RATE SUPPORT GRANTS

HC Deb 24 January 1978 vol 942 cc1281-322

Mr. George Younger (Ayr)

I beg to move Amendment No. 491, in page 30, line 41, leave out 'have regard to such considerations' and insert 'act in accordance with such directions'.

The Second Deputy Chairman

We may consider at the same time Amendment No. 492, in page 31, line 1, leave out 'bring to his notice' and insert 'make'.

Mr. Younger

These amendments enable us to have a look, albeit brief, at the future of the rate support grant after the Assembly is set up. Our object here is to insert more clarity into the nature of the future relationship between those involved in the rate support grant order negotiations at every level.

In order to explain the amendment, we must look for a moment at the rate support grants in general and how they work relative to the new proposed system. As the Committee knows, the rate support grant is now the main, and in many respects the only, organ of Government support for local government in Scotland and England—but as far as we are concerned, for local government in Scotland. It is an immensely complex system. It involves a great deal of calculation behind the scenes by the Civil Service and by local government officials.

In general the system is that, in consultation with each other, the Civil Service and local officials draw up an agreed total of aggregate expenditure expected to be incurred in the years in question by the local authorities. They then, as a separate calculation, parcel this out, according to what I always regard as immensely complicated formulae, among the various local authorities involved.

I stress the complication of all this because I doubt whether anyone on the Government Benches will dispute that we who are not involved in these negotiations always find it extremely difficult to get into the swing of understanding the negotiations each year when they take place. I personally find that if I have to indulge in a period of study of them for some particular debate, by the end of it I think that I am beginning to understand something about it, but when I come back to it again in the next year, I might as well have started from scratch because it has all gone again.

In the future, the system will be further complicated by the fact that there are to be two completely different sources of local authority expenditure. In Schedule 15 there is a list of what are to be in the future the reserved functions of local authorities and other bodies. These are the functions which to be reserved entirely to the decision of central Government through the Secretary of State, although they are carried out by local government or other bodies either to a very great extent or entirely.

There is on page 28 a long list of functions. Some of them are fairly small ones and some are very big ones. The most obviously big one at the beginning is that of police, which is an extremely expensive service. It will continue once the Scottish Assembly is set up to be administered as it is now, by local government. It will be grant aided, of course, in the way that it is now, with the exception that the local authorities will have to rely upon getting the support for this, as of now, as part of the rate support grant settlement. But this will now be made up differently, in that the Secretary of State and central Government will have to negotiate with the Scottish Assembly and the Scottish Executive to establish what element in the rate support grant will be relevant to these reserved functions.

This is where the necessity for our amendment comes in. If the Committee will imagine the situation, it will be that for, as an example, the police—a very expensive service—the Scottish Executive and the Ministers under the Scottish Secretary will be told by the United Kingdom Government, through the Secretary of State, what the Secretary of State thinks is necessary for running the police service, or running any of the other services mentioned in Schedule 15.

The words written into the Bill which I wish to delete by the amendment are that the Scottish Secretary shall have regard to such considerations affecting reserved functions as the Secretary of State may bring to his notice. That seems to be a pretty good euphemism for what I imagine will happen.

If the Scottish Secretary and the Scottish Executive are merely to have regard to such considerations as are drawn to their attention, surely what it means is that they will have to carry out what the Secretary of State tells them. If the Secretary of State says that £50 million will be needed to run the police service through local government in the coming year, the Scottish Executive will have no option. It will have to "have regard to" that, as it is put in the Bill. It will certainly have to accept that figure. No doubt it can argue if it wants to. But I cannot see—I hope that we can be assured that this is not the case—it being able successfully to deny the validity of the figure that is presented to it by the Secretary of State.

For this reason we think that the wording in the Bill ought to reflect the imperative nature of the requisition on the Scottish Secretary by central Government. Therefore, it would read from line 40 on page 30: The Scottish Secretary shall act in accordance with such directions affecting reserved functions as the Secretary of State may make. Our contention, therefore, is that the words that we wish to insert much more accurately convey what I believe will be the situation.

For that reason, I very much hope that the Government will accept the two amendments, because it is surely desirable that there should be no doubt in anyone's mind of the nature of the relationship.

I make one or two points about the relationship between the Secretary of State's interest and the Scottish Secretary's interest in the rate support grant order. The first point that I make is in the nature of a question. It is a fundamental question as to the drafting of the Bill, on which I would ask the Secretary of State for some advice. I may have got it wrong, but it appears to me that the nature of the wording may be defective.

8.30 p.m.

As the Committee knows, the Scottish Assembly will be empowered to legislate within the scope of many of the functions that we are giving to it. One of those functions is local government. The Assembly will be able to legislate on local government.

It follows from that that the Scottish Assembly will be able to change the rate support grant system in future if it wishes to do so. I presume that a Bill could be introduced into the Assembly, which could pass it and make it an Act of the Scottish Assembly, for an entirely new subsidy system.

The Scottish Assembly is not empowered to alter, repeal or amend the Scotland Act, as this Bill will become when passed. But it can alter, repeal or amend the Local Government Acts. Therefore, what will happen if in the future the Scottish Assembly were to decide to have a completely new subsidy system which was unsuitable, perhaps, or did not work in very well with the interests of the Secretary of State and the Government in the supporting of the reserved functions? We should then have two different systems of local government financial support—first, the RSG system, which for the reserved functions would be continuing, I presume; second, a new system brought in by legislation of the Scottish Assembly.

First, I should like to know whether I am right in thinking that this complete difference could take place between the two bodies in the future. My second question follows from the first. If it is the case that we could move towards two different systems because of the different political control of each part of the setup, would it not be wiser to operate this system as laid down in the Bill by having two RSG settlements instead of one that is bundled in with another?

I see no reason why the Secretary of State and the United Kingdom Government or the Scottish Office should not draw up their own RSG arrangements exactly as they do now for their own reserved functions, of which they are retaining control, and pass that to local government. The Scottish Assembly and the First Secretary and his Ministers have no standing in this matter at all. It is a central Government responsibility.

The Secretary of State could have his RSG settlement exactly as he does now, calculated and discussed as it is now, exactly as it has always been, and the Scottish Secretary could have his RSG settlement, again calculated as it is now, in negotiations between the Scottish Executive and Scottish Ministers and the local authority association, COSLA. If that were done, many of the undesirable features of the present joint system would be eliminated.

That brings me to my next point, which concerns the nature of the support in future that central Government will give for their central functions. It seems to me that we are working back—not wittingly; I think unwittingly—to the old system of specific grants, which we have been trying to get away with—[HON. MEMBERS: 'Oh."] It was a Freudian slip. We have been trying to get away from that system.

I take again the example of the police, as it is, perhaps, the clearest and most obvious example. What will happen is that the local authorities will receive in future a specific grant for police. They will not be able—I hope that I can be assured that this is true, anyway—to pocket the portion of RSG which is earmarked for police support and decide to cut down the police force and spend the money on bigger hospitals. It is important that everyone concerned should be assured that that will not be so.

That again emphasises the absolute wall that we are building between these two chunks of the RSG. That wall is patently there, in my opinion—unless I have got all this wrong. I should be delighted to be corrected if I have it wrong. It seems to me that we are building in between the two chunks of the RSG a wall that absolutely demands that we recognise these two sections of RSG, negotiated by two sets of individuals, two different Government Departments—the Scottish Executive's Department and the Secretary of State's Department representing the United Kingdom Government.

There is a great deal more to think and talk about and to cause concern in this innocuous clause. There is much more than at first appears. The amendments are designed to do quite a simple job on the face of it—to represent as faithfully as we can in language the nature of the relationship between the Secretary of State and the Scottish Executive and Scottish Ministers when it comes to those subjects which local government administers but which central Government have the total interest in controlling and for which they proide the whole rate support grant money.

The two amendments are a genuine attempt to make the wording of the Bill more closely correspond to the reality of the situation. Going with them are the other questions, which go much wider. I shall understand if the Secretary of State cannot give a full answer tonight, because we shall have to return to the subject in another place, and if we are ever given time—a matter about which we cannot feel confident these days—at another stage in the House of Commons.

I hope that I shall carry every hon. Member with me when I say that the rate support grant system is in all conscience difficult enough to understand anyway. If we are to put into it two different sources and two different methods, with two different Government Departments dealing with COSLA and the local authorities in Scotland, the complexity that we find difficult now will become almost impossible. In the interest of clarity and correctness, to make it easier for all to know where they stand, I very much hope that the amendments will be accepted.

