Local Government Finance (No. 2) Bill

HC Deb 18 January 1982 vol 16 cc48-123

Order for Second Reading read.

Mr. Gerald Kaufman (Manchester, Ardwick)

On a point of order, Mr. Speaker. I should be grateful if you would give the House your guidance on a matter relevant to the manner in which we proceed to debate the Second Reading of the Bill.

On the Order Paper is motion No. 132, which by 22 December had been signed by 297 right hon. and hon. Members, calling for the House's approval of the Public Accounts Committee's report on the role of the Comptroller and Auditor General. On 17 December the Prime Minister and the Leader of the House gave a commitment that, in the light of the views expressed in the House in the debate on 13 November, the Chancellor of the Exchequer would make a statement.

One issue raised in the report in chapter 5 is the auditing of local government accounts. The Public Accounts Committee opposes the setting up of an Audit Commission, as proposed in the Bill. Therefore, may we have your guidance on the propriety of the House proceeding to debate the matter in the absence of the promised statement?

Mr. Speaker

The matter can be raised on Second Reading. Orders of the Day have been called. I can make no further comment.

The Lord President of the Council and Leader of the House of Commons (Mr. Francis Pym)

My right hon. Friend will refer to the matter during his speech moving the Second Reading of the Bill, and I assure the right hon. Gentleman that my right hon. and learned Friend the Chancellor of the Exchequer will make an announcement about his reaction to the debate on the PAC report in due course. The commitment will be fulfilled. Although that aspect is only a small part of the report, it was touched on by both sides of the House in the debate on the PAC report.

5.2 pm

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

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

The Bill does three things. It abolishes supplementary rates and precepts, so that local authorites will have to rate or precept for complete financial years; it enables me to protect from any general loss of grant local authorities which meet their individual spending targets; and it establishes an Audit Commission to supervise the audit of local authorities in England and Wales.

Let me start with the decision to abolish supplementary rates. The House will know that there has recently been a growing tendency for local authorities to levy supplementary rates. In 1981–82 we saw more than 30 local authorities issue either supplementary rates or precepts on their own account. This is far more than ever before.

It has particularly unfortunate consequences, but perhaps the most unfortunate is the effect on those people who try to budget their family income and make allowances within it for their rates payment to local government, only to find that their calculations are thrown aside by the arrival of an unbudgeted and unwelcome increase in their already increased rate demand. The effect on those with low and fixed incomes is particuarly harsh. Harsh, too, are the effects on industry and commerce in many of our larger cities, where the people who have to pay the supplementary rates simply do not understand when local councillors complain about harsh economic conditions, yet at the same time increase the cost of the public sector and push out supplementary rates to aggravate the problems, particularly of the private sector.

What the House clearly has to face, and what is at the centre of the controversy about so much of local government today, is that parts of local government are determined to scrap the traditional relationship between central Government and local government whereby local government recognised and accepted the right of central Government to set the level of local government expenditure. The situation is at its most severe when local authorities ignore the Government's request for economy, actually increase their expenditure, and then finance it by supplementary rate. A Labour Government would not tolerate such a position. Indeed, in 1976 they did not hesitate to demand economies and to penalise local government to secure the cuts forced on them by the IMF. In Opposition, Labour Members are at their most irresponsible.

The overwhelming majority of authorities which levied supplementary rates to increase their spending were Labour-controlled—Labour authorities determined to increase public expenditure and, increasingly, Labour authorities using their position in local government to challenge the electoral mandate of the national Government.

Mr. Guy Barnett (Greenwich)

What about the local mandate?

Mr. Heseltine

The hon. Gentleman is right to ask about the local mandate. The Shadow spokesman on the environment has made his position as clear as I make mine. Where there is a clash between the local and national mandate, the national mandate must prevail.

Mr. David Ennals (Norwich, North)

Will the right hon. Gentleman give way?

Mr. Heseltine

No.

In this context, the Government welcome the GLC's decision to reduce the level of its subsidy to London Transport to its former level in the current year. This reduction of its expenditure means that the amount of block grant payable in 1981–82 will be increased by £60 million over what it would have been under the GLC's previous budget. This grant is payable to the London boroughs, and I shall be taking steps to ensure that the necessary adjustment is made immediately in the supplementary RSG report to be published later this month. This will mean that the boroughs recover the grant in February and March of this year.

I understand that the London Boroughs Association is advising the individual boroughs to credit ratepayers who have paid the supplementary rates levied to meet the unlawful GLC precept, including the anticipated loss of grant, or to make repayments to them if a refund is requested. Of course, the precept in respect of ILEA stands. I welcome the advice to make credits or repayments. If, having considered its position, any borough decides that it requires a sanction under section 161 of the Local Government Act 1972, I am prepared to give sympathetic consideration to granting such a sanction.

Part I of the Bill will ensure that there can be no repetition of the rash of supplementary rates witnessed in a minority of authorities in 1981–82. As from 1982–83 there will be a ban on all supplementary rates and precepts. Authorities will be required to make a single rate or precept for the whole financial year. Once they have set their rates for the year, councils will have to live within their means without further recourse to the ratepayer. Ill-judged increases in spending part way through the financial year of the sort seen this year will no longer be possible. The benefit for ratepayers, whether private individuals or businesses, is that they will know where they stand. They can plan their budgets without fear of disruption by further unexpected supplementary rate demands.

These provisions should cause few problems for the vast majority of responsible local authorities which manage their finances prudently. After all, until the recent experience under largely Labour-controlled authorities, the supplementary rate was a rare phenomenon. However, it is conceivable that an authority, through no fault of its own, may find that it faces an urgent need for extra revenue which could not have been anticipated at the time that it made its rate or precept for the year, perhaps to meet the costs of dealing with some natural disaster. In such circumstances, I would expect the authority to seek my approval for special temporary borrowing under the terns of schedule 13 to the Local Government Act 1972. The GLC will be covered by clause 3 of the Bill. I should, however, make it clear to the House that I would give my consent to applications for temporary borrowing only where it was absolutely essential for the expenditure to be incurred in the year to enable unavoidable commitments to be met.

The House will note that to underline the continued credit-worthiness of local authorities in the new situation, clause 3 also provides that interest on money borrowed by local authorities shall be a first charge on their revenues. That brings the position in England into line with that in Scotland, where authorities also have no power to levy supplementary rates. In addition, it is my intention that a condition of any borrowing I might approve should be repaid out of revenue income within the first quarter of the following year.

Part II of the Bill is necessary for much the same reason as part I—namely, the failure of some authorities to work within the Government's public expenditure guidelines. I have always been determined to recognise that the majority of local authorities co-operate with central Government in their expenditure plans. Indeed, nothing proves more clearly the reasonableness of the expenditure targets that we, as a Government, have sought than the number of authorities that have achieved, or come close to achieving, those targets. I am grateful to those local authorities that have tried so hard to meet my objectives. I am determined to protect those authorities that achieved their targets from the effects of a general reduction in grant. Section 59 of the Local Government, Planning and Land Act 1980 provides such a means—the multipliers that can be used to adjust block grant. I accordingly propose to use that power to protect authorities achieving their individual targets or spending below their grant-related expenditure assessment figures.

The 1980 Act refers specifically to the main purposes for which the power to determine multipliers will be used. We therefore consider it right to take this opportunity to include in legislation a specific reference to that use of the power. Part II strictly circumscribes the ways in which the power to set protective multipliers can be used. It cannot be used to restrict the reasonable exercise of local government discretion. Local authorities will still be free to determine their own mix of services.

The specific provision that we propose to include in the Act can be used with one, and only one, object in view—setting a reasonable limit on the overall level of public expenditure. That has always been accepted as the proper concern of central Government. That part of the Bill ensures that we do not have to penalise authorities indiscriminately, as we had to do in 1980–81. As such, it will be welcomed by everyone who has the real interests of local government at heart.

Mr. John Page (Harrow, West)

I am grateful to my right hon. Friend for giving way. I was nervous that my silence might be construed as total acquiescence. I find the business of multipliers extremely complicated. Is my right hon. Friend absolutely sure that the base year that he has chosen is not too rough an instrument for certain local authorities which thought that they had tried to be good boys?

Mr. Heseltine

I take my hon. Friend's silence not as acquiescence but simply as politeness and an interest in what I have to say. I can help my hon. Friend on the matter of base years. He is referring to the initial standard on which I had to base the level of expenditure in 1978ndash;79, which was the year immediately preceding the general election. We have now moved away from strict reliance on that base line because there are anomalies associated with choosing any one year. The various targets that we have now set for local authorities place much greater reliance on their grant-related expenditure assessment position than could be done when we had only the base year on which to concentrate.

Part III of the Bill proposes the establishment of an Audit Commission to assume responsibility for the audit of local government in England and Wales. The House will know that when I became Secretary of State I inherited from the Labour Government the Advisory Committee on Local Government Audit. That body consisted of a wide representation from local government and the financial world, including the leader of the London borough of Camden. I am especially grateful to Mr. Brian Maynard, formerly a partner of Coopers and Lybrand, for chairing that committee and for the advice that it gave me.

That body considered the future of local authority audit and unanimously recommended the establishment of a Commission for England and Wales on a similar basis to that existing in Scotland since 1975. The Scottish Commission has, as far as I am aware, operated very successfully. Indeed, the Labour Party actually carried out the implementation of the 1973 legislation, which it did not oppose, and therefore set up the Scottish system.

Of course, local government will argue that we should leave the system alone to remain broadly unchanged. That is not a wholly unfamiliar stance for local government to adopt. But in May I received a letter from the Association of Metropolitan Authorities from which I shall quote a small part. Referring to my proposals for an Audit Commission, it said: Your own proposals do, to a large extent, meet the need for an independent and controlled approach to the development of the Audit Service, subject only to getting the composition of the Commission right and other matters such as whether or not LAMSAC should be embraced in the proposals. There are three main points to be made about the proposed commission. The first is the general point about the need to secure the maximum value for money and the most effective pursuit of best practice that should unite all opinions in local government.

The other two issues are those of principle: first, who should appoint the auditors of local government and, secondly, the position of Parliament and the Comptroller and Auditor General in the context of the audit of local authorities. Of course, the right hon. Member for Manchester, Ardwick (Mr. Kaufman) drew some of the issues to the attention of the House in his point of order a few minutes ago.

Part III of the Bill sets up the commission and new responsibilities and strengthens the duties of auditors, especially in the crucial area of value for money. Audit involvement in value-for-money work is not new, but the Bill gives much greater emphasis to it. The commission will have a duty to undertake comparative studies on economy, efficiency and effectiveness, and the auditor will have a duty to satisfy himself that the authority has made proper arrangements for securing value for money. These separate duties are closely linked.

The central part of a value-for-money audit is comparing a local authority's practice and performance with best practice in other similar authorities. The commission's comparative studies, and studies undertaken by, for example, the Local Authorities' Management Services and Computer Committee and the Chartered Institute of Public Finance and Accountancy will provide the auditor with the basic tools he needs to do a value-for-money audit.

In the final analysis it is a local authority's responsibility to give its ratepayers value for money. Neither the auditor nor the commission can take over that responsibility. The auditor can draw an authority's attention to any shortcomings, but the policy decision rests with the local authority.

Mr. David Atkinson (Bournemouth, East)

In the studies by the commission on economy and efficiency, will my right hon. Friend encourage the commission to investigate the local government functions that are suitable for privatisation to provide even greater economy and efficiency, and to make recommendations?

Mr. Heseltine

The commission will want to consider those matters. However, it must consider the relative costs incurred in both the public and private sectors where those services are being carried out as alternatives within those sectors. Doubtless, it would wish to report on that matter. It is clear that the commission would not have the power to compel an authority to make a policy decision to move from public to private or private to public. That decision would be within the policy responsibility of the individual authority.

One of our objectives in drawing up the proposals has been to facilitate the greater use of private sector firms in local authority audit work. The private sector has a wealth of experience to offer, especially on value for money. I believe that if the commission uses that expertise in harness with the particular skills of the district audit service, audit will have a much greater impact on local authority efficiency than it has at present.

We have also been concerned to strengthen the accountability of local authorities to their electorate. Part III does that in three ways. The increased audit effort means that local electors and ratepayers will be informed about their local authority. Auditors will have a new duty to report immediately on matters of public concern before the money is actually spent, giving the pubic an opportunity to influence events before it is too late. The Bill also widens the circumstances in which electors may object at audit. Electors will in future be able to draw the auditor's attention to matters which, though not illegal, appear to require his formal comment.

I mentioned the issue of principle on who should appoint the auditor to an organisation. It is the essence of the audit function that the auditor should be, and be seen to be, independent. The present system does not make a clear enough separation between the auditor, central Government and the authorities under audit. One of my key objectives has therefore been to "distance" local government audit from both central Government and local authorities.

District auditors are of course entirely independent in discharging their statutory duties, for which they answer to the courts and not to me, but they are civil servants carried on my Department's Vote; and their organisational link with central Government does not permit local government as a whole a role in its policy direction. Similarly, because local authorities appoint their own auditors, audit is not seen to be obviously independent of local government.

Part III therefore provides for the establishment of an Audit Commission for local authorities in England and Wales whose prime function will be to secure the audit of local authorities. The chairman and members of the commission will be appointed by my right hon. Friend the Secretary of State for Wales and myself. They will include a number of representatives of local government interests, and local government will be consulted about the membership. The commission—quite independently of central Government—will appoint the auditors after consultation with the local authorities concerned.

This proposal to take away from local authorities the right to choose their own auditors has understandably generated much opposition from local government, which claims that we are singling it out for especially hostile treatment. The facts do not support this allegation. Very few public sector bodies appoint their own auditors. The nationalised industries, the National Health Service and many other public bodies have their auditors appointed by the sponsoring Minister. Government Departments do not choose their auditors—they are audited by the Comptroller and Auditor General, who reports, of course, to Parliament.

In the private sector, company auditors are appointed by the shareholders, not by the directors. I know that for much of the time this is a distinction without a difference, but at critical times of difficulty shareholders do exercise their powers. The local government equivalent of shareholders would, I suppose, be the electors or ratepayers, but clearly it is impractical for them to appoint auditors. That is why I propose to set up the commission—as an essentially independent body—to fulfil that function.

In short, I do not accept that local government is being singled out. On the contrary, I believe that our proposals will bring local government more closely into line with practice elsewhere in the economy.

The second issue of principle arises within the answer to questions about the role of Parliament and of the Comptroller and Auditor General and along the line of the point of order raised by the right hon. Member for Ardwick. The Government did not feel able to adopt the Public Accounts Committee's proposals for local government audit. We accept wholeheartedly the PAC's basic objectives: to improve the present audit arrangements, especially in the field of value for money, and to reduce the amount of central Government control over local authority audit. Both are central to the present proposals, but we could not accept the PAC's conclusion that the best way of achieving those objectives would be for the Comptroller and Auditor General to assume responsibility for the district audit service.

Local authorities are responsible to their own ratepayers and electors, whereas the Comptroller and Auditor General is responsible to Parliament. The rate support grant is paid to local authorities in such a way that they are free to make their own expenditure decisions. Parliament has a legitimate role to play in the determination of the size of the grant and in its broad distribution, but not in how the local authority spends its money. Once the grant is paid, how it is spent is the local authority's business. Ministers are already fully accountable to Parliament for their own responsibilities for local authority activities.

Mr. Michael Morris (Northampton, South)

My right hon. Friend is aware that members of the Public Accounts Committee could not possibly share his view that, as gross expenditure is 60 per cent. of local authority spending, it should be accountable to Parliament in the round. To that end, even within his own proposals, will he write into the Bill the requirement that the Audit Commission shall produce an annual report that will be laid before the House?

Mr. Heseltine

That would be a proper interpretation of the constitutional position that I have advanced. The House will insist on that, and it will be part of the Government's intention. I am grateful to my hon. Friend the Member for Northampton, South (Mr. Morris) for raising that aspect.

Mr. John McWilliam (Blaydon)

On the basis of the logic of the argument expressed so far in favour of the Audit Commission, will the Secretary of State explain why the immediate reference from the auditor relating to any problems which might arise from the audit is to the courts rather than to the Audit Commission?

Mr. Heseltine

I do not follow the concern expressed by the hon. Member for Blaydon (Mr. McWilliam).

Mr. McWilliam

It is a surcharge.

Mr. Heseltine

The hon. Gentleman raises the question of surcharge. If the district or private sector auditor advises the local authority that it is acting ultra vires, the risk of surcharging exists. If I misunderstand the Gentleman, I will again give way.

Mr. McWilliam

The Secretary of State gives way again because, within the Bill as drafted, there is an opportunity for the auditor to refer to the courts items which are not ultra vires but are not within his view of what is efficient or practicable. It therefore seems that the Secretary of State is asking the courts to determine on subjective rather than objective terms what is ultra vires.

Mr. Heseltine

The hon. Member for Blaydon is not interpreting the legislation as it is drawn. As I understand it—although this point can be explored in Committee, if the Bill receives a Second Reading—the commission's powers are very much the powers of the district auditor and are merely being transferred under this legislation.

The district auditor refers to the courts when there is a matter of law at stake, and not the policy matters of individual authorities. As I understand it, there is no change in the legislation that we are proposing from the existing position. If the hon. Member for Blaydon is so selective, I am sure that he will want to pursue these matters in Committee.

Mr. George Cunningham (Islington, South and Finsbury)

Who has the power to surcharge?

Mr. Heseltine

In the end it is the courts. The district auditor plays a role in the surcharging procedures, but the precise position about surcharges, which arises when a local authority acts outside the law, will not be significantly changed under the new as opposed to the existing proposals. There is a surcharge risk if local authorities act ultra vires today and there will be the same risk if they act ultra vires under the new proposals. It is not intended to change the local authorities' position in a significant measure or in principle under this legislation.

Mr. Cunningham

At the moment, if the district auditor thinks that the local authority has acted ultra vires, he can surcharge the council. Is it proposed that a private auditor would have that power in the future?

Mr. Heseltine

This is obviously an important legal matter. I do not want to give a final legal view about precisely where the responsibilities would lie without exploring the matter very carefully. I shall ask my right hon. Friend the Minister for Local Government and Environmental Services to return to that point in the reply. However, it is not intended that there should be a significant change in the surcharge position under the new arrangements and those under the existing arrangement, but the Government will explore the matter raised by the hon. Member for Islington, South and Finsbury (Mr. Cunningham) because it is an important point. I have dealt with that point as effectively as I can and the matter can be further explored in Committee.

I have sought to stress the extent of the commission's independence. A statutory body of this nature cannot, however, be completely independent. Parliament has an interest in seeing that it discharges its statutory functions satisfactorily. It is largely for this reason that the Secretary of State is given powers, in particular, to appoint the members of the commission, and to give the commission directions on the discharge of its functions. The Secretary of State will not—I emphasise the point—be able to give such directions in respect of individual local authorities.

The Bill also empowers the Secretary of State to fix audit fees and to require an extraordinary audit. These two are minimal reserve powers. The first of these would be used only where the commission had, in the view of the Secretary of State, failed, for example, to reach agreement on a fee scale. The second preserves an existing power of the Secretary of State to direct an extraordinary audit when it appeared to him to be in the public interest that there should be one. However, it will generally be for the commission to decide whether to direct an extraordinary audit.

The commission will take over responsibility for the district audit service. Naturally the staff have questions about the nature of the change and its effect on careers and the loss of their Civil Service status. I believe that their worries are misplaced.

The audit function will be strengthened and the audit effort increased. Although I expect to see more widespread use of the private sector, the district audit service staff with their unique expertise will have a key role in the new arrangements and will, I believe, benefit from the enhanced importance of audit. The Bill contains safeguards to protect the interests of staff.

Part III of the Bill specifies the audits for which the commission is to be responsible. It includes all the local authorities in England and Wales, the passenger transport executives and the London Transport Executive. As large trading bodies, water authorities are more akin to nationalised industries than to local authorities.

We propose that they should switch to nationalised industry style audit arrangements with auditors appointed by the appropriate Secretary of State.

Audit reports on water authorities will be laid before Parliament and published, and we shall continue with our policy of using the Monopolies and Mergers Commission to examine their cost effectiveness and efficiency. Inevitably, the changes set out in part III will increase local government audit costs.

The commission will be required to be self-financing, apart from grants for working capital in the first two years. The audit fees paid by local authorities will be its main source of income, and an increase in fees seems inescapable, but I am convinced that any increase will be repaid many times over from the resulting improvements in local authority efficiency.

Mr. George Cunningham

The right hon. Gentleman has referred to the proposed changes in the auditing of water authorities. Did he notice in one of the newspapers over the weekend a reference to a fear that the public are losing a right of access to documentation from the water authorities? Will he say whether that fear is well grounded? My impression from the Bill is that it is not and that the public's right of access to documentation in the schedule to the Water Act 1973 is not affected. Is the change that is referred to in The Sunday Times story taking place?

Mr. Heseltine

I am grateful to the hon. Gentleman for raising that issue. The story is grounded in fact. There is a diminution in that right but there are alternatives which I believe are more important in the auditing of the water authorities. There will be a report and the authorities will be subject to the nationalised industries' disciplines with which we are familiar in another context. As I read the debate that took place on the Public Accounts Committee's report—I am sure that right hon. and hon. Members have read it—there was much more concern about the auditing of nationalised industries than about arrangements for auditing local government.

Any changes that might flow should stem from the Government's response to the PAC report. We see the water industry having a grouping with the nationalised industries as opposed to the local authorities.

The audit reports of water authorities will be laid before Parliament and published and we shall continue with our policy of using the Monopolies and Mergers Commission to examine their cost effectiveness and efficiency. In those two ways our material changes consist of new disciplines to replace one of those lost, which is the public's right of access to which the hon. Member for Islington, South and Finsbury has referred.

Our intention is that the commission should be established soon after Royal Assent. It will be given a skeleton staff and will begin detailed preparations with a view to acquiring its full responsibilities on 1 April 1983.

On that basis, I commend the Bill to the House. It is an important step in the Government's determination—

Mr. Tony Marlow (Northampton, North)

I am grateful to my right hon. Friend. Going back quite some distance in his speech, he said that there will now be only one rate increase each year, which might in some cases be a very big increase. Can he say what special protective measures he has for commerce and industry, who not only pay more than the domestic ratepayer but are completely disfranchised?

Mr. Heseltine

My hon. Friend will be as aware as I am—perhaps not quite as aware as I am, but none the less well aware—of the controversy that surrounded my earlier proposals, which would have given a degree of protection to the commercial and industrial ratepayer. In the absence of those proposals, it was not possible to give the degree of protection for the commercial and industrial ratepayer that would have been provided. That was one of the powerful arguments for my first proposals.

Mr. Harry Cowans (Newcastle upon Tyne, Central)

The right hon. Gentleman is taking away the right of local authorities to levy a supplementary rate and he is conferring upon himself, or any other Secretary of State, the right to alter local authorities' grants at any time during the financial year. In other words, he is conferring upon himself the right to make a decision on a supplementary rate while removing that right from local authorities.

Mr. Heseltine

The hon. Gentleman raises an important issue that has been raised by the Association of County Councils during its representations on the Bill. It is an issue that we shall want to consider as we examine the detailed workings of the proposed legislation. We come back in the end to the Government's determination to secure lower levels of public expenditure. We believe that the traditional relationship between local government and central Government entitles us to expect local government to keep within the levels of expenditure that are set by central Government. The failure of some local authorities to do that has led to the pressures that were enshrined in the 1980 legislation and which to some extent are extended by the Bill.

Mr. W. Benyon (Buckingham)

Having jumped over part II of the Bill quickly, will my right hon. Friend say whether he agrees with a situation in which the rules could be altered after the beginning of the financial year? That is tantamount to fixing the rate.

Mr. Heseltine

I do not think that it is tantamount to fixing the rate. However, it would have an effect on expenditure levels in the absence of supplementary rates. The rates would have been fixed at the beginning of the year and would then not be capable of adjustment. I am sure that my hon. Friend understands as clearly as I do that that is the position. I realise that the issue has been the subject of representations that we are considering as a Government. I am sure that the House will want to consider it when it scrutinises part II.

The Bill is an important step in the Government's determination to get better value for money in the public sector and it includes important safeguards designed to protect those authorities that are co-operating with the Government's strategy. It will by the abolition of supplementary rates bring to an end the rapidly growing practice of sharp changes in the budgets of local government with all the hardship and uncertainty that this causes. And the Bill will bring a new impetus to the audit practices of local government while giving to local government for the first time a significant role in the policy direction of audit.

In all it is an important measure to carry us forward to the next stage which will follow the consultation we have now begun on the reform of local government finance itself.

5.39 pm

Mr. Gerald Kaufman (Manchester, Ardwick)

The Secretary of State for the Environment has just spent 37 minutes seeking to persuade the House that there are merits in the legislation that he is asking us to approve tonight. Until the intervention of the hon. Member for Northampton, North (Mr. Marlow) in the final minutes of the Secretary of State's speech, anyone listening to him could have been forgiven for being completely unaware that part I of the Bill represents the Government's second thoughts, or, according to some reports, their seventh thoughts, on the subject. However, the fact is that we are debating the Bill in late January rather than November because the Secretary of State has been compelled to abandon his original intentions. Therefore, let the Government not seek to railroad the Bill through Parliament. If there has been any delay, it is entirely their responsibility.

