Localism Bill

Lord McKenzie of Luton Excerpts

Monday 10th October 2011 Lords Chamber

Moved by

[Lord McKenzie of Luton]

195H: Schedule 5, page 278, line 38, at end insert—
“( ) On application by a relevant authority, the Secretary of State may direct that the substitute calculations referred to in subsection (5) may be increased by an amount determined by the Secretary of State.”

[Lord McKenzie of Luton]

My Lords, the purpose of the amendment is to try to have a safety valve in the arrangements for referendums around council tax, and for the outcomes of those, whereby the Secretary of State, notwithstanding the early determination, may direct that a substitute calculation can be increased by an amount determined by the Secretary of State. When we debated these amendments before we instanced particular circumstances where it was perhaps difficult for a local authority to disclose fully some of the sensitivities around its budget. Those matters might be commercially confidential or there might be a dispute outstanding. To spell out the consequences, risks and costs associated with that that could fall on the local authority, which could be difficult and prejudice its position. Hence the proposition that there should be an opportunity for the Secretary of State, obviously after discussions, to increase the amount determined. It may be that the Minister will say that this could be dealt with earlier in the process when the Secretary of State designates certain categories of authority, and that there will then be scope through that discussion to itemise just a few or even one particular local authority. That would be the mechanism to allow a council tax increase which was relevant to that local authority, but which was greater than the amount generally determined. That is the purpose of the amendment. I beg to move.

[Earl Attlee]

My Lords, I fear that my response on this occasion will be fairly similar to the previous one. The amendment does not take account of the fact that the provisional principles for council tax referendums will be announced at the same time as the provisional local government finance settlement. Authorities will then have the opportunity to make the Secretary of State aware of any exceptional circumstances that they consider he should take into account when determining the principles.

The noble Lord, Lord McKenzie, suggested that there may be financial problems that the local authority is reluctant to disclose. But what about being open to the Secretary of State about its problems? Surely it would want to keep the Secretary of State informed. I do not understand how the situation could arise whereby a local authority was in severe difficulties but wanted to keep that quiet from the Secretary of State.

[Lord McKenzie of Luton]

I am sorry if I was not clear. The concern was not about being open and transparent with the Secretary of State, but about the process of a referendum laying bare some difficult situations that could prejudice the outcome of those so far as the wider public is concerned. Obviously, in due course, everything would have to be properly reported and accounted for in the public domain, but there could be some sensitivity around issues just at the point where the referendum might be undertaken. That is the issue we are seeking to safeguard.

[Earl Attlee]

I think that I can accept, as the noble Lord describes, that you might not want to make the difficulties public at the time of the referendum, should that be necessary, but I do not understand why the local authority would not make it clear to the Secretary of State that there was a problem locally. It might have been a minor disaster, or a facility could have been destroyed, for example. The Secretary of State may or may not be aware of it but the local authority could tell the Secretary of State, and if it is a matter that does not need to be fully advertised then the Secretary of State could perhaps put it in a different category. It might be common knowledge, and therefore it would not be a surprise that the local authority was put in a different category.

In addition, if an authority is faced with difficulties prior to the referendum being held, the Secretary of State may direct that the authority need not hold a referendum if he considers that it will be unable to discharge its functions effectively or unable to meet its financial obligations. It cannot be right to allow an authority to apply to set an excessive council tax after it has been rejected by the electorate, nor can it be right for the Secretary of State to set a higher level of council tax after a referendum.

I do not think that this is localist. Indeed, it would defeat the whole reason for having a council tax referendum in the first place—to let the local electorate decide. I therefore ask the noble Lord to withdraw the amendment.

[Lord McKenzie of Luton]

My Lords, I am grateful to the noble Earl for his explanation. We had this response and exchange previously. I should stress that I was not in any way suggesting that a difficulty which a local authority may be in should not be fully shared with the Secretary of State. I was simply expressing the difficulty, at that point in time, of having to expose it fully in the public domain because of the adverse consequences that it might bring, to the detriment of the taxpayers in that area. That was the issue that I was seeking to pursue.