Mr. Dalyell

I made a long speech on the previous amendment, and it would be unfair of me to detain the Committee for long now. But the amendment raises the question of the increasing disquiet felt by many local authority heavyweights in Scotland about the idea of having to deal with both an Assembly and the previous people with whom they have dealt.

Therefore, I repeat that people such as Councillor Charles Snedden of the Central Region and some of his colleagues who have to deal with finance, people such as Councillor Alex Bell in the Lothian Region, say to me more and more that they are extremely concerned about the future of local government as they have known it. They wonder whether the present Government have any idea how the Assembly will tie in with local government.

I leave it with one question: how do these arrangements fit in with the continued existence of the regions? If we keep them, there will certainly again be heavy duplication in the financial structures, which are difficult enough and which the Bill seems to make even more complicated.

Mr. J. Grimond (Orkney and Shetland)

The rate support grant is indeed of great importance and considerable complexity.

I notice in the schedule that it is not only police but ports that are reserved functions of local authorities and other bodies. I share the desire of those who want to see as much clarity in this matter as we can give. I hope that the Secretary of State will be able to spend a minute or two explaining how he sees the working of the clause. I am not so far convinced that the amendment will add to clarity. If it does, so much the better.

I should like first to ask whether the hon. Member for Ayr (Mr. Younger), who moved the amendment, is right in saying that it would be open to the Assembly to set up an entirely new subsidy system, as he described it. I am not clear that that would be so. That might be challenged, probably successfully, as going outside the Assembly's powers as stated earlier in the Bill.

My second question concerns the consultations with associations of local authorities and consultation generally. At present rather elaborate consultations go on. Although there are complaints about them, those who take part in them usually come out from them feeling that they have made their point and that some attention has been paid to it. Is it the intention of the clause that this form of consultation will carry on? I follow that it may be with different people, but I take it that the same type of consultation is intended.

Such consultations will have to be tripartite. The hon. Member for Ayr spoke of building walls and of returning from the system of general grants to specific grants for specific circumstances. I was not certain whether he wanted the walls to be erected higher or removed altogether. If we have two systems the walls would be thicker and higher. It seems that the consultations must be tripartite to some extent. If, for instance, the police is a reserved subject, it will have to be a subject of which the consultations with the Scottish Secretary will take some account.

I should be grateful if it could be explained how these consultations will be carried on. Although I see that to have an absolutely firm direction, as the amendment suggests, might increase the size and height of the wall, it might clarify matters and make it easier for local authorities to understand with whom they have to deal. I hope that the Secretary of State will do his best to enlighten us on these points.

The Secretary of State for Scotland (Mr. Bruce Millan)

The amendment deals with a complex and important matter. Although the hon. Member for Ayr (Mr. Younger) said that he found difficulty at the best of times in understanding the rate support grant, he made a pretty good fist at it with his amendment. He has raised a number of interesting matters.

The rate support grant will continue. That does not mean that it will continue in its present form for all time. The Scottish Assembly could, to answer the question of the right hon. Member for Orkney and Shetland (Mr. Grimond), decide to give financial assistance to local authorities in some different way. As a matter of practicality, the Assembly will probably find, in the early days, and possibly for a good length of time afterwards, that it would be sensible to continue with something like the present system.

Whatever complaints there may be about the rate support grant system, it is one that has been built up over many years. It has been refined through consultations between local authorities and the Scottish Office so as to meet individual circumstances and cope with the needs and resources of individual authorities. In my view, it is not something which would be lightly abandoned by any Scottish Executive. The system can be refined further, and made even more fair and equitable. A lot of thought has been given to it over the years, and no doubt the Scottish Executive would want to look at it carefully before making radical changes.

It would be within the power of the Assembly to make radical changes, but we are dealing with the situation as it is. The clause was drafted in such a way as to enable the necessary adjustments to be made if the system were radically changed. That might involve Assembly legislation, but, in so far as there might be an impact on reserved functions, Westminster legislation might be involved. That is something that could apply to anything in this Bill when there is a relationship between what will be done by the Assembly and the House of Commons. Alteration in the legislation of one place may require corresponding alterations elsewhere. In principle we are not in any different situation when dealing with the rate support grant.

8.45 p.m.

For the purposes of the clause it is assumed that the responsibility for the rate support grant negotiations will be taken over by the Scottish Executive. That is because the vast majority of local authority functions are devolved functions, and the individual Scottish Secretaries will, therefore, be responsible for these functions. The Secretary for Finance—or whoever it is in the Executive who deals with these matters—will presumably go through the negotiations with the Convention of Scottish Local Authorities, as I do at present. There is a system of consultation. We have, I think, three formal meetings, and an enormous amount of work is done behind the scenes through local government finance working parties, in which local authority officials and my own officials are involved.

I cannot give a guarantee that the Executive will run the system in exactly that way in the future, but I think that, as a matter of common sense and convenience, as these consultations and the system of consultations have been built up over the years, one must assume that things will continue in that particular way. The system basically will carry on as it is at present, with the very important exception that it will be the Scottish Executive, rather than the Secretary of State for Scotland, which will have the negotiations with COSLA.

That raises the important question of what happens about the reserved functions. Although it is true that the vast majority of the functions will go to the Scottish Assembly, there are certain reserved functions, outlined in Schedule 15, which will remain with the Secretary of State for Scotland and will have to be financially supported in the same way as the services are supported at the present time.

It is, of course, important to point out that rate support grant is a general and not a specific grant. It is something that provides for Government assistance to a whole range of services. Although certain discussions take place between Government and COSLA as to the development of individual services—and certain estimates are made as to likely expenditure, so that there is an aggregate total of relevant expenditure on which rate support grant is calculated—once the grant is paid the local authority is absolutely free to use it in any way it desires.

That is the essence of the rate support grant system, and it is something to which the authorities attach a great deal of importance. The general authority view is that it is better to have a general grant arrangement of that sort, which gives the authorities scope for deciding their own priorities, rather than to have a system of grants which are specific and which relate the Government help to individual services.

That is the general situation and we have tried to maintain that within the new framework that we are establishing here. In other words, we look on the general support to local authorities, even for the reserved services, as coming from the rate support grant negotiations between COSLA and the Executive. That is why we require a clause which enables the Secretary of State for Scotland to be responsible for a certain amount of input, so to speak, into the system before the final negotiations are concluded. For that reason, in Clause 65(2) we say that a Scottish Secretary shall have regard to such considerations affecting reserved functions as the Secretary of State may bring to his notice". Why did we use that language rather than the language suggested in the amendment? The hon. Gentleman suggested that the language in the amendment is a more accurate indication of what will happen, but I do not think that that is true. Suppose that we were to direct, as was suggested—the hon. Gentleman thought that we should have statutory authority for it—that for a certain reserved function a certain amount of money should be put in as the relevant expenditure, and that this were decided between ourselves and COSLA without the Scottish Executive being involved, and the Executive then disagreed with that item of expenditure. If there were a specific direction it would not bite in practice, because an adjustment could easily be made by deducting the amount in dispute from some other item that was part of the total relevant expenditure—or, for that matter, by deducting it from the total. The grant is not based on individual items but on a total. Therefore, if there were a practical difficulty the Executive could make an adjustment elsewhere. One would, therefore, be making a direction and establishing the wrong relationship, instead of consultations, which I hope will be carried out on a reasonably friendly level.

If one puts it in the sense that the Secretary of State is directing or dictating to the Executive we shall probably get more difficulty and more chance of dispute. At the end of the day the Secretary of State for Scotland would not be able effectively to dictate what would go into the settlement because an adjustment could be made elsewhere over which he would have no control. That is the reason we have drafted the clause in this way, although I fully understand why the hon. Gentleman has moved the amendment. I believe that he has raised some interesting issues in doing so.

I should like to go on and say something about the police, which is the main reserved function. Although there will be consultations between the Secretary of State and the Scottish Executive, the RSG negotiations will not be on a tripartite basis, as suggested by the right hon. Member for Orkney and Shetland. The Secretary of State will have certain discussions with COSLA about reserved functions, specifically the police. The Scottish Executive will have the general RSG negotiations about the main generalities—the 90 per cent, or more of local authority expenditure relating to devolved functions. It is not provided in the Bill that there will be a tripartite negotiation. Indeed, I would consider it improper for the Secretary of State for Scotland to be involved in negotiations about devolved functions.

Speaking for myself, whatever there was in the way of informal discussions on expenditure as a whole, I would not see myself—if I were Secretary of State in those circumstances—being involved in those negotiations. I am pretty sure that the Scottish Executive would not want me to be concerned, and nor would the local authorities. So far as I was dealing with reserved functions I would be having my own discussions; but those discussions, having taken place, the input has to go into the RSG negotiations, as I have already explained, because the generality of the RSG will still come through the Scottish Executive.

