HC Deb 21 July 1986 vol 102 cc143-51
Mr. Straw

I beg to move, amendment No. 16, in page 4, line 21, leave out paragraphs 8 and 9.

Mr. Deputy Speaker

With this it will be convenient to take the following amendments: No. 17, in page 4, line 24, leave out from 'words' oto end of line 25 and insert 'the reasons for making'.

No. 18, in page 4, line 24, leave out from 'words' to end of line 26 and insert `the material consideration leading the Secretary of State to make any such determination'. No. 19, in page 4, line 27, leave out from 'words' to end of line 29 and insert `the material consideration leading to them'. No. 20, in page 4, line 28, leave out from 'words' to end of line 29 and insert `the reasons for making them'. No. 21, in page 4, line 32, leave out from 'words' to second 'the' in line 33 and insert 'the reasons for making'.

No. 22, in page 4, line 32, leave out from 'words' to end of line 34 and insert 'the material considerations leading the Secretary of State to make the determination'. No. 32, in page 5, line 47, at end insert— `14.— (1) Section 56 of the said Act of 1980 shall be amended as follows: (2) After subsection (10) there shall be inserted— (10A) If representations are made to the Secretary of State by any association of local authorities or by any local authority that the total expenditure of local authorities generally or of any particular local authority' shall be adjusted by the addition or subtraction of expenditure of any description the Secretary of State shall consider those representations before determining whether or not to make a direction and shall give reasons for his decision.".'.

Mr. Straw

Amendment No. 16 proposes that paragraphs 8 and 9 of schedule 1 should be left out. When, earlier today, I made a submission to Mr. Speaker about the possibility that a certificate might be made classifying this Bill as a money Bill, I drew particular attention to paragraphs 8, 9 and 13. I hoped to show Mr. Speaker that this Bill is about much more than the variation of charges out of moneys voted by Parliament.

11.45 pm

Paragraphs 8, 9 and 13 are not subordinate issues but go to the heart of the relationship between central and local government in relation to financial matters. They relate to the explanations that Secretaries of State are to be required to give for the decisions that they have made in relation to various determinations under the rate support grant legislation.

We discussed this aspect of the Bill at some length in Committee. The Minister's anxiety is that the existing words, which require him to spell out the considerations that lead the Secretary of State to make any such determination, are so wide that he might be tripped up in court when he had inadvertently failed to specify such considerations. I think the Minister accepted that no such attempts had so far been made to go to court under section 60(6)(b) of the 1980 Act. Therefore, this anticipated the possibility of a legal assault rather than dealing with one that had already taken place.

Our objection to paragraphs 8 and 9 is that they remove a clear duty under the 1980 Act and substitute a wholly subjective discretion. Instead of the Secretary of State giving the considerations that led him to make the determination, there is a discretion to provide such explanations as he thinks desirable of the main features of any such determination". That could mean anything or nothing.

The Minister said that he and his hon. Friends were reasonable people, and we are told ad nauseum on account of Wednesbury that that goes without saying. He said that as reasonable people they would provide as much information as possible—indeed, that we would not be able to spot the join between the application of the present provisions and the new provisions.

Two points arise. First, if we are unable to spot the join between the old regime and the new one, why make the change at all? Secondly, while this Minister may be very reasonable, he may at some stage be elevated to an even higher position—

Mr. Terry Davis

A peerage.

Mr. Straw

That awaits him in any event, but as the roulette wheel has turned, half the Cabinet has been in office for less than a year. Therefore, it is short odds against, if not odds on, that the Minister may find himself in the Cabinet. However, he will not be there for ever, and who knows how another Secretary of State may interpret these words. Secretaries of State do not have to take account of explanations offered in this House, and they cannot be the subject of court actions. As we well know, only the words on the face of Acts can be tested in the courts, and paragraph 8 waters down an existing and important duty.

