Redetermination and lowering of regional, district or general rate

HC Deb 23 March 1981 vol 1 cc646-77

'In the 1973 Act, after section 108 there shall be inserted the following section—

108A.—(1) Where a local authority have in respect of any financial year determined a rate under section 108 of this Act but the Secretary of State makes and causes to be laid before Parliament, for the reasons mentioned in paragraph (c) of section 5(1) of the Local Government (Scotland) Act 1966, a report as regards them under section 5(1) (reduction of rate support grant because of excessive and unreasonable total estimated expenses), or they have reason to believe that such report may be so laid they may, at any time before the Secretary of State informs them that the reduction specified in such report has been made, reassess the total estimated expenses mentioned in subsection (2) of section 108 and subject to that subsection determine under this subsection in respect of the financial year a rate lower than that determined under section 108

(2) If a local authority determine a rate under subsection (1) above, that rate and not the rate determined under the said section 108 shall be their regional, general or district rate (as the case may be) for the financial year and shall be levied accordingly.

(3) The Secretary of State may by order under this subsection repeal or amend any enactment (including this Act) in so far as that enactment relates to the determination, levy or payment of a regional, general or district rate and such determination, levy or payment is affected by a determination under subsection (1) above.

(4) An order made under subsection (3) above shall have no effect until approved by resolution of each House of Parliament.

(5) A reference in this Act (except this section and subsection (1) of section 108) and in any other enactment, whether passed or made before or after the passing of this Act, to such rates as are determined under section 108 of this Act shall be construed as including a reference to such rates as are determined under subsection (1) above.".'.—[Mr. Younger.]

Brought up, and read the First time.

4.17 pm

The Secretary of State for Scotland (Mr. George Younger)

I beg to move, That the clause be read a Second time.

Mr. Speaker

With this, we may discuss Governments amendments Nos. 29, 44, 48, 49, Government new clause 2, entitled "Prohibition of using sums from loans fund to offset reduction of rate support grant or diminution in amount of resources element," Government new clause 3 entitled "Consent to certain local authority borrowing", and Government amendment No. 50.

Mr. Younger

My hon. Friend and I have always emphasised our wish to ensure that the effect of the Bill is to bring about moderation in local spending but not if it is to the detriment of ratepayers. The new clause, which complements the provision already in part II of the Bill, offers a major potential benefit to ratepayers whose authorities are proposing excessive and unreasonable expenditure.

It will give authorities which are facing a reduction in rate support grant an opportunity to look again at their spending plans and to set a lower rate for the year than that previously announced. In this way, local ratepayers will be able to benefit immediately from the authority's decision to prune its budget in a way which they cannot do at present because, as the law stands, a rate once determined by an authority cannot be subsequently altered. The new power which the clause seeks to create will be exerciseable not only where I have laid a report before Parliament as regards an authority, but also where an authority has reason to believe that such a report will be laid; and the powers will be available for use right up to the time when I formally intimate to that authority that a reduction in grant has been made. If an authority takes advantage of the power to reduce its expenditure and thus reduce the rate, it would be my intention not to proceed to withdraw the appropriate amount of grant.

In effect, the clause will give a straightforward choice to authorities that are proposing excessive and unreasonable expenditure: either they will have to give back a portion of rate support grant to the Government, or give back a similar sum to the local ratepayers. This should not be a difficult choice for an authority if it has any regard for its ratepayers.

The new clause does not impose any new burden on local authorities, but it will help to ensure that the Bill's provisions assist in reducing the burden on ratepayers of all types, whether domestic or commercial.

Amendment No. 29 is consequential on the new clause dealing with the redetermination and lowering of regional, district or general rates. The effect of the amendment is to provide that, like my extended powers to reduce rate support grant in certain circumstances, the new power will be available in respect of the financial year 1981–82 and thus could be used to reduce rate poundages already struck earlier this month.

It is sensible that the new power available to local authorities should be effective at the same time as the Secretary of State's extended powers to reduce rate support grant since it is only in circumstances where a local authority faces an order reducing its share of rate support grant that it could exercise its power to reduce its rate poundage. This amendment also ensures that ratepayers can receive early relief from the burden imposed by a rate poundage struck to support an excessive and unreasonable level of expenditure.

Amendment No. 44 is consequential. It makes necessary adjustment to section 238 of the Local Government (Scotland) Act 1947 which deals with appeals against rates to provide that an authority must set different dates for the lodging and hearing of appeals when they are redetermining their rate poundage. Section 238 of the 1947 Act does not at present allow a local authority to change the dates set for lodging and hearing appeals once they have been fixed. But, clearly, the dates might be inappropriate in respect of redetermined rates. This amendment will therefore require a local authority to determine a different date for the lodging and hearing of appeals at the same time as they redetermine their rate poundage.

Amendment No. 48 adjusts some of the detailed provisions in the Local Government (Scotland) Act 1973 dealing with the determination, levy and collection of rates. The amendment is consequential on the new clause.

The amendments to section 108(1) and section 109(2) make it clear that references to the levying of regional, islands or district rates and to the intimation by a district council of its rate to the regional council include rates redetermined under the new powers. The amendment to section 111(1) would enable the Secretary of State to make regulations providing for the repayment by a local authority of sums paid to it in respect of its initially determined rate and for the cost of levying and collecting a redetermined rate.

Amendment No. 49 is also consequential on the new clause. This adjusts section 8(3) of the Local Government (Scotland) Act 1975 to put beyond doubt that the reference in that section to rate demand notes includes a reference to rate demand notes issued in respect of a redetermined rate.

That is all that I propose to say about the first group of amendments that we are discussing. I should like to add briefly a few words about new clause 2, new clause 3 and amendment No. 50.

Free-spending authorities should have every inducement to prune their planned expenditure without recourse to higher rates or to borrowing. New clause 2 will deny an authority free recourse to borrowing to make good a shortfall in revenue income resulting from reduction of rate support grant. It, therefore, supports the other powers that I seek in the Bill for the reduction of expenditure levels. The new clause will close off access to loans fund money to offset reduction of rate support grant or diminution in the amount of resources element. All borrowed money must pass through the pool which is the loans fund.

The new clause seeks to prohibit the use of borrowed money to offset any part of a reduction which I may make in an element of rate support grant or in the amount of the resources element payable to a local authority. It is recognised that such a prohibition cannot be applied indiscriminately. The clause provides that the Secretary of State may permit offsets on such terms and conditions as he considers appropriate.

It is also recognised that there may be contravention of the prohibition or even of the terms and conditions applied to a permitted offset by the Secretary of State. The clause therefore seeks to ensure that the loans fund shall be reimbursed forthwith or within such time as the Secretary of State may allow when the Secretary of State intimates to an authority that he is of the opinion that there has been such a contravention. Time and again my hon. Friend and I have made clear that it is not practicable to borrow for public expenditure that this country cannot afford. Therefore, this particular measure will be applicable from today's date to ensure that there is no lack of effectiveness in the clause, assuming that it is passed by the House. No new burden on local authorities will be imposed by the clause. It will help to concentrate the minds of local authority members on reducing high levels of expenditure.

New clause 3 seeks to produce a power which is a reintroduction of loans sanction but only over a very limited and seldom used sector of local authority borrowing. Paragraph 1(2) of schedule 3 to the 1975 Act empowers a local authority to borrow sums required to meet certain expenses where the local authority is satisfied that expenses should be so met and repayments spread over a term of years. The substitute paragraph will continue that power but make it subject to the Secretary of State's consent which would be given only if he were satisfied that the nature of the expenses was such that they should be met by borrowing. The consent would be given on such terms and conditions as the Secretary of State would allow.

I have already indicated that the clause does not seek to reintroduce loan sanctions through the full range of local authority borrowing. The existing local authority powers to borrow for capital purposes under paragraph 1(1), for public utility undertaking purposes under paragraph 1(3) and temporary borrowing for revenue purposes under paragraph 3 will be unaffected by the provision. They are all monitored and limited by the various controls and checks in section 94 of the 1973 Act and in the Treasury's powers derived from the Borrowing Control and Guarantees Act 1946.

Accordingly, we have decided to seek reintroduction of loan sanction powers as proposed in the new clause. This does not impose a heavy burden on local authorities. It will bring my control over borrowing for these purposes into line with those controls exercised already over local authorities in England and Wales.

Amendment No. 50 is also to be discussed with the new clause. The proposed paragraph 27A is consequential on the new clause prohibiting the use of loan fund moneys to offset a shortfall or an anticipated shortfall in revenue as a result of reduction in the rate support grant under clause 13 or clause 14 unless the Secretary of State consents to such use of loan fund moneys, which he may do subject to such terms and conditions as he considers appropriate. The amendment ensures that the provisions of schedule 3 to the 1975 Act which controls the borrowing and lending powers of local authorities and other bodies and their respective loans funds are, where necessary, qualified by the self-contained provisions of the new clause.

The proposed paragraph 27B contains two additions to schedule 3. The first, paragraph (a) is consequential on the new clause dealing with consent to certain local authority borrowing and seeks to empower the Secretary of State to control the extent of borrowing by a local authority to meet expenses of a revenue nature arising out of the exercise of any of its functions other than those relating to a public utility undertaking.

Paragraph 15(1), which is affected by the amendment, provides that all sums advanced from a loan fund to a borrowing account shall be repaid within the fixed period and specifies the method of repayment. The amendment enables the Secretary of State to apply such terms and conditions to the repayment of sums borrowed with his permission under the new clause even though this would be contrary to the ordinary repayment provisions contained in paragraph 15(1).

The second head is paragraph (b) of the new paragraph 27B. It is not strictly consequential, but it puts beyond doubt the Secretary of State's power to control the period of certain borrowings in a particular manner. This is achieved by adding to the definition of "fixed period" in paragraph 31 words enabling a determination to be made for any class of cases and not just any particular case as at present and by permitting the Secretary of State to make determinations thereunder from time to time as necessary, which, again, he could not do at present.

