Localism Bill

Lord McKenzie of Luton Excerpts

Thursday 30th June 2011 Lords Chamber

[The Earl of Lytton]

In response to the very wise comments of the noble Lord, Lord Beecham, it may well be a cumbersome way of doing it but the point is that we do not yet know what the precise trigger is going to be, or the subject matter. The provisions of the Bill cover a very large spectrum of possibilities and we are effectively empowering the Secretary of State to make orders. It is legitimate to lay down a marker as to what the parameters might be—I suspect that is all the noble Lord, Lord Jenkin, is doing at the moment—and just to sound a word of warning. It is timely in that context.

[Lord McKenzie of Luton]

I am going to speak in support of what my noble friend Lord Beecham said. It is the mention of airports that I cannot resist, of course, because we have one in Luton. I know how important it is to the local community and what a generator of jobs it is. In many ways, airports are the organisations least likely to need the measure that the noble Lord proposes because they have consultative committees anyway so there is automatically a wide engagement with the community. The principle of somebody who is potentially on the receiving end of a referendum or a petition knowing about that and the local authority having to make a decision to engage with them seems to be entirely reasonable. What we are balking at is that the specific amendment is a little too prescriptive and takes us too far down an unfortunate path. However, we are all well aware of the challenges that airports in particular face.

[Lord Newton of Braintree]

My Lords, I apologise to my noble friend but tempted again I have been—on this occasion just to show how even-handed I am—to join in a little bit with the noble Lords, Lord Beecham and Lord McKenzie, with due apologies to my noble friend Lord Jenkin. It is the third arm of this that worries me most. It says,

“any other person whom the authority considers to have an interest which is likely to be affected by any steps that the authority may take to give effect to the result of the referendum”.

It is not just airports. Major commercial developments, for example, have effects over a wide area. Leaving aside Stansted, about which I know a good deal, and which would certainly be said to have effects over 30, 40, 50 or 100 or more miles, Lakeside at Thurrock has had effects on shopping centres all over Essex. It is unimaginable that the local authority would really have to consult the people of Thurrock, Chelmsford, Colchester, Braintree and Brentwood—to name the Secretary of State’s constituency and indeed that of the noble Baroness, Lady Smith. We need some caution before going down the path scripted in this amendment. That is all I would say. There may be merit in the purpose but the wording needs very careful consideration.

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[Lord Brooke of Alverthorpe]

My Lords, I hope that you will forgive me for intervening as I did not speak on Second Reading. Under this heading, I wonder whether the Minister can clarify whether there is an exemption on petitioning and on moving to have a referendum on car-parking charges. I discovered that my area in London recently increased car-parking fines to £130—a phenomenal increase. I gather that many of these increases are taking place in different locations on similar scales around the country. I wonder whether this will provide the opportunity for the citizen to petition against those, or indeed move for a referendum.

[Lord McKenzie of Luton]

My Lords, I shall speak briefly to the amendments, and say that we are with the noble Lords, Lord Best and Lord Lucas, on this. It is an opportunity for the Government to set out quite broadly their view on the exclusion, not only for particular planning applications but for the broader role of planning briefs and everything that goes with the planning process. Like the noble Lord, Lord Best, I think that we should congratulate the Government on their earlier concessions. That has helped our deliberations to move on a lot.

I say to the noble Lord, Lord True, that of course it must be right that people have the opportunity to engage and influence their neighbourhood and place. That is just what the neighbourhood planning provisions in the Bill are designed to do, with a referendum attached to that. We have some amendments coming now suggesting that there should be earlier consultation in the process of those engaged in developing plans, so we are with you on that. That is within the structure of the Bill. The noble Lord, Lord Best, made an important point about LDFs. We need to get on with that as so many of them are not yet completed. We have a lacuna, with regional spatial strategies going before many of these plans were in place, and the data associated with all of those are in danger of disappearing. We propose to deal with that by transition arrangements but that is a debate for another day, if not another week at the rate we are going. I hope that the Government will take the opportunity to clarify, as far as they are able, the scope of the exemption around planning as that is hugely important.

[Lord Taylor of Holbeach]

My Lords, I am grateful for this opportunity as it was a key area and the decision to table the amendments has helped to move the Bill forward. I am, however, in a less than satisfactory situation in the sense that we can see that a number of factors now come into play. The definition of planning appeals, an appeal process, and the rest of it means that it will require some further thought to see what the implications are. It is clear that a referendum on planning applications can be ruled out, but indicative planning and the like with consultative processes are a matter that we need to consider, as well as how exactly they might be brought into this process. My noble friend Lord True carefully articulated the importance of making sure that the public voice in these matters is not stifled. We accept that, but on the other hand we do not want the whole referendum process to be totally absorbed on planning matters.

