My Lords, our Amendment 511 is in this group. This is to ask the Secretary of State to inform each local authority of any new responsibilities before the commencement of relevant provisions.
Clause 222 has the list of the commencement of relevant provisions, so the amendment sits under Clause 222. However, it refers to Clause 74, which proposes to give the Secretary of State significant powers to intervene in a local authority regarding capital finance, including limiting borrowing and/or directing a local authority to sell specific assets. Such an intervention would follow a review that could be triggered by an assessment against a specific financial formula, the thresholds for which are to be set by regulation after the Bill has received Royal Assent.
So my question to the Minister is: how can we assess the impact of this provision without knowing those thresholds, without an impact assessment, and with incomplete information? Unsurprisingly, local government has expressed concerns about this. I understand that the measures relate to government concerns about some councils’ approach to capital and borrowing, but we need to set this in context. The LGA has drawn attention to the fact that rising energy prices, rising inflation and national minimum wage pressures are set to add around £3.6 billion in unforeseen extra cost pressures on council budgets by 2024-25. This is on top of the £15 billion cuts to council budgets by central government over the previous decade. Councils are simultaneously managing significant spending reductions and a growing demand for services.
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The reductions in central government grants since 2010 have understandably led councils to look for new ways to generate revenue in order to secure services in the long term and move towards greater self-sufficiency. Councils have been pushed into commercialism and borrowing, and have made investments to contribute to their local economy and their environment, such as building new houses, introducing energy efficiency improvements, and providing necessary infrastructure such as schools and roads. I do acknowledge that there are only a very few councils where this has involved huge sums, because councils have to follow strict rules and assessments, as required by the Department for
Levelling Up, Housing and Communities. The Chartered Institute of Public Finance and Accountancy’s prudential code for capital financing in local authorities also needs to be followed when making borrowing and investment decisions, and those rules have been reviewed and updated very recently.
Given the framework and the new rules that councils already have to follow, I ask the Minister: what is the enhanced intervention process likely to mean in practice? It is crucial that the proposed changes do not have unintended consequences, and there is a danger that the strict, formula-based approach that the Bill suggests could have wide and potentially unintended implications, particularly if there are any problems with the thresholds and the metrics that the Government have not yet identified in terms of how they would work in practice. It is important that we ensure proportionality in this. I understand that the Government have said that the stated intention is for only a handful of councils to be affected, but if the levels are not set right or if the calculations are not done effectively, this may end up not being the case.
The purpose of my amendment is therefore to ask the Government to undertake full engagement with local government, including full consultations with councils and their representative bodies, before enacting the regulations. The advice from councils and the LGA would help the Government to preserve the legitimate and important concept of prudential borrowing, which we would all support, while ensuring that the new arrangements genuinely addressed the Government’s concerns.
I will comment very briefly on the two amendments from the noble Lord, Lord Northbrook. On the amendment concerning the local authority consultation’s code of practice, noble Lords know of my particular interest around consultation; I was an associate of the Consultation Institute. It is really important that we have proper, good-quality, high-standard consultation.
I will put on the record the Consultation Institute’s seven best-practice principles for consultation, because they fit very well with the noble Lord’s amendment and what it is trying to achieve. They are: first, integrity; secondly, visibility; thirdly, accessibility; fourthly, transparency; fifthly, disclosure—which is very important. The sixth is fair interpretation—in other words, when you have a consultation, you do not just take what is on paper and move along with it, you properly consider it and interpret the evidence, and then demonstrate your decision-making based on that. Finally, the seventh principle is publication of that decision-making.
Whether or not we need the guidelines outlined in the amendment I do not know; I am sure the Minister will have to say something about this, because there are Cabinet Office guidelines that already exist, and it may well be that they could be used for this particular purpose. That would be very interesting. On the business improvement districts, again it is really important that there is proper involvement of the local community; that is a very important thing to consider.
I will end by saying that I thought they were very interesting proposals and I look forward to hearing what the Minister has to say in response.