GENERAL POWER TO REDUCE RATE SUPPORT GRANT

HC Deb 08 July 1980 vol 988 cc241-96 3.40 pm

Mr. Roy Hattersley (Birmingham, Sparkbrook)

I beg to move amendment No. 79, in page 31, line 33 at end insert 'and if that authority has been informed that such a reduction will be made, and of the size of that reduction, by 1st July in the relevant financial year'. The Report stage of the Bill now begins a consideration of the financial provisions, which have been as controversial as anything proposed by the Government. They have been received with universal criticism from local government associations—including those controlled both by Conservative and by Labour Parties—and they have not had a good word from any newspaper.

Some hon. Members therefore may find it slightly surprising that the Secretary of State, the "onlie true begetter" of these proposals, is not in his place to justify and defend them. That is the case, and we must rely on the capable interpretation of the wishes of the Secretary of State that we heard for so many sittings in Committee, but the Secretary of State will understand that some of the things that need to be said about these proposals are said about him. They are his proposals, and they relate as much to his character and psychology as to the proper organisation of local government. That he is not in his place to hear what will be said is to my surprise and not my fault. It is his fault, and his fault alone.

The first of the amendments that I move is, obviously, modest and patently reasonable. All it asks is that local authorities that are to be punished by the Secretary of State should be told about their punishment before 1 July of the year in which the punishment is to be exacted. Having spent many hours with him, I know that at some time during his reply the Minister of State will tell the House that even under the present rate support grant system the eventual work-out of distribution of funds—the resources element and needs element being taken into account—takes three distributions over a period perhaps as long as three years.

I believe that on reflection even the right hon. Gentleman will understand that there is a basic difference between the system that provides that one receives money according to a formula that may require adjustment from time to time, and that that formula may require three tranches of payment, and the system that we now debate—the so-called transitional arrangements. In the first instance those arrangements provide a formula for the distribution of grant but then provide that the Secretary of State of the day may, arbitrarily and without any real indication how the conclusion is to be reached, pick on a few authorities and punish them for what the Secretary of State regards as overspending.

By any legal definition of the term it will not be overspending, since those local authorities will have done what they are entitled to do in law. But by changing the law the Secretary of State proposes to punish a few authorities of his choice. There is no comparison between that and the present rate support grant system. In the view of the Opposition there is no possible justification for councils being told after July that they will receive the peculiar, specific, arbitrary and uncircumscribed punishment that the Secretary of State will be enabled to enact under the Bill.

It seems to us no more than common justice, and, indeed, essential for the prudent management of local authority affairs, that a council that is to be fined in November should at least be told about it during July. That is all that we ask in the amendment. If, as we suspect—for I do not delude myself about the reasonableness of the Secretary of State—this amendment is rejected by the Government and all those Hampdens and Pyms on the Government Benches who will gladly vote for whatever their Whips say they should vote for, there is only one real conclusion to be drawn from such a rejection. That is the growing suspicion that the Government still have no idea how their block grant and transitional arrangements will be worked out in practice.

They are still groping, trying to find a formula to enable the declarations of the Secretary of State to be applied in the real world, and as they grope, trying to save him from the folly into which his unthought-out declarations got him in the earlier part of the year, they are prepared to pick on any system, no matter how damaging to local authorities and no matter how much against the interests of local autonomy it may be, so long as it enables the Secretary of State to say that he promised he would punish local authorities and that, at last, he has devised a scheme of punishment.

Mr. Nigel Spearing (Newham, South)

Will my right hon. Friend remind the House, for the benefit of those hon. Members here who were not on the Committee, that when he speaks of punishing local authorities the authorities will not be punished but the citizens of those local authorities who have authorised them to undertake and provide services—which the Secretary of State arbitrarily says shall not be provided—will be punished? Perhaps my right hon. Friend will spell that out for the benefit of Conservative Members who will receive letters from their constituents in due course.

Mr. Hattersley

I was about to go through—not in detail but I hope with some clarity—the way in which the block grant system and, initially on this amendment, the transitional arrangements will work, not least for the reasons given by my hon. Friend the Member for Newham, South (Mr. Spearing). People outside the House would not believe it if the situation were described only by implication. Those Conservative Members whom I suspect will vote for this measure should be clear about what they will vote for. Clause 37 provides: The Secretary of State may reduce the amount of rate support grant payable to a local authority … if the uniform rate for that authority's area in that year exceeds the notional uniform rate. What that means in plain language is simple and, I believe, wholly unacceptable to people who believe in local autonomy. It means that the Secretary of State of the day is able to stipulate a notional figure for rates that might he raised or are raised or are thought likely to be raised throughout the breadth and length of England and Wales, and that any authority which raises a rate higher than the figure laid down by the Secretary of State is liable to penalties and can discover in November that moneys which it legitimately expected to receive under the rate support grant are withheld.

I wish to emphasise what I mean by "legitimately expected to receive". There is no doubt that a majority of councils, all over the country, which are raising rates in excess of what the Secretary of State thinks to be right, do so wholly legally. In Great Britain today a council and councillors must, as a duty, make their own judgment about the services which are necessary for their areas and about the rates necessary to finance those services. All over the country councils have made their right, proper and legal judgment about the rates that they should raise. Yet a few of them will be punished for acting legally in April it this law is passed on to the statute book by November.

I can only echo the words of the Spectator, a magazine not universally in support of my party and not universally complimentary to me. It said, in effect, that if this is not a retrospective act of legislation it is difficult to imagine how retrospection can be properly defined. People are being punished in November for what their councillors did legally in April. That in itself is bad enough. But the other point to which the amendment specifically refers is that at this moment those councils that are candidates for punishment have no way of knowing that it is their bad fortune to have been selected by the Secretary of State.

I raised the question with the Secretary of State at Question Time last week. I asked him when he would tell those councils who would have their legitimate grant withheld because they did not conform to his wishes, when that grant would be withheld, how much would be withheld and, for that matter, that they were candidates for grant being withheld. The Secretary of State said: I do not believe that there can be any doubt in the minds of many authorities as to what the figures are all about. He also said: We have sent to every local authority a precise figure showing exactly what we believe their levels of expenditure should be"—[Official Report, 2 July 1980; Vol. 987, c. 1519.] The Secretary of State could have had two half-ideas in his mind when he gave that answer, both of which would have been wrong. I propose to deal with each in turn. The Bill provides that any council that levies a rate in excess of the notional uniform rate is liable for penalties.

In his circular to local authorities on 21 December the Secretary of State announced that the notional uniform rate was 119p. That was the hypothetical figure of rate levy in excess of which any council would be liable to punishment. But it is hardly likely that when the Secretary of State answered my question he meant that every council that was raising a rate in excess of 119p would be punished. It is hardly likely for two reasons. The first is that in his circular he told local authorities that he proposed to penalise only 10 or 20, and we were comforted when the Minister for Local Government and Environmental Services, who has never attempted to deceive us, confirmed that in Committee on 18 March. Therefore, we take the Secretary of State's word absolutely. If he is to punish only 10 or 20 he cannot expect every local authority that has exceeded the notional uniform rate to anticipate punishment, because on the latest information 241 authorities out of 456 are paying above the odds.

The Minister for Local Government and Environmental Services, who is nothing if not predictable, said that it had always been like that. In a moment he will probably tell me that he would expect it—half above and half below. If that is the case it is even more intolerable that the Secretary of State has the power to punish any one of the 50 per cent. of authorities that go above the notional uniform rate. At last, the Minister has grasped the nature of our complaint. The Bill allows the Secretary of State to pick and choose the authorities that he is prepared to penalise. It does not seem to me to be remotely unreasonable that he should make his choice before 1 July.

In fact, there are 42 authorities where the notional uniform rate is more than 150p. Therefore, even if the Minister chooses only those that are excessively above his arbitrary and meaningless figure, he must still somehow pick 50 per cent. of them, and the other 50 per cent. will go free.

The second thing that the Minister's inaccurate answer of last week could have meant is that he proposes to penalise authorities that have not accepted the judgments of his various circulars and cut down their spending by 2 per cent. in real terms compared with the outturn for 1978–79.

The first thing that must be said about that is a matter of principle, which is that the Secretary of State must learn—if he does not learn quickly, 150 Labour authorities will teach him—that the letters and circulars that he sends out do not have the force of law. They are an expression of his judgment and wishes. In a free society, his judgment and wishes are no more important than those of anyone else. If a local authority chooses to ignore his judgment and wishes it is perfectly entitled to do so. It is wholly intolerable that he should now be passing a law to penalise local authorities that did not accept his wishes and judgment in April. That is exactly what he is expecting the House to do.

If the right hon. Gentleman is to penalise only 20 authorities at most, he will have the most difficult job choosing which of those non-complying authorities he proposes to take to task. At least 200 authorities have refused, found themselves unable, or described themselves as "unwilling" to make the reductions in their expenditure that the Secretary of State demands. That is why he had to send out a second circular, part pleading, part threatening, on 13 June saying "You are not making the cuts that I want. I expect you to do so." Somehow, the Secretary of State will have to choose which of 200 authorities—perhaps 250—should obtain the special punishments that he has in mind.

What the right hon. Gentleman owes the House this afternoon, and what I am sure he owes many local authorities, is a clear description of the way in which he will choose those that he decides are suitable cases for punishment. The Minister has already said that there must be some discretion. …it is inevitable said the Minister, in winding up the Second Reading debate, that a number of authorities will exceed the notional uniform rate, but we have made clear that only those authorities which are substantially in excess"— and hon. Members cried By how much?"—[Official Report, 16 January 1980; Vol. 976, c. 1777.] Well, answer came there none. We have not had an answer since that question was asked.

If local authorities that are in excess of the 119p figure stipulated by the Secretary of State are those that are likely to be punished, he has a duty to tell them how little in excess they must be in order to escape punishment, or at which point of excess spending they will receive his wrath. In a free society it is intolerable that they should be allowed to dangle in this way, not knowing whether grant is to be withdrawn, withheld or abandoned. It is intolerable not least because unless the right hon. Gentleman tells us which are the candidates for penal sanctions, when they will be notified of his choice, and—much more important—how his choice is to be determined, we shall again be driven back to the conclusion that he does not yet know and that he will cobble together some arbitrary scheme that meets his political requirements rather than the requirements of prudent spending.

Let me try to explain what I mean, and let me help the right hon. Gentleman give us the answer by offering some alternatives. He could, of course, penalise the 20 authorities with the largest increase in rates, or the 20 authorities with the highest rate levels, or the 20 authorities with the biggest increase in expenditure. He could choose any one of those things, but in choosing any one he would not be choosing the others, because the 20 authorities with the biggest rate increases are not the 20 authorities with the biggest rates, or the 20 authorities with the biggest increase in rate spending. Therefore, it is intolerable that he should have the arbitrary power to decide how to penalise these councils and to pick them out and pick them off one by one without notifying them until the last minute that he intends to do so.

Mr. Arthur Lewis (Newham, North-West)

I do not quite follow my right hon. Friend's argument. Perhaps he can help me. He knows that I represent part of the London borough of Newham. Unfortunately, that area has always suffered. I shall not go into the details, but recently there has been trouble about tower blocks. Whether or not it wants to, the authority has to move people out of those places. It must pull them down and rehouse those people. Is my right hon. Friend telling me that if the authority must pay by putting up the rates, because the Government so far have done nothing on Ronan Point, the Secretary of State can penalise the local ratepayers? Is he saying that we shall be penalised because the authority must move people out of tower blocks for safety reasons?

Mr. Hattersley

I am telling my hon. Friend exactly that. One of the major complaints, which was dealt with at some length in Committee, was that authority after authority had high levels of spending which, first, they could not avoid and, secondly, were imposed upon them by the Government. For example, the Government urged inner city authorities to spend more on the inner cities, on partnership schemes, and on decaying central areas.

The great example is Newcastle, with its underground transport system, which it can hardly abandon half-way through. By conforming to the Government's wishes it may discover that it is having money taken away from it because it is spending money on projects that the Government forced upon it. My hon. Friend has put the position exactly.

