Local Government Finance Bill

HC Deb 12 January 1987 vol 108 cc36-118

Order for Second Reading read.

4.28 pm

Dr. John Cunningham (Copeland)

On a point of order, Mr. Speaker. I rise in respect of certain provisions in the Bill on which it is proposed to have a Second Reading debate in the House today. Clause 1 requires all local authorities to keep a rate fund revenue account, and the Inner London education authority is a local authority for that purpose. Will you, Mr. Speaker, consider treating the Bill as a hybrid Bill? Clause 7 provides for the maximum rate precept of each designated authority to be determined in accordance with schedule 2. If any hon. Members have had the opportunity to look at schedule 2, they will recognise, not only its complexity, but the need to have a considerable understanding of algebra to make any sense of it.

Within designated authorities, subparagraphs 2(1) and (2) of the schedule include what is called a "T" factor, calculated in accordance with paragraphs 3(6) and 4 of schedule 2 which is intended to pick up the effects of the teachers' pay settlement. The formula for designated authorities in sub-paragraphs 2(3) to 2(6) of schedule 2 exclude that T factor.

Sub-paragraphs 2(1), 2(2) and 2(6) relate to types of local authorities which are, or may be, local education authorities. Within the category of local authorities which are designated authorities, the Inner London education authority is the only one with the functions of a local education authority which does not have the T factor applied to it. It is, therefore, arguable in terms of hybridity that among that category, the ILEA's financial interests—and therefore the financial interests of Inner London ratepayers—are treated differently from the interests of all other local authorities and their ratepayers. That could accordingly be argued to come within the definition of a hybrid Bill, as given in "Erskine May", as: a public Bill which affects a particular private interest in a manner different from the private interests of other persons or bodies of the same category or class. In the argument on a similar point relating to what is now the Local Government (Interim Provisions) Act 1984, you held, Mr. Speaker, that there was no hybridity as the category of constituent authorities—the London boroughs—were a genuine class, and the fact that the City of London was not within that class did not alter the position. In the present case, however, the definition of ILEA as a local authority for the principal purposes of the Bill—remedying the rate support grant position—distinguishes it from the City under the 1984 Act.

I submit, Mr. Speaker, that there is a prima facie case for saying that this is a hybrid Bill. I ask you to consider this submission most carefully in view of its complexity. To save any risk of further damaging your vocal chords, perhaps your could let the House know your decision in due course.

Mr. Nigel Spearing (Newham, South)

Further to that point of order, Mr. Speaker. I wish to make a point related to hybridity. I apologise for the lack of notice, but, as you will appreciate, the Bill was published only the day before the House went into recess, and its effects have been difficult to determine, even for those expert in this complex area.

The essence of private legislation, as I understand it, is that there is within any enactment or proposed enactment an injurious affection of a technical, private interest exercised in an arbitrary manner within a single statutory classification in that legislation. If such injurious affection can be shown to exist, such legislation may come—I emphasise "may come"—within the ambit of the Standing Orders for private business in this House, and if it is a public Bill, it is therefore declared hybrid, being subject to both sets of Standing Orders.

As my hon. Friend the Member for Copeland (Dr. Cunningham) said, schedule 2 contains a number of complex mathematical formulae which seek to define classes of local authority. I quote the ruling of Mr. Speaker Hylton-Foster in 1963—a predecessor of yours, Mr. Speaker—from the current edition of "Erskine May", on page 896. He said: I think that a hybrid bill can be defined as a public bill which affects a particular private interest in a manner different from the private interests of other persons or bodies of the same category or class. Unlike my hon. Friend the Member for Copeland, I am concerned that in the case of a borough the application of this formula may result in a very different injurious affection on both the borough and its inhabitants than on those to which that formula refers. You will know, Mr. Speaker, that in this respect, a borough corporate can be regarded as a private corporation just as any ratepayer in the borough can be regarded as a private individual.

The submission I make, therefore, is that if it can be shown that within any one of these classes of formulae the effect on any such borough, any of the burgesses or ratepayers, would be injurious, as distinct from the effect of other classes, the Bill should be regarded as subject to the Standing Orders for private business and, therefore, hybrid.

I do not necessarily expect a reply now. However, that is the position with which we are faced because of this legislation.

Mr. Speaker

I can deal with the matter despite my vocal chords, if the House will bear with me. I am grateful to the hon. Member for Copeland (Dr. Cunningham) for having given me notice of his point of order, and also to the hon. Member for Newham, South (Mr. Spearing), because I understand that he was making inquiries about this last week. That has given me an opportunity to look very carefully into the question of hybridity. I and my predecessors have frequently ruled that a Bill that concerns a matter of public policy and deals with private or local interests as members of a class without singling out any one of a class for adverse treatment is not hybrid.

The hon. Members for Newham, South and for Copeland both argue that because ILEA is dealt with separately from other authorities, the Bill is prima facie hybrid. I must tell them, however, that the Inner London education authority has, since its inception as the governing body for education in the inner boroughs of London, been treated as a class of its own in the metropolis. That was the case both in the London Government Act 1963 and in the Local Government Bill of 1984. I must, therefore, rule that dealing with ILEA separately does not render the Bill hybrid.

Several Hon. Members

rose——

Mr. Speaker

Order. I shall call the hon. Member for Blaydon (Mr. McWilliam), but I have nothing to add to my statement.

Mr. John McWilliam (Blaydon)

On a different point of order, Mr. Speaker. I apologise for not giving you notice, but I could not do so until I discovered that a money resolution was attached to the Bill. Part II, which deals with its financial effects, states: It is not envisaged that there will be any significant increase in the amount available for grants. I have gone through the Bill, but I cannot find any clause in italics. In other words, I cannot find any financial clause, yet a money resolution is attached to the Bill. The Bill was not properly presented to the House, as it appeared that it had no financial effects. Yet today we find that, in fact, financial effects are covered by a money resolution which we must debate later this evening.

Given the way in which the Bill has been presented and the fact that it has financial effects—or there would not be a money resolution—I put it to you, Mr. Speaker, that the Bill has not been properly presented. The Government must consider what they are trying to do in presenting such a Bill. The House must decide how to consider the Bill, because it clearly has financial aspects.

"Erskine May" is quite clear that if a Bill has financial aspects, the clauses which relate to the financial aspects must be printed in italics. As they have not been printed in italics in the Bill, I submit that the Bill has not been properly presented to the House.

Mr. Speaker

On page 10, in part III, clause 16, the Bill states in italics: "There shall be paid out of money provided by Parliament any increase attributable to this Act in the sums payable out of money so provided under any other Act." A money resolution means, not that more money will be spent, but that it will be spent under a new authority. The matter is quite in order.

Dr. Cunningham

I accept what you have said, Mr. Speaker, about ILEA being a unique authority. It is the only single-purpose authority of its kind. I also accept what you have said about the 1962 and the 1984 Acts. However, my point is different. My point is that, for the purposes of today's Bill, ILEA is taken in a class with other authorities with educational functions. They are given consideration on the basis of the T factor that I mentioned in working out the implications of the Bill for them, but ILEA is not. Therefore, within the terms of the Bill, ILEA is treated differently from the other authorities in the same class in the Bill. That is the point at issue, and it is not a question of the treatment of ILEA, as in the previous cases that I have mentioned.

Mr. Speaker

I assure the hon. Gentleman that I have looked at this with the greatest of care, as the House would expect me to do when a question of hybridity is likely to be raised. I am satisfied that the Bill is not hybrid, for the reasons that I have stated.

Mr. Spearing

I apologise for returning to this matter, Mr. Speaker. We are subject to time constraints, and I have already apologised to you for not having been able to raise the point by notice. My point of order was not that raised by my hon. Friend the Member for Copeland (Dr. Cunningham). It was a new and a fresh point of order, and when you replied to him with the ruling that you have just reiterated, I hope that you were not attempting to include my point of order, which I hope can be dealt with as a separate issue, in an informal or formal manner, as you so please.

Mr. Speaker

I take the hon. Gentleman's point. He was dealing with the formula under which local authorities are rate-capped and how it may affect this authority. In view of the difficulty that I am facing today, I shall write to the hon. Gentleman about this matter.