I promised my noble friend Lord True that I would write to him. Indeed, I will write to all noble Lords and place a copy in the Library of our position on this issue, so that it is quite clear. However, I do not from this Dispatch Box want to give an on-the-hoof answer which may mislead noble Lords in this regard; I do not think that helps to take the debate forward and I apologise.

[Lord McKenzie of Luton]

We appreciate what the Minister has said because we are likely to get into planning issues next week—maybe on Tuesday at some stage, or maybe not even till Thursday. It would really help our deliberations if by then the Government had been able to focus more specifically on these issues, and perhaps we could have some reassurance on that.

[Lord Taylor of Holbeach]

I thank the noble Lord for assisting me. Knitting it into the neighbourhood planning proposals is clearly going to be important as well.

The noble Lord, Lord Brooke of Alverthorpe, was worried not so much about his car-parking charges as the fines when he did not pay them, if I heard him correctly. At any rate, perhaps one may lead to the other. Our amendments put in place a framework for councils to decide to refuse a referendum in certain cases. The issues raised by noble Lords clearly illustrate how difficult it would be to compile a list. This is why we have adopted our approach in our recommendations generally about how councils may determine particular referendum petitions.

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[Lord Greaves]

I am grateful to noble Lords for the discussion. It is an indication of the complexity of the issue that I have agreed with most of the things that most noble Lords have said on all sides; it is in no circumstances straightforward. As I hope I said, I moved the amendment to probe and, in order to probe, I proposed something quite different from what was in the Bill. There are good arguments on both sides. I firmly believe that local authorities, faced with what they might think of as a hostile referendum question, should be able to put their point of view forward and, if it is a complex question, should be able to explain it.

It is quite possible, of course, that the local authority will be in favour of the referendum question, in which case it is not clear why they should spend any money at all. Perhaps they think that the people organising it are incompetent and will not do it very well. Who knows? One can imagine lots of different circumstances.

I am firmly of the countervailing view that local authorities ought not to be able to get involved in promoting referendum campaigns which are effectively being put forward by parties or party-political candidates—or any candidate in local elections—for political purposes. That would be quite wrong and quite contrary to the present code of publicity. It is difficult to see how to draw up regulations which cater for both the extreme circumstances of a hostile referendum which the authority thinks would seriously wreck its strategy and policies in key areas and, on the other hand—

[Lord McKenzie of Luton]

Does the noble Lord have a view on whether local authorities should be able to campaign on council tax referendums, which are in a sense political because the policy is effectively decided by elected councillors? Would he support the right of councils to be able to campaign in those?

[Lord Greaves]

Yes, I would. Although it is important that local authorities should not get involved in party-political campaigning, the present code of conduct on local authority publicity is too restrictive. Local authorities ought to be able to campaign in a general way more easily and widely than they can at the moment if they believe that what they are campaigning for is in the interests of the people that they serve and represent. However, that is a wider issue. We have the code as it is and I do not think that there is any prospect of it being changed much in the near future. However, it will be very difficult to find satisfactory wording that stops local authorities intervening in elections and political matters, but allows them to defend their well thought-out and agreed policies and strategies against hostile attack. This matter has to be further discussed and considered and the various organisations involved, including the LGA and the Electoral Commission, have to be involved in that. I beg leave to withdraw the amendment.

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[Lord Shipley]

My Lords, I will speak to this clause on behalf of the noble Lord, Lord Tope, and will address some of the principles that stand behind it. In practice, the clause continues a capping regime. Councils will not want to risk losing a referendum because there will be a significant rebilling cost. Clause 59, and Schedules 5 and 6, create a duty for a billing authority to determine, in line with principles set out by the Secretary of State, whether a proposed council tax increase is excessive. Authorities will be required to hold a local referendum on the proposed rise if it is deemed to be excessive.

The difficulty is that it should be for local people to determine whether they find a proposed council tax increase excessive rather than for the Secretary of State to decide what constitutes excessive. Local people should trigger the referendum, not the Secretary of State. Therefore, there is a strong case for saying that amendments to the Bill should be introduced that would limit the Secretary of State's power to determine what constitutes an excessive rate of council tax and would give that power instead to local people under proposals elsewhere in the Bill for holding local referendums so that they can decide what constitutes an excessive rate of council tax.

Secondly, councils, rather than the Secretary of State, ought to be able to decide when a referendum will be held and to decide the arrangements for it. We should also delete powers for the Secretary of State to make non-specific regulations on matters such as the question to be asked in the referendum, the allowable publicity accompanying that referendum and how votes are to be counted. We have already discussed the percentage levels required to trigger a referendum and it seems to me that this is an example of where we do not need to have the Secretary of State interfering with what local people could perfectly well handle for themselves.