Another example of the absurdity into which the Government have got themselves can be demonstrated by comparing council with council—candidates for punishment—and their various spending and rate-raising records. I take my first example from London. If the punishment is to be exacted on the highest rates charged, Camden is a prime target—perhaps the prime target—with a rate of 266p, based on the notional uniform rate. My hon. Friends will be aware that Camden is a Labour authority. Under that classification of punishment, Hammersmith—a Conservative authority—escapes, because there the notional uniform rate is only 116.4p.

On the other hand, if councils are to be punished according to their most recent rate increases, the Tory authority of Hammersmith put up its rates by 26.5 per cent. Camden raised its rates by only 25.3 per cent. On that criterion, Hammersmith is more worthy of punishment than Camden. I use the word "intolerable" for the seventh time. It is intolerable that, under the Bill, the Secretary of State can say "We are after Camden. We shall judge it on the gross rate levy, and thus enable Hammersmith to escape in a way that it could not escape if we judged it on percentage rate increases." I hope that the Secretary of State will spend some time justifying a system that gives that power to the Secretary of State, with its peculiar political proclivities.

4 pm

Mr. John Home Robertson (Berwick and East Lothian)

My right hon. Friend referred to absurdities. Will he comment on the fact that only yesterday, when giving evidence to the Select Committee on Scottish Affairs, the Secretary of State for Scotland said that he did not propose to seek the punitive powers being sought by the Secretary of State for the Environment in this clause?

Mr. Hattersley

We pursued that matter in Committee and came to the only possible conclusion—which will reverberate round local authorities when the Secretary of State fails to answer any questions tonight—that the reason why this is happpening in England and not in Scotland is that the Secretary of State for the Environment was foolish enough to make promises about punishing councils, without thinking about them. The Secretary of State for Scotland was not so foolish. The past six months have been spent inventing a way in which the promises made by the Secretary of State can be fulfilled.

I shall give another example about the absurdity—

The Minister for Local Government and Environmental Services (Mr. Tom King)

On a point of order, Mr. Speaker. Are hon. Members allowed to raise on the Floor of the House matters from a Select Committee before that Select Committee has reported?

Mr. Speaker

That Select Committee sat in public. If a Select Committee sits in public, nobody can reveal any secrets.

Mr. Hattersley

The Minister's mad desire to follow the truth, wherever it may lead, is demonstrated again this afternoon. We had a great example of that in Committee. I hope that by the time he replies to the debate he will change the habits of a lifetime and say something about what is going on in ministerial minds.

There has been a great deal of talk about Wolverhampton, the council that raised its rates by the largest amount this year. It is also the council where the Labour Party increased its membership by four seats. Wolverhampton raised its rates by 44.2 per cent. I am sure that it will be argued in Conservative clubs in the South of England that Wolverhampton, above all other councils, should be punished for that increase. But 100 councils in Britain—a quarter of them Conservative—are charging a higher rate than Wolverhampton. The Secretary of State has to make the invidious decision whether he punishes the councils that raise their rates by the largest amount, or the councils whose rates are at the highest levels. He must tell us how he will make the distinction between those two choices.

If it was a simple matter of those absurd choices being made by harassed officials in the Department of Environment, the scheme would be laughable. But because it allows the Secretary of State to construct virtually whatever rules he wants for punishing whichever councils he wants, and allows him to do that retrospectively after the legal decision to raise their rates and decide their spending has been taken, it is something that no democratic House of Commons should allow, not least because of the behaviour of the Secretary of State.

Mr. Eldon Griffiths (Bury St. Edmonds)

Nonsense.

Mr. Stan Crowther (Rotherham)

rose—

Mr. Hattersley

I shall give way to my hon. Friend the Member for Rotherham (Mr. Crowther) in a moment. I wish to deal first with the hon. Member for Bury St. Edmunds (Mr. Griffiths) who said "Nonsense". After that, I shall gladly give way to my hon. Friend so that we can move from the ridiculous to the nearly sublime. I was about to refer to something that happened earlier, when the hon. Member for Bury St. Ed- munds may not have been in his place.

The Secretary of State was pressed on Second Reading to tell us the criteria against which he would judge a council as being worthy or not worthy of punishment. I read not the version which appeared in Hansard originally but the version as corrected after the Secretary of State agreed that words he had used had been omitted from the original text. The revised version is that he will judge whether they are punishable and worthy of punishment "in the light of the expenditure intentions and the decisions of individual local authorities and the speeches made by members of those authorities". The hon. Member for Bury St. Edmunds might like to say whether he thinks that councils should have their spending and Government grants determined by the speeches made by individual local councils. Is that the way that money should be distributed in a free society?

Mr. Eldon Griffiths

The right hon. Gentleman is generous in giving way on this point. The word "punishment" is inappropriate to the Government's intention, which is to protect the taxpayers' money. I should have thought that the right hon. Gentleman also felt some responsibility in that respect. In his responsibility to have regard to the protection of public money, my right hon. Friend the Secretary of State must form his judgment on a variety of factors, including the public pronouncement of elected officials in an area.

Mr. Hattersley

The House will make its judgment about the libertarian principles of the hon. Gentleman in making speeches. I shall give him some advice about money. The rate support grant accommodates about £9.6 billion. The transitional arrangements will influence the distribution of £2 million to £3 million out of £9.6 billion. The idea that that will encourage councils to be more prudent and to spend less, as I hope to demonstrate in a moment, is a dream world. The idea that the Secretary of State can stop local authority spending is imaginary. If the threat had had any effect, the Secretary of State would not have had to send out a second letter on 13 June. He failed to stop councils from spending money that they intended to spend and, in most cases, needed to spend.

Mr. Crowther

Before my right hon. Friend leaves the question of the uncertainties arising from the clause, he may wish to comment on the discrepancies in valuation, about which the Government are refusing to take any action by putting off the revaluation. That has resulted in some authorities levying rate poundages which appear to be high, but which are producing a low level of income from the rates because of the serious discrepancy between one authority and another in the valuation of property.

Mr. Hattersley

That matter will be dealt with in a subsequent amendment; I must not deal with it at any length now. Conservative Members may discover to their surprise—although not to the surprise of them all—that, because of the problems to which my hon. Friend referred, some councils will be penalised when they are spending very little, but have the misfortune to be high-rated authorities. The incompetence of the Government has included them within the formula. How many local authorities controlled by the Conservative Party are scrimping for every penny, and may well be penalised?

The rateable value makes an enormous impact on the amount that authorities are able to raise. Yet, under the Bill, the Government are proposing to make changes in revaluation which, once more, allow the Secretary of State the widest discretion to decide on the timing of revaluation, or to order a partial revaluation—

The Secretary of State for the Environment (Mr. Michael Heseltine)

The Labour Government put them off every time.

Mr. Hattersley

The Secretary of State cannot say a word in the House or elsewhere without revealing some extra facet of his character. The simple difference is that the previous Labour Government thought it right to include a provision which required us to come to the House for its approval. The Secretary of State does not need that approval any more. He will put it off without a word. He is able to order a revaluation in one area but not in another, or a revaluation of commercial property but not of domestic property. It is intolerable that he alone should hold that power.

I return to the question of the operation of the transitional arrangements. Why are the Government introducing transitional arrangements which threaten a number of councils between now and the introduction of block grants? The Minister gave two reasons for that. The first was the one that the hon. Member for Bury St. Edmunds suggested to the House, namely, that this would have the effect of preventing profligate councils spending more than they ought to spend.

My first comment is that in this society today it is legal for local authorities, for their councils, to make their own judgments about what their own areas need. If they can carry their local electorate, that is all they are required to do. To change the law retrospectively to punish them for that is intolerable.

My second comment is that the scheme is not working. The Minister of State said in Committee that the transitional arrangement would help to achieve a lower level of clawback this year. What he meant was that by threatening a few he would frighten a lot. But he has not done that. I regard it as deeply disreputable to have a vague threat hovering over the heads of 200 councils, with only 20 to be punished but with the other 180 so afraid that they do things that in their judgment are against the interests of their area. Disreputable as it may be, there is no argument about the fact that it is a failure.

This is demonstrated by the speeches that the Secretary of State keeps making and the letters he keeps sending out saying that councils have not cut their spending. The transitional arrangements have not worked. I gave the figures from memory. I have since discovered, to my relief, that I got them right. The distribution of the rate support grant this year will be about £9.6 billion, and the transitional arrangement will not save the public purse a penny, because the grant will only be distributed a little differently. The only difference it will make will be to the marginal £1 million or £2 million on that £9.6 billion. Both in terms of the level of public expenditure and the distribution of public expenditure, the effect of the transitional arrangements is not so much negligible as non-existent.

That leads me to the second reason that we were given for the introduction of the transitional arrangement. It was that profligate authorities were receiving too much of the grant and prudent authorities were receiving too little. In Committee we were told poignant stories about the prudent knights of Avon having to pay £1 million to the profligate burghers of Bristol. The Government were determined that in the future these great men in the shires—who would not spend a penny unless forced to do so—should not be penalised for their attitudes towards public spending and public services.

The hard fact, squeezed out of the Minister after two days of debate, is that the redistribution—the clawback as it is called, the second division of the rate support grant—will still apply, even with transitional arrangements. The rich knights of Avon will still have to provide their £1 million for the poor burghers of Bristol. In terms of redistribution of the grant, it makes no difference at all. The idea of equity may be there in theory, but in practice no difference will be made. A few marginal pounds will be moved from one authority to another, but nobody will know the difference.

I am left with one final task, which is to offer my own idea why this proposal—arbitrary, unreasonable, retrospective and unworkable—is being pushed through the House of Commons. I repeat what I said earlier. At a moment of typical rashness during one Question Time, the Secretary of State announced that he intended to punish overspending authorities. "Do you intend to punish them?", I asked. "That is exactly what I intend to do," said the Secretary of State. Ever since that moment, he has been trying to find a way in which he can fulfil that promise.

The promise will be deeply damaging to local democracy. It will be an affront to all those people who object to and resent retrospective legislation, but it will save the Secretary of State's face. Having suffered from this bad attack of ministerial machismo, he is now trying to justify it. I am sure that the right hon. Gentleman will try to justify it in his typically brazen fashion.

4.15 pm

Mr. Eldon Griffiths

The best feature of the extraordinary speech that we have just heard from the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) was his alliteration—the "ministerial machismo" and so on. I do not know whether the right hon. Gentleman, during his period of office, ever had responsibility at the Department of the Environment. Perhaps he will advise me whether he did. Apparently not. He has not, therefore, the misfortune to belong to that small band of Members who have had to grapple with the peculiarly difficult and frequently unjust business of rate support grant allocation. I know of no other formula under any Government which can be said to have thrown up such great inequity among the various authorities. I am sure that right hon. and hon. Members on each side of the House who have had to tackle the problem will agree with me there.

I cannot say with any certainty that the solution or formula that my right hon. Friends have devised will necessarily work equitably. I cannot even say with certainty that their solutions will be any better than the mish-mash that they replace. But I am certain that if the right hon. Member for Sparkbrook had had the experience of trying to protect the taxpayers' money, for which he was responsible to this House, he would not have made the speech that he made. What he has failed to recognise is that there is a problem, namely, that local government—which has to provide services which this House requires of it, and services that our people as a whole rightly expect to be provided—is one of the main engines of inflation in this country.

In saying that, I am not making attacks on any particular authorities. I simply know that an engine which is generating the public expenditure that local authorities generate must play its part in the general containment of inflation. No Secretary of State grappling with that problem, on whichever side of the House he sat, could do other than seek ways and means either to persuade people to take a certain course of action—I am sure that I can carry the right hon. Gentleman in that direction—or, if persuasion failed, none the less seek to protect the public interest. That, in my view, is the whole motivation behind what my right hon. Friend is seeking here to do.

As I said at the beginning, I cannot say that I believe that this solution is necessarily the best, the only or the right one. But I believe that it moves us forward in one important respect, namely, that it introduces a measure—dare I use the word?—of discrimination as between those authorities which can be seen to be using public expenditure in a prudent way and those which are not.

I have been a local government Minister and I accept at once that the whole heart of local government must be a measure of local democracy, where elected members, responsible to their own ratepayers, make their own decisions. Of course, I accept that. But it must also be understood that when elected members make those decisions, because of our previous grant system, including the new block grant system, they hypothecate the expenditure of very large sums of the money for which this House is responsible.

