HC Deb 26 June 1984 vol 62 cc817-35

Lords amendment: No. 3, in page 2, line 37, leave out from beginning to "subject" in line 39 and insert— (3) If the total of relevant expenditure as estimated for the purposes of the Rate Support Grant Report for any financial year (other than the first) in which this section is in force is greater or smaller than the total of relevant expenditure as estimated for the purposes of the Rate Support Grant Report for the previous financial year, the Secretary of State shall by order substitute for the amount for the time being specified in subsection (2)(a) above (whether £10 million or an amount previously substituted under this subsection) an amount which is proportionately greater or smaller except that any substituted amount may be rounded to the nearest £100,000. (3A) The power to make an order under subsection (3) above shall be exercisable by statutory instrument

Mr. Patrick Jenkin

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

Mr. Deputy Speaker (Mr. Ernest Armstrong)

With this it will be convenient to discuss Lords amendment No. 14.

Mr. Jenkin

The first of these amendments provides for the £10 million cut-off level, below which small local authorities will be excluded from selective rate limitation, to be uprated annually. The other amendment is consequential.

These are short amendments but they are important. They were made in response to proposals from Lord Sandford and they have been warmly welcomed by the Association of District Councils of which he has the honour to be president. In the amendments we are making it clear that, whilst we are intent on achieving savings from excessively overspending councils, we do not want to apply rate limitation to the large number of small authorities whose total expenditure is a small proportion of local government spending. We particularly wished to avoid tying up scarce resources by rate capping a large number of small authorities. That was the purpose of the £10 million cut-off provided in the Bill as it was first brought before this House. Now we are providing that after the first year of operation when the limit will be £10 million the limit will be adjusted annually in proportion to the increase or decrease in the total of relevant expenditure as detailed in successive rate support grant reports. The increase or decrease will be rounded to the nearest £100,000. We do not want to become involved in an unrealistic degree of precision. Our purpose is to maintain the present value of the £10 million exemption.

We estimate that in 1985–86 about 277 authorities will be exempt from any risk of selective rate capping under the clause. The majority of such authorities will continue to be excluded from selective rate limitation thereafter. That means that we can concentrate on the larger authorities which are seriously overspending by significant sums in the aggregate.

Dr. John Cunningham (Copeland)

The irony about the amendment and the original provision is that the size of an authority bears no relation to the Bill. Small authorities do not necessarily charge lower rates. Many small authorities are responsible for some of the largest increases in rates that have taken place in the past three or four years. The claim that the Bill is about protecting people from rate increases is neatly turned on its head by this part of the measure. We are not against the amendment, but it demonstrates that the Bill is not about protecting people from increases in the rates. It is about something entirely different. It is about giving the Secretary of State powers to control authorities which he chooses to control for entirely different reasons.

If the Secretary of State wanted to give real force to his commitment to exclude some authorities absolutely he would abandon the general power in the Bill. It is significant that he and his colleagues in another place steadfastly refuse to do that because they know that in the end, if significant savings in expenditure are to result from the Bill, almost certainly such general powers will have to be used. We shall not oppose the amendment, although it highlights the inconsistencies in the Government's approach to the issue.

4.15 pm
Mr. John Cartwright (Woolwich)

I support the view expressed by the hon. Member for Copeland (Dr. Cunningham). The amendment is logical in that it continues the Bill's approach. Ministers say that ratepayers welcome the Bill's proposals. That claim is made frequently on behalf of the Government and there is probably some justice in it. Ministers argue that help is at hand for ratepayers who experience constant difficulty through oppressive councils deliberately forcing up rates. The Government, like the United States' Fifth Cavalry, are galloping to the rescue of hard-pressed ratepayers living in areas where the local authority spends large sums. People who live in areas where the authority spends less than £10 million will not receive Government help through the legislation. Some ratepayers in smaller areas may feel let down when they find that the help that they thought they might get is not forthcoming.

Mr. Peter Pike (Burnley)

I do not oppose the amendment, but it is illogical and goes against the principle of the Bill as expressed by the Government. Burnley will welcome the amendment because its budget is below £10 million. If the Government operated on the basis of grant-related expenditure being the target, Burnley would be 56 per cent. over that target. It seems illogical that a small authority with a budget below that level should be exempt. I want Burnley to be exempt, but is seems a wrong move from the Government's point of view.

Mr. Straw

I am pleased that Burnley will be exempt. Blackburn featured in at least one of the exemplifications for rate capping under one of the measures. I should feel aggrieved, when its expenditure over grant-related expenditure is about half that of Burnley, if it became a candidate simply because it had gone over a capricious and arbitrary limit.

Mr. Pike

My hon. Friend is correct. Because the budget of an authority such as Blackburn happens to be higher, it is illogical—whether the cash target figure or GRE is used—that size should be the determining factor. Burnley and Blackburn are two good examples. They are in close proximity. Burnley spends well over the target on one basis but only marginally over it on the other basis.

The only reason why the Government support this amendment is to appease a large number of authorities that happen to be Conservative-dominated. Obviously I shall support it on behalf of my local authority, but it is illogical for the Government to support it.

Mr. Patrick Jenkin

By leave of the House, Mr. Deputy Speaker, may I say that as the hon. Member for Burnley (Mr. Pike) spoke I wondered whether the present leader of his local authority would have been pleased to hear him apparently arguing that his authority should be capped and not come within the exemption. I understand that the hon. Gentleman had the honour to lead his authority. However, he redeemed himself at the end of his speech and said that he would support the amendment.

The hon. Member for Woolwich (Mr. Cartwright) said that ratepayers in the small authorities would feel let down because their authorities would not be capped. The ratepayers of Greenwich would feel considerably let down if they heard their Member of Parliament—and not a Labour Member—say that he disagreed with the current spending of Greenwich, but was not prepared to concede that Greenwich was spending too much.

Mr. Cartwright

The Secretary of State constantly makes that point. It is the one thing that has stuck in his brain since the Committee stage. If he is surprised at my reaction, rather than simply visiting Liverpool and expressing surprise at the conditions he finds there, he should come to Woolwich and see the problems that face my constituents. He might then understand why I want to see more money spent in the right direction.

Mr. Jenkin

I recently paid a visit to Greenwich when I visited the Thamesmead estate.

