HC Deb 25 March 1981 vol 1 cc948-57
Mr. Rifkind

I beg to move amendment No. 13, in page 6, line 27, leave out `—(i)'.

Mr. Deputy Speaker

With this it will be convenient to take Government amendments Nos. 15 and 16.

Mr. Rifkind

The amendment proposed is a result of the consideration given to this part of the clause in Committee.

The clause as drafted requires the Secretary of Stale, before being satisfied that planned expenses are excessive and unreasonable, to have regard to the financial and other relevant circumstances of the area of the authority and to the entire area of a joint board, inasmuch as the expenses relate to the functions of a joint board.

In considering the contributions that were made in Committee the Government have concluded that there is a strong case for deleting the reference to joint boards. As drafted, the clause would require the Secretary of State to look at the entire area of the board, for example, the area of each constituent authority of the board, even if action were contemplated against only one. This could be burdensome and unnecessary, as joint board expenditure is unlikely to contribute materially to any estimated expenditure excess. Deletion of the reference to joint boards would not, however, preclude action under the provisions in respect of joint board expenditure if it were prima facie excessive and unreasonable. In that event the Secretary of State could subject joint board expenditure to examination as part of an examination of expenditure planned by the constituent authorities or as part of the Secretary of State's consideration of the financial circumstances.

Amendment No. 15 is consequential upon amendment No. 13.

I come now to amendment No. 16. When this part of the clause was examined in Committee I advised hon. Members that it would be the Secretary of State's intention in the first instance to look at total planned expenditure, but that if that seemed prima facie excessive and unreasonable he would need to consider planned expenditure on particular services. It is important in these circumstances that the Secretary of State should be able to compare expenditure on individual services as between authorities. That is a necessary step in making a comprehensive assessment. Accordingly, the removal of the definite article before the reference to "expenditure" or "estimated expenses" of other closely comparable authorities is to avoid restricting the Secretary of State to making comparisons on the basis of total expenditure.

I commend the amendments to the House.

Amendment agreed to.

4.45 pm
Mr. Dewar

I beg to move amendment No. 14, in page 6, line 28, leave out 'the area of'.

Mr. Deputy Speaker

With this it will be convenient to take amendment No. 26, in clause 14, page 7, line 36 leave out sub-paragraph (ii).

Mr. Dewar

The amendments deal with the phraseology of the clause. We have little time for it. We find it a thoroughly unpleasant and unnecessary piece of tyranny. It is important that it should be put in the most respectable order possible, and the amendments are an attempt to do that.

Amendment No. 14 refers to the phrase "the area of the authority. The House will remember that in considering whether expenditure is excessive or unreasonable the Secretary of State will have regard to the financial and other relevant circumstances of the area of the authority. We have long considered that it would be clearer and more flexible if the inhibiting phrase "the area of" were removed and merely the financial and other relevant circumstances of the authority had to be taken into account.

The point was argued at length in Committee and has reappeared on Report because in Committee the Minister made fairly symphathetic noises and it seemed worth while to give him a chance to reconsider his position. He made it quite clear that he thought that there was an arguable case for the exclusion of the words. He said: one could stretch a case to say that they are matters affecting an authority, which are more correctly problems affecting the area of the authority". The factors that he was thinking of were the sparsity of the population and the possibility of oil developments and other demographic factors of relevance. Those can easily be taken into account if the phrase is merely "the authority" and not the area of the authority". Later, the Minister said: I agree that that is by no means an evident proposition, because it could be argued that the phrase 'financial or other relevant circumstances' already covers these matters".—[Official Report, First Scottish, Standing Committee; 3 February 1981, c. 306.] Put shortly, we prefer that second view and it would be better if the words were removed.

In his letter of 18 March, for which I thank him, the Minister said that he rejected the proposition on consideration because it would be unwise, as the criteria more accurately can be ascribed to the area. That is a statement of view and does not tell us why he came to that conclusion. Given the friendly noises that he made in Committee he owes us more of an explanation, or perhaps he will continue his recently established habit of retreat and concede the amendment.

