§ Mr. StrawI beg to move amendment No. 5, in page 1, line 16, leave out from first 'section' to end of line 17.
§ Mr. Deputy Speaker (Sir Paul Dean)With this it will be convenient to take the following amendment: No. 9, in page 2, line 7, leave out from 'desirable' to end of line 14 and insert—
'( ) The Secretary of State shall not exercise the power for the purpose mentioned in subsection (2) above so as to decrease the amount of block grant payable to a local authority unless he is satisfied that it is necessary to do so in order to prevent—No. 10, in page 2, line 7, leave out from 'desirable' to end of line 14.
- (a) the difference in question having an unreasonable effect on the way in which block grant for that year is distributed; and
- (b) an unreasonable increase in the amount of block grant payable to that authority for that year compared to the amount payable to them for the previous year;'.
No. 11, in page 2, line 18, at end insert
'subject to section 8(3)(a) of the Local Government Finance Act 1982'.No. 15, in schedule 1, page 4, line 5, leave out'paragraph (a) shall be omitted'and insert'for the words "in paragraph (a) of subsection (6) of that sectionthere shall be substituted the words'subsection (2) of section 2 of the Rate Support Grant Act 1986" '.
§ Mr. StrawAmendment No. 9, the operative amendment, seeks to change the criteria under which block grants might be capped. Section 8(3)(a) of the Local Government Finance Act 1982 deals with caps. The section provides that powers conferred by section 59 of the Local Government, Planning and Land Act 1980 shall not be exercised for the purpose specified in subsection (6)(a) of the 1980 Act
so as to decrease the amount of block grant payable to a local authority unless the Secretary of State is satisfied that there will he an unreasonable increase, unless he exercises the power, in the amount of block grant payable to that authority for a year compared with the amount payable to them for the previous year".The Bill seeks to change the test for caps from the effect on individual authorities that have received, on the face of it, a large amount of additional block grant, to the effect on other authorities. Clause 2(3) of the Bill provides that the Secretary of State
shall not exercise the power for that purpose so as to decrease the amount of block grant payable to a local authority for any year unless he is satisfied that it is necessary to do so in order to prevent the difference in question having an unreasonable effect on the way in which block grant for that year is distributed or on the contribution made or to be made by ratepayers in that year to the expenditure of local authorities.142 There is a major friction between the test under the present law and the test under the Bill.The Committee sought an explanation from Ministers as to how the new power would operate. We asked whether it was possible, under the proposed powers, for an authority to have its block grant otherwise payable capped where it could be said that the amount that the authority was to receive was unreasonable, but where it could not be said that the amount was unreasonable for all other authorities, or that it would have an unreasonable effect on all other authorities. I was confused by the answers. When we considered the matter on 10 July, the Minister sought to explain it. However, the hon. Lady left me even more confused. She said:
Last year"—I assume that that is an error in the record, because she meant 1982—section 8(3) (a) of the Local Government Act 1985 provided the Secretary of State with powers to cut"—it should say "cap"—gain where there was an unreasonable effect on one authority alone, but that power was not used last year, or even interpreted that way, and the action we took in relation to Birmingham concerns the power we now propose in clause 2(2)—the ability to tap"—it should be "cap"—The authority's gain because of the unreasonable effect on the settlement to all other local authorities and all ratepayers." — [Official Report, Standing Committee G, 10 July 1986; c. 120.]I invite the Under-Secretary of State to explain what she meant. She seemed to suggest that the power under section 8(3) (a) was not used last year in relation 10 the matters about which Birmingham complained. If that section is not in contention, why have we wasted so much of our time in the past few months seeking to amend it? My understanding was that section 8(3) (a) was a pertinent part of Birmingham's objection to the way in which Ministers made decisions.
Is the Under-Secretary of State saying that capping could not be introduced where the only objection to the amount of grant received by an authority was that it could be regarded as an unreasonable imposition on that authority but could not be regarded as such an imposition on every other authority?
§ Mrs. RumboldI shall try to clarify the matter that we discussed in Committee. As the hon. Member for Blackburn (Mr. Straw) said, the amendments deal with a restriction on the power of the Secretary of State to cap grant gains by applying multipliers which reduce the grant. The existing provision requires the Secretary of State to satisfy himself that there would be an unreasonable increase in an authority's grant for one year compared with the previous year if he did not apply a cap. The amendments suffer from the same flaw with respect to the general powers of multipliers as was disclosed in the Birmingham case. This requires the Secretary of State to look at the overall change in grant. The amendments would simply incorporate the same flaw in the new legislation. I include amendment No. 9, which is a sort of hybrid between the existing provision and the one in the Bill.
In the Bill, as drafted, there is a new requirement that the Secretary of State should not apply caps
unless he is satisfied that it is necessary to do so in order to preventan…unreasonable effect on the way in which block grant for that year is distributed".The use of caps is to prevent large gains by some 143 authorities, reducing the pool available to all authorities. That is a serious, sensible and proper constraint on the power of the Secretary of State to cap gains. I hope that the House will agree that that is the effect of the new power that the Secretary of State will be given under the Bill as opposed to the old power which will be subsumed by the new legislation.