Northumberland (Structural Change) Order 2008

I shall resist the temptation to skip to page 30 of my speech and resume where I left off. I was about to explain to the Committee our general approach; our precise approach to assessing proposals, especially when looking at the criteria against which we have made our judgments; and our approach to implementation. I shall then address the points raised by the Merits Committee of this House and the Joint Committee on Statutory Instruments in their reports, which I feel noble Lords would want me to do. When we debated these issues in the context of the local government Act, I could refer only prospectively to the process which was then unfolding as we considered the merits of the various proposals put forward as a result of the invitation issued to local councils to come forward with a proposal for restructuring the local area. The Committee does not need me to speak at any length about the principle which inspired this, or the way in which it was set out at every stage of the process, save to make the fundamental point that it was in no way driven or imposed by government, and that any invitation that was taken up was a local decision which reflected local aspiration and circumstances. In fact, we needed to be persuaded that a case had been made, based on the evidence that had been brought forward. We were also well aware that, like every other reorganisation of local government, there was bound to be controversy and local disagreement—we certainly were not blind or deaf to that. The orders that we are considering are the final legislative step in a process which started formally in October 2006 with the publication of the local government White Paper and the invitation to councils to submit proposals for unitary structures by 25 January 2007. I say that this is the final legislative step rather than the final step because, in terms of achieving the outcomes of better governance in the areas concerned, the order is but a milestone, albeit an important one. If the orders are approved by Parliament, made and come into effect thereafter, there will in each of the areas concerned be a process of transformational change to deliver new local governance arrangements—different arrangements that fit the circumstances of each area—which both those who made the initial proposals, and we in government who evaluated them, believe are likely to facilitate the areas’ economic, environmental and social success. It is interesting to note not only how different are the six proposals that have come forward, but how clearly they demonstrate a difference in the notions of strategic leadership and neighbourhood engagement. Our conclusions about two-tier and unitary local government and our decision to issue our invitation were based on extensive discussions across the country. That debate has continued during the past few months: there has been intensive debate within the new unitary areas. However, what is significant—and it was evident in the debates on each order in another place—is that although there has been heated local debate, involving particularly those who are loyal to the district councils that are being abolished, a genuine willingness has emerged to make work what has been undertaken.  In the areas which we are discussing today and in the very different proposals that have come forward, officials and elected members alike have put differences aside and have come together in a determination to work through what is best now for the local area as swiftly and as clearly as possible.  I pay tribute to all those who have been part of that process and who have served councils so well in the past. It is to the enormous credit of those who did not want to see a unitary council that they are now committed to making the process work and making the most of the benefits. They now need and seek the approval of Parliament. That approval has been forthcoming.  As noble Lords know, these orders have been considered in detail in another place. The debates showed some sharply argued disagreements, sometimes between parties and sometimes within parties, but were good and constructive. A number of local MPs who opposed the decision and the process have committed to making it work.  That reflects the progress that has been made to make it a success.  I have every confidence that your Lordships will assist this process and support the orders, I hope without delay or division. The most important point is that these orders represent successful advocacy and evidence from local authorities. Noble Lords will remember that some 26 proposals were submitted which followed consultation and rigorous assessment against the five criteria and led to the five orders we are considering today. Only nine proposals came forward.  There is a draft structural change order for Cheshire that we shall be considering another time, and the Government have yet to take a decision on proposals which they have received for unitary structures in Bedfordshire.  We decided not to implement 15 proposals and referred three proposals to the Boundary Committee for advice.  In short, we failed far more local authorities against the criteria we set than we passed.   The local authorities before us today satisfied the criteria against which the proposals were assessed. Let me reiterate why we went down this path in the first place.  The aim was to put in place local governance that would best enable an area to achieve greater economic, social and environmental success. We set out criteria to reflect that aim. Our invitation set out three criteria which specified the outcomes that any new unitary form of local government, if it were to be implemented, should deliver.  