Encroachments on Local Government Autonomy

HC Deb 12 November 1981 vol 12 cc672-754 4.11 pm

Mr. Speaker

I have selected the amendment in the name of the Prime Minister. Before calling the right hon. Member for Manchester, Ardwick (Mr. Kaufman) to move the motion in the name of the Leader of the Opposition, I have a ruling to make on the scope of the debate.

As the House is aware, a Bill has been presented and set down for Second Reading which is not unconnected with the substance of the motion. I must therefore have regard to the rule of anticipation. The effect of that rule, as stated on page 371 of "Erskine May", is that a motion must not anticipate a matter already appointed for consideration by the House. It would accordingly be wrong, in my view, for any right hon. or hon. Member to attempt today to canvass in detail the provisions of the Local Government Finance Bill. There will be other opportunities to do that. There will be a Second Reading.

Subject to that restriction, a wide debate is possible on the terms of the motion arid the Government amendment that I have selected. As long as hon. Members do not try to deal clause by clause with the Bill, honour will be satisfied.

Mr. Reg Prentice (Daventry)

On a point of order, Mr. Speaker. I apologise for delaying matters, but I wish to have some clarification. If action is to be taken by the Government to restrain expenditure by local authorities—which is their intention, as expressed in the Bill—will it be in order to discuss whether that should take place by means of a referendum?

Mr. Speaker

That is covered by the terms of the motion. The motion and the amendment having been accepted as being in order. the right hon. Gentleman will find that it is covered. All that I am asking the House to do, for the sake of respectability, is not to deal with the clauses of the Bill. I am sure that the House will co-operate and work safely through the minefield.

Mr. Robin Maxwell-Hyslop (Tiverton)

I believe that no day has been appointed for a Second Reading of the Bill. It may be that the Bill will not come to Second Reading. Does the anticipation rule mean that we can never discuss in detail the matters in the Bill once it has had a First Reading, even though no day has been appointed for its Second Reading?

Mr. Speaker

The hon. Genteman always makes me anxious when he rises on a procedural point. I remind him that the Second Reading is down on the remaining orders for today, but it is very unlikely to take place today.

Mr. Kenneth Marks (Manchester, Gorton)

Before publishing the Bill the Government submitted a technical memorandum to local authorities giving the various options. Will reference to that technical memorandum be in order?

Mr. Speaker

As long as the hon. Gentleman does not hang his argument of any special clause in the bill, those who occupy the Chair will be tolerant.

Mr. Patrick Cormack (Staffordshire, South-West)

Will there be a Division on the substantive motion?

Mr. Speaker

If it is pressed and the House desires a Division—I should be surpised if it did—one will be called.

4.16 pm

Mr. Gerald Kaufman (Manchester, Ardwick)

I beg to move, That this House upholds the autonomy of local government and opposes any attempts to impair or undermine it such as were announced by the Secretary of State for the Environment in Torquay on 24th September, including transferring control over rate-making from town and county halls to Whitehall and imposing the device of the enforced referendum, which have been rejected by all local authority associations as totally unjustified, constitutionally unacceptable and technically unsound. The words with which the motion concludes are those that the Association of District Councils has used to comment on the proposals made by the Secretary of State for the Environment. The title of the debate, as printed on the Order Paper, is the verdict on those proposals by the Association of County Councils.

The proposals have aroused profound disquiet throughout Britain, yet the Government are in such haste to implement them that they have rushed out the Local Government Finance Bill within 46 hours of the opening of the parliamentary Session by Her Majesty. The Secretary of State's proposals are based on one false assumption and one undeniable fact. The Government have linked the false assumption to the undeniable fact and decided that the problem that they claim arises from the linkage can be solved only by the means that they propose.

The undeniable fact is that the rating system is profoundly unpopular. It is regarded as unfair, inaccurate and illogical, and ratepayers have come increasingly to dislike it. That should have caused the Government to go to the heart of the matter and deal with the system that spawns so many anomalies rather than deal with some of the anomalies while retaining the system undisturbed.

One of the alleged anomalies is a false assumption. It is the repeated implication that local authority expenditure is increasingly spiralling out of control. Ministers have pursued the false assumption and drawn from it the conclusion that the allegedly profligate expenditure by local authorities is responsible for the unpopularity of the rating system. Accordingly, they are trying to control the levying of rates in the hope that that will put a stop to the allegedly profligate expenditure. However, local authority expenditure is far from spiralling out of control. It has been falling for many years now. If the Government controlled their expenditure with the efficiency achieved by local authorities, they would have little difficulty in meeting their financial targets.

I do not claim that every local authority is a model of financial rectitude in every particular. All of us can point to examples of what we regard as wasteful or foolish local authority expenditure. However, those examples are excrescences within the overall expenditure, which is contained with remarkable effectiveness. The Secretary of State for the Environment concedes that point both explicitly, in statements that he has repeatedly made to the House, and implicitly, when he repeatedly insists that only a small number of authorities are disregarding his wishes.

The Secretary of State has a penchant for quoting the celebrated speech in which Anthony Crosland, as Secretary of State for the Environment, declared "The party is over". The right hon. Gentleman fails to point out that, far from making that statement in 1975—the occasion of an attack on local government expenditure—Tony Crosland used it to reaffirm his belief in the virtues of public expenditure and to point out that he was allowing for increased spending by local councils in the following two years. Yet each time that the Secretary of State repeats that quotation he tries to give the impression that, since 1975, there has been an orgy of sumptuary debauchery in our town halls and county halls.

In fact, since 1975–76 local authority expenditure has fallen in real terms by no less than 21 per cent. During that time Government expenditure has risen by 8 per cent. During the time that the Government have held office local authority expenditure has fallen in real terms by 10 per cent., while Government expenditure has risen by 7 per cent.—in part to finance unemployment, which, in part, has been caused by the fall in local government expenditure. Local authority expenditure has fallen from 28.2 to 24.7 per cent. of total public expenditure.

When those facts are drawn to the attention of the Secretary of State, he has his stock reply ready. He produced it to the House a fortnight ago during Question Time, when he drew attention to the disparity between capital and current expenditure. The implication of the comparison is that while capital expenditure—which is virtuous—is falling, current expenditure—which is vicious—is inexorably rising. That is simply not so. It is true that capital expenditure has fallen disastrously, but local authority current expenditure has fallen also. On one basis of calculation it has fallen by 6.9 per cent. since the Government took office. On another, it fell by 1.25 per cent. last year alone. That contrasts with an increase in the Government's current expenditure.

If local authority expenditure has been falling, why have rates been rising? I must make it clear immediately that, while rates have risen by 125 per cent. between 1974 and 1980, they have risen less than earnings, which rose by 163 per cent., and less than retail prices, which rose by 145 per cent. Even so, they have risen and have become increasingly unpopular. One reason is that the burden of rates is being cast increasingly on householders. That is not the impression that we gain from the regular and understandable complaints from business, commerce and industry about their rates burdens. However, the increasing impact on householders is vividly illustrated by statistics provided by the Secretary of State to the House only three weeks ago. They show that every year since 1975–76 householders have been paying an increasing share of the rate bill. They paid 38.6 per cent. in 1975–76, but by 1980–81 their share had risen to 43.5 per cent.

Industry, while justifiably concerned at its rate bill, paid only 0.7 per cent. of manufacturing costs in rates in 1978. Interest rates are a far greater proportion of its costs. Between 1978 and 1980 its interest payments rose by 94 per cent., compared with an increase of 48 per cent. in rates. It is the volume of the rates bill that troubles all who have to pay it—both householders and industry. One reason is the cost of interest rates to local authorities themselves. During the past two and a half years increased interest rates have added billions of pounds to the costs of local authorities. The latest round of interest rate increases earlier this year is estimated to have cost local councils no less than £700 million.

Local authorities have suffered another crippling financial loss—the withdrawal of Government grants and subsidies. That was made clear in a letter to the Secretary of State from the London Chamber of Commerce only this week, which referred to the loss of Rate Support Grant which London has suffered since the new system was introduced. In the current year this amounts to about £350 million—the equivalent of an 18p rate rather than the 5.6p rate which you predicted in February. It is that drain of funds from local councils that causes them to ask for more money from the ratepayers if they are to avoid cutting their services unacceptably.

Mr. Eldon Griffiths (Bury St. Edmunds)

I am listening to the statistics with interest. Whereas the aggregate figures that the right hon. Gentleman has rightly placed before the House may help his point, what is annoying ratepayers and local councils in many parts of the country is that about 200 councils have made substantial economies in their expenditure, only to see the whole amount—£189 million—wiped out by the additional spending of three large authorities, the GLC, the West Midlands and the Manchester area.

Mr. Kaufman

I intend to deal with that point later. If I do not do so, I hope that the hon. Gentleman will intervene again. I shall make a note of the figure that he mentioned, because it is important to my case.

This year the rate support grant in England has been cut by £1,060 million compared with last year. In addition, the housing subsidy has been cut by £738 million. That means that the Secretary of State has subtracted £1,800 from local authorities in reduced grant and subsidy in this financial year alone.

Let us consider the effect of that on Merseyside. The Secretary of State is now especially concerned with the part of the country that contains Merseyside. He told the Conservative Party conference last month about the needs of Merseyside. He even said that there might be a case for additional public expenditure in that area. Yet this year he is subtracting £33 million from Merseyside in reduced grants and subsidies. For the Merseyside district councils the loss is far greater, at no less than £102 million. If such a deprived area is to maintain essential services, it must obtain the money in some other way. The only way to do that is through the rates.

The problem of Merseyside is the problem of Strathclyde, Lothian, Greater Manchester, the West Midlands and many other parts of the country. That is why the rate burden inexorably increases while actual expenditure steadily declines. Yet the Government choose as their target not the cause but the effect. For the past two years there have been a series of measures to deal with what Ministers persistently choose to misdescribe as overspending.

First, in England there was the withholding of £200 million in rate support grant under the transitional provisions of the Local Government, Planning and Land Act 1980. Next came the discriminatory measures against eight local authorities in London, six of which have recently been successful in a court action against the Secretary of State. Throughout last summer there was the exercise in which the Secretary of State, without any parliamentary authority, instructed local authorities to cut their budgets by 5.6 per cent. below their expenditure for 1978–79. He threatened them with what he described as the hold-back of grant if they failed to comply. Right hon. and hon. Members on both sides of the House well know of the anger with which that hold-back operation was greeted by local authorities of every description, controlled by different parties. The councils were infuriated by the injustice of what the Secretary of State had asked them to do.

The chairman of Buckinghamshire county council, Mr. Roger Parker-Jervis, described the Secretary of State's demands as a grave problem. He said: We believe Mr. Heseltine's formula is unjust and falls particularly harshly upon Buckinghamshire … the only way of achieving economies of the scale now being demanded involves large scale redundancies which will leave children not properly taught in school, old people uncared for, fires unattended and increasing danger on our well worn roads. Buckinghamshire was not able to comply fully with the Secretary of State's demands. It is on his list of offenders as an 8.9 per cent. overspender.

In essence, the chairman of the county council, Mr. Bob Daniels, made similar complaints. He said: We have already cut to the bone. It is physically impossible for us to cut any more. We would have to close old people's homes all over the place and get rid of people all round. There would be a tremendous loss of jobs. It is just not on. Even though Essex finally made substantial cuts, it still ended up as a 3.9 per cent. overspender.

The Secretary of State for the Environment treated Suffolk in such a bad way that one of the local Members of Parliament said: We think Suffolk is very unfairly penalised by the particular method that is being adopted to cut public spending. I am going to say that, as far as Suffolk is concerned, what he proposes is unfair. That was said by the present Secretary of State for Northern Ireland. He still counts as someone who, on the whole, is in sympathy with the Government's policies. Suffolk has made cuts, but: still remains a 2.6 per cent. overspender. It was not only the injustice of the hold-back operation that upset the local authority, but the operation's lack of logic.

That was vividly illustrated at a meeting a few days ago of the South Northamptonshire district council which, like all the local authorities to which I have referred, is Conservative controlled. The chief finance officer, Mr. Harry Hanlon, said: Mr. Heseltine claims to penalise high spenders, but this council is the lowest spending authority in the country per head of population. South Northants, like the other district councils, made cuts, but, even so, it is on the Minister's list of transgressors as, a 3.9 per cent. overspender.

It is no wonder that Conservative Councillor Mr. Sid Wootton accused the Government of what he called "collective dictatorship". It is no wonder either that Conservative Councillor Kathleen Riggall summed up the situation in this way: I never thought I would be unhappy about a Conservative Government, but I think that the last two years have been pretty miserable as far as local councils are concerned. Hon. Members may recall that the hold-back operation was designed to cut local authority expenditure by £800 million and that the weapon deployed by the Secretary of State was a threatened extra reduction of £450 million in the rate support grant.

The hon. Member for Bury St. Edmunds (Mr. Griffiths) referred with admiration to the £189 million that had been saved. However, the Government had asked for £800 million to be saved throughout the range of local authorities. The fact that three local authorities counterbalanced the savings cannot hide the overall failure of councils to save more than one quarter of what the Secretary of State told them they had to save. The operation was an abject failure, and planned expenditure rose instead of falling. That did not apply only to the councils referred to by the hon. Member for Bury St. Edmunds.

Far from compensating for the alleged excessive expenditure by withholding even more grant, the Secretary of State finally cut the grants by far less than he had originally planned, by £311 million instead of £450 million. Targets which were one day imperative became disposable the next.

One reason for the failure of the expenditure provisions was the illogical absurdity of the system that the Secretary of State employed. So that hon. Members may follow his method with ease, I shall quote the relevant passage from his circular. It said: If a reduction in the amount of grant available for distribution is approved by Parliament, the national poundage schedule would need to be further adjusted so that the Grant Related Poundage for spending at a level equal to Grant Related Expenditure would be increased by 9.03p compared with what would be required simply to close-end grant entitlements in the way described above. I am sure that that has assisted hon. Members. The outcome for 30 authorities that took the opportunity not to cut expenditure but to increase it was that the Secretary of State penalised them by the novel punishment of increasing their grants. For the other 46 overspending authorities, the Secretary of State's definition was that he "solved the problem" by changing the definition and turning them into underspenders. The authorities were still overspending by his original criterion by an aggregate of £77 million, but he let them off scot-free. By then, the Secretary of State had completely lost track of what he was doing and where he was going, but he still went on doing it.

When the Hollywood film director Howard Hawks made the famous thriller "The Big Sleep", he found the script so confusing that he forgot the murder motive. To discover the motive he telephoned the script writer, Raymond Chandler, in New York and requested an explanation. Chandler responded by saying that he could not remember either.

The Secretary of State for the Environment is on record as, understandably, having written off the whole holdback episode as disastrous. Although he has forgotten his own motive, he still wants to secure a conviction. That is how his latest proposals have arisen. The Government remain convinced that local authority spending is too high and must be reduced. However, instead of trying to force councils to cut their expenditure, Ministers are seeking to control their rate-making powers. Ministers hope that if they continue to cut grants and subsidies and prevent councils from raising their rates to obtain the necessary compensating revenue, local authority expenditure will stop rising, even though it has not risen anyway.

The Government have chosen as their control method the grant-related expenditure assessment provided under the new block grant scheme. They are contravening assurances given when the grant-related expenditure assessments were introduced. The Government's grant-related expenditure programme, which was published in February, specifically stated: The assessments are not tailor-made to the circumstances of each authority. They do not set an expenditure target for authorities. More importantly, when earlier legislation was passing through the House, the Minister for Local Government and Environmental Services made the following categorical statement: Grant-related poundage and grant-related expenditure is in no sense a prescriptive definition by central Government of what the local authority should spend, but is the basis on which the grant will be distributed."—[Official Report, 8 July 1980; Vol. 988, c. 304.] Furthermore, the Conservative-controlled Association of District Councils, in a document entitled "Government Proposals for New Rating Procedures—a Threat to Local Democracy", stated that the grant-related expenditure assessments of block grants were intended merely to be the basis of a grant distribution. The document said: They are grossly unsuitable as individual targets because of the numerous and significant anomalies they contain. The change of criterion is particularly unfair on the local authorities which, during the hold-back operation, made successful efforts to budget within the volume target. Those authorities have suddenly been shocked to find that they are massively overspending on their grant-related expenditure assessment. An example of that is Tonbridge and Malling, which is part of the constituency that is represented by the Minister for Housing and Construction.

When the Secretary of State issued his first list of overspendings and underspendings in June, Tonbridge and Malling smugly discovered that it was a 1.7 per cent. underspender and subject to no penalties of any kind. Preening itself, it took the opportunity to increase its expenditure by £42,000. Under the Secretary of State's somewhat unusual system of penalties, that council found itself requited for its addition to its budget by an increase in rate support grant of £23,000. So far so good for Tonbridge and Malting. That council was still an underspender by 0.7 per cent.

Last month the Secretary of State for the Environment issued yet another of his unending lists of municipal sheep and goats. Tonbridge and Malling discovered that, under the criterion that would trigger off penalties under the Secretary of State's new proposals—although its budget had not been changed by a single penny—it suddenly became a 29.5 per cent. overspender.

That is not all. The Secretary of State is making new arrangements in his forthcoming rate support grant settlement to reduce grant-related expenditure assessments for district councils in line with the rent increases that he is demanding. This latest development is known as the E7 factor. The lower the grant-related expenditure assessment, the higher the local authority ascends into the penalty zone. The most recent calculation is that Tonbridge and Malling is likely to go 107 per cent. over the grant-related expenditure assessment. If the proposals are implemented, we may all have to take the train from Charing Cross to campaign in the referendum in defence of the Minister for Housing and Construction and against the Secretary of State for the Environment.

That is not an isolated instance. The Association of District Councils estimates that the rate arrangements will affect 242 out of 296 shire districts. Other forms of council will also be affected by these absurdities. A quirk of the grant-related expenditure components has an especially severe effect on new towns. Milton Keynes, which is a 1 per cent. underspender on the volume target criterion, is a cool 55.7 per cent. overspender on the GREA criterion. Peterborough will be a 49.2 per cent. overspender, Basildon will overspend by 41.1 per cent., Harlow by 94.8 per cent., Stevenage by 82.9 per cent., Welwyn and Hatfield by 82.1 per cent. and Crawley by 82.9 per cent., though several of these councils are underspenders on the volume target criterion.

The Government claim that in putting forward these proposals they have only a few profligate authorities in mind. I challenge the equity of that approach. It is unseemly and unfair for Ministers to conduct a vendetta against a handful of authorities with whose policies or political control they may disagree and whose alleged excess expenditure is only a fraction of 1 per cent. of the local authorities' total budget. It is even more unacceptable that to achieve this objective Ministers should employ measures that will reduce the traditional freedom and independence of every local authority.

That is not the way in which the Secretary of State seeks to present his proposals. Last Friday he held a press conference, at which he said: I want to emphasise that this legislation will apply to only a few high-spending authorities. That is untrue, and the Secretary of State knows that it is untrue. His proposals will give him power not only over a few high-spending authorities, but over every local authority. His proposals, as he has formulated them, remove the right of local authorities to make their own rates. They transform every local authority into a puppet. Whose puppets will they be?

During his press conference the right hon. Gentleman said that it was Parliament that would take over. He talks about rate levels prescribed by Parliament but that is not what the Bill sets out. It provides that limits on local authority rate-making shall be imposed not by Parliament but by a method specified by the Secretary of State. The only role for Parliament will be to say "Yes" or "No" at the end of a 90-minute debate.

The removal of the power of local authorities freely to make their own rates lies at the heart of the Opposition's resistance to the right hon. Gentleman's proposals. The Times summed up the position last week in a leading article, when it stated that the right hon. Gentleman may be constructing a dangerous hammer to crush some small nuts … It would be imprudent to introduce major constitutional changes in the balance between central and local power in pursuit of isolated deviants. To pick up what The Times described as a few high-spending authorities, Ministers must place shackles on every one of the 456 local authorities in England and Wales. They will be shackled whether they are overspenders or underspenders, whatever overspenders or underspenders may be.

The concept is cogently challenged in a memorandum on the Secretary of State's proposals which has been drawn up by the Royal borough of Kingston upon Thames., a Conservative-controlled authority, which is an under-spender on the right hon. Gentleman's volume criterion, but which will be an overspender on the criterion adopted in the new proposals. The Kingston authority said: The Royal Borough of Kingston upon Thames strongly oppose these proposals … the conflict between central and local government … is the real cause of the proposals … The reality is that the conflict is about power. It is a constitutional matter. It is understandable that central Government does not like having other authorities in the land over which it has Limited control, but if it tries to take control over these authorities it is threatening the basic 'checks and balances' in our unwritten constitution … Local government does not overspend in total. Individual authorities may do but (i) it is difficult to demonstrate what constitutes overspending and (ii) the whole point of local government is that there should be differences between authorities and that some should be high spenders and some should be low spenders. Beyond the obnoxious controls over rate-making lies the unacceptable device of the referendum. To many right hon. and hon. Members, whatever their views on local authority spending, it is the Secretary of State's decision to adopt the device of the enforced referendum that lies at the heart of their opposition to the Government's proposals. Others may ask "What is wrong with a referendum? After all, it will give the people the final say. Did not the Labour Government introduce the referendum system on the Common Market and on devolution? Did not the city of Coventry set its own referendum on this very issue of the rates"?

Whatever we may think of the principle of the enforced referendum, there is a great difference between that and the referendums that were called on the Common Market, devolution and Coventry rates. It is a difference that was pinpointed by the Prime Minister at Question Time today. When referendums took place on the Common Market, devolution and Coventry, Parliament and a local authority were asking of their own free will for the guidance of their electorates. As the Prime Minister said only an hour and a half ago, national referendums have hitherto been only advisory. The Secretary of State's proposals involve timing dictated by the Government, criteria fabricated by the Government and questions framed by the Government, which they will not ask Parliament to approve, although it was promised that they would. The right hon. Gentleman's answer is to insert a compulsory and binding referendum into the budget-making process of every local authority in the land. It is no wonder that all three of the local authority associations in England and Wales oppose the proposed legislation.

Mr. Harry Cowans (Newcastle upon Tyne, Central)

The picture is rather blacker than the one that my right hon. Friend is painting. Referendums will be enforced on local authorities and they will have to pay for them. The AMA estimates that £10 million will be spent by local authorities for no reason other than to please the Secretary of State.

Mr. Kaufman

My hon. Friend is right. The Government claim that they want to reduce expenditure, and the cost of the referendums requires some explanation from the right hon. Gentleman.

The Convention of Scottish Local Authorities opposed referendum legislation for Scotland and legislation that was expected to be outlined in the Queen's Speech. Last week the Secretary of State for Scotland announced that he had dropped his plans for referendum legislation. He has other methods that are objectionable enough in their way, and my right hon. Friend the Member for Glasgow, Craigton (Mr. Millan) will deal with them when he replies to the debate on behalf of the Opposition.

The Secretary of State for Scotland heeded the objections of the Convention of Scottish Local Authorities and dropped the referendum proposals. He explained his decision while referring to the convention. He said: They did not think that it was a good idea. They thought it was a very bad idea. If a compulsory referendum is a very bad idea for Scotland, it is a very bad idea for England and Wales.

If the Secretary of State for Scotland was responsive to the opposition of the Convention of Scottish Local Authorities, why do the Secretaries of State for the Environment and Wales spurn the views of the Association of Metropolitan Authorities, the Association of District Councils and the Association of County Councils? Does genuine consultation end at Berwick-upon-Tweed and the Solway Firth?

This enforced referendum would mark the end of representative and responsible democracy in our cities, towns and councils. Not just the few councils where the referendum will take place, but all the 456 councils living under the threat of the referendum will become puppets dangling from the strings of Whitehall.

Mr. Jim Craigen (Glasgow, Maryhill)

I hope that my right hon. Friend will not view the withdrawal of the referendum proposals in Scotland as a major concession on the part of the Scottish Secretary of State, because he will still retain the ultimate power over rate-fixing in Scotland. That is what matters.

Mr. Kaufman

I fully accept what my hon. Friend the Member for Glasgow, Maryhill (Mr. Craigen) says. I was trying to point out that, while the Secretary of State for Scotland and the Secretaries of State for Environment and Wales wish to take control over the activities of local authorities, it is the Secretaries of State for the Environment and Wales who have decided, despite the view of the Secretary of State for Scotland, to retain the uniquely objectionable method of the compulsory referendum.

The local authorities that are threatened with the referendum are placed in an intolerable position. The cancellation by the Secretary of State of the consultative council on the rate support grant, which was timed for 20 November, means that local authorities have to begin their budget-making procedures without knowing what grants they may expect from the Government. Accordingly, they cannot calculate how to evade the referendum, even if they wish to, because to do so they would need to know the GREA figure and the tolerance limit above it, and those are being withheld.

In any case, even when they find out what the GREA is to be, it does not mean that local authorities will necessarily be induced to cut their planned expenditure. Many of them may even increase it, because if the Secretary of State is to fix the penalty limit high enough to catch only the small number of councils that he claims are his target he may well induce local authorities to spend more than they originally intended, because they will know that they will not be penalised for doing so. The spending ceiling may come to be regarded as a norm, and the outcome of this whole feverish exercise could be higher rather than lower than total local authority expenditure.

In its memorandum, to which I referred earlier, the Royal borough of Kingston upon Thames, as a self-avowed Conservative-controlled authority, summed up the position in these words: Conservative Councillors cannot understand how the present proposals can be put forward by a Conservative Government. They conflict with the party's long-established belief in decentralisation. If this policy has now changed, then who changed it, what was the mandate to do so and why has the party not been told? The Secretary of State spoke very differently when, soon after taking office, he addressed the Joint Local Authority Association conference as follows: My philosophy towards local government is clear. It rests on a total commitment to give you the maximum possible freedom. The Prime Minister was even more forthright when she told councillors at the Conservative local government conference in 1978: Our aim will be to give you more responsibility for your own communities. It is time-wasting and pound-wasting for central government to spend so much time looking over your shoulders. No one claims that local government is perfect or that it does not make mistakes, or that from time to time it does not indulge in excesses. Mistakes and excesses are part of the price that we pay for democracy. Local democracy is very precious to this country. It is a bulwark against the tyranny of the Government. It permits innovation and experiment. It provides for the humanity of diversity rather than the deadening pall of uniformity. It creates opportunities for thousands of men and women, councillors and officers, to dedicate themselves to public service, and it makes our community richer for it.

Let there be no doubt that these proposals could be manipulated by a Labour Government. As Mr. Noel Hepworth, director of the Chartered Institute of Public Finance and Accountancy, said last week: The whole system of local government as we have known it will soon start to collapse; not necessarily next year, but soon. When the Conservatives lose power you will find the multipliers they have built in being fiddled in a completely different way by other hands. I take this opportunity to say, in words firm and clear enough to be quoted to my party as and when we become the Government of the country once again, that we do not want those powers, even though we could indeed make use of them. We find them odious and undemocratic. If they reach the statute book and we are in a position to do so, we shall repeal them. When, at Torquay in September, the Secretary of State quoted Tony Crosland's statement "The party is over", he introduced his own variation. He said that it was now closing time. If these proposals are permitted to become law, it will be closing time. It will be closing time for local democracy. We hope that this House will act, as it has the power to act, in defence of democracy. It is in that spirit that I commend the motion to the House.