It would be churlish to proceed without paying our last respects to the Local Government Finance Bill, which has been consigned to the oblivion that seems to await so many of the Secretary of State's projects. Last month, when he announced his change of course, the Secretary of State made it all seem so simple. He told the House on 16 December: Instead of the proposals to permit supplementary rates only after a poll of local communities, the Government propose to ban supplementary rates altogether."—[Official Report, 16 December 1981; Vol. 15, c. 309.] With a bound the Secretary of State was free. One would never have thought that the referendum was the linchpin of part I of his first Bill. When he made the original announcement in Torquay last September he laid stress on the role of what he called the mandatory referendum, by which the approval of the local electorate for a supplementary rate would have to be obtained.

In the following month, at the Conservative Party conference, the Minister for Local Government and Environmental Services went to some trouble to proclaim the merits of the referendum as preventing what he called a concentration of power in the hands of the State. That is precisely why we have proposed the referendum approach, so that the final decisions will not be for central Government but for the local people themselves. Now, apparently, the local people are to be deprived of the right to make those final decisions that the Minister believed to be so essential four months ago. When the trouble over the referendum proposal blew up, the Minister for Local Government and Environmental Services was heard to mutter that all the bother could have been avoided if only, in place of "referendum", the Department of the Environment had used the phrase "town poll".

Therefore, the Government's climb down is much greater than the Secretary of State tried to make out, because it was not just the referendum that was the obnoxious feature of part I of the first Bill. In the original Bill the Secretary of State planned to interfere in the rate-making process of every local authority in the country by placing a limit on the level of each council's initial rate. That intention has now been abandoned, together with the referendum which would have been imposed on any authority seeking to go above the Secretary of State's limit for that council.

The ditching of part I of the original Bill is a great victory for local government and for the House of Commons, which forced the Secretary of State to change his mind. Why is local government so vehemently opposed to the Bill in its present revised form? Make no mistake about it: all three local authority associations still bitterly oppose what the Government are seeking to do.

The Association of Metropolitan Authorities, which is Labour controlled, has declared that the Bill represents a marked shift in power towards the Executive and away from elected local government. The Association of County Councils, which is Conservative controlled, denounces the Bill as a further encroachment on local government autonomy… It will diminish the freedom of local authorities. Even more vehement is the Association of District Councils, which is also Conservative controlled. That organisation warns that the Bill seriously threatens the autonomy and financial independence of local government and that its proposals are a further move towards the centralisation of the spending decisions of each individual local authority and are inherently constitutional in nature. It is for that reason that tonight we shall ask the House to agree that the Committee stage of this constitutional measure should be taken on the Floor of the House.

Dr. Oonagh McDonald (Thurrock)

To illustrate the points that my right hon. Friend was making, may I make him aware of the position of my local authority of Thurrock? It is one of two local authorities outside the Greater London area that is having its total block grant removed. In spite of having cut spending to the bone, it will now be forced to lose 5p in the pound, thus forcing up rates and rents in the coming year. There will be elections in May. The power of the local authority will pass from the motley collection of Tories and Independents who now run it to Labour representatives. That Labour authority will be forced to conform to the decisions of the Tories and Independents who are running the authority. It will have no power to change those decisions in the course of the coming financial year.

Mr. Kaufman

It is for the reason given by my hon. Friend in relation to her local authority and because of the appalling penalties being imposed on such authorities that the Association of District Councils is so strongly opposed to the legislation. It has summed up its opposition to the Bill in these stark words: The whole institution of local government is under severe attack. How is the Bill mounting that attack? It is a menacing fact that even clauses that seem purely technical in nature have the most worrying implications. For example, at first glance clause 3 looks innocent. The Secretary of State tried to gloss over it when he gave a misleading explanation of its purpose. Subsection (1) asks that the following should be inserted in the 1972 Act: Subject to sub-paragraph 3 below, the interest for the time being payable in respect of money borrowed by a local authority, whether before or after the coming into force of this Schedule, shall be a first charge on the revenues of the authority. That clause means that in the event of a local authority becoming insolvent, the money brokers must be paid before anyone else, even including the authority's employees. Therefore, that apparently innocuous clause at a stroke places local authority employees in a worse position than private sector employees whose firm goes bust. That is not a phantasmagorical mirage. It is significant that that clause did not appear in the Bill when it was originally introduced in November. It has been belatedly inserted at the insistence of the money lenders of the City of London. They discovered to their alarm that clause 12 of the old Bill—clause 4 of the new Bill—could force local authorities into insolvency. They were understandably worried at the implications for them. The dangers inherent in new clause 4 are at the heart of our opposition to the Bill. My hon. Friend the Member for Newcastle upon Tyne, Central (Mr. Cowans) and the hon. Member for Buckingham (Mr. Benyon) were right to draw attention to the grave implications of that clause, for reasons that I shall give later.

There are the proposals that make up the bulk of the Bill—the decision to set up the Audit Commission for Local Authorities. The House will relish the irony of the Secretary of State as self-appointed quango hunter-in-chief setting up one of the most powerful quangos that the country has ever seen. The Secretary of State has been busy recently in the world of quangos. Earlier this month he heartlessly killed off the National Voluntary Panel on Captive Hawks, but unfortunately he immediately cancelled out that decisive move by setting up in its place the Hawk Board: The new body used these words to explain the Secretary of State's equivocal policy on hawks: The Department of the Environment has expressed a desire to continue a full discourse with the hawk keeping public on an ongoing basis. We lose one body on hawks and gain another. We also gain a new and mighty quango which will oversee the spending of about £20 billion of public money.

Up to now, auditing of local authority expenditure has been independent of the Government, but if this proposal becomes law, in charge of local authority auditing will be a huge commission, up to 17 members strong, all no doubt adequately remunerated. There will be a deputy chairman, who will be still more adequately remunerated, and a chairman, who will be yet more adequately remunerated. All of them will be placemen of the Secretary of State for the Environment. Most unfortunately, Sir John Grugeon, Conservative leader of Kent county council, will not be available, because he has just been put in charge of the Secretary of State's new fancy—a garden festival in Liverpool—at a salary of £21,000 a year. No doubt other public-spirited folk will be ready, in the national interest, to shoulder the necessary burdens.

The establishment of this new quango goes directly against the recommendation of the Layfield committee, which stated: What is the most efficient and economical way of doing something is very often a question of judgment. Councillors are elected to local authorities to exercise such judgment and any procedures that are instituted to allow the government or any other body to investigate their decisions represent an intrusion into the responsibilities of the council. The new commission is opposed by the Society of Local Authority Chief Executives and by the Society of Metropolitan Treasurers. The Association of District Councils declares itself "strongly opposed" to the proposed Audit Commission. The Association of Metropolitan Authorities warns that the new commission will bring about interference by, and inevitably accountability to, the Executive". The Association of County Councils rejects it as yet another attempt to erode the autonomy of local authorities". Moreover, this proposal is contrary to the expressed wishes of the majority of Back Bench Members. No fewer than 279 right hon. and hon. Members from all parts of the House have signed a motion approving the report of the Public Accounts Committee on the role of the Comptroller and Auditor General, and the report is opposed to an audit commission as proposed in the Bill.

The Secretary of State's remarks today were not an adequate response to that report. If he is saying that it is inappropriate for the Comptroller and Auditor General to be responsible for local government audit, because local authorities are elected bodies, he is demolishing his own comparison of those elected authorities with nationalised industries and thus demolishing the attempt to have their accounts audited in ways comparable with those of nationalised industries.

Mr. Heseltine

If the right hon. Gentleman is so much in favour of the PAC report on how local government audits should be carried out, why did the hon. Member for Edinburgh, Central (Mr. Cook), speaking from the Dispatch Box on behalf of the Opposition, say: Nothing is more likely to cause resentment within local authorities than the suggestion that Parliament should ultimately be in charge of an efficiency and effectiveness audit of local authorities."—[Official Report, 30 November 1981; Vol. 14, c. 106.] Does the right hon. Gentleman agree with that?

Mr. Kaufman

Yes. My hon. Friend was referring to the views of the local authority associations, which I have mentioned. They are certainly opposed to the PAC proposals on how local authority audits should be carried out. I was pointing out to the Secretary of State that 279 right hon. and hon. Members are in favour of that course of action. That being so, I further pointed out that the right hon. Gentleman's response to that report and his attempt to gloss over it by saying that local authority accounts ought not to be audited by a servant of Parliament because they are elected bodies does riot chime in with the wish of local authorities not to be supervised by a quango appointed by him. That is my point.

I make that point particularly because one aspect of the proposals for an Audit Commission has aroused the most serious misgivings, even among those who support the plan for a commission. I refer to the powers of direction given to the Secretary of State in, for example, clauses 15 and 16 and schedule 1. Schedule 1 is particularly sweeping. It provides: The Secretary of State may, after consultation with the Commission, give it directions as to the discharge of its functions and the Commission shall give effect to any such directions.'' It is no wonder that the provisions are opposed by the Institute of Chartered Accountants in England and Wales, by the Advisory Committee on Local Government Audit, which the Secretary of State quoted in his support, which says that such powers would seriously diminish the independence and therefore the standing and authority of the commission", and by the Association of County Councils, which warns that such powers must reflect on the integrity of the commission and call into question its true independence from central Government".

All of those bodies are aware of the danger of putting such a weapon into the hands of any Secretary of State, but above all they are rightly fearful of giving such powers to the present Secretary of State with his unprecendented and discreditable record of interference in the freedom of local government.

Nowhere is the Secretary of State's baneful and distinctive touch more obvious than in clause 9, which is clearly based on section 99 of the Local Government (Scotland) Act 1973, which set up the Audit Commission for Scotland. Paragraphs (a) and (b) reproduce that section almost word for word, but a third paragraph has been added which does not appear in the Scottish Act. Clause 9 therefore further provides that an auditor shall by examination of the accounts and otherwise satisfy himself… (c) that the body whose accounts are being audited has made proper arrangements for securing economy, efficiency and effectiveness in its use of resources and in the carrying out of its policies. In recent years there have been serious misgivings about the increasing incidence of district auditors intervening in the policy making role of local authorities, setting themselves up as local Lord Dennings, but this is the first time that an Act of Parliament will actually instruct auditors to involve themselves in the political role of local authorities. This is an exceptionally dangerous clause, particularly when set in the context of the financial controls and penalties contained in parts I and II.

The provision in clauses 1 and 2 to remove the power of English and Welsh local authorities to levy supplementary rates and precepts has been accepted by some Conservative Members as preferable to the original proposal to impose a referendum on a local authority wishing to rate above the limit set by the Secretary of State, but it comes very strangely from a party which claims to represent tradition and continuity in British political and social life. Rating authorities have certainly had the power to levy a supplementary rate since the year 1601. The term "supplementary rate" itself dates from the Poor Rate Assessment and Collection Act 1869. This long-entrenched power is now to be swept away for short-term, adventitious reasons in what Aneurin Bevan would have described as "an emotional spasm".

At the time when the Secretary of State assumed his present office, very few local authorities levied a supplementary rate or precept. This year, as he has pointed out, about 30 have done so. That is still a small proportion of the total of 457 local authorities, and in all but two cases it was at least partly to compensate for removal of rate support grant by the Secretary of State.

What will be the result of this ban on supplementary rates? The local authority associations are in no doubt. The considered opinion of the Association of County Councils is as follows: A prohibition on supplementary rates and precepts could result in local authorities seeking a high rate or precept initially to cover all contingencies. However, there are some contingencies which even the most foresighted local authorities are unable to anticipate, such as the current spell of exceptionally severe weather. The financial problems for local authorities of the snow and its aftermath were referred to in both the evening news bulletins of ITN on Saturday 9 January. All worries on that score were swept away. On the authority of what I am assured was a senior source, this is what the newsreader on ITN told the nation: The Department of the Environment, said the Government, were very concerned about the situation. Local authorities had the power to raise a supplementary rate to meet emergencies and other help might be available. That power will be denied to local authorities as and when clauses 1 and 2 of the Bill become law. Those two clauses, combined with clause 4, place local authorities in the tightest squeeze that they will ever have had to cope with. Already local authorities have been mutilated on a financial bed of Procrustes devised by the Secretary of State and his colleagues. This has been accomplished by the imposition of arbitrary spending targets accompanied by damaging penalties achieved through the removal of grant from local authorities singled out as scapegoats.

All this goes against explicit assurances given by the Minister for Local Government and Environmental Services during the passage of the Local Government, Planning and Land (No. 2) Bill 1980. This is what he said on Report: Some people have suggested imposing individual cash limits on every authority. That would be a very serious step indeed … When the public funds have been distributed, it is then a matter for individual local authorities and their councillors as to what their expenditure decisions are. It is their choice between services, their choice as to the volume of expenditure on those services, and their choice as to the rate levels that they decide to impose."—[Official Report, 8 July 1980; Vol. 988, c. 313.] Every word of that solemn commitment has been violated by both the Secretary of State and the Minister. What is more, the targets have changed with such bewildering speed that local authorities simply do not know what to do to safeguard themselves. For example, 47 local authorities were, in relation to targets set by the Secretary of State for the current financial year, either underspenders or nil overspenders. On the basis of the same budgets which made them underspenders for this year, those authorities are transformed for the forthcoming year by the newly formulated targets, announced by the Secretary of State last month, from prudent and frugal budgeters into profligate wastrels, liable to the maximum penalties that the Secretary of State plans to impose.

Although the Secretary of State always accuses Labour councils of being profligate, more than half of these councils are Conservative controlled. The problem is that if the Secretary of State does not catch a local authority with one of his targets he is sure to trap it with another. He is like the lady who bought her son-in-law two ties for Christmas. When he went for lunch with her on Boxing Day, he naturally wore one of the ties. But the moment he walked through her door his mother-in-law called out to him "What's wrong with the other tie?"

As far as I know, the Secretary of State does not yet have a son-in-law, but he does have the next best thing—the Minister for Housing and Construction. His local authority, Tonbridge and Malling, has been caught wearing the wrong tie. On this year's budget and target Tonbridge and Mailing is an obedient underspender. On that same budget, but on this year's new form of target, that same council becomes a maximum 7 per cent. overspender subject to condign penalties unless it makes lacerating cuts in its already not very satisfactory service.

As the Secretary of State produces each new spending target, accompanied by the inevitable new penalty, his imagination grows more and more bizarre and his use of language more and more eccentric. The House has the right to be informed how this year's targets are to be compiled and I shall therefore quote from annexe B of appendix C of what, for want of a better word, I will call the relevant document. It says: The scaled minimum volume budget is reduced (or increased) by 0.2 percentage points for each 1 per cent. that the scale minimum budget is above (or below) 1982–83 GRE and a further 0.2 percentage points for each 1 per cent. that the minimum current expenditure at November 1980 prices has been termed skewing and it produces an unconstrained target for each authority. This is only the beginning. Because there is an imbalance between authorities spending above or below both volume targets or GREs, the total of unconstrained targets will not be equal to the aggregate controlled total. Consequently, the unconstrained targets are adjusted so that the sum of expenditure targets is equal to the cash control total (which is equal to the GRE control total). The 'skewed' targets thus derived are then compared to 1981–82 minimum volume budgets revalued by inflation factors which are based upon the Government's assumptions for inflation by economic category. The implied real reductions from these budgets are calculated as percentage differences. On the basis of these comparisons the targets for individual authorities are then adjusted on the following constraints:

1. (i) that no authority should be asked to make real reductions from revalued 1981–82 minimum volume budgets of more than 7 per cent.;
2. (ii) that no authority should have a target which implied a real increase in expenditure from its revalued 1981–82 budget; and
3. (iii) that authorities with planned spending at or below GRE and at or below volume target should not be asked to make real reductions of more than 1 per cent.

As a result of imposing these constraints the sum of individual targets is no longer equal to the cash control total. The House would never have thought that they would be.

The final stage in the construction of the targets then involves the iterative process of scaling all the targets, and then checking the individual targets against the constraints outlined above until the targets sum to the control total without violating the constraints. That sounds like rubbish, for the very good reason that it is rubbish, with its unconstrained targets, its iterative processes and its skewing. Some local authorities fear that they are being skewed for all they are worth. However, that rubbish will affect the daily lives and welfare of millions of people.

There are other oddities about the compilation of these targets. For example, local authorities are instructed for target purposes to assume an inflation rate of 9 per cent. Yet we all know that inflation is running at 12 per cent. and that the most optimistic of the Government advisers would be surprised and delighted if the rate were to drop into single figures this year.

There are other inflation rates which the Government are operating. We can take the Bill as an example. When the first version was published on 6 November the cost of the Bill per page was 8.9p. The No. 2 Bill, published on 16 December, was much more expensive at 10.5p per page. The inflation rate for local government finance Bills has risen by 17.5 per cent. in six weeks—an annual rate of 160 per cent. Let us sincerely hope that there is no No. 3 Bill.

What is more, the Government's targets are highly unlikely to produce the expenditure cuts that are the object of the whole exercise, because this year local authorities have a choice of expenditure ceilings—a choice between their expenditure targets compiled in the manner that I have just attempted to describe and their grant-related expenditure assessments. If each local authority chooses to spend up to its GREA or spending target, whichever is the higher, local authorities will in the coming year spend £790 million—4.3 per cent.—more than the Secretary of State wants them to and they will be subject to no penalties whatever.

That is where clause 4 comes in. Its first objective is retrospectively to legalise unlawful acts that have been committed by the Secretary of State. The House will recall that last October the High Court found in favour of six local authorities in London which took legal action against the Secretary of State for unlawfully withholding grant from them. It is an offensive fact that four months later the Secretary of State has still not stated how he intends to comply with that court decision.

So now the Secretary of State's legal advisers—a pathetically hard-pressed and over-worked group of public servants—are scared that the grant penalties in last summer's grant hold-back exercise may be even more unlawful. Under the Local Government, Planning and Land Act 1980 the Secretary of State is barred from manipulating multipliers to reduce rate support grant, yet that is precisely the method that he has chosen to punish those councils that have over-budgeted on hold-back. Therefore, clause 4 aims to legalise retrospectively that whole disreputable episode.

Last month the Secretary of State and his acolytes rebuked the Labour Party for announcing how it intends to repeal the compulsory sale of council houses when it returns to office. They accused us of retrospective action—a curious description of advance notice of what a Government plan to do in two years' time—but clause 4 is retrospective in the shoddiest sense of the term. Last summer the Secretary of State ordered every local authority in the land to obey his instructions, and he told them the penalties if they disobeyed, yet he had no legal power whatever to impose those penalties. He still does not have that power, and he will not have it until the Bill becomes law. Only then will he be able to present the necessary rate support grant supplementary report to Parliament. That is why subsections (5) and (6) backdate to 1 April 1981.

Subsection (6) treads new ground, even by the Secretary of State's standards, and the House should pay careful attention to what it says. It states: In relation to the year beginning on the said 1st April references in this section to guidance issued by the Secretary of State include references to guidance issued by him before the passing of this Act and, as respects any determination under the said section 59 or paragraph 8, the requirements of subsection (5) of section 60 of the said Act of 1980 and of that subsection as applied by section 61(2) of that Act may be satisfied by consultation before the passing of this Act. Not only will the Secretary of State be able to impose penalties that were not legal when he threatened them, but the Bill will even make the necessary consultation retrospective. Stalin himself could not have done better than that. This comes from a Secretary of State who has the nerve to lecture local authorities on the need to obey the law, when he flouts it and then asks Parliament retrospectively to legalise his unlawful actions.

The dangers of clause 4 go much further than that. At any time he likes the Secretary of State can single out a local authority for penal action. He can swoop on that authority and remove grants from it—the super hold-back that local authorities now fear.

As a result of the Bill the local council will not he able to levy a supplementary rate to make good that grant nor will it be able to borrow to make up the difference. Exactly like the danger that threatened Lothian last year, it could run out of money and be unable to pay its bills and wages. Under clause 3, those who have lent it money will have first call on whatever it is able to pay. As both the Association of District Councils and Association of County Councils solemnly warn, any council in the country is liable to be picked on by the Secretary of State for this cat-and-mouse game.

All that is bad enough, but there is now another factor that local councils must take into account—what NA we may call the Diplock factor. Last month, the House of Lords found against the GLC in the action on subsidisation of fares brought against it by Bromley borough council. Naturally, attention has mainly been focused on the impact of that decision on London Transport fares, and the Labour Opposition regard today's response to this problem by the Secretary of State for Transport as shortsighted and irresponsible. But the problems created by that judgment go far wider than London Transport. They affect every local authority in the country precisely because of the methods for controlling local authority spending adopted in the 1980 Act and in the Bill.

The dilemma that now presents itself to local government is contained in words spoken by Lord Wilberforce and echoed by two of the other Law Lords. Lord Wilberforce charged the GLC with what he called a deliberate failure to deploy to the best advantage the full financial resources available to it by avoiding any action that would involve forfeiting grants from central funds. It was thus a breach of the fiduciary duty owed by the GLC to the ratepayers. In his customary thoughtless way the Secretary of State greeted those words with a whoop of triumph and said that they placed increased pressure on local authorities, as he put it, to behave responsibly. It is true that every local authority is now wondering how best to fulfil its fiduciary duty. Should the council budget not to spend above its GREA threshold, as above that it forfeits grant? Will the council be fulfilling its fudiciary duty only if it budgets not to lose any grant through any Government penalty?

Councils spending above their GREA or target for 1982–83 could be taken to court by a ratepayer for being liable to grant penalties and so failing in their fiduciary duty. Incidentally, such councils could include Bromley borough council, which is an overspender on the new targets for the coming financial year. Have the councils already under threat of hold-back of grant for having failed to adhere to this year's targets failed in their fiduciary duty as well—presumably, each one could be tested in court the moment the Secretary of State's penalties are retrospectively validated by the enactment of this Bill—or do the implications of the Lords decision go much farther than that?

As it is open to them to do by making massive cuts, ought councils to budget to ensure that their entire expenditure is covered by Government grant? Will they be failing in their fiduciary duty—

Mr. Cowans

I draw my right hon. Friend's attention to his opening remarks, when he proffered the advice given by the Department of the Environment to raise supplementary rates to deal with the effects of the bad weather. What would be the position if that were done by retrospective legislation? Would such a local authority find itself in court, or would the Secretary of State meet the bill?

Mr. Kaufman

Literally no one can answer that question because of the confusion into which local government finance has been thrown by the legislation and the decision of the courts.

Mr. Christopher Price (Lewisham, West)

Will my right hon. Friend give way?

Mr. Kaufman

I have been speaking for some time, and if my hon. Friend will forgive me I will not give way at this point.

If local authorities do not have their entire expenditure covered by grant, will they be failing in their fiduciary duty? No one knows, and the uncertainty of the law could create a field day for litigants even more irresponsible and mischievous than Bromley borough council.

There could also be litigants the other way because local authorities have certain statutory duties which they are required to fulfil—highway maintenance, maintenance of a police force and fire service, refuse collection and disposal and provision of an adequate education service. The dilemma created by the Lords judgment for one authority, the Inner London Education Authority, is summed up in the following words: It will be noted that a reduction of £115 million is still £15 million short of the point at which Government grant would be attracted. To put the matter in perspective, in order to obtain grants of £11 million, or relief to the ratepayers amounting to a product of a 1p rate, the authority would have to reduce its expenditure in 1982–83 by £145 million. Neither the target set by Government nor the facts set out in Annex B, which relate to that target, support the view that it would in practice be possible to achieve this, other than at the expense of the wholesale destruction of the service which it is the statutory responsibility of the authority to maintain. That quotation is from a report just submitted to the ILEA by its chief education officer, Mr. Peter Newsam, a man in whose judgment the Government have just shown confidence by appointing him as chairman of the Commission for Racial Equality. If the ILEA fails in its statutory duty, as described by Mr. Newsam, it is open to any parent in its area to take it to court. If it spends the money necessary to fulfil its statutory duty, it may be failing in its fiduciary duty and be liable to legal action for that.

Those are the agonies of local government that previous legislation introduced by this Secretary of State has created. The Government should be legislating now to remove those dilemmas and allow local government to conduct its activities free of such incalculable difficulties. But instead, the Bill, if it is enacted, will make those difficulties even worse.

The next Labour Government will repeal the Bill if it becomes law. In the interests of all local authorities and of the people whom they are elected to serve, it is undesirable for the Bill to become law. We shall vote against it in the Division Lobby tonight. If it obtains a Second Reading, we shall oppose its further stages with all our strength.

6.23 pm

Mr. Tony Durant (Reading, North)

The right hon. Member for Manchester, Ardwick (Mr. Kaufman) gave us an amusing dissertation about the form of the rate support grant. I wonder whether he has spoken to his right hon. Friend the Member for Stepney and Poplar (Mr. Shore) about the formula that his right hon. Friend used when he was the Secretary of State for the Environment. I have no doubt that it read as amusingly, but we do not see it because it is hidden in the archives of the Department of the Environment. However, above all, the right hon. Member for Ardwick has proved that there is a need to reform local government finance. It needs to be examined because it is becoming more and more complex.