Amendment No. 26 refers not to the mandatory conditions which the Secretary of State must take into account but to the discretionary conditions in the clause. One factor of the new sub-paragraph (ii) of subsection (1A)(a) is the "general economic conditions". There are statutory precedents for certain phrases. No doubt the Minister will draw them to my attention again. My view is that the phrase "general economic conditions" means that the Minister will be able to call something excessive and unreasonable if it does not suit his policy.

There will be many occasions when, in the view of the local authority and the people living in the area of that local authority, there is a strong case for expenditure in terms of reflating the local economy and creating jobs. Given the present difficulties, it is an almost unanswerable case. I am suspicious of sub-paragraph (ii) because I fear the phrase will allow the Minister, as a loyal acolyte of the Chancellor of the Exchequer, to fly in the face of local reality, of the judgment of local representatives, and merely say that something is excessive or unreasonable because he does not like it. I believe that all these—the mandatory criteria, the discretionary criteria, the whole thicket of words that has been gathered around what at the end of the day is a pretty naked power—

Mr. Rifkind

There may be some confusion. The hon. Gentleman is speaking to amendment No. 26. He appears to be suggesting that it deals with the deletion of the words "the general economic conditions" in clause 13. But the amendment suggests that the hon. Gentleman wishes to leave out sub-paragraph (ii) in clause 14, which deals with the resources element.

Mr. Dewar

I apologise. I do not mean to criticise anyone, but the confusion has arisen because of the rather strange grouping. The second amendment dips into a different clause for reasons that I do not understand. I had assumed—I accept that it was a mistaken assumption—that we were dealing with a group of amendments to clause 13 and not to clauses 13 and 14.

The Minister is correct. However, my remarks were valid, and I shall hold to them without a blush. I retreat, even though my arguments are evidently sound. The phrase "the area of" is one to which the Minister should address his mind. Perhaps if he is feeling generous he will give me a crumb of comfort by conceding that.

Amendment No. 26 dips into a different clause but it raises questions about which the Minister appreciates we feel strongly. Clause 14 deals with a local authority's estimated expenditure relevant factor in calculating the amount of resources element. Sub-paragraph (i) is merely a restatement of words already in the existing statute. Subparagraph (ii) imports, we believe unnecessarily, all the paraphernalia and arbitrary machinery involved in clause 13 where it is not needed.

Our amendment asks simply that that should not be done, but that we should leave it as it is. We do not object to the original words, which were of the opinion that the local authority have fixed an unnecessarily high rate". We do not object to that concept being restated, because it is not a new infringement of local authority independence. We are prepared to live with that. But to import the imperfections and the unsatisfactory paraphernalia from clause 13 into the subsequent paragraph in part II of schedule 1 of the 1966 Act is unnecessary. I hope that at this late stage the Minister will be prepared to reconsider.

Mr. Rifkind

I shall deal first with amendment No. 14, which is concerned with the words the area of the authority. That is essentially a drafting matter. In a sense, I am surprised that the hon. Gentleman is continuing his opposition to the wording in its present form. I should have thought that from the point of view of the local authorities the inclusion of the word "area" was an added protection to ensure that the relevant circumstances would be taken into account in a way that might be proper with the words proposed by the hon. Gentleman but which would not necessarily be seen to be proper. By the use of the word "area" we are anxious to ensure that if there are factors such as sparsity of population there should be no confusion in anyone's mind that that is a relevant consideration for the Secretary of State to take into account when considering whether expenditure is excessive and unreasonable. That might be the conclusion if the wording were limited to references to the local authority itself, but there is doubt on the matter.

There is a second factor that the hon. Gentleman might wish to bear in mind. The wording in the clause is consistent with the wording used in the 1966 Act from which those powers stem. Under the 1966 Act the Secretary of State had power to withdraw expenditure from a local authority whose spending was excessive and unreasonable. The reference in that Act is to the area of the authority. It seems reasonable that there should be consistency.

The hon. Gentleman also spoke to amendment No. 26, which deals with the power of the Secretary of State to reduce the resources element going to an individual authority by substituting a notional rate poundage for the rate poundage fixed.