The provisions in these new clauses and the amendments attached to them, taken together, amount to a most important safeguard for ratepayers all over Scotland who are at present deeply concerned about what they have heard and read of the rate increases proposed to be placed upon them. Not only are many individuals deeply concerned about whether they can afford to pay, but many businesses and even small industries are at present wondering whether the rate increases they are expected to meet will make their whole businesses unviable.

4.30 pm

Mr. J. Grimond (Orkney and Shetland)

I fully share the Secretary of State's anxiety about high rates, but can he give us any idea how long it will take the Scottish Office to deal with the various matters that he has mentioned and to give the consents? It is extremely important to local authorities to get their finances in order. I hope that it does not mean enlarging the staff of the Scottish Office or a long delay.

Mr. Younger

I appreciate what the right hon. Gentleman has said. To be effective, the powers must be operated reasonably simply and reasonably quickly. We have had the information about local authorities' rating proposals for only about a week, and are already working on them. We do not expect he work to take very long; we expect to be able to make decisions fairly timeously, without long delays. It should be possible to deal with the matter with the normal level of staff. There is no extra burden there.

The important point about what we are doing is as follows. Local authorities that, for the reasons I have given, find themselves under the threat of having grant removed because of excessive and unreasonable expenditure will be able for the first time to hand back the money thus saved from their expenditure directly to their own ratepayers.

Many thousands of ratepayers are deeply concerned about what they may face. The provisions are a major reassurance to them that they do not necessarily have to bear the increases that some of them feared. I am certain that the provisions will have 100 per cent. support from all ratepayers in Scotland—certainly those who think that they are affected. I hope that the House will pass the provisions with great enthusiasm.

Mr. Donald Dewar (Glasgow, Garscadden)

It would be misleading the House to say that we welcomed the new clauses, but in one narrow and specialised sense it would be true, because they represent an unusual phenomenon. The Secretary of State has been thinking about the consequences of his legislation, which he sees are unfortunate for him. He has realised that he got it all wrong.

It is amazing that we should be presented with these far-reaching, complex and important longstop provisions—not in the original Bill, not in Committee, but only now, on Report. I suppose that we should be grateful that conscience-stricken production of these provisions at least suggests that the right hon. Gentleman has steeled himself to look into the future and try to see exactly how clause 13 would work.

The Opposition object to clause 13 root and branch. We regard it as an obnoxious and offensive attack on local government independence. If we are to have such machinery, its clear consequence, as the clause was originally drafted, would have been a disaster for the ratepayers themselves, if it had ever been used.

The circular introducing new clause 1 was given the jazzy title A second chance for local authorities", as though it were a religious event, a second coming. In it we were often told: It was his —the Secretary of State's— objective to remove excessive and unreasonable expenditure, but not to the detriment of the local ratepayers. The Secretary of State imagined that clause 13 would be the legislative equivalent of the Seventh Cavalry, coming to the rescue of hard-pressed ratepayers. The tragedy was that the clause would have meant that the ratepayers were left badly hurt upon the field, having been trampled underfoot. Now a selection of new clauses has been hurriedly cobbled together in a desperate attempt to find a way around the otherwise inevitable consequences of the blunt weapon of clause 13 that the right hon. Gentleman imported into the Bill.

I shall not say that the practical consequences of what is proposed are ignored in the circular, No. 224/81, because I accept that the Conservatives always pride themselves on being practical men of business. They may know nothing about right or wrong, good or evil and the philosophy of politics, but they certainly claim to know about the nuts and bolts and the balance sheet.

Addressing himself to the practical consequences of new clause 1, the Secretary of State said in the circular: All that would be required is adjustment of the remaining instalments due. We are asked to envisage that a local authority has been caught by the penal sanctions in clause 13 and has been told that there will be a clawback out of this year's rate support grant. If having looked at all the options it accepted the somewhat unpleasant choice offered by the new clause and lowered its rate, then, according to the right hon. Gentleman, All that would be required is adjustment of the remaining instalments due. I took the trouble to ask one local authority about this. It happened to be Strathclyde, the authority in whose area I live, and the authority that collects the rates in that area. I asked whether it would be a simple matter of merely adjusting "the remaining instalments due", and I discovered a different story. In Strathclyde 1.1 million legal personae pay rates. Since 533,000 individuals have to be sent rate bills, a change in the rate will mean an enormous imposition on the staff of the region, or of any other local authority that is caught in the same way.

I am told that, because of some district variations and the inevitable administrative difficulties of an operation of this size, Strathclyde reckons that it will have to send out about 630,000 individual billings intimating the change in the level of rates. Apart from the ordering of stationery and so on, the pure computer processing will take six to eight weeks. It is not simply a matter of the individual billings. There are also 96,000 people who pay by rate vouchers.

Probably more Conservative than Opposition Members own shares in the De La Rue company. I bring them the glad tidings that that work goes to De La Rue. Therefore, if there is a capitulation under the force majeure of clause 13, at least some work will go to that company.

Once all that work has been done, there will be all the problems of processing standing orders. It is not simply a matter of those who are individually billed. There are also the agency arrangements. In Strathclyde some people pay their rates with their rent to the district council, the Scottish Special Housing Association or the new towns. I am told that if there were a change in the rates as a result of arrangements introduced in response to the new clauses, about 578,000 rent books in Strathclyde would have to be called in and altered. In addition, 211,000 rent rebates would have to be adjusted.

I make these points because I object to the bland plausibility with which we are told: All that would be required is adjustment of the remaining instalments due. It will be a massive administrative burden, a massive operation. I am advised by the officials of two regional councils that almost certainly the only way in which the operation can be carried out, because of the complications of old instalments being paid while new ones are phased in over two or three months, is to suspend collection of instalment payments during that period, with considerable complications for cash flow and for the local authorities' borrowing requirements.

Therefore, when the Secretary of State makes almost dismissive remarks about the complications that would arise from a reduction in the rates, he is a world away from the reality for the hard-pressed regions and their hard-pressed staff, whose numbers he would like cut.

The Under-Secretary of State for Scotland (Mr. Malcolm Rifkind)

The hon. Gentleman has produced a predictable moan in response to these provisions. He has suggested that they will impose a massive administrative burden. Is he aware that every year at least one or two English local authorities use their existing powers to levy a supplementary rate in the middle of the year to increase the rates paid by ratepayers, with all the administrative requirements that will be required of a Scottish local authority which wishes to reduce its rate? If English local authorities have been able to absorb the administrative requirements for many years when levying a supplementary rate and obtaining more money, why should Scottish local authorities be totally incapable of making the same arrangements when it will be to the ratepayers' benefit?

Mr. Dewar

I do not know the exact terms of the English experience. I do not intend to take it as a carried story from the Minister. Over the past seven or 10 days I have taken the precaution of talking to the officials who will be involved. If my memory serves me rightly, the imposition of one lump sum across the board in Lambeth may have simplified the operation. If the Minister bothers to talk to some of the officials, including computer staff and those in assessors' departments, he will be given the picture that I have just described.

I have not taken an unreasonable example. If I had wanted to be difficult, I might have suggested two changes in rates, one in a district and one in a region, the district being within the region. That may not be likely this year—we all know which authorities are likely to be on the shortlist of sacrificial victims—but, we are legislating for the long term. If the Bill is enacted with these new clauses, it will be available to successive Governments. The situation that I have postulated could occur in future.

The Minister may say that the answer would be to implement the new rates on the same day, but we do not know whether that would be possible. It will be for a local authority to decide the day on which it will alter its rate to take account of the blackmail provisions in clause 13. A region might agree to the implementation of the machinery in July and a district my surrender in July, August or September. That means that we may have to go through an appallingly complicated and difficult operation twice in one year for one rating authority, the region, which has to collect on behalf of itself and the district.

Substantial complications and difficulties will arise from this proposal, and we must also consider new clause 2. I ask the Minister to deal with some of the practical difficulties that I foresee. It is a mean and petty measure, infringing the right of local authorities to manage their own affairs. It appears that the Minister is taking powers to insist on his specific consent being obtained before any authority can borrow on its consolidated loan fund to make up any shortfall resulting from a clawback under clause 13.

If that borrowing is taking place, how will the Minister identify it? I understand that in the first half of the financial year there is a constant cycle of borrowing and repayment on the consolidated loan fund which is dictated by the flow of income from rates within the local authority. It will be difficult to identify at what stage a local authority is borrowing to maintain its day-to-day expenditure and at what point it is trying to hide, within the cycle of borrowing and repayment, the money used to make up what has been clawed out of the year's rate support grant as a penalty for what the Secretary of State regards as excessive and unreasonble expenditure.

4.45 pm

The nature of the borrowing could be established only towards the end of the year when the outturn figures began to come clear, and they could be measured against estimated expenditure at the beginning of the year. If the technical difficulty is as substantial as I suspect, we shall be returning to the farce of making a judgment at the end of the financial year and to the machinery of section 5 of the 1966 Act. That means that all this huffing and puffing, beating of chests and bullying of local authorities will have been totally useless in practical terms. I suspect that that is the position in which we shall find ourselves.

All the new clauses and consequent amendments are part of the engine of oppression of clause 13, which we greatly dislike and regard as an offensive attack on local authority democracy. None of us knows after 18 sittings in Committee and about 700 of the rather expanded columns of the new-style Official Report exactly how the sanctions will be imposed and on what scale.

If there is excessive and unreasonable expenditure according to the whim and the prejudiced view of the Secretary of State, he may intend to claw back pound for pound. As there is a rate support grant sanction, we shall run into complications because of the 68½ per cent. grant factor. The Under-Secretary of State may outline his thinking at this late stage. Surely he knows what he intends to do when the Bill reaches the statute book, assuming that it does. He must have a fair idea which authorities are spending unreasonably and excessively and the sort of penalties that will be imposed.

