Relations between Central and Local Government: Select Committee Report

HL Deb 18 November 1996 vol 575 cc1101-58

3.7 p.m.

Lord Hunt of Tanworth rose to move, That this House take note of the Report of the Select Committee on Relations between Central and Local Government, entitled Rebuilding Trust (Session 1995–;96, HL Paper 97), and of the Government's response (Cm. 3464).

The noble Lord said: My Lords, in moving the Motion in my name on the Order Paper, I should perhaps start by reminding noble Lords briefly of the remit that the House gave us in October last year. Our task was to consider the relationship between central and local government: the balance in that relationship; whether it was working well or badly; the legitimate concerns of both parties to it; and in particular the financial relationship, including the extent to which financial independence for local government is desirable and practicable. We were not concerned with structure or boundaries, with devolution or with problems relating to particular services; and our terms of reference excluded Northern Ireland. Finally, we were told to complete that rather formidable task by the Summer Recess.

After studying some 150 written memoranda and holding 28 meetings, during which 35 sets of witnesses gave oral evidence, we were left in no doubt that relations between central and local government, although perhaps better than a few years ago, were unsatisfactory. There is a high degree of unconstructive tension between them. We did not point fingers or attempt to allocate blame because the movement of power to central government or to quangos has been happening over a long time and under different governments.

The pressures for national standards are part of the story and, of course, in the 1980s some local authorities had only themselves to blame for some of the restraints imposed upon them. The trouble is, however, that the shift in the balance over time has been on a piecemeal basis as governments reacted to particular problems by taking powers away from the local authorities and it has not been in accordance with any over-arching philosophy as to what it is right for local government to do.

However, the cumulative effect has been not just a weakening of local democracy—which most people who gave evidence to us regretted, since local government is concerned with issues which affect the citizen locally and directly—but also a blurring of accountability so that a local consumer or taxpayer with a problem often does not know and cannot even find out who is responsible for it.

The overwhelming weight of our evidence was that a change of climate was required and that that change pointed to strengthening local democracy while safeguarding and maintaining the essential interests of central government. Although some of our witnesses sought that change in new constitutional arrangements or a Bill of Rights to reinforce the democratic mandate of local government, we did not see it as within our terms of reference to consider or to call for a codified written constitution to enshrine the powers of local government. We thought it more sensible to assume the continuation of the doctrine of vires under which local government has to adduce powers from Parliament for any action it takes and to see how the climate could be improved and how present arrangements could be made to work better. We came to the unanimous conclusion that there was plenty of room for this.

I cannot mention them all, but our main recommendations can be summarised under three objectives: first, to mark the status and respect which is due to a system of local government enjoying a democratic mandate. We recommended that, first, the guidelines agreed in November 1994 between the Prime Minister and the English local authorities should be expanded into a more formal concordat on the place of local government, its role, its financial base and so on. Secondly, we recommended that the UK should adhere to the Council of Europe's Charter—and of course, the Council of Europe has nothing whatever to do with the European Union. The charter is on local self-government and we seem to meet its provisions anyhow. Thirdly, we recommended that a permanent parliamentary committee should be established to take an overview of and to monitor central/local government relations.

Next, we recommended helping local authorities to play what we felt was their increasingly important role of community leaders in the field of local governance where they alone at the local level can take an overall and prioritising role, in contrast to quangos which are normally single-interest bodies and often unelected. We recommended that: first, the local authorities should have a new power of local competence somewhat wider than that provided in Section 137 of the Local Government Act, but still a restricted power; secondly, that they should be enabled to experiment with different internal management and electoral arrangements; and, thirdly, that better arrangements should be introduced in Whitehall to co-ordinate policy on local issues like public safety and drugs which cut across departmental boundaries.

Finally, on the crucial issue of finance, we recommended: first, that capping should no longer be the general practice, although a reserve power to cap should remain subject to parliamentary approval. Whatever the past justification for capping—and we did not comment on it—it is in our view no longer necessary. It distorts local finance, it confuses accountability and it restricts the ability of local authorities to take financial responsibility for their action. Secondly, we recommended that Treasury control of local authority self-financed expenditure should be relaxed and that the local revenue base should be enlarged by returning the non-domestic rates to local authority control. We felt that the shrinkage of the locally financed base is a disincentive to accountability and has a most undesirable effect on gearing. Thirdly, we recommended that standard spending assessments should be simplified and should be used only for their original purpose of grant distribution. Fourthly, we thought that there should be a review of whether compulsory competitive tendering should become voluntary and in any case less detailed.

I do not have time to expand on most of the recommendations, although I hope that some of my colleagues will do so. However, I wish to say a word about the proposal for a permanent parliamentary, although not necessarily House of Lords, committee to maintain an overview of central and local government relations. We were aware that in 1992 the Select Committee on committee work, under the chairmanship of the noble Earl, Lord Jellicoe, considered and came down against the idea of a standing committee. We would not wish to appear disrespectful of that view. Indeed, our recommendation for an outside overview committee is couched somewhat tentatively and does not necessarily refer to this House. It seemed to us, however, particularly in the light of the evidence we heard, that things had changed somewhat since 1992. We were mainly influenced by the feeling which ran through all the evidence that we took that whatever decisions were taken on particular issues, the real need was for central and local government to put an adversarial past behind them and to build a new relationship of trust, otherwise, we might as well get rid of local government altogether. To give them their due, I believe that both sides recognise that. But we were struck by the number of witnesses who felt that an outside independent body could play a useful role in making the inevitable tension between the two tiers creative rather than adversarial.

Before touching on the Government's White Paper which is also mentioned in the Motion, I wish to thank all those who helped the Select Committee in its work. I wish to thank the many witnesses, and perhaps I may say how struck we all were by the number of people who thought the issue that we were discussing was important and volunteered evidence to us. We were also exceptionally fortunate in our two specialist advisers: Professor Michael Clarke from the School of Public Policy at Birmingham University, and Mr. Tony Travers of the London School of Economics. Their wide knowledge and experience and their constructive approach were very helpful to us. Our clerk, Mr. Simon Burton, was a real tower of strength both in organising our work and in drafting and redrafting our report against a very tight timetable.

Finally, I wish to express my personal thanks to my colleagues for their consistently helpful approach and for their forbearance. Some of them may wish today to develop points raised in evidence which do not feature in our report, but I wish to stress that the report itself was unanimous.

I now wish to express my appreciation of the fact that the Government's response to the report takes the form of a White Paper. I understand that it is an unusually formal way of replying to a Select Committee report and thus marks the Government's view of the importance of the subject. It is most welcome. I am sure that my committee would also welcome much of the tone of the White Paper and, above all, the fact that it looks to the future and does not rake up old scores. Of course, my committee no longer exists, so the few comments that I should like to make about the White Paper are essentially personal ones.

The Government agree that the present state of central-local government relations is unsatisfactory and that a change of climate is needed. They agree that the existing guidelines for central and local relations for England and Wales should be developed to incorporate issues of the kind identified by the Select Committee and that similar guidelines should be prepared for Scotland. They agree that those guidelines should include a statement setting out the role and status of local government, covering the same ground as the Council of Europe's charter, even though, no doubt for political reasons, the Government are still unwilling to adhere to the latter.

The Government agree in principle on the need for a new and restricted power of local competence to encourage the leadership role of local authorities. They agree to legislate to allow experimentation with new forms of internal management and to conduct joint research on ways of encouraging public participation. They agree also to examine the effectiveness of Whitehall arrangements for handling cross-departmental business affecting local government.

Those decisions and the language about partnership accompanying them are very much in line with the Select Committee's thinking and I welcome that. But then, coming to the crucial, day-to-day issue of finance, a quite different tone emerges. The Select Committee's recommendations on the discontinuation of capping as a standard procedure with a reserve power to cap when an authority sets a clearly unreasonable budget, on the simplification of SSAs, on the relaxation of control over local authorities' self-financed expenditure and on the return of the non-domestic rate to local control are all rejected.

The Select Committee fully accepted the Government's clear need to ensure that local authority expenditure as a whole is kept within reasonable bounds and that adequate reserve powers are in existence to ensure that. However, we were concerned about the way in which that control is exercised at present. I am afraid that we were not at all persuaded by the Treasury's evidence on the matter. Our recommendations may not be perfect but I am bound to say that it seems somewhat inconsistent, to say the least, to talk the language of rebuilding Trust while refusing to make any concession at all on the financial issues which are at the heart of the central-local government relationship. We shall all want to listen very carefully to what the minister has to say when he comes to reply to the debate.

Perhaps the most intriguing sentence in the White Paper came at the end of paragraph 6. After saying that the building of good central-local government relations is something which must be continued and developed over time, it goes on to say: The Lords Report and this response, therefore, should not be regarded as the end of a story or even a beginning, but rather simply as one more, albeit significant and valuable, chapter in the continuing development of our living constitution". I hope that that does indeed mean that as trust is rebuilt both sides will show a greater sense of partnership and greater flexibility in future years *on finance as well as on other matters.

I commend the Select Committee's report to the House as a contribution to what will be a continuing debate. I beg to move.

Moved, That this House take note of the Report of the Select Committee on Relations between Central and Local Government, entitled Rebuilding Trust (Session 1995–;96, HL Paper 97), and of the Government's response (Cm. 3464).—(Lord Hunt of Tanworth.)

3.25 p.m.

Lord Williams of Elvel

My Lords, the House will be grateful to the noble Lord, Lord Hunt, for presenting the committee's report and for outlining its conclusions in the elegant manner we would expect from a former Secretary of the Cabinet. To my party, the debate is particularly welcome at this time. A general election is in the offing. One of the issues which no doubt will be debated, perhaps because of a coincidence of dates between the general election and local elections, is the future of local government. The least I can say is that there appear to us to be some important differences of opinion about what that future should be between ourselves and the present Government—I use the words "present Government" advisedly—which the noble Lord, Lord Hunt, illustrated. I am glad of the opportunity afforded today to restate and reaffirm the essential themes presented to the committee by the Labour Party in both our written memorandum and oral evidence.

The House will be grateful to the noble Lord not only for the clarity with which he introduced the report of his committee but also for the manner in which he chaired its proceedings, as I know from the compliments I have heard paid to him and my own personal experience. As the noble Lord said, the committee's report has been welcomed not only by my party but also by those who will form the new Local Government Association in England, the Welsh Local Government Association and the existing Convention of Scottish Local Authorities.

The report has also been welcomed, although in a somewhat muted tone and with many reservations, by the present Government. That is indeed a tribute to the committee, especially as the welcome is in the form of a White Paper.

I hope that I do not strike too much of a partisan note if I say that the committee's report is particularly welcome to us since it broadly endorses views which we have held for some time and which we set out in our evidence. I shall mention only a few specifics on which our agreement is absolute. Britain should sign without delay the Council of Europe's charter on local self-government. Local government should be encouraged to develop its role as the community leader; should be allowed more freedom to experiment with internal structures; and should seek new ways of increasing turnout in local elections and be encouraged by central government to do so. Capping should no longer be a general practice imposed without regard for circumstances. The non-domestic rate should be returned to local authority control. The whole system of compulsory competitive tendering needs to be reviewed and there should be some outside independent body. I recommend that that might be an appropriate matter for your Lordships' House in the course of time.

In all those matters we support the conclusions of the report. I do not wish to say too much more about them except perhaps that we regard the Council of Europe charter as a matter of the greatest importance. My noble friend Lady Farrington will have more to say on that matter later; she will also comment on SSAs, of which she has great experience.

I wish to concentrate on what I regard as the central issue of the report; namely, the problem of what may be described as centralisation. From that follows logically the matter, described by the noble Lord, Lord Hunt, as a crucial issue, of local authority finance. In case your Lordships feel that I am wholly and uncritically supportive of the report, I should like to indicate some of the difficulties we see in the full and immediate implementation of the committee's conclusions. I can assure your Lordships it is a matter of timing rather than substance.

Centralisation, as our evidence to the committee pointed out, is not a new problem. The noble Lord, Lord Hunt, described how the shift to the centre has taken place throughout the 20th century under governments of all political persuasions. The Liberal Government in 1906 took control over the payment of pensions. The Labour Government of 1945 nationalised gas and electricity. The provision of water and sewerage, long regarded as a local government function, was nationalised in England and Wales by a Conservative Government in 1973. Even by the time the Conservative Government took office in 1979, the position of local authorities in terms of authority and stature was a long distance from the old Birmingham of Joseph Chamberlain. In the matter of centralisation no political party can claim total innocence.

Our concern now is that the shift to the centre has gone unhealthily far. In short, we believe that central government have taken too much to the centre and that local democracy has become enfeebled to the point where it is neither true nor effective. We agree with the broad conclusions of the report on that issue. But let me be brutally frank. We believe that since 1979 there has been a deliberate and sustained assault on local government. The time has now come to call a halt. It is not only a question of calling a halt; it is also a question of putting the whole process into reverse.

The nature of the assault was perhaps best illustrated by the imposition of the poll tax against the advice of practically everyone in local government—of all parties or none—who saw its pitfalls. The experience, as noble Lords will be aware, was truly dreadful. Indeed, it was largely responsible for the fall of one Prime Minister. It is now time to repair—in this we agree with the report—in so far as we can, some of the damage that has been done.

I understand from the government response that the Government have, somewhat belatedly, come round at least partially to that point of view. They accept the recommendation in the committee's report that the guidelines agreed in November 1994 between the Prime Minister and local government associations should be in a more formal framework. But the government response still reserves the right to add to the issues suggested in the report another matter; namely, the role of local government in supporting national aims and objectives set by the Government". I find that particular response seriously depressing. The Government—or perhaps I should say the Conservative Party since it is the Conservative Government who are responding—have completely failed to understand that one of the main features of local democracy is pluralism. Simply put, that means that democratically elected local authorities may well fall to be controlled by parties or a combination of parties different to the party in power at Westminster. That is a fact which any party in control of central government must accept. It is a monstrosity to insist that any party, of whatever colour, should retain the right—not in legislation, because that is self-evident as long as that party commands a majority in the House of Commons—to require local government to support objectives set by that party's government unless those objectives are either submitted to and approved by Parliament in legislation or they are the product of a consensus between all those who have responsibility in the area; in other words, and in practice, all political parties. Anything else would be a negation of proper democracy. Unless that fundamental point is accepted I doubt whether all the fine words in the Government's response are worth more than a row of beans.

Local authorities have a direct democratic mandate which is quite separate from national government. Until and unless that is recognised—this is the main thrust of the report—and local authorities are no longer treated as mere providers of services, democracy in this country will continue to suffer. I recognise that in their response to the committee's report the present Government—I repeat, the present Government—have moved their ground a bit. But the history of the past few years gives me little confidence that it is more than a temporary spasm.

Let us consider the facts. Since 1979 over 200 Acts of Parliament affecting the powers and responsibilities of local government have been implemented. Regulations of the greatest detail have been introduced to curtail the freedom of local councils to take their own decisions. The degree of central government interference in what most countries would regard as management decisions is not mirrored anywhere else in the developed world. There has been a deliberate attempt to bypass local authorities through the mechanism of the quango. Government-appointed or self-appointed bodies are now responsible for over £30 billion of public spending which used to be under the influence or control of elected local authorities. Education, training, housing, urban development, public transport and planning are only some of the major policy areas over which democratically elected representatives of local people have lost their say. To cap it all, central government now make no fewer than 40,000 appointments to non-elected bodies.

In the light of all that, it is no wonder that local authorities have lost trust and that the noble Lord—I am sure he was responsible—entitled the report, Rebuilding Trust. It is little wonder that in the circumstances so few candidates of quality in any party are prepared to stand for election as councillors or to serve local authorities as officials. Local government used to be the breeding ground for aspiring politicians at national level. It is no longer. It seems that that role has now passed to estate agencies.

