POWER TO REDUCE CERTAIN GRANTS TO LOCAL AUTHORITIES

HC Deb 24 July 1975 vol 896 cc1165-211

Mr. Timothy Raison (Aylesbury)

I beg to move, Amendment No. 69, in page 3, line 21, leave out 'or likely to be taken'.

The Temporary Chairman (Mr. A. P. Costain)

With this we can also discuss Amendment No. 70, in page 3, line 22, leave out "may result or'.

Mr. Raison

It has taken the Committee a considerable time to arrive at this clause. I hope that the Committee will feel that we have come to an important part of the Bill. My purpose in moving this amendment is to probe the Government's intentions about the use of this major power which they have introduced into our system of government through subsection (1). The clear effect of these amendments would be that the Secretary of State could only reduce or withhold grant where a local authority had paid remuneration in excess of the limit in Clause 1. We want to remove the power of the Secretary of State to hold back remuneration in expectation of action by a local authority.

12 noon

The power to withhold grants, which is introduced in this clause is new to our system of local government. The Opposition are not against that power in principle. We accept the need to exercise tight control over pay in the local government sector. In the past there has been a huge escalation in the local government wage bill, and a decline in services. Given the nature of the Government's crypto-statutory approach to the question of pay policy, I accept that the Government's way is plausible, but will the secret, missing, magical mystery Bill about which we have heard so much bear any reference to local government? I assume that it will not. However, I stress that as we approach this clause—however rapid we are in debate, as I do not think that the Committee wishes to spend a great deal of time on it—it is important that the country and local government should be told of its contents.

I am glad to see that the Secretary of State for the Environment is present. I suspected that he might not arrive. I also suspect that if we had discussed this clause during the night he might not have been here. It was remiss of him not to have taken part in any of this week's debates in which the problem of a counter-inflation policy was discussed. Local government is of great importance and I hope that the Secretary of State will take advantage of the opportunity afforded by our short debates to explain these provisions.

It seems to me that within this clause, as within the Bill, there is an element of blackmail. This is what it means. If it appears to the Secretary of State that any action likely to be taken may result in remuneration being paid in excess of the limits, he may reduce, and in the meantime withhold, sums payable by way of grant. Why is that power necessary? It is a Draconian power. It must be fully justified to the Committee. In what circumstances will it apply? Why is it not enough to make clear to local authorities that if they exceed the limits imposed by this appalling White Paper they will lose their grants? Why must there be this threatening, anticipatory provision worked into the Bill?

At this time we are imposing heavy sanctions on local government when it has a difficult job to do. Surely it is not right to approach them in a spirit of harrowing vindictiveness. We should approach them in a spirit of understanding, recognising that they have a difficult job to do. If I were a member of a local authority reading the Bill I should feel that the Government were out to get me. Why is this power necessary? Will he also explain why this hazy word "appears" is contained in the clause? We should always avoid including that kind of wording in legislation if possible.

I should like to know what check there is on the Minister in the exercise of his judgment, to make sure that he is being fair. Why should he have the right to withhold, and even reduce, grants as a result of the actions of local authorities?

Why is it necessary to use the phrase an opportunity of making representations"? This is like punishing someone because one thinks that he might commit a burglary. It is in line with the arm-twisting approach which we find throughout the Bill.

I hope that the Government will justify these powers.

Mr. Eldon Griffiths

I take exception to the suggestion that local authorities can be punished not for something which they have done but for something which the Secretary of State or his officials think that they might do.

Under the Bill it is proposed to give unprecedented powers to the Secretary of State. I have no objection to the prospect of the Government's tightening up on local authorities' payrolls, which are an engine of inflation. But it is unjust, and bad law, that the Secretary of State should take power to withhold the rate support grant only when he believes that an authority may act in a way to which he objects.

How will the Secretary of State or his officials know what a local authority is likely to do? Every day thousands of decisions are taken in council chambers. Many of those decisions affect pay. Decisions affecting pay are taken in executive session, in other words, in secret. How does the Minister propose to find out what decisions are taken by local authorties in executive session about the pay of staff? I believe that the Secretary of State has no power to monitor such decisions. If he has the power, I wish that he would tell me which law provides it. When my right hon. Friend the Member for Crosby (Mr. Page) was in office we sought power with which to monitor such decisions, but could not find it. No such power is provided in the Bill, either.

What will happen if a local authority takes a decision to make payments above the level which the Government regard as objectionable, in other words, over the £6 limit? What will happen when that authority, having made its decision, starts to pay that sum so as to keep one of its services going—the collection of rubbish, the cleaning of streets, the inspection of meat, perhaps—and finds that the Secretary of State docks its rate support grant? As a result of the reduction of its rate support grant the authority may be unable to keep one of its other statutory services going. What will the Secretary of State do? Will he take action against that authority because of its inability to perform a further statutory duty as a result of the drop in its rate support grant? What will happen if a ratepayer takes an action at law against a local authority for failing to provide a statutory service when the failure results from the reduction of the rate support grant? Will the Government provide local councils with the same relief from legal action, and relief for their members against being sued, owing to their failure in their statutory duty because of the reduction in the rate support grant? The right hon. Gentleman must say whether he will provide to local councils and their members the same relief from legal action as is provided in other parts of the Bill to employers who are caught in similar circumstances.

The Minister and I debated my final point in Committee. For some extraordinary reason the Government and the draftsmen have omitted to mention regional water authorities. They are not referred to anywhere in the Bill. They employ tens of thousands and perhaps hundreds of thousands of people. They spend hundreds of millions of pounds and they deal with all sewerage, water and rivers, yet they are not mentioned in the Bill. Will the Minister tell us what is the position of regional water authorities? It is not a nationalised industry: therefore the authorities are not directly under Government control. They are not local authorities. They are set up as special statutory agencies.

I hope that the Minister will give clear answers to the three questions I have put to him.

Mr. Ron Thomas

I appeal to my right hon. Friend to re-examine the whole of Clause 4, including the Government amendment. He will know better than anyone in the Committee how Labour-controlled councils throughout the country are struggling against considerable odds, in terms of inflationary pressures and the considerable cost of local government reorganisation, and in terms of the cuts that have been made—and, it would seem, will be made—in local government services. Those Labour-controlled authorities are worried that they may have to cut back on essential services in the near future. Unless we are careful, the Labour Party and the Labour Government will be faced with a number of Clay Cross-type situations if we implement this policy. I expect that my tight hon. Friend knows far more than I do about the background details of the happenings. I took it upon myself to have a look at the life story of Lansbury. Perhaps what George Lansbury did may have relevance to the present day.

I am concerned that we have just established that if a firm has sufficient money, is in a certain market position, is highly capital-intensive, and has low labour costs per unit of output—a firm such as ICI on Severn-side, whose costs per unit of output are 1 per cent.—that firm can pay wage increases well above the £6, provided that it does not have to ask for a price increase. Only when it needs to ask for a price increase will Clause 3 come into effect. Linked with that, as was said in our detailed discussion, the firm would lose not only the amount of the price increase but certain other benefits as well.

I am worried about the wording of Clause 4, which refers to a reduction being made and states that the Secretary of State may, in the meantime, withhold, any sums payable". It does not say whether the reduction will be the amount above £6, if that can be worked out. It does not say that £5,000 plus £2 a week will be held back. The clause simply says that the Secretary of State may: reduce and may, in the meantime, withhold, any sums payable to the authority by way of rate support grant and so on. Indeed, it goes on to say that the reduction may be made from any of the elements of the grant.

12.15 p.m.

Local authorities are worried about cut-backs. They are certain that there will be public expenditure cuts in education and the social services. We can all be proud of the Government's house building programme. In my city of Bristol there is a first-rate ongoing house building programme, of which I am proud, but I am worried that reductions can be made from any elements of the grant. Does the phrase "any elements" include housing?

The dustmen, who received a wages increase nine or 10 months ago, will make a claim at the beginning of the next pay round, and whatever they get will have to last them for 23 months. Since the last settlement their wages have been eroded by 20 per cent. or 25 per cent. Many local authority workers, including ancillary workers and manual workers, are amongs the lowest paid in our society. I hold no brief for the local authority officers who did very well out of reorganisation. It would be a tragedy if a Labour-controlled authority felt that its ancillary workers and manual workers deserved more than £6 and came into conflict with the Government along the lines suggested in Clause 4.

I earnestly appeal to my right hon. Friend to think, and think again, about this clause, because unless he does I fear that somewhere along the road there will be a conflict between a Labour-controlled local authority and the Labour Government.

Mr. Graham Page

This clause creates. an entirely new relationship between central Government and local government, the type of relationship which both parties have always striven not to create, namely, a dictatorship from the centre. The words which the amendments seek to leave out take us further along the road from cooperation to a form of dictatorship by central Government. I question the use of that device to control local government.

The public are now beginning to think that a rein should be put on the salaries paid by local government and the number of staff employed by local government. We are left in no doubt about that. We see comments to that effect in newspapers, and we hear them on radio and television, and from our constituents who think that the local authorities are being too extravagant both in numbers of staff and in wages. It is right to tackle this problem, and we can only tackle it from the centre.