The hon. Gentleman suggested that he believed that to be unfair and unnecessary. In the context of the general provisions of the Bill, I believe that clause 14 is eminently sensible and reasonable. At present, if a local authority fixes a high rate to fund its excessive spending, not only does it squeeze substantial sums out of the ratepayers but it automatically entitles itself to a greater amount of resources element in the rate support grant calculation. The more one local authority receives in resources element the less is available to others. Therefore, other local authorities suffer directly and inevitably as a consequence of a high rate poundage fixed by one authority to fund excessive spending.

If the Secretary of State uses the powers available to him under clause 14 and substitutes a notional rate poundage for the rate poundage fixed by the local authority—although that local authority will receive less resources element than it otherwise would receive—that sum will not be a loss to local authorities. It will automatically be redistributed among other local authorities in Scotland. That is a fair and sensible provision. I hope that with that explanation the hon. Gentleman will accept that the provisions are sensible. We are seeking to ensure that anything that might be considered relevant to the expenditure of the authority is taken into account. While the hon. Gentleman may be correct to say that it is unnecessary to refer to the area of the authority, I assure him that by including that word we are giving at least the possibility of added protection to the local authority. There is no way in which a local authority can be better off by the deletion of that word. While the inclusion of it may have little practical effect, it may give greater certainty that all relevant considerations will be borne in mind by the Secretary of State.

Amendment negatived.

Amendments made:No. 15 in page 6, line 28, leave out from `authority'; to end of line 33.

No. 16 in page 7, line 7, leave out `the'.—[Mr. Rifkind.]

Mr. Rifkind

I beg to move amendment No. 17, in page 7, line 9, leave out are, in the opinion of''.

Mr. Deputy Speaker

With this it will be convenient to take Government amendments Nos. 18, 24, 25, and 27.

Mr. Rifkind

The amendments are intended to change the wording of clauses 13 and 14 as suggested in Committee. As drafted, the clauses use the terms "satisfied that" and "in the opinion of', relative to various decisions by the Secretary of State. Both phrases are used at different stages.

In Committee hon. Gentlemen argued for consistency, and I can see no compelling arguments for not meeting their point. I therefore propose to substitute the test of satisfaction for the test of opinion relative to selection of comparable authorities and in that way to use the same terminology in various parts of clauses 13 and 14. I am sure that the amendment will be acceptable to the House.

Mr. Dewar

We are grateful to the Minister for agreeing to the point that came up in Committee and was argued by the Opposition. He was a little grudging when he suggested that he could not think of any reason for not being consistent, so he supposed that he had better be. I should have thought that he would be anxious to be consistent, for consistency can be a virtue. I have not gone through this in great detail, but the words "of the opinion" survive in brackets in clause 14, next to the word "multiplicand" and various other terms that we did not like in Committee.

Before the Bill concludes its passage through Parliament I hope that the Minister will consider whether that outbreak of "opinion" can be curbed, in the interests of consistency. It is not a matter of great importance, but we thought that consistency would improve the Bill and we are grateful for the amendment.

Amendment agreed to.

Amendment made: No. 18, in page 7, line 10 after `State', insert 'is satisfied are'.—[Mr. Rifkind.]

5 pm

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

I beg to move amendment No. 19, in page 7, line 16 leave out sub-paragraph (iii).

Mr. Deputy Speaker

With this we may take Government amendment No. 20 and amendment No. 21, in page 7, line 19, at end add— '(c) shall exclude estimated expenditure on public transport subsidies where such subsidies can be shown to promote energy conservation and to support an efficient public transport system.'.

Mr. O'Neill

The amendments are concerned with the criteria on which unreasonable and excessive expenditure will be determined. We objected in Committee to subparagraph (iii) because we considered it to be too ague. The amendment seeks to delete the sub-paragraph, though we concede that in amendment No. 20 the Government have gone some way to meet our criticisms by introducing various adjectives in relation to the criteria. We do not wish to be churlish, but there are references to economic criteria in sub-paragraphs (ii) and (iii). Perhaps the Under-Secretary will arrange to have one "economic" deleted in another place in order to avoid repetition.