In general terms, I welcome the Bill. I was opposed to the referendum formula in the previous Bill, but this Bill is a step in the right direction. We must look at local government budgets, particularly as they affect ratepayers, many of whom are widows, single-parent families, and so on, who are rightly concerned about the high level of rates. The local shopkeepers and small business men are also concerned.

The right hon. Member for Ardwick quoted many people and organisations in defence of his argument. I quote from the Association of British Chambers of Commerce, which sent us a paper today. The second paragraph of the paper is headed Why Supplementary Rates must be banned and states: A supplementary rate demand is much more damaging than an equal addition to the main rate demand. It comes well into the financial year and cannot satisfactorily be taken into account in company budget and cash flow forecasts. A firm which allows for a supplementary in its costings will tender at higher prices than a rival which does not allow for a supplementary. If a firm does not allow for a supplementary rate, it will be faced with a choice between making a loss or emergency cuts in its costs. Commerce certainly believes that a supplementary rate is damaging to its business, damaging to its budget and should not be allowed. I agree.

When there is a change in control in a local council the Bill will prevent sudden changes in policy and sudden implementation of a supplementary rate that is unexpected by the electorate. That will also help small business men.

Expenditure on local government is still too great a part of the gross national product—still well over 25 per cent. Ten per cent. of the working population is employed in local government, and £25.7 billion is spent on it. The Government should examine that in detail. We cannot sit idly by and accept those astronomical figures. We must take action, and with this Bill we are doing so.

We must encourage a move away from local government always providing the services that it currently provides. We should encourage privatisation. Where a service can be provided more efficiently and at a lower cost by private industry, it should be given out to private firms. Why do we always look to local government to provide the solutions to our problems? The job of local government should be to provide services that no one else will provide. Refuse collection is an outstanding example of where private industry can operate. Southend has carried out the experiment with great success, and an efficient, well-run refuse service is provided.

Do we really need direct works departments when so many small builders need work? Direct works departments have a damaging effect on local industry and local builders. Should local government be concerned with the leisure industry? After all, Lew Grade made a mistake, so local government can also make mistakes. Surely we can leave it to the private sector to risk its money.

In the long term, rate reform is the main aim and we must move quickly towards it. The Green Paper outlines the options. I accept that none is perfect. I do not believe that there is a perfect answer to local government finance. If there were a perfect answer, we would have found it years ago. No one likes taxes and we must therefore find the best option.

I welcome the audit option. I do not understand the fears about it. Audit is a perfectly normal process, so why should it not be encouraged and put out to the private sector? There should be better reporting from auditors. One of the weaknesses in audit in commercial concerns is that the auditors have limited powers. Their powers should be extended there and in local government.

I am worried about the water authorities and about the removal of citizens' rights to scrutinise the accounts. I have been approached by my Reading ratepayers regarding the Thames water authority. I accept that they did not find anything particularly wrong, hut their examination of its accounts had a salutary effect on the water authority. It made it look more carefully at what it was doing. We should not dismiss lightly the right of local residents to examine accounts. I should like that right to be reintroduced into the Bill.

I agree with the right hon. Member for Ardwick about part II of the Bill, and we must examine it carefully in Committee. It has been included as a safeguard against local authorities that impose too high a rate demand. However, we must be careful that in including this safeguard we are not setting the rate levels for everyone in the country.

I regard the Bill as an interim measure and I hope that the Government classify it as such. We need rating reform as quickly as possible. I spent the weekend looking up old speeches and I came across my maiden speech. It is always revealing to an hon. Member to read his maiden speech, because it makes him realise that perhaps he was not as good as he thought he was. However, I stressed in my maiden speech the need for urgent rate reform. Things were bad enough at that time and they have got worse.

We also need to consider the position of commercial ratepayers. They have been left out of the general permutation and that will have to be considered in Committee. The Bill is worthwhile. We shall have to work on it in Committee, but I support its general tenor.

6.31 pm

Mr. David Ennals (Norwich, North)

The hon. Member for Reading, North (Mr. Durant) will not expect me to agree with most of his comments, but I share his hope that the Bill is an interim measure, and I hope that we shall be told later how long it is to be with us.

I congratulate my right hon. Friend the Member for Manchester, Ardwick (Mr. Kaufman) on a speech that made mincemeat of the Bill. Of all the members of the Cabinet the Secretary of State for the Environment is the most difficult to understand. He shows extraordinary arrogance in his relationship not only with individual local authorities, but with the organisations that represent those authorities, whether Conservative or Labour controlled. The right hon. Gentleman was influenced by the threats of his Back Benchers that they would not vote for the original Bill, which contained the referendum provisions, but he is not influenced by local authority associations.

The Secretary of State refused, in his usual polite way, to give way to me after referring to the consultative council. I served on that council for longer than the right hon. Gentleman and I know that the previous Labour Government wanted from time to time to see reductions in public expenditure. We discussed that with the local authority associations, but at no time did we have disagreements and, whatever party controlled the associations, we never brought forward the sort of throat that is contained in the Bill.

The Secretary of State constantly says one thing and does another. It is fascinating to read in the Green Paper on alternatives to domestic rates: successive Governments have wanted local authorities to have a wide measure of independence and local autonomy over their budgets and priorities and to be accountable to their own electorate for their decisions on these matters rather than to central government. Making such a statement and introducing the Bill before us is blatantly two-faced.

The Secretary of State's current proposals are almost as dangerous as were the referendum proposals. Local authorities may be put in a desperate situation if the Government estimate of the inflation rate goes wrong—and it has gone wrong each year so far and is seriously wrong at present. Local authorities will be required to cut essential expenditure, to go bankrupt or to act contrary to the law.

Local authorities may decide that in order to face up to such eventualities, which may include another winter like the present one, which involved considerable unexpected expenditure, they should set a rate level higher than they may need—to the disadvantage of their ratepayers and contrary to the Government's policies.

The Secretary of State acts in an extraordinary double manner. He commands local authorities to slash their expenditure, but, even if the Norwich council merely stood still on public expenditure in 1982–83, the cuts in the level of the rate support grant would mean approximately a 15 per cent. increase in the rates—not on the decision of the authority, but on the decision of the Secretary of State.

Norfolk county council faces problems as a "wicked overspender" and is discussing the scrapping of all nursery places. Forcing local authorities, whether Conservative or Labour, to act against the interests of their citizens is contrary to the principle of local democracy as we have known it over the years.

My right hon. Friend the Member for Ardwick quoted the views of the ADC, which is not Labour controlled. The Labour council at Norwich supports those views. The association believes strongly that a vigorous democratic and independent local government is an indispensable part of our national system of government. Does any hon. Member not believe that local government is a vital part of democracy in Britain? Local authorities say that the Bill will cripple them. The ADC recalls the reorganisation of local government 10 years ago when the then Conservative Government declared that local government was an essential part of the whole democratic framework of government and that, above all else, a genuine local democracy implies that decisions should be taken—and should be seen to be taken—as locally as possible … Ten years on the whole institution of local government is under severe attack. The Local Government, Planning and Land Act 1980 brought in a package of financial and other measures which Secretary of State… claimed 'offers a new deal for local government. It is a major advance in local freedom and local responsibility'. Yet the block grant and capital expenditure controls decisively shifted responsibility and accountability from local government to central government in key areas of finance. The Government knew exactly what they were doing, and they are taking the process a stage further in the Bill. That is wrong in principle and it must be opposed.

One matter on which I disagree with my right hon. Friend the Member for Ardwick is the possibility of a No. 3 Bill. I hope that the Government will bring in a Bill to remove the most objectionable parts of this Bill. The Secretary of State uses Bills as White Papers and the cost of paper reminds us that local government's record in controlling its expenditure is far better than the Government's record in controlling theirs.

The Secretary of State chides local government as though his hands were clean and local authorities were naughty boys. By what right does he do that? Councillors have been elected to do their jobs. The Secretary of State was not elected by the public to be Secretary of State, but councillors were elected by local citizens, on the basis of manifestos and commitments. Did the Secretary of State write into the Conservative manifesto in 1979 that it was the policy of the Conservative Government, step by step, Bill by Bill, to reduce the powers of local government and undermine local democracy? Of course not. In fact, most of the steps that the Government are taking would have been denied and were denied by them at the time of the election.

I shall leave the matter there, because I know that many of my right hon. and hon. Friends wish to speak. People throughout the country, across party lines, not just in this House but in local councils, both Conservative controlled and Labour controlled, whether before May or after May, will say "This is not a Bill that the House of Commons should pass". Very few local authorities have found it necessary to have a supplementary rate, and no good reason has been given for introducing the Bill. I and my right hon. and hon. Friends will vote with deep conviction against what I consider to be a deplorable Bill. It is a blatant attack on local government powers. It is a display of no confidence in the principles of democracy at a local level. For those reasons I believe that we should reject the Bill.

6.41 pm

Mr. Charles Morrison (Devizes)

Once again, I am almost speechless at the display of righteous indignation from the Labour Benches about alleged intervention and increased control by this Government in the affairs of local government. I am speechless when I recall the record of the last Government, who consistently and—unfortunately—effectively, reduced the autonomy and power of local government during their period of office. I can at least claim that I am guilty of the dangerous charge of consistency about the need to uphold local government autonomy, whether I was speaking on the Opposition or the Government Back Benches.

I welcome the decision to drop the proposal for local government referendums. The right hon. Member for Manchester, Ardwick (Mr. Kaufman) said that it was a victory for the House of Commons. It is none the worse for that. The referendums would have undermined the concept of representative local government. In my view, they would have been a constitutional monstrosity. Moreover, they would not necessarily have had the merit of achieving their stated objective of controlling local authority expenditure.

I agree with my hon. Friend the Member for Reading, North (Mr. Durant) that we have a duty to consider the future of local government finance, and to consider rating reform. The Green Paper is a step in that direction. He was right, too, when he said that there is no perfect answer. However, there must be a better answer than the present system of local government finance.

For the time being I am not unhappy about the proposal to abolish the supplementary rate. Of course, the proposal is open to the criticism that, in consequence of it, some local authorities may increase their main rating demand. However, on the whole, I think that that is unlikely, because supplementary rate demands, in spite of what my right hon. Friend the Secretary of State said, are relatively rare. I can recall no occasion in my part of the country—I was in local government in 1957, but also before and after that time—when a supplementary rate was demanded.

On the other hand, the abolition of the supplementary rate has two specific advantages. First, it prevents a newly elected controlling party from lashing out a supplementary rate demand immediately on election, as happened in the case of the Greater London Council. Secondly, it removes uncertainty from domestic, commercial and industrial ratepayers alike. My hon. Friend the Member for Reading, North rightly mentioned the views of the Association of British Chambers of Commerce. What is true of commerce is true of the budgeting of the domestic ratepayer. I therefore welcome part I of the Bill, and I am happy to support it.

I must admit, however, that there my happiness ends. I do not believe that benefits will be achieved from parts II and III. The Bill would be better without them, because they attack the autonomy and constitutional position of local government. Yet again, I remind my right hon. Friend that until now a major facet of Conservative philosophy has been the decentralisation of power. However, the Department of the Environment seems more concerned with centralising it. In doing so, as my right hon. Friends take on more power, leaving local government with less, they produce more rods for their own backs and more and more reasons why they will be blamed for all the alleged misdemeanours of local government.

Yet again, I must remind my right hon. Friends that it is a bad principle to legislate year after year on the same subject. It says little for the depth of the initial thinking and—at least as bad—it is a recipe for chaos and uncertainty. Only last year we had the Local Government, Planning and Land (No. 2) Act. Some of us did not like it, and we said so. However, once passed, it should have been given time to settle down and be tested over several years. That did not happen. Here we go again, and I fear that it will be for the worse.

It is significant that both the Conservative-controlled Association of County Councils and the Association of District Councils are deeply concerned about the provisions of parts II and III. Surely the Government should have more regard for the opinions of its more responsible friends. I regard clause 4, in particular, as thoroughly obnoxious. To paraphrase the views of the Chartered Institute of Public Finance and Accountancy, the clause allows the Secretary of State freedom to decrease a particular authority's grant at any time during or after the end of the financial year in accordance with any guidance on local authority expenditure levels that he may choose to issue, and by any amount that he chooses to specify in a supplementary report. It is too far-reaching. As it stands, the clause is unacceptable to me. I do not know how any local authority can budget with confidence against the background of clause 4. When clause 4 is coupled with the provision to abolish the supplementary rate, it means, as my hon. Friend the Member for Buckingham (Mr. Benyon) said, that any Secretary of State, not necessarily my right hon. Friend, at any time in the future can have total control over the spending of every local authority. In those circumstances, why bother to have local government? Clause 4 is simply not good enough, and should be removed or vastly amended.

I cannot see how part III and the establishment of an Audit Commission will achieve much. I cannot see that it will do much more than is done at present by the district auditor. On the other hand it could become an expensive quango. I note with interest that my hon. Friend the Member for Carlton (Mr. Holland), the best known quango hunter, is present to hear the debate. I hope that my hon. Friend, if he catches your eye, Mr. Deputy Speaker, will intervene to give his own comments on this proposal.

The present auditing arrangements by the district auditor have worked pretty well. I fear that the new proposals will prove bureaucratic, expensive and prove to no advantage. My right hon. Friend said—I think I am quoting him correctly—that the district audit system does not allow central Government a role. That is a very good thing.

Mr. Heseltine

No. A role in the policy formation of local government audit.

Mr. Morrison

I am sorry. I misheard my right hon. Friend. I withdraw my criticism.

My right hon. Friend also drew the analogy between the appointment by shareholders of auditors, implying that shareholders are outsiders, and the provision in the Bill for the appointment by him of the Audit Commission. I suggest that his analogy is false. It seems to me that shareholders are much more analogous to electors who have elected councillors as their representatives.

The appointment of auditors for nationalised industries may be made, rightly, by a Secretary of State. In that instance, however, the Secretary of State is acting, in effect, as the shareholder's representative. I do not therefore believe that my right hon. Friend's analogy is correct. He is not, in this instance, the representative of the shareholders in local government. The representatives of the shareholders or electors are the elected councillors. I need to be a great deal more convinced about the proposed Audit Commission.

I shall support the Government tonight on Second Reading. There must, however, be some major amendments to the Bill, particularly in regard to clause 4, when the Bill goes into Committee.

6.52 pm

Mr. Guy Barnett (Greenwich)

I agree with a great deal of what the hon. Member for Devizes (Mr. Morrison) said, although I was surprised to hear his suggestion that the previous Government, of which I was a junior member, did more damage to the independence of local government than the present Government. As someone who was an Under-Secretary responsible for local government, I find that remark surprising. I do not recognise it in my behaviour. I was interested that the hon. Gentleman did not elaborate on the charge.

Since the Secretary of State for the Environment moved to Marsham Street, there has been growing alarm about the damage that he would cause to local government. During its passage the Local Government, Planning and Land (No. 2) Bill found hardly any friends in the House or outside. At that time, the local authority associations, all of them dominated by the Government's political friends, were also against it. They were strong in their opposition to it.

The spectacle has had to be endured of a Government who blandly say one thing and do precisely the opposite. Every step along the road that the Government have taken has been in flat contradiction to what the country had been led to believe was the philosophy of the Conservative Party—that local matters, so far as possible, should be under local control, that civil servants are not and cannot be competent to judge how resources should be allocated because they lack the tools to enable them to make such decisions and, even if they did possess them, that local decisions are better and more properly the responsibility of local democracy.

The Prime Minister, as Secretary of State for Education and Science, when introducing the White Paper on nursery education, said: We do not want to attempt central detailed control over the way resources are used because the statistical methods at our disposal for measuring social deprivation are crude".—[Official Report, 19 February 1973; Vol. 851, c. 44.] You can say that again. Not merely did the Prime Minister then recognise that local councils are competent to make local decisions. It is also apparently even recognised by the Government in the statements that they make. That is the stated purpose of the Bill hon. Members are not considering. The Queen's Speech, foreshadowing this legislation, described the purpose of the Bill as to improve the accountability of local authorities for the level of their rates". It could have fooled me. I assume that the word "accountability" implies accountability to a local authority's electorate. If so, this Bill is in flat contradiction to the stated intentions of the Gracious Speech. Perhaps the speech did not mean that. Perhaps it meant accountability to the Secretary of State and his civil servants. That is, in effect, what the Bill does. There can be no equivocation.

The Bill places councils firmly under the control of the Secretary of State and makes them accountable to him for what they do. I wonder sometimes whether the Secretary of State understands the meaning of the words he utters, or whether the only interpretation to be put on his behaviour is to assume that he will always do the exact opposite of what he says he will do. I refer to the statement that he made to the annual conference of SOLACE in July 1979. His words were: I believe that an effectively functioning local democracy can monitor the activities of local councils far better than civil servants in Marsham Street".

That is an interesting reflection on the Bill that hon. Members are now considering. Whatever the right hon. Gentleman's denials and protestations of innocence, whatever sophistries, including some very brilliant ones, from his Minister for Local Government and Environmental Services, this Bill will enable him to monitor and control the activities of local authorities and will finally destroy local government accountability. I can illustrate this no better than by referring to the horrific consequences of the powers that I believe the Secretary of State is taking and asking the House to approve than by quoting the effects that will be felt in my borough of Greenwich.

I take, first, the grant-related assessment per head of the population for the current year. It amounts to £158. For the London borough of Camden, it is £311. So, from their intimate knowledge of local affairs, Department of the Environment civil servants have worked out that it is almost twice as expensive to provide a comparable level of service in Camden than in Greenwich. They are convinced clearly that this is a reliable estimate since for 1982–83, I am informed, the grant-related assessment for Greenwich is £175 per head while the Camden figure has risen to £352, again twice as much.

The grant-related assessment for Greenwich is £36 million. There might be some demonstrable scientific basis for this assessment, although no one to whom I have spoken can understand what it is. What has been clearly and brilliantly illustrated by my right hon. Friend the Member for Manchester, Ardwick (Mr. Kaufman) as much more spurious is the so-called target figure. I understand that next year, in Greenwich, this will be just over £48 million. How is that worked out? I do not know. I am even more confused having listened to the account given by my right hon. Friend than I was before. I understand that it is based on what the Government thought Greenwich ought to be spending in 1979–80 plus what the Government think is a reasonable inflation figure, but minus such cuts as the Government reckon should be made. It could not be a more arbitrary figure.

The Government label Greenwich as an overspender because in 1981–82 the council is spending just over £50 million. Inevitably, to achieve the same level of service, this implies an inflation figure of about £5 million. Because the council is an overspender, the Government are asking for cuts of £7 million which, without the safety net, would work out at 13 per cent. in one year. The fact that a safety net is needed seems to indicate the failure of the formula that the Government are attempting to use.

Now the Secretary of State comes forward with this Bill which gives him a new power making it impossible for the council to make any sensible estimates for next year. At least under the 1980 Act, it knew where it was when it was making decisions and which decisions were likely to bring it into the penalty area. But the Bill gives the Secretary of State power to penalise an authority in June, July or at any other time he pleases, by almost any amount he pleases.

No longer will it be possible for an authority to make its budget and fix its rate with any reasonable measure of certainty about the likely consequences. No longer will the supplementary rate be available to it to meet these new uncertainties. It can give no guarantee to its electorate when fixing its rate that it has any reliable idea of the outcome—whether the outcome is a drastic cut in expenditure during the year, whether it will have to draw on balances, or whether, with the permission of the Secretary of State, it will have to borrow.

Therefore, I am left with a question. In the circumstances, how can my local authority act responsibly? It is accused of being an overspender, but figures available to the Government, which observe one code of practice of local authority annual reports, belie this claim. On the cost of providing services per thousand of the population, Greenwich is below the inner London average. For personal social services, it is well below average. The joint manpower watch survey of September 1979 shows that, although Greenwich is above average in the size of its population, its staff numbers are generally below average. If staff is related to population, Greenwich is virtually the lowest for all or most of its services of the inner London boroughs.

By these indications, required to be published by law in order for such comparisons to be made, Greenwich comes out as a highly efficient authority and also a very prudent authority. Yet the Government label it a high spender. To me, that makes no sense.

The Bill will enable the Secretary of State who, in my opinion, is working on false assumptions and misleading figures, to impose unknown penalties on local authorities. The situation will be similar for all local authorities. According to an article in the Financial Times today, it will result in the Government controlling rather than influencing council spending. It will make local councils into the poodles of the Secretary of State and place them on a level similar to health authorities in their relationship to the Secretary of State for Social Services.

I have never felt more inclined or more certain about a decision to vote against a piece of legislation, and I take that view because the Bill will gravely damage my local authority and local government.

7.5 pm

Mr. Philip Holland (Carlton)

I congratulate my right hon. Friend the Secretary of State on the measures that he proposes in part I and, unlike my hon. Friend the Member for Devizes (Mr. Morrison), in part II of the Bill to discourage the worst excesses of profligate local authorities. I commend particularly the flexibility of his approach in producing a solution to the difficult problem that is acceptable to those of us who did not like his first proposal.

I support the main objective of the Bill and the method of achieving it which is set out in parts I and II. I have no doubt that the measure will be adequately supported on Second Reading and that its passage in this, or an amended form, will be assured through its remaining stages.

I am reminded of an anecdote told by one of the characters in a classic Western film called "The Magnificent Seven" about a man falling from the top of a skyscraper. He was heard, as he passed windows on the way down, saying to himself "So far, so good." I, too say "So far, so good." But I come specifically to the proposal in part III and schedule 1 to establish an Audit Commission and the framework within which it will operate.

It may not be within the knowledge of the House, though it is within the understanding of the Government, that I have a strong objection to any unnecessary expansion of ministerial patronage arising from the creation of non-departmental public bodies. In this context, I am delighted to welcome the conversion of the right hon. Member for Manchester, Ardwick (Mr. Kaufman) which has taken place since he moved from Government to Opposition, but, far more than that, I welcome steps already taken since 1979 by Ministers in this Government to reduce the number of such bodies.

In general terms, I dislike quangos because in their present numbers they constitute an unnecessarily large expansion of bureaucracy under the patronage of Ministers while, to a great extent, lacking accountability to Parliament for their activities and their finances. In other words, they are creatures of the executive enjoying quite extraordinary facilities for empire building. In this context, I refer particularly, though not exclusively, to the executive agency-type quasi-autonomous national governmental organisations.

My objection to the Audit Commission proposed in part III is that it includes almost all the worst features of a traditional agency-type quango. I remind the House that clause 5 provides that, after consulting whoever it pleases him to consult, the Secretary of State shall appoint the chairman, deputy chairman and the members of the commission at his discretion.

Schedule 1(3) gives the Secretary of State power to direct the commission on how its functions shall be discharged. Schedule 1(4) gives the Secretary of State power to remove from office any member not discharging his function in a manner satisfactory to the Secretary of State. Schedule 1(5) empowers the Secretary of State to determine the pay, allowances and pension provisions for each member. Therefore, with the power to hire, fire, pay and give directions to "quangurus", the Minister clearly retains to himself absolute power over the policy decisions of the commission. He can appoint those who will do his bidding and get rid of those who will not.

Mr. McWilliam

Is not the hon. Gentleman criticising the powers of the Secretary of State rather than those of the proposed body?

Mr. Holland

I shall come to the powers of the proposed body, if the hon. Gentleman will allow me to continue.

The commission comes into its own when it deals with day-to-day administrative tasks, such as engaging staff and fixing its revenue. Apart from the chief officer, whose appointment requires the approval of the Secretary of State, the commission is empowered to engage as many employees as it wishes, to offer them whatever it chooses in terms of pay, allowances, expenses and compensation for loss of office, and to exercise its monopoly power by charging its customers whatever fees it deems necessary to meet its own expenditure. Clearly this represents an open invitation to empire building. The only hazard for this highly qualified accounting body to overcome is the need to produce an annual report that will allay any possible anxieties of the Comptroller and Auditor General. We shall have the kind of quango that I find almost wholly objectionable, not least because it is unnecessary in this form. Whether it is necessary to have the independent appointment of auditors for local authorities is a matter about which the Secretary of State is in a better position than I to judge. Indeed, I accepted his arguments on this point, but, even accepting them, alternative methods of achieving his objective come immediately to mind.

First, if it is desirable for auditors to be appointed under the direction of the Secretary of State—which is virtually how this could work out—why does he not directly do the job himself? In that way there would be more direct public control over the size of staff and the charges levied, the Secretary of State would be directly answerable to the House for every detail of his activities, and the threatened creation of yet more "quanguru" jobs for the boys would be eliminated.

If, on the other hand, it is felt desirable to take the appointment of auditors out of the hands of both local authorities and the Minister—the Secretary of State implied this, anyway—perhaps we should move from the commoner British type of quasi-autonomous national governmental organisation towards the American-style quasi-autonomous non-governmental organisation. This is the type of quango established privately to take advantage of a Government contract or to perform functions that would otherwise need to be performed by the Government. This type is rare, but not unknown, in Britain. Examples are the Press Council, set up by newspaper proprietors, the Jockey Club, set up by the principal racehorse owners, and—for a totally different purpose—Trinity House, which was established and paid for by the ship owners.