Mr. McWilliam

Further to my point of order, Mr. Speaker. You drew my attention to page 10, which I had read. It says: "There shall be paid out of money provided by Parliament any increase attributable to this Act in the sums payable out of money so provided under any other Act". "Erskine May" is clear that the financial aspects of any Bill should relate to that Bill and not to any other Act. It is with that point that I find the greatest difficulty. The general financial clause seems to say that money for the Bill can come out of any other aspects of Supply to which the House has already agreed. This seems not to be in order with the general way in which we deal with financial procedures and does not, in a reasonable manner, relate to the way in which we should deal with legislation that concerns finance.

Mr. Speaker

The hon. Gentleman raises a technical point. As far as I can see this is in order, but in view of what he has said I shall look carefully at the matter before we come to the money resolution.

4.33 pm

The Secretary of State for the Environment (Mr. Nicholas Ridley)

I beg to move, That the Bill be now read a Second time.

As the House knows, the purpose of the Bill is to validate the practice that my Department and the Welsh Office have both adopted since 1981–82, in line with the wishes of local government, in calculating relevant and total expenditure for block grant and rate limitation, to allow that practice to continue on a proper basis for the remaining years of the present system; and to set rate and precept limits for 1987–88. It deals also with a much lesser problem in Scotland. I explained the background in my statement on 16 December. The House may find it helpful if I expand a little on what I said then, before describing briefly the provisions of the Bill.

I shall begin by explaining the concepts of relevant and total expenditure. "Relevant expenditure" is essentially the net expenditure of local authorities after netting off income such as fees and charges. The Secretary of State must take this into account in determining the total amount of grant which should go to local authorities each year. "Total expenditure" is a narrower concept. It is broadly relevant expenditure less specific and supplementary grants. An authority's total expenditure is the total which is eligible for block grant. Neither relevant nor total expenditure is a measure of gross spending.

Total expenditure is taken into account in determining grant related poundages, multipliers, and, perhaps most important the individual entitlements to grants of local authorities. Total expenditure also has an important role in rate limitation. I select authorities for rate limitation if in my view their total expenditure is excessive. The expenditure levels that I determine are levels of total expenditure, and I calculate rate limits from these.

Before taking the House through the history of events, I should also say something about local authority funds and accounts. Every local authority is required to keep a general rate fund or its equivalent, into which receipts are paid and from which liabilities are discharged. Each will maintain, though not required to by statute, an account of its main revenue transactions, often called a rate fund revenue account. Depending on the nature of the authority, it will have a number of other named funds or accounts, some required by statute, some not—for instance, the housing revenue account, the direct labour organisation revenue account, the superannuation fund, the loans fund, special funds, including capital funds set up under the Local Government (Miscellaneous Provisions) Act 1976, and trading accounts. This Bill stems from the relationship of the general rate fund—what is usually called the rate fund revenue account—to these and other funds and accounts.

The central issue is whether the rate fund for the purposes of calculating relevant and total expenditure should be interpreted in the wide sense of treating all other funds and accounts, such as special funds, the housing revenue account, and accounts of trading undertakings merely as sub-divisions of the rate fund, or in the narrow sense of seeing the rate fund as a separate and distinct entity from these other funds and accounts. Under the wide interpretation, expenditure falling to be defrayed from the rate fund is the entire expenditure of the authority but does not include internal contributions between funds and accounts. Under the narrow interpretation of the rate fund, its expenditure excludes expenditure charged direct to the other funds and accounts, but includes contributions to those funds and accounts. Since the beginning of the present grant system, my Department and the Welsh Office have adopted the narrow interpretation in line with the wishes of local government.

What happened was as follows: from late 1979 the Local Government Planning and Land Act 1980, which established block grant, was passing through Parliament. The Act defines relevant and total expenditure, on which block grant is paid, essentially as expenditure falling to be defrayed from the rate fund. It was only after the Act was passed, and after the first block grant settlement had been made in December 1980, that the issue emerged clearly. This was when draft grant claim forms were sent to the local authority associations which made it clear that the Department envisaged using the wide interpretation for calculating authorities' entitlements.

The local authority associations were very concerned about the proposal to interpret references to the rate fund in the 1980 Act in this way. They argued that the narrow view of the rate fund was an equally possible interpretation of the Act and that the wide view was not consistent with accepted and sensible accounting practices.

Mr. Allan Roberts (Bootle)

The Conservative-controlled associations were particularly vociferous in making this point. It was also welcomed by Department of the Environment Ministers. They hoped to encourage housing revenue account profits which the Government had made legal by the 1980 Act.

Mr. Ridley

I am speaking from memory, but I believe that all the local authority associations preferred the narrow rather than the wide interpretation. The only exception was the London borough of Wandsworth, which at that time was led by my hon. Friend the Member for Southampton, Itchen (Mr. Chope). He believed that it would have been better at that time, or at a later stage, to use the other definition. I cannot comment on the hon. Gentleman's second point. I was not in the Department at that time. However, I have more to tell him about what happened.

In considering the issue, Ministers had at that time to weigh the two differing interpretations of the 1980 Act references to the rate fund and the disruption to local authorities' accounting practices which would have stemmed from a decision to proceed with a wide view of the rate fund. The Government therefore decided to accept the strongly argued and unanimous views—this is the answer to the hon. Member for Bootle (Mr. Roberts)—of the local authority associations and adopt a narrow definition for calculating grant entitlements under the 1981–82 rate support grant settlement, thus continuing what had been existing practice for many years under earlier legislation. A circular letter to this effect was sent to local authorities on 13 February 1981. No queries were raised and the approach taken was generally welcomed.

The change in 1981–82 to the local authority approach to the rate fund was made on the basis that for 1982–83 the issue would be reconsidered with the associations.

A paper was put to the local authority associations in April 1981. Given the unanimous acceptance of the interpretation adopted for 1981–82, this proposed that the local authority approach to total expenditure should be continued for 1982–83 and suggested a study to look at the pros and cons of changing to the wider approach in the longer term. The local authority associations continued, however, to press strongly the view that there should be no switch to the wide approach and that there was no need for any study to look at this alternative approach. The Department agreed to put the issue on one side but indicated that they might come back to the group with proposals in future if they seemed necessary". From then on, the Government operated the block grant system on the basis of the narrow view of the rate fund. During that period there were a number of legal challenges, brought on a variety of grounds, to the Secretary of State's decisions on rate support grant and rate limitation. But in those proceedings no legal point was taken against the narrow view, nor did local government auditors question the practice.

The issue re-emerged last year when it was discovered that a number of returns of expenditure from local authorities did not conform to normal practice on expenditure. Several authorities had decided to show contributions to special funds, even though they appeared to have a deficit on the rate fund revenue account and there was apparently no liability for which the money was being set aside. Another authority had decided that in 1984–85 transfers from a special fund should not count as income-reducing expenditure even though, in a previous year, it had counted transfers to special funds as expenditure. This was directly contrary to the approach which the Government had taken in 1981 at the request of the local authority associations.

It appeared that these devices were designed to increase block grant entitlement at the expense of other authorities. We estimate that the authorities concerned could gain a total of £38 million in grant because of them.

Although the practices had been accepted by the auditors in a number of cases, my Department was very doubtful whether it could accept them as a basis for paying grant. One set of authorities appeared in effect to be conjuring money for special funds out of the air solely to increase their grant entitlements. The approach of the other authority ran completely counter to normal practice. If accepted, it would have meant that the Government tolerated two completely opposite practices on the question of calculating total expenditure. That, clearly, was not on. I should say here that my Department has written to the authorities concerned seeking an explanation of the figures that they have submitted.

In September, in deciding how to respond to these cases, I looked closely at the definitions of relevant and total expenditure. I was concerned that the accepted practice did not correspond to the statute. I decided that it was essential to seek the Attorney-General's view. He supported counsel's opinion that the treatment of total expenditure which the Government had operated at the request of the local authority associations was indeed incorrect in law. Transfers between funds and accounts within the rate fund were not expenditure. Expenditure took place only when an authority had liabilities in the outside world and met these from the general rate fund. Any fund or account, whether statutory or non-statutory, which a council set up was simply a part of the rate fund earmarked for a particular purpose. I received the advice of the Attorney-General in later October and the Government decided to take urgent action.

As I have explained, the Government had originally responded positively and constructively to the strongly held views of the local authority associations on the interpretation of expenditure, but, in view of the cases which emerged last year and of the further legal advice, the Government had no alternative but to legislate. Without such legislation, all past decisions which involved the concepts of total or relevant expenditure would have been in doubt. It would have been quite improper to take further decisions about rate support or rate limitation without securing the legal position. I came to the House in December as soon as I was able to present the Government's fully worked up proposals for handling the problem. It would have been quite irresponsible to come without such a solution and face local government with the great uncertainty that that would have caused.

