ADJUSTMENTS OF DISTRIBUTION OF BLOCK GRANT

HC Deb 07 July 1982 vol 27 cc334-58

Lords amendment: No. 8, in page 3, line 8, leave out from "(cc)" to "any" in line 10 and insert.

making, in the amount of block grant payable to an authority, adjustments by reference to guidance issued by the Secretary of State and designed to achieve

Mr. Giles Shaw

I beg to move, That this House doth agree with the Lords in the said amendment.

Mr. Deputy Speaker

With this it will be convenient to take Lords amendments Nos. 9 and 11.

Mr. Shaw

Will it be to your convenience, Mr. Deputy Speaker, to take at the same time Lords amendments Nos. 10 and 12?

Mr. Gerald Kaufman (Manchester, Ardwick)

Pershaps it will assist you, Mr. Deputy Speaker, if I say that that is agreeable to the Opposition.

Mr. Deputy Speaker

There appears to be general agreement in the House that we should take together Lords amendments Nos. 8, 9, 11, 10 and the proposed amendment thereto, and 12.

Mr. Shaw

I am grateful to you, Mr. Deputy Speaker, for allowing us to consider all these amendments together, because they are related, either closely or slightly distantly. They are primarily drafting improvements designed to express more clearly the way in which holdback will work. I refer here to amendments Nos. 8, 9 and 11.

Clause 4, as it left the House, said that the purpose of the holdback multipliers was to achieve any reductions in local authority expenditure which my right hon. Friend the Secretary of State thinks necessary, having regard to the general economic circumstances. That is the Government's general objective, and it is the reason for giving targets and for the creation of the holdback scheme. On further consideration, we think that it is more accurate to say that it is the guidance or the targets that are designed to achieve the desired reduction in local authority expenditure. Holdback and holdback multipliers are then designed to adjust grant entitlements in such a way as to provide authorities with a financial incentive to comply with the guidance or targets.

Amendment No. 8 accordingly makes it plain that the purpose of holdback multipliers is to adjust grant by reference to guidance issued by my right hon. Friend, and that it is the purpose of the guidance to reduce the level of local government expenditure.

Amendments Nos. 9 and 11 are consequential. Amendment No. 9 preserves the restriction on the guidance—that it should be framed by reference to principles applicable to all authorities—but transposes it from subsection (1) to subsection (2). Amendment No. 11 is consequential on amendment No. 9, which moves that reference to principles from subsection (1) to subsection (2). It ensures that the guidance issued in respect of 1981–82 and 1982–83 must still conform with general principles.

Amendment No. 10 is about exemptions from holdback. The House will recall that when, in June last year, my right hon. Friend the Secretary of State first announced detailed proposals for the reduction of rate support grant he said that he proposed to exempt from the effects of the proposed overall reduction those authorities which planned to spend within their current expenditure target. In September, in response to the many representations that he received, he agreed to exempt in addition those authorities which spent at or below their GRE and to disregard certain categories of urban programme expenditure and expenditure incurred as a result of the civil disturbances last summer. Since then, my right hon. Friend—also in response to representations—has agreed to disregard expenditure resulting from the winter's bad weather, and he has agreed to extend the GRE exemption to 1982–83.

All these exemptions extend the scope of protection. They all reduce, rather than increase, the incidence of holdback. They all represent a response to representations made by, or on behalf of, the authorities themselves. However, the Bill as originally drafted did not make specific provision for any such exemptions. In view of the importance that we attach to the ability to respond to representations in this way, we felt that it was prudent—more than prudent, essential—to put the question beyond all possible doubt by moving this amendment in another place. For the same reason, I ask the House to agree to the amendment.

Amendment No. 12 simply corrects a deficiency in the clause, which arose as a result of the passage of time since this part of the Bill was drafted. Subsection (10), as it stands, provides that, in relation to 1981–82, references to guidance are to include references to guidance issued before the passage of the Act. Guidance in relation to 1982–83 had to be issued before authorities finalised their budgets, and a final version was issued last February. The amendment extends the provision to cover 1982–83.

I ask the House to agree with the Lords in the said amendments.

6.30 pm

Mr. Harry Cowans (Newcastle upon Tyne, Central)

On a point of order, Mr. Deputy-Speaker. Did the Minister move amendment No. 10 together with amendments Nos. 8, 9 and 11 or did he only refer to amendment No. 10 and not move it?

Mr. Deputy-Speaker (Mr. Bernard Weatherill)

I have proposed amendment No. 8 with which, I understand, it is convenient to take amendments Nos. 9, 10, 11 and 12. They will be moved when they are reached on the Amendment Paper.

Mr. Kaufman

Having listened to the Under-Secretary of State just now and to the Minister in the earlier debate I sometimes wonder whether we are living in the same world. They have moved, briefly and cursorily, that this House agree with amendments which do great violence to legislation and to the way in which local authorities proceed. They always speak to the amendments as if they were little technicalities. Amendment No. 12, for example, is the retrospective validation of holdback for this year. We are told that the other amendments are drafting corrections. To the Government a drafting correction means penalising local authorities and backdating the date of the penalty. The Government call that a drafting correction.

In Committee we spent a great deal of time on clause 4, which was the heart of the badness of the Bill and remains so. When the hon. Member for Hornchurch (Mr. Squire) tabled amendments which were accepted we were under the impression that although much of the clause remained bad and uncorrected, a major advance had been made in dealing with one of its worst aspects—making super-holdback impossible. Amendments have now been inserted by the House of Lords which bring back the right to impose super-holdback—Interruption —I shall ask the Government for certain assurances and the best way that they can validate those assurances is by accepting the amendment tabled by the hon. Member for Devizes (Mr. Morrison) to Lords amendment No. 10. If the Government accept that amendment, some of our misgivings will be removed. The protest that we just heard from the Minister can be judged by how he reacts to the amendment moved by his hon. Friend which, as he knows, has the support of the Association of County Councils, which has asked all hon. Members to support the amendment.

The group of amendments is unsatisfactory for other reasons. We wish to ask a number of important questions and I hope we shall have the attention of Ministers. The Opposition believe that clause 4 is not only bad but, having been improved in Committee and on Report, it has been seriously worsened by what has been done in the House of Lords. I understand why that has come about. On this occasion we acquit the Government of malice, but because of commitments that they made and a rash move of theirs, they have sought to amend the Bill to validate those commitments. We all know that it was so difficult for them to draft amendments which would validate their commitments that they have redrafted the clause in a way which restores to it some of the worst features that existed when we entered Committee in January. What is more, we have serious suspicions—I shall be raising them in detail—about how the Government may be misusing the amendments which they inserted in another place and to which the House is asked to give approval.

The clause continues to be unsatisfactory to the Opposition and to the Government, who have now made four attempts to improve it. The Government introduced the clause and amended it in response to amendments from the hon. Member for Hornchurch—amendments which we supported and, which because of our support, had to be conceded. Within hours of the Government's amendments being made public they were found to be seriously faulty. The amendments had to be withdrawn and new ones were tabled. Now the Government are amending the clause all over again.

In the previous debate my right hon. Friend the Member for Widnes (Mr. Oakes) rebuked the Government for what they were doing in the amendments relating to the Bedfordshire supplementary rate. My right hon. Friend said that by those amendments the Government were retrospectively making illegal what was legal when it was done. The clause and the amendments retrospectively make legal what was illegal when it was done.

Holdback, with which the clause deals, has been operating unlawfully for a year. At the beginning of June 1981 the Secretary of State made his statement about holdback, requiring that budgets be returned by the end of July. We now know—it has been admitted; the existence of the clause admits it—that the Secretary of State had no legal right to introduce that holdback operation. He had no legal right to introduce the guidance. That is why the clause retrospectively validates the guidance. He had no legal right to threaten the penalties and that is why the clause retrospectively validates the penalties.

For a year and more, under the holdback operation, the Secretary of State has been demanding money with menaces from the local authorities. Clause 4 seeks to achieve the impossible—to make an honest man of the Secretary of State for the Environment, even though retrospectively. We had the famous use of the word "clarify" for which the Minister for Local Government and Environmental Services has claimed credit. He has admitted that "clarify" is his word. We are told that clause 4 of the Bill will clarify the powers used under the holdback operation. Under my Anglo-Heseltinese dictionary, which I hope will be published as a supplement to the Official Report, we will now see the work "clarify" defined as "to make legal retrospectively that which was illegal when it was originally done by the Secretary of State for the Environment".

The Secretary of State instituted that holdback operation 13 months ago, believing that section 59(6)(d) of the Local Government, Planning and Land Act 1980 empowered him to do so. That section, which dealt with the adjustment of the distribution of block grant, provided that the Secretary of State could use his powers for any such other purpose as the Secretary of State may determine. As happens so often with the Secretary of State, it turned out that he exercised the power first and found out later that he had no legal right to do it.