I take the noble Earl’s point that doing this perhaps after the referendum has been lost would seem to negate that process. However, I hang on to the point that there needs to be some mechanism to deal with it. The noble Earl referred to provisions, which we will cover in a different way in Amendments 196A and 196B, whereby if the Secretary of State is of the view that an authority is unable to discharge its functions or would be unable to meet its financial obligations the Secretary of State can step in. However, when we discussed that matter last time, it emerged that that would be an in extremis situation and I am still trying to focus on an issue when that situation has not been reached but it might be a material contractual issue that the local authority is facing. The issue may have reached a critical stage in negotiations, or there may be litigation pending or under way. I am suggesting a safety valve to deal with that.

If the Minister is saying that the best way of dealing with that is to have these discussions earlier so that there can be a separate category for that authority, I would accept that as a route forward. Quite how it would be viewed by the wider public if an individual authority, which presumably would have to be named, were to be separately categorised, and the inferences that might be drawn, could give rise to some—

[Earl Attlee]

My Lords, you could have a category with a single authority or with two authorities that have some bad luck, where something went wrong, and they could be treated a little more generously than others.

[Lord McKenzie of Luton]

Again, I am grateful for that. I hold to the view that although it may help in some instances, being named separately in a category with a potential council tax increase that was greater than that of most other authorities could itself engender inquiries, concerns and speculation over what might be going on. There is no easy way round this but I am happy to accept the Minister’s assurance that this type of issue could be dealt with through the mechanism that he identifies. I am content to leave it there and beg leave to withdraw the amendment.

Amendment 195H withdrawn.

--- Later in debate ---

Moved by

[Lord McKenzie of Luton]

195K: Schedule 5, page 285, leave out lines 31 to 45

[Lord McKenzie of Luton]

My Lords, I beg to move Amendment 195K but shall not move Amendments 195L or 195M because this is an overlapping provision. This amendment would delete the detailed list of issues where guidance can be given by the Secretary of State in relation to a referendum. Regulations can touch upon provisions relating to: the question to be asked; the publicity to be given in connection with a referendum; the limitation of expenditure in connection with a referendum; the conduct of the authority, members of the authority and officers of the authority; when, where and how voting in a referendum is to take place; how the votes cast in a referendum are to be counted; and for disregarding alterations in a register of electors and so on. I contend that those issues should be left to the local authority to determine. If we are to be adherent to localism and want to trust local authorities, then we do not need this degree of prescription.

I am afraid that I missed all the fun over the removal of referendums earlier in the Bill as I was in the Committee on the Welfare Reform Bill. This is one area where referendums clearly remain in the Bill but I believe that the prescription should be removed.

[Earl Attlee]

My Lords, this amendment removes the power to make regulations in relation to significant issues relating to the conduct of council tax referendums. If there are to be no regulations, what are there to be? Are authorities to be left to make up their own rules on conducting council tax referendums and counting the votes?

Voters are entitled to see referendums handled in a consistent way with proper safeguards. The Government have accepted, on the recommendation of your Lordships’ Delegated Powers and Regulatory Reform Committee, that the regulations should be subject to the affirmative resolution procedure.

When I responded to similar amendments proposed in Committee, I said that the regulations would be modelled on existing regulations on the conduct of referendums on local government executive arrangements and would be subject to consultation with the Electoral Commission. Therefore, we are not suggesting a completely different system for operating a referendum; we are merely suggesting changes, where necessary, for this particular type of referendum.

Given that the regulations will be given considerable scrutiny and will be subject to the approval of both Houses, I request that the amendment be withdrawn.

[Lord McKenzie of Luton]

My Lords, I do not think that we are going to agree on this issue. We think that the Bill is unduly prescriptive and unnecessary. Clearly, the local authority has to have a referendum if it is going to deal with its council tax levels or if it wishes to go above the designated level. It cannot avoid that. If it acted spuriously or arbitrarily, it could obviously be held accountable for that.