When we debated this in Committee, I sought to meet the Minister half way by accepting that the words "the considerations" might have been slightly infelicitously drafted. The Minister feared that everything would have to be put in the pot, including the reason why he had a go at Birmingham, which may have been because he had a bad breakfast. To meet the half genuine point of the Minister, I suggested that "consideration" should be qualified by "material" so that we would deal with the main considerations leading to the determination. The Minister said: I shall study closely what he has said, but that undertaking carries with it the lowest level of moral commitment to introducing an amendment." — [Official Report, Standing Committee G, 15 July 1986; c. 164.] We may be denied the possibility of pursuing this, even in the other place, if the Bill is certified as a money Bill, which I hope it is not. I understand, but do not accept, the Minister's argument that the wording is too wide. Certainly, the new wording is too narrow and will give Ministers too substantial a discretion. I hope that the Minister will accept the amendment which incorporates "material" as a qualification. That would meet the Government's concern that they should not have to specify every tiny consideration, but merely the main ones.

The courts are capable of applying common sense in this case. They are not expected to produce tomes the size of the Encyclopaedia Britannica, merely an adequate explanation of the reasons for Ministers' decisions. If local government is to be convinced that there is a systematic approach to the amounts of block grant they receive and that decisions are not based on caprice, it is crucial that it can satisfy itself how decisions are made. The Minister knows well—he is sensitive about this—that relations between central and local government have taken more than one knock over the past five years. He is anxious to restore them, but he will not do so if he seeks to deny local authorities adequate information about how decisions are made.

Amendment No. 32 seeks to amend section 56 of the Local Government Planning and Land Act 1980. It states: If representations are made to the Secretary of State by any association of local authorities or by any local authority that the total expenditure of local authorities generally or of any particular local authority shall be adjusted by the addition or subtraction of expenditure of any description the Secretary of State shall consider those representations before determining whether or not to make a direction and shall give reasons for his decision. The amendment seeks to require the Secretary of State to consider requests from local authorities to amend the definition of total expenditure for block grant purposes and to give his reasons for granting or not granting such requests. In previous debates we considered the operation of targets and I moved new clause 1 to remove the power to establish targets under the 1982 legislation. Targets have now been abandoned for the time being and we do not lament their passing. But of the facilities that went with targets was the Secretary of State's opportunity to disregard certain items of expenditure when comparing an authority's expenditure with its target. That was an important safety valve of the target mechanism and enabled certain classes of expenditure which everyone accepted were essential not to suffer penalty.

Under the so-called pure block grant arrangements, a similar mechanism is not provided for disregards, but that would be all right provided that the penalty system was abandoned altogether. Although targets were abolished, the penalty system continues, with changes in the slope of the schedules, which means that authorities will still suffer considerable financial penalties if they spend over their grant-related expenditure assessment, plus tolerance. The abolition of the target mechanism and, with it the disregards, mean that a number of expenditures that would have been disregarded for target purposes and that would not have suffered penalty under that system will place some authorities in a more difficult position than would otherwise have been the case.

As examples of the cost to ratepayers of various disregards, in 1985–86 Lambeth paid £1.36 for every £1 of expenditure. In 1986–87, based upon provisional exemplifications of the settlement, with package A GREAs, the extra cost to Lambeth will be £2.17. In 1985–86, for every £1 of additional spending the cost to Birmingham was £1.09. In 1986–87 it will cost Birmingham £2.60. Most reprehensible of all is Lancashire. For every £1 of additional spending last year it was only having to pay 72p. This year it is having to find £1.24.

A paper was published by the Association of Metropolitan Authorities, supported by the London Boroughs Association, the Association of Local Authorities and the Greater London Council, in an effort to seek a way out of this problem. It is important that the Minister should make observations upon that paper.

Mr. Simon Hughes

I support the amendments. The Minister will remember that in Committee it was strongly argued that the local authority associations would appreciate as much explanation as possible. We sought to find the best definition. The reply of the Under-Secretary of State, the hon. Member for Mitcham and Morden (Mrs. Rumbold)-I was grateful to her for it—dealt with the precedent for the word "desirable". I accept entirely what she said about that being an appropriate word. The amendments do not preclude desirability as a factor, if that is thought to be appropriate. However, the amendments seek to provide for everybody who is interested in and affected by the rate support grant decisions of the Government the most material considerations—that is, the matters that relate to the basis of the Secretary of State's decision.