Last year's holdback exercise has to be validated and so does this year's exercise, which is equally unlawful at the moment. Last year's exercise was found to be unsatisfactory to Conservative local authority associations. That is why, at the last moment, almost as an afterthought, the Government introduced the grant-related expenditure assessment exemption. Having learnt that lesson, they decided this year to introduce the GREA exemption from the beginning.

It turns out that the GREA exemption was also unlawful and that the Secretary of State had no right to make the exemption last year and, until the Bill becomes law, has no right to make the exemption this year. The GREA exemption derives from the failure of the Secretary of State's attempts to control local authority spending in the current financial year. What is more, the right hon. Gentleman is responsible for a large part of the expenditure in excess of the ceilings that he has imposed.

The Secretary of State set spending ceilings for every local authority for the current financial year. Those ceilings were designed to achieve an overall reduction in local authority spending, with penalties for overspenders. The whole operation was unlawful.

The right hon. Gentleman was worried about a repetition of last year's events. He feared that the ceilings might result in penalties being imposed on too many Conservative-controlled local councils. Therefore, he decided that he would not penalise any local authority, even if its spending plans exceeded the ceiling, if it was not planning to spend above its GREA.

The GREAs are entirely artificial. The Minister for Local Government and Environmental Services has many things on his conscience and there is keen competition for what is the worst, but one must concede that the biggest stain on the right hon. Gentleman's record is his specific promise during the passage of the Local Government, Planning and Land Act 1980 that GREAs would not be used as spending ceilings. The right hon. Gentleman broke that promise, and he and the Secretary of State have resorted to GREAs as alternative expenditure ceilings, because the manner in which they are calculated gives greater latitude to Conservative-controlled councils.

Until the Bill, with the Lords amendments, becomes law, the use of GREAs as an alternative target is not only politically discriminatory, but unlawful. It is not provided for in current legislation and it will be made lawful only as a result of the amendments before us.

Lawful or not, the GREA. exemption has created havoc with the Government's expenditure controls. Of the 411 local authorities in England, only 138 are budgeting to spend at or below the ceilings assigned to them by the Secretary of State. The other 273—two-thirds of the total—are budgeting to overspend, on the Secretary of State's criteria. Of the 273 that the Secretary of State denounces as overspenders, 152–57 per cent. of the total—are Conservative-controlled and only 97 are Labour-controlled.

The total alleged net overspend is £1,448,745,000. Those of us who criticised the proposed amnesty for councils spending above the expenditure ceiling, but below GREA, predicted that many councils would be tempted to spend above their ceilings if those were below their GREAs. Our predictions were derided by Ministers, but they have turned out to be justified.

6.45 pm

Figures that the Secretary of State has had to publish—he did not volunteer them, but they were forced out of him—and which we have carefully analysed, show that of the net overspend, no less than £405,452,000 is incurred by councils spending above their ceilings, but below their GREAs. That means that although those councils are overspending by massive sums they will suffer no penalty.

It is interesting that of the 273 councils that are spending above their ceilings, more than half—142—will not be penalised. The political bias with which the system is being operated is quite blatant. Of the 152 Conservative councils spending above their ceilings, 34 will be penalised, and 118 will not. Of the 97 Labour councils spending above their ceilings, 82 will be penalised and 15 will not.

The anomalies are grotesque by any standards. In the county of Avon, the Conservative-controlled Kingswood council is spending 36.7 per cent. above its ceiling, but will not be penalised. Bristol, at 1.6 per cent. above its ceiling, will be penalised. In Derbyshire, the Conservative-controlled West Derbyshire council, at 10.4 per cent. above its ceiling, will not be penalised, but the Labour council in North-East Derbyshire, which is only 0.1 per cent. above its ceiling, will be penalised.

In Nottinghamshire, the Conservative council at Gedling, at 15.7 per cent. above its ceiling, will not be penalised. Mansfield, a Labour council, is 6.9 per cent. above its ceiling and will be penalised. In Warwickshire, the Conservative Warwick council is spending 8.4 per cent. above its ceiling and will not be penalised, but the Labour council at Nuneaton, spending 1.2 per cent. above its ceiling, will be penalised.

The Conservative-controlled Mid-Devon council, at 22.5 per cent. above its ceiling, will not be penalised, but Wye Forest, in Hereford and Worcester, where there is no majority, is spending 4.3 per cent. above its ceiling and will be penalised.

Of the great cities, Leeds, a Labour council, is spending 7.9 per cent. above its ceiling, but will not be penalised. Manchester, another Labour council, is 1.3 per cent. above its ceiling and will be penalised. Among the counties, Hampshire, a Conservative-controlled council, is 4.6 per cent. above its target and will not be penalised—nor will Northamptonshire, which has no majority, and is spending 12 per cent. above its ceiling, or Leicestershire, which also has no majority, and is spending 11.1 per cent. above its ceiling, but Northumberland, a Labour council spending 3.4 per cent. above its ceiling, will be penalised.

Mr. Den Dover (Chorley)

I do not blame the right hon. Gentleman for picking out figures that show that Labour authorities are being penalised and Conservative councils are not being penalised, but has he taken selective statistics or is he covering the whole range?

Mr. Kaufman

The hon. Gentleman is welcome to go to the Library and look at the document that was placed there by the Secretary of State in answer to a written question of mine. The information would not have been revealed if I had not put that question to him. The hon. Gentleman will see that these are but a few examples. I would weary the House if I gave more detail. That is how it has worked out. I have tried to pick areas which are geographically proximate so that the unfairness is even more obvious.

Mr. King

The right hon. Gentleman has chosen to present the figures in that way, but does he agree that if my hon. Friend the Member for Chorley (Mr. Dover) consults the document in the Library, he will find that the authorities that are being penalised are consistently spending a considerably higher amount per head and that those that are not being penalised are spending a consistently lower amount per head? As he has the figures, would he give us the expenditure per head for Kingswood and Bristol and say why one is being penalised and the other is not?

Mr. Kaufman

I am grateful to the Minister for intervening. We now have a new criterion on which councils have not been asked to base their expenditure cuts. The House can refer to the report of the debate in January. In the mad, demented document which works out how the target shall be obtained, there is nothing about expenditure per head.

The Government have worked out a spending target. They have told local authorities that if they go beyond that target they will be penalised, regardless of expenditure per capita. They then brought in the GREA exemption, because they were terrified that too many Tory authorities would be penalised. Indeed, they have managed that piece of political legerdemain quite neatly.

If there are legal actions, what the Minister has said is extremely important. He is now saying that all the other targets do not matter—only expenditure per capita. In addition to the document deposited in the Library, which I recommend the hon. Member for Chorley to look at, let the Minister give us the expenditure per capita. Those figures are not published. Therefore, we cannot judge them. The Minister was seriously misguided to make that intervention. That is not the issue that we are facing.

The enormous overspend of nearly £1.5 billion—on the Secretary of State's criteria; I do not accept that there is an overspend—shows that he has failed to control local authority expenditure. However, he has succeeded in creating a system of discriminatory penalties which are lacking in logic and justice and can be explained only by the motivation of political malice.

Amendment No. 10 validates the GREA exemption, which makes that piece of political legerdemain possible. Because other exemptions were needed, the drafting is now so wide that the Secretary of State can excuse from penalty whatever local authority makes a representation to him. From a Department which, under the Conservatives, has been adept over the years at planted questions, we now have the new development of planted representations. A local authority which the Secretary of State does not wish to penalise can be told to come along and make representations under the amendments. It will then be let off.

I understand that the Minister will reply to the debate. Therefore, I have several questions to which I should like him to pay attention because we want his replies. We are now told that we have a system of exemptions, partly to fulfil the Government's undertaking, for which I pressed when we had the debates on the riots. In order that we may have those exemptions, we have the amendment.

I want a categorical assurance from the Government that this exemption amendment will not be used to introduce super-holdback by the back door. Hon. Members will have seen the document from the Association of County Councils. I have discussed it frequently with all three local authority associations. It is their view that super-holdback—a mid-year differential holdback—is now again possible by the Government imposing the overall holdback—which they already had power to do, as I accepted in Committee—imposing a mid-year holdback and inviting applications for exemption. In that way they will operate a super-holdback by a holdback from which there are exemptions for favoured local authorities.

First, I want from the Minister a categorical assurance that they do not intend to do that. Better than a categorical assurance would be acceptance of the amendment tabled by the hon. Member for Devizes because that would be much more helpful.

Secondly, we come to the treatment of Wales. I am glad that the Secretary of State for Wales is present. I only wish that the Secretary of State for the Environment were still here. He popped in for three-quarters of an hour, found it all too much, and disappeared—heaven knows where.