We are talking about 3 million employees in local government. Central Government already have control over the pay of teachers and the police and, to some extent, over others in other spheres in local government. I would prefer control of wages and of the number of personnel employed by local authorities to be in the same way as that for teachers and the police, to this new scheme of saying, rather like a governess, "Naughty, naughty child, I shall take away your sweets." We are taking away a grant or part of a grant which is intended to be spread over the whole of local government expenditure, namely, about 60 per cent. Therefore, we are putting a penalty on local government.

The words left out by the amendment are oppressive in that way. We could proceed by co-operation with local authorities in fixing the salaries and the number of personnel. I am sure we could obtain that co-operation. After all, throughout the year—at least from the summer months into November when we debate the rate support grant—there is close co-operation between central Government servants—civil servants of the Department of the Environment—and the officers of local authorities, and eventually the senior councillors through the local authority associations.

There is close co-operation in working out the rate support grant. I cannot believe that out of all that discussion and consultation the Secretary of State wants to finish by saying to a county or district "I shall dock a bit of your rate support grant". It is true that one finishes the negotiations over the whole country in that way, with local authorities asking for a little more than the Secretary of State is prepared to grant, but that is the national purse. Under the clause the Government will say, "Because we think you intend to pay something out on salaries which is above the rate fixed by the Bill, we shall take not only that bit that you are paying in excess; we shall take even more." Indeed, the Chancellor let us know that not only the excess would be taken off the rate support grant; local authorities would be punished by a penal sum being taken off their rate support grant.

I am sure that we are getting into deep and difficult waters if that is the way in which we are going to deal with central and local government. It would be far better to proceed on the tested, tried and known way of controlling salaries, as with teachers and the police, trying in that way, with agreement, to keep local authorities in check.

What are we talking about in terms of the increases for local authorities under the Bill? If they obey the limit in the Bill and use that as the maximum—this applies to both private and public sectors—the £6 minimum will be the figure. I cannot imagine anyone getting less than that. However, if all local authorities in the next 12 months are to increase their wages bill by the £6 a week we must tell the public that their rates are going up by £900 million. This is not an anti-inflation Bill; it looks more like an inflation Bill, if we have to talk in those terms to our ratepayers. If we are to tackle this problem of remuneration as the Government want it tackled, keeping to the £6 limit, why cannot we relate that directly to the employees, with central Government putting a ceiling on what local authorities pay their employees, and on the number of employees, without using what has been referred to as the blackmail in Clause 4?

Mr. Pardoe

The right hon. Gentleman started out by saying that the Government were proposing to interfere in the affairs of local government, and we all opposed that, but he is now proposing a massive interference by the Government, in terms of settling the total number of people to be employed and the salaries to be paid to every grade. What sanctions does he propose to use or allow the Government to use in a Clay Cross situation, to which reference has already been made?

Mr. Page

The same sanctions as we have always used in regard to teachers and the police. It has never been necessary to prosecute a council or to put the chief executive in gaol. That is not the relationship that has been adopted with the local authorities, and that is why I fear this Bill. I think we can maintain the existing relationship between central and local government by dealing with this problem in a way already known to local government, namely, by control of wages in their various sectors.

Mrs. Millie Miller

In spite of the pleasant way in which the right hon. Member for Crosby (Mr. Page) referred to the record of previous Governments in their relationship with local government, I had the bitter experience, before coming to the House, of spending at least the last two years dealing with the Tory administration and having to attack it because of the rapid slide into a state of Fascism, with growing control from the centre and more and more attacks on local government independence of action. There were many examples of this, especially during the period of reorganisation, when many aspects of local government affairs were taken out of the hands of the democratically elected councils—health services, water services, and so on—to such an extent that the Government were threatening the whole independence of that separate level of government which is our local government.

We all understand that at a time of national emergency local government cannot expect to be free from controls, but it is bitter to hear today that the Government are making proposals which go beyond those of the previous administration. The whole idea of withdrawing grant from local authorities of which the Minister disapproves, because of something which they appear likely to do, is reminiscent of the days of the Housing Finance Act.

After years of severely deteriorating relationships between local and national government, I have been relieved to see in the journals of the local authority associations and in the speeches of some leading members of local authorities the reflection of a new relationship between the Government and our locally elected representatives. This has been a welcome improvement, and I hope that it will long continue; but it cannot continue for long if the Government choose methods for dealing with local authorities which will immediately ruin that new understanding between them.

In my view, there is more of a case for imposing penalties on the House of Commons for putting new burdens on local authorities which will make their task impossible. Even at this very time, when we are talking of ways to restrict local government expenditure, we are passing new legislation which will add to their burdens. If we want, and if the public want, the new services to be provided by this legislation, those services will have to be paid for, but it seems to me that there is no sound basis for co-operative work between the Government and the local authorities on these new social developments if we put the request to them at the same time as we put a gun to their heads.

The problem of salaries in local government is very touchy. As all hon. Members know, on 1st April last year, with the reorganisation and extension of boundaries and the per capita arrangement for the payment of salaries to top officers, it was not uncommon throughout the country to find somebody in the top salary level—perhaps £8,000 or £9,000 then—having his salary doubled overnight. Now, a year or so later, it is proposed to impose these rigid restrictions on wage increases, yet we are doing it in the light of the top people having already had substantial increases.

12.30 p.m.

I hope that the Minister will give us an assurance about incremental salary advances. I know that this has been mentioned several times, but if anything is calculated to finish off the way in which local government and national Government now work together, it is the making of increments available to the level which the previous negotiations would have put them, in spite of the £6 a week limit. I hope that my right hon. Friend will deal carefully with that matter.

My main concern at this point is for the lowest paid workers in local government, although, of course, I am concerned also for the lowest paid workers throughout industry. However, in the context of local government, if they failed in respect of incremental advances I should feel that the Government had betrayed not only those low paid workers in local government but also the councillors who in every local authority have been and are struggling hard to keep their heads above water in these difficult times.

I echo what was said by my hon. Friend the Member for Bristol, North-West (Mr. Thomas). In a year or so, the councils which are now Labour-controlled will be going back to the electorate for their records to be considered prior to the next set of elections. I know what it is like in local government when the central Government of one's own party completely disregard the relationships between the two, so that it looks, at least to the general public, as though local government has been responsible for what are, in fact, the sins of national Government. I appeal to all my right hon. Friends to remember that we shall be losing control of local authorities throughout the country as a result of the policies on which we are now embarked.

This has happened before. It is like a bad dream coming true again. In spite of all that has been done in the remarkable contribution which our local authorities have made in building up their communities, the one thing which they dread is coming true again, and it is once more the result of the actions of a Labour Government. I feel very sad about that.

Mr. Geoffrey Finsberg

As one of its vice presidents, I wish to raise two matters on behalf of the Association of Metropolitan Authorities. However, before coming to those questions, I must comment upon the speeches of the hon. Members for Bristol, North-West (Mr. Thomas) and Ilford, North (Mrs. Miller) which seemed to me to descend into nonsense.

The hon. Member for Bristol North-West said that he hoped that there would be no help in pay for senior officers, and the hon. Lady repeated that nonsense. I was astonished to hear her say that because she has served as leader of a major local authority and well knows the immense strain and burden put upon top officers as a result of massive reorganisation—a strain and burden which, to her knowledge, have driven at least one senior officer to a premature death. Yet she now says that these senior officers should not have the salary increases negotiated for them at the time and the increments that should follow. That cannot be either practical or sensible.

Mrs. Miller

Perhaps I should make clear that I was not suggesting that they should not have increases. In fact they had them on 1st April 1974. All I am saying is that the increments should be no larger than the increments to which everyone else will be entitled during the coming year.

Mr. Finsberg

That is a view characteristic of the hon. Lady, for she wishes always to level down.

I must make one other comment on the hon. Lady's speech. She has no right to call the actions of the last Conservative Government Fascist. That is sheer non- sense, and I put it to her that, as someone who is herself awaiting a decision of the district auditor, since she took it upon herself to encourage the breaking of a law passed by that Government, she should be careful about her terminology in this place.

I come now to the two questions that the AMA has asked me to raise. They are in no way controversial. The association is worried about Clause 4, especially about the withholding of more than the excess of salary and wage payments. The AMA considers that the Bill goes much further than the Prime Minister suggested in his statement to the House. The right hon. Gentleman said that the grant lost would be for any part of the settlement, not just the excess.

The AMA would welcome an answer to one question. What happens if an authority is faced with a strike by a small number of operatives in an essential public service—street cleaning, refuse collection, or, indeed, one might add, computer staff, who have on occasion been known to hold certain authorities to ransom? In such circumstances, what happens if the local authority, under immense pressure, makes a local settlement? The same question arises, of course, in the general context, since employers in the private sector may well face the same sort of blackmail—but that is not relevant to the present amendment.

What will happen if the local authority has to make a local settlement in disregard of a national settlement, or indeed—one knows how immensely complex are the bonus and productivity schemes worked out over the years for refuse collection, for example—if an innocent mistake is made?

Will that authority lose grant in respect of the wages of all its other operatives in the same national settlement, or will it be at risk of losing rate support grant, as the clause appears to suggest?

The AMA does not believe that it is the Government's intention to operate the clause in that unreasonable or unfair manner. It hopes that the Secretary of State will not disallow grant when the excess payment is made as a result of innocent mistake or non-wilful mistake. It is essential that that matter be clarified.

