Local Audit and Accountability Bill [HL]

Lord Beecham Excerpts

Wednesday 26th June 2013 Grand Committee

I think that it is that concern, which is actually expressed well down in section 7 of the briefing, that gives rise to our concern—although I am sure mission creep is not the intention—that exactly the same would have been said in the early days of the Audit Commission. It crept and it crept to such an extent that we are now legislating to abolish it. We do not want that to happen with the NAO. What we are seeking here is perhaps to amend the Bill, but most certainly to have a discussion on how best, while considering the Bill, we can ensure that that does not happen in years to come.

[Lord Beecham]

My Lords, I am a vice-president of the LGA but I am not sure that I will retain that position after what I have to say. I am afraid that I do not entirely concur with the sentiments and positions taken by the two noble Lords who have spoken thus far. I said in a previous Committee sitting that I had a concern that, although the Audit Commission was, in fairness, asked by the previous Government to over-regulate, overprescribe and over-report, it nevertheless performed a valuable role in looking particularly at the interface between services and the comparisons between different types of authority. Actually that information, contrary to what the noble Earl, Lord Lytton, said, should inform local debate. It does not supplant it. It should help to facilitate the citizens to hold their local authority to account, because they must have some comparative data to see how well or badly they are doing in relation to other authorities. That will be one of the things that we will miss. I express a hope—or, put another way, a fear—that with only six value-for-money studies to be carried out by the NAO, which I understand is the position, we would lose that independent assessment of what local authorities are doing.

I am a great supporter of peer review and of the work that the LGA has done in promoting improvements across the sector, and it has done very well in that regard, but when it comes to an objective assessment, the perception will be that that is an in-house job. It is better in my view that there should be a role for a body like the Audit Commission was—and currently still is, temporarily—or the National Audit Office will be. That is something that this amendment would very much restrict. Yet the formulation here depends on a division of resources, and whence comes the money? Of course, increasingly we will see national organisations, be it in the health service or other bodies—the Chancellor again mentioned what was called “total place” and is now called whole community budgeting—

[Lord Smith of Leigh]

Whole place.

[Lord Beecham]

Yes, whole place. It is playing with words, and of course Labour words such as “total” are not acceptable. Within these areas there will of course be collaboration, and the proportion of funding will vary considerably. For example, in public health, less than 50% of government money will be coming in, so the Audit Commission would presumably be prohibited from taking a look at the effectiveness of that. It is not an audit job in that sense, but it is particularly desirable that it should address the issues of effectiveness and outcome, not purely in financial terms but across the piece as well, and that in itself should facilitate the work that the LGA and individual local authorities are doing, particularly in their scrutiny functions, to see how they are faring relative to others, and for that information to be communicated to the people who elect them. So I certainly could not support these amendments. I understand what the noble Lords are saying, but I think that a mission creep has overtaken their amendments as well. They were going too far in the interests of local democracy and the effectiveness of local government.

[Lord McKenzie of Luton]

My Lords, like my noble friend who was unable to support these amendments from the noble Earl, Lord Lytton, and the noble Lord, Lord Tope, I understand that—apart from the issue around this 50% funding—the Bill does what they are seeking to achieve. If you look particularly at paragraph 117 of the Explanatory Notes to the Bill, it says:

“These powers do not enable examinations of individual relevant authorities and are not designed to produce assessment of the performance of individual relevant authorities or comparative analyses in the form of published league tables”.

Unless that wording is defective—doubtless the Minister can help us on that—it achieves what the noble Lords want. As my noble friend says, whether it achieves what we want is another matter.

In relation to the other test in Amendment 18ZA—that is, an authority,

“who receives more than half their income from government funds”—

I can see that, for certain bodies, it is a test that is currently relatively straightforward to determine. However, if you seek to apply it to a local authority you can imagine the sort of criteria that you would have to unpick and examine. Presumably it is not part of government funds to take account of its income which comes from council tax. What happens when you come to the business rate? Is it part of its income? Do you look at the gross amount or the 50% under business retention that goes to central government and then comes back? Is that still government funding? Does it originate with the local authorities? All the issues around how tariffs, top-ups and safety nets work just from that regime itself could make that particular test in the context of local authorities extremely difficult to apply. It would be easy in some cases where either they would be clearly in or clearly out but I would be surprised if there were not a whole range where it would be extremely problematic.

The test at the moment, as I understand it, is that the Auditor-General can carry out examinations of bodies when more than half of their income comes from public funds and where they are appointed by or on behalf of the Crown. I am not quite sure how you translate that into the local authority context but it seems to me that the basic proposition which the noble Lords are seeking to achieve in terms of avoiding mission creep and certainly league tables is already in the Bill.

If that is right—and for that reason some of the comparative stuff to which my noble friend was referring is not available—it raises again the question we discussed earlier about the value-for-money profiles, the guardian of which is currently the Audit Commission. We discussed who was going to maintain those profiles, which I think would be part of the data that my noble friend and I would be looking for. We do not yet know where that is going to end up and how those profiles are going to be maintained, but I think that that is a slightly different issue from the one pursued by the noble Lord, Lord Tope.

