local spending plans

Question proposed, That the clause stand part of the Bill.

With this it will be convenient to discuss new clause 3—Local spending reports: rights of principal councils and representatives of local persons —

‘(1) After considering the information contained in a local spending report issued pursuant to section 4, a principal council may make recommendations to the Secretary of State as to—

(a) whether that council could decide how any part of the money specified in that report may be spent; and

(b) any consequential delegation of functions to the council.

(2) Where a principal council proposes to make recommendations pursuant to subsection (1), it must—

(a) refer the matter to any panels under section 3 for consideration; or

(b) establish such panels if they do not exist and refer the matter to them for consideration.

(3) A principal council and any panels acting pursuant to this section shall exercise their functions to promote the sustainability of local communities.

(4) Within three months of receiving recommendations made by a principal council under subsection (1), the Secretary of State shall either adopt or reject each of the recommendations, and in either case shall give reasons for his decision.

(5) At least once in each calendar year the Secretary of State shall publish a report providing details of all decisions taken pursuant to subsection (4) above.’.

And the following amendments thereto: (a), inLine 2, leave out ‘may’ and insert ‘subject tosubsection (2)’.

(b), in Line 6, at end insert—

‘(2A) A principal council may not make recommendations regarding any money that has been specified in the local spending report as being spent on services of a wider or national significance.

(2B) In subsection (2) “services primarily of a wider or national significance” means services provided wholly or largely for the benefit of persons resident in areas wider than the area of the council.’.

(c), in Line 12, leave out ‘shall’, insert—‘(a) ’.

(d), in Line 13, at end insert ‘and

(b) have regard to the council’s community strategy prepared pursuant to section 4 of the Local Government Act 2000 (c.22);

(c) specify that in their opinion any recommendations are consistent with that community strategy; and

(d) give their reasons for that opinion.’.

We now come to the meat of the Bill. This is the first time that we have had a chance publicly to debate what will become the old clause 5, with which we are taking new clause 3. I believe it to be meat of the Bill, because the whole driving force and premise behind it is that local people know best when it comes to decisions on the development and sustainability of communities; we want to give them more influence over those key decisions. The point was well made on Second Reading by my right hon. Friend the Member for West Dorset that, in this day and age, power is power over money. The Minister has reiterated that point on many occasions, so I think that he accepts it.

The proposition of old clause 5 is straightforward. It has a clear link with the original clause 4, which has been accepted in principle by the Committee and will trigger something quite radical in terms of our ability to account for public expenditure in this country. The proposition of that clause, too, is straightforward. It sets us on a journey towards a destination whereby every one of our constituents will be able to trace almost every pound of public expenditure in the local authority area in which they live. It will throw a spotlight into the dark corners of public expenditure in a way that will have a considerable impact across the country and across communities, as people finally get to see exactly what the Government are spending on their behalf.

However, information by itself is not enough. If we are to let the genie out of the bottle, we need to give people some opportunity to influence how that money is spent. We need to give them power, and some sense  that they have influence and can change things. That is the core of the proposition behind clause 5.

The original proposition was that the Government would publish the information and that local authorities would have the right to go back to the Secretary of State with alternative recommendations for how the money should be spent. It is clear from the drafting of old clause 5 that the Bill’s sponsors had intended to place some presumption on the Secretary of State that he or she would accept the local recommendations unless there were good reasons not to.

It was clear from the start of negotiations with the Government that there were reservations about that. There were predictable concerns about boxing in Secretaries of State, but also legitimate ones thatthe original drafting had underestimated some key elements that might call into question the workability of the original proposals, particularly in relation to statutory requirements on agencies. It was felt that it was not enough simply to reallocate money, but that one had to consider the statutory responsibilities of the agencies required.

We took those concerns on board, and they are reflected in new clause 3. That clearly sets out the path without undermining the principles of the old clause 5. Subsection (1)(b) of the new clause makes it clear, to some extent, that recommendations from councils to the Secretary of State must take into account and take a view on

“any consequential delegation of functions to the council.”

Subsection (2) makes it clear that, when making recommendations, councils must demonstrate that they have engaged with the local community and that there is, in effect, a popular mandate for those recommendations. It refers specifically to the mechanism of citizens panels, which we explored when debating the amendments to clause 3.

I say to the Minister that I believe that we have been constructive in responding to the concern about boxing in Secretaries of State. The new clause would soften the requirements on them, but hold firm on the requirement that any decisions that they take should be utterly transparent. The amendments to the new clause must be seen in the context of the concern that this process could leave the Secretary of State vulnerable to mischief-making from councils. We live in a cynical world—a point strongly made in our informal discussions—and there is concern that the Secretary of State could be left exposed to politically motivated campaigns and held directly responsible for unpopular local decisions.

The amendments would address that concernby making it clear that councils must put their recommendations in some sort of framework. Recommendations must be seen to be consistent with a sustainable community strategy. They must not come from a completely random perspective, but be evidence based—I think that that was the expression used by the Minister.

We have taken an extremely constructive approach in tabling the new clause and the subsequent amendments to respond to the concerns that have been articulated. Our problem is that we are operating in a vacuum because the Government have failed to table a single  word of amendment to clause 5, which is the meat of the Bill. That concerns us because this clause is a test of the Government’s commitment to the Bill and to devolving genuine influence and power to communities.

