Local Government in Scotland Bill: Stage 2
We are in the final day of the committee's stage 2 consideration of the Local Government in Scotland Bill. Once again, I welcome to the meeting the Deputy Minister for Finance and Public Services, Peter Peacock, and his officials.
After section 30
Amendment 77 moved—[Peter Peacock]—and agreed to.
Amendment 93 is in a group of its own.
Amendment 93 is a purely technical amendment that enables the Executive to fulfil its commitment to deal with the housing debt of councils that transfer their housing into community ownership. Furthermore, it meets the new policy circumstances that now pertain and give ministers the necessary powers over time.
Under section 90 of the Housing (Scotland) Act 2001, Scottish ministers have the power to pay grants to local authorities in connection with local authority housing-related debt. However, they have no express statutory power to make direct payments to funding providers.
Scottish ministers may make payments of that nature using common-law powers, provided that the payment is authorised under the Budget Act. In such circumstances, the usual practice is to seek statutory powers for recurring payments. That is the purpose of amendment 93, and it raises no other policy or practical issues related to stock transfer.
I move amendment 93.
Minister, you said that the amendment will allow you to reduce or eliminate housing debt. Will that happen irrespective of any stock transfer?
Does the provision contain any accountability mechanism to Parliament for the use of such a power?
We know that local authorities have this power, whereas the Executive does not. I know that the minister has said that amendment 93 is simply a technical amendment, but if ministers have such a power, will it speed up the process for establishing housing stock transfers? Will the amendment have any financial implications?
In response to Keith Harding, I should point out that, because of the change in policy circumstances, we felt that we needed a general power in case any other relevant circumstances arose. That is what amendment 93 provides. However, I have to say that we have no particular circumstances in mind at the moment.
In response to Sylvia Jackson's question, we did not feel that the provision required parliamentary authority as the power would be used as a consequence of decisions about stock transfer and so on. As a result, the amendment contains no provision for reporting to Parliament.
In response to Sandra White, the situation has come to light because we have entered a new policy arena in which, for the first time ever, we are paying off local authorities' housing debt. After finding out that we could not pay the funders directly, we felt that, for reasons of administrative convenience, it was appropriate to take this particular power. The provision itself has no financial implications.
Thank you. The question is—
Convener—
I am sorry, Sandra. We have moved on. The question is, that amendment 93 be agreed to. Are we agreed?
Convener—
I am sorry. We have moved on. We will deal with your point later.
Convener, I beg your indulgence. The minister said that amendment 93 will allow ministers to exercise this particular power, regardless of whether stock transfer is involved. I find it quite difficult to take that comment on board.
I thought that the minister had answered that point.
Not to my satisfaction.
He might not have answered the question to your satisfaction, but did he answer it? Yes, he did.
I do not think so.
I am happy to discuss the matter further, convener, at your discretion.
Sandra, you will need to be quicker than this. I am not going to delay things because the minister's answer does not satisfy you.
I thought that I had answered the point, but perhaps I missed some other point that Keith Harding or Sandra White raised. If either of them will make that point again, I will seek to provide clarification.
If ministers have this power, will they be able to write off any council debt, regardless of whether stock transfer is involved?
As I have said, in taking this particular power in relation to stock transfers, ministers will also have the power to pay off debt in other circumstances. However, we have not yet defined those circumstances. We are simply taking both powers at the same time.
I thought that members would welcome this power as providing flexibility for ministers instead of seeing it as a matter for regret. Amendment 93 would give ministers extra flexibility to remove debt from a local authority, if that were required.
So your question has been answered, Sandra.
I think that Keith Harding wanted to come in.
I am sorry, but who is in the chair here? The question has been answered.
Not to my satisfaction.
I am now going to put the question.
On a point of order, convener.
The question is, that amendment 93 be agreed to. Are we agreed?
I do not agree. We cannot get an answer to the question. There is no accountability to the Parliament on this matter.
There is disagreement, so we are going to a vote.
Yes. We will go to a vote.
There will be a division.
For
Godman, Trish (West Renfrewshire) (Lab)
Against
Harding, Mr Keith (Mid Scotland and Fife) (Con)
White, Ms Sandra (Glasgow) (SNP)
Abstentions
Jackson, Dr Sylvia (Stirling) (Lab)
Marwick, Tricia (Mid Scotland and Fife) (SNP)
The result is: For 1, Against 2, Abstentions 2.
Amendment 93 disagreed to.
I suspend the meeting for five minutes while we check this out.
Meeting suspended.
On resuming—
We now proceed to amendment 94, which is in a group on its own.