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[Lord Beecham]

My Lords, I have a certain sympathy with the amendment moved by the noble Lord. It is a long time since I recall seeing a notice about the provision of a cattle grid, a busker’s licence or even acupuncture, which feature among the interesting series of regulations which apparently apply, and it seems that an overhaul of the requirement is long overdue. However, I do not completely follow the line he has taken. We must not forget that a significant proportion of the population are still not involved with modern communications and are therefore not able to log on to a council website, for example. Moreover, if you log on to a council website, generally speaking you are looking for something, whereas if you are perusing a newspaper you are more likely to come across things. The question is: what things ought to be included in this provision? That is a perfectly legitimate point which the Government need to address to reduce substantially the scope of the present requirement.

However, I do not have too much sympathy with local authorities which complain that they are being charged a differential rate as the answer is in their own hands. They should threaten to withdraw the relevant advertising from the local paper if they do not get better terms. I should think that that would be a pretty powerful sanction. I think that my authority spends £88,000 a year on statutory notice advertising. There is ample scope to reduce that with a more sensible list but I would not like to see the requirement go altogether. Certain other things also have to be published by way of statutory notice—for example, in the realm of probate, licensing matters and things of that kind. Certain things in this enormously long list ought to be retained. I am with the noble Lord in hoping that the Government review this issue and come forward with a much reduced list which would make more sense and perhaps reduce the cost. However, I would not go all the way with him and support the amendment as it stands.

[The Earl of Lytton]

My Lords, I will follow what the noble Lord, Lord Beecham, said, in the same vein, because I think that getting rid of the requirement altogether would create all sorts of difficulties, which the noble Lord, Lord Beecham, has referred to.

I cannot help commenting that for all the money that is spent on these things, they seem to be reproduced in the smallest print and in the most insignificant parts of the relevant newspaper. One always wonders whether a local authority chooses its moment to stick in an important announcement when the local football team has been moved up to the next division or whatever it happens to be, and nobody is going to read the small print in the public notices part of the paper. Maybe it is because they are being charged so much that the print is so small so they need to cram it into a smaller number of column inches in order to get value for money—but that is speculation on my part.

I agree that better and more efficient ways should increasingly be used to disseminate this information. Very often I hear about things not through the pages of the press, where they are carefully hidden, but because the parish council or some other organisation sends a round robin e-mail and I happen to be on the circulation list and that is how I get to know about it. I think that must be the experience of many noble Lords and many members of the public. So I support the general purpose here. Certainly, I would not necessarily support the removal of public advertising in the press for every single thing that is on the list of the noble Lord, Lord Tope.

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Moved by

[Lord Beecham]

19BA*: Clause 38, page 24, line 46, at end insert—
“(3) In section 4 of the Local Government Act 1986 (codes of recommended practice as regards publicity) after subsection 8 insert—
“(9) In respect of the characteristics set out in section 4 of the Equality Act 2010, nothing in section 38 shall restrict the rights of authorities in pursuance of their obligations under section 149 of the Equalities Act 2010 to publish at any time factual material by way of correction or rebuttal of inaccurate statements which promote discrimination, harassment or promotes or constitutes other unlawful acts.”

[Lord Beecham]

My Lords, this rather intimidating-looking amendment is a probing amendment. It arises somewhat curiously from my membership of a committee set up by the All-Party Inquiry into Electoral Conduct, which is preparing a report on material produced in elections that might be racist or discriminatory in one way or another. In the course of discussions, some doubts were expressed about whether, under the present code of practice, it is possible for authorities to publish statements of fact correcting statements of that kind. I put it no higher than that there is a doubt about that. There is a legal opinion that it is perfectly legitimate to do so but certain reservations are held in the world of community relations and local government that it may not be permissible to make clear that what other people are saying is wrong in particular areas.

The reference here to the characteristics set out in the Equality Act cover the following areas: race, gender, age, gender reassignment, sexual orientation, and religion and belief. The concern is that particularly—but not exclusively—around the time of elections we may get significant misstatements which can be calculated to mislead people and may indeed in themselves be unlawful. The amendment seeks to clarify the position. The Minister may be able to say today or subsequently that, having taken advice from government lawyers, the position is okay and authorities are able to correct such misstatements.

To illustrate the kind of problem that one might face, a ludicrous urban myth is currently developing around the infamous bedroom tax, purporting to say that if you are a Muslim householder, you can describe one of your rooms as a prayer room and that will avoid the bedroom tax. This is complete nonsense but one can see how statements of that kind can cause considerable problems and, in the context of an election, be influential.

Therefore, the amendment seeks simply to sanction or confirm, if it is indeed the case, that it is permissible for authorities to publish,

“factual material by way of correction or rebuttal of inaccurate statements that promote discrimination, harassment or promotes or constitutes other unlawful acts”,

in the areas to which I referred. It is particularly important that it be made clear that that is permissible during the purdah of an election period because that is precisely when it may be that those with a particular axe to grind will be most likely to produce such material. It is important that it be rebutted, not in a party or political sense but in a purely factual sense, as quickly as possible in order that the situation should not be inflamed.