There are two issues that I feel concerned about and I have raised them at previous stages of the Bill. When a billing authority is determining whether a council tax proposal is excessive it might be appropriate for a referendum to be held on whether the council tax level and increase proposed is deemed by some to be too small. True localism should mean that local people have the right to hold a referendum on whether the council tax might be raised higher than the level that the Secretary of State deems to be excessive. I do not propose that one should have a higher rate—simply that if you really want to implement localism it should lie within the power of local people to make that decision.

There is a further complication to this. Under the Bill, referendums can be held within electoral areas within a council area. It is inevitable that referendums will be held on issues that might require additional expenditure to be made within that area. It might be unreasonable to expect the whole of the council area to fund the additional increase. The increase could be for a specific local facility that might otherwise close down, such as a swimming pool that people would like to preserve that requires additional cash. At the moment parish councils have certain powers to raise additional money. We could see referendums being held to save local facilities such as the swimming pool where local people might be willing to pay for the facility and would wish a referendum to be held on generating the necessary resource.

This seems to strike at the very heart of localism. Ultimately, if we permit referendums to be held within one or more electoral areas of a council, logically those people should be allowed, as those who have a parish council are allowed, to vote to spend additional money. I speak from my perspective as a member of Newcastle City Council. Half of my ward has a parish council, which has the power to raise additional money, and the other half does not and is not able to raise additional money. That is a complication that will become very important.

The broader issue in terms of Clause 59 is whether it is for the Secretary of State to decide to hold a referendum or whether it is for local people to use the facilities that exist to generate that referendum.

[Lord McKenzie of Luton]

My Lords, we should thank the noble Lord, Lord Shipley, for introducing this clause stand part debate and for his very clear exposition of localism and what it means in terms of council tax. I agree with him that the provisions in the Bill amount to a capping regime. I am sure the Government will argue that local people do determine what is excessive if they support a referendum. That is a very narrow interpretation of the Bill. This is capping by another name.

We also have to acknowledge that successive Governments have reserved the right to limit increases in domestic taxation when they have been judged to be excessive. We certainly did as a Government, and I believe that the Conservative Government did. I am not sure whether the noble Lord, Lord Jenkin, is culpable as well. There are arguments about whether that is important for the overall management of the economy.

When the noble Lord, Lord Greaves, introduced his first amendment in our proceedings, he talked about localism being decisions being taken at the lowest possible level, but he acknowledged that there is a wider dimension that has to be taken into account in some instances. The impact assessment for the Bill—

[Lord Greaves]

I think I said “underpinning a minimum level of service”. I certainly would not apply it to council tax.

[Lord McKenzie of Luton]

Indeed. I was not suggesting that the noble Lord would have judged council tax to be one of those things, but I think there is an argument that it is. The impact assessment reminds us that some 36 authorities have been capped under legislation that this Bill will replace—I think that is since the power was first used in 2004-05—and 16 of those were subject to in-year designation and had to redo their calculations. Indeed, the architecture of the Secretary of State setting principles with the opportunity to look at different categories of authorities has been imported from the existing capping regime.

We feel constrained in denying the Government powers which effectively amount to capping powers and their right to influence levels of taxation in the broader interests of the management of the economy, anti-poverty strategies, et cetera because the reality is that each year the Secretary of State will set the benchmark for council tax increases and it is probably right that few councils will run the gauntlet of a referendum, given the costs and consequences of an adverse outcome. The impact assessment estimates the cost of a council tax referendum to be between £85,000 and £300,000. Should a referendum not be successful, the administrative consequences could be convoluted, with year-end refunds or credits against future liabilities and the possibility for people to ask for an in-year refund, so the systems and costs involved in those choices could be significant.

We are coming on to discuss the powers that the Secretary of State has taken for himself in framing how the referendum question is to be put and the constraints around expenditure. According to the impact assessment, the authority will not be able to campaign for its proposed council tax level. Given the debate we have just had about the authority’s role in referendums, perhaps the Minister will confirm that an authority cannot campaign for the council tax increase that it thinks is appropriate. Of course, we might expect the cards to be stacked against those proposing the increase. Councils are facing unprecedented dilemmas at present with budgets severely constrained and with front-end loading because the coalition Government’s approach to the deficit is to cut too far and too fast. The system will have to cope with the challenges of the localisation of non-domestic rates. If this is to happen, will not local councils be forced to look to that as a source of extra income before running the risks of referendums that would increase council tax? I am not sure that that would be good news for the business community, but perhaps the Minister will tell us—I know these things are embryonic at the moment—whether there will be equivalent capping-type regimes for a localised, non-domestic rate and, if not, what the likely impact of having these effective capping powers on council tax increases might be for the NNDR.