By the same token an audit board—or whatever it is to be called—could be established by the professional accountancy and audit institutions. For example, appointments to the board could be divided equally between the three professional bodies listed in clause 7 (6), which cover practitioners in England and Wales, since the measure will apply only to England and Wales. The board could still be required to submit an annual report to the House, to the Comptroller and Auditor General, or to both. That could be required by statute. If it was felt desirable, there might be representation of local authority interests either on the organisations appointing the board or on the board itself. On balance, it would probably be preferable to confine membership of both bodies to professionals sharing the common interest of maintaining the highest professional standards in the auditing of public accounts.

During the past two and a half years the Secretary of State has announced the abolition of 64 non-departmental public bodies associated with his Department. I take a kinder view than the right hon. Member for Ardwick of his activities in that respect. He has announced the creation of only five new bodies in that period. Therefore, he has cause to feel aggrieved with me, because, having offered only general protests at the creation of 67 new quangos by his right hon. Friends in other Departments, I now make a more specific protest at his fifth proposal for a new public body. I can only say to him and to my right hon. Friend the Minister, who is holding a watching brief, that it becomes necessary, at some stage, to make a start and to shout "Enough is enough".

It is not merely the number of the Secretary of State's new creations to which I object, but the nature of the fifth creation that I do not like, because it has weaknesses that are avoidable. Because I approve of the rest of the Bill, I shall not vote against Second Reading. However, I find myself unable to support a measure containing the proposal set out in part III and schedule 1, unless the Minister can give a firm commitment to amend the Bill in Committee to meet my anxieties about the present proposal. In default of a clear and specific undertaking tonight, I propose to abstain on the Question, That the Bill be now read a Second Time.

7.12 pm

Mr. John Cartwright (Woolwich, East)

The hon. Member for Carlton (Mr. Holland) will, I hope, forgive me if I do not take up all his quango-hunting, which he expounded in detail and with such ominous—for the Government Front Bench—determination.

The Secretary of State is an unlikely adherent to the policies of the late and unrevered Leon Trotsky, but, in local government, the Secretary of State has embraced the Trotskyite theory of continuous revolution. No one could accuse the right hon. Gentleman of being idle during his time at Marsham Street. During the three years in which he has held office, he will have changed the grant system on four occasions, brought in major legislation that has lasted only one year, twice introduced Bills that had to be withdrawn and produced a grant system that is so tortuous and mind-boggling in its complexity that it is incomprehensible to councillors, local government officers and, by the looks on their faces, to Ministers as well.

It is a measure of the Secretary of State's achievement that local government is nostalgic about the old rate support grant system. That system was complicated, but by comparison with what we now have it was the very model of stability, simplicity and comprehensibility. The Bill is the most recent of a series of assaults that the Secretary of State has unleashed on local government and left it reeling and punch-drunk.

Part I is breathtaking in its simplicity. The Secretary of State has clearly given up the struggle to control supplementary rate demands and has come up with the simple solution of outlawing them altogether. In the minds of most of those who understand local government there is no doubt that that will tempt local authorities to levy a higher rate than necessary in order to safeguard themselves against the unexpected happening during the year.

Local authorities that are unwise enough to believe in Government forecasts about pay and price rises will find that they need more in the kitty than they began the year with. If they find themselves in difficulty they will, under the Bill, have to go cap in hand to the Secretary of State for borrowing approval. The Secretary of State has given fair warning that slight misjudgments on the part of the Government about inflation forecasting and so on will not be allowed as an excuse when it comes to borrowing permission. I know municipal treasurers, and they are prudent individuals. I am sure that they will recommend their councils to budget for substantial reserves when they levy their rates at the start of the next financial year. Some of them will certainly need substantial reserves to deal with the problems stored up for them in part II.

As has been pointed out, clause 4 gives the Secretary of State power to cut Government grant paid to individual local councils which, in his view, fail to comply with his guidance on what the Bill calls any reduction in the level of local authority expenditure … which he thinks necessary having regard to general economic conditions". That is a sweeping power to penalise councils that do not comply with the Secretary of State's judgment. As has been said, the power can be exercised at any time during the financial year.

The Secretary of State seems to be employing a double-barrelled shotgun against what he regards as recalcitrant councils. The first barrel cuts the grant and the second denies supplementary rates to get local authorities out of the difficulty of a reduced grant. It also makes local authority borrowing illegal unless it has the Secretary of State's agreement. This double-barrelled attack gives the Secretary of State a powerful weapon with which to bludgeon local authorities into making expenditure cuts.

The Chartered Institute of Public Finance and Accountancy has made some interesting comments on the impact of enforced cuts part way through the year. CIPFA reckons that it would be at least June before the grant cut was announced. There would then have to be time for the local authority to react. To achieve a full-year effect in a half year would need much more severe expenditure cuts. To achieve the required saving, for example, would mean double the number of full-year staff cuts. If staff cuts were chosen, it would mean heavy redundancy payments and would produce the silly situation of staff being sacked one year and being re-engaged at the beginning of the ensuing financial year. If institutions such as old people's homes, children's homes and libraries had to be closed, they would have to be reopened after a period. That is a wildly inefficient, extravagant and wasteful way of enforcing local authority expenditure reductions. It also leaves local authorities in a situation of complete uncertainty.

Local authorities can fix the rates legally and properly at the start of the financial year, but they cannot be sure that they will not fall foul, later, of the Secretary of State's double-barrelled attack and lose their grant income. That runs counter to what the Government said in their Green Paper, "Alternatives to Domestic Rates": To budget sensibly and tightly, local authorities need to be able to predict their income and their cash flow with reasonable precision. The Bill clearly takes that reasonable precision from local authorities.

I am sorry that the Secretary of State should try to conceal his nutcracker approach to local authorities. When the Secretary of State announced the Bill on 16 December 1981 I suggested that he was taking unprecedented powers to control the spending of individual local authorities. He then said in reply: The hon. Gentleman has not understood the announcement that I made earlier today if he believes that I am trying to control individual local authority expenditure."—[Official Report, 16 December 1981; Vol. 15, c. 313.] I am not alone in believing that. I have with me the Association of Metropolitan Authorities, the Association of District Councils, the Association of County Councils and the Chartered Institute of Public Finance and Accountancy, all of which take the view that the Bill constitutes a powerful weapon to control spending by individual councils through the deliberate use of the grant penalty. That is in sharp contrast to assurances given by Ministers.

On the Second Reading of the Local Government, Planning and Land Bill 1980 the Secretary of State said: The new system in no way sets limits to what an authority spends, nor does it fix the level of an authority's rates. Those decisions remain with the authority."—[Official Report, 5 February 1980; Vol. 978, c. 251.] The Minister for Local Government and Environmental Services went further on Report. He said even more clearly that it is a matter for individual local authorities and their councillors as to what their expenditure decisions are. It is their choice between services, their choice as to the volume of expenditure on those services, and their choice as to the rate levels that they decide to impose."—[Official Report, 8 July 1980; Vol. 987, c. 313–14.] It may be argued that the Bill in no way interferes with that freedom and that ostensibly, I accept it does not. However, those choices are exercisable only if a local authority exercises them in such a way as to meet the approval of the Secretary of State. If it exercises a spending choice that is not approved, down will come the penalty of the Secretary of State's removal of grant. For Ministers to say that there is still freedom under the Bill is to imply that the freedom exists provided only that it meets with approval by Ministers. It is rather like the freedom that the Polish Government are offering to the Polish trade unions. It is utterly inappropriate for relations between central and local government in Britain. Such an approach will force local councils to become the creatures of Whitehall, and I and my colleagues in the Social Democratic Party reject it.

It is also worth reminding ourselves that the idea of grant-related expenditure assessments is a poor way in which to fix targets for local authority spending. It is also worth remembering that Ministers gave repeated assurances that it would not be used for such a purpose but would be used only for grant allocation. Those assurances seem to have been abandoned. However, the grant-related expenditure system is bad enough for grant allocation purposes. It is arbitrary, suspect and unreliable. It produces extraordinary variations between one authority and another, variations that are quite inexplicable and quite unrelated to spending needs.

The hon. Member for Greenwich (Mr. Barnett) referred to some of the difficulties in the borough that he and I have the honour to represent. We should remind ourselves of those figures. The grant-related expenditure assessment for Greenwich per head of the population for the current financial year is £158. That is by far the lowest in inner London. It is less than half the figure in Camden, and it is considerably lower than in boroughs such as Westminster and Kensington and Chelsea, which are not noted for their areas of deprivation. If we compare the grant-related expenditure assessment for Greenwich at £32.2 million for the current year with the council's estimate of over £51 million, we find that the spending is 60 per cent. higher than the assessment. That shows how unreal the figures are.

If one considers one service—social services—the grant-related expenditure assessment is £9.8 million and the council's current spending is £18 million. That again shows the unreality of the approach. The figures show that the GREA approach is unsuitable as a basis for targets for local authority spending. The idea that a group of mandarins in Marsham Street can know what it is right for individual local authorities to spend from Land's End to John o' Groats is dangerous nonsense.

I am not persuaded by the Secretary of State that the Audit Commission is somehow a tremendous extra safeguard for local democracy. I always understood that the statutory independence of district auditors from central and local government was a reasonable safeguard for ratepayers. I am not persuaded by the Secretary of State's assurances to the contrary that the proposed commission will not be in a very different position.

The Secretary of State will appoint the chairman, deputy chairman and all the members. He will have the power to fix fees, to require an extraordinary audit and to direct the commission as to the discharge of its functions. All those factors make the commission resemble not an independent watchdog on behalf of local electors but a creature of the Secretary of State. I am not opposed to the idea of a commission, but it would be a much more effective operation if it did not have the overtones of central control.

The Social Democratic Party certainly does not suggest that everything in local government is perfect. We accept that some local councillors are much more interested in sparking off knock-down, "drag-'em-out" fights with the Government than in running humdrum, vital services for local people. However, those problems will not be solved by making local government the whipping boy for mistakes by the Government in economic management. The Social Democratic Party does not defend overspending by local authorities. We do not defend unreasonably high rate burdens, but we believe that those problems are best dealt with by local electors and not by the Secretary of State. We wish to see local government made much more accountable downwards to the people that it represents. The Bill does exactly the opposite. It makes local government more accountable upward to Whitehall.

My right hon. and hon. Friends and I reject that approach totally and we shall vote against the Bill tonight with enthusiasm.

7.25 pm.

Dr. Brian Mawhinney (Peterborough)

The House will have listened with interest to the position of the Social Democratic Party. It is against virtually everything. It says "We do not like this, we do not like that, we do not like the other." However, it has spared us from information about what it likes, with one exception. The hon. Member for Woolwich, East (Mr. Cartwright) spoke kindly about the old rate support grant. I suppose that the message that goes out from the House tonight about the SDP is that it favours a system whereby the more one spends, the more one gets, and the less one spends, the less one gets. No doubt British people will take due note of that implication.

Mr. Cartwright

I am sure that the hon. Gentleman does not wish to misrepresent me. In comparison with the current complex system that has been wished on local government, the rate support grant system, difficult though it was, was much better in retrospect than that which we now have.

Dr. Mawhinney

The House will have noted that I took great care not to misrepresent what the hon. Gentleman did not say.

We listened to an interesting and typical speech from the right hon. Member for Manchester, Ardwick (Mr. Kaufman). It was long on rhetoric and indignation and short on support on the sparsely populated Opposition Benches behind him. It was not clear to those of us who heard his speech exactly why, near the beginning, he tried to link in his mind the Secretary of State with that worthy bird, the hawk. However, by the end of his speech, the matter was quite clear. He did so because he knew that the impact and logic of his speech had the dimensions of a sparrow.

The right hon. Member for Ardwick quoted objections from local authority associations and other professional bodies—those who have a political or vested interest in the Bill. Their views are important and must be considered. However, the right hon. Gentleman did not mention the views of the ratepayers. I suggest that ratepayers will welcome the Bill.

I found it hard to take the right hon. Gentleman seriously when he talked about the constitutional crisis that was being precipitated by the Bill. The Bill is being forced on the House and on Britain not because the Government are trying to reverse the long-standing constitutional relationship between central and local government, but because they wish to reintroduce the status quo. It has long been a convention in Britain that if there is a difference of opinion between local and central Government, it is central Government that has the overriding responsibility for the control of public spending. In local government finance, that understanding was monitored by a combination of guidance through the rate support grant and a reliance on responsible behaviour by local authorities. That principle was endorsed by the right hon. Member for Ardwick as short a time ago as September 1981. Central Government have the ultimate responsibility.

That relationship was enjoyed by the Labour Government, who had co-operation from local authorities—including many Conservative-controlled authorities—in holding local government expenditure within reasonable limits, but the situation changed in 1979. A minority of Labour-controlled councils have deliberately decided to challenge the primacy of central Government in determining levels of public expenditure. No Government, if they seek objectively and honestly to govern, can view the challenge with equanimity. The extra spending involved means that extra rates have to be levied and jobs are put at risk. Hon. Members have mentioned constitutional implications and professional bodies, but the debate has not been long on discussing what happens to our constituents.

Industrialists in Peterborough together wrote a letter, which is without precedent, to my local council. They said that more unjustified rate increases would cost jobs. Because of its spending policies, Peterborough city council has lost over £½ million in Government grants. Until recently it maintained a non-redundancy policy, which has a long-term catastrophic effect on rates for ordinary people. That is what is behind the Bill.

A survey published by the London Chamber of Commerce and Industry on 2 December 1981 revealed that 38 per cent. of the companies responding had already reduced staff because of high rates, 17 per cent. had moved elsewhere to avoid high rates, and 16 per cent. had decided to close their businesses in London. About 37 per cent. stated that they would reduce staff if rates rose by more than 25 per cent. in the next two years, and nearly 30 per cent. claimed that they would be forced by such increases to close.

Mr. Allen McKay (Penistone)

Is not the hon. Gentleman's broad-brush approach wrong? In my constituency, even if we had no rates at all, few jobs would be saved. For industries such as steel it is not rates but high energy costs and interest and exchange rates that are the problem.

Dr. Mawhinney

A variety of economic pressures on businesses and industry combine in different forms in different areas to put pressure on profitability, investment and jobs, including high, indefensible rates. I have given examples of where people in the forefront of business and industry have made that clear.

I welcome the proposed Audit Commission in the interests of ordinary people. My right hon. Friend the Secretary of State made clear that the commission would not dictate policies. It would not have the opportunity to force policy on local authorities; it would simply raise questions about effectiveness, efficiency and economy. My constituents are more worried about not getting value for money than about local government policies. The Audit Commission would address itself to that issue. I fail to see why an independent and professional assessment of the job that officers and members of a local authority do should cause concern to anyone, although I take the point raised by my hon. Friend the Member for Carlton (Mr. Holland).

My local authority understands the concern about value for money. With the co-operation of the leader of the council, last June I set up a committee of business men and industrialists to examine the working and efficiency of the Peterborough city council. Its report is to be made public on Wednesday. The House will forgive me if I do not let it into the secrets of the report before they are made available to my constituents, but I will say that it justified setting up the committee. My right hon. Friend will take heart from its findings. It is fallacious to believe that people do not want value for money. They will welcome the move, even if those with a vested interest express reservations.

I, too, hope that the Bill will be an interim measure, at least in part. I should like to see a thorough review of the rating system. It needs to be replaced. It is fundamentally unfair, if for no other reason than that it takes no account of a person's ability to pay. The base needs to be broadened. I support the measure with, I believe, more enthusiasm than many of my colleagues. I believe that it is what the people want, even if it is not what the pressure groups want. I hope that it will not be a substitute for a more thorough-going review.

7.37 pm.

Dr. Edmund Marshall (Goole)

The crux of the issue before the House is whether we want local accountability and democracy to remain in the working of local government.

For many years local accountability has been eroded for the simple reason that by successive Acts of Parliament local authorities have been given more and more responsibilities, duties and services to perform, but have not been given a modern system of local government finance. The system of financing local government is anachronous and, without great Government subventions, will not support the services that have to be provided by local authorities. When we have a system of local government finance that does not enable local authorities financially to stand on their own feet, we run into the danger of He who pays the piper may call the tune and central Government become more and more influential in determining everything that happens in local government.

The trend has continued for decades, but it has been accelerated and given new twists under this Government. For political reasons, they wish to force local authorities to follow their national policies. That is partly because of the Government's obsession with monetarist economic theory and its impact on the spending policies of local authorities. During the past year, that additional twist of the screw by central Government has increasingly taken place because more local authorities have been controlled by the Labour Party rather than the Conservative Party. That is an added political dimension to the erosion of local authority autonomy.

The Bill will abolish supplementary rates and precepts, but it includes a provision in part II to extend the power of the Secretary of State to make supplementary cuts in grants to local authorities. As a result, local authorities will be caught between the opposite workings of the two provisions. Either they will become puppets of central Government—agencies carrying out Government policies—or, under the working of part II of the Bill, they will be in danger of becoming insolvent.

My right hon. Friend the Member for Manchester, Ardwick (Mr. Kaufman) referred to the historic origins of supplementary rating. My researches do not go back as far as his, but I find that the power of rating authorities throughout England and Wales to levy supplementary rates was made general by the Rating and Valuation Act 1925. That was extended to precepting authorities, the county councils, by the Local Government Act 1972. It is of interest that both those Acts were introduced by Conservative Governments. I do not know why they introduced them, but the present Conservative Government are trying to undermine the handiwork of their own predecessors.

As has been mentioned a number of times in the debate, until this year supplementary rates and precepts were comparatively rare. My right hon. Friend said that one reason why supplementary rates had become more numerous was the impact of the cuts in Government grants. Another simple factor has led to more supplementary rates this year. In local elections last May the control of many county councils in England and Wales changed, and the new councils and their leaders found themselves saddled with budgets drawn up by their predecessors who had been defeated at the polls. It is strange that local elections are held in May, while the budget and rates for the succeeding year are fixed by the outgoing council before the beginning of April. It is an anomalous position that a political party gaining control of a county council is bound by the financial strategy and decisions of its predecessor that was rejected at the polls. However, until now it has had some flexibility in the levying of supplementary rates.

As politicians, we know the strange way in which the fixing of rates immediately before an election affects the rate level. The party controlling a local authority is tempted to set an artificially low rate to court popularity at the polls. If it is defeated, the incoming party is saddled not only with its opponent's budget but with an artificially low rate. Political parties which know that they will lose office at a forthcoming election have a great temptation to levy an artificially low rate to cause embarrassment to another political party taking control. The abolition of the supplementary rate and precept will undermine the scope of new, democratically elected councils in carrying out their policies during the first year of office.

One way that that anomaly can be corrected is by reconsidering the timing of local authority elections. Why should they be held each May? Would it not be more sensible for them to be held before the budget-making process begins?

Mr. Albert Roberts (Normanton)

My hon. Friend is trying to outline a case. It would be far better if he named the authority. The point that he is making is quite correct, and it applies to West Yorkshire.

Dr. Marshall

My point applies to many authorities which have had to levy a supplementary rate during recent months. My researches show that local elections have not always been held in the spring. That has been the regular pattern only during the last 33 or 34 years. Under the Local Government Act 1933, borough council elections in both county and municipal boroughs were held in the autumn in October and November, whereas county councils were elected in March and urban and rural district councils in April. We must examine the possibility of returning to a system of local government elections in either September or October each year. That would have repercussions on the annual calendar of local government and also for electoral registration. If we are to maintain any semblance of local democracy in local government while abolishing supplementary rates and precepts, we must determine the best time of year to hold local elections.

I wish to refer briefly to the Bill's definition of local authority expenditure for the purposes of part II, which extends the penalising powers of the Secretary of State when he is not satisfied that local authorities are sufficiently reducing their expenditure. Currently, the expenditure of rating authorities includes money paid to parish councils within their areas through parish precepts. It also includes payments made to internal drainage boards under section 81 of the Land Drainage Act 1976. The key point is that in both those cases the amounts spent are wholly beyond the control of the rating authority, which is the district council.

In some areas, where there are many internal drainage districts, the amounts of money involved can be considerable. Drainage rating is complex, and I shall not deal with it in detail, but the vital point is that under section 81 of the Land Drainage Act 1976, it is possible for internal drainage boards, when sending out their own drainage rate demands, to reach agreement with the district councils in their areas so that payments en bloc can be made direct by the district councils to the drainage boards, equivalent in total to the amount that would be collected from individual ratepayers.

The amounts paid in drainage precepts have been included by the Government in the sum total of district councils' expenditure. The Boothferry borough, which covers a large part of my constituency, is in a position where, although the local authority, which is Conservative-controlled, has tried to dance to the tune of the Secretary of State and to cut its expenditure substantially, it has been unable to meet the required levels of cutting because the expenditure in precepts to drainage boards has increased and brought the total of district council expenditure well above the prescribed limits. Of course, we all know that drainage in some parts of Britain is vital. Unless we increase expenditure on drainage, an increasingly large part of Britain will be in danger of inundation.

Recent events have shown that it is wrong to include within the definition of local authority expenditure payments made to internal drainage authorities. If the Government persist in maintaining that those payments should be included in that expenditure, then increasingly councils will be forced to cancel their section 81 agreements and drainage boards will be issuing the same drainage rate demands as they used to issue before reaching agreements with the local authorities.

Both the examples that I have given serve to show how the flexibility and local accountability of district councils and county councils are being undermined yet further as a result of the Government's policies. There is no doubt that in the provisions of the Bill, particularly in part II, we are being asked, as a House, further to cut the sense of local responsibility of English and Welsh local government. If we value that local accountability, we have no choice but to throw this Bill out.

7.53 pm

Mr. W. Benyon (Buckingham)

Looking at the empty Benches on both sides of the House, who would imagine that we are discussing a matter of major constitutional importance? Many hon. Members have already fallen into the tempting trap of dealing with the matter entirely on a local basis. The spokesman for the Social Democratic Party, the hon. Member for Woolwich, East (Mr. Cartwright), did that, as did the right hon. Member for Norwich, North (Mr. Ennals) and my hon. Friend the Member for Peterborough (Dr. Mawhinney). It is even more tempting for me to do that because my local authority has been heavily penalised by these arrangements. However, I shall resist that temptation and deal with the Bill in its general form.

The real background to the Bill was hinted at by the hon. Member for Goole (Dr. Marshall), and it is very simple. The tasks imposed on local government by successive Governments over the past 100 years have created a level of expenditure which far outstrips the capacity of the rating system to finance. As a result, the burden has had to be shouldered more and more by central Government acting on behalf of the taxpayer.

It has always seemed to me that the only correct division of responsibility under the present system gives Parliament the guardianship of the taxpayers' money and a similar responsibility to the local council about the ratepayers' money. I thought that Her Majesty's Government took that view. My hon. Friend the Minister for Local Government and Environmental Services, who will reply to the debate, made a statement on 8 July 1980, which has already been quoted in the debate. He said that it was their choice between the services, their choice as to the volume of expenditure on those services and their choice as to the rate levels they decide to impose. When the Minister replies he must reconcile that statement to the reply given to my interjection earlier in the debate. As I then said, it seems to me that under these arrangements a future Secretary of State will be able to decide the rate if he wants to. That goes to the root of the matter, and it would destroy the partnership and relationship that has existed for many years.

The Guardian stated this morning that the principle of the supplementary rate goes back to 1601. Although I have not had time to check that date, it certainly goes back a long way, and it is incumbent on a Conservative Government, in particular, to explain why that privilage and right should be abolished.

Parliament must obviously lay down the rules under which local finance can be raised, but once that has happened and once it goes further than that and either explicitly or implicitly controls the level at which local taxes are raised, the independence of local government ceases. It would be much more honest to accept that and to revert to some form of direct rule from Whitehall. The precedents of the medieval barons and Cromwellian major-generals are not exactly encouraging in that respect but perhaps we could sugar the pill by giving the local regional controller a sort of local advisory body which he would receive from time to time in a lofty and arrogant state.

It is because I believe so passionately in the importance of local government as an integral part of our constitution that I oppose this measure. There is a degree of inevitability in what we are considering. The rot started with the Labour Government's policy towards education a long time ago, and when I listened to the right hon. Members for Manchester, Ardwick (Mr. Kaufman) and Norwich, North, it was as if Satan was rebuking sin, because it was they who started all this—they sowed the wind, and today we are reaping the whirlwind. However, of course, the situation was compounded by the Government's Housing (Amendment) Act 1980 and the Local Government, Planning and Land Act 1980 was only just all right. A reason why I was prepared to support the Government on that occasion was the remark made by my hon. Friend the Minister for Local Government and Environmental Services, which I have just quoted. Now the Bill knocks just one more prop out of what is a tottering edifice.