That leads me naturally, since it is central to the problem pointed out by the noble Lord, Lord Hunt, to local authority finance. It is at the heart of centralisation, as the committee points out in chapter 5. It is clear to us that local authorities should have as great a control over their revenue-raising powers as is possible. Perhaps I may speak to the present situation. Local authorities should not be put in the position in which they are forced to raise council tax in order to provide a dying government with room to reduce the headline rate of income tax. In case your Lordships think I am making too much of a party political point, it is worth remembering that last April, when inflation was 2.4 per cent., council tax increases averaged 6 per cent. The previous year, when inflation was at 3 per cent., council tax increases averaged 5.2 per cent.

We know that the Government wish to reduce the standard rate of income tax for purely electoral reasons—it has been advertised well in the press—but it makes no social sense to force a disproportionate increase in council tax in order to do that. In purely party political terms, if I may be cynical for another moment, it makes great sense since the manoeuvre allows the Conservatives, who control central government, to blame Labour and the Liberal Democrats for the council tax increases as opposition parties control most local authorities which are responsible for setting the level of council tax. The tactic is really very simple. You reduce the revenue support grant from central government to local authorities so as to leave room for income tax cuts. Local authorities are then forced to raise more in council tax in order to maintain the level of service which has been, and is, required of them by central government and Parliament. Central government—Conservative—can then reduce national income tax and blame local councils—Labour or Liberal Democrat—for raising taxes in another form. It is all very simple, but I put it in those terms to your Lordships because I believe it is fundamentally dishonest.

I said earlier that we accepted the broad conclusions of the committee's report. Nevertheless, as I pointed out when giving oral evidence to the committee, what is required in our view is a change of culture—a change in the whole way in which the governance of this country is perceived. As I said in the debate on the Address—I do not like to quote my own words but I shall—subsidiarity, like charity, begins at home. And it is no good demanding subsidiarity from Europe unless we are prepared to concede it at home. But it is equally no good imagining that such a cultural shift as I am suggesting and as I suggested in oral evidence to the committee is quickly or easily accomplished. It is going to take a long time and many disappointments to get from where we are at the moment, as the committee pointed out, to where we should be. It is that word of caution which I would leave with your Lordships. Fine words may be spoken in opposition, but they butter no parsnips in government, and since that is where we expect to be in a few months' time I hope your Lordships will accept that my reservations on timing are to the point.

Having delivered that perhaps slightly sombre warning, I conclude by congratulating the noble Lord, Lord Hunt, and his committee on the quality of the study and the report. I assure your Lordships that we do, and will, take most seriously their recommendations. They have pointed to changes that are needed. Their work has been thorough and effective. We will make sure that that work and those results are not lost.

3.43 p.m.

Baroness Hamwee

My Lords, I start by declaring an interest as a serving councillor in the London Borough of Richmond upon Thames and I have various local authority positions, mainly stemming from that. I wondered how, in paying tribute to our chairman, I could avoid being formulaic. It really is quite difficult. One has heard before the thanks to chairs of Select Committees, but I have to say that the noble Lord, Lord Hunt, expressed what members of the committee thought far better than we could have done. It would have been a pleasure to have been a fly on the wall witnessing his incisiveness and objectivity. It was an even greater pleasure to take part in the process and in the work led by him, with, as he rightly said, the assistance of the professional advisers and of the Clerk of the Committee.

It was in large part due to the noble Lord's chairmanship that our report was unanimous and also to a large extent because the subject matter—the importance of rebuilding trust—transcended so many differences. I suspect that some members of the committee may have been a little uneasy at how far we went. I know that some of us might have liked to have gone a little further, not perhaps so much in content as in emphasis and in the expansion of certain points. However, the serious nature of the report, and especially of its recommendations, is underpinned and underlined by that unanimity.

I have explained that I am a local councillor. I have been vividly reminded recently of the need for trust by somewhat parochial events—but parochial events illustrating wider issues. In my ward the local authority has been involved in what I think most people would regard as a very small proposal for a very small development. We have called it "mini golf', for failure to find any smaller term to describe it. People who live nearby are anxious and suspicious and talk of it in terms such as an "astro-turfed theme park", but it is something on the scale of clock golf at the seaside.

I have been forced recently, because of these reactions, to assess the response. Why do people think there is a hidden agenda? In my defence I should say that generally the scheme has been well received, but why should some people think that my colleagues and I—and indeed the council officers—would want to impose something if it is really so very unpopular? What possible benefit could there be in it for us? The answer is not logical, or if it is logical, at any rate it is not causally connected. I think it is that politicians and politics generally are in such disrepute that the instinctive view among many members of the public—the default mode, perhaps, in computer speak—is that anything that comes out of the political process must be tainted. So they distrust the politicians. The future of local government—the future of all government—lies in recreating trust. I do not believe we can recreate trust between the tiers of government without rebuilding the trust of the public.

I recall that when I first thought about standing for my local authority one of my friends started to call me "T. Dan Hamwee". Things have moved on rather positively since then, but politicians share the responsibility for rebuilding trust. If we can do it, we shall be a little nearer to the goal of helping to build a society of people who are keen to exercise their rights of citizenship. That is what a good deal of our report was concerned with—the quality of government, the importance of democracy and the ballot box and the opportunity for local government to do what it sees as right for its own community and to take the consequences at the ballot box. It is that readiness to take the consequences that entitles councillors to do things differently between different areas.

We heard a good deal of such sentiments during the evidence given to the committee. The Scandinavian countries have gone through this exercise. I was fascinated to learn of the experiments that have gone on there. In Scandinavia the systems of local government have traditionally been subject to quite heavy regulation. To try to break that up, free local government experiments were set up. The aim was to innovate, to develop systems and service delivery and to develop ways of relating to the citizen. The experiment was endorsed officially—ironically, that means that it was endorsed centrally—but the endorsement created an environment in which people would take risks. The whole process involved evaluation. So schemes which did not work were dropped and some which did work and worked well were taken up by central government; and the examples were passed round. That very culture of freedom meant that some authorities actually did things which they discovered they could have done under the old rules but had assumed that they could not. That freedom to experiment, as your Lordships will readily appreciate, means that the freedom to fail must be accepted as being an occasional, one hopes, but inevitable consequence.

In our first public session, we moved very quickly to the issue of local competence. The Select Committee raised with the Department of the Environment the freedom for local government to exercise the power of competence. The DoE stated very firmly in its written evidence that, local authorities must be able to adduce specific statutory authority for their actions". The senior civil servant giving evidence to the Select Committee commented that local authorities can use Section 137 of the Local Government Act. That section is referred to in the Government's response. He reminded the Select Committee that the section enables local authorities to spend money for the benefit of their areas and inhabitants.

I asked whether spending within that section has to come within any cap which is applied by Government under the current rules. The reply was, "yes". My noble friend, Lord Tope, asked, Since capping is related to Standard Spending Assessment, can you tell us how section 137 spending is reflected in the SSA calculations? The reply was, I think specifically not at all is probably the short answer". I am disappointed with the Government's response on the question of the power of local competence. To say that financial limits placed on the use of those powers do not give rise to difficulties because most authorities are spending within the limits is perhaps a failure to understand or admit the relationship with the other regulations to which I have just referred. I look forward to the reassessment which we are promised, but the very wording used in the White Paper: whether a more general power of local competence is practical and advisable in the light of broader priorities", seems to hint at the answer.

The freedom to experiment seems to be accepted more readily in the response in the area of internal working arrangements. How one does things is important, but the scope for effectiveness is limited if what one can do is limited. The freedom to do things differently has recently been identified as important by Sir Charles Carter, whose report on pulling together 10 years of work by the Joseph Rowntree Foundation on local government has just been published. He says that leadership is especially needed in promoting this idea. It is, not a ground for suspicion or rebuke or bureaucratic obstruction, hut the essential means for the emergence of new ideas which can then compete for more general acceptance". It is a pity that the Government are not more willing to embrace the freedom to do things differently. That is particularly odd, given that at European level they argue this very freedom for themselves.

The various controls and constraints which the committee called to be lifted, such as capping, CCT and so on, are not just about constraining spending, but about constraining innovation. The effects are much more long term and fundamental than year-on-year economies. Pushing CCT so far that those who let the contract lose all sense of hands-on experience; controlling capital in order to control a local authority's capital base, because that base means power, so that there is little investment; capping and ring fencing and the Treasury imposing hypothecation even when it does not accept it for itself—all these things are very serious.

I read earlier this year of a warning that the private financing of local authority projects was at risk after a recent court judgment. For the cognoscenti, I refer to the Allerdale case. Bankers would not know if their borrowers were allowed to borrow so they did not know if they could enforce repayment. The Government were being urged to establish a new tribunal to vet deals in advance in order to certify whether a proposed borrowing was intra vires. Is not the real issue local authority freedom, not the artificial criteria but a local authority being able to seek borrowing based on proper, normal commercial and indeed correctly political assessments?

These regimes also distort perceptions. Who is responsible for certain courses of action or indeed the failure to take action? Accountability breaks down so fast when discretion is constrained. My own authority is currently consulting, as it always does, on next year's budget. At a public meeting last week we were asked, "Please do not spend so much on roads. We want you to spend more on education and on services for elderly people". But if my local authority gets credit approvals, as it may well do, for work to the roads, what are we to do? That credit approval will not be transferable. How do we explain without whingeing—I assure noble Lords that most of us would prefer not to whinge about all this—to the resident who sees road works outside his own house when he has an elderly relative who is receiving less than an ideal level of domiciliary care? I believe that we shall continue in the vicious circle of deficient accountability and mistrust by the public while so little of the local authority budget is raised locally. That is a view that is widely shared. The Government seem to accept that there should be an increase, even if it is a small one. I have to say that theirs is a minority voice in arguing against a return to the business rate.

It is no wonder that people are so confused and that their votes, if they do vote locally, are so affected by what is happening nationally. I am glad to see the statement in the White Paper that the Government want to see progress in increasing public participation in local democracy and local government. I hope that their actions will not be as top down as some of their comments seem to suggest. I do not believe that people want to be treated with paternalism, which is not to say that they do not want leadership. They are very open to that idea, particularly where they have been involved by their local authority. I believe that the future of local government lies in finding the best level of that involvement and the best mechanisms. That is almost bound to vary from place to place and from group to group because even in a relatively small country such as ours we have a culture which is not a monotone. I remain true to my Liberal Democrat roots in believing that government should be delivered at the lowest possible level, but I do not believe that there is any one formula. Certainly I believe that politicians at all levels have an obligation to encourage participation, not simply saying to people, "Here is power, get on with it", but "Here is power and support to use it in the best way".

It is all a question of trust, which is sometimes assisted by symbolic actions. Signing the European charter of local self-government would, among other things, be such a symbol. Perhaps that would be too symbolic in the case of Europe. Establishing a new mechanism to scrutinise the Government's proposals would also be a symbol, as well as a useful mechanism. As the noble Lord, Lord Hunt of Tanworth, reminded us, that is what was proposed when we drew to some extent on the experience of the Delegated Powers Scrutiny Committee. That is not perhaps the step which the White Paper suggested. A concordat between central and local government, something more than a guideline, would also be a symbol, but it would be much much more.

The Government's response states, It hopes that local government will be willing to play its part". That is fair enough. Every sector must play its part to rebuild trust, including the trust of citizens—and of people who want to be citizens, not subjects—and the trust of tiers of government of one another.

I believe that there is a great responsibility on the next government, of whatever colour and of whatever intensity of colour, to work to rebuild that trust. If the next government fail, or refuse, to do that, they will be failing thousands of councillors and council officers who are frustrated in the job that they want to do. They will be failing millions of people, not only by precluding efficient and effective local government, but by precluding their participation. Indeed, I do not think that it would be going too far to say that they would be failing the cause of democracy itself.

4.1 p.m.

Baroness Platt of Writtle

My Lords, our interests are declared in our report so your Lordships will understand that I attach great importance to the deliberations of the Select Committee on relationships between the two elected tiers of government in our democracy and that I deeply wish to see the gradual but strong move towards "Rebuilding Trust" between them, which is the title of our report. We were very fortunate in our chairman whose longstanding skills drew out an agreed report although there were many areas of disagreement during our deliberations.

I am glad that in their response the Government also accept the importance of the subject and wish to play their part in improving those relationships and regenerating trust, as does the newly set up joint Local Authority Association. That augurs well for the future.

The committee believes, as do the Government, that there will always be tensions between the two levels of democracy. Those tensions need, however, to be used constructively on both sides to solve difficult problems of future policies. Too often they are used as an excuse for slinging mud across the fence, particularly if different political parties are involved and, of course, the media love to stir up a row.

As we stated in our report, recognising that local government is created by statute, it needs to play its part in improving future relationships with a mature recognition of its standing relative to central government. As councillor Sir Jeremy Beecham and others fully acknowledged in evidence to us, Some local authorities during the 1980s sometimes tried to take on national government in matters which were not their proper concern, and to spend to excess". That was a great mistake which I believe many now regret. We need a mature recognition of their standing.

Central government must play its part too, and I was glad to read in the response that the Government regarded, robust, independent local government as an essential feature of the country's democratic society". Local government has become more corporate over the years and I am glad that the Government are to examine the effectiveness of cross-departmental handling of business so as to reflect that need in Whitehall. The involvement of the Government's regional offices in this respect will be valuable as they too are more corporate, but they must be seen to take local needs upwards to Whitehall, as well as demonstrating government policy the other way. I am glad that the Government are already putting our recommendation into action by increasing the number of two-way secondments and exchanges between senior civil servants and local government officers so as to improve the link between "Town Hall and Whitehall". There needs to be a strong ongoing policy in developing mutual professional respect.

We welcomed the Prime Minister's guidelines for central and local government relations as a turning-point of the tide towards better days, but those need to be further strengthened and mutually and sincerely put into action on both sides over future years. Actions of central government such as publishing major policy changes affecting local government in the press without prior notice to local government so that it can produce a considered response instead of a knee-jerk reaction should be unthinkable. That shows a total lack of trust. I am glad that the Government accept our recommendation that those guidelines should be strengthened and given more formal status and that they are to pursue the matter with the new overall Local Government Association, and in Wales and in Scotland, with the stated aim of improving the guidelines. It may be worthwhile looking at the impact of the Citizen's Charter in this area because it has been very successful overall. I also welcome the fact that the Government propose similar action to improve public involvement and local participation in local government. That is very important.

I am very sorry that the Government are not to set up a parliamentary committee to review relationships and to receive annual reports from those concerned. I believe that that would have helped to strengthen relationships between Members of Parliament and their local authorities and to improve mutual respect. Perhaps at least annual reports should be presented to the Select Committee on the Environment, and to others where relevant.

I also regret that the Government will not sign the European Charter although they support its principles. However, I welcome the fact that they consider that a clear signal is necessary to recognise the value of local government and that they intend to agree with local government a statement covering the same ground as the charter and setting out the role and status of local government. That constitutes a valuable step forward in trust.

It is of great importance that the Government accept the vital role of local government in community leadership and agree to review the scope for action within Section 137 and to assess whether a more general power of local competence should be allowed. I hope that that too is approached on both sides in a constructive manner and results in progressive action.

I am glad that the Government intend to bring forward enabling legislation in the next Parliament to allow local authorities to propose experiments in internal management. I am not in favour of wholesale change in that area, but pilot schemes can often give valuable experience that others can follow, and new arrangements can gradually develop based firmly on successful practical experience. I am not in favour of any major reorganisations in local government—certainly for another 20 years—as they always prove more expensive than expected and, if anything, create more problems than they solve. "If it ain't broke, don't fix it" is a good motto.