Mr. Tristan Garel-Jones (Watford)

The right hon. Gentleman should get on with his speech.

Mr. Kaufman

I went off to a meeting of the shadow Cabinet where great affairs of State were discussed. I had a note made by my hon. Friend the Member for Coventry, North-West (Mr. Robinson). He observed that I left at 4.15 and that the Minister left at 5 o'clock precisely.

The hon. Member for Watford (Mr. Garel-Jones) should have learnt by now that the role of a Whip is to be utterly silent. I suggest that he sends a message to the Secretary of State for the Environment saying that he is wanted again so that, even though he has done little work on the Bill, he may, in its final stages, listen a bit more to what he has done. It is the poor Minister who has all the work. I shall report the Whip's heckling to the Patronage Secretary.

Wales is of exceptional importance. The good faith of the Minister and of the Government is at stake. When the Minister made his statement on 2 February about super-holdback, he said that the amendments to prevent super-holdback, for reasons which he explained and which we accepted, could operate only from the financial year 1983–84. That being so, he gave us a pledge, which I shall read to the House. He said: In regard to 1982–83, I can, therefore, give a specific assurance to the Committee that we do not intend to operate a differential holdback scheme in England of any greater severity than that already announced on 21 December."—[Official Report, Standing Committee D,2 February 1982; c. 73.] Either the Minister was being deliberately disingenuous or he meant what he said. As the Bill related to England and Wales, we took it that the commitment on super-holdback referred to all the authorities covered by it. If the Minister did not specifically mean to include Wales in his assurance, he should have been honest and open with the Committee and said that Wales would not be covered. It was not enough to say that it applied to England. He should have said that the commitment did not extend to Wales. He did not say that. Therefore, we took it that Wales was covered by his assurance.

The Secretary of State for Wales (Mr. Nicholas Edwards)

For once, my political antennae were alert. I was passing calmly through the Chamber, not intending to stay, when I noticed the right hon. Member for Rhondda (Mr. Jones) lurking on the Opposition Front Bench. Being a suspicious individual, I thought that I would stay to see why.

I should point out to the right hon. Member for Manchester, Ardwick (Mr. Kaufman) that we have never had to operate a holdback in Wales. Therefore, the introduction of a system of holdback in Wales of greater severity than that already announced does not arise. We have not announced a system of holdback in Wales. Thanks to the good sense and co-operation of Welsh local authorities, I have not found it necessary to follow the course of action pursued in England.

I repeatedly warned local authorities in Wales at the consultative council and in the House that if they overspent we might have to operate a different system. That has always been clear. I have asked them to revise their budgets and I have told them that I will consider the matter when they have done so. There is no question of there being a holdback scheme of greater severity than that already announced. There has never been a holdback scheme in Wales. It is monstrous for the right hon. Gentleman to accuse my right hon. Friend of misleading the House when the holdback scheme applies to England, not to Wales. I cannot imagine why he should be so sloppy in his thinking as to believe that the system in England should apply to Wales.

7 pm

Mr. Kaufman

The right hon. Gentleman said that he entered the Chamber because he is a suspicious person. A suspect person would be a more apt way to describe him. He had a guilty conscience, and it led him to the scene of his crime. The Secretary of State for the Environment, having no guilty conscience and too many scenes of crime, was unable to do the same thing.

If the Secretary of State for Wales is saying that local authorities in Wales have been good boys and that no holdback has been necessary, he should remember that on two occasions during Welsh Question Time my right hon. Friend the Member for Rhondda (Mr. Jones) has said that, in so far as there is a concept of overspending—a concept that I have repeatedly rejected—in percentage terms Welsh local authorities are overspending by a much smaller amount than English authorities. That is a fact and the right hon. Gentleman cannot deny it. I think that he will acknowledge that the overspend is 4.8 per cent.

The Department of the Environment has precluded a differential holdback in England, although the overspend in England is nearly double the overspend in Wales. Therefore, the right hon. Gentleman has to justify his decision to institute a penal procedure against Welsh local authorities which are continuing, on his criteria, to operate on a basis that is more acceptable to the Government than that of the English authorities.

Mr. Nicholas Edwards

I understand that the right hon. Gentleman is not fully familiar with what has happened in Wales. I have net decided to introduce a penal procedure. No decision has been taken. I said that I would like local authorities in Wales to deal with the matter themselves. They are currently reconsidering their budgets. I have told them that when I receive their revised budgets on 16 July, I shall consider the matter against that background. I am doing nothing worse than what has happened in England. A holdback has already been announced for England, but I have not announced a holdback for Wales. I have merely said that I shall consider whether holdback is required when I have received revised budgets. I shall take into account the relative performance of the Welsh authorities compared with that of the English authorities. The matter remains to be decided.

Mr. Kaufman

I am grateful to the right hon. Gentleman. He is right to say that on Welsh matters I am nowhere near as well informed as my right hon. Friend the Member for Rhondda, who will deal with them when it is appropriate to do so. However, differential mid-year holdback was opposed by the Opposition, by some Conservative Members and by local authority associations. It was taken out of the Bill because it was considered to be a penal procedure on local authorities, which cannot raise supplementary rates, to have money taken away from them in mid-year when their budgets have been made and their rates have been set. The right hon. Gentleman is doing precisely what we opposed and what we said should not happen. Local authorities will have made their budgets on the basis of the rates that they have set. The right hon. Gentleman is now threatening to take grant away from them, which would place them in serious difficulty.

My right hon. Friend the Member for Rhondda tabled a question, which was answered on Monday by the Under-Secretary of State. My right hon. Friend asked how differential holdback was to operate and how Ministers would be empowered to exercise selective holdback on rate support grant for Welsh local authorities for the current year. The Minister replied: Subject to Royal Assent, clause 4 of the Local Government Finance (No. 2) Bill (print No. 130) which amends Section 59 of the Local Government, Planning and Land Act 1980, as amended in another place, will provide the necessary powers."—[Official Report, 5 July 1982; Vol. 27, c. 33.] How will this be done? What provisions of the Bill, as amended in another place, will enable the Secretary of State for Wales, if this is what he decides to do, to impose a differential mid-year holdback? Will he do it by means of the planted exemption, or is there another mechanism in the Bill which will enable him to do it? If he is to do it by means of the planted exemption, our fears about the planted exemption are vindicated. If he does not do it by that means, we want to know how he will do it. I hope that the Minister will give us a precise reply. It is essential that he does.

Will the Minister assure the House that there will be no mid-year holdback in England this year? Will he give us that assurance following the Secretary of State's statement to the consultative council on 19 May?

Will the Minister repudiate the report, published this week, that clawback is instead to be used as a discriminatory penalty? The right hon. Gentleman will remember that we discussed the issue in Committee and that he, in his kindly way, told me that I did not understand the difference between clawback and holdback. I told him that we were worried about the use of differential clawback as a means of penalising local authorities. We want a categorical assurance that clawback used differentially will not be employed as a penalty in this financial year.

Finally, I ask the Minister to repudiate reports that the Secretary of State for the Environment, having resisted Treasury demands that there should be an overall mid-year holdback this year, will introduce a massive cut in the rate support grant next year. Reports suggest that there will be a back-door penalty if there is not a front-door penalty this year.

The Government's handling of these matters has been marked by incompetence that is remarkable even by the standards of the present incumbents at the Department of the Environment, one of whom is a temporary, visiting incumbent as far as we can gather from his attendances when we have been considering the Bill. The clause is bad. The amendments make it worse. We shall oppose them.

Mr. Charles Morrison (Devizes)

The last point in the lengthy speech of the right hon. Member for Manchester, Ardwick (Mr. Kaufman) might be the most important of those that he made. I took part in the Second Reading debate, but I have taken no further part in the proceedings until now. I thank my lucky stars that I was not required to take part in the Committee proceedings.

I do not wish to criticise or to be rude to the right hon. Member for Ardwick, but, because of the way in which we have developed a jargon for local authority finance, and because of the immensely complicated way in which the system has developed, no one but a genius can have a clue about what is meant by what is said at any one time. I am not suggesting that there is an easy way round that fearsome problem, but I doubt whether many hon. Members understand how the system works or have been enlightened by what the right hon. Gentleman has just said. If we do not understand, it is not surprising that most of our constituents do not understand.

Clause 4 was subjected to strong criticism on Second Reading, particularly because of the power to be allocated to the Secretary of State but also because of the uncertainty that it would create for local authorities when budgeting. The powers proposed, which would have allowed variation in the distribution of the block grant during the year, could have made local authority budgeting at best inspired guesswork and at worst a farce. That is apart from undermining the discretion and power of local government—a matter about which I complain consistently.