The real danger is that whenever a pressure group dislikes something that local government does it now goes over the head of local government to central Government. That is the real weakness of the present situation; it destroys the status and responsibility of local government. That is being done by a Conservative Government at a time when the official Opposition seek one-chamber Government in Britain; when all talk of constitutional reform comes to nothing—the Cabinet is not interested, the Prime Minister is not interested and the Lord Chancellor says that he is interested but nothing happens.

On top of all that, the courts are relatively powerless to safeguard the rights of citizens. At this moment a Conservative Government hand to future extremists the weapon that we are discussing, and it is a very powerful weapon. We shall be told, as we always are, that this is simply to deal with a temporary situation, until action can be taken on the Green Paper, and that we shall have a new form of local government finance. However, we know, do we not, that tyranny always come in under the guise of temporary provisions and that is why we dislike them so much. Therefore, the Bill is constitutionally wrong and it is also wrong financially, because it will encourage, as many hon. Members have already said, higher levels in the main rate precept.

Councils that are faced with penalties will safeguard their positions with a higher rate initially. If the provisions were restricted to the initial grant, which could be followed by a given penalty if the target were exceeded, the Bill might just be acceptable, but the part I procedure allied with the part II formula is uncertain and gives too much power to the Secretary of State.

The Bill is unnecessary. It is designed to catch a few over-spending authorities because, so the argument goes, they are pre-empting too much of the nation's resources. However, rate-borne inflation cannot be inflationary, because the budget is balanced. There need be no element of borrowing if the Government do not wish it to take place. That was cogently argued in a letter to The Times shortly before the House went into recess by Mr. Hepworth, the director of the Chartered Institute of Public Finance and Accountancy. He wrote: Local government needs consistency. There is also evidence that reducing the amount of grant does cause local authorities to reduce expenditure. To use the existing levers of control and reduce grant aid is likely to produce the best overall result from the Government's point of view. It won't stop all the high spenders; but then no system will unless politcal power is removed from local government. It is that last sentence that is the key to the issue that we are discussing. The Bill will not solve the problem of the high spenders unless power is removed totally from local government.

Thus we are faced with an unnecessary Bill. It is a Bill of dubious financial merit and a Bill which sets a dangerous constitutional precedent. It gives me no pleasure to say that it is not a Conservative measure. As my hon. Friend the Member for Devizes (Mr. Morrison) said, it is a further advance on the road to centralism and it should be resisted. I shall resist it when the Division is called.

8.3 pm

Mr. Stan Thorne (Preston, South)

It is not often that I have the opportunity of agreeing with a Conservative Member, but I very much agree with the comments of the hon. Member for Buckingham (Mr. Benyon). However, I take him up on his reference to the Labour Government's education policy having some influence in a political sense on local government. No doubt the hon. Gentleman will remember the Conservative Government's Housing Finance Act 1972, which sought to interfere with local government practices. Further back than that we had the Education Act 1944.

The purpose of a national Government is to try to ensure that there is no lower standard of provision in certain areas in consequence of a dilatory attitude on the part of local government to that political service. Attempts have been made by Governments in the past to overcome that problem. The hon. Member for Buckingham referred to the absence of interested Members in the Chamber during this debate. I am surprised that not one Conservative Member who represents a Lancashire constituency is in the Chamber now. Indeed, there has not been one present throughout the greater part of the debate.

The Lancashire county council, the South Ribble borough council and the Preston borough council have all made it abundantly clear that they are opposed to the Bill. Possibly the absence of Conservative Members representing Lancashire constituencies indicates that they will join the hon. Member for Buckingham and Opposition Members in voting against the Bill, in which circumstance their absence now and their attendance later will be worthwhile.

On 5 February 1980 the Secretary of State said: The new system in no way sets limits to what an authority spends, nor does it fix the level of an authority's rates. Those decisions remain with the authority."—[Official Report, 5 February 1980; Vol. 978, c. 251.] On 8 July his sidekick, or rather the Minister for Local Government and Environmental Services, said that it is then a matter for individual local authorities and their councillors as to what their expenditure decisions are." —[Official Report, 8 July 1980; Vol. 988, c. 313.] The Bill seriously threatens the autonomy and financial independence of local government, as was ably demonstrated by my right hon. Friend the Member for Manchester, Ardwick (Mr. Kaufman), the Opposition's Front Bench spokesman, in opposing the Bill.

A shift has taken place since we last heard from the Secretary of State. It seems that we shall now have no supplementary rates, whereas we were to have referendums for supplementary rates. To withhold grant after a local authority has fixed its rates for the current financial year is possibly the most serious aspect of the Bill. I agree with the hon. Member for Buckingham that the basis of the centralisation of spending decisions is completely contrary to the historical growth of local government and the notion which some of us have, which is still important, that small is beautiful. It is contrary to ensuring that local government is able to do the job that it was established to do and which it should be permitted to do as far as possible in the absence of Government interference.

There is no doubt that the Bill raises a constitutional issue. Local government is virtually at the crossroads. That will be the position that will arise if the Bill is enacted. I wonder whether, unbeknown to my right hon. and hon. Friends, the Government consider that it might be best to administer health, housing, education, social services, transport and highways through an extension of Civil Service departments into towns and cities throughout Britain. That is the logic of this type of legislation, from which only a short step is required to abolish local government.

It is not to exaggerate to suggest that the Bill is a further move towards the corporate State. The justification for the Bill that is presented by the Government, and which I believe is unproven, is that local government has failed over the years to act responsibly in trying to meet Governments' financial targets. Those on the Government Front Bench have not spelt out detailed evidence to establish that justification for the Bill. Capital spending has been controlled by this and past Governments, and the rate support grant is determined by the Government.

If Governments place on local authorities the responsibility for cutting back to such an extent that local services are imperilled by those decisions, it is not surprising that they do not get from local government the response to their proposals that they anticipate. If a local authority is to plan its use of resources, it is surely essential that it has knowledge of the money that is to be made available.

The Secretary of State used the phrase "value for money". That is a concept that has always been open to considerable difficulty, because of the several value judgments that are involved. It is clear that the Government Front Bench consider that only one value judgment is relevant, and that is its. I question the validity of that approach. I much prefer to accept local government values in terms of the services that they need to provide within their communities than to accept the value judgments made by civil servants, who, with due respect to them, remain in London and take a completely different approach to the needs of some provincial towns and cities.

Many hon. Members have worked as councillors in local government. I served for six years on a local council. We were continuously faced with trying to meet needs on the basis of scarce resources. We had to determine our priorities. We may have got those priorities wrong from time to time, but there is no doubt that we were more able to judge the order of priorities locally than will be the case if the Bill becomes law.

Other hon. Members want to speak, so I shall attempt to draw my brief remarks to a conclusion. My right hon. Friend the Member for Ardwick pleased me when he said that if the Bill became law it would be repealed by the next Labour Government. I believe that we will have a good majority in 1984. [Interruption.] I thought that that would bring a cheer from Conservative Members.

The localised institutions that we have protected over the years in local government represent a value that we cannot afford to allow the architects of destruction sitting on the Government Benches to do anything about. I understand that they must get the Bill through by the end of March. It is a responsibility for all Opposition Members to ensure that that is not possible. We know the answer. There will be a guillotine and the measure will be forced through because the Government have a majority. There is a lesson in that for Opposition Members. I hope that when the Labour Government are elected they will have no compunction, given a majority, about reversing many of the trends that we have seen on the Government Benches over the past two to three years.

I remember the Minister for Local Government and Environmental Services and the Secretary of State for the Environment serving as the two chief spokesmen on the Aircraft and Shipbuilding Industries Bill during the Labour Government's term of office. They made some lengthy speeches, the gist of which often was that we were carrying out measures for which we had no mandate; they were unconstitutional, improper and so on. The Secretary of State has not spelt out where the mandate is for this measure in the 1979 Tory manifesto. Perhaps the Minister for Local Government and Environmental Services will tell us. No mention was made in the manifesto that the Government would introduce a Bill seriously to restrict the powers of local government to such an extent as to create the possibility of further moves towards a corporate State.

I hope that there will be a maximum attendance of hon. Members like the hon. Member for Buckingham in the No Lobby, so that even this Government will not be so foolish as to proceed with this measure.

8.14 pm

Mr. Robin Squire (Hornchurch)

I had some sympathy with the earlier comments of the hon. Member for Preston, South (Mr. Thorne), but I lost that sympathy rather easily when he spoke of guerrilla tactics during the night. Hon. Members are aware of what that means in practice. If there are defects in the Bill, the way to defeat them is by rational debate, not by hammering through the night.

There is a song that runs What a difference a day makes". In this case it is not a day, but just over a month. The House will be reassured when I say that I do not intend to sing that song. The difference is between the first and second Bills. I shed few tears at the non-appearance of the referendum proposals. They were, and remain, unfair in principle and in practice. They would have been costly and would have cut completely across the traditional relationship between the Government and local government. They will be largely unmourned by most people involved in the affairs of local authority financing.

Similarly, I can work up few tears about the ban on supplementary rates, although I listened with interest to several hon. Members who could. I say that as someone whose support of local government generally is well known. The ban will be a relief to my constituents, and certainly to my small business men, of whom there are a large number.

If we analyse why supplementary rates were ever used, we see that they come under two headings. The first is the change of control—the political decision. If that means that instead of changes being brought in in six months they are brought in in one year, with the inevitable consequence that should control change again the outgoing council will have a further six months' or a year's control, that is not the stuff of which dreams are made or about which fighting speeches are made. That is a comparatively small point.

The second heading is potentially more important. I shall grandly call it the mistake area, where councils have underestimated either price inflation or wage inflation, often through taking advice in exalted places at the beginning of the year. However, those instances are comparatively rare.

I welcome the Secretary of State's intention that if such a position were to arise in future the requirement would be on the local authority to repay that excess in the first quarter of the following year. That is important, because, as I suspect many hon. Members know, the local authority borrowing market in this country is sophisticated and enjoys a high reputation world-wide. It would be potentially damaging to our reputation as a capital market were that provision not to be included in the legislation. We need to reassure anyone who would lend to a local authority that his money is as safe as it was under the previous structure.

There is a good consequence of part I, in that there is a certainty of expenditure for local authorities at the beginning of the year. However, in part II the situation is a little different because of the effect of clause 4, which has attracted considerable attention from different speakers. With the abolition of supplementary rates, local authorities may find, some time after the year in question has commenced, that they are required to lose the grant. The consequences could be fairly major, not least because, with the ban on supplementary rates, they will be doubly penalised.

My hon. Friend the Member for Buckingham (Mr. Benyon) well described how the clause goes against a number of statements made in Committee on the 1979 Bill, now the 1980 Act, and indeed subsequent statements about the Government's intentions. I regret that we have before us legislation that gives still greater centralising powers. I especially regret that the wide discretionary powers effectively mean that the volume of expenditure is no longer a realistic council decision. How many councils, currently in receipt of grants—we know that some are no longer in receipt of any grant—will risk jeopardising that grant? If we recognise that, we recognise that the essential decision is not being taken by the council itself.

I realise that I may be in a minority of Conservative Members in deploring that, but I believe that this needs to be stated. I believe that we can get round it without facing legislation of this nature. The essential difficulty arises because there is an inherent fallacy in basing control on grant-related expenditure assessments. These are the successors to the old rate support grant. Hon. Members will remember that they were used as a guide to who should receive grant or assistance from the Government, and the substance and size of that support. It was never intended, however, that they should serve as a control on expenditure. They were never intended to be a volume control.

The measurement of need may be very accurate. I grant to my right hon. Friend that the measurement of need may be better now than it has ever been. Within the mighty Wurlitzer of statistics, which is now part and parcel of block grants, we have assembled a most impressive measurement of need. Nevertheless, it is still an estimate, and I submit that some of the individual elements are not strong enough to stand up to the interpretation now effectively being placed upon them, especially if they are used to determine the direction of grant and to penalise local authorities when they seek to spend a little more or less on that assessment. That is its weakness, and that is where we make a false assumption.

In recognition of the fact that other hon. Members wish to speak I shall curtail my comments on this aspect of the matter, except to repeat that it is unfair to expect local authorities to make sound and sensible adjustments if they are advised well into a year—in June or July, let alone later—that a fairly large sum may have to be found.

To sum up on part II, I believe that local authorities should be in a position to be sure of their revenue when fixing budgets or, as the recent Green Paper "Alternatives To Domestic Rates" said: To budget sensibly and tightly, local authorities need to be able to predict their income and their cash flow with reasonable precision. I turn to part III and the Audit Commission. I should point out that I am a chartered accountant, but I have no possible way of benefiting in any shape or form from the proposals in this or indeed any part of the Bill. Here I part company to some extent from my hon. Friend the Member for Devizes (Mr. Morrison), because, as an erstwhile auditor, I can readily appreciate that there are some genuine benefits for local government in providing wider experience on the part of those carrying out the audit.

With the best will in the world, the existing direct audit, by its very nature, draws its experience from a narrow band. I shall pay full tribute later to that experience, but it is a very narrow band. There is therefore an obvious advantage in widening the audit to bring in the additional expertise and much more modern computer-based auditing techniques. That is not to say that these are not available to the district audit at present, but the sheer range of experience which it cannot possibly have is an argument for recognising the inherent sense and soundness of the Government's main proposal.

Nevertheless, I do not wish to forget the district audit and I fear that there may be a danger of going almost too far the other way and losing the advantage of the local authority experience that the district audit has. I am rather glad that the decision is not mine, as I do not know how the new commission will determine when to have a district audit and when to have a private audit. I can well see how within the private audit it will choose which private auditor in the ordinary way, but it is difficult to see what yardstick it will adopt in deciding on that essential switch. However, that may become clear in my right hon. Friend's summing up or subsequently in Committee.

My other fear is that the powers at present set out for the direction of the Audit Commission by the Secretary of State seem to me quite wide. My own institute, the Institute of Chartered Accountants in England and Wales, in its submission on the consultation paper, said: We believe that it would be inappropriate for the Secretaries of State to have any general power to give the Commission directions as to the discharge of its functions. Similarly we believe that the appointment of the Controller of Audit should be a matter for the Commission, not subject to the approval of the Secretary of State. I believe that there is great value in that observation and I certainly sympathise with it.

I echo some of the points so well argued by my hon. Friend the Member for Carbon (Mr. Holland) who went much further and questioned the entire structure. I hope that the Government will look closely at his comments when the Bill goes to Committee.

I cannot resist drawing attention to something relating to the Audit Commission said by the right hon. Member for Manchester, Ardwick (Mr. Kaufman) in his amusing speech. Suddenly, as if pulling a rabbit out of a hat, he became conspiratorial and claimed that under clause 9 there was all the evidence of a political conspiracy. In the hope of excitement I turned to clause 9, which is the position in Scotland, plus political conspiracy. Clause 9 provides: The Auditor should consider whether, in the public interest, he should make a report on any matter coming to his notice in the course of the audit in order that it may be considered by the body concerned or brought to the attention of the public,". I wondered what could be so heavily political. Could it be clause 9(1)(a)? Surely not. Could it be clause 9(1)(b)? No. I realised that it must be subsection 1(c), which says that the body whose accounts are being audited has made proper arrangements for securing economy, efficiency and effectiveness". That rang a bell, and I realised that the right hon. Gentleman must have been saying that that was a political gesture.

I am sure that my right hon. Friend the Minister for Local Government and Environmental Services will draw attention to this when he sums up the debate, but the implication is that if one believes in those three qualities one would be well advised to recognise them as Conservative qualities. Whatever else they may be, they are certainly not qualities that appertain to the right hon. Member for Ardwick.

Although some of my comments may be light, I still believe that the Bill can be seen only as an interim measure. My right hon. Friend the Minister for Local Government and Environmental Services said as late as November 1981 that that was how he saw the Bill and how he hoped that it would be considered. If it is not to be considered in that manner, a number of other questions and queries must be raised.

As well as that, we must see any measure of local government reform against an ideal. We have a Green Paper, on which I shall not comment, but we must see any short-term proposals against what we want to see as a final state of local authority financing. Those who have studied history and literature say that when Samuel Beckett wrote "Waiting for Godot" he took his inspiration from undertakings to reform local authority fund raising. Those who know the play will know that Godot never arrives. I have great faith that in this case something will arrive.

If the Government adopt a non-centralist approach and recognise the need to reconcile more accurately those who benefit from the services with those who pay for them, we shall be on the right track. Provided the Bill is interim I shall give it qualified support. However, if it is merely a further instalment down the centralist path it is as mistaken as the block grant proposals were originally in 1980 and will similarly fail in its overall aim.

Several Hon. Members

rose—

Mr. Deputy Speaker (Mr. Ernest Armstrong)

Perhaps it will help the House if I inform it that five hon. Members are trying to catch my eye, and just over 50 minutes remain before the Front Bench speakers hope to catch Mr. Speaker's eye.

8.27 pm

Mr. John McWilliam (Blaydon)

I listened with interest to the speech of the hon. Member for Hornchurch (Mr. Squire) and particularly to his comments on clause 9 to which I shall return.

I was a member of the Scottish Commission for Local Authority Accounts and I am the only hon. Member who has served on such a body. It therefore gives me no great pleasure to attend the last rites of local government democracy, as we are doing this evening. The sparsity of the attendance in the Chamber is out of all proportion to the important and constitutional impact of this particularly obnoxious legislation.

The Bill is obnoxious because it flies in the face of the principles of democracy and because, ultimately, it will not achieve the objectives suggested by the Secretary of State of more efficient, compliant and democratic local government. The Bill will not achieve those objectives because it contains nothing that practically helps towards that end.

Indeed, I am surprised that the Secretary of State and his officials have failed to consider the Layfield commission's observations on the general points that the right hon. Gentleman made about this matter. I am even more surprised that, instead of referring back audit reports to the commission, the Bill proposes to refer them back to the courts. I would think that the Secretary of State has had enough of litigation and learnt that litigation will not necessarily help secure the kind of objectives that he wants to achieve.

I redirect the Secretary of State's attention to the Layfield report, particularly to paragraph 19 entitled "The Search for Efficiency". It says: What is the most efficient and economical way of doing something is very often a question of judgment". Paragraph 20 states: We believe that the best way of promoting efficiency and securing value for money by external means is through the dissemination of comprehensive but intelligible information on the methods employed by local authorities and the results they achieve". It does not say that that can be achieved by the litigious suggestions in the Bill.

The hon. Member for Hornchurch spoke amusingly about clause 9, but missed the point. He referred to clause 9(3). I should like to refer to clause 9(1)(c), which states: that the body whose accounts are being audited has made proper arrangements for securing economy, efficiency and effectiveness in its use of resources and in the carrying out of its policies. I am sure that all hon. Members would laud those as good objectives and as things towards which we ought to strive.

I also remind the hon. Gentleman of the institution to which he belongs and of the protections which that institution can and cannot afford. It is all very well saying that something may be contrary to law and that something may not have been brought into account, but any auditor would be expected to produce those facts, and any auditor's report should do so.

However, when the Bill talks about proper arrangements for securing economy, efficiency and effectiveness in the use of resources, we come on to the subjective judgments of a local authority and the way in which it behaves. I suggest that the Secretary of State is in error here, because there is the danger that in reporting on those subjective judgments an auditor may well render himself liable under the law. For example, he could say some thing contestable that may not be true.

As I have already said, I was a member of the Commission for Local Authority Accounts in Scotland. Had the relevant legislation been framed in the same way as this legislation, I would not have consented to join such a body. I remind the House that a Conservative Secretary of State appointed me to it. I would not have joined it for two reasons. The first is that I have a young wife and family, and I could not afford the possibility of the sort of action that could accrue as a result of the provisions of clause 9(1)(c). Secondly, I do not approve of the destruction of local government democracy.

It pains me greatly that democracy in this country has come to such a sorry state that a clause such as this appears. I tell the House and, more notably, the ladies and gentlemen in the Civil Service box that the phrases about "economy, efficiency and effectiveness" were widely bandied about at the time of the Local Government (Scotland) Act 1973. The then Secretary of State for Scotland wisely did not incorporate such phrases into the legislation because he realised the dangers that they held, both for the auditors and for the members of the commission.

As a member of the Commission for Local Authority Accounts in Scotland, I can tell the House that those phrases appeared frequently in circulars from the Scottish Development Department, which seemed to assume that, because it had privilege arising from the protection of the Comptroller and Auditor General and the Secretary of State, we had similar privilege. We had no such privilege, nor will any auditor or commissioner who is appointed under the Bill.

I go further. As the Bill now stands, anyone who consents to be either an auditor or a commissioner is walking on dangerous territory if clause 9(1)(c) remains. He could be liable for heavy damages. I seriously advise that, unless fundamental amendments are made to the Bill, no one presently employed by the local government audit service and no private auditor should become involved in any audit under the Bill. He will have no privilege whatever. He will be unable to say that a person has acted wrongly when he only thinks that a person may have acted wrongly. He has no defence and no privilege in law. The Bill is fundamentally defective in this area.

I began by saying that it gave me no pleasure to be present at the death rites of local government democracy. My only hope is that sufficient Conservative Members are as aware as I am of the dangers of central Government extending their tentacles further into the direct control of local authorities and further destroying the existing level of local democracy.

8.38 pm

Mr. Michael Shersby (Uxbridge)

I listened with interest to the hon. Member for Blaydon (Mr. McWilliam), but I do not take such a pessimistic view of the Bill as he does. I do not believe that we are witnessing the death rites of local government. We are witnessing a scene in the Chamber where a Secretary of State is trying to grapple with the fact that local government expenditure now accounts for about 25 per cent. of all public expenditure and where, because of the action of several local authorities, he has striven to place before his colleagues in Parliament a proposal designed to deal with that action and to protect ratepayers who are disadvantaged by it. That is a serious position for any Secretary of State to face and for the House of Commons to have to consider. Therefore, we must approach the Bill with that in mind, put forward our views, express our reservations and see whether we can find ways to improve the position during the passage of the Bill.

We have heard much from hon. Members on both sides of the House about the Bill imposing important changes in the delegated powers given by Parliament to local authorities in various statutes. They have been described by my hon. Friend the Member for Buckingham (Mr. Benyon) and others as constitutional changes. That is not an inappropriate description of some parts of the Bill, but it is important to point out that there is nothing basically wrong in Parliament reviewing the powers under which local authorities operate or requiring them to conduct their financial affairs in a way that is acceptable to Parliament, from which they derive all their powers and their very existence.

In carrying out the review and considering the Bill, Parliament is exercising its powers properly. After all, local government has not assumed to itself powers to act independently of Parliament or parliamentary scrutiny. I am sure that most local government leaders accept that, but some commentators and hon. Members have lost sight of the fact that local government operates under a variety of statutes and Parliament has a responsibility to review them to make sure that they are up to date and meet the needs of modern society.

Of course, local government has a right to question proposed changes in its powers and practices, and every hon. Member will wish to consider carefully the objections that have been put forward. The question is whether the proposals in the Bill are acceptable to the House and appropriate to changing the powers under which local government operates. I wish to comment briefly on the Bill as it stands, and I hope that it will be improved in Committee.

By abolishing the power of local authorities to levy supplementary rates my right hon. Friend the Secretary of State intends, as I understand it, to remove the fear and uncertainty to which domestic and commercial ratepayers have been subject in the past year. Such action is necessary because a comparatively small number of local authorities have pushed ahead with plans for public expenditure regardless of the exhortations of the Government or the ability of ratepayers suddenly to find an extra sum demanded by way of supplementary rate.

Every hon. Member must know that supplementary rates have caused considerable worry and even hardship to domestic ratepayers, particularly those just above the rate rebate level. As my hon. Friend the Member for Hornchurch (Mr. Squire) pointed out, the payment of a substantial extra sum during the year in respect of a supplementary rate has meant an unbudgeted on-cost for small businesses to the detriment of those businesses and representing a threat to their profitability and to jobs, particularly in areas such as Greater London, part of which I represent.

However, there are some dangers in abolishing the power of councils to make a supplementary rate. I am such that my right hon. Friend is aware of many of the dangers and has not brought his proposals before the House without weighing them in the balance, but I should like to spell out one or two of the problems.

There is a danger that some councils will be tempted to levy a rate that is higher than they need to meet their expenditure, because there would be no let-out if they overspent. There is also a danger for the prudent, responsible local authority that budgets to break even, without providing a contingency fund. Such councils, most of which, though not all, are Conservative-controlled, rightly believe that they should not take money from ratepayers until they need it, but any reduction in grant through clawback would mean that a council would quickly have to cut its expenditure rather than raise a small supplementary rate. That could mean that private contracts with house repair firms would have to be stopped immediately. I give that as an example of the flexibility of a local authority to meet such an eventuality. I hope, therefore, that these dangers will be fully considered in Committee and that a way will be found of taking account of them.

I come now to part II. We have discussed clause 4, in which the Secretary of State proposes to take power to reduce the amount given in grant after he has made the rate support grant announcement. It is a very sweeping power, and it appears to be retrospective. I hope that my hon. Friend in replying will spell out the reasons in more detail, because it is important that the House should know why the Secretary of State requires the retrospective aspect of those powers. Again, I am sure that the Committee will wish to scrutinise this matter carefully before agreeing to it.