I am sorry that the Government do not feel that they can loosen the compulsion on compulsory competitive tendering. We felt that that would indicate a substantial statement of increased trust. It is a pity that, to quote from the Government's response, many local authorities have sought to avoid competition wherever possible", but we felt that the holding of a reserve power by government, which is strictly enforced, might have controlled those few authorities adequately. We have no doubt, as we say, that CCT has produced a change for the better, and has led many councils to see themselves as efficient and economic enablers in the provision of services rather than purely providers. Public services must be there to serve the local public in the best possible manner and flexibility must be the name of the game.

Finance is a knotty problem. In saying that, I believe that the Audit Commission has done an excellent job in encouraging efficiency, economy and the conservation of public expenditure. I hope that it continues to do that. It is very important that the public should be clear who has made a decision to alter the services that affect them substantially. At present mud is slung indiscriminately by both sides and the public have no means of judging who is at fault. As The Times said on 25th July, councils can be their own worst enemies, whingeing a great deal but still managing to foot the bills. They cry "Wolf' too often.

Accountability is vital in a healthy democracy. SSAs are complex and the public does not understand them. Councillors often feel that they are a very blunt instrument, and especially when used for capping. Different parts of England have very different expectations and priorities in the provision of services, and elected local government must be free to try to meet those local needs in a variety of ways. SSAs and capping form a straitjacket of prevention rather than enablement, especially when associated with a high gearing which is inevitable where local government is raising only 21.4 per cent. of local expenditure. I am glad to hear that the Government plan a modest increase in the proportion met by council tax.

I am sorry that the Government did not feel able to return the non-domestic rate to local authority control. I have doubts myself, in that the non-domestic rate smacks of "taxation without representation" as industry and commerce have no vote. However, I believe that local authorities now have a statutory duty to prepare an economic strategy for their areas upon which they must consult the business community. If non-domestic rates are too high, industry and jobs flee to other parts of the country. So I hope that that new duty will enforce prudence. It would certainly have improved accountability.

Local government is only as successful as the people it attracts to its service—councillors and officers. I thoroughly support the Nolan Committee's view that the most important qualities to be encouraged in public life are selflessness, integrity, objectivity, accountability, openness, honesty and leadership. Beyond that, we want members with a variety of experience in life, and good professional officers upon whom to rely for advice. They will be attracted to local government only if they have sufficient freedom to develop innovative and worthwhile services to the public to meet local needs.

I am glad that the Government are taking the steps that they are in response to our report. I wish they had gone further in relaxing financial controls, with safeguards, but clearly making local government both responsible and accountable for its decisions. In that respect, I believe that the emphasis on local government elections should return to being more local. Too often the media show local elections as a vote for or against the national government in Westminster, which they most emphatically are not. Local elections must be about electing the best and most responsible local councillors—strong-minded, honest, efficient men and women prepared to stand up for the needs of their local communities—truly prepared to be accountable locally.

Whitehall certainly does not know best on local matters, and local government, as the Government accept, has been elected to be a focus of leadership in local communities. The Government themselves believe in subsidiarity, and are proposing, in the new Local Government Rating Bill, to give more influence to the lowest tier of local government (parish councils), which I welcome.

I hope that the Government, in their wish to continue to work on improving relationships over a period of time, will see their way, step by step, to relaxing some of those straitjacket financial controls as local government itself acts responsibly. I hope that will attract people of calibre into local government, and although not a believer in "golden ages", I am sure that democracy in this country will be the beneficiary in future.

4.14 p.m.

Lord Borrie

My Lords, in following two speakers who were themselves members of the Select Committee, I have great pleasure in congratulating them as well as the noble Lord, Lord Hunt of Tanworth, on the presentation of this clear and valuable report and I also congratulate the noble Lord on initiating this debate today.

I have only one small interest to declare, as honorary president of the Institute of Trading Standards Administration, an office which I held for four years from 1992, until a few weeks ago, when I happily handed over that task to the noble Baroness, Lady Wilcox, whom I see in her place on the Government Benches. The Institute of Trading Standards Administration is the professional body for trading standards officers engaged by local authorities in the important task of upholding high trading standards and fair dealing in the market place, to the benefit of the general public and legitimate business.

I am proud of the fact that the institute asked me to be its president when I left my post as Director-General of Fair Trading in 1992, because, after all, I had been head of a non-ministerial central government department and they are local government officers. I am happy to imagine at any rate that there were good relations between those two parts of central and local government and trust between us, in the pursuit of similar objectives.

Yet I do not disagree with the general thrust of the Select Committee's report. In general, I do not have much doubt that relations between central and local government are, as it put it, "unsatisfactory and can be improved". Given the all-party and cross-bench membership of the committee, the report's title, Rebuilding Trust, is significant. After all, one can only rebuild trust if it has broken down. Trust is, at its best, a two-way concept.

I suppose that central government in the 1980s, with its strongly assertive and conviction politics agenda, did not trust local government to conform to central government's objectives for policy and spending restrictions, and, as the noble Baroness, Lady Platt, indicated, some local authorities overreached themselves in ambitious and often silly extensions of local authority competence. Local authorities, for their part, lost trust in central government because their powers and functions, and spending capacities, were drastically reduced and their role marginalised when vital areas of policy were transferred to central government or central government-appointed quangos.

The Select Committee report steers clear of commenting upon local government structure. I fully understand that, and I do not complain. But I believe that another aspect of local government distrust of central government has been the launch of large-scale local government reorganisation in all parts of Great Britain. I follow again the noble Baroness, Lady Platt, "If it ain't broke, why fix it?" I wonder what all that restructuring was in aid of. The exercise seemed to involve a remedy in search of a problem at least in England, as distinct from Wales and Scotland. There was massive consultation through the work of the Local Government Commission, although one must admit that that seems to have resulted in a great deal of confusion and inconsistency between one part of England and another. When Sir John Banham did not invariably come up with solutions acceptable to central government, he was replaced as chairman. In Wales and Scotland, reorganisation simply went ahead imposed by Act of Parliament.

Trading standards form but a small part of local government activity, but they are important to consumers of goods and services of all kinds, and, as I said, to legitimate business. I point out that at one time I led a delegation of trading standards officers, all employed by local authorities, to see various Ministers. When we went to see John Redwood, then Secretary of State for Wales and Allan Stewart who was then at the Scottish Office, I did not find them at all rewarding occasions. Our concern was that splitting up existing cohesive, hard-working and useful trading standards departments between several new unitary authorities would be bad for efficiency and even the viability of the service, and therefore for the protection of the public. These concerns were brushed aside with the suggestion that local authorities could after all co-operate voluntarily one with the other. There could be voluntary co-operation between different local authorities. Can the government tell us in the course of today's debate whether such arrangements in Wales and Scotland have been made?

The report of the Select Committee expresses the general position extremely well. I do not believe I need to apologise for quoting it again. The Select Committee reports that many in local government feel that they have been crushed and abused by central government over many years. I believe that that expresses the matter with great clarity. I particularly like the conclusion of the report that acceptance of its recommendations would give local authorities more space in which to breathe and develop.

I detect in the report a moderately optimistic note to the effect that recently there has been an improvement in central government/local government relations. I quote Councillor Sir Jeremy Beecham, chairman of the Association of Metropolitan Authorities. He has already been quoted today. He gave evidence to the committee that in the past few years there had been an increasingly relaxed relationship between Department of the Environment Ministers and representatives of local government. So that I do not partially quote him, he added that he was not sure whether that extended to other government departments.

Sir Jeremy was one of three leaders of major local authorities on my party's Regional Policy Commission (on which I also served) whose report was published earlier this year. I should like to conclude my remarks this afternoon by mentioning two of the commission's conclusions. They are particularly relevant to the subject of today's debate and give some cause for optimism for the future. One of our conclusions was that local government could and should give leadership. My noble friend Lord Williams of Elvel referred to community leadership as a vital aspect of local government work. We believed that it should give leadership to much needed economic and social regeneration, particularly in the worst parts of urban conurbations, in partnership with private as well as various community interests.

The Select Committee report gives a number of examples of partnerships between local authorities and other bodies, for example to achieve successful single regeneration budget bids. An example of successful local authority leadership is the work of Lancashire Enterprises which was started by Lancashire County Council. It has a number of achievements to its credit, including the rescue of Leyland Daf in 1993, investment in small-scale management buyouts and worker buyouts and the provision of venture capital to local entrepreneurs. Recently, someone has commented that partnerships are becoming as familiar a feature of urban life as traffic jams. At least they are more constructive.

I also want to mention our approach to the 10 government offices for the regions established two years ago to co-ordinate the work of central government departments in the various regions of England. We sought to follow the twin principles of democratic accountability and subsidiarity. We proposed that a Minister at Cabinet level be appointed with overall responsibility for co-ordinating and integrating regional matters for which the government offices for the regions would be accountable. In time, as regional chambers or assemblies were set up some of the functions of the government offices for the regions should be transferred to them, ensuring more direct accountability to elected representatives of local and regional communities.

I believe that the work of the Select Committee has been extremely timely. History may show that it led the way to a more collaborative and co-operative relationship between central and local government—one in which the inevitable tensions between different levels of government are creative rather than negative.

4.25 p.m.

Lord Beloff

My lords, those of your Lordships who have studied the list of members of the Select Committee will be aware that I stated no interest. I believe that in that I was unique; I was a member of the committee who had never served in, or been in any organisation related to, local government. My interest, such as it was, was confined to local government in the late 17th century, about which I wrote my first book, when England was governed by justices of the peace, local landowners, clergymen and the closed corporations of the towns. Whether we were then governed better or worse is not a matter that we need to go into today.

When we refer to local government we mean locally elected government. My interest was to find whether, in a modern advanced industrial society, that is a viable proposition in the sense that, unlike the situation in the 17th century, more people now work in one place, get their recreation in another and reside in a third. So the question of local identity is itself a problem. We were confronted with passionate advocates of local self-government and increased powers for local elected bodies both in the scope of their activities and their freedoms. I, and no doubt my colleagues, were interested in the evidence of the witnesses who came before the committee. For me, it was a wholly new world. I was like an anthropologist in the rain forests of New Guinea. They were strange creatures. My conclusions were somewhat surprising. In the whole series of oral evidence—I do not believe that I missed a single session—those who came out best were the officers of local government. Their evidence was in general clear, to the point and well expressed. Those who came out worst were, without exception, civil servants. It may be that they are so restricted by their duties to Ministers that they are unable to answer questions on which they have not previously received instructions. It might be referred to as "smothered by Osmotherley".

We have to ask ourselves whether Select Committees of either this House or another place can properly fulfil their proposed functions if an important part of government that makes so many of the decisions is inhibited in helping those committees reach conclusions. I was not in the least surprised—I imagine that the noble Lord, Lord Hunt, to whom we owe an obligation, was also not surprised—by the tone of the White Paper in dealing with our financial suggestions since the representatives of the Treasury showed a total inability to understand the subject we were investigating. That was a problem.

The other problem which exercised me and which still exercises me after hearing the enthusiastic proponents of some kind of reinvigoration of local government is whether there is a popular demand. My noble friend Lady Platt of Writtle who, unlike me, has vast experience in this field, says that parish councillors, town councillors, county councillors and so on should be elected in the light of the services they can perform for their local communities and not as a demonstration of people's attitude to the government in power or to the Opposition of the day.

That might be a moral injunction but I think it bears no relation to what research indicates and, indeed, what the bare statistics indicate about local government. If people were really interested and if they thought that different councillors would give them better roads, better miniature golf courses, or whatever the current phrase may be, would they not seek opportunities to question them about such matters and eventually to vote? The low turn-out in local government elections is a fact which the committee could not escape and which your Lordships, in considering the matter, cannot escape either.

Democratic local government was created in this country as part and parcel of the democratisation of government as a whole. The various reforms in local government did not exactly coincide with but were roughly parallel to the enlargements of the franchise for Parliament; that is, they were part of a general movement by which power was diffused from the few to the many.

I have come to doubt whether in this country there is an enthusiasm even for national self-government. After all, we have allowed an increasing part of Parliament's duties to be transferred to the institutions of the so-called European Union without much protest on the part of the public; in fact without an awareness that it is happening. I wonder whether noble Lords opposite who hope to form part of a forthcoming Labour Government appreciate that Mr. Blair as Prime Minister will have less influence on our destinies than his predecessor, Mr. Kinnock, who is a Brussels Commissioner. There is someone with power.

If we are not interested in self-government as a nation, it is perhaps understandable that we are not interested in self-government locally. When one questioned the enthusiasts for self-government on the ground, locally, there was an inability to show a demand from the public for the return of greater power to local authorities.

Another factor to emerge very clearly was that without a greater degree of fiscal autonomy there was nothing much that local government could do to improve its powers or its performance. The cry, "No representation without taxation" was heard from successive witnesses. I venture to disagree with the noble Lord, Lord Williams of Elvel, about the poll tax. The more I listened to people saying how important it was that there should be a direct relationship between those who were receiving the services and those who were paying for them through local taxation and that that relationship should exist through the elected councils, the more it became clear to me that the poll tax was a very good idea and would have been a very popular way of returning power to local government if it had not been messed up in its application. In principle what we were being asked for was a form of poll tax which would have re-created the link between local expenditure and local taxation on the one hand and local services on the other.

Lord Williams of Elvel

My Lords, perhaps the noble Lord will forgive me for intervening. I have two questions. The noble Lord referred to the 17th century. Does he believe that the way forward is that pursued by Louis XIV which led in my view, and I am sure in the noble Lord's view, to the inefficiency of local administration which was part of the main cause of the French Revolution? Secondly, as regards the poll tax, it is all very well to say that you can vote for finance for the charges that you want. The problem with the poll tax, as Wat Tyler would have reminded the noble Lord had he been here, was that it was simply a head tax with no distinction between one source of income and another.

Lord Beloff

My Lords, there were weaknesses in the definition of what could constitute a tax of that kind, but a tax on individuals, perhaps of greater flexibility than that which appeared in the Bill, rather than a tax of property, seemed to me to be something which was espoused in one form or another by many of our witnesses.

The noble Lord referred to Louis XIV, and I know that the noble Lord has a special interest in France. But I was thinking about local government in this country at the time of the Glorious Revolution when there were, and remained, very considerable powers in the hands of local authorities, admittedly not elected, which proved extremely successful in guiding the country until the industrial revolution demanded greater central intervention in their affairs. Therefore, I am not shaken by reference to Louis XIV, who does not often figure in our debates.

Looking back, I can say that it was an extremely educative experience serving on the committee even though I share the disappointment of some of my colleagues that more of our recommendations were not looked at more favourably by the Government. That raises the question, referred to by several noble Lords, including the chairman, of what happens next. Clearly, it would be worth having some kind of inquiry, possibly parliamentary, possibly extra-parliamentary, to determine what is an almost irreconcilable logical difficulty. People say that they want local initiative, local autonomy and the capacity to innovate and experiment. At the same time they want services which are no different if they move from one part of the country to another. That is most obvious in the field of education, but one can perhaps see it elsewhere.

Those two things are very hard to reconcile. Does one prefer something original but different and so risk, when one moves, having to accommodate oneself to a new system? Alternatively, does one believe that uniformity of service and provision is something which every citizen of a democracy has a right to demand? Those are problems which certainly demand further consideration. Despite the Government turning down the ideas that the committee put forward, I hope that something will be done to address them in the future.

4.40 p.m.