Mr. Michael Meadowcroft (Leeds, West)

The Secretary of State said that he came to the House at the earliest possible moment. On 3 December, some weeks after he knew about the problem, he made his third rate support grant statement to the House, although he knew that the basis upon which it was assessed was open to doubt under the system which he intended to tell us about on 16 December.

Mr. Ridley

That third consultative paper was intended for discussions with the local authorities. I have not made a decision about next year's rate support grant, although I hope to make a statement very soon on that subject. No rate support grant settlement is legal until it has been approved by the House. I shall be unable to invite the House to approve the rate support grant settlement until this Bill has become an Act. The House might like to remember that without the Bill becoming an Act, it will be impossible to pay grant for 1987–88.

Mr. Richard Page (Hertfordshire, South-West)

No Conservative Member blames my right hon. Friend for the problems with which he is faced. It was his misfortune to be sitting in the chair and holding the parcel when the music stopped. As the Bill effectively tries to maintain the status quo, will my right hon. Friend consider introducing either an amendment or a new clause to stop the present ratchet effect, which reduces the rate support grant for counties such as Hertfordshire? If it were introduced for 1988–89, it could continue until the new Conservative Government were able to produce their new rate reforms after the next general election.

Mr. Ridley

I am grateful to my hon. Friend. I should be even more grateful if he would not seek to add to the Bill, which is already complex enough, something that is of a completely different nature, which would freeze the present pattern of grants for 1988–89 and thereafter. I agree with my hon. Friend that it will be a blessing and a godsend when the new Green Paper proposals are implemented by an Act of Parliament. In the meantime, it will become increasingly difficult to operate the present system. This is neither the time nor the place to deal with that, although the suggestion of some sort of freezing of the system is not totally unattractive.

Dr. Cunningham

Will the Secretary of State be absolutely precise and tell the House when he was first advised of this state of affairs? We want to be told, not when the Attorney-General confirmed it, but when the Secretary of State was first advised of the illegality of the Government's position.

Mr. Ridley

I think I told the hon. Gentleman that I first became aware of the problem in September.

Dr. Cunningham

When?

Mr. Ridley

Without consulting my files I cannot give the precise date in September, but let me make it clear that this was brought as a possible problem upon which it would be correct to seek legal advice. We sought legal advice from counsel and then had to seek a second opinion, and I consulted my right hon. and learned Friend the Attorney-General. It was not until we were certain about the legal position that I realised the problem would have to be dealt with.

The main purpose of the Bill is to allow my Department and the Welsh Office to continue with the practice adopted to date, and supported by the general body of local government, for calculating relevant and total expenditure. The Bill will enable transfers to and from this account to be defined in a way which replicates current practice on expenditure; that is, that total expenditure should be the net expenditure of the rate fund revenue account.

Clause 1 and schedule 1 require authorities to keep a rate fund revenue account and list those accounts separate from it. Clause 2 sets out the practices to be observed in compiling the account. Clause 3 defines relevant and total expenditure in relation to the rate fund revenue account. These clauses apply from the financial year 1987–88 onwards. Clause 4 validates all things done for rate support grant purposes since 1981. There are, however, further decisions on rate support grant to be taken for all years since 1981–82. Clauses 4 and 5 provide for these.

For 1981–82 and 1982–83, only the conclusive calculation of block grant remains to close the books. The Bill provides that these calculations shall be done on the basis of the figures in the last supplementary reports made for those years. For the years 1983–84 to 1986–87, there are outstanding supplementary reports to be made. The Bill provides that these shall be made on the same basis as reports for the years 1987–88 onwards. As I have explained, authorities have in practice kept what is usually called a rate fund revenue account. Clearly, it is not possible retrospectively to require authorities to keep rate fund revenue accounts. Therefore, the calculations will be based on the notional existence of such an account.

Mr. Charles Morrison (Devizes)

I think my right hon. Friend will agree that clause 5 is a little obscure and as a consequence seems to be open to a variety of interpretations, one of which is giving rise to fears that the basis of rate support grant from 1984–85 on may be changed to the disadvantage of local authorities. Those authorities will not know that until 1987, with the consequence that the whole of their calculations, not only for 1987–88, but for earlier years, might be adversely affected and ultimately ratepayers might be disadvantaged. Can my right hon. Friend confirm that it is not his intention to act retrospectively to the disadvantage of local authorities and ratepayers? If he can confirm that, and if it is possible to devise amendments for the Committee stage, will he agree to accept them?

Mr. Ridley

I can confidently confirm that no change whatever is proposed in the way in which past years will be treated for rate grant support settlements. The only point is that they must be based on what is in the Bill about the state of the definition, because hitherto the definition on which they were based was illegal. The Bill merely confirms the definition on which previous rate support grant settlements have been struck.

Dr. Cunningham

Will the right hon. Gentleman give way?

Mr. Ridley

I am replying to the point raised by my hon. Friend. Let me make it clear that the only effect of the Bill is that we will not be able to present to the House those final and other statements for the years in question until the Bill becomes an Act.

Dr. Cunningham

What the Secretary of State says cannot be true. There are retrospective provisions in the Bill. He must recognise that and must know that the Bill gives powers enabling him to invalidate decisions which may have been taken by local authorities and which may have been confirmed by the auditors. What he says about there being no retrospection is not true.

Mr. Ridley

I do not accept that for one moment. No change whatever is proposed to the way in which total expenditure definitions are calculated. We would not have paid grant on the devices that I have explained to the House. Despite what an auditor may have said, if we understood exactly what the local authorities were doing, we would not have paid grant on those claims. Therefore, there is no change whatever, because we will not pay grant on them under the Act.

Mr. Terry Davis (Birmingham, Hodge Hill)

The Secretary of State says that there will be no retrospective change. Will he confirm that he has already told Birmingham city council that it will lose £8 million because the Bill will change the basis on which the grant was calculated in previous years?

Mr. Ridley

No, that is not right. If I understand the matter correctly—and I think I do, but I want to put in a caveat in case we do not have the whole picture—Birmingham council moved a sum of money which it did not have into a special fund, and at a later stage it moved that money back into the rate fund, thereby claiming grant. Even the hon. Gentleman will agree that that is not quite right, because it is taking money from other authorities by reducing the grant which those other authorities would have received. If that is what happened in Birmingham, clearly it would not have been acceptable to the Government and the practice would not have resulted in my Department paying grant to Birmingham. The effect of the Bill will be to leave Birmingham in exactly the same position.

I shall now turn to rate and precept limitation. Because of the need to pass the Bill, we are unable to proceed with rate and precept limitation to the normal Rates Act timetable. The Bill therefore provides for rate and precept limits for designated authorities to be determined in accordance with a formula for each class of authority. The formulae contain broadly the same factors as are necessary to calculate rate and precept limits under normal procedures and reflect, as far as is possible, the decisions which we would have taken under those procedures.

Dr. Cunningham

The Secretary of State is dealing with the important matters of rate limitation and expenditure limits. Expenditure limits were set in July and some councils sought redeterminations. The results would normally have been announced in December and would have been based on the merits of individual cases. Because of the fiasco that the Government have created for themselves, and presumably to avoid charges of hybridity, it now appears that the Secretary of State is proposing to treat local authority cases not on their individual merits, but by class. That is grotesquely unfair, especially to boroughs such as Newham. Will he confirm that paragraph 3(2) of schedule 2 would enable him to set new expenditure limits before the Bill is passed and thus give authorities much fairer treatment?

Mr. Ridley

I do not have the time, in response to an intervention, to study the portion of the Bill that the hon. Gentleman has mentioned. We listened to all those authorities which applied for redetermination and took account of what they said. About half the local authorities applied and the result of those representations is accurately, although not totally accurately, reflected in the schedule showing the formula which we decided would cover the case. The alternative of allowing the Bill to become law and then go through the rest of the rate limitation procedure under the Rates Act would have taken us well past midsummer before the last rates limitation could be effected. That would have been intolerable for the authorities because they would have had no certainty at all.

Mr. Tony Banks (Newham, North-West)

rose——

Mr. Ridley

I shall give way to the hon. Gentleman, but that will be the last time that I do so, as I must allow other hon. Members to join the debate.