The hon. Member for Copeland (Dr. Cunningham) said that there was an illogicality in the exemption of a large number of very small authorities. That is not the case, and I firmly refute it. It is the operation of the well-known principle of de minimis. The hon. Gentleman should bear in mind that the proportion of the total rate burden that any ratepayer must pay attributable to the district rate—if he is living in a shire district, and therefore bears his share of the county precept and the district rate—may be very small indeed, between 15 per cent. and 17 per cent., less than one fifth. In many cases, it may be a great deal smaller than that. Therefore, even if the district rate rose more than proportionately, the burden on the ratepayer proportionate to his total burden would be very small indeed.

Dr. Cunningham

Is not what the right hon. Gentleman said yet another illogicality? When we discussed these matters in Committee, he said that the increase in rates would be one of the criteria that he might use for the designation of an authority. He is now saying that small authorities can increase their rates by as much as they like and are absolutely free from all possibility of being designated.

Mr. Jenkin

Let us take the example of Basildon, which has increased its spending mightily, is now 68 per cent. over GRE, and spending above £10 million. It has taken itself out of the exemption. Therefore, the hon. Gentleman's point is not a good one.

On the question of abandoning the general power, we shall come to the clauses dealing with that later. I hope that the hon. Gentleman will welcome the amendment that will exclude a large number of responsible, low-spending authorities from the operation of the general power. That is consistent with the principles that I have outlined.

Question put and agreed to. [Special Entry.]

Lord's amendment, No. 4, in page 3, line 2, leave out for all authorities falling within that class and insert either for all authorities falling within that class or for all of them which respectively have and have not been designated under this section in the previous financial year.

Mr. Patrick Jenkin

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

Mr. Deputy Speaker

With this we shall discuss Lords amendments Nos. 5 and 6.

Mr. Jenkin

This group of amendments is a little more complex than those that we have been discussing so far. I hope that the House will forgive me if I explain their purpose in some detail.

The main purpose of the amendments is to allow separate criteria to be applied to the selection of authorities for rate limitation if those authorities have already been selected for limitation in the prevous year. The need for the amendments arises from the way in which we have said we wish to make selections for rate limitation.

We have always argued that the purpose of the scheme will be to identify those high-spending authorities that have not responded to the calls for restraint in spending. Therefore, we propose to look at authorities' expenditure in relation to their grant-related expenditure assessment as the best available basis for assessing expenditure which is excessive compared with similar authorities.

We will look for some measure of how authorities are responding to the need for economies. In the first year at least, as I have indicated, we expect to have regard to performance against expenditure targets. I am not yet in a position to say precisely how we shall set out the criteria, but during the earlier stages of the Bill in this House I gave some illustrative examples of selection criteria. Those hon. Members who served in Committee felt that it was a helpful explanation of how the selection process might work.

One of those criteria would have selected authorities spending more than 20 per cent. over GRE and more than 2 per cent. over their targets. For the purposes of explaining the amendment, I shall refer to that example. However, I want to make it absolutely clear that that carries no implication as to what might be the actual test that I shall announce to the House in a few weeks.

The problem that the amendment addresses is that in the second year of the selective limitation scheme authorities that were selected and limited in the first year would have had their expenditure limited by their rate or precept limit. In general, I would expect those authorities to be constrained to spend at or very close to their expenditure targets. So, if it was desired to use the same selection criteria in year two as in the first year, many of the authorities previously selected might automatically escape selection because it appeared they had met the criteria of having shown restraint in their spending. I am sure the House recognises that that would be contrary to common sense.

Such authorities, having been selected in the first year, may well be spending excessively by any reasonable test—certainly spending high compared with other comparable authorities, and if using the GRE test. They would be capable of making substantial further economies. It is well known to the House that when an expenditure limit is set under the Bill it forms an absolute limit and must be attainable. As we argued in Committee, it must be reasonable and the reasonableness must be justiciable. That is the most that can be expected in one year. However, such authorities may be capable in time of making substantial further economies.

As I say, the expenditure target is for only one year, and since performance in relation to target results directly from the rate limit and not from any change of heart it would not necessarily reflect any credit on the authority and it would say nothing about its attitude to spending in the future, so that there might be no sensible ground for refusing to select the authority in year two in those circumstances. That makes it necessary for the Government to have power—as we have already for different classes of authority—to use separate principles for authorities depending on whether or not they have previously been selected.

4.30 pm

I anticipate that the criticism of the amendment will be to the effect that, as a result of it, it might be possible to continue selecting authorities indefinitely, even if there were no longer any reason to do so, comparing their spending with that of other comparable local authorities. I assure the House that that would not be our approach. We shall want to free authorities from rate limitation as soon as it becomes sensible to do so.

One way in which we might reach such a view would be if the authority concerned, perhaps as a result of rate capping over a period of two or three years, established a spending level which no longer placed it among the high spenders. In those circumstances, it would be highly desirable that the powers of this measure should no longer be applied to it.

One would, of course, see whether there was any tendency to reverse that process. Clearly, one would need to look at the general pattern of the spending of that authority. It might mean establishing criteria for selection which required previously selected authorities, for instance, to have reduced their rates to levels more typical of other authorities in their class, or to have made specified reductions in manpower which would be evidence of fairly long-term expenditure reductions.

The effect of rate limits on authorities would be to compel them to spend at or about the expenditure levels set for them. We would not want to give authorities credit for that if they were doing it, as it were, under compulsion. If they were able to go further and realise the savings more quickly, obviously that would be valid evidence of a change of attitude.

Taking the example I used earlier, if authorities generally were to be selected for exceeding their target by 2 per cent. or more and expenditure levels were, generally, to take selected authorities, below that 2 per cent. figure, it might be appropriate to set as the alternative criterion for those authorities that they should not have exceeded their target.

It is impossible at this stage to be absolutely clear about how the power will be used. We do not know how events will develop in the first year. One point we have in mind is that it may be possible for authorities to use accounting devices—creative accounting, as the jargon has it—to make short-term apparent improvements in their expenditure performance. Obviously, we should want to be sure that any alternative criteria did not give scope for manipulations of that sort. Evidence of more than one year's spending might be required. I can be absolutely firm in saying—I give the House this clear assurance—that we do not wish to keep authorities in rate limitation for one year longer than necessary.