Lord Monkswell

My Lords, I should like, first, to thank the noble Lord, Lord Hunt of Tanworth, and his committee for a most excellent report. I must admit that during the debate I had a blinding flash of revelation. I believe that the noble Lord, Lord Beloff, suggested that his membership of the Select Committee opened his eyes like—and I paraphrase his remarks—a series of anthropological lectures on a foreign race. At any rate, that seemed to be the gist of the noble Lord's remarks. It is curious that a senior supporter over the past 17 years of the Conservative Government, who have implemented, according to my noble friend Lord Williams, about 200 Acts of Parliament affecting local government, should turn round after the event and say, "I knew nothing about it; it was like a foreign race".

The latter is perhaps an explanation as to why this country no longer has an empire. If Conservative Governments have been followed by such assiduous followers for the past 200 years while implementing legislation which affected British citizens throughout the world, no wonder they turned around and said, "We are not totally happy about it". They just did not know what they were doing.

I could use today's debate to indulge in a long and probably rambling discourse about how badly local government has been treated over the past 25 years, and then take some time to suggest how things might be changed for the better in the future. However, I am sure that noble Lords will be glad to hear that I shall try to contain myself. I aim to make just a few simple points. First, I would commend anyone listening to our debate, or reading the transcript of it in Hansard later, to read the report itself. It is a very useful document which has been most skilfully compiled. I pay tribute to the noble Lord, Lord Hunt, to all the members of the committee and, indeed, to all the officers involved for their work. I would also recommend people to read the Government's response. Although I do not agree with all their responses to the recommendations in the report, at least they have at last recognised that there is a problem.

Democracy as we know it can do two useful things. In the first place it can enable people in a community or society to come together to develop them. Secondly, it can enable that society or community to accommodate change. To do those things successfully there must be a climate of trust. I believe that the noble Baroness, Lady Hamwee, pointed out that if central government politicians do not respect local government politicians then they cannot expect respect in return. That does not apply just between the national political arena and the local political arena; it also applies to the European and—dare I say it?—the worldwide political arena. I hope that the report will help to build that mutual trust and respect which both national and local politicians need. It is essential.

Innovation and change is one of the things that local government can do most effectively. Indeed, that has been demonstrated, for example, over the past 150 years. I shall give your Lordships three specific examples. The first was mentioned by my noble friend Lord Williams of Elvel; namely, Joseph Chamberlain in Birmingham. He instituted the municipal provision of public utilities that is now taken for granted across the country. It is interesting to reflect that it took something like 30 or 40 years before Birmingham's experience effectively translated to London. However, that is another story.

The second example is one of competitive tendering, not compulsory competitive tendering, for local authority goods and services. I believe that that happened in the 1930s and 1940s. It was insisted upon by Communist members of the Leiston urban district council. To prevent the previous local councillors providing their friends and cronies with orders for council work, competitive tendering was insisted upon. Again, even today, that remains an essential feature of local authority activity throughout the country.

My third example is that of the Conservative controlled county council of Leicestershire in the 1950s and the 1960s. It realised the inadequacy of the secondary modern education that was being provided for a large proportion of their young population and instituted the system of comprehensive education which has benefited this country so much over the past 30 years or so.

I can understand why the following was not touched upon by the Select Committee. It is unfortunate that it did not do so, but I believe that it was slightly outside the committee's terms of reference. I have in mind the structure of local government. I have referred to three tiers of local government; namely, the small urban district county council and the county borough—the Birmingham-type situation. However, there is a third category which we no longer have and that is the ability of all the people living in a large urban conurbation to come together and have a directly elected council which can speak and work for that whole population. I make a plea that all the people in our urban heartlands—that is, the Glasgows, the Liverpools, the Manchesters, the Birminghams and the Londons of our country—should be able to elect a council to speak and work for the whole of that urban conurbation.

We did have such councils but they were lost. It is interesting to note that they were instituted by a past Conservative Government under the leadership of Sir Edward Heath who reorganised local government. He did so after a series of Royal Commissions on local government and indeed committees of inquiry stretching over a good many years. The final result was the local government reorganisation which began in 1974 and which went on to bring about the introduction of the regional authorities in Scotland.

Interestingly enough, that Conservative Government under Sir Edward Heath made two significant constitutional changes. The first was our entry into membership of the European Community, which is now the European Union. The other was the institution of the major elected authorities for the major urban conurbations. It is unfortunate that Sir Edward Heath's involvement in trade union/industrial affairs and in economic policies went wrong, but I believe that history will suggest that those two constitutional changes were of great significance. I hope that the actions of this Conservative Government of the past 17 years which have attacked both those constitutional changes will be reversed by the next government.

4.50 p.m.

The Earl of Kintore

My Lords, I also had the privilege of serving on the Select Committee under the chairmanship of my noble friend Lord Hunt of Tanworth. The chairman kept us in remarkably good order and any points that had to be conceded to produce a unanimous report were conceded with grace and humour. We were well served by our Clerk, Simon Burton. I wish him good luck in his new appointment.

I wish to address two points. As the only "independent" on the committee, apart from our chairman, I started the inquiry thinking that local government would be more effective if all councillors were non-political. By the end, I think I was just persuaded that political parties are necessary in local government to provide the necessary infrastructure. However, I hope the political parties will regard the prime function of their councillors as that of acting for the good of all their local electors. I realise there may be some noble Lords in the Chamber who consider that dominance by one political party of central government for too long is a bad thing. At the local level it is even worse. I am pleased to note at paragraph 42 of their response the Government accept that some form of proportional voting should be tried to achieve a better consensus at local level.

Local government is big business. It will spend £74.5 billion in 1996–97, including capital and revenue expenditure. Most of the money is provided by central government—as we have already heard—but a small proportion is raised locally through the council tax. I note at paragraph 65 of the response that the Government state their belief that, the council tax should raise a slightly larger proportion of money spent locally and current plans envisage a modest increase in the proportion met by the council tax". I suppose the words that worry me are "slightly" and "modest". The Department of the Environment told us that council tax might raise, say, a quarter—that is, 25 per cent.—of local government revenue. While not knowing if my council tax for this year represents a figure of 25 per cent.—here I declare an interest as owner of a Band H house—I hope I may encourage the parties involved in local government to bear in mind that local authority expenditure should be kept within reasonable bounds. If that is the case, local authorities may then be able to restrain the increases they demand of the top band payers who raise insignificant amounts, but even these amounts are beginning to bear heavily on those who have to pay. I hope our report Rebuilding Trust will aid and carry forward positively the relations between central and local government.

4.54 p.m.

Lord Dubs

My Lords, it was a privilege and a pleasure to serve on the Select Committee chaired by the noble Lord, Lord Hunt. However, he also achieved at the end what I thought would be well nigh impossible when we started; namely, a broad measure of agreement among such a diverse membership. He certainly showed skills which in previous years the Cabinet had the benefit of.

I should perhaps declare an interest in that in the past I have been a local councillor on Westminster City Council and for a few years I worked in local government. Since that time there have been many changes in local government in this country. I believe morale is now lower and fewer people feel that to become a local councillor is worthwhile as a career and as an expression of civic duty. I agree with the thrust of our report that far more needs to be done to promote the image of local government. If that were to be achieved—I believe it is achievable—some of the comments made by the noble Lord, Lord Beloff, when he suggested that local government was not particularly interesting to people and that people did not care much about it, might be reversed. It is one of our challenges to try to make local government exciting and interesting to the local communities that are served by local authorities.

One of the key points that came out of our work was the question of centralisation. I note that over many years—particularly since 1979, but it is a longer-term trend—there has been an erosion of local government power. That has arisen partly because central government have sought to exercise tighter control over local authority spending. However, the matter goes further than that. I accuse the Conservative Government of having tried to suppress views emanating from local authorities which ran counter to the Government's beliefs. I believe that a healthy democracy is a plural democracy. One has only to look at the United States to see the differences of view expressed between the President and Congress and between the states and Washington. Those differences may sometimes be too wide but I believe it is healthy in a democracy that different points of view should be expressed. We have gone too far in trying to denigrate the views of local government when those views have been contrary to the policies of central government.

If powers are taken away from local government it becomes less attractive to serve as a local councillor. However, it has also had one other consequence which is that voting for local authorities has increasingly become a way of indicating views on national politics rather than on the worth of the policies and practices followed by a particular local authority. It would be a healthy move if we could devise ways in which people in local authority areas were as concerned about the policies of their local authority as about those of national government, and sought to reflect those concerns in their voting practices.

There is another problem which I think is as yet unresolved, and that is the dilemma to which other noble Lords have referred as to how to resolve the conflict between seeking to have uniform national standards of service throughout the country, as provided by local authorities, and giving local authorities the right to encourage diversity, and for local authorities to practise that element of diversity in the way they provide services. Clearly there are many pressures to adopt national standards. I refer to pressures of public expectations and pressures from the media and from the Audit Commission with its proper emphasis on performance measurement and comparison between one local authority and another. However, if we are to support local government and local diversity we have to accept that there have to be some departures from national standards. Another area in which local authorities have lost power is to quangos. That is a well developed argument and one which need not concern us too much this afternoon.

I now turn to finance. I am concerned that central government now contribute 80 per cent. of local authority expenditure. Not so long ago the figure was 50 per cent. I appreciate the argument made earlier this afternoon by my noble friend Lord Williams, when he prophesied something that I believe is widely expected; namely, that in their bid to reduce national taxation central government will impose pressures on local authorities to increase the amount they levy through the council tax. That may slightly change the percentage of central government support to local government, but it is not the answer that I seek. I should like to see a different method whereby central government contribute less and local government is therefore not so dependent upon central government funding. It is therefore a matter of particular regret that the Government have not accepted the committee's recommendations that the business rate should be returned to individual local authorities. That proposal is supported by the CBI and the Institute of Directors, among other bodies, and would help to make local government finance more independent of central government and therefore make local authorities more autonomous.

However, we need to go further. The committee throws out a few hints in that direction. It would be right and proper to seek ways of providing additional income for local authorities. One example might be that the road tax on motor cars could be transferred from central government to local government. After all, the presence of motor cars is a burden on local authorities, which have to find parking space for them; motor cars exercise pressure on roads which local authorities have to meet. It might be better if the income and the process of collecting the road fund tax could be transferred from central government to local government. We should also look at other sources of income for local government in order for it to achieve more independence from central government.

It is right, as the committee states, that a power of local competence should be given to local authorities to raise money for other purposes—a power rather wider than the old Section 137 as it was called. Obviously some reserve powers would have to be given to central government to ensure that there was no abuse. But it would he a proper way of allowing local government to exercise some element of independence.

I should also like to see more freedom for local authorities to experiment in constitutional matters, as the committee suggests. The idea of elected mayors is an interesting suggestion. They might well give more focus to a local authority and might attract more interest in local government on the part of electors. Certainly at the time of the GLC there was a great deal of interest in that body. The GLC established something in the minds of its people that most local authorities do not establish.

I accept that if we are to move to the position of having elected mayors—I support the idea merely on an experimental basis—there would have to be a change in the role of elected councillors; and that would possibly involve some diminution in their powers. It is worthwhile examining the idea of elected mayors, but I see that problems might arise. We might also move to annual elections for councillors, with one-third of the members of a council retiring every year. That is the practice in some areas, but not in others. It would be a good thing if it became universal. It would make local authorities more sensitive to changing opinions on the part of their electorates.

Finally, I turn to a point that was outside the remit of the committee, and it concerns local government in London. I am not sure that it should have been outside our remit, but I accepted the decree that it should be. I believe that since the abolition of the GLC there has been a constant weakness in local government in London. The various measures devised to bring together the 32 London boroughs and the Corporation of London simply do not represent a democratic way of providing local government for the capital of this country. It is right that following a change of government there should be a move not to bring back the GLC in its old form but to provide some strategic body that can represent the people of London and look after the overall interests of Londoners.

5.4 p.m.

Baroness Carnegy of Lour

My Lords, the noble Lord, in a very interesting speech, bemoaned, as did other speakers, what he sees as the diminished power of local government. I agree with him. I also agree with my noble friend Lord Beloff in his remark that had we been able to implement the poll tax, albeit in a much more flexible form than that in which it came before Parliament, local government now would have a lot more power than it has and would probably he raising more than 50 per cent. of what it spends. But that is history.

I read the report with very great interest. It is a masterly report. It contains a number of ideas that are new, at any rate to me. I was not a member of the committee. I wish to confine myself to two limited points, both as they might affect Scotland in particular. The first concerns the report's evidence and recommendation on the capping of local government expenditure. The second relates to what is proposed for competitive tendering.

On capping, the Select Committee concludes that a council's spending should no longer be capped by central government unless a council's budget is clearly unreasonable. It recommends that whether a budget is reasonable should be determined by a Select Committee of Parliament, which would receive recommendations from the relevant Secretary of State backed by means of a statutory instrument. The noble Lord, Lord Williams, who is presently not in his place, indicated that the Labour Party liked that idea.

The question arises as to what would happen in Scotland should Mr. Blair win the general election and implement his plans for a Scottish parliament. That parliament, out of a block grant from Westminster together with any amount raised in Scotland as additional income tax on the Scots—the so-called tartan tax—would be entirely responsible for allocating central funding to 32 Scottish local authorities as well as for legislating for local government.

Would it be appropriate for a Westminster committee to consider the Secretary of State for Scotland's recommendation on what are reasonable budgets for Scottish local authorities? I think not. In any case, the idea seems to be that there would no longer be a Secretary of State for Scotland to do any recommending at Westminster. I take it therefore that in Scotland the committee that would do the recommending would be a committee of the Scots parliament to the Scots parliament. I suppose that that parliament would then act by means of a Scots form of statutory instrument, if it had one. However, I wonder how easily the members of a Scots parliament and its committee would accept that the council had budgeted unreasonably. One must remember that they would not have determined the overall block grant in the first place.

We heard from the noble Lord, Lord Williams of Elvel, at the outset of the debate that in contrast to the Government the Labour Party would probably implement this proposal. I wonder whether the noble Baroness, in winding up, might be able to tell us whether the Labour Party considers that it would work in Scotland—whether the mechanics would work in relation to a Scots parliament, and whether the politics would work. It could be an important point. As local government and its funding would be a major part of the work of a Scots parliament, it would doubtless have to be catered for in any devolution Bill.

My other points relate to competitive tendering, which has hardly been mentioned so far in the debate, and whether it should continue to be compulsory. The Convention of Scottish Local Authorities, like the local authority associations south of the Border, in its brief to noble Lords indicated that it believes it should be voluntary. The Scottish National Party said, in evidence to the committee, that compulsory competitive tendering is: a prime example of inappropriate central government policy applied to local Authorities". It also said that it had had, disastrous consequences on local Communities and local Authorities". The Select Committee's report takes the view that competitive tendering has brought about major changes of management style and approach which have been good, but it also expressed the view that they would not have come about without some compulsion and that if compulsion were to end there would need to be an alternative. I agree with that. I would add that in Scotland the alternative would need to be a pretty strong one, at least if the part of the country where I live is anything to go by. When Tayside Regional Council was set up in 1974 under Conservative control, we used competitive tendering in many areas of our activities from the outset. We did it partly to aid cost effectiveness, but also to invigorate the local economy. In Dundee, which was part of our area, the private sector had withered on the vine because traditionally it stood little chance of contracts in the midst of such an enormous public sector.

We councillors took a lot of care in designing our system and in appointing a really able official of great integrity to operate it. The system worked extremely well. But when, 12 years later, a Labour council took over, supported by the Scottish National Party, there was little enthusiasm. As a Conservative central Government began to take a grip, efforts were increasingly made in Tayside to undermine the system.

