§ Lords Amendment: No. 105, after the words last inserted, insert new clause J—
§ (a) the following subsection shall be substituted for subsection (1) —
§ "(1) Where a local authority are satisfied that it would be for the benefit or improvement of their area, they may, subject to the provisions of this section, advance money to any person for the purpose of enabling him—
§ (a) to acquire land; or
§ (b) to erect any building or carry out any work on land."; and
§ (b) the following subsections shall be substituted for subsection (3) —
§ "(3) The amount of the principal of an advance made under subsection (1)(a) of this section shall not exceed nine-tenths of the value of the land.
§ (3A) The amount of the principal of an advance made under subsection (1)(b) of this section shall not exceed nine-tenths of the value which it is estimated the mortgaged security will bear upon the completion of the building or other works in respect of which the advance is made".")
Mr. Deputy Speaker
I would inform the House that privilege is involved in this amendment. With this we may take Lords amendments No. 106 to 108.
§ Mr. Macfarlane
It may assist the House if I explain, as these amendments are fairly lengthy, that doubts have recently been expressed about the powers of local authorities to assist industry and about the extent of those powers. Some authorities have local Act powers but many have made use of section 137 of the Local Government Act 1972 which is a general power available when there is no express power for authorities to incur expenditure in the interests of their area or its inhabitants. Authorities have relied on that power to enable them to participate in the urban development programme and the youth opportunities and community programmes of the Manpower Services Commission and the Department of Employment. It is vital that local authorities' participation in those programmes should not be jeopardised.
1186 In March this year we put forward proposals for a new specific power for local authorities to assist small firms. That would have enabled them to incur expenditure up to the product of a ½p rate, but except in the case of authorities designated under the Inner Urban Areas Act 1978 they would not have been able to use the general power under section 137 in addition. The response to consultation on the proposal revealed wide differences of opinion within local government about what was required. After careful consideration we decided that the right course was to table amendments in another place dealing with those matters on which there was a good measure of agreement. Those amendments are now before the House for consideration. I will go through them in order.
New clause J forms amendment No. 105 and amends the Local Authorities (Land) Act 1963. It will enable local authorities to make loans to any person to buy or lease any land or carry out works on land when it is in the interests of the authority's area to do so. It enables local authorities to advance loans of up to 90 per cent. of the mortgaged value of relevant land, or land and buildings, instead of 75 per cent. as at present.
New clause K forms amendment No. 106. It makes clear that section 137 of the Local Government Act 1972 may be used to assist industry or commerce by means of loans, guarantees or grants. The Government's view is that the section already covers such assistance. We are advised that the clause adds nothing to the section as it stands.
However, some authorities have doubts about their powers. We felt it right to remove any possibility of doubt by this clarifying provision. The clause does not affect the responsibility that rests on local authorities to apply proper accounting procedures especially in the case of guarantees.
Doubts have recently been expressed about the proper interpretation of the expenditure limit in section 137. The limit is the product of a 2p rate in any financial year. The doubt is whether the limit refers to gross or net expenditure. The new clause makes it clear that in calculating expenditure for the purposes of the limit certain sums may be deducted from the authority's gross expenditure. The most significant item is the expenditure reimbursed by the Government on urban programme projects under the Local Government (Social Need) Act 1969. Other items are listed in the clause and there is power to enable us to deal with other matters in a reasonably flexible way by order should that need arise.
New clause L forms amendment No. 107 and gives local authorities express power to enter into arrangements for funding schemes under the Employment and Training Act 1973, for example, the youth opportunities and the community enterprise programmes. It overcomes two problems. Local authorities have had to rely hitherto on section 137. Thus expenditure on such projects counted against the expenditure limit in the section. There were doubts as to whether section 137 was available when the whole cost was refunded by the Manpower Services Commission or the Department of Employment, and there was, therefore, no expenditure by the local authority. This new power removes both of those difficulties and puts local authorities' participation in those programmes on a firm basis.
New clause M forms amendment No. 108. It extends the operation of certain local enactments. Powers to assist industry in post-1974 local Acts which lapse in 1984, in common with earlier local powers, were due to expire 1187 under the Local Government Act 1972. We have undertaken to defer the deadline until 1986 by order because of the pressure on the parliamentary timetable arising from the number of local authorities' rationalisation Bills still to be introduced. We should not want industry powers in post-1974 Acts to run until only 1984 while others continued until 1986. The new clause provides that they shall run until 1986.
These amendments will help local authorities to assist local firms within the framework of national priorities. It is right that they should be able to do so.
We shall want to keep the matter under review and shall look with interest at the use that local authorities make of the powers. In the light of experience, further clarification of the procedures, especially in respect of assistance by guarantee, may be required. We shall, if necessary, have further consultations with local authority associations about what further steps may be required.
§ Dr. David Clark
We strongly support the Government amendments. That the Government could even contemplate reducing local authority aid to industry, as they did a few months ago, was almost unthinkable. We welcome their conversion, just as we welcome all repentant sinners.
I am pleased that the Minister is closely to monitor the working of the scheme and, if necessary, further consult and possibly take further action, with a view to local authorities providing more or different forms of help to local industry. Deindustrialisation often involves heavy industry. The small man providing two or three jobs is often most in need of help. Frequently only the local authority is in a position to provide the help.
§ Mr. Alexander
New clause K was brought forward at the request of local authorities, not least my authority in Newark. It clarifies local authorities' powers to assist industry. It makes clear their powers to give loans, grants and guarantees under section 138 of the principal Act.
I am grateful to the Minister for clarifying the position, but I am not happy about local authorities levying as much as a 2p rate direct to enable them to give financial assistance to industry and commerce. I hope that my hon. Friend will bear one or two caveats in mind.
The 2p rate raised to assist some sections of industry or commerce will have to come from others. It is the same as arguing for more public expenditure; someone has to pay the bill, and it might be a hard-pressed business man. Is the Minister absolutely sure that he is not giving unfair assistance to one section of industry when the struggles of another might be equally harsh but unknown to the authority?
With a 2p rate, there will be the temptation for competitive bidding and tendering. That is regrettable and wasteful and will be an unfair burden on those who have to pay. The temptation may be for local authorities to make judgments on propositions that the market place may not see as viable.
I hope that when my hon. Friend reviews the working of the clause he will bear in mind the Government's consultation paper that proposed to limit the arrangement to a ½p rate and to firms employing not more than 25 people. Can my hon. Friend assure me that the clause is not the final word and that, if it produces any of the results 1188 that I fear, he will review it and consider again the proposals in the consultation paper, including the ½p product limitation?
§ Mr. Macfarlane
I am grateful for the welcome from the hon. Member for South Shields (Dr. Clark) and I confirm that the matter will be kept constantly under review.
I should tell my hon. Friend the Member for Newark (Mr. Alexander) that the 2p rate is not mandatory. It will be for the local authority to decide, and I have every confidence that local electorates will ensure that councils act wisely and prudently on all forms of expenditure. It is also important that the Government should keep the matter under review and we shall do so.
§ Question put and agreed to. [Special Entry.]
§ Lords amendments Nos. 106 to 108 agreed to. [Some with Special Entry.]