Local Democracy, Economic Development and Construction Bill [HL]

Because of the need to make it clear to noble Lords what EPBs are about and why they are necessary, I have rather a long speaking note for which I apologise in advance. However, I think that it is very important. One of your Lordships said that we were looking at a Bill beneath which there is a commitment to set up an economic prosperity board the intentions and scope of which cannot always be explained within the confines of a parliamentary Bill or in parliamentary language. So I shall take the time to explain what has been in the Government’s mind to enable this to happen. I have been a bit disappointed at the nature of the language being used—about the Government forcing local authorities to do this, interfering and controlling local authorities, the creation of bureaucracies, how it is unnecessary and so on. The Government are not in the business of doing those things; there would be no point. The noble Baroness, Lady Warsi, got it absolutely right when she asked whether I agreed that local authorities should act in their own interests. Yes, I certainly agree—and the economic prosperity board is an example of how we want local authorities to act in their own interest. This part of this Bill and the propositions being put forward are about enabling those local authorities that so wish to have some additional powers to be able to have them. I should ask noble Lords, if there are local authorities that want to do this, for reasons that I shall explain and in the way I shall explain, whether or not they feel that they should stand in the way of local authorities being able to do this. What is the rationale for EPBs? Do they fit into the overall pattern of sub-regional provision? What will they achieve, and can it be achieved through existing and more familiar mechanisms? What benefits would they bring? Let me start with their purpose, which is to drive economic development and regeneration across a sub-region. As everybody knows, evidence suggests that this is much more likely to reflect real economic markets. They will be driven by and for local authorities, as they show that that is what they want. They will have to provide the evidence for wanting to do this. It will be up to local authorities to determine the area that will be covered, which functions should be passed to it, and how it will operate—for example, whether it will set economic strategy for the sub-region or be involved in delivering programmes and projects. That choice will be driven by the evidence that will have to provide that an EPB will bring real economic benefits beyond those that could be secured by other arrangements. It will allow councils to direct to their EPB those portfolios which are key to the economic development and regeneration of the area. EPBs are about improving the economic prosperity of the area as a whole. After the sub-national review of 2007 and the subsequent appetite for local area agreements and MAAs have made it clear that there is a genuine appetite in many regions for more strategic capability among groups of local authorities, which they feel will allow them to have a greater impact on the challenges facing local areas—to take the tough choices and exploit long-term economic possibilities. That creates the need for more robust frameworks that will make that joint working more effective. I shall come to the points raised by my noble friend Lord Smith of Leigh in a moment. Form is dictated by function and the intention of taking greater direct advantage of greater freedoms and flexibilities in investments. They will be corporate bodies at the sub-regional level; they will be made up of constituent local authorities. They will allow councils to pool some of their functions, but they will also enable authorities to work more efficiently; they will help to remove duplication of activity and provide better value for money. Noble Lords have asked why MAAs or other bodies are not sufficient for the purpose. They may well be sufficient for the purpose that the local authority has in mind, but this is another choice—a choice. Multi-area agreements have proved very popular; 80 councils have signed up to one of 10 agreements; but they have a definite, limited brief. They are collective agreements between authorities and their partners to deliver improvement targets in an area. They focus effort on the priorities for that place and align public sector organisations towards common goals. However, their capacity is limited. They do not allow councils to pool functions, to seek to direct to win investment directly or to act strategically. Their capacity as a delivery partner is acknowledged to be limited. EPBs will enable those local authorities who wish to do so, and who can demonstrate the economic benefits, to take the next step towards more strategic working. If they do so, they will take that step in the knowledge that it involves establishing a legal personality and governance structure at the sub-regional level. A lot of pressures now move towards stronger sub-regional working. It is no secret that some of our city authorities want to work more strategically together. Following the Pre-Budget Report, we said that the Government would select two pilot city regions. Since then, we have received 14 expressions of interest in being part of that process from 14 sub-regional partnerships. We will work with the pilot city regions to give