That raises the question whether in practice there might be some difficulty if there were a difference of view as to the correct level of relevant expenditure for the reserved functions. I am talking about a difference of view between the Secretary of State for Scotland and the Scottish Executive or a difference of view involving COSLA as well. If there were a real danger of that not only happening but making a substantial financial difference as well, the hon. Gentleman's solution—which is to break the thing completely—would have a considerable amount of merit, although it would almost mean making the reserved functions specifically granted rather than setting up an entirely separate RSG negotiation so that two separate negotiations would be going on.

In practice, I think that the amounts of money involved, in terms of the generality of local government expenditure, are not so great that we would want to go for that system. I say that for two reasons. First, as I have already said, the reserved functions are rather less than 10 per cent, in terms of total local authority expenditure. Secondly, the overwhelming item is, of course, police and traffic warden expenditure.

I have figures for 1978–79, although I should not like to be wholly bound by them because the reserved functions contain a number of minor items which we have not yet identified. We reckon that the identifiable reserved services amount to about £138 million, which is between 9 and 10 per cent, of total local authority expenditure next year. When we have identified some other items the figure might rise to £140 million, but it will certainly be a figure of that kind. Of that figure the police and traffic wardens represent no less than £129 million, and in addition to the police the Civil Defence and sheltered workshops are specifically granted. Out of that figure of £138 million, less than £10 million is specifically granted at present, and that will be reserved to the Secretary of State.

In regard to matters which are not devolved, the Committee will see that paragraph 5 of Part II of Schedule 10 reserves grants for specific purposes relating to reserved functions of local authorities". In other words, the specific amount of 50 per cent, for police services, which is the main reserved function, will remain with the Secretary of State for Scotland. Therefore, the Secretary of State for Scotland will not only decide the relevant expenditure in consultation with COSLA but will make a specific grant as well. What will come through the rate support grant will be the residual amount that comes through the normal RSG calculations. That will still come via the rate support grant even in respect of the police, but it will be a small proportion of what local authorities will be receiving in respect of the police. Therefore, in practice the difficulties to which the hon. Gentleman rightly drew attention will not be likely to make a great deal of difference.

We are not saying that this is the only way of dealing with this complicated matter, but we felt that it would maintain the rate support grant system for devolved functions and for as many of the non-devolved functions as we thought we could legitimately grant. We believe that this will be for the convenience of everybody, including the local authorities. At the same time, with regard to the reserved functions, there is a safeguard in both financial and statutory terms. Therefore, the most important of these functions—that relating to the police—is not likely in practice to be neglected. I hope that with that explanation of this complicated matter the hon. Gentleman will be willing to withdraw his amendment.

Mr. Dalyell

I do not think my right hon. Friend dealt with the relationship with the regions. He may have overlooked that matter.

Mr. Millan

The answer is that the clause makes no difference to the situation. The general question of the relationship between local government and the Scottish Executive is a wide one. As Ministers have made clear on numerous occasions, it will be possible for the Executive to reform local government, if that is what the Assembly wishes to do. However, this clause as drafted does not have much effect on the wider issue.

Mr. Younger

I am grateful to the Secretary of State for Scotland for a most interesting reply, which has answered many questions and helped to clarify how the new system will work. However, it raises a few important points which should go on the record.

It appears that the right hon. Gentleman has in mind an extra stage in the rate support grant negotiations, which as a first step will take the form of bilateral negotiations. There would be the preparatory work, and there would then be bilateral discussion between the Secretary of State and COSLA on these reserved functions on the one hand, and between the Scottish Executive or the Scottish Secretary and COSLA for the non-reserved functions. Only after those two bilateral negotiations have been completed would they be put together, and the rate support grant negotiation would take place between the Scottish Secretary and COSLA. The Secretary of State would not be involved.

Therefore it follows that in the general rate support grant negotiations there would be no chance of altering that section which related to reserved functions. That would be on the table as a fixed, agreed amount and, to that extent, the negotiations will be pre-determined as regards reserved functions.

9.0 p.m.

I take the Secretary of State's point that the vast majority of the expenditure on reserved functions relates to police and that the vast majority of that expenditure is specifically granted now and will be specifically granted in future by virtue of the provisions at the foot of page 50. In fact, we are leaving the vast majority of the responsibility for police, traffic wardens and so on with the Secretary of State. That should be clearly understood so that we all know where we are.

Two other things arise from what the Secretary of State has said—and his explanations have been helpful. The right hon. Gentleman agrees that the whole system could be changed by the Assembly, though I take his point that the Assembly may not want to meddle with the system. Equally, it is possible that Whitehall might want to change its side of the bargain.

I understood the Secretary of State to say that the wording in Clause 65 is sufficiently flexible to cover any of these eventualities. If it is not, this matter should be looked at carefully before the Bill leaves the House so that we may see whether it can be improved. It is important that we should not let it go through in a form which fetters either side in changing the system.

Mr. Dalyell

Can the hon. Gentleman imagine a situation in which the Assembly would not want to change things, given that one authority—that in Strathclyde—will be half the size of the Assembly?

Mr. Younger

That is a good point. I agree with the Secretary of State that the Assembly, if it has any sense, will be chary of changing this complicated system because it will take Assembly Members some time to understand it. However, there will be strong pressures, and that brings me to my next point.

The Secretary of State made clear that it is possible for the Scottish Assembly to change the rules in the middle of the game. It may be granted so many hundreds of millions of pounds under agreed calculations of what the money is needed for, and then spend it on quite different programmes. I accept that the specific element of the central Government grant cannot be changed, but there is nothing sacrosanct about the allocation of the sums agreed in the negotiations. The money approved for education, hospitals, housing or anything else could be used for different purposes. The Secretary of State has also admitted that the portion of the money provided for the reserved functions which is not specifically granted could be used for other things.

In making this legislation we must allow for the worst cases as well as for the best cases. If all concerned wish to make the system work, it could probably be made to work, but we must envisage the worst situations. We must think this through and take into account the possibility of a thoroughly hostile relationship between the two parties.

We must consider the clause in the light of accepting that it is possible—some would say extremely likely—that there will be strong pressures to spend the money that is granted for quite different purposes than those for which it was voted. Further, we would be unrealistic if we did not face the fact that there will be a bargaining system. Such a system is bound to develop from time to time. If the Assembly gets at loggerheads ideologically with central Government at Westminster, it will try to bargain something that it wants to get out of Westminster in return for spending money on certain things in certain ways.

The right hon. Gentleman has fairly admitted that it will still be open for the money to be spent in ways quite different from those envisaged in the rate support grant calculations. That is something that he should recognise. I should like to know what he thinks he would do if lie went to next year's rate support grant discussions and found that last year's grant had been completely misallocated in the spending of it. Would he have any sanction that he could apply? What action would he intend to take, or would he think that it did not matter?

I ask the Secretary of State to tell us whether it would be possible for the Assembly quite deliberately to accept a rate support grant and deliberately to underspend on important matters affecting local government, relying upon local government to raise the necessary shortfall by increasing the rates. If that were so, it would be tantamount to giving the Assembly a right of taxation, something which many have wanted it to have and which so far has been said to be impossible. Is the right hon. Gentleman able to allay my fears? It is my understanding that it would be possible for the Assembly to take a rate support grant settlement of £500 million and to ensure, for example, that it spent £50 million short on local government services, thereby forcing local government to raise extra money through the rates and altering the whole balance of the system between central Government and the Assembly.

I hope that the right hon. Gentleman will try to answer my questions. They are not raised with any destructive intent. I believe it necesary that we try to legislate for the worst situation. There is no problem with the best situation. If everybody happily goes along with the system, wanting it to work and determined that it shall be made to work, clearly it can be made to work. However, we must legislate after having taken into account situations which are bound to occur from time to time in which there is a deliberate intention not to make the system work.

I hope that I shall not tread on too delicate ground when I offer an example that I believe will wash out any rosy ideas that Ministers may have that everything will always be sweetness and light. There is no doubt that the Scottish Grand Committee and Scottish Standing Committee system in the House of Commons has, at various times during the past 15 years, been deliberately operated upon by those who did not wish it to work to ensure that it would not work. Incidentally, that is a great deal of the reason for our being where we are today.

I hope that the Secretary of State will regard my remarks as being constructive. I stress that we must ensure that we legislate for the worst situation as well as the best. I hope that he will now answer some of my questions.

Mr. Millan

I am glad to answer some of the questions of the hon. Member for Ayr (Mr. Younger).