On amendment No. 21, we accept that expenditure resulting in an efficient and energy-conscious public transport system should be excluded from consideration of excessive and unreasonable expenditure. An efficient public transport system that is conscious of the requirements of energy conservation will be of general benefit to the economy and, in many respects, of greater assistance than attempts to limit the public sector borrowing requirement in the simplistic way that the Government's monetarist philosophies entail.

We shall not press amendment No. 19, but I should point out that if Government amendment No. 20 is accepted the word "economic" will appear in the criteria in sub-paragraphs (ii) and (iii). That repetition is unnecessary, and we ask the Minister to suggest to his noble Friends in another place that they should delete one "economic". We are not fussy which one they choose.

Mr. Gavin Strang (Edinburgh, East)

I wish to speak to amendment No. 21, which would require the Secretary of State to exclude public expenditure on providing an efficient public transport system from consideration when he is deciding whether a local authority is spending excessively. Such expenditure is desirable if it is supporting an efficient service. There will be a redistributive aspect to such spending. Those who benefit most from reduced fares are those on low incomes, though others, including visitors to a city such as Edinburgh, may also benefit.

In addition, if bus fares are held down many workers will accept low-paid jobs, which they would otherwise not accept but would continue to live on benefit. That is an important consideration, which applies not only to some of my constituents but to some of those of the Under-Secretary in Westerhailes.

There are other pragmatic reasons for supporting such a policy. It reduces traffic congestion in a major city such as Edinburgh and it can promote energy conservation.

We in the Lothian region are proud of the Edinburgh bus service, which was shown in a recent national survey to be the most efficient in Britain. We believe that the benefit of subsidisation is that it increases the use of the service and the revenue from passengers. It is cost-effective expenditure.

I do not expect the Government to produce a circular encouraging local authorities to pursue such a policy, but I hope that they will give the benefit of the doubt to authorities that are attempting that approach, so that we can make a proper analysis of the cost benefits of such an approach to transport policy.

The constructive meeting that took place between the Scottish Transport Group and representatives of Lothian region yesterday about the proposal to cut fares on Eastern Scottish buses in the region will mean, I hope, that there will be an opportunity for that policy to be implemented and for equity to prevail in bus fares throughout the Lothian region.

Mr. John Home Robertson (Berwick and East Lothian)

I agree with my hon. Friend the Member for Edinburgh, East (Mr. Strang) that Government intervention to cut off local authority subsidies of bus services is likely to be damaging to our public transport network and to energy conservation measures. Nowhere is that more relevant than in the rural areas of Scotland, such as my constituency.

The Borders regional council transport policy and programme for 1981–82 states: The Government's proposals to end New Bus Grant and to impose financial targets on Scottish Bus Group predicate against any further reductions in public transport support over the next few years except by depriving many villages of their bus services. That view has been overtaken by events, because the Scottish Bus Group has already increased its demands on local authorities, including the Borders region, and the regional council has refused to pay the additional subsidy. A report in The Scotsman on 17 March revealed that Eastern Scottish would be compelled to reduce the bus fleet in the Borders from 98 vehicles to 76 and that 20 bus drivers were to be made redundant. It continued: The bus company is also taking steps to recover the £140,000 which Borders Regional Council have refused to pay towards the company's profitability target. The report stated that the company had threatened further increases in fares and cuts in services in the region.

The problem is that high fares and a low level of services bring about resistance among passengers. There is clear evidence that the number of passengers falls and public transport services come up against the law of diminishing returns when fares are increased. The areas that prove that the converse is true are South Yorkshire and the Lothian region. Reasonable fares attract passengers and lead to more efficient public transport.

The only problem in the Lothian region is that since local government reorganisation fares in the city of Edinburgh and those in other parts of the region have not been in line. Bus fares are about 20 per cent. higher outside the city, and it could be argued that my constituents in East Lothian have been subsidising passengers in the city.

To its credit, the regional council brought forward a policy to increase the subsidy to Eastern Scottish bus services outside the city in order to ensure that fares would be at a similar level. That would have required a subsidy of £3 million.

At that stage, the Secretary of State intervened and prevented the Scottish Bus Group from accepting the additional subsidy. That is our worry, and explains why we are discussing this matter. The right hon. Gentleman's action ensures that an inequitable situation is preserved and that my constituents continue to have to pay unreasonably high fares compared with people in other parts of the region.