We have a Secretary of State and a Minister for Local Government and Environmental Services who are responsible to this House precisely because this House requires that they should be the guardians and the stewards of the national funds which are hypothecated by local authorities when they take decisions in the democratic way that the right hon. Gentleman has suggested. He failed in his speech to recognise that the decisions of local government in the aggregate—free and democratic as they may be in each case—none the less impose an aggregate demand on resources, on credit and on finance in this country from which no Government, particularly in present circumstances, can possibly turn away their face.

I did not sit through the Committee proceedings, but I have had some experience in local government and in rate support grant negotiations—which are difficult. I believe that the Bill has introduced for the first time the principle that a Secretary of State responsible to this House will be able to act selectively, with discrimination, but will have to justify himself here to hon. Members. That is the democratic accountability for what he is doing. I believe that in present circumstances it would be madness for any Government to turn their face away from their responsibility to the general taxpayer, to the general revenues of the country and to the general need to control inflation. That is the answer to the right hon. Member for Sparkbrook.

Mr. Arthur Lewis

I wish to be personal because I wish to put a personal point. All hon. Members know that the hon. Member for Bury St. Edmunds (Mr. Griffiths) represents the Police Federation. We all know that the police received what some of my constituents would call a fabulous increase in their salaries, although the hon. Gentleman may think that that increase was reasonable. My constituents have elected a local authority that will have a precept from the Tory-controlled GLC to pay the salaries of policemen. If because of that the local authority has to raise the rates over the notional £1.19 or £1.20, it could be penalised—

Mr. Deputy Speaker (Mr. Bernard Weatherill)

Order. Is the hon. Gentleman making an intervention, or is he making a speech? I did not call him to make a speech.

Mr. Lewis

I am making an intervention. I am asking the hon. Member for Bury St. Edmunds whether he is aware that that cannot be fair to my constituents.

Mr. Griffiths

In fact, I had sat down, but just as I did not wish the House to be disappointed by no hon. Member rising to respond to the right hon. Member for Sparkbrook, I would not wish to disappoint the hon. Member for Newham, North-West (Mr. Lewis) by not accepting that he made an intervention. Subject to confirmation by the Minister, the short answer to his question is that, in so far as the police precept which would fall to be paid by the hon. Gentleman's local authority required an increase in the rates, because it had no choice in the matter, it would fall to be taken fully into account by the Secretary of State in his assessment of the rate support grant. I should be surprised if that were not the case.

Mr. B. J. Woolmer (Batley and Morley)

On this occasion, I address my remarks to the amendment relating to the transitional arrangements. The remarks of the hon. Member for Bury St. Edmunds (Mr. Griffiths) appeared to relate to all the clauses on the rate support grant. If he feels that the Bill concerns the wish to improve the fairness, equity and reasonableness of our rating system, he badly misjudges the circumstances and nature of the Bill. It does not improve the overall control of the local government in public expenditure. It falls badly short of those measures.

There is a strong element of retrospective legislation in this clause. It picks upon a few councils halfway through the year for decisions that were taken last spring, when those councils could not have known which would be affected, by how much, and on what grounds. That is an unreasonable way for the House to proceed. I suggest that when local authorities considered the amount of the rate, it would have been unreasonable for them to have known whether they would be affected, on what grounds they would be judged, and what the effect on them would be. Even now, we do not know the criteria that will be applied during the transitional arrangement that is proposed.

Mr. Eldon Griffiths

I am sure that the hon. Gentleman is not suggesting that any local authority when fixing the rate could have been under any illusions about the Government's call, and the national need, to contain expenditure as much as possible. Many did not, and they said so.

Mr. Woolmer

My right hon. Friend the Member for Birmingham, Spark-brook (Mr. Hattersley) has already pointed out that it is possible for a local authority to control expenditure with virtually no rate increase, and still come out as one of the highest rating authorities in the country, and yet still be penalised. That would be extremely unreasonable. At present, we do not not know whether that will apply to them, and this is simply an illustration. It is possible that, no matter what an authority did in the spring, it could not have avoided being caught out later in the year. That is one of the reasons why the Bill appears to be opening up an arbitrary and unreasonable power to the Secretary of State.

If the Secretary of State really wished local authorities in aggregate to restrain expenditure in the national interest, the record over the last few years has been incredibly good. By comparison with central Government, and with the uncertainties of the private sector's demands upon the banking system, the record of the local authorities within margins of 1, 2 or 3 per cent. has been good. Both in the transitional arrangements and in the Bill as a whole, the Secretary of State appears to be trying to find a way of screwing down local authorities in aggregate to a fine degree of expenditure, and to a degree that no other major sector in the economy could possibly be kept to. He is doing that by attempting to frighten a lot, by picking on a few. That is not likely to result in the aggregate behaviour that the Government want.

The problems of some authorities in achieving this unknown target, based on unknown criteria, which could result in unknown penalties, are manifold. For example, over the last few years many authorities—particularly the partnership authorities, but also many of the old industrial areas—have been positively exhorted by successive central Governments to spend more in the interests of overcoming serious problems. It has often been said by central Government that, unless local authorities help themselves, central Government will not help them. Central Government have said that unless local authorities are prepared to pay for the local rate, they should not expect central Government to subsidise part of their effort. In Yorkshire we understand the principle of self-help. Yorkshire was prepared to pay its part of the improvements that were necessary. But the paradox of the transitional arrangement is that the penalty for self-help in the last two years is likely to be money taken away this year. The spending this year is, in substantial part, the consequence of spending programmes which were started in the last financial year and are going on this year.

4.30 pm

I put this forward as one of the reasons why many authorities genuinely feel not simply a sense of grievance but of bewilderment. I do not know how ratepayers are to understand a succession of public pronouncements and exhortations for areas to start helping themselves in industry, to clear up dereliction in the environment, to spend more on improving educational prospects and technical training for children and to get rid of bad housing and then to be picked off because their rate is increasing by a certain percentage this year or they have finished up as high spending authorities. That is why I suggest that this attempt to achieve no more than a 1 per cent., 2 per cent. or 3 per cent. overall change in all local authorities seems like taking a sledgehammer to crack a nut.

I suspect that if the Secretary of State had said to local authorities, as my right hon. Friend the Member for Stepney and Poplar (Mr. Shore) did when he was in that office, "In the national interest, despite all your problems, will you try to get down another 1 per cent. or 2 per cent?", there would have been greater co-operation and understanding with the flexibility that certain authorities which could not avoid particular spending decisions, would be able to carry out those spending decisions.

Mr. Donald Thompson (Sowerby)

Does the hon. Gentleman agree that, had that appeal been made, it would have been met but that certain authorities—those which have taken no notice year after year—would again take no notice?

Mr. Woolmer

Many hon. Members have equal or greater local government experience than I, but my experience is that local authorities bring considerable pressure to bear on each other to try to conform with national priorities. At the same time they ultimately respect the judgment of individual councils which say that for very good reasons they should nevertheless spend a certain amount of money and levy a particular rate.

In West Yorkshire there is a tremendous derelict land problem. I suggest that many local councils in the South of England would well understand the decision of an authority in West Yorkshire, faced with spoil heaps and derelict land, to spend money to do something about them. Some of those authorities face the prospect of the 100 per cent. derelict land grants being taken away from them. Therefore, they may need to increase their spending to get rid of an increasing spoil problem resulting from the fact that we are now producing one tonne of waste for every tonne of coal taken out of the ground. There will be as much spoil in the next 20 years as we have had in the last 100 years. These are the kind of problems with which no rule book can deal. No Secretary of State can at the end of the day explain why one authority or the other should have a fixed, inflexible rule.

I am not the only one who says that. The Conservative leader of the AMA prior to May made the same point to the Minister for Local Government and Environmental Services. He asked whether the right hon. Gentleman accepted that it was ironical that partnership authorities singled out as having particularly serious problems should be so at risk from the Government's grant proposals. This was a Conservative, not a Labour, leader. It was not someone who did not agree with the Government's policies making that point. Local authorities cannot suddenly switch off the spending consequences of recent investment decisions for priorities which until today had been agreed.

I cannot agree with the alternative of penalities relating to percentage increases. The implication is that an authority which has been a low spender in the past with poor services cannot, if there is a change of political control, make good those poor services. I suggest that it would be intolerable for a local authority, not for the first year but for successive years, to be ossified into adopting a proportionate position in providing services as a result of this Bill. If a local authority has poor services and there has been local reaction to them, surely we should not set up a system which provides that that local authority shall not merely be penalised but should face savage penalties for attempting to improve its poor services. Is it reasonable to say to school children "If your local authority is the lowest in the table in spending on books, it will be penalised if it tries to go up the league"? I suggest that would be nonsense. Yet we have no guidance in the Bill to enable us to believe that that will not be done.

One of my authorities in Kirklees is in very much that position. The Conservative council said that it believed that ratepayers would prefer low rates and poor services, but last May it lost to a Labour council on a programme that people wanted better services. Are we to say to that Labour council "Despite your being elected to improve services, if you do so you will be penalised"? There is no easy answer. But from my experience in local government, the answer is not to have rigidly laid down formulae which mean that local authorities cannot respond. That will ultimately lead to conflict between local government and central Government of a kind that we have not experienced. I believe that such a conflict would not be in the best interests of this country.

It is not that I do not want local government control of spending. When I was on the policy committee of the AMA and chairman of one of the AMA's major authorities, I always took the view that the ratepayers' money was as good as mine. I thought of it as coming out of my pocket. I did not spend money as if it did not matter. I would ask myself "If it were my money, would I spend it? Is it fair to take even a penny out of a man's or a woman's pocket for this expenditure?" It is not a case of taking money out of rich people's pockets. Council leaders and council finance committees consider an item of expenditure and ask themselves "Is it reasonable to take another 10p a week from people bringing home only £30, £40 or £50 a week?" That is the attitude adopted by councils. They are not spendthrifts. They do not throw money around. They consider whether people in the locality can afford it.

I am possibly preaching to the converted in this Chamber. But local leaders and chairmen are like everyone else. They meet people in the street and are asked "Why have you put up the rate? It is costing me another £1 a week." They have to justify the expenditure not in the House once or twice a year, but virtually every time they go into the street. It is an injustice to suggest that local authorities are not acutely aware of the ratepayers' or the national interest. I suggest this is the wrong way to go about it.

Mr. Eldon Griffiths

The hon. Gentleman is making an interesting and valuable speech. I take the point that local councillors are conscious of the ratepayers' pressures upon them and that they do not for the most part spend money like water. But does the hon. Gentleman accept that local councillors are a little less provident with money that they can hypothecate from far-off anonymous Government sources which in the past have been automatically payable because of the grants systems? The hon. Gentleman wants more local responsibility. Is not that achieved by getting away from the grants system, which meant that they were spending the taxpayers' as well as the ratepayers' money, and moving towards the block grant system which means that they can show more responsibility in the use of their own locally allocated funds?

Mr. Woolmer

The hon. Member raises matters which are probably more appropriate to the debate on the block grant clauses. I shall address my remarks to him on that occasion, if he is in the Chamber. However, I suspect that he will agree that I have been on my feet for too long already. I shall return to the subject.

Mr. Deputy Speaker

Order. I was about to rise when the hon. Gentleman rose to reply to the intervention of the hon. Member for Bury St. Edmunds (Mr. Griffiths). We must keep to the amendment under discussion. The hon. Gentleman is going rather wide of it. Perhaps he will now address himself to the amendment.

Mr. Woolmer

The problem in this attempt at transitional arrangements is that the Government are trying to tie local authorities down to a degree of inflexibility in a year when they face widely divergent reasons as to why their situation is what it is. That is a very strong objection to the way in which the Government appear to be proceeding, particularly as the local authorities have the very good record to which I have referred.

The truth is that the intention behind the clause, and the other clauses to which we shall come in due course, is not an improvement in the method and the distribution of control of local rate support grant. That is not the purpose. Local authorities see the Bill as the product of the Tories' deep suspicion of local goveranment, especially in industrial areas and the big cities. That is what is at the heart of the Bill—a deep and ideological dislike of public services. As my right hon. Friend the Member for Sparkbrook has said, it was an attempt to show the local authorities that they could be put in their place. I suggest that these transitional arrangements will do a great deal of damage. They will do no good to the reputation of central Government, and they will do a lot of damage to the local authorities which most desperately need improved public services.