The origin of amendments Nos. 5 and 6 is obviously similar to that of amendment No. 4. Nos. 5 and 6 recognise that if an authority has been selected for rate limitation, then for the purposes of further rate limitation action it is effectively in a different class from an authority which has not hitherto been selected. In this case we are concerned that authorities selected for rate limitation in more than one year shall enter the latter year having made some economies in the past. They might find it more difficult to make further economies in the future, certainly more so than authorities selected in, say, year two for rate limitation for the first time. That search for economies may become more difficult, perhaps not immediately but later.

It would, of course, have been open to us to rely on the re-determination procedures—that is, where a council may apply for a derogation—but I understand from an interview that the hon. Member for Blackburn (Mr. Straw) recently gave to the Municipal Journal that the Labour party view is that local authorities should not apply for derogations. That is their choice. In this case, it seems to us that it is right to give ourselves power to impose a less stringent limit on authorities which have already been capped because, as I said, they may not be able to make the size of economies as those authorities that are to be capped for the first time.

We looked carefully at whether this added complication could be avoided, in which case this series of amendments would not have been necessary. However, we came to the conclusion that there was here a genuine area of difficulty, and it was felt that both for the purposes of selection—to make sure that they would still be selected, notwithstanding that they had made savings—and so that the rate limit could be made less stringent than those being selected for the first time, because we should not be unfair to authorities selected for a second or subsequent time, it was necessary to have these powers.

Dr. John Cunningham

This is a disturbing group of amendments. The Secretary of State is further widening his powers of control over democratically elected local authorities. Not content with the wide and free-ranging powers that he has already given himself in exercising his judgment on the criteria that he will apply, he is now extending his freedom even further.

Contrary to what was said in Committee, the right hon. Gentleman is seeking powers to apply different criteria, even within the same class of authority, to suit his own purposes. That is disturbing because he is now giving himself the refined power and duty to make specific judgments almost about individual councils, even within the class of authority to which they belong.

We have said from the outset that the Bill's powers are dangerously anti-democratic because they allow the Secretary of State in Whitehall to override the judgment of local electors and to make decisions in an arbitrary way. Everything that the right hon. Gentleman said in putting forward the amendment confirms us in that belief. When will the House be told what principles he will apply so that we may discuss these issues properly? So far the right hon. Gentleman has given himself absolute discretion and latitude, and we realise that that is likely to remain the case. I trust that announcements of this kind will be made when the House is sitting and not when Parliament is in recess. I think I see the right hon. Gentleman assenting to that request. If so, I hope that he will not leave it to the last day of the Session, because a number of serious questions arise.

When we raised this matter in Committee, the Under-Secretary of State, the hon. Member for Bristol, West (Mr. Waldegrave), who is not at present in his place—I make no point in saying that; I mention it simply for the record—said: It is conceivable—though rather unlikely—that the principles could differ between classes of authority".—[Official Report, 9 February 1984, Standing Committee G; c. 270.] When we pressed the issue on a number of other occasions in Committee, that or similar responses were obtained from Ministers.

The Secretary of State has had second thoughts and he wants the power to continue to designate an authority year after year, to tailor the criteria to suit his purposes and to change them year after year. When an elected coucil meets the first set of criteria that the Secretary of State applies, and even if it does what he requires it to do, he can pose new requirements and change the criteria to suit his purposes. He is seeking the power to require the authority to do something more. This is the antithesis of democracy. This is Big Brother in action. The right hon. Gentleman is requiring that year after year, regardless of what local electors have said or what they have voted for, he shall be able to determine what the council does.

Mr. Patrick Jenkin

The hon. Gentleman would be the first to complain if we sought to take powers which would make lawful whatever expenditure reduction a Secretary of State decided, however unreasonable. We have not taken that view. We have decided that we must ask authorities, which by definition are spending excessively having regard to the Government's economic objectives, to make such savings in any year as are reasonable and obtainable. The expenditure of some authorities is so excessive that it will take them several years to reach a level of spending which will not conflict with the purposes of the Bill. In those circumstances, it is entirely reasonable to make provisions to enable an authority to handle the matter sensibly over a period of years.

Dr. Cunningham

This is 1984 and this is doublespeak. It is astonishing. The right hon. Gentleman is safeguarding himself from challenges in the courts. He is introducing a safeguard to prevent local authorities from taking him to court on the basis that what he is asking them to do would undermine their statutory obligations to their electors——

Mr. John Powley (Norwich, South)

That is nonsense.

Dr. Cunningham

If the hon. Gentleman takes that view, having been a member of the Committee which debated the issue at great length, it is clear that he was not listening carefully to the right hon. Gentleman. The Secretary of State is introducing amendments that will enable him to keep control of an authority for so long as he shall determine. He will be the judge and the jury. This is a device to enforce regular cuts year on year on individual authorities until he has decided—not the electors and not Parliament—that he is satisfied with what has been done to the level of services and employment in the individual local authority as well as with the reduction in expenditure that has been achieved.

When the Bill left this place it provided that an authority could be designated for rate limitation only in accordance with certain principles. It stated that the aim of such principles would be to establish that an authority's spending was excessive having regard to general economic conditions. Different principles could be applied to different classes of authority. For example, the metropolitan county authorities could be judged to be overspending by criteria different from those applied to non-metropolitan county authorities. As I have said, the Secretary of State has wide-ranging power and latitude.

4.45 pm

The effect of Lords amendment No. 4 is to permit at least 16 different sets of principles to be used. There will be one set for previously designated metropolitan authorities and another set for non-designated metropolitan authorities. There will be two sets of principles for each of six classes of authority plus a set for each of four authorities that are not in a class, which are the GLC, ILEA, the City of London and the Isles of Scilly.

There is a massive panoply of restrictive measures at the disposal of the Secretary of State. The amendment is far from being the innocuous measure that the right hon. Gentleman suggested because it will greatly increase his flexibility and his room for manoeuvre in designating authorities, taking control of their budgets and overriding the local electors' wishes. Furthermore, the parliamentary safeguards at the designation stage of the process are minimal. Parliament is not required to approve the principles that are used to designate authorities, and nothing could be clearer than that. The Secretary of State is giving himself wide-ranging, punitive and authoritarian powers that are beyond the control of the House of Commons. That is the reality of what is taking place.