Also, private sector competition does not seem to be viewed with great favour in the three all-purpose councils that have succeeded the Tayside Regional Council. A team recently appointed by the Secretary of State for Scotland to investigate residential care for the elderly has found that all three of the new authorities are paying more for accommodation in publicly run homes than they would in the local private sector. In the Scottish National Party-run Angus and Perth and Kinross councils, council homes for the elderly cost £200 and £150 a week more respectively. In Labour-run Dundee, it is £100 a week more. What is more, the added costs, says the inquiry team, are not leading to better quality care. That attitude does not bode well for the formal system of competitive tendering which we are discussing in this debate. In Tayside and, I believe, throughout much of Scotland, should tendering no longer be compulsory, there must be a very strong alternative indeed.

I add just one final point. To work, a competitive tendering system must clearly have the confidence of both business and the public. Councillors need to confine their role to agreeing a good system, choosing the official to operate it and making the final decisions on the official's recommendation according to predetermined criteria.

In my view, for councillors to allow themselves to be beholden in any way to potential tenderers for contracts would compromise the integrity of a council's system from the start. I profoundly disagree with Mr. Ashdown when he said that there was nothing wrong in inviting potential tenderers to contribute to party funds so as to meet councillors at the Liberal Democrat Party conference in order to hear about business possibilities in local government, however general the discussion may have been. Councillors need to keep at arm's length the whole tendering procedure until they exercise their statutory responsibility of deciding which tender to accept. I dare say that it is not only in Scotland that the framework for competitive tendering must be both clear and strong.

Lord Hunt of Tanworth

My Lords, before the noble Baroness sits down, on her first point perhaps I may draw her attention to paragraph 1.7 of our report. It states that we specifically did not consider the effect which our recommendations would have if there were a Scottish parliament and devolution. We could not do so. In a sense, it was outside our terms of reference, but unless one knew what the powers of that parliament were to be in relation to finance, one could not consider it.

The noble Baroness raised an important subject and the essential point that we were trying to get over is that if you abolish capping and have a reserve power to cap, which we felt was necessary, it should not be exercised at the whim of the Secretary of State thinking that it would be a nice thing to do in the case of a particular council. It should only be exercised after debate and approval in the appropriate parliamentary assembly.

Baroness Carnegy of Lour

My Lords, I thank the noble Lord for pointing that out. I appreciate that the committee decided not to take account of the possibility of a Scots parliament and I understood why. Nevertheless, the noble Lord, Lord Williams, having said that he was very much in favour of that approach, would have to accept the point which perhaps the noble Baroness, Lady Farrington, will take on board when she replies; namely, that some arrangement would have to be made for the Scots parliament. There are problems in making such a move in the circumstances of that parliament. That was my point.

5.16 p.m.

Lord Prys-Davies

My Lords, as a member of the Select Committee I too wish to begin by giving my thanks for the manner in which the noble Lord, Lord Hunt of Tanworth, guided our deliberations with his outstanding skills as a former Secretary to the Cabinet. I also wish to thank our chairman for the clear way in which he presented the report's main recommendations to the House today. I am very pleased that the local government associations are greatly heartened that the report attaches vital importance to local government and its democratic legitimacy. I believe that that is one of the basic principles of the report.

I note that in their response the Government call in aid the well-established principle that local authorities are statutory bodies created by Acts of Parliament and hence are unable to act unless given specific statutory authority to do so. Of course, Parliament, in the end, is supreme. Parliament giveth and Parliament taketh away. Yet the local authorities have invoked the equally well-established principle that a local authority is itself more than the sum of its statutory functions. It has itself a distinctive role to play as trustee serving its community. I am gratified that the Government acknowledge that wider principle in at least two lines of the report.

Surely the proper relationship of central and local government must be based upon a common understanding which pays regard to the two principles which I have attempted to describe, both the restrictive and the positive. Indeed, unless that common understanding is there, it seems to me that we have a recipe for trouble.

To some degree, the relationship has always been adapting and changing. Yet, as Professor George Jones of the London School of Economics and a member of the National Consumer Council put it in his evidence to the committee: something very serious happened in the 1980s". For their part the Government recognise, in paragraph 8 of their response, that the traditional central and local government relationship, in their words, "broke down in the 1980s". As our chairman indicated, it was not for the committee to attribute blame.

The legislation of the 1980s left a legacy which has soured the central and local government relationship. There is also something else. Many councillors and council officials who gave evidence to the committee felt that they had been treated by too many Ministers as outsiders, constantly under unfair attack, while those same Ministers were never short of praise for the quangos, many of which now provide services formerly provided by local government and which are in the hands of unelected members appointed by Ministers. I have seen no evidence in the report that that criticism has been taken on board by the Government.

But, in fairness, the Government agree that the present state of relations must be improved. So where do we go? As the House has repeatedly been reminded, our report takes as its title Rebuilding Trust. Mutual trust is essential. How can it be rebuilt? For my part, I share the view, expressed by many of our witnesses, that we have to go back to the principle that local government is a cornerstone of what has been called "a viable system of local democracy." That principle is well illuminated in the evidence of Mr. Vernon Bogdanor, Reader in Government at Oxford University, and Mr. Simon Jenkins, chairman of the Commission on Local Democracy, in particular.

As we heard from our chairman, the committee fully agrees that there is not one single answer to the problem. There is not one single answer because the problems are far too deep-seated for that. There is a need for a package of significant measures. Those measures can be said to fall within three broad categories: first, the symbolic changes to recognise that local government has an assured place in the governance of this country; secondly, the strengthening of local government's position in its relationship with central government; and thirdly, the strengthening of local government's position in financial matters.

Time permits me to touch only briefly on some of our main recommendations and the Government's response thereto. We urge the Government to sign the Council of Europe's charter of local self government as an expression of a commitment to local government. Many witnesses pressed for that. They believed that signing the charter would send a clear signal to the local authorities that the Government wish to establish a new chapter in its relationship with them. Alas, the Government do not agree that it would be "a worthwhile step". Of course, I do not deny that there are difficulties for this Government in going down a path which is signposted to Europe. It is therefore gratifying that the Government say they support the principles of the charter and that these will be reflected in the new concordat between central and local government. That compromise is welcome. I hope that the preparation of the new agreement is given great priority in Whitehall.

The committee considered that there is a very good case for setting up a permanent committee of Parliament—not necessarily of your Lordships' House—to keep central and local relations under review. It would have the wide-ranging remit touched on by our chairman, the noble Lord, Lord Hunt of Tanworth, in his opening speech. That recommendation is supported by the evidence of Professor John Stewart and Professor George Jones and by the local authority associations.

I am saddened that, contrary to our hopes, the Government have not fully supported the proposal, although they have come part of the way. They have relied on the view which the committee chaired by the noble Earl, Lord Jellicoe, took of it in 1991. I re-read the debate held on 3rd June 1992 on the Jellicoe report. The climate has changed since 1992, and we now have the analysis of the Select Committee. I, for my part, am not satisfied that the arguments then advanced against it remain valid today. I find it difficult to believe that a permanent committee of Parliament with the wide-ranging remit described in the report would merely duplicate the work of the existing departmental Select Committees. We are entitled to ask whether those committees are producing the rewards which the proposed permanent committee could achieve.

The Government have suggested the possibility of another ad hoc Select Committee in about five years' time. That would be a step in the right direction. Nevertheless, I suggest that an ad hoc Select Committee would not be so informative and so effective as a permanent forum operating within the remit that the committee suggested. I hope that in due course the House will pursue the proposal.

Again and again we heard that the local authorities are seeking a more active role as community leaders serving their communities. That implies that they should have freedom to supplement statutory services in accordance with local needs and aspirations and to raise money for that purpose. The committee believes that that role could be partly achieved by a new statutory power of local competence, although it would be legitimate for safeguards to be written into the proposed new power. I am glad that the Government accept the spirit of that recommendation and propose a review of existing Section 137.

The review is welcome. But we find that it is the Government's intention that a power under an amended Section 137 is not to be exercised in a way which will increase total spending of the local authorities. The committee (in paragraph 6.27) found that Treasury argument unconvincing. Surely it is for local electors, to whom the councils are accountable, to determine whether the additional expenditure is acceptable or unreasonable. So I fear that at the end of the promised review the Government will miss the opportunity to strengthen the role of the local authority as community leader.

I should like to mention briefly compulsory competitive tendering, which, as we say in the report, is a clear example of central regulation of local government. The committee recommended a review of whether CCT should now become voluntary and in any case less prescriptive. It is a pity that the Government seem to have set their face against that recommendation. But that is another reform which could be a symbol of greater trust and confidence on the part of the Government in the local authority's ability to serve its community.

We have indicated that action is also required on the part of local authorities to promote local government. We have heard of the low level of public interest in local government generally and low participation in local elections. Those must be matters of concern. It is important that local government leaders in England, Wales and Scotland should get to grips with the issue. I note in their supplementary written evidence that the local authority associations accept that they too must be ready to make a fresh start.

In conclusion, I hope that the publication of the report and the Government's response mark the opening of a new and constructive debate about the role of local government in the future. It is time for all concerned to realise that unless we move forward along the lines suggested in the report there is a danger that local government could wither away. Would that matter? I think it would. I believe, notwithstanding the increased mobility mentioned by the noble Lord, Lord Beloff, that strong local government in partnership with their communities is important to the health of local communities and democracy.

5.30 p.m.

Lord Gray of Contin

My Lords, I appreciate that it is inevitable that a Motion to consider a Select Committee report will inevitably lead to a certain amount of repetition. But I make no apology for starting my remarks by joining with others in paying tribute to our chairman. The noble Lord, Lord Hunt of Tanworth, chaired our committee with total acceptability. His guidance when we were deliberating was profound; his tolerance when we were taking evidence was equally impressive and I am sure that we are all delighted to have served on a committee under his leadership.

I should like also—briefly because it has already been elaborated upon—to say thank you to both our professional advisers and also to our clerk, Mr. Simon Burton, whose tireless work was much appreciated by everybody.

I have to admit that I was less than enthusiastic in relation to one or two of our recommendations. But if a Select Committee is to produce a unanimous report, everyone has to make concessions. In the end we were able to produce a report which, at any rate I feel, is worthwhile and forms a basis for improved relations between central and local government. I trust that it will not be cast aside to gather dust, but will be used as something which may sow seeds among those who read it which will grow into fresh developments. Indeed, my only worry about the report is the warmth of the response to it from the other side of the House. I always feel a little apprehensive when I have been involved in something which receives as much praise from our natural opponents as the report has done.

Probably the most satisfying aspect so far is that it has been given a positive welcome both by the Government and by local authority associations. Both sides seem prepared to try to work positively to come at least some of the way towards the other's point of view. The tone of the Government's response is optimistic and the briefing paper from the local authority associations for today's debate carries a different tone from much of the evidence we heard earlier this year. That is good and augurs well for the future. Indeed, the Government go so far as to suggest that their responses form a package of proposals which can open a new chapter in their relations with local government.

I am glad that the Government were able to accept a good many of our recommendations in principle, if not to the letter. It is rather like a Minister at the Committee stage of a Bill who accepts an amendment in principle but does not like the drafting. We now look forward to the Government's implementation of the good will which they have shown in accepting a great deal of what we suggested.

However, we should not forget why we are where we are. The main reason is the abuse of the old conventions which existed between national and local government—abuse by only a minority of councils. That gradually resulted in the introduction of measures to ensure that local authorities kept within their budgets. If those are to be relaxed, there must be a positive indication that local authorities will co-operate and put behind them some of the blemishes they attracted in the past.

I was interested in what my noble friend Lord Beloff had to say about the poll tax because I happen to agree with him. In principle, it was probably the answer. I still believe that had my party in another place been prepared to accept an amendment around two-thirds of the way through the discussions in Committee which would have taken into account ability to pay, that may well have gone through. I agree with my noble friend Lady Carnegy of Lour that it might have made a considerable change to the whole of local government as we know it today.

Certainly the Government's responses are positive on many of the recommendations. For example, the recommendation for existing guidelines to be expanded is virtually met; the power of local competence is accepted in spirit; experimentation with new forms of internal management and alternative electoral systems is accepted; and the Government agree that they will examine our recommendation that Whitehall arrangements be changed. It is only when we come to the financial aspects that the Government do not go along with much of what we want. I suppose one must admit that it is relatively easy to accept proposals from the Opposition Benches; it is relatively easy to accept them from our Back Benches, but when one has to implement them and make them work it is a totally different matter.

The noble Lord, Lord Williams, gave us one of his interesting addresses this afternoon. But I noticed that he carefully avoided the question of capping. He did not deal with that in any serious way at all. I am not surprised. During our deliberations we received, among other documents, a paper from the Scottish Local Authorities Management Centre at the University of Strathclyde. It was interesting in as much as it was as critical of the Labour Party as it was of the Conservative Party. When we are dealing with the question of capping it is interesting to read what the document says at page 9: It is alarming that the Labour Party in its published consultation proposals seems to accord the same priority to expenditure control as the present government in order for Ministers to discharge their macro economic responsibilities a 'reserve power' of capping will be retained". The report goes on to be rather scathing about that position. I merely wanted to point out that those who think that a change of government will lead to a loosening of the reins in relation to expenditure are barking up the wrong tree. It seems to me from everything said by Mr. Gordon Brown and other Front Bench spokesmen that a future Labour Government would treat local government in regard to expenditure in not too different a fashion from the way it has been treated over the past 17 years. We must not forget that local government brought most of those measures upon itself. No government could sit back and allow local government to defy government policy in relation to local government expenditure and not do something about it. That is precisely why the present Government took the necessary steps and I believe that those steps would be enforced just as rigidly by a new Labour Government, if we ever have one.

The evidence we received was not particularly inspiring. However, I would not criticise those who came to give us evidence. I say it was not particularly inspiring because it said very little new. It did not feed us with any number of ideas that we could turn over and think about. It was very much along the old lines: much criticism of the present system and much criticism of the present Government, but no exciting alternatives. However, I do not criticise those people. I merely state fact. I do perhaps criticise ourselves as a Select Committee. Perhaps we were not exciting enough; perhaps we were not radical enough; perhaps we were not able to give the intellectual spark to produce a report to which both government and local authorities could immediately have responded, "Here they are. They have hit the nail on the head. This is exactly what is needed". I feel sorry that we did not rise to the challenge placed before us.

I have already indicated how highly we all thought of our chairman. However, it does not really matter how good a chairman is. If the ideas are not forthcoming from the members, there is not a great deal he can do about it. I hope that, if a future ad hoc committee is set up in five years' time, perhaps our successors will be able to give that intellectual spark and to create something which can be universally accepted. I strongly support the chairman in the Motion he has put before the House.

5.40 p.m.

Baroness David

My Lords, I am sorry that the noble Lord, Lord Gray of Contin, is so suspicious about the attitude of the Opposition. I should have thought that, as a member of the committee, he would have been rather pleased to have had a generous and, I think, sensible approach from this side. I am also rather surprised that he does not seem more enthusiastic about his own committee's report when everyone else has praised it; and I am going to do the same.

I should like to thank the chairman, the noble Lord, Lord Hunt of Tanworth, most warmly for a very good and clear report which I have thoroughly enjoyed reading. The report has come at a very opportune moment, when the local government associations are to amalgamate and when central government seem to be a little more flexible and willing to listen than they were. As both the report and the White Paper recognise, this will offer an important opportunity to take advantage of the new climate and to re-fashion a positive working relationship between central and local government. I also congratulate the noble Lord on achieving a unanimous report. That was a great achievement when one considers the membership of the committee. I believe that a unanimous report will have much more effect in Parliament.