It is significant that even those who opposed the eventual outcome have often made the case—it has been a historic case in some instances—for some unitary solution on the grounds that it offers greater clarity and accountability. Indeed, some have put forward alternative proposals for unitaries that did not meet the criteria—for example, the district councils bid in Cornwall. These criteria focused on strategic leadership, genuine opportunities for neighbourhood flexibility and empowerment and the delivery of value for money and efficiency in public services. The judgment against these criteria was necessarily prospective because it was about future outcomes if the proposal were to be implemented. It was also important to consider not only what the proposal would achieve once implemented, but also the cost of the change. Would it be worth the candle?  Would it have sufficient support locally for the new unitary structure to be a success? Therefore, the invitation set out two additional and practical criteria to ensure that if a change were to be made, it would be able to succeed and that we would set up no new councils to fail. That meant, first, that those advocating change had to show that it was affordable and, secondly, that it would have the support of people who would ensure, pragmatically through their partnership and commitment, that its purposes would be achieved in terms of better services and better places for people to live. That is why we specified that there should be, "““a broad cross section of partners and stakeholders””." These criteria also involve prospective judgments.  Since these criteria generated a great deal of public and parliamentary debate, I shall explain a bit more about them and how local authorities satisfied them. I shall take affordability first. For a proposal to meet the affordability criterion, the transitional costs must be expected to be more than offset by the savings that the proposal is estimated to generate, and that is expected to be achieved within less than five years. It also means that implementation will not involve capitalisation, using capital resources to meet revenue costs; it will not involve incurring costs that would have to be met by increasing the council tax; and to the extent that in any year the costs of transition are not covered by savings, they are expected to be met by council reserves. In assessing all the proposals, the financial cases were subjected to rigorous scrutiny.  I am aware that some local authorities brought in their own academic reviews.  Quite rightly and properly, we engaged independent financial experts with wide experience in local government at chief finance officer level through CIPFA and the Institute of Public Finance to scrutinise the business cases and the additional information provided during the consultation process not only from the proposers, but also from those who expressed concerns about the financial viability. For Northumberland and the other unitary proposals we are considering this afternoon, we are satisfied that there is a reasonable likelihood that all the outcomes specified by the affordability criterion will be achieved.  Our financial experts concluded that in financial terms the proposals were low risk.  Each of the new unitaries will effect projected annual savings of between over £9 million and over £18 million annually, a total of over £75 million. However, in relation to the definition of ““broad support”” there has been, predictably, the greatest and most heated debate. Therefore, it is very important that I set out what it means. It is, essentially, about whether the new unitary authority will genuinely meet its objectives and will work for local people.  We have done things differently from in the past.  No other reorganisation has proceeded by invitation. We have wanted to ensure, given the strain and stress in any change—I know that noble Lords have been very concerned about this—that the proposals would be tested against whether they would work because they had the support of those outside local government itself, who would have to make them work in the interests of local people. Therefore, we deliberately did not look for public support, we did not require local referendums, and we did not make this a test of public opinion. We did not base support on whether a majority of stakeholders, of local citizens or of some other group of interested persons supported or approved the unitary proposal. In our original invitation we explicitly said that no single council or body, or group of councils or bodies, would have a veto, and we recognised that a proposal might not carry consensus from or within all sectors. However, we thought that there needed to be sufficient confidence about the new council among those public sector bodies that will need to work with it.  There also needed to be confidence in the future prosperity and success of the area, which is why partnership with the business community, in its wider sense—from tourism to public sector industries—was a key element. There also needed to be a level of confidence about the improvements among local people, if the council’s plans for community engagement and empowerment were to work.  