I come now to my second question, I direct the Minister's attention to Section 5(1) of the Local Government Act 1974, which enables the Minister to deprive an authority of grant if it does not achieve reasonable standards. If authorities are under pressure in the achievement of standards and the maintenance of services, there could be circumstances in which they would need some protection before the Secretary of State went so far as to penalise them.

Those are two reasonable requests that the Association of Metropolitan Authorities makes. It is right to say that in general, although the AMA did not have opportunity to meet in time to consider the White Paper, it has said that there will be a recommendation at a full meeting that it gives its support to the general principles of the White Paper. However, it would be greatly helped by answers to those two questions.

Mr. George Rodgers (Chorley)

Clause 4, Mr. Costain, worries me as much as any other clause in the Bill does.

The Deputy Chairman (Sir Myer Galpern)

Order. I know that hon. Members have been in attendance through the night and their vision may be a hit blurred, but Mr. Costain has just left. I suppose it may be said that we look pretty much alike.

Mr. Rodgers

I am sorry, Sir Myer. I was saying that this clause bothers me a great deal. It is likely that we shall see accelerating unemployment; indeed, people of standing, both inside and outside the trade union movement, are forecasting as many as 2 million unemployed within a comparatively short time. This prospect has direct relevance to the position of local government, because I am certain that within a fairly short time this Government—as others have done—will look to local authorities to mop up excess unemployment.

Although at this stage there may be some enthusiasm for anti-inflation measures, once the rise in unemployment is under way there will, I believe, be a great waning of that enthusiasm, especially if there is massive unemployment, and at that stage the Government will no doubt turn to local authorities and ask what plans they have in their pigeon holes to help them take up some of the unemployed.

In such circumstances, this clause would operate against local government. In the White Paper, we see the shape of things to come: … unless staff numbers are tightly restricted, the Government will have to reconsider scale of provision of grant. That is a formidable threat to local authorities. It anchors them tightly, leaving them very little room to manoeuvre

As people become aware of the extent and impact of these measures, they may feel that the cure is worse than the illness, because the road to inflation is often very comfortable. It is only when the calamity becomes sufficiently close that people realise just where they are heading Recently, a pensioner in my constituency who was having a pint, told me, "If this is inflation we should have had it in the 1930s, when I was expected to bring up a family on a few shillings." There is a different attitude. From the initial enthusiasm for disposing of inflation, people will begin to see what it all means particularly as unemployment rises. It is then that they will look to the Government to provide a remedy.

I do not think that public spending is sacrosanct. I think that there can be savings. For example, there could be savings in tax concesisons to people with substantial incomes buying houses for £25,000 or more. Money spent on the monstrosity at Holy Loch could be saved. I accept that there is room for saving in public spending, but perhaps in a different area from that advocated by the Opposition.

My main plea to the Government is that they shall not close the door to local authorities. I think that we shall be grateful to local authorities for the help they can give the Government, as they have helped so many previous Governments under stress. I ask the Government to think very hard again about this clause.

Mr. Dykes

There is a rumour that Clause 4 in various statutes always worries meetings of the Parliamentary Labour Party as well as Labour Members in Committee stages. If they do not think me discourteous, I do not know which speech was the more ludicrous—that of the hon. Member for Chorley (Mr. Rodgers) or that of the hon. Members for Ilford, North (Mrs. Miller). They are both living in cloud-cuckoo-land. They are out of touch with reality and with the strong demand by the public for severe restraint in local authority current spending, which is even more important and relevant than what has been done in recent years on capital account.

I echo the anxieties about Clause 4, particularly because of the putative power given to the Government. But my anxiety is increased by the drafting of the subsection. With some Bills, one's misgivings decline as they go through Parliament. One's misgivings are increasing with this Bill.

For example, we were very worried earlier about Clause 1(5) and its implications. It gives extra work to the Secretary of State for Employment—and perhaps we can have sympathy with him for wider reasons. But many questions are also raised by the Clause. I hope that the Minister will deal with our anxieties about the drafting and the language. I think that the clause is actually illiterate. It is sloppily drafted. The reference made by my hon. Friend the Member for Bury St. Edmunds (Mr. Griffiths) to "any" before "sums" was extremely valid.

Is there to be a withdrawal of everything by way of additional sums if a local authority has its way in paying wages above the limit? Are there to be differences? Will each case be decided on merit? I hope that the hon. Gentleman will be able to respond to our anxieties and say that he will follow the line proposed in the amendment by removing the words which are a putative and anticipatory part of the Minister's powers. The whole provision brings in undesirable new principles.

12.45 p.m.

The provision states that the Minister will act after giving the authority an opportunity to make representations. How will that work? Will the Secretary of State issue a certificate of exemption? Will a local authority have to send a formal letter saying "We are going to do this. Will you clear it officially?", we need a clear explanation of these things. We are not nit-picking. The Bill needs to get through relatively quickly because there is broad support for the basic measures behind it.

As the Secretary of State for Employment has been disillusioned, abject and hapless throughout these proceedings, perhaps the Secretary of State for the Environment is resigned to his new powers and how they will work. Perhaps the Paymaster-General is the most enthusiastic. He was asleep earlier, but is now awake. I do not know whether that is a tribute to my few words. But many hon. Members both sides of the Committee, however appallingly drafted, however rough and ready, however corporate Statist—I was tempted to use the word "Fascist"—the provisions are, and however onerous the responsibility placed on local authorities, will broadly welcome the fact that there are now to be effective controls over local authority spending. The wage elements in local authority spending are a substantial proportion of current expenditure, and it may be that tighter control will be a good thing. It is appropriate not only in a temporary emergency period. It may be possible to develop such control later.

If the Government are to take these dramatic and controversial new powers, for which there may be varying degrees of support, depending on political alignment, they must draft them in a way which will estabish the precise mechanistic relationships between the Government and the local authorities in their different aspects. How will this provision work? Can it be improved in textual as well as real terms? Can we have a more precise mechanistic explanation of how these powers will work? If we do not get a proper explanation, the Opposition will be entitled to be difficult at least.

Mr. Bob Cryer (Keighley)

The clause will be greeted with great disappointment by many low-paid workers in local government. The recent 22½ per cent. increase given to top officers will establish a feeling of great unfairness. The "fat cats" at the top of local government service are already doing very well, and did very well out of local government reorganisation. They are getting the cream, while the poorly-paid manual workers are being held down. I wish that my right hon. Friend the Secretary of State for the Environment would put a little more energy into controlling local government capital expenditure instead of controlling wages.

We read today that one local authority in London is to dig a £70,000 atom bombproof shelter for its executives. No doubt I would be told that there was no power to control a local authority in such things. Yet we can threaten a local authority that if it pays out more wages than the limit in the Bill it can get a cut in Government assistance. It means that local authorities must either cut services or sack people.

Tory controlled local authorities—if we carry on like this, there will be many more of them—will say to the men "We want to pay you more and we realise that you need it, but your Labour Government say that we cannot". The Labour Government will incur the odium of often politically motivated decisions by Tory-controlled councils.

Let us take the example of a school caretaker. The Low Pay Unit has produced some interesting information on this subject. A caretaker may get an increase of £6, from £30 to £36. It is not wildly beyond the bounds of possibility that some people are paid £30 a week. That may seem strange to Tory Members who are wounded when people mention increases for those earning £20,000 a year. I am appalled that Opposition Members should sit smugly content when that sort of injustice is going on. The people who empty dustbins are just as important as highly paid executives who sit in plushly carpeted offices.

A man who gets an increase of £6 on a £30 wage gets a 20 per cent. wage increase but a net decrease of 0.3 per cent. in income if he has a wife and two children, because he loses the family income supplement, free school meals and other benefits. So he becomes worse off. What is the Government's attitude to that sort of person? That sort of contrast with the rich makes me very angry.

What happens if a local authority tells that employee that to get the benefit of a real wage increase he should have £7.50? Will the cut in the rate support grant be applied only to the education service? How does the Secretary of State pick out the money specifically allocated to paying a school caretaker? That may not be a good example, but there are many local authority services where it is difficult to separate wages from other costs. Therefore, the Secretary of State will have to decide that the money must be taken from the whole service in some fashion.

I should like specific answers to these questions. We recognise that the Government are facing difficulties and it should not be imagined that we do not. But some of us on these benches believe that the solutions are wrong and that they will create more problems than they solve, as well as a sense of bitterness and injustice, and we should cope with the problems here and now instead of leaving them to grow over the next few months.

Mr. Paul Hawkins (Norfolk, South-West)

I shall be very brief, as I have promised my old trade union I should be.

I support the argument so strongly advanced by my hon. Friend the Member for Bury St. Edmunds (Mr. Griffiths). I was a member of a county council for about 21 years. My own Norfolk County Council has a difficult job to do, and does it extremely well. It could well be inconvenienced by the words that we seek to omit. I know the Under-Secretary to be a very reasonable man and I should like him to consider whether these words will result in disagreements with local authorities.

I want, secondly, to mention water authorities, which appear to be a law unto themselves. I have written to the Department of the Environment about the extraordinary expenditure in my own district, where the water authority has spent £500,000 on a new computer and where many new laboratories have been built although the undertaking was new to the constituency only two or three years ago.