I hope that the Minister can assure me that the advice is that such publicity is permissible, including during an election period. If not, I invite the Minister to consider the position further and see whether the amendment or something along the same lines can be incorporated into the Bill. It is an area where, particularly given present tensions, councils acting responsibly can correct factual misstatements, thereby helping to promote community cohesion and avoid any discrimination or harassment of any of the groups identifiable within the characteristics listed in the Equalities Act. Of course, authorities have a duty under that Act; the question is whether we can confirm that that duty will allow them to take the steps to which I referred. I beg to move.

[Baroness Hanham]

My Lords, I just want to check for the noble Lord the exact position regarding elections because that is probably the most salient purpose of the amendment. Perhaps I may first reply in general.

As the noble Lord has acknowledged, Section 149 of the Equity Act 2010 places a duty on local authorities to tackle discrimination in all the areas that he mentioned. The Code of Recommended Practice on Local Authority Publicity, to which local authorities have a statutory requirement to have regard, sets out the seven principles that local authorities must abide by when producing any publicity. Publicity must be, lawful, cost-effective, objective, even-handed, appropriate, have regard to equality and diversity, and be issued with care during periods of heightened sensitivity.

The publicity code, in its guidance on the principle of publicity about equality and diversity, is clear that local authorities may seek to influence the attitudes of local people or public behaviour in relation to matters including race relations, equality, diversity and community matters. The provisions in the Bill relating to the publicity code allow the Secretary of State to make a direction requiring a local authority or group of local authorities to comply with some or all of the publicity code. As I understand it, the amendment is intended to ensure that any direction about compliance with the code would not prevent a local authority from exercising its obligations under Section 149 of the Equality Act. The code makes provision for just this sort of publicity; a direction to comply with the code would serve only to put the guidance on a statutory footing.

Paragraph 35 in the current code states:

“It is acceptable to publish material relating to the subject matter of a referendum, for example to correct any factual inaccuracies which have appeared in publicity produced by third parties, so long as this is even-handed and objective and does not support or oppose any of the options which are the subject of the vote”.

I think that that clears up the matter as regards being able to respond during elections, in particular.

[Lord Beecham]

Is an election to be treated the same as a referendum because a referendum is putting an issue? I am not sure that that is right. If that is the intention and that can be confirmed, that would be sufficient.

[Baroness Hanham]

My Lords, this is an important point. If the noble Lord withdraws the amendment, perhaps we can discuss this further before the next stage and identify whether, in parliamentary terms, a referendum would cover elections. If that is so, the noble Lord is right—the issue is not covered. Is the noble Lord happy to withdraw the amendment with that assurance?

[Lord Beecham]

Yes. I am grateful for the assurance and I beg leave to withdraw the amendment.

Amendment 19BA withdrawn.

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[Lord Beecham]

My Lords, perhaps I can give the Minister a few more minutes to assemble her thoughts.

Once again we are dealing with one of Mr Pickles’s little obsessions. It is unfortunate that so often our parliamentary time is taken up with dealing with these notions of his. I entirely support the amendment and the sentiments with which the noble Lord, Lord Tope, has moved it.

It is interesting to look at the justification—perhaps that is the wrong word; the explanation—for the proposals in the government document, which describes their objectives in revising the code. The code speaks of competition but of course it does not deal with competition, which can and should be dealt with by the appropriate legislation. The department, however, considers that the publicity code is,

“the right vehicle for imposing tougher rules to stop unfair competition by local authority newspapers”.

That is quite extraordinary. It goes on to say:

“The Department’s view is that the proliferation of council newspapers can have the effect of reducing the impact of independent local newspapers. A healthy free press is important in providing information to the public to hold their local authority to account”.

I could not agree more. I deplore the decline in the coverage of the affairs of my council and many others, which has gone on now, to my certain knowledge, for 20 years. Those sentiments are quite right but the statement goes on, risibly, to suggest:

“Council newspapers, issued frequently and designed to resemble a local newspaper can mislead members of the public reading them that they are local newspapers covering council events and give communities a biased view of the activities of the council”.

So the residents of Newcastle are so dim as not to be able to distinguish between the Evening Chronicle or the Newcastle Journal and the occasional distribution of the council’s Citylife? This is a ludicrous proposition.

The suggestion that somehow the terrible decline in the newspaper industry, local newspapers in particular, is the responsibility of local government is just absurd. I can quote some figures about that. Trinity Mirror, which runs papers in my part of the world, employed 6,000 production and editorial staff in 2004; the figure is now fewer than 2,700. The Daily Mail has shed a quarter of its 3,000-strong workforce since 2010. This is not because people are rushing out to get hold of a council newspaper, or waiting eagerly for it to arrive through the door, and therefore no longer need to read these other papers, it is because of the changes in the industry; it is because we now have the internet and social media; and it is perhaps because people are less interested in news.

Certainly, in my experience, local newspapers are much less interested in covering council affairs than they ever were. That process is still going on and I regret it. When I was leader of the council—this is going back a long time—I used to get daily calls from a newspaper correspondent. That stopped before I finished as leader, which was in 1994. They do not come to council meetings and never cover scrutiny meetings, because the industry is in an altogether different position now.