Indeed, to reinforce that point, one of the proposals we received—that from Somerset—in our judgment met all the criteria fully apart from the support criterion. We considered that the bid commanded some support, but it was not sufficiently broad in range and we did not progress that proposal. Therefore, I understand that much of the debate has turned on the nature and extent of public support, and in each area the prospect of change has been greeted differently, not least because we left it to local authorities to work out how they wanted to do this themselves and solicit opinion in the way they thought effective. A wide variety of methodologies was used, from Ipsos MORI polls to questionnaires and surveys, public information leaflets, meetings and focus groups. The opinion polls were usually postal polls or surveys, undertaken by the district councils. Inevitably, that provoked a great deal of heat and hostility to the prospect of change. There has been a febrile atmosphere in some local areas, with claims and counterclaims and a campaigning strategy has been evident, but in each case, although it has been variable, we have seen sufficient positive support for change in principle and in practice, which has led us to conclude that there is reasonable support for the proposal among local people.  For example, in Northumberland, the public sector support ranged from Northumbria University; the local NHS trust, the Northumberland Care Trust; the fire authority; the North East Chamber of Commerce; local businesses; and there was also significant campaign correspondence expressing a preference for a single unitary option. It is significant that this approach to determining a broad level of support was precisely one of the grounds on which we were challenged in the courts last year. Last autumn, the court dismissed the challenge brought by Shrewsbury and Atcham, and Congleton. The court found conclusively that the Secretary of State was entitled to take the approach she had followed in relation to assessing proposals against the support criterion. That judgment is currently the subject of an appeal and we await the court’s decision. Much of that support is bolstered and, we believe, will grow due to the fact that each of the new unitaries, reflecting the size and range of the local authority itself, proposes to put in place new arrangements. The duty to involve, which we introduced in the Bill last year, will ensure that local people are represented properly, have local influence and will be connected in new ways to the local authority. That has been a very important part of what makes this a new organisation. I turn briefly to implementation, the timetable and the impact on elections. Each of the orders provides for the creation of new single-tier local government from 1 April 2009, with the existing district councils being dissolved and the county council being transformed into a new unitary council with both district and county functions. They also put in place transition arrangements. Each one establishes an implementation executive to discharge transitional functions until elections are held, and provides for the creation of a team of officers to support the implementation executive. In two cases—Northumberland and Durham—the orders provide for elections in May 2008. In Cornwall, Shropshire and Wiltshire they will be held in 2009, and the orders also provide for the cancellation of district elections in two districts which elect members by a third—Penwith, and Shrewsbury and Atcham respectively. I stress that in each case the decisions on timetabling and the implementation processes have been driven by what local members and their officers think is best for their area. I would like to cover three connected issues arising from this: first, elections; secondly, the reports of the JCSI and the Merits Committee; and, thirdly, the rationale for the county council as a continuing authority. I know that noble Lords raised the last issue when we debated the Bill. As I explained, the orders make provision for elections in Durham and Northumberland in May 2008. Our approach to deciding when the first elections should be was essentially as follows. As a matter of principle and as a starting point, we believe that elections to the new unitary councils should be held as early as possible to reduce delay and disruption. That would point to elections in May 2008, but there were also reasons why that might not be appropriate or right for a locality. The first reason was that, if there was a consensus among all councils and across all parties that the first elections should be in 2009, then, as a matter of principle in terms of devolution, we should adopt that. The second reason was that elections earlier than 2009 would necessarily be on the basis of existing wards or electoral divisions. In some cases, those simply did not fit with the neighbourhood or community arrangements envisaged as part of the new governance arrangements. In Northumberland and Durham, there was agreement for elections to be held in May 2008 because the councils wanted to proceed rapidly to determine their future and felt able to do so. In Cornwall, Shropshire and Wiltshire, the councils accepted or agreed that the first elections should be in May 2009, thus allowing the Boundary Committee to undertake a full review of the electoral arrangements to reflect the new community governance arrangements in the proposals. I turn to the reports of the Merits Committee of this House and the JCSI. The Committee will know that the Merits Committee reported on all five draft orders, drawing attention to what it saw as the uncertain support, the cancellation of elections in some districts and parishes that would otherwise be held in May 2008, and the use of the orders to specify the structure and political balance of implementation executives. The Committee will also know that the Joint Committee on