Perhaps the Minister will be able to say that what we are asking for is what the Government intend and that they will tell us a little more tomorrow. We are seeking to make clear the main criteria, so that when the annual reports on the rate support grant are published, there can be an assessment, year on year, of the change in the decision-making process and material parts of that. and in particular on the way in which the criteria that the Government have chosen to use are applied either local authority by local authority, or group of local authorities by group of local authorities.

12 midnight

As the hon. Member for Blackburn (Mr. Straw) said, amendment No. 32 is something that the Minister could meet by way of an undertaking. The Government are being asked to undertake that certain representations made are considered, and that there is a specific duty and process whereby matters raised in the amendment, brought singly by local authorities or by groups of local authorities, about the total expenditure or single expenditure of a local authority, can, when they are added to or subtracted from, be the subject of specific consideration by the Government. These are procedural matters, but they would help confidence building between local authorities and central Government, arid the understanding of the processes of central Government. They would follow in the tradition that the previous Secretary of State said it was the intention of the legislation to carry out, that is, to make the process more simple and comprehensible. I hope that we can achieve some acceptance by the Minister of what is intended by the amendments.

Mr. Waldegrave

I am sorry to have to disappoint the hon. Member for Southwark and Bermondsey (Mr. Hughes), who has joined our debate. Perhaps he has dropped in to see whether the Opposition Front Bench is occupied. On one memorable occasion, he found it unoccupied and moved in, but I would not advise a takeover with the hon. Members for Birmingham, Perry Barr (Mr. Rooker) and for Birmingham, Hodge Hill (Mr. Davis) as bodyguards to the hon. Member for Blackburn (Mr. Straw).

We went into the arguments about consideration in some detail in Committee. As the hon. Member for Blackburn was generous enough to say, if the law meant that every underlying consideration had to be published, that would produce a mountain of useless information, which would not help the local authorities or anybody else. A good way of hiding useful information is by surrounding it with useless information, and that is as good as not providing any information.

In Committee I told the hon. Member for Blackburn that we would look at other formulations that he provided, and we have done so. The hon. Gentleman suggested that "material considerations" should be specified, but I am advised that that would not help because it could be argued that every consideration underlying every GRE component is material. It would have done us no harm to have accepted a formulation that would have met the hon. Gentleman's point, but his suggestion would not work. Therefore, I have to ask him to accept that the declaration that we have made, with which my right hon. Friend the Secretary of State is associated, that it is not our intention to reduce the level of explanation given, should carry the burden of meeting the points that he and the hon. Member for Southwark and Bermondsey made.

On the fundamental and new point that the hon. Member for Blackburn made about trying to reintroduce the disregard system into the working of block grant, I have one of those dual-edged arguments. First, it is out of the question to do so, because that would plainly be turning the workings of the block grant into something different. Rather than allowing the resdistributive system of the slope to do its work, it would reintroduce something much more like holdback and targets. On the other hand, we have, by law, to do a large part of what he wants. We have to consider any representation made about total expenditure and what should be included in it. Several representations have been and are being made, but it would take a very strong case to make us use the total expenditure definitions to reintroduce disregards in that way. It would take us back, to some extent, to the duality and complexity of having a target and holdback system.

Mr. Straw

Does the Minister accept that as long as the block grant mechanism is used for penal purposes and for purposes for which it was not intended — it was originally intended as a distribution system—there must be some safety valve to take account of expenditure that authorities have incurred, through no fault of their own, for national reasons or because of an act of God?

Mr. Waldegrave

I do not accept that argument. The block grant system, schedule and slope are used in response to a good deal of pressure from my right hon. and hon. Friends in order to try to provide a marginal taxation rate that puts greater pressures on the high spenders than on the low spenders. Within that, we do not accept that it would be sensible to reintroduce the additional complexity of a zero marginal rate for certain categories of expenditure. However, we will have to listen to representations on the definition of total expenditure. In view of that, perhaps the amendment will not be pressed.

Amendment negatived.

Mr. Boyes

I beg to move amendment No. 33, in page 5, line 47, at end insert— `(14.—(1) Section 57 of the said Act of 1980 shall be amended as follows: (2) After subsection (3) there shall be inserted— `(4) A local authority's grant-related expenditure shall not be less than the level of expenditure (if any) determined or redetermined by the Secretary of State for the authority under section 3 of the Rates Act 1986.'.