5.6 pm

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

I beg to move, to leave out from "That" to the end of the Question, and to add instead thereof: this House calls upon Her Majesty's Government to continue its efforts to restrain the activities of overspending local authorities and to provide further protection for domestic, commercial and industrial ratepayers". The motion before the House seeks to oppose any attempts to impair or undermine the autonomy of local government. If the right hon. Member for Manchester, Ardwick (Mr. Kaufman) is serious in moving that motion, he is now seeking a fundamental rewrite of the relationship between local government and central Government.

Let me first put local government spending in context. In 1980–81, local government in Great Britain spent £24 billion. That is more than the Health Service and the Defence budgets combined. Nearly £9 billion of that was raised in rates. That is equal to just over one third of the total United Kingdom yield of income tax. About 2.8 million people are employed in local government. That is one tenth of the work force. Local government borrowed externally £2.3 billion. That is nearly one fifth of the public sector borrowing requirement. Local government accounts in total for about one quarter of public spending programmes.

The first question that we must ask ourselves is: does anyone seriously believe that central Government would have legislated to build up local government to its present level if the assumption was that local government would then be free, of its own momentum, to set public expenditure levels of its own choosing? Not a single member of the Labour Party who served as a Minister can believe it, for every one of them took part in the public expenditure reviews. What did they think they were doing? They were fighting as departmental Ministers for the precise totals of expenditure each autumn that local government would spend the following year. Indeed, having fought for the spending allocations, they then continued to control a large part of local government spending—its capital programmes—in suffocating detail.

Mr. David Ennals (Norwich, North)

rose—

Mr. Heseltine

I shall not give way.

Mr. Ennals

rose—

Mr. Deputy Speaker (Mr. Ernest Armstrong)

Order. The Secretary of State is obviously not giving way.

Mr. Heseltine

This is a very important debate. The right hon. Member for Manchester, Ardwick (Mr. Kaufman) was listened to virtually without interruption although he advanced his case at great length and in great detail. I must ask the House to understand that if I give way within a minute of rising to my feet, we shall never reach the important matters under discussion.

Mr. Ennals

rose—

Mr. Heseltine

I normally give way as much as any right hon. or hon. Member would wish me to. However, interventions add to the time during which a Minister speaks and deprive hon. Members of an opportunity to speak later. I must, at least, be allowed to set out the broad outline of my case.

If any hon. Member thinks that local authorities used to be free to spend their capital programmes, he should have joined me when I first took over the Department of the Environment, in 1979. No local authority could put a brick on the ground in a new housing programme without filling in eight forms and answering 80 questions to the absolute satisfaction of regional architects employed by the Department. The same attitude prevailed over current expenditure.

What did the right hon. Member for Stepney and Poplar (Mr. Shore) mean, in 1978, when he said: I am proposing a level of relevant expenditure of £14,109 million … It accords with the Government's expenditure plans … This is 1.6 per cent. above the level of expenditure which we have estimated authorities are undertaking in 1978–79"—[Official Report, 14 December 1978; Vol. 960, c. 1053.] What did the right hon. Gentleman mean in 1976 when he told local Government to make cuts of £100 million and then, without parliamentary authority, withheld grant to ensure that it did so? He asserted the right of the House and of the Government to lay down levels of public expenditure in the country. 'There is not the slightest doubt about what the right hon. Gentleman meant by those words. It was the Labour Government's way of setting out, with brutal clarity, the basic assumptions of local authority freedom. It was freedom within the rules and the House well understood that.

If the concept of local government freedom is considered, it is found to be extremely limited. Local authorities are established by Parliament and operate within the duties and powers conferred on them by Parliament. They are largely dependent on money that is provided or authorised by Parliament. Once they have been given those powers Parliament—usually through its Ministers—retains a right of appeal or scrutiny over their affairs. Therefore, there is discretion, but within the rules. Every Minister knows that a whole range of local government discretion is ultimately subject to rights of appeal or scrutiny by the spending Departments. The word "circular" is at the heart of the question of Government control.

In practice, the rules within which local government operates originate with Government. The corner-stone of those rules is that the Government have the right to establish the macro-economic pattern of local authority expenditure. When I took on this job, local government's proudest boast was that it stuck by those rules. One of the earliest consultative councils that I attended raised that fundamental issue. I asked local government how I could secure compliance with the Government's public expenditure target. The answer is indelibly printed on my memory. It came not from a member of the Conservative Party but from a member of the Labour Party. That answer was, "Trust us. You set the targets and we will abide by them. We always do." That is exactly what I proceeded to do. I have often said publicly that local government has a proud record—better than that of central Government—of keeping within overall public expenditure targets.

At the same time, I did something else. I asked local authorities to keep within the rules when, over a period, the direction of expenditure was downwards. That had never happened before in post-war Britain. I set them the realistic target of a 5.6 per cent. reduction in current spending over three years, or under 2 per cent. per annum. Any of my right hon. and hon. Friends who doubt that figure will bear in mind the pressure that has fallen on the private sector because we have been unable to secure reductions in public-sector consumption. The scale of that pressure can be measured in far higher figures than that of 5.6 per cent. over three years.

In its totality, local government has failed to keep within the rules. This year, I faced almost £1 billion of overspend in volume terms. I always said, long before I could prove it, that the targets that I had set were realistic and reasonable. Reductions in manpower have taken place at about half the rate at which the Civil Service has been run down and at about one quarter of the rate at which I have managed to reduce the size of my Department.

I no longer need to rely on my judgment that the targets are reasonable and attainable. Time has marched on and I can now point to the majority of local authorities that have proved that my targets were reasonable and attainable. Of course, the right hon. Member for Ardwick can give quotations from endless local government spokesmen about the difficulty of reaching the targets for their areas. There is no right hon. or hon. Member who does not have a catalogue of quotations from local authority leaders, arguing—as is argued every time that the Government make rate support grant decisions—that their cases are special cases. Ultimately, we must judge on the priorities and allocations that we can afford.

If one allows for the usual difference between outturn and budgeting, 235 authorities are budgeting to spend at the lower levels of target that I set. It is no good the right hon. Member for Ardwick selecting cases to show that such action might have been possible in Tory shires, or Tory shire districts. Those 235 authorities that have achieved or come close to achieving my target represent a widespread of local government and include authorities under the control of the Labour and Conservative Parties in virtually every circumstance. They include 47 per cent. of the metropolitan districts, 77 per cent. of the non-metropolitan districts, 31 per cent. of shire counties and 69 per cent. of London boroughs. That is the breakdown of the authorities that have proved that the Government's targets are attainable and realistic.

It serves no purpose to go on selectively quoting those who have not achieved the targets, or do not wish to try to achieve them, when it is provable beyond doubt that it is possible to do what the Government have asked. It was fascinating to listen to the right hon. Member for Ardwick when he described my block grant mechanisms and the hold-back requests as crass failures. Did he not tell the House halfway through his speech that local government consumption was 6 per cent. lower before I became responsible?

The right hon. Gentleman cannot have it both ways. Either block grant is driving down expenditure, or expenditure has not been driven down. Even better results have been achieved within the block grant mechanisms that I introduced in the area for which my right hon. Friend the Secretary of State for Wales is responsible. All that increases the agony of that £1 billion overspend, because it need not have happened. As has been proved by the authorities that achieved economies, the provision of services would have been adequate if there had been no overspend.

The right hon. Member for Ardwick always rests his case on the argument that local government has cut its expenditure, although he explained it further than usual today. As a bold assertion that is true. However, it is a misleading statement. Local government expenditure was 18 per cent. lower in 1980–81 than in 1974–75. I do not dispute the broad statement, but behind the crude figures lies the tragedy of Britain's economy. Almost all the cuts were cuts in capital, not cuts chosen by local government. They were not implemented by the deliberate decision of local government. They were cuts imposed by central Government on local government capital programmes.

It was under the last Labour Government that the devastation of capital programmes to keep up consumption programmes first got seriously under way. The Labour Party would not face the harsh, unpalatable truths. The country was living totally beyond its means, following the oil price changes of 1973. The Labour Party would not tell the councillors or the public sector union. It would not face its own prejudices with these unpalatable facts. As a result it paid the mounting staff bills by slaughtering the capital programmes.

We all remember the social contract and the wage explosions of 1974–75. More people were employed in the public sector. Inflationary wage settlements were distributed, and the private sector was expected and ultimately forced, to pay the bills.

Unemployment rose relentlessly under the last Labour Government. However, it did not rise in local government. Unemployment in the nation rose by 125 per cent. between 1974 and 1979 but the numbers of people employed in local government, far from reducing as a measure of the strain that the economy was going through, went to an all-time high. The figures are clear. For every £100 invested in capital schemes in 1974–75, only £40 was being spent by 1980–81. On the other hand, for every £100 of current spending in 1974–75, in real terms £106 was spent in 1980–81.

To keep up employment on direct manpower services in local government, we have not built the new houses, the new roads and the new schools. Year after year the Labour Government struck away remorselessly at those capital programmes. They made a judgment about the nation's priorities. They decided on high levels of consumption in the public sector and lowering levels of capital investment. That was the background that I inherited. There were record staff numbers and local government capital programmes were cut in half. That is a record of disaster. We must reverse it if there is to be any prospect of rebuilding the strength of the national economy.

I asked local government to help me to reverse the process. In total terms the response has been minimal. The majority of local authorities have tried but the minority have sucked up the economies that the majority made. The savings of 258 authorities have been wiped out by the overspending of just 50. About 80 per cent. is caused by only three authorities.

However, the right hon. Member for Ardwick claims that local government must be allowed to act without constraint. That is what the motion states.

Mr. Jack Straw (Blackburn)

Read the motion.

Mr. Heseltine

That is what the motion says. It says that there must be no attempt to introduce a control or check on local government. That is what the House is debating.

Mr. Straw

Read the motion.

Mr. Heseltine

The House will read the motion for itself.

Hon. Members

Read it.

Mr. Heseltine

The motion states: That this House upholds the autonomy of local government and opposes any attempts to impair or undermine it".

Hon. Members

Read the rest of it.

Mr. Heseltine

As an illustration of one possible attempt, the motion mentions my speech in Torbay. The motion says that there should be no attempt at all.

Several Hon. Members

rose—

Mr. Straw

Give way.

Mr. Heseltine

Right hon. and hon. Gentlemen can read the motion and understand what it means.

When in power, the Labour Government faced precisely the same need to take such difficult decisions. In Opposition, one can opt out of the lonely decisions, but £1,000 million of overspending cannot be ignored. This Government cannot turn their backs on that degree of overspending, certainly when we were elected to fight this very problem and when time and again in Opposition we attacked the disproportionate share of the burden of the recession being placed on the private sector compared with the public sector.

The right hon. Member for Ardwick quoted the local authority associations.

Mr. Ioan Evans (Aberdare)

On a point of order, Mr. Deputy Speaker. The Secretary of State has deliberately sought to mislead the House about the motion. He began to read the first part of the motion. Will he read on?

Mr. Deputy Speaker

That is not a point of order.

Mr. Heseltine

I have no complaint to make about the right hon. Member for Ardwick quoting the local authority associations. However, when I announced my proposals—I would say the same of any version of the proposals—I made it clear that only authorities spending substantially above their grants-related expenditure levels could be caught by what we have in mind. I made it clear that only a small minority of authorities would be affected. I repeat that to my right hon. and hon. Friends, because it was absolutely clear in the Government's approach that we recognised that the majority of local authorities were co-operating and seeking to secure our targets and that we were concerned only with the small minority of authorities which were not.

It is reasonable to quote the local authority associations but they represent only one voice to which the Government must listen. They are entitled to be heard, but is it seriously argued that central Government should listen only to their case? Is there no other audience to which we should give our attention? Should we not consider ratepayers, for example? Should we not listen to the industrialists who have to create the resources upon which the whole edifice depends? Should we not concern ourselves with the plight of those whose jobs are being destroyed under the weight of public sector charges such as rates?

Should we not think of those who do not get jobs because the interest rates are so high, because the Chancellor of the Exchequer must borrow too much to finance the consumption of the public sector? All those people are entitled to ask the Government to listen to their case and to decide where freedom ends and oppression begins.

The fact is that a £1 billion overspend is not the marginal excess of legitimate freedom. It is the extravagant consequence of political licence. It is too large, too persistent and too flagrant. I do not believe that, up to this point in my speech certainly, my right hon. and hon. Friends would advise me differently. The Government must take their challenge seriously. It is one thing to assert the problem as clearly as I hope I have. Even to secure assent to the definition of the problem is simple enough. However, it is another thing to secure agreement to the solution to the problem which is necessary.

I know of only three courses of action if we have rejected the option of abandoning the ratepayer to his fate, which is what the right hon. Member for Ardwick and his party believe that we should do. The first course is to reform the domestic rating system. [HON. MEMBERS: "Hear, hear."] I am delighted to know that the Labour Party has joined the cause of conversion to that point of view. It never did when in power.

The Government will publish shortly their Green Paper on the reform of the rating system and the alternatives. But however quickly we legislate, there will still be a gap. It is with that gap that the motion is concerned. The motion wishes to leave it open and the domestic and industrial ratepayer unprotected. That is a difficult view to accept. Something must be done and done quickly.

Therefore, there are only two directions in which to advance, either in the direction of Government intervention or in that of enhanced local accountability. The motion rejects all alternatives. It refers specifically to my speech at Torbay, but the wording of the motion rejects not only my proposals, hut any alternatives to my proposals, whether local or central. Therefore, in effect, the motion says "Do nothing; accept the £1 billion overspend with all the consequences for the ratepayers that that implies." I hope very much that the ratepayers will understand exactly where the Labour Party stands on that issue.

It would be unthinkable, having spent two and a half years wrestling with the dilemma, if I did not have my won views on the best way to proceed. Ideally, the traditional relationship of voluntary adherence to targets is the best way. I did not change that relationship—a minority of high-spending local authorities changed it.

If that is the ideal way, the alternatives become at best a second or third choice. On the one hand there are those alternatives that represent broadly a local solution. Local polls or local elections are a solution based on local mandate and protect the division of powers between Government and local authorities more clearly.

Another possibility is the centralised solution. Central targets and the setting of expenditure targets for high-spending authorities by Parliament are not without their constitutional critics, but they appear to offer some clarity, which has its attractiveness. Of course, we can debate those matters. I have thought hard about the alternatives and I will think longer about them. However, in the end we cannot escape the plight of the ratepayer and the £1 billion overspend.

Another possibility is to remove entirely the right of authorities to levy supplementary rates and to provide that excess expenditure above a ceiling should be financed by borrowing repayable at the beginning of the next financial year. All are possibilities that can be examined.

Whichever measure is approved by the House, it must be seen as an interim measure. After the Green Paper on alternatives to the domestic rating system has been published, I shall launch a process of consultations so that we can consider all strands of opinion. Therefore, I can assure the House that our present proposals relate only to the short term.

Mr. Douglas Hogg (Grantham)

If the measure that we will be asked to consider is essentially interim, will my right hon. Friend consider the possibility of that Bill providing in its terms that powers provided under it will expire in, for example, three years?

Mr. Heseltine

If that is seen as a way of reinforcing the statement that I make and in which I totally believe, it would be a sensible amendment to consider.

Mr. Cormack

Are we also to understand from what my right hon. Friend said a moment ago that he is prepared to reconsider totally the question of local referendums?

Mr. Heseltine

I know how my hon. Friend feels on that matter. [HON. MEMBERS: "So do we."] We were having an internal discussion. I was saying to my hon. Friend that I would deal with his question later on.

As I have made clear, those measures are to be seen in a short term context. I am grateful to my hon. Friend the Member for Grantham (Mr. Hogg) for his helpful question. Everyone understands that the issues that we should discuss today are profound. They touch on the relationship of Government to local authorities, on the management of the economy and the accountability of elected bodies.

However, I cannot accept the view of the right hon. Member for Ardwick that we should treat local government autonomy as if it were in some way sacrosanct. That is not what he believes. A few weeks ago during the conference at which I spoke, the right hon. Gentleman made his views clear. He said: I do not deny the right of Government to impose specific duties for which it has an electoral mandate. We may require local government to perform certain specific duties. At the same conference the right hon. Gentleman also said: I believe a parliamentary mandate overrides local government. Parliament is paramount and the will of Parliament must prevail. In June the right hon. Gentleman said: Governments are elected to govern, not to subordinate their views to independent inquiries. If a Government wants to carry something out it should rely on its own judgment. Those words are a long way from the right hon. Gentleman's argument when he was trying to imply that, somehow or other, central Government should share the management of the national economy with local authorities. That is not a credible view.

We must reach decisions, whereas the right hon. Gentleman has only to draft motions. There is no easy course for this party. We have a difficult choice to make. However, the fact that it is difficult does not make the need for it less urgent.

That leads me to the point made by my hon. Friend the Member for Staffordshire, South-West (Mr. Cormack). What courses are open to the Government? As I have said, there are local options or further central controls. First is the route of enhanced local accountability before higher expenditure can take place. That can be achieved by special elections of the whole council and by building on the existing local government legislation that permits the holding of—I believe—mandatory polls on single issues of local significance.

In the circumstances of an election or a poll, it is possible to make the domestic ratepayer and the local electorate more conscious of the impact of high levels of spending by lessening the share of the rate burden borne by the non-domestic ratepayer. That offers a degree of protection to the industrial and commercial ratepayer in those areas of high expenditure.

Painful as it would be, such an approach has the merit of asking the electorate for its views specifically on spending levels and, hence, on the level of rates. The alternative approach is no less painful—increased control from the centre. We could propose that authorities that wish to set rates in excess of limits prescribed by Parliament should be required to seek Parliament's approval for the levying of such supplementary rates as they require. That would entail more central Government involvement in the affairs of individual authorities.

Let me say something to my right hon. and hon. Friends. I fully understand the anxiety about the choice that I put forward at Torbay—that we should enhance the concept of the local poll as a method to secure our objectives. In choosing the route of enhanced local acceptibility by the use of local polls, the Government in no way believed that it was any easy choice. We realised that it would be controversial, and justifiable only against the background of the scale of overspending and the gap that is bound to exist between now and our longer-term reforms.

Colleagues want a range of other methods explored. There can be no possible objection to that, and of course I will do so, but I ask them to vote against the motion because it objects to the exploration of any alternatives. The very debate that it would prevent would help to explore the difficulties of controlling local government expenditure.

Mr. Terence Higgins (Worthing)

Is my right hon. Friend prepared to consider dropping his proposal for a referendum before the thing goes ahead? [HON. MEMBERS: "No."]

Mr. Heseltine

I am trying to understand as best I can my right hon. Friend's views, and I have had every opportunity to do so. I am trying to make it clear that if there are better alternative ways to deal with the problem there is no timing objection to the point at which those better ways could be adopted. That is intended to be as helpful an answer as I can give to my right hon. Friend against the objectives that we seek.

My purpose this afternoon is not to argue the merits one way or another of a given solution. I have an open mind about the method.

Mr. David Crouch (Canterbury)

I am grateful to my right hon. Friend for saying that he has an open mind. He talks of giving a degree of protection to the ratepayers who are asked to pay so much more for the unjustified increased expenditure. Will he give a degree of protection to hon. Members who are anxious to protect democracy itself?

Mr. Heseltine

My right hon. and hon. Friends will need no encouragement from my hon. Friend in the protection of democracy. However, we may feel that democracy as we know it depends on the sovereignty of Parliament and its duty to protect any one group in society against another that seeks to overburden it. Therefore, I believe that the proposal is fully compatible with the high ideals that I and my hon. Friend wish to support.

I wish to ensure that, if there is a better solution to the problem that we face, we seek it with urgency. The longer that it takes to find an alternative, the greater the risk that we shall not be able to introduce it in time to offer hope to local ratepayers in the next rate fixing round. In pursuit of our objectives it is necessary to seek methods that distinguish between low and high spending authorities.

With those general principles, it is important to stick by the Government's public expenditure programmes and to give genuine protection by whatever method we find in our consultation. I ask the House to reject the motion, which would prevent us doing any of those things.

5.46 pm

Mr. Jack Ashley (Stoke-on-Trent, South)

The most important moment in the debate was about three minutes ago when the right hon. Member for Worthing (Mr. Higgins) asked a direct question. The Secretary of State's answer was clear. He was asked whether he would drop the referendum, and he refused to say that he would. That message should be brought home to the House, especially to hon. Members on the Government Benches. The essence of the debate is whether the Government intend to pursue the referendum, and it is on that issue that the Secretary of State's speech will be judged.

Mr. W. R. Rees-Davies (Thanet, West)

The right hon. Gentleman heard the Secretary of State say that he is prepared to consider any options that the House would like considered. He did not mention the Scottish option—that, in the event of expenditure being far above the prescribed limits, the House may intervene to ensure that the authority does not get its grant. There are other similar ideas. All of these—

Mr. Speaker

Order. It is a long interruption. Many hon. Members wish to speak.

Mr. Ashley

The hon. and learned Gentleman's speech was better than that of the Secretary of State. He is trying to get his right hon. Friend off the hook by suggesting that he has an open mind. The hon. Member for Canterbury (Mr. Crouch) has already tried that stunt. However, the Secretary of State's answer shows that he does not have an open mind. He is not prepared to reconsider the referendum issue. Conservative Members must vote in the clear knowledge that it is going ahead.

The Secretary of State evaded and avoided the question of Scotland. He did not refer to it. My right hon. Friend the Member for Manchester, Ardwick (Mr. Kaufman) invited the right hon. Gentleman to discuss Scotland. My right hon. Friend asked: as the referendum has been dropped in Scotland, why not drop it here? The Minister's evasion clearly shows the weakness of his ground. I do not believe that the hon. and learned Member for Thanet, West (Mr. Rees-Davies) will get much further with that point.

A futher factor to be borne in mind, especially by Conservative Members, is that, in response to all the arguments, the Secretary of State time and again brought out the old fashioned answer, TINA—there is no alternative. The right hon. Gentleman brought forward various alternatives for the consideration of the House, but the only real proposition that he offers is the referendum. I do not believe that his argument is valid. Indeed, he said that the freedom of local authorities is extremely limited, and then insisted on putting forward proposals which would limit that freedom even further.

In dealing with the priorities of local government, the Secretary of State took no account of the points made by my right hon. Friend the Member for Ardwick about the closing down of old people's homes and the effect of the cuts on local authorities. There can be endless disputes about the finer points of constitutional changes, but it is beyond dispute that the Government's proposals fundamentally alter the balance of power between central and local government. That is the key issue for the House today. The question of constitutional change is less important.

The Secretary of State's proposals will turn councillors into robots and town halls into local museums. They will replace local choice by central dictatorship. I hope that Conservative Members, who are proud of their councillors, will remember that. The proposals will lake the "local" out of local authorities. It will no longer be local government. The proposals will give mandarin power to the hopeful mandarins of Whitehall. They will also provide the Secretary of State with the type of supervisory powers for which all aspiring dictators long.

When my right hon. Friend the Member for Ardwick referred to Hollywood, I thought that he was about to make a joke about the jocular nickname "Tarzan", which friends of the Secretary of State used at the Conservative Party conference. I suspect that the Secretary of State was given that friendly nickname more because of his hairstyle than of his lifestyle. But in these matters he might more aptly be described as King Kong, because he is barging through and destroying the carefully built up structure of local government. The Secretary of State should see the film. He will then appreciate that the lovable monster fell from a great height. Perhaps he had better be safe than sorry. Sooner or later, the right hon. Gentleman must recognise the basic values of local government.

Many hon. Members on both sides of the House who have served as councillors know of the close interaction between local government and the locally governed. It is as close to pure accountability as it is possible to get. Neighbours come knocking on the door if they are dissatisfied, and no idle councillor can enjoy a pint in peace if people in his ward want action. The telephone becomes less a method of communication, more an instrument of pressure. Councillors must act or quit. There is no half-way house. Local people do not have to table parliamentary questions to get answers or early-day motions or to express their views. They say what they think and councillors are directly responsible to them. It is that earthy, priceless, democratic heritage that the Secretary of State is discarding in pursuit of the discredited monetarist doctrine.

Any discussions of democracy, local or national, must take as its touchstone the need to persuade. That is the essence of democracy. But that is not so with the Government. They are prepared to dictate where they disagree. They are gaining for themselves the power to overrule, but losing the capacity to win support.

Last week I attended a meeting called by Staffordshire county council to discuss the Government's proposals. The meeting was attended by Conservative and Labour councillors and by city and county officials who had studied every paragraph, every sentence and every nuance of the Secretary of State's proposals—from the Torquay speech to the technical memorandum—including all the speeches made by the Secretary of State and other Ministers.

It was the unanimous view of that meeting that the proposals should be rejected. In all my 15 years in Parliament I have never known Conservative and Labour councillors on Staffordshire county council to be united on any issue. The Secretary of State should beware, because the alliance of councillors in that local authority may well be repeated in Parliament. If it is, he has no chance of getting his proposals through. The Conservative councillors at that meeting spoke with as much vehemence, conviction and determination as any Labour Member of Parliament will speak today. The warning signals are out for the Secretary of State, and he should beware.

The dilemma facing Staffordshire county council, of which the Conservatives were as aware as the Socialists, is that it must now decide whether to make further reductions in expenditure on all services other than education, or to incur the Secretary of State's vicious penalty. The extent of the dilemma may be judged by the fact that some services in the county are already below the average. The poor will therefore be made poorer. That is the classical hallmark of Conservative philosophy. Conservative Members may shake their heads, but Staffordshire councillors are not prepared to wear these proposals. When they return to their constituencies, Conservative Members will find the opposition there as powerful and implacable as any that they have ever encountered.

The Secretary of State should recognise the resentment among his own supporters. If he did, he would think again. It is one thing to stab one's opponents in the chest. It is quite another to stab one's supporters in the chest as well, and he would be well advised not to do so. It makes a change from stabbing people in the back, of course, which is commonplace in politics, but the Secretary of State will make no friends if he acts in this manner.

The Secretary of State's erstwhile supporters will object strongly to his attack on local freedom. The question for Conservative Members who reject these proposals is whether they are prepared to act tonight in accordance with their convictions. Without naming names, I see that some Conservative Members agree. This should be noted by the Secretary of State. It means that tonight there will be votes against the right hon. Gentleman, although I do not know how many. I hope, however, that those Conservative Members will vote with the same conviction as they speak. Otherwise, we shall assume that their sound and fury signify nothing.

The Secretary of State's attack on local government is a serious error of political judgment. He stands condemned by his opponents and abandoned by some of his friends. He can neither expect nor deserve support for such a blunderbuss technique. Instead of decreasing the powers of local authorities, the Secretary of State should be increasing them. Instead of crushing local initiative, he should be nourishing it. Instead of hitting councillors, he should be helping them.

The relationship between central and local government as always complex and difficult. It is a relationship that requires tact, skill and patience. The Mace-swinging approach is damaging to that relationship and also to the Minister who adopts it. The Secretary of State has a choice. He can keep charging forward, trampling on his enemies, his allies and local democracy. If so, he will come to regret the wreckage. Alternatively, he can do what any good Minister ought to do—respond to the House of Commons, listen to county and city councillors and strengthen the fabric of local democracy.