I gather from the letter that referred me to the chairman of the water authority that the Minister has no power in this matter, and the chairman told me that it was his opinion that this expenditure had to be incurred. Water authorities should be checked and controlled as much as other authorities. I hope that the Under-Secretary will explain why they are not covered by this provision.

Mr. Sainsbury

I support, as I suspect, a number of other hon. Members on both sides of the Committee support, what was said by my hon. Friend the Member for Norfolk, South-West (Mr. Hawkins) about water authorities. I hope that the Under-Secretary will agree that. in the national interest, the Secretary of State has power to intervene in the conduct of the affairs of water authorities, and this might well be an occasion for him to do so.

I suspect that a number of hon. Members would agree with my hon. Friend the Member for Harrow, East (Mr. Dykes) that this is a Bill that seems more sloppily drafted the more one looks at it.

I hope that the Under-Secretary will agree that if the statutory sanctions of the clause were invoked, the effect on local authorities and ratepayers would be serious. It is always difficult to answer hypothetical questions, and for that reason the words "likely to be taken" are open to the gravest objection. My hon. Friend the Member for Hampstead (Mr. Fins-berg) mentioned the complications of bonus schemes. It would be difficult to decide whether a course of action was likely to result in a payment that could be held to be a breach of the Bill.

If the Under-Secretary feels unable to accept the amendment—although I hope that he will accept it—I hope that at least he will give a firm assurance that he will urgently consider circulating to local authorities the fullest possible statement of the criteria upon which any judgment would be made of actions held to be likely to result in a payment. In default of the issue of such a document, almost any authority, its elected members or officers, would find itself unable to tell whether the routine conduct of a bonus scheme could be held to be action falling within the clause. I urge the Under-Secretary to recognise the uncertainty consequent upon the curious and, I believe, sloppy drafting of the clause, and express the hope that he will help local authorities at least by a circular, if not in the Bill.

1 p.m.

Mr. Crouch

I do not share the concern expressed by my right hon. Friend the Member for Crosby (Mr. Page), although I regard him as having the widest possible knowledge of local government, its administration and its relationship with the Government. He hoped that the Government would find a way out of exercising this sanction and control if they could not remove it from the Bill, because he thought it would be bad for the relationship of local authorities and the Government.

I understand his view, but it is a very small sanction, and the rest of the nation will be subject to sanction. It must be remembered that the White Paper and the Bill are taking us into hard times. It seems to be forgotten that this is not an easy time. We have to face hard times, and the £6 limit will represent a hard time for everyone. We cannot lift local authorities out of the responsibility of bearing the burdens borne by everyone—the low-paid, those in industry, and everyone else.

We are all searching in our memories and experience for those who will be especially disadvantaged by changing differentials as the months go by. That is why the Bill has been given only a year's life. Some damage will arise from changing differentials after 12 months, and perhaps even before. We are having to take desperate measures, because the country is in a situation of economic war—not a war with anyone else but a war that is eating into the fabric of the nation.

My hon. Friend the Member for Hampstead (Mr. Finsberg) said that some latitude should be allowed to local authorities which were under great pressure to pay more than the £6 limit. I cannot sympathise with his view.

Mr. Geoffrey Finsberg

I did not say that. I said that this was a question that was being asked by the local authorities. They were asking for clarification.

Mr. Crouch

I am obliged to my hon. Friend. He has made the point clear.

The hon. Member for Keighley (Mr. Cryer), in a more rational part of his speech—some of it was slightly irrational, but the debate has been going on for 20 hours; I have become a little irrational at times during the night and I may start throwing barbs at the hon. Gentleman—made a point with which I have some sympathy. The Bill is about remuneration, charges and grants. It is not about the control of capital or revenue expenditure by local authorities. However, it is not wrong that, in passing, we should point out that there is concern among hon. Members about the enormous sums of money which can still be spent, freely and virtually unfettered, by central Government and Parliament in delegating responsibility to local government to administer its own affairs and provide for its constituents.

Some remarkable events are taking place. We must ensure that expenditure on certain local projects does not escalate. I am concerned about a variety of projects in my constituency which seem to be going ahead. Some of them are necessary projects—for example, sea defences—involving the expenditure of millions of pounds. There will be a flood in the Thames estuary within the next 20 years when the tide and winds come together, and lives will be at stake. Therefore, expenditure on such matters as sea defences is necesary.

But in my constituency the building of a pavilion at a cost of nearly £400,000 is going ahead. I think that that is rather extravagant. The other day I was asked to give my blessing to the creation of a picnic area at a cost of about £55,000. In the present and difficult times we must be concerned about expenditure on projects of that type which are going ahead in district councils and county councils throughout the country.

My hon. Friend the Member for Bury St. Edmunds (Mr. Griffiths) and others have said that the problems of water authorities are not dealt with in the Bill. Next year a reservoir is to be built in my constituency. Hon. Members can imagine the outcry there has been at the prospect of hundreds of acres being covered with water, involving the loss of people's homes and farms. No doubt we need the water, but I wonder whether sanction will be given to the Southern Water Authority for the expenditure of £10½ million?

We are being asked to give the Government the power to control remuneration, which I think is right, but if control from the centre is disliked, a clear direction must be given that the nation must live within its means.

Mr. Ian Lloyd (Havant and Waterloo)

I am surprised—I expect that a number of hon. Members are—that throughout this long and extremely important debate no hon. Gentleman has mentioned or drawn the opposite conclusion from something which has happened in the last three weeks on the other side of the Atlantic. I refer to the organisation known as Big Mac. This is the rescue operation mounted to save the city of New York from bankruptcy.

The State of New York has a population which is roughly half of the population of this island and wealth which is probably equal to the wealth of this island. Yet New York, faced with vast public expenditure, is on the verge of bankruptcy and has had to mount a major rescue operation.

Until my hon. Friend the Member for Canterbury (Mr. Crouch) spoke, there had been a sense of unreality about the debate. My right hon. and hon. Friends have rightly drawn attention to the extremely important legal aspects of the Bill. But this is not a legal occasion. We are passing judgment on a major economic crisis, the nature of which is precisely the same as the nature of the crisis which affected New York. The people of New York have lost contact with the reality of their economic situation, as have the people of this island. Effect will not be given to the purpose of the White Paper and the Bill by endless argument—

Mr. Arthur Blenkinsop (South Shields)

On a point of order, Sir Myer. What is the relevance to the amendments of what the hon. Gentleman is saying?

The Deputy Chairman

There is no doubt that the hon. Gentleman is getting wide of the mark, but one must make allowances for the fact that after an all-night sitting one's judgment is not as incisive as it should be. However, I know that the hon. Gentleman will shortly bring his remarks to a conclusion.

Mr. Lloyd

I do not propose to bring them to a conclusion just yet, Sir Myer. I have not strained the patience of right hon. and hon. Members for a long time, but I hope that I shall remain within the rules of order.

The amendment concerns such matters as regional water authorities and methods by which local authorities can be forced, in the national interest, to face the reality of the economic situation. Local authorities and all those who have a discretionary spending power must realise that the game of musical chairs must stop. There is no more money. It has been suggested that no great harm would be done if wage settlements of £6 were offered nationally. But immense economic and national damage would follow if as a result of the passing of this Bill, there was a general wage settlement of £6 next year.

I wish to quote the following entirely objective and impartial comment on the situation: Worst of all, perhaps, is the way the program that is, this Bill— ignores or glosses over some of Britain's most basic problems. There is no mention of…productivity or of increases in public expenditure.…And the inclusion of fresh food and housing subsidies in Wilson's new pay package will add to the budget deficit…". I endorse that entirely. The phsychological mesage must go out from this place that the spending must stop and that wage increases can no longer be given unless the resources exist. The cornucopia State has ended. We are facing a minus 3 per cent. growth rate in the United Kingdom. Our resources are diminishing—

The Deputy Chairman

Order. I allowed the hon. Member to continue, thinking that he would give an indication that he was about to bring his remarks to a conclusion. I cannot allow him to continue in this way discussing a subject which has nothing whatever to do with local authorities.

Mr. Lloyd

I am sorry, Sir Myer, that you consider that I have strayed from the rules of order. This clause concerns local authorities. Local authorities are responsible for one of the major segments of public expenditure in this country. In the wide general national experience of the community, this type of expenditure is wildly out of control. The hon. Member for Keighley (Mr. Cryer) made an excellent point, endorsed by my hon. Friend the Member for Canterbury, when he said that public expenditure by local authorities is not the concern of this clause, and that it is concerned with remuneration. But the importance in our national figure of gross remuneration paid by local authorities is very great. It is this remuneration which, as a segment of total national expenditure, has been wildly out of control for a long time.

I support the clause. I support any means whereby the clause and any of my hon. Friends' amendments to it can bring the red light signalling and flashing from the top of every tower in this country. This expenditure has got to stop now; the sooner the better.

The Under-Secretary of State for the Environment (Mr. Gordon Oakes)

The debate technically is on two very important but very narrow amendments to the clause. The debate, in fact, has been very wide-ranging indeed, covering, I think, every amendment to the clause, together with a lot of "stand part" debate and going even further afield to local government finance.