Lords amendment No. 6 increases the number of principles that may be used to determine an expenditure limit for an authority in the same way as Lords amendment No. 4 increases the number of designation principles. The Secretary of State argues that he intends to use the provision benignly. There is nothing benign about any aspect of the Bill. The Bill is malevolent, the opposite of benign. It is draconian and authoritarian. It is centralist in conception and anti local electors' views and wishes. To describe any part of it as benign is deliberately to seek to disguise the Government's intent and purpose. I shall be asking the House to resist the amendments. They are yet one further step along a reactionary road.

The Secretary of State smiles, but he knows in his heart of hearts that his Department, however distinguished his officials are, is not equipped to make the judgments that should be made in the towns, cities and boroughs of England and Wales. His officials have proved that over and over again in existing legislation, let alone in what is proposed in the amendments. The Government's approach is arbitrary. The ease with which entirely different lists can be constructed is frightening. That is borne out by the leaks over recent weeks on the information that the Secretary of State has already been considering. The leaks concerning Portsmouth city council emerged during the recent by-election.

I very much regret that my friend, Bill Bush, was arrested on Westminster bridge. Why do the Government not pick on someone their own size? Why do they not pick on me? I have received plenty of leaks from the right hon. Gentleman's Department and elsewhere. They pick on defenceless people like Bill Bush and Sarah Tisdall and bring down all the draconian might of the establishment to intimidate these people. What better argument could we have for the need for a freedom of information Act than the abuse of power which has been demonstrated again today?

Mr. Douglas Hogg (Grantham)

The previous Labour Government did not introduce a freedom of information Bill.

Dr. Cunningham

The hon. Gentleman had better keep quiet because it was his distinguished father who made a definitive speech about elective dictatorships and the threat that they pose. I should advise the hon. Gentleman to have nothing to do with the Bill.

It is clear from the evidence presented in the past few days by the Secretary of State in answer to a parliamentary question that some authorities have increased expenditure but reduced rates while others have increased rates but reduced expenditure. Those effects are most often the result of the iniquities of the block grant target and penalty system rather than any objective measure of the efficiency or otherwise of the authorities involved, Labour or Conservative. That position applies right across the board to all those authorities, including those arbitrarily excluded from the impact of the legislation by the £10 million limit.

Today the Secretary of State said, "If you as local authorities do what we tell you, you will be free at some point." He did not, however, say when. What price local democracy? What will be the purpose of holding local council elections in the middle of a period of several years when an authority is controlled from Marsham tower? What will be the purpose of people voting in those circumstances? What is the worth of the assurance of the Secretary of State that he will not want to use those powers for one moment longer than necessary? That was an absolutely worthless comment that would have been better left unsaid.

We have always argued that the Secretary of State was providing himself with the absolute freedom to pick upon and fit up any council in any part of the country which suited his political purposes. That is the nature of these powers. That is the origin of the Bill. The amendments propose to take that position one stage further along an authoritarian road. The amendments stink, and we shall oppose them.

Mr. Chris Smith (Islington, South and Finsbury)

I rise briefly to express my strong disagreement with the Lords amendment. I shall gladly go through the Lobby in support of the amendment of the hon. Member for Copeland (Dr. Cunningham).

Those of us who sat through the long watches of the night on the Standing Committee will recall that we had many discussions about the way in which the Secretary of State would select authorities for designation. Some of us pointed clearly to the danger that he would exercise his power to catch those authorities that he wished to catch. We pointed clearly to the danger of the actions on which he was embarking.

The right hon. Gentleman subsequently provided us with a graphic confirmation of precisely what we warned of in the exchange of words and letters between himself and Opposition Members on the subject of Portsmouth. The right hon. Gentleman revealed in that exchange that his Department was considering a number of lists of potential authorities and that effectively the Department was juggling those authorities to see which would be caught under particular criteria. There was one saving grace in the arguments that the Secretary of State was advancing during our discussions in Standing Committee on that precise point—whatever principles were eventually determined within one class of authority, those principles would stand for all authorities within that class. That was a point that the right hon. Gentleman could not breach.

The Secretary of State has moved that we should agree with an amendment—I suspect that it was inspired by himself—which was passed by the other place and seeks to take away that safeguard. Frankly, the Secretary of State cannot have it both ways. Either an authority within a particular class is overspending according to a set of principles clearly laid down and accepted by Parliament or it is not. The fact that in the previous year the authority was designated and had orders placed upon it by the Secretary of State should make no difference to the decision on whether it is an overspender in the present year. Frankly, the right hon. Gentleman's argument does not hold water.

The Secretary of State has now revealed the fact that not only will he select in a politically motivated way classes of authority and criteria to fit particular classes but he will operate this legislation in a particularly motivated way within a particular class. Nothing could be clearer than the amendments drafted by the other place and which the right hon. Gentleman is now supporting. The amendments must be resisted, and I shall take great pleasure in doing so.

Mr. Cartwright

Like the hon. Member for Copeland (Dr. Cunningham), I thought that in all conscience this clause was bad enough when it left the House. Inevitably, the idea that authorities would be selected for rate capping on the basis of different sets of principles for different classes of authority—metropolitan areas would be judged differently from non-metropolitan areas and counties would be judged differently from districts—raised the suspicion, which I am sure the Secretary of State must understand, that the right hon. Gentleman was seeking to juggle the net to ensnare those authorities that were within his sights from the word go. As the hon. Member for Copeland said, the juggling went slightly wrong in the case of Portsmouth. No doubt that is one argument for making the criteria a good deal tougher and more selective.

The amendments substantially increase the number of different criteria that can be used. They make the mesh of the net a good deal finer, enabling the Secretary of State to be even more flexible in his approach to the problem. I and other hon. Members who have spoken in the debate find that an unappealing prospect.

The other problem arising from the impact of the measures is one to which the Secretary of State has, in a sense, drawn our attention. It concerns the ability that the Bill provides the Secretary of State to lay down over a period a regime for a rate-capped authority. This means not just that an authority will be rate capped for one year but that it can look forward—if "look forward" is the correct phrase—to year after year of rate capping when the Secretary of State can move the finishing post each time. As the authority, panting down the home stretch, finally achieves the cuts demanded of it in year one, its hand goes out for the finishing tape only to discover that for year two the tape goes a bit further on, and the authority must start the whole race over again for year two. When the authority finally achieves that cut, weary and exhausted, with the few services it has remaining in year two, away goes the finishing post for year three. That is an appalling prospect to lay out for local authorities.