Mr. Banks

The three hon. Members representing Newham constituencies went to see the Minister to support the council's case for redetermination. Is the Secretary of State saying that the Bill incorporates our individual application for redetermination? Frankly, that is not the case. Authorities are treated in terms of a class. Even boroughs which did not apply for redetermination have been given a 2 per cent. increase in their expenditure levels. Therefore, they have been treated as a class and not individually. However courteous the Minister's treatment of us, we wasted our time in seeing him.

Mr. Ridley

If a borough or a district does not wish to increase its rates by the amount allowed for in the Bill, it does not have to do so. Some authorities which did not apply for redetermination have been given a 2 per cent. increase. They can leave their rate 2 per cent. lower than the level in the Bill.

Newham has the highest rates of any London borough. Its 1986–87 budget was 18 per cent. over GRE and is 15 per cent. up on the 1985–86 budget. Therefore, it is the hon. Gentleman and his colleagues, not the Government, who have a case to answer.

In setting the formulae, we took into account all the information that we had about designated authorities, including in particular that from redetermination applications and the meetings about them.

With your permission, Mr. Speaker, I hope to make a statement tomorrow about rate support grant for 1987–88. My colleagues and I will then inform authorities of the rate and precept limits for each authority that will result from the formulae. Authorities will, therefore, be fully aware of these when they come to issue precepts and set rates—even if the Bill is not yet enacted.

Clause 6 validates past decisions and actions on rate and precept limitation. Clauses 7 and 8 and schedule 2 set out the formulae which will produce the rate and precept limits and provide for the implementation of those limits. In particular, clause 8 provides that where an authority has fixed a rate or precept higher than its limit before the passing of the Act, it becomes invalid thereafter and it should substitute a lower one. Under the normal Rates Act procedures, rates and precepts fixed above the limits set by the Secretary of State are similarly invalid.

This legislation is urgent to enable the House to complete the rate support grant settlement for 1987–88 and to make outstanding supplementary reports from previous years and to complete the 1987–88 round of rate limitation. It is essential that we put matters right as fast as possible to end uncertainty about grant entitlements for 1987–88 and allow authorities to plan their budgets and rates. That is why we are asking Parliament to consider this legislation on an urgent timetable.

Supplementary provisions in clauses 10 and 11 will allow myself and the Secretary of State for Wales to announce our intentions for the 1987–88 rate support grant settlement, and certain earlier supplementary reports, which can be laid before Parliament immediately on Royal Assent. The purpose here is to give authorities the maximum certainty in setting their budgets and rates over the next two months. My right hon. Friend the Secretary of State for Wales announced his intentions before Christmas. As I have said, I hope to announce mine tomorrow.

My hon. Friend the Under-Secretary of State for Scotland will reply to the debate. Part II deals with a considerably more limited difficulty in Scotland. Clause 14 validates past actions of the Secretary of State for Scotland in relation to the imposition of grant penalties. It allows him to continue for the future to take into account movements between the general fund and any special fund or account, in the process of estimating a local authority's expenditure for the purpose of imposing grant penalties. Clause 15 provides that, for the future, the Secretary of State may similarly take account of movements between the general rate fund and any special fund or account, in taking decisions about selective action against any authority.

To conclude, the principal effect of the Bill is to validate my Department's and the Welsh Office's practice in calculating relevant and total expenditure over the past six years. It confirms that practice for the future. This is a long-standing, well-established practice for which local government has consistently argued. In the light of the legal advice, the Government had no option but to legislate.

I commend the Bill to the House.

5.15 pm

Dr. John Cunningham (Copeland)

We have heard an uncertain speech from a Secretary of State who is on uncertain ground. I advise him at the outset that if the purpose of today's debate was simply and solely to clarify a point of law, to make the de jure situation accord with the de facto practice since 1981, and for no other purpose, we could complete discussion of the Bill quickly.

No one is opposed to placing the distribution of rate support grant on a proper legal footing. Although we do not like Government policy or the way that the grant is manipulated, we would have agreed to a Bill that intended simply to clarify the law. No such claims can be made for the complex, controversial, centralising and retrospective provisions encompassed by the 17 clauses and four schedules of the Bill.

It is a collection of bad ideas to which we are almost wholly opposed. Even a cursory examination of it exposes the Secretary of State's misleading claims. As the debate has already shown, the legislation contains proposals for even more authoritarian, central powers for Ministers, the denial of any justice—let alone natural justice—to some local authorities. It contains proposals by the Secretary of State to try to set himself above the law, to protect himself from the normal processes of the courts and to deny the basic right of any legal challenge to his arbitrary decisions, which will also be above parliamentary scrutiny and control.

The proposals are draconian, even for this most authoritarian of Governments. No legislature should afford such proposals to any Minister in these circumstances. The Government have brought this fiasco upon themselves and upon local government, against all the evidence and against all the advice of friends and opponents in the House and in the local authorities. The Government have made change after change in local government finance and heaped Act upon Act. Since coming to office they have made 12 major changes in local government finance, mixing malice towards local democracy with ignorance of local government finance, and overlaying all with the stupefying legislative and political incompetence about which we have just heard. On each occasion, in every debate and during every Committee stage, a long line of Secretaries of State and Ministers of State have claimed, "This legislation will simplify the situation," and "This legislation is necessary to clarify the law." Incidentally, the system has been condemned by The Economist, the Audit Commission, the Public Accounts Committee and the Comptroller and Auditor-General.

The right hon. Member for Henley (Mr. Heseltine) began all this at the Tory party conference as long ago as 1979. As there is some sensitivity on Tory Benches about quotations at present, I have brought the text with me in case any hon. Member wishes to challenge it. The right hon. Member for Henley said: We shall, in Government department after department, reduce and eliminate many of the controls that currently link Britain's cities to Whitehall departments… We are now starting to tackle not only the capriciousness but the quite ludicrous complexity of the system. I wonder whether the right hon. Gentleman has a conscience or, given his experiences under the Government, whether he will vote Conservative in the next election? He organised all this nonsense, but a few months ago the Minister for Environment, Countryside and Planning told the House, as yet another reckless Bill went through: This Bill is necessary to provide local authorities with certainty about their present and past grant entitlements."—[Official Report, 23 June 1986; Vol. 100, c. 82.] The same Minister also said: We are about to pass a Bill which will clarify the law."—[Official Report, 21 July 1986; Vol. 102, c. 150–1.] That Bill received Royal Assent only on 21 October 1986. That gives us one of several clues as to why the Secretary of State deliberately delayed his announcement about this fiasco.

In December, the Secretary of State told the House that he learnt of this matter in late October. Although he refused to be specific, he has now admitted that he has known about it since September last year. If he is worried about the delay in the payment of rate support grant to every local authority, why has he allowed four months to elapse before coming to the House with proposals to rectify the matter? That is reprehensible enough. He knew of the problems a long time ago, but he kept quiet because he wanted to avoid the humiliation of confessing that even more legislation was necessary, even before the previous Bill was on the statute book.

The Secretary of State had other reasons for delaying—even more devious reasons than that. He announced his provisional proposals for next year's rate support grant in July 1986. He expressed his intention to make his final statement in November, but suddenly, and unusually, in October, when Parliament was not even sitting, he issued a second consultation document on which he said he would make final decisions within weeks. What had changed, we wondered? Within weeks, we had an unprecedented third consultation paper on local authority grant, which was greeted with incredulity inside and outside Parliament. We now know that the Secretary of State was fiddling the figures to buy off his Tory Back-Bench critics from the shires and from southern England—another example of the transfer of resources from the north to the south, regardless of need.

The Secretary of State has been forced by Tory party pressure to make a humiliating climbdown on his original grant proposals. He was forced to make those changes despite the damaging consequences of the further withdrawal of funds from many communities in the midlands and the north of England and from some inner-city areas. His grovelling surrender—that is what it is—contrasts starkly with his words on the original decision in July, about which he wrote last August to all Tory councillors. In case he is a bit sensitive about the quotation, I have his letter here. He said this about his first proposals: I recognise the strong feelings over the rate support grant for 1986–87. There is no point in going back over that, and it seems more sensible now to look forward to next year. The settlement I announced last month is realistic… All of us must make sure we claim the credit for it. That is what he said to every Tory councillor in August, but he subsequently made two changes to his proposals. I wonder what he is claiming credit for now.

The delay in bringing the measure before the House owes nothing to attempts to clarify the law. It owes everything to the mixture of political ineptitude, fiddling and chicanery that I have just described.