First, the hon. Gentleman is formally right and accurate in how he describes the way in which the negotiations will take place. However, the discussions between COSLA and the Secretary of State for Scotland on the reserved functions will be a much less complicated matter than the discussions between COSLA and whatever Scottish Secretary is responsible for them at the Scottish Executive level. That is because they will be dealing not only with much less expenditure and a very restricted range of functions but with a simpler operation because of the specific grant for police. With that qualification, I accept that the hon. Gentleman accurately described what would happen.

Secondly, the hon. Gentleman asked whether the rate support grant system could be changed and whether the Bill as drafted would comprehend and deal with any other system that might be put in its place. We have drawn the clause in a way that we think will fit amendments to the rate support grant system as we know it. But if the system were replaced by something entirely different, the clause would not bite.

Legislation may be passed by the Assembly on many matters which affect relationships with Westminster, and we may have to make corresponding changes here. Equally, we may make changes here which have an impact on Assembly legislation. Therefore, it was impossible to draft a clause which would bite not only on the rate support grant system but on some other system, not yet invented, for supporting local authorities. But for this system and any variation within the limits that we know now—we change the formula from one year to another in modest ways to affect redistribution and so on—the clause is perfectly adequate.

Mr. Younger

We must envisage the Scottish Assembly changing the system and the Westminster Government not changing or refusing to change it. In those circumstances, would the clause still be operative as regards the reserved functions?

Mr. Millan

Yes. We shall have to assume that as a matter of common-sense where there is an inter-relationship. First, legislation does not go through the House of Commons overnight and presumably it will not go through the Assembly overnight. There will be some informal coming and going. No one would want a system which did not fit together. The local authorities would have a strong view to express on this matter. As a matter of practical politics, we do not want a system, invented by either the Assembly or Westminster, that is so out of joint with what is happening at the other place that it does not work and local authorities are grossly inconvenienced. We must assume that that will not happen.

The last two matters raised by the hon. Member for Ayr rested on a misunderstanding not of the rate support grant but of the block fund system from Westminster to the Assembly.

The rate support grant that the Scottish Executive will pay to local authorities in Scotland will come out of the Scottish Consolidated Fund. The block fund from Westminster to the Assembly will not identify specific elements for rate support grant. Still less will it identify specific elements for individual services within the rate support grant.

The problem about which the hon. Gentleman was worried—that the Assembly would get money for one item and use it for another—will not arise, because the block fund is not specifically allocated to a particular service. The real problem, if it is one—I am not admitting that it is—is present now. The rate support grant, being a general grant, leaves it open to local auhorities to spend the money on other items, and they do.

When we discussed the rate support grant for 1978–79 we noticed that the actual expenditure for 1976–77 was, in a number of instances, different from the calculation of aggregate relevant expenditure. There was no reason why that should not be so. The local authorities were free to use the money in whatever ways they thought fit. They were not bound to use it on an individual service because it was identified at a particular level of expenditure in the previous rate support grant negotiations. There will be no difference in terms of local authorities using the rate support grant for other purposes when the Scottish Executive deals with the matter.

The hon. Member for Ayr was under a misapprehension about the block fund arrangements between Westminster and the Assembly. It will be possible for the Assembly to alter the general relationship in terms of expenditure between itself and the local authorities just as this Government have altered the RSG every year. Certainly, while I have had responsibility we have increased and reduced the RSG. That alters the balance of revenue raising between central Government taxation and local taxation. As regards the Assembly, it will alter the balance between what is raised by local taxation and what is paid out of the block fund.

The Assembly may be more generous—that is, reduce the rate and pay more out of the block fund—or less generous. In principle, that is what happens now. The decisions about the balance between local taxation and other ways of raising money are taken after consultation by the Secretary of State for Scotland. Those decisions will be taken in future by the Scottish Executive, but such decisions will basically be the same. They will be taken in the light of exactly the same kind of considerations that influence or determine the Secretary of State's decision at present.

The debate has gone slightly beyond the amendment into the clause as a whole, but I hope that it will have clarified some of the financial relationships which I agree are extremely important and in which the local authorities have a keen interest.

9.15 p.m.

Mr. Robert Adley (Christchurch and Lymington)

I apologise for not being in the Chamber for most of the debate but I hope that the Minister will answer a question. Perhaps this is one of the few opportunities that we shall have to raise the question of tourism, which is dealt with in the Bill. There seems to be little or no chance of debating it.

Are the rights within the Bill for the Scottish Tourist Board to advertise itself overseas and to take over the functions within Scotland, which are at present under legislative arrangements, reserved to the BTA, to be under the RSG arrangements or under the Assembly Fund arrangements? Would the Minister say something about this important matter? It is little short of a scandal that the constitution of the British Tourist Authority is to be completely changed and that the Committee is given no opportunity to discuss the matter.

Mr. Younger

I am grateful to the Minister for his answers. I have one important comment to make about them. Finally we have got out of the Secretary of State a matter of great importance. He has made it clear that in effect the Scottish Assembly will have a tax-raising power. It will be able to save money on its block grant, which will be given on the understanding that it will be spent on a range of services which will be discussed in detail during negotiations, and to spend that money on something quite different. It will then be able to recoup that sum by raising rates from the ratepayers of Scotland.

Can the Secretary of State confirm that there is nothing to prevent the Assembly from doing that if it so wishes? Can he confirm that there is no limit and no protection for the ratepayers?

Mr. Grimond

This is an important matter. I am sure that what the hon. Member for Ayr (Mr. Younger) says is correct, but if the Assembly saved money by not spending its total grant, it could spend its savings only on something within its powers. Presumably the Assembly would have negotiated the total grant. It cannot simply save money and do something which is not in its power.

Mr. Younger

I agree. I hope that I am wrong in my conclusion.

Mr. Dalyell

Is the hon. Member for Ayr (Mr. Younger) saying that this is a back door way into the levy on rates which was discussed on the White Paper?

Mr. Younger

That is exactly what I am saying. I hope that I am wrong. There are good arguments for saying that the Assembly should have a tax-raising power, but I am not arguing that tonight. I am saying that we have unravelled from the Secretary of State that the Assembly will have the ability to do this. It will be able to spend its block grant on matters within its powers. It will be able to spend more than is expected on one part of its functions and make up the shortfall by forcing local authorities to raise rates at a higher level. There is no safeguard for the ratepayers against that. Hon. Members may regard that as good or bad, but at least in the debate we have unearthed the truth, and I hope that that will be noted and carefully considered before we proceed much further.

Mr. Millan

I hope that the hon. Member for Ayr (Mr. Younger) is not seeking to give the impression that he has extracted some terrible admission. This fact has been clear all along. If he is only now appreciating it, that is too bad. This matter has nothing to do with the Government. The negotiations on rate support grant, and therefore the ultimate impact on ratepayers, will pass to the Scottish Executive. That has been crystal clear all along, and the local authorities understand it very well.

The point raised by the hon. Member for Christchurch and Lymington (Mr. Adley) does not arise on this amendment or this clause. But where tourism expenditure is involved with local authorities as distinct from the Scottish Tourist Board, that is relevant expenditure under the rate support grant and nothing in the Bill will change it.

Miss Harvie Anderson

Do I have it right? Assuming that expenditure from the block grant on housing exceeds the official amount and leads to a shortfall on education, will that shortfall be met by an increase in rates?

Mr. Millan

Some of these points are rudimentary. The block fund—and this is the essence of the arrangement—will give the Scottish Executive the opportunity to distribute its expenditure as it wishes. If it wants to spend less on housing and more on education, or vice versa, it will be free to do that. If that were all determined in advance, there would be no scope for the independent initiation of policies.

Mr. Younger

I do not wish to criticise the Secretary of State. He has been most helpful this evening. But I want to make clear to everyone who reads the debate what is happening. If this fact has always been known, why did everyone reject out of hand the idea of a surcharge on the rates? It was said that all sorts of undesirable factors would result. It is now clear that such an approach is possible for the Scottish Assembly.

We have had a good answer from the Secretary of State. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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

Mr. Dalyell

Rudimentary though these points may or may not be, I hope I may be forgiven for wondering whether the members of Scottish local authorities realise that money can be raised in this way. Whatever my right hon. Friend the Secretary of State may say, this will be news to a number of them, I know. After all, we had an endless discussion on the question of raising money through a levy on the rates, and local authority members and people such as Dr. Cecil Stout, director of finance for the Edinburgh district, endlessly in seminars and elsewhere, argued the case how wrong it would be for the Assembly to depend on finance raised by the local authorities through traditional methods.

We seem to have stumbled, as we so often do in these debates, on truths which should have been obvious to some of us. It was not obvious to me from all the debates we have sat through. I see hon. Members nodding in agreement, so I think that I am not the only one who is puzzled.