6.2 pm

Sir Derek Walker-Smith (Hertfordshire, East)

I count it a privilege as well as a pleasure to be called to follow the felicitously-expressed speech of the right hon. Member for Stoke-on-Trent, South (Mr. Ashley), who rightly commands such great and universal respect in this House. He has addressed himself, as will other hon. Members, to the important matters with which we are concerned—local government, finance and rating. They are important but, alas, not easy matters. I recall an observation made in my early days in the House by D. N. Pritt, one of the most eminent lawyers to sit in the House, although his political acumen did not perhaps match his forensic skill because he sat with the Labour Party. D. N. Pritt said: Anybody is very lucky if he is ever right about anything on the Rent Acts. Following what is now a long and close experience of rating both in my professional and parliamentary capacity, I would apply the same dictum to that matter. Unlike the right hon. Member for Stoke-on-Trent, South, I have never had the advantage of serving as a member of a local authority. This point was taken in my first general election. I was asked "Will you not be at a considerable disadvantage, Mr. Walker-Smith, in not having been a member of a local authority?" "No, sir," I replied. "In my professional capacity, local authorities pay me for my advice, but I am proposing that here you should get it for nothing, and thereby be much luckier."

I am glad to say that through the years, in a professional capacity, local authorities have continued to seek my advice, and on a very ecumenical basis. By no means all are of my political persuasion. This enables me, I hope, to take a suitably broad, objective, dispassionate and ecumenical view of these subjects.

The terms of the motion refer to local government autonomy, the referendum and rate-making. All are matters that require close and careful analysis. They are not to be disposed of by cloudy generalisations or by pejorative epithets. The right hon. Member for Manchester, Ardwick (Mr. Kaufman), who led for the Opposition and who speaks as engagingly as he writes, referred to the traditional freedom and independence of local government—clearly a very considerable oversimplification of a very complex relationship. The relations of local government and central Government in this country are the products of long development. In the British tradition, this has been an ad hoc development, resulting not in a fixed pattern but in a pattern fluid and flexible and capable of adaptation to changing needs and circumstances. That is, indeed, the hallmark of our British constitutional practice.

We have no written constitution in which we can look up the easy answers. We have only Dicey's twin pillars of the constitution to guide us, the sovereignty of Parliament and the rule of law. That principle negates the possibility of fixed positions in our constitutional arrangements or in our institutional relationships. We have to seek them from the lessons of history and from the application of principle. As usual, we do not seek in vain. We find, it is true, not a fixed pattern unalterable as the law of Medes and Persians, but a key to the principles that should guide us.

Modern local government is in essence the creature of statute. I may be told that it has ancient and honourable origins going back as far as Saxon times. That is true. By the nineteenth century it was necessary to give a statutory framework because of changing circumstances. The nineteenth century trend to central supervision derived not from a desire to dictate or dominate from the centre. It derived from the requirements of the situation. It went hand in hand with improved local procedures, in particular the local boards of health set up under the Public Health Acts of those days. It was the Local Government Act 1929 that really set the pattern by combining a transfer of responsibilities to county councils and boroughs with a system of general Exchequer contribution that is now called the rate support grant.

I suggest, in the light of that history and development, two interrelated principles. The first is maximum practical autonomy in local affairs for locally elected authorities. The second is recognition that, where local spending is in part financed by central grant, autonomy in the nature of things cannot be unlimited. One cannot avoid in local government any more than in any aspect of human affairs the application of the universal and inescapable principle that he who pays part of the piper is entitled to have some say in the tune.

We know what a substantial payment that is. We have been reminded by my right hon. Friend the Secretary of State in his excellent speech that it amounts to about a quarter of all public expenditure—about £20,000 million. This is more than defence and health put together. Of this enormous expenditure, about 60 per cent. is met by the rate support and other grants and only a minority by rates.

With such figures, it is fanciful to talk of local autonomy in the abstract, as if it could or should be untrammelled in its exercise. The exercise of power cannot be divorced from the means whereby alone that power can be exercised or from the source which provides that means. The principle is not one of local autonomy as a generalised principle unrelated to reality or circumstance. It is a quest for as much local autonomy as the logistical limitations allow.

The question for the House, therefore, is, how far are the measures and proposals of Ministers achieving this desired result? The answer to that must be sought in two parts—first, in the progress towards this desirable end achieved up to and including the 1980 Act and, secondly, in the prospects thereafter. On the first part, I say with confidence that the Government measures, including the 1980 Act, have made a substantial contribution to the desired result. I refer, of course, to the recasting of the rate support grant, the introduction of the new block grant, GREAs, the tapering mechanism, threshold, and so on.

Government thinking and approach was admirably summarised not, I hasten to say, by way of commendation, but as an explanation, by that eminent jurist Lord Justice Ackner in the Camden case. He said: The present Government regarded a grant distribution system with these features"— the old features— as intrinsically inequitable and in particular as incompatible with its commitment to achieving substantial and sustained reductions in public expenditure. Whilst the rate support grant mechanism enabled central Government to influence total local expenditure, it only did so in a non-selective, across the board way. Therefore, shortly after taking office in 1979 it began to consider changes in order to remove what it regarded as an incentive to spending, and instead sought to provide authorities with an incentive for economy. I identify three basic questions for the consideration and judgment of the House. First, on the prospects hereafter, is it either necessary, or is it premature, to essay a further step so soon after the passage of the 1980 Act and before assessing its impact. Secondly, without pronouncing on the ipsissima verba of the Bill, which would be out of order, do the proposals that have been outlined appear ex facie to accord with the basic constitutional principles as I have sought to adumbrate them to the House? Thirdly, has full consideration been given to the effect of these proposals on the possibility of a more radical and comprehensive attempt to improve our existing method of local government finance?

On the first question, whether it is premature to try a further step, that is a matter of judgment. Perhaps my right hon. Friend, who is a veritable Rupert of debate, may think that he should go forward with a proper and characteristic panache, regardless of the cautionary approach of the gentlemen of the long robe. I leave that question to the verdict of time, not least because it is closely involved with the third and basically most important question.

The second question is that of the referendum. Here again, we have to consider the position in the general context of our constitutional procedure. Again, generalisations and pejorative epithets are of no help. It is nonsense to call referendums per se undemocratic. A referendum is, in essence, a direct consultation of the electorate on a specific issue—hardly, in the ordinary use of language, an undemocratic procedure. It has its origins in the constitution of sixteenth century Switzerland—hardly an undemocratic country. It has an acknowledged place in the practice of the United States and many other great democratic nations. Indeed, much of the case law on referendums is in the United States, including the classic definition in the case of Beall v. The State: The reservation by the people of the State of the right to have submitted for their approval or rejection any law passed by the law making authority. The question must then arise "If it is good for these great democratic nations, why should it not be good for us?" There are, of course, basis differences. These are federal States with written constitutions, and we are a unitary State without one. Nevertheless, we can distil some philosophy on the use of referendums from British history and practice. It was advocated originally by the Council of the Army in its submissions to Cromwell—hardly an encouraging precedent. It was eliminated for a long time from British thinking by Burke's classic letter to the electors of Bristol in 1774—konwn by heart by every hon. Member, I would hope.

The concept of referendums was unsuccessfully revived in proposals of the Conservative Party in 1910, and practical expression has been given to it in special cases, such as Northern Ireland, Gibraltar and—I list these in no order of importance—drinking in Wales. Those are specialised precedents, to which must be added the special case of the 1975 referendum, referred to by the right hon. Member for Ardwick.

The history of that exercise hardly adds to the weight or respectability of the precedents for referendums. I take my description from the authoritative text of Professor Irving, writing in the European Law Review. He said: The referendum of June 1975 was essentially a political rather than a constitutional device: Harold Wilson's Labour Government decided to hold a referendum on continued British membership of the EEC not because it believed in the intrinsic constitutional or democratic merits of referenda as such, but because it could see no other way to heal the deep-seated divisions within the Labour movement. Indeed, on the eve of the 1970 General Election Mr. Wilson had stated that he was opposed to holding a referendum on British membership of the EEC: 'I think' he said on BBC Television 'that it is Parliament which should take the decision with a sense of full responsibility with a sense that reflects national views and national interests. Perhaps the right hon. Member for Ardwick wrote that speech for the right hon. Member for Huyton (Sir H. Wilson).

Professor Irving continued: Questioned further on the possibility that he might change his mind if opinion polls indicated that the electorate was turning against EEC membership, Mr. Wilson replied: 'I am not going to trim to win votes on a question like that … I shall not change my attitude on that'. Almost exactly two years later, in April 1972 to be precise, Mr. Wilson, as Leader of the Opposition, did change his mind. Again, the right hon. Member for Huyton probably had the advice of the right hon. Member for Ardwick, whose thinking was close to his.

It would not be fair, however, to leave the issue of the constitutional propriety of the referendum in this country without a brief reference to our two great constitutional pundits, Dicey and Sir William Anson. Dicey recorded the view in the Spectator of 1894 that in a country such as ours, with no written constitution, the referendum should be introduced as a constitutional long-stop to prevent party leaders and Whips from abusing their power. Perish the ignoble thought!

Anson recorded the view in The Times of 1910 that a referendum would afford some security against violent and sudden change and would correct some of the evils of the party system. Clearly, therefore, the concept of the referendum in appropriate cases can find powerful support from this country as well as overseas. But, apart from special cases not here in point, the circumstances in which its use may be appropriate—this is the heart of the matter—are those where issues of great constitutional importance arise, and which are susceptible of clear and direct questions and answers. On the face of it, the use of referendums on supplementary rates in individual areas does not come within that category. I leave the point by saying that the burden of proof must rest on my right hon. Friend the Secretary of State.

The final question concerns the long-term effects on a more radical review, revision and reform of our rating and local government finance procedures. I find it difficult to exclude the possibility that the proposals may at least defer the consideration in depth of a radical reform of our present system.

There is nothing sacrosanct about our rating procedures, any more than there is about our local government arrangements. They have a long history and a study of it shows how much the procedures have changed over the years and how different the present financing and use of rate-borne expenditure is compared with its origins in 1601 when it was directed mainly to what we now call social services, which are administered by the Government.

It follows that there is no prescriptive right for the present rating system to persist in perpetuity. Still less should it be exempt from close and careful scrutiny with a view to change and improvement. It is with that great question that Ministers should primarily be concerning themselves.

The Government should seek a solution that conforms to four criteria—it should be related to ability to pay, there should be benefit from the expenditure to which the tax is related, reasonable parity of treatment between taxpayers and compliance with the basic constitutional principle of no taxation without representation.

Those criteria have only to be posed in the context of our rating system to raise grave doubts about its compliance with them. Industrial hereditaments are a classic example of the breach of the constitutional principle of no taxation without representation, because they pay 100 per cent. rates and receive little benefit and have no representation.

There are plenty of alternatives to canvass, set out and analysed in detail in the report of my distinguished friend Sir Frank Layfield. That is a matter for the future and, I hope, for the early future. This is not the time to specify a choice between alternatives, but it is a time to say to the Government that the case for an urgent examination is clear and the time to start is now. It should have precedence over short-term measures so that we can reach the right result.

We have to avoid the classic false syllogism "Something must be done; this is something; let's do it"; but it is true that something must be done. With that priority task in mind, the Government should approach the secondary task of their current proposals in a receptive and flexible mood. My right hon. Friend showed such an attitude in his speech and the Government should see the contents of the proposed Bill as a pacemaker for the larger and more important, vital and enduring task of the basic reform of our rating and local government systems.

Several Hon. Members

rose—

Mr. Speaker

Order. I appeal to hon. Members to help each other. Many hon. Members wish to take part in the debate and we have reached 6.23 pm before I have been able to call anyone who is not a Privy Councillor. I appeal to the House for short speeches.

6.23 pm

Mr. Stephen Ross (Isle of Wight)

Perhaps I should start by declaring an interest as the leader of a county council—the only Liberal-controlled county council in the country.

I enjoyed the speech by the right hon. and learned Member for Hertfordshire, East (Sir D. Walker-Smith), which will undoubtedly be picked up by every local authority association. It seems hard that the right hon. and learned Gentleman cannot charge a suitable fee for his advice, but perhaps I can make it up to him some day. We shall be pleased to retain his services for the Isle of Wight county council any day.

I support the motion and call on the Government to think again about their actions and legislative proposals. There is still time to withdraw the Bill. I should hold the Secretary of State in considerable respect if he had the courage to do that. He has embarked on a collision course at a time when local authorities and the Government should be working together for the good of our country.

Moreover, the further move to more centralised control will have exactly the opposite effect to what I believe is the Government's avowed policy which I support—namely, to encourage our citizens to do more for themselves. Surely the more that decisions can be taken at the point of implementation, the better it will be for the encouragement of enterprise and initiative. I have no doubt that the more that we can devolve decision-making to the regions and the boroughs the better it will be, and that the sooner we start on the process the more chance we shall have of a genuine economic revival.

It is interesting that the AMA poll reported in the Financial Times yesterday seems to confirm that a majority of people support local spending decisions being taken at local level. The Government may be persuaded that their actions will protect industrial and commercial ratepayers from facing unreasonable demands from rating authorities—and I accept that those ratepayers are worried about that prospect—but those very industrialists and small business men are now pleading for help from local authorities—and justifiably so.

Yesterday, I received a letter from the proprietor of a small boatyard in my constituency. He said: We had hoped that it would never be necessary for us to write a letter of this nature, but we are now clutching at straws in an attempt to save our Company from the impending danger of closing down. A year ago we had 35 employees, now we have only 12, and in spite of our efforts to keep these men occupied we feel we are fighting a losing battle … Sir, we are not looking for a hand-out, but the future of our remaining loyal and hard working craftsmen, who genuinely want to earn an honest day's pay, is in serious jeopardy. My heart bleeds for that firm. I am sure that many hon. Members have received similar letters. My fellow councillors on the island would dearly like to help that company, and we would do so, even if only in the limited ways open to us. A growing number of businesses are in a similar position and are looking to us for help.

In the House last night I met a business man who is hoping to manufacture in my constituency. We have nothing to offer him. We have to compete with urban development corporations, enterprise zones, assisted areas, the Welsh Development Agency, the Highlands and Islands Development Board and others. In addition, there is the cost of getting across to the island by ferry.

Business men ask us "What can you offer us? What goodies are there?" We have to say that we can offer virtually nothing. We might be able to give them a little rate relief or help to bring equipment over from the mainland, but no more than that.

The county council would love to establish its own development fund. The Department of the Environment supported the establishment of our enterprise agency, largely funded by private firms, but we want to go further, because we feel that we must.

Recently, representatives of local builders and construction companies visited me, desperately seeking work and hoping that the county council would be able to provide some capital construction projects so that they would not have to lay off a substantial number of workers. Unfortunately, there is nothing much that we can do about that due to Government restrictions.

I believe that, if asked to contribute through the rates to specific unemployment reliefs, most ratepayers would willingly do so. But I make a plea to the Government: do not hem us in with unnecessary referendums and the like. Local authorities want more freedom to do what we know needs to be done at local level and to help the wealth creators.

The vast majority of us in local authorities will not abuse our position. Unfortunately, it appears that the Secretary of State does not trust us. He said that this afternoon. Yet everyone is agreed that the record of local government over the years has been excellent—far better than that of its masters.

There is no doubt that there are savings to be made. I am sure that the Minister will not be surprised to hear from me that such savings lie in some future reform of the whole structure of local government. Do we need the GLC—or the metropolitan counties, for that matter? If we have not the stomach to face such major upheavals—and I realise that we probably have not—why not at least let those authorities that want to merge or improve their structures put their case—backed in this case, if necessary, by referendum—to the Secretary of State? I am willing to go before my electorate on the proposition that we have one all-purpose authority for the Isle of Wight, because I know that the support will be overwhelming, so let us get on with it now.

I believe that other parts of the country would wish to do likewise. Although I do not like to speak in the absence of the hon. Member for Hereford (Mr. Shepherd), I think that Hereford would love to have its own authority back. It would do a rather better job than it is at present by being merged into an authority called Hereford and Worcester. [Interruption.] I gather that there are similar feelings in East Anglia.

If we can make changes in the Health Service, why not in local government? The Government should concentrate on that issue rather than fix impossible targets, such as: 5.6 per cent. below the 1978–79 budget. It was obvious that authorities would not be able to make huge cuts of that sort. In Essex the necessary cuts amounted to about £24 million.

In some counties the calling in of outside consultants worked quite well because they were able to convince the Secretary of State that cuts of such substantial sums were impossible if mandatory services were to be maintained. In the Isle of Wight the switch to the GREAs in September got us off the hook, and thank goodness for that. It may have upset Tonbridge and Malling, but we were grateful, because, without that action, we would have had to go for a supplementary rate. There was no other way in which we could have carried on.

That budget was formed not by a Liberal administration, but by a Conservative one, though I doubt whether a Liberal council would have done anything very different. However, we are now being told that a further 5½ per cent. cut on existing budgets is necessary—which, for some strange reason that I do not quite understand, means cuts of between 6 and 9 per cent.

The Isle of Wight authority has worked out what this cut would mean. It would mean that 14 out of 47 primary schools would have to close, with a consequent loss of 80 jobs. The school meals service in the primary schools would also have to go—Dorset has done this already, but we have not—with the loss of 200 part-time jobs. This in a part of the country where the unemployment rate is well over 12 per cent. and likely to be 14 or 15 per cent. by the end of November.

Our school crossing patrols would have to go, and fees and charges would have to be increased. We would have to close two fire stations, reduce road standards and, of course, the work force. We would have to close the only day centre for the mentally disturbed and sack 16 social workers. We would have to close one library and reduce the book fund. That is what a 5½ per cent. cut in our budget would mean for us.

I am glad to say that it appears from press reports that this requirement is being reconsidered. However, when will we know exactly what is required of us and what the amount of the rate support grant will be? The only other time that I was chairman of the policy and resources committee was in 1974, when we were not told until February. I hope that this year we shall be told in December, not January or February.

Surely the result of the Croydon by-election, the recent GLC by-election, and even the decision this week of the Court of Appeal together with other events, have convinced the Secretary of State that he does not have to legislate to deal with three bad guys. The voting public will take it into their own hands to deal with these matters, and will do so at the ballot box, until the message sinks in.

The right hon. Member for Manchester, Ardwick (Mr. Kaufman), quoted Mr. Hepworth, the director of the Chartered Institute of Public Finance and Accountancy. As I follow Mr. Speaker's request to cut speeches short, I advise hon. Members to read the article for themselves. Briefly, it says that referendums are not compatible with the electoral system. What is more, there are only 18 million ratepayers to 42 million voters. The 42 million would, therefore, dictate the size of the rate bills to the 18 million. There are many reasons why I do not think that a referendum is suitable for supplementary rates.

Why must we have another Green Paper on rating reform? It is only five years since we had the very comprehensive Layfield report. All the answers are in it. I recall giving evidence to the Layfield committee. Surely we do not have to go through that sort of exercise again. The truth is that the Government want to play for time until after the next election. They are pledged to do away with domestic rating, which they know to be politically unpopular, but they have no idea what to put in its place. They are apparently not in favour of a local income tax, which must surely be one source of local government finance; but the Government, of course, are pledged to cut income tax.

The Government have made trouble for themselves, and I do not feel at all sorry for them. But I hope that they will think again on this question. From what we have heard from the Conservative Benches, there are signs that many Conservative Members are unhappy about it. I do not think that it can be said to be a good day for local government if it has to face a battle with the central Government. I hope that the Government get back on to an even keel with local government so that we can both do the job that so badly needs to be done.

6.36 pm

Mr. Patrick Cormack (Staffordshire, South-West)

I cannot begin to compete with the magisterial eloquence of my right hon. and learned Friend the Member for Hertfordshire, East (Sir D. Walker-Smith), nor do I have the experience of local government that is possessed by the hon. Member for Isle of Wight (Mr. Ross). Nevertheless, I begin what I fear will be a rather critical speech by congratulating my right hon. Friend the Secretary of State on his pledge to tackle the reform of the rating system. Those who were here on the last occasion when we had a Green Paper, and who waited in eager anticipation for the Layfield report, cannot fail to realise what a mammoth task my right hon. Friend has set himself.

Having on four occasions introduced my own very modest rating reform Bill in the House, I urge my right hon. Friend not to start from the premise that only total abolition will do. He will answer many of the critics of the present system—not all, but many of them—if he gives local authorities the right to raise additional revenues, ensuring that all adult wage earners who enjoy local facilities and services pay something towards them. This need not necessitate removing the rate base altogether. And, in areas frequented by tourists, there is much to be said for giving the local authority the right to levy a bed occupancy tax.

Many of the immediate worries of industrial and commercial ratepayers would be eased if, for example, the existing exemption period for empty property were to be extended to six months or more, if some statutory protection were to be given to industries not able fully to utilise their productive capacity for reasons beyond their control—the sort of firm to which the hon. Member for Isle of Wight referred might well benefit from such a change—if they were able to pay their rates by instalments, irrespective of the rateable value of their property, and if local chambers of commerce had statutory rights to representation on appropriate local authority committees, perhaps on the same basis as that on which representatives of the teaching profession sit on education committees.

These are matters which the Secretary of State will doubtless want to consider. And we must all wish him well in his endeavours. There can be very few hon. Members who do not also wish him well in his endeavours to curb the outrageously excessive expenditure of a few local authorities.

Those of us who have recently received our supplementary rate demands—I am glad to say that some of us have not paid them, and now await certain events to see whether we have to pay them—fully understand why my right hon. Friend feels as he does. But it is important to say that, although we are picking up the manifesto bill, and although we are underwriting the profligate spending of people such as Mr. Livingstone, nevertheless, he and his colleagues were elected. They were elected very recently and, to give them credit, they did not seek to hide the fact that the ratepayers would have to pay dearly for their services. Be that as it may, I do not think that anyone can seriously disagree with my right hon. Friend's general line in this respect.

Nor can anyone question the Government's right, as part of their national economic policy, to determine the slice of the cake in terms of the resources that should be allocated to local government from national funds. However, the measures being discussed, so brilliantly analysed by the right hon. Member for Manchester, Ardwick (Mr. Kaufman) and which are enshrined in a Bill that the House will shortly have the opportunity to debate, are measures that go far beyond this. In my view, they amount to a monstrous contradiction of a long and honorouble Tory tradition in local government. They are a contradiction too of the oft-stated belief that the gentleman in Whitehall does not know best. The proposals constitute a massive centralisation of power and are of major constitutional significance. If implemented, they would kill local government as we know it and seriously weaken the entire democratic process.

Democracy is indivisible and such a shift in the balance of democratic power in this country could have incalculable consequences. I hope that when he has heard the arguments advanced in the debate my right hon. Friend—and his colleagues—will think again. I was glad that we had some assurance at least this afternoon—not enough, but some. I hope that my right hon. Friend will see some merit in the arguments that have been adduced with great clarity and good humour by the right hon. Member for Ardwick. He pointed out that it would be wrong for my right hon. Friend to take to himself powers that he would not wish to see the right hon. Member for Ardwick exercising. That is one of the tests that I apply to myself when considering these measures.

The worst features of my right hon. Friend's proposals are that they undermine the traditional constitutional relationship between central and local government and militate against true democracy and accountability at local level. Democratic local government has existed for almost as long as democratic central Government. It is an integral part of the economic, political and social order of our nation. It has had a remarkably successful record of achievement, as we were reminded this afternoon, showing itself adaptable to changing circumstances and both responsive and responsible in the way that it has exercised its functions and developed its services.

Its most important feature is that it is locally accountable for local decision-making over a whole range of services. It is government of local people by local people for local people as a result of local elections, and it is tragic that there has been a breakdown of trust and confidence between local and national Government in recent years. That trust and confidence is essential to the smooth working of our democracy and will not be restored by the sort of proposals that my right hon. Friend has in mind.

The most objectionable of those proposals and the one on which I concentrate my opposition is the proposal to usurp the will of the people, expressed in local elections, by resorting to local referendum. I voted against the idea of a referendum on the Common Market. I accept that the device is now part of our constitutional system, and I believe that it is reasonable for the Government to use a referendum on issues of major constitutional significance and importance, such as devolution. However, it is a device that should be used sparingly and with the utmost caution.

If the Secretary of State proceeds with his present plan he will do a grave disservice to the whole democratic structure at local and national level. It would be impossible to refute with any degree of logic the claim that the Chancellor should have a referendum if he wishes to impose a tax between Budgets. There are many populist issues on which people will want this place to abdicate its responsibilities. Panic measures and populist solutions rarely make for good legislation, and the referendum proposal of my right hon. Friend smacks of both.

I received a letter today from someone who has certainly paid his supplementary rate in London. He says: To seek purely partisan political advantage by imposing ill-considered legislation on local government throughout the country is more than mere ministerial folly—it is the beginnings of the destruction of democracy. My right hon. Friend cited Coventry as an example that inspired him. But what of those areas where a high proportion of the electorate are tenants or employees of the local council and where business finds most of the rates? Will he get the results he wants there? Even on practical grounds, it seems to me that this measure is fraught with danger. I remind my right hon. Friend that the Coventry chamber of commerce is far from happy about this aspect of his package. It sees much more clearly than my right hon. Friend apparently that this is a weapon that can be used two ways and can also lead to unnecessary confrontation between local industrialists and local government.

If the Secretary of State proceeds along these lines, he will provide for those very few councils which could not care less about their prodigality a platform from which they can blame the Government for all the shortcomings of their services, possibly with results that will not please him. He might be able to frame the questions, but he cannot guarantee the answers.

Side by side with attempts to reform the rating system, my right hon. Friend should certainly consider how best he can improve local accountability. By all means let us have a reversion to and an extension of the system whereby a third of each council retires each year. That is true democracy. That may not provide the immediate result that my right hon. Friend wants, but it is far better sensitively to alter the system to ensure that future generations will be adequately protected than to resort to a measure which can only damage local government, encourage extremists of all ilks and discourage conscientious and hard-working local people from offering their services to their fellows. That is something else that we should bear very carefully in mind.

Extreme cases, like hard cases, make bad law. I hope that my right hon. Friend will now give himself a breathing space to consider the views expressed in this Chamber and elsewhere. I hope, too, that he will reflect that, although local authorities have been the subject of a great deal of criticism for alleged overspending and excessive costs of services, the evidence does not support this view in regard to local authorities in general—and my authority of Staffordshire in particular.

I have never been more impressed than I was a fortnight ago when, like the right hon. Member for Stoke-on-Trent, South (Mr. Ashley), I helped to receive an all-party delegation representing the county council and all of the nine district councils. They came, from all parties, to convey the unanimous view of the councillors and councils of Staffordshire that this legislation, in its present form, must not be allowed to pass. They brought telling evidence of their record of sound budgetary control. They were able to demonstrate that they and most authorities had largely conformed to the guidelines set by successive Governments and that their record could be compared favourably with the central Government's record.

My right hon. Friend has a chance to reflect on all these things. In his answers this afternoon to interventions by my hon. Friend the Member for Grantham (Mr. Hogg) and myself, I detected that he was beginning to think again. I hope that he will have the courage and wisdom to do so. Tonight, I certainly cannot support my right hon. Friend in the Lobby. If the Bill comes before the House with its referendum proposals intact, I shall most definitely vote against it.

6.48 pm

Mr. David Ennals (Norwich, North)

I often agree with the hon. Member for Staffordshire, South-West (Mr. Cormack), because he is my pair, but I do not think that I have ever agreed with him more than in the speech that he has just delivered, which showed a great deal of courage. My only worry is that if he were to vote against the Government too often I might find that he would be an unstable pair, so I want him to use a little discretion.