Amendment 94 relates to money managed by local authorities in Scotland. At any one time, Scottish local authorities will have substantial sums held in the bank or in investments. Much of that money is spoken for and is held temporarily, on what the banks refer to as short-term call. Usually, it is a mix of revenue income and capital borrowings. There are periods when councils are said to be cash rich because of the particular flow of funds at a given time; there are other periods when they are cash poor because of the flow of expenditure.
Some of the money that is available when councils are cash rich is the balance of monthly grant unspent at any particular time; income generated during the usual course of activities; receipts from the sale of assets; capital loans taken out by the authority which have not yet been applied to the purpose for which they were borrowed. Money is also put aside for contingencies.
Shetland Islands Council and Orkney Islands Council, uniquely, have other funds in reserve, which are generated from their engagement with the oil industry, as authorised by Parliament in the 1970s. Those funds are held against the day when the oil industries move elsewhere and the islanders and the islands need to find new ways to make a living. For the time being, both councils prefer to spend only the interest income from those reserves.
The way in which such money is generally managed in local authorities is usually referred to as treasury management. Whatever the basis for lending and investment, councils want to get as much benefit from the resulting funds as they can without putting them at significant risk. The key criteria that fund managers need to bear in mind are: liquidity, or the accessibility of funds; the risks in using various investment vehicles; and the potential returns to the council through interest income.
During the period of preparation for the bill we were asked to consider the legal regime that controls treasury management in Scotland. It was put to us that the current arrangements are well out of date and do not recognise a number of developments in the financial field that have taken place over the past 40 years. It was suggested that we could do more to help local authorities get best value from their funds. That could be achieved, even though we prefer councils to follow risk-averse, conservative investment policies, which keep money in domestic banks, stocks and bonds and in domestic currencies.
It was pointed out to us that local authorities in England and Wales have been allowed a range of extra freedoms and flexibilities in investment. We are satisfied that the public money that is being managed by Scottish local authorities could safely be put to work a little more actively. The Chartered Institute of Public Finance and Accountancy code on treasury management is a respected code of practice. It is in use in every Scottish local authority and has done a great deal to improve performance. We want to hold discussions with local authorities and others with an interest in money management about a range of details that will ensure that good practices such as those advocated in the CIPFA code of practice for treasury management are adopted.
We believe that we could sensibly allow different provisions to be made for investments for different purposes. For example, it is sensible for any new regime to allow Orkney Islands Council and Shetland Islands Council to take a longer-term approach to the investment of the special reserves arising from their oil-related activities. One option would be to enable them to take advantage of the investment approach that is authorised for use by Scottish local authority pension funds managers. If two different approaches are in use in an authority, it should be required to seek Scottish ministers' consent before moving funds from one investment system to another.
The regulation-making power that is described in amendment 94 is intended to allow us to move forward once detailed discussions of those matters are complete. The amendment provides that there must be full consultation on proposals and that draft regulations should be subject to parliamentary approval by the negative procedure.
With those undertakings, I hope that the committee will agree to amendment 94. I know that the amendment will be warmly welcomed by all concerned in managing local authority funds.
I move amendment 94.
I want to ask about the regulations that the minister intends to introduce. I understand that at the moment local authorities can invest—I am thinking about the scandal that took place in the Western Isles a few years ago. Will the regulations that you plan to introduce ensure that scandals of that sort cannot happen in future, or will the liberalisation of the financial regime that you propose make such scandals more likely in the future?
Tricia Marwick makes a very good point. I have quizzed my officials about the matter, on the basis of the advice that I was given originally. I am absolutely certain that the new financial regime would not allow or encourage local authorities to do what Western Isles Council did. I understand that Western Isles Council acted outwith its powers. The liberalisation that we propose—to the extent that it is a liberalisation—gives authorities more flexibility, but within a very prudent regime. We recognise the risks that are involved. Nothing in these proposals would authorise or make proper what happened in the case of the Bank of Credit and Commerce International. That is completely outwith the bounds of what we propose.
Amendment 94 agreed to.
Amendment 107 is grouped with amendment 107A.
Amendment 107 should be welcomed as an opportunity to address public concerns about the quality of drinking water. We need to address that issue now.
Member will be aware of well-publicised incidents that took place this summer. For example, there were difficulties with E coli at a campsite. The first stage of a comprehensive public consultation is complete. Interested parties, including local authorities, the Royal Environmental Health Institute of Scotland and Unison, said that new private water supplies regulations that are due to come into force in 2003 will have significant financial implications for citizens and business.
In the recent Scottish budget, money was allocated for grants to bring private supplies up to new standards—£22 million in the period 2003 to 2006. We now need a legislative mechanism to ensure that those grants are delivered cost-effectively and efficiently.