I strongly agree with the comment made by the hon. Member for Copeland. In such a case, how can we honestly go on talking about local government? The word "government" implies that someone is in charge at the local level making judgments about the quality of services needed, the spending of resources and the level of taxation. In a rate-capped authority all those decisions will have been taken away for not just one year—that was bad enough—but for a period of years.

The Secretary of State appalled me with his suggestion—in an almost throwaway remark—that one should be fairer to those authorities being capped for the second or third year than to those being capped for the first year. I thought that the purpose of rate capping was to ensure that an example was made of a limited number of authorities so that other authorities would see the error of their ways and not go down the same road. This afternoon, the Secretary of State appeared to suggest that, even when some authorities were in their second or third year of rate capping, others might be coming into their first year. That is an unpleasant scenario against the background of the limited operation which at the beginning we were told was the approach.

It is important to remember that Parliament will not be required to approve the principles used to designate authorities. It will simply be told about them as a matter of courtesy. Parliamentary approval will not be required until the very end of the whole rate-capping operation. Against the background of the increased powers given to the Secretary of State by the amendments, I find that a thoroughly unappealing prospect and I certainly cannot support it.

5 pm

Like so many other elements in the Bill and so much of the legislation of the past few years, the amendments constitute enabling legislation to give the Secretary of State for the Environment more and more freedom to do whatever he wishes in relation to what used to be freely elected local authorities. That is not what the House should be about, and I shall certainly oppose the amendments.

Mr. Tony Banks

The amendments show what a mess the Government have got into with their rate-capping policy, which itself is an inadequate substitute for the Government's failure to honour their 1979 manifesto pledge to do something about rates. Once again, the Secretary of State is giving himself the kind of powers that previous Secretaries of State only dreamed of. He is producing sets of rules that we cannot know of at this stage. We shall be told in due course what the selection process will be. I am not even confident that the same Secretary of State will be telling us about it. In view of all the mess, I suspect that the Prime Minister will take an early opportunity to award the right hon. Gentleman the Conservative party equivalent of the second ball-bearing plant at Omsk, whatever that may be in the right hon. Lady's mind—perhaps the chairmanship of the Conservative party—so I doubt whether the same right hon. Gentleman will be coming to the Dispatch Box to tell us about the secret selection process.

As my hon. Friend the Member for Copeland (Dr. Cunningham) said, when the Bill left the House of Commons an authority could be designated for selective rate limitation only in accordance with "principles" aimed at establishing that the authority's spending was excessive having regard to general economic conditions. Two points arise out of that. First, the Secretary of State talks about the Government's overall economic objectives, but I have no doubt that if he were ever Chancellor even greater chaos would be visited on our national finances, if his record in local government is anything to go by. In any case, the Government's general economic objectives do not bear close examination. We were told earlier that one reason for the Bill was the overspending by certain authorities, and that the case for abolition of some authorities was made out because their overspending was imperilling the Government's economic strategy. Many of us do not believe that the Government have an economic strategy, but I shall let that pass. I believe that the overspend involved for 1983–84 was about £771 million. Meanwhile, the all-party Select Committee on Defence estimates that the cost of Trident has risen by £700 million. Apparently, £700 million extra on Trident can be absorbed without imperilling the Government's economic strategy but a similar amount of extra spending on local services somehow puts the whole economic strategy at risk. The economic argument does not bear examination. It is just another miserable excuse.

Secondly, the definition of excessive spending is in no way objectively based. The definition of expenditure on which the Secretary of State's selection of criteria will depend can itself be varied by the Secretary of State. Moreover, the criteria for what the spending ought to be will also be chosen by the Secretary of State. In other words, the Secretary of State cannot lose. As the hon. Member for Woolwich (Mr. Cartwright) said, the Secretary of State can simply keep on varying the criteria so that no authority can know with any certainty what its position will be a year later. As the Secretary of State is pressed by the Cabinet to reduce spending even further, he will simply alter the criteria so that no councillor or local authority treasurer will ever know what is going on.

The process is not just fundamentally inequitable and arbitrary. Worse still, the appearance of objectivity is given to a process which in practice will depend on one holder of public office, the Secretary of State, who will ensure that no Labour local authority can win financially. That brings me back to my accusation about the selective vindictiveness which lies at the centre of the Government's strategy for local government, which is further exemplified by their use of hit lists. I noted that at the Conservative party conference Lord Bellwin said: Concrete overshoes are on the GLC and next year into the Thames it goes. That typifies the gangster-like mentality of Lord Bellwin and it is thoroughly appropriate to the Government's hit list approach to local authorities. It all fits in with the Conservatives' Chicago-style mentality of firing from the hip and speaking first and thinking afterwards in relation to local government finance.

When the Bill left the House of Commons it involved 10 different sets of principles. The amendment would allow 16 different sets to be used. Moreover, there is infinite scope for variation within them, so the Secretary of State will always be in the position that he wishes and cannot be challenged in the courts or anywhere else. Whenever things look a bit dodgy he will simply alter the targets and the criteria so that the local authorities fall foul of his latest economic policy.

The arbitrary nature of the criteria is clear from many examples. I shall not go through them all, but one brings the point home especially clearly in London. Not only can the Secretary of State select Labour-controlled authorities for his hit list. He can exclude Tory authorities which for reasons of short-term political expediency he does not wish to be seen to be attacking. The City of London spends 247 per cent. above its GRE, but by using the second criterion of expenditure targets that authority will be allowed to escape.

The second example is the sordid, shoddy little manoeuvre between the Secretary of State and the Prime Minister about whether Portsmouth would be on the rate capping hit list. No one can now deny that that was connected with the Portsmouth by-election, but it did not do the Conservatives much good then and the Bill will not do them much good when they are eventually forced to take this to the ballot box. In London at the moment the Conservatives are terrified of the ballot box. If they think that this legislation will get them off the hook, they are wrong. It is a recipe for chaos in local government finance and it alters the rules always in favour of the Secretary of State. I shall certainly vote against the amendment.

Mr. Patrick Jenkin

The hon. Member for Newham, North-West (Mr. Banks) is rapidly earning himself the title of the Lenny Bruce of the Labour party, as he has a nice line in vituperative insult. But we have learnt by now not to take what he says too seriously. Perhaps the hon. Gentleman will need to take some of the things that he has said more seriously in future.