Mr. Allan Roberts (Bootle)

I shall attempt to keep to the amendment, Mr. Deputy Speaker, and not to speak about the proposals for introducing a block grant system, to which reference has been made by the hon. Member for Bury St. Edmunds (Mr. Griffiths).

The proposal to claw back from local authorities this year rate support grant which they have already received, and on which they have based their present rating assessments, and the block grant proposals, are based on the Government's assumption that public expenditure is a bad thing, that, in the words of the White Paper, Cmnd. 7746: Public expenditure is at the heart of Britain's present economic difficulties and that there is a need, therefore, to control public expenditure. The Government are choosing local government as their scapegoat and are trying to control local authority expenditure even more than central Government expenditure, central Government having increased expenditure on such matters as defence and law and order.

Local government will be penalised by these retrospective clawback provisions. The White Paper claims that local government expenditure and public expenditure are out of control. The introduction to the main document, Cmnd. 7841, repeats the theme, and in table 1.2 shows how large a proportion of the gross national product is taken up by public expenditure. The figures are: 41½ per cent. in 1973–74, 46½ per cent. in 1974–75 and in 1975–76, and then 45 per cent., 41 per cent., 42½ per cent. and 42 per cent. in the following four years. From the figures, it looks as though such expenditure is coming down—but never mind; that is what the Government believe.

It was at this point, when all doubts seemed to have been resolved—public expenditure is out of control, it is at the heart of our economic problems, and, therefore, local government ought to be penalised if it spends more than the Government wish—that The Guardian of 28 March 1980 saw fit to point out that in Britain the share of the national income devoted to public expenditure is lower than that in any other EEC country. In 1979 we spent 42.8 per cent. in this way. West Germany and France spent 46.4 per cent. Holland spent 58.3 per cent. Yet all these economies have regularly out-performed ours.

4.45 pm

I do not believe that in order to solve the country's economic problems we need to cut local government expenditure or to penalise local authorities in the way that the penal clauses in this legislation will penalise them. I believe the opposite. I believe that the country's economic success and economic future is dependent upon increased public expenditure and on increased activity on the part of local government.

The area which I represent, Bootle, is on Merseyside. In my constituency and in the areas surrounding it, the only economic activity taking place is activity which is a direct result of public expenditure, either of central Government or local government. The two main employers of labour in my constituency are the local authority and the National Girobank, and without increased public expenditure on Merseyside through local government and so on, Merseyside will continue to decline, as it has over the last 20 years under successive Governments with monetarist, pseudo monetarist and interventionist policies. We have never managed to get proper private investment and private capital on Merseyside. We have been dependent mainly upon local government initiatives.

Mr. David Alton (Liverpool, Edge Hill)

In perhaps the largest of the local authorities in Merseyside, in Liverpool, a Labour administration recently allowed the rates to rise by 50 per cent. That was doing an equal disservice to the local economy, because it has forced many small firms out of business.

Mr. Roberts

I am grateful for the hon. Gentleman's intervention. He represents a party which, together with Conservatives on Merseyside, is now cut- ting back on local authority expenditure, making hundreds of people redundant, increasing unemployment in the Merseyside area and cutting services, in a way which demonstrates adequately that the Labour council was justified in increasing rates to the level needed to provide the services that are required in that city. The Labour council was dealing with an inherited situation of a virtually bankrupt city as a result of Liberal and Tory actions previously in spending reserves and in under-rating, and as a result of RSG cuts imposed by central Government.

Mr. Alton

How many people have so far been made redundant in local government in Liverpool?

Mr. Roberts

The hon. Gentleman again proves my point. The resistance of the Labour movement in the direct labour department and on the council in fighting the cuts that are being made by the Liberal/Tory council has so far prevented the redundancies taking place. But they are still on the programme and are still being proposed. They are likely to happen if the Liberals and Conservatives in Liverpool have their way.

Mr. Arthur Lewis

Is it being denied that it is better to keep people employed doing something useful than pay taxpayers' money to people on the dole who are doing nothing?

Mr. Roberts

That is exactly what the Liberal/Tory philosophy in Liverpool seems to be. I am grateful to my hon. Friend. Ordinary citizens of Merseyside will not tolerate a situation in which a council is making building workers redundant from a direct works department when there are thousands of people on housing waiting lists, when there is a need to build houses and when houses need repairs. The electors will decide on these matters in future local elections.

In proposing these penal clauses, the Government are not penalising Labour councils or councillors. No Clay Cross situation is being created in which, if Labour councillors vote to increase the rates more than the Government wish, they will be penalised or surcharged. These clauses are aimed directly at penalising the electors, voters and citizens of the areas in which Labour councils are in control. What Labour councillors have done, as my hon. Friend the Member for Batley and Morley (Mr. Woolmer) has described, is to take account of the level of services required and to balance that with rate increases which they think the citizens of their area can afford. They have assessed that a certain level of services needs to be provided for the elderly, for children, for the disabled and others, and they have levied a rate accordingly.

The Government will tell them that the rate is too high and that they will claw back some of the rate support grant. The Labour council will be forced to decide whether to cut the services below the level necessary—which will hit the elderly, the handicapped and the disabled—or to increase the rates to compensate for the money clawed back. The Government will probably penalise authorities again. They will probably claw back more of the rate support grant.

Ultimately, a local authority may be faced with such great clawbacks that it is unable to pay its staff. Local authority employees, and those in greatest need of local authority services, will suffer the most. We should get away from the idea perpetrated by the Government that spendthrift Labour councils will be penalised. The elderly, the handicapped, the disabled and schoolchildren will suffer from the clawback. Labour councils will not suffer if they act in the best interests of their electorates, which democratically voted for them.

Have the Government considered what may happen when the Labour Party comes to power? I hope that that time is not too far distant. The powers that the Secretary of State for the Environment wishes to take will be on the statute book by the time that my right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley) has become Secretary of State for the Environment. I shall urge my right hon. Friend to use those powers as ruthlessly as the Secretary of State for the Environment will use them in the interests of the Conservative Party.

I should like the next Labour Secretary of State to threaten the Conservative-controlled Sefton council, and to use the powers in the opposite way. I should like him to say that Sefton council will be penalised unless it levies sufficient rates to provide decent services, and unless it gives a reasonable rate fund contribution to the housing revenue account in order to provide the necessary housing. A Labour Secretary of State would say that, if the council did not provide essential services, it would not get the money for fairy lights in Southport.

Mr. Robin Squire (Hornchurch)

I have listened with great interest to the hon. Gentleman. However, I am sure that he is talking about the wrong amendment. We are discussing the transitional provisions.

Mr. Deputy Speaker

That is for me to judge. I am listening very carefully.

Mr. Roberts

I hope that the next Labour Secretary of State will tell Sefton council that, if it does not provide funds for housing, education and the social services, it will not get the money necessary for fairy lights in Lord Street, Southport, or funds for statues of Red Rum and bandstands. I hope that a Labour Secretary of State will study the powers and use them to the benefit of local government and to the benefit of those in greatest need. The Secretary of State does not know the powers that he is giving to the next Labour Government.

Conservative councillors, Labour councillors and officers who serve local government, know that the Government are penalising local government in an unnecessary and undemocratic way. The Government's proposals will destroy the foundation of local government. The essence of local elections is being destroyed by the Government's Draconian measures. The kick-back will come not only from Labour-controlled local government but from Conservative-controlled local government. When the Secretary of State implements the clawback provisions in an unsatisfactory way, the reaction will reverberate along the Back Benches of the House of Commons and throughout the Conservative Party conference in Brighton.

Mr. Anthony Beaumont-Dark (Birmingham, Selly Oak)

One thing is clear. The whole of part VI is unsatisfactory. One does not have to echo the argument of the hon. Member for Bootle (Mr. Roberts) on that. Any sensible person would have been scared to death when the hon. Gentleman suggested that local authorities should be able to spend, spend, spend. That is nonsense. Both central and local government have continually spent money. Local authorities have not been more inclined to spend money than central Government. One could argue that local authorities are more responsible if one compares the amounts spent by central Government against those spent by local authorities in the past 10 years.

There has always been a conflict between the ones who give and the ones who spend. Local government expenditure involves £15 billion. One must bear in mind that 70 or 80 per cent. of that expenditure is foisted on local government by Whitehall. We cannot blame local authorities for the misfortunes that have been foisted on them by Parliament. The block grant proposals represent a great stumbling block. However, this provision also involves the problem of retrospective legislation.

It is nonsense to have a notional rate of 119p. That will mean one thing to those who come from Huddersfield or Birmingham, and another to those who come from Bournemouth or Torquay. It is nonsense to suggest that the problems of the elderly in Bournemouth are the same as those of the elderly in Huddersfield or Birmingham. They cannot be the same. That is why the Government are so wrong. They are well aware that it is with great pain that I say that I shall not support the proposals. I have no intention of allowing my 24 years' experience in local government to be tarnished by such proposals.

Mr. Russell Kerr (Feltham and Heston)

Sock it to 'em, Darkie.

Mr. Beaumont-Dark

With such help, I do not need to encourage enemies.

The proposals are wrong. Would the Association of Metropolitan Authorities, the London Boroughs Association, the Association of County Councils or the Association of District Councils—most of which are Conservative-led—have flown to Socialist Members for support if they had been given a proper hearing? Of course not. The transitional arrangements are part of a wretched package. We shall reap a bitter harvest, and we shall not get the co-operation that we desperately need between the great spenders of Whitehall and of town halls.

It is not too late. The Government should reconsider the transitional arrangements. Block grant is probably one of the worst things that I have seen for many a long year. One does not have to be a great expert on local government, nor does one have to be as involved as many hon. Members have been, to recognise that one cannot have a notional rate. Treasurers and chairmen of finance committees cannot arrange their figures only to find that some Minister has spoken with weary officials and has announced that one authority will get "X" and another "Y".

There is no such thing as a notional rate in local government. There is no such thing as an average authority. There is no such thing as a uniform man, woman or child, or uniform authorities with the same problems. One of the things that I have found, having spent 20 years in local government, is how often people misunderstand what local government is all about. It is about the democratic right of people to make their mistakes. In God's truth, this place has made enough mistakes in its time under one Government or another. Also, we should remember that many of the problems faced by local authorities are not of their own making; they have been foisted upon them.

5 pm

I hope that the Government realise that councillors are as much elected to serve their people as we are. It is wrong to try to dictate a system of payment, because it will not be and has not been accepted or understood. Of course, it is just as irresponsible for local authorities to spend as if there is no tomorrow because there will not be an economic tomorrow if all the authorities go on in the way that a few have done. Of course, they have to be brought under sensible control.

But anyone who has dealt with Ministers, as I have as chairman of finance in the city of Birmingham and the West Midlands county, knows full well that there are ways of controlling local authorities without using a great big hammer to crack very few nuts. I hope that the Government will recognise that we can either be in partnership with local government or we can operate a dictatorship over it. It is no part of my philosophy or of my reason for coming here to see the Government set themselves up as a great dictatorship because of temporary problems.

Inflation has come as a great shock and a great rolling cloud over all those who plan local government expenditure year after year. For 20 years I have lived under some kind of inflation. I helped to plan the city of Birmingham's expenditure based on a 5 per cent., 6 per cent., or at worst 8 per cent. rate of inflation. Then, because of one misfortune or another—oil or Government mismanagement—local government has been overwhelmed by inflation that no one could have hoped, at a stroke, to do anything about.

I hope that there will be a sense of mercy and understanding of the problems of those people who are doing the job. This is not the time to war with local authorities; it is the time to talk to them. It is a time to achieve a real sense of understanding. This clause on transitional arrangements and other clauses to come will damage the fabric of local government for many years. We are foisting the mistakes that this House has made in the past on to the local authorities. Certainly there is no way in which I can go in the Lobby in support of this or the other clauses of part VI. The time has come to think again and do something positive. The time has come for us to say what we want the local authorities to do instead of foisting one great law after another on them. When they spend the money and get the people to do the tasks, we then tell them that they should not have done it. That hypocrisy must end. It damages; it does not build. I am in this place in order to build, and that is why I cannot support this clause or the clauses to follow.