In paragraph (cc), which clause 4(1) seeks to insert in section 59(6) of the Local Government, Land and Planning Act 1980, the Secretary of State can seek to achieve any reduction in the level of local authority expenditure … which he thinks necessary having regard to general economic conditions. If that power has to be taken, I am rather sorry that it does not enable the Secretary of State to do the reverse, because circumstances could arise in which it was necessary. I believe that there is a danger that the use of this power, as set out in the Bill, could put a council in a "Catch-22" situation. For example, if the Secretary of State announces that the rate support grant for a local authority in any given year is so much, and the council budgets accordingly, and he subsequently announces that the grant is to be cut because of "general economic conditions", the council will have to cut expenditure immediately, because it cannot raise a supplementary rate. As I have said, this could cause real problems for a responsible local authority which has already cut expenditure to the bone, in line with the Government's target. It may have no option but to reduce or cut essential services. That aspect bothers me a great deal, quite apart from the general principle of any Secretary of State, irrespective of political party, having such sweeping powers to act without recourse to Parliament.

I wish to put forward a suggestion for a better way of dealing with the problem, and I am glad that my right hon. Friend the Secretary of State is present to hear what I say. Surely a better way of achieving his general aim would be for the Bill to make it a statutory duty for a local authority to set itself a cash limit and then stick to it. That would leave the decision with the local authority, acting in accordance with the generally prevailing conditions. The local authority would then be required by statute to stick to it. I hope that this suggestion will be considered carefully in Committee, because if the Bill were amended in that way the Secretary of State would still control the limits of local authority expenditure through his grant penalties, but it would at least avoid a situation in which he arbitrarily reduced grant after having announced what it was to be. I hope therefore that my right hon. Friend will consider this type of cash limit set by the local authority itself.

I am interested in the thinking behind part III, which proposes an Audit Commission. A number of leading councillors, some of them in London, believe that it is right to have more private sector auditors and that private sector expertise can be brought to bear on accounts. They welcome the provisions relating to public inspection of accounts, together with the right to challenge them, in clauses 11 to 14. However, I should like to be sure that the independence of the auditor will not be threatened by the fact that recourse to the courts could overturn his decision. The Committee will want to consider that point.

An opportunity is already provided in clause 11 for any elector or his representative to question the auditor about the accounts and to make objections. The hon. Member for Blaydon (Mr. McWilliam) described a situation where an accountant would be loth to express his view freely for fear of incurring some penalty under the law if an action was taken against him in the courts. It was my impression that the auditors were already the beneficiaries of some qualified privilege and that this would continue. The hon. Member for Blaydon shakes his head. It would be interesting if my right hon. Friend, in his reply, could deal with that point.

One of the most important points in the debate was made by my hon. Friend the Member for Carlton (Mr. Holland), who is well known for his dislike of all quangos.

I hope that the Secretary of State will consider carefully the suggestion that, instead of an Audit Commission appointed by the Secretary of State, the various professional institutions should be invited to appoint the chairman, vice-chairman and other officers of such a commission, that they should be responsible for running it, that they should report to Parliament and that they should be seen by Parliament, by the country and by local authorities to be absolutely and totally independent of Parliament, the Secretary of State or of any hint of ministerial privilege. That was a valid and important point. My hon. Friend the Member for Carlton has done the House a great service by drawing this matter to our attention.

Many people believe that this is a necessary Bill in the light of events in the past year. They are worried about the powers in clause 4, but they, like me, accept that Parliament has given certain delegated powers to local government and that Parliament and the Government cannot stand aside when they see, as all have seen, some local authorities during 1981 impose swingeing supplementary rates upon their unfortunate ratepayers. There must be stricter rules for the levying of rates and greater scrutiny by an Audit Commission of the way in which money is spent. The public must be reassured that local authorities will act responsibly and that they will not be able to increase local taxation through the rates half-way through the financial year in the manner that has been seen in the last year or so.

I believe that the Bill will ensure that local authorities, like every domestic and business ratepayer, work within their annual budgets. This will be good for all concerned. If there is any justification for hon. Members voting for the Bill on Second Reading, it should be the knowledge that many constituents have approached us to say that they cannot afford to pay the supplementary rate. They have asked hon. Members "Why don't you do something about it?" After all, they argue, Parliament lays down the rules under which local government operates. Those people look to Parliament to review the arrangements to see whether they are adequate in the light of present-day conditions.

We are responding to people throughout the country who say that Parliament should do something. The Secretary of State is attempting to do something. I am certain, knowing my right hon. Friend as I do, that he is as reluctant as any hon. Member to take the powers proposed in the Bill. Like any hon. Member, however, my right hon. Friend cannot stand idly by while many people, who are not well off, are so worried about their supplementary rates that they feel they cannot afford to heat their homes properly and cannot easily contemplate their budgeting for the year ahead. These are matters that hon. Members should have in mind when taking a decision tonight.

8.55 pm

Mr. Stephen Ross (Isle of Wight)

It is clear that the last few speeches have come from hon. Members with a knowledge of local government, and I welcome their contributions. The hon. Member for Uxbridge (Mr. Shersby) criticised the Bill, but then said that he felt that the Secretary of State was justified in taking the actions that he proposed.

Nearly all the speeches to which I have listened have talked about people's inability to pay rates or supplementary rates, but we have had no reference to the numbers of ratepayers, including constituents of mine, who have been asking in the last few days for more work to be done clearing footpaths and roads. We have had no reference to local industries which expect roads to be repaired for their lorries. I am sure that that has happened in Wales, which has suffered so badly during the recent adverse weather conditions. I can assure the House that it has happened in my constituency. I get an enormous number of inquiries from small businesses asking for help of one sort or another. We are not discussing a one-sided argument or a constant moan against the rates. People expect better services and want their local authorities to provide them. Unfortunately, in most cases the local authorities have not been financially able to do so.

I want especially to congratulate the hon. Member for Buckingham (Mr. Benyon). His was an honest speech. It is obvious that the hon. Gentleman feels very deeply about what he sees as the ultimate effect of the Bill. I, too, believe it to be unnecessary and dangerous. The ultimate effect may be far greater than is appreciated on the Treasury Bench.

I am opposed to the whole Bill, although I recognise that there has been some unnecessary and even wanton expenditure by a few local authorities, but the general public already have the answer. We have seen some of the results of local elections in the past 12 months and how those who, in the eyes of the public, have been guilty of exceeding their authority have suffered at the polls. At the end of the day, the public will call the tune and show their feelings in the best way possible, which is at the ballot box.

I hope that I am responsible. I am probably the only hon. Member who is also leader of a county council and will have to present a budget in a week or two. I have occupied that position for the past nine months, and I recall what happened when my party came to power and took over from a Conservative council which had drawn up a budget that was a bit too near the bone. Our predecessors had not left enough in our balances. Last summer, when we had first the clawback and then the penalty imposed upon us, it was necessary for us to look for savings or cuts of £2¾ million when in our balances we had less than £2 million.

Much as I should have hated the idea of being the first Liberal leader of a council to impose a supplementary rate, it seemed likely that we would have to introduce one, even though we had not spent anything new by then. If the Secretary of State had not changed the rules in September and introduced the GRE basis to replace the volume targets, we would have had to go for a supplementary rate because we would have moved into debt and would then have been trading illegally.

That position could arise again for local authorities in the coming year. That is why I say that it is wrong to remove the right to raise a supplementary rate. There can be excellent reasons why an authority should go to the public and say that it is obliged to raise such a rate. There might be times when it had massive public support for doing so. The public might ask the council what it was doing about unemployment and about some of the damage caused by recent disasters. They would much prefer the local authority to levy a 3p or 4p rate to raise the necessary money to perform some job than to borrow it at an interest rate of 15 per cent. or more and have to find that money in the next financial year.

There are times when a local authority, if it appealed to the public properly, would be encouraged by electorate to levy a supplementary rate. Therefore, it is wrong to do away with supplementary rates. I am sorry that the local authority associations—the ACC and the Association of District County Councils—seem to have rejected that argument and to have accepted a sort of compromise in saying "All right, let us do away with the supplementary rate and have a real go at part II". They are wrong. We should fight to the bitter end.

No responsible authority wants to levy a supplementary rate, but there are occasions—we are going through periods of high inflation—when the unexpected happen and a local authority might have to do so, and it might be the right thing to do. It is a pity to allow that power to go without a real fight. I hope that there will be one.

Local authorities will now undoubtedly be overcautious and will build up their balances to protect themselves against a rainy day. My council feels that that will be necessary if we are to get through the coming financial year and if part II becomes law. Frankly, we do not know where we stand. If we have a clawback and then further penalties, we shall need sufficient balances to meet that. That, surely, is prudent financing.

The uncertainty of part II is diabolical. It will mean building up against possible future clawbacks or perhaps grant abatement, should the Secretary of State so decide. We shall not know about that until June at the earliest. That was the time last year. We did not know about the change of policy until September, when we had already put wheels in motion to raise a supplementary rate. Thank God we were able to cancel it, but that cost money.

There is a further difficulty, which I shall put directly to the Minister, because only he can answer it. In the council chamber last week I received a note from my county treasurer. Incidentally, I pay tribute to all county treasurers and treasurers of local authorities because, they are without doubt, very able and responsible people and we value their advice. His note said: We have just received a message from the ACC's financial advisers that the DoE have made some sort of error in the data they have used in the provisional GREs of 21st December. Perhaps they "skewed" them wrongly.

The DoE are unable (or unwilling) to give details yet but warn that it could be significant for some authorities. The RSG order comes up on 25th January—exactly seven days before our Budget meeting and could mess up our strategy. Is there any chance that the Minister can give us the information that he apparently will not give to the ACC? Has an error been made in the calculation of GREs, and will we at the last minute find a further clawback of money of which we did not know before? That would be diabolical, because we are already far advanced in our plans for setting the rate. We very much hope that it will be within the GRE limits and within the guidelines set out by the Secretary of State. I can promise the Minister that we shall not spend more money than is prudent in our view.

I recently attended a committee meeting—and this is typical—because I thought I had found something which could be cut. Our amenities and leisure committee wanted to appoint a site and monuments officer. I went in to the meeting hot foot to say that we could probably do without such an appointment, but the county librarian read me a letter from the Department of the Environment which made clear that the Secretary of State wants us to make such an appointment. The letter stated, There is no conflict to be seen between this initiative by the Inspectorate of Ancient Monuments and the Secretary of State's call for local authorities to monitor closely expenditure and staffing levels. For, in making this call, the Secretary of State's aim was to promote greater interest and a better balanced debate at local level on the relation of manpower and resources in the financial situation. It was not his intention to inhibit developments in this important area of our work. —namely, the protection of county sites and monuments. End of story. We are appointing a county sites and monuments officer. The Department of the Environment is funding half of the money for one year but after that the expenditure is totally ours. I am all in favour of recording our sites and monuments. However, it takes the ground from under one's feet when officers are able to read out such letters.

I am opposed to part II. It is far too uncertain and some changes must be made to the Bill. It is unfair to leave local authorities in the dark about what the future may hold.

When part III was first announced by the Minister I thought that there might be something in it. However, the more I look at it the more I feel that it is unnecessary. The present situation works pretty well. Local authorities have cost-effectiveness committees and manpower watches and the local authorities management services and computer committee gives us all the advice that we need. It is against current thinking to set up another such body and it is unnecessary. Hon. Members from both sides of the House have criticised the Audit Commission. The chartered accountants Arthur Young, McLelland and Moores are a nationally known firm and they have produced a good document about the Audit Commission. There is much criticism of the proposal, although the firm is in favour of it. I hope that there will be changes in the method of appointment of its members. Nevertheless, the com-mission is unnecessary. On the whole, local government is desperately trying to keep within the Government's guidelines, as it has always tried to do. Central Government should show more faith in local government. Above all, a Conservative Government should have more faith in locally elected representatives. It is a tragedy that a party that has always talked about devolving power and giving more responsibility at a local level should—as the hon. Member for Buckingham clearly stated—take such power away.

9.6 pm

Mr. Anthony Steen (Liverpool, Wavertree)

All the ratepayers who are crammed into the Strangers' Gallery and all those who are listening to the debate on the radio, with their ears to the speakers, must be avidly trying to gather whether they will get better value for money as a result of the Bill. All ratepayers must be asking themselves whether they will get a better service for their local authority's expenditure. That is at the heart of the Bill and that is what ratepayers are concerned about. It is also a question for the Audit Commission. It must ask itself whether it can find a way of giving ratepayers better value for money.

If the Audit Commission sees that ratepayers will get better value if the local authority contracts a service out to private enterprise, or that there is no need for a service, it should be able to say so. There is no point in setting up another quango if it has to remain silent. It must have a voice with which to speak up and to say which questions should be answered by local authorities.

If the Audit Commission sees that a local authority is not buying the best available, and continues to operate costly services, services that have a bad performance record, or services that private enterprise is likely to carry out more efficiently and economically, it should be able to say so, even if the local authority ultimately has to decide whether to take that advice.

In response to a question, the Secretary of State blurred whether the auditors could question the prudence of local authorities. I hope that the Minister will let us know whether the Audit Commission can question a local authority's wisdom, even though it is for the local authority ultimately to decide what it wants to do. The Audit Commission's job should be not just to see that current public services are maintained, but to satisfy itself that the level of efficiency needs the present number of staff. It should satisfy itself that the rise in the number of local authority employees—from 2,154,000 in 1965, to 3,013,000 in 1980—is justified. It will need to consider whether the provision of more social and community workers has resulted in better community relations. It will need to satisfy itself that the provision of more planners has helped to reduce inner city decay. It must consider whether matters have become worse or better.

Why can it not remind the local authority that private firms are less at the unions' mercy, that they benefit from commercial experience by carrying out the jobs for which they contract, and that there would be a reduction in the number of public officials on the local authority payroll?

The Audit Commission should also be able to consider the number of working days lost because of industrial disputes in local authorities. We know that in 1977 1,236,000 days were lost in industrial disputes. In 1979, 2,563,000 days were lost. In 1980, the first real year of the Conservative Government, only 261,000 days were lost as a result of industrial disputes. The commission should consider that matter.

The commission must also have regard to what is happening in other local authorities such as Southend, which my hon. Friend the Member for Reading, North (Mr. Durant) mentioned. He said that the council is saving £500,000 a year by utilising private contractors for cleansing services and refuse collection. Similar arrangements in Liverpool would lop £1 million from the council's £6 million annual bill, which includes nearly £300,000 for the administration of cleansing services. With public sector spending in excess of £1 billion a year for cleaning services and local authorities spending a further £300 million a year on internal cleaning, there is great scope for saving money and for the private entrepreneur.

Nor should the Audit Commission confine its observation to local authorities who switch from private to public sector only for refuse collection. Private firms can keep roads gritted. We know what has happened during the recent appalling weather. The failure of the Liverpool city council to clean the side streets was disgraceful. We wish to see more private enterprise cleaning the side roads and keeping them gritted. Private enterprise can run school bus services, run day nurseries, maintain street lighting, erect bus shelters, organise grass verge cutting and maintain street signs.

McDonalds, the hamburger chain, provides varied and nutritious school meals in one American State. Would not our children prefer a McDonald's bill of fare to what comes out of most local authorities' kitchens?

The build-up in the numbers of professional people seeking refuge in the sanctuary of public service rather than competing in the cut and thrust of private enterprise is well illustrated by the numbers of architects currently employed in the public sector. In 1978, 1,351 architects and their assistants were employed by central Government, 1,569 were employed in nationalised industries and 6,537 were employed in local government. Those numbers could be reduced considerably if fewer buildings remained in public ownership, building control regulations were relaxed and private architects tendered for new public buildings rather than have them designed automatically by in-house teams.

As matters stand, local authorities are top-heavy with professionals. In addition to the architects and architectual assistants—Manchester metropolitan district employs 462 and Birmingham metropolitan district employs 197—many of the larger departments have staffs of structural engineers, structural engineers' assistants, quantity surveyors and their assistants, environmental engineers and their technicians, building surveyors, land surveyors and their respective assistants, and lawyers and their assistants. Manchester metropolitan district employs 111 lawyers and their assistants, whereas Birmingham metropolitan district employs 127. Manchester metropolitan district employs 150 planners whereas Birmingham metropolitan district employs 360. In Birmingham there are 960 accountants and financial assistants, and in Manchester 407. All are on the public payroll. They cost more and are often less effective than their counterparts in private practice. Will the Minister ensure that the Audit Commission can look at such things and that it will recognise the scope for private enterprise in community and social services?

Paid neighbourly care could result in daily visits by a local housewife to old and lonely people near at hand. With nearly 10 per cent. of the city's population of pensionable age, the welfare services cannot cope with anything more than emergencies, so it usually makes contact with less than 20 per cent. of the aged.

Most cities have suffered from managerial collapse at the town hall. They lack the skilled and far-sighted officials necessary for the long and sustained effort to cut costs, red tape and the numbers employed. Nor is it likely that those currently there have much desire to dismantle the vast edifice of public democracy which they have been responsible for building up and on which so many careers depend.

Those are the questions that I would expect the Audit Commission to ask. It is no good the Government just talking about private enterprise. We need action.

9.16 pm

Mr. Dafydd Wigley (Caernarvon)

It is gratifying to see that Wales can be squeezed in at about 9.15 pm at the end of the debate, especially when hon. Members who have come in only in the middle of the debate are called and I have not missed a minute of it.

What has happend in Wales in the past week or so is pertinent to our debate. Hundreds of thousands of pounds have been spent by local authorities which could not have foreseen the severe weather conditions, which are probably the worst for a generation or two. The Government tell the local authorities that if they wish they can undertake the extra work and that if expenditure goes over what a penny rate in the pound can produce—more on some interpretations—the Government may provide extra funds. That is the Government's formula for local authorities in Wales to deal with the unforeseen eventuality, and it is central to what we are debating.

The hon. Members for Buckingham (Mr. Benyon), for Preston, South (Mr. Thorne), for Blaydon (Mr. McWilliam), and speaker after speaker, have said that the Bill is a disaster and a threat to local government. Hitler's first action in Germany was to erode local government power. When democracy was reintroduced, the first step was to set up a strong system of decentralised government. Although the Secretary of State may not be aware of it, he is opening the door for the situation to be used in such a way.

Far from being an interim measure, I see the Bill as a clear sign that there is not the slightest possibility in this Parliament of steps being taken to scrap the local rating system. The progressive attack on local government over the past three years has got under one's skin. The Bill is an attempt to keep the pot boiling in the local authority witch hunt.

We should remember that we have placed many responsibilities on local authorities, and it is not surprising that it is more and more difficult for them to find the money for the services. However, over the past six years local authority expenditure on a constant basis has decreased by 21 per cent., although central Government expenditure has increased by 8 per cent., yet the venom in Bill after Bill is directed at local authorities and not at the Government.

Paragraph 11 of the White Paper published in September 1979, which deals with Government controls over local authorities, states: Apart from the plethora of specific controls by Government departments over the activities of local authorities, many statutory duties have been placed upon them in the past. The Government's objective is to provide councils with greater local discretion and automony". However, all we see is the further centralisation to which speaker after speaker has referred.

A constitutional sledgehammer is being used to crack an economic nut. How often are supplementary rate increases imposed? What proportion of local authority expenditure is covered by supplementary rate increases? The problem is minuscule compared with the door that we will open by the proposed change.

I am chiefly concerned about two areas of the Bill. First, local authorities will lose their flexibility in spending. We have heard what happens when control of a local authority passes from one party to another. It is the right of the incoming party to pursue its policies, whatever they may be. The Bill is slanted in one direction. If a radical party takes power and wishes to spend more it will be prevented from doing so, but if a reactionary party takes power and wishes to spend less it will not be prevented from doing so.

The words "economy" and "efficiency" have been used. The word "economy" has taken on a political meaning during recent months, as in the case of the GLC problems with transport. Therefore, if the commissioners and the Government are placing special emphasis on the economic performance of duty, that is a declaration of political intent. It will be a political job for those appointed to monitor the system.

Local authorities will be placed in an impossible position. They will not know what their real income will be in the year for which they have to decide the level of rates. They will not know the exact amount that they will receive through grants. If they do not receive the full grant that they expect, they will be prevented from levying a supplementary rate. As a result, essential services will be cut, and that will be a severe body blow to all. To say that special temporary borrowing will be sufficient to overcome the problem puts all the powers into the hands of the Secretary of State. It is yet another element of the centralism in the Bill.

My other main area of concern relates to the Audit Commission. It is a centralising factor, as can be seen in schedule 1(3), which deals with the Secretary of State's powers to give directives to the commission. We shudder when we think of the possibilities in that direction. The key jobs will be controlled by the Secretary of State. The commission will be a central body that will pursue the policies of that Government to the detriment of local government.

There is not sufficient time to consider in detail many aspects of the Bill. They must be discussed in Committee. For example, there is a contradiction between clauses 11 and 22. Clause 11 advocates freedom of information, while clause 22 runs directly contrary to that. There is a question of public interest in clause 9(3) and its political implications.

Misgivings about the Bill have been expressed by every Conservative speaker bar two. If, despite that, the Bill goes ahead, certain safeguards must be provided. There must be a strong local voice on the Audit Commission. No power should be given to issue directives to local authorities about their policies. Local authorities must retain the right to appoint their auditors. The staff of the commission must be independent of the Government. There must be an appeal procedure against the decisions of the commission.

There are many issues that must be considered at great length. I hope that there will be an opportunity to do so in Committee. If we go down the proposed road without sufficient thought, we shall enter a new chapter in the political structure of the United Kingdom. That could lead to something that none of us has foreseen.

9.24 pm

Mr. Gordon Oakes (Widnes)

Every English and Welsh Member has a vital and important interest in the debate. Almost certainly, their district and county councils—whatever their political complexion—are opposed to what the Bill attempts to achieve. The hon. Member for Buckingham (Mr. Benyon) made what I am sure the House will agree was a characteristically honest and courageous speech and he stated that it was surprising—I underline this—how few Members from both sides of the House had attended the debate. At least all four parties whose members have contributed to the debate will vote against the Bill. Conservative Members share a greater degree of blame in that they missed many excellent speeches from their colleagues and they were also opposed either in entirety, as the hon. Member for Buckingham explained, or to most of the Bill's provisions. It should be astonishing, therefore, to see them in the Government Division Lobby. With the reservations they expressed, they must surely vote against the Bill or at least abstain.

As my right hon. Friend the Member for Manchester, Ardwick (Mr. Kaufman) stated in his opening speech, it is not only hon. Members who oppose the Bill; the three local government associations—two of them Conservative and one Labour-controlled—all oppose the Bill and nearly every provision in it. Indeed, to varying degrees, they are opposed to every provision in it.

The Bill is opposed because it is of vital significance to local democracy as we have known it for decades—indeed, one could almost say for centuries. It cuts at the root of local democracy and breaks a constitutional partnership which has existed between central and local government and almost sacrifices it at the whim of the Secretary of State for the Environment.

Conservative Members showed courage and devotion to local government only a few weeks ago when they opposed the Secretary of State's No. 1 Bill. I admired that. How did they square themselves with voting for this Bill? The Secretary of State mentioned that there were some 30 authorities with supplementary rates but we still get supplementary bills. There was a Local Government and Planning (No. 1) and a (No. 2) Bill. Hon. Members in Committee found Nos. 3, 4 and 5 Bills being advanced. The same has again happened with this Bill—a No. 1 and a No. 2 Bill. How competent can the Department be? No other Department seems to have No. 1 and No. 2 Bills every time it attempts to do something.

The basic difference in the No. 1 Bill was that it proposed that local authorities should hold a referendum if they wanted to impose a second supplementary rate. Surely the Conservative Members who were so opposed to that were not merely opposed to the idea of a referendum. What they were opposed to and what their authorities had been saying to them was that the mischief of the Bill was the attack on local democracy. What does this Bill do? It takes out the referendum, but it does not allow a local authority even one supplementary rate, never mind a referendum, before a second supplementary rate.

There was talk among many Conservative Members about the interim nature of the Bill. I cannot find anything interim in it. If it were an interim Bill, it would have to be renewed before the House. There is nothing to say that it will be renewed. I hope that the Minister for Local Government and Environmental Services will consider what he said on 12 November 1981: 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."—[Official Report, 12 November 1981; Vol. 12 c. 745.] That was the excuse used to try to get the Minister off the hook when so many of his hon. Friends opposed the No. 1 Bill.

The No. 2 Bill is far more damaging and far worse for local authorities and local democracy than the No. 1 Bill ever was.

A number of Conservative Members have said—this is so self-evident that I am amazed that the Government do not recognise it—that the direct result of part I, especially coupled with part II, is that any prudent treasurer or chairman of a finance committee of a local authority—a job that I once held before I came to the House—will try to get the rate right the first time by building up balances for the authority. He will surely do that if he cannot levy a supplementary rate and if he can borrow only with the consent of the Secretary of State. It would be madness for the man or for the finance committee to do otherwise.