This demonstrates that the Secretary of State's influence in the matter is not helpful. I support the move made by my hon. Friend the Member for Edinburgh, East, which would prevent the Secretary of State from taking this kind of consideration into account when reducing rate support grant.

Mr. Rifkind

The amendment moved by the hon. Member for Clackmannan and East Stirlingshire (Mr. O'Neill) from the Opposition Front Bench deals with a different matter from the transport consideration. It proposes the deletion of the final part of clause 13, which relates to the discretion that the Secretary of State can use in considering whether proposed spending is excessive and unreasonable.

The hon. Gentleman and his hon. Friends put forward in Committee the understandable proposition that the words to such other criteria as he considers appropriate were too wide and too dangerous and would not even guarantee that the factors taken into account were legitimate considerations from the point of view of local government expenditure. The Government undertook to consider whether the wording was too wide and whether some amendment was desirable.

Government amendment No. 200, which is being discussed with the amendment that has been moved, is our response. By referring specifically to financial, economic, demographic, geographical and like criteria, it will be impossible for the Secretary of State to take into account considerations that are patently irrelevant to a proper consideration of the aggregate of local government spending.

The hon. Gentleman asked whether it was desirable to include the word "economic" in the amendment, because if it were there it would lead to its appearing in two different parts of the clause. I do not think that it does any harm. Indeed, I consider that it is positively desirable. The first mention of "economic" refers to general economic conditions. That means considering the totality of public spending by local authorities as a whole and the economic circumstances that the country faces at the time. The wording points to national economic considerations and to general economic conditions, and not necessarily to criteria which, although economic, are limited to the economic situation of the local authority in question. The use of the word "economic" in the amendment includes matters specifically local to the authority in question.

The more substantive point to which the hon. Members for Edinburgh, East (Mr. Strang) and for Berwick and East Lothian (Mr. Home Robertson) have drawn attention is that of the assistance that a local authority might wish to give to its transport undertakings. The amendment seeks to exclude any expenditure of that kind from any determination by the Secretary of State whether the proposed spending of an authority is to be considered excessive and unreasonable.

The Government will not be terribly interested in the proposed spending of a local authority on any particular service if the aggregate of its spending does not appear to be prima facie excessive and unreasonable. The procedure that my right hon. Friend will carry out in relation to the powers is that he will first look at the budget of a local authority and then at the grand total of its proposed spending. If the grand total—the aggregate of proposed spending by the authority—does not appear to be prima facie excessive and unreasonable, he will not wish to look further at the budget.

Mr. Robert Hughes (Aberdeen, North)

Will the Minister say what guidelines will be used to determine what is prima facie unreasonable expenditure?

Mr. Rifkind

This matter was discussed at length in Committee. A whole series of considerations is spelt out in clause 13. It enables the Secretary of State to look at a whole series of factors, including the guidelines that have been laid down, any question of growth that the local authority may be building into its proposed spending, comparability of spending by that authority and other similar authorities, and questions of per capita expenditure of the authority compared with that of authorities in other parts of Scotland. A whole series of considerations can be looked at.

If, and only if, the Secretary of State takes the view that on a prima facie basis the proposed spending of the authority is excessive and unreasonable will he wish to look further into what has brought about that situation. As the Secretary of State is required, if he wishes to use his powers, to indicate both to the local authority and to Parliament his reasons for believing that the proposed spending is excessive and unreasonable, it would be impossible for him to fulfil that requirement unless he were able to look at specific items in a budget which he believed added up to aggregate spending that was clearly excessive and unreasonable.

5.15 pm

Even if, at the end of the day, the Secretary of State believes that a local authority's spending meets those criteria and rate support grant is withdrawn from it, there will be no question of my right hon. Friend's giving directions to a local authority about how it should make reductions in order to achieve a total level of spending acceptable both to the Secretary of State and to Parliament. That will be a matter for the local authority to decide. Equally, if a local authority wishes to spend far more on any one area of spending and can do so by making economies elsewhere, that is not a matter on which my right hon. Friend will wish to intervene. It is a matter properly within the discretion of the local authority.

