Local Democracy, Economic Development and Construction Bill [HL]

My Lords, with the leave of the House, I shall move that the House do agree with the Commons in their Amendments 2 and 3 en bloc and speak to Commons Amendments 7 and 10. This group of amendments brings forward amendments agreed in the other place to give powers to local authorities and other best-value authorities in relation to mutual insurance. In July, the Secretary of State for Communities and Local Government published the consultation paper Strengthening Local Democracy. This sought views on the scope of local authority powers, in particular around their powers to undertake mutual insurance arrangements. The consultation attracted 96 responses to the specific question on mutual insurance, with 82 per cent agreeing with the proposed power. The amendment adds a new clause to provide permissive powers for named authorities to enter into mutual insurance arrangements should they wish to do so. These authorities, which are described as "qualifying authorities", are local authorities—other than parish and community councils—fire and rescue authorities, police authorities and other best-value authorities in England and Wales. Authorities exercising the power will need to ensure that any proposed arrangement meets the duty of best-value as laid down in legislation. While it seems unlikely that all qualifying authorities will wish to establish or participate in an insurance mutual, clear and specific legal powers will be available for those for whom it makes good business sense to do so. The amendment provides that best-value authorities may establish and become members of a corporate body whose objectives are to provide insurance to those authorities who are members of the mutual. Other qualifying authorities may be members of the mutual and the mutual may also provide insurance to other bodies, which will be prescribed by regulation and which I will call affiliates. Affiliates will be those which have some association with qualifying authorities; for example, in the case of local authorities, arm’s length management organisations (ALMOs), academy schools or wholly-owned subsidiaries. Broadly, the intention is for a qualifying authority to be able to sponsor an affiliate to bring it within the mutual’s insurance cover as we understand that many local authorities already arrange insurance cover for ALMOs and some schools. However, affiliates will not be able to become members of the mutual. The qualifying authorities are provided with a power to pay premiums and other payments to the mutual insurance body and can agree to make any such payments as may be necessary in future. They can also assume financial obligations in respect of their affiliates. The Secretary of State in relation to England and Welsh Ministers in relation to Wales, may, by regulation subject to the affirmative procedure, amend the list of authorities that are qualifying authorities. They may also impose restrictions or conditions on the use of the power by regulations subject to the negative resolution procedure. We intend to consult on the content of such regulations. However, we are of the view that the following may be required. First, the mutual insurance body should be registered with the FSA so that it will be a body authorised to carry out the activity of providing insurance, which is regulated by the Financial Services and Markets Act 2000. Secondly, a mutual insurance company will not be able to reinsure risk with another qualifying authority mutual, although it will, if course, be able to reinsure in the market. This is to avoid a potential spiral of risk were a number of different qualifying authority mutuals to reinsure each other, with the danger of the risk effectively ending up where it began. Thirdly, qualifying authority mutual insurance bodies are unlikely to be allowed to have offshore captive insurance subsidiaries. Our view is that providing powers to local authorities which could facilitate avoidance of UK tax, or would enable the avoidance of appropriate levels of regulation which are needed to protect public money, is not something appropriate for local authority mutual insurance companies. Qualifying authorities are required to have regard to any guidance issued by the Secretary of State or Welsh Ministers and to any document specified in regulations, such as CIPFA guidance. Again, we will want to consult further on this. Commons Amendment 3 adds a further new clause to provide a list qualifying authorities which are being provided with the power to become members of a mutual insurance body. It also sets out the appropriate parliamentary and Welsh Assembly procedures for regulations. Commons Amendment 7 amends Clause 144 to provide commencement for these clauses which will be brought into force by order. Commons Amendment 10 is a consequential amendment to add a reference to insurance in the Long Title of the Bill. I beg to move.