Mr. Alfred Dubs (Battersea, South)

I congratulate the hon. Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) on having defended local government on the basis of his years of experience in it. I notice that the Secretary of State has been in hiding for most of the afternoon. He disappeared earlier like a scalded cat when he did not want to respond to the criticisms made by my right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley), and I am sure that he is even more pleased now to escape the wrath of the hon. Member for Selly Oak. However, I hope that we shall have some response to these criticisms because the questions that have been asked this afternoon deserve an answer.

I represent a constituency within the London borough of Wandsworth. The Conservative Party captured that local authority in May 1978. Judging by the many speeches from Conservative Front Bench spokesmen when the previous Government were in office, and from Ministers in this Government, Wandsworth is the jewel in the crown of the Tory Administration. Ministers have gone to Wandsworth and told that authority how wonderful it is because it is cutting local services. They have patted the leader of the council on the head and then rushed back to London. In Wandsworth the council appears to have been doing what Ministers have asked—cutting services with a savagery and ruthlessness that has been unequalled by most local authorities. Whatever the services, Wandsworth council has cut them. That is true of housing, social services, law centres and transport for the disabled.

Yet what do we find after all these cuts have taken place? Wandsworth council is still, according to the Secretary of State's yardstick, spending too much money. Wandsworth council's rate is still well above the notional uniform rate. Some of us would have thought that Wandsworth would be exempt from the punishment that will be meted out to local authorities. Perhaps that is why the Secretary of State has been so imprecise in stating how he will punish local authorities that levy rates above that set by him as the notional uniform rate. If there is any fairness in the way in which the Secretary of State applies his punishments, Wandsworth council, despite all its ruthless efforts to cut expenditure, should be clobbered with the rest of them. But of course we know that that will not be the case. Wandsworth will not get that sort of punishment. We know that that punishment will be reserved for other London boroughs, such as Lambeth, with which Wandsworth is frequently compared.

Having seen the effect of these cuts, we all know the consequences. We know also that these transitional arrangements can only make things worse. They will either make local authorities cut services further or they will add to the conflict between local government and central Government. These transitional arrangements will increase the sense of unfairness felt by local government, which is why every local authority association has protested to the Government about the nature of these arrangements. They will add to the uncertainty with which local government must face its difficult financial tasks in the year ahead. One of the things that local authorities have complained about for years is the uncertainty caused by Whitehall.

The Secretary of State and his team are making matters worse. They will compound this by giving local authorities no warning at all of whether they will be punished. It is difficult enough for local government to make plans several years ahead in terms of prudent financial management. But to have to make savage cuts in expenditure, if they are to be punished at the last moment in the financial year, is asking too much of local authorities. Such an attitude seems to be based on a lack of understanding of how local authorities operate and the difficulties with which they are faced in meeting the edicts from the Secretary of State and his colleagues.

Mr. King

How much warning did local authorities get under the existing system on clawback which was operated by the Labour Government when they were in office?

Mr. Dubs

It is certainly true that local authorities have had a legitimate complaint when they have been faced with cuts under both Governments. When faced with cuts or clawback they have not had the time that they might have had. These new proposals will make things worse. Local authorities will have even less time and they will have to make their plans in such a hurry that those plans can hardly be based on prudent financial expenditure.

I am sure that everyone wants to see increased efficiency in local government. No one will pretend that local government is as efficient as it could be. But the difficulty is that in order to make local authorities spend their money wisely and in order to increase their efficiency, one must give them years of planning to improve the efficient delivery of their services. The more that local authorities have to make last-minute cuts and respond to last-minute pressures, the less they will be able to concentrate on the efficient delivery of their services, and they will increasingly have to consider what services they can cut to comply with the latest edict or punishment.

The problems of inner city areas are numerous. They have been reiterated many times. If those problems are to be overcome, local authorities, whose main concern they are, need the money and resources, and they need to be certain that they will get them. The Government's proposals for the transitional arrangements will have the most damaging effect on local government and inner city areas. I hope that even at this late hour they will reconsider them.

Mr. Arthur Lewis

I, too, pay tribute to the hon. Member for Birmingham, Selly Oak (Mr. Beaumont-Dark). This debate is about a local government matter, and is not a party issue. However, it will become a serious party issue if the Government do not listen to their Back Benchers, who are greatly interested in local government.

We all remember what happened at Clay Cross. The Government cannot make people do good, bad or indifferent things if those people believe that it is wrong and the Government are being unfair and unkind. Whatever laws are passed and whatever proposals are put forward—"In Place of Strife" or whatever else—they all mean nothing without co-operation. [Interruption.] The right hon. and learned Member for Hexham (Mr. Rippon) may laugh, but I remember when the five dockers were put in prison and we had to dig out the Official Solicitor from somewhere to get them out.

I give the Government a warning. In most areas that suffer the worst deprivations there are powerful Left-wingers, Trotskyists or revolutionaries, as Conservative Members will call them. These areas have immense problems with unemployment, housing, immigration, schooling and so on. I could go on all night. Incident after incident occurs, and the local authority has to spend money to avoid near revolution. I shall not go into the merits or otherwise, but let us consider the actions of this Government. Rightly or wrongly, they drastically enforced a huge increase in gas and electricity charges. Those charges went up, and they are going up again. An overwhelming number of old age pensioners live in my constituency. We have more blind, deaf, dumb and disabled people in the constituency than elsewhere in London. It is a good local authority with good social services, and people have been attracted to the area. Many of these people cannot pay their already high electricity bills, and their electricity is being cut off.

An immigrant lady with three little nippers came to my surgery last week. Her electricity had been cut off—

Mr. Deputy Speaker

Order. I am extremely sorry to interrupt the hon. Gentleman, but will he relate his remarks to the amendment before us?

Mr. Lewis

I was trying to show that, if the Government go ahead with their proposals and do not accept the amendment, they will have serious difficulties in enforcing the cuts. Even without such cuts, people are experiencing difficulties, and the proposals will multiply them.

5.15 pm

This immigrant lady had no electric lighting. She had to use candles in jam jars. That is very dangerous with kiddies running around. We have tower blocks in my constituency. There was an explosion at Ronan Point, for which we still have not had the money. Gas supplies had to be taken away from such tower blocks, and electricity used instead, which costs a great deal of money. Electricity charges are now rising, and the council will have to help people meet their expenses. Those are all additional costs that the local authority feels it should legitimately meet. I cannot decide whether those costs are legitimate or not. The elected council has to decide. If the council wastes money, overspends or unnecessarily increases charges, I assume that its electorate will eventually vote it out of office.

If the Minister is not careful, he will create great social unrest in such areas. People will not live in rat holes with- out gas or electricity, or stay in bed without heat. Whatever Government are in power, they will not put up with that. The troublemakers will cash in on the unrest. They are not concerned whether their actions are legal. Other people, too, will be willing to go to prison. My local authority has some councillors who would be prepared to go to prison rather than take such action. I do not want to see that happen, but the Minister may create that situation.

Local authorities are normally able to discuss such matters with the Government and reach agreement. I ask the Minister not to go ahead with the transitional arrangements until he reaches agreement with the local authorities. He should also discuss the matter with his hon. Friend the Member for Selly Oak and others like him. Although something needs to be done, it should be done by consensus. The proposals should not be forced on local authorities. Even if the Government get their way, implementing such proposals will be dangerous.

Mr. Derek Foster (Bishop Auckland)

The hon. Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) spoke with great passion and feeling from his experience. I hope that the Government will listen to him. My experience in local government is not nearly as long as his 24 years, but I had the somewhat unusual experience of being both a senior officer and a member of a local authority. If the fact that there is a great deal of unease throughout local government, both at officer and member level, about the present arrangements has not communicated itself to the Government, I cannot imagine what more can be said or done to get the message across.

People are talking about a fundamental change in the relationship between central and local government being established in the next 25 years. I appreciate that we are discussing clauses that relate to the temporary arrangements and that this matter might be more appropriately raised on the rate support grant clauses, but there are fears in the minds of every local government councillor and officer. Indeed, many officers are more fearful than are members, because they see themselves becoming mere agents of central Government and they entered the service with a different expectation and belief.

I was pleased to hear what the hon. Member for Selly Oak said, because I have heard many Conservative Members and some of my hon. Friends making speeches that suggest that they have no understanding of the problems of local government or the commitment and time given by members and officers. Members often have no hope or expectation of reward and officers often work long hours without extra pay because they feel themselves part of a service to the public.

Members and officers of local authorities have felt punch drunk for many months because they have been criticised on all sides as though they were the naughty boys in present circumstances. As the hon. Member for Selly Oak said, many of local government's functions have been imposed by Governments who have created expectations in the country that things could be achieved. But they can be achieved only through the spending of money, and councillors and officers have welcomed the chance to respond to the legislation imposed by the House because they believe that their job is to ensure progress in their boroughs and counties.

My county of Durham has not been chosen as a partnership area, for justifiable reasons, but there are areas of deprivation in the county that are just as bad as some of those in inner cities. We are all conscious that we can get to grips with those problems only by spending public money.

I wish that Conservative Members would not talk about public expenditure as though it is a sin against the Holy Ghost. Of course, it is possible to spend more than we can afford and of course local government expenditure must be brought under some sort of control, as must central Government expenditure. However, local government has a respectable reputation for keeping its expenditure within 1 per cent. of its target. That has been done over a long period and central Government cannot compete with such a record. It is with the greatest resentment that local government councillors and officers listen to suggestions that local government expenditure has been out of control over the past decade. Such suggestions bear no relation to the facts.

There is a feeling that the Government are proposing a set of arrangements to penalise a few overspending authorities. Overspending is a value judgment, because authorities have been democratically elected on the basis of a programme of serving the needs of their communities. If they feel that their actions are right, who is the Minister to say that those are the wrong things to do? The local electorate will decide on that at the next election.

It is wrong for the Government to take to themselves dictatorial powers to penalise a few authorities. I shall be glad to join the hon. Member for Selly Oak in the Lobby.

Mr. Ted Leadbitter (Hartlepool)

I was surprised to learn from the explanatory memorandum to the Bill that the Government seek To relax controls over local government". The Bill is anything but a relaxation of controls. The Minister must recognise that every body of opinion expressed to him and his Department, including speeches in the House and debates on another Bill in Committee, have shown that local government is anxious to have the freedom to make its own decisions and to be responsible to its communities.

Some previous speakers have considerable experience of local government. They have confirmed that local government is responsive to electorates. My theme is that we should give local government freedom. It has exercised the freedom that we have given it over the years with prudence. When difficulties have arisen electorates have changed the composition of their councils. There is no freedom in this Bill. There is only restriction.

As we are considering public expenditure, this is a good opportunity to put forward another theme that is relevant to the economy and the impact of the rate support grant. If we go too far in cutting public expenditure so that we build fewer schools, hospitals and houses and roads, the immediate consequence will be increased unemployment in the construction industry. One of the pet themes of the Government is giving freedom to the private sector, but their actions will deprive private sector building industries of a substantial number of large contracts.

If the Government go too far, we will be on the roal to depression. It has been proved that when unemployment rises above 1 million the public sector borrowing requirement increases at a sharper rate than if public expenditure is increased and employment is provided by the construction of schools, houses and hospitals.

5.30 pm

No one is talking about building for building's sake. We need to build in accordance with the needs of our people, particularly our young people. One corollary of large-scale unemployment is that public purchasing power is taken away from local areas, and that affects retail industries. There could be a whole range of depressing influences on local economies which would add up to a national disaster. That theme might be worthy of examination in comparison with the policies of the Government, who believe, oddly enough, that the savage cutting of public expenditure will create a better economic climate.

If the ability of authorities to make judgments in the knowledge of the needs of their people and their areas is to be taken away through the Secretary of State having power to punish them by reducing the rate support grant, that would have another depressing effect. Protests would arrive from every local authority. Authorities will not know what reductions the Secretary of State might impose.

The Bill is not clear. It establishes that there will be a penalty if the uniform rate for any authority in any year exceeds the notional uniform rate. I have studied the words "notional uniform rate". The hon. Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) indicated that he did not understand how hon. Members could make judgments on the basis of what appeared in the Bill. Of course the Government seek to clarify notional uniform rate. However, it is not clear to those who have to implement the judgment on rate support requirements. The Bill says: 'notional uniform rate' means the rate which, having regard to payments of the needs element of rate support grant and the prescribed national standard rateable value per head of population and so on.