What the hon. Member confirmed was that my right hon. Friend the Member for Manchester, Ardwick (Mr. Kaufman) had made a devastating case when he opened the debate. I think that the hon. Member also confirmed that the Secretary of State, in replying, totally failed to convince his own supporters, let alone any Opposition Member. The argument that Whitehall knows best still seems to lie in the Secretary of State's mind—or perhaps he is not saying that it is just Whitehall that knows best, but that it is he who knows best.

The Secretary of State's decision to refuse to give way to a former Secretary of State who has sat as a member of the consultative council for even longer than the present Secretary of State has done but to give way to his hon. Friends was an act of considerable discourtesy. I know why he did not give way. It was because at that moment he was talking about the consultative council. Of course the Labour Government had problems over the restraint of public expenditure, but never did we have any disagreement within the consultative council.

The Labour Government did not threaten to introduce legislation that would screw down local authorities against their wishes. We were never in open conflict, such as now exists, with the associations that represent local authorities. The Association of District Councils says that the proposals make a mockery of the working partnership between local authorities and the Government through the consultative council machinery.

The right hon. Member for Bridgwater (Mr. King) knows that there was not such a crisis when the Labour Government were in power. The crisis has arisen because of the policies that have been put forward by his right hon. Friend and himself.

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

rose—

Mr. Ennals

The Secretary of State refused to give way to me. To show that I am a little more courteous than he was, I give way to the Minister.

Mr. King

Does the right hon. Gentleman recall that during the previous Labour Government he received full co-operation from Conservative councils? He will recall that the majority of councils then were Conservative-led and that they gave full co-operation to the Government of the day, regardless of party, when economies were called for.

Mr. Ennals

That did not apply to the metropolitan counties. There were elections during the term of the previous Labour Government. Sometimes councils were Labour-controlled and sometimes Conservative-controlled, so I do not accept the argument.

The Secretary of State's argument is that the local authorities must trust the Government. I agree with that. The Labour Government set up consultative machinery. What the Secretary of State now proposes will undermine the trust that has existed for many years between the Government and local authorities and their representatives.

The Association of District Councils has referred to the present crisis of confidence. No one can doubt that if the Secretary of State's proposal goes through it will create a crisis of confidence. His proposal will fetter locally elected councillors. As one of the associations has said, what is proposed will remove the statutory right of the local authority to determine its own level of spending and rates. It will destroy the autonomy of local authorities and undermine local responsibility and democratic accountability. As my right hon. Friend the Member for Stoke-on-Trent, South (Mr. Ashley) said, it will turn councillors into automatons. The plans threaten the future of local authorities and challenge the relationship with the Government.

Perhaps the Minister will tell us how many local authorities have written to him supporting the referendum proposals. I can tell him the views of the Conservative-controlled Norfolk county council. Last month it rejected the proposals by 66 to one. [HON. MEMBERS: "Who was the one?"] That was Mr. Ian Coutts, who was defeated by my hon. Friend the Member for Norwich, South (Mr. Garrett). He is in a minority of one on his local council. He cannot remain as chairman of the finance committee of the Association of County Councils.

The leader of Norfolk county council, Mr. John Alston, said: There are a number of people who take great exception to any idea of a referendum in our constitution. He proposed that the council should support the resolution passed by the Association of County Councils, which asserted that local democracy was essential and rejected the referendum concept.

Another councillor said that he would find it abhorrent to think we would have to have a referendum at local level. The county council threw out the idea by an overwhelming majority.

A referendum can and should be used on national constitutional issues. It was right to use it in respect of the Common Market. However, that is not the Government's view. In view of the Government's position, why should we not have a referendum on the expenditure cuts in universities or on cuts in benefits and services for the disabled? Why should we not have a referendum on the Budget? Why does the Minister not have a referendum on this proposal?

If the right hon. Gentleman believes that a national referendum would be too costly, let him have a referendum of all elected councillors. If he wishes to obtain a biased result from a smaller electorate, he can have a referendum of Conservative-elected councillors. He may be surprised at the results. If he requires local authorities to have a referendum, why is he not prepared to have a referendum on his proposals?

The Secretary of State is showing himself to be a potential dictator in his handling of local authorities. There comes a time—as with all would-be dictators—when one has to say that he has gone too far. I believe that that time has come.

A second example of the Secretary of State using his powers wrongly is his handling of Norwich city council in the context of the right to buy council houses. He picked Norwich as the first authority to threaten with the powers given to him—or which he took—under section 23 of the Housing Act 1980. He threatened to send a commissioner to do the council's work if it did not adhere to his targets. He summoned council officials to his office last week. I was part of the delegation. Why did he pick on Norwich, which is one of the best housing authorities in the country? [HON. MEMBERS: "Oh!"] The electorate in Norwich decided that.

The local authority is almost crippled by the spending cuts imposed by the Department of the Environment. Fewer than 30 new homes will be handed over to the council in the next 12 months, compared with 500 last year. The ruthless policies of the Secretary of State are wreaking havoc on waiting lists and the many other statutory responsibilities placed on local authorities. Those obligations include improvements, repairs, transfers, sheltered housing schemes—which are now in mothballs because of the action taken by the Secretary of State—accommodation for single or homeless people and slum clearance. Out of that list of statutory obligations, the Government have chosen the sale of council houses as the central issue. The Minister for Housing and Construction is not that—he is the Minister for the sale of council houses.

The city of Norwich recognises that, against its views, it must live within the law. The councillors were elected overwhelmingly not to sell council houses, but with the law as it is they are now dealing effectively and expeditiously with the statutory responsibilities laid down in the Act.

The council is issuing section 10 notices at the rate of 60 a month and is changing many procedures to meet the specific wishes of the Minister, who still calls himself the Minister for Housing and Construction. It aims to complete the issue of those notices by next June. Since last week's meeting with the Secretary of State, the council is arranging for the mortgages sub-committee to meet fortnightly until the evaluations are complete.

However, last week the Secretary of State said that June was too late and that the evaluations must be completed by February. The dividing line is four months. If the Secretary of State decides to take over the responsibilities of elected councillors he will be doing so for the sake of four months. I warn the right hon. Gentleman that if he does not accept the council's response—which is a fair one—to the representations made it, and if he decides in the next few days to issue a notice under section 23 of the Housing Act 1980, the council will take action in the courts to quash it. It has received that advice from learned counsel. The Secretary of State should ensure that his legal advice is better than that which he received when he was last taken to court and was found to have committed an illegal act.

If I have appeared angry during my speech, it is because of the Secretary of State's handling of my local authority. I was Secretary of State for rather longer than he has been one. I never received a deputation in the climate that prevailed last Thursday when the right hon. Gentleman received a deputation in my presence. I urge him now, as I did then, to take no precipitous action, but to review progress in January. The council has decided to do exactly that.

Why has the right hon. Gentleman picked on Norwich? I asked him, but he gave me no answer. I tabled a number of written questions asking how Norwich compared with other authorities in its performance. He said that he would answer the questions shortly. Why shortly? He has the information available. All of it must be available in his office, otherwise he would not have decided to pick on Norwich—a Labour council—and issue threats against the autonomy and rights of that locally elected council.

I know of a number of authorities under Tory control whose records are considerably worse than that of Norwich—even on the issue of the sale of council houses, which the Tory Government so much acclaim. I hope that when the Ministr replies to the debate he will give me a hint of why the Government have picked on Norwich.

There are too many examples of the way in which what has been built up over many decades—local responsibility and a relationship between local authorities and the Government—is being threatened. It is being threatened not only by the measures proposed by the Secretary of State, but by the way in which he acts. I counsel him to act with some restraint and wisdom, and with sound legal advice.

7.2 pm

Mr. Reg Prentice (Daventry)

I agree with the right hon. Member for Norwich, North (Mr. Ennals) on one point, that being his opposition to a referendum. It is significant—and I hope that this has been recognised on the Government Front Bench—that, with the exception of the Secretary of State, every speaker in the debate, Conservative, Labour and Liberal, has been opposed to the referendum proposal, and in expressing that view they have spoken on behalf of many people throughout Britain.

I intend to confine most of my brief remarks to that subject. However, before doing that I must say that I found the speech of my right hon. Friend convincing on the general proposition that the Government need to take new powers to deal with the big spenders in local government. Given the total overspend, and given also the fact that five out of six local authorities are co-operating with the targets—thereby carrying on their affairs according to the old tradition of the relationship between local authorities and the Government—he cannot avoid bringing the subject to the House in the form of a Bill. He is wrong about the referendum, but right in his objectives.

I think it sad that the old relationships have been fractured. The right hon. Member for Norwich, North referred to his experience of the relationship between Ministers and leaders of local authorities when he sat on the consultative council. I also sat for a time on that council as a Minister in the Labour Government. The atmosphere was more friendly then—partly for the reason given by my right hon. Friend the Minister, that there were a large number of Conservative leaders of councils, but partly also because the character of the Labour leaders was different.

Those were the days when the Greater London Council was led by Sir Reg Goodwin. That was a different sort of leadership from that now operated by Ken Livingstone and his colleagues. And it is not only Mr. Livingstone, because since the election changes last May there are now less publicised but equally flamboyant characters throughout Britain operating in the same direction.

In my county of Northamptonshire the election resulted in a tie between Labour and Conservative. The council is now under Labour and Liberal control. The Liberals are as bad as the Labour members in deciding on higher expenditure and in imposing a supplementary rate.

I support my right hon. Friend the Secretary of State's objective, but I profoundly disagree with the technique of a referendum. I carefully noted his remarks. He referred to thinking about the techniques for a longer period. He talked about exploring other methods. With great respect, that is not good enough. The Government's intentions are on record in the form of the Bill laid before Parliament recently. My right hon. Friend knows the extent of the reaction to that. What he could have done, and should have done, was to come to the House today and say that that proposal was being dropped. If my right hon. Friend the Minister, in his reply to the debate, cares to say that it will be dropped, I shall be happy to go into the Lobby with him tonight. If he does not, I shall feel bound to abstain and to vote against Second Reading of the Bill if it contains that proposal.

My right hon. and learned Friend the Member for Hertfordshire, East (Sir D. Walker-Smith) said in his interesting speech that there was nothing incompatible between a referendum and democratic principles. Perhaps not, but it is incompatible with the British tradition of representative democracy. I accept that there are already provisions on the statute book for local polls. Those take place occasionally in unusual and erratic circumstances. They are out of the main stream of political decision-making in Britain. I accept that in recent years there have been referendums on constitutional issues. Frankly, I wish that they had not occurred. But there is a distinction to be drawn between referendums on those subjects, when the relationship of Parliament with the nation is involved, and referendums on matters of general policy.

I strongly object to the fact that the Government are proposing to bring before Parliament a proposition to have enforced referendums—they would not be consultative referendums, but binding referendums—on matters of important general policy, such as the level of local rates. If that were to happen, no one with any political experience would expect the process to stop there. Once the precedent had been set, there would be further provisions to accelerate the process, in three ways.

First, successive Governments might find it convenient to use the technique again and again to solve a particular issue. Secondly, the public would demand referendums on certain issues about which there were strong feelings. Capital punishment is the most obvious example of that. Thirdly, pressure groups—large and small, good and bad—would ask for referendums so that they could have a national campaign, paid for by the taxpayer, during which they could put their case to the public.

One can imagine the situation during the run-up to an election, when pressure groups could ask political parties to include in their manifestos promises of referendums on various matters.

Step by step we would become a different and worse kind of democracy. Surely we should recognise the simple truth that the complex issues involved in the government of a modern State cannot be split into simplistic questions that lend themselves to "Yes" or "No" answers.

We are developing a system by which elected Members of Parliament and elected councillors are responsible for taking decisions that are sometimes unpopular. The persons who make them stand or fall on their record when it comes to the next election. In between those elections they have responsibility. That is a distinction that runs through the whole of our constitutional history, and it is something that we should regard as of great value.

My right hon. and learned Friend the Member for Hertfordshire, East quoted Dicey. I remarked to him afterwards that it was extraordinary that Dicey should have suggested that a referendum was a long-stop, bearing in mind that the main theme was the sovereignty of Parliament. If we are to go through that trend—I hope that we never do—and introduce referendums or long-stops that are an abuse of power by Governments or others, let us do so deliberately and after a long, sustained and detailed debate on whether we want to introduce referendums into our constitution and in what circumstances. Do not let us slide into that process as a byproduct of the Government's need to deal with an isolated problem.

The alternative, as my right hon. Friend the Secretary of State said, is to increase the Government's power over local government. That does not mean a significant increase of central power over local government beyond that which will be contained in the Bill anyway.

The purpose of the Bill is to limit the freedom hitherto enjoyed by local authorities in the setting of their rates. That is an alternative balance of power. I see nothing wrong with that. As other hon. Members have stated, the powers of local authorities derive from legislation passed in the House. We have often debated the extent to which Government policies should be superimposed on those of local authorities.

There had been argument over whether local authorities should be compelled to produce plans for comprehensive secondary education. There has been an argument about whether local housing authorities should be allowed to sell council houses. There will always be similar arguments. It is legitimate to have an argument about rate-setting powers and whether to alter those powers by the process of Parliament. Having done so, I suggest that Parliament should see it through.

If a local authority proposes a supplementary rate that is against the criteria in the Bill—I am not suggesting any change in that—surely the correct procedure is for the Secretary of State for the Environment or one of his Ministers to meet the leaders of the council. If it is the Secretary of State's view that there is an excessive and unacceptable proposal to increase rates, he should lay orders before both Houses of Parliament, using the affirmative resolution procedure, to settle the matter.

That would be consistent with our parliamentary system and would settle the issue more rapidly and less expensively than having a referendum. More importantly, it would avoid a departure which many of us are determined to avoid—namely, a departure from the central processes of relative democracy.

7.13 pm

Mr. John Home Robertson (Berwick and East Lothian)

The right hon. Member for Daventry (Mr. Prentice) has fallen for a red herring on the issue of referendums. It seems that the Secretary of State for the Environment is likely to give way on that issue—the Secretary of State for Scotland has already caved in—because he knows, as the Secretary of State for Scotland knows, that he can apply as much central control over local affairs as he wants without resorting to a referendum.

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

Are we discussing Scotland?

Mr. Home Robertson

As a Scottish Member I feel qualified to contribute to the debate. I have the benefit of experience of central interference in both tiers of local authority. Both the Lothian region and the East Lothian district in my constituency have already suffered from the full weight of the powers that the Secretary of State for Scotland has obtained for himself in the House. They are powers which are similar to those that the Secretary of State for the Environment hopes to achieve from Parliament.

East Lothian's unhappy experience of the increased central powers of Whitehall may be a foretaste of things to come throughout the United Kingdom. Central control over local affairs, at least in our experience, has been crude, insensitive and irrational. Its impact has been completely arbitrary and unfair, and it has had a devastating effect on the concept of local democracy and accountability. Incidentally, and in my opinion extremely importantly, these new central powers have taken a heavy toll of the morale of local councillors, who should have a vital part to play in the democratic life of our country.

As my right hon. Friend the Member for Manchester, Ardwick (Mr. Kaufman) said at the beginning of the debate, this process has been accomplished by the manipulation of the rate support grant, which has been downright brutal since the Conservative Government took office. I cite in evidence of that fact, not a Labour-controlled local authority but the Scottish equivalent of a Tory shire. The Borders regional council covers one part of my constituency. The convener of that council wrote to the Secretary of State for Scotland last month. The letter states: The indications are that if the council projects a realistic figure for inflation and maintains its existing level of services next year, the 1982–83 budget is likely to exceed the cash guideline by at least £2 million and possibly a great deal more. The present level of services are already the result of successive cuts over the past few years and the council believes that it cannot ask the public to accept any further reductions. That is a local authority which has an enthusiastic programme of closing local village schools. It has the highest bus fares in the whole of Scotland. At least, it has now decided to say "Enough is enough". I am afraid that the damage has already been done. Other local authorities, which merely try to maintain their existing services find themselves compelled to increase rates by up to 40 per cent.

During the course of these procedures the Government have successfully generated an elaborate smokescreen of confusion round the whole issue. Any objective study of what has taken place must lay the blame for the cuts and for most of the increased rates fairly and squarely on the Conservative Government.

I should like to quote from a paper, produced by Strathclyde university earlier this year, by Arthur Midwinter, entitled "Conflict and Confusion: the politics of rates". It states: It must be clearly understood why rates have been rising. The evidence shows that the ratepayers' anger was misdirected and they were firing at the wrong target. The decisions of central Government about inflation were crucially important determinants of local rates, yet played little part in the public debate, which focused on suitably vague concepts like 'wasteful', 'profligate', or 'prudent' expenditure. I have so far been talking about what I term "arms length" encroachment on local government autonomy. The Secretary of State for Scotland has obtained powers which he has already exercised in a way which has caused great harm and a degree of chaos amongst both tiers of local authority in the northern part of my constituency.

Mr. Beaumont-Dark

Are we talking about Scotland?

Mr. Home Robertson

The hon. Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) seems to have neglected the fact that this is a United Kingdom debate. We are talking about the encroachment of central Government on local government throughout the United Kingdom.

A regional council in Scotland is broadly equivalent to a county council in England or Wales. The Lothian regional council decided to try to resist the encroachment of central Government power. It attempted to call the Government's bluff. The directly elected Lothian regional council, the fully-accountable-to-the-people Lothian regional council, decided to maintain the existing level of services, which in itself was bound to lead to an increase in rates because of the inadequate rate support grant.

The council also decided, perhaps rashly—I express my personal opinion—to budget for a modest growth in some of its important services. The Secretary of State for Scotland went completely berserk. He used existing powers to interfere with the council's capital spending projects. I was astonished to learn that, under the present Government, decisions on the provision of new facilities at a small primary school in a small village in my constituency were being made not by local councillors, not by local officials at Haddington, not by local officials in Edinburgh and not by civil servants in Edinburgh, but by Scottish Office Ministers and civil servants at Whitehall. Surely that is an example of centralisation gone crazy.

That still was not enough for the Secretary of State for Scotland. He obtained sweeping new powers from the House to penalise authorities which, in his opinion, were spending excessively or unreasonably. I believe that the Secretary of State for Scotland's judgments on these subjective issues were influenced by political considerations. He exercised his powers against the Lothian regional council, having obtained authority from the House to drive the council into complete submission. Armed with those powers, he arbitrarily deducted £30 million from the council's rate support grant arid handed the money to the Treasury, despite protestations that he was looking after the interests of local ratepayers. He compelled the council to impose an extremely damaging package of cuts at short notice. For example, there was a freeze on education department staffing, which meant that some communities in my constituency which had enjoyed the benefits of the best pupil-teacher ratios in Scotland suddenly found themselves with the worst ratios. In those areas, individuals who had been calling for cuts in the council's expenditure rapidly changed their tune when they discovered what the cuts really meant.

Charges for the use of school playing fields were forced up by as much as 2,900 per cent. as a result of the package. When the secretary of the Ross High rugby club in Tranent wrote to me about that, I felt that it would not be reasonable to write, as one normally would, to the local authority to complain or to make representations to it about the increased charges. I knew that the local authority had not willingly taken the decision to increase the charges. I wrote to the Scottish Office asking it to justify the increased charges as they stemmed from its decision, not from any decision taken by the council. I am still waiting for a reply. I am sure that many of my colleagues who represent Scottish constituencies will address their queries to the men in Whitehall, to the Scottish Office, rather than to local authorities because the men from Whitehall have taken the decisions upon themselves.

Mr. Barry Henderson (Fife, East)

Some hon. Members will not be as familiar with Lothian issues as the hon. Gentleman. Will he put in perspective for the House the increase in rates that the Lothian regional council originally proposed? Will he give the precise figure so that the House may appreciate the tenor of his speech? Can he mention any regional council in Scotland which proposed a rate increase of half as much?

Mr. Home Robertson

The increase in rates proposed by the Lothian regional council was 50 per cent., the overwhelming majority of which was attributable to cuts in the rate support grant. I hope that the hon. Member for Fife, East (Mr. Henderson) is aware of that. I certainly hope that my constituents are aware of that.

I could continue with a list of the wild adjustments that had to be made. They were made, for example, in the social work and transport budgets, and they made complete nonsense of local decision-making and of the continuity of management of local affairs. The saddest feature has been the axing of a proposal to build a day centre for the handicapped during the International Year of Disabled People in Prestonpans, an area of multiple deprivation in my constituency.

I move on to the experience of the lowest tier of local government in my constituency under the new regime of direct rule from Whitehall. Having flexed his muscles with orders laid before the House against the Lothian region, the Secretary of State for Scotland proceeded with some old-fashioned arm-twisting of a number of smaller authorities. First, he threatened to table orders against them reducing the rate support grant. The process that followed can perhaps best be described as sordid horse trading. At the beginning of the summer the Scottish Office demanded that the East Lothian council reduce its budget by £1.35 million—a cut of more than half of the council's rate support grant. The East Lothian council can by no stretch of the imagination be described as profligate. It has a smaller staff that that of its predecessors before local government reorganisation. However, it is still coming under attack from the Government.

Everyone in the area, including the Tories, rejected the Secretary of State's initial demand. The issue continued throughout the summer until last month when the Scottish Office agreed to a package of cuts amounting to £700,000—rather less than half of the cut that was originally demanded. The cuts amounting to £700,000 had to be made during the remaining half of the year. The package was agreed against the background of a threatened statutory cut in the rate support grant of £900,000.

Cuts have had to be made across the board. Libraries have been shut on Saturdays. The opening hours of swimming pools have had to be adjusted. Grants to local voluntary organisations have had to be cut drastically. Of particular importance, grants to community councils have had to be cut drastically. I do not know whether England and Wales have the equivalent of community councils, but they are the most local democratic institutions in Scotland. They have statutory obligations, but they are being deprived of the funds that they require to carry out their obligations by the package that was imposed on local authorities by the Scottish Office.

In my constituency the ultimate monument to the folly of the Secretary of State for Scotland is a community centre that has recently been completed in Prestonpans. It cost £500,000, but it will remain closed to save £10,000 as part of the package that has been demanded by the Scottish Office.

I welcome the Government's decision not to proceed with the order to reduce the rate support grant for East Lothian because of the crude deal that has been made. I suppose that is a small mercy. It seems crazy that the council is not to be allowed to use £700,000 of its ratepayers' money. It seems absurd that that money will have to lie uselessly on the side despite the urgent needs of the community. That will have to be done to satisfy the diktats of the men in Whitehall.

I have been seeking to illustrate from recent experience in my constituency the impact of the Government's encroachment on local government autonomy. It makes nonsense of local management and local accountability. It is a wicked imposition on local councillors. They are being compelled to act against their better judgment. Councillors find that they are getting the blame for all the distasteful consequences of the policies that the Government are implementing because of the devious way in which the Government have handled the process. Councillors are being forced into an impossible position.

When I was elected to serve as a local councillor for the area in which I live I wanted to improve services for the community. Councillors are now having to carry out the Government's dirty work. They are having to cut services against their better judgment and their will.

If the Government were to proceed with the referendum proposals, that would be the final straw for many good local councillors. Would Ministers remain in their posts if every key decision that they made in their Departments could be subjected to a final decision by a referendum? Such a process would make nonsense of good management and the responsibility of central Government or local government.

The Lord President of the Council in his winding-up speech last night said: I want to reaffirm our conviction that a strong second Chamber is an essential part of the constitution, and an essential safeguard for individual liberty. We are committed to its continuance and maintenance."—[Official Report 11 November 1981; Vol. 12, c. 621.] I believe that strong local democracy is an equally important part of our constitution and our people's safeguards. I urge the House to reject any further proposals for interference in local affairs from Whitehall. In particular, I urge the House to take the earliest possible opportunity to repeal the obnoxious clauses in the Local Government (Miscellaneous Provisions) (Scotland) Act 1980, which have already caused such havoc in my constituency.

7.30 pm

Mr. Charles Morrison (Devizes)

I could not help feeling when I read the Opposition's motion that, instead of huffing and puffing about the Government's proposals, they would do the country a far greater service if they were to insist that the few Labour-controlled local authorities which are acting with selfish financial irresponsibility were to have regard to the harsh realities of the national economy. Had the Opposition done that, not only would it have benefited the economy, and local domestic and non-domestic ratepayers, but it would also have helped the vast majority of reponsible local authorities, most of which are grappling with problems and demands for expenditure of equal urgency and complexity, and would have avoided the publication of a Bill which is unacceptable to many of us.

There is more than a whiff of hypocrisy and self-righteousness about the Opposition's case. It would smell a good deal less of political opportunism if the Opposition's own record of interference in local government were not so bad.

This afternoon, my right hon. Friend the Secretary of State spelt out the situation as he found it when he first came to office. It was perfectly clear from what he said that the degree of intervention and control by the Labour Government was steadily increasing. He could also have mentioned the Education Act 1976 or the Community Land Act 1975 as other examples of how the Labour Government reduced the discretion and powers of local government.

Nevertheless, we should look at the position of local government as it exists today, and consider whether there is any threatened further encroachment on the discretion and powers of local government. The objective of local government reform in the early 1970s was, in my view, simply to create a system of autonomous local authorities. On the other hand, the perception of most people, councillors and public, is that local government has been subjected by successive Governments to a process of slow strangulation. If local government is not to be killed off in all but name, the process should be stopped, and preferably reversed.

There is no doubt that in a small country such as ours there is a case for abolishing local government. After all, our communications are swift and the distances to be covered, in comparison with those in many other countries, are small. In my view, however, to abolish local government would be a mistake for three reasons. First, undoubtedly it would be contrary to Conservative philosophy—the philosophy of decentralisation of power, which sometimes seems to be forgotten; second, it would destroy the opportunity for local interpretation of national policy; third, the national administration of local services would prove to be more expensive in practice than is local administration.

Our locally-elected representatives get cursed up hill and down dale, and are virtually never thanked. I want to place on record that the vast majority of local councillors are at least as much concerned as we are—if not more—to produce value for money, within limited resources to be stretched over an increasing number of statutory powers and duties imposed upon them by this House and successive Governments. Broadly speaking, local councillors do a very good job.

Perhaps I should add a fourth reason for the continuing existence of local government, and say that without it the life of a Member of Parliament would be totally impossible. Therefore, I am in favour of the continuation of local government.

However, if we are to have local government, we must accept that there will be different levels of service, different standards of provision, and different levels of local taxation. That is what local government means. It would be unacceptable if central Government were to legislate just because, as we have been told, they received 1,500 letters of complaint about the rates. It would be odd, and indeed dangerous, if the Government felt impelled to legislate every time they received 1,500 letters of complaint. If they did, most of our time would be spent considering animal welfare. That might be admirable, but it would not advance the interests of the nation.

In any case, I wonder how many of the 1,500 letters which apparently landed in the Department of the Environment during the past three months came from the high-spending areas at which the Secretary of State is aiming his guns. If many of those letters come from other areas, undoubtedly they will be disappointed by the legislation that the Government propose, and the result will be still more disillusionment with Government and Parliament.