From our discussions with the Government, we have gleaned that they are comfortable with devolving more power to local authorities and more money to local decision making. Their desired framework is the local area agreement and—the Minister will correct me if I am wrong—they see the Bill as going with that grain.

I understand that the Government’s desired direction of travel is to move towards the concept of super-LAAs. We are urged to buy into the vision of local partners sitting around a table laden with a large pot of money, which results, in theory, from clause 4. Under the terms of local area agreements and the strategic partnership framework, they will be encouraged to agree on a maximum of 35 locally set targets, framed beneath the umbrella of a sustainable community strategy. In theory, they could agree to bend the money towards the achievement of their locally set targets.In the Government’s view, the duty to co-operate effectively bestows on local authorities the position of first among equals. That is a logical and rational approach, but it is my belief, shared by the Bill’s sponsors, that it is not enough in this context. We are in danger of legislating for business as usual.

As I understand it, the duty to co-operate is restricted to co-operation on agreeing targets and does not extend to what we hope are quite spirited arguments about how money is allocated—that is a big difference. There can be a different vision of how such co-operation works. In an earlier sitting we had an eloquent debate comparing how sustainable community strategies are formulated with how village plans are formulated. There is a different dynamic, culture and sense of ownership in those two processes. If I spent next Saturday morning standing on Ruislip high street and asked a hundred of my constituents what they thought of the local area agreement or the Hillingdon community strategy I would get a lot of puzzled looks—even more than normal.

I am sure that the Government have taken an intellectually honest approach and a new direction of travel, engaged in the spirit of devolution, but my honest assessment is that that spirit does not gripthe public in the way that they had hoped. I believethat part of the Government’s conversion, or their engagement with the Bill, is an opportunity, and that some elements of the Bill can be a catalyst for engaging the public more through the opportunity to be involved in local decision making.

The Government’s vision is of the continuation of business as usual, with discussions behind closed doors between a set of people for whom this is not their day job—their day job is compliance with national targets and the management of their fixed and, in manycases, quite vulnerable budgets. I may be generalising excessively, but there does not seem to be the culture out there genuinely to take the opportunity provided by the Bill.

We have to change something in the mix, and the mechanism that we have developed in clause 5 as drafted, and in new clause 3 and amendments (a) to (d), delivers that change. It gives local authorities the power to break the impasse by giving them the right  to say, “We can’t agree, so we’re going to take a recommendation to the Secretary of State.” It effectively makes them leaders around the table, which is an important shift.

I believe that the Minister accepts that there is some logic to that argument, and he certainly accepts the basic position that we need a mechanism to break an impasse. We are not just talking about green targets; we are trying to create a situation in which people have a genuine debate about how money is spent and have to account for what they are doing and win arguments.

We want to encourage the kind of thinking outside the box that we explored informally in our discussions. I think the Minister’s favourite example is the Blackburn slipper, which is a useful one to place on the record. In that centre of innovation, Blackburn, some clever person decided that pensioners should be given free slippers. I am not sure what the original motivation was—it was clearly extremely popular with pensioners—but the consequence, intended or unintended, was that fewer pensioners fell over in their homes or down their stairs, and admissions to accident and emergency fell. The net savings to the public purse were considerable as a result of that one simple decision, but it would not have happened unless someone was prepared to think innovatively.

Most of the partners around the table are thinking in their boxes or silos, and are directed towards their targets. We hope to create a culture in which the partners co-operate in a much more innovative wayand there are incentives in the system for people to co-operate. I am concerned that the Government’s framework, although we have never seen it written down, will not trigger or create the conditions for such creative thinking.

We need a mechanism to break the impasse and to make it clear that the real leaders of discussion should be local authorities with local mandates. That is our vision, and the principles that I have outlined are the basis for old clause 5 and amended new clause 3.

I shall be brief. Unlike many other proposals, which have been tabled on a cross-party basis, the new clause and amendments have been tabled by the hon. Memberfor Ruislip-Northwood, but they have my support nevertheless. New clause 3 sets out a very flexible framework whereby both local authorities and their communities could produce firm recommendations to the Secretary of State through consultation with the relevant panels. The Secretary of State would then be able to review those recommendations and make a decision on them.

The framework is a further way to provide help to the office of Secretary of State. In an earlier sitting, much was said about the patchwork effect whereby different measures would be relevant in different parts of the country—something that the Bill would facilitate. However, there might also be common elements between plans. If a Secretary of State chose not to grant permission to devolve the relevant powers in each individual case, that might inform him or her that further primary legislation was necessary. It might also allow him or her to identify ways in which additional legislation could meet common demands   that were emerging across the country. New clause 3 is a sensible way forward, and I hope that the Committee will support it.

One problem with the Bill is that we have now spent so long on it that we are sometimes confused as to which clauses remain part of it, which have been removed, and what has replaced the clauses that have been removed. I hope that things will be clearer after today, because the Bill must proceed to the Report stage.

I am happy to give my support to new clause 3. The hon. Member for Ruislip-Northwood did not table it in a spirit of unilateralism, and it is our inadequacy rather than anything else that meant that other names were not added to the relevant motion. I hope that the new clause proceeds in a spirit of multilateralism, because that is the purpose of the Bill.