Can anyone tell me how a chief executive or treasurer of a local authority can anticipate, assume, calculate or consider what will be the "notional uniform rate" in such a manner that he can advise his council that, if it does this or that, it may go beyond the margins? It will not know. Worse than that, I am sure that it will not know the standard rate. If one exceeds the other, we must seek to establish what is the uniform rate. The provision is very vague for those who have to implement it. According to the Bill, uniform rate has the meaning assigned to it for the purposes of sub-paragraph (1) of paragraph 10 of Schedule 2 to the Local Government Act 1974 by sub-paragraph (3) of that paragraph". How on earth can any finance committee make a judgment? I am prepared to sit down if the Minister can say how he would calculate it. He cannot, unless he gels a note from his advisers in the box.

Mr. King

Figures are made available to the finance committtee. The hon. Gentleman has read out the definition that describes the categories of expenditure to be covered in that way. When he asks how the finance committee gets the figures, I have to tell him that the figures are provided. Has he seen the rate support grant order every year?

Mr. Leadbitter

I was not only the leader of a Labour group on a council for some years, but I also have 16 years' local government experience, including chairmanship of a finance committee. Hon. Members with local government experience will confirm what the hon. Member for Selly Oak says. The great mistakes are not made at local government level; they are made here. It is arrogance on the part of any hon. Member to come to the House with a brief from the Treasury or any Department and to presume that, because it has the authority of Whitehall or the House of Commons, it is likely to be firmer, more correct and more likely to be acceptable than judgments made at local authority level.

Although local authorities can turn to the Bill to find the definitions, it is known to the Minister that when authorities make decisions for future expenditure, this is done in the form of estimates. They will, therefore, be punished, not on a warning about the future position, but because of what they have done and are later told by the Government that they have gone over the margins. Local authorities are placed in an invidious situation. They cannot plan in a situation when they do not know precisely what are their commitments and obligations under this section of the Bill.

I plead with Ministers. A great deal of common sense has been applied to this problem in the House of Commons. The Ministers who are now present do not possess the power to change their minds. The Secretary of State is not here. The process of holding this debate is a matter of interest. There will be comment in the press tomorrow, but the fact is that the Ministers here lack the necessary power. I beseech them to appreciate that the Bill is not yet through the House, and the Secretary of State should heed the voice of the House of Commons and those hon. Members with experience of local government. They must recognise that if they want to carry out some changes in the Bill, they must relax the controls on local government. For God's sake, do it.

Mr. King

I was interested to hear the contribution of the hon. Member for Hartlepool (Mr. Leadbitter). The hon. Gentleman was not a member of the Committee. I can understand that he has not had the chance to bring himself completely up to date on some of the matters that were discussed. I do not complain. They are complex matters. The one thing that gave him away was his last attack in which he said that Ministers were sitting paralysed and unable to change their minds. He should talk to some of his hon. Friends who served on the Committee. One or two were kind enough to say that Ministers responded positively and, on a number of occasions, changed proposals in the Bill. We are not perhaps as paralysed as we might appear.

Mr. Leadbitter

I know that people change their minds. I am simply saying that the two Ministers now present are not in a position to change their minds today.

Mr. King

That is a fascinating observation. But these are the two hon. Members who did change their minds from time to time in Committee. We have now listened to the arguments made on Report.

It is important to remember what this interesting debate has been about. We are discussing an amendment which says that this proposal shall not be implemented unless notification is given by 1 July to the councils concerned. The right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley), who made an extremely entertaining contribution. will forgive me if I say that I occasionally get a feeling of déjà vu and that we have been round the course before. His speech was a little schizophrenic. It seemed to oscillate between describing the Bill as the most outrageous attack on local government democracy that he could remember and as a pretty insignificant measure because of the minor variations that it would make to the distribution. The right hon. Gentleman quoted a figure of £9,600 million gross as being what he thought might be the impact of the clause in terms of the transitional arrangements. I cannot at this stage confirm or deny such a figure.

The right hon. Gentleman asked what would be the criteria and the guidance that I could give. The hon. Member for Hartlepool, who was working from the face of the Bill, experienced some difficulty over the transitional arrangements and how they might be implemented. This matter was covered in a circular issued to local government in December last year. It was set out originally in the consultative council with local government. A report was made to Parliament and a parliamentary answer given in November last year. These details were spelt out at the time. Having established initially that we would much prefer not to have to implement the transitional arrangements, the criteria made clear that if this was, however, necessary, they would be applied to authorities that were substantially in excess of the notional uniform rate. It was envisaged that they would apply to possibly 10 and certainly not more than 20 authorities. There would, in addition, be a power of waiver for those authorities that are already at such a high level of expenditure that they would see themselves inevitably within the danger area and feel that there was no way in which they could come within proximity to the notional uniform rate. Where it is clear that there has been a significant attempt to moderate expenditure, or reduce the volume of expenditure, waiver will be applicable.

I had hoped that it would be possible to tell the House the full details of how the transitional arrangements will operate. However, that is not possible. Contrary to what the hon. Member for Batley and Morley (Mr. Woolmer) said about the traditional role of local government in managing to keep within the guidelines of the totality of local government expenditure, the returns show that expenditure by local government this year is budgeted at about 5.6 per cent. above that envisaged in the Government's expenditure plans. Therefore, we have had to ask for a revision of budgets, as the right hon. Member for Stepney and Poplar (Mr. Shore) did in a similar situation.

It would be wrong for us to anticipate that revision of budgets in determining how to apply the waiver. Some authorities could make revisions that will qualify them for consideration under the waiver. For that reason we shall not be able to let the House have details of the transitional arrangements before the end of September at the earliest. Local authorities are engaged on the revision of their budgets. It will take time to interpret their returns and that is a necessary precursor to determining the application of the transitional arrangements.

The right hon. Member for Sparkbrook and my hon. Friend the Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) referred to retrospection. The right hon. Gentleman has tried to find an element of retrospection in the arrangements. As I listened to him I remembered that I fought the previous Government on the Aircraft and Shipbuilding Industries Bill. The compensation provisions envisaged that the average stock market price for the companies to be confiscated, for the three years prior to the previous general election, would be the price which the shareholders and owners of such companies would receive. After that, to be lectured by the right hon. Gentleman on the nuances of retrospection is outrageous.

My hon. Friend the Member for Selly Oak suggested that there is retrospection in the changes that we might make to the increase order. There is no question of our taking money away from the local authorities. Adjustments will be made to an increase order in November. We gave warning of it last November and it was confirmed in December in the House. It will be the subject of approval by Parliament in the main legislation. It will then be subject to further parliamentary approval. Amendment No. 84 specifically requires parliamentary approval for the principles and details of the transitional arrangements. Nothing can happen without parliamentary approval and that must precede any payments to local authorities. I do not know how that can be made out to be retrospection nor how it can be compared with the present situation and be found inferior.

At present clawback is imposed, not by the will of the House, but by civil servants working an arbitrary mathematical formula based on the resources element and the rating decisions of individual local authorities. Hon. Members have said that our proposal is an abrogation of democracy. The right hon. Member for Sparkbrook said that no democratic society should tolerate the proposal. His Government took much more Draconian action, and diverted more substantial resources than we are likely to divert, without any parliamentary approval or notification. The charge of retrospection is unacceptable. There is no retrospection. We are talking of a properly approved parliamentary decision.

5.45 pm

A number of hon. Members have suggested that local authorities are to be punished. It is suggested that the transitional arrangements propose to claw back money to help cut public expenditure. That does not arise. The Opposition Front Bench understand that but some hon. Members do not. None of the money will come back to Government. Under the provision Ministers act as trustees and arbitrators between the competing claims of local authorities, as they have traditionally done under the rate support grant scheme. My hon. Friend the Member for Bury St. Edmunds (Mr. Griffiths) put the argument well. Nothing under the transition will reduce the amount of public money going by grant to local authorities. However, it will influence its distribution.

Parliament has sanctioned the existing clawback arrangements. When the resources element has been distributed and when authorities think that they know what they will receive, they are told, later in the year, that because the competing claims on the resources element have exceeded the finite sum it will be redistributed. The effect of that redistribution is to give more to authorities with the highest level of expenditure and to take away from authorities which are more prudent. That is what happens at present. I doubt whether a single hon. Member is prepared to defend that practice.

We shall not be able to go all the way. I apologise because our transitional arrangements are in some ways too modest. There will be clawback this year because the transitional arrangements cannot cover the extent to which the resources element has been exceeded in the rating proposals of local authorities. However, the clawback this year will be diminished to the extent that local authorities with expenditure levels which are so significantly in excess of needs will have a certain amount reduced. That amount will be distributed among the other authorities or will help to reduce the amount by which money would otherwise be taken away from every other authority in the land.

Mr. Hattersley

I thought that this might be the moment for the Minister to answer one or two questions. By how much will this adjustment to the £9.6 billion ensure that the redistribution will be beneficial as a result of the transitional arrangements?

Mr. King

I have answered that question. I have already told the right hon. Gentleman that he quoted a figure that I could neither confirm nor deny. I do not know whether he was listening then. I have answered the question and he will recall the phrase. It all depends on our receiving the revision of budgets. Until we know which authorities have been successful in achieving exemption under the waiver for those significantly in excess of the notional uniform rate it will not be possible to make that determination.

I was seeking to establish the particular role that Ministers have in the duty to distribute grant and in that context I turn to the remarks of my hon. Friend the Member for Selly Oak. I know that he has many commitments in other directions but he may not have appreciated the point that there is a common misconception that our proposal in some way removes rating decisions from councillors. My hon. Friend used the phrase—I think I got it rightly—that the issue was about the democratic right to make mistakes. In the context of local government he used that phrase. It is the privilege of councillors. I accept that entirely.

However, in the matter of making mistakes with public money, it is a question of the distribution of that money on the fairest possible basis. That is something about which the House—not only Ministers—must be specially concerned. That is the challenging job. This is not a party political point. The right hon. Gentleman quoted the figure of £9.6 billion. That money must be split among 454 local authorities.

The problems of the present rating system as the resource base for local government were raised and these difficult issues must be tackled. But our proposal does not in any way seek to remove the democratic responsibilities of councillors to their electors to run their local councils. Our responsibility is for public money and for the distribution of the money that enables councillors to discharge that responsibility. It has always been the responsibility of Ministers, no matter how we dress it up. We may call it rate support grant, the block grant or anything we like, but it is a problem that Ministers must face.

I would like to make it abundantly clear to the House that the suggestion made by the right hon. Gentleman that councillors going about their legal business of fixing the rates and deciding the budget might suddenly find themselves in some way acting illegally is absolute nonsense. There is no question of them having acted illegally. Those are decisions that those councillors are entitled to take. What he is asking is whether the Government will decide, in the light of the expenditure decisions, the fairest way to distribute that grant. The proposal tackles that issue.

In speaking of the transitional arrangements, I hate to disappoint the hon. Member for Bootle (Mr. Roberts), who seemed to have some passing knowledge of these matters. I found his contribution to the debate pretty depressing. I do not always agree with the hon. Member for Liverpool, Edge Hill (Mr. Alton) but I did agree entirely with his intervention. One cannot help wondering whether the lack of employment opportunities that might exist in his area has something to do with the sort of political comments made by the hon. Member for Bootle and his friends. It is no good the hon. Gentleman coming and pleading in the House for employment in his area and saying that employment can be achieved only through State support if his local authority policy, his colleagues in local government and his party supporters are, by their rating decisions, destroying the very seed corn of the businesses that might provide that employment.

Mr. Allan Roberts

Is the Minister of State supporting the actions of Liverpool council in proposing to make hundreds of men redundant and in running down the direct works department and other essential services?

Mr. King

I listened to the exchange that took place between the hon. Gentleman and the hon. Member for Edge Hill. If the hon. Gentleman wishes, I will tell him what I wrote down at the time. I wrote: "The worst sort of local Tammany Hall politics." If that is the sort of leadership that Bootle gets in the face of present problems in the country, it is not surprising that Bootle has those difficulties. The hon. Gentleman asked for it by his intervention and he has got it. The hon. Gentleman, in the face of problems, is fighting petty party politics and does not realise what are the serious issues at stake. He made exactly the same sort of debating society intervention to me as he made to the hon. Member for Edge Hill.