I suspect that what the writers of those letters wanted—as do most hon. Members—is a thorough-going reform of the system of local government finance. It is no use pretending that such a reform would be simple. I sat on a series of policy groups between 1966 and 1978, and I cannot pretend that we came to any easy answers or found any solutions. However, I hope that my right hon. Friend the Secretary of State will find an answer which will cope with the problem now facing him just as much as it will cope with the interests of the ratepayers.

My right hon. Friend is saying that in the immediate future, whatever the Green Paper may foretell, we must contain the total of local government expenditure. I do not argue against that proposition, but we should bear in mind the comparative record of local and central Government expenditure, to which the right hon. Member for Manchester, Ardwick (Mr. Kaufman) drew attention. The comparative position of local authority expenditure has altered. Legislation such as the health and safety at work legislation has added considerably to the cost of local government. That legislation may be good in itself, but it has added enormously to the cost of local government, as have the employment protection legislation and numerous other measures.

If the Government want to control the total of local government expenditure, they should do so by means of a mechanism that will definitely achieve its objective. As likely as not, a referendum will not do that. Just because it happened to do so in Coventry, it does not follow that it will do so everywhere.

Even if the Secretary of State achieves the result that he seeks in the first year that a referendum is held in one area, it does not follow that he will get the result that he desires thereafter. Let us think what a determinedly bloody-minded council could do to its emotion-packed services in the year following the year that it lost the referendum. Let us think whom the authority would blame. After a year of blaming the party in power at Westminster, the result would probably be very different the next time the authority was forced to hold a referendum. There is not much point in mobilising a sledgehammer unless one can be certain that it will crack the nut. Referendums are as likely as not to miss the target.

If referendums are used for the purposes that the Secretary of State desires, they will be wholly unacceptable. At the best of times, I am not a referendum fan since they undermine the concept of representative Government. However, they are probably necessary on some constitutional issues. They are not acceptable for practical issues and I will not vote for them in that sense. As my right hon. Friend the Member for Daventry (Mr. Prentice) pointed out, if referendums are allowed for local government, the demand for them for other purposes will grow day by day. It will be almost impossible to resist those demands. In fairness and in logic, how could we resist such demands if we had conceded referendums for local government?

Legislation such as the Local Government Finance Bill is unnecessary. It would be better by far to rely on the electorate, coupled—if need be—with the sensible and judicious use of the powers that the Government gave themselves last year in respect of the block grant. If the Government use the type of powers that they propose in the Local Government Finance Bill, people such as Mr. Livingstone will be turned into martyrs. I suspect that that is precisely what such people want. It would be far better to leave the electors to get rid of him. Indeed, the Labour group within the GLC may do so before any election.

If the Secretary of State insists on legislation he must first issue a Green Paper on rating reform. Secondly, the legislation should be temporary and that should be emphasised by making it annually renewable. Indeed, the Secretary of State referred to that in his speech. Thirdly, the legislation should allow the Secretary of State to take action against local authorities, subject only to the approval of the House.

I listened carefully to the Secretary of State. For the purposes of this debate, I shall pretend that I have not read the motion or the amendment. However, the Secretary of State paved the way for sensible withdrawal from the position that he took up. Therefore, I am prepared to support the Government, but purely on the assumption that the concept of referendums in this context will be withdrawn, because for that, in a Bill, I will not vote.

7.45 pm

Mr. Bruce Douglas-Mann (Mitcham and Morden)

Like the hon. Member for Devizes (Mr. Morrison) and every hon. Member who has spoken—with the possible exception of the Secretary of State—I strongly believe that local government serves a valuable function which the proposed measures are in danger of destroying. I am sorry that, in a serious debate, the Secretary of State felt it necessary to misrepresent the Opposition's position by pretending that the motion called for total local government autonomy.

Of course, Opposition Members accept that local government cannot be completely autonomous. We would not want it to be. The Secretary of State quoted my right hon. Friend the Member for Manchester, Ardwick (Mr. Kaufman). My right hon. Friend's remarks showed that we accept that the Government are responsible for the overall conduct of the economy. However, the measures that are suggested will probably be used for five or six local authorities. I very much doubt whether the economic consequences of a few local authorities increasing their expenditure and funding it 100 per cent. from rates will be serious. The arguments are well presented in the current issue of the Municipal Review which I strongly commend to the Secretary of State.

The danger is that the proposed legislation will destroy the machinery of local government. Where does the Secretary of State think that the next generation of local councillors will come from? Where will he find people who are genuinely concerned to work in the interests of their local community, instead of those who are merely interested in the prestige and status of being able to call themselves councillors? Why on earth should anyone put up with all the disadvantages of serving in local government, with the hours of unpaid work, the tedium of reading through vast agendas of committee meetings and so on, and the boredom of sitting through one's opponents' speeches—[Hon. Members: "Hear, Hear']—and those of some of one's colleagues. Attendance at local council meetings is far better and more continuous than attendance in the House, so their sessions seem longer than ours. Who would put up with the risk of a personal surcharge as a result of an error of judgment or of interpretation? Who would put up with the risk of penalties for speaking or voting when one has a potential but remote interest?

Who would put up with spending weeks or months of work on shaping a policy that the electorate may never allow him to put into effect? Who would put up with the risk that, even if he is elected, he will be subject to the scorn of Lord Denning for having used his discretion unreasonably? The traditional test of reasonable conduct is that of the view of the ordinary, reasonable man on the Clapham omnibus. I suspect that that particular reasonable man would have adopted a different position—

Mr. Deputy Speaker (Mr. Bryant Godman Irvine)

Order. I understand that the matter about which the hon. Gentleman is addressing the House is sub judice.

Mr. Douglas-Mann

I sought to make a general point. Nothing that I am likely to say will be of concern to the court that will deal with that matter. However, I shall change the subject.

Such discouragements were bad enough in my day in local government. However, since the Conservative Party has been in office, the discouragements have become worse. As a result of the evidence on the sale of council houses given to the Select Committee, I am, more than most hon. Members, aware that local councillors have become very demoralised, because they have been compelled to sell the local housing estates in which they took great pride. Such demoralisation is not confined to Labour-controlled local authorities. We heard evidence from authorities of all political persuasions, and particularly from those in rural areas. They were desperately anxious about the consequences of being compelled to sell council houses against their better judgment.

Local councillors have had to recognise that their ratepayers are liable to be penalised if the Department of the Environment considers that their expenditure is too high; but, up until now, elected councillors could control their budgets. They could provide services if they thought that the community needed them provided that they were willing to take the risk of presenting their case for higher rates and better services at the next council elections. Now the Government have devised a system which makes local councillors no more than agents of the central Government.

The Government are making any council which wishes to spend even a little more than the Government consider necessary levy a first supplementary rate in July instead of budgeting for it in April and collecting it immediately. That involves substantial additional and unnecessary administrative costs and cash flow problems for the local authorities. It involves difficulties for individuals in relation to rate rebates and instalments.

Mr. Bert Bucknall, in the Local Government Chronicle for 16 October, says: I cannot see the reason behind the requirement to have two bites at the cherry with an initial and first supplementary rate, when the authority will presumably know at budget time that it needs the sum of the two rates. I suggest a reason. It is purely political. It is to pile up unpopularity for the council by having a first supplementary rate to make it as near as possible certain that the council will be so unpopular by the time that the second supplementary rate is levied that it will lose the referendum. The Secretary of State grins. Perhaps he acknowledges that.

Mr. Heseltine

The hon. Gentleman is describing the scheme that we have not adopted.

Mr. Douglas-Mann

The Secretary of State has by no means allayed the fears of local authorities on that score.

As a consequence, in any referendum the cards will be viciously stacked against the council. That creates a situation which is contrary to every principle of responsible government. The right hon. Member for Daventry (Mr. Prentice) said that the electors choose a Government for the country or for a local authority to take responsibility for a period of time. I agree. I strongly oppose people who call for unconstitutional action to prevent the Government from carrying out the contents of their manifesto. The Government have a responsibility, and in their term of office they must be permitted to do what they believe to be right. So, within the powers that we have delegated to local authorities, must an elected council.

We must not emasculate a council and say "You have been naughty. You spent more than the man in Whitehall thinks that you should spend. Yes, you can keep your robes and chains and call yourselves councillors, but you can no longer be trusted with money". In effect, that is what the Government are saying to local authorities. That will ensure that self-respecting members of local communities will not be willing to serve. They will have no power to carry out the programmes on which they are elected.

Three other issues need urgent attention if healthy, democratic and responsible local government is to be developed. The rating system is unpopular, but it has many advantages. It is cheap to collect, difficult to evade and people with low incomes are protected. It constitutes about 2¾ per cent. of personal expenditure and 1 per cent. of business turnover. There are unfairnesses in the way that it operates, but they would be tolerable if the total collected through the rating system were smaller. Instead of 37 per cent. of contemplated local government spending being met from rates, between only 15 and 20 per cent. should be raised. For most of us that would mean that the money would be paid out of one pocket rather than another. It would also mean, however, that the difference between the high spending and low spending local authorities would be much more apparent to the rate-paying electors. The electors should be able to make their choice at the ballot box, and then abide by the consequences.

There is an urgent need to amend the rule in relation to surcharges which makes it possible for a local councillor to be made personally financially liable for the loss to the council, which could run into hundreds of thousands of pounds, as a result of what might be no more than an error of judgment or a failure correctly to interpret a complex or ambiguous statute.

Not many right hon. and hon. Members, who authorise the spending of billions of pounds on the nod and seldom with adequate scrutiny, would be willing to accept that risk. However, we are paid to do the job, and local councillors are not. The fact that the surcharge is more often used as a threat rather than a penalty does not detract from its obnoxiousness. It is unnecessary. The courts already provide a forum where unauthorised expenditure or decisions can be challenged, as we have seen. Perhaps we need to improve the machinery by which ultra vires or improper actions can be challenged in the courts. However, if we want constitutional, responsible and democratic local councillors, we must remove the threat of personal bankruptcy from people who carry out their duties conscientiously.

I turn to the personal interests of councillors. We must remove the risk of penalties being imposed on councillors who speak or vote on issues on which they have a general, rather than a specific, pecuniary interest. Judges who are London ratepayers and who use London Transport can decide issues, such as the GLC case. Of course, it is right that they should. They will not be influenced by that. Equally, it should not be necessary for the current issue of the Local Government Chronicle to warn: Businessmen may feel obliged to avoid the planning committee … and parents the education committee That is absurd. I trust that it will be eliminated as rapidly as possible.

Local government must operate within the powers that we delegate to it. Elected local councillors know their local problems, their local electorates and their local resources far better than the Secretary of State or his civil servants. If we destroy the voluntary, dedicated structure of local government which has been built up over many years, it will be hard to replace. The present proposals are likely to destroy it.

7.58 pm

Mr. Terence Higgins (Worthing)

Many hon. Members have concentrated on the referendum issue. That is at the heart of our debate. It is a matter of profound concern on both sides of the House. I share the Secretary of State's concern that excessive expenditure and rate increases by local authorities should be curtailed, but his proposals are the worst possible way to do that. As has been stressed by a number of hon. Members, they endanger our whole system of representative parliamentary democracy. I hope that the Government will think again and will not go ahead with the Bill, which incorporates the referendum idea.

In my right hon. Friend's opening remarks, in response to an intervention, he seemed to indicate that he was prepared to reconsider the matter, but his terminology was not as clear as many of us would have wished so that we could be convinced that he would examine the matter afresh and come forward with better and less dangerous proposals.

I shall set out the fundamental objections to ex tending the use of the referendum in the way in which the Government propose. As Burke said, we are sent here not as delegates but as representatives. We are not simply a computing machine which, if it could define precisely how many of our constituents would vote in a particular way on an issue, would feel obliged to vote in that way. The contrary is true. We are here as representatives to take fully into account all the views expressed by our constituents. We are here to take fully into account all the debates in the House and all the information that we are able to acquire on an issue.

At the end of the day we do not vote simply as if we represent numbers in our constituency. Our duty is to vote as our constituents would vote if they had all the available data, and to vote in the interests of the country. That is a complex task. The idea of a referendum is alien to that system of representative democracy. For that reason, I view with great concern any extension of the referendum principle.

We have precedents for the principle but the issues for which referendums have been used, greatly to my regret, and despite my opposition, as far as national issues are concerned, have been constitutional—the EEC, devolution, the Northern Irish border and so on. On those issues one can reasonably distinguish constitutional issues from others. However, this is a different matter.

Mr. Tam Dalyell (West Lothian)

Will the right hon. Gentleman give way?

Mr. Higgins

With respect, I should like to put forward a complicated argument, so I shall not give way. Also, many other hon. Members wish to speak.

At the other end of the scale, there are so-called local polls. I notice the change from referendums on the one hand to local polls on the other. In the explanatory memorandum, what is proposed is described as a referendum. If we go ahead we shall effectively put in a formal way the imprimatur of the Government and the House of Commons on the idea of a referendum. That is objectionable. I shall deal with some of the specific problems that will arise on the proposals put forward by the Government.

Apparently, the debate before the referendum takes place will be on whether local rates should be increased. However, the people who will vote in the referendum will not be those who pay the rates. Many of those who vote will not be paying rates. More of the total cost of local government expenditure comes from industrial rates than from domestic rates. Those involved in industry and with industrial interests will have no vote in the referendum. That is the first thing that seems wrong.

What form will the question take? There are specific proposals, but I shall not go into details. Presumably the sort of question that will be asked will be "Do you want your rates to increase?" It would not be surprising if many people said that they would prefer not to have their rates increased. The alternative question is "Do you want more spent on local services?" In that referendum one would almost certainly receive the opposite answer. There would be a conflict. It is just such a dilemma that people who are elected to Government must decide. They weigh the expenditure against the taxation. Therefore, to introduce that concept into our fiscal affairs seems to have serious disadvantages.

The Secretary of State sought to placate some of those who object to the extension of the referendum principle by saying that it would be only temporary or that there would not be many referendums. That makes his case a great deal worse, not better. It means that the dangers involved in extending the referendum principle are being opened up for something that is temporary and, in any case, will not affect many councils. That makes it worse than if he said that that was a panacea for all our economic problems, that there would be hundreds of referendums, public expenditure would be brought under control and such a measure would be permanent. I could not agree with that but it might be thought to be worth while. But to say that we will go down that road, when it is a temporary and stopgap measure, seems wrong. The result of the referendum might be perverse and contrary to expectations. In a number of cases the local referendum might produce a result that led to the rates being increased.

The alternative centralist solutions are also worth mentioning. The Secretary of State is concerned that the courts may find that he has not been reasonable. I am not sure that if he concurred with the view expressed in the local referendum the courts would believe that that was reasonable, because one would have to consider whether those voting in the local referendum had had all the data that was necessary to reach a reasonable decision. I doubt whether they would have studied all the ways in which the money might have been spent or raised. Therefore, it is not just the general principle that is wrong and the dangers that are grave, but that there are specific problems in introducing the measure into fiscal legislation in the context that we are debating.

That being so, the Secretary of State is right to ask what the alternative solution is. He put forward one alternative—the so-called centralist solution—that would bring back authority to the House. That is infinitely preferable to the idea of a referendum. At all events, it is a stop-gap. We are all agreed that what is needed is a change in the rating system.

The Secretary of State seeks to placate those who do not like the proposals by saying that the Government will produce quickly a Green Paper on alternatives to rates. I have lost count of the number of Green Papers and other documents on alternatives to the rating system. In addition, the Layfield committee produced a thick report which went into the matter in significant detail and made recommendations. We do not need another Green Paper. What we need are positive decisions by the Government. There is no reason why there should be further procrastination.

It will be said that it will take a while to devise a system that will replace the rates. I confess that I have a simple solution. The rating system, with its many deficiencies, which I shall not recount now, cannot be reformed. The only answer is to abolish it. That is the right line along which to go. Whether one would find an alternative is an interesting thought.

If we introduce a local income tax—I am not in favour of that—will we have referendums on whether local income tax should be increased? If we have such referendums, will we avoid the argument that we should have a referendum on whether national income tax should be increased? That situation should not be contemplated without the gravest consideration of the fundamental constitutional issues that are opened up by what is proposed.

There is a tremendous electoral advantage in abolishing the rating system and transferring the cost of so doing to the Exchequer. It would cost the equivalent of 4p on income tax. I think I heard someone say 13p, but I am talking about domestic rates. That was an answer to a parliamentary question that I received a short time ago. In many ways, it would have great attractions and would still leave local authorities with important decisions on how they spent the money. In many ways, they would have less interference from the centre than now. There is now considerable interference, and it is steadily increasing.

For all those reasons, the Government must reconsider the matter fundamentally before they go ahead with their proposals in legislative form. Sufficient attention has not been given to the matter. There has not been sufficient consultation. If the Government seek to obtain a Second Reading of the Bill as it now stands, incorporating proposals for a referendum, I am convinced, for the reasons that I have set out, that it will be wrong to vote for the measures. At that stage it will not be an extension issue. It will be an issue on which one should make up one's mind. I shall vote against any Bill in that form.

8.8 pm

Mr. A. E. P. Duffy (Sheffield, Attercliffe)

I shall not pursue the arguments of the right hon. Member for Worthing (Mr. Higgins), if he will forgive me. Many people in South Yorkshire are justifiably concerned about the proposals and about the matters that clearly disturbed the right hon. Gentleman—the accountability of local authorities, and, especially, the proposed referendum. It is only fair to say that in that part of England, where there is more deprivation than in many other parts of England, there is currently more concern about the impact that such proposals might have on the maintenance of services and on jobs.

Within one year of carrying through the Local Government, Planning and Land Act, which produced a major change in the relationship between Government and local authorities, the Government have now, in effect, admitted the failure of the Act and are proposing a yet more fundamental constitutional change, all to meet a temporary financial crisis that is of the Government's own making.

The Secretary of State for the Environment intends to make referendums a part of the budgetary process of local authorities. He attacks the principle on which local government has been based—the right of a local authority to determine its own expenditure if financed from local taxation—and he is preventing local authorities from balancing their books at the time of their budgetary decisions, thus forcing them to short-term borrowing.

The implications of the proposals for local democracy everywhere are extremely serious, as has been said from both sides of the House. They can only have a devastating impact on the provision of services and jobs by local authorities such as Sheffield and the South Yorkshire county council.

They are seen, first, as an attack on local democracy. Local councillors have been described by my hon. Friend the Member for Berwick and East Lothian (Mr. Home Robertson) and the hon. Member for Devizes (Mr. Morrison) as those on whose shoulders the sustenance of democracy rests most. They have been led to believe that, within a reasonable framework of what national policies and local resources will allow, they are entitled to provide an environment for their communities and services for those whom they were elected to represent.

Secondly, the proposals seem to threaten the accountability of local authorities. The imposition of referenda not only changes the relationship which they have had with their local communities and which they have valued, especially as expressed through local taxation. In addition, by isolating only the level of expenditure, with the wording of the questions under the control of the Secretary of State, the process would be complex, costly and capable of manipulation.

Thirdly, the proposals smack of injustice. As the right hon. Member for Worthing reminded us, the Government do not subject their own taxation decisions to referenda. They would plead that they have already received their mandate from the ballot box. Why then should local taxation decisions be subject to local referendums?

Fourthly, the proposals stem from false premises, such as that local government is out of control. The fact that that is a false premise was amply proven in the powerful speech of my right hon. Friend the Member for Manchester, Ardwick (Mr. Kaufman). I take up one piece of evidence that he cited. Local authority spending has been close to central Government targets each year from 1975–76 to 1978–79. Despite being faced with several different sets of targets since then, overspend is estimated at only 5.6 per cent. this year. Local government spending is not out of control.

Nor is there, fifthly, an urgent need to protect non-domestic ratepayers. I know of the distress of industry as much as any other hon. Member. Few hon. Members have more industry in their constituencies. I try to have the closest possible working relationship with the industries in my constituency and to give them every possible help. However, I cannot close my mind to the fact that the contribution of domestic ratepayers to the total rates bill has fallen in recent years and that there is no satisfactory evidence that an unfair burden is being imposed on industrial ratepayers.

Finally, the proposals as published are full of technical shortcomings. First, the predictability of the rate yield—a major advantage of this form of tax revenue—will be lost. Secondly, as local authorities lose local financial stewardship, they will be forced into the money markets at short notice. However, at the same time, thirdly, the standing of local authorities in the money markets will seriously decline, as the loss of the certainty of their rate income will increase the apparent risk to lenders. Fourthly, no technically acceptable limit has yet been devised.

Central Government have established several different financial targets for local authorities, and those have very diverse consequences. The South Yorkshire county council has been accused of overspending by 75 per cent. in 1981–82, but, taking other yardsticks and targets, the figure could be as low as 17 per cent.

Fifthly, the provisions of the Bill increase the complexity of the rating system and will confuse taxpayers. We know that even in 1981 and within our mature democracy we cannot take for granted public awareness of the complexity and mechanics of Government.

Finally, the legislation will inflict extra costs on local government. Thus, the Government will be the instrument of increasing overheads for local government while it is pressing local authorities to cut the services that they provide.

In the words of Professor George Jones of the London School of Economics and Professor John Stewart of the university of Birmingham, both distinguished scholars and outstanding authorities on local government: It is likely that the proposals will not achieve their intended effect. The high target for overspending which will trigger the referendum, is likely to encourage spending in other authorities which will feel it safe to come closer to the target. It is therefore probable that Mr. Heseltine will have to admit the failure of this new measure before the year is out. That was stated in a letter to The Guardian on Tuesday. I am aware of no weightier authorities on the subject of local authorities than those two gentlemen.

Why then is the Secretary of State persisting with such ill-thought-out measures in the face of that opinion and of the resistance within his party, as well as from Conservative-controlled local authorities? His only possible purpose can be to control a small number of authorities with whose policy the Government disagree. Everyone in local government in South Yorkshire believes that those authorities may be at the top of his hit list. He resents not only their overspending but also the character of their policies.

They believe that the proposals are designed to restrict spending levels and are, therefore, related to the grant related expenditure assessment and not to the current level of rates being levied. Therefore, it would appear that it is not a straight restriction on how much Sheffield and the South Yorkshire county council increase their current rate but the rate they can levy under the proposed law, related directly to their grant-related expenditure assessment.

However, the assessment is made up of a large number of elements. It is made up of elements that local authorities never really accepted, some of which were deliberately weighted against metropolitan urban areas such as Sheffield and South Yorkshire and which resulted in the switching of resources to the shire areas. Next year that arbitrary form of assessment of needs will be used to judge authorities as overspenders, whereupon they will be subject to the new restrictions and penalties and made to suffer all over again.

Limitations on a local authority's freedom to levy the rate needed to pursue the policies for which it was elected are damaging in themselves, but for metropolitan urban areas such as Sheffield and South Yorkshire, where the Government grant-related expenditure is particularly low, the expenditure limit could easily be lower than current spending, resulting in reduced services and loss of jobs.

In short, the grant-related expenditure assessments put forward as a basis for setting rate limits are extremely crude attempts to measure need. In South Yorkshire, the social need which generates spending is certainly regarded as a good deal more complex, and the current method of quantification is regarded as profoundly unsatisfactory.

What will areas such as Sheffield and South Yorkshire do? They will oppose the legislation, even though we have been told today that it will be of limited duration. Even if both authorities attempted to achieve the Government's targets, it is almost impossible at this stage to predict exactly what that would mean. On all known estimates, it would certainly mean a massive reduction in spending to meet the tightest of the likely limits. Such a draconian exercise at this time would inevitably destroy the current standard of services. More flexible limits at the outset would still pose acute problems for those areas. Therefore, although the Secretary of State gave the impression today that he was trying to accommodate the fears expressed on both sides of the House, I must tell him that he said nothing which might begin to assuage the fears of my colleagues in South Yorkshire.

Finally, both those authorities, as well as the district councils of Barnsley, Doncaster and Rotherham, are excellently staffed as well as represented. So far, I have heard only tributes to those who represent us in local government. I pay tribute also to those who staff local authorities. They are all men and women of high motivation, devoted to the public service and proud of their councils' successful and distinctive accomplishments. That is particularly true of the district and county councils of South Yorkshire.

I hope that the Secretary of State will therefore hesitate before obliging such people to make an almost certainly vain attempt to fulfil his ill-considered proposals when they can plainly see that the minimum savings required to meet the so-called targets cannot be achieved without a significant effect upon jobs or services or the undermining of the policies on which they stand. Their councillors would regard that option as entirely unacceptable.

8.23 pm

Mr. Tony Durant (Reading, North)

I shall be brief so that all hon. Members who wish to speak may do so. I shall not follow the hon. Member for Sheffield, Attercliffe (Mr. Duffy) in all his arguments, but I wish to take up his point about the business rate. I have visited his city, although not his constituency. I went there for the first time quite recently to attend a conference. I was taken to the conference by a taxi driver who did not know me from Adam. The first thing that he mentioned was the commercial rate in the city, so it is not true that there is no anxiety about it. I believe that there is deep anxiety in that area.

I do not wish to follow through the argument about referendums. My right hon. Friends the Members for Daventry (Mr. Prentice) and Worthing (Mr. Higgins) have made the argument extremely well, and I do not wish to take it further. I wish, however, to draw attention to what I regard as the slight humbug on the Labour Benches about intervention in local government. The relationship between the Government and local authorities is not sacrosanct. It has developed over the years. Indeed, local government in its present form is a relatively recent development in the history of this country, so we cannot suddenly regard it as holy—a thing with which we must not interfere. We must therefore consider the whole matter very carefully.

I put it to the Opposition, first, that the Government even now provide 58 per cent. of the money which goes to local government. Secondly, the House lays many statutory requirements upon local government. We pass legislation as though it were going out of fashion and then leave local government to pick up the tab. Labour Governments are the principal offenders, but Governments of both complexions have interfered far too often in local government.

I cite some of the actions taken by the Labour Government. Did not the Community Land Act constitute interference in local government, forcing authorities to assemble land and imposing upon them an entire Act of Parliament dealing with land? What about the Clay Cross people? I support and admire the action taken by the Labour Government to deal with them, but was not it an incursion into local government?

The right hon. Member for Stepney and Poplar (Mr. Shore) interfered in pay settlements. He encouraged local government unions to demand high pay rises which cut right across the efforts of local authorities to keep pay within certain restraints. The right hon. Member for Manchester, Ardwick (Mr. Kaufman), at the conference at Torbay, gave a categorical assurance that the Labour Party would take over all rented accommodation. If he became a Minister, which God forbid, and a particular authority did not wish to take over all rented accommodation, would he force it to do so? He condemns interference with local government, but says that the Labour Party would take over all rented accommodation, so he must answer the question. Would he interfere? It is clear that there is a certain amount of humbug in this.

The Government are, of course, in difficulty on this issue. They wish to do something about rates, particularly business and industrial rates. The problems are the high spenders and the low spenders. By any standards, local government administration in Britain is far too big. In other countries, local government administration is much smaller. In this country, a staff of 3 million is involved. As the Secretary of State pointed out, that is 10 per cent. of the working population. That is an enormous number. Expenditure of £15.5 million is involved. No Government could brush that aside as unimportant. The Government therefore have a right to intervene.

The argument is not whether but how we should intervene. Since last year, we have had the GREA, but it is in its infancy and parts of it are not particularly good. The E7 proposals on housing, for example, which were mentioned by the right hon. Member for Ardwick, require urgent examination. I agree, and I support the right hon. Gentleman in that view. I believe that we may be rushing headlong into a new system without giving it time to settle down. I am told that in coastal resorts problems have arisen because there is not much for coastal preservation in the GRE. That, too, needs to be examined. I do not say that the GRE is wrong, but it is a new system which needs time to settle down. The Government must therefore take care in this area.