One of the more useful briefings that some of us have received has come from the National Union of Journalists. It opposes this government stance and this clause. As it puts it:

“The NUJ has no difficulty with additional guidance being issued to local authorities and councils. However, the new publicity code ‘includes specific guidance about the frequency, content and appearance of local authority newspapers, including recommending that principal local authorities limit the publication’”—

well, we know about that. The journalists go on to say:

“We do not believe that this element of guidance reflects the needs of many communities, nor the practicalities of providing prompt, accurate advice and information to communities”.

That is, of course, right. They also make the point that it is perfectly possible that if authorities stray into the area of political propaganda—which they should not—they can be,

“referred to the appropriate body for investigating improper use of council funds for political aims”.

Proper officers of the council should be keeping an eye precisely on that sort of area. If they do not, perhaps the auditors should be doing so. They presumably will be getting copies of any civic newspaper while they are about their business.

The Audit Commission itself, three years ago, rebutted the suggestion by newspaper proprietors that local authority publications represented unfair competition. It found that the money spent by councils was not unreasonable, that few council publications were published sufficiently frequently to be viable media for most local advertising—which is where the press think that they are being deprived of revenues—and that the current accountability framework is adequate. That seems a pretty unanswerable case. The position that the Government are adopting bears no relationship to the reality.

However, that is only publications and the press. There is another aspect to this code, which the noble Lord has not mentioned—the question of lobbying and the effective injunction against councils employing firms to lobby on their behalf. Again, if there were any suggestion that the lobbying was of a political nature, that would be caught in exactly the same way as any political material in a newspaper. But why should a council not seek to use lobbyists—preferably registered ones, which I hope will come, even if we have not got round to it yet—to develop an argument with Members of this House or the other House, or to influence government or public opinion? There is nothing wrong with that provided it is not a political exercise. However, that is also excluded under the revised code of practice.

Again, too much power is accruing in the hands of the Secretary of State, who in this case is being set up as a censor or inquisitor prepared to put something on the index of prohibited publications. That is not the function of the Secretary of State. This is an intrusion into local democracy under the specious argument that somehow local council publications are undermining the press. It is an absurd proposition and I support the noble Lord.

[The Earl of Lytton]

My Lords, the noble Lord, Lord Tope, will be pleased to know that the National Association of Local Councils supports the thrust of what he has advanced here. It does not believe that there is a problem, nor does it see a need to change the present code status. It is not aware of a single instance of the Secretary of State intervening in a parish council publicity matter. It says that the taking of additional powers by the Secretary of State is distinctly non-localist, and there are some concerns at the potential longer-term implications for parish newsletters. It certainly does not think that this is a legislative priority. I am at one with what has been said on this.

I have a separate concern that I expressed at Second Reading on the suitability of the present code to become a statutory code at all. When I put this to the Local Government Association, it agreed with me that the current drafting appears to be less than precise and said that it was a matter on which the LGA had taken some advice. However, that is not to say that the general thrust of the code is wrong. It actually contains some good principles but is qualified by all sorts of terms, mainly prefaced by the word “should”, and includes phrases such as “likely to be perceived”. There are also imperatives about there being no,

“commentary on contentious areas of public policy”,

and positions being presented “in a fair manner”. Authorities should not do anything,

“designed to influence members of political parties”.

Paragraph 13 of the code states:

“The purchase of advertising space should not be used as a method of subsidising voluntary, public or commercial organisations”.

That begs the question: when is a subsidy merely part of a cost contribution? I note also that the definition of what might be unreasonably partisan, contentious, sensitive or likely to have an influence if not even-handed is probably not a constant between Parliament at this level and the parish pump at that level. I certainly question whether it applies in equal manner to everything in between. How would making this code statutory improve things? Would it be simply an avenue for contention whereby the matter would have to be thrashed out in the courts—the Secretary of State versus some borough, parish or other?

Is that a profitable way to go forward, bearing in mind that there do not seem to have been any substantial problems? It is said there have been one or two in some London boroughs but I do not know whether they are regarded as being typical or whether those boroughs that have had the finger wagged at them have failed to observe the wagging finger. Other noble Lords may know more about than I do, but it seems to me that the case for the clause is not made.

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Moved by

[Lord Beecham]

19BB*: Clause 39, page 26, line 14, leave out subsection (15)

[Lord Beecham]

My Lords, with the leave of the Committee, I will speak to both this amendment and the following one, Amendment 19BC, since they both relate to council tax referendums, which is a highly contentious issue—to use the noble Baroness’s phrase—about which no doubt several authorities would be only too pleased to be able to lobby. I do not think a telephone call would suffice to deal with this issue.

Amendment 19BB deals with a particularly objectionable part of the Government’s proposals. I remind your Lordships that the ad hoc committee on the Bill had no opportunity of considering these amendments, or indeed the code of practice that we have just discussed, because these matters came very late in the day and were added to the Bill as a convenient vehicle for the Secretary of State’s obsessions, to which I have already referred. In terms of the council tax referendum, what is particularly objectionable is that there is a potentially retrospective effect here, because decisions already taken in the past can be used as the basis for requiring a referendum in the future. That is particularly objectionable where the decisions might have been taken by a body that is not actually the individual local authority. If it is a precepting authority or, as this Bill is seeking to require, a levying authority, that is even more objectionable. There is no justification whatever for this element of retrospectivity and I hope that on reflection the Government will see that it is a departure from normal practice and one that cannot be justified except in the most exceptional circumstances. In my submission these simply do not arise.

