Local Government and Public Involvement in Health Bill

I am grateful to the hon. Gentleman for raising that point. My intention and belief is that the measures will have the opposite effect. Including in statute what the CIPFA code does will guarantee that public sector borrowing overall—and specifically borrowing in relation to local authorities—is more accurately defined. That will mean that the books can better reflect the liability that exists. I would not want any suggestion whatsoever that the Chancellor’s golden rules were being broken in any way, especially at the moment. Local authority organisations such as some of the limited liability partnerships—to give an example, as the hon. Gentleman requested in his previous intervention—are covered by what is currently in the code of practice. The new clauses replace part V of the 1989 Act. They will ensure that an appropriate range of entities are covered by propriety controls. They will also provide a less bureaucratic regime for local government in considering the relationship authorities have with their entities—if I can use that term to capture all the bodies involved—for accounting, capital finance and propriety control purposes. Authorities will need to have regard only to a single definition of entities. The new clauses confer on the Secretary of State a power to require, regulate or prohibit the taking of specified actions by an entity connected with a local authority. The power is wide enough to ensure that an entity should not undertake an activity that the parent authority could not itself undertake if the need arose to do so. That is an important point for the private sector. Where entities might be in a marketplace with other organisations, we seek to ensure a level playing field for competition. Our intention is to use the power to make an order to apply propriety controls to the wider range of entities covered by the SORP definitions. We intend to consult on the controls that should apply to such entities, recognising that, as with the present arrangements, it may be appropriate for differential controls to apply to entities depending on the precise relationship of the authority to the body. Consistent with that, the provisions permit an order to differentiate the application of controls to entities of a particular description, enabling the propriety controls to operate on a tiered basis according to the degree of control that the authority has over the entity—in other words, so that the liability recognises the proportion of involvement in it. New clause 22(6) allows the description of that relationship to be provided by a reference in a document. It is our intention to use that power to differentiate according to accounting definitions contained in the CIPFA SORP guidance. An entity is considered to be connected with a local authority if financial information about the entity must be included in the authority’s statement of accounts for that year. This shows that the authority is able to derive benefits or to be exposed to the risk of potential losses arising from the relationship and it is these entities that we would wish to apply propriety controls to. Under its obligations as a trustee, a local authority could be exposed to the risk of potential losses and therefore we wish to ensure that trusts can be brought within the provisions of new clause 22 should that be desirable. As a trust is a purely equitable obligation, it does not easily fall within the consideration of an entity, which is why we have made this provision. New clause 23 brings trusts within the scope of an order made under new clause 22. The existing propriety controls ensure that entities that are significantly connected with a local authority are required to act transparently and in accordance with the standards of the authorities themselves. To ensure that we can replicate these controls, new clause 24 makes further provision about what propriety controls in an order made under new clause 22 might contain. We recognise that there may be exceptional circumstances in which the application of the propriety controls might not be appropriate to individual or particular descriptions of entities. Therefore, new clause 25 provides that the Secretary of State in England, or Ministers in Wales, can direct that these may be exempted from an order made under new clause 22. Other legislation relies on the definitions of ““control””, ““joint control”” and ““influence”” in part V. Following the repeal of part V, new clause 26 will give the Secretary of State the power to define, for the purposes of other enactments, those definitions by order. Although that is a separate order-making power, we intend to use the definitions provided by the CIPFA SORP guidance. New clause 27 makes similar provision to new clause 26, but the power is conferred on Welsh Ministers to define definitions for other enactments that are the responsibility of the Welsh Assembly. New clause 28 will repeal part V of the 1989 Act. It will also allow any consequential amendments made to subordinate legislation to make reference to a definition contained in a document identified by the order, such as the CIPFA SORP. Amendments Nos. 114, 115, 117, 121 and 122 will make provision regarding the procedure for orders made under new clause 22, the extent of the repeal of part V of the 1989 Act, and the commencement of the provisions. Amendment No. 130 details the extent of the repeals made by the provision. New schedule 3 relates to the consequential amendments that are necessary due to the repeal of part V to ensure the competence of enactments.