I will now tell the hon. Gentleman something about the Bill that we are supposed to be debating and the amendment to which he was, for most of the time, seeking to address himself. He made a point about the position of a Labour Secretary of State. I am sorry that he has not been able to read the Order Paper because I wish to give him a bit of information that might be helpful. He will find that these are transitional arrange- ments and that they will not be available to a future Labour Secretary of State. That is because the arrangements are for one year and are to be repealed under an amendment. After that we move on to arrangements for block grant. That is the answer to his question.

Mr. Allan Roberts

rose—

Mr. King

No, I have given way enough. This amendment to which we are addressing ourselves seeks to delay, or wreck, the introduction of the transitional arrangements for this year. The proposals we have made are a genuine attempt to seek a fairer method of distribution for this year as we move towards the block grant. It is on that basis that I urge the House to reject the amendment.

Mr. Allan Roberts

On a point of order, Mr. Deputy Speaker. I would like to draw the attention of the House to the fact that I consider the Minister's state-men to be a personal attack on me. It was an attack on my activities as the Member representing Bootle. Because the Minister would not give way to enable me to answer that personal attack I raise this point of order in the hope that the Minister will withdraw his personal attack.

Mr. Deputy Speaker

The Minister has already sat down. However, I took his remarks to be a debating point rather than a personal attack.

Mr. Hattersley

If it is any consolation to my hon. Friend, if he reads the Committee record he will see that there were many references to what we all described as the Minister's technique. That technique was to patronise a few—as he did with his hon. Friend the Member for Birmingham, Selly Oak (Mr. Beaumont-Dark)—and in the end to be offensive to someone upon whom he had picked for no other reason than that by that time he had run out of arguments on the main subject. I expect that that technique is known in Bootle, as it is in Sheffield, by the immortal phrase "If you cannot fight, wear a big hat." That is what the right hon. Gentleman constantly does. His reluctance and inability to fight is best demonstrated by the simple fact that we know no more now about which authorities will be punished, when they are to be punished, how they are to be punished and by what amount they will be punished than we did when the debate began.

The one fact that the Minister brought himself to include in his speech was that there will be about 20 such authorities. I revealed that to the House having quoted a letter from the Minister. The only fact concerning punishment in the Minister's speech was that we have known about it since 21 December when it was notified in a circular sent to local authorities. The essential questions in this debate concern the number of authorities to be punished, what their punishment will be and when that punishment will be made known. The Minister has not attempted to answer.

I can feel little but sorrow for the right hon. Gentleman who has been left as the last boy on the burning deck to defend the indefensible. He heard from his own side only one speech of support. That was from the now absent hon. Member for Bury St. Edmunds (Mr. Griffiths), who revealed a total innocence of the contents of the Bill. I suspect that if the hon. Gentleman had understood the Bill he would have taken exactly the same position as the hon. Member for Selly Oak whose powerful speech was, I think, understood and welcomed on both sides of the House. The Minister is laughing now. I hope that he is laughing just as loudly when he reads the Division list this evening.

The speech by the hon. Member for Selly Oak evoked the comment that this was not a party issue and that the same views and attitudes had characterised speeches on both sides of the House. One thing that has emerged from the debate is that the division is largely between those hon. Members who have had local authority experience—who have served on local authorities, who understand their problems and who have faced their difficulties—and those who have not. Among those who have not are the Minister of State and particularly the Secretary of State for the Environment. Not only does the Secretary of State not understand or have any experience of the problems of local authorities, but he has a positive disdain of local authorities. He believes that they are little people who can be instructed by him to do what they ought to do according to his principles. As I have said, as the years wear on, he will have to learn that that is not true.

6 pm

I devote the rest of my few remarks to only four points which were half raised by the Minister. The first concerns his oft-repeated assertion that there is no element of retrospection in the Bill. I do not know whether he believes that, but no one else believes it.

Mr. King

Prove it.

Mr. Hattersley

Well, let me try.

Councillors behave wholly legally in raising the rates of their choice. The Minister says that they will behave wholly legally in September. Nothing illegal will have happened, but, although their behaviour in April was legal, they will be punished for it in November. When they took that action in April, and when they said that the rates ought to go up to 140p, 160p or 210p, there was no legal power for the Secretary of State to punish them. He has assumed a legal power to punish them for something that they did before he possessed that legal power. I again use the phrase in the Spectator: if that is not retrospection, retrospection has no normal meaning, coinage or currency.

That is not the worst aspect of the right hon. Gentleman's failure to answer the debate. He asked why I described this simultaneously as trivial and a major affront to the constitution of principle. Let me assure him that it can be both things simultaneously and that it is both things simultaneously. It will have only the most minimal effect on the distribution of grants between one authority and another. It will have no effect at all on the overall levels of grant, which the hon. Member for Bury St. Edmunds could not bring himself to understand. It will have the most minimal effect in terms of overall Government policy.

However, in terms of the principle, and in terms of saying to an individual local authority "Thou shalt not do this, or if you do it you will be punished for it", that is a consequence which we at least regard as having the most enormous constitutional implications. It is the beginning—we find it again and again in the Bill in other clauses—of the Government telling local authorities what to do, and telling them in a specific, detailed and arbitrary way. It is the arbitrary quality which leads me to my final point.

The Minister's speeches on this subject are always couched in value judgments. He talks about overspenders, but does not define what overspending is.

Mr. King

I am rather worried about the right hon. Gentleman because he has asked me to answer a question that I have already answered, and now he says that I did not give a definition of overspending. That is precisely what I did. I said that it was substantially in excess of what either the previous Government or the present Government, based on the needs assessment, have in the past calculated to be a reasonable level of expenditure. The right hon. Gentleman may not have been aware that the previous Government did that. He may have heard of the needs assessment, and I said that it would be substantially in excess of that.

Mr. Hattersley

If the right hon. Gentleman believes that that is a definition, it accounts for why he does not understand what retrospection means. It is just a problem of vocabulary rather than a problem of politics. I have twice asked him what "substantially" means. For example, if a person who is to go to prison for stealing a substantial amount of bread and potatoes asks the judge "How much is substantial?", and he says "Well, the best thing to do is to steal no bread and potatoes and then you are covered", it is a peculiar definition of a rule by which people are to be punished. It is determined by, and based on, the right hon. Gentleman's constant use of value judgments in describing all that he is talking about.

The right hon. Gentleman talks about more prudent local authorities, but more prudent by whose definition and by what standards? I fear—this is where the real affront in the Bill lies—that it is more

prudent by the Secretary of State's judgment. He decides whether one is prudent. If he does not think that one is prudent, one is in trouble. If he thinks that one is prudent, one may get away with it. That was confirmed by what the Minister, in his innocence, thought was one of the defences of the Bill.

The right hon. Gentleman said that there will be a waiver and that local authorities which made a genuine attempt to reduce the volume of their expenditure would be let off by the Secretary of State. I am sorry if the right hon. Gentleman resents the seriousness and strength of our attitude over this, but I believe that fundamentally it is a wrong principle to pass a Bill which allows so much discretion in the hands of the Secretary of State. The idea that "I will penalise whichever local authorities I choose, but, do not worry, I have a waiver and I may be magnanimous, do your best according to my lights and I may let you off", is not something which will attract the Opposition or anyone who believes in local government autonomy.

Of course, we all believe that there must be limits on the amount of money provided by national Government to local government. Of course, that must be consistent with the Government's overall economic plans and their public expenditure programme. But what we do not believe is that that money should be, or can be, distributed in a way which coerces individual local authorities to behave in a way that the Secretary of State of the day happens to think right. It is because we are grossly offended by the embodiment of that principle in the Bill that we shall vote for the amendment.

Question put, That the amendment be made: —

The House divided: Ayes 241, Noes 274.