I think, Sir Myer, that both you and your predecessor in the Chair are absolutely right in what you have done. This is the first of a series of amendments, and it may be that your action will save the time of the Committee on subsequent amendments and, indeed, on a debate on the Question "That the clause stand part of the Bill".

I deal first with the hon. Member for Aylesbury (Mr. Raison). He was right in a number of things he said. He was right in saying that local government is a very large sector of the economy. Over 3 million people are employed in the local government sector, and no policy concerning restraint of pay could possibly ignore so large a sector. He is also right in saying that these powers are unprecedented at least in this respect. But, as the hon. Members for Havant and Waterloo (Mr. Lloyd) and for Canterbury (Mr. Crouch) said, the times are unprecedented as well. That is why such severe and, indeed, Draconian powers have had to be taken in this Bill.

The hon. Gentleman was right, too, in a qualified way when he said that local government might interpret this clause as "the Government are out to get me". The Government "are out to get me" if, and only if, a particular local authority is deliberately and wilfully in breach of a nationally laid down pay policy which has the overwhelming support of this country. Only then are the Government "out to get me".

Mr. Raison

The hon. Gentleman has missed the whole point of the amendment. The objection is not that the clause applies to people who are in breach. What we object to is the threat to the people whom the Government consider might be in breach.

Mr. Oakes

I am coming to that.

The hon. Member for Bury St. Edmunds (Mr. Griffiths) asked how we would monitor the system. It is difficult to monitor the system. He knows that, having been a Minister in my present Department. But I suggest it is far easier to monitor a system of local government payments, precisely because these are public bodies and have to report to the public, then it is to monitor in the private sector. To that extent, monitoring in the public sector is easier.

1.15 p.m.

A number of hon. Members, including the hon. Member for Norfolk, South-West (Mr. Hawkins), for Hove (Mr. Sainsbury) and for Canterbury asked about regional water authorities. This is a particularly important point. I am glad that the hon. Member for Bury St. Edmunds is interested in the present behaviour of what could have been described as his wayward child. Regional water authorities are treated in the same way as nationalised industries. The Bill and the White Paper will deal with water authorities in the same way as nationalised industries are dealt with, in that water authorities make charges for domestic water or for sewerage or for industrial supplies of water, and if in making those charges they are in breach of the pay code and try to increase their charges, the other machinery in the Bill will deal with them, and not Clause 4.

My hon. Friend the Member for Bristol, North-West (Mr. Thomas), who I know is not in agreement with this general policy, asked about the lower-paid workers, as did my hon. Friend the Member for Keighley (Mr. Cryer). One of the great virtues of this way of dealing with the matter is the fact that we are dealing with cash—£6 a week—and not with some percentage. It is the percentage system which hits the lower-paid worker. The cash system is deliberately designed to assist the low-paid worker. My hon. Friend was talking about chief executives and deputy chief executives, and was saying how the "fat cats" of local government, as I think he described them, came very well out of this. But most of those people, in any event, are receiving over £8,500 a year, so it is not a question of £6 for them. It is nothing for them under the Bill and under this policy.

The Secretary of State for the Environment (Mr. Anthony Crosland)

And no increments.

Mr. Oakes

And, as I am reminded, no increments either.

The right hon. Member for Crosby (Mr. Page), in a rather surprising speech, suggested that the answer is not to deal with the problem as we propose but that a ceiling should be put on the number of employees that a local authority may have. Rightly the hon. Member for Cornwall, North (Mr. Pardoe) was as appalled as I was at this suggestion. The bureaucracy that we would have to maintain under the Government to vet such a system would be enormous. It would reduce the local authorities to mere supine agents of the Government. It is not a solution that we on this side of the Committee would contemplate. I am surprised that the right hon. Gentleman, with his great knowledge and love of local government, should regard this as viable solution in preference to the system that we are adopting.

Mr. Graham Page

Is not that exactly what the Government have done with teachers?

Mr. Oakes

It is not what we have done with teachers. It is a much wider sphere that we are dealing with. We are dealing with all local government employees.

Mr. Graham Page

Sixty per cent.

Mr. Oakes

But this is not precisely what we have done with teachers, plus the fact that there is another 40 per cent.

The hon. Member for Hampstead (Mr. Finsberg) raised two specific and fair questions. One came from the AMA. He asked what would happen if a local authority made an innocent mistake. If he reads the clause he will see that the powers which the Secretary of State has are discretionary. I can assure him and the local government associations that in the case of a genuinely innocent mistake in no circumstances would the authority be penalised by the use of Clause 4.

The hon. Gentleman then asked whether the Secretary of State, having reduced the amount of money given to an offending authority, would reduce the rate support grant. Would he further penalise that authority by bringing in his powers under Section 51 of the 1974 Act? All I can say is that I cannot conceive of a Secretary of State doing that sort of thing and attacking such an authority in two ways.

Mr. Eldon Griffiths

I know that the hon. Gentleman is trying to answer these points quickly, but may I raise a specific matter to which the Committee requires an answer? In my local authority area at the moment there is a very grave shortage of meat inspectors at a very large plant which slaughters large numbers of pigs. It is not possible for the local authority to obtain meat inspectors unless it offers a substantially increased amount of money. The local authority has advertised and has failed to get the necessary people. There is only one way in which it can obtain those meat inspectors, and that is by raising the salary by much more than £6 a week. If it does that, it will be defying the Government's policy and will be punished. If it does not do that, it will be breaking the law of the country in failing to provide meat inspection and allowing salmonella and other risks to spread in my local community. What is to happen when a local authority does its statutory duty to provide a public service and can do it only by paying more than the Government will allow it to pay?

Mr. Oakes

That is a fair example, but it is the sort of thing that starts off the spiral that we are trying to stop in the Bill. The hon. Gentleman gives me an exceptional case. I hope that the fact that the Secretary of State's power is discretionary is not treated by the Opposition or local government as in any way implying that if a local authority breaches the pay code and comes with a hard-luck story the Secretary of State is likely to exercise his discretion. He has a discretion which he can exercise in the most highly exceptional circumstances. But the hon. Members for Canterbury and Havant and Waterloo clearly said that there were certain things that the Government must stop, and we are trying to stop them by means of the Bill.

Mr. Eldon Griffiths

As a responsible local Government Minister, the hon. Gentleman must face the point that if that authority or any other fails to provide meat inspectors and there is an epidemic, the councillors who allowed that to happen can be sued. Does the Minister propose to provide them with immunity from that law suit because they have allowed the situation to come about by obeying his policy?

Mr. Oakes

The hon. Gentleman is taking an exceptional case. I repeat that the Secretary of State has discretion. That is the whole purpose of the Bill. I have no doubt that the Secretary of State will exercise discretion, but that is not to say that any highly desirable scheme that comes to him, or a buying-off for industrial peace in an area, will receive his approval.

You have been as patient with me, Sir Myer, as you have been with the Committee on a rather wide-ranging debate. I believe that I should have been criticised if I had not answered the debate.

I come to the amendment. The words in the Bill are purposefully put there for a number of reasons. First, we want to give the Secretary of State power to reduce or withhold grants before offending remuneration is paid, and even give him power to act before an offending pay settlement is cleared, if it appears to him that it is likely to be concluded outside the pay limits. That gives the clause a deterrent as well as a penal effect. The amendment would significantly weaken an important part of the Secretary of State's powers. It would be possible to lock the door only after the horse had bolted. We are trying in the clause to give the Secretary of State power where a settlement is pending to withhold money from the local authority if that authority will clearly give the money at some time in the future.

Another difficulty that we foresee if we accept the amendment is that it would provide a fairly easy way to get round the clause altogether if a local authority could pay more than the £6 limit to a group of workers not there and then but in, say, 12 months' time, which would defeat the policy. The Opposition amendments would render the Secretary of State powerless in such a situation, because the payment had not been made and was not operative.

I ask the Committee to give the Secretary of State this wide power. My right hon. Friend is responsible to the House as a whole. He will exercise his discretion within the power that the House gives him. I ask the Committee to give him the widest Dowers, in the interests of what Opposition Members, as well as my hon. Friends want, which is to cure inflation.

Mr. Raison

We have had a wide-ranging debate. I started with a rather narrow approach. When it was suggested that we might not have a "Clause stand part" debate I had some reservations, because there are a number of other points that I should like to raise, if only briefly.

This has been an important debate, and I am grateful for the contributions that have been made by a number of my hon. Friends. By and large, the Minister has tried his best, as always, to meet the matters raised by my hon. Friends, and to some extent he has succeeded. However, I do not think that he has wholly satisfied all of my hon. Friends.

My hon. Friend the Member for Bury St. Edmunds (Mr. Griffiths), who made an important point about breach of duty, has suggested to me than another telling example of what might go wrong concerns the fire brigade. Clearly, the duty to provide an effective fire brigade is of great importance. The dilemma that he exposed and applied to meat inspectors is very important if applied to the fire brigade.

I hope that the Government will think hard about this problem, because it is two-faced. There are two types of discretion which perhaps the Secretary of State will be called on to exercise. The first is the discretion which has already been referred to. The second is the discretion to permit a below-standard level of service. That is something that we should take very seriously.