Not surprisingly, given the content of clause 4, local government reaction was strong. Representations were made. I am glad that my right hon. Friend the Secretary of State listened carefully, took sensible account of what was said and agreed to amendments in Committee. Without doubt, requiring the Secretary of State to specify at the main order stage in November the principles that he would apply to all authorities when assessing the operation of any differential grant went some way towards recreating certainty about holdback. That was excellent, although it did not reduce the overall dislike of the Bill, and local government was grateful.

The Government had still further thoughts and, in another place, they introduced Lords amendment No. 10, which was accepted. The Minister in another place said that the position was still not understood. There is nothing surprising about that. Either because it is not understood, or because for some the Bill has a different meaning from that in the Government's mind, great anxiety continues.

I accept that amendment No. 10 is meant to be helpful. In the context of the clause there is little wrong with giving the Secretary of State power to consider representations from local authority associations or individual local authorities to the effect that certain categories of expenditure might be disregarded when considering the operation of grant holdback. There is something to be said for that power, but amendment No. 10 reintroduces budgeting uncertainty in respect of grant totals for individual local authorities. It will enable decisions on the level of grant holdback to be taken not only at main order stage, but, through the mechanics of supplemetary orders, at other times in the financial year.

7.15 pm

That is the background to my amendment. If my right hon. Friend accepts it, not only will the Secretary of State be required to announce such categories of expenditure as will be disregarded for holdback purposes at the main order stage, but for the second time a major uncertainty will be removed from local authority budgeting—an uncertainty which could make local authority budgets meaningless.

I have noted the comments in another place by the Under-Secretary of State. He said that the amendment could be used only to reduce the incidence of holdback, not to increase it. That is what he thinks, and I suspect that that is what my right hon. Friend the Minister thinks, but some local authority associations believe that the power goes much further than my right hon. Friend assumes. My hon. Friend the Member for Hornchurch (Mr. Squire) wishes to be associated with that view. Even at this late stage, I hope that my right hon. Friend will be prepared to accept my sensible amendment.

Mr. John McWilliam (Blaydon)

The House cannot be pleased at the absence of the Secretary of State from a debate on the most important part of the Bill. Clause 4 causes most consternation among local authorities. It causes the most dismay when they look to the future. Given the tenor of the amendments, particularly amendment No. 10, I regret that the Secretary of State is not in the Chamber to answer the pertinent questions posed by my right hon. Friend the Member for Manchester, Ardwick (Mr. Kaufman).

We are extremely worried about the amendments. In Committee we were given a categoric assurance that there would be no mid-year holdback or clawback. We were assured that the provision dealt with all local authorities, not specific authorities. Amendment No. 10 allows the Government to grant exemption from holdback to local authorities of which they approve.

That has two effects. It means, first, that the sums will be held back selectively—there will be a clawback. Secondly, the burden of the balance will have to be shared among everyone else. There is a cash limit. It is a difficult problem.

If the Government were to honour the categoric assurance that they gave in Committee, they would not support amendment No. 10, but I do not expect them to do that. I have learnt in my short time as a Member of Parliament that the Government will do whatever they believe is convenient. I have no confidence in any of the assurances that they have given.

I hope that when the Under-Secretary replies to the debate he will be able to give my right hon. Friend the Member for Ardwick a categoric assurance that the Government will not operate amendment No. 10 in the way that my right hon. Friend suggested. The only honourable way to proceed is not to move amendment No. 10, but to drop it. If it is left on the statute book the assurances that the Government have given in all good faith could be used differently by others in the future. I do not impugn the Government's honour, but their assurances are not worth the paper on which they are written as long as anything like amendment No. 10 is on the statute book.

It is especially galling to listen to the Government talking about the way in which they intend to operate holdback and clawback. I am glad that the Under-Secretary of State for Education and Science is present. Blaydon is part of the Gateshead metropolitan borough, which has overspent by £1 million, according to the Government's calculation, on its education budget. It has overspent by 10 per cent. on the GREA. It should be remembered that education represents about 60 per cent. of the GREA.

The council is castigated by Her Majesty's chief inspector for the cuts that it has had to make in the education service, but that does not ring true. Either the Government want a decent service, or they do not. The use of two Departments, one to castigate the local authority because it is not spending enough on education, although it has overspent to the GREAs, the other to castigate the authority because it is underspending on the GREAs, seems daft.

I hope that the Minister will seriously consider the commitments that he gave to the Committee and whether the terms of amendment No. 10 are compatible with the assurance that there would be no differential holdback. The facility for that type of exercise will exist if the amendment is carried, even though it may be done under a different name.

I am not suggesting that the Minister will be dishonourable about a commitment that he has given, but he speaks only for himself. He cannot speak for the Secretary of State, because he is not here. He cannot speak for the Under-Secretary of State, because he is not here either. He can speak only for himself. I hope that the House will give the reply—I know that the hon. Gentleman who will reply is an honourable Gentleman—the weight that it is worth. It will be his commitment. We will accept it as being honourably given, but we cannot accept that it could not be misused by future Ministers in the hon. Gentleman's Department.

Mr. Marks

The hon. Member for Devizes (Mr. Morrison) spoke of the utter confusion arising from the complications of the system of RSG and the jargon associated with it. It is not long since the Secretary of State said that the main reason for changing the system was to simplify it. I can only assume that the Heseltinian version of simplicity is about as accurate as the right hon. Gentleman's definition of clarification.

Hon. Members were informed last week of the installation of a new paper shredding machine on the ground floor. We can only assume that the old one was chucked out with the Local Government Finance (No. 1) Bill and the several drafts of the Local Government Finance (No. 2) Bill. I hope that the new Bill, especially clause 4, will be fed into the new machine.

The amendments that the Government say will improve the Bill relate to its worst part—clause 4. It makes legal the penalties that were illegally imposed on the local authorities by the Secretary of State. Many of the cuts that have been imposed because of the threat of the present Bill and the cuts in the rate support grant have made for inefficiency. They have lowered standards. Local government redundancies have added considerably to youth unemployment. It is all very well to talk of natural wastage, but in the end those who suffer are the youngsters who would normally have filled those jobs.

The transfer of work from local authorities to private firms has not helped. There has been a large reduction in the number of apprenticeships both in local government and within the Department. Education absorbs most of local government spending. Cuts and uncertainties because of the Bill have led to much confusion and are leading to further confusion in education.

We were assured by the right hon. and learned Member for Runcorn (Mr. Carlisle), when he was Secretary of State, that the cuts would not lead to a reduction in educational standards. We hear little of that now. The Under-Secretary of State for Education and Science popped into the Chamber a few moments ago. I hope that he will return to listen to what I have to say about education.

Her Majesty's inspectors have already warned some authorities of the dangers of the cuts. Somerset is one of four local authorities about which the inspectors have made adverse comments on the quality of education.

Mr. King

The inspectors have not made adverse comments about the quality of education. It is important to put that on the record. They raised questions about resources and the possible ramifications. The hon. Gentleman will know that the quality of education and examination results in Somerset are extremely high. I hope that he will understand my reason for intervening. I know a little about the county.

Mr. Marks

Somerset is one of four authorities in which we are given to understand by Her Majesty's inspectors—not the inspectors of the Department of Education and Science or those of the Department of the Environment—education resources are unsatisfactory.

Mr. Christopher Price (Lewisham, West)

I, too, know a little about this, although clearly not as much as the Minister. The inspectors were referring both to standards of provision, which accounted for about 50 per cent. of the criteria included in their assessment, and to their professional judgment about education standards which are separate from standards of provision. The Minister was therefore wrong in his intervention. Her Majesty's inspectors gave evidence that those two elements were involved. Standards of provision were part of it and counties that had reduced standards of provision two years in succession tended to be at the bottom of the third division, but the inspectors also made judgments about the quality of education quite separately from the standards of provision.

7.30 pm

Mr. Marks

I am grateful to my hon. Friend. The reasons for the problems in education are the cuts and the uncertainty that has arisen. It is beyond question that Her Majesty's inspectors are not satisfied with certain local education authorities. Yet the Department of the Environment is simultaneously telling Somerset that it is spending too much. What will happen if the Department of Education and Science eventually tells that authority that it is not carrying out its statutory requirements and the Department of the Environment continues to maintain that it is spending too much?

The Guardian yesterday quoted a letter to parents from the head of Tiffin grammar school in Kingston, which still suffers under the system of segregated secondary education, as follows: Expenditure by parents (on textbooks) is essential to the maintenance of our standards of GCE A-level work in the sixth form. That may be all right for some parents in Kingston, but not for all of them. What happens if a pupil's father is one of the 3 million or more unemployed or one of the 1 million who have been out of work for more than a year? Supplementary benefit does not include textbook allowances for children. The worst possible financial position is to be unemployed when one's children reach the sixth form.