The amendment requires the Secretary of State, in determining grant-related expenditure for those authorities subject to rate limitation, to set it at a level that is not less than the expenditure level determined under section 3 of the Rates Act 1984. Section 3 enables the Secretary of State to determine an expenditure level for those authorities subject to rate limitations. The 1984 Act is also the primary legislation under which the new joint authorities are subject to precept control for a period of three years from their establishment.

It is a constant source of discontent that rate-capped and precept-controlled authorities are subject to two separately assessed bench marks of expenditure: GREA, being the formula-derived standard level of service, and the expenditure level, which is a more realistic assessment of what the Secretary of State believes is a reasonably achievable level of expenditure. At the basis of the argument is the principle that the expenditure level represents a recognition by the Secretary of State that that is the level at which authorities need to spend if they are to maintain a reasonable level of service. If that level of expenditure is reasonable, the artificially contrived GREA should be set at least at the same level. I can illustrate some of the problems with reference to newly established metropolitan joint police authorities for 1986–87. I live in Northumbria, and there the GREA is £43.178 million and the expenditure level is £43.431 million. Thus the level of expenditure is higher than the GREA.

But the difference can perhaps best be illustrated by looking at west Yorkshire. There, the GREA is £50.712 million and the expenditure is £63269 million, a difference of almost £13 million.

An authority covered by the Rates Act 1984 may be expressly designated for rate limitation only if it appears to the Secretary of State that its total expenditure in the preceding year was excessive, having regard to general economic conditions. For the new police authorities which are deemed to be designated, there is no presumption that the total expenditure of the predecessor authorities in 1985–86 was excessive. In determining the expenditure level for these new authorities the Home Secretary's principle is that each authority should be broadly able to maintain the level of service for its area provided by the predecessor authority, and he takes into account all the individual circumstances of each authority.

It is clearly inequitable that in those conditions the GREA should be set lower than the expenditure level. There is a precedent for the suggested course of action. The GREA for the Metropolitan police is set equal to the budgeted expenditure and the amendment would ensure similar treatment for rate-capped and precept limited authorities. In other words, if it is good enough for the Met it is good enough for the police authorities.

Mr. Simon Hughes

Last year the Government sought to move towards reconciling the difference there had always been between target and GREA. That was always an inconsistency and it gave rise to some illogicalities complained about by hon. Members in all parts of the House. The complaint was that what local authorities could aspire to reach without penalty was not the basis on which their rate support grant was calculated compared to the needs of other local authorities. The amendment would continue the march towards consistency and would reconcile yet another and the most recently introduced of the Government's assessments — that applied under the Rates Act 1984 for rate capping purposes.

I hope that the Minister will be able to say that the Government will simplify matters by defining in one way for all purposes the specific amount of local authority expenditure calculated by them as being appropriate. It would seem logical that it should be extended to the calculations for the purposes of rate capping. I can understand that there may he an argument for saying that there is a common calculation, but there is room for an acceptable maximum that goes above that to allow scope within which local authorities can expend without being capped and having their rates determined by the Government.

If not tonight and in the context of this Bill, I hope that the Minister will be able to say that it is the intention to reconcile this definition with the others. The Minister may be able to shorten this debate by asking us to wait 12 hours at which time the Government will accede to the request in an announcement.

Mrs. Rumbold

As the hon. Member for Houghton and Washington (Mr. Boyes) has said, all local authorities and expecially the new joint authorities can be selected for the first three years but they can only be selected for rate limitation under section 2 of the Rates Act 1984 if their spending exceeds their grant-related expenditure in the year of designation.

I have to tell the hon. Member for Southwark and Bermondsey (Mr. Hughes) that the practice has been in the first two years of its operation that authorities are selected only if they are spending at least 20 per cent. above their grant-related expenditure. The amendment would arbitrarily increase the level of an authority's grant-related expenditure and would validate any authority that has chosen to indulge in high spending. it would also give them a higher grant entitlement at the expense of local and precepting authorities which are generally low spending. It would give them an unfair advantage and would let authorities out of rate limitation for the following year because by definition, those authorities would no longer he spending in excess of grant related expenditure. For those reasons I find it impossible to accept the amendment.

