My Lords, Amendments 42 and 43 would remove subsections (15) and (16) from Clause 39. Amendment 45 allows for transitional provisions to be made in respect of previous arrangements or contracts entered into prior to 2013-14. As noble Lords have said, subsections (15) and (16) are not linked and they fulfil different purposes. However, I understand that the noble Lord, Lord Tope, originally tabled these to address a single concern, although he has not spoken tonight. It was made clear in Committee by the noble Lord, Lord Tope, and now the noble Lords, Lord Beecham and Lord Shipley, that Clause 39 and subsection (15) in particular have a retrospective effect, and that the clause would be impractical and councils would have insufficient time to take account of the changes.
With respect to the noble Lord, Lord Shipley, I must restate the Government’s disagreement with this view. Neither the clause nor subsection (15) is retrospective. They do not interfere with the council tax and levies set last year. Those increases have been made and are in authorities’ tax base for future years.
Subsection (15) simply allows the Secretary of State—should he so choose—to set a referendum principle for 2014-15 focusing on authorities where the council tax, including levies, increased by a large amount in 2013-14. The Secretary of State will consider whether he wishes to do this later in the year as part of the usual round of principle-setting. Authorities and levying bodies will have an opportunity to make representations on principles, which will be put to the other place for approval.
Furthermore, authorities will have the opportunity to set an overall increase in council tax and levies in excess of the principles, making the case to the local population in a referendum if that is where they need to go. If noble Lords work it out—as I think the noble Lord, Lord Beecham, has done—they will find that very few authorities are likely to be affected because the combination of the levies and the council tax potentially gives a bigger pot for the percentage increase.
The approach proposed in the clause is entirely consistent with previous and current practice. Perhaps I may go back to the unhappy word of capping. As part of the setting referendum principles, the Secretary of State considers all relevant factors. These always include council tax decisions taken by authorities in previous years. It is worth highlighting that 2012-13 and 2014-15 have been the only two years since the 1980s when levies have not been part of excessiveness considerations. We are simply reverting to the definition of excessiveness used by successive Governments from 1984 to 2010. This approach resulted in some smaller authorities with a history of lower council tax being set more generous referendum principles in 2013-14. No one accused the Government of taking retrospective action when they took this approach.
The possibility of the Secretary of State setting specific principles for those authorities where substantial levy increases resulted in substantially higher bills in 2013-14 should come as no surprise to them. His speech to the New Local Government Network and his Written Statement of 30 January 2013, and letters to all authorities, could have left them in no doubt as to the possibility. Council tax and levies for 2013-14 were set in full knowledge of the Government’s intention for 2014-15—that is, a year later on.
The Government have been clear from day one that council tax payers should be protected from excessive increases, and this clause will extend that protection. It will also increase fairness for local authorities by ensuring that all the money raised through council tax is potentially subject to a referendum if it is in excess of the principles. At present, there are areas where more than 50% of the local council tax bill is made up of levies and is therefore not subject to a referendum.
The legislation is not retrospective. We have been clear about what the situation is since January this year. Existing legislation already gives powers to the Secretary of State to determine different categories of authority, so the measures will not necessarily be across the piece.
Amendment 43 would remove subsection (16) from the clause. It may be helpful for me to explain the purpose of that subsection, which is not, as noble Lords have already admitted, directly linked in purpose with subsection (15). To be able to determine whether an excessive increase has been set in 2014-15, all authorities will need to make a like-for-like comparison between the council tax in 2014-15 and that set in the previous year. The principles will be based on an amount including levies in the next year, so the removal of the provision would not be helpful for many local authorities. It would mean that their previous year’s relevant basic amount of council tax would be at a much lower level than that of the subsequent year, against which it was being compared. Subsection (16) simply means that the 2014-15 figure can be compared with the one for 2013-14, which includes the levies that were set for that year. Without subsection (16), authorities would be effectively required to compare apples with pears, and the whole clause would be unworkable. I am sure that that was not the noble Lord’s intention.
The Government have been entirely open with authorities about their intention to bring levies within the scope of the referendum legislation and to take into consideration the previous increases when setting future referendum principles. A Statement approving the referendum principles for 2013-14 was laid in the other place on 13 February—so between January and February plenty of notice was given. Amendment 43 would undermine the Government’s commitment to protect council tax payers and prevent all authorities and levying bodies being subject to the same kinds of accountability and financial discipline. In view of the comments that I have made, I hope that the noble Lord will not press the amendment.
Amendment 45 replicates one which was proposed in Committee, so I shall expand on the response that I made then. The issue here is city deals and the levies that are envisaged by combined authorities in future years following the agreement between the Government and local authorities, particularly in West Yorkshire. The city deal implementation plan agreed between government and the Leeds City Region included the following summary text:
“Leeds City Region will establish a £1bn West Yorkshire … Transport Fund overseen by the new Combined Authority. The Fund will be financed by a levy that the Combined Authority will place on individual councils”.
In Committee, the noble Lord, Lord Tope, read into the record an e-mail from the director of finance at Bradford Metropolitan District Council. Bradford’s contribution to the city deal is funded by a £1.2 million increase to its levy each year.
We have looked at these figures carefully. These levy amounts would produce a council tax increase in Bradford of 0.7% in 2014-15, falling to 0.5% by 2023-24. We have also established that similar percentage figures apply across authorities in West Yorkshire. There is therefore no need for any transitional or other provisions to be made for contracts already entered into, as the levies envisaged by the authorities in the Leeds city deal area are substantially below the current 2% referendum threshold. I therefore hope that the noble Lord is willing to withdraw his amendment.