One of the other issues that arise from this in making an assessment about whether council tax levels are fair is how council tax rebate is going to work in the future. The Government are localising council tax rebate. Not only are they cutting 10 per cent off it in aggregate, but it seems as if it is going to be left to local authorities to make individual judgments about the scheme that they want to introduce and maintain. That runs contrary to giving powers to government to manage these things centrally, and is an added complication.

For the present, we will focus our efforts on trying to improve the provisions in the Bill rather than to do away with them, but we are mindful of the strong localist argument for not having these powers at all.

[Earl Attlee]

My Lords, I am grateful to my noble friend Lord Shipley for giving me the opportunity to promote the principle of council tax referendums. We have several interesting amendments to debate later on, including some government ones.

Clause 59 gives effect to Schedule 5, which inserts a new Chapter 4ZA into the Local Government Finance Act 1992. This enables local electors to approve or veto excessive council tax increases in a referendum. It also gives effect to Schedule 6, which removes the Secretary of State’s powers to cap council tax in England and makes consequential amendments to various Acts as a result of the provisions for council tax referendums. The clause will ensure that excessive council tax increases occur only where they have a clear mandate from local people. This is in contrast to capping, where Ministers take the decisions and local people have no say at all. It will strengthen local democracy and ensure councils are more accountable to their electorates, but it will allow the electorate to vote for increased expenditure if they want it.

A set of principles defined by the Secretary of State will be used by authorities to determine whether their council tax increases are excessive. These principles must be submitted in a report to the House of Commons for its approval. A comparison of basic amounts of council tax could be the only principle, but the Secretary of State can include other principles as he sees fit. It is necessary for the excessiveness principles to be determined by the Secretary of State with the approval of the House of Commons.

The noble Lord, Lord McKenzie, touched upon the wider economic issues of council tax expenditure. It would be impractical and excessive to require a referendum for every single council tax increase. The flexibility allows for different sets of principles for different categories of local authorities. For example, principles relating specifically to town and parish councils could ensure that the great majority of councils—indeed, all but large, high-spending parish councils—would not be required to hold referendums. The report for the House of Commons must be laid before the date on which the local government finance report for the year is approved. Authorities will therefore know, when setting their council tax, whether or not they have exceeded the principles, so they will go into this process with their eyes open.

Where an authority determines that its council tax is excessive, it will normally hold a referendum no later than the first Thursday in May—the usual date of local elections. However, the Secretary of State can specify a different date by order, such as to allow the referendum to be held on the same day as local government elections if this date is not the first Thursday in May. Entitlement to vote in the referendum is based on the register of local government electors and entitlement to vote in local government elections for a particular area.

Where an authority sets an excessive council tax increase, it must also make substitute calculations to determine a basic amount of council tax which does not exceed the excessiveness principles. The substitute calculations would take effect in the event that the authority’s increase is rejected in a referendum or the authority fails to hold a referendum by the required date. The Secretary of State may make regulations concerning the conduct of referendums, which would include such matters as the wording of the question to be asked in the referendum, the publicity to be given and expenditure limits. There are obvious reasons why this may be necessary.

The noble Lord, Lord McKenzie, asked whether authorities can campaign for the proposed increase in council tax. No, it is intended that they cannot. They must put the facts to the electorate and leave them to decide but individual councillors will be free to campaign.

The Secretary of State will have the power to direct that the council tax referendum provisions should not apply. The power could be exercised only where it appears to the Secretary of State that unless the authority is allowed to increase its tax excessively, the authority will be unable to discharge its functions in an effective manner or be unable to meet its financial obligations. This is a reserve power and the expectation is that this would be used only in exceptional circumstances, such as where the High Court has exercised its powers to appoint a receiver where an authority has failed to service its debt within a set time period.

This clause is long and detailed but it is not as complicated as capping legislation, which has such concepts as budget requirement, designation, nomination, designation after nomination and vice versa, notional budget capping as well as actual capping and so on. And I have not got the foggiest clue what that is about. It replaces all that with a simple concept; namely, that local people and not Ministers should take the decision to approve or veto excessive council tax increases.

Sadly, council tax has more than doubled since 1997. If councils want to set excessive council tax increases—that is, those that exceed the norm—in future they will have to prove their case to the electorate. I urge that Clause 59 should stand part of the Bill.

[Lord McKenzie of Luton]

I touched on non-domestic rates and localisation, and how that regime would sit alongside the regime proposed in the Bill. In particular, I should like to know whether there would be equivalent capping powers on the business rate because that has ramifications for council tax levels as well.

[Earl Attlee]

My Lords, that is a weensy bit technical for me. Some amendments deal with non-domestic rates. If the noble Lord’s point does not get covered, I will of course write to him.