The criticisms of the amendment have gone very wide of the mark. Perhaps it is tight for me to remind the House in two or three short sentences that the purpose of the legislation is to put into effect the convention that has long since governed local authority spending, namely, that the total of local authority spending should remain broadly in line with the guidelines that are sanctioned by the House of Commons.

Dr. Cunningham

Nonsense.

Mr. Jenkin

The hon. Gentleman says that it is nonsense, but that convention has been widely regarded and acted upon. For many years it has given local authorities little problem. They have been able to accommodate it and live within it.

We are faced with the position that a tiny minority of high-spending and extravagant authorities have made it clear that they do not regard themselves as constrained by that convention. As the sums involved run into hundreds of millions of pounds, that has necessitated—my right hon. and hon. Friends have made this clear—the imposition of stringent targets as a counteraction. That has been done in relation even to authorities that have done their very best to stay within the Government's guidelines. The Government can no longer ignore that. In those circumstances, we have had to bring forward the legislation, with its selective power of rate limitation. The power will be confined to a few high-spending and extravagant authorities in order to protect the ratepayers in those authorities from the outrageous rate increases that they have faced. That is the purpose.

Mr. Straw

rose——

Mr. Jenkin

Perhaps the hon. Gentleman will allow me to develop the argument. No doubt he will have other opportunities to intervene.

That is the background. The group of amendments recognises that the circumstances affecting authorities in the second year and perhaps even in subsequent years of rate capping will differ from those for authorities facing rate limitation for the first time.

The hon. Member for Copeland and his hon. Friends have made great play of the fact that this will broaden the scope of selection and of my discretion as Secretary of ateState in the selection of authorities for rate limitations. But I must tell him that there is nothing in the amendment that absolves me from the jurisdiction of the courts in saying that I should exercise the powers reasonably. That is fundamental to the legislation. Whether or not the power contained in the group of amendments is used to define different criteria for selection of authorities that have been rate capped in the past, the power must be exercised reasonably. I shall remain subject to the jurisdiction of the courts and, no doubt, if I exercised those powers unreasonably the necessary legal action would be taken.

Mr. Michael Shersby (Uxbridge)

Will my right hon. Friend say to what extent the selection of different criteria in different years will be affected by public sector pay settlements?

Mr. Jenkin

I cannot answer that question sensibly in that form. I can say, however, that the effect of, say, local authority pay settlements is bound to have an impact upon the spending of local authorities. It therefore behoves all those who are concerned with maintaining the level of services to make sure that resources are not swallowed up in excessive pay settlements.

I shall move on. Not only must the Secretary of State's selection be reasonable and amenable to the jurisdiction of the courts, but the ultimate orders that impose rate limits on authorities will be subject to the vote of the House. They must come before the House of Commons. Ministers will be accountable here at the Dispatch Box for the decisions that they recommend that the House shall take. The hon. Member for Copeland said that that is an insubstantial protection, but to say that is to belittle the importance of the House of Commons in the operation of this legislative power.

5.15 pm

It was said that this will give me power to distinguish, as it was put, between my friends and those who are in opposition. I flatly refute that suggestion. The power will not entitle me to twist the criteria in any way so as to keep out Conservative authorities or to rate-cap Labour authorities. There is an inconsistency in the case that was made by the hon. Members for Newham, North-West and for Islington, South and Finsbury (Mr. Smith), who charged me with chicanery over the question of Portsmouth.

Portsmouth is a Conservative-controlled authority and, as anyone who chooses to look at the records will ascertain, it has overspent on its GRE by about 38 per cent. I think that it is 5.5 per cent. over it target expenditure. If we took criteria that were less than those figures there is no power in the Bill—it would be an unreasonable use of a power if I sought to do this—for me to exclude Portsmouth from the list of authorities in those circumstances. The hon. Member for Copeland asked me this question in the last two or three days of the by-election campaign. The hon. Gentleman recognised that I was completely frank with the House on this matter. As soon as he asked me the appropriate question and stopped accusing me of doing of what I have no intention of doing, and would not have been permitted to do by the legislation, I made the position clear to him.

Dr. Cunningham

I hesitate to open old wounds but, as the right hon. Gentleman has almost done it for me, let me ask him whether his right hon. Friend the Secretary of State for Trade and Industry went to Portsmouth, where he held a press conference and denied the validity of what I had said the day before? He sought to obscure the issue.

I wrote to the Secretary of State for the Environment on the matter, and he wrote back saying that, among other things—his final sentence said this—what I had written to him was rubbish. When I asked the question on the third occasion, the right hon. Gentleman had the grace to tell the House the truth. We would have asked him anyway on the Floor of the House that very day, because there were questions to the Secretary of State for the Environment. Eventually we got the truth from the right hon. Gentleman, but I remind him that it took a week and three letters.

Mr. Jenkin

The hon. Gentleman is wrong in that respect. His first letter charged me with a degree of chicanery that was an absolute travesty. I denied that firmly and clearly. The hon. Gentleman did not ask the right question. When he recognised the constraints that would inevitably be placed on the Secretary of State by the legislation, he asked a new question and got a straight answer. I have always tried to deal with the hon. Gentleman in that way.

Dr. Cunningham

rose——

Mr. Jenkin

No, I think we must leave the matter there and move on.

Dr. Cunningham

Come on. I shall continue to seek evidence in support of what I said and did. Which Minister authorised the Conservative candidate in the Portsmouth by-election, Mr. Patrick Rock, to say that he had consulted Ministers and that there was no truth in what I had said about Portsmouth city council being on a list for designation? Which Minister authorised that statement?

Mr. Jenkin

I can say firmly that if that is a report of what Mr. Rock said, the hon. Gentleman has been misinformed or Mr. Rock was misreported. According to the information that I have, he was not so authorised. I leave it at that.

I completely deny the main burden of the complaint that has been made against the amendments by the Labour party, that in some way they will allow Ministers to distinguish between friend and foe. They will not, but will merely give the Secretary of State the flexibility to distinguish between authorities who have been capped and those who are being capped for the first time. That is necessary partly to ensure that the principles can be applied fairly, and partly, as I made clear, to make sure that the limits take account of savings already made by a capped authority so as not to impose unreasonable further constraints upon their spending. As such, I commend the amendment to the House.

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

The House divided: Ayes 243, Noes 188.