The Secretary of State has tried to absolve himself of any responsibility for the legislative shambles that the Government have created, but he has supported every bit of it, been in the Cabinet which approved it and, in the letter that I mentioned, boasted about it. He claimed in that letter of August 1986: I have been closely if not directly involved with all the issues I now deal with. He cannot escape his massive responsibility for the present state of affairs and the inexcusable delays of his own making.

The Secretary of State could have told the House about this during the debate on the loyal Address. He could have been candid on 3 December in answer to a private notice question which I forced him to answer. If he had acted openly and expeditiously, a short Bill could have already gone through the House to put the matter right. When the right hon. Gentleman finally confessed to the shambles on 16 December, he probably reflected on the words of Ecclesiastes: He that increaseth knowledge increaseth sorrow. It was indeed a sorry performance. He implied that the law was an ass, but his performance has been a mixture between Mr. Bumble and Bottom the weaver. It is not a Midsummer Night's Dream, more like a midwinter nightmare—I am tempted to say, to paraphrase "A Midsummer Night's Dream," an ass with a hole in it, as some Americans might say less politely.

On 16 December, the Secretary of State not only told the House that he was the only person who was certain what the law is, but he ensured that his officials wrote that day to local authorities to tell them of his certainty. Unfortunately, they had to write on 18 December correcting his view yet again.

The Labour party is opposed to many of the detailed provisions of this highly technical, legal and financially complicated Bill. We oppose the sweeping new powers proposed by the Secretary of State. We question the concept of "proper practice". We oppose the legal immunity that it affords Ministers. We oppose its retrospective penalties on councils. We oppose its effects on rate limited authorities.

Clause 2 talks of "proper practices" in connection with local government rate fund revenue account matters, but offers no definition of them. In finance law, auditors are already under a duty to ensure that councils use proper practices in their accounts. The new proposals need detailed explanation and examination of their effects on the rate support grant system. The de facto position that transfers of cash from the rate fund revenue account to other accounts or special funds were expenditure and that transfers from such special funds back to the account were income was undermined by the legal advice received by the Secretary of State. In his statement of 16 December, he made it clear that the de jure position was that transfers of cash from the account to other accounts were not expenditure and that, consequently, transfers of cash from such other accounts back to the account were not income, could not be regarded as reducing the expenditure of the council and, therefore, could not be helpful in due course in increasing the block grant which that council received. He now claims that the Bill is only an attempt to make the de jure position accord with the de facto practice since 1981. On the face of it, that appears to be helpful to local authorities. The Bill would allow them to continue accountancy practices which have been helpful to them in maximising their entitlement to block grant.

However, that is not necessarily the case. Under clause 2(4), the Secretary of State is given sweeping powers to specify any income to the account as income that can be disregarded as revenue. Instead, such income could, if the Secretary of State deemed or specified it, be treated as a capital receipt or as having a prescribed expenditure portion. In practical terms, therefore, income from leaseback or from some other scheme, now treated as revenue income to a council and thus reducing its expenditure and potentially increasing its grant, could be deemed to be capital income or could be disregarded altogether for block grant purposes. Those are additional wide-ranging powers for the Secretary of State.

Many points arise on this. The Bill appears to be intended to catch councils that attempt to bridge substantial budget gaps by those means. There is no parliamentary restraint on the Secretary of State's discretion to act under the clause. He need not lay an order under the positive or the negative procedures. He may act without parliamentary scrutiny and simply by letter to local authorities. Is that the sort of power that he is asking the House to give him, unscrutinised and unfettered? We respectfully decline.

It is also not clear whether internal transfers of cash from account to account are caught by the procedures specified in clause 2(4). It is clear that transfers of cash from an external source to the account are caught in this way, if the Secretary of State says that they are. He simply has to say so. The Bill is drafted by reference to the word "expenditure" without any definition of what expenditure is. It will therefore be open to any authority to challenge the Secretary of State, regardless of the enactment of the Bill. Clause 5 applies these new rules to the financial years 1983–84, 1984–85, 1985–86 and 1986–87. For all of those years, supplementary rate support grant reports are still to be made. How can the Secretary of State claim that the Bill will not affect decisions that have already been taken? How can he say that it will have no retrospective impact? He cannot possibly know but, in reality, it probably will.

Clause 5 will have effect as regards anything falling to be done after (but not as regards anything done before) the passing of this Act. That is what the Bill says. The power to specify items of expenditure for inclusion or exclusion in the expenditure definitions is applied retrospectively to the intermediate years by clause 9. Clause 10 envisages specifications being part of the rate support grant report or supplementary report for the year in question, but the Bill does not make that obligatory.

As the rate support grant for the intermediate years is not yet closed, it is open to the Secretary of State, in future supplementary reports, to use his power of specification to exclude from the expenditure definitions items of expenditure of which he may disapprove, such as fund contributions which he believes brought certain authorities into deficit for certain years, even if the cause or link cannot be established.

Clauses 4 and 6 have virtually identical provisions in respect of the role of the courts, as they shall have effect notwithstanding any decision of the court (whether before or after the passing of this Act) purporting to have a contrary effect. The Secretary of State is there trying to safeguard himself from legal challenges to his arbitrary decisions by local authorities which disagree with him. He is trying to put himself above the law. He is trying to give himself special protection from action in the courts. This extraordinary provision is designed to prevent litigation by any local authority against the Secretary of State's determination of block grant levels to authorities from 1981 to 1986 inclusive. He is asking the House to give him five years of immunity.

Mr. Tony Banks

As my hon. Friend quite clearly understands the technical effects of the Bill better than does the Secretary of State, can he tell me what would be the position under clause 6(4) of Greenwich and the judicial review of the rate support grant settlement for 1986–87?

Dr. Cunningham

I understand that the provision would prevent Greenwich, or any other local authority, from proceeding with a challenge against the Secretary of State which is before or about to come before the courts.

Clause 6 prevents litigation by any local authority against the Secretary of State in respect of his designation of an authority under part I of the Rates Act 1984 in the financial years 1985–87, and in respect of any determination or notification of rate limits and maximum expenditure levels to an authority for the financial year 1987–88.

Having pursued a policy that has been found to be illegal, the Secretary of State is seeking to abolish the right of local authorities to appeal to him through the redetermination procedure, abolishing the effective right of appeal against his decisions that is possible through parliamentary debate on, and voting on, the annual rate limitation orders, and abolishing by ministerial diktat any right of access to the courts in respect of his policies on block grant and rate capping, covering a period of seven financial years. It is quite stupefying that any Minister should try to give himself this much legal immunity. The Secretary of State is quite simply trying to set himself above the House of Commons and the courts. It is a quite new twist to the idea of Crown immunity.

When the Rates Act 1984 was before Parliament, many promises were made by the right hon. Member for Wanstead and Woodford (Mr. Jenkin) and by the hon. Member for Bristol, West (Mr. Waldegrave) about time for consultation. Those promises were even written into the Act. The Government's intentions to abide by those promises were confirmed by the then Secretary of State in an exchange of letters with me in January and February 1985. I shall dispose of the civilities at the beginning, but this is what he wrote: Since rate limits were proposed, it has been for each authority to assess its proposed limit in the light of its particular circumstances, and to put forward any proposals which it might wish to suggest by way of alternative limits. I have made clear that I am fully prepared to give details of how I arrived at my proposed limits in the context of negotiations with authorities on possible alternative limits. My clear legal advice is that this is a reasonable approach. In a subsequent letter, dated 22 February, the right hon. Member for Wanstead and Woodford wrote: I have always made it clear that if authorities were willing to enter frankly and honestly into discussion of their rate limits—as the Act provides—I would be more than happy for there to be a full exchange of information. The present Secretary of State is cynically casting aside those promises to Parliament and to every local authority in the country.

Mr. Spearing

My hon. Friend has expressed succinctly a most serious state of affairs with regard to the powers of Parliament against the prerogative of the Crown. Apart from reneging on the assurances that were given in the correspondence that my hon. Friend has just quoted, does he agree that, in the Bill, the Secretary of State is seeking powers retrospectively in respect of legislation with which otherwise the courts would have dealt concerning the past four or five financial years and that he is also blocking appeal to the courts in the future, which would otherwise have been posssible under present legislation?

Dr. Cunningham

Yes. That is exactly my understanding of the Bill.

Mr. Spearing

Disgraceful.