On the question of rates and the electorate, one of the difficulties is that council tenants still believe that they do not pay rates, although of course they do. When the rates are increased, the rent appears to rise, so they say that rents have been increased. They do not realise that an element of rent is rates. I urge the Government to consider separating the rates from rents so that council tenants receive a separate rate demand. This was salutary in Lambeth. When the supplementary rate demand was distributed in Lambeth, it went to every individual. The effect was dramatic. Council tenants were saying "My God, a rate demand. What is this? I have never seen it before."

I prefer reconsideration of the whole question of a third of each council retiring each year. There are two arguments in favour of this proposal. The first is the achievement of some continuity, which I believe is important in local government. The second is that councillors have to face the electorate one year after some high spending. The case can be taken to the electorate and argued. A proposal can be put in the manifesto. It will either be thrown out or accepted. I urge the Government to consider this possibility.

I agree that the Government have rights in dealing with the money that they provide. They can do what they like about the element that they provide. I agree that big spenders should be fined.

I should like the Minister to examine the role of parish councils in relation to rate levels. Parish councils in some parts of the country—this is happening in a district not far from my constituency—are causing great difficulty by their demands on the district council. If the Secretary of State is to impose rate levels on local authorities, he must consider the parish councils.

I urge my right hon. Friend to re-think what he is trying to do. At meetings I have attended with councillors up and down the country, most people do not decry the aim of the Secretary of State. The argument is on the way that he is going about it. It is taking a hammer to crack a few nuts—and they are nuts. If there were regular elections in those areas, they would not last long. The public is not stupid. They soon catch up with what is happening. They will put things right if they believe that people are acting foolishly.

I urge the Government to examine this matter again. I am concerned about what is proposed. I hope that following further consideration there will be fresh ideas.

8.31 pm

Mr. R. C. Mitchell (Southampton, Itchen)

At the last general election, Conservative speakers—

Mr. Nigel Spearing (Newham, South)

The hon. Gentleman was elected as a Labour Member.

Mr. Mitchell

There is something wrong with the acoustics, some humming in the background. At the last general election, many Conservative speakers toured the country advocating greater freedom to local authorities. Since the Government came to power there has been a succession of measures, one after another. All have slowly but surely diminished the freedom of local government. This is an inevitable part of trying to run the economy on monetarist lines. It must mean taking central control of all expenditure. It must diminish the freedom of local authorities.

The monstrosity that we are discussing today is the last straw. It has been condemned by every responsible organisation connected with local government. It has been condemned by virtually every council, including Conservative councils, as striking a severe blow at local democracy. I attended a meeting this morning of the district councils in Hampshire. All are Conservative controlled, as one would expect in Hampshire. Speaker after speaker condemned the proposals that the Government are introducing. The Government had no friends among the Conservative councillors at that meeting.

The councils also objected strongly to the lack of consultation before the proposals were introduced. I understand that the technical memorandum that preceded the proposals was issued only at the end of September this year. Local authorities were given about three weeks in which to comment on what is a fundamental constitutional change in their position. This is treating local government with contempt.

I should like to refer to a document sent to all hon. Members representing constituencies in Hampshire by the Hampshire county council. It will not surprise hon. Members to learn that the council is fairly overwhelmingly Conservative-controlled, as has been the case in living memory. It says: Local government has already been forced to accept central Government targets for grant purposes and for capital expenditure. It now faces the prospect of absolute targets for revenue expenditure as well. Targets can be manipulated by the centre to force an authority to spend at a level either lower or higher than it desires. The setting of yet more targets will actually encourage higher spending and borrowing levels in some cases. The proposals also debar an authority from rating to meet its total planned expenditure. The references to supplementary rates in the proposals are misleading. At present, supplementary rates are sought only when an authority finds during the course of a year that the original rating levy is going to be insufficient. Under the new proposals, supplementary rates will become in some cases a means of 'topping up' income to allow the original budget plans to be financed. An authority should always rate or tax immediately for the total of its revenue expenditure and should not be allowed to mortgage future generations of ratepayers. Those are great words of wisdom from a Conservative-controlled local authority.

If this country is to be governed efficiently, central Government and local government must work together in harmony and must not be in perpetual conflict. The Government must not seek to dictate to local government—Whitehall does not always know best—but, equally, those in control of local authorities should not try to use their position to force a direct conflict with the elected Government of the day.

To deal with a few recalcitrant local authorities the Secretary of State seems to be willing to destroy the relationship that exists between central Government and local government. As the hon. Member for Reading, North (Mr. Durant) said, he is taking a sledgehammer to crack a nut. I agree that there are a few nuts. Those few local authorities that have imposed swingeing rate increases well above what is reasonable do great damage to local government. Not only do they cause unemployment in the area because firms move out, but they impose intolerable burdens on ordinary people who have to pay the price. Some of those unreasonable burdens, particularly in the London area, are the fault of the Secretary of State, due to his manipulation of the block grant. Others are due to the profligacy of a few extremist authorities.

The proposals on referendums are ill conceived and ill thought out. The democratic process in this country depends on an elective test of a wide range of policies and programmes, which include financial policies. To take a single issue for a referendum is a bad and expensive means of obtaining a public view on the complex issues involved. In the long term, many extreme policies could be eliminated by a fundamental reform of the voting system. Until that occurs—as it inevitably will—I re-emphasise a suggestion that was made by the hon. Member for Reading, North.

My experience in local government has shown that there are less extreme policies in those councils where one-third of the councillors retire every year and annual elections to the council are held. That is a valuable suggestion as a possible alternative to a referendum. If the London boroughs held annual elections of a proportion of their membership, instead of councillors being in office for four years, we would not have some of the silly policies that are put forward today. Nothing concentrates the mind of a councillor more than if he knows that he or some of his colleagues have to face the electorate the following year. I should like the Minister to make it compulsory for all district councils at least, and certainly all London boroughs, to hold annual elections, with a proportion of their councillors retiring every year.

I urge the Secretary of State to withdraw the proposals and to concentrate his mind and efforts on producing suggestions for a fundamental reform of the rating system. I know that it will not be easy. There have been many reports, White Papers and Royal Commissions on the matter ever since the war, all seeking alternatives to the rating system. Perhaps all that the Secretary of State need do—instead of wasting time writing a new Green Paper—is to look out the 1971 Green Paper, dust it off and reprint it. I doubt whether any new ideas have been put forward since that Green Paper was published and I am sure that no new ideas have emerged since the Layfield committee report.

The Hampshire county council said in its message to the Prime Minister: At a meeting this morning Hampshire County Council voted unanimously to oppose the proposed legislation on new rating procedures. The County Council has consistently played its full part in containing public expenditure and stands on its record. Nevertheless, we believe that the proposals which have been placed before you are seriously flawed on both financial and constitutional grounds. We do not think that they will meet the short term aim of curbing the profligate on the one hand, while on the other we are certain that in the long run they will impair efficiency and lead to worse services at greater cost. Members and officers of this County Council stand ready to assist your Government immediately in framing alternatives to meet the present needs, but we urge you respectfully, yet most earnestly, not to proceed with the proposals presently before you. I echo those words, which could have been written by almost any council in the country.

The SDP will vote for the motion, even though we recognise that there is a slight defect in the wording, but we make it quite clear that we are totally opposed to Ken Livingstone, Ted Knight and the other extremists who are bringing local government into disrepute.

8.41 pm

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

A consideration of Parliament's attitude towards local government in the past 40 years is a melancholy one. Time and again and in Bill after Bill, Parliament has adopted a policy of cnetralisation and we have seen almost a Becket-like principle; "Who will rid me of local government, and who can do it soonest?"

Many services that local goverment use to perform have gradually been taken away from it, including electricity supple and distribution, gas, water, sewerage, hospital services and local health services. Has the transfer of those powers and functions led to a better service to the community?

Anyone who remembers the services as they were when run by the local community will agree that nowadays there is usually a rotten service, which is vastly expensive and has involved massive staff increases, enormous bureaucracy and less service to the people. It is generally less responsive.

Local authorities are not perfect, but I have been offended by the argument that has got through to the public, that if any hon. Member is against the proposed referendums he is, therefore, in favour of high-spending authorities. Because a person stands clearly on the principle that referendums should not become an established part of our procedures—with the result that councillors and hon. Members will become delegates instead of representatives—that does not mean that he is in favour of high-spending authorities.

The Government have panicked. They have looked at the figures and someone has bullied my right hon. Friend the Secretary of State for the Environment and told him to play his part and a bit more. I know that some of the cuts have been made in capital projects, which is a bad thing, but let us remember the Blue Books, Red Books and White Papers on future Government expenditure that were produced when we first came to office.

I say to any Minister who claims that local authorities are ruining things that if the Government had got their cuts only half right interest rates would be about 6 per cent. now. Our problems have not been caused by profligate local authorities. They have to pay high prices for energy, high charges for gas and so on.

Democracy, local and central, is often inconvenient, uncomfortable and fractious. But is any other system devised by mankind as good as the system we have today?

The Minister would be right to ask me what I would do. I was strongly in disagreement with the Local Government, Planning and Land Act 1980. I am now even more pleased that I voted against it. The 1974 Local Government Act set up the weird county authorities which many hon. Members now agree should be changed. Local authorities should not have a four-year run of office. That is quite incredible. It can and should be changed, and I am sure that this House would pass a speedy Bill to see that every local authority had a third of its members re-elected every year.

Council tenants should clearly understand that in their rents they pay heavy rates. I agree with what I believe the Government wish to do. The way to bring the problem home to people is not to go in for a system of referendums, where Granny Whitehall knows best. Having worked for about 20 years in local government, I am aware that it certainly does not. Better, more sensible and responsive people, with more interest in their communities are to be found in town halls than in Whitehall.

We must encourage people to vote. Most people vote with their backsides, but there is one way to get them to move. The domestic rate relief of 18.5p should gradually be moved over to an industrial rate relief. If local authorities wish to have a right to spend that money, they should be willing to defend it to their electorate. The whole idea of local democracy is not that local authorities should have one bag of gold after another to spend as they wish but that they should be able to explain to people what they wish to do with the money and allow the people to vote. Voting every May is a first-class idea.

If we are meant to be a democracy, the one thing that has to be made clear is that the rating system may seem to the professional to be a good idea, but to the man in the street, who pays his rates in anger, it seems unfair.

Successive Governments have all promised to do something about the rating system. I have the greatest regard for the Prime Minister's knowledge of local government. She said that she would do away with rates. If there is any electoral promise that people always demand that Governments keep it is this. People will still have to pay for their services but the rating system seems unfair. If enough people think that it is unfair, even though we clever dicks think that it is as good as any other system, it should be changed. That is what being responsive to democracy means.

The Secretary of State made one fundamental error when he said that all have to play our part in cutting expenditure. That was when he said that he would be willing to let local authorities borrow money. If local authorities are allowed to raise rates, that does not affect the PSBR—the magic figures of today. However, if local authorities borrow money, that affects the PSBR. I know a little about treasury affairs, and the one thing that local authorities should not be allowed to do is to borrow money. If money has to be raised, let it be raised by the rates, but let us hope that within a very short time it can be raised on a system that is more just.

Let us defend local democracy, not overspenders. Let us defend the right of local authorities to make mistakes. Let them go to their electorate each May, so that the electorate can tell them whether they were right or wrong. That is far better than adopting a panicky, escapist measure about referendums—a system that no Conservative Government should use.

Democracy is not some kind of expedient. We should hold on to the belief that people have a right to be difficult and fractious. The democratic way of life in this country should be regarded as inviolable. The local government way of doing things is the right way, and we should not deprive local authorities of their powers.

8.50 pm

Mr. Frank Dobson (Holborn and St. Pancras, South)

There are three really objectionable features of the Government's proposals. The first is the referendum, about which several hon. Members have spoken. It may to some extent be a red herring—or, rather, a blue herring.

An even more objectionable feature is the extent to which the Government's proposed measures will allow the totally arbitrary interference by the Secretary of State in the expenditure of local authorities and in the amount of grant that is given to them.

The third objectionable feature is what is described as a measure of protection for industrial and commercial ratepayers. It springs in part from the Government's desire to perpetuate the myth that British business is overtaxed. It simply is not true. In 1980, the corporate business sector contributed only 8.4 per cent. to total Government revenue—and that included petroleum revenue tax.

The extent to which the payment of tax can be avoided by big corporations is so enormous that Britain is now regarded by the major multinationals as a tax haven. While small businesses may suffer, the big corporations and multinationals have reached the stage at which they pay corporation tax only by accident, or if their accountants are incompetent. That is one reason why rates come as a great shock, particularly to large businesses. It is the one tax that their accountants and lawyers cannot fiddle their way out of; they have to pay it. It is worth remembering, when talking about non-domestic ratepayers, that they can all set their liability for rates against their tax liabilities. Consequently, large numbers of them do not, in effect, pay any rates.

The area in which I live, and which I also represent, has what can only be described as rather high rates. That is partly because the London borough of Camden received no grant from the Government this year; nor did the Inner London Education Authority, which was robbed by the Government of £128 million.

Although some small businesses are in danger of being driven out, other businesses seem desperately eager to move into the area, despite the high rates about which they complain. The Confederation of British Industry moved into Centre Point not long ago and is now moaning about the rates that it has to pay. About two years ago, the CBI was on its knees, begging and praying the Camden local authority to change the use class of part of that building in order to facilitate the CBI's use of it.

I understand that Times Newspapers has also been moaning, and even went to the extent of changing its architect, so that it could get through its scheme for its new premises in Grays Inn Road.

Another gigantic office development in my area is that of EMI. When the Chancellor of the Exchequer was one of the directors of EMI, it said to the Camden council, and at subsequent inquiries and at appeals before the courts, that it could not survive or compete internationally unless it went into a large building that was being constructed in Tottenham Court Road. Not a word was said then about the extent of the rate burden that it would have to pay.

Another organisation that is very close to the heart of the Conservative Party is Saatchi and Saatchi. That firm is so desperately oppressed by the commercial rate in Camden that, without benefit of planning permission, not long ago it extended its offices into property which at that time was zoned for light industrial purposes.

All of these organisations are very keen to move into central London despite the fact that they have very high rate burdens.

I am very disturbed at the prospect of the Government abating rate increases for such organisations and, at the same time, not seeking to abate rate increases for people who live in London. I have considerable sympathy with small businesses in London because of the rates that they must pay, but I hope that they will recognise that the main reason for the increase in the rate burden on residential and non-residential ratepayers in London over the last year is the robbery by the present Government of about £450 million in one year. That is the main reason why there have been rate increases in London, and it is not the sort of madnesses referred to by the hon. Member for Southampton, Itchen (Mr. Mitchell), who is apparently such an expert in the affairs of London local government—and who has now disappeared.

8.55 pm

Mr. John Butcher (Coventry, South-West)

In the five minutes available to me, I should have found it extremely agreeable to respond to the reference by five hon. Members to the Coventry referendum. I do not have time to explain why that referendum had a number of curious features that may have led us to conclusions that were not entirely accurate.

I should like to refer to two documents. One is a discussion paper entitled "Decentralisation of Government" which was produced at the Social Democratic Party conference this year, and the other is entitled "An Encyclopaedia of Local Government Law." Unfortunately, Social Democrat Members, in a poorly attended debate on their part, are no longer with us. I can only assume that they are in a buffet car somewhere between Euston and Croydon, enjoying rhyming couplets and a general singalong. I beg the pardon of those hon. Members. I made a Freudian slip. The buffet car is somewhere between Euston and Crosby.

The Social Democrats emphasise that this is a discussion document, because policies are something to be feared rather than projected. They say in the document: There is no evidence that local micro-economic intervention need upset central Government's macro-economic calculations and if local decisions were in the hands of those with local knowledge who were locally accountable, it is reasonable to expect they would be relevant to the locality and therefore effective. They use the words "no evidence."

The fact that we are having this debate is surely indicative of the conditions surrounding the relationship between local government and central Government. There is ample evidence that the microeconomic decisions of local government often clash with the macroeconomic decisions of the Department of the Environment and its Ministers.

This pitiful, sorry, policyless document goes on, when it discusses regional elected assemblies, to say: In some parts of the country the boundaries will suggest themselves. In others the public identification with the particular locality will follow, rather than precede, the delineation of regional boundaries". What that means is that even though one may have no loyalty to or identity with a particular region at the moment—in the way that Coventrians no longer have any loyalty to or identify themselves with the West Midlands county region—"We, the SDP, will tell you what your region is and you will grow to like it, will you not?"

The hon. Member for Southampton, Itchen (Mr. Mitchell) accused the Government of arrogance in their dealings with local government. That shows the arrogance of those who think that they were born to lead, the arrogance of those whose shock troops are the militant middle management of the public sector. My goodness, they are serving their supporters well in this sorry document.

The only other document to which I should like to refer is the one published by Sweet and Maxwell entitled "An Encyclopaedia of Local Government Law". It lists all those Acts that have affected local government since 1970. There are 148 in total. I am ashamed to say that 23 of them were passed in the last 18 months by this Government. Parliament has imposed thousands of measures upon local government during the past 10 years. That is why there are now 500,000 more full-time employees in local government than there were in 1970. We must review the weight of that legislation and, if necessary, repeal it.

If my right hon. and hon. Friends were to start with the abolition of the West Midlands county council, they would be cheered to the echo. We would hear the noise at this end of the M1. The arguments deployed for the abolition of the West Midlands county council may be frighteningly similar to the arguments deployed against other metropolitan county councils and that awesome body the GLC.

9 pm

Mr. John Forrester (Stoke-on-Trent, North)

There have been many periods of strain between local government and national Government, but relations have never been as bad as they are now. The Secretary of State has welded a united band of councillors, of all political persuasions, that would not have been thought possible years ago. They stand united against the Whitehall juggernaut.

The message that we received from the Staffordshire councillors was that if Whitehall is to decide what is spent—and when and where it is spent—there will be no need in the future for free-thinking men and women with a social conscience serving on local councils. Many of those serving in local government will fade away and leave the way open for others whose motives may be different from those of the councillors who have, on the whole served Britain so well for so long. That would be a tragedy for Britain and for local government.

Most local authorities have played fair with the Government. They have tried to achieve their targets, but they are somewhat annoyed when, once the target is in their sights, it moves away. Sometimes when they achieve their target they receive notice of a hold-back of their rate grant. That may be due to some miscalculation by the Whitehall computer, despite the fact that figures have been presented to the Government. That attitude is demoralising, both for councillors and for the officials who feel now that they are always walking on shifting sands. My right hon. Friend the Member for Manchester, Ardwick (Mr. Kaufman) produced evidence that local authorities are better than central Government at controlling their expenditure.

One problem is that local authorities are being asked to contract when there is an ever-increasing demand for their services. The increasing demand is imposed upon them by new legislation from the Government. There is also a feeling that the Government are trying to use a broad brush approach and are insensitive to local problems. The Secretary of State has recently seen and appreciated the magnitude of inner city problems in Liverpool. To a greater or lesser extent, those problems apply in all of Britain's major cities. He now knows that we cannot solve those problems with massive cuts in local expenditure.

No one doubts that rates are an unwelcome expenditure. No one wants to pay rates. Nor do they wish to pay taxes. However, we do not need a referendum to tell us that. We know that the nation's answer would be that it does not wish to pay any more. If we introduce Government by referendum in Britain, the Secretary of State will be making a grave error of judgment. A referendum should be used only for great constitutional changes in society.

We have a very good method called local elections. I support the view put forward earlier that if four years is too long for a council to sit—even a county council—we should change the law so that one third or one quarter of councillors retire every year. That is sufficient incentive for councillors to keep their houses in order. If Government by referendum is to become part of the British way of life, where will it end? Will we degenerate into referendums on individual topics such as a town hall here and an old folks' home there? That appears to be the position that will come about.

Many hon. Members on both sides of the House hold dear to their hearts various services and issues that they would not wish to be the subject of a referendum because they would be fearful of the results. The battle cries of TINA and TINOW—there is no alternative and there is no other way—cannot be right. Few things in life respond to only one approach. The Secretary of State should know that there are those in local government who recognise his problem. There must be ways to control the few big spenders other than by destroying local democracy for the innocent and guilty alike.

I ask the Secretary of State to think again before he introduces this legislation. I ask him not to open that Pandora's box. I ask him not to put on the statute book powers that he would not have urged on another Government—powers that he would not willingly have voted for when in Opposition. Laws made for short-term expediency have a habit of becoming long-term shackles in other people's hands.

The lessons of Croydon, Camden and Coventry have been well learnt in the town halls and political offices throughout Britain. They will take due note of them without the necessity to introduce a dictatorship into local government.

9.7 pm

Mr. Bruce Millan (Glasgow, Craigton)

The most significant feature of the debate has been that not one hon. Member from either side of the House, with the exception of the Secretary of State, has supported the proposals. There were eight Conservative Back Bench speeches, and not one supported the proposals. As I listened to the right hon. Gentleman I was not sure whether, towards the end of his speech, even he was convinced about his proposals. He certainly did not convince either side of the House. I hope that that will be reflected in the Minister's reply. In view of the contributions from both sides of the House, it would be a travesty of the debate if there was not a positive and constructive response from the Minister.

A number of hon. Members said that they were expecting great things of the Government's proposed consultative document on the reform of the rating system. They want to believe that there will be great things in the document. I am sceptical whether that will be so. We have been over that ground before on many occasions. I doubt whether there will be anything original in the document. A report today in the Financial Times of evidence given by the Inland Revenue shows that local income tax—one of the favourite alternatives to rates—could not be introduced for a number of years for technical and other reasons.

The right hon. Gentleman said that the Government were serious about reforming the rating system, that they had alternatives to put before the House in the form of a Green Paper, that there would be consultation, and that the Government would press ahead as rapidly as possible. If that is the Government's intention, it is all the more extraordinary and unnecessary to press ahead with the Secretary of State's proposals now. If the Government intend to make fundamental changes in the rating system within a measurable period, it does not make sense to introduce proposals which are so controversial and which are opposed by all local authority associations and by large numbers of Government supporters in the House.

One of the arguments we have heard today about local government expenditure—important in terms of the economy as a whole—is that it is out of control. In an extremely able speech this afternoon, my right hon. Friend the Member for Manchester, Ardwick (Mr. Kaufman) mentioned some figures which were published by the AMA. In whatever way one considers the comparison between local government and central Government expenditure over the past six or seven years, it is not possible to argue that local authorities have a worse record over the control of their expenditure than central Government.

Details such as how far a particular base year is sensible and appropriate can be argued about. The division between current and capital expenditure can be argued about, as in a rather laboured passage of his speech the Secretary of State did this afternoon. However, the overall picture is not disputable. It is indisputable that local government has a better record of controllong total expenditure than the central Government.

There is a close link between capital and revenue expenditure. It is a fallacy to imagine that while we attempt to screw down local authorities' current expenditure, a stimulus to capital expenditure can be obtained at the same time. Capital expenditure has revenue consequences. The CBI and some hon. Members today have called for reflation by means of local authorities' capital expenditure without giving some leeway to their revenue expenditure. They are crying for the moon. That will not happen, because it is not in the nature of local government that we can have one without the other.

The Government have gone well beyond saying that local government expenditure is too high. They have said that it is they, and they alone, who should decide the total of local government expenditure. The Secretary of State tried to pretend that that had always been the position, whatever Government were in power. Successive Governments had taken the view that the Government alone should decide the total of local government expenditure. That is not so, and the right hon. Gentleman's attempt to describe what happened under the previous Labour Government does not carry conviction.

It would be futile to argue that any Government are unaware of or are indifferent to total local government expenditure. Of course they are not. Every Government—whether Labour or Conservative—are interested in the total of local government expenditure. If, in the Governments view, total local government expenditure is likely to be too high, they try to persuade local government to reduce its expenditure, or at least to confine it to parameters that the Government of the day believe are in the national economic interest.

Long before the 1980 legislation and before the Local Government (Miscellaneous Provisions) Act 1981, the Government had powerful weapons in their hands to control local government expenditure. As the right hon. Gentleman stated, local authorities are virtually unable to spend anything on capital account without the central Government's permission. If it is revenue expenditure, the pressure that can be exerted on local authorities under the old system of rate support grant to keep total expenditure within reasonable limits is great indeed. That was true before the Government's misguided attempts to interfere with the system in 1980 and 1981.

While every Government certainly take the view that local government expenditure is something that they should be interested in and should try to influence, this is the first Government to attempt to impose an overall control on local government expenditure by Act of Parliament. All previous Governments have taken the view that central Government contributions towards local expenditure through the rate support grant, or in other ways, are matters for the central Government. They have taken the view that, in the last analysis, local government's contributions to its own expenditure should be the responsibility of local government itself.

The Government say that total expenditure should be controlled directly by the central Government and that the only decisions made in that regard should be those of the Government. That is fundamentally antithetical to what we understand to be local democracy. It is the first major mistake that the Government have made, and it is the first injustice that they are imposing on local authorities.

Part of the Government's defence has been that it is necessary to take the action that they are proposing because, although most local authorities are reasonable, a few do not listen to any advice from the central Government.

I take up one of the arguments that was advanced by the hon. Member for Staffordshire, South-West (Mr. Cormack) in an interesting and effective speech. The essence of local democracy is that some local authorities should behave in a way that the central Government find disagreeable. Otherwise, every local authority will be turned into an agent or creature of central Government. Every Secretary of State, whether for Scotland, the Environment or anything else, must accept that if local democracy is to mean anything, some authorities will behave in ways that he finds unacceptable or disagreeable whatever pressure he might apply to them. That is no reason for changing local government's financial system. It is certainly not a reason for changing the system in favour of the central Government and against local democracy.

The Government have to deal with not a few local authorities. I am pleased that the Secretary of State for Scotland has taken his place. He has not been here all day but I am delighted to welcome him now. When the right hon. Gentleman issued his guidelines to Scottish local authorities, 59 of the 65 authorities were spending in excess of the guidelines. The overspenders were not just a few recalcitrant authorities. Nearly half of them—28 authorities—were about 20 per cent. above the guidelines. My right hon. Friend the Member for Ardwick demonstrated that while some Labour authorities in England were spending in excess of the Government's assessment of what they should be spending a considerable number of Conservative authorities were in a similar position.

Against that background, the Government are acting not only as if they know enough in Whitehall or at St. Andrew's House to determine the total amount of local government expenditure and to try to coerce local authorities to stay within that grand total. They are claiming to know enough to lay down limits of expenditure for individual local authorities. That is demonstrable nonsense. No Government and no Department can possibly know enough about local circumstances to be able to lay down in detail the right expenditure for any individual local authority.

Scotland has had experience over the past few years of the Government's penalties. Local authorities have been asked to respond to the Secretary of State's demand for reduction in expenditure. The local authorities supplied the right hon. Gentleman with details of their local circumstances. It was demonstrated beyond peradventure that, even in Scotland, which is a smaller country than England and Wales taken together, with fewer local authorities, with a much smaller population and with an intimate relationship between the central Government and local government, it was impossible for the Scottish Office to know the details about individual local authorities' circumstances—details that it would be necessary to know if we accept that the principle should be applied—to enable it determine what penalties to impose on individual local authorities for spending beyond what the Government considered to be reasonable amounts.