The administrative complications and costs will present to authorities a great disincentive to take the way out that new clause 1 is meant to represent. Faced with all the complications to which I have referred and an inevitable substantial reduction in services—this is not an alchemist's stone and the Government are offering no miracle—the authorities will be unlikely to opt for the clause. Ratepayers cannot have lower rates without unpleasant side effects. There will be school closures. There will be a reduction of facilities for the disabled. Fewer nursery places will be available. The present standard of education service will not be maintained across the board in the regions concerned. There will be reductions in housing and in leisure and recreation facilities in the districts concerned.

This is a bargain which is no bargain at all. There will be unpleasant cuts in services for the ratepayers of the local authority that opts for the clause. Given the complications and costs, it may be an extremely bad bargain. We oppose clause 13 and we shall vote against the entire Bill on Third Reading. However, if local authorities are to be bludgeoned and crushed into submission by the Secretary of State, I suppose that new clause 1 offers at least a choice. It may be a Hobson's choice, and the confidence of the Secretary of State that it will be taken up by local authorities may be much misplaced. However, it presents an option and I shall not be advising my right hon. and hon. Friends to vote against the clause.

Conservative Members have examined a vicious and unpleasant legislative initiative and found it totally unworkable. Having erected an engine of oppression, they have been running around squawking. They have attempted to think out the consequences and to cobble together a new clause that will allow it to be used, if that unhappy day ever comes. I advise my right hon. and hon. Friends not to vote against new clause 1 or to give one inch in our opposition to the whole concept. We shall wish to divide the House on new clauses 2 and 3, which are basic infringements of the rights of local authorities, although new clause 1 is an addendum and a consequential measure which, in the context of clause 13, may be defensible.

New clauses 2 and 3 are merely ways of further forcing local authorities into a straitjacket and we shall have nothing to do with them.

I draw the Minister's attention to the admirable leader that appeared in The Scotsman on 20 March. It is not every day that I have cause to compliment The Scotsman. However, I am not one to miss a rare pleasure which is all the more welcome for its scarcity value. The Scotsman has got it right on this occasion. It states: The one common theme in ministerial behaviour for many months has been a decided ignorance about the consequences of their decisions. That is what has happened here. Clause 13 was thrown into the Bill because the Government had to be seen to be doing something to be beastly to Labour councils. Months later, the unfortunate Secretary of State has now asked what happens when it is used. He has discovered that the main victims are the ratepayers in whose name, mistakenly, the whole daft operation was launched. This jumble of unfortunate new clauses is a consequence of that realisation.

We shall express our discontent with the way in which those matters are managed by voting against new clause 2.

Mr. Michael Ancram (Edinburgh, South)

I have always had much respect for the intellectual ingenuity of the hon. Member for Glasgow, Garscadden (Mr. Dewar). When I considered the new clause over the weekend, I wondered how he would achieve a position in which he would not be against—for he is often a reasonable man—the principle of giving power to local authorities to reduce rates, at the same time as keeping in line with those in his party who dictate the policy at local government level, if at no higher level, who are telling him that this new clause is obnoxious and should be opposed at all costs because it will make life exceptionally difficult for particular councils in Scotland, such as the one which covers my constituency—the Lothian council.

I was interested to hear the hon. Gentleman's clever, circular argument which allowed him to reconcile the two irreconcilables. After all the evidence which has been produced over the past few months, he has still failed to concede that there is overspending in any local authority in Scotland. He mentioned talking to officials of local government and to people on the ground. I invite him to come to almost any area of the Lothian region and to ask ratepayers whether they see any examples of overspending, duplication and waste. I have given a number of examples at earlier stages of the Bill, and I shall not rehearse them now.

Mr. Dewar

Specify.

Mr. Ancram

I shall give a good example which I believe I have not given so far.

Within the proposed expenditure for Lothian region this year there is the extraordinary statistic that those who are employed in the architectural division will have their salaries of pay increased, while the amount of work which they will do will be reduced. As the hon. Member for Garscadden is a reasonable person, he will accept that there is an illogicality in that.

Mr. Dewar

I deny it.

Mr. Ancram

The hon. Gentleman may deny that he is a reasonable man, but I still pay him that compliment. I am sure that he will accept that there is an illogicality in that position. It suggests that there is overspending of an unreasonable and excessive sort in that area, if in no other.

The hon. Member for Garscadden talked about the clerical difficulties which the clause would cause because fresh pieces of paper would have to be sent out to ratepayers. This morning I had a complaint from a constituent who had received two identical letters within a week on the same subject of the rate rebate. I have not yet managed to ascertain what the reason for that was. Obviously the fact that the first letter had been sent out had not been recorded within the authority. A second letter on the same subject, costing another 11½p in postage, was sent to the woman. If the hon. Gentleman proposes to refer to the difficulties which will be caused by this legislation, which will mean that local authorities will have to send out another letter, he might consider some of the errors which are being made now, and some of the wastage in this area which is occurring for one reason or another.

Mr. Barry Henderson (Fife, East)

I understand my hon. Friend's characteristic forbearance in not rehearsing many of the scandalous, over-expensive ways of the Lothian region. Has he drawn attention to the Socialist propaganda sheet which was put out by Lothian regional council?

Mr. Ancram

That may be a fairly small item of the overall expenditure. The fact that £25,000 a year is being spent on pushing through people's doors a piece of paper which no one wants to read is perhaps the most obvious example of overexpenditure.

Mr. Dewar

Has the hon. Gentleman looked at the Lothian regional newspaper, an admirable production brought out by the then moderate-controlled—that is, Tory—Edinburgh corporation? In 1970 it produced a newspaper which ran to at least seven issues in about 18 months. Its main lead story was the founding of a public relations department in the first issue. There was also a splendid photograph in it of all the councillors of the day, the most prominent of whom, sitting in the front row, was the hon. Member for Edinburgh, Pentlands (Mr. Rifkind).

Mr. Ancram

I remember that newspaper well. Having compared that publication with the so-called "Lothian Clarion", I know which I believe has the less biased editorial policy. However, I shall not rehearse those arguments.

I welcome new clause 1, particularly from my point of view and from the point of view of ratepayers in the Lothian region. On Second Reading, I said to my hon. Friend the Under-Secretary that I was worried that the legislation as it stood would shut the stable door after the rate increase horse had bolted. He assured me that he did not think that that was so, but that has been a continuing worry in my mind. New clause 1 gives the local authority the chance to call the horse back into the stable to decide whether there is just cause for reducing the rates.

Since my hon. Friend the Under-Secretary made the announcement about the new clause some time ago, the reaction from the Lothian region has been one of increasing horror, anger and hostility. It is time that ratepayers, hon. Members, and the Lothian region asked themselves whose money we are talking about. We are talking not about the local authority's money, but about either ratepayers' money or public money being produced through the Government rate support grant.

When I was a student, a friend of mine opened a bank account which went into overdraft so badly that he was called in by the bank manager and told that he was not allowed to sign any more cheques until the overdraft had been reduced. He came out of the bank complaining because he felt that the bank was telling him what he could and could not do with his own money. It took some time for his friends to explain to him that it was not his money but the bank's money which was concerned.

The situation is much the same with the Lothian region now. It complains because the Government tell it that they wish to exercise more control over the taxpayers' money which the Government are giving it. The region is complaining now because the Government have said that, in the light of the representations made by ratepayers and the difficulties which might be caused to ratepayers under any withdrawal of the rate support grant, they will give the local authority the chance to say that it will reduce the rates and receive the Government's money rather than seeing a reduction in the amount of money from the Government and leaving the rates as they are.

Mr. Gavin Strang (Edinburgh, East)

that is one of the points at issue. The Government have fixed the level of rate support grant for the Lothian region. They decide the relevant expenditure, the volume of expenditure and how it is disbursed. A decision by the Lothian region in the forthcoming financial year to increase expenditure or to reduce it does not affect the level of the rate support grant to Lothian region in that year. Therefore, if the hon. Gentleman wants to argue that the Government should curtail expenditure on general grounds—for which a case can be made, although I do not accept it—he should do so. There is a tendency to blur that issue and not to point out fairly and squarely that the Secretary of State wants to limit the freedom of the Lothian regional council to spend the money which it raises from its ratepayers.

Mr. Ancram

I have no intention of blurring the issue. The Lothian region is spending excessively and unreasonably, as I hope that the Secretary of State will find when the legislation is passed. Its expenditure should be limited. Ratepayers in the region, particularly in the city of Edinburgh, also wish to see its spending limited.

5 pm

After the limitation is made, the Lothian region will be faced with the choice between reducing rates and accepting the rate support grant set by the Government and leaving the rates at their unjustifiably high level and giving money back to the Government. It will be surprising if the Labour-controlled council did that, because it might be accused of assisting the Government. I particularly welcome the legislation because it will force the council to make that choice.

Whatever its political views, I hope that in making the choice it will consider its responsibility to ratepayers, which is a major one for any local authority. Although the council may not like the Hobson's choice, I hope that it will opt for the reasonable line taken by the hon. Member for Garscadden and give relief to ratepayers. If it fails to do that, continues in its political hostility to the Government and sees the action as one more way of attacking the Government, it will be carrying vindictiveness beyond the bounds of acceptabilty, even for that local authority.

Would the hon. Member for Edinburgh, East (Mr. Strang) support the Lothian region if it decided to give money back to the Government instead of reducing rates? I hope that he will agree that everyone who has the ratepayers' interests at heart should press the Lothian region to make a reduction in rates.

Mr. Strang

We have followed with interest the remarks of the hon. Member for Edinburgh, South (Mr. Ancram) over the months—it seems almost years—about the policies pursued by the Lothian regional council.

The Secretary of State said that if he obtained parliamentary approval for his decision that a local authority's expenditure was excessive and unreasonable it would be faced with a straight choice. Although we may not agree with it, we can understand the approach that he and the Under-Secretary of State have spelt out in the media in the past week or so.