I have a couple of observations to which I hope the Minister can respond. I know that he is still somewhat unhappy about matters. However, if there is no power over the money, the Bill will be about fine words and nice actions with very little change, and one wonders what it will actually achieve. We should make sure that people in the outside world perceive a radical and engaging intention behind the Bill.

In comparison with the original clause 5, newclause 3 represents a considerable change. As the hon. Member for Ruislip-Northwood said, it is less explicit, but more capable of discretion and flexible use. That is important, because it is difficult for anyone to believe that a decentralising process is happening if they are being told exactly how to decentralise.

The result will be that there will be quite some pressure on the partners in the different panels. One of the points that I want to mention to the Minister—heis smiling, and he knows what I am going to say—concerns something that was clarified to me in the proceedings on the local government Bill yesterday. In unitary authority areas it is clear which council is the principal council and what that council’s role, responsibilities, powers and duties are. In areas of two or three-tier local government, it is difficult to make any difference at all without a spirit of real partnership between the two “higher” councils. I use the term “higher” not out of any wish to be derogatory about lower council levels; in many ways they are the first level in the representation of parishes, towns and communities. However, I could do with some clarification of what is meant in references to principal councils.

The term “principal council” is now taken in law to mean the district council in two or three-tier areas. However, we still need to be able to lock in shire authorities, because if they are not part of the delineation of decision making, local authorities will be at their worst and play off against one another. I hope that it will not be a problem because we want to enhance local communities.

If there is a mature democracy, the provision should work relatively easily. However, we all know that things are not always as robust or mature as we would want them to be. How does the Minister see the spending arrangements working to ensure that we lock in all the  different elements? It behoves the Government to do something about that because even though they may have devolved their responsibilities, they will, for the first time, see their decision-making bodies being part of the process and opening up.

The Blackburn slippers are a wonderful example of a local authority and the national health service coming together with, I suppose, the full support of the voluntary sector to make a difference to ordinary people’s lives. To prove that that can be done is the test of the Bill. There will be a successful outcome if the parties act transparently by sitting around a table and undertaking their business in a different way. It is clear from the discussions behind the scenes the degree to which the proposal is a change of culture. The notion that all discussions should take place openly among the partners will bring about a genuine change. It may seem idealistic, but we all know what goes wrong. People feel disengaged because they consider that decisions are all taken behind closed doors and that their views do not make a blind bit of difference. That is why consultation is perceived to be something with such notoriously disadvantageous associations.

I am happy to support the new clause. Even though the Minister might have some concerns about the provision, I hope that he will say how he envisages it working in practice. We must ensure that the spending plan is as robust as possible. It will benefit the Government, because the last thing that they want when such matters are referred to the Secretary of State is a lot of half-baked measures. It is a sign of disunity in an area when one party uses a reference to the Government as an opportunity to undermine what is happening locally. We have all seen that happen and it is the nature of politics that, if we do not get what we want, we try to undermine the process. The spending plan will put great pressure on local parties to work towards making the process work.

I hope that we will now have a better clause and that the Government recognise what we want to achieve.We have discussed it on many occasions and knowthe inherent dangers, but we must act in a spirit of reasonableness to ensure that the procedure works and that people take on the responsibility and use it locally, rather than seeing it as an opportunity to undermine central Government by acting against their policy. If we get the targets right—the 35 or however many there will be—it will be part of the Government’s policy anyway. It is not that we have a blank sheet of paper on which to write what Littlehampton could do to be nuclear free when it is next to a nuclear power station, because it will not be like that—I am being a bit topical.

The different partners have to be aware andwork around the 35 agreed targets. I hope that the Government will accept that and work with it. They may want to tweak the measure, but the concept is vital if the Bill is to make a difference.

I, too, shall keep my remarks brief. It is important to echo what the hon. Members for Ruislip-Northwood and for Stroud said about how important clause 5 is to the narrative of the whole Bill. Although there have been discussions behind the scenes, it is frustrating that the Government’s approach has been to highlight the  difficulties of the clause and not to propose any alternative. Following those discussions, it is clear that there were problems with clause 5. The timetable was too prescriptive and the clause places too much responsibility on the local authority. It could go ahead without having to co-operate with partners, which is the whole point of the Bill. Therefore, it is clear that there were shortcomings that needed to be addressed.

Ultimately there needs to be a clause that flows from clause 4 and sets out the public spending for each local area. There must be a debate about how that money is spent otherwise we could end up with a situation that we talked about before. A process might be in place in which there is greater transparency about what is spent and, as with the parish plan, a diversity of ideas about what needs to be done in an area. However, if the money is not there, those ideas cannot be delivered and we end up with a situation that is worse than the status quo because we have raised expectations and then failed to deliver on them. That is why it is so important that we have a measure similar to that outlined in clause 5, otherwise the Bill will be the worst of all worlds. It will raise expectations and then fail to deliver on them.

New clause 3 addresses some of the deficiencies in clause 5. It is more flexible and it is not prescriptive about how local spending plans are put forward. It neatly ties in with a lot of what the local government Bill is trying to address as well, but tries to push those boundaries further. It is not just about a duty to co-operate on the 35 targets, but enabling a discussion on how money is spent on trying to achieve a sustainable communities Bill. Unlike the original clause, it specifically ensures that the lead local authority works with local partners on the panel to ensure that there is consensus on the local spending plan that goes to the Secretary of State. The plan is not to be used as a mechanism for disagreement at local level, but should go forward only if there is complete agreement, as subsection (2) of new clause 3 outlines.