I should perhaps declare my interest. I have been a councillor in Cambridgeshire and I am presently a vice-president of the ACC and the AMA. Last week I was at the last ACC conference in Eastbourne, which was presided over by Sir Frank Layfield, who told me how much he appreciated the report.

It begins by stressing the importance of deciding whether local government was, primarily a means of administering a national service at a local level or a means by which local people democratically make their own choices about local services". The committee came down strongly for the latter. Local government is democratic, as quangos and appointed bodies are not. Layfield is quoted: Local government has a value in its own right in promoting democracy; it acts as a counterweight to the uniformity inherent in government decisions". Democratic accountability has not been respected by this Government.

What is disappointing is that the Government are not willing to sign the Council of Europe's charter of self-government, as many others have said, which would have been, as the report says, an obvious first step in signalling the value of local government in the UK. This refusal seems illogical, since the DoE accepts that the UK system of local government powers conforms to the charter. The noble Lord, Lord Hunt, himself said that. One can only suspect that there are party political reasons for this refusal. The Labour Party has said that it will sign up to the charter. But the White Paper does state that the Government intend to agree, with the new local government associations and the Welsh AGA, a statement covering the same ground as the charter and setting out the role and status of local government in England and Wales, and that this would be included in any expanded guidelines. I suppose we should be grateful for that, but it does seem to be rather odd logic.

The guidelines are to be developed into a more formal concordat. That is satisfactory. What strikes me on reading the guidelines is that they are admirable and, if followed, would be a real help to local government. But has there really been informal discussion with the associations at the early stages of developing policy affecting the role, functions, organisation, financing and operating of local government and its services? I suspect that the consultation promised has been minimal and that the period in which to respond to the proposals has been much too short.

The recommendation for there to be a permanent parliamentary committee to maintain an overview of central/local government relations is something about which I confess I have some doubts. The White Paper rejects it, drawing attention to the existing departmental committees in the Commons which, interestingly, it says the Government, intends should in future have more opportunities to scrutinise legislative proposals, including those affecting local government". I hope that really happens. The more early scrutiny, the better. If Ministers could be questioned after even a Second Reading debate on a new Bill, and would then pay attention to what emerged from that session, a great deal of parliamentary time could be saved and a better Bill produced. A similar committee to the one chaired by the noble Lord, Lord Hunt, should be set up in the course of the next three or four years to monitor developments.

A very legitimate concern of the committee is the lack of interest in local elections shown by the low percentage of those voting. The White Paper does propose that the LGA and the Welsh LGA should join government in analysing current difficulties, with public participation. Power to experiment with different internal managements and different voting structures and patterns should be given. The Government have given an undertaking to legislate in this area.

If local government is allowed to innovate, to experiment, to pay a lot of attention to its community role, and if the wide general power which would help to support that community role is conceded by the Government, I believe that it will encourage people to be more interested in what is going on locally. With very reduced powers, it is not altogether surprising that there has been, I am afraid, a greater lack of interest in local elections.

Local government has been very innovative in the past. Chief officers have had ideas—and good ideas—and I was very glad to hear what the noble Lord, Lord Beloff, said about the good quality of the officers who gave evidence. I speak from my own experience of Cambridgeshire where our most famous chief education officer, Henry Morris, invented the village college, providing education, services and care to people of all ages in its area. From the village college grew the community school and the community college. Although the idea of local management of schools—LMS—had been talked of, Cambridgeshire was the first to put it into practice. That was in my time in the late 1970s. We were also among the first councils to have truly representative governing bodies, adding parents and teachers and independent people to the councillors. So much can be done with good will.

I want to say a word about secondment. The report recommended an expansion of existing programmes. The Government appear to agree and congratulate themselves on what has already been done. I would suggest that 70 exchanges in three years was not very much when you consider the number of senior officers there are in all our councils. I do not know whether the fact that the social services have a positive and creative relationship with the Department of Health was because of secondments or on some personal basis. But Mr. John Ransford, secretary of the Association of Directors of Social Services, said that positive relationships were enjoyed with both Ministers and officials.

There had been an enormous amount of round table work on the Children Act and as one who took an active part when that Bill was going through this House, that certainly showed in the legislation. It was very enjoyable working on that Bill. The noble and learned Lord, the Lord Chancellor, was perhaps a benign influence on all of us, but everyone was concerned to get the best Bill possible.

Contrast that with the atmosphere when education Bills were going through the House. The Society of Education Officers, in evidence to the committee, said that relations were very poor and that there was a gap in terms of policy making and a lack of real partnership on major educational issues. Surely, if there had been more secondments, relations and understanding would have been improved. I was sorry to hear what the noble Lord, Lord Beloff, said about civil servants, if they are as had as he made out. I believe that there probably has been a deterioration in the quality of civil servants, but I had hoped that the secondments would work and that there would be good enough people to come to local government and to learn how it works. However, I believe that relations are, as far as the education officers are concerned, a bit better than they were.

It is typical that it is only in the section on finance that the Government disagree profoundly with the committee. That is very disappointing to me. It takes away from the value of the Government's response, which started by being pretty emollient and good. They seemed to agree with a lot that the committee recommended. But to turn down the recommendations on capping, SSAs, CCTs and the non-domestic rates seems to me to be profoundly disappointing. The trust that it is hoped to rebuild will not be encouraged by that.

I must end by saying that as a true believer in local government and as one who regrets very much the diminished role and loss of powers it has suffered in the past 16 years, I am immensely grateful for this report and its hopeful title, Rebuilding Trust. It will take time to rebuild that trust, but a start has been made and I hope that it heralds a happier time ahead for the relationship between central and local government.

I am pleased that many of the recommendations in the report are already Labour Party policy. I hope that the noble Lord, Lord Gray of Contin, will enjoy that. I recommend to those noble Lords who are interested in this subject that they read the Labour Party document Recovering Democracy, Rebuilding Communities. I believe that they might find that quite informative and helpful.

5.53 p.m.

Lord Sewel

My Lords, perhaps I may add my congratulations to those of other noble Lords to the noble Lord, Lord Hunt of Tanworth, and his committee for providing us with the report that forms the basis of today's debate. The report has many virtues—it is concise, it is clear and, at the risk of being misunderstood, it is politically correct.

I do not know whether in the course of the debate the noble Lord, Lord Gray of Contin, and the noble Baroness, Lady Carnegy of Lour, have been laying the ground for the Conservative Party's first manifesto for a Scottish parliament. If so, it would appear to have one policy—bring back the poll tax. I have to tell them that we shall be very happy to fight the election on that basis.

I was a member of my own council in Aberdeen from 1974 to 1984, and between 1982 and 1984 I served as president of the Convention of Scottish Local Authorities. Those were not happy days for local government, especially in Scotland where, to many of us, it seemed that we were being used almost continually as guinea pigs for policies and legislation. Once they had failed and been seen to fail in Scotland, they were then applied to England.

It was during those years that central government moved from influencing to actually controlling the level of local government spending. It was also the time when central government both exercised more detailed control over local government and also moved areas of activity outwith local government's sphere of influence. By the time I left local government it had lost control over local taxation and it had seen its powers further reduced.

But it had all started so differently. The Royal Commission report under the chairmanship of the late Lord Wheatley led to the fundamental change in the structure of local government brought about through the Local Government (Scotland) Act 1973. The Wheatley report appeared to promise a new age for local government and perhaps for the first time argued the case for local government from first principles. Wheatley was about a system of local government in which local councils were strong enough and had sufficient capacity and capability to tackle in a co-ordinated and comprehensive way the problems confronting their communities. What Wheatley was attempting to establish was a strong local government system within which local authorities would be able to provide local solutions to local problems against a set of locally defined priorities. There was to be a decisive shift away from the idea of local administration to that of local government, or what is now called local governance. Local councils, while remaining creatures of statute, were to be something much more than the passive administrative agents of central government.

Wheatley wrote about the need even then to bring about a fundamental shift in the balance of power from central to local government. Those were brave days, but things turned out, sadly, rather differently. Now, some 30 years on, the Wheatley Report is still worth reading. It is interesting and fascinating how so many of the same issues and concerns that appear in the Wheatley Report resurface in our own Select Committee's report and in the debate today.

If we are to discuss the relationship between central and local government, we have to ask some pretty fundamental questions about the nature of our political system and the distribution of power within it. Essentially, the case for a strong system of local government rests not so much on issues of service delivery, important as they are, but on local government's contribution as a key building block in the structure of a democratic, pluralist political system. Pluralism is a difficult concept to define, yet in essence it is about the diffusion of power within the political system and especially to those intermediate institutions in society that stand between the individual and the state. A society that enjoys a richness of strong, vigorous and autonomous intermediate institutions enjoys the best defence against both totalitarianism and authoritarianism. Indeed—and this is one of the ironies of the past 20 years—the party opposite has historically been sensitive to such propositions and has traditionally been suspicious of centralised power. Of course, from time to time there is a need for reform, but over the past 20 years or so those institutions that act as a check on the power of the state have not so much been reformed, they have been enfeebled.

The report draws our attention to the idea of local governance as a possible way forward for local government. I believe that such an approach has a lot to offer. It is a model which sees local government, because of its democratic authority and legitimacy, acting as the local community leader. It provides the means by which local problems and challenges are not only identified but are challenged by bringing together the local interests and agencies drawn from the public, private and voluntary sectors. They are all given focus and direction. But one of the major costs of the rise of the quango and of the enfeeblement of local government has been fragmentation at the local level: the mushrooming of different, largely unaccountable organisations with often differing and conflicting agendas. In the future I believe that local government is going to be required to play a local strategic leadership role, bringing together and helping to focus the work of all those organisations that both affect and have a stake in the future of their communities. If not, I do not see how such diverse problems as urban regeneration on the one hand and rural depopulation on the other can be tackled effectively.

However, for such an approach to succeed, it would be necessary for central government to rethink its relationship with local government. I do not think that the conventional partnership model has ever been wholly adequate or accurate to describe the relationship between local and central government. There have always been too many contested areas. There have always been too many areas where objectives and outcomes have not been shared. In recent years the response of central government to those tensions has been brutal in its clarity. Central government dominates and says, "We'll abolish you if you disagree".

What I am asking for and what I think is necessary if we are to make progress towards the idea of local governance is a move away from central dominance, but we should not replace that with a system of city states. We need a system in which central government's relationship with local government is marked by the toleration of difference. That is essential. It must be recognised that in a diverse society such as ours, with its richness of different local communities, those local communities will be tackling different problems and challenges. In such circumstances, the emergence of local priorities and local policy outcomes, which may differ from those of central government, should not be seen as a threat, but as the mark of a flourishing, plural, democratic society.

Of course, the toleration of difference will have to be exercised within boundaries and there are limits, but those limits should not be as closely drawn as they are today. I do not think that we would do well by trying to be too precise in defining the relationship between central and local government through statute. I am a strong supporter of the "I know what it is when I see it" school and do not place too much faith in the usefulness of abstract definitions.

One of the key proposals in the report which I found attractive was that relating to the establishment of a parliamentary committee to oversee relations between central and local government. It is a pity that the Government have been less than lukewarm in their White Paper response to that proposal. Such a committee could undoubtedly exercise a much wider breadth of view than a more narrowly focused and perhaps more centrally oriented departmental Select Committee. One of the useful functions that could be exercised by a permanent parliamentary committee such as was advocated in the report would be to act as something of a whistle-blower and to draw attention to where either central or local government was pushing too hard at the boundaries, where local government was going beyond the limits of tolerable difference and where central government was seeking to impose too great a degree of central control and direction.

We have had the benefit of an excellent report which has produced an equally excellent debate. I hope that the Government will listen and reflect rather than pursue further a narrow, constraining and ultimately distorting agenda. In their White Paper the Government have started what should be a more positive process. For my part, I remain an advocate of strong local government operating within a local governance framework because I am convinced that not only will that provide the means by which local problems can best be confronted in an integrated, effective and comprehensive way, but because I believe that by going down that road we also strengthen and revitalise our democratic, pluralist political system—and that is a worthy and necessary objective.

6.4 p.m.

Lord Tope

My Lords, like others I start by paying a warm tribute to the noble Lord, Lord Hunt of Tanworth. His Select Committee was the first of your Lordships' Select Committees on which I have had the privilege to serve and, as one who frequently has to chair committees in other places, I found it an extremely valuable learning experience to see the gentle but firm skill with which the noble Lord steered us. To the surprise of many of us, we managed to produce a unanimous report without too much difficulty. That is a considerable tribute to the noble Lord.

Those who have managed to reach Appendix 7 of the report will note that our interests are declared there. I have some considerable local government interests, but absolutely none in central government so my place on the two sides is clear.

We have had some discussion today about when local government's golden age might have been. Some noble Lords have said that it was in the 1960s. The noble Lord, Lord Williams of Elvel, suggested that it was some time before the Liberal Government of 1906. The noble Lord, Lord Beloff, told us that it was in the 17th century—except that local councillors were not elected then. I must admit that that has its attractions at times. However, whenever the golden age of local government occurred, it certainly has not been in the 22 years in which I have served in local government. Indeed, no sooner was I first elected than the then Secretary of State told me that the party was over—before I had even got there.

I am clearly on one side of this debate—and that is because I have a strong belief not only in local government, but in local democracy. There is a difference. As I am so strongly on one side of the debate and because all my experience comes from one side, I am also sometimes one of local government's strongest critics. That is why I wanted to start my remarks by saying that I recognise, as do many in local government, that local government itself or at least some parts of it—that is an important qualification—has played a part in the deterioration of the relationship between central and local government. For too long we have paid the price of the damage that was done by a minority of local authorities in the 1980s. I acknowledge that. Indeed, that fact was acknowledged in the first evidence that was given to the committee by local government politicians when Sir Jeremy Beecham acknowledged that it had been a mistake in the 1980s for some local authorities to believe that it was essential for them to have a policy on Nicaragua. That is right, but those days are past, and very few, if any, local authorities now take that view.

The report is important because it recognises, first, that there has been a deterioration in the relationship between central and local government and, secondly and most importantly, that there are things which must and can be done about it. As someone from local government, I have been pleased by the tone of this debate because without exception every speaker has led me to wonder whether there is a problem. When listening to the debate one would think that the importance and the strength of local government and local democracy were already fully recognised. I must agree with the noble Lord, Lord Gray of Contin—I suspect that this will surprise him because we have not always taken the same view of the evidence that we have heard—that the evidence that the committee received was long on the problems but rather short on the solutions. I accept that as a member of local authority associations I have some responsibility for that.

However, as I listened to the evidence I became increasingly convinced that the fundamental problem is the low esteem in which local government is held in this country. At the root of so many of the issues that we considered was not only the low esteem in which local government is held in general, but sometimes the low esteem in which local government holds itself. I was struck today when a noble Lord referred to local government as the training school for Parliament and for national government. Perhaps that is a statement of fact, because one of the things that I discovered during our deliberations was that 280 of our current Members of Parliament had at some time been local councillors. I suggest that one of the matters that is wrong with the relationship is that too many good quality local councillors see their only progression as being to Parliament.

One of the strengths of the report is the unanimity of its recommendations. The most important recommendation which goes to the heart of the issue is that there should be a concordat between central and local government. That goes substantially further than the existing guidelines, which were themselves considerably watered down from what was initially proposed to central government. I should like to quote briefly that part of the report which specifies the nature of the concordat. I believe that in principle it goes significantly further than simply beefed-up guidelines, however desirable they may be. The report suggested that the concordat should cover the constitutional place of local government, the role of local government and the financial base for local government. It should place a requirement on central government to consult local government about any changes to that relationship. It should also include a commitment by central government to consult local government on policy proposals and legislation affecting matters for which local government has a responsibility, and—this is important—there should be a commitment by local government to respond within a certain period of time. I believe that that concordat goes to the heart of what is needed to address the problems of the relationship and the low esteem in which local government is now held in this country.