On Second Reading I suggested to the Secretary of State that in considering what was reasonable and what was excessive he had to take account of an authority's expenditure policy. I shall deal in more detail with the Lothian region on my amendment, but I wish to challenge the Secretary of State about a local authority, such as the Lothian region, embarking on a policy of allowing the transport service to run at a deficit and allocating so much each year of its estimated expenditure towards the cost of the service. The Secretary of State said: I have no intention, nor am I taking any power, to look into the particular expenditure of any particular authority on any given revenue item such as bus fares."—[Official Report, 9 December 1980; Vol. 995, c. 1215.] I have also referred again to the Under-Secretary's remarks in Committee. As I understand it, the Government will fix "a particular standard" against which to judge a local authority's global expendit ure. Therefore, if an authority has decided substantially to subsidise its bus service, it will have to make disproportionate cuts in other areas. Perhaps the Under-Secretary of State will confirm that that will be the result of the legislation. If the Government set a standard and the Lothian region continues to pursue its policy, they will have either to allow the standard to be increased because of the pattern of expenditure or to accept that Lothian region will provide, for example, fewer teachers or home helps than another region.

It is widely assumed in Scotland that the Government will use the legislation to threaten the Lothian region that if it does not cut its rates by a certain amount they will withdraw money. On Second Reading, it was already apparent that Lothian region was being singled out. My right hon. Friend the Member for Glasgow, Craigton (Mr. Millan) pointed out then that the council's rate increase for the current financial year was the same as that for Strathclyde and not far out of line with that for the neighbouring Borders authority. I accept that the Secretary of State is concerned with expenditure rather than with the figure for rates, but it was a point well made. The situation has changed. The Lothian region is increasing expenditure more than other authorities, so the Government presumably see their case strengthened by recent events and by the expenditure level fixed by the authority for the coming year.

I beg the Secretary of State to take a reasonable and objective approach to the Lothian regional council. The hon. Member for Edinburgh, South generates enormous publicity on the issue almost every time he opens his mouth. He is guaranteed substantial coverage in the Edinburgh press. Because of all the publicity, fear has been created, and not only among the leadership of the council and traditional supporters of the Labour-controlled authority. In Committee the Under-Secretary of State said: We are anxious that in his relationships with local government the Secretary of State should be fair."—[Official Report, First Scottish Standing Committee, 29 January 1981; c. 209.] I hope that he will be fair and will not be too much influenced by the wild men in the Conservative Party in the Lothian region. Counting the Scottish Whip, no fewer than three Ministers represent Edinburgh constituencies, and there is also the Chairman of the Scottish Conservative Party, the hon. Member for Edinburgh, South. A great deal of mileage has therefore been extracted from the issue.

The Lothian regional council has lost £20 million this year—not through political decisions by the Secretary of State. All local authorities have been hit hard, but the Lothian region has been hit disproportionately harder than the others. That fact must be taken into account when the Government decide the level of expenditure to be attacked.

On the practicality of these clauses, my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) argued that there would be considerable difficulty in fixing a different rate in the middle of the financial year. I have sympathy with his fears, which were not entirely allayed by the Under-Secretary of State's response. I take the point that if it has been done elsewhere it can be done in Scotland, but there has been no experience of it so far.

Surely, however, the appropriate time to use this legislation would be immediately at the beginning of the financial year, or perhaps even before it begins. From the Government's point of view, it will be much harder to operate the legislation effectively in the 1981–82 financial year than in other financial years, not least because it is much harder for a local authority to achieve a given reduction in global expenditure the further into the financial year one goes. Therefore, the scope for reducing expenditure, or for the Secretary of State to penalise authorities and seek to enforce a reduction, will clearly be greater in the following years than in the forthcoming year.

I therefore hope that the Secretary of State will approach this exercise in a gingerly fashion, with objectivity and caution.

The extent and ability of a local authority to reduce expenditure in mid-stream will also depend largely upon the type of expenditure that it chooses to cut. I assume—I should be grateful for the right hon. Gentleman's assurance of this—that there is no question of the Secretary of State singling out items of expenditure that he regards as excessive or giving guidance to the council as to which items it should cut.

It will be easier to make cuts in some areas of expenditure than in others. Contrary to popular impression, one area which will be difficult to alter is a subsidised public transport system. An increase in fares in the Lothian region simply will not wipe out the deficit. The figures show that in the forthcoming financial year Lothian regional council will wipe out the deficit accumulated over the past two years, and that in future years it will wipe out the previous year's deficit on a year-on-year basis. The council will therefore continue to subsidise fares.

I should make it clear that Lothian regional council is not planning to end fares on its buses, contrary to the impression created by at least one banner headline in a Sunday newspaper. It is pursuing a successful policy of running an efficient, reliable and cheap public transport system. Indeed, a national survey deemed it the most efficient and reliable public transport system in the country and the cheapest in cost per mile. If Lothian regional council doubled the fares, that would not balance the books. The resistance to the increase would be such that the local authority would still have to subsidise the system. Indeed, authorities which have pursued a policy of jacking up fares have found themselves forced to subsidise their transport undertakings. This is therefore very different from other items of expenditure. However, we shall be dealing with those later.

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I plead with the Government to look carefully at this issue. I believe that the policy being pursued in the Lothian region is an example to other authorities. Even if the Secretary of State does not agree, I hope that he will not seek to punish that council for attempting to run a subsidised public transport system. I mention in passing that the Secretary of State has intervened to prevent Lothian regional council from cutting the fares on Scottish Transport Group buses. This is a matter of great concern to my constituents in Musselburgh because they pay rates like everyone else and looked forward to their fares being brought into line with the rest of Edinburgh. But the Secretary of State, under powers quite different from the local government legislation on the basis of the fixed external financial limit for the Scottish Transport Group, has intervened to prevent that subsidisation.

I hope that the Government will look at this. Lothian regional council will be meeting the Scottish Transport Group tomorrow, and I have no doubt that it will continue to pursue this issue. I hope, notwithstanding the Secretary of State's global approach to public expenditure in the Lothian region, that he will allow us to continue this policy and give us a chance to give an example to the rest of Scotland. Other authorities are losing passengers, drastically in some cases. The only transport undertakings to have increased the number of passengers and thus the amount of revenue are the South Yorkshire and the Lothian regional bus services.

I assume that the Secretary of State's involvement with a local authority's expenditure will happen only once in a financial year, and that only once will the Government tell Lothian regional council or any other authority that they wish it to cut its expenditure and thus its services. Let us not forget that that is what the Secretary of State is about. This will not be achieved by savings in the architect's department or by not providing a local newspaper, as I assume that more than a few thousand pounds is involved here. We are therefore talking about a real cut in the level of service in the Lothian region. May we be assured that the Secretary State will seek to impose only one such cut in the Lothian region in one financial year?

To use the Secretary of State's own phrase, I accept that there is deep concern at the latest round of rates increases. I think that he applied that remark to the whole of Scotland. If there is concern in the whole of Scotland, there is certainly concern in the Lothian region.

Mr. Ancram

Before the hon. Gentleman sits down, will he answer my question? If Lothian regional council is faced with a choice between reducing rates or losing rate support grant, what will the hon. Gentleman advise his Labour colleagues there to do?

Mr. Strang

Lothian regional council is a responsible, able and intelligent authority. It is much closer to the issues than I am. The issues, of course, relate to cutting the services. I therefore hope that the Secretary of State will look objectively at this and will decide that the region's expenditure for the forthcoming year is not excessive. That may seem a way-out remark to Conservative Members, but it is not if one looks at the whole issue and at the enormous cuts in expenditure in relation to Government support for the region.

I take the hon. Gentleman's point however. In the crunch situation to which he refers, of course one would prefer the benefit to go to the ratepayers in one's own area than for the money simply to be handed to the Government. I do not think that that is a particularly provocative response, and I do not think that it will be resented by my colleagues on Lothian regional council.

I take the Secretary of State's point. Of course there is immense concern in the Lothian region about rate levels. All Labour councillors on the Lothian regional council are concerned. They cannot fail to be concerned about the increases in rates—or in rents, for that is how many council tenants see it—that are being imposed upon people there.

The councillors had to strike a balance and make a judgment about the extent to which services would be damaged by cuts. Some of the growth was agreed by Conservative councillors. The increased maintenance on education buildings was deemed necessary by Conservative councillors on the Lothian regional council. By the same token, I believe that support should be given for a subsidy to the public transport system.

There is immense concern about the increase in rates. The plans to reduce those rates must be judged not just in terms of the rate burden but also in terms of the possible severe diminution in services. Notwithstanding the arguments between the Secretary of State and the council over the last year or two, and notwithstanding the rather wild statements made by some of his hon. Friends, we hope that the right hon. Gentleman will look objectively at the position of Lothian regional council.

Mr. Bill Walker (Perth and East Perthshire)

I shall not follow the hon. Member for Edinburgh, East (Mr. Strang) down the highways and byways of the Lothian region. Instead, I turn my attention to the new clauses.

I am saddened by the fact that legislation such as this should be necessary, because some local authorities have not behaved in a way which the ratepayers of Scotland consider sensible, logical and reasonable, given existing conditions.

Some areas of Scotland have difficulty in creating new jobs. One of the deterrents to firms coming to an area is the level of rates. I have a league table of local authority rates which shows that Dundee district council heads the league by a long way. That is sad, because Dundee is in need of jobs more than any other city in Scotland.

I recently met the chairman of an oil company and tried to persuade him to move some of the company's operations from Aberdeen to Dundee. He made it quite clear that the company did not come to Dundee in the first place because of the behaviour of the local Administration. He said that it was still in doubt because it wondered what the local administration was up to, particularly in regard to its attitude towards council house rents and their effect on other ratepayers. That person just could not see that as an encouragement for his company to come to the district. That is sad, because Dundee, more than any other city on Tayside, is desperately in need of jobs.

I am sure that Tayside ratepayers will welcome the provisions in the new clauses. They recognise that in the event of the Secretary of State deciding to take action under the new clauses they will not be penalised under clause 13. There is no doubt that as the Bill stood the ratepayers of Dundee, particularly the ratepayers in my constituency, would not have gained the advantages and benefits which the legislation intended. Primarily the Bill sought to ensure that in these difficult times local authorities behaved in a sensible and prudent manner.