Subsections (3) and (4) of the new clause try to ensure that there is no political agenda that is designed to embarrass other local authorities or the Secretary of State. The additional amendments that have been tabled are also important in dealing with the issues that the hon. Member for Stroud raised. I am talking about the genuinely difficult problem of what happens if there is a disagreement between the authorities or the bodies that represent different geographical areas. That problem is easy to envisage. For example, a local authority could have a view on one issue and the primary care trust could be operating on an entirely different level. The same is true for a strategichealth authority or a regional development agency. Amendment (b) tries to deal with that by ensuringthat issues of a national significance are specifically excluded and the whole issue of the different authorities is dealt with. I should emphasise that the provisions try to deal with the genuine debate that has taken place outside about potential problems, which they try to resolve.

In that spirit, I hope that the Minister understands that we are clear about where we are coming from. Clause 5 is essential, and I hope that he will feel able to support new clause 3 and the amendments to it.

I want to make three small points and one big one. First, the hon. Member for Stroud mentioned the county level. In practice, a district that introduces a spending plan for the district will want to have conversations with the county, as it will with other members of the local area agreement. Typically, the county is a more powerful component of the local area agreement than any given district. The district will have an incentive to have discussions with the county because various kinds of expenditure in which the county has significant involvement will be “of primarily national significance” and will therefore not be covered by the local spending plan—education spending may be a classic case, social care spending is another and local transport spending is a third. It therefore seems unlikely that districts will typically ignore the county’s position, any more than they will typically ignore the position of other powerful agencies.

Indeed, the problem is the other way around: at the moment, the county and the other agencies have the whip hand, and the district is largely powerless, except in its own domain of planning and housing. In every other area, districts feel powerless because they are small and the other bodies are big; indeed, the county council is one of the big players in the county. We are therefore talking about trying to right an imbalance and increase co-operation. Typically, parties co-operate because there is a balance of power, but when one has a lot of power, it can afford to ignore the other. Although the hon. Gentleman’s point is a serious one, it need not keep us awake at night.

Another thing that need not keep us awake at night—this time, it is not a serious point—is the Minister’s possible rejoinder that it would be expensive to consult via the panels. He may say that because he entertained the Committee with the idea that consultation on another clause—I assure you, Mr. Cummings, thatI will not dwell on that clause—would have cost£42 million. A rapid calculation suffices to show that if that estimate were accurate, and one multiplied it to take account of similar, parallel consultations around the country, the Government would have spent£23 billion on consultations so far. To lapse for a moment into partisanship, I have often said that the Government are wasteful with public money, but not even I would accuse them of having spent £23 billion on public consultations to date. Therefore, I think that the Minister’s calculations have gone awry—perhaps by several orders of magnitude. We need not detain ourselves, therefore, with figures suggesting that the panel consultation on new clause 3 or clause 5 will be hugely expensive.

My third small point is about the local area agreements or super area agreements. My hon. Friend the Member for Ruislip-Northwood said that they are not enormously well known, and hon. Members on both sides of the Committee jovially suggested that men in white coats might come along if he were to stand in Ruislip high street asking people about them. However, there is a further problem with local area agreements. As they operate at present, they affect a minute proportion of expenditure—it is much more minute than the rhetoric suggests. When one investigates in detail the operation of the Kent local  area agreement, for example, as we have done, one discovers that the amount of discretionary expenditure under local area agreement control is minute. I accept in good faith the Minister’s direction of travel, and I accept that the LAAs-plus may have somewhat more discretion, but let us not delude ourselves. The public will not know what is going on in the local area agreement forum and there is no sign so far of any significant cultural shift in the way that spending is determined through local area agreements. Nor is there is any significant evidence that the amounts of money that will be available for discretionary spending within the LAAs-plus will be sufficiently great to alter the balance of power very much.

I do not think that we can expect to have a productive discussion on new clause 3 if it is set in the context of an alternative being a local area agreement. There is nothing wrong with local area agreements: they are an excellent development. There is nothing wrong with developing them further: it would be excellent to move in that direction. But this is a much bigger and much more important shift. One is either for it or against it, but one cannot pretend that local area agreements will do the same trick. They will not. They are not designed to. Above all, they cannot, because, as my hon. Friend pointed out, there is no device to enable the lower level of government—the more community-based level of government—to break the impasse and to assert itself in the context of a local area agreement.

I now come to a very big point. As other members of the Committee have mentioned, the Minister is uncomfortable, and has been throughout, with old clause 5 and new clause 3 because he fears embarrassment. That is not personal embarrassment, and not necessarily even that of a Secretary of State of this regime. It is the embarrassment of a Secretary of State in a putative regime, faced with a council of a different political colour, which seeks to use the device of new clause 3 to argue for the impossible and then complains publicly when the Secretary of State, sensibly and rightly, points out the impossibility of the impossible and prevents the political tricksters in the local council from doing what they seek.