If the Lothian region or any other authority wished to spend more on transport than is the case in the rest of Scotland, but proposed to do so by making corresponding economies elsewhere so that its aggregate of spending was not excessive or unreasonable, that matter would not interest my right hon. Friend in any sense that is relevant to the powers in clause 13.

The hon. Member for Berwick and East Lothian implied that if the amendment moved by his hon. Friend were to be approved by the House and become part of statute the Secretary of State would be unable to do in future what he did in respect of Lothian region's proposal to give an extra £3 million, I think, to the Scottish Transport Group. The hon. Gentleman misunderstands the situation. He misunderstands the basis on which the Scottish Transport Group was unable to accept the sum which the local authority in question wished to provide for it. It has nothing to do with clause 13 or the Bill as a whole. It is concerned with the question of the external finance limit of the Scottish Transport Group itself.

A letter sent by my right hon. Friend to the chairman of the Scottish Transport Group illustrates the position. My right hon. Friend wrote: An increase of the kind which was being proposed would have major implications for the Scottish Transport Group's external finance limit, which the Secretary of State announced in Parliament on 24 November last year was to be fixed at £17 million for the year 1981–82. Local authority bus support payments are one of the elements in the calculation of the EFL which, in turn, reflects, in relation to the Government's judgment of resource availability, the volume of external financial resources (in addition to direct income from customers of the service) which it is considered that the country can at any one time devote to the industry in question. In considering the total external finance limit of the Scottish Transport Group or any other public body of that kind account has to be taken of the sums received from outside sources. That includes the bus support grant received from a local authority. In the case of the Scottish Transport Group, the sum had been fixed at £17 million in respect of all its services throughout Scotland. This allowed for a substantial degree of bus support grant from various local authorities in Scotland. There was no way in which the Scottish Transport Group could have accepted the extra subsidy of about £3 million from Lothian region within the EFL that had been laid down. That EFL was not laid down in order to prevent its accepting sums of this kind. The EFL had been fixed some time previously. It was the Scottish Transport Group's own judgment that there was no way in which it could accept this extra sum from Lothian region without breaching its external finance limit. It was on that basis that the Scottish Transport Group reached its decision.

Mr. Home Robertson

We realise the limitations of the amendment. We are seeking to make it less easy for the Minister to be as obstructive as in the past.

Mr. Rifkind

It is kind of the hon. Gentleman to express himself in that way. He should appreciate that whatever the desirability or undesirability of spending large sums of money on subsidising public transport, what the Secretary of State and the Government are concerned about is not how much a local authority spends on transport, social work, education or other individual items, but total spending of that local authority. The best way for local authority to ensure that my right hon. Friend takes no interest in how much it spends on any one item is to ensure that the totality of its spending is not excessive and unreasonable.

Mr. Strang

A few years ago the external finance limit for the Scottish Transport Group was calculated in a manner that excluded any subsidy from a local authority. Will the Minister confirm that had it been a private bus service the Secretary of State would not have been in a position to intervene?

Mr. Rifkind

I am not sure about the hon. Gentleman's latter point. A private bus service does not have an external finance limit. We are dealing with public bodies that have external finance limits. No one can seriously question that the Scottish Transport Group must operate within its EFL.

I cannot comment on the question whether such a sum would not have been included within the EFL some years ago. However, the change in the system was made some time ago. I know that the hon. Gentleman acknowledges the fact that that change was made by the Labour Government. We are operating a system that was introduced by the Labour Government. On that basis, there is no way in which the Scottish Transport Group can absorb an increase in subsidy of £3 million, which is a considerable sum, when its EFL for the whole of Scotland is £17 million. In those circumstances we took a necessary decision.

On the general question of a transport subsidy, I repeat that if a local authority wishes to make that a priority for its expenditure and is able to do so within total expenditure that is not excessive and unreasonable, we shall not intervene by using the powers contained in the Bill. It will be free to make its judgment about priorities. That is a full response to the points that have been raised.

Amendment negatived.

Amendment made: No. 20, in page 7, line 16, after `other', insert 'financial, economic, demographic, geographical and like'.—[Mr. Rifkind.]

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