Statutory Instruments reported on the draft orders for Cornwall and Shropshire, and highlighted what it described as, "““an unexpected use of powers in specifying the membership and political balance of the Implementation Executive in each case””. " It also concluded that there was doubt as to whether, if the order was approved and made, its provisions on cancelling district council elections would be intra vires. I have discussed the support for the proposals. The structure of the implementation executives was discussed and agreed in each case by the affected authorities, and it was the authorities themselves that asked us to cement the arrangements—in some cases they had proved hard to negotiate—by prescribing them in the orders, for the avoidance of any doubt in the future. Noble Lords would expect that, with regard to the cancellation of district council elections, we would have considered the reports of the committees very carefully indeed, and we did so.  However, we remain of the view that there is both an overwhelming practical case for cancelling these elections and, on advice, that an order giving effect to this policy would clearly be defensible if legally challenged. As we explained in our memorandums to the JCSI, the cancellation of the elections is based on compelling practical grounds. It is necessary to maintain the confidence of the electorate during the move to unitary local government. To press ahead for those district councils affected would have serious consequences. First, it would mean holding elections whose purpose would be open to question, since those elected on this occasion would not have key functions that those elected would normally be expected to undertake; those functions have been transferred to the implementation executive, as I explained. They would have nothing to do with setting budgets or council tax for the next year. In such circumstances, there would be a question about whether candidates would be prepared to stand for a council left with only residual functions. Would there be any point in standing if one could not carry out any manifesto commitments? If there were candidates, could that not be confusing and damaging to an electorate who would have thought that they were voting for a fully functional councillor? It would also be extremely wasteful to elect an officer for less than 11 months; they would not have the opportunity to take key decisions, as I said. The second point is about the defensibility of the order against legal challenge. We have been advised that, while there are valid concerns about our powers in the 2007 Act to provide in the order for the cancellation of district council elections, there are reasonable arguments that there is a power under that Act to make such provision. In short, there are two arguments, as my right honourable friend in another place set out in a letter that I passed on to the Front Bench, but I shall put it on record. The first argument is that Section 11 of the Act lists certain matters for which an implementation order may make provision, including ““electoral matters””; I think that that is in subsection (4). Section 12 defines ““electoral matters””, specifying a number of matters that fall within that definition. Although many of the matters listed in Section 12 appear to refer to the holding and not the cancellation of elections, it is arguable that Section 12 matters, particularly, "““the election of councillors for any electoral areas””," are wide enough to cover the cancellation of elections. There is an alternative argument, which is that Section 13 of the 2007 Act enables an order to include any, "““incidental, consequential, transitional, or supplementary provision””," that that should be read broadly, and that it encompasses any matter which has a sensible connection to the main thrust of the order. Particularly given the powerful policy case for cancellation, it is arguable that election cancellation provision in the order is part and parcel of an efficient and effective implementation of the unitary proposal, and hence could be included under Section 13 powers. We believe that there are precedents, both in terms of policy and legal powers, for the order’s cancellation provision—for example, a 1995 order on the restructuring of Humberside, made under the Local Government Act 1992. Our advice is that there are sufficient similarities between the Cornwall and Humberside orders for them to be seen as reasonable parallels. Before I come on to Northumberland, I assure the Committee that we are clear that the process is not in any way the county council just carrying on and taking over the district councils.  This is a wholly new start. There will be new members, a refreshed senior management team, new and innovative service delivery and neighbourhood engagement arrangements, which we can discuss when we come to the individual orders. They will be new councils, even though they are technically continuing councils, because that approach reduces the turbulence in each area and makes the transfer process much smoother and more tolerable. We are very concerned to ensure that this is as smooth a process for loyal and committed staff as possible, and the staff of each of the new unitaries will be treated in the same way. It is an unsettling time for employees of the affected authorities. Detailed arrangements are for the local councils as employers to consider, but we are putting in place a framework to ensure that all staff are treated fairly. We have made it clear that all staff employed immediately prior to 1 April 2009 by the authorities which are to be abolished