The noble Lord, Lord Williams of Elvel, in a sense provided a trailer for the noble Baroness, Lady Farrington, who follows me in this debate, when he spoke about the Council of Europe Charter of Local Self-Government. I will not say very much about it because I know that the noble Baroness is an expert in such matters. However, one of the important features of that charter is symbolic rather than real. Nothing would change the day after it was signed. However, it would be a recognition by central government, of whichever party, of the importance of local government. Noble Lords have suggested today, and others have suggested elsewhere, that the Government's disinclination to sign the charter is primarily because it begins with the word "European" and that may cause difficulties with some members of their party. That may have been one of the considerations. I suspect that when the Minister replies to the debate he will not reveal that to us. Having read the charter, I wonder whether the real problem is that someone else in local government has also read it and realised that it is at least questionable whether the United Kingdom qualifies under the terms of the charter as having local self-government. I will not take time in pursuing what I believe to be an important point.

I turn to the Government's White Paper response. I am pleased that the local authority associations have given a qualified welcome to it. I believe that that is a right and positive response. We need to build upon whatever is there for us to build upon. Others have said that they are disappointed with the response. To be disappointed one must have expectations in the first place. The only expectation I had was that the Government might agree to sign the charter on local self-government because they would not accept anything else in the report. My expectation was that the Government would provide warm words on the attitudinal points—those which dealt more generally with the relationship—and there would be a specific "no" on the finance-related recommendations. I was not disappointed. My expectations were met in full, except for the European charter. We have received warm words from the Government about the relationship. I hope and want to believe that they are meant. I strongly support the intentions of the new Local Government Association to try to build upon those warm words and develop that relationship. But warm words must be backed by real actions. Words alone are not enough. At the same time as we have warm words on the White Paper we are faced with an Education Bill that results in further powers being taken away from local authorities. We also have the Secretary of State for Health attending a conference on social services and announcing that there is to be a White Paper which proposes to take away social services provision from local government. In parenthesis, it was remarkable that in taking the evidence the relationship between social services directors and the Department of Health appeared to be markedly better than anywhere else within the central/local government relationship. Therefore, even where it is good it is now to be damaged. These are issues that need to be raised and discussed, not announced at a conference and put into a White Paper in this way. It must be developed in the way that the suggested concordat will do.

If we are to rebuild trust, as the title of the report proposes, central government must learn to trust local government, and local government must feel that it is trusted. Nowhere is that more important than in the realms of finance. For that reason, although I am not surprised, I am saddened that the Government still do not recognise that. It is the fundamental right of a democratically elected local council to determine the needs of its community, the priorities to meet those needs, the level of tax required to pay for them, to balance them, and to be properly and democratically accountable locally for the decisions that it takes. If local government is to be trusted that is the real test of that trust. Until we get back to that stage it will not happen. The recommendations of the committee which other noble Lords have addressed well—the noble Lord, Lord Hunt, in his intervention, put the case extremely well on capping—go a long way to meeting that. I am sorry that they drew back just a little from positively recommending local income tax. I believe that that would go even further towards creating the kind of direct link that many noble Lords in this debate said was needed.

I touch briefly on the CCT arguments. I believe that this is also a key measure of trust between central and local government. I have never been in favour of compulsion. I do not like it. But I will concede that it is probable that in the first instance there would not have been so much progress—I use that word carefully—in competitive tendering had there not been an element of compulsion. However, the Government's proposals in that respect were not driven primarily by a desire to improve competition—something which I believe that most, though not all, local authorities now embrace—but by a desire to take services away from local government. All of the rules and regulations surrounding CCT were designed, not for a level playing field on which local authorities could genuinely test whether their service provision was competitive, but to ensure that wherever possible those services went to the private sector. I believe that it is a tribute to local authorities that so many of them have been able to retain their service provision and to do so competitively.

I say a brief word about the parliamentary committee. The noble Lord, Lord Hunt, in his intervention made reference to that committee in the context of capping. The suggestion was that the parliamentary committee should oversee the relationship between central and local government. It may be just a drafting error, although I suspect that it is more significant, that in the summary of the White Paper the Government refer to it as a parliamentary committee to oversee local government matters. To oversee local government matters is substantially different from overseeing a relationship between central and local government. If the Minister can reassure me that that is only a drafting error and it is not what the Government mean, I will listen with care.

I turn finally to community leadership. The Select Committee has made some useful recommendations on the development of the role of local authorities as community leaders. I believe that to be a very important future role for local government. It is, and is likely to remain, the only local democratically elected body with proper accountability to its community and the ability to take an overview of the interests and needs of that community.

Reference has been made to the problem of low turn out; of voting on national issues—there is no time for me now to explore that. I have to say that when I avidly read any report I can about what is happening in local elections I find that they are invariably written by national political correspondents and speak only of their implications for national government. Rarely do they say much about local government.

We can say a great deal about how to improve the ability of people to go to vote in terms of a different day for elections, different electoral arrangements and so forth. Noble Lords might not be surprised to hear me say that by far the best way to increase turn out and accountability is to introduce proportional representation. I have always believed that local government is well suited to a system of proportional representation.

The committee recommended that local authorities should have an opportunity to experiment, including in relation to electoral arrangements. My noble friend Lady Hamwee from the London Borough of Richmond-upon-Thames, and I, as leader of the London Borough of Sutton, feel a certain discomfort over that. My party has 84 per cent. of the seats on my council with about 53 per cent. of the votes. In the London Borough of Richmond-upon-Thames it is slightly less than that. We do not defend that, but I am not sure that we wish to experiment with proportional representation until and unless the London Boroughs of Newham and Haringey agree to join in the experiment. Nevertheless, it is an important point which would do much to increase interest in local democracy.

There is much talk about experimenting as regards the right and opportunity to be different. That is important. The right to experiment is important. I am sad that the Government are a little lukewarm about it, for all their fine words, which I support, about internal management. The right to experiment is one thing: for those experiments to take place we need also the climate to experiment. If local authorities are to be bold enough to undertake experiments—we must recognise that by their nature some experiments must fail, and we may learn more from a failed experiment rather than from one which is an assured success and therefore not truly an experiment—they must know that if those experiments fail, or are perceived to fail, they will not be descended upon from a great height by Ministers, or big wigs from their own party; they are not going to be pilloried in the media. In other words, we need to have a climate in which well thought out experimentation—not reckless experimentation—is a good thing when encouraged positively. It is the kind of climate about which my friend Lady Hamwee was talking in the free communes in the Scandinavian countries.

To conclude, the report is entitled Rebuilding Trust. We need to return to that. If we are to rebuild trust, central government must trust local government and local government must reflect that trust by behaving responsibly and by playing a positive part in the central and local government partnership in the way that the concordat suggested in the report envisages.

The health of our democracy depends upon the strength of its roots, and its roots lie in local democracy. The report makes some major proposals towards achieving that. I was privileged to have served on that committee. I support the report most strongly.

6.24 p.m.

Baroness Farrington of Ribbleton

My Lords, I, too, compliment and thank the noble Lord, Lord Hunt of Tanworth, and all the members of his committee. It is an excellent report. At the end of the debate, it is even more remarkable to note that the report was agreed unanimously.

I wish to declare an interest as a serving county councillor and a member of the Association of County Councils, which is due to be replaced next April by the new Local Government Association. That is a welcome development for local government.

This has been a good and important debate. The issue is crucial because we need to live in a healthy democracy. That must include democratic subsidiarity and strong local government with a capacity to respond to local circumstances. My noble friend Lord Prys-Davies stressed the need for an understanding of the local community initiative and diverse issues such as economic development initiatives—pilot schemes and innovation. They all enrich the quality of life of the citizens of the UK with the provision of specific services through local government.

I shall refer to three issues raised in the report and during the debate. The first is the European charter; the second is the need for partnership; and the third is the vexed issue of finance, especially SSAs. The report rightly recommends that the UK should adopt the Council of Europe's charter for local self-government. I have a special interest in the charter because, as a member of the Standing Conference of Local and Regional Authorities of the Council of Europe, I was present and voted for the adoption of the charter. We sought support and understanding from colleagues in other countries as the UK Government insisted on watering down the proposals in the charter and, having achieved that, sadly refused to sign it.

DoE witnesses to the committee confirmed that the UK should have no problem in signing the charter. Despite that, the Government still refuse to do so. Presumably they will also oppose the acceptance of the charter within the revision of the treaty as requested by the Committee of the Regions. I declare an interest as a member of the Committee of the Regions. With the noble Lord, Lord Tope, and other Members of your Lordships' House, our CoR membership has convinced us of the need for the treaty to be revised within the EU in line with the charter which applies to the Council of Europe to ensure that European citizens both in the wider Council of Europe Europe and, in this case, in the EU have a greater say through genuine democratic subsidiarity which should begin in our cities, towns and rural communities where decisions can best be made at local level through full, universal, democratic choice.

Many people within the UK have for a long time been critical of Brussels. Perhaps they were unaware of the degree of centralisation of their own country until services affecting them and their families showed them the danger of the centralised state in which they live. The UK would be in an even stronger position in the process of working to encourage the development and strengthening of pluralist democratic societies, structure and stability in the countries of central and eastern Europe were we to be signatories to the charter. It is a sad irony that on many occasions the pressure on countries seeking membership of the Council of Europe to sign the charter has been applied even by representatives of our Government, notwithstanding their refusal to sign the charter.

During the debate there has been welcome stress on the report's recommendations with regard to the value of partnership. It is impossible to comment upon the wide range of issues raised in that area. However, the need to unlock the potential at local level, to respond to many of our economic, social and environmental problems, has been stressed by the report and by contributions today. We hope that the Government's agreement to review the scope of Section 137 funding will enable even greater initiative at local level. My noble friend Lord Borrie referred to the sort of development that has taken place in my own county of Lancashire through Lancashire Enterprises. There is a long list of authorities, Conservative, Labour and Liberal Democrat controlled, which have pioneered the way in that field of economic development.

I wish to refer to the vexed issue of local government finance. The report recommends the return of the non-domestic rate to local government and a reversal to the use of capping as a reserve power only where an authority has clearly set an unreasonable budget.

There has been much dishonesty in the relationship between central and local government in many fields but nowhere greater than in the field of local government finance. I agree with the noble Baroness, Lady Platt of Writtle, who welcomed the shift towards council tax for the raising of revenue at local level. But my doubts, fears and concerns are strengthened by bitter experience over my many years, since 1973, in local government. It will be said by many Members of Parliament, and in the presence of many Members of Parliament both here and, more importantly, in the other place, that the result of government policy will be an inevitable increase in council tax bills with no improvement in service, an approximate increase in taxation of 5 per cent. being needed to raise every 1 per cent. of additional expenditure and to make up the shortfall. When that happens, sadly, there are those who lack political integrity who will return to their constituencies and make a party political point that those parties in government at local level are scurrilously raising taxation without any necessity to do so. That is the tragedy.

The second tragedy of local government finance during my time in local government since 1973 has been the development of the standard spending assessment. It is necessary for any government to develop and establish a system for the distribution of grant from central government funds to local government. SSAs are inevitably crude. Perhaps I may give a few examples to demonstrate that crudity. SSAs are broken into components by service area. The SSA for the fire service changed dramatically during the time the Minister was at the Home Office because of a change in the calculation of the formula concerning the Isle of Wight and whether an island authority could reasonably be expected to call on fire brigades from adjacent fire authorities at the time of an emergency. It is clearly a nonsense to suggest that a fire engine can drive across the Solent to tackle a fire. But the vagaries of changing the system made quite a marked difference because the calculation then became based on length of coastline. That took funds away from many fire authorities and gave them to another.

I understand that London, which is not an area on which I am an expert, has an SSA system which calculates degrees of social need, financial poverty and hardship. I understand that the system assumes that something in the order of 12 per cent. of all those living in the City of Westminster are considered to be in the category of social deprivation. There is also an assessment about the need to have regard to the number of visitors which an authority has. The result of those two calculations leads to a system of SSAs which places approximately 12 per cent. of visitors staying in the Savoy or the Ritz in the band of social poverty and need. It is unlikely that the City of Westminster is putting people who are homeless in the Ritz or the Savoy.

I make those points as serious points because any system or formula is bound to have a degree of crudity when it is worked out in Whitehall. I do not sneer at Ministers unless I believe that they are deliberately manipulating the system. But it is wrong, tragic and bad—bad for government, bad for local people and bad for local democracy—as the report says, for it to become a rigid measure of controlling the amount which is to be spent at local level.

It is important to protect and improve minimum standards for people. Noble Lords have referred to that. It is important that we recognise that government will always have a role to play. But when government cynically increase teachers' pay with end loading and when they say cynically that the grant will not increase but that the authority's ability to spend will increase and when those same government Ministers claim that that is an example of profligacy in local government, then we see the system being undermined.

It is critically important that we look forward. It is critically important that we do not engage in, and embark upon, a further war of attrition. I lived through the war of attrition in the early 1980s when I would say that it was six of one and half a dozen of the other. There were bad authorities. But there were government Ministers who demanded of local government that there should be no cuts in services, no rate increases and no rent increases.

The noble Lord, Lord Beloff, referred to the importance of the calibre of people who are local government officers. Personally, I have found the same high calibre among the civil servants with whom it has been my pleasure to work from local government. There is one deep difference. It is that officers at local level have to stand in public meetings night after night and answer detailed questions from the public as to what they are doing and what their political government is doing. They must face that. Therefore, I do not think that it is a difference of quality; it is the importance of changing the service.

The charter needs to be signed. It is important for us to go ahead. CCT is important and has achieved savings. But from these Benches we would argue with the noble Baronesses, Lady Platt of Writtle and Lady Carnegy of Lour, that it would have been better for the people working in those services had they as individuals been protected by a national minimum wage so that the savings were not made by cutting the pay levels of the poorest in the community.

From these Benches, I repeat the commitment made by my noble friend Lord Williams of Elvel. We believe that this country must sign the charter. There is a need for a clear statement of the powers and duties of local government. We believe in a pluralist local system, as described so well by my noble friend Lord Sewel. We believe in a reduction in the dependence on central government grants; decisions made should be more transparent. We look forward to rebuilding trust; we believe that the report paves the way to achieving that worthy and important objective.

6.40 p.m.

The Minister of State, Department of the Environment (Earl Ferrers)

My Lords, we have had an interesting debate and the House will be grateful to the noble Lord, Lord Hunt of Tanworth, for having introduced today's debate and for giving your Lordships the opportunity to discuss one of the most important factors of a democracy—the relationship between central and local government. Noble Lords have also expressed appreciation for the masterly way in which I understand the noble Lord, Lord Hunt of Tanworth, chaired the Select Committee. Indeed, a substantial tribute has been paid by those speakers this afternoon who served on the committee.

The committee deliberated for some nine months and produced a valuable report in a short time on a system of local government which has developed over many decades.

The Government welcome the Select Committee's examination of this subject and see the report as an important contribution to the debate about the nature of local governance in Great Britain. In turn, I was pleased that my noble friend Lord Gray of Contin was glad that the Government have gone as far as they have.

The development of good relations between central and local government is something which has to continue over time. The Select Committee's report, and the Government's response to it, should not be regarded as the end of a story—or, indeed, the beginning of one. It is merely a step on the road—a most important one—in the continuing development of what is, after all, a living constitution.

Local democracy is an essential element in the constitution of any democratic state. It is one of the hallmarks of a free society—along with the respect for human rights, the rule of law and a freely elected government. But just as there is no one universal model of a free society, there is also no one blueprint for local democracy.