Division No. 392]	AYES	[6.05 pm
Abse, Leo	Beith, A. J.	Callaghan, Rt Hon J. (Cardiff SE)
Adams, Allen	Benn, Rt Hon Anthony Wedgwood	Callaghan, Jim (Middleton & P)
Allaun, Frank	Bennett, Andrew (Stockport N)	Campbell, Ian
Alton, David	Bidwell, Sydney	Campbell-Savours, Dale
Anderson, Donald	Boothroyd, Miss Betty	Canavan, Dennis
Archer, Rt Hon Peter	Bottomley, Rt Hon Arthur (M'brough)	Carmichael, Neil
Ashton, Joe	Bray, Dr Jeremy	Carter-Jones, Lewis
Atkinson, Norman (H'gey, Tott'ham)	Brown, Hugh D. (Provan)	Cartwright, John
Bagler, Gordon A. T.	Brown, Robert C. (Newcastle W)	Clark, Dr David (South Shields)
Barnett, Guy (Greenwich)	Brown, Ronald W. (Hackney S)	Cocks, Rt Hon Michael (Bristol S)
Barnett, Rt Hon Joel (Heywood)	Brown, Ron (Edinburgh, Leith)	Cohen, Staniey
Beaumont-Dark, Anthony	Buchan, Norman	Concannon, Rt Hon J. D.
Conlan, Bernard	Jay, Rt Hon Douglas	Roberts, Allan (Bootle)
Cook, Robin F.	John, Brynmor	Roberts, Ernest (Hackney North)
Cowans, Harry	Johnson, Walter (Derby South)	Roberts, Gwilym (Cannock)
Craigen, J. M. (Glasgow, Maryhill)	Jones, Rt Hon Alec (Rhondda)	Robertson, George
Crowther, J. S.	Jones, Barry (East Flint)	Robinson, Geoffrey (Coventry NW)
Cryer, Bob	Jones, Dan (Burnley)	Robinson, Peter (Belfast East)
Cunliffe, Lawrence	Kaufman, Rt Hon Gerald	Rodgers, Rt Hon William
Cunningham, George (Islington S)	Kerr, Russell	Rooker, J. W.
Dalyell, Tam	Kilroy-Silk, Robert	Ross, Ernest (Dundee West)
Davidson, Arthur	Kinnock, Neil	Ross, Stephen (Isle of Wight)
Davies, Rt Hon Denzil (Llanelli)	Lambie, David	Rowlands, Ted
Davies, Ifor (Gower)	Lamborn, Harry	Ryman, John
Davis, Clinton, (Hackney Central)	Leadbitter, Ted	Sandelson, Neville
Davis, Terry (B'rm'ham, Stechford)	Leighton, Ronald	Sever, John
Deakins, Eric	Lestor, Miss Joan (Eton & Slough)	Sheerman, Barry
Dean, Joseph (Leeds West)	Lewis, Arthur (Newham North West)	Sheldon, Rt Hon Robert (A'ton-u-L)
Dempsey, James	Lewis, Ron (Carlisle)	Shore, Rt Hon Peter (Step and Pop)
Dixon, Donald	Litherland, Robert	Short, Mrs Renée
Dobson, Frank	Lofthouse, Geoffrey	Silkin, Rt Hon John (Deptford)
Dormand, Jack	Lyon, Alexander (York)	Silkin, Rt Hon S. C. (Dulwich)
Douglas, Dick	Lyons, Edward (Bradford West)	Silverman, Julius
Douglas-Mann, Bruce	McCartney, Hugh	Skinner, Dennis
Dubs, Alfred	McDonald, Dr Oonagh	Smith, Rt Hon J (North Lanarkshire)
Duffy, A. E. P.	McElhone, Frank	Snape, Peter
Dunn, James A. (Liverpool, Kirkdale)	McGuire, Michael (Ince)	Soley, Clive
Dunnett, Jack	McKay, Allen (Penistone)	Spearing, Nigel
Dunwoody, Mrs Gwyneth	McKelvey, William	Spriggs, Leslie
Eastham, Ken	MacKenzie, Rt Hon Gregor	Stallard, A. W.
Edwards, Robert (Wolv SE)	Maclennan, Robert	Steel, Rt Hon David
Ellis, Raymond (NE Derbyshire)	McNally, Thomas	Stoddart, David
Ellis, Tom (Wrexham)	McNamara, Kevin	Stott, Roger
English, Michael	McTaggart, Robert	Strang, Gavin
Ennals, Rt Hon. David	McWilliam, John	Straw, Jack
Evans, Ioan (Aberdare)	Magee, Bryan	Summerskill, Hon Dr Shirley
Evans, John (Newton)	Marks, Kenneth	Taylor, Mrs Ann (Bolton West)
Faulds, Andrew	Marshall, David (Gl'sgow, Shettles'n)	Thomas, Jeffrey (Abertillery)
Field, Frank	Marshall, Dr Edmund (Goole)	Thomas, Mike (Newcastle East)
Flannery, Martin	Marshall, Jim (Leicester South)	Thomas, Dr Roger (Carmarthen)
Fletcher, Ted (Darlington)	Martin, Michael (Gl'gow, Springb'rn)	Thorne, Stan (Preston South)
Foot, Rt Hon Michael	Maxton, John	Tilley, John
Ford, Ben	Maynard, Miss Joan	Tinn, James
Forrester, John	Mellish, Rt Hon Robert	Torney, Tom
Foster, Derek	Millan, Rt Hon Bruce	Urwin, Rt Hon Tom
Fraser, John (Lambeth, Norwood)	Miller, Dr M. S. (East Kilbride)	Varley, Rt Hon Eric G.
Freeson, Rt Hon Reginald	Mitchell, Austin (Grimsby)	Wainwright, Edwin (Dearne Valley)
Freud, Clement	Mitchell, R. C. (Soton, Itchen)	Wainwright, Richard (Coine Valley)
Garrett, John (Norwich S)	Morris, Rt Hon Alfred (Wythenshawe)	Walker, Rt Hon Harold (Doncaster)
George, Bruce	Morris, Rt Hon Charles (Openshaw)	Watkins, David
Gilbert, Rt Hon Dr John	Morris, Rt Hon John (Aberavon)	Weetch, Ken
Ginsburg, David	Morton, George	Wellbeloved, James
Gourlay, Harry	Moyle, Rt Hon Roland	White, Frank R. (Bury & Radcliffe)
Graham, Ted	Newens, Stanley	White, James (Glasgow, Pollok)
Grant, John (Islington C)	Oakes, Rt Hon Gordon	Whitehead, Phillip
Grimond, Rt Hon J.	Ogden, Eric	Whitlock, William
Hamilton, W. W. (Central File)	O'Halloran, Michael	Wigley, Dafydd
Harrison, Rt Hon Walter	O'Neill, Martin	Willey, Rt Hon Frederick
Hattersley, Rt Hon Roy	Orme, Rt Hon Stanley	Williams, Rt Hon Alan (Swansea W)
Haynes, Frank	Palmer, Arthur	Williams, Sir Thomas (Warrington)
Healey, Rt Hon Denis	Park, George	Wilson, William (Coventry SE)
Heffer, Eric S.	Parker, John	Winnick, David
Hogg, Norman (E Dunbartonshire)	Parry, Robert	Woodall, Alec
Holland, Stuart (L'beth, Vauxhall)	Pavitt, Laurie	Woolmer, Kenneth
Home Robertson, John	Pendry, Tom	Wrigglesworth, Ian
Homewood, William	Powell, Raymond (Ogmore)	Wright, Sheila
Hooley, Frank	Prescott, John	Young, David (Bolton East)
Horam, John	Price, Christopher (Lewisham West)
Howells, Geraint	Race, Reg	TELLERS FOR THE AYES:
Hudson Davies, Gwilym Ednyfed	Radice, Giles	Mr. James Hamilton and Mr. Donald Coleman.
Hughes, Mark (Durham)	Rees, Rt Hon Merlyn (Leeds South)
Hughes, Robert (Aberdeen North)	Richardson, Jo
NOES
Aitken, Jonathan	Benyon, Thomas (Abingdon)	Bowden, Andrew
Alexander, Richard	Benyon, W. (Buckingham)	Braine, Sir Bernard
Allson, Michael	Best, Keith	Bright, Graham
Amery, Rt Hon Julian	Bevan, David Gilroy	Brinton, Tim
Ancram, Michael	Biffen, Rt Hon John	Brittan, Leon
Arnold, Tom	Biggs-Davison, John	Brocklebank-Fowler, Christopher
Atkins, Robert (Preston North)	Blackburn, John	Brooke, Hon Peter
Baker, Kenneth (St. Marylebone)	Blaker, Peter	Brotherton, Michael
Baker, Nicholas (North Dorset)	Body, Richard	Brown, Michael (Brigg & Sc'thorpe)
Banks, Robert	Bonsor, Sir Nicholas	Bruce-Gardyne, John
Bell, Sir Ronald	Boscawen, Hon Robert	Bryan, Sir Paul
Bendall, Vivian	Bottomley, Peter (Woolwich West)	Buchanan-Smith, Hon Alick

Buck, Antony	Hooson, Tom	Porter, George
Budgen, Nick	Hordern, Peter	Price, David (Eastleigh)
Bulmer, Esmond	Howe, Rt Hon Sir Geoffrey	Proctor, K. Harvey
Burden, F. A.	Howell, Rt Hon David (Guildford)	Raison, Timothy
Butcher, John	Howell, Ralph (North Norfolk)	Rees, Peter (Dover and Deal)
Butler, Hon Adam	Hunt, David (Wirral)	Renton, Tim
Carlisle, John (Luton West)	Hunt, John (Ravensbourne)	Ridley, Hon Nicholas
Carlisle, Kenneth (Lincoln)	Hurd, Hon Douglas	Ridsdale, Julian
Chalker, Mrs. Lynda	Irving, Charles (Cheltenham)	Rifkind, Malcolm
Channon, Paul	Jenkin, Rt Hon Patrick	Roberts, Wyn (Conway)
Clark, Hon Alan (Plymouth, Sutton)	Jessel, Toby	Ross, Wm. (Londonderry)
Clark, Sir William (Croydon South)	Johnson Smith, Geoffrey	Rossi, Hugh
Clarke, Kenneth (Rushcliffe)	Jopling, Rt Hon Michael	Rost, Peter
Clegg, Sir Walter	Joseph, Rt Hon Sir Keith	Royle, Sir Anthony
Cockeram, Eric	Kilfedder, James A.	Salnsbury, Hon Timothy
Colvin, Michael	Kimball, Marcus	St. John-Stevas, Rt Hon Norman
Cope, John	King, Rt Hon Tom	Scott, Nicholas
Cormack, Patrick	Kitson, Sir Timothy	Shaw, Giles (Pudsey)
Corrie, John	Knox, David	Shaw, Michael (Scarborough)
Costain, A. P.	Lamont, Norman	Shelton, William (Streatham)
Critchley, Julian	Lang, Ian	Shepherd, Colin (Hereford)
Crouch, David	Langford-Holt, Sir John	Shepherd, Richard (Aldridge-Br'hills)
Dean, Paul (North Somerset)	Latham, Michael	Shersby, Michael
Dorrell, Stephen	Lawrence, Ivan	Sims, Roger
Douglas-Hamilton, Lord James	Lawsort, Nigel	Skeet, T. H. H.
Dover, Denshore	Lee, John	Smith, Dudley (War. and Leam'ton)
du Cann, Rt Hon Edward	Lennox-Boyd, Hon Mark	Speller, Tony
Dunn, Robert (Dartford)	Lewis, Kenneth (Rutland)	Spence, John
Durant, Tony	Lloyd, Ian (Havant & Waterloo)	Spicer, Michael (S Worcestershire)
Dykes, Hugh	Loveridge, John	Sproat, Iain
Eden, Rt Hon Sir John	Luce, Richard	Stainton, Keith
Edwards, Rt Hon N. (Pembroke)	Lyell, Nicholas	Stanbrook, Ivor
Eggar, Timothy	McCrindle, Robert	Stanley, John
Elliott, Sir William	MacGregor, John	Steen, Anthony
Emery, Peter	MacKay, John (Argyll)	Stevens, Martin
Eyre, Reginald	Macmillan, Rt Hon M. (Farnham)	Stewart, Ian (Hitchin)
Fairbairn, Nicholas	McNair-Wilson, Michael (Newbury)	Stewart, John (East Renfrewshire)
Faith, Mrs. Sheila	McNair-Wilson, Patrick (New Forest)	Stokes, John
Farr, John	McQuarrie, Albert	Stradling Thomas, J.
Fell, Anthony	Madel, David	Tapsell, Peter
Fenner, Mrs Peggy	Major, John	Taylor, Robert (Croydon NW)
Finsberg, Geoffrey	Marlow, Tony	Taylor, Teddy (Southend East)
Fisher, Sir Nigel	Mates, Michael	Temple-Morris, Peter
Fletcher, Alexander (Edinburgh N)	Mather, Carol	Thatcher, Rt Hon Mrs Margaret
Fletcher-Cooke, Charles	Maude, Rt Hon Angus	Thomas, Rt Hon Peter (Hendon S)
Fookes, Miss Janet	Mawby, Ray	Thompson, Donald
Forman, Nigel	Mawhinney, Dr Brian	Thorne, Neil (Ilford South)
Fowler, Rt Hon Norman	Maxwell-Hyslop, Robin	Thornton, Malcolm
Fox, Marcus	Mellor, David	Townend, John (Bridlington)
Fraser, Rt Hon. H. (Stafford & St)	Meyer, Sir Anthony	Townsend, Cyril D. (Bexleyheath)
Fraser, Peter (South Angus)	Miller, Hal (Bromsgrove & Redditch)	Trippler, David
Galbraith, Hon T. G. D.	Mills, Iain (Meriden)	Trotter, Neville
Gardiner, George (Reigate)	Mills, Peter (West Devon)	van Straubenzee, W. R.
Gardner, Edward (South Fylde)	Miscampbell, Norman	Vaughan, Dr. Gerard
Garel-Jones, Tristan	Mitchell, David (Basingstoke)	Viggers, Peter
Glyn, Dr. Alan	Moate, Roger	Waddington, David
Goodhew, Victor	Monro, Hector	Wakeham, John
Goodlad, Alastair	Montgomery, Fergus	Waldegrave, Hon William
Gow, Ian	Morris, Michael (Northampton, Sth)	Walker, Bill (Perth & E Perthshire)
Grant, Anthony (Harrow C)	Morrison, Hon Charles (Devizes)	Walker-Smith, Rt Hon Sir Derek
Gray, Hamish	Morrison, Hon Peter (City of Chester)	Wall, Patrick
Greenway, Harry	Murphy, Christopher	Ward, John
Grieve, Percy	Myles, David	Warren, Kenneth
Griffiths, Eldon (Bury St. Edmonds)	Nelson, Anthony	Watson, John
Griffiths, Peter (Portsmouth N)	Neubert, Michael	Wells, John (Maidstone)
Grist, Ian	Newton, Tony	Wells, Bowen (Hert'rd & Stevn'age)
Gummer, John Selwyn	Onslow, Cranley	Wheeler, John
Hamilton, Hon Archie (Eps'm&Ew'll)	Oppenheim, Rt Hon Mrs Sally	Whitelaw, Rt Hon William
Hamilton, Michael (Salisbury)	Osborn, John	Whitney, Raymond
Hampson, Dr Keith	Page, John (Harrow, West)	Wickenden, Keith
Havers, Rt Hon Sir Michael	Page, Rt Hon Sir R. Graham	Wilkinson, John
Hawkins, Paul	Page, Richard (SW Hertfordshire)	Williams, Delwyn (Montgomery)
Hawksley, Warren	Parris, Matthew	Winterton, Nicholas
Hayhoe, Barney	Patten, Christopher (Bath)	Wolfson, Mark
Heddle, John	Patten, John (Oxford)	Young, Sir George (Acton)
Henderson, Barry	Pattie, Geoffrey	Younger, Rt Hon George
Heseltine, Rt Hon Michael	Pawsey, James
Hicks, Robert	Percival, Sir Ian	TELLERS FOR THE NOES:
Higgins, Rt Hon Terence L.	Peyton, Rt Hon John	Mr. Spencer Le Marchant and Mr. Anthony Berry.
Hogg, Hon Douglas (Grantham)	Pink, R. Bonner
Holland, Philip (Carlton)	Pollock, Alexander

Question accordingly negatived.