Amendment negatived.

Motion made, and Question proposed, That the Bill be now read the Third time.—[Mr. Wuldegravel]

12.14 am
Mr. Straw

My understanding was that the Minister would say a few words on Third Reading. I am delighted that he wants to speak after me rather than before me.

We have been over the ground of the Bill. It is three and a half months since the Minister came to the House to make his now-famous statement on the block grant multipliers. Never has a statement had such a fascinating title. Of course, the nation has been held enraptured ever since as we have pursued the Bill.

However, the Bill had a bad birth. It was dreamt up by Ministers to get them out of a difficulty caused by the application of their policies during the past seven years. It is a bad Bill, and we have not been convinced otherwise during our consideration of the measure. If we have the opportunity, we shall ensure that the Bill is pursued in the other place.

12.16 am
Mr. Simon Hughes

The criticism of the Bill from the beginning was that it was introduced solely because the courts had said that they would rule against the Government. It was the Government's response to the case brought by the city of Birmingham. It is never a satisfactory beginning for any legislation to be introduced as a way of getting the Government off a hook of their making and to alter the rules that they laid down. The principle of retrospective legislation, as applied by the Government in the Bill, has never been adequately justified. It does not accord with the principles of retrospective legislation that is acceptable and has been used in the past.

The Bill includes a couple of tidying-up mechanisms which are acceptable, but the part of the long title which suggests that the other major purpose of the Bill was, "to clarify and amend the law relating to rate support grants," has not, sadly, produced the clarification and amendment that many of us would have wished.

It is clearly now an issue as to whether the Bill can be debated only by the House of Commons. I hope that those who consider such matters will remember that the Bill contains matters that relate not only to finance. Indeed, the second part of the long title makes it perfectly clear that the clarification and explanation of the law—for example, the explanation of what goes into the determination of rate support grant—goes far beyond that. I hope that the Bill will go to the other place, where it can be debated and, if necessary, amended. With the Bill, the Government have made no substantial progress towards convincing the Opposition, and many of their own Back-Benchers, that they have yet got the rules, let alone the application, of the rate support grant and rating system anywhere near right.

12.18 am
Mr. Allen McKay (Barnsley, West and Penistone)

We understand that this could be a money Bill. Had we known or suspected that previously, the Committee stage would have been much longer than it was. As you know, Mr. Deputy Speaker, when a Committee considers amendments to a Bill, it also looks to the Lords to table other amendments. If the Bill does not go to the other place, some matters will not be debated at all. I wish to put some of them on record.

In this Bill, the Secretary of State has taken to himself great powers. But those powers will be available to any Secretary of State, of any political persuasion, once they are on the statute book. The Bill talks about local authorities belonging to the appropriate class. For the first time, we shall be in danger of placing authorities into classes for the distribution of rate support grants. The amount that they receive will depend on their class, not the special difficulties to be found in those local authority areas. The Bill, if passed, will give the Secretary of State powers to direct finance to any authority in any way that he wishes. If the Secretary of State exercises those powers in one direction, he must remember that a Labour Government can exercise them in another.


Mr. Waldegrave

With the leave of the House, Mr. Deputy Speaker, I should like to say a few words. We are about to pass a Bill which will clarify the law and make it what it was thought to be in a number of important technical respects in relation to rate support grant settlements. I hope that we have blocked off one or two other technical opportunities for challenge which would have introduced further confusion into the rate support grant settlements, both those that have been made in the past and will be made in the future.

I am grateful for the support given by my hon. Friends in Committee and on the Floor of the House. The Opposition have probed the Bill properly and introduced a number of powerful arguments, in particular relating to Birmingham, if I may mention that dreaded city. [HON. MEMBERS: "Oh!"] Not dreaded in any real sense—that attractive and important city. We have all learnt a great deal about Birmingham; but, apart from that, I think that the general opinion of the House will be that the Government have thoroughly won the argument on the Bill.

Question put and agreed to.

Bill accordingly read the Third time, and passed.