If the Under-Secretary of State for Education and Science had remained in the Chamber, he would probably have said that the pupil-teacher ratio is better than ever. There are two explanations for that. Either he does not know what the ratio is, or, if he does, he will not tell us. Last week, I asked the Secretary of State for Education and Science what was the pupil-teacher ratio for each education authority in January 1982. He said that he could not give the information before the autumn. Anyone who has worked in schools knows that the return on pupils and teachers is ready by the end of January, and that by the end of February the local authority has sent its return to the Department. Yet the Department cannot produce the figures, although the Minister claims that they have improved.

Ministers at the Department of the Environment must realise that with falling school rolls maintenance of the pupil-teacher ratio is not enough and that children are suffering. I note that the Secretary of State—the so-called Minister for Merseyside—has told Liverpool to forget any worries about spending too much and to see that schools in Toxteth are brought up to standard. Education is just one example in which false economies are proving costly.

Any motorist and most pedestrians will testify to the state of the roads. Only this week I heard from an old lady who was on her way to hospital in Manchester when she tripped in a pothole in the road and broke her leg. Under an earlier Conservative Administration, we had a ruling that a local authority is not liable to pay compensation for injury as a result of a fall on the pavement unless there is a difference of at least an inch between the levels of the paving stones. It seems that we now need a ruling about the depth of potholes.

The people hardest hit by the cuts are those most in need. Considerable investment is needed in education and in social services to help the sick. People are now discharged from hospital at a much earlier stage of convalescence, but, because of the threat of the clause—the amendment, I believe, will make the position worse—the services available to them when they come out of hospital will be cut still further.

This is an attack on local government. What kind of candidates will come forward for council elections if the Government continue this attack? They will be those who carry on in the hope that some day they may become chairman of the council or mayor, not those who are enthusiastic about local government and have something to offer.

When the Minister introduced the amendments, he said that they were merely drafting improvements to deal with the way in which holdback will work and to achieve a reduction in expenditure. They are nothing of the kind. They are a serious attack on local government. They are nonsense and should be rejected.

Mr. Cowans

I shall try not to detain the House for too long, but two points must be made in this connection. The House is entitled to an explanation from the Minister on two aspects of clause 4 which greatly concerned Members on both sides of the Standing Committee. Under great pressure from the Opposition and, I readily accept, with the help of Conservative Members, some alterations were made.

The Committee was concerned that under the clause as drafted any Secretary of State, Labour or Tory, had a dictatorial option to isolate an individual local authority. Another nonsense in clause 4 that exercised the Committee's mind was the fact that at any time during the financial year the Secretary of State could step in and change the rules after all the authorities had drawn up their budgets.

The Secretary of State got together with my right hon. Friend the Member for Manchester, Ardwick (Mr. Kaufman) and was persuaded of the error of his ways. Having seen the error, he took the provision out of the Bill. It was a bad Bill from the outset, but it became slightly better as a result of that. One can only assume that between the end of the Committee stage and the arrival of the Lords amendments the Minister had a brainstorm. What is the logic behind taking something out and then having it put back by the other place? Even in a lunatic asylum that would require some explanation.

The explanation can only be either the Minister was wrong to take it out in the first place—in which case, why did he not say so at the time?—or that somebody outside who was not in the Committee has wheedled his way in and sneaked up behind the Minister and told him that he must put it back. The Minister did not come to members of the Committee and tell us honestly that he had considered the matter again and that although he had agreed to take it out then, he intended to put it back. It is nonsense to give and implement assurances and then reverse them in another place. By doing that the Minister has confused not only the Opposition but his own party, and nowhere was that made clearer than in the speech of the hon. Member for Devizes (Mr. Morrison).

More importantly, the Minister has successfully confused every local authority association in the country. He has the unique distinction, which should go into the "Guinness Book of Records", of being the only person to my knowledge—and I have spent some time in local government—to have united every local authority association, whether Tory or Labour controlled, against him. That takes some doing. They are completely confused. They were divided when the Bill went into Committee. We are now back to square one and a two-minute explanation from the Minister is not good enough. We need a detailed explanation of why he changed his mind or why somebody else changed it for him.

The hon. Member for Devizes made a laudable attempt to rectify something that the Minister had done. There is only one way in which he can have his wish. The Bill must be returned to its original form. If that is the Minister's desire, I hope that he will join the Opposition in the Lobby tonight.

Mr. Cartwright

I, too, shall concentrate on amendment No. 10. It is the most objectionable of the batch. I strongly agree with the hon. Member for Devizes (Mr. Morrison) that it adds to the uncertainty for local authorities. Uncertainty is the main obstacle to local authorities budgeting tightly and sensibly.

As Opposition hon. Members have pointed out, the major concern of local authorities when they first saw the Bill was that a differential holdback would be sprung on them part way through the financial year. They are worried that they will be caught in a nutcracker, lose grant half way through the year and be unable to make good the losses with a supplementary rate. They would be completely at the Secretary of State's mercy.

To be fair to the Minister, in our discussions in Committee it seemed that he understood that concern. When the Bill left the House, efforts had been made to safeguard the position. It had been made clear that the principles on which differential holdback would be applied would be made clear and evident at the main order stage in November. Local authorities would at least know the risk they were running and could levy a suitable rate at the start of the financial year. As the hon. Member for Newcastle upon Tyne, Central (Mr. Cowans) said, that was an improvement on a not very good situation.

What must have come across to the Minister, in the odd moments during which he listened to the debate, is the substantial worry that that position is being undermined by amendment No. 10. That worry cannot be put down to the nasty suspicious mind of my right hon. Friend the Member for Manchester, Ardwick (Mr. Kaufman). It has been expressed in representations by the Association of Metropolitan Authorities and the Association of County Councils. There is a general fear that if this power is given to the Secretary of State it will be used to introduce a system of mid-year holdback.

Where cash is limited, exemptions granted to favoured authorities could lead to larger penalties on unfavoured authorities. As my right hon. Friend the Member for Ardwick suggested, it would be possible to apply a super-holdback and then exempt the favoured authorities from that holdback.

It is clear that the worry about the undermining must be removed tonight. The safest way to do that is to vote against the amendment. If we do not, it is for the Minister to persuade us that he is the honourable man with whom we discussed this issue in Committee and assure us that these powers will not be used to undermine the assurances given in Committee.

In any case, I object to the proposals in amendment No. 10. It gives the Secretary of State considerable personal powers to exempt expenditure of any description or amount in deciding whether an authority has or has not complied with its target and the guidance of the Secretary of State. It is another piece of enabling legislation for the Secretary of State. We have seen much of that in the past few years.

7.45 pm

Secretaries of State should not have the power to dish out rewards and penalties to local authorities, unless we are absolutely clear about the criteria that will be used in dishing out the goodies and the bad things. A new criterion was bounced into our debate by the Minister. He said that one of the criteria will be a judgment based on spending per head of the population. That has not appeared anywhere else in our discussions—Interruption— I am sure that if we refer to Hansard we shall see that the Minister referred to spending per capita by one authority compared with another. He seemed to imply that where spending per capita was lower the authority might benefit from the Secretary of State's judgment, but where the spending was higher the authority could be penalised. That is a new criterion to be used by the Secretary of State in making his judgments.

There is a natural suspicion that one of the criteria will be political affinity, with an old pals' protection system which will safeguard political allies and penalise political enemies. I do not suggest that the present Secretary of State would fall victim to that temptation, but Secretaries of State should not have that temptation placed in front of them. We must reject amendment No. 10.

Mr. R. B. Cant (Stoke-on-Trent, Central)

I shall look at this saga from the point of view of one of the few remaining practising local councillors in the House.

The general consensus, whether one is referring to Tories, Labour or alliance, and even from officials, is that the Bill and the original Local Government, Planning and Land Act give the impression of massive incompetence by civil servants. I shall not include politicians in that criticism, or the Minister, because he is much too gracious a man to be indicted in that way. I include the lawyers and statisticians who worked on what used to be called multiple regression analysis, and so on.

I have been in local government for 30 years and I have never known a period in which the most senior officials in local government have been so continuously bewildered and perplexed by what the Government are doing and by their changes of mind. The changes in the Bill are serious I hope that the Minister will say something about the retrospective validation of targets, guidelines and penalties, as well as the new dimension of policy by representation.

I also support my right hon. Friend in asking for clarification of the report in the Financial Times on the battle between the Secretary of State for the Environment and the Chief Secretary to the Treasury. The Secretary of State for the Environment is reported to have said that the Chief Secretary to the Treasury's new idea is nothing more than a trick to dress up the unacceptable 'differential holdback' as 'differential close-ending.' It is not enough to develop these legalities and various topical methods of working out the rate support grant, and so on. If the Minister wants to control spending—I speak as chairman of a fairly big education committee—he must, above all, see how the machine operates. He must find out whether the time scale of what he is expecting from local authorities is adequate. He must be prepared to look at what local education authorities face when cutting education expenditure, at the great problems of closing schools—one of the main cuts—and at how difficult and obstructive the Department of Education and Science can be in getting a school closed. He must bear in mind that we are fed with leaks of one sort or another and we have to make cuts in the number of polytechnic staff in 1983–84. That is still a leak, yet at least 12 months' notice must be given before one can get rid of a polytechnic lecturer.