Let us remember—I am not punning on the word—the climate in which the budget decisions are being taken. Local authorities have had to face enormous expenditures for which they probably did not budget. Putting salt on the roads and filling holes in the roads are only minor parts of a typical iceberg for local authorities. In the constituency of the hon. Member for Liverpool, Wavertree (Mr. Steen) there has been devastation among council houses. They will have to be repaired. Those who live in those houses will become a charge and a burden on the social service department. I have no doubt that that is equally true of parts of the constituency represented by the hon. Member for Caernarvon (Mr. Wigley).

We depend on local authorities to carry out other functions. Many local authorities have had to look after and care for those who were trapped who did not live in their areas or in the constituencies of which they are part. We expect such things to happen. If I were back again as a chairman of a finance committee, I should bear very much in mind that I would not be able to raise a supplementary rate and that I could do nothing if I found myself in that difficult position.

Part I of the Bill is worse than the No. 1 Bill. I hope that Conservative Members who had the courage to oppose the No. 1 Bill will have the courage totally to oppose the No. 2 Bill.

I turn to the second part of the Bill, which begins with clause 4. It is a sort of Secretary of State general absolution clause for all sins past, present and future. It is one of the most retrospective pieces of legislation that I have ever seen before the House. It is naked retrospection because court decisions have been made against the right hon. Gentleman to which he has not yet responded or replied. He is using the House as an instrument to get him off the hook at the expense of crippling the financial arrangement between the Government and local authorities. That will be done at the expense of chaos for local authority finance committees throughout the country. There will be chaos for treasurers and finance committees.

The mischief of the proposal that is set out in clause 4 is that the Secretary of State will be able to intervene in the affairs of an authority and change the grant after the level of grant has been fixed during the course of the grant year.

The Secretary of State has said that it is terrible for a ratepayer suddenly to be faced with a supplementary rate. Very often the need for that supplementary rate has been created by the Government pruning too much the local authority's ability to expend. It will be even worse for the local authority if at any point in the grant year the Secretary of State can take a dislike to it, can intervene and can reduce the grant, coupled with the first three clauses that provide that no supplementary rate may be issued. Against that background we can see the mischief that the Bill is doing to the constitutional pattern between central Government and local authorities as we have known it. The associations and practically every authority, regardless of political complexion, have completely and bitterly opposed the Bill.

Yet less than two years ago the Secretary of State said on Second Reading of the Local Government, Planning and Land (No. 2) Bill, on 5 February 1980: The new system in no way sets limits to what an authority spends, nor does it fix the level of an authority's rates. Those decisions remain with the authority."—[Official Report, 5 February 1980; Vol. 978, c. 251.] That is not so any more. We said during the course of that Bill that it was only a paving stone on the way to more draconian measures taken by the Government on a policy of centralism against local government and local democracy. I repeat to Conservative Members that, regardless of political complexion, the measures affect and tie in not only Labour controlled authorities, but Conservative controlled authorities, which have tried to be prudent but are utterly bewildered with the grant-related expenditure. It changes almost weekly and those authorities must read the gobbledegook that is meaningless to us and must be equally meaningless to the treasurer of a local authority.

I hope that when he replies the Minister for Local Government and Environmental Services does not look only at his own words, which have been often quoted by the hon. Member for Buckingham (Mr. Benyon), among others, but at his Secretary of State's words, and that he realises that he must eat those words because a number of his hon. Friends like the hon. Member for Buckingharn were seriously concerned on Report. I was on the Front Bench when it was happening and I saw that they were on the point not only of abstaining but of joining the Opposition to vote against that Bill. There were not one or two, but nearly a dozen. Because of the soothing words of the Minister of State, they backed the Government. Now, presumably, they are sorry. The Minister of State must explain to those hon. Members why those words are no longer true. There is no doubt that they are no longer true as a result of the Bill today.

I am not really surprised at the attention that part III ha s received. It contains important provisions, but compared to the damage done by parts I and II they are minor and minuscule provisions. However, even they are bitterly opposed by the local authority associations and by professional bodies. When he outlined the proposals, the Secretary of State had the impertinence to call to his aid the independence of the audit system, where the chairman of the Audit Commission is appointed by the Secretary a State. The deputy chairman is appointed by the Secretary of State. Every member of the Audit Commission appointed by the Secretary of State. That is significant with regard to quangos. One of the Conservative Members made a good point when he said that at least professional associations should have a say in decisions rather than the Secretary of State.

Worse still, the hands of that body are tied. Schedule 1(3)(1) enables the Secretary of State to give the commission directions as to the discharge of its functions and the Commission shall give effect to any such directions. So much for independence! The Secretary of Slate appoints the members and gives the directions. The commission has the power and the right not only to look at the ordinary accounts of the authority for the effectiveness and legality of its policy decisions, as in the present audit arrangements, but clause 9(1)(c) goes further, as a number of hon. Members have said. It says that the auditor shall satisfy himself that the body whose accounts are being audited has made proper arrangements for securing economy, efficiency and effectiveness in its use of resources and in the carrying out of its policies. That is not policy. It is management. The commission, set up by the Secretary of State, his creature, obeying his directions by statute, is looking not only at policy decisions but at management.

Under clause 19, powers are given to the commission to engage in studies. To me, studies always had an academic context, but now they have a more sinister one. If it studies something and issues a report which local authorities do not follow to the letter, what will happen to the local authorities? There is no true independence here.

When we discuss these provisions in Committee, I hope that the Secretary of State will pay heed to the views of the Public Accounts Committee, the professional associations and the local government associations and will not retain this egotistical power to create his own creature which can sweep the land looking at local authorities and getting its own way because of the statutory power that this Bill gives to it.

This is a most devastating Bill. Of the 31 clauses, not to mention the four schedules which themselves cover 10 pages, there is not one clause, not even a subsection, which is not opposed by someone, each one normally being opposed by everyone.

As my right hon. Friend the Member for Ardwick said at the outset of the debate, we shall fight this Bill not only clause by clause but line by line and word by word—whether on the Floor of the House, as I hope that it will be since it is a constitutional matter, or in Standing Committee. Only the present Secretary of State for the Environment would have the arrogance to believe that a Bill of this nature could possibly receive Royal Assent by the date on which its major proposals are designed to come into effect—All Fools' Day 1982.

9.42 pm

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

As the House knows, the Bill is divided into three parts. It may help hon. Members if I deal with a number of specific points at the outset.

My hon. Friend the Member for Reading, North (Mr. Durant) referred to water authorities. As my right hon. Friend the Secretary of State made clear in opening the debate, we feel that their position is more akin to that of nationalised industries. As the hon. Member for Islington, South and Finsbury (Mr. Cunningham) said, the Bill will have the effect of removing the power of objection from individual ratepayers, but it will bring the water authorities into line with nationalised industries in that they are subject to the Monopolies and Mergers Commission, their auditors will be appointed by the Secretary of State and there will be answerability to the House and its Select Committees on their behaviour. I am sure that with the energy that the hon. Gentleman's constituents have shown in this matter they will find adequate ways of continuing to monitor the water authority in their area.

The hon. Member for Greenwich (Mr. Barnett), in referring to comparisons of GREs, spoke only of standards of service. He will know that, like the previous needs assessment, the size of the client groups also influences the overall GRE per head—a point that he perhaps did not take fully into account in his contribution.

The hon. Member for Woolwich, East (Mr. Cartwright), who referred to mandarin groups determining GREs for particular areas, is perhaps not familiar with the complex network of grant working groups and expenditure sub-groups, comprising considerable numbers of local authority representatives, who combine together throughout the year in the work that forms the basis for the GRE assessment for the various authorities.

The hon. Member for Goole (Dr. Marshall) referred to the problems of the drainage rate. He and I have corresponded on this and I am aware of the problem. I do not conceal from the House the fact that it raises difficulties. I am willing to look at the matter again, although I should make clear that I do so without commitment. Nevertheless, I shall genuinely look at it again, as he raised a perfectly fair point today, as he has done on previous occasions.

My hon. Friend the Member for Buckingham (Mr. Benyon) referred to the arbitrary power, as he saw it, of the Secretary of State in a number of these matters. I make once again the point that I have made before to my hon. Friend and to the House in this connection. Any decisions made by my right hon. Friend, and any determinations that he wishes to make, are subject to the approval of the House. That safeguard exists at all times in any of the proposals that we make in this respect.

I stand by the statement that I made on an earlier occasion, which has been quoted by a number of hon. Members. It remains the case that, while the Government still have a responsibility for the distribution of grant, the levels of rates are the responsibility of the the local authorities. They have to determine them and remain answerable to their electorate.

The hon. Member for Preston, South (Mr. Thorne) found difficulty in finding any evidence of overspending by local authorities. However, the latest figure that I have is £1,300 million for the current year. If the hon. Gentleman fails to regard that as a signififcant level of overspending, I am not sure what he would regard as a serious level.

My hon. Friend the Member for Peterborough (Dr. Mawhinney) made it clear that it is against that background that the Government have been forced to act. The Labour Government, faced with a similar problem, were also forced to act, although they now prefer not to draw the attention of the House to that too frequently.

My hon. Friend the Member for Uxbridge (Mr. Shersby) spoke of the qualified privilege of auditors. My understanding is that that already exists for auditors in their work, and it will continue to do so both for district auditors and for approved auditors.

Mr. McWilliam

rose—

Mr. King

If the hon. Gentleman will forgive me, I am trying to cover a number of detailed points which I know hon. Members will wish me to cover.

Mr. McWilliam

rose—

Mr. King

The hon. Gentleman is putting me in a difficult position.

The hon. Member for Isle of Wight (Mr. Ross) asked about lowering the GRE. There is no error in the GREs. What we are seeking to do is to use the very latest information, including information on capital allocations, that affect loan charges for local authorities in their GREs. We will incorporate that as well to avoid one of the problems experienced this year, when there was a substantial adjustment in the GREs to take account of capital allocation. Those figures will be available this week and the effect will be about minus £56,000 for the Isle of Wight—that is an estimation. The hon. Gentleman may look as if the world has come to an end for him, but it is 0.15 per cent. of the authority's GRE, which is not a substantial change. That information will be available shortly.

I understand the point raised by the hon. Member for Caernarvon (Mr. Wigley) about costs for disasters and special emergencies. As he correctly stated, the Government have made it clear that, as with the policy followed by the previous Government, for emergency expenditure over the product of the penny rate the Government will be prepared to pay 75 per cent. of the extra cost. That was the formula adopted by the previous Government, which we feel is helpful, and we intend to make clear the ways in which it will be covered in respect of block grant and any penalties so that it will be possible to meet councils' points on that. In the past, emergency expenditure has been coped with without any need for a supplementary rate and I hope that it will be possible to continue to do so in the future. The authority should expect to cope with emergencies in the normal way.

My hon. Friend the Member for Peterborough put clearly to the House the background of the Bill. The Government face a challenge to the traditional voluntary relationship between central and local government which has always been observed by local authorities and councils of all political denominations. Certain local authorities are no longer prepared to respect the traditional relationship in which the Government set overall expenditure levels and local government, as a whole, seek to achieve those objectives.

Against that background of a serious level of overspend, with the problems that it causes not only for Government and public expenditure targets but, as we all know, for a considerable number of ratepayers, the Government decided that it was necessary to act.

I am grateful for the support that I have received in respect of part I. My hon. Friends the Members for Carlton (Mr. Holland), for Devizes (Mr. Morrison), for Hornchurch (Mr. Squire), for Peterborough, for Uxbridge and for Reading, North all supported our proposal to ban supplementary rates. Whatever views are taken about supplementary rates, there is no doubt that in the past year they have caused considerable distress to individual ratepayers, particularly the elderly and pensioners faced with an unexpected bill. They have also posed particular problems for many sections of industry, which budgeted their costs and were faced with a serious extra burden. I therefore make no apology to the House for our proposals to ban supplementary rates.

Mr. Guy Barnett

I am grateful to the right hon. Gentleman for giving way. I ask this question quite seriously. Has he or his right hon. Friend made a serious attempt to obtain the co-operation of the so-called overspenders in the way in which the previous Government did and obtained it? Have they seriously attempted by negotiation through the consultative council and with individual local authorities to gain the kind of co-operation that he says they are seeking?

Mr. King

I assure the hon. Gentleman that we did precisely that. Faced with problems over the levels of local government expenditure, we invited the local authority associations to put forward their own proposals on how the situation could be met. I understand their problems, but I must tell the House that they were unable to advance any alternative proposals to the ones that we have put forward. They told us that quite frankly. If the hon. Gentleman wishes to check what I have said, he will find that that is so.

The difference between the present situation and the one faced by the hon. Member for Greenwich as a Minister in the previous Government is that on that occasion local authorities of an opposite political persuasion—Conservative authorities—recognised their responsibilities and co-operated in the national interest. Now authorities of a different persuasion from the Government are not prepared to recognise the national interest.

Part II of the Bill has commanded a slightly less enthusiastic response in certain quarters of the House. We put forward this proposal because the alternative is to do what the previous Government did. If there was a need to hold back grant, just as they did in 1976, it was done across the board so that all paid equally. As a result, the most prudent paid as much as the most extravagant. We are not prepared to tolerate such a situation. The only way in which we can protect the prudent is by the use of multipliers contained in the Bill.

I am well aware of the concerns of my hon. Friends over a mid-year adjustment of the grant. This raises serious issues, which were referred to by my hon. Friends the Members for Reading, North, for Devizes and for Uxbridge. I understand the difficulty. The matter has also been raised with us by the Association of County Councils and individual local authorities. I cannot give any commitment tonight, but my hon. Friends have put their arguments forcefully, and we shall look at them carefully.

The right hon. Member for Manchester, Ardwick (Mr. Kaufman) referred to the problem of retrospection. We announced this proposal in January 1981. Considerable consultations have been held since then, and a number of exemptions have been made. Obviously, nothing will be effected unless the House gives approval.

I now turn to part III. Contrary to what the right hon. Gentleman said, there is much wider support for this proposal than he suggested. The Layfield report made clear its belief in the need for an independent organisation responsible for local government audit. The advisory committee on local government audit—appointed by the Secretary of State for the Environment in the previous Government, and which we have not changed—also recommended it. It is the system that is applicable in Scotland and the system that the right hon. Gentleman's Government brought into effect in 1975 when they came into power and which they now find extremely offensive. We believe that it will combine the strengths of the district audit and the private sector accountants and make a more effective organisation for local government audit.

My hon. Friend the Member for Carlton expressed concern about what he thought was an unfortunate form of quango. He was kind enough to pay tribute to my right hon. Friend's record in what he referred to as "quango hunting". Our score at the moment is 64 to five, which is a fairly convincing win. We understand his concern, but I know that he does not carry his campaign to the extent of saying that on no occasion should such an organisation ever be set up if we believe that it is manifestly the right organisation. He is concerned about the growth of such bodies. We have made clear our support for his views by the action that we have taken in severely curtailing the number of organisations involved with our Department. We believe that this is the right body. We do not believe that a new body, separate from Government, composed exclusively of chartered accountants or professional bodies would be right.

The powers of direction and the position in Scotland, to which the right hon. Member for Manchester, Ardwick (Mr. Kaufman) took exception, is the system that his Government put into effect in Scotland. In our view, it has no great handicap. The importance that the Audit Commission will attach to greater value for money is probably the most important single ingredient in the Bill. My hon. Friend the Member for Liverpool, Wavertree (Mr. Steen) referred to that and my hon. Friend the Member for Reading, North drew attention to the scope for economies that exists within local government. Contrary to what the hon. Member for Isle of Wight said, there is no doubt that LAMSAC, which has done much good work, has not had the impact that one would wish to see more widely in local government. We hope very much that the Audit Commission will have such an effect.

The hon. Member for Blaydon (Mr. McWilliam) and the right hon. Member for Widnes (Mr. Oakes) were concerned that it would be the responsibility of the district auditor to look into economy, efficiency and effectiveness. We believe that they are important in local government. It is not a matter of determining the policies. The sentence should be read as a whole: economy, efficiency and effectiveness … in the carrying out of its policies". The Bill does not put the district auditor into the position of determining the policy. It determines the economy, efficiency and effectiveness of carrying out that policy.

In my judgment, the hon. Member for Woolwich, East, for a member of the SDP, came perilously close to making a policy statement. It was immediately picked up and welcomed, rather graciously, by my hon. Friend the Member for Peterborough only, unfortunately, for him to be accused of misrepresentation by the hon. Gentleman. He appeared to be paying tribute to the previous rate grant system, and he was singular in that respect.

The right hon. Member for Ardwick made his typical speech. He started with a point of order and then announced that he was going to call for a Committee of the whole House. He made an amusing speech. I enjoyed it more than I should have done, because he dealt flippantly with serious issues. His main charge was an outrageous accusation that the Bill was prompted by the moneylenders of the City of London because we were making borrowing a first charge on the revenue of the authority. We took that provision specifically from the Local Government (Scotland) Act 1975, an Act of the right hon. Gentleman's Administration.

We believe that this measure, which is an interim measure in advance of our proposals for rating reform, as highlighted and foreshadowed in the Green Paper, is important and should command the support of the whole House.

Question put, That the Bill be now read a Second time:—

The House divided: Ayes 298, Noes 255.

Division No.37]	[10 pm
AYES
Adley, Robert	Dykes, Hugh
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, Sir Peter
Arnold, Tom	Eyre, Reginald
Aspinwall, Jack	Fairbairn, Nicholas
Atkins, Rt Hon H. (S'thorne)	Fairgrieve, Sir Russell
Atkins, Robert(Preston N)	Faith, Mrs Sheila
Atkinson, David(B'm'th, E)	Farr, John
Baker, Nicholas(N Dorset)	Fell, Sir Anthony
Bell, Sir Ronald	Fenner, Mrs Peggy
Bendall, Vivian	Finsberg, Geoffrey
Benyon, Thomas(A'don)	Fisher, Sir Nigel
Best, Keith	Fletcher, A.(Ed'nb'gh N)
Bevan, David Gilroy	Fletcher-Cooke, Sir Charles
Biffen, Rt Hon John	Fookes, Miss Janet
Biggs-Davison, Sir John	Forman, Nigel
Blackburn, John	Fowler, Rt Hon Norman
Blaker, Peter	Fox, Marcus
Body, Richard	Fraser, Peter (South Angus)
Bonsor, Sir Nicholas	Fry, Peter
Bottomley, Peter (W'wich W)	Gardner, Edward (S Fylde)
Bowden, Andrew	Garel-Jones, Tristan
Boyson, Dr Rhodes	Glyn, Dr Alan
Braine, Sir Bernard	Goodhart, Sir Philip
Bright, Graham	Goodhew, Sir Victor
Brinton, Tim	Goodlad, Alastair
Britten, Rt. Hon. Leon	Gorst, John
Brooke, Hon Peter	Gow, Ian
Brotherton, Michael	Grant, Anthony (Harrow C)
Brown, Michael(Brigg&Sc'n)	Gray, Hamish
Browne, John(Winchester)	Greenway, Harry
Bruce-Gardyne, John	Grieve, Percy
Bryan, Sir Paul	Griffiths, E.(B'ySt. Edm'ds)
Buck, Antony	Griffiths, Peter Portsm'th N)
Budgen, Nick	Grist, Ian
Bulmer, Esmond	Grylls, Michael
Burden, Sir Frederick	Gummer, John Selwyn
Butcher, John	Hamilton, Hon A.
Butler, Hon Adam	Hamilton, Michael(Salisbury)
Cadbury, Jocelyn	Hampson, Dr Keith
Carlisle, John (Luton West)	Hannam, John
Carlisle, Kenneth (Lincoln)	Haselhurst, Alan
Carlisle, Rt Hon M. (R'c'n)	Hastings, Stephen
Chalker, Mrs. Lynda	Havers, Rt Hon Sir Michael
Channon, Rt. Hon. Paul	Hawkins, Paul
Chapman, Sydney	Hawksley, Warren
Churchill, W.S.	Hayhoe, Barney
Clark, Hon A. (Plym'th, S'n)	Heath, Rt Hon Edward
Clarke, Kenneth(Rushcliffe)	Heddle, John
Clegg, Sir Walter	Henderson, Barry
Cockeram, Eric	Heseltine, Rt Hon Michael
Colvin, Michael	Hicks, Robert
Cope, John	Higgins, Rt Hon Terence L.
Cormack, Patrick	Hill, James
Corrie, John	Hogg, Hon Douglas(Gr'th'm)
Costain, Sir Albert	Hooson, Tom
Cranborne, Viscount	Hordern, Peter
Critchley, Julian	Howe, Rt Hon Sir Geoffrey
Crouch, David	Howell, Rt Hon D. (G'ldf'd)
Dean, Paul (North Somerset)	Howell, Ralph (N Norfolk)
Dickens, Geoffrey	Hunt, David (Wirral)
Dorrell, Stephen	Irving, Charles(Cheltenham)
Douglas-Hamilton, Lord J.	Jenkin, Rt Hon Patrick
Dover, Denshore	Jessel, Toby
du Cann, Rt Hon Edward	Johnson Smith, Geoffrey
Dunn, Robert(Dartford)	Jopling, Rt Hon Michael
Durant, Tony	Joseph, Rt Hon Sir Keith

Kaberry, Sir Donald	Prentice, Rt Hon Reg
Kershaw, Sir Anthony	Price, Sir David (Eastleigh)
Kimball, Sir Marcus	Proctor, K. Harvey
King, Rt Hon Tom	Pym, Rt Hon Francis
Knox, David	Raison, Rt. Hon. Timothy
Lamont, Norman	Rathbone, Tim
Lang, Ian	Rees, Peter (Dover and Deal)
Langford-Holt, Sir John	Rhodes James, Robert
Lawrence, Ivan	Ridley, Hon Nicholas
Lawson, Rt Hon Nigel	Ridsdale, Sir Julian
Lee, John	Rifkind, Malcolm
Le Marchant, Spencer	Roberts, M. (Cardiff NW)
Lennox-Boyd, Hon Mark	Roberts, Wyn (Conway)
Lester, Jim (Beeston)	Rossi, Hugh
Lewis, Kenneth (Rutland)	Rost, Peter
Lloyd, Ian (Havant & W'loo)	Royle, Sir Anthony
Lloyd, Peter (Fareham)	Sainsbury, Hon Timothy
Loveridge, John	St. John-Stevas, Rt Hon N.
Lyell, Nicholas	Scott, Nicholas
McCrindle, Robert	Shaw, Giles (Pudsey)
Macfarlane, Neil	Shaw, Michael(Scarborough)
MacKay, John (Argyll)	Shelton, William(Streatham)
Macmillan, Rt Hon M.	Shepherd, Colin(Hereford)
McNair-Wilson, M. (N'bury)	Shepherd, Richard
McNair-Wilson, P. (New F'st)	Shersby, Michael
McQuarrie, Albert	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, Michael(S Worcs)
Maude, Rt Hon Sir Angus	Sproat, Iain
Mawby, Ray	Squire, Robin
Mawhinney, Dr Brian	Stainton, Keith
Maxwell-Hyslop, Robin	Stanbrook, Ivor
Mayhew, Patrick	Stanley, John
Mellor, David	Steen, Anthony
Meyer, Sir Anthony	Stevens, Martin
Miller, Hal (B'grove)	Stewart, A. (E Renfrewshire)
Mills, Iain (Meriden)	Stewart, Ian (Hitchin)
Mills, Peter (West Devon)	Stokes, John
Miscampbell, Norman	Stradling Thomas, J.
Mitchell, David (Basingstoke)	Taylor, Teddy (S'end E)
Moate, Roger	Tebbit, Rt Hon Norman
Monro, Sir Hector	Temple-Morris, Peter
Montgomery, Fergus	Thatcher, Rt Hon Mrs M.
Moore, John	Thompson, Donald
Morgan, Geraint	Thorne, Neil (Ilford South)
Morris, M. (N'hampton S)	Thornton, Malcolm
Morrison, Hon C. (Devizes)	Townend, John (Bridlington)
Morrison, Hon P.(Chester)	Townsend, Cyril D, (B'heath)
Mudd, David	Trippier, David
Murphy, Christopher	Trotter, Neville
Myles, David	van Straubenzee, Sir W.
Neale, Gerrard	Vaughan, Dr Gerard
Needham, Richard	Viggers, Peter
Nelson, Anthony	Waddington, David
Neubert, Michael	Wakeham, John
Newton, Tony	Waldegrave, Hon William
Nott, Rt Hon John	Walker, Rt Hon P. (W'cester)
Onslow, Cranley	Walker-Smith, Rt Hon Sir D.
Oppenheim, Rt Hon Mrs S.	Waller, Gary
Osborn, John	Walters, Dennis
Page, John (Harrow, West)	Ward, John
Page, Richard (SW Herts)	Warren, Kenneth
Parkinson, Rt Hon Cecil	Watson, John
Parris, Matthew	Wells, Bowen
Patten, Christopher (Bath)	Wells, John (Maidstone)
Patten, John (Oxford)	Whitelaw, Rt Hon William
Pattie, Geoffrey	Whitney, Raymond
Pawsey, James	Wickenden, Keith
Percival, Sir Ian	Wiggin, Jerry
Peyton, Rt Hon John	Wilkinson, John
Pink, R. Bonner	Williams, D. (Montgomery)
Pollock, Alexander	Winterton, Nicholas
Porter, Barry	Wolfson, Mark

Young, Sir George (Acton)	Tellers for the Ayes:
Younger, Rt Hon George	Mr. Anthony Berry and
	Mr. Carol Mather.