There is also the question, which we touched on in Committee, of what happens if the referendum is found to be flawed in some respect in due course. What happens to the declared outcome of that referendum? That is an adjunct to these provisions but, on the specifics of seeking the removal of this prescription, I think that I understand the Government’s position. I do not agree with it but I do not see that there is a great point in pursuing it further this evening and I beg leave to withdraw the amendment.

Amendment 195K withdrawn.

--- Later in debate ---

[Earl Attlee]

My Lords, in its report, your Lordships’ Delegated Powers and Regulatory Reform Committee recommended that regulations made under new Section 52ZQ should be subject to the affirmative procedure.

These regulations will set out the rules for conducting council tax referendums, and I am content that the Bill should be aligned with this recommendation. To give effect to this recommendation, Amendments 196 and 197 will add new subsection (6A) to new Section 52ZQ of the Local Government Finance Act 1992, which is inserted by Schedule 5 to the Bill, and will amend Schedule 6 accordingly.

There are a number of further minor and technical amendments—Amendments 197A, 197ZA, 197ZB, 197ZC, 197ZD and 197ZE. These do not alter the policy effect of the council tax referendums provisions but they ensure that minor drafting errors are corrected and that the provisions operate appropriately in relation to Wales. If your Lordships desire, I can give more detail on these amendments, but I assure noble Lords that they are minor and technical. I beg to move.

[Lord McKenzie of Luton]

My Lords, I am content with the government amendments and have no points to raise in connection therewith. Although they are grouped together, I have not yet spoken to Amendments 196A and 196B. I do not know whether they will be called separately but I can support the government amendments as they stand.

Amendment 196 agreed.

Moved by

[Lord McKenzie of Luton]

196A: Schedule 5, page 286, line 12, at the beginning insert “Subject to subsection (1A),”

[Lord McKenzie of Luton]

My Lords, this amendment takes us back to the point that we touched on earlier this evening: whether circumstances might arise where currently the Secretary of State can determine whether an authority will be unable to discharge its functions in an effective manner or will be unable to meet its financial obligations unless it has a so-termed excessive council tax increase. Our amendment would bring to that process the right to seek an independent assessment of those same criteria, so that there is a process, other than, or in addition to, the Secretary of State’s own engagement with that decision. That may, in part, provide a route for dealing with the issue that we discussed earlier concerning one-off events arising for local authorities.

My understanding is that these tests are to be judged in the extreme—only if there is a cataclysmic situation and not one somewhere along the spectrum before that. I do not think that that is what the wording actually says or what the natural meaning would be. However, I believe that an authority should have a right to an independent assessment when it is heading towards situations which are very serious for it and which, without an excessive council tax increase, it could not see its way through.

[Earl Attlee]

My Lords, similar amendments were withdrawn in Committee. I set out the Government’s position there and my noble friend Lady Hanham followed up in significant detail in her letter to the noble Lord, Lord Beecham, dated 19 July, a copy of which has been placed in the Library of the House. I shall not repeat all those points in detail, other than to reiterate that it would be inappropriate for an unelected and unaccountable person to make the decision, which will involve a judgment about whether local taxpayers should be entirely unprotected from excessive increases for a financial year.

My noble friend’s letter made it clear that authorities will be able to make the Secretary of State aware of any special circumstances applying to them during the process when council tax principles are formulated and finally determined. We talked about the possibility of having a separate category. If my right honourable friend got this decision wrong, clearly there could be very serious consequences if it turned out that a local authority was not able to carry out its functions, and there would be political repercussions for my right honourable friend. My noble friend also said the Government would keep an open mind about the context within which this power to disapply a council tax referendum would be used. With this in mind I would ask the noble Lord to withdraw these amendments.

[Lord McKenzie of Luton]

My Lords, I am grateful again for that assurance being on the record. As with our earlier discussion, if the categorisation of authorities heading for severe difficulties is the route to deal with it, I am pleased to see that on record. I beg leave to withdraw the amendment.

Amendment 196A withdrawn.