I imagine that the Minister has in his mind people with banners saying “What a nasty Minister”. This may sound like a minor irritant. It may sound like something one could deal with in the drafting. But it is a profound point. It goes absolutely to the heart of what the Bill is about. The mindset that leads to that being identified as a problem is exactly the contrary of the mindset that leads to genuine devolution of power. Let me explain that in more detail.

We are consciously and intentionally setting up a situation in which there may be confrontation between the locality and the centre. We intend to create the possibility of such confrontation. There could be a genuinely different view between somebody sitting in Whitehall and somebody locally about how the money is best spent. Let us not pretend that away. It is nothing to do with whether it is a Labour Minister and a Conservative council or vice versa. Either way around, and even if they were of the same party, regardless of party politics, there are likely to be confrontations and differences. It is the essence of the Bill that we set up the possibility of those confrontations and differences.

We have very carefully given the Secretary of State of the day the power to circumscribe the scope of those confrontations and differences. It is up to the Secretary of State of the day to define what is the primary national significance and to define the area within which confrontation about who governs local expenditure occurs. That is a decision that the Secretary of State makes in the full light of day and which is subject to national democratic debate. Under new clause 3, the Secretary of State—this is the first main point about the whole Bill—has to decide about the definition of the national, as opposed to the local. Ultimately, the Secretary of State has the power. As he putatively has the confidence of the House, he can always legislate as he sees fit, and he has the administrative power to define what is primarily of national significance. The only check on that power is a democratic check—a check on the ability of the Secretary of State to carry the day politically to the satisfaction of the Government.

Once the Secretary of State has not felt that he can plausibly make the argument that a particular area of our national life is of primarily national significance, he has already, by hypothesis, admitted that he cannot defend the proposition that it is something that ought to be controlled by the centre because it is has primarily national significance. If he has not defined it as being of primarily national significance, he feels that he cannot defend in public the proposition that that is the case. He has admitted that, in the course of democratic debate across the nation, people in general have felt so strongly that a given matter is of primarily local significance that the Minister does not feel able to assert that it is of primarily national significance.

Once the Minister has admitted that the democratic debate makes x something that is primarily local in its intended effect, the Secretary of State needs to follow that logic. He needs to accept that in all cases bar the most exceptional it ought to be decided locally how the money is to be spent. That brings me to the profound point: the Government either accept the fundamental proposition of the Bill or they do not—that is, if a piece of Government expenditure or taxpayer-borne expenditure has or is intended to have a primarily local effect, then the locals should in all but the most exceptional circumstances have the power to decide how the money is spent.

The Committee can accept or reject that proposition. For several hundred years, the trend of British Government has been not to accept it. We have moved steadily away from the proposition. A few hundred years ago, it would have been accepted generally. Local boards and councils had far greater discretion. There was, of course, much less grant equalisation—originally none—and far less administration at the centre. In fact, there was a time when local administrations vastly exceeded in their numbers, complexity and bureaucratic grasp the capacities of the centre. Those things have changed enormously. Over the past century and more, the tendency has been centripetal and the powers have accumulated at the centre. We have come to believe—wrongly, I think, and our purpose is to establish that everybody on the Committee agrees with that—that, generally, decisions about how local money for local things should be spent are best made at the centre. That has been the proposition, and we think that it is wrong.

We are saying that the presumption should always be that if the intended effect is local, the decision should be local. It is true that if a particular Secretary of the State does not share that culture, and a local authority comes forward, having gone to its panels and had its discussions with its local area agreement partners and so on, and says, “We would like to spend this piece of money, which you, oh Secretary of State, have defined as not being of primarily national significance in this way rather than in that way,” then that Secretary of State, who does not accept that proposition, is bound to face the possibility of embarrassment. We do not think that that is a problem. We think that 99.9 per cent. of the time the Secretary of State should just say yes. There should not be any embarrassment, because if the Secretary of State has accepted that the expenditure is local in character, not of primarily national significance, he ought, by hypothesis, to have accepted that except in the most exceptional of circumstances he is going to say yes no matter how the local authority says that that money should be spent.

The only way in which to generate a problem about embarrassment is to start with the cultural assumption, which the Bill is trying to defeat, that even though the expenditure is local in its intentions and consequences, the Secretary of State, rather than the local authority, should normally decide.

The Minister, and the Government, are at a fork in the road, and it may or may not be a centrepiece of the next general election, because if the Government are serious about localism, we have a consensus. My Liberal Democrat colleagues are serious about it; I accept that my party has not been serious enough about it for many years, but we are now. Labour Members and the Government say they are now serious about it, and if that is so, there is no argument. We cannot have an argument because there cannot be embarrassment and in all but the most exceptional circumstances the Minister will just say “tick”. He has to decide whether he means localism or centralism with the appearance of localism, in which case there will be lots of embarrassment and he will not like clause 5 or new clause 3.

My hon. Friend the Member for Ruislip-Northwood said that this is a test; yes, it is, there is no other test. In the end, in our democracy today, the test of whether someone is a localist is not whether they can create institutions, plans, panels or Bills, but whether they are willing to let local people make decisions, and the most important decisions are about money. We are either willing to let them make those decisions by and large on their own and to accept them, or we are not. There is no third possibility.