When he turned to my amendments, the Minister seemed to imply that he needed the deterrent power, because without it he would not be able to catch a local authority which promised to pay somebody extra money in years to come. From my understanding of subsection (3), that problem does not exist. The purpose of the subsection is to dispose of that problem, because it states that the reduction may be made from the sums so payable in any subsequent year. If I understand that subsection correctly, it proves that the point the Minister made is faulty. I should be grateful if he could at least give me an assurance that he will have another think on that matter.

Mr. Oakes

Subsection (3) is designed to meet another point. It is not designed to meet this point, and I do not think that it does. If the amendments were passed, the powers of the Secretary of State would never be triggered into existence. The point of subsection (3) is that if a local authority postponed the effects of a reduction of the rate support grant to a future year, the Secretary of State would be in a position to deal with the matter for that future year.

Mr. Raison

I am not wholly persuaded by that answer. Perhaps it is one that we should look at carefully when we read Hansard.

Some important points have been raised during the debate. We have more important points to raise, but I do not propose to press the amendments to a Division at this stage.

Amendment negatived.

Mr. Pardoe

I beg to move Amendment No. 44, in page 3, line 24, leave out from 'he' to end of line 25 and insert 'shall'.

The Deputy Chairman

With this amendment we may discuss Amendment No. 46 in page 3, line 26, after 'reduce', insert 'by an amount equal to the value of the payment of any remuneration in excess of the limit mentioned in this section or,'.

Mr. Pardoe

The amendment would remove the Secretary of State's discretion concerning the reduction of amounts which he may or may not pay to a local authority which infringes the pay limits. In view of the one or two matters raised during the last debate, and the general aura in which the debate was conducted, my right hon. Friends and I believe that there must be some effective sanctions during this period of restraint, if not beyond, against local authorities which infringe the pay limit.

We all know what has been happening to local authority expenditure. Hardly a day goes by without Opposition Members quoting increased public expenditure figures at the Government and asking "What will you do about this?". Hon. Members on both sides of the Committee can quote scandalous instances of over expenditure.

I have in my possession an advertisement from The Times dated 16th July. It says: Personal Assistant Secretary. £3,963 for senior officer in local government. Twenty-one working days holiday. Lots of contact with people at all levels. Brook Street Bureau. I have a hunch it is the GLC, but I have no way of proving it. Perhaps I should not have said it, but I have. A salary of £3,963 for a secretary makes the recent increase in the parliamentary secretarial allowance look pretty minute, yet there are people who say it is too much.

If a local authority breaks the pay limit and pays its employees more than an extra £6 a week, either across its payroll or individually, what can the Government do about it? The most obvious way in which they can exert pressure is through the rate support grant. I find it incredible that Conservative Members have been criticising what one hon. Member referred to as "this form of blackmail". I have no objection to this form of blackmail at all. The rate support grant is the one way in which the Government can get to grips with local authority expenditure.

The Government can also put a curb on local authorities' access to the capital market. The White Paper says the Government will be prepared to use their powers of control over local authority borrowing, including access to the capital market, but no such sanction is included in the Bill. The Government will have to be tough with local authorities in this period of restraint.

I do not like interference with local authorities' autonomy any more than any other hon. Member, but it is humbug for hon. Members on the Conservative benches to talk, as they have so far, about their own proposals to abolish thet local rating system and finance local authorities from national expenditure. That is one way of ensuring that central Government has far more control over local authorities' expenditure. We all know where this idea was born. It was born out of the frustration of Conservative Treasury Ministers between 1970 and 1974, who watched in horror as public expenditure by local authorities soared to the sky. They know there was precious little they could do about it.

Earlier this week we debated an Opposition amendment regretting the Government's prolonged failure to reduce public expenditure. A substantial part of the increase in public spending, particularly local authority spending, is caused by the increase in the total wage bill, and that is why this clause is essential to an attack on inflation and why we are seeking to toughen it up. The Minister may have the latest figures of the increase in local authority expenditure and how much of it is due to wages. It is certainly a substantial amount. The remarks from the Conservative benches about the Government being too tough with local authorities are a load of nonsense, coming as they do shortly after Conservative criticisms of the Government for the increases in public expenditure. There is an article in The Times today under the heading "Tories attack plan to restrict growth of local council services to 1½ per cent". The article says: The Government's intention to restrict the growth of local government services to 1½ per cent. next year came under attack from Conservative members of the Association of Metropolitan Authorities in London yesterday". What humbug. The Conservative Party is speaking, if not with a forked tongue at least with not one voice.

Mr. Keith Speed (Ashford)

If the hon. Gentleman is so keen and excited about this aspect of increased public expenditure, why did the Liberal Party's spokesman not take part in the debate we had earlier this week on a rate support grant increase order? We were discussing a large sum of money and we had an excellent debate. The Liberal spokesman was here but did not take part in the debate.

Mr. Pardoe

We have done our fair share of talking in the debates this week. I do not know whether the hon. Gentleman wants Liberals to monopolise all the debates.

Mr. Stephen Ross (Isle of Wight)

The debate being referred to was dealing with expenditure of two years ago and not with current expenditure.

Mr. Pardoe

That may solve the problem. I am quite happy to make any speeches that the Opposition Front Bench wishes, but I do not think it would help our proceedings to draw to a close.

The Deputy Chairman

I entirely agree with the hon. Gentleman.

Mr. Pardoe

I thought you would, Sir Myer. I was giving myself the advice I thought would come from you.

We are concerned that the Government are not tough enough to deal with the squander-bugs in local government offices. The clause gives the Secretary of State a dangerous discretion. If he finds that a local authority has gone beyond the pay limit he may reduce the rate support grant. Why is "may" used? It should be "shall". Amendment No. 44 says it should be "shall". Why does the Secretary of State have that discretion? He will be more likely to exercise his discretion in favour of a Labour-controlled council than a council controlled by another party. There is a danger that if a Labour council wants to pay more than £6 a week extra to its employees, it will approach the local Labour MP and ask him for help. He may say: "Do not worry. I will let the Tribune Group loose on the Minister and they will make him bend his discretion." I do not think the Minister should have this discretion.

Our amendments will also remove the obligation on the Secretary of State to allow local authorities to make representations. That may seem rather odd, because I was arguing earlier that private companies that infringe the pay limits should be able to make representations to the Secretary of State. What is sauce for the goose should be sauce for the gander. If the Government are not going to allow other employers to make representations, I do not see why there should be special privileges for local authorities.

Amendment No. 46 seeks to define what is meant by the word "reduce". The Secretary of State may reduce any sums payable to an authority, but by how much may he reduce them? By any amount? The Secretary of State's discretion is again open to political pressure. The White Paper is much clearer. It says that a major item in the new approach will be that rate support grant payable to local authorities will be restricted, so that if there is a national pay settlement in excess of the limit, no grant will be payable on the excess. That is why Amendment No. 46 seeks to define the amount by which the Secretary of State may reduce the amounts available to an authority. We have said that it should be by an amount equal to the value of the payment of any remuneration in excess of the limit". That is virtually writing the words of the White Paper into the Bill, which is where they should be.

Mr. Michael Shersby (Uxbridge)

I hope to incur your approval for the shortest speech in the debate, Sir Myer. Will the Minister say how his discretion on the reduction of grants to local authorities applies in respect of new appointments by local authorities after 1st August? In the Daily Telegraph today there is an advertisement by a London local authority, which I shall not name, for a chief management services officer at £8,000-plus. He has to be appointed after a report by management consultants reviewing the rôle and organisation of its personnel and management service functions. How does the Minister propose to control the increase of local government expenditure on this type of new appointment during the period of wage restraint?

Mr. Raison

The hon. Member for Cornwall, North (Mr. Pardoe) referred to the view of the Conservative Party on this matter. I emphasised in our previous debate that we accept the basic control which is embodied in Clause 4. Perhaps one could be tempted superficially by the hon. Member's arguments. There is a kind of apparent logic in what he says, but I do not share his avowed enthusiasm for blackmail.

In putting forward the amendments we discussed in the previous debate we were not seeking to undermine the sanctions, but at times like this, when one is expecting a great deal of economy from people and bodies, it is extremely important to be fair. I can see no virtue in the kind of bullying that the hon. Member was advocating in his speech.

I cannot help wondering whether the hon. Member for Isle of Wight (Mr. Ross), who, I suspect, knows more about local government than the hon. Member for Cornwall, North, went along with the hon. Gentleman's approach. I do not go along with it, because I do not like the excessively Draconian effect of the amendment, in that it seeks to eliminate the opportunity of making representations to the Minister before the sanctions are applied.

We tabled an amendment designed to strengthen the representation, which suggested that local authorities should be allowed 28 days in which to make those representations. If the amendment had been called we might have been persuaded that a period shorter than 28 days could be effective, but at a time like this it is essential to try to make sure that relations with local government are kept as good as possible, in the very difficult situation we face. I do not accept the hectoring tone of the hon. Member for Cornwall, North.

Mr. Oakes

I thank the hon. Member for Cornwall, North (Mr. Pardoe), who clearly accepts the spirit behind the Government's legislation and, to a large extent, the way the Government are tackling the matter. He has reservations on this clause and I shall seek to explain why the Government are putting the clause in in this form in the hope that he will accept the explanation I give. On Amendment No. 44 the hon. Member for Aylesbury (Mr. Raison) was a little unfair to the hon. Member for Cornwall, North. The hon. Member for Cornwall, North explained that the representation was rather on a quid pro quo basis, and that if representation was not permitted for private industry he did not see why it should be permitted for local government. For precisely the sort of reasons that the hon. Member for Hampstead (Mr. Finsberg) was talking about earlier, in the situation where an innocent mistake had been made, it is imperative that there should be representations to the Secretary of State through the local authority concerned. I am sure that the hon. Member would not seek to press that point, but I understand why he raised it.