We must, therefore, discuss at some length, though not perhaps on this occasion, whether it is right for a subordinate Parliament to be financed through ways which have been traditional to the local authorities. I shall be very interested to send a copy of the present exchanges to Mr. Graham Spiers, the secretary of COSLA, and to other local authority members to find out whether I have been as obtuse and ignorant as might seem to be the case. In my view, this must be cleared up.

I turn now to another matter. The hon. Member for Ayr (Mr. Younger) talked about ideological problems. It is not a matter only of ideological problems. On the last amendment we went over the ground regarding what would happen if there were a Conservative Minister in London and a Labour Scottish Secretary in Edinburgh, and vice versa. But the whole position is an adversary position. There is no chance of its not being so.

Sometimes a hypothetical model is produced, on the assumption that all are men of good will. If we had all been people of good will, we should not have been here in the first place, and this situation would not have arisen. In these debates, I do not accuse and have never, I believe, accused SNP Members of being men of ill will. No question of their being people of good will or ill will comes into it. But they happen, perfectly honourably, to want something which is entirely different from what others want.

My hon. Friends and I—this goes for the Government Front Bench as well as for Back Benchers, including those who think as I do and those who do not, as well as most members of the main Opposition party—want something fundamentally different from what the SNP wants. Therefore, it is not a question of ill will or otherwise. It is a matter of wanting to change things, not just settling in and being as co-operative as possible.

Mr. Gordon Wilson (Dundee, East)

Is not the hon. Gentleman in danger of exaggerating his position? I accept, of course, that our aims in the Scottish National Party are defined in our policy, just as the aims of other parties are defined in theirs. But does he not accept that in many matters, such as detailed negotiation on the rate support grant and so on, positions can be negotiated? These matters are negotiable, and in many instances will be settled by negotiation.

Mr. Dalyell

Yes, but I must in all candour add that they will be settled to the hon. Gentleman's satisfaction only on his terms, which entail something approaching a separate State. He may be reasonable in his negotiations, and quiet as he was in his speech last week, but there are many members of his party who certainly would not settle for that kind of quiet negotiation. That is a fact of life which we have to face.

I do not want to take up more time, save to put a specific question on the wording of subsection (2) of Clause 65: … a Scottish Secretary shall have regard to such considerations affecting reserved functions as the Secretary of State may bring to his notice after consulting with such associations of local authorities: as appear to him to be concerned and before the conclusion of the consultations required by that subsection. What is meant by "shall have regard to"? In any sort of adversary situation, it can be interpreted according to pleasure. In fact, the wording is very loose. This is a grey area. Once again, we come back to the problem of grey areas and of vagueness, which in itself is a recipe for conflict.

If the Secretary of State wants to rebut me on that, he will doubtless do so, so I put my question in these terms: to what extent is this a grey area, and does he accept the charge of loose wording?

9.30 p.m.

Mr. Russell Johnston

I wish to record the fact that, like the Secretary of State, I am exceedingly surprised at the response of the hon. Member for Ay (Mr. Younger) and, perhaps, less surprisingly, that of the hon. Member for West Lothian (Mr. Dalyell) to the self-evident statement by the Secretary of State that the Assembly will have the right to vary the rate support grant that it gives to local authorities. It is as if the hon. Members had just purchased a house and suddenly discovered a skeleton in the attic. [An HON. MEMBER:"A family heirloom."]

That is a most unrealistic response. It is not a question of the Assembly being given some sort of back door method of raising money. The whole basis of this devolutionary proposal is that the Assembly should have the power to disburse its resources, which come in the form of a block grant, as it feels appropriate. That is not an astonishing matter. It would be very alarming if it were otherwise.

Mr. Teddy Taylor

The hon. Member for West Lothian (Mr. Dalyell) said that we could discuss this matter at a later stage. Quite frankly, there will not be an opportunity at a later stage. Therefore, I think it right to ask the Secretary of State on this important point, which has been referred to as so obvious by the hon. Member for Inverness (Mr. Johnston), for a few assurances as to what steps can be taken by the Secretary of State on his reserved functions if local authorities are deprived of substantial proportions of revenue because of the action of the Scottish Assembly in spending its block grant.

Although the hon. Member for Inverness says that this is something which has been obvious—as, indeed, it has—he must appreciate that we are moving into a new situation. At present, the Scottish Office pays about 71 per cent, of the expenses of local authorities.

Mr. Millan

It is 68½ per cent.

Mr. Taylor

Yes, 68½ per cent. It was 71 per cent, under the Conservatives. So 68½ per cent, of local authorities' expenditure is accepted as being his responsibility by the Secretary of State. If, for any reason, he were to reduce that to, say, 50 per cent., with devastating consequences for Scottish ratepayers, there would presumably be a riot in the House of Commons and in the Scottish Grand Committee.

Mrs. Winifred Ewing (Moray and Nairn)

That will be the day.

Mr. Raison

What if it were reduced to the English proportion of 60.5 per cent.?

Mr. Taylor

If it were reduced to the English proportion, there would be considerable increases in rates in Scotland, and we would not want that. If the Secretary of State were to seek to do such a thing and if the Government did it, there would be great complaint. Hon. Members would understandably blame him and say "You are to blame. Something must be done." If, on the other hand, the Scottish Assembly or the Executive were to do such a thing, as they can, indeed, do—as has been discussed —is it the Assembly and the Executive which would be blamed? I very much doubt it. The Scottish Assembly and Executive would not be blamed. The Scottish Assembly or the Executive could say, as they no doubt would say," The only reason we have had to cut your money and why the rates have had to go up in Moray and Nairn, Dundee, Ayr and everywhere else, is that the Government and the Secretary of State, as our representative in the Cabinet, have been so niggardly in the block grant allocated to us."

Mr. Gordon Wilson

Does the hon. Member not accept that if there were to be a Conservative Administration in the Scottish Executive and the Scottish Assembly, people might as well say that it is the policy of the Conservative Party to reduce public expenditure and that therefore it is the fault of that Conservative Administration in the Scottish Executive? That would be a plain answer.

Mr. Taylor

We do not want to talk about economic policies now. All that I can say is that Conservative policies in Scotland would work an awful lot better than the present policies, which have landed us with 203,000 unemployed.

Mrs. Winifred Ewing

As Moray and Nairn was mentioned, may I point out to the hon. Member that we had the situation of a very efficient organisation with rather low rates and wonderful services before regionalisation—which was, I think, supported by his party?

Mr. Taylor

I was present at the discussions. I can assure the hon. Member that the representative of the Scottish National Party in no way voted against the proposition. Nor did anyone in the Scottish Grand Committee vote against the Local Government (Scotland) Bill on its Second Reading. I was there.

Mrs. Winifred Ewing

There was no vote.

Mr. Taylor

Of course there was no vote, because nobody called a vote. I can assure the hon. Lady that she has a lot to learn. She knows a lot about Europe but not about the Scottish Grand Committee. One can divide the Scottish Grand Committee with one person seeking to do so. The hon. Lady is shaking her head. If she doubts what I have said, that shows how little she knows about Scottish affairs. All I can say is that on Tuesday this week, my hon. Friend the Member for Edinburgh, South (Mr. Hutchison)—the hon. Lady can ask him about this—alone divided the Scottish Grand Committee. I think that the vote was 13 to 1. That can be done in the Scottish Grand Committee.

If it did not happen in this case, it was because the nationalist representative so chose. However, we are discussing not the policy of SNP Members, who show an abysmal ignorance of Scotish affairs, but a serious issue that affects local authorities.

I hope that the hon. Member for Inverness will take the simple point that whereas if it happened directly people would blame the Secretary of State, if it happened through the Scottish Executive cutting RSGs the Scottish Executive would say that the Secretary of State had not given them enough.

Let us look at the situation as of today if the clause were in force. We have 203,000 unemployed in Scotland. Understandably, the Scottish Assembly would be under enormous pressure to do something about that. Doing something about it usually means trying to create employment, and spending money. If that were done from the amount allocated by the Government, the only way in which money could be saved would be to reduce the allocation to local authorities. Can we honestly say that a Scottish Assembly would be blamed for so doing? As usual, it would be the Westminster Government to whom all blame would accrue if this Bill came into effect.

Therefore, I suggest to the hon. Member for Inverness that it is not like the situation as of today. It would be a new ball game. There would be a man at Westminster to blame for all the problems.

Mr. Russell Johnston

I am sorry to interrupt the hon. Gentleman. I shall do so only briefly. Does he not agree that where we have local authorities at present whose rates are either raised or lowered by whichever party is in control of the local authority area, if the rates are increased it is very often the party in control of the local authority that rightly takes the responsibility, and that the blame is not necessarily transferred to central Government and the amount of rate support grant?