NOES
Abse, Leo	Flannery, Martin
Adams, Allen	Fletcher, Ted (Darlington)
Allaun, Frank	Foot, Rt Hon Michael
Alton, David	Ford, Ben
Anderson, Donald	Forrester, John
Archer, Rt Hon Peter	Foster, Derek
Ashley, Rt Hon Jack	Foulkes, George
Ashton, Joe	Fraser, J. (Lamb'th, N'w'd)
Atkinson, N. (H'gey)	Freeson, Rt Hon Reginald
Barnett, Guy (Greenwich)	Freud, Clement
Beith, A.J.	Garrett, John (Norwich S)
Bennett, Andrew (St'kp't N)	Garrett, W. E. (Wallsend)
Benyon, W. (Buckingham)	George, Bruce
Bidwell, Sydney	Gilbert, Rt Hon Dr John
Booth, Rt Hon Albert	Ginsburg, David
Boothroyd, Miss Betty	Golding, John
Bottomley, Rt Hon A. (M'b'ro)	Graham, Ted
Bradley, Tom	Grant, George (Morpeth)
Bray, Dr Jeremy	Grant, John (Islington C)
Brocklebank-Fowler, C.	Grimond, Rt Hon J.
Brown, Hugh D. (Provan)	Hamilton, James (Bothwell)
Brown, R.C. (N'castle W)	Hamilton, W.W. (C'tral Fife)
Brown, Ronald W. (H'ckn'y S)	Harrison, Rt Hon Walter
Brown, Ron (E'burgh, Leith)	Hattersley, Rt Hon Roy
Buchan, Norman	Haynes, Frank
Callaghan, Rt Hon J.	Healey, Rt Hon Denis
Callaghan, Jim (Midd't'n & P)	Heffer, Eric S.
Campbell, Ian	Hogg, N. (E Dunb't'nshire)
Campbell-Savours, Dale	Holland, S. (L'b'th, Vauxh'll)
Canavan, Dennis	Home Robertson, John
Cant, R. B.	Homewood, William
Carmichael, Neil	Hooley, Frank
Carter-Jones, Lewis	Horam, John
Cartwright, John	Howell, Rt Hon D.
Cocks, Rt Hon M. (B'stol S)	Howells, Geraint
Cohen, Stanley	Hoyle, Douglas
Coleman, Donald	Huckfield, Les
Conlan, Bernard	Hughes, Mark (Durham)
Cowans, Harry	Hughes, Robert (Aberdeen N)
Cox, T. (W'dsw'th, Toot'g)	Hughes, Roy (Newport)
Craigen, J.M. (G'gow, M'hill)	Janner, Hon Greville
Crawshaw, Richard	Jay, Rt Hon Douglas
Crowther, Stan	John, Brynmor
Cunliffe, Lawrence	Johnson, James (Hull West)
Cunningham, G. (Islington S)	Johnson, Walter (Derby S)
Cunningham, Dr J. (W'h'n)	Johnston, Russell (Inverness)
Dalyell, Tam	Jones, Rt Hon Alec (Rh'dda)
Davidson, Arthur	Jones, Barry (East Flint)
Davies, Rt Hon Denzil (L'lli)	Jones, Dan (Burnley)
Davies, Ifor (Gower)	Kaufman, Rt Hon Gerald
Davis, Clinton (Hackney C)	Kerr, Russell
Davis, T. (B'ham, Stechf'd)	Kilroy-Silk, Robert
Deakins, Eric	Kinnock, Neil
Dean, Joseph (Leeds West)	Lambie, David
Dewar, Donald	Lamborn, Harry
Dixon, Donald	Lamond, James
Dobson, Frank	Leadbitter, Ted
Dormand, Jack	Lewis, Arthur (N'ham NW)
Douglas, Dick	Lewis, Ron (Carlisle)
Douglas-Mann, Bruce	Litherland, Robert
Dunlop, John	Lofthouse, Geoffrey
Dunnett, Jack	Lyons, Edward (Bradf'd W)
Dunwoody, Hon Mrs G.	Mabon, Rt Hon Dr J. Dickson
Eadie, Alex	McCartney, Hugh
Eastham, Ken	McDonald, Dr Oonagh
Edwards, R. (W'hampt'n S E)	McElhone, Frank
Ellis, R. (NED'bysh're)	McKay, Allen (Penistone)
Ellis, Tom (Wrexham)	McKelvey, William
English, Michael	MacKenzie, Rt Hon Gregor
Ennals, Rt Hon David	Maclennan, Robert
Evans, Ioan (Aberdare)	McMahon, Andrew
Evans, John (Newton)	McNally, Thomas
Faulds, Andrew	McNamara, Kevin
Field, Frank	McTaggart, Robert
Fitch, Alan	McWilliam, John

Magee, Bryan	Sheerman, Barry
Marshall, D (G'gowS'ton)	Sheldon, Rt Hon R.
Marshall, DrEdmund (Goole)	Shore, Rt Hon Peter
Marshall, Jim (LeicesterS)	Short, MrsRenee
Martin, M (G'gowS'burn)	Silkin, Rt Hon J. (Deptford)
Mason, Rt Hon Roy	Silkin, Rt Hon S. C. (Dulwich)
Maxton, John	Silverman, Julius
Maynard, MissJoan	Skinner, Dennis
Meacher, Michael	Smith, Rt Hon J. (N Lanark)
Mellish, Rt Hon Robert	Snape, Peter
Mikardo, Ian	Soley, Clive
Millan, Rt Hon Bruce	Spearing, Nigel
Miller, Dr M. S. (E Kilbride)	Spriggs, Leslie
Mitchell, Austin (Grimsby)	Stallard, A.W.
Mitchell, R.C. (Soton Itchen)	Steel, Rt Hon David
Morris, Rt Hon A. (W'shawe)	Stoddart, David
Morris, Rt Hon C. (O'shaw)	Stott, Roger
Moyle, Rt Hon Roland	Strang, Gavin
Mulley, Rt Hon Frederick	Straw, Jack
Newens, Stanley	Summerskill, HonDrShirley
Oakes, Rt Hon Gordon	Taylor, Mrs Ann (Bolton W)
Ogden, Eric	Thomas, Dafydd (Merioneth)
O'Halloran, Michael	Thomas, Jeffrey (Abertillery)
O'Neill, Martin	Thomas, Mike (Newcastle E)
Orme, Rt Hon Stanley	Thomas, Dr R. (Carmarthen)
Owen, Rt Hon Dr David	Thorne, Stan (Preston South)
Palmer, Arthur	Tilley, John
Park, George	Tinn, James
Parker, John	Torney, Tom
Pavitt, Laurie	Varley, Rt Hon Eric G.
Pendry, Tom	Wainwright, E. (Dearne V)
Penhaligon, David	Wainwright, R. (Colne V)
Pitt, William Henry	Walker, Rt Hon H. (D'caster)
Powell, Raymond (Ogmore)	Watkins, David
Prescott, John	Wellbeloved, James
Price, C. (Lewisham W)	Welsh, Michael
Race, Reg	White, Frank R.
Radice, Giles	White, J. (G'gow Pollok)
Rees, Rt Hon M (Leeds S)	Whitehead, Phillip
Richardson, Jo	Whitlock, William
Roberts, Albert (Normanton)	Wigley, Dafydd
Roberts, Allan(Bootle)	Willey, Rt Hon Frederick
Roberts, Ernest (HackneyN)	Williams, Rt Hon A. (S'sea W)
Roberts, Gwilym (Cannock)	Williams, Rt Hon Mrs (Crosby)
Robertson, George	Wilson, Rt Hon Sir H. (H'ton)
Robinson, G. (Coventry NW)	Winnick, David
Rodgers, Rt Hon William	Woodall, Alec
Rooker, J.W.	Woolmer, Kenneth
Roper, John	Wrigglesworth, Ian
Ross, Ernest (Dundee West)	Wright, Sheila
Ross, Stephen (Isle of Wight)
Rowlands, Ted	Tellers for the Noes:
Ryman, John	Mr. Ron Leighton and
Sandelson, Neville	Mr. George Morton.
Sever, John

Question accordingly agreed to.

Motion made, and Question put, That the Bill be committed to a Committee of the whole House.—[Mr. Michael Cocks.]

The House divided: Ayes 251, Noes 297.

Division No. 38]	[10.15 pm
AYES
Abse, Leo	Booth, Rt Hon Albert
Adams, Allen	Boothroyd, Miss Betty
Allaun, Frank	Bottomley, Rt Hon A. (M'b'ro)
Alton, David	Bradley, Tom
Anderson, Donald	Bray, Dr Jeremy
Archer, Rt Hon Peter	Brocklebank-Fowler, C.
Ashley, Rt Hon Jack	Brown, Hugh D. (Provan)
Ashton, Joe	Brown, R.C. (N'castle W)
Atkinson, N. (H'gey)	Brown, Ronald W. (H'ckn'y S)
Barnett, Guy (Greenwich)	Brown, Ron (E'burgh, Leith)
Berth, A.J.	Buchan, Norman
Bennett, Andrew(St'kp't N)	Callaghan, Rt Hon J.
Bidwell, Sydney	Callaghan, Jim (Midd't'n &P)

Campbell, Ian	Howells, Geraint
Campbell-Savours, Dale	Hoyle, Douglas
Canavan, Dennis	Huckfield, Les
Cant, R. B.	Hughes, Mark (Durham)
Carmichael, Neil	Hughes, Robert (Aberdeen N)
Carter-Jones, Lewis	Hughes, Roy (Newport)
Cartwright, John	Janner, Hon Greville
Cocks, Rt Hon M. (B'stol S)	Jay, Rt Hon Douglas
Cohen, Stanley	John, Brynmor
Coleman, Donald	Johnson, James (Hull West)
Conlan, Bernard	Johnson, Walter (Derby S)
Cowans, Harry	Johnston, Russell (Inverness)
Cox, T. (W'dsw'th, Toot'g)	Jones, Rt Hon Alec (Rh'dda)
Craigen, J.M. (G'gow, M'hill)	Jones, Barry (East Flint)
Crawshaw, Richard	Jones, Dan (Burnley)
Crowther, Stan	Kaufman, Rt Hon Gerald
Cunliffe, Lawrence	Kerr, Russell
Cunningham, Dr J. (W'h'n)	Kilroy-Silk, Robert
Dalyell, Tam	Kinnock, Neil
Davidson, Arthur	Lambie, David
Davies, Rt Hon Denzil (L'lli)	Lamborn, Harry
Davies, Ifor (Gower)	Lamond, James
Davis, Clinton (Hackney C)	Leadbitter, Ted
Davis, T. (B'ham, Stechf'd)	Lewis, Arthur (N'ham NW)
Deakins, Eric	Lewis, Ron (Carlisle)
Dean, Joseph (Leeds West)	Litherland, Robert
Dewar, Donald	Lofthouse, Geoffrey
Dixon, Donald	Lyons, Edward (Bradf'd W)
Dobson, Frank	Mabon, Rt Hon Dr J. Dickson
Dormand, Jack	McCartney, Hugh
Douglas, Dick	McDonald, DrOonagh
Douglas-Mann, Bruce	McElhone, Frank
Dunlop, John	McKay, Allen (Penistone)
Dunnett, Jack	McKelvey, William
Dunwoody, Hon Mrs G.	MacKenzie, Rt Hon Gregor
Eadie, Alex	Maclennan, Robert
Eastham, Ken	McMahon, Andrew
Edwards, R. (W'hampt'n S E)	McNally, Thomas
Ellis, R. (NED'bysh're)	McNamara, Kevin
Ellis, Tom (Wrexham)	McTaggart, Robert
English, Michael	McWilliam, John
Ennals, Rt Hon David	Magee, Bryan
Evans, loan (Aberdare)	Marshall, D (G'gowS'ton)
Evans, John (Newton)	Marshall, Dr Edmund (Goole)
Faulds, Andrew	Marshall, Jim (Leicester S)
Field, Frank	Martin, M (G'gowS'burn)
Fitch, Alan	Mason, Rt Hon Roy
Flannery, Martin	Maxton, John
Fletcher, Ted (Darlington)	Maynard, Miss Joan
Foot, Rt Hon Michael	Meacher, Michael
Ford, Ben	Mellish, Rt Hon Robert
Forrester, John	Mikardo, Ian
Foster, Derek	Millan, Rt Hon Bruce
Foulkes, George	Miller, Dr M.S. (E Kilbride)
Fraser, J. (Lamb'th, N'w'd)	Mitchell, Austin (Grimsby)
Freeson, Rt Hon Reginald	Mitchell, R.C. (Soton Itchen)
Freud, Clement	Morris, Rt Hon A. (W'shawe)
Garrett, John (Norwich S)	Morris, Rt Hon C. (O'shaw)
Garrett, W.E. (Wallsend)	Moyle, Rt Hon Roland
George, Bruce	Mulley, Rt Hon Frederick
Gilbert, Rt Hon Dr John	Newens, Stanley
Ginsburg, David	Oakes, Rt Hon Gordon
Golding, John	Ogden, Eric
Graham, Ted	O'Halloran, Michael
Grant, George (Morpeth)	O'Neill, Martin
Grant, John (Islington C)	Orme, Rt Hon Stanley
Grimond, Rt Hon J.	Owen, Rt Hon Dr David
Hamilton, James (Bothwell)	Palmer, Arthur
Hamilton, W.W. (C'tral Fife)	Park, George
Harrison, Rt Hon Walter	Parker, John
Hattersley, Rt Hon Roy	Pavitt, Laurie
Haynes, Frank	Pendry, Tom
Healey, Rt Hon Denis	Penhaligon, David
Heffer, Eric S.	Pitt, William Henry
Hogg, N. (E Dunb't'nshire)	Powell, Raymond (Ogmore)
Holland, S. (L'b'th, Vauxh'll)	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)

Richardson, Jo	Summerskill, Hon Dr Shirley
Roberts, Albert (Normanton)	Taylor, Mrs Ann (Bolton W)
Roberts, Allan (Bootle)	Thomas, Dafydd (Merioneth)
Roberts, Ernest (Hackney N)	Thomas, Jeffrey (Abertillery)
Roberts, Gwilym (Cannock)	Thomas, Mike (Newcastle E)
Robertson, George	Thomas, Dr R. (Carmarthen)
Robinson, G. (Coventry NW)	Thorne, Stan (Preston South)
Rodgers, Rt Hon William	Tilley, John
Rooker, J. W.	Tinn, James
Roper, John	Torney, Tom
Ross, Ernest (Dundee West)	Varley, Rt Hon Eric G.
Ross, Stephen (Isle of Wight)	Wainwright, E. (Dearne V)
Rowlands, Ted	Wainwright, R. (Colne V)
Ryman, John	Walker, Rt Hon H. (D' caster)
Sandelson, Neville	Watkins, David
Sever, John	Wellbeloved, James
Sheerman, Barry	Welsh, Michael
Sheldon, Rt Hon R.	White, Frank R.
Shore, Rt Hon Peter	White, J. (G'gow Pollok)
Short, Mrs Renee	Whitehead, Phillip
Silkin, Rt Hon J. (Deptford)	Whitlock, William
Silkin, Rt Hon S. C. (Dulwich)	Wigley, Dafydd
Silverman, Julius	Willey, Rt Hon Frederick
Skinner, Dennis	Williams, Rt Hon A. (S'sea W)
Smith, Rt Hon J. (N Lanark)	Williams, Rt Hon Mrs (Crosby)
Snape, Peter	Wilson, Rt Hon Sir H. (H'ton)
Soley, Clive	Winnick, David
Spearing, Nigel	Woodall, Alec
Spriggs, Leslie	Woolmer, Kenneth
Stallard, A. W.	Wrigglesworth, Ian
Steel, Rt Hon David	Wright, Sheila
Stoddart, David
Stott, Roger	Tellers for the Ayes:
Strang, Gavin	Mr. Ron Leighton and
Straw, Jack	Mr. George Morton.

NOES
Adley, Robert	Carlisle, John (Luton West)
Aitken, Jonathan	Carl isle, Kenneth (Lincoln)
Alexander, Richard	Carlisle, Rt Hon M. (R'c'n)
Alison, Rt Hon Michael	Chalker, Mrs. Lynda
Amery, Rt Hon Julian	Channon, Rt. Hon. Paul
Ancram, Michael	Chapman, Sydney
Arnold, Tom	Churchill, W.S.
Aspinwall, Jack	Clark, Hon A. (Plym'th, S'n)
Atkins, Rt Hon H. (S'thorne)	Clarke, Kenneth (Rushcliffe)
Atkins, Robert (Preston N)	Clegg, Sir Walter
Atkinson, David (B'm'th, E)	Cockeram, Eric
Baker, Nicholas (N Dorset)	Colvin, Michael
Bell, Sir Ronald	Cope, John
Bendall, Vivian	Cormack, Patrick
Benyon, Thomas (A'don)	Corrie, John
Best, Keith	Costain, Sir Albert
Bevan, David Gilroy	Cranborne, Viscount
Biffen, Rt Hon John	Critchley, Julian
Biggs-Davison, Sir John	Crouch, David
Blackburn, John	Dean, Paul (North Somerset)
Blaker, Peter	Dickens, Geoffrey
Body, Richard	Dorrell, Stephen
Bonsor, Sir Nicholas	Douglas-Hamilton, Lord J.
Bottomley, Peter (W'wich W)	Dover, Denshore
Bowden, Andrew	du Cann, Rt Hon Edward
Boyson, Dr Rhodes	Dunn, Robert (Dartford)
Braine, Sir Bernard	Durant, Tony
Bright, Graham	Dykes, Hugh
Brinton, Tim	Eden, Rt Hon Sir John
Brittan, Rt. Hon. Leon	Edwards, Rt Hon N. (P'broke)
Brooke, Hon Peter	Eggar, Tim
Brotherton, Michael	Elliott, SirWilliam
Brown, Michael (Brigg&Sc'n)	Emery, Sir Peter
Browne, John (Winchester)	Eyre, Reginald
Bruce-Gardyne, John	Fairbairn, Nicholas
Bryan, Sir Paul	Fairgrieve, Sir Russell
Buck, Antony	Faith, Mrs Sheila
Budgen, Nick	Farr, john
Bulmer, Esmond	Fell, Sir Anthony
Burden, Sir Frederick	Fenner, Mrs Peggy
Butcher, John	Finsberg, Geoffrey
Butler, Hon Adam	Fisher, Sir Nigel
Cadbury, Jocelyn	Fletcher, A. (Ed'nb'gh N)

Fletcher-Cooke, Sir Charles	McQuarrie, Albert
Fookes, Miss Janet	Madel, David
Forman, Nigel	Major, John
Fowler, Rt Hon Norman	Marland, Paul
Fox, Marcus	Marlow, Antony
Fraser, Peter (South Angus)	Marshall, Michael (Arundel)
Fry, Peter	Marten, Rt Hon Neil
Gardner, Edward (S Fylde)	Mates, Michael
Garel-Jones, Tristan	Maude, Rt Hon Sir Angus
Glyn, Dr Alan	Mawby, Ray
Goodhart, Sir Philip	Mawhinney, Dr Brian
Goodhew, Sir Victor	Maxwell-Hyslop, Robin
Goodlad, Alastair	Mayhew, Patrick
Gorst, John	Mellor, David
Gow, Ian	Meyer, Sir Anthony
Grant, Anthony (Harrow C)	Miller, Hal (B'grove)
Gray, Hamish	Mills, lain (Meriden)
Greenway, Harry	Mills, Peter (West Devon)
Grieve, Percy	Miscampbell, Norman
Griffiths, E. (B'ySt.Edm'ds)	Mitchell, David (Basingstoke)
Griffiths, Peter Portsm'th N)	Moate, Roger
Grist, Ian	Monro, Sir Hector
Grylls, Michael	Montgomery, Fergus
Glimmer, John Selwyn	Moore, John
Hamilton, Hon A.	Morgan, Geraint
Hamilton, Michael (Salisbury)	Morris, M. (N'hampton S)
Hampson, Dr Keith	Morrison, Hon C. (Devizes)
Hannam, John	Morrison, Hon P. (Chester)
Haselhurst, Alan	Mudd, David
Hastings, Stephen	Murphy, Christopher
Havers, Rt Hon Sir Michael	Myles, David
Hawkins, Paul	Neale, Gerrard
Hawksley, Warren	Needham, Richard
Hayhoe, Barney	Nelson, Anthony
Heath, Rt Hon Edward	Neubert, Michael
Heddle, John	Newton, Tony
Henderson, Barry	Nott, Rt Hon John
Heseltine, Rt Hon Michael	Onslow, Cranley
Hicks, Robert	Oppenheim, Rt Hon Mrs S.
Higgins, Rt Hon Terence L.	Osborn, John
Hill, James	Page, John (Harrow, West)
Hogg, Hon Douglas (Gr'th'm)	Page, Richard (SW Herts)
Holland, Philip (Carlton)	Parkinson, Rt Hon Cecil
Hooson, Tom	Parris, Matthew
Hordern, Peter	Patten, Christopher (Bath)
Howe, Rt Hon Sir Geoffrey	Patten, John (Oxford)
Howell, Rt Hon D. (G'ldf'd)	Pattie, Geoffrey
Howell, Ralph (N Norfolk)	Pawsey, James
Hunt, David (Wirral)	Peyton, Rt Hon John
Irving, Charles (Cheltenham)	Pink, R. Bonner
Jenkin, Rt Hon Patrick	Pollock, Alexander
Jessel, Toby	Porter, Barry
Johnson Smith, Geoffrey	Prentice, Rt Hon Reg
Jopling, Rt Hon Michael	Price, Sir David (Eastleigh)
Joseph, Rt Hon Sir Keith	Proctor, K. Harvey
Kaberry, Sir Donald	Pym, Rt Hon Francis
Kershaw, Sir Anthony	Raison, Rt Hon Timothy
Kimball, Sir Marcus	Rathbone, Tim
King, Rt Hon Tom	Rees, Peter (Dover and Deal)
Knox, David	Rhodes James, Robert
Lamont, Norman	Ridley, Hon Nicholas
Lang, Ian	Ridsdale, Sir Julian
Langford-Holt, Sir John	Rifkind, Malcolm
Lawrence, Ivan	Roberts, M. (Cardiff NW)
Lawson, Rt Hon Nigel	Roberts, Wyn (Conway)
Lee, John	Rossi, Hugh
LeMarchant, Spencer	Rost, Peter
Lennox-Boyd, Hon Mark	Royle, Sir Anthony
Lester, Jim (Beeston)	Sainsbury, Hon Timothy
Lewis, Kenneth(Rutland)	St. John-Stevas, Rt Hon N.
Lloyd, Ian (Havant & W'loo)	Shaw, Giles (Pudsey)
Lloyd, Peter (Fareham)	Shaw, Michael (Scarborough)
Loveridge, John	Shelton, William (Streatham)
Lyell, Nicholas	Shepherd, Colin (Hereford)
McCrindle, Robert	Shepherd, Richard
Macfarlane, Neil	Shersby, Michael
MacKay, John (Argyll)	Silvester, Fred
Macmillan, Rt Hon M.	Sims, Roger
McNair-Wilson, M. (N'bury)	Skeet, T. H. H.
McNair-Wilson, P. (New F'st)	Smith, Dudley

Speed, Keith	Viggers, Peter
Speller, Tony	Waddington, David
Spence, John	Wakeham, John
Spicer, Michael (S Worcs)	Waldegrave, Hon William
Sproat, lain	Walker, Rt Hon P. (W'cester)
Squire, Robin	Walker-Smith, Rt Hon Sir D.
Stainton, Keith	Waller, Gary
Stanbrook, Ivor	Walters, Dennis
Stanley, John	Ward, John
Steen, Anthony	Warren, Kenneth
Stevens, Martin	Watson, John
Stewart, A. (E Renfrewshire)	Wells, Bowen
Stewart, Ian (Hitchin)	Wells, John (Maidstone)
Stokes, John	Whitelaw, Rt Hon William
Stradling Thomas, J.	Whitney, Raymond
Taylor, Teddy (S'end E)	Wickenden, Keith
Tebbit, Rt Hon Norman	Wiggin, Jerry
Temple-Morris, Peter	Wilkinson, John
Thatcher, Rt Hon Mrs M.	Williams, D. (Montgomery)
Thompson, Donald	Winterton, Nicholas
Thorne, Neil (1IfordSouth)	Wolfson, Mark
Thornton, Malcolm	Young, Sir George (Acton)
Townend, John (Bridlington)	Younger, Rt Hon George
Townsend, Cyril D, (B'heath)
Trippier, David	Tellers for the Noes:
Trotter, Neville	Mr. Anthony Berry and
van Straubenzee, Sir W.	Mr. Carol Mather.
Vaughan, Dr Gerard

Question accordingly negatived.

Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).