It is sad that oil-rich Aberdeen has had an overall rates increase of 19 per cent., whereas the overall increase in Dundee has been 60 per cent. It means that in Aberdeen, where the benefits of the oil industry have been felt, the average rate per house is £237.15, whereas in Dundee, which has missed out on those benefits, the average rate per house is now £253.69. Here we have a city in North-East Scotland which has benefited from the North Sea boom to a tremendous extent, yet its rates are cheaper than those in Dundee district. Something must be badly wrong —in the-Dundee area, which is why I believe—

Mr. Russell Johnston (Inverness)

Is not the hon. Gentleman advancing a criticism of the rating system rather than anything else?

Mr. Walker

That is a good intervention. From what we can see now, the rating system and the way in which we finance local government need to be looked at. I have been persuaded of that because of the introduction of this Bill. In addition, firms in my constituency have told me how they object to paying the new rates. They have stated clearly and categorically that one of their problems is the distance from their customers. Secondly, they feel that they are penalised because of the level of rates in the old manufacturing cities of Scotland. As a result, those firms will think twice about expansion, and they will certainly think about moving if they cannot expand.

We must turn our minds to local authority revenue expenditure, because capital expenditure is not the real problem. In fact, many Conservative Members would argue that we should spend more on capital expenditure. The real problem is revenue expenditure.

Contrary to what has been said, if there is not enough work local authorities should dispense with the services of architects and quantity surveyors' departments and put the work out to the many professional firms in the private sector which would be only too happy to do it. That would remove a substantial burden of revenue expenditure. It would not be peanuts, because the cost of such departments is substantial. We are not talking about peripheral savings. These would be massive savings.

As a business man, I know that the first thing one looks at is revenue expenditure in order to see where substantial savings can be made. Revenue expenditure continues year after year. Capital expenditure is an investment in the future. Revenue expenditure is what one pays this week for what one got last week. To that extent, one has nothing to show for it at the end of the day, unless one has a future. Local authorities which are behaving badly are in need of some sort of administration to tell them "You are not doing what your electors want". I therefore welcome the new clauses.

Mr. David Lambie (Central Ayrshire)

The hon. Member for Perth and East Perthshire (Mr. Walker) said that the new clauses should not have been necessary and that the local authorities should have obeyed the Government's dictat. Had the Government represented the people of Scotland, I would have agreed with him. Unfortunately, they do not do so.

There are 71 Scottish Members of Parliament, and at the last election the Labour Party won 44 seats. Therefore, the Government do not represent the people of Scotland. The local authorities represent the people of Scotland, because they were elected by the people in that area. They have a mandate to carry out the manifestos which were placed before the electors at the local government elections. They also have a duty to protect the people against the Government's vindictive attitude.

It seems strange that, as a result of this Bill and the new clauses, the Secretary of State for Scotland will become more vindictive towards ratepayers and electors than the Secretary of State for the Environment, who has a mandate in England and Wales. The Secretary of State for the Environment does not possess the powers which the Secretary of State for Scotland is now demanding, yet the people of England and Wales voted Conservative. Therefore, the Government have a right to say that they represent the people of England and Wales.

5.30 pm

The local authorities in Scotland should stand up to the Government and should protect the people they represent. These clauses are the final nails in the coffin of local government democracy. The Bill provides the coffin in which to bury Scottish local government. With the clauses the Government are providing the nails. I hope that our people in local government will stand up to the Government and that we on the Labour Benches will in our turn support our local authority colleagues.

Mr. Henderson

Around 1978 would not the hon. Gentleman have supported the Labour Government when they made local government in England and Wales, as in Scotland, reduce its expenditure while they did not command a majority in England and Wales?

Mr. Lambie

During my time as a Member of Parliament I think that on local government finance I must have voted against my Government more times than I have voted against the Tory Government. On many occasions I have even acted as a Teller for some of my hon. Friends who supported my view in Divisions against the Labour Government's proposals. At that time the Conservatives, including the Secretary of State and the Under-Secretary, threw their weight behind my party's Administration. I am therefore clean on these matters. I wish that I could say the same for the hon. Member for Fife, East (Mr. Henderson). I hope that he will support us tonight and will vote against his Government.

The hon. Member for Perth and East Perthshire was right to say that the rating system is at fault. Even if the Government carry the new clauses and enact the Bill, they will not help Scottish ratepayers. During the last Labour Administration I shared a lot of platforms with the right hon. Member who is now the Secretary of State for Scotland dealing with the proposed revaluation of properties in Kyle and Carrick and Cunninghame, areas which he and I represent. On many occasions the right hon. Gentleman committed himself, on getting to power, to abolishing local rates.

Why is he not now bringing in a Bill to do that instead of producing this Bill which attacks local democracy and ultimately will save ratepayers only peanuts? The problem in Scotland is that we have operated a system of rating revaluation every five years. That has not been done in England and Wales. The result is that Scottish valuations are out of all proportion to what they should be.

Industrialists are interested not in the rate poundage but in the valuation of the properties. ICI, Beechams and Roches, chemical firms in my area, tell me that their valuations are higher than those of their counterparts in England and Wales. I noticed in the local press at the weekend that Ayr racecourse has halted an expansion programme. It says that it cannot go ahead because of the rates increase. The true reason is that the valuation of the racecourse is four times what it would be if it were sited in England or Wales. It is the valuation, not the rate poundage, imposed by the Kyle and Carrick district council that is wrong.

Conservative Members should be campaigning against their Government to persuade them that, instead of trying to kill local democracy, they should be implementing their election manifesto promise—not at the last election but at the one before that—to abolish local rates. Instead of spending all their time attacking Scottish local authority representatives, Conservative Members should concentrate their attention on the Ministers who have failed to implement Tory Party policy and who are now trying to obscure that failure by an attack on local government.

It is for that reason that I shall certainly oppose the clauses. I hope that my Front Bench will reconsider its decision not to vote against new clause I. We on the Labour Benches should demonstrate our full opposition to them. Never mind the administrative arguments put forward by the Opposition Front Bench—we should be advancing political arguments. The local authorities, like Scottish Labour MPs, represent the people of Scotland. The sooner we get rid of the Tory Government, the sooner will Scotland's ratepayers get a fair deal.

Mr. Peter Fraser (South Angus)

It is with little pride that I must say to my right hon. Friend that the powers that he is proposing to introduce in the clause are nowhere more necessary than within that part of my constituency that comes under the Dundee district council. With the rate increase for the district council alone—I hope that my hon. Friend the Member for Perth and East Perthshire (Mr. Walker) will not think that I am contradicting him—well in excess of 150 per cent., I hope that my right hon. Friend the Secretary of State will make certain that the Dundee district council is at the top of his hit list when he exercises his new powers.

It was interesting that the hon. Member for Edinburgh, East (Mr. Strang) at least attempted to argue that the attacks against the Lothian region were unfair, ill-founded, or based, in one form or another, on an inaccurate portrayal of the facts. It is more interesting that any voices from the Opposition Benches that might have been expected to support Dundee district council in its attitude to the rates have remained silent.

The Labour administration in Dundee has set out on a deliberate and sustained attack on ratepayers, and it can only be for wholly misguided dogmatic reasons. That same dogmatic reasoning has led it, through its failure to do anything about council rents, to ensure that £2 million will be lost to the city in capital support for the construction of houses that even I agree are necessary in the town. Accordingly, any device that my right hon. Friend the Secretary of State can use to relieve the Dundee district council ratepayers of their rates burden should be welcomed.

The curiosity of it all is that the lord provost of Dundee has recently set up a working party to do what it can to attract new industry to the city. That idea has the support of myself and my hon. Friend the Member for Perth and East Perthshire, and the hon. Member for Dundee, East (Mr. Wilson), even though he was today described in the local press as a Tory lackey, has given support to that scheme of a Labour administration. The working party is considering such worthy matters as the development of the local airport, a move that would enable industrialists to fly their jets and to have regular access to the major airports of the United Kingdom. All that has been discussed in the greatest of detail, but the whole exercise is futile so long as industrialists refuse to come to the city in the face of the rate increases that we have witnessed this year.

It is all a complete and utter waste of time unless the district council takes note of that message. As it has utterly failed to do so, I do not see that there is any other opportunity open to those of us who want to see industry being expanded and sustained in that part of the country, and the ratepayers enjoying a reasonable and fair share of the services that are to be provided.

It is not with any great enthusiasm that I support what the Secretary of State seeks to do by introducing these measures. It would be infinitely preferable if we could find, in every district and regional council in Scotland, that sense of responsibility that would make these new powers unnecessary. But it is abundantly clear that if we are to safeguard the interests of ratepayers in industry in cities such as Dundee they are now necessary.

Mr. Russell Johnston

A lot of interesting things have been said by the last two or three hon. Members who have contributed to the debate. The hon. Member for South Angus (Mr. Fraser) said that any device that the Secretary of State can use to control what a district is doing is justified. The hon. Gentleman was not terribly enthusiastic about what is being done, but he said that any device is justifiable in the circumstances. It is not devices that we need at this juncture but some sort of genuine reform in the system. But we have been presented with a set of devices.

The hon. Member for Central Ayrshire (Mr. Lambie), in one of his customarily robust interventions, said basically "Vote Labour because the Tories have not scrapped the rates". But what did the Labour Government do about it? They did absolutely nothing.

Mr. George Foulkes (South Ayrshire)

What did the Liberal Government do about it?

Mr. Johnston

The hon. Member for South Ayrshire (Mr. Foulkes) has obviously had a previous life if he can recall what the Liberal Government did about it. I am glad to note his reincarnation, but his point is an absurd one.

The hon. Member for Perth and East Perthshire (Mr. Walker) said that he was saddened that we had to debate these matters at all, and that local authorities should have behaved more responsibly. The hon. Member for South Angus also made that point. As one of those who did not serve on the Standing Committee, I feel that it is sad that at this stage in some complicated legislation the Government find it necessary, with all the resources they have, to produce very detailed amendments to their own. proposals.