Dr. Cunningham

The kind of problems that I have referred to——

Mr. Ridley

The hon. Gentleman should read the Bill again.

Dr. Cunningham

The Secretary of State says that I should read it again, but he gave all the indications that he has not read it once. In the Bill, the promises that I have mentioned and the assurances to the House and to local authorities have been cynically cast aside. This is contemptible behaviour, even by the standards that are as low as those of the Government. It demonstrates yet again how empty and valueless promises from Ministers at the Dispatch Box really are. They are worthless.

Sir Hugh Rossi (Hornsey and Wood Green)

During his telling speech, the hon. Gentleman seems to have overlooked what my right hon. Friend the Secretary of State said earlier. It was the sleight of hand, or almost three-card trick, exercised by certain local authorities which led to an examination of the practice being pursued between local and central Government which, in turn, led to the discovery that the law needed to be put right. Those practices, which deprived other local authorities of some £38 million, are something which all hon. Members would want brought to an end, and it requires certain, precise and definite legislation and powers for the Secretary of State to ensure that such trickery cannot take place.

Dr. Cunningham

If that were the case, I would support his view. If it were a piece of chicanery or political skullduggery, or a deception that was at point, I would agree with him. If it were a simple matter of correcting the law to prevent that kind of eventuality in the future, I would agree with that too. I have already made it clear that if that was what the Bill was about, we would allow it to go through without let or hindrance. However, that is not what the Bill is about, and that is the burden of my argument.

Indeed, it is not established that what the Secretary of State said was correct or accurate for this reason. Birmingham's auditors—Birmingham is one of the authorities mentioned by implication by the Secretary of State—Price Waterhouse, wrote to the Department of the Environment in May 1986 relating to the account, stating: We have considered this issue in some detail and have concluded that the contribution is a lawful charge. Price Waterhouse is a firm of auditors of high repute in the private sector. Is the hon. Gentleman saying that its reputation, work, and professional conduct is suddenly not acceptable; that it is party to some kind of sleight of hand by local authorities; that it is willing to overlook dishonest practices by local authorities? I do not believe that for one moment. Many of the other accounts at stake in this argument and debate have been verified either by independent auditors or by district auditors. That is the reality of the situation. I do not agree with the premises in the first place. If it were the case, I would agree with the hon. Gentleman, but I do not believe it to be so.

Mr. Richard Caborn (Sheffield, Central)

Would it be true to say that the point that my hon. Friend is outlining is the one that has now affected Sheffield, that on 17 December Members of Parliament made representation on redetermination—I say all the Members of Parliament for Sheffield, because one is a Conservative Member, the hon. Member for Sheffield, Hallam (Sir J. Osborn). We also went with the acting treasurer for Sheffield who asked the Minister when he would announce the redetermination levels. The Minister said that it would be no later than the second week in January. Yet we come back to the House to find a Bill denying us redetermination.

Dr. Cunningham

I differ slightly with my hon. Friend, because the Bill is not denying redetermination; it is giving it but without taking cognisance of the individual circumstances of each local authority. It is applying a general formula to authorities by class.

Under this legislation, no debates on orders consequent upon the 1984 Act will take place. My hon. Friends will not have the opportunity to raise these matters in the debates, which were promised—indeed, written into the 1984 Act. The rights and safeguards given to rate-limited authorities by that Act are simply removed by the Bill. It is impossible for this House properly to examine the implications of schedule 2 without detailed scrutiny, but they appear to me to be essentially arbitrary decisions. Far from ending uncertainty, this Bill will extend and prolong it because local authorities will not know their final grant entitlement for 1983–1984 until 1988–1989, five years later.

The decision not to validate all past decisions increases uncertainty. At the very least, the retrospective provisions should be dropped and the Rates Act set aside in the coming financial year. Past decisions of councils which have been properly validated and duly certified by auditors, either district auditors or auditors from the private sector, should not be threatened retrospectively. That is a quite shameful act for any Government to embark upon. The question now arises whether councillors can take any lawful decision without the fear that the Government will retrospectively change the rules and move the goal posts. Not surprisingly, local government is rightly opposed to these proposals and contemptuous of the Ministers introducing them. This is bad legislation, guaranteed to sour further the already desperately bad relations between local and central Government. It must be opposed.

5.43 pm

Mr. W. Benyon (Milton Keynes)

The hon. Member for Copeland (Dr. Cunningham) made great play about the delay between September and December. What he was really saying was that my right hon. Friend the Secretary of State for the Environment should have come to the House without getting legal advice. That is plainly nonsense. He had to go through not one legal process, as I understand it, but three by the time he had finished with my right hon. and learned Friend the Attorney-General.

It is not the fault of my right hon. Friend that the Bill has to be brought to the House today, and I am glad to have that confirmed by the Association of District Councils, which says: No blame should be ascribed for making what is now known to be an error in the definitions of expenditure used for rate support grant purposes… In reality, all the relevant matters were fully discussed in the appropriate fora, the Secretary of State took his decisions, and Parliament gave them due consideration. The reason why we are discussing this measure today is the appalling complexity of the system. When I listened to my right hon. Friend opening the debate this afternoon, and the complicated language he used, I thought how appropriate it was that some of us had been here when the tributes were paid to Lord Stockton. We heard the hon. Member for Linlithgow (Mr. Dalyell) recount a very amusing episode in his relations with the then Prime Minister about the appalling complexity of the wording of Government legislation.

I thought that there were one or two people who understood this legislation, whether they were in the Department or local authority associations, but I now begin to wonder whether anybody fully understands the byzantine complexities into which we have got ourselves.

Not only is the system complex, but it was not designed to be overburdened, as it is, with the level of expenditure that it has to meet. This is the point that we have got to, despite all the discussions that have taken place on this vexed subject of local government finance. Rating is a tax on property, and it is an easy and efficient tax to collect, but when the burdens placed upon it become disproportionately high, particularly in the area of education, it becomes manifestly an unfair tax.

My concern is that the Government's very laudable concern to remedy one unfair tax has pushed them down the path of the community charge, which is now being debated, for Scotland, which is another unfair tax.

Here again, it is not the tax so much as the burden that it has to shoulder that is important. I wish that we could get some sort of consensus in the country that it is the burden, rather than the method, of raising the revenue that is the important matter.

To me—I do not know whether it is to every hon. Member of the House—it is incontrovertible that everybody should in some measure pay towards the costs of local services, or should contribute in some measure, depending on their income.

What is being proposed now and discussed in Committee in relation to Scotland, is not the way to do it. That tax will be seen to be as unfair as rates. Because the charge will be large due to the burden that it has to bear, it will be a heavy imposition; people will not pay it, and the difficulties of collection will be immense. I do not want to trespass into those realms, Mr. Deputy Speaker, because I know that you would call me to order.

If there were to be a simple poll tax its collection would at least be easy, but that is not what is proposed. I beg the Government, even at this late hour, and bearing in mind all the difficulties that have been described already this afternoon, to have second thoughts on this tax, or, at least, to allow the Scottish experiment time to be proved or not, as the case may be. Nothing could be more disastrous for England than to introduce a new system which would have to be withdrawn because it proved to be unworkable. Nothing could more damage the relationship between central and local government.

I call in aid the Layfield report, which bears rereading after all these years. It was completed after many years of calm, careful discussion——

Mr. Robin Squire (Hornchurch)

I am sorry to interrupt my hon. Friend in the middle of a sentence, but I should like to add that a glance at our 1983 White Paper would show that we came to similar conclusions about the way in which a poll tax would be unworkable.

Mr. Benyon

I accept what my hon. Friend says. It will be remembered that the Layfield committee's conclusion was that if it were decided that a local income tax was not a runner and that the cost would be too great, the present system would be the best. That is still my view. It is perfectly possible to make rates an acceptable, efficient and modern tax. To achieve that, certain things must be done, and the joy is that they can be done almost immediately, with one particular exception.

First, the burden on local government, which it was not expected to bear initially, must be lessened. Therefore, certain items which are now paid for by local government must be tranferred to the Exchequer. Obviously, after the trouble that we have had over the teachers' dispute, teachers' salaries must be a top candidate for that.

Secondly, as the Layfield report suggested, rateable values must be changed from a rentable value to a capital value. People can understand capital values. They know what their house is worth. They do not know its rentable value.