Amendment 19BC acknowledges—as do both amendments—the fact that we are living with a provision about council tax referendums. Many of us opposed them when they were inserted into what is now the Local Government Act but they are there and we have to live with that. What this amendment deals with is the position that might arise as a result of not simply a decision in the past but a decision in the past with a continuing effect on expenditure. So, for example there are authorities—I understand that Leeds has raised this—with city deals that have entered arrangements which would require expenditure over a period which, if the current referendum provision is applied, might severely impact on the schemes to which the Government are party.

The city deal, which one welcomes, is an opportunity for the Government, local government and private sector partners to work together. It involves a commitment of expenditure on all parts. If such decisions are not to be thwarted, given the ever tightening situation affecting local authorities, at the very least the Government should be making transitional provision to ensure that decisions fairly recently arrived at, but which will have a continuing impact, will not merely be on the finances but on the economic state of the area with which these arrangements are very largely concerned. The Government’s proposed changes could cause very severe problems, whether they are over transport—which I think was the case in Leeds—or about city deals such as that in which my own authority has been involved. No doubt we shall hear from my noble friend Lord Smith about Greater Manchester Combined Authority and its arrangements.

Referendums are both costly and unpredictable in their outcome. You cannot have that situation when you are dealing with third parties and have entered into arrangements that could be disrupted as a result of the change which is now being proposed. I think that the Government should take both of these matters back. The first point is really a matter of principle about retrospective legislation and requirements. The second is to deal with what appears potentially to be a significant issue for a number of authorities which are endeavouring to do their best in many respects to work with government on agreed programmes that could be rendered difficult—no doubt unintended—as a result of the provisions. I beg to move.

[Lord Smith of Leigh]

My Lords, before I speak on this matter I shall declare my interests. I am a vice-president of the LGA and also, as my noble friend indicated, the chairman of the Greater Manchester Combined Authority. Greater Manchester is one of the areas where the Secretary of State was somewhat upset by the level of council tax rises which were entirely consistent with the law as it stood. Before I begin I would like to quote from a document published by DCLG on 12 January 2012 on council tax referendums.

“The definition of ‘relevant basic amount of council tax’ . . . is essentially an adjusted Band D amount which is derived from a calculation of the authority’s basic amount of council tax. This amount is modified by omitting local precepts issued to or anticipated by a local authority, and levies issued to or anticipated by an authority, from the calculation. This is to ensure that increases in levies, over which authorities have minimal or no control, are not a factor in triggering a council tax referendum”.

Those were the words of the department in issuing guidance on council tax. As my noble friend indicated, levies come in to local authorities in a number of different guises. In Greater Manchester last year, two particular things impacted on the levy situation. First, not quite like Leeds, we had an agreement between authorities on transport expenditure, which will put a 3% increase above the day-to-day spending needs of the transport authority to invest in transport infrastructure. That programme began in 2009 with the commitment of the 10 authorities in Greater Manchester—which took some getting, I assure you, but we got there—to put that money in for six years. When we went to the Government and negotiated our city deal—we were the first conurbation to get a city deal—this transport expenditure was seized upon by the Government as an innovative way forward for local authority spending. It has taken some time, but we have devised an earn-back model and have now agreed that the Treasury will reallocate some of the increased taxation back to Greater Manchester. We will be able to spend that money on future investment. It is a good deal, and I understand that it will be part of the announcement on the public spending review.

Last year, the increase for the Greater Manchester transport levy was 3.6%. In other words, it was 0.6% for day-to-day transport needs—the cost of fuel and other things; this meant that there were big impacts on costs. The other 3% was that commitment made back in 2009, which continues to roll forward in future years—a contribution to investment and transport. We can prove that the transport investment is taking place. If noble Lords go to Manchester, they will see that the new Metrolink system is up and running, and new bus ways beginning in my area. There are all sorts of things going on which meet our commitment, and government commitments, to reduce greenhouse gases and all sorts of things. We thought that we would agree that with the Government but, obviously, they pushed up the levy.

I step back slightly from the second impact because Wigan is not part of the Greater Manchester waste disposal authority. The waste disposal authority signed a new PFI deal a couple of years ago because it did not have the facilities to deal with modern waste and needed expenditure on a new facility. So often with PFI deals, the early years have a really high cost which inevitably falls over future years. The effect on the waste disposal levy was 4.5%; obviously a very big increase for those authorities. A number of authorities in Greater Manchester therefore raised their council tax by more than the 2%, which the Secretary of State said would trigger a referendum. This was entirely legitimate within the rules of council tax referendums as they then were. In fact, the ironic thing was that a number of authorities, including those which seemed to have the biggest increase, actually reduced the proportion of the council tax take for their own services to meet the needs of external levies. That means that if this clause goes through, then the threat of the Secretary of State—the revenge of Eric Pickles—will be that any authority which raised its council tax by, say, 3.5% while the guideline figure remained at 2% can only increase its council tax next year by 0.5%. The rules have changed.