That is a reflection not particularly on the Government—one realises that they have to deal with the mechanisms which are available to them—but on the quality of the work that is produced by the Scottich Office. If people who—by virtue of NALGO and Civil Service arrangements—are paid extremely well to produce legislation for the Government of the day are unable to do it in a form that is not filled with legislative loopholes, they are not doing their job terribly well.

The Secretary of State, in introducing the new clauses, said that they were really about controlling unnecessary and unreasonable levels of expenditure. T:hat goes to the heart of the matter, and it has been touched on by a number of hon. Members. Throughout the course of the Bill, the Government have claimed that they are seeking to remove certain minor restrictions on local authorities when essentially they are imposing new central controls. That is what I find most objectionable.

As the hon. Member for Edinburgh, East (Mr. Strang) pointed out, the Government already have powers under the 1966 Act to deal with excessive and unreasonable expenditures. Those powers have never been exercised, as was pointed out on Second Reading. I do not see the reason for introducing new controls of this kind.

5.45 pm

It is very distressing in many ways that, in debating local government at this time, we should be dealing with methods of inhibiting the independence of local government. Behind it all lies the fundamentally unsatisfactory nature of the rating system, which successive Governments have failed to do anything about. There is also the failure of successive Governments to do anything about the spirit of the proposals of the Wheatley Commission, which were announced 11 years ago. Although the structure of the proposals was more or less implemented, the spirit of the proposals has never been implemented.

One of the fundamental suggestions made at that time was that the form of taxation and the level of taxation should be shifted from the central Government to local government and, in consequence, the onus of responsibility for local decisions shifted from the central Government to the local government. The Government, in the proposals that they have laid before us—even in what might be called the "retracting" clause, which is what new clause 1 is—are still essentially saying that they do not trust local government to make the right decisions, and that they need to have somebody looking over its shoulder. The hon. Member for South Angus mentioned that aspect, as did the hon. Member for Perth and East Perthshire.

It is part of the mythology of the Conservative Party that Socialism means that somebody from the centre is looking over our shoulders and telling us what to do. It is the Conservative Party which, traditionally, has been the defender of the independence of local authorities and their right to make decisions in the interests of the people who elect them. Surely we do not want to impose central standards in this sort of way.

I shall vote with the Opposition against new clause 2. I would probably have voted also against new clause 1 but, unlike the hon. Member for Central Ayrshire, I believe that excessive voting in this place is an enormous waste of time.

Mr. Foulkes

I want to speak to new clause 1. That will make a change for me, bearing in mind my contributions in Committee, but it will also to some extent make a change from the debate that has taken place already on this group of clauses.

There is a great deal of ignorance in the House about local government. While my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) was making some sensible points, the Secretary of State and the Under-Secretary of State were giggling like schoolgirls, paying no attention whatever to what was being said.

In a rather trite intervention the Under-Secretary of State got it all wrong, because he tried to compare the present position in England with what he is proposing for Scotland. In the hope that he will take a few moments to reply to the debate, I shall deal with the current position in England and also with the position that he wishes to see in Scotland. When I have made that comparison, I shall ask him a question.

Under section 11 of the General Rate Act 1967 local authorities in England—unlike those in Scotland—have a general rating power. As Lambeth has recently shown, they can levy an additional supplementary rate. By definition, the supplementary rate comes towards the end of the financial year, as it did in the case of Lambeth. As interest rates have increased, as inflation has shot up and as the Government's vindictive attitude has become clear, local authorities—such as Lambeth, which the Government wish to punish—which maintain a high level of services for ratepayers find that they have to levy a supplementary rate towards the end of the financial year. Indeed, it should be noted that ratepayers are also taxpayers.

In cases such as that in Lambeth, a single demand is sent to all ratepayers regardless of whether they are private householders or council house tenants. A single, once-and-for-all demand is sent to everyone. That is a simple and cheap operation. Unlike the proposal for Scotland, it is not complicated. Indeed, let us consider the proposal for Scotland. A local authority takes account of all the relevant factors and determines its rates. It knows the local situation and decides what the rates should be. It makes a difficult decision. As we have seen during the past month, local authorities usually make their decisions in February. I think that the Under-Secretary will confirm that that is so.

A local authority then informs the Secretary of State of its rating decision. In Scotland there are nine regional authorities, three island authorities and 53 district authorities. The Secretary of State must decide whether an authority's level of expenditure is unreasonable or excessive. It is a serious decision and not one that any Secretary of State would make lightly. Indeed, even our present Secretary of State, who makes some decisions very lightly, would not make that one so lightly. He would take some time to reach decisions about all the authorities. Two or three months later he might tell an authority that its expenditure is unreasonable or excessive.

The local authority will then be bludgeoned and bullied in "discussions". The Secretary of State will exercise his powers of blackmail. He will point out that if a local authority does not do what he tells it to do he will cut its financial provision. As a result the authority's rates will have to increase yet again. That will all happen at some time in the spring. The local authorities' financial year begins on 1 April. In his relations with local authorities the Secretary of State will bludgeon, bully and blackmail.

Let us suppose that the Secretary of State wins and that the authority gives in. Let us suppose that the authority concedes in the face of the Secretary of State's blackmailing, bullying and threatening. What will it do? Assessing a new rate at the beginning of the financial year is different from introducing a supplementary rate towards the end of a year. An authority has to assess whether people have paid their rates. It has to make an analysis of those who pay monthly. Have those who pay twice yearly paid the first and second instalments? Have those who pay in one lump sum paid their rates?

As my hon. Friend the Member for Garscadden said, the rent books of council tenants show the original rate level. It will be a huge administrative task to find out who has paid, to re-issue rent books and statements and to send out cheques to those who have paid and to whom a rebate is due. It will involve a completely different type of operation. The Secretary of State and his officials have not thought out the administrative consequences. Those who are ignorant of the workings of local government have brought forward an absurd proposal.

During his silly intervention in the speech of my hon. Friend the Member for Garscadden the Under-Secretary demonstrated the Government's ignorance. I hope that the hon. Gentleman will take the opportunity to answer the points that I have raised or, failing that, to issue an unqualified apology to my hon. Friend.

Mr. Bill Walker

Will the hon. Gentleman confirm that it has long been the practice of local authorites to make changes in rent books both in terms of rates and rents? For a long time different rents have applied to different houses because income has varied from house to house. Adjustments have been made regularly where there have been changes in income. There is nothing new about those adjustments.

Mr. Foulkes

Changes have been made in particular rent books, but there has not been a wholesale change. The Under-Secretary appears to be nodding. The Secretary of State and the Under-Secretary are supposed not to want changes that will involve administrative costs. I am not saying that changes do not take place in other circumstances, but the Under-Secretary was wrong to compare the situation in Scotland with that in England. If the Minister does not believe me he can read the report of the debate on the Ten-Minute Bill that was introduced by the hon. Member for Streatham (Mr. Shelton) on 25 February. The situation in England is different from that in Scotland. I hope that the Under-Secretary will either withraw his silly statement or apologise to my hon. Friend.

Like my hon. Friend the Member for Central Ayrshire (Mr. Lambie), I believe that the new clause is unworkable. It has not been thought out. I hope that my right hon. and hon. Friends will support neither the spirit nor the letter of this provision.

Mr. John Home Robertson (Berwick and East Lothian)

I agree with my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) that it would be a mistake for us to vote against the new clause. A vote against a power to reduce rates would be like a vote against better weather. However, the Secretary of State has laid a fundamentally bogus proposition before the House. The right hon. Gentleman suggests that he can take something away from local authorities and from ratepayers without hurting anybody. He says that it is not his fault if any one gets hurt. He is hiding behind a screen that bullies have used throughout the ages by saying that it is not his fault.

The fact remains that ratepayers in Scotland will be seriously harmed by the Government's antics. When the Secretary of State tried to cast himself in the role of the good guy and of the ratepayers' friend he gave us the benefit of the complacent grin, which we have learnt to know and love. Part of my constituency lies in the Lothian region. Ratepayers in Scotland, including those in my constituency, are only too well aware that a large part of the substantial rate increases that they face is a direct result of the Secretary of State's actions.

With characteristic charm, the right hon. Gentleman spoke about cuts in the rates. He said nothing about the cuts in the rate support grant. It is fundamentally dishonest for a Secretary of State to say that the Government propose to give people the power to cut rates when only a few weeks or months earlier they deprived local authorities of their funds. As a result, local authorities had to force up rates or cut services substantially.

We are discussing substantial rate increases that will take place not only in the Lothian region, but throughout Scotland. Tayside is a Conservative-controlled regional authority that will increase the rates by about 38 per cent. It can be taken for granted that rates throughout Scotland, as a result of the cuts in the rate support grant, will go up by about 40 per cent.—or that there will have to be substantial cuts in local authority services.

6.00 pm

We can all agree about the benefits of cutting rates. I agree with my hon. Friend the Member for Central Ayrshire (Mr. Lambie) that we should do away with the rating system and replace it with something fairer. [HON. MEMBERS: "What?"] Predictably enough, since the Secretary of State dealt only with the joys of cutting back on the rates, it might be of assistance to people in Scotland if some of us illustrate the unacceptable part of this package about which the Secretary of State has said so little—cuts in public services.

The hon. Member for Edinburgh, South (Mr. Ancram) made his standard speech about profligate spending by local authorities. He talked about a saving of one 11½p stamp at one stage. That was really scraping the bottom of the bucket.

It might help to look further at the proposals laid before the Lothian regional council by the Lothian region Conservative group for the current year. We might then get some practical examples of the so-called profligate expenditure which Conservative Members in the House and Conservatives in local authorities feel is non-essential.

First, let us look at transport. The first section in this draft budget which was prepared last year by the Lothian region Conservative group refers to cuts in concessionary fares. It refers to making concessionary fares available to pensioners and disabled people only during non-peak hours, thereby effecting a saving of £1.3 million. It refers to removing the additional provision for pensioners living outwith Edinburgh—a saving of £220,000. That might suit the hon. Members for Edinburgh, South and Edinburgh, Pentlands (Mr. Rifkind), but it will not suit my constituents in East Lothian or others in West Lothian and Midlothian.