1.45 p.m.

On Amendment No. 46 the hon. Member said that he had inserted the words of the White Paper into the amendment, and he asked why the clause should not be expressed in the same terms as the White Paper, which says that the excess remuneration, and not the whole amount of the settlement, will be taken away from local authorities. When the hon. Member talked about taking away the excess remuneration he was thinking in terms of a general national wage settlement, where the excess amount of money would not be included in the rate support grant available for authorities generally. It would not be available in any subsequent increase order. The provision deals with the national situation in which the amount in excess of the £6 in the settlement would not be included in the rate support grant.

The clause deals with an individual offending authority where the settlement was over £6, where an authority, knowing of the Government's pay policy, nevertheless deliberately pays one section of workers an increase of more than £6 a week. The Government regard such cases as involving a conscious act by the authority to defy the nationally laid down policy, and therefore Clause 4 contains certain penal provisions. They are practical provisions and they provide that the grant may be withdrawn.

On Second Reading of the Bill, however, my right hon. Friend the Chancellor gave an assurance that in no circumstances would the Secretary of State ever" exact a penalty on a local authority exceeding the whole cost of the offending pay settlement. He would never withdraw grant in excess of the whole cost of the offending settlement, but he might, in certain circumstances—because this clause has penal implications against the individual authority—say that it is not just the excess over the £6 but the whole of the settlement that shall be withdrawn from the rate support grant.

That is the difference between authorities at large where the excess is taken back and the individual authority dealt with under this clause. In no circumstances would the Secretary of State deduct from the rate support grant more than the whole of the offending settlement.

Mr. Pardoe

The Minister has made a helpful reply. It is a pity that what he says will not be taken into account in the negotiations, because there the White Paper and the Bill will be the guiding documents. However, in the light of his interpretation, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr. Speed

I beg to move Amendment No. 72, in page 3, line 37, at end, insert— '(4) Where a local authority, in order to make payments of remuneration in excess of the limits stated in section 1, propose to increase its rate demand, or to make a supplementary rate demand, it must seek the approval of the Secretary of State'.

The Deputy Chairman

With it we are to take Amendment No. 51, in page 3, line 37, at end insert— '(4) Where the Secretary of State has reduced the grant of any local authority under this Section, that local authority will not be allowed to levy a higher rate in the year following the year in which the reduction was made'.

Mr. Speed

This is a probing amendment. We should like to hear what the Minister thinks about the views of the ratepayers themselves. It is possible that these various sanctions could be imposed upon a local authority by the Minister in the circumstances that the Minister has outlined, and presumably the local authority could offload the burden on to the ratepayer if it wished!

We should consider the scale of expenditure which is involved. I have made inquiries over the last couple of days and it is clear that Mr. Len Murray and his colleagues believe that £6 per week will be the going rate for pay increases. That will cost Kent County Council about £50 million in a year and will raise its wages bill by more than 11 per cent. The increase of total expenditure is likely to go up by 6.6 per cent. These are the figures of one of the largest counties. We can see the scale of the operation.

Another problem is that if a local authority tries to pass increases on to the ratepayer it could result in the owners of small businesses being squeezed in two ways. Many are small shopkeepers, particularly in rural areas, for whom a full £6 could mean an increase in wages of 20 per cent. On the other hand, if the local authority also offsets its cut in grant by pushing up rates, many of these people will not receive the domestic element on rate relief. Thus, on the one hand, they will have to face a 20 per cent. increase in wages and, on the other hand, there will be a substantial increase in their rates. We have discussed this problem before, and my hon. Friend the Member for Norfolk, South (Mr. Macgregor) has tried to do something about it.

I do not want to press this too far, because there may be other ways in which the matter can be dealt with. We should seriously consider how the ratepayer will fare in all this. If we have a local authority doing a "Clay Cross"—a rogue local authority which says "We do not agree; we will do certain things."—we do not see how the money can be cut back by the Secretary of State. It would be extremely unfortunate if this extra burden were placed upon the ratepayer.

If the Minister says that the ratepayer has the ultimate sanction through his vote I would agree that this is true in certain parts of the country. But we all know that in other parts there has been no change in political control of local authorities for many years. I doubt whether those will change. I move the amendment on the basis of seeking to discover what is in the Minister's mind so that we may know to what the ratepayer can look forward.

Mr. Jasper More (Ludlow)

I support everything that has been said by my hon. Friend the Member for Ashford (Mr. Speed). I wish to press the matter much more than he seemed inclined to do. It must be obvious from the provisions of the clause that the end product will be a severe bashing for the ratepayer unless something is done. As my hon. Friend says, this is likely to happen in Labour-controlled areas, starting, for example, in Clay Cross. In justice to the ratepayers who have suffered so much in recent years as a result of so many aspects of Government policy, it seems essential that some sort of safeguard should be built into the Bill.

Mr. Oakes

The hon. Member for Ashford (Mr. Speed) asked me what the ratepayer got out of this. What the ratepayer gets out of the Bill and the policies that we are pursuing will ultimately be precisely what he is asking for. The biggest cause of the increase in rates has been inflation. If the policy is successful, all ratepayers will benefit considerably because expenditure, particularly on salaries, forms by far the greatest demand upon local authority spending.

We have in mind here an authority which, deliberately, offends against a national policy. By withholding grants in that situation, it is true that we place a burden on the ratepayer. We do this because local authorities are democratically elected bodies. In a way the ratepayer and the elector in the area stand in the same relationship as shareholders do to the board of directors of a company. There are parallel situations in many respects.

We say that if an authority—and we hope never to have to use these powers—deliberately flouts the Government's policy, the Secretary of State has to use the power, whether it be a county council or a district council. The grant is withheld and the folk in the area pay more in rates. They elect their council, and it is their council which flouts a Government policy that is overwhelmingly accepted elsewhere. The councillors, therefore, have that deterrent. They will incur not merely the unpopularity of the Government, not merely the sanction of having Government money withheld but also the wrath of the ratepayer in their areas. That is what the clause seeks to do—to bring the deterrent effect of the electorate in a democratically elected body against any council that seeks to breach the policy.

Mr. John Farr (Harborough)

I thoroughly support my hon. Friend the Member for Ashford (Mr. Speed). Notwithstanding what the Minister has said, I feel that to establish the fact that these authorities had to approach the Minister for approval before making increases would have been a much more satisfactory way of doing things. If these amendments had been accepted it would have been the first time the words "regional water authority" appeared anywhere in the Bill. The Minister said earlier that regional water authorities would be treated in all respects like nationalised industries. The point is that this is not in the Bill and they are not treated as such. The Minister's intentions in this respect will have no effect when the Bill becomes law if it remains in its present state.

It would have been a useful thing to have established a system whereby a local authority which wished to increase its rate support for any reason had to go to the Minister for approval. That would have meant a better bargain for the ratepayer in the long run.

Mr. Speed

One thing worries me slightly. The Minister talked about the ratepayers and the electors. Many ratepayers are not electors, particularly some of the smaller businessmen. This is one of the defects in a system of taxation without representation. There could well be small businesses in the outer suburbs of a town or in rural areas being squeezed both ways. On the one hand, they will find that they have a much bigger increase in the wage bill, and, on the other hand, they will face higher rates.

This has been a useful debate, it shows that the ratepayers are not forgotten. Although I cannot pretend that I agree 100 per cent. with the Minister's reply, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr. Speed

I beg to move Amendment No. 73, in page 3, line 37, at end, insert— '(5) Where a county council or a regional water authority or any other precepting authority (including the Inner London Education Authority), in order to make payments of remuneration in excess of the limits stated in section 1, proposes to increase the amount of the precept levied on any district councils, it must seek the approval of the Secretary of State'.

The Deputy Chairman

With this we can also discuss Government Amendment No. 64.

Mr. Speed

When I originally saw this group I thought that our amendment was nearer the mark than that standing in the name of the Chancellor. I accept at once that our amendment is defective in its drafting. It is intended to be helpful, and if it is deficient, that can, no doubt, be put right.

2 p.m.

We believe that this part of the Bill should apply to all local authorities. Our interpretation is that it applies to local authorities in receipt of rate support grant. However, some local authorities do not receive rate support grant. I refer to parish and town councils which sometimes employ a substantial number of staff. Such councils sometimes administer large areas. They employ caretakers for village halls, and clerks at salaries running into four figures. However, those councils seem to be excluded from the Bill. If they are not so excluded I shall be delighted to be told.

Similarly, local authorities which precept with the Greater London Council, ILEA, or county councils could escape their obligations by suffering a rate support grant cut and then precepting the poor districts. I ought to declare an interest as vice president of the association of district councils.

The Opposition are genuinely trying to be helpful. We believe that it is wrong to exclude any local authority large or small. If any local authorities are excluded our amendment attempts to put them on all fours with the other.