Local authorities are the most appropriate body to deliver grants because they are responsible for monitoring supplies and enforcing standards, and have expertise in grants administration. Amendment 107 would place a duty, rather than a discretionary power, on local authorities to pay grants. That will guarantee consistency and will ensure that the objective of improving public health throughout Scotland is achieved. As I indicated, funding has already been secured in the Scottish budget. The level of that funding is based on knowledge of the number of supplies.
Amendment 107 also seeks powers for Scottish ministers to pay local authorities grants for the cost of the grants that they pay and the cost of administration. A full public consultation on private water supply regulations and the grant regulations is due in the spring. I trust that the committee will view the proposed new section as a positive measure to improve public health and I urge the committee to support amendment 107.
I want to reassure Tricia Marwick, who lodged amendment 107A, that it has always been the intention that the Scottish ministers shall fund private water supply grants that are made by local authorities, in accordance with the conditions that will be set in regulations. Moreover, it has always been the intention to fund reasonable costs that are incurred by local authorities in the administration of the grants scheme. Therefore, Tricia Marwick will be pleased, and perhaps surprised, to learn that I have no objection to amendment 107A in principle.
However, before amending subsection (6) of the proposed new section, the Executive would like the opportunity to give fuller consideration to the detailed wording of the amendment and to the way in which the Executive would reimburse such expenditure. For that reason, I invite Tricia Marwick not to move amendment 107A. The Executive accepts the principle that it contains and I have given my assurance that the amendment's thrust reflects the Executive's policy intentions.
The Executive will give further careful consideration to the issue, with a view to preparing a stage 3 amendment that embodies the basic principles that Tricia Marwick and other members might desire. I give an undertaking that I will advise the committee of our proposed amendment in plenty of time before stage 3, to allow proper consideration by the committee. I invite Tricia Marwick not to move amendment 107A. If she is unwilling to do so, I ask the committee to vote against it on the basis of the assurances that I have given about dealing with the issue at stage 3.
I move amendment 107.
I lodged amendment 107A because I felt that the Executive ought not to impose a duty on councils and then not give the funding to allow that duty to be carried out. That is not only my view, but the view of the Convention of Scottish Local Authorities. COSLA had been led to believe that the relevant part of the proposed new section would read "shall" rather than "may".
I have another concern about the councils' duty to improve private water supplies, which the minister might be able to answer. Although I understand that Scottish Water is responsible for the public water supply, I do not see why the duty to deal with private water supplies is not being placed on Scottish Water, instead of on local authorities. That might have made a bit more sense.
Another reason for amendment 107A is my concern about lead pipes. The problem of lead pipes leading to the public water supply is not being dealt with. About 60,000 houses in Glasgow have lead pipes and Glasgow City Council can deal with only up to 500 of them a year. If a new duty to improve private water supplies is to be imposed on local authorities, it is imperative that they have full funding to allow that work to be carried out.
I accept the minister's assurances and I appreciate his acceptance, in principle, of amendment 107A. Subject to his comments about why the duty is being placed on local authorities in the first place, I move amendment 107A, but do not propose to press the amendment to a vote.
Do other members wish to comment?
As I think Tricia Marwick said, the point about lead pipes in Glasgow relates to the public water supply, not to private water supplies. I am happy to refer that matter to colleagues who have the principal responsibility for that supply.
Local authorities are responsible for monitoring supplies and for enforcing standards in relation to private water supplies. The other reason that we placed the duty on local authorities is that they have the expertise in administrating grants for private water supplies.
As I have indicated, the policy intention is for the Scottish Executive to fund the cost of the duty that will be placed on local authorities in relation to private water supply grants. That intention is expressed broadly in Tricia Marwick's amendment 107A. We will look at the issue and will come back with a precisely worded amendment at stage 3.
Amendment 107A, by agreement, withdrawn.
Amendment 107 agreed to.
Amendment 108 is in a group on its own.
Amendment 108 provides for a technical adjustment to allow councils to comply with proper accounting practice in the treatment of pension arrangements in their accounts. From next year, the code of practice in local authority accounting will require all councils in the United Kingdom to account for pension arrangements. That is in line with financial reporting standard 17, or FRS17 as I will refer to it in the rest of my remarks. The code of practice to be applied from 2003-04 has been the subject of detailed consultation with local authorities in accordance with arrangements required by the Accounting Standards Board. We and local authorities support the change.