There is also the financial burden placed on local education authorities by the teacher training colleges that no-one seems to want, but the Department of Education and Science will not say whether they should be closed. We were originally to be told a year ago. The decision was then put back to last December. We were then told that it would be Easter this year. Now we are told that it will be some time in the autumn.

Local authorities may be forced to make these cuts to keep within their grant-related expenditure assessments, yet the Department keeps dragging its feet. It is no good the Minister telling local authorities to behave themselves and to make cuts unless he is prepared to look at the logistics of the operation. If necessary, he should knock a few heads together in other Departments to get the job done.

Mr. Christopher Price

I did not intend to intervene, but the Minister made a statement that simply was not true. It is important to get the truth on the record, and, as Chairman of the Select Committee, I have a responsibility to do it.

I am glad that the Secretary of State is present, because I think he will confirm what I am about to say. Many hon. Members have alluded to the fact that the Department of the Environment is threatening to penalise local authorities which are being told by the Department's inspectors that their expenditure is so low that it is jeopardising standards of education in those authorities. The four authorities at the bottom of the senior chief inspector's third division have now been revealed as Somerset, Wiltshire, Norfolk and Gateshead.

This system originated under the Labour Government, who proposed to make cuts in education expenditure. The local authorities warned at the time that if such cuts were made, education standards would fall below those required by the 1944 Act. As a result, an expenditure steering group, under the local authority consultative committee, was set up to test whether the money available would jeopardise education standards.

For a number of years, the inspectors produced reports that were not made public. I commend the Government for making those reports public in the last two years. If it were simply a report on the amount spent on education in each local authority area, we would not need HMIs to produce such a report. The Chartered Institute of Public Finance and Accountancy could produce those figures easily.

The point about this report and the rank order in which local authorities are put is that it is the judgment of professionally qualified inspectors on provision and on the standards of education. The inspectors were concerned about education standards in the four authorities that I have mentioned because provision had been reduced to such an extent.

Ministers are now arguing, "But the inspectors are not doing it right." The right hon. Gentleman is presuming that he is a better inspector of education standards than the people appointed by the Secretary of State. It is true that there is some connection between education standards, which were meant to be guaranteed by section 8 of the 1944 Act, and the amount spent on education. The only people who can report on the state of the nation's education are the HMIs, and the Minister does the education service no good at all by saying that he knows better than the senior chief inspector that Somerset is all right and that there is nothing to worry about.

It is important to put that on the record, because if we have ministerial statements of that sort, there is no point going through the ESG(E) cycle each year to determine the quality and standard of education.

All hon. Members believe that we should have good standards of education. Ministers have put those standards in jeopardy in the last two years, not just by cutting the money available, but by presuming that, although Somerset cut the money two years in succession, they know best and that there is nothing wrong with Somerset education. The Minister does no service to the House by adopting such an attitude.

Mr. King

The speech of the hon. Member for Lewisham, West (Mr. Price) diverted us slightly from the main debate. The hon. Gentleman chose to misquote me. He knows perfectly well that I took exception to what the hon. Member for Manchester, Gorton (Mr. Marks) said about poor education in Somerset. I know something about the HMI report on Somerset. The hon. Gentleman was making an argument about the resources applied to education in 1981, but he did not take into account certain changes that have recently been made in the county education budget, particularly with regard to in-service training of teachers and other aspects. That was a misleading comment, and I wish to correct it. Somerset has a fine record of achievement in its examination performance, which is one criterion the use of which I hope the hon. Member for Lewisham, West does not entirely disparage.

The right hon. Member for Manchester, Ardwick (Mr. Kaufman) said that we do not seem to live in the same world. I hope that he will not think it offensive if I say that I have thought that for some time and that such a view does not entirely disgrace me. The amendments are essentially technical and clarify certain aspects of the operation of block grant and the multipliers, but I well understand why the right hon. Gentleman made rather more of them than they perhaps deserve.

I accept that Lords amendment No. 10 has given rise to concern among a number of hon. Members, including my hon. Friend the Member for Devizes (Mr. Morrison) and my hon. Friend the Member for Hornchurch (Mr. Squire) who, while unable to be present, has made representations to me.

The right hon. Member for Ardwick will know that I am sensitive to the honouring of undertakings that I give. He referred perfectly fairly to my original statement in Committee on the Local Government, Planning and Land Bill 1980 that we did not intend GREAs to be used as targets. That was in response to strong representations from local authorities at the time that we should not do so. The change of mind was not a unilateral decision of the Government, but was in response to strong representations from local authorities and local authority associations that we should use GREAs as an alternative target. The Government felt that it was reasonable to accede to that request.

I deal now with the political nightmare that was paraded before the House about this being a selective and partisan system for determining grant distribution and penalty. I intervened earlier on that matter, and the hon. Member for Woolwich, East (Mr. Cartwright) also raised the issue. I wished, not to establish a new criterion, but simply to draw attention to the fact that there were other ways in which the matter could be examined. Expenditure per head is not a criterion that one can apply, because it will vary widely. For example, expenditure per head on education will depend very much on the proportion of children for which a local authority is responsible.

8 pm

The GREA tries to establish an absolute level or yardstick by which comparisons can be made. As the right hon. Member for Ardwick said, people are suffering not on political grounds, but because of expenditure by some local authorities which is way above that of others. We have departed from the old and offensive system which meant that the more an authority spent, the more grant it received at the expense of more prudent and economic authorities. That is the political nightmare which I hope is now well behind us.

The right hon. Member for Ardwick made another accusation—that I had wilfully misled the Committee by pretending that an undertaking that I had given applied to Wales. Very fairly, the right hon. Gentleman read out the undertaking that I gave. Having read it out, it is incredible that he should then try to maintain his argument. I remind the Committee what I said: I can, therefore, give a specific assurance to the Committee that we do not intend to operate a differential holdback scheme in England of any greater severity than that already announced on 21 December."—[Official Report, Standing Committee D, 2 February 1982; c. 73.] I did not merely rely on a few words muttered unobtrusively in Committee. I immediately made available to every member of that Committee a copy of that statement so that each Member could study it. I am not entirely familiar with every aspect of the way in which the scheme operates in Wales. We must put our heads together on that. One feature of the block grant is that the Welsh grant, as the right hon. Member for Rhondda (Mr. Jones) said, is now operated separately from the English grant.

I have no authority to speak about Wales. I simply made a statement in relation to England. I referred to the scheme not being of any greater severity than that already announced on 21 December. My right hon. Friend did not announce anything on that date and there was no holdback in Wales. The position is entirely different. I hope that he will not accuse me of misleading the Committee—I put it no stronger than that—because to do so would be monstrously unfair.

The right hon. Gentleman asked a fair question: if my right hon. Friend the Secretary of State is to operate a different scheme in Wales, how will he do it? From the Bill, the right hon. Gentleman will see that the powers that my right hon. Friend will use are contained in section 59(6)(a) of the Local Government, Planning and Land Act 1980. Subsection (7) of clause 4 of this Bill prevents that from being done in anything other than the main report. But that provision cannot come in until next year. What the right hon. Gentleman sought to establish, and the purpose of my assurance, is to say that that power, which will hereafter be prohibited, will technically be available to us this year. That is why gave the specific assurance for England. That is why the power will remain available if my right hon. Friend decides to use it.

My hon. Friend the Member for Devizes and the hon. Member for Woolwich, East mentioned amendment No. 10 and the exemption powers. Exemption from holdback is important. The right hon. Member for Ardwick said, fairly, that emergency expenditure should be exempted. He referred to riots, and he will know the importance that inner city authorities attach to their urban programme expenditure. The exemption power must be included, because we are not satisfied that the previous arrangements provided adequate power to cover the exemptions.

The amendment of my hon. Friend the Member for Devizes provides that the power to give exemptions should be confined to the main report and not apply to supplementary reports. The difficulty is that in the first two years the exemption provisions that have already been announced have to be implemented in supplementary reports. The effect of my hon. Friend's amendment will be to disbar urban programme riot and emergency expenditure from those exemptions. No one wishes to see that happen.

I well understand that the provision has caused anxiety, and we have tried to ensure that the exemption is fairly circumscribed. An exemption can be granted only to diminish the holdback, not to increase it. It can be made only on representations from local authorities and in accordance with general principles applicable to all authorities. However, the right hon. Member for Ardwick said that there might be an across-the-board holdback and that the exemption could be used to introduce a differential selective discrimination against individual authorities. That is ingenious, but it is not the purpose of the amendment. I assure the right hon. Gentleman that we do not intend to use the new amendment to introduce super-holdback by the back door.