It is significant that the Secretary of State for Scotland has refused to give details to the Scottish local authorities of how he has drawn up the guidelines that he expects them to follow. Yet the idea of the Government knowing best is now to be taken beyond the 1980 Act in England and the 1981 Act in Scotland to the new proposals that we are now debating.

Before I deal with those proposals I want to give more details of the background, which is important to the whole question of the relationship between local authorities and the Government. The Government have not dealt with local authorities honestly during the past two and a half years. Not only have they asked for cuts in local government expenditure, but they have asked for unrealistic targets, despite the right hon. Gentleman's protestations this afternoon. He seems to think that if some authorities can meet his targets every local authority should be able to do so. What a non sequitur that is. Moreover, he says that the targets are perfectly reasonable and realistic.

That is absurd. Many local authorities believe that the targets laid down for them by the Government are unrealistic, and they are also suffering the penalty that the cash limits imposed on them by the Government each successive year have included wholly phoney inflation limits which have not met the real inflationary expenditure which local authorities have had to meet—from no wish of their own, but as a result of the general economic situation.

In that wholly dishonest situation, expenditure limits have been unrealistic, and doubly so, because they have been accompanied by cash limits that have not allowed local authorities to meet the inflation that has been imposed on them by Government policy. That is why, as my right hon. Friend the Member for Ardwick said, there have been reductions in expenditure, poorer services and at the same time soaring rate bills for domestic and other ratepayers. The main responsibility for those soaring rate bills lies with the Government, not with local authorities.

As well as soaring rate bills, the new proposals will mean that there will be an even greater breakdown of confidence between local authorities and the Government. The relationship between them is now at a lower ebb then ever before in recent history. The relationship has been damaged because Ministers have often sought to stimulate and encourage prejudice by ratepayers and others against local authorities.

I was glad to hear the hon. Member for Devizes say that virtually all local authorities and councillors are trying to do a decent job for their areas. Much as I may disagree with Conservative councillors from time to time, I believe that that is true of most of them as well as of most Labour councillors. It does no good to local democracy, to the Government or to the House, to stir up prejudice against local authorities. That is an unfortunate result of the great battle between local authorities and the Government, and it has been encouraged by Ministers both in the Department of the Environment and in the Scottish Office.

It is hardly necessary for me to repeat the arguments against the referendum proposals. However, I repeat that no hon. Member has defended these proposals today, not even to a limited extent. If there are any Conservative Members who are prepared to defend them, it is a pity that they did not do so. The proposals have no friends in the local authority associations, in the House, in the media, in the press or in the country.

In those circumstances it is extremely foolish of the Secretary of State to press ahead and publish provocatively a Bill while he is in the midst of discussions with members of his party. As a result, he has not had a single friend in the House today.

The referendum proposal is dangerous, not only for local democracy, but for democracy in general. Some hon. Members have speculated about the result of a local referendum. They have pointed out that it might produce perverse results. If the Secretary of State lays down the terms on which a referendum is to be held, if he sets the question and it is concerned solely with whether the rates should be increased, the referendum will be phoney. People will not be asked to make a sensible choice In such circumstances, no authority could win.

I am sorry to say that such action is reminiscent of the tactics used by authoritarian Governments—of both Right and Left—all over the world. They hold phoney general elections, in which 90 or 95 per cent. of the electorate are apparently in favour of the Government of the day. Such elections are completely phoney and so is the poposed referendum.

An analogy can be drawn. If it is good enough for local government to hold referenda, why cannot the same type of referendum be held for Budget proposals? In 1979, why should not the Government have put the doubling of VAT to a referendum of electors and taxpayers? Why should the decision not to increase personal income tax allowances—contained in the 1981 Budget—not he put to a referendum, so that we can see how the people feel about it? On populist measures, why should we not put the question of capital punishment to a referendum? Few hon. Members would believe that to be sensible. It would bite at the roots of parliamentary democracy.

The Government will no doubt say—whether in relation to Budget proposals, or anything else—that they have a mandate for what they are doing. We may or may not like that, but it is up to the Government to discharge their mandate and put their record to the electorate at the end of their term of office. That is a valid argument, and if it is valid for the Government it is valid also for local authorities. That is the type of decision that electors should take. They should not be faced with some phoney referendum, with a choice that will almost inevitably go against the local authority and is calculated to stir up even more antagonism towards local democracy.

An interesting comparison can be drawn between the Secretary of State's decision in relation to England and Wales and the decision that has been made in relation to Scotland. We are glad to see the Secretary of State for Scotland in the Chamber.

Mr. George Foulkes (South Ayrshire)

Why is he not replying?

Mr. Millan

The right hon. Gentleman does not have a reply. As recently as last month he told Scottish local authorities that he would go ahead with a referendum. Why has that decision been dropped in the last month? The excuse that is being given is that the Government have decided that they have sufficient powers in Scotland. However, they have not gained any new powers between October and November, or between the date on which the proposals were put to the Scottish local authorities and the day, last week, on which they decided to drop them.

The Government have dropped the proposals for Scotland because they were unanimously condemned by Scottish local authorities and by many Conservatives, who previously supported the Government in their actions in relation to local government finance. The Government did not have a single friend in Scotland—among local authorities or anywhere else—for their proposals. They have no friends for their English proposals either. If the proposals are to be dropped for Scotland, why should they not be dropped for England and Wales?

Mr. Ioan Evans

There is complete unanimity in Wales on the condemnation of these measures.

Mr. Millan

I should expect that from Wales.

The Secretary of State said that he had an open mind on the matter. That was a revelation. It was a change from his behaviour during the last few days. If he has an open mind and is willing to consider alternatives, we are entitled to an explanation of the alternatives. It is not enough to be offered the vague proposition that if he does not go ahead with his proposals he will introduce other measures that will result in more local democracy or more central Government intervention. We are entitled to more detail than that.

Some hon. Members have suggested that we should go for the Scottish option. Let me make the position clear. Government Members had better understand that there is no question of either my right hon. and hon. Friends or local authorities in Scotland finding the Scottish option acceptable. The Scottish local authorities are against what is being done in Scotland. If similar measures are introduced in England and Wales, there will be considerable hostility among the English and Welsh local authorities.

The Scottish option contains all the objectionable elements except the referendum. We are grateful for small mercies. All other aspects of the scheme are objectionable. There are no supplementary rate powers for Scotland. Under the 1981 Act the Secretary of State can determine local spending. He can do that on an individual basis and he does not have to justify his action. He has arbitrary powers and will not have to explain the guidelines. He does not even have to justify the choice of authorities that he singles out for penalty under the Act.

If those arguments do not appeal to Government Members, I warn them that one of the arguments in favour of the Scottish system was that it would allow the good and bad authorities, in the Government's estimation, to be dealt with differently. The good authorities were supposed to escape scot-free and only a few recalcitrant authorities were to be dealt with. However, every local authority in Scotland is being penalised this year by the Government. That is so whether they have attempted to co-operate with the Government and whether they are Tory or Labour controlled. All local authorities in Scotland are being penalised and have had their rate support grant reduced. If anybody believes that there is a solution for authorities in England and Wales in the Scottish option, they could not be more wrong and will be disillusioned.

We require neither the English nor the Scottish option. The Government's whole approach to the problem is wrong. Their attempt to push through the idea that the Government know best, that only the Government have a right to decide local authority financial matters, is at the root of the problem.

That whole idea, far from encouraging a conciliatory or helpful approach by local authorities, simply provokes local authorities into opposition. If the Government had attempted to maintain the normal harmonious relationships between themselves and local authorities with regard to total expenditure, they would have done a great deal better from their point of view than they have so far.

During the debate hon. Members on both sides of the House have said that there is a desperate need to restore confidence between the Government and local authorities and to try to recreate the harmonious relationship which by and large, although with exceptions, has existed for many years. We badly need that new relationship. The first step towards creating it would be to abandon the referendum proposals. The Secretary of State will not be able to carry through those proposals. He would do better to give in graciously now and accept the Opposition's motion.

9.36 pm

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

We have had a serious and interesting debate on local government and its relationship with the Government. A number of hon. Members have spoken of their experience in local government. The hon. Member for Mitcham and Morden (Mr. Douglas-Mann) struck a chord in describing his concerns about the morale of councillors and the hardships that they must face. He described as one of those hardships the boredom of having to listen to one's opponents' speeches. At certain moments in the debate that also struck a chord with me. I felt that that problem was not confined to councillors.

I understand why the right hon. Member for Glasgow, Craigton (Mr. Millan) dwelt on the situation in Scotland, particularly the Lothian regional council. The action taken by my right hon. Friend the Secretary of State was the only responsible action that he could have taken in the circumstances, when faced with such gross overspending. I understand that, faced with such a problem, the right hon. Gentleman would have done nothing, but, in all candour, that hardly seems to ring true. He was a member of a Government who were faced with a similar situation. The then Secretary of State for Transport was not prepared to put up with high overspending in England.

With regard to the relationship between the Government and local authorities, most hon. Members recognise that the Government have a responsibility to set the macro-economic targets and fix the overall levels of public expenditure. It cannot be otherwise. I shall not rehearse the arguments and quotations of my right hon. Friend the Secretary of State, but the House knows that the late Anthony Crosland, when he was Secretary of State for the Environment, and the right hon. Member for Stepney and Poplar (Mr. Shore) made clear their determination to secure the overall levels of public expenditure represented by the sums involved in local government services. The right hon. Member for Manchester, Ardwick (Mr. Kaufman) knows that he was a member of the Government and a Minister in the Department of Environment when that policy and approach were being followed. Therefore, as my hon. Friend the Member for Devizes (Mr. Morrison) said, it is extremely hypocritical to suggest that it is just this Government who have taken such a keen interest in the levels of public expenditure in local government.

The clearest impression that I have had in my time as a Minister in the Department of the Environment is that every responsible local government leader, regardless of party, has made it absolutely clear that he accepts entirely the proper role of the Government in setting those overall expenditure targets. Moreover, they take pride in achieving over the years their overall public expenditure targets.

However, we must recognise that that was at a time when expenditure was consistently increasing, especially in the post-war period. The problem is much more difficult when public expenditure is being reduced. I pay tribute to those authorities which in such difficult times have shown their determination to play their part and to achieve the targets. Of 413 local authorities in England, 235 will hit their target. They are not just the small shire districts but also comprise metropolitan districts, shire counties and London boroughs. Every sector of local government has played its part. The majority are trying to achieve the targets.

However, more recently there has been a change. When the right hon. Member for Norwich, North (Mr. Ennals) was recounting his happy experiences of the consultative council, my right hon. Friend the Member for Daventry (Mr. Prentice) pointed out that they were due to the co-operative attitude of a vast number of Conservative authorities and Conservative-led associations that recognised their responsibility in the national interest to contribute to economies in public expenditure. My right hon. Friend also pointed out that the sharp distinction and difference now is among some Labour leaders in local government.

Mr. Ennals

Does the Minister not accept that all local authority associations, whatever their political control, are against the proposals, including the Association of County Councils and the Association of District Councils? By no stretch of the imagination does that view come from only one political party.

Mr. King

I shall come to that point shortly.

Relationships between local government and central Government relationships have rested on voluntary understanding, but that is now under threat. I make no bones about it. It is under threat from people who are no longer prepared to accept the basic tradition on which local government has stood—the acceptance of the Government's responsibility to set overall public expenditure targets, which we happen to believe are important.

The hon. Member for Sheffield, Attercliffe (Mr. Duffy) said that local government spending was on target, as it was only 5.6 per cent. over. I do not know how he would have got on had his right hon. Friends been in Government and he had told them that he had overspent by only £1 billion. He also suggested that people in Sheffield were not concerned about commercial rates. Like my hon. Friend the Member for Reading, North (Mr. Durant), I visited Sheffield. I spoke at a chamber of commerce lunch on the day when a number of companies working under extremely difficult trading conditions learnt that their commercial rates were to be increased by 42 per cent. The hon. Gentleman has less understanding of his constituency than I would expect if he believes that those companies were not concerned.

We cannot allow a few authorities to destroy the traditional relationship between central Government and local government. If they went ahead, the authorities that have willingly co-operated and honoured that traditional relationship will no longer feel that there is justification in continuing to do so. When people in local government who are playing their part see the extravagances of the few they wonder why they should bother. Action must be taken to protect the traditional relationship. The introduction of the block grant last year in the Local Government, Planning and Land Act worked on the basis that local government was still free and that local authorities would be free to set their own rate levels. There was a disincentive in the grant distribution system against higher levels of spending, but the essential freedom remained.

Hon. Members have asked about grant distribution. The Government hope to make an early announcement of the settlement this year, as the hon. Member for Isle of Wight (Mr. Ross) asked. We understand the importance of doing this as soon as possible, but important decisions are involved. We are conscious of the need to make the decision and help local authorities.

My hon. Friend the Member for Reading, North was concerned about the housing aspects of the famous E7 indicator. That, too, is very much in our minds. I cannot anticipate the rate support grant distribution but I can confirm the Government's close interest in that matter. The basic assumption of block grant rests on the cardinal issue that local authorities will have some ultimate regard for their ratepayers because of the disincentive whereby higher levels of expenditure curtail the level of grant and can lead to higher rates. This implies that local authorities will have some ultimate regard for the level of rates imposed on ratepayers.

The Government's concern must be for the overall level of public expenditure. It must also be to ensure that there is some ultimate protection for ratepayers against gross abuse. We have listened to all points of view in drawing up our proposals. The views of local authority associations are important. Local authorities are far from unanimous on this question and there is considerable support for the proposals among councillors. The interests of business are important also and we have had representations to that effect.

Let us consider the options before us. The first would be to do nothing about the level of overspend and extravagance by a few authorities. The right hon. Member for Ardwick clearly favoured that option. We believe that we cannot ignore the problem and must confront it with a number of courses of action. Conservative Members have made it clear that they wish to see early action on rate reform. My right hon. Friend the Member for Worthing (Mr. Higgins) wished to see rates abolished immediately and transferred to a central Government vote and operated in that way. My hon. Friend the Member for Staffordshire, South-West (Mr. Cormack) had different ideas on rating reform.

My right hon. Friend the Secretary of State has made it clear that a Green Paper will be published shortly. I hope that we can arrive at an early understanding on the best way to proceed. From what my right hon. and hon. Friends have said, there will need to be discussions on this. Perhaps my hon. Friend the Member for Staffordshire, South-West did not hear all of the speech of my right hon. Friend the Member for Worthing. Certainly their approaches to the rating problem did not entirely tally. I make no more of that, as clearly there are difficult problems imvolved in these matters.

Against the background that we must proceed as speedily as possible with the issues involved in the Green Paper, we nevertheless see a need for interim measures. I emphasise, as did my right hon. Friend the Secretary of State, that there are interim proposals. It was suggested that these measures should be on a time limited basis, possibly renewable annually or triennially. My right hon. Friend responded very positively to that proposal.

The important thing, however, is that we have an option available to work for next year. We have put forward our proposals. We recognise that they are controversial. There are different ways to enhance local accountability. One option is the local election. The other is the local poll. A number of my right hon. and hon. Friends made clear their views on national referendums. My right hon. and learned Friend the Member for Hertfordshire, East (Sir D. Walker-Smith) pointed out the constitutional background. He did not refer to the local poll, enshrined in the Local Government Act 1972. That is an established precedent which has been used on various occasions. As my right hon. and hon. Friends will be aware, we take the view that the proposal is perhaps not the constitutional departure that others may feel it is, but I understand the views that are sincerely held on this and we have, of course, listened to them with great interest.

I turn to the possible alternatives. My right hon. Friend the Member for Daventry suggested that there should be parliamentary approval for expenditure above a certain level, and that instead of the local poll approach there should be some form of parliamentary order to sanction spending above another level. Clearly that would involve problems and difficulties, but it is an option. The suggestion that we should remove the power to levy a supplementary rate, which has been made before, would also involve problems, but again it is an option which can be discussed.

The alternative means of improving accountability which has been most canvassed in the debate, however—I noticed that it spanned all parties, including my hon. Friends the Members for Reading, North and Birmingham, Selly Oak (Mr. Beaumont-Dark) and the hon. Member for Stoke-on-Trent, North (Mr. Forrester)—was that of regular annual elections, electing one third each year. Certainly the present pattern of local government elections is inconsistent. In some cases, all members stand for re-election, in others only one third. There may be an argument to be considered in that respect.

So that there can be no misunderstanding, I should make clear exactly what my right hon. Friend the Secretary of State said in opening the debate. He made it clear that he has to fight for the Government's public expenditure programme, as we all do. He made it clear that most local authorities have tried to meet their targets, but that a minority has not and he cannot ignore that. He made it clear that he has an open mind as to how we achieve control over the small minority, but we cannot ignore its existence.

My right hon. Friend made it clear that he will consult and will examine any alternatives—including all the suggestions put forward in the debate—which can achieve the Government's objectives, provided that this can be done quickly enough for the Government to act in time for the next rating round. In all sincerity, I do not believe that my right hon. Friend could have shown a more responsive and responsible attitude to the concern expressed by a number of my right hon. and hon. Friends today and by others who I know are concerned about this. We understand their concern. I very much hope that my right hon. and hon. Friends will be able to respond in a constructive way to the approach that my right hon. Friend has adopted. In contrast to that flexible and constructive approach, I believe that my right hon. and hon. Friends are far too sophisticated to fall for the glib and facile political approach adopted by the Labour Party.

These are difficult issues. As my right hon. and learned Friend the Member for Hertfordshire, East stated, we have no written constitution. The actual balance between central and local government has evolved over the years. There is no hard line or exact correctness of line that can be claimed at any one time. We are, however, seeking to maintain a sensible balance and not allow the few authorities to destroy what otherwise should be a proper voluntary relationship between central and local government.

The right hon. Member for Ardwick said that the block grant had failed and later claimed that the saving in local government expenditure that my right hon. Friend had achieved was an even higher figure than the Government had suggested. If there was one part of my right hon. Friend's speech to which I would have taken exception, it was the outrageous remark that the right hon. Member for Ardwick could not have it both ways. That challenges a very dangerous concept in this House. The right hon. Member for Ardwick has been having it both ways in every speech I have heard him make. I am puzzled that it came as such a surprise to my right hon. Friend.

The right hon. Gentleman is guilty of gross hypocrisy in bringing this motion—

Mr. Speaker

Order. I think that the Minister means that the argument is hypocritical. He cannot accuse the individual.

Mr. King

I am grateful to you, Mr. Speaker. [HON. MEMBERS: "Withdraw".] Of course, I withdraw immediately. I think that the arguments advanced by the right hon. Gentleman are the grossest hypocrisy. The right hon. Gentleman accused us of seeking to centralise, to interfere and to change the balance fundamentally. It occurs to me that he was a member of a Government whose idea of running local government was an endless avalanche of circulars and Government directives that used to pour out of the Department of the Environment at every conceivable opportunity.

I should like to put the facts so that the House can judge which side of the House is the keenest to interfere and to supervise at every stage. In their last year, the Labour Government issued no fewer than 1,873 circulars to local authorities on how to run their business in every nook and cranny of their activities. I am pleased to say that, under the watchful eye of my right hon. Friend the Prime Minister, this number has been sharply reduced. The figure in our first year was 671, one-third of the number in the right hon. Gentleman's last year. I am pleased to say that in the second year we reduced that figure by another 50. I am delighted to say that I hope we shall make further economies.

The right hon. Member for Craigton, in his slightly confusing speech, referred to the detailed control over capital expenditure exercised by every Government Department. The right hon. Gentleman is a little out of date. We have now changed that system.

Mr. Millan

rose—

Mr. King

Now, for England, we have a single block system. In my own area of responsibility, local environmental services, we have allocated the responsibility individually to the associations to make their own distribution. We have not kept it within the Department of the Environment. We have spread the responsibility and diffused it, and also decentralised power to give local authorities more say over their own capital allocation.

I hope that the House, having heard the proposals made by my right hon. Friend, will feel that this is a fair basis on which to proceed and will recognise the hypocrisy of the Opposition motion and have no hesitation in substantially rejecting it.

Question put, That the original words stand part of the Question:—

The House divided: Ayes 249, Noes 299.

Division No. 4]	[10 pm
AYES
Abse, Leo	Crowther, Stan
Adams, Allen	Cryer, Bob
Allaun, Frank	Cunliffe, Lawrence
Anderson, Donald	Cunningham, G. (Islington S)
Archer, Rt Hon Peter	Cunningham, Dr J. (W'h'n)
Ashley, Rt Hon Jack	Dalyell, Tam
Ashton, Joe	Davidson, Arthur
Atkinson, N. (H'gey,)	Davies, Rt Hon Denzil (L'lli)
Bagier, Gordon A.T.	Davies, Ifor (Gower)
Barnett, Guy (Greenwich)	Davis, T. (B'ham, Stechf'd)
Beith, A.J.	Deakins, Eric
Benn, Rt Hon Tony	Dean, Joseph (Leeds West)
Bennett, Andrew(St'kp'tN)	Dempsey, James
Bidwell, Sydney	Dewar, Donald
Booth, Rt Hon Albert	Dixon, Donald
Bottomley, Rt Hon A.(M'b'ro)	Dobson, Frank
Bradley, Tom	Dormand, Jack
Bray, Dr Jeremy	Douglas, Dick
Brown, Hugh D. (Provan)	Douglas-Mann, Bruce
Brown, R. C. (N'castle W)	Dubs, Alfred
Brown, Ronald W. (H'ckn'y S)	Duffy, A. E. P.
Brown, Ron (E'burgh, Leith)	Dunnett, Jack
Callaghan, Rt Hon J.	Dunwoody, Hon Mrs G.
Callaghan, Jim (Midd't'n & P)	Eadie, Alex
Campbell,Ian	Eastham, Ken
Campbell-Savours, Dale	Edwards, R. (W'hampt'n S E)
Canavan, Dennis	Ellis, R. (NE D'bysh're)
Cant, R. B.	Ellis, Tom (Wrexham)
Carmichael, Neil	English, Michael
Carter-Jones, Lewis	Ennals, Rt Hon David
Clark, Dr David (S Shields)	Evans, Ioan (Aberdare)
Cocks, Rt Hon M. (B'stol S)	Evans, John (Newton)
Cohen, Stanley	Ewing, Harry
Coleman, Donald	Faulds, Andrew
Concannon, Rt Hon J. D.	Field, Frank
Conlan, Bernard	Fitch, Alan
Cook, Robin F.	Fitt, Gerard
Cowans, Harry	Flannery, Martin
Craigen, J. M. (G 'gow, M'hill)	Fletcher, L. R. (Ilkeston)
Crawshaw, Richard	Fletcher, Ted (Darlington)

Foot, Rt Hon Michael	Molyneaux,James
Ford, Ben	Morris, Rt Hon A. (W'shawe)
Forrester, John	Morris, Rt Hon C. (O'shaw)
Foulkes, George	Morris, Rt Hon J. (Aberavon)
Fraser, J. (Lamb'th, N'w'd)	Morton, George
Freeson, Rt Hon Reginald	Moyle, Rt Hon Roland
Freud, Clement	Mulley, Rt Hon Frederick
Garrett, John (Norwich S)	Newens, Stanley
Garrett, W. E. (Wallsend)	Oakes, Rt Hon Gordon
George, Bruce	Ogden, Eric
Gilbert, Rt Hon Dr John	O'Halloran, Michael
Ginsburg, David	O'Neill, Martin
Golding, John	Orme, Rt Hon Stanley
Grant, George(Morpeth)	Owen, Rt Hon Dr David
Grant, John (Islington C)	Palmer, Arthur
Grimond, Rt Hon J.	Park, George
Hamilton, W. W. (C'tral Fife)	Parker, John
Harrison, Rt Hon Walter	Parry, Robert
Hart, Rt Hon Dame Judith	Pendry, Tom
Hattersley, Rt Hon Roy	Penhaligon, David
Haynes, Frank	Pitt, William Henry
Healey, Rt Hon Denis	Powell, Rt Hon J.E. (S Down)
Heffer, Eric S.	Powell, Raymond(Ogmore)
Hogg, N. (E Dunb't'nshire)	Prescott, John
Home Robertson,John	Price, C. (Lewisham W)
Homewood, William	Race, Reg
Hooley, Frank	Radice, Giles
Horam, John	Rees, Rt Hon M (Leeds S)
Hoyle, Douglas	Richardson, Jo
Huckfield, Les	Roberts, Albert (Normanton)
Hudson Davies, Gwilym E.	Roberts, Ernest (Hackney N)
Hughes, Mark (Durham)	Roberts, Gwilym (Cannock)
Hughes, Robert (Aberdeen N)	Robertson, George
Hughes, Roy (Newport)	Robinson, G. (Coventry NW)
Janner, Hon Greville	Rodgers, Rt Hon William
Jay, Rt Hon Douglas	Rooker, J. W.
John, Brynmor	Roper, John
Johnson, James (Hull West)	Ross, Ernest (Dundee West)
Johnson, Walter (Derby S)	Ross, Stephen (Isle of Wight)
Jones, Rt Hon Alec (Rh'dda)	Rowlands, Ted
Jones, Barry (East Flint)	Ryman, John
Jones, Dan (Burnley)	Sandelson, Neville
Kaufman, Rt Hon Gerald	Sever, John
Kilroy-Silk, Robert	Sheerman, Barry
Kinnock, Neil	Sheldon, Rt Hon R.
Lambie, David.	Shore, Rt Hon Peter
Lamborn, Harry	Short, Mrs Renée
Lamond, James	Silkin, Rt Hon J. (Deptford)
Leadbitter, Ted	Silverman, Julius
Leighton, Ronald	Skinner, Dennis
Lestor, Miss Joan	Smith, Rt Hon J. (N Lanark)
Lewis, Arthur (N'ham NW)	Snape, Peter
Lewis, Ron (Carlisle)	Soley, Clive
Lofthouse, Geoffrey	Spearing, Nigel
Lyon, Alexander (York)	Spriggs, Leslie
Mabon, Rt Hon Dr J. Dickson	Stewart, Rt Hon D. (W Isles)
McDonald, DrOonagh	Stoddart, David
McElhone, Frank	Strang, Gavin
McGuire, Michael (Ince)	Straw, Jack
McKelvey, William	Summerskill, Hon Dr Shirley
MacKenzie, Rt Hon Gregor	Taylor, Mrs Ann (Bolton W)
Maclennan, Robert	Thomas, Dr R.(Carmarthen)
McNally, Thomas	Thorne, Stan (Preston South)
McTaggart, Robert	Tilley, John
McWilliam, John	Tinn, James
Magee, Bryan	Torney, Tom
Marks, Kenneth	Urwin, Rt Hon Tom
Marshall, D (G'gow S'ton)	Varley, Rt Hon Eric G.
Marshall, Dr Edmund (Goole)	Wainwright, E. (Dearne V)
Marshall, Jim (Leicester S)	Wainwright, R. (Colne V)
Martin, M (G'gow S'burn)	Watkins, David
Mason, Rt Hon Roy	Weetch, Ken
Maynard, Miss Joan	Wellbeloved, James
Meacher, Michael	Welsh, Michael
Mellish, Rt Hon Robert	White, J.(G'gow Pollok)
Mikardo, Ian	Whitehead, Phillip
Millan, Rt Hon Bruce	Whitlock, William
Miller, Dr M.S.(E Kilbride)	Wigley, Dafydd
Mitchell, Austin (Grimsby)	Willey, Rt Hon Frederick
Mitchell, R.C. (Soton Itchen)	Williams, Rt Hon A. (S'sea W)