them greater freedoms and powers over the development of their area than have been available through MAAs, including over issues such as transport, employment, skills, housing and planning. We are committed to exploring the possibility of devolving greater flexibility. We cannot deny that that is happening; that is reality. The pilots will take different forms to take into account the needs of different areas, but they will need strong governance arrangements at the sub-regional level. Several of the leaders of the interested partnerships—not all, but several—have said that they want to explore the option of economic prosperity boards, because they will deliver a robust level of governance. Significantly, this direction of travel has been welcomed by the LGA, which has said that it regards EPBs as a ““positive step””. Let me address some of the concerns that have surfaced this afternoon. The main concern is that EPBs will in some way be compulsory. It is far from being an issue of compulsion. I am absolutely happy to admit that EPBs will not be suitable for every area, or even for most areas. The noble Lord, Lord Greaves, talked about ““one size fits all””. No, we are clear that these are specific new options. Many local authorities will want to continue working with their neighbours through MAAs, or not at all, and they are welcome to do so. We have heard about the pattern of sub-regional arrangements in Essex recently, for example. However, an EPB could give some areas another bit of engine power to deal with their economic ambitions. It will be up to local authorities to decide whether or not to enter into an EPB, and to provide the impetus for so doing. The argument has been couched in very emotive language about the Secretary of State forcing, interfering, or having a master plan, Whitehall interfering and so on. At Second Reading, the noble Lord, Lord Dixon-Smith, was concerned that the initial proposals for an EPB would come from the Secretary of State. That is categorically not the case. The creation and design of an EPB must be a bottom-up process. It will start with a local review of arrangements for economic development started by the local authorities. The second stage will involve local authorities preparing their scheme, identifying the functions and determining their objectives and outcomes. The final, confirmatory element of the scheme will involve a statutory order by the Secretary of State, as the noble Baroness, Lady Hamwee, said, to transfer powers. There is no power for the Secretary of State to direct any authority to undertake a review. For a council’s area to be included in a scheme, the authorities must prepare and publish that scheme. The council must, in most circumstances, either participate in preparing the scheme or give its express consent that it is happy for that to be done. The only exception is districts where the whole of a county is to be included, and I shall return to that point when I speak to the next group of amendments. This scheme will set out how the EPB will operate—it is nothing to do with the Secretary of State or the Government—including its constitutional, membership, funding and other arrangements. The Secretary of State will issue guidance on what should be included but it is entirely up to the local authorities to design and agree the arrangements. Beyond a few key criteria, the Bill is not prescriptive about any arrangements that should be made for an EPB, including the functions that it should have and the activities it will carry out. Once the scheme is agreed and published, the Secretary of State will consider whether implementing the scheme will deliver benefits for the area in question. If that is the case, the Secretary of State will make a statutory order that will clearly set out all the arrangements for the EPB, such as the constitution, membership and so on. I think that is fair enough; it is not appropriate for a new body of this stature to be established without a clear statement in place of what it will do and how it will operate, and that is what the statutory order will do. On that basis, I hope that the Committee will understand why I cannot accept Amendments 183A and 194PA. However, a statutory order brings advantages for Members who are concerned with transparency. It means that there can be scrutiny, including by Parliament, of the arrangements. We have provided for such an order to be subject to affirmative procedures, which will be of interest to the House. The Secretary of State will consult on the order before it is laid, allowing both authorities and others a final opportunity to give their views on the arrangements. Why not use the model of the economic development company? It has proved useful. EDCs are arm’s-length companies, although they have their limitations. They can bring in specialist professional and organisational skills, they can have both public and private sector representation and they can be an excellent means for securing delivery of complex projects, but accountability is weaker than for a local-authority-led body. That is not what we want to see; we want to have accountability and democratic strength. The Committee has been concerned about a democratic deficit with regard to the impact and effect on local authorities. The purpose of these reforms is to give elected councils that choose to go down this route more control, not less, over the economic destinies of the places they represent.