Mr. Taylor

One usually finds that ratepayers are not daft. If rates rise because the authority has been spendthrift, the party in power is blamed. If, on the other hand, the rates rise in consequence of cuts in the RSG or cuts in the allocation, that is a different matter. I can give a good example. A strange Bill is being put through Parliament now. It will mean that some well-managed housing authorities will lose housing grant and some spendthrift authorities will get more housing grant. The result of this in rate poundage has been explained to us. Councils should make absolutely clear to ratepayers why this has happened.

The Secretary of State may huff and puff, as he is trying to do. I am sorry that he does not attend our debates more often. If he did, he would learn of the shambles that we shall have if the Bill is passed. I just wish that the Leader of the House would attend even as regularly as the Secretary of State. It would not be much, but it would be something.

However, I put a straight question to the Secretary of State, which I hope he will answer "Yes" or "No". It concerns the reserved powers available to the Secretary of State, and I am thinking essentially of Clause 37. It appears to me that if—for the sake of argument—a Scottish Assembly were to use its powers in such a way as to reduce grant to local authorities in such a way that rates had to rise substantially, and in consequence jobs were put at risk—as we know that they can be, because the rates in some of our cities so substantially affect jobs—that could be regarded by the Secretary of State as something that would, indirectly or directly, affect a reserved function. Is that so?

We know that jobs, industry, employment creation and so on are reserved functions. It seems to me that if a Scottish Assembly were to reduce the percentage RSG to local authorities in such a way that rates rose substantially, and jobs were put at risk, that could be claimed to affect a reserved matter.

I turn to a question that the Secretary of State should have clear in his mind and we would want to have clear in our minds if a Conservative Government came to power with this astonishing Assembly to cope with. Does the right hon. Gentleman consider that Clause 37 could be used to protect local authorities against such action by a Scottish Assembly? If I am right in thinking that it could be used in that way, how would the Secretary of State give a direction for action to be taken? Would he give a direction to the Assembly that it must increase its percentage of RSG? If he did not do it in that way, how would he do it?

We have not had much opportunity to discuss the Secretary of State's reserved powers. He must accept that Clause 37 is there for some reason, but he has given us no indication how it could be used. It seems to me that it is one way in which the powers could be used by him. If the right hon. Gentleman tells us that even if the Assembly acted irresponsibly, by slashing the proportion of grant being made available for local authorities, he could not cope under Clause 37, the reserved powers are of little value.

There is no doubt that this is an indirect way of the Assembly's raising revenue. Therefore, I simply ask the right hon. Gentleman this. He may say that it will not happen, that he hopes it will not or thinks it will not, but if the powers were used in such a way, could Clause 37 be used to protect local authorities?

I have another question to which there is probably a simple answer. Has the Assembly any powers in relation to industrial derating? I should like clarification, and this seems a good place in the Bill to raise the matter.

Mr. Adley

Perhaps I should declare an interest in tourism. I want to probe a little further, because the closing remarks of my hon. Friend the Member for Glasgow, Cathcart (Mr. Taylor) and his reference to Clause 37 are very relevant.

Tourism is clearly a matter which, in the words of Clause 37, concerns Scotland (whether or not it also concerns any other part of the United Kingdom)". Overseas tourists who come to the United Kingdom will have little desire to know what is or is not in this measure. Will the Secretary of State explain which powers, if any, he will reserve or hold concerning tourism policies carried out by the British Tourist Authority on behalf of the United Kingdom Government, as opposed to tourism policies carried out by the Scottish Tourist Board?

My second point concerns the relationship between the Assembly—

The Second Deputy Chairman

Order. I hope that the hon. Gentleman will bear in mind that we are discussing rate support grants.

Mr. Adley

What happens if the sums that the Assembly thought it would have available for tourism purposes are no longer available and the regions take unto themselves, using additional rates, the decision to spend more on tourism? There may well be competition between Tay-side, Strathclyde and Lothian. The Secretary of State knows of the recent controversy over the activities of the tourism director in Lothian, who has been trotting all over the globe. What guarantee have the ratepayers of any of the regions that their money will not be used in a way that is not compatible with the policies of the Scottish Tourist Board?

It is only because there may be no other opportunity to raise the matter that I ask for a passing reference to tourism from the Secretary of State on this clause.

Mr. Raison

I want to raise what may seem a trivial point which I am assured has not been mentioned. Subsection (2) says: In taking into consideration the matters mentioned in paragraphs (a) to (d)…a Scottish Secretary shall have regard to such considerations affecting reserved functions as the Secretary of State may bring to his notice after consulting with such associations of local authorities as appear to him to be concerned". What I am not quite clear about is whether it is the Scottish Secretary who does this consulting with the association of local authorities or whether it is the Secretary of State. It appears that it could be either. It is desirable that the Secretary of State should explain what is meant here and perhaps consider tabling an amendment to make the position quite clear.

9.45 p.m.

Mr. Millan

It is the Secretary of State who is meant to be doing the consulting. If the hon. Member for Aylesbury (Mr. Raison) feels that the clause is ambiguous, I will look at the wording again.

Mr. Raison

I am grateful to the right hon. Gentleman. I had assumed that it would be the Scottish Secretary who would do the consulting. It is interesting that the Secretary of State should have the right to consult with the Scottish local authority associations. That seems to be a breach of this principle of devolution. There is meant to be a clear and sharp distinction between the powers here and those in Edinburgh.

Mr. Millan

The hon. Member was present earlier in the debate but one would not think so from that last comment. I explained at considerable length the way in which the Secretary of State would be discussing with COSLA the matters concerning reserve powers.

The question of tourism is dealt with under Clause 67. If the hon. Member for Christchurch and Lymington (Mr. Adley) would keep quiet we might get to that clause.

To my hon. Friend the Member for West Lothian (Mr. Dalyell) I say that on all of these matters affecting the rate support grant a minimum amount of good will helps with the consultations. We have it at the moment and I see no reason why COSLA and the Scottish Executive should not establish the kind of relationship that I have, which is more or less cordial, with the Convention of Scottish Local Authorities. We must not assume that the Scottish Executive will be so inept or provocative that it will not be able to deal sensibly with local authorities and other interests in Scotland. That would be an extremely arrogant and patronising attitude. I would not assume that I must be better, intrinsically, in dealing with COSLA than would be the Scottish Executive.

Dealing now with the remarks concerning the words "shall have regard to", that was the point of the previous amendment which was withdrawn. I pointed out that the Scottish Secretary would have matters drawn to his attention and would have regard to them and would take them into account. For reasons that I explained at length, it was not possible effectively to put that provision in stronger terms and dictate to the Scottish Secretary what he should do in that situation. We are not trying to tie him down absolutely. We could not do so. There has to be a form of words which gives the Secretary of State a statutory locus on this issue. The form of words we have seems to be as good as any other.

The hon. Member for Glasgow, Cathcart (Mr. Taylor) asked me about industrial derating. That is a matter for the Assembly. I have announced that I intend to continue the 50 per cent. industrial derating from 1st April 1978 and I shall be laying an order for the next three years quite soon. Thereafter, this will be a matter for the Assembly. I daresay that, again, the Executive will have the same balance of considerations in mind when it makes decisions about industrial de-rating as I have had in making my decisions. I refer to such things as the interests of local authorities, of domestic ratepayers compared with other ratepayers and of the need to encourage Scottish industry.

The hon. Member for Cathcart also asked whether a Government would be likely to use their reserved powers under Clause 37 if a Scottish Administration started to slash the level of rate support grant. I make the general point that the only way to ensure that the present level of rate support grant, 68½ per cent., was maintained for ever would be to write that into the Bill, but no one is suggesting that we should do that or tie the hands of the Scottish Executive in that way. But in any case, since I have already explained at great length earlier in the debates on the clause that they can change the whole system of rate support grant, it would be utterly pointless to put in a particular percentage and try to tie the Scottish Executive down to it.

I understand the hon. Gentlemena's worries. He recognises that the present level of rate support grant is very generous to local authorities and is worried that there might be an Executive which would reduce it to the significantly low level at which it stood when the Conservative Party was in power. That is a legitimate worry, and the local authorities appreciate that devolution might have that unfortunate effect.