New clause 3 is critical. We are no longer having debates about the fine detail; we are now talking about the essence. What we hear from the Minister today, on Report and on Third Reading will be very important.I profoundly hope that we have a consensus in Committee. Throughout my political life I have not sought disagreement where there is none, as it is in the interests of our nation that we should move together. However, I assure the Minister that if he does not want something extraordinarily like new clause 3, we will join battle and have the argument that says some ofus believe in localism and others do not, and that argument will not be escapable.

I thank the right hon. Gentleman very much indeed for his speech about the future direction of our country. I am struggling to find that huge point in new clause 3. I shall address his analysis first, and then come to the points about the Bill.

The right hon. Gentleman set up his argument on a false premise. The clause does not do what he says it does, and my reason for having difficulty with it is not what he says it is. If the Government were motivated by the fear of embarrassment there would be nobody in it. If the idea is that the proposal would create a conflict between local and centre, and that that is desirable, I reassure him that every minute of every day there is conflict between local and central.

For example, local authorities consistently ask the Department for Communities and Local Government for more resources. They never ask for less, they never send a cheque back, and they never write and say, “We wholly agree with your formula. We think this is a fair allocation of resources.” They never say, “Thank you for that devolutionary measure. It will save us money so we are returning your cheque.” They always say, “You are imposing a new burden on us,” and they always come up with a gross cost for it. The figure of £42 million is but a tiny proportion of what the Local Government Association would calculate for the extra cost of consultation that results from these measures.

The Department for Communities and Local Government’s relationship with the local authorities and local government is a marriage of 50 years. A golden wedding anniversary has just taken place and we get on fine compared with the bottle-throwing and shouting that goes on in the Home Office. Conflict between local authorities—police authorities are local authorities as defined by law—and the strictures of the Home Office, between central and local, are built in.

The right hon. Gentleman is putting up a solution to real world problems which, as the hon. Member for Falmouth and Camborne eloquently said, I fear would raise expectations only to see them dashed. The point that he makes would not increase resources.

I hope that the Minister is not goingto labour this point. Of course it does not increase resources; it is about who decides how to use the existing resources.

That is right. So this debate is notabout extra resources, but the distribution of existing resources. The right hon. Gentleman says that the decision about such distribution should be taken locally. On the whole, that is a proposition that is shared by the whole Committee. That is the purposeof local area agreements, the purpose of the Local Government and Involvement in Public Health Bill, and the purpose of my party’s manifesto, in the section that committed the party of Government to supporting that proposition.

The problem that I have is that, at the moment, new clause 3 does exactly the opposite, because it would put in law that the Secretary of State should determine the distribution of resources. If one is genuine about building localism, one has to create a culture, by the  financial agreements and statutory arrangements, that encourages partnership. If someone asked the people of my constituency, “Should the money that the Benefits Agency spends not be spent instead on subsidising the Post Office?”, I know what they would say; they would say, “Subsidise the Post Office.” However, that would mean that money from the Benefits Agency was not spent on benefits.

Mr. Letwin rose—

Let me finish my point. I listened to the right hon. Gentleman’s rhetoric and argument.

There is another side of the coin to localism, and that is equity. The mechanisms of the Bill must ensure equity as well as localism. The right hon. Gentleman is missing the point about LAAs, and it is an interesting debate from that point of view. The purpose of an LAA is not to pool mainstream revenue funding and put it under the control of the local spending plan. The amount of money that is free money, as it were, within the LSP is quite small; it is £500 million, and it is increasing, probably to about £3.5 billion within the next spending period. So it is not insignificant, but it is certainly not a large proportion of spending, and in most cases it is only in neighbourhood renewal areas where there is, as it were, untapped money.

The purpose of the LAA is not to take money off the Benefits Agency, the council and the primary care trust, and put it all in one pot. The purpose of the LAA, with the duty to co-operate on targets—the hon. Member for Ruislip-Northwood is right about that, and I do not claim anything else of the Bill—is to help all local organisations to move in the same direction.I fear that, if the Secretary of State is determining matters, that would build in not partnership but conflict, because one body would know that, if it did not get what it wanted from the partnership, it could go to the Secretary of State.

Very interestingly, where I think the right hon. Gentleman is wrong—I am not sure how much thought he gave to this point—is the idea that bodies co-operate when they are roughly of equal power. That is not what happens in life. Where a body or an individual has no power, and another body or individual has a lot of power, the one without power tends to do as it is told. It is precisely where there are powerful organisations working together that conflict is more likely. [Interruption.] I do not know whether the right hon. Gentleman has experience of local public administration, but if, for example, a PCT sets a target on reducing lung disease and heart disease, and a social services director disagrees with that target being made a priority, we get conflict. The purpose of localism, and the measures that we are putting into place, is to encourage a partnership between those two bodies so that they address the issues. I agree that, within the bounds of equity, that target should be determined locally. At the moment, however, it is not. I agree with the right hon. Gentleman strongly on that point. It is folly and a waste of public money to have a national target that is not applicable in an area where lung disease, to use my example, is not a particular problem or a high priority.

Having discussed a grand point—the right hon. Gentleman said it was a big point, which I do not recognise as being behind the new clause—perhaps I might explain how we can best move forward.

Does the Minister agree that part of the problem is that he is talking about a disagreement between a director and an unelected primary care trust? We are talking about trying to give more power to locally democratically elected people and the wider community through consultation. That is the key to what we are talking about.