Who knows what would have happened if the council had known that that was the situation last year? Different decisions might have been made. How can we predict the mind of the Secretary of State and the mind of the department when it wants to change the rules in this manner? It is grossly unfair that some authorities, in addition to the awful amount of cuts that they are taking on board, will have to make savage cutbacks in services to cope with this part of Clause 39. This is bad and retrospective legislation and the Committee should think very carefully before it commits to Clause 39.

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[Baroness Hanham]

My Lords, as I understand it, the noble Lord has grouped together Amendments 19BB and 19BC. Amendment 19BB challenges the Secretary of State’s power to determine categories of authority and to set excessiveness principles which apply to them accordingly. Subsection (15) makes it explicit that, in doing so, he may differentiate between authorities on the basis of past council tax decisions. The amendment would remove subsection (15) because of concerns, as raised in our discussion, about retrospection and about it providing much wider powers to the Secretary of State when setting excessiveness principles.

I am happy to confirm that subsection (15) does not apply referendum principles retrospectively. It does not make any changes to the setting of council tax in previous years or change the referendum limits that applied. The Government were clear before council tax and levies were set for 2013-14 that they would take into account the decisions taken by local authorities on council tax in setting future principles. As already stated, no changes will be made to those principles that applied in 2013-14 or, indeed, to any other year. Both authorities and levying bodies can continue to plan accordingly.

In light of the fact that local authorities have had a pretty clear indication that their decisions for 2013-14 would be taken into account—what they did, where and why—in setting future principles, there is no argument that authorities were not aware of the Government’s intentions or justification for accusations of unfairness, given the Written Ministerial Statement of 30 January 2013, followed by an information note sent to all to local authorities on 8 February. Decisions taken on council tax increases for 2013-14 were taken in full knowledge of those warnings. Subsection (15) does not radically extend the Secretary of State’s existing powers. It clarifies those powers and removes any doubt as to whether they allow him to continue to take into account past council tax decisions when making decisions on the following year.

Amendment 19BC would provide that during a transitional period specified expenditure could be exempt from inclusion within the calculation on whether a council tax increase was excessive. The noble Lord will be aware that the excessiveness principles, which are set annually, already allow for different principles to be set for different categories of authority. For this reason, I assume this amendment is intended to press the case for the additional flexibility that we have been talking about.

It is intended that the detailed excessiveness principles for 2014-15 will be made later in the year. However, the principle will remain that local taxpayers should be protected from unwanted excessive council tax increases. It is local residents who should have the final say on whether to accept an excessive increase. We recognise that there may be specific reasons as to why a particular local authority may wish to set an increase above that level; the noble Lord, Lord Beecham, referred to the city deal in Leeds, and the noble Lord, Lord Smith, referred to Manchester. The city deal with Leeds on private sector investment has been predicated on increases in levies from the West Yorkshire Integrated Transport Authority. It is right that the levy set by the 22 elected councillors from the five district councils that manage the authority should be treated in exactly the same way as the costs of every other local authority investing in local transport projects. The Government accept that neither this nor any other city deal is dependent on setting an excessive council tax increase, nor that excessive increases in levies were agreed as part of the deal. The chair of the West Yorkshire Integrated Transport Authority put it well himself. He said that,

“transport will be managed locally rather than from Whitehall, with decision making to suit local needs, accountability to Council Tax-payers and creating a transport network fit for purpose”.

Local decision-making and local accountability to council taxpayers are what the current clause would provide by extending the transparency of decisions taken by bodies funded from council tax receipts and ensuring that local residents have their say when those decisions would require larger increases. In summary, the Secretary Of State already has flexibility to set referendum principles that address particular situations and the right to take into account the 2013-14 council tax level. With those explanations, I hope that the noble Lord will be willing to withdraw his amendments.

[Lord Beecham]

My Lords, of course I am not going to seek to test the opinion of the Committee today, but this is a matter to which I and other noble Lords from different parts of the House will want to return. I confess that I used the word “sophistry” to my noble friend to describe some of the assertions made by the noble Baroness—assertions no doubt made at the behest of those in somewhat higher positions within the department. This is not a satisfactory position. We will clearly need to look in detail at what she said but the reality is that decisions were taken in good faith, along with the Government, to establish a range of agreed policies without the expectation that these would somehow be affected by decisions of the kind to which the noble Baroness referred. If those agreements reached with government and other partners are to be sustained, it will, on the basis of the Government’s announced policy, be at the expense of core services. That was not envisaged at the time these deals were entered into, and it will make councils extremely reluctant to enter into any further arrangements with government when that could have the impact that it appears is now facing a number of significant authorities that are doing their best to work with government. It is an unsatisfactory position to which we will no doubt return on Report, but I beg leave to withdraw the amendment.

Amendment 19BB withdrawn.