The right hon. Gentleman asked for an assurance about a mid-year holdback or a differential clawback this year. He may be referring to press speculation, but he must understand that I cannot comment on that. I cannot assure him about those matters. He is right to say that it would be possible under the present legislation, but whether it will be required is another matter. I can go no further now, except to say that I understand his point that local authorities should know about it as early as possible.

The right hon. Gentleman also asked me for a categorical assurance that there would be no cut in the grant percentage for 1983–84. Those matters are being discussed and I cannot give him any assurance now. However, I agree with him that it is important to give local authorities information about the grant arrangements for the coming year as soon as possible. The hon. Member for Stoke on Trent, Central (Mr. Cant) made that clear. I understand the Government's duty to give the earliest possible guidance to local authorities. We hope that we can do so much earlier than it has been done for some time.

I hope that those comments clarify certain queries that have been raised are helpful and that the House will agree with the Lords amendment.

Question put and agreed to.

Lords amendment Nos. 9 and 11 agreed to.

Lords amendment proposed: No. 10, in page 3, line 44, at end insert— ( ) If representations in that behalf are made to him by any association of local authorities or by any local authority the Secretary of State may—

1. (a) in the Rate Support Grant Report made for any year under section 60 of the said Act of 1980; or
2. (b) in a supplementary report made for any year under section 61 of that Act,

provide that expenditure of any description or amount shall be disregarded for the purposes of paragraph (cc) of subsection (6) of the said section 59 and in determining under subsection (3)(c) above whether or the extent to which local authorities have or have not complied (or have or have not taken steps to comply) with the guidance referred to in that paragraph.".—Mr. Brooke.

Question put, That this House doth agree with the Lords in the said amendment:—

The House divided: Ayes 282, Noes 215.

Division No. 261]	[8.10 pm
AYES
Aitken, Jonathan	Brittan, Rt. Hon. Leon
Alexander, Richard	Brotherton, Michael
Alison, Rt Hon Michael	Brown, Michael (Brigg & Sc'n)
Amery, Rt Hon Julian	Browne, John (Winchester)
Ancram, Michael	Bryan, Sir Paul
Arnold, Tom	Buchanan-Smith, Rt. Hon. A.
Aspinwall, Jack	Buck, Antony
Atkins, Rt Hon H. (S'thorne)	Budgen, Nick
Atkins, Robert (Preston N)	Bulmer, Esmond
Baker, Kenneth (St.M'bone)	Burden, Sir Frederick
Baker, Nicholas (N Dorset)	Butcher, John
Banks, Robert	Cadbury, Jocelyn
Benyon, Thomas (A'don)	Carlisle, John (Luton West)
Benyon, W. (Buckingham)	Carlisle, Kenneth (Lincoln)
Berry, Hon Anthony	Carlisle, Rt Hon M. (R'c'n)
Best, Keith	Chalker, Mrs. Lynda
Bevan, David Gilroy	Chapman, Sydney
Biffen, Rt Hon John	Churchill, W. S.
Biggs-Davison, Sir John	Clark, Hon A. (Plym'th, S'n)
Blackburn, John	Clark, Sir W. (Croydon S)
Blaker, Peter	Clarke, Kenneth (Rushcliffe)
Body, Richard	Cockeram, Eric
Bonsor, Sir Nicholas	Colvin, Michael
Boscawen, Hon Robert	Cope, John
Bottomley, Peter (W'wich W)	Cormack, Patrick
Bowden, Andrew	Corrie, John
Boyson, Dr Rhodes	Costain, Sir Albert
Braine, Sir Bernard	Cranborne, Viscount
Bright, Graham	Critchley, Julian
Brinton, Tim	Crouch, David

Dickens, Geoffrey	Lang, Ian
Dorrell, Stephen	Latham, Michael
Douglas-Hamilton, Lord J.	Lawrence, Ivan
Dover, Denshore	Lawson, Rt Hon Nigel
du Cann, Rt Hon Edward	Lee, John
Dunn, Robert (Dartford)	Lennox-Boyd, Hon Mark
Dykes, Hugh	Lester, Jim (Beeston)
Eden, Rt Hon Sir John	Lewis, Kenneth (Rutland)
Edwards, Rt Hon N. (P'broke)	Lloyd, Ian (Havant & W'loo)
Eggar, Tim	Lloyd, Peter (Fareham)
Elliott, Sir William	Loveridge, John
Emery, Sir Peter	Luce, Richard
Eyre, Reginald	Lyell, Nicholas
Faith, Mrs Sheila	Macfarlane, Neil
Farr, John	MacGregor, John
Fell, Sir Anthony	MacKay, John (Argyll)
Fenner, Mrs Peggy	Macmillan, Rt Hon M.
Finsberg, Geoffrey	McNair-Wilson, M. (N'bury)
Fisher, Sir Nigel	McNair-Wilson, P. (New F'st)
Fletcher, A. (Ed'nb'gh N)	Madel, David
Fletcher-Cooke, Sir Charles	Major, John
Fookes, Miss Janet	Marlow, Antony
Forman, Nigel	Marten, Rt Hon Neil
Fowler, Rt Hon Norman	Mather, Carol
Fraser, Peter (South Angus)	Maude, Rt Hon Sir Angus
Fry, Peter	Mawby, Ray
Gardiner, George (Reigate)	Mawhinney, Dr Brian
Gardner, Edward (S Fylde)	Maxwell-Hyslop, Robin
Glyn, Dr Alan	Mayhew, Patrick
Goodhart, Sir Philip	Meyer, Sir Anthony
Goodhew, Sir Victor	Miller, Hal (B'grove)
Goodlad, Alastair	Mills, Iain (Meriden)
Gorst, John	Miscampbell, Norman
Gow, Ian	Mitchell, David (Basingstoke)
Grant, Anthony (Harrow C)	Moate, Roger
Gray, Hamish	Monro, Sir Hector
Greenway, Harry	Montgomery, Fergus
Griffiths, Peter Portsm'th N)	Moore, John
Grist, Ian	Morgan, Geraint
Grylls, Michael	Morris, M. (N'hampton S)
Gummer, John Selwyn	Morrison, Hon C. (Devizes)
Hamilton, Hon A.	Morrison, Hon P. (Chester)
Hamilton, Michael (Salisbury)	Mudd, David
Hampson, Dr Keith	Murphy, Christopher
Hannam, John	Myles, David
Haselhurst, Alan	Neale, Gerrard
Hastings, Stephen	Needham, Richard
Havers, Rt Hon Sir Michael	Nelson, Anthony
Hawkins, Sir Paul	Neubert, Michael
Hawksley, Warren	Newton, Tony
Hayhoe, Barney	Nott, Rt Hon John
Heath, Rt Hon Edward	Onslow, Cranley
Heddle, John	Oppenheim, Rt Hon Mrs S.
Henderson, Barry	Osborn, John
Heseltine, Rt Hon Michael	Page, John (Harrow, West)
Hicks, Robert	Page, Richard (SW Herts)
Higgins, Rt Hon Terence L	Parkinson, Rt Hon Cecil
Hogg, Hon Douglas (Gr'th'm)	Parris, Matthew
Holland, Philip (Carlton)	Patten, John (Oxford)
Hooson, Tom	Pawsey, James
Hordern, Peter	Percival, Sir Ian
Howell, Rt Hon D. (G'ldf'd)	Pink, R. Bonner
Howell, Ralph (N Norfolk)	Pollock, Alexander
Hunt, David (Wirral)	Porter, Barry
Hunt, John (Ravensbourne)	Prentice, Rt Hon Reg
Hurd, Rt Hon Douglas	Price, Sir David (Eastleigh)
Irvine, Bryant Godman	Proctor, K. Harvey
Irving, Charles (Cheltenham)	Raison, Rt Hon Timothy
Jenkin, Rt Hon Patrick	Rathbone, Tim
Jessel, Toby	Rees-Davies, W. R.
Johnson Smith, Sir Geoffrey	Renton, Tim
Jopling, Rt Hon Michael	Rhodes James, Robert
Joseph, Rt Hon Sir Keith	Ridley, Hon Nicholas
Kershaw, Sir Anthony	Ridsdale, Sir Julian
Kilfedder, James A.	Rifkind, Malcolm
Kimball, Sir Marcus	Roberts, M. (Cardiff NW)
King, Rt Hon Tom	Roberts, Wyn (Conway)
Knight, Mrs Jill	Rossi, Hugh
Knox, David	Rost, Peter
Lamont, Norman	Royle, Sir Anthony