There is a suggested reduction of £½ million in the subsidy to the Scottish Bus Group pending an examination of the quality of service, following the well-known principle of cut first and ask questions later, and only then consider the practical effects of the cuts on transport.

There is a suggested cut of £3.3 million on social work. That includes cuts mainly in staffing, but there are some charming items of profligate expenditure, such as increased charges for home helps, meals on wheels and so on for elderly and disabled people in the region. These are examples of the services that the Conservatives in the Lothian regional council wanted to cut. They also wanted to reduce investment in play groups and in other areas of social work.

Moving on to education, the Conservatives in Lothian wanted to restrict the provision of transport to playing fields. The children might have to walk long distances from their schools to the playing fields. They also wanted to reduce by 40 per cent. the provision for sick leave, maternity leave and so on, which would mean a reduction of 42 supply posts in primary and secondary schools.

The Conservatives in Lothian also wanted to "adjust"—a charming word when talking about cuts—the amount for milk in primary schools. That was to effect a saving of £164,000.

They wanted to raise charges for school lets for community use. Presumably community organisations would have to pay more or not be able to get the use of schools in the evenings and at other times.

Again, the Conservatives wanted to "revise"—another little euphemism—the provision for staff for severely mentally handicapped pupils. Nothing would be safe if the Conservatives were to come to power in the Lothian region. They also wanted to reduce the provision for schools furnishings by 50 per cent. So it goes on. Cuts are suggested in nursery teaching, secondary teaching, staffing and all the rest.

These are practical examples of what the Conservative Party wants to do to local authority expenditure throughout Scotland. It is despicable of the Secretary of State to say that the cuts that he is suggesting will not hurt anybody when he knows that they will hurt ordinary people in my constituency and his.

Mr. Ancram

In all seriousness, if the Lothian region were faced with a choice between seeing its rate support grant further cut or reducing the rates, what would the hon. Gentleman advise it to do?

Mr. Robertson

I shall neatly side-step that question—[HON. MEMBERS: "Ah."]—by saying that I would never advise any local authority to impose cuts in services of the kind about which I have been talking.

Mr. Ancram

Answer the question.

Mr. Robertson

It would be intolerable and despicable to suggest to a local authority that believes in its responsibilities to the people it serves that it should impose such cuts. It is unreasonable for the Secretary of State to try to skate over that aspect of what he is doing.

The Secretary of State is trying to apply slow strangulation to local authorities in Scotland. He wants them to impose grave damage on the services for which they are responsible, including services that they have a statutory obligation to provide. Their only alternative would be to impose massive rates increases.

In this measure the Secretary of State is threatening to get rid of local authorities' ultimate power to find other sources of funds to preserve essential services. In doing that, the Under-Secretary of State is doing what he hotly denied he was doing at Question Time a few weeks ago, when I suggested that he was setting himself up as a one-man non-elected fourth tier of local government. It may be a third tier. I have lost count of the number of tiers of local government nowadays. There is no justification for the authority that he is now seeking from the House.

The question remains: what will happen if a local authority refuses the so-called offer that has been made under the terms of the clause? The original tactic, whereby the Secretary of State would have power simply to cut the rate support grant, would obviously force up rates still further. The Secretary of State has now come forward with an eleventh-hour suggestion which would enable him to put a further stranglehold on local authorities and to adopt further methods to coerce local authorities to do what he wants them to do.

What will happen if local authorities do not take this double-edged option? The Secretary of State must realise that at the end of the day people will have to accept these unreasonable cuts or be forced to put up with intolerable rate levels. Rating is one of the most regressive and unfair forms of taxation in this country. The Minister will not get away with this proposal. People in Scotland are aware of what is going on and in due course they will pass the right judgment on this appalling Conservative Government.

Mr. Gordon Wilson (Dundee, East)

Those of us who did not serve on the Standing Committee were appalled when we re-read the terms of clauses 13 and 14. This is a disgraceful mechanism of central control. It takes away almost completely the freedom of local authorities to carry out the mandates on which they were elected. I say that as one who represents an area with a Labour council which is a disgrace not only to the Labour Party but even to those who espouse the Marxist cause, because it has been following stupid policies on Palestine, local government and other matters.

The district councillors were elected at the district council elections. If one carries forward the philosophy which the Government have adopted, there will, in effect, be very little of locally elected democracy left after the Bill has gone through. That is the danger of it.

I suppose that it is easy to legislate for special circumstances, for the circumstances of cutbacks by the Treasury in any one year. But what the Minister is seeking to do here is to subvert the whole foundations of local government with financial control. He might as well decide to put central Government commissioners into certain areas and at least honestly admit that the local control which came from the democratic element has been utterly overridden.

Certain areas, such as Lothian and Tayside, must face this year a very heavy burden in terms of rates bills. Dundee district council, by not increasing rents, has given the impression that council tenants will be protected. However, from the figures issued by Dundee district council's housing division, I notice that tenants will be faced with very substantial bills this year. As the books come rattling through the doors, I am sure that there will be a great deal of anger and objection to what has been happening.

I give the House an example. In a one-apartment house, the weekly increase will be £1.16. For a five-apartment house, it will be £2.69 a week. That is in rates increases alone. In the housing estates of the SSHA in Dundee, the increases will also be very substantial. The rates for three-apartment tenament in Fintry will rise, on a monthly basis, from £11.52 to £18.40. Rates for a five-apartment cottage will rise from £17.84 per month to £28.46. This is something that district councillors in Dundee have not admitted—that the SSHA will be putting rent increases on top of these huge rates, so the poor unfortunate tenants of the SSHA will be having to pay twice over. It is extremely unfair that that has happened.

The House is faced with an impossible situation which is the creation not just of the Secretary of State but also of the Treasury. As the hon. Member for Berwick and East Lothian (Mr. Home Robertson) has said, some of these increases in rates come through the errors or sheer folly of local authorities, but most of the increases are coming because the RSGs and housing support grants have been slashed to a level which makes it difficult for local authorities to budget. They have to budget on a year-by-year basis. They have to carry commitments for capital finance and the servicing of loans, and so on. They can find the whole nature of their financing blitzed by what has been done by the Government in the reduction of these grants.

The Secretary of State, as a member of the Cabinet, has no doubt accepted Cabinet responsibility for the cuts which have been imposed on local government finance. But I think that he ought to admit that the problems for which the legislation is coming are as much of his own making as they may arise from local authorities. It is damnably unfair that reputable local authorities have been put into an impossible situation by the savage way in which the Government have cut back the funding available to them.

The hon. Member for South Angus (Mr. Fraser) was dipping his toe into the Monifieth area of his constituency that lies within the territory of Dundee district council. Dundee should not be singled out as one of the first hit-areas. If the hon. Gentleman follows through what he said and the Secretary of State takes that advice, there will be even greater penalities, visited not on the district councillors in Dundee district—who are so besotted ideologically anyway that they probably would not notice what was happening and would not care—but in the possible cutback of £3 million in the capital allocations for housing, which will cause tremendous harm.

I quote the figures contained in today's edition of The Scotsman, under the heading Councils facing £35 million 'penalty' over rents. The article mentions certain things happening in relation to expenditure, and it says: If this happens, Glasgow seem set to have their December figure reduced by more than £10 million, Aberdeen by about £3.5 million and Dundee by more than £3 million. Other councils likely to suffer reductions are likely to include Stirling, Falkirk, Hamilton, Inverclyde, Monklands and Kyle and Carrick. In addition to the rate increases which are being put into force by local authorities as a result of Government policy, the difficulties in the public housing sector which could come from the cancellation of housing grants could certainly put the housing structure in Scotland into a state of crisis from which it would have difficulty in escaping for many years, particularly if expenditure remains restricted and curtailed, as it has been.

If the Secretary of State has in mind stringent and swingeing cuts of that nature, he most certainly should reconsider them, because he will just be bringing misery and damage to tenants and ratepayers in Scotland and causing damage out of all context. The enormity of what he is doing will reverberate from year to year throughout Scottish housing. I certainly hope that the Secretary of State will think again about these matters.

6.15 pm

Mr. Rifkind

The bulk of the contributions to the debate have related to new clause 1 and the power to reduce rates, but certain questions were asked of my right hon. Friend and myself about new clause 2 and the new controls over borrowing. Perhaps I might explain them by saying that if a local authority, faced with a loss of RSG, does not use the alternative opportunity available to it of reducing its rates, my right hon. Friend will undoubtedly reduce its RSG.

The hon. Member for Berwick and East Lothian (Mr. Home Robertson) asked what will happen when it has lost its RSG. As a result of the law as it will then be, a local authority in Scotland, which has no power to levy a supplementary rate to get additional revenue, will also, unless it receives the consent of the Secretary of State, have no power to borrow to cover the loss that it has incurred by losing the RSG. It will therefore have no alternative but to reduce its spending by the equivalent amount.

The Government freely acknowledge that that will be the consequence of their decision, and it will not be the Government's decision except as approved by Parliament, because any attempt or desire by my right hon. Friend to reduce the RSG cannot come into effect until and unless a report has been presented to the House and approved by it.

Therefore, I make no apology for the fact that if the House agrees with my right hon. Friend that the proposed expenditure of an individual authority is excessive and unreasonable, it is right and proper that that authority should have to reduce its spending by an appropriate and equivalent amount.

The hon. Member for Glasgow, Garscadden (Mr. Dewar) asked how one would know whether a loan that the local authority had incurred had been for this purpose, because the loans fund is a general fund. He asked how it would be possible to identify whether the authority was in breach of what is in new clause 2. First, I have not the slightest doubt that all local authorities, and particularly local authority officials, will not consciously breach an Act of Parliament.

The matter is quite simple. If my right hon. Friend has to reduce the RSG of an authority, that authority will have to explain, if not to the Secretary of State, at least to its own elected members and its community, the consequences of that. If, having no reserves, and no power to levy a supplementary rate, the authority still intends to maintain the previous proposed level of spending, the only way in which that can be done is by a loan from the loans fund, because bills have to be met and cheques have to be signed and so forth. Therefore, if the authority intends to continue with the original proposed level of spending, there will be no way in which that can be done other than illegal borrowing. Thus the practical point to which the hon. Gentleman refers is not really a problem.