--- Later in debate ---

[Lord Smith of Leigh]

My Lords, I agree with the noble Earl about the problems of the electoral cycle. It was a bit disappointing that this is the fallow year for metropolitan authorities so we did not have elections. Noble Lords may recall that Wigan won the FA Cup and the feel-good factor was particularly good; obviously there have been fantastic comments on social media, but unfortunately we did not have any local elections to take advantage of that.

It was really interesting that the noble Lord, Lord Tope, read out the views of the director of finance from Bradford. The answer that the Minister gave to the earlier amendment was that, under Clause 39, the current provisions of the Localism Act, which define the relevant basic amount of council tax increase, will change from being what the council itself sets to include levies and other charges. Therefore, decisions that were entirely within the law as it stood earlier this year in March will be affected.

We had a debate earlier on the council tax referendum principle. The Government say they are not capping but actually they are. In my long experience of local government, I cannot believe that once the Secretary of State sets out the guidelines to which a referendum will apply, any local authority would want to set an amount of council tax increase above that guideline. If it does, it is on to an absolute loser. There is no way it will win a referendum on that. Which council tax payer is going to vote for higher council tax? They are not asking, “What services are being cut?”. It is a simple referendum on the increase in council tax and nobody wants it. The Secretary of State may want and need that part of it but effectively it is capping local authorities.

Capping does not always have the longer-term political impact that Governments may think. When capping was first introduced, my authority was one of the 22 Labour authorities that were all capped at once; no Conservative authorities were. We set a budget, but the Government said we could not and that we had to reset it and make significant cuts. When we came to the elections that May, we had a really big increase in our majority, so it did not have any negative political impact. I have great sympathy with the noble Earl’s position. Do we need this clause? I do not think so.

[Lord Beecham]

My Lords, I shall be brief. The position is a curious one in relation to what the Government regard as an area of excessive increases and what they regard as something else. An increase of more than 2% in council tax is excessive but an increase of 5.8% in social housing rents is acceptable. Indeed, the Chancellor has said today that social rents will increase by CPI plus 1% a year for virtually a decade. That actually will be rather less than the increases imposed in this past year but whichever way you look at it, it means that what is an unacceptable increase for council tax payers is well below what social housing tenants will be expected to pay. It is an interesting anomaly.

However, on the referendum point, it should be noted that three sets of organisations are involved in local government finance at the local level—the council, the levying bodies and the precepting bodies such as police commissioners. Several police commissioners increased their levies by significantly more than the 2% figure. That was acceptable because it did not raise the overall increase significantly. On the other hand, technically, their regime is rather different and rather more generous in terms of potential increases. However, if they breach the limit for precepting authorities, I understand that they would have to have a referendum. Therefore, there are two referendum systems here, as it were. It is odd that there are in effect two external bodies—some bodies, admittedly, comprise a combination of local authorities, but many do not—which can, by means of a levy, potentially force the council to have a referendum on its overall council tax levy, whereas precepting authorities are in a different category. That anomaly certainly raises questions to which we may want to return on Report.

I anticipate that the noble Earl will not seek to test the opinion of the Committee tonight. Given the fact that referendums are now, unfortunately, part of the system, despite the opposition of many of us when the Local Government Bill went through, I am not sure that we will get very far in that regard on Report. However, in this curious area of anomalous situations and differential rates of what is acceptable and what is not, we might at least provoke the Government into thinking about the system they are creating and the degree to which it is being made more elaborate, complex and, ultimately, less accountable to people with every successive announcement.

[Baroness Hanham]

My Lords, I thank noble Lords who have contributed to this debate. I shall try to deal with one or two specific questions at the end of my remarks. I shall lay out the purpose behind Clause 39 and pick up some of the questions as I go along.

Clause 39 amends the calculation that authorities must make each year to determine whether their council tax increase is excessive and therefore requires the approval of local people in a referendum. It changes the definition of excessiveness from an amount that excludes levies to one including levies. It will ensure that people get the final say over an excessive increase in the total council tax charged by an authority. The noble Lord, Lord Beecham, properly drew attention to the fact that precepts are already part of the local government charge. Currently, the excessiveness calculation is based on the relevant basic amount of council tax, defined so as to exclude changes in levies raised on an authority by levying bodies. The level of levies varies in different areas, but can make up more than 50% of an authority’s council tax requirement. This year, many council tax payers have seen their total bill increase by a higher percentage than they might have expected due to the impact of levies, with the overall increase appearing to be above the referendum threshold set by the Secretary of State and approved by the other place.

In short, a levy is a demand for payment by a levying body on a local authority. A large number of organisations and bodies have historically been granted the power to issue levies. Some of these are relatively small organisations but others are much larger. We have discussed more recent creations such as integrated transport authorities and joint waste disposal bodies, which carry out substantial functions across cities or regions.

Combined authorities can bring together a number of others to pool their resources and make savings, removing duplication and giving them an opportunity to make sure that the levy is not as much as it would otherwise be. However, we are clear that levying bodies are part of the local government landscape; they are funded to varying degrees by local council tax payers. We discussed the levies briefly. They were removed from the provisions of the Localism Bill, and it is partly an attempt now to exempt certain types of expenditure from the excessiveness calculation, such as that which has been approved by a local referendum. I have missed a page and shall go back.