Mr. Spearing

The amount of money that has to be paid is the same, whichever method is used. However, does the hon. Gentleman agree that part of the trouble is that the Government, having contributed 60 per cent. of local government costs, are now contributing 50 per cent.? That is the basic problem to which the Government are not addressing themselves, but that is the problem that the hon. Gentleman is talking about.

Mr. Benyon

I accept that one can argue about the level at which Government grant should be set. However, if one accepts my first point, Government support for local government would increase considerably.

We want a simple system that people understand. People understand what their house is worth, not what it can be let at in the open market, which is the present definition of rateable value.

Thirdly, it is necessary to redefine carefully—this follows the point made by the hon. Member for Copeland (Dr. Cunningham)—the powers of local government in relation to the expenditure that they can undertake. It is no good easing the burden of local government by transferring some of their expenditure to the Exchequer if that can be set at naught by raising extra rates without control.

Fourthly, it is necessary—this is where I support what is being proposed in Scotland—to introduce a uniform business rate and a maximum poundage on other property.

Finally, there should be a simple equalisation factor which everybody can understand and which means that the product of a 1p rate does not fall below a certain figure. Everybody can understand that. With such a system we would not have to talk in the byzantine terms that we have heard today.

With the exception of the revaluation point—I accept all the difficulties that this implies—that system could be introduced immediately. It would be an efficient and cheap system to administer which could be augmented at will with specific grants for urban deprivation and other such matters.

Essentially, in this matter, politics is the art of the possible. We shall not obtain a perfect system, because there is not one. Therefore, let us go for one that makes sense.

5.54 pm

Mr. Michael Meadowcroft (Leeds, West)

I want, first, to stress that the Government have not kept faith with the House in line with the Secretary of State's statement on 16 December. When he came to the House to admit that a grave error had been made he specifically said that the Bill that would come—which is before us today—would make no changes in policy. However, the Bill clearly dos make changes in policy. It makes changes in policy which have failed so many times in the past, increasing the powers of the centre against the legitimate and valid powers of local authorities. What is more, it rules out in the coming financial year the consultations that rate-capped authorities had previously been guaranteed under the Rates Act 1984, putting local authorities into a collective rather than an individual situation.

If local authorities—in particular, those local authorities which the Government dislike so much, led by the likes of Councillor Derek Hatton of Liverpool—tried to do what the Government are trying to do in the Bill, the Government's outrage would have been wondrous to behold. The Government are endeavouring to do by diktat what they cannot do by agreement. That will not work. It has not worked in the past and it will not work in the future.

When the Secretary of State came to the House in December he had to admit in the end that he had first learnt about the legal error in September. Then, on 3 December, at the time of the private notice question of the hon. Member for Copeland (Dr. Cunningham), he made comments and statements about the rate support grant which he must have known at that time could not be substantiated in the law as he hoped it would become.

If, as the Secretary of State said again today, local authorities wanted this and welcomed the definition that has now proved to be wrong, they can have welcomed it only in the sense that if one is being guillotined one at least welcomes the blade being sharp. There is no other sense in which local government would welcome past legislation. We have yet again an attempt to deal with local authorities in the most unfair way.

On 16 December the Secretary of State was clearly trying to pass the buck. He tried to blame others. I always thought that, whatever else one tried to accuse Conservatives of, they could not be accused of trying to dodge the doctrine of ministerial responsibility, but that is precisely what they have done in this case. It is monstrously unfair to say that they were advised that local authorities wanted this and that therefore the Government accepted it.

The hon. Member for Milton Keynes (Mr. Benyon) told us that the Government had to wait for proper legal advice before coming to the House in December. Why on earth did they not have proper legal advice from their officials about the proposals which were put before the House previously and which have now been found to be so grievously wrong?

The matter goes back a long way. I wish that the Government would go back to the historic doctrine of ministerial responsibility and not try to shift the blame. The Government are responsible and the Secretary of State's predecessor, the right hon. Member for Henley (Mr. Heseltine) is particularly responsible. I wish that he would accept that publicity as well.

The error that we face today is not, at heart, the huge sum of money involved. Of course £70 billion is a vast sum of money. but the error that matters to the House is the error of principle. At the end of the day, there is no way in which the powers and the accounting procedures of individual local authorities can be run by legislation.

There are other constitutional objections. Like the rest of the local government legislation since 1980 which greatly increases central power, this legislation is unprecedented. The Bill attempts to give the Secretary of State power to define how local authorities should make up their accounts. He is given a blanket power to include items in or exclude them from local government's accounting system. But local authorities were legitimately seeking to ameliorate what the Government were doing and the Government did not like it.

The Government's second unprecedented action is their attempt to gain protection from future actions in the courts. The Bill says, in effect, "If a court decision seems to be contrary to what is said here, it should be disregarded." The Bill does not seek to put the Government above the law; it seeks to put them above the courts, and that is a more insidious proposal.

Mr. David Amess (Basildon)

I am becoming a little confused about what the hon. Gentleman is saying. He seems to be arguing against uniformity of accounting methods. Is he seriously suggesting that local authorities should have their own methods? That seems to be a bizarre contradiction of his opening remarks.

Mr. Meadowcroft

The hon. Gentleman gives himself and his party away. Of course I suggest that within the provisions of the law any local authority, as an individual, corporate, elected body, should be able to present its accounts in ways that it sees fit. Surely we need greater democratic accountability, rather than central dictation.

Conservative Members ought to know that local government has done more to put its house in order than the Government have done to put their house in order. The Chartered Institute of Public Finance and Accountancy has codes of practice on local authority accounting and the Controller of Audit at the Audit Commission, Mr. Banham, has said in many reports that local authorities have been better than the Government in their accounting principles and in accounting for finance. It is odd that the hon. Member for Basildon (Mr. Amess) should seek to defend what his Government are doing in the name of uniformity.

The Government say that they are abolishing the rating system and moving to some kind of poll tax. However, they are doing nothing about the problem of equalisation. We were told during the Second Reading of Abolition of Domestic Rates Etc. (Scotland) Bill that central Government payments of rate support grant would be replaced in 1989–90 by revenue support grants, the amount of which would be determined by procedures that were broadly similar to those for rate support grant.

When the Government are seeking to change the system by the method set out in the Bill, it is ridiculous for them not to do something about the equalisation system, which would benefit local authorities. The Government have instead gerrymandered the system in favour of Conservative-controlled shire counties. But the needs are not in those areas and the equalisation process should move in the opposition direction.

Like the hon. Member for Copeland, my colleagues and I feel that if the Bill merely sought to rectify a legal error and to make the position what we thought that it was there would be a case for supporting it. However, in response to my intervention the Secretary of State said that there was the hidden threat that if the Bill were not passed in time it would not be possible to make the appropriate rate support grant settlement. It is monstrous and unjust to say to local authorities which are endeavouring to provide services that if the Bill is held up in Parliament there may be no cash for those services.

Under the guise of correcting a legal error, the Government have attempted to slip through other proposals. That is unacceptable. We oppose the retrospective fiddling of grants to 13 councils, including two Conservative-controlled councils, Cambridgeshire, which is controlled by the alliance parties, and a number of urban authorities, including my own in Leeds.

We also oppose the Secretary of State's powers to interfere with local authority accounting and we regret the Government's failure to make any move towards ironing out the injustices of the existing central-local government relationship.

Of course we oppose the attempts of some local authorities to avoid bankruptcy by using separate accounting methods. However, those are different from the accounting methods that have been used to ameliorate the effects of the Government's legislation. What is more, those differences have been spotted by district auditors, as we have seen in various cases that have trundled through the courts. There is no doubt that the professional bodies that were set up to control the accounting of local authorities have accepted the legitimacy of accounting methods that have sought to ameliorate the Government's efforts to do injustice to local authorities. It is a bit rich for the Government to criticise local authorities which acted legally to ameliorate the Government's illegal actions. That is a ludicrous and unjust criticsm.

The order of the clauses in the Bill is not straightforward, and the way in which the measure has been presented is not helpful. Putting past practice on a legal footing is uncontroversial, but the Bill includes unacceptable proposals. It decides which items—credits and debits—should be put into local authority revenue accounts and seeks to control what is described as creative accounting. I do not believe that there is justification for the powers given to the Secretary of State in that area.

The Bill mentions the principles which the Secretary of State may apply, but there is no definition of those principles. That is unjust. How can local councillors, who regulate huge budgets and are responsible for massive services, continue to work if they have no idea what principles the Secretary of State might apply to their accounting practices? The Minister who is to reply to the debate must give us more information.