Wilson, Gordon (Dundee E)	Wright, Sheila
Wilson, Rt Hon Sir H.(H'ton)	Young, David (Bolton E)
Wilson, William (C'try SE)
Winnick, David	Tellers for the Ayes:
Woodall, Alec	Mr. Allen McKay and Mr. Hugh McCartney.
Woolmer, Kenneth
Wrigglesworth, Ian

NOES
Adley, Robert	Durant, Tony
Aitken, Jonathan	Eden, Rt Hon Sir John
Alexander, Richard	Edwards, Rt Hon N. (P'broke)
Alison, Rt Hon Michael	Eggar, Tim
Amery, Rt Hon Julian	Elliott, Sir William
Ancram, Michael	Emery, Peter
Arnold, Tom	Eyre, Reginald
Aspinwall, Jack	Fairbairn, Nicholas
Atkins, Rt Hon H. (S'thorne)	Fairgrieve, SirRussell
Atkins, Robert(Preston N)	Faith, Mrs Sheila
Atkinson, David (B'm'th,E)	Farr, John
Baker, Kenneth (St.M'bone)	Fell, Anthony
Baker, Nicholas (N Dorset)	Fenner, Mrs Peggy
Banks, Robert	Finsberg, Geoffrey
Bell, Sir Ronald	Fisher, Sir Nigel
Bendall, Vivian	Fletcher, A. (Ed'nb'gh N)
Bennett, Sir Frederic (T'bay)	Fletcher-Cooke, SirCharles
Benyon, Thomas (A'don)	Fookes, Miss Janet
Best, Keith	Forman, Nigel
Bevan, David Gilroy	Fowler, Rt Hon Norman
Biffen, Rt Hon John	Fox, Marcus
Biggs-Davison, Sir John	Fraser, Peter (South Angus)
Blackburn,John	Fry, Peter
Blaker, Peter	Gardiner, George (Reigate)
Body, Richard	Gardner, Edward (S Fylde)
Boscawen, Hon Robert	Garel-Jones, Tristan
Bottomley, Peter (W'wich W)	Gilmour, Rt Hon Sir Ian
Bowden, Andrew	Glyn, Dr Alan
Boyson, Dr Rhodes	Goodhart, Sir Philip
Braine, SirBernard	Goodhew, Victor
Bright, Graham	Goodlad, Alastair
Brinton, Tim	Gorst, John
Brittan, Rt. Hon. Leon	Gow, Ian
Brooke, Hon Peter	Gower, Sir Raymond
Brotherton, Michael	Grant, Anthony (Harrow C)
Brown, Michael (Brigg&Sc'n)	Gray, Hamish
Browne,John (Winchester)	Griffiths, E. (B'y St. Edm'ds)
Bruce-Gardyne, John	Griffiths, Peter Portsm'th N)
Bryan, Sir Paul	Grist, Ian
Buchanan-Smith, Rt.Hon.A.	Grylls, Michael
Buck, Antony	Gummer, John Selwyn
Budgen, Nick	Hamilton, Hon A.
Bulmer, Esmond	Hamilton, Michael (Salisbury)
Burden, Sir Frederick	Hampson, Dr Keith
Butcher, John	Hannam, John
Butler, Hon Adam	Hastings, Stephen
Cadbury, Jocelyn	Havers, Rt Hon Sir Michael
Carlisle, John (Luton West)	Hawksley, Warren
Carlisle, Kenneth (Lincoln)	Hayhoe, Barney
Carlisle, Rt Hon M. (R'c'n)	Heddle, John
Chalker, Mrs.Lynda	Henderson, Barry
Channon, Rt. Hon. Paul	Heseltine, Rt Hon Michael
Chapman, Sydney	Hogg, Hon Douglas (Gr'th'm)
Churchill, W.S.	Holland, Philip (Carlton)
Clark, Hon A. (Plym'th, S'n)	Hooson, Tom
Clark, Sir W.(Croydon S)	Hordern, Peter
Clarke, Kenneth (Rushcliffe)	Howell, Rt Hon D. (G'ldf'd)
Clegg, Sir Walter	Howell, Ralph (N Norfolk)
Cockeram, Eric	Hunt, David (Wirral)
Colvin, Michael	Hunt, John(Ravensbourne)
Cope, John	Hurd, Hon Douglas
Corrie, John	Irving, Charles (Cheltenham)
Costain, Sir Albert	Jenkin, Rt Hon Patrick
Cranborne, Viscount	Jessel, Toby
Critchley, Julian	JohnsonSmith, Geoffrey
Crouch, David	Jopling, Rt Hon Michael
Dean, Paul (North Somerset)	Joseph, Rt Hon Sir Keith
Dickens, Geoffrey	Kaberry, Sir Donald
Dover, Denshore	Kellett-Bowman, MrsElaine
du Cann, Rt Hon Edward	Kershaw, Sir Anthony
Dunn, Robert (Dartford)	Kilfedder, James A.

Kimball, Sir Marcus	Rathbone, Tim
King, Rt Hon Tom	Rees, Peter (Dover and Deal)
Kitson, Sir Timothy	Rees-Davies, W. R.
Lamont, Norman	Renton, Tim
Lang, Ian	Rhodes James, Robert
Latham, Michael	Rhys Williams, Sir Brandon
Lawrence, Ivan	Ridley, HonNicholas
Lawson, Rt Hon Nigel	Rifkind, Malcolm
Lee, John	Roberts, M. (Cardiff NW)
LeMarchant, Spencer	Roberts, Wyn (Conway)
Lennox-Boyd, HonMark	Rossi, Hugh
Lester, Jim (Beeston)	Rost, Peter
Lewis, Kenneth (Rutland)	Royle, Sir Anthony
Lloyd, Ian (Havant & W'loo)	Sainsbury, Hon Timothy
Lloyd, Peter (Fareham)	St. John-Stevas, Rt Hon N.
Loveridge, John	Scott, Nicholas
Luce, Richard	Shaw, Giles (Pudsey)
Lyell, Nicholas	Shaw, Michael (Scarborough)
Macfarlane, Neil	Shelton, William (Streatham)
MacGregor, John	Shepherd, Colin (Hereford)
MacKay, John (Argyll)	Shepherd, Richard
Macmillan, Rt Hon M.	Shersby, Michael
McNair-Wilson, M. (N'bury)	Silvester, Fred
McNair-Wilson, P. (New F'st)	Sims, Roger
Madel, David	Skeet, T. H. H.
Major, John	Smith, Dudley
Marland, Paul	Speller, Tony
Marlow, Antony	Spence,John
Marshall, Michael (Arundel)	Spicer, Jim (West Dorset)
Marten, Rt Hon Neil	Spicer, Michael (S Worcs)
Mates, Michael	Sproat, Iain
Maude, Rt Hon Sir Angus	Stainton, Keith
Mawby, Ray	Stanbrook, Ivor
Mawhinney, Dr Brian	Stanley, John
Mayhew, Patrick	Steen, Anthony
Mellor, David	Stevens, Martin
Meyer, Sir Anthony	Stewart, Ian (Hitchin)
Miller, Hal (B'grove)	Stewart, A (E Renfrewshire)
Mills, Iain (Meriden)	Stokes,John
Miscampbell, Norman	Stradling Thomas,J.
Mitchell, David (Basingstoke)	Tapsell, Peter
Moate, Roger	Taylor, Teddy (S'end E)
Monro, Sir Hector	Tebbit, Rt Hon Norman
Montgomery, Fergus	Temple-Morris, Peter
Moore, John	Thatcher, Rt Hon Mrs M.
Morgan, Geraint	Thomas, Rt Hon Peter
Morris, M. (N'hampton S)	Thompson, Donald
Morrison, Hon C. (Devizes)	Thorne, Neil (IlfordSouth)
Morrison, Hon P. (Chester)	Thornton, Malcolm
Mudd, David	Townend, John (Bridlington)
Murphy, Christopher	Townsend, Cyril D, (B'heath)
Myles, David	Trippier, David
Neale, Gerrard	Trotter, Neville
Nelson, Anthony	van Straubenzee, Sir W.
Neubert, Michael	Vaughan, Dr Gerard
Newton, Tony	Viggers, Peter
Normanton Tom	Waddington, David
Nott, Rt Hon John	Wakeham, John
Onslow, Cranley	Waldegrave, HonWilliam
Oppenheim, Rt Hon Mrs S.	Walker, Rt Hon P. (W'cester)
Osborn,John	Walker, B. (Perth)
Page, John (Harrow, West)	Walker-Smith, Rt Hon Sir D.
Page, Richard (SW Herts)	Wall, Sir Patrick
Parkinson, Rt Hon Cecil	Walters, Dennis
Parris, Matthew	Ward, John
Patten, Christopher (Bath)	Warren, Kenneth
Patten, John (Oxford)	Watson, John
Pattie, Geoffrey	Wells, John (Maidstone)
Pawsey, James	Wells, Bowen
Percival, Sir Ian	Wheeler,John
Peyton, Rt Hon John	Whitelaw, Rt Hon William
Pink, R.Bonner	Whitney, Raymond
Pollock, Alexander	Wickenden, Keith
Price, Sir David (Eastleigh)	Wiggin, Jerry
Prior, Rt Hon James	Wilkinson, John
Proctor, K. Harvey	Williams, D. (Montgomery)
Pym, Rt Hon Francis	Wolfson, Mark
Raison, Timothy	Young, Sir George (Acton)

Younger, Rt Hon George	Mr. Anthony Berry and Mr. Carol Mather.
Tellers for the Noes:

Question accordingly negatived.

Question, That the proposed words be there added, put forthwith pursuant to Standing Order No. 32 (Questions on amendments).

The House divided: Ayes 312, Noes 247.

Division No. 5]	[10.14 pm
AYES
Adley, Robert	Dean, Paul (North Somerset)
Aitken,Jonathan	Dickens, Geoffrey
Alexander, Richard	Dorrell, Stephen
Alison, Rt Hon Michael	Dover, Denshore
Amery, Rt Hon Julian	du Cann, Rt Hon Edward
Ancram, Michael	Dunn, Robert (Dartfbrd)
Arnold, Tom	Durant, Tony
Aspinwall,Jack	Dykes, Hugh
Atkins, Rt Hon H. (S'thorne)	Eden, Rt Hon Sir John
Atkins, Robert (Preston N)	Edwards, Rt Hon N. (P'broke)
Atkinson, David (B'm'th, E)	Eggar, Tim
Baker, Kenneth(St.M'bone)	Elliott, Sir William
Baker, Nicholas (N Dorset)	Emery, Peter
Banks, Robert	Eyre, Reginald
Beaumont-Dark, Anthony	Fairbairn, Nicholas
Bell, Sir Ronald	Fairgrieve, Sir Russell
Bendall, Vivian	Faith, Mrs Sheila
Bennett, Sir Frederic (T'bay)	Farr,John
Benyon, Thomas (A'don)	Fell, Anthony
Benyon, W. (Buckingham)	Fenner, Mrs Peggy
Best, Keith	Finsberg, Geoffrey
Bevan, David Gilroy	Fisher, Sir Nigel
Biffen, Rt Hon John	Fletcher, A. (Ed'nb'gh N)
Blackburn, John	Fookes, Miss Janet
Blaker, Peter	Forman, Nigel
Body, Richard	Fowler, Rt Hon Norman
Bonsor, SirNicholas	Fox, Marcus
Boscawen, Hon Robert	Fraser, Peter (South Angus)
Bottomley, Peter (W'wich W)	Fry, Peter
Bowden, Andrew	Gardiner, George (Rigate)
Boyson, Dr Rhodes	Gardner, Edward (S Fylde)
Bright, Graham	Garel-Jones, Tristan
Brinton, Tim	Gilmour, Rt Hon Sir Ian
Brittan, Rt.Hon.Leon	Glyn, Dr Alan
Brooke, Hon Peter	Goodhart, Sir Philip
Brotherton, Michael	Goodhew, Victor
Brown, Michael (Brigg&Sc'n)	Goodlad, Alastair
Browne, John (Winchester)	Gorst,John
Bruce-Gardyne,John	Gow, Ian
Bryan, Sir Paul	Gower, Sir Raymond
Buchanan-Smith, Rt. Hon. A.	Grant, Anthony (Harrow C)
Buck, Antony	Gray, Hamish
Budgen, Nick	Griffiths, E. (B'ySt.Edm'ds)
Bulmer, Esmond	Griffiths, Peter Portsm'th N)
Burden, Sir Frederick	Grist, Ian
Butcher, John	Grylls, Michael
Butler, Hon Adam	Gummer,JohnSelwyn
Cadbury, Jocelyn	Hamilton, Hon A.
Carlisle,John (Luton West)	Hamilton, Michael (Salisbury)
Carlisle, Kenneth (Lincoln)	Hampson, Dr Keith
Carlisle, Rt Hon M. (R'c'n)	Hannam,John
Chalker, Mrs.Lynda	Haselhurst, Alan
Channon, Rt.Hon.Paul	Hastings, Stephen
Chapman, Sydney	Havers, Rt Hon Sir Michael
Churchill, W.S.	Hawksley, Warren
Clark, Hon A. (Plym'th, S'n)	Hayhoe, Barney
Clark, Sir W. (Croydon S)	Heddle, John
Clarke, Kenneth (Rushcliffe)	Henderson, Barry
Clegg, Sir Walter	Heseltine, Rt Hon Michael
Cockeram, Eric	Hicks, Robert
Colvin, Michael	Higgins, Rt Hon Terence L.
Cope,John	Hogg, Hon Douglas (Gr'th'm)
Cormack, Patrick	Holland, Philip (Carlton)
Costain, Sir Albert	Hooson, Tom
Cranborne, Viscount	Hordern, Peter
Critchley,Julian	Howell, Rt Hon D. (G'ldf'd)
Crouch, David	Howell, Ralph (N Norfolk)

Hunt, David (Wirral)	Parris, Matthew
Hunt, John (Ravensbourne)	Patten, Christopher (Bath)
Hurd, Hon Douglas	Patten, John (Oxford)
Irving, Charles (Cheltenham)	Pattie, Geoffrey
Jenkin, Rt Hon Patrick	Pawsey, James
Jessel, Toby	Percival, Sir Ian
JohnsonSmith, Geoffrey	Peyton, Rt Hon John
Jopling, Rt Hon Michael	Pink, R.Bonner
Joseph, Rt Hon Sir Keith	Pollock, Alexander
Kaberry, Sir Donald	Porter, Barry
Kellett-Bowman, Mrs Elaine	Prentice, Rt Hon Reg
Kershaw, Sir Anthony	Price, Sir David (Eastleigh)
Kilfedder,James A.	Prior, Rt Hon James
Kimball, Sir Marcus	Proctor, K. Harvey
King, Rt Hon Tom	Pym, Rt Hon Francis
Kitson, Sir Timothy	Raison, Timothy
Knox, David	Rathbone, Tim
Lamont, Norman	Rees, Peter (Dover and Deal)
Lang, Ian	Rees-Davies, W. R.
Latham, Michael	Renton, Tim
Lawrence, Ivan	Rhodes James, Robert
Lawson, Rt Hon Nigel	Rhys Williams, Sir Brandon
Lee,John	Ridley, Hon Nicholas
LeMarchant, Spencer	Rifkind, Malcolm
Lennox-Boyd, Hon Mark	Roberts, M. (Cardiff NW)
Lester, Jim (Beeston)	Roberts, Wyn (Conway)
Lewis, Kenneth (Rutland)	Rossi, Hugh
Lloyd, Ian (Havant & W'loo)	Rost, Peter
Lloyd, Peter (Fareham)	Royle, Sir Anthony
Loveridge,John	Sainsbury, Hon Timothy
Luce, Richard	St. John-Stevas, Rt Hon N.
Lyell, Nicholas	Scott, Nicholas
McCrindle, Robert	Shaw, Giles (Pudsey)
Macfarlane, Neil	Shaw, Michael(Scarborough)
MacGregor,John	Sheiton, William (Streatham)
MacKay John (Argyll)	Shepherd, Colin (Hereford)
Macmillan, Rt Hon M.	Shepherd, Richard
McNair-Wilson, M. (N'bury)	Shersby, Michael
McNair-Wilson, P. (New F'st)	Silvester, Fred
Madel, David	Sims, Roger
Major, John	Skeet, T. H. H.
Marland, Paul	Smith, Dudley
Marlow, Antony	Speed, Keith
Marshall, Michael (Arundel)	Speller, Tony
Marten, Rt Hon Neil	Spence, John
Mates, Michael	Spicer, Jim (West Dorset)
Maude, Rt Hon Sir Angus	Spicer, Michael (S Worcs)
Mawby, Ray	Sproat, Iain
Mawhinney, Dr Brian	Squire, Robin
Mayhew, Patrick	Stainton, Keith
Mellor, David	Stanbrook, Ivor
Meyer, Sir Anthony	Stanley, John
Miller, Hal (B'grove)	Steen, Anthony
Mills, Iain (Meriden)	Stevens, Martin
Mills, Peter (West Devon)	Stewart, Ian (Hitchin)
Miscampbell, Norman	Stewart, A. (E Renfrewshire)
Mitchell, David (Basingstoke)	Stokes, John
Moate, Roger	Stradling, Thomas,J.
Monro, Sir Hector	Tapsell, Peter
Montgomery, Fergus	Taylor, Teddy (S'end E)
Moore, John	Tebbit, Rt Hon Norman
Morgan, Geraint	Temple-Morris, Peter
Morris, M. (N'hampton S)	Thatcher, Rt Hon Mrs M.
Morrison, Hon C. (Devizes)	Thomas, Rt Hon Peter
Morrison, Hon P. (Chester)	Thompson, Donald
Mudd, David	Thorne, Neil (IlfordSouth)
Murphy, Christopher	Thornton, Malcolm
Myles, David	Townend, John (Bridlington)
Neale, Gerrard	Townsend, Cyril D, (B'heath)
Nelson, Anthony	Trippier, David
Neubert, Michael	Trotter, Neville
Newton, Tony	van Straubenzee, Sir W.
Normanton, Tom	Vaughan, Dr Gerard
Nott, Rt Hon John	Viggers, Peter
Onslow, Cranley	Waddington, David
Oppenheim, Rt Hon Mrs S.	Wakeham, John
Osborn, John	Waldegrave, Hon William
Page, John (Harrow, West)	Walker, Rt Hon P. (W'cesfer)
Page, Richard (SW Herts)	Walker, B. (Perth)
Parkinson, Rt Hon Cecil	Walker-Smith, Rt Hon Sir D.

Wall, Sir Patrick	Wiggin, Jerry
Walters, Dennis	Wilkinson, John
Ward, John	Williams, D. (Montgomery)
Warren, Kenneth	Winterton, Nicholas
Watson, John	Wolfson, Mark
Wells, John (Maidstone)	Young, SirGeorge (Acton)
Wells, Bowen	Younger, Rt Hon George
Wheeler, John
Whitelaw, Rt Hon William	Tellers for the Ayes:
Whitney, Raymond	Mr. Anthony Berry and Mr. Carol Mather.
Wickenden, Keith

NOES
Abse, Leo	Eadie, Alex
Adams, Allen	Eastham, Ken
Allaun, Frank	Edwards, R. (W'hampt'n S E)
Anderson, Donald	Ellis, R. (NE D'bysh're)
Archer, Rt Hon Peter	Ellis, Tom (Wrexham)
Ashley, Rt Hon Jack	English, Michael
Ashton, Joe	Ennals, Rt Hon David
Atkinson, N. (H'gey,)	Evans, Ioan (Aberdare)
Bagier, GordonA.T.	Evans, John (Newton)
Barnett, Guy (Greenwich)	Ewing, Harry
Beith, A.J.	Faulds, Andrew
Benn, Rt Hon Tony	Field, Frank
Bennett, Andrew (St'kp'tN)	Fitch, Alan
Bidwell, Sydney	Fitt, Gerard
Booth, Rt Hon Albert	Flannery, Martin
Bottomley, RtHonA. (M'b'ro)	Fletcher, L. R. (Ilkeston)
Bradley, Tom	Fletcher, Ted (Darlington)
Bray, Dr Jeremy	Foot, Rt Hon Michael
Brown, Hugh D. (Provan)	Ford, Ben
Brown, R. C. (N'castle W)	Forrester, John
Brown, Ronald W. (H'ckn'y S)	Foulkes, George
Brown, Ron (E'burgh, Leith)	Fraser, J. (Lamb'th, N'w'd)
Callaghan, Rt Hon J.	Freeson, Rt Hon Reginald
Callaghan, Jim (Midd't'n & P)	Freud, Clement
Campbell, Ian	Garrett, John (Norwich S)
Campbell-Savours, Dale	Garrett, W. E. (Wallsend)
Canavan, Dennis	George, Bruce
Cant, R. B.	Gilbert, Rt Hon Dr John
Carmichael, Neil	Ginsburg, David
Carter-Jones, Lewis	Golding, John
Clark, Dr David (S Shields)	Grant, George (Morpeth)
Cocks, Rt Hon M. (B'stol S)	Grant, John (Islington C)
Cohen, Stanley	Grimond, Rt Hon J.
Coleman, Donald	Hamilton, W. W. (C'tral Fife)
Concannon, Rt Hon J. D.	Harrison, Rt Hon Walter
Conlan, Bernard	Hart, Rt Hon Dame Judith
Cook, Robin F.	Hattersley, Rt Hon Roy
Cowans, Harry	Healey, Rt Hon Denis
Craigen, J. M. (G'gow, M'hill)	Heffer, Eric S.
Crawshaw, Richard	Hogg, N. (EDunb't'nshire)
Crowther, Stan	HomeRobertson, John
Cryer, Bob	Homewood, William
Cunliffe, Lawrence	Hooley, Frank
Cunningham, G. (Islington S)	Horam, John
Cunningham, Dr J. (W'h'n)	Hoyle, Douglas
Dalyell, Tam	Huckfield, Les
Davidson, Arthur	Hudson Davies, Gwilym E.
Davies, Rt Hon Denzil (L'lli)	Hughes, Mark (Durham)
Davies, Ifor (Gower)	Hughes, Robert (Aberdeen N)
Davis, T. (B'ham, Stechf'd)	Hughes, Roy (Newport)
Deakins, Eric	Janner, Hon Greville
Dempsey, James	Jay, Rt Hon Douglas
Dewar, Donald	John, Brynmor
Dixon, Donald	Johnson, James (Hull West)
Dobson, Frank	Johnson, Walter (Derby S)
Dormand, Jack	Jones, Rt Hon Alec (Rh'dda)
Douglas, Dick	Jones, Barry (East Flint)
Douglas-Mann, Bruce	Jones, Dan (Burnley)
Dubs, Alfred	Kaufman, Rt Hon Gerald
Duffy, A. E. P.	Kilroy-Silk, Robert
Dunnett, Jack	Kinnock, Neil
Dunwoody, Hon Mrs G.	Lambie, David

Lamborn, Harry	Roberts, Ernest (Hackney N)
Lamond, James	Roberts, Gwilym(Cannock)
Leadbitter, Ted	Robertson, George
Leighton, Ronald	Robinson, G. (Coventry NW)
Lestor, Miss Joan	Rodgers, Rt Hon William
Lewis, Ron (Carlisle)	Rooker, J. W.
Lofthouse, Geoffrey	Roper, John
Lyon, Alexander (York)	Ross, Ernest (Dundee West)
Mabon, Rt Hon Dr J. Dickson	Ross, Stephen (Isle of Wight)
McCartney, Hugh	Rowlands, Ted
McDonald, DrOonagh	Ryman, John
McElhone, Frank	Sandelson, Neville
McGuire, Michael (Ince)	Sever, John
McKay, Allen (Penistone)	Sheerman, Barry
McKelvey, William	Sheldon, Rt Hon R.
MacKenzie, Rt Hon Gregor	Shore, Rt Hon Peter
Maclennan, Robert	Short, Mrs Renée
McNally, Thomas	Silkin, Rt Hon J. (Deptford)
McTaggart, Robert	Silverman, Julius
McWilliam, John	Skinner, Dennis
Magee, Bryan	Smith, Rt Hon J. (N Lanark)
Marks, Kenneth	Snape, Peter
Marshall, D (G'gowS'ton)	Soley, Clive
Marshall, Dr Edmund (Goole)	Spearing, Nigel
Marshall, Jim (Leicester S)	Spriggs, Leslie
Martin, M (G'gowS'burn)	Stewart, Rt Hon D. (W Isles)
Mason, Rt Hon Roy	Stoddart, David
Maynard, Miss Joan	Strang, Gavin
Meacher, Michael	Straw, Jack
Mellish, Rt Hon Robert	Summerskill, Hon DrShirley
Millan, Rt Hon Bruce	Taylor, Mrs Ann (Bolton W)
Miller, Dr M.S. (E Kilbride)	Thomas, DrR. (Carmarthen)
Mitchell, Austin (Grimsby)	Thorne, Stan (Preston South)
Mitchell, R.C. (Soton Itchen)	Tilley, John
Molyneaux, James	Tinn, James
Morris, Rt Hon A. (W'shawe)	Torney, Tom
Morris, Rt Hon C. (O'shaw)	Urwin, Rt Hon Tom
Morris, Rt Hon J. (Aberavon)	Varley, Rt Hon Eric G.
Morton, George	Wainwright, E.(Dearne V)
Moyle, Rt Hon Roland	Wainwright, R. (Colne V)
Mulley, Rt Hon Frederick	Watkins, David
Newens, Stanley	Weetch, Ken
Oakes, Rt Hon Gordon	Wellbeloved, James
Ogden, Eric	Welsh, Michael
O'Halloran, Michael	White, J. (G'grow Pollok)
O'Neill, Martin	Whitehead, Phillip
Orme, Rt Hon Stanley	Whitlock, William
Owen, Rt Hon Dr David	Wigley, Dafydd
Palmer, Arthur	Willey, Rt Hon Frederick
Park, George	Williams, Rt Hon A.(S'sea W)
Parker, John	Wilson, Gordon (Dundee E)
Parry, Robert	Wilson, RtHonSirH.(H'ton)
Pendry, Tom	Wilson, William (C'try SE)
Penhaligon, David	Winnick, David
Pitt, William Henry	Woodall, Alec
Powell, Rt Hon J.E. (S Down)	Woolmer, Kenneth
Powell, Raymond (Ogmore)	Wrigglesworth, Ian
Prescott, John	Wright, Sheila
Price, C. (Lewisham W)	Young, David (Bolton E)
Race, Reg
Radice, Giles	Tellers for the Noes:
Rees, Rt Hon M (Leeds S)	Mr. Joseph Dean and Mr. Frank Haynes.
Richardson, Jo
Roberts,Albert(Normanton)

Question accordingly agreed to,.

MR. SPEAKER forthwith declared the main Question, as amended, to be agreed to

Resolved. That this House calls upon Her Majesty's Government to continue its efforts to restrain the activities of overspending local authorities and to provide further protection for domestic, commercial and industrial rate-payers.