will become employees of the new unitary authority and will be protected in line with the principles of the Transfer of Undertakings (Protection of Employment) Regulations 2006— TUPE—as if those regulations applied. We made that clear on 5 December. This means that all staff that transfer to a new unitary authority will do so on their current terms and conditions. It will then be for the new unitary councils to decide their new staffing structures in accordance with TUPE and employment legislation generally. I am very grateful for the Committee’s patience as I have set out that detail. I shall now say very briefly a few words just about the Northumberland order. In the case of Northumberland, we received two proposals—one for a single-unitary authority, which this draft order implements, and another for a two-unitary authority solution for Northumberland, submitted by the district councils. As I told the House on 5 December, our judgment is that if the proposal for the single-unitary authority were to be implemented, there is a reasonable likelihood that it would achieve the outcomes specified by all five criteria in the invitation. That is our judgment. In contrast, I also told the House that in our judgment the proposal for a two-unitary Northumberland met only two of the five criteria—those on neighbourhood empowerment and affordability. On the basis of the proposal that we received, and having regard to all the other material and representations that we have received and to the advice provided by our independent financial experts, which shows the financial viability, the expectation is that the change in Northumberland will lead to annual savings of more than £17 million. Therefore, the proposal is affordable. Secondly, we judged that the proposal met the support criteria, which we have also discussed. I gave a few examples of that and the mixed response from the public. But in the north-east, we were also in the unique position of being able to look at the results of the referendum held in 2004, which asked voters explicitly whether they wanted unitary authorities. In Northumberland, two in five people said that they did—I think that it was 44 per cent. Yes, a majority said that they did not want a unitary, but that was relatively narrow. There was support from public agencies for a single-unitary solution, and there were mixed views among town and parish councils, although the Northumberland Association of Local Councils expressed a preference for a single-unitary authority. The order establishes the new unitary Northumberland Council, following consultation and full discussion with the councils, so that the arrangements that we are setting up are those which local people believe are best for them. The order provides that from 1 April 2009 there will be a single tier of local government in Northumberland. The existing district councils will be dissolved and the county council will be transformed into a new unitary council with both district and county functions. This is a wholly new start; there is no question of the county council simply taking over the district councils. There will be a refreshed senior management team and potentially, once elections are held in May 2008, new members. Thirdly, the order makes provisions for the key transitional arrangements and provides for the establishment of an implementation executive to be led by the county council, whose membership will be drawn from the county and all the district councils. The membership and make-up of the implementation executive was discussed in detail with all the affected councils and a consensus was reached and is reflected in the order. The order provides that the county council will have the function of preparing for and facilitating the economic, effective, efficient and timely transfer of the district councils’ functions, property rights and liabilities to the respective new council. It also requires that these transitional functions be discharged by the implementation executive prior to the election of the new Northumberland Council in May 2008, which is the earliest practical date for fresh elections. That means that there will be a democratic mandate as early as possible. To provide the necessary support for implementation, the orders also provide for the creation of a team of officers in each area, again drawn from the county and all the district councils. Those arrangements can start to bear fruit and deliver the outcomes that local people will rightly expect only if all the councils in each area work closely with each other. The order places duties on them to do so, and the indications are that this is happening. The order provides for the next elections after May 2008 to be held in May 2013, which is the normal election day for county authorities. We recognise, of course, that after the May 2008 elections, the Boundary Committee and Electoral Commission will be undertaking electoral reviews in each of the new unitaries with the aim of revising as necessary the counties’ electoral divisions in light of the new unitary arrangements. Under the statute, it is for the Electoral Commission to decide when these new electoral arrangements should be implemented, be that at the 2013 elections or some special interim elections. In the discussion document last August, we explained that we thought that the first few years of a new unitary should be as stable as possible, to get the new council off to a good start. Such considerations would point to avoiding any interim elections between 2008 and 2013. [The Sitting was suspended for a Division in the House from 2.41 to 2.51 pm.]