That is a welcome point and a timely intervention. I do not think that that is what we are talking about, but I agree that it is the fundamental point. The analogy with standing on the street corner asking about the local area agreement, which was used earlier, is right. The local area agreement was never intended to be otherwise. It is a financial arrangement and a modus operandi between authorities. I suspect that if someone stood on the street corner and asked about amendment (a) to new clause 3 of the Sustainable Communities Bill they would also be taken away by men in white coats. Therefore, it is exactly as the hon. Gentleman says: local involvement, the feeling of ownership and the reality of being involved in the decision are at the core of the Bill. That is why we support it. However, again, I gently remind him that such involvement does not remove the paradoxes: such a provision involves the public in the decisions made about them to a greater extent than they are involved at the moment, but it still comes down to the allocation of money, as the right hon. Gentleman said on Second Reading. Therefore, one has to build in those strictures.

Does the Minister also agree that it is about outcomes? One of the benefits of the parish plan process, which my right hon. Friend spoke about, is that people feel engaged in it, even in some large communities, and get involved. An astonishingly high number of people might respond to a survey, for example, then see certain quick wins and start to feel a sense of empowerment. That sense of achieving outcomes can be delivered on a larger scale through this Bill.

I am grateful to the hon. Gentleman for making a good point. That is why we supported parish plans. I think that it was my right hon. Friend the Member for Oldham, West and Royton (Mr. Meacher) who moved the idea of parish plans, although he is not normally associated with villages and rural areas, given his constituency. However, that idea has been taken up. Let me remind the Committee that it is also true, although I am not suggesting that the right hon. Member for West Dorset said or implied it, that that same involvement and sense of ownership is powerful in urban areas as well as in rural areas and villages. The evidence from the new deal for communities is thatin areas which the newspapers would stereotype asthe most notorious estates in Britain, many of which the right hon. Gentleman has visited, we have seen the most dramatic improvements in respect of a sense of involvement and ownership. That will be backed up by further measures, such as the ownership of community assets, which has been announced recently. I agree with the hon. Member for Newbury.

Let me move to the issues before us. There is agreement, as hon. Members have already mentioned, that clause 5 has some deficiencies—the hon. Member for Falmouth and Camborne mentioned it in someof our conversations—and for that reason, the hon. Member for Ruislip-Northwood has tabled new clause 3. I agree with my hon. Friend the Member for Stroud that the lettering and numbering causes confusion. For example, new clause 3 is not a new clause 3, butthe third proposed new clause, which would replace clause 5.

The Committee should be grateful to the hon. Gentleman for tabling the amendment, because, unfortunately, I was unable to table a Government amendment in time. I should like to reassure the Committee regarding my good intent and that of the Government. The strictures on Government amendments are not the same as those on other hon. Members: we require Government clearance, which takes time. The hon. Gentleman would be first to criticise us—actually, no, he would be the second; the right hon. Gentleman would be the first—if we introduced measures that were inconsistent with other proposed Government legislation. I imagine that there would be jibes about joined-up Government and railroading legislation through Parliament.

I remind the Committee that only yesterday, the Government’s White Paper on planning policy was published, elements of which relate directly to the point that the hon. Member for North Cornwall made about community involvement. I expect that all constituency representatives will recognise that this is about planning.

I am grateful to the hon. Member for Ruislip-Northwood for tabling new clause 3, which I do not intend to oppose. I should like to consider it and improve it if there still are, as I suspect, deficiencies.

On the other side of the coin, let me explain what we have found wrong with clause 5. It would enable a local authority to prepare a local spending plan setting out a proposed breakdown of the allocation of relevant expenditure in its area. If that spending plan were approved by the Secretary of State under clause 6, the Secretary of State would be under a duty to implement the local sending plan by allocating resources in accordance with its provisions. It would, therefore, give a local authority the ability to determine the allocation of relevant expenditure, even that of other authorities operating in its area, as my hon. Friend the Member for Stroud said.

I hope that the Minister is clear that his term “relevant expenditure” refers to expenditure that the Secretary of State has already defined as not being of primary national significance, which means that it is relevant locally and is locally intended expenditure.

The right hon. Gentleman is setting out a process that makes assumptions about the acceptance of other clauses.

The processes described in clause 2 are directly relevant and, in my view, superior, to those set out in clause 5. I appreciate the point, made by the hon. Member for Falmouth and Camborne, that a clause like clause 5 is needed to make the jigsaw puzzle fit  together, and I explained that to the Committee at some length. I think that we agree that clause 5 would create a situation that would not work. Authorities undertake specific functions for which they are granted money. If another authority were able to reallocate that money, perhaps for its own purposes, it would result at best in leaving authorities unable to plan their own budgets and at worst in important functions not being discharged. So, I think that we agree on the deficiencies of clause 5.

New clause 3 states:

“After considering the information contained in a local spending report...a principal council may make recommendations to the Secretary of State” first, as to

“whether that council could decide how any part of the money specified in that report may be spent” and, secondly, as to

“any consequential delegation of functions to the council.”

It also proposes that when the Secretary of State receives a recommendation, she or he must adopt or reject it within three months. The Government and I agree that that would undoubtedly be an improvement on clause 5, and I have no problems with it in principle. I would not say that my objections to it are minor—they are important—but they are not of the stature of the great philosophical speech that we have just had from the right hon. Gentleman.