[Lord Beecham]

It is retrospective.

[Baroness Hanham]

I was trying to be brief; it is always a mistake.

I want to make it clear that the Secretary of State is able to set excessiveness principles which compare council tax figures in 2013-14 with 2014-15, using the methods set out in this clause, and now including the cost of levies. This remains consistent with current arrangements, where the Secretary of State takes into account all relevant factors, including previous council tax levels. Noble Lords will be aware that the effect of the clause is to reinstate the model for council tax referendums contained in the Localism Bill when it was introduced to Parliament in 2010. Not one objection was raised to the inclusion of levies during the consultation or the parliamentary debate on council tax referendums. The concept of taking account of those is familiar, having been part of the consideration of the excessiveness under the old capping regime, to which reference has been made.

Levies were removed from the provisions of the Localism Bill as part of an effort to keep certain types of expenditure from the excessiveness calculation, such as expenditure which was approved by referendum or which was not under the direct control of the authority. However, since the passing of the Localism Act, there have been two developments. First, the rate of levy increases has outstripped the national increase in council tax. In total, the levy increased by 4.1% in 2011-12 at the time of an overall council tax freeze. The coalition Government have been clear from the outset about their wish to protect people from excessive council tax increases, and the inclusion of levies in the referendum legislation supports that. Secondly, authorities have shown themselves to be consistently capable of working with levying bodies in setting them and considering the cumulative pressure on council tax. Local authorities are well represented on the majority of boards of levying authorities, and there are hundreds of examples of councils and levying bodies already meeting the terms of the schemes which require a freeze or reduction in the overall council tax bill.

The Government do not accept that local councils will simply have an excessive increase forced on them by levying bodies. We have had representations that this clause could constrain authorities that have already come together to collaborate and pool resources. We must be clear about this, too. In many areas, transport and waste disposal are run by local authorities—the noble Lord, Lord Smith, drew attention to that—and are funded through the council tax, which is subject to referendum principles. In larger metropolitan areas, these functions are carried out by joint waste and transport authorities, funded by levies that are not currently subject to the referendum principles. It is right that the spending by these large organisations, with budgets in the hundreds of millions of pounds, should be subject to the same scrutiny and accountability as happens elsewhere in the country.

I should like to make it clear that a number of authorities lobbied for this change. One was Liverpool City Council, which approached the department last year, making the case for increased consistency in the treatment of different classes of local authority. That council may be alone, but it has been done.

The question was asked about elections, including those for thirds. Decisions on council tax and on the amount of council tax charges are taken in March and local elections take place in May. If there was a referendum at the same time, local electors would be very clear what the situation was and what they were voting on. I hope that that will, if not satisfy noble Lords, clarify the points raised, and as a result I beg to move that this clause stand part of the Bill.

--- Later in debate ---

[Lord Beecham]

My Lords, the noble Earl has made a compelling case. We seem to be moving from the high politics of Greater Manchester and West Yorkshire to Clochmerle or Eatanswill. There is nevertheless a real issue here, of which I was certainly unaware. The ridiculous numbers involved to call a poll, the non-binding nature of the result and the financial cost all seem to add up to a pretty lethal cocktail which ought to be addressed. I hope that the Minister will give the noble Earl an indication that the Government will look at this and seek, either on the basis of his amendment or in some other way, to deal with what looks like a highly anomalous situation in which a tiny handful of people—even fewer than voted in police commissioner elections—can wreak havoc in a local community.

[Lord Wallace of Saltaire]

My Lords, I was unaware of the parish poll dimension. I say from the outset that, although we are very much on the outer edges of the scope of the Bill, the noble Earl’s points are clearly of importance for the modernisation of parish polls, which has rather fallen through the net. The questions of the threshold for triggering the poll and what a legitimate subject for a poll should be are issues to which we would be happy to give further consideration. We would happy to meet the noble Earl to discuss this further. I am rapidly turning over in my mind the question of how one deals with that. Even though this is a relatively limited area, it might be the sort of thing that is appropriate for a Private Member’s Bill in a future Session, which might be given a fair wind. It is a relatively self-contained set of issues.

We are aware of the issue of whether one could institute postal or proxy votes. Certainly, we should be lengthening the time during which a vote could be cast and modifying regulations about the threshold for triggering a parish poll. All those issues really need to be considered.

I understand that the provisions of the regulations limit the content of polls to matters which have been considered by the parish meeting, which means that the person chairing a parish meeting could rule out of order any attempt to discuss matters which are not parish affairs and so prevent parish polls on, for example, EU referendums, or whatever it may be. However, we are all conscious that different parishes and local communities are often dominated by different small groups. This is one of the problems we have with getting back to community self-government. I am often conscious that I am extremely lucky to live in the community of Saltaire, which has far too many people who are highly educated. We are overstuffed with activists, and there are other areas around Bradford which are not so blessed with local activists willing to turn up to lengthy committee meetings in the evenings and take part in local community activities. With that assurance and that offer to talk further on this small but important issue, I hope that the noble Lord will feel able to withdraw his amendment.