Division No. 381] [5.19 pm
AYES
Adley, Robert Braine, Sir Bernard
Aitken, Jonathan Bright, Graham
Alexander, Richard Brinton, Tim
Alison, Rt Hon Michael Brown, M. (Brigg & Cl'thpes)
Amess, David Browne, John
Ancram, Michael Bruinvels, Peter
Ashby, David Bryan, Sir Paul
Aspinwall, Jack Buck, Sir Antony
Atkins, Rt Hon Sir H. Budgen, Nick
Atkins, Robert (South Ribble) Butcher, John
Baker, Nicholas (N Dorset) Butler, Hon Adam
Banks, Robert (Harrogate) Butterfill, John
Batiste, Spencer Carlisle, John (N Luton)
Bellingham, Henry Carttiss, Michael
Bendall, Vivian Cash, William
Berry, Sir Anthony Chapman, Sydney
Best, Keith Clark, Dr Michael (Rochford)
Biffen, Rt Hon John Clark, Sir W. (Croydon S)
Biggs-Davison, Sir John Clarke, Rt Hon K. (Rushcliffe)
Blaker, Rt Hon Sir Peter Clegg, Sir Walter
Body, Richard Cockeram, Eric
Boscawen, Hon Robert Colvin, Michael
Bottomley, Peter Conway, Derek
Bottomley, Mrs Virginia Coombs, Simon
Bowden, A. (Brighton K'to'n) Cope, John
Boyson, Dr Rhodes Cranborne, Viscount
Currie, Mrs Edwina Knowles, Michael
Dorrell, Stephen Lang, Ian
Douglas-Hamilton, Lord J. Latham, Michael
Dover, Den Lee, John (Pendle)
du Cann, Rt Hon Edward Leigh, Edward (Gainsbor'gh)
Dunn, Robert Lennox-Boyd, Hon Mark
Durant, Tony Lester, Jim
Dykes, Hugh Lewis, Sir Kenneth (Stamf'd)
Edwards, Rt Hon N. (P'broke) Lilley, Peter
Eggar, Tim Lloyd, Ian (Havant)
Emery, Sir Peter Lloyd, Peter, (Fareham)
Evennett, David Lord, Michael
Eyre, Sir Reginald Luce, Richard
Fallon, Michael Lyell, Nicholas
Farr, Sir John McCrindle, Robert
Favell, Anthony McCurley, Mrs Anna
Fenner, Mrs Peggy Macfarlane, Neil
Fletcher, Alexander MacKay, John (Argyll & Bute)
Fookes, Miss Janet Maclean, David John
Forman, Nigel McQuarrie, Albert
Forsyth, Michael (Stirling) Madel, David
Forth, Eric Malins, Humfrey
Fox, Marcus Malone, Gerald
Franks, Cecil Maples, John
Fraser, Peter (Angus East) Marland, Paul
Freeman, Roger Marlow, Antony
Galley, Roy Marshall, Michael (Arundel)
Gardiner, George (Reigate) Mates, Michael
Gardner, Sir Edward (Fylde) Mather, Carol
Glyn, Dr Alan Maude, Hon Francis
Goodlad, Alastair Mawhinney, Dr Brian
Gow, Ian Maxwell-Hyslop, Robin
Gower, Sir Raymond Mellor, David
Grant, Sir Anthony Merchant, Piers
Gregory, Conal Miller, Hal (B'grove)
Ground, Patrick Mills, Iain (Meriden)
Grylls, Michael Mills, Sir Peter (West Devon)
Hamilton, Hon A. (Epsom) Mitchell, David (NW Hants)
Hamilton, Neil (Tatton) Moate, Roger
Hampson, Dr Keith Monro, Sir Hector
Hanley, Jeremy Montgomery, Fergus
Hargreaves, Kenneth Moore, John
Harris, David Moynihan, Hon C.
Harvey, Robert Neale, Gerrard
Haselhurst, Alan Nelson, Anthony
Havers, Rt Hon Sir Michael Neubert, Michael
Hawkins, C. (High Peak) Normanton, Tom
Hawksley, Warren Norris, Steven
Hayes, J. Oppenheim, Philip
Hayhoe, Barney Oppenheim, Rt Hon Mrs S.
Hayward, Robert Ottaway, Richard
Henderson, Barry Page, Richard (Herts SW)
Hickmet, Richard Parkinson, Rt Hon Cecil
Higgins, Rt Hon Terence L. Patten, Christopher (Bath)
Hind, Kenneth Patten, John (Oxford)
Hirst, Michael Pawsey, James
Hogg, Hon Douglas (Gr'th'm) Pollock, Alexander
Holland, Sir Philip (Gedling) Powell, William (Corby)
Hooson, Tom Powley, John
Hordern, Peter Price, Sir David
Howard, Michael Proctor, K. Harvey
Howarth, Alan (Stratf'd-on-A) Raffan, Keith
Howarth, Gerald (Cannock) Raison, Rt Hon Timothy
Howell, Rt Hon D. (G'ldford) Rees, Rt Hon Peter (Dover)
Hubbard-Miles, Peter Renton, Tim
Hunt, David (Wirral) Rhodes James, Robert
Hunt, John (Ravensbourne) Rhys Williams, Sir Brandon
Hunter, Andrew Ridley, Rt Hon Nicholas
Hurd, Rt Hon Douglas Ridsdale, Sir Julian
Irving, Charles Rifkind, Malcolm
Jackson, Robert Roberts, Wyn (Conwy)
Jenkin, Rt Hon Patrick Robinson, Mark (N'port W)
Johnson-Smith, Sir Geoffrey Roe, Mrs Marion
Jones, Gwilym (Cardiff N) Rost, Peter
Jones, Robert (W Herts) Ryder, Richard
Joseph, Rt Hon Sir Keith Sainsbury, Hon Timothy
Kellett-Bowman, Mrs Elaine St. John-Stevas, Rt Hon N.
Kershaw, Sir Anthony Shaw, Giles (Pudsey)
Key, Robert Shepherd, Colin (Hereford)
Knight, Gregory (Derby N) Shepherd, Richard (Aldridge)
Shersby, Michael Vaughan, Sir Gerard
Silvester, Fred Viggers, Peter
Sims, Roger Wakeham, Rt Hon John
Skeet, T. H. H. Walden, George
Smith, Tim (Beaconsfield) Walker, Bill (T'side N)
Speller, Tony Watson, John