FRS17 will not change the way in which councils make pension payments or the entitlement of current or previous employees. Councils will continue to make contributions to their pension funds based on regular actuarial reviews. The change is purely a change in accounting treatment—there will be no movement of cash sums paid in or out. The intention is to allow local authorities to record the necessary accounting transactions. The accounting transactions arising from implementation of FRS17 will be recorded in the pensions reserve. Pension payments and contributions will remain properly chargeable against the local authorities' general funds.
Councils are concerned that, in responding to the change in accounting policy, there should not be an unintended impact on their annual council tax setting arrangements. Allowing surpluses or deficits on that reserve to feed through into the budget calculations would result in volatility in council tax levels unrelated to any genuine change in the level of council activity.
The first part of the amendment will allow Scottish ministers to issue regulations by allowing councils to establish the pensions reserve and determine the items that authorities may account for within it.
The second part of the amendment will ensure that local authorities are not required to take account of any deficit or surplus on the pension reserve when setting their council tax levels. Councils will still be required to respond to the quinquennial reviews and valuations of their funds and those might, as always, have some implication for council tax levels over time.
The power to make regulations under the amendment would also allow the Parliament to ensure that further improvements to local authority accounting practice arising from closer alignment with the UK generally accepted accounting practice and whole government accounting could be accommodated without any unintended impact for council tax payers.
I move amendment 108.
I would be grateful if the minister would comment on common good funds. As I understand it, amendment 108 will allow local authorities to move money in and out of common good funds. Common good funds are not owned by local authorities. They have been set up to benefit particular communities. If the purpose of amendment 108 is to allow local authorities free rein to dip in and out of common good funds as they see fit, without any requirement to consult the communities to which the benefit of the common good funds should go, I will oppose the amendment.
Common good funds are a serious matter. It will not be resolved by allowing local authorities the free rein that I suspect amendment 108 will give them.
I am just triple-checking with my aides. There is no implication for common good funds; the amendment applies only to pension funds. The scenario that Tricia Marwick describes could not occur under the terms of amendment 108.
Amendment 108 agreed to.
I lodged amendment 78 to make record services for local authority sites and monuments statutory rather than voluntary. At the moment, the majority of local councils carry out that work, but only 28 out of the 32 do so and it is voluntary. Amendment 78 would get rid of that gap and make it statutory. As a member of the William Wallace Society, I have had experience of looking through records and I know that it is difficult to find out where certain areas are if the local authority does not have those records. The Ancient Monuments Board for Scotland, which advises Scottish ministers, has been asking since 1996 for record services to be a statutory requirement and not a voluntary option.
I move amendment 78.
As Sandra White said, local authorities have a key role to play in conserving Scotland's rich and diverse built heritage. They play an important role in protecting our listed buildings and, through the planning system, they also have a role to play in protecting our ancient monuments. Twenty-eight local authorities already have, or have access to, sites and monuments records to help them in that task, which means that only four do not.
Making a national statutory provision that would impact on only four local authorities is taking a legislative sledgehammer to crack a nut. Such a move does not have the support of COSLA or of the Executive, especially as the overall aim of the bill is to empower local government, not direct it. Local authorities are encouraged by the Executive to make provision for sites and monuments records through national planning policy guideline 5 and planning advice note 42. Historic Scotland has provided advice and support to a number of local authorities to enable them to enhance SMRs for their areas.
Since Sandra White lodged amendment 78, I have advised the responsible minister of the concerns raised, although they relate only to four councils. Historic Scotland has today written to the remaining four local authorities. Historic Scotland will draw their attention to the guidance that I have referred to and will meet their representatives to find a way forward for them to close the gap that apparently still exists. I hope that such active encouragement and support will ensure the completion of nationwide coverage of SMRs.
The fact that the amendment has been lodged will help to demonstrate to the councils involved that it would be wise to seek to make progress on that issue in case Parliament feels that it must act at some point to require some action. However, to enact primary legislation at this time to achieve the aims sought would be an action significantly in excess of what is required. I hope that, on the basis of my assurances and the action that we have taken since she lodged her amendment, Sandra White will consider withdrawing her amendment.
I am encouraged by what the minister has said and by the fact that Historic Scotland is writing to the four remaining local authorities. I hope that they will take on board that advice. I seek leave to withdraw the amendment.
Amendment 78, by agreement, withdrawn.
Amendment 111 is grouped with amendment 110.
Amendment 111 has been suggested by local authorities and would give them more flexibility. It would allow them to charge parents of pupils who live within walking distance of a school for extra places on school buses. At present, those extra places are distributed free in a manner decided by the local authority. The anticipated effect of amendment 111 is that it would lead to more children being transported to school by bus rather than being dropped off by car, hence stopping congestion around schools. Local authorities say that it would allow them to pay for larger buses or for a bus rather than a minibus. At present, they are limited to using the size of vehicle that is required to transport only those for whom they must provide transport.