Sainsbury, Hon Timothy	Townend, John (Bridlington)
St. John-Stevas, Rt Hon N.	Trippier, David
Shaw, Giles (Pudsey)	Trotter, Neville
Shaw, Sir Michael (Scarb')	van Straubenzee, Sir W.
Shepherd, Colin (Hereford)	Vaughan, Dr Gerard
Shepherd, Richard	Viggers, Peter
Shersby, Michael	Waddington, David
Silvester, Fred	Wakeham, John
Sims, Roger	Waldegrave, Hon William
Smith, Dudley	Walker, Rt Hon P. (W'cester)
Smith, Tim (Beaconsfield)	Walker, B. (Perth)
Speed, Keith	Waller, Gary
Spence, John	Walters, Dennis
Spicer, Michael (S Worcs)	Ward, John
Sproat, Iain	Warren, Kenneth
Squire, Robin	Watson, John
Stainton, Keith	Wells, Bowen
Stanbrook, Ivor	Wells, John (Maidstone)
Stanley, John	Wheeler, John
Steen, Anthony	Whitelaw, Rt Hon William
Stevens, Martin	Whitney, Raymond
Stewart, A. (E Renfrewshire)	Wickenden, Keith
Stewart, Ian (Hitchin)	Wiggin, Jerry
Stokes, John	Wilkinson, John
Stradling Thomas, J.	Williams, D. (Montgomery)
Tapsell, Peter	Winterton, Nicholas
Taylor, Teddy (S'end E)	Wolfson, Mark
Tebbit, Rt Hon Norman	Young, Sir George (Acton)
Temple-Morris, Peter	Younger, Rt Hon George
Thomas, Rt Hon Peter
Thompson, Donald	Tellers for the Ayes:
Thorne, Neil (Ilford South)	Mr. Peter Brooke and
Thornton, Malcolm	Mr. Tristan Garel-Jones.
NOES
Abse, Leo	Davis, Terry (B'ham, Stechf'd)
Adams, Allen	Deakins, Eric
Alton, David	Dean, Joseph (Leeds West)
Anderson, Donald	Dewar, Donald
Archer, Rt Hon Peter	Dixon, Donald
Ashley, Rt Hon Jack	Dobson, Frank
Ashton, Joe	Dormand, Jack
Bagier, Gordon A.T.	Douglas, Dick
Barnett, Guy (Greenwich)	Dubs, Alfred
Barnett, Rt Hon Joel (H'wd)	Duffy, A. E. P.
Beith, A. J.	Dunwoody, Hon Mrs G.
Benn, Rt Hon Tony	Eastham, Ken
Bennett, Andrew (St'kp't N)	Ellis, R. (NE D'bysh're)
Bidwell, Sydney	Ellis, Tom (Wrexham)
Booth, Rt Hon Albert	English, Michael
Bottomley, Rt Hon A. (M'b'ro)	Ennals, Rt Hon David
Bray, Dr Jeremy	Evans, Ioan (Aberdare)
Brocklebank-Fowler, C.	Evans, John (Newton)
Brown, Ronald W. (H'ckn'y S)	Ewing, Harry
Buchan, Norman	Faulds, Andrew
Callaghan, Rt Hon J.	Flannery, Martin
Callaghan, Jim (Midd't'n & P)	Fletcher, Ted (Darlington)
Campbell, Ian	Ford, Ben
Campbell-Savours, Dale	Forrester, John
Canavan, Dennis	Foster, Derek
Cant, R. B.	Foulkes, George
Carmichael, Neil	Fraser, J. (Lamb'th, N'w'd)
Cartwright, John	Freeson, Rt Hon Reginald
Clark, Dr David (S Shields)	Freud, Clement
Clarke, Thomas C'b'dge,	Garrett, John (Norwich S)
A'drie	Garrett, W. E. (Wallsend)
Cocks, Rt Hon M. (B'stol S)	Ginsburg, David
Coleman, Donald	Graham, Ted
Cook, Robin F.	Grimond, Rt Hon J.
Cowans, Harry	Hamilton, W. W. (C'tral Fife)
Cox, T. (W'dsw'th, Toot'g)	Hardy, Peter
Craigen, J. M. (G'gow, M'hill)	Harrison, Rt Hon Walter
Crowther, Stan	Hattersley, Rt Hon Roy
Cryer, Bob	Healey, Rt Hon Denis
Cunliffe, Lawrence	Heffer, Eric S.
Cunningham, Dr J. (W'h'n)	Hogg, N. (E Dunb't'nshire)
Dalyell, Tam	Holland, S. (L'b'th, Vauxh'll)
Davidson, Arthur	Homewood, William
Davies, Rt Hon Denzil (L'lli)	Howell, Rt Hon D.
Davis, Clinton (Hackney C)	Howells, Geraint

Hoyle, Douglas	Pendry, Tom
Huckfield, Les	Penhaligon, David
Hughes, Mark (Durham)	Powell, Raymond (Ogmore)
Hughes, Robert (Aberdeen N)	Prescott, John
Hughes, Roy (Newport)	Price, C. (Lewisham W)
Jay, Rt Hon Douglas	Race, Reg
Jenkins, Rt Hon Roy (Hillhead)	Radice, Giles
	Rees, Rt Hon M (Leeds S)
John, Brynmor	Richardson, Jo
Johnson, James (Hull West)	Roberts, Allan (Bootle)
Johnson, Walter (Derby S)	Roberts, Ernest (Hackney N)
Jones, Rt Hon Alec (Rh'dda)	Roberts, Gwilym (Cannock)
Jones, Barry (East Flint)	Robertson, George
Kaufman, Rt Hon Gerald	Robinson, G. (Coventry NW)
Kerr, Russell	Rooker, J. W.
Lambie, David	Roper, John
Lamborn, Harry	Ross, Ernest (Dundee West)
Leadbitter, Ted	Rowlands, Ted
Leighton, Ronald	Ryman, John
Lestor, Miss Joan	Sever, John
Lewis, Arthur (N'ham NW)	Sheldon, Rt Hon R.
Lewis, Ron (Carlisle)	Shore, Rt Hon Peter
Litherland, Robert	Short, Mrs Renée
Lofthouse, Geoffrey	Silkin, Rt Hon J. (Deptford)
Lyon, Alexander (York)	Silkin, Rt Hon S. C. (Dulwich)
McCartney, Hugh	Silverman, Julius
McDonald, Dr Oonagh	Skinner, Dennis
McElhone, Frank	Smith, Rt Hon J. (N Lanark)
McGuire, Michael (Ince)	Spearing, Nigel
McKay, Allen (Penistone)	Spriggs, Leslie
McKelvey, William	Stallard, A. W.
MacKenzie, Rt Hon Gregor	Steel, Rt Hon David
McNally, Thomas	Stoddart, David
McNamara, Kevin	Stott, Roger
McTaggart, Robert	Strang, Gavin
McWilliam, John	Straw, Jack
Marks, Kenneth	Summerskill, Hon Dr Shirley
Marshall, D (G'gow S'ton)	Taylor, Mrs Ann (Bolton W)
Marshall, Dr Edmund (Goole)	Thomas, Dafydd (Merioneth)
Marshall, Jim (Leicester S)	Thorne, Stan (Preston South)
Maxton, John	Tinn, James
Maynard, Miss Joan	Torney, Tom
Meacher, Michael	Wainwright, E. (Dearne V)
Mellish, Rt Hon Robert	Wainwright, R. (Colne V)
Millan, Rt Hon Bruce	Walker, Rt Hon H. (D'caster)
Miller, Dr M. S. (E Kilbride)	Watkins, David
Mitchell, Austin (Grimsby)	Weetch, Ken
Mitchell, R. C. (Soton Itchen)	Welsh, Michael
Morris, Rt Hon A. (W'shawe)	White, Frank R.
Morris, Rt Hon C. (O'shaw)	White, J. (G'gow Pollok)
Morris, Rt Hon J. (Aberavon)	Whitehead, Phillip
Morton, George	Whitlock, William
Moyle, Rt Hon Roland	Wigley, Dafydd
Mulley, Rt Hon Frederick	Willey, Rt Hon Frederick
Newens, Stanley	Williams, Rt Hon A. (S'sea W)
Oakes, Rt Hon Gordon	Wilson, Rt Hon Sir H. (H'ton)
Ogden, Eric	Wilson, William (C'try SE)
O'Halloran, Michael	Winnick, David
O'Neill, Martin	Woodall, Alec
Owen, Rt Hon Dr David	Woolmer, Kenneth
Palmer, Arthur	Wright, Sheila
Park, George	Young, David (Bolton E)
Parker, John
Parry, Robert	Tellers for the Noes:
Pavitt, Laurie	Mr. James Hamilton and

Question accordingly agreed to.

Lords amendment No. 12 agreed to.