Mr. Dewar

To complete this cheerful picture of disaster, perhaps the Under-Secretary will talk us a little further through the process. If a local authority refuses to co-operate in the way that has been suggested, and borrows, what sanction will be imposed?

Mr. Rifkind

An authority that borrowed in those circumstances without the Secretary of State's consent would be in breach of the law and would be in exactly the same position as any local authority that breaches its statutory obligations. There are well-known procedures, which have applied for many years, for dealing with these situations, which, fortunately, occur very rarely. Opposition Members are well aware of them, because they have been used in a different context in recent years.

Mr. John Home Robertson

It would be helpful if the Minister would tell us a little more about how he proposes to work the scheme. If he forces a local authority to go into compulsory or voluntary liquidation—that is what it looks like—can he explain precisely how that will be administered? Does he have contingency plans whereby Scottish Office officals will move into a local town hall to sack people? How will he work it?

Mr. Rifkind

The hon. Gentleman is indulging in delightful irrelevant exaggeration, which bears little relation to what the House is considering. We are not talking about the total rate support grant of a local authority being withdrawn. We are concerned only with the proportion that has been judged by my right hon. Friend, and approved by the House, to be excessive and unreasonable. One would hope that in the vast majority of local authorities, certainly those affected by these provisions, that proportion of their expenditure that is excessive and unreasonable will, by definition, be expenditure which they are capable of reducing if they have the will to do so. I am sure that the House would not approve of any attempt to remove from an authority what is accepted to be vital and essential expenditure and could not be withdrawn or removed except by imposing intolerable and unacceptable damage on a local authority. That is a matter that will be judged at that time.

Mr. Martin J. O'Neill (Clackmannan and East Stirlingshire)

Is the Minister telling us that he will surcharge councillors in the event of loans being obtained by means which he regards as unacceptable for expenditure which he considers to be unreasonable and excessive?

Mr. Rifkind

I am not saying anything of the sort. If a local authority breaks the law, either this law or any other—and local authorities have, over the years, occasionally been found to be in breach of the law—it will end up in court and a court order will be made for it to comply with the law. If an authority fails to do so, that will be a matter between it and the courts. There is no new provision in any part of the Bill that changes that. That is how the matter stands, and the House can consider it in that light. That is the essential effect of new clause 2.

My right hon. Friend makes no apology for the fact that if a local authority has proposals that involve excessive and unreasonable spending it is right and proper that once the House has approved the Secretary of State's judgment the authority should be required to reduce its spending by an equivalent amount. I am sure that the public and all reasonable people would expect that.

In support of that contention I quote the president of the Convention of Scottish Local Authorities, COSLA, Councillor Fitzgerald, whose views were reported in. The Scotsman of 20 March: He thought that any council who tried to borrow to meet the loss of grant would be engaging in a 'dubious' method of trying to raise finance. 'It would be very difficult for anyone to condone such action'.

Mr. Dewar

Does the Minister agree that Mr. Fitzgerald, who is a welt-known member of the Conservative Party, is opposed to the section 13 initiative, root and branch?

Mr. Rifkind

What is perhaps of particular significance is that, if the hon. Gentleman is correct, he will accept that Mr. Fitzgerald's remarks are important and extremely persuasive. If someone who, according to the hon. Gentleman, does not approve of the general powers nevertheless comes to the same conclusion as the Government about the iniquity and impropriety of any attempt to borrow once the powers have been used, that is a persuasive argument that I am happy to endorse.

I come now to the basic points that have been raised and the unique and unprecedented power that will be given to local authorities in Scotland in certain circumstances to reduce their rates as an alternative to losing the rate support grant.

I shall comment first on the remarks of the hon. Members for Garscadden and for South Ayrshire (Mr. Foulkes), who seemed to be anxious to show that the proposals would be impracticable. They hoped that if the proposals could be shown to be impracticable they would not have to face what, from their point of view, would be the unfortunate choice about whether the proposals would at least be preferable to the loss of rate support grant for a local authority.

The hon. Member for South Ayrshire made great play of my comparison with the power that has existed for many years and has been used every year by one or two local authorities in England to levy a supplementary rate during the year. He is not correct to say that that is always done at the end of a financial year. Occasionally, it has been done in the summer or the autumn by individual local authorities.

My first point is that there is no obligation. The local authority will be able to decide whether it wishes to use the powers. It will have no obligation placed upon it. If it takes the view that the right or opportunity to refund money to the ratepayer is inappropriate or undesirable, it can explain that decision to the local community. It can explain why it prefers to give the money to my right hon. Friend the Secretary of State.

My second point is that if the regional council is the body responsible for collecting the rates and does so on behalf of the district council, there is provision within the new clause to ensure that it will be compensated by the district authority for any expenditure that it has incurred in that administration. That will not be a problem.

Neither the hon. Member for Central Ayrshire nor the hon. Member for Garscadden suggested why an English local authority, in the middle of a financial year, can, if it thinks appropriate, go through all the procedure of sending out a new rates demand, filling in the forms, making the consequential changes in rebate entitlement and calling in the rent cards, which has to be done if the rent payers are also ratepayers. Even if it does not have to do that for the rent cards because a single block sum is being demanded, many local authorities throughout the United Kingdom often make a second rent decision during the year. My hon. Friend the Member for Perth and East Perthshire (Mr. Walker) pointed that out. It is a perfectly normal procedure to change the rent cards as a consequence.

Mr. Foulkes

The Minister is squirming and dodging the issue. He cannot get away from the fact that in England it is a single simple rate demand, which is the cheapest and simplest way of raising additional revenue, whereas in Scotland he is proposing a very complicated procedure. Will he deal with the points raised about monthly, biannual and annual payments for those in council houses? Will he explain properly and honestly for once that he has made a far more complicated proposal?

Mr. Rifkind

The hon. Gentleman's bluster is normally used to conceal his lack of information. I shall deal with his specific point. He has said that when an English local authority wishes to levy a supplementary rate it demands a lump sum from every ratepayer. The hon. Gentleman has suggested that if the powers that we are proposing to reduce the rates were to be used in Scotland that would be complicated and impossible to work out.

Mr. Foulkes

I did not say that it would be impossible.

Mr. Rifkind

That is progress. We now have it acknowledged by the hon. Gentleman that it would be possible, if more difficult. That is something that the local authority will take into account when deciding whether to use the powers. The hon. Gentleman is making it sound far more complicated than it is. If a local authority decides to reduce its rates, any repayments due to a ratepayer will be pro rata to that ratepayer's original contribution. It will be substituting a new sum for the original total sum to be collected by the rates. The individual obligation of each domestic, commercial or industrial ratepayer towards meeting the required sum will be pro rata the original contribution. The method involved in all regions will not be complicated to work out. Computers are used for that purpose.

I accept that an administrative problem is involved. One does not deny that. It would be astonishing for me to say that it could be done by the press of a switch, but the administrative costs are but a tiny fraction of the sums involved. It is an entirely practical proposition.

Mr. Foulkes

The Minister is being increasingly helpful in his explanation. Will he give us an example of what will happen halfway through a financial year for ratepayers who pay monthly?

Mr. Rifkind

Ratepayers pay either monthly or in two instalments, one at the end of September and one at the end of the financial year. The hon. Gentleman will agree that in the latter case it is obvious how the system will work. Where monthly instalments are paid, it will be for the local authority to decide how it wishes to do it. If many monthly payments have been made, they will be reduced for the remainder of the year by £x. Alternatively, it could decide to dispense with monthly payments. It will be for the local authority to decide which system would be more convenient and economic. The hon. Gentleman has conceded that the proposals are feasible, and it will be for local authorities to decide whether they wish to use them.

6.30 pm

I pay tribute to the hon. Member for Garscadden, because he acknowledged at the end of his circumlocutory remarks that, despite all his reservations, equivocations, doubts and concerns, he would not vote against the new clause. The hon. Member for Berwick and East Lothian was correct in saying that voting against the new clause would be like voting against good weather. I have no doubt that the Opposition will agree that the new clause is one of the best things to happen to ratepayers in Scotland for many years. The Opposition's voting intentions are an indication of that.

In reply to the hon. Member for Edinburgh, East (Mr. Strang), I should say that there is no question of the Secretary of State dictating to an individual authority what it should spend on a particular item. If it wishes to spend more in one area, while ensuring that its aggregate spending is maintained at a reasonable level by making economies elsewhere, that will be a reasonable decision for it to take, if that is what it believes local priorities deserve. Nothing that the Government intend to do will interfere with that discretion.

The hon. Member for Edinburgh, East appealed to my right hon. Friend to treat authorities affected by the proposal leniently and objectively. Of course we shall do that. The hon. Gentleman sounded at one point as though he were making a plea of mitigation rather than a defence of any individual authority, but I may have misunderstood his remarks.

Mr. Strang

I do not think that a reading of my speech would justify that observation. I made it clear that the real issue is that Lothian regional council will be required by the Government to cut services and that if those cuts are made it will be clear to the vast majority of the ratepayers that the decision was erroneous.

Mr. Rifkind

That is a matter that we could debate for a long time. I pay tribute to the hon. Gentleman for stating firmly in answer to my hon. Friend the Member for Edinburgh, South (Mr. Ancram) that if an authority had to choose between giving rate support grant back to the Government and giving an equivalent amount back to local ratepayers, he had no doubt that giving money to the ratepayers would be a far more sensible decision. I am sure that hon. Members on both sides of the House agree with that.

I thank the Opposition for, if not enthusiastically endorsing new clause 1, at least indicating that they do not intend to vote against it. The other provisions that we are considering are a logical and necessary part of the package and will ensure that excessive and unreasonable spending does not take place.

Question put and agreed to.

Clause read a Second time, and added to the Bill.