four of these new councils. The Explanatory Memorandum is not clear that debt allocations will be in relation to previous activity, rather than there being a simple pro rata division, which would not be fair on some of the council tax payers. For example, there will be councils—I know of one in Somerset—that no longer have any housing capital finance debt. Will they be asked to pick up a share of other district councils’ debt? If so, is that fair? Those are my questions. I am sure that the civil servants will have looked into this and will be able to give me an answer, but I would like it on record.

With those comments and questions, I look forward to the noble Baroness giving me an answer. If she cannot, I am quite happy to have a written response.

[Lord Khan of Burnley (Lab)]

My Lords, I declare my interest as a serving councillor in one of the finest counties in the country, Lancashire, contrary to what the noble Baroness, Lady Pinnock, might think. I apologise: I have a cough, so bear with me. I blame all of the departmental SIs that they keep bringing out; they affect my throat pretty badly.

The Minister spoke in depth about this technical legislation, which takes minor steps to help to create new councils in Cumbria, North Yorkshire and Somerset. The instrument includes provision in relation to ceremonial matters, the transfer of pensions, exit payments, fisheries and conservation—technical and important areas. It is a pleasure to follow the noble Baroness, Lady Pinnock, who has a wealth of experience. She asked many of the questions that I wanted to ask, but I have a few more. Although we will not oppose this, we on these Benches want to see what happens in the Commons—I am trying to work it out, but I think it has not been there yet. When does the Minister foresee this happening?

This has been debated at some length, as the Minister mentioned, so I will not go through the arguments again, but I will add some probing questions of my own to those of the noble Baroness. Will the Government bring forward any further legislation to enable the establishment of these new councils? Have the Government consulted trade unions on the provisions relating to pensions and exit payments? On the noble Baroness’s point about the independent auditors, what is the specific nature of the consultation that the Minister had with them? Did they speak about any concerns or pitfalls?

Have the Government done further research on previous experience of this anywhere in the country, or is this the first of a set of new councils? These councils are very different, geographically and culturally. Councillors in local district councils will tell you that we all have our own identities, ways of working and cultures, so I want to see the feedback that we received from those councils.

Lastly, what will happen in terms of reviews and monitoring to keep an eye on this? In the current economic climate, the markets are all over the show, given the famous Budget a few months ago. What is the plan B, particularly for pension funds, which were mentioned, if things deteriorate?