I move amendment 111.
We welcome amendment 111, which will allow local authorities greater flexibility in providing school bus transport. We understand that COSLA supports the amendment and believes that it will allow local authorities to respond to requests from parents to provide additional transport to schools at a reasonable charge for pupils who live within walking distance of schools. As Sylvia Jackson has said, it may also allow local authorities to pay for larger buses than those required at present, or to provide a bus rather than a minibus or taxi on some routes. We hope that that measure will lead to some decrease in the number of children being dropped off at and collected from schools by car, and will therefore increase safety around school entrances.
I am pleased to see that the amendment makes specific reference to avoiding financial hardship and assessing how much a parent should pay. The Executive therefore expects that those on low incomes will not lose the free places that they currently enjoy and that free places will continue to be available for those who come after them.
The amendment will not affect pupils who live outwith walking distance from schools and who receive free school transport. Those pupils will continue to receive free transport to and from school.
It will be for local authorities to decide whether they wish to change their existing policies. The amendment allows them the flexibility to do so in a way that is responsive to local needs. We have made it clear from the outset that the purpose of the bill is to provide a framework to enable the delivery of better and more responsive public services. We are satisfied that allowing local authorities the flexibility sought in the amendment contributes to the overall aim of the bill. For those reasons the Executive supports amendment 111.
Amendment 110 is a technical amendment that simply modifies the long title to reflect more adequately the content of the bill.
I am pleased that the minister agrees that amendment 111 is worth while. Local authorities will welcome the flexibility that it will bring to considering transport around schools.
Amendment 111 agreed to.
Sections 31 and 32 agreed to.
Section 33—Repeals and consequential amendments
Amendment 95 moved—[Peter Peacock]—and agreed to.
Amendment 96 is grouped with amendments 39, 40, 97, 109 and 98.
Amendments 39 and 40 are intended to ensure that the current obligation to make associated companies compete for contracts in compulsory competitive tendering defined activities is repealed. The amendments are largely straightforward and technical and are to achieve clarification. However, although they are minor and technical, they are part of a change that is profoundly significant—the repeal of CCT, which we have debated at length.
I turn to amendments 96, 97 and 98. The existing regulation-making power on the promotion of economic development is no longer necessary in the light of the underlying policy of the bill. The bill sets out to empower local authorities as far as possible, not to restrict their power to advance well-being. What local authorities do to promote the economic well-being of their area will be subject to the general provisions of the bill concerning best value and the power to advance well-being. Amendments 97 and 98 are consequential. The effect is to remove two references in planning legislation to sections 171A and 171B of the Local Government (Scotland) Act 1973. The relevant part of the Town and Country Planning (Scotland) Act 1997 covers the powers of a local authority to acquire land by agreement or by compulsory purchase for planning purposes. The amendments ensure the removal of the qualification in the 1973 act to the exercise of those powers.
I turn finally to amendment 109. The spirit of the best-value regime is that local authorities and passenger transport executives use best value to secure goods and services. There is no reason why that should not extend to the subsidised passenger transport services. It will remove unnecessary red tape, but local authorities and passenger transport executives will still be bound by European regulations. The fact that local authorities and passenger transport executives can choose to go out to tender if they wish to introduces greater choice for them.
Amendments to section 63(5)(b) and section 88(1) are a consequence of the abolition of sections 89 to 91. The Strathclyde Passenger Transport Executive will be required to use best value by means of a direction issued by the Strathclyde Passenger Transport Authority, which is covered by the best-value provisions of the bill.
I move amendment 96.
Amendment 96 agreed to.
Amendments 39, 40, 97, 109 and 98 moved—[Peter Peacock]—and agreed to.
Section 33, as amended, agreed to.
Section 34—Definitions
Amendments 48, 52 and 53 moved—[Peter Peacock]—and agreed to.
Section 34, as amended, agreed to.
Section 35—Short title and commencement
Amendment 99 is grouped on its own.
Amendment 99 allows for the early commencement of the temporary suspension of the legislation that we dealt with in earlier stages of the bill. That will enable the deadlines that were envisaged then to be met. The amendment has the full support of the Scottish Negotiating Committee for Teachers, and its introduction will help to facilitate the completion of the job-sizing exercise that is required as part of the teachers' recent settlement. I move amendment 99.
Amendment 99 agreed to.
Section 35, as amended, agreed to.
Long Title
Amendments 100 to 103 and 110 moved—[Peter Peacock]—and agreed to.
Long title, as amended, agreed to.
Meeting suspended.
On resuming—