It is conceivable that there could be a Conservative Administration in Scotland. It is not very likely, but I agree with the hon. Gentleman that we must look at every contingency, however remote. I suppose that it could happen, and it might have these effects. In that hypothetical situation, if a Conservative Administration in the Assembly were to behave in a wickedly damaging way, and this had an impact on the reserved functions—which is what Clause 37 is about—it would then be open to the Government in Westminister to intervene. But I consider that these are very remote matters indeed, and I do not believe that the normal matters of relationship betwen the local authorities, on the one hand, and the Scottish Executive, on the other, are matters in regard to which the reserved powers would be likely to be used. But if there were matters of great controversy of that sort, I dare say that they would come up at the annual negotiation of the block fund. For practical purposes, therefore, I do not believe that Clause 37 would be relevant.

Mr. Dalyell

It is simply a question of saying that the relationship—

The Second Deputy Chairman

Is the hon. Gentleman intervening in the Minister's speech?

Mr. Dalyell

My right hon. Friend sat down.

The Second Deputy Chairman

I certainly had not called the hon. Gentleman. Mr. Taylor.

Mr. Teddy Taylor

The Minister has treated this subject in an arrogant and silly way. I say so because I raised a serious question about a situation which could arise, I put it to the Minister that obviously—[Interruption.] I wish that the hon. Member for Moray and Nairn (Mrs. Ewing) would keep quiet and not make silly observations on a subject about which she knows nothing.

Mrs. Winifred Ewing

Is the hon. Gentleman suggesting that a Tory Administration in Scotland is a real possibility?

Mr. Taylor

That is the kind of thing that I would prefer to discuss with the hon. Lady at an earlier hour of the day. If we were to embark on such a discussion now we should get away from the debate on the clause. It would not amount to sense to have such a discussion with the hon. Lady at this time of night.

I repeat to the Minister that it was a serious point that I raised. The Government would presumably make their own assessment as to what percentage could be given to local authorities by way of a block grant. If there were to be considerable economic stringency, the present Government or a future Government might have to say that the block grant was to be a little lower. It might say that it considered a level or. 60 per cent, or 65 per cent, to be right, but it could tell the authorities that if they wanted to spend more on one thing and less on another, that would be a matter for them. If the Scottish Assembly, the Government in Westminster having made their calculation, reduced the amount available to local authorities, and a big increase in rates followed, would it be possible for action to be taken? The Secretary of State has rather dodged the question.

Secondly, if such an intervention were called for, how would it be made? Having looked at the reserved powers, I do not see how it could be done. That is one of the most dangerous points. If we had an RSG order it would presumably be a Statutory Instrument placed before the Scottish Assembly. What can the Secretary of State do about that? Under Clause 38 he has the power to revoke a Statutory Instrument. But here we would find ourselves in exactly the same difficulty which hon. Members on this side find when discussing RSG orders. All we can do is either vote against it, in which case local authorities get nothing, or let it go through, in which case they get something.

If the Secretary of State used the power in Clause 38 it would not help at all because all he would do would be to object, and instead of getting 50 per cent, there would be nothing at all.

Mr. Harry Gourlay (Kirkcaldy)

Surely the hon. Gentleman will make an analogy with what happens in this House? His argument would then be that the Scottish Assembly would introduce another order just as we do in this House.

Mr. Taylor

That would be fine if we had co-operation. But what are we dealing with? Suppose for the sake of argument one had a Conservative Government in Westminster and some of the hon. Gentleman's wild Left-wing friends in control of the Scottish Administration; we could not have that degree of cooperation between the Government and the Assembly, particularly if we were to have the appalling level of unemployment which there is under the present Labour Government. In those circumstances Clause 38 would not work.

If we look at the reserved power in Clause 37—that is the power to instruct the Scottish Secretary to do something—it now appears that this particular power does not apply to legislation or Statutory Instruments. It would be a most unusual use of power if the reserved power in Clause 37 were used to direct a Scottish Secretary to promote a Statutory Instrument.

We are then left with the reservation in Clause 36—it is not a reserved power at all—which relates only to legislation. But that would not happen except in very unusual circumstances. What the right hon. Gentleman has not said is how precisely he can use the reserved powers to do anything about the situation I have described. That was something about which we asked him specifically and it is a question which he has not answered.

While we accept that the right hon. Gentleman regards these as powers which would be used only in unusual circumstances—perhaps in circumstances in which we had an irresponsible Administration either here or in the Assembly—we are bound to ask how can reserved powers be used to resolve such a situation. I hope that the Secretary of State can give some indication of what the answer is.

Mr. Dalyell

I do not think it is either arrogant or patronising to say that the relationship between my right hon. Friend in his present position and COSLA is totally different from the relationship with an Executive that does not accept the guidelines which hitherto we have always accepted as between local government and national Government. That is a totally different situation and one is entitled to point it out.

As has so often happened in these debates over the past 10 days, whenever the Committee lifts a manhole, it seems to stumble on some kind of hornets' nest. That is a 10 o'clock metaphor, but it is exactly what happens.

I took down the words of my right hon. Friend which were "The people down here would intervene ". In which circumstances would they intervene and with what effect? That particular view ought to be explained. How would the people down here intervene, on what grounds and with what result?

Mr. Millan

I do not want to go back over the question of reserved powers. We have already dealt with this matter in Clauses 36, 37 and 38. Clause 36 deals with the situation where it is an Assembly Bill, which I suppose could be conceiv-Clause 37 deals with Executive action able, with regard to rate support grant, which could conceivably relate to rate support grant, and Clause 38 deals with subordinate instruments which is relevant in respect of RSG because it is expressed in an order. All these clauses deal with reserved powers which are related directly to actions, whether legislative or in other ways, of the Scottish Assembly which have a severe and detrimental effect on reserved powers.

10.0 p.m.

I gave an illustration relating to the reduction in RSG, but the Scottish Assembly equally could decide to increase RSG. I said that it was unlikely that that would be the kind of situation in which these reserved powers were appropriate to be used by a Secretary of State for Scotland and the Government down here. But if the hon. Member for Ayr (Mr. Younger), who is now muttering to himself, is asking whether the Bill contains all the powers that would be necessary if such intervention seemed appropriate, so far as I can see from this clause and from what has been said by way of explanation in the past, all the powers are available in the Bill.

Mr. Teddy Taylor

I believe that the Secretary of State should take back this clause and re-examine it. He said he believed that the powers were there, but

I believe that the powers patently are not there in Clause 38. Clause 38 gives him power only to revoke a Statutory Instrument put forward by the Assembly.

The situation which we have envisaged is that the Scottish Assembly, hard up for money, will say to the local authorities "I am sorry, but we need more money to help Scotland. Therefore, we shall have to cut your money." This will go into a Statutory Instrument, it will be put to the Assembly, and the Secretary of State in those extreme circumstances could say "I am sorry, but there will be no order. I am revoking it." What happens then? Has he power to insist on a new order with a new percentage? That will certainly not happen under Clause 38.

This is a situation which may prove to be a danger to Scottish local authorities and ratepayers. We do not appear to have the weapons to deal with it. In those circumstances let us throw out this clause as a warning to the Secretary of State that these matters should be thought out and that Ministers should be prepared with the proper answers.

Question put:—

The Committee divided: Ayes 161, Noes 147.