Here in the United Kingdom, our local democracy is the product of our own traditions and of our unique constitutional experience. We have a constitution which continues to develop; therein lies its strength.

Today our local democracy provides democratically elected local authorities which provide the leadership of local communities; which have important roles in overseeing the implementation of various regulations; and which have a major part to play in providing, or arranging, different services to the locality.

Local government is also involved in carrying out the national priorities for the economy and in ensuring that certain minimum national standards exist—such as, for example, in education. I agree with the noble Baroness, Lady "T. Dan" Hamwee, as she likes to call herself, that it is important to encourage people—and the right people—to go into local government. Of course, that does mean that a certain element of pro bono publico is needed behind those people.

The Government also share the committee's view that the traditional relationships between central and local government broke down in the 1980s. We agree that, from that point, there needed to be a rebuilding of trust. Indeed, I would echo those speakers who have already said that it is most appropriate for the report to be entitled Rebuilding Trust. It is important that that is achieved.

Over a long period of time, relations between central and local government were always conducted informally. That continued during the period after the war when local authorities began to do an increasingly large number of things and when they began to spend an increasingly large amount of money. But there came a point at which central government were bound to acknowledge that the activities of local government were such that, when taken together, they had a real effect upon what central government could decide and what it could—and should—do at the centre. I suppose that that probably reached its zenith when a Labour Secretary of State, Mr. Tony Crosland, said, in a state of frustration on a famous occasion, "The party's over".

The noble Lord, Lord Williams, said that since 1979 there has been a deliberate and sustained assault on local government. I know that the noble Lord likes to use fairly graphic expressions from time to time but I believe that he went too far in that respect. Of course there has not been an assault on local government; indeed, we believe it to be an extremely important part of the constitution.

It is common knowledge that, from 1979, the Government took a very firm step to manage the economy and to ensure that people were given value for money in what local government did. It was pretty unpopular with some, but the economy today demonstrates that that was the right thing to have done.

Then, some in local government began to see themselves as an alternative voice on how the country as a whole should be run. Some tried to break the Government's plans to cut spending by pushing up their own local spending in the knowledge that many of their voters would be protected from increased local tax bills by the benefits system; that many local businesses do not have the vote and, therefore, could do little about their increased rates; and that many people who benefited from increased local authority spending did not actually pay any rates. That, of course, was the genesis of the poll tax, which the Government prefer to call the community charge. However, as my noble friend Lady Carnegy said, had that continued in operation, that may well have resulted in local authorities having more power. Other people tried to use their local platform to influence matters which properly belonged to central government.

My noble friend Lady Platt of Writtle pointed out that the committee said that there will always be tensions between central and local government and that we must try to lessen them. That is absolutely right. Clearly no government, whether this Government or one of another political complexion—if one can extend one's imagination to that enormous extent—can afford to find themselves in a position where they cannot decide major issues about the national economy. After all, the Government provide 50 per cent. of all that local government spends. If one adds to that the non-domestic business rates of 25 per cent., what is actually produced in the locality from the council tax is about 21 per cent. in broad terms.

The noble Lord, Lord Tope, wanted local government to be free to do what it wants and then to be accountable. However, I am sure that the noble Lord will realise that when you look at such figures obviously a government of any persuasion have a great interest in the way in which the money from taxpayers is spent. The government of the day have to be able to decide on the overall level of public expenditure, both central and local, which the economy can afford. They have to be in a position to decide their priorities for central government spending.

If local government collectively seeks to raise significantly the total amount which local government spends, then central government is bound to be forced to do one of two things: either they have to abandon their overall strategy for spending and taxation, or reduce their expenditure in other areas of the public sector—such as, on the health service—below the level which they consider appropriate. That is the position in which central government found themselves in the early 1980s.

The Government, therefore, took steps to make formal that which had previously been a reasonably well accepted informal understanding with local government as to the boundaries of local government action.

There was a good deal of tension and disagreement during the 1980s, as your Lordships will remember only too well, about the measures which the Government introduced, and which culminated in the present financial arrangements which involve capping, the national business rate and the introduction of the council tax.

Since then, there has been a genuine attempt—by local government and by central government together—to rediscover the traditional relationship between central and local government which we in the Government, and the great majority of those in local government, too, believe is the right way of proceeding.

The Government intend to do their best to improve relations with local government and to improve the esteem in which local authorities are held. My noble friend Lady Platt of Writtle said that it is not a bad maxim to say, "If it ain't broke, don't fix it". The noble Lord, Lord Borrie, agreed with that. I also agree with that. I hope that he will be able to persuade his noble friends to adopt that maxim when they consider the future of the constitution and of your Lordships' House. The noble Lord, Lord Borne, said that he visited Mr. Redwood and Mr. Stewart and that it was not a rewarding experience. He went to see them about trading officers. He was told that local authorities should be able to co-operate. The noble Lord, Lord Borrie, never visited me to inquire about that subject when I was at the Department of Trade. That was my misfortune, but those words were familiar because I have used them myself. The Government tend to speak with one voice on these matters. The Government have seen no evidence that the oversight as regards trading standards is any worse following local government reorganisation. It is for local authorities to decide whether and how to co-operate in that field.

My noble friend Lord Beloff made the most astonishing swipe at civil servants which I believe horrified the noble Baroness, Lady David, as well as myself. He said they are so occupied tending Ministers—that is a touching thought—that they cannot answer any questions unless they have sought advice beforehand. I have great sympathy with civil servants. Anyone who has had to answer questions in your Lordships' House will be upset if he has not been briefed properly on the questions which are likely to be asked. I thought the noble Lord, Lord Borne, was going a little far when he talked about trading standards. When he asked me a question about that I could not give him an exact answer at the time but, fortunately, my mental powers are such that I recalled the answer and I have given it to him. My noble friend Lord Beloff cast appalling aspersions on civil servants. In my experience, irrespective of the department concerned, they have always been absolutely superb in knowing the facts and the details and in expressing those articulately to Ministers, one of whom is not always quick to recognise the facts and takes rather longer than his colleagues to do so.

The Government's White Paper sets out a programme of action which has three objectives. The first is to strengthen local democracy; the second is to promote the local leadership role of local authorities; and the third is to improve yet further relations between central and local government. One might ask how local democracy can be strengthened. The respect in which it is held must be increased. Local democracy must be held in high esteem. The programme of action therefore proposes a statement, which is to be agreed between central and local government, on the role and value of local government.

For reasons which I shall mention later, the Government do not feel that we can accept the committee's recommendation that the United Kingdom should adopt the European Charter of Local Self Government. Indeed, we propose a statement instead. We view the proposed statement as addressing one of the main principles which underlies the committee's recommendation, which is that the Government should give a signal that they recognise the value of local government. The statement will do that.

The Government also wish to see local democracy strengthened by increasing public participation in local government. Your Lordships' committee has identified a number of measures which might achieve that, to one of which the noble Baroness, Lady David, referred; namely, allowing individual authorities the option of moving to a different electoral system for local elections. The noble Earl, Lord Kintore, thought we were going down the path of voting by proportional representation. Of course the noble Lord, Lord Tope, could not resist the opportunity of again banging the drum of proportional representation. I am sorry to have to disappoint them. Before decisions are taken about which methods might be used, there has to be a proper analysis of the issues and the difficulties which are being encountered. The Government's programme of action therefore involves joint research and analysis with the new Local Government Association on the level of local participation in local government. Then, and only then, will we be in a position to decide whether, and if so what, new measures and arrangements are necessary or desirable.

The noble Lord, Lord Dubs, referred to the management of local authorities, and in particular elected mayors. The Government intend to bring forward in the next Parliament legislation to enable local authorities to experiment with their internal management arrangements. However, as regards elected mayors, it is worth noting that during consultation by my department in 1991, of over 600 responses only four favoured elected mayors. The main objection was that there would be conflict and confused accountability between the elected mayor and the other councillors on the council.

The noble Lord, Lord Tope, was concerned about what the White Paper meant by local government matters which could be overseen by a parliamentary committee. I can assure him there is nothing sinister in that. It simply means the matters to which the committee refers in paragraph 2.70 of its report; in other words, the matters which it suggests should be looked at by a parliamentary committee. One might ask then how we can better promote the leadership of local authorities. The noble Lord, Lord Sewel, wants us to move away from central government dominance over local government. Of course these are difficult balances to maintain but local authorities need the ability to innovate. To do that, the committee has recommended a general power of local competence. Local authorities, of course, already have a general power in Section 137 of the Local Government Act 1972. The Government accept the spirit of the committee's recommendation. Our programme of action also proposes a review of Section 137 in order to assess the scope which it gives for leadership action and to see whether a wider general power is either practical or advisable.

The Government also accept the committee's recommendation about experimenting with different models for the internal management of local authorities. We shall bring forward legislation in the next Parliament to enable local authorities to do so. All these measures will help to improve yet further the relationship between central and local government. The Government also accept the committee's recommendation concerning the existing guidelines for central and local relations. We propose to consider, with the new Local Government Association, how the existing guidelines can be developed yet further. The Government also accept the committee's recommendation concerning Whitehall arrangements for considering local government issues which involve more than one department. We shall carry out a review of their effectiveness.

I believe that this programme of action is based on the Government's belief—which I am glad to say the Select Committee shares—that democratically elected authorities have important roles in the world of local governance today, in particular that of being the leader of the community in which they serve. As your Lordships' committee recognised, local authorities are not, and never have been and never will be, the sole monolithic providers of all services in a given geographical area. Nor can they ever operate wholly apart from the powers of central intervention. Our programme will prove to be a significant chapter in the continuing development of local government. That is a development which we aim to continue in a spirit of partnership and of collaboration with local government.

The noble Lord, Lord Borrie, referred to regional assemblies. The Government see no case for setting up new bodies to provide regional government. That would simply add an unwanted and unnecessary tier of bureaucracy. As regards partnerships for regeneration, we share his view of the importance of partnerships and of local authorities' role in this. Of the partnerships which won bids for the single regeneration budget, 80 per cent had local authority involvement and about 50 per cent had been led by local authorities.

However, I am afraid there are some recommendations of the committee which the Government do not feel able to accept. I refer to the recommendation that we should adopt the European Charter of Local Self Government. That was a source of disappointment to the noble Lord, Lord Prys-Davies, a source of shock to the noble Baroness, Lady Farrington, and a source of scurrilous speculation to the noble Lord, Lord Tope. The Government have always held the view on the charter that while we support the principles of local government which are established in the charter—and which are reflected in the United Kingdom's system of local government—we do not consider that it is necessary for the United Kingdom to enter now into a binding international agreement which covers domestic local government arrangements. We have a long tradition of effective local government—a tradition which is founded on, and which is given practical expression by, the legislative decisions of your Lordships' House and of another place. We do not need a European convention to bolster those traditions or to show that we carry them out.

However, the Government accept the committee's view that it would be worth while for central government to send a clear signal that they recognise the value of local government. We therefore propose to agree with the new Local Government Association a statement covering much the same ground as the charter which will set out the role and status of local government in this country. The committee also recommended the establishment of a permanent parliamentary committee. It is clearly a matter for the House and for Parliament, and one that Parliament must decide.

My noble friend Lady Platt of Writtle was sorry that the Government did not view the prospect of a permanent committee with enthusiasm. It is the Government's belief that a permanent committee would be very difficult to justify when there is already an existing structure of departmentally based committees in another place to which can be added other arrangements such as the ad hoc inquiries which were undertaken by your Lordships' committee.

The committee also questioned whether there was still a need to retain the compulsory element of compulsory competitive tendering, and whether compulsory competitive tendering itself could be made less detailed and prescriptive. The committee felt that local authorities have now well embraced the tendering philosophy and that they can be relied upon to continue tendering without the compulsory element. A number of noble Lords felt that to be the case, including the noble Lord, Lord Prys-Davies, and the noble Baroness, Lady Farrington. They wanted the compulsory element removed.

The Government's researches do not support the view that removal would be beneficial. They show that local authorities as a whole cannot be relied upon to provide open and fair competition in tendering. For the time being at least, we believe that the compulsory element ought to remain. It may, however, be possible in the longer term to consider a more flexible regime. Our recent experience does not lead us to believe that a voluntary framework would provide for local residents the benefits and improvements that are obtainable under compulsory competitive tendering.

As the noble Lord, Lord Hunt, reminded us, the committee made a series of recommendations directed at removing the influence of central government over local government finance. It suggested that central government should relax their control over the amount of local authority expenditure that is financed locally—sometimes referred to by the ghastly acronym "LASFE"; that in essence the present arrangements for the capping of council tax should be abolished; and that non-domestic rates should be returned to the control of the local authorities.

The Government introduced a national business rate because they believed that businesses ought to be able to plan properly without major annual tax variations, and that businesses should pay the same rate wherever in the country they happen to locate themselves. We still maintain that view.

The noble Lords, Lord Hunt and Lord Williams, the noble Baroness, Lady David, and my noble friend Lord Gray of Contin, referred to the matter of capping. My noble friend Lady Platt also referred to it and said that Whitehall does not always know best. That is perfectly true. However, the Government are elected to look after national economic priorities and the overall level of local spending, including local authority self-financed expenditure, as it affects the national economy. The government of the day therefore have a legitimate interest in influencing it. Capping, although controversial, has proved effective in controlling the overall level of local authority budgets and in protecting the local taxpayer from excessive tax rises.

The noble Lord, Lord Williams, and the noble Baronesses, Lady David and Lady Farrington of Ribbleton, referred to standard spending assessments. I am bound to say that I have a certain sympathy with the points made. The Government share the committee's aim. We would dearly like to simplify them if possible. Such action is very close to my own heart, since I have personally tried to simplify and understand the SSAs and regrettably, as noble Lords might imagine, both because of the nature of the problem and the quality of the erstwhile reformer, I failed desperately on both counts. The fact is, if one finds SSAs unfair and tries to simplify them, they become more unfair; if one tries to "refine" them, they then become more bureaucratic. However, that does not mean that efforts should not continue to be made to simplify them. After all, formulae ought to be designed to be the servant of the people, not their master.

The Government accept the committee's assessment of the present state of the relationship between central and local government and we agree that considerable effort has to be expended to improve further that relationship and to enable local authorities the better to be able to fulfil their role as leaders of the community.

On that basis, as well as having regard to wider economic and policy objectives, the Government have considered the committee's recommendations. We believe that the measures we propose to take will improve the current state of relations. We believe that they can open up a new chapter in our relationships with local government and will contribute to the development of local democracy and local government into the next century.

7.5 p.m.

Lord Hunt of Tanworth

My Lords, I thank the Minister for that reply, and I thank all noble Lords who took part in this interesting debate. Despite the criticisms that some of us made of the Government's decisions on finance questions, the debate has also been an encouraging one. No one is now saying that there is not a problem. No one says that the problem can be solved by a quick fix, whether by making local government simply a branch office of central government or by some new constitutional arrangement. Everyone seems to be saying that what is needed is a rebuilding of trust and of an attitude of partnership, of working together, with the essential acceptance by the Government of the recommendation that the guidelines should be developed into a more formal concordat that would send a signal to local government as to its place in the system. But the rebuilding of trust has to be earned, and by both sides. I am sure that people will reflect on that.

Some very kind remarks were made about me. However, I remind the House that this was not an issue on which a manipulative chairman could secure unanimous agreement. It was a hard, difficult issue. The committee was composed of senior Members with different political views and different experience of local government. Over a period of nine months we listened, read, argued and talked; and at the end we found that we had reached a consensus. I hope that the debate will continue, in Parliament and in the media, as to how local democracy best finds its place in our constitutional systems.

On Question, Motion agreed to.