I should like to raise two issues. One is the timing, again not a minor point. The three-month period is very restrictive. I appreciate that the hon. Member for Ruislip-Northwood wants to put in a timetable. I have no problem with that in principle, although I am more than slightly concerned about the three months. It is only honest of me to say that.

I have another point that I wish to put into the pot, namely the powers, which have existed for many decades, that allow a local authority to discharge the functions of another. That was best codified in section 101 of the Local Government Act 1972, which I think was Geoffrey Ripon’s Act.

Secondly, the power of well-being is very important. Hon. Members may be reminded that the power of well-being is being granted to quality parish councils by the Local Government and Public Involvement in Health Bill. That is an important opportunity for local parishes. Therefore, that power of well-being, along with the existing powers to discharge functions, is already there. The mechanisms that I proposed in my revised clause 2 would allow local authorities to raise matters of that nature with the Secretary of State.

I cannot agree to new clause 3; I do not have clearance to do that. I have explained some of the problems with it. I do not think that they are insurmountable. As hon. Members know, it had been my intention to table new amendments.

This is a genuine inquiry. I understood perfectly clearly the Minister’s first point about the time limit, which is a matter of sublime indifference to us. Within reason, whatever time limit the Minister wants is fine with us. However, I genuinely did not understand his second point.

Put very simply, authorities can already share their functions or discharge the functions of another. Under the power of well-being and section 101 of the 1972 Act, they can already request that of the Secretary of State. What they do not do—in the words of the hon. Member for Ruislip-Northwood—is stir the firmament. My fear is that if we are setting up a mechanism that invites conflict, as the hon. Gentleman said, then we are in danger of breaking up the partnership at local level. However, I do not see that as a major point. [Interruption.] The right hon. Member for West Dorset is tittering from the Front Bench. He does not accept that there is conflict between local partners. I do not know whether it is different in West Dorset. Perhaps they all agree with each other, but I doubt it very much indeed. If localism is to work, one has to have mechanisms that encourage partnership. However, those points are outside the strictures of new clause 3.

I hear what the Minister says and I think that he is talking about two sides of the same coin. Creative tension can unearth some interesting possible new routes to consensus.

May I pick up on the “concept of equity”, which is an issue that I feel very strongly about? If the Minister is going to rephrase that, will he reassure me thathe will look to use the word “equity”? That isvery important. There is equity between different communities and also equity within a community—something that I have talked about in our private discussions. Using the word “equity” will ensure that when we discuss groups that may be disadvantaged there will be a predisposition to deal equitably with the matters that those panels take forward. Will my hon. Friend say something about that?

There are two points to be made about equity. One, which was raised in earlier proceedings, is about ensuring that disadvantages are recognised inthe processes of consultation and involvement. I have undertaken to ensure that that is dealt with. The second relates to the provision in new clause 3 to give local authorities the opportunity to present proposals to the Secretary of State. Any honest differences that existed would inevitably emerge from that process, and the right hon. Gentleman is right to say that that is a situation in which a straightforward decision would be called for. He said that in most cases the Secretary of State would decide sensibly and rightly, and I believe that the public would recognise such a decision and that the matter would be one of simple disagreement rather than of embarrassment.

I want to press the Minister to clarify the nature of the problem. I am sure that there is not a timetabling problem, but the Minister appears to have some difficulty with new clause 3(1)(b) and with the  issue of consequential delegation of council functions. My understanding of the intention of that provision is that, when local authorities make recommendations to the Secretary of State, those recommendations should be as comprehensive and transparent as possible and should take account of consequential delegation, which I admit was an issue whose significance was underestimated in the original clause. The modified provision tidies things up.

The fact that the power to shift functions already exists in statute reinforces my confusion about why there is a problem. Is it complicated? Yes. Is it possible? Yes. What is the objection?

Ministers always have difficulties in Public Bill Committees when they argue that a proposal is unworkable and unnecessary, because the counter-argument is that if the proposal is unnecessary then no harm is done in agreeing to it. Logically, therefore it is the argument of unworkability that is the difficult one. In the present case, my view is that that argument is not insurmountable. There are questions about how the delegation of functions would be carried out, whether it could ensure cost-effectiveness, and whether it could be done efficiently, but in principle I see no problem. Indeed, how could I see a problem, when I have already argued that the 1972 Act allows that transfer of functions?

But are not those difficulties part of the calculation that the Secretary of State has to make?

Not all the difficulties with the process are a matter for the decision. It is the difficultieswith the legislation that need to be agreed on and ironed out, and I would have preferred the processes in clause 2.

I think that I should allow the hon. Gentleman to speak, because there is little time left in this morning’s sitting.

I am happy to speak, although I remain to some degree in the dark on the Government’s intentions. I should like to give the Minister the opportunity to place on record his intentions with respect to new clause 3. The earlier debate made it clear that that provision is fundamental to the Bill.

I will certainly do that. I have done it already, and I will repeat this afternoon what I said10 or 15 minutes ago, which was that I intend to table the amendment on Report.

It being twenty-five minutes past Eleven o’clock, The Chairman adjourned the Committee without Question put, pursuant to the Standing Order.

Adjourned till this day at Two o’clock.