Division No. 74]	AYES	[10.2 p.m.
Allaun, Frank	Davies, Ifor (Gower)	Huckfield, Les
Anderson, Donald	Davies, Clinton (Hackney C)	Hughes, Roy (Newport)
Archer. Rt Hon Peter	Deakins, Eric	Hunter, Adam
Armstrong, Ernest	Dempsey, James	Irving, Rt Hon S. (Dartford)
Ashley, Jack	Doig, Peter	Jackson, Colin (Brighouse)
Atkins, Ronald (Preston N)	Dormand, J. D.	Jackson, Miss Margaret (Lincoln)
Bain, Mrs Margaret	Dunn, James A.	John, Brynmor
Barnett, Guy (Greenwich)	Eadie, Alex	Johnson, James (Hull West)
Bates, Alf	Ellis, Tom (Wrexham)	Johnston, Russell (Inverness)
Benn, Rt Hon Anthony Wedgwood	Ennais, Rt Hon David	Judd, Frank
Bidwell, Sydney	Evans, Gwynfor (Carmarthen)	Kerr, Russell
Bottomley, Rt Hon Arthur	Evans, John (Newton)	Kilfedder, James
Boyden, James (Bish Auck)	Ewing, Harry (Stirling)	Lambie, David
Bray, Dr Jeremy	Ewing, Mrs Winifred (Moray)	Lamborn, Harry
Brown, Hugh D. (Provan)	Fernyhough, Rt Hon E.	Latham, Arthur (Paddington)
Brown, Robert C. (Newcastle W)	Flannery, Martin	Litterick, Tom
Buchan, Norman	Fletcher, Ted (Darlington)	Loyden, Eddie
Buchanan, Richard	Foot, Rt Hon Michael	Lyon, Alexander (York)
Campbell, Ian	Fowler, Gerald (The Wrekin)	Lyons, Edward (Bradford W)
Canavan, Dennis	Freeson, Rt Hon Reginald	Mabon, Rt Hon Dr J. Dickson
Carmichael, Neil	George, Bruce	McCartney, Hugh
Cartwright, John	Gilbert, Rt Hon Dr John	MacCormick, Iain
Castle, Rt Hon Barbara	Golding, John	McDonald, Dr Oonagh
Clemitson, Ivor	Gould, Bryan	McElhone, Frank
Cocks, Rt Hon Michael (Bristol S)	Gourlay, Harry	MacKenzie, Rt Hon Gregor
Cohen, Stanley	Grant, George (Morpeth)	Maclennan, Robert
Coleman, Donald	Grocott, Bruce	McMillan, Tom (Glasgow C)
Crawford, Douglas	Hamilton, James (Bothwell)	Madden, Max
Crawshaw, Richard	Harper, Joseph	Magee, Bryan
Crowther, Stan (Rotherham)	Harrison, Rt Hon Walter	Marks, Kenneth
Cryer, Bob	Henderson, Douglas	Marshall, Dr Edmund (Goole)
Davidson, Arthur	Hooley, Frank	Marshall, Jim (Leicester S)
Davies, Bryan (Enfield N)	Horam, John	Maynard, Miss Joan
Davies, Rt Hon Denzil	Hoyle, Doug (Nelson)	Millan, Rt Hon Bruce
Miller, Dr M. S. (E Kilbride)	Rose, Paul B.	Wainwright, Edwin (Dearne V)
Molloy, William	Ross, Stephen (Isle of Wight)	Walker, Harold (Doncaster)
Morris, Rt Hon Charles R.	Ross, Rt Hon W. (Kilmarnock)	Walker, Terry (Kingswood)
Morris, Rt Hon J. (Aberavon)	Sandelson, Neville	Watt, Hamish
Murray, Rt Hon Ronald King	Shore, Rt Hon Peter	Wellbeloved, James
Oakes, Gordon	Silkin, Rt Hon S. C. (Dulwich)	Welsh, Andrew
O'Halloran, Michael	Sillars, James	White, James (Pollok)
Orme, Rt Hon Stanley	Skinner, Dennis	Whitlock, William
Owen, Rt Hon Dr David	Smith, John (N Lanarkshire)	Wigley, Dafydd
Palmer, Arthur	Snape, Peter	Willey, Rt Hon Frederick
Park, George	Spearing, Nigel	Wilson, Alexander (Hamilton)
Parker, John	Spriggs, Leslie	Wilson, Gordon (Dundee E)
Pavitt, Laurie	Steel, Rt Hon David	Wise, Mrs Audrey
Penhaligon, David	Stewart, Rt Hon Donald	Woodall, Alec
Price, William (Rugby)	Stewart, Rt Hon M. (Fulham)	Wool, Robert
Radice, Giles	Stoddart, David	Wrigglesworth, Ian
Rees, Rt Hon Merlyn (Leeds S)	Thompson, George	Young, David (Bolton E)
Roberts, Albert (Normanton)	Thorne, Stan (Preston South)
Robinson, Geoffrey	Thorpe, Rt Hon Jeremy (N Devon)	TELLERS FOR THE AYES:
Roderick, Caerwyn	Tinn, James	Mr. Thomas Cox and
Rodgers, Rt Hon William (Stockton)	Tomlinson, John	Mr. Ted Graham.
NOES
Adley, Robert	Hampson, Dr Keith	Parkinson, Cecil
Alison, Michael	Harvie Anderson, Rt Hon Miss	Percival, Ian
Arnold, Tom	Haselhurst, Alan	Pink, R. Bonner
Atkinson, David (Bournemouth, East)	Holland, Philip	Powell, Rt Hon J. Enoch
Bell, Ronald	Hordern, Peter	Prentice, Rt Hon Reg
Benyon, W.	Howe, Rt Hon Sir Geoffrey	Price, David (Eastleigh)
Berry, Hon Anthony	Hunt, David (Wirral)	Pym, Rt Hon Francis
Biffen, John	Hunt, John (Ravensbourne)	Raison, Timothy
Blaker, Peter	Hurd, Douglas	Rathbone, Tim
Boscawen, Hon Robert	Hutchison, Michael Clark	Rees, Peter (Dover & Deal)
Boyson, Dr Rhodes (Brent)	James, David	Rees-Davies, W. R.
Bradford, Rev Robert	Jenkin, Rt Hon P. (Wanst'd &W'df'd)	Renton, Tim (Mid-Sussex)
Braine, Sir Bernard	Johnson Smith, G. (E Grinstead)	Rhodes James, R.
Brittan, Leon	Jopling, Michael	Ridsdale, Julian
Brocklebank-Fowler, C.	Joseph, Rt Hon Sir Keith	Rifkind, Malcolm
Brooke, Peter	Kaberry, Sir Donald	Roberts, Michael (Cardiff NW)
Brotherton, Michael	King, Evelyn (South Dorset)	Roberts, Wyn (Conway)
Bryan, Sir Paul	Knox, David	Rossi, Hugh (Hornsey)
Buchanan-Smith, Alick	Lamont, Norman	Rost, Peter (SE Derbyshire)
Buck, Antony	Latham, Michael (Melton)	Sainsbury, Tim
Budgen, Nick	Lawrence, Ivan	St. John-Stevas, Norman
Bulmer, Esmond	Lester, Jim (Beeston)	Shepherd, Colin
Churchill, W. S.	Lloyd, Ian	Silvester, Fred
Clark, William (Croydon S)	Luce, Richard	Sinclair, Sir George
Clarke, Kenneth (Rushcliffe)	McCrindle, Robert	Skeet, T. H. H.
Clegg, Walter	Macfarlane, Neil	Smith, Timothy John (Ashfield)
Cooke, Robert (Bristol W)	MacGregor, John	Spence, John
Cope, John	McNair-Wilson, M. (Newbury)	Spicer, Michael (S Worcester)
Cormack, Patrick	Marten, Neil	Sproat, Iain
Corrie, John	Mather, Carol	Stanbrook, Ivor
Dalyell, Tam	Mawby, Ray	Stokes, John
Dean, Paul (N Somerset)	Maxwell-Hyslop, Robin	Stradling Thomas, J.
Dunlop, John	Mayhew, Patrick	Tapsell, Peter
Dykes, Hugh	Meyer, Sir Anthony	Taylor, Teddy (Cathcart)
Emery, Peter	Miller, Hal (Bromsgrove)	Tebbit, Norman
Eyre, Reginald	Mitchell, David (Basingstoke)	Temple-Morris, Peter
Fairbairn, Nicholas	Moate, Roger	Townsend, Cyril D.
Fairgrieve, Russell	Moore, John (Croydon C)	van Straubenzee, W. R.
Finsberg, Geoffrey	More, Jasper (Ludlow)	Viggers, Peter
Fookes, Miss Janet	Morgan, Geraint	Wakeham, John
Forman, Nigel	Morgan-Giles, Rear-Admiral	Walder, David (Clitheroe)
Fowler, Norman (Sutton C'f'd)	Morris, Michael (Northampton S)	Weatherill, Bernard
Gilmour, Sir John (East Fife)	Morrison, Charles (Devizes)	Wells, John
Glyn, Dr Alan	Morrison, Hon Peter (Chester)	Winterton, Nicholas
Goodhew, Victor	Mudd, David	Young, Sir G. (Ealing, Acton)
Gow, Ian (Eastbourne)	Neubert, Michael	Younger, Hon George
Gower, Sir Raymond (Barry)	Nott, John
Gray, Hamish	Osborn, John	TELLERS FOR THE NOES:
Grist, Ian	Page, Rt Hon R. Graham (Crosby)	Mr. Spencer Le Marchant and
Hall-Davis, A. G. F.	Page, Richard (Workington)	Lord James Douglas-Hamilton
Hamilton, Michael (Salisbury)

Question accordingly agreed to.

Clause 65 ordered to stand part of the Bill.

Mr. Teddy Taylor

On a point of order, Mr. Murton. May I, through you, ask the Secretary of State to withdraw an erroneous statement that he made in our last debate? The right hon. Gentleman referred to the reserved powers in Clause 38 as matters that we had dis cussed previously. In fact, that clause was guillotined and we did not discuss it at all.

The Chairman (Mr. Oscar Murton)

That is not a point of order. It is not a matter for the Chair.