Steen, Anthony Watts, John
Stern, Michael Wells, Bowen (Hertford)
Stevens, Martin (Fulham) Wheeler, John
Stewart, Allan (Eastwood) Whitfield, John
Stokes, John Wiggin, Jerry
Temple-Morris, Peter Wood, Timothy
Thomas, Rt Hon Peter Young, Sir George (Acton)
Thompson, Patrick (N'ich N)
Thorne, Neil (Ilford S) Tellers for the Ayes:
Thornton, Malcolm Mr. John Major and Mr. Donald Thompson.
Thurnham, Peter
van Straubenzee, Sir W.
NOES
Abse, Leo Fatchett, Derek
Alton, David Faulds, Andrew
Anderson, Donald Field, Frank (Birkenhead)
Archer, Rt Hon Peter Fields, T. (L'pool Broad Gn)
Ashdown, Paddy Fisher, Mark
Ashley, Rt Hon Jack Flannery, Martin
Ashton, Joe Foot, Rt Hon Michael
Atkinson, N. (Tottenham) Forrester, John
Banks, Tony (Newham NW) Foster, Derek
Barnett, Guy Fraser, J. (Norwood)
Barron, Kevin Freud, Clement
Beckett, Mrs Margaret George, Bruce
Beith, A. J. Godman, Dr Norman
Bell, Stuart Golding, John
Benn, Tony Gould, Bryan
Bennett, A. (Dent'n & Red'sh) Gourlay, Harry
Bermingham, Gerald Hamilton, W. W. (Central Fife)
Blair, Anthony Hancock, Mr. Michael
Boothroyd, Miss Betty Harman, Ms Harriet
Boyes, Roland Harrison, Rt Hon Walter
Brown, Gordon (D'f'mline E) Hart, Rt Hon Dame Judith
Brown, N. (N'c'tle-u-Tyne E) Haynes, Frank
Brown, R. (N'c'tle-u-Tyne N) Healey, Rt Hon Denis
Brown, Ron (E'burgh, Leith) Heffer, Eric S.
Bruce, Malcolm Hogg, N. (C'nauld & Kilsyth)
Buchan, Norman Holland, Stuart (Vauxhall)
Callaghan, Jim (Heyw'd & M) Home Robertson, John
Campbell, Ian Howells, Geraint
Carter-Jones, Lewis Hughes, Dr. Mark (Durham)
Cartwright, John Hughes, Roy (Newport East)
Clark, Dr David (S Shields) Hughes, Sean (Knowsley S)
Clarke, Thomas Hughes, Simon (Southwark)
Clay, Robert Janner, Hon Greville
Clwyd, Mrs Ann Jenkins, Rt Hon Roy (Hillh'd)
Cocks, Rt Hon M. (Bristol S.) John, Brynmor
Cohen, Harry Jones, Barry (Alyn & Deeside)
Concannon, Rt Hon J. D. Kaufman, Rt Hon Gerald
Conlan, Bernard Kennedy, Charles
Cook, Robin F. (Livingston) Kilroy-Silk, Robert
Corbett, Robin Kinnock, Rt Hon Neil
Corbyn, Jeremy Lambie, David
Craigen, J. M. Leighton, Ronald
Crowther, Stan Lewis, Ron (Carlisle)
Cunliffe, Lawrence Lewis, Terence (Worsley)
Cunningham, Dr John Litherland, Robert
Dalyell, Tam Lloyd, Tony (Stretford)
Davies, Rt Hon Denzil (L'lli) Lofthouse, Geoffrey
Davies, Ronald (Caerphilly) McCartney, Hugh
Davis, Terry (B'ham, H'ge H'l) McCrea, Rev William
Deakins, Eric McDonald, Dr Oonagh
Dewar, Donald McKay, Allen (Penistone)
Dixon, Donald McKelvey, William
Dobson, Frank Mackenzie, Rt Hon Gregor
Dormand, Jack McNamara, Kevin
Douglas, Dick McTaggart, Robert
Duffy, A. E. P. Madden, Max
Dunwoody, Hon Mrs G. Marek, Dr John
Eastham, Ken Marshall, David (Shettleston)
Evans, John (St. Helens N) Martin, Michael
Ewing, Harry Mason, Rt Hon Roy
Maxton, John Sedgemore, Brian
Maynard, Miss Joan Sheerman, Barry
Meadowcroft, Michael Sheldon, Rt Hon R.
Michie, William Shore, Rt Hon Peter
Mikardo, Ian Short, Ms Clare (Ladywood)
Mitchell, Austin (G't Grimsby) Short, Mrs H.(W'hampt'n NE)
Molyneaux, Rt Hon James Silkin, Rt Hon J.
Morris, Rt Hon A. (W'shawe) Skinner, Dennis
Morris, Rt Hon J. (Aberavon) Smith, C.(Isl'ton S & F'bury)
Nellist, David Smith, Rt Hon J. (M'kl'ds E)
Oakes, Rt Hon Gordon Soley, Clive
O'Neill, Martin Spearing, Nigel
Orme, Rt Hon Stanley Steel, Rt Hon David
Owen, Rt Hon Dr David Stott, Roger
Park, George Strang, Gavin
Parry, Robert Straw, Jack
Patchett, Terry Taylor, Rt Hon John David
Pavitt, Laurie Thomas, Dr R. (Carmarthen)
Pendry, Tom Thompson, J. (Wansbeck)
Penhaligon, David Thorne, Stan (Preston)
Pike, Peter Tinn, James
Powell, Rt Hon J. E. (S Down) Torney, Tom
Powell, Raymond (Ogmore) Wainwright, R.
Prescott, John Wardell, Gareth (Gower)
Radice, Giles Wareing, Robert
Redmond, M. Weetch, Ken
Rees, Rt Hon M. (Leeds S) Welsh, Michael
Richardson, Ms Jo White, James
Roberts, Allan (Bootle) Williams, Rt Hon A.
Roberts, Ernest (Hackney N) Winnick, David
Robertson, George Wrigglesworth, Ian
Robinson, G. (Coventry NW) Young, David (Bolton SE)
Rogers, Allan
Rooker, J. W. Tellers for the Noes:
Ross, Ernest (Dundee W) Mr. James Hamilton and Mr. John McWilliam.
Rowlands, Ted

Question accordingly agreed to. [Special Entry.]

Lords amendment No. 5 agreed to. [Special Entry.]

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