Mr. Oakes

I shall refer first to the Opposition amendment and relate that to the Government amendment. The hon. Member for Ashford (Mr. Speed) accepted that part of his case had been met by the Government amendment.

The hon. Gentleman's amendment was defective, in that it sought direct control by the Government over the level of rates, which would be bureaucratically intensely difficult to do, as many factors, apart from salaries and wages, are involved in the rates. We accept that there are two important categories of authorities which, athough their money had been reduced, nevertheless, because they were precepting authorities, could recoup it from the districts within their area. That was the hon. Gentleman's key point. He referred to the county councils and the Greater London Council, Basically, those are the authorities which are affected.

The needs element of the county councils, or the transport supplementary grant in the case of the metropolitan county councils, could bear the loss if my right hon. Friend took action under this clause. However, those councils could pass on to the district council by means of a higher precept, either in that year or the following year, the sum which had been taken off them by the Government. The resources element of that district would gain, because the precept had gone out, and therefore the Government would pay 60 per cent. of the penalty which it had exacted in many cases. That would not be a proper situation, and we have tried to clear up that defect by the amendment.

I should like to tell the district councils that in the unlikely event of this power being exercised the Secretary of State would make clear beyond any doubt who the guilty party was. We would not want a district council innocently to carry out the pay policy and then to be criticised or attacked for what the county council or the Greater London Council had done. We would make it clear on every possible occasion who had caused the resources element to be taken away from that district. Parish councils are exempt. They are not included in the Act, as they do not receive rate support grant, although the majority may receive an honorarium for their clerks and sometimes for a few full-time and part-time workers.

If the Opposition think that parish councils should be included, in view of their contribution to inflation, I shall consider the question. However, I do not think that that is necessary, as those councils employ few staff.

Mr. Speed

I thank the Under-Secretary of State for that reply. I know several parish councils in which the clerk's remuneration runs into four figures. It is not an honorarium these days, and I do not think that it should be when one considers the wide powers given to parish councils in the local government reorganisation.

The position of caretakers would be anomalous. Many parish councils employ full-time caretakers at a reasonable wage. It would be unfortunate if the parish caretakers were working alongside a county council caretaker in a local school. I do not press this, but it is a little anomalous.

Where does ILEA fit in? Is it treated by the Government as a special committee of the Greater London Council for the purpose of the clause? It would be even more anomalous if ILEA were left out. I hope that it is covered by the amendment.

Mr. Oakes

Speaking off the cuff—if I am wrong I shall write to the hon. Gentleman—I think that ILEA is treated as the Greater London Council. It is certainly not left out.

Amendment negatived.

Mr. Lawson

I beg to move Amendment No. 52, in page 3, line 38, leave out subsection (4).

The Bill does many wicked and dreadful things in many spheres, no doubt in a good cause, albeit misguided. However, one thing which I cannot imagine even the framers of this Bill intended was to bring about the dissolution of the United Kingdom. Yet, on a cursory reading, that is the force of subsection (4), which treats local authorities in Scotland differently from those in England and Wales. It seems to me and to my hon. Friends whose names are appended to this amendment that the simplest way is to strike out subsection (4). Subsection (1) applies to local authorities in Great Britain. Great Britain includes Scotland. Therefore Scotland is safely taken care of in subsection (1), on all fours with England and Wales. I shall therefore be grateful if the Minister, when replying to the debate on the amendment, will explain why there must be special provisions for Scotland and what is the precise significance of this provision.

The Under-Secretary of State for Scotland (Mr. Hugh D. Brown)

I am happy to assure the hon. Member for Blaby (Mr. Lawson) that there is no devolution significance in this. It has nothing to do with any intended break with the United Kingdom. It is a factual point that the calculations of the resources element in the rate support grant in Scotland is done on a different basis, and we need subsection (4) to achieve the same result as is achieved in England and Wales.

Mr. Lawson

Having received that assurance from the Minister that this is not intended as a step towards devolution or the break-up of the United Kingdom, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment made: No. 64 in page 4, line 8, at end add— '(6) Where, in consequence of any action taken or treated under subsection (5) above as taken by the Greater London Council or a county council, any sums payable in any year to that council by way of rate support grant or grant under section 6 of the Local Government Act 1974 are reduced and that council in that or any subsequent year issues a precept to a rating authority, subsections (1) to (3) above shall apply as if the action of that council had been the action of the rating authority.'—[Mr. Armstrong.]

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

Mr. Raison

I wish to raise a simple but not unimportant point. Will the remuneration exceeding the limits imposed—if I may use the nauseous terminology of the Bill—under the White Paper be ultra vires? Will the district auditor have the duty of either certifying and approving such payments or rejecting them? Are we in for more Clay Crossery under this provision? I am tempted to say that, if we are in for more Clay Crossery, I hope that the Tribune Group is accumulating funds with which to bail out those Labour councillors who may be caught. I hope that for the sake of those councillors the fund will be more successful than that raised by the Labour Party National Executive Committee, which seems to have helped the Clay Cross councillors.

This is an important point, and if I have caught the Secretary of State unawares, I am rather pleased on the one hand, but I hope that he will find a means to answer it fairly quickly.

Mr. Crosland

The answer to the hon. Gentleman's question is "No". I shall try to answer more fully before the end of my speech.

I do not want to add to the large number of words which have been spoken in the last 22 hours, but I want specifically to repeat what my right hon. Friend the Chancellor of the Exchequer said yesterday during the Second Reading debate. He made clear that the Secretary of State would follow the Government's policy as set out in the White Paper: he would reduce grant up to the full amount of the settlement which went outside the pay limits, but no more. Those last three words are extremely important. I give a clear assurance that the net reduction of grant to an authority will not be greater than the total amount of the pay settlement in question.

I do not want there to be any misunderstanding about consequential reductions. Once the Secretary of State has decided on such a reduction, he will not pay resources element to help any part of the consequent increase in expenditure that the authority has to meet out of rates. If the cost of the settlement is, say, £100,000, not only will the local authority have to find that money itself, but a deduction will be made from its grant of up to an equivalent amount.

Furthermore, if a local authority in the following year rates to recoup payment of the grant which has been deducted, the Secretary of State has power also to reduce the grant for that later year so that the resources element will stay the same. In effect, the Secretary of State will have to make two reductions to ensure that the Government's intention is carried out. Indeed, if authorities went on recouping themselves out of higher resources element year after year, there might have to be more than two reductions, but that is a highly unlikely situation.

I have an extremely important answer to give to the hon. Gentleman's extremely important question. District auditors will not certify wage settlements made in excess of the pay limits as ultra vires. The payments are lawful, which is why the Government are imposing sanctions under Clause 4.

Mr. Graham Page rose—

Mr. Crosland

Do not catch me out. I have only the answer I was supplied with.

Mr. Graham Page

How does the Secretary of State find out about these wrongful deals with the local authorities? What will be the process of monitoring? We have asked that question before, but we have not had an answer to it. I know the difficulties.

Mr. Crosland

The right hon. Gentleman and other hon. Members have raised that question, which has been answered by my hon. Friend the Under-Secretary of State. Without a formal process of monitoring, the Department has a great deal of information about the individual wage settlements made in individual authorities, and I do not think that there will be much difficulty about discovering settlements which exceed the 10 per cent. laid down in the White Paper.

2.15 p.m.

Mr. Eddie Loyden (Liverpool, Garston)

Earlier in the debate we discussed the mechanisms that would trigger off investigation into increases beyond the levels laid down in the Bill. It could be established from the Price Code. There is no evidence that the same mechanisms could operate in the case of local authorities. It has been consistently said during the debate that the essence of the Bill is to take sanctions against employers. If the limit was exceeded and the local authority did not pass on the increase in terms of rates but made a cut-back in its services, would not the Secretary of State consider this to be moving away in principle from the concept that the Bill is designed to bring sanctions against the employer? In that case, it would bring sanctions against the community, which would not be in accord with the arguments which have been put forward.

Mr. Crosland

There is no doubt that we shall know of settlements which might come to fall under the provisions of Clause 4. We are dealing here with a public sector in which everything is made public. We should certainly know, if not from the local authorities, from the trade unions concerned.

My hon. Friend the Member for Liverpool, Garston (Mr. Loyden) raised rather wider issues. The Bill is not about public expenditure as a whole. There is no statement about local public expenditure in the Bill. There is a statement about wages, salaries and prices. I hope that the difficulty to which my hon. Friend alluded will not arise.

Mr. Lawson

I am slightly puzzled, because a moment ago the Secretary of State referred to the monitoring of settlements to make sure that they did not exceed the 10 per cent. laid down in the White Paper. Was he referring to the £6 limit laid down in the White Paper, or had he in mind some future scheme for total local authority expenditure?

Mr. Crosland

I was referring to the £6 flat-rate increase referred to in the White Paper. In the debate on the amendments there has been much discussion whether that is the best way of going about it. The real point about this clause, as about other clauses in the Bill, is that it is our profound, firm and optimistic hope that the clauses will never have to be brought into effect. Given that we embarked on this kind of prices and incomes policy, the sanctions provided for in the clause—which are on all fours as far as one can make them with the Price Code—appear to be the best available means of enforcing the policy.

Question put and agreed to.

Clause 4, as amended, ordered to stand part of the Bill.