It is unfair that individual local authorities will not now be able to apply for redetermination for 1987–88. That makes the initial injustice of rate capping even greater. Rather than having rates set under formulae in which some categories, including previously rate-capped councils, are affected even more injuriously, we should look for a better formula to deal with the present system. The proposed formulae will affect different categories of local authorities in different ways, according to the services that they carry out. Police authorities may get extra cash.

Mr. William O'Brien (Normanton)

The Secretary of State's formulae mean that there may be a serious danger to property and life in West Yorkshire, because the resources available to the fire and civil defence authority in West Yorkshire will be reduced.

Mr. Meadowcroft

I applaud the hon. Gentleman's ingenuity in making a point to which he knows I am sympathetic. The situation that he highlights is part of the problem presented by the formulae in the Bill. The authority to which the hon. Gentleman referred is not treated as generously under the multiplier in the schedule as it ought to be if it is to cope effectively with the problems that it faces in running a service on which our security and emergency services depend.

I do not know whether all hon. Members have been able to examine in detail the formulae in schedule 2. I hope that in his reply the Under-Secretary of State for Scotland will endeavour to explain them to those of us who have English levels of competence in these matters.

The most amazing thing that I have seen in my three and a half years in the House can be found in schedule 2. There is a large bracket, inside which there is a small bracket. It says:

((EL—(BG+E)) x 100\RV)+T

One might think that that was enough, but one has to turn over the page to find out what T means. Incidentally, I am glad to see, Mr. Deputy Speaker, that you are following me closely. The definition of T is given as

A x M/B x 12

I hope that all that will be explained to us. It is certainly a bizarre way of determining what local government has been doing effectively for centuries. It is ridiculous that a Bill should be introduced to deal with a particular point, and that it should then go beyond that in threatening to deny local authorities the money that they need.

Conservatives are saying that they have got us into this mess and that they can get us out of it only by creating an even greater mess and by imposing yet further restrictions on local authorities. However, the Labour party has no alternative proposals for local government finance that would give me any confidence in its doing any better.

It is appropriate that in today's edition of The Guardian, Mr. Ian Aitken makes the very point that I should like to make, in good faith, to Labour Members. He says: Mr. Kinnock and his colleagues must act decisively to curb the handful of over-zealous local authorities which are employing left-wing illiberalism to eliminate the illiberalism of the Right. There is no liberty for anyone in replacing one form of political indoctrination for another. The sad thing is that the actions of some local authorities have been used by the Government as a justification for this sort of measure. I hope that Labour Members will urge the local authorities over which they have some control to avoid giving the Government any further excuse for such action. We say clearly that the Tories have created a complete shambles. They must give local authorities some discretion. The Bill vividly illustrates the impossibility of controlling the vast scale and variety of local government by central Government diktat.

Every piece of legislation on this subject that comes before the House produces a need for more legislation. That will continue, and the Bill will not work any more than the other measures have worked. We must recognise that fact. The Secretary of State may regret what his predecessor commenced in 1979, but he should be big enough to admit it and not try to compound the felony by bringing still more legislation before the House.

Responsibility, in local government just as much as in central Government, comes by increasing democratic accountability and not by external repression. That is the alliance position, and that is why we shall oppose the Bill.

6.13 pm

Mr. Robin Squire (Hornchurch)

I apologise to the Chair, the House and to the two Front Bench spokesmen, as a very long-standing speaking engagement will almost certainly prevent me from being in the Chamber at the end of the debate. However, I assure my hon. Friend the Minister that I shall read his words carefully, as I hope that he will be able to answer at least one of my questions and perhaps comment on my remarks.

My right hon. Friend the Secretary of State must be right to introduce legislation when he discovers, as any Minister could, that the practice of the law is not as was thought when the legislation was enacted. I think that that must be common ground between us. There is obviously some urgency, as we must have some certainty in the settlements for future years, which will be delayed until this legislation has been enacted. I echo what has been said by at least one of my hon. Friends, in that my right hon. Friend the Secretary of State can scarcely be held to be primarily responsible, given the track record.

To some extent my hon. Friend the Member for Devizes (Mr. Morrison) has already raised the query that I have in mind, but I should like to flesh it out. As drafted, clause 5 gives rise to some concern. It seems to allow the Government to amend the rules for the calculation of grant entitlement after the end of a future grant year. I hope that I am wrong, but if I am right, I must say that that is exactly the principle that we encountered in the 1982 Bill—a principle that was then given the quaint title of mid-term holdback—and several of us who served on that Committee succeeded in deleting it. We felt that it was the antithesis of good management for local authorities to be faced, after the end of the year, with something that changed the ground rules. However, I hope that I am wrong. Indeed, I had better keep quiet about those of my hon. Friends who joined me then, as at least one of them is now on the Treasury Bench, and I would not want to embarrass him——

Mr. Tony Banks

The hon. Gentleman paid the price.

Mr. Squire

I am still here. However, I hope that my hon. Friend the Minister will satisfy me on that point, as we have a responsibility to let local authorities plan properly.

I have a second confession to make, in that I served on the Committee dealing with the 1980 Bill, just as only one or two other hon. Members who are now in the Chamber did, including the hon. Member for Newham, South (Mr. Spearing). I should point out that I never voted for block grant either in Committee or in the House, so my conscience is clear. All of seven years ago the drawbacks of block grant seemed fairly clear to me. In the intervening period, there has been little to remove my doubts. My main concern is that I doubt the ability of any Government adequately to be able to measure need in the detail necessary in order not merely to distribute grant but, in effect, to punish and penalise on the basis of those self same statistics. That was my main objection seven years ago, and it remains my main objection. The Bill is the third measure to seek to resolve legal matters arising out of block grant, so one or two of my fears would seem to have borne fruit.

The recent announcement made following representations to my right hon. Friend the Secretary of State about the distribution of rate support grant serves to highlight how relatively arbitrary distribution can be if it can be amended by simply adjusting a series of multipliers, thus producing a quite different answer. I am not in a position to regret the amended statement that my right hon. Friend the Secretary of State made, but it served to emphasise the rather blunt instrument that he is dealing with. In that respect, if in no other, I am sure that my right hon. Friend the Secretary of State would agree with me.

It must be something to do with the Christmas air that both I and the hon. Member for Copeland (Dr. Cunningham) should find ourselves looking back at the details of the 1980 Act. I happened to find the paper that was submitted in February of that year by all the local authority associations. They pointed out the drawbacks to block grant. Hon. Members will be relieved to know that I do not intend to quote copiously from it, but it is worth summarising the four objectives that the then Secretary of State, my right hon. Friend the Member for Henley (Mr. Heseltine) sought to achieve via block grant and to assess them in the light of what has been achieved.

The first objective was to introduce a simple, readily understood grant distribution system. The second was to place a limit on the extent to which an authority increasing its expenditure could thereby increase its entitlement to grant. The third objective was to end the system whereby the needs element was distributed solely on the basis of an analysis of past expenditure, and the fourth was to stimulate greater public interest in local government and to reinforce local accountability.

We have taken steps with regard to the second and third objectives, but I do not think that anyone would claim that we have introduced a simple, readily understood grant distribution system after seven years, and I am very unsure about reinforcing local accountability. The local councils raised eight points against those objectives. I shall not go through them, as that would not be fair to those hon. Members who wish to speak, but their first and main objection to block grant is as true today as it was then.

The joint paper from those local authority associations says: Although every effort must be made to devise a new and better system of needs assessment, there is no way in which any"— that last word is stressed— centrally-operated, formula-based needs assessment could ever be good enough to enable the government to use it to specify what individual authorities ought to be spending. To attempt to do this will actually reduce local accountability and increase centralist control of local affairs". I submit that the record of the past few years has been precisely that.

The hon. Member for Newham, South (Mr. Spearing) made an interesting interjection when he rightly said that there has been a reduction over the years in the amount of support given to local authorities by central Government. I part company with the hon. Gentleman in only one respect but the difference between us is absolute. If local authorities had a sufficiently dynamic and sizeable enough opportunity to raise finance, it would be right and positively desirable to reduce the amount by which authorities rely on central Government. Those in the Chamber who have been councillors, let alone the chairman of a finance committee—a role in which I found myself—will know that the amount that comes from the centre, as it were, can transform any other figure in the accounts. I am speaking of the majority of authorities that still receive support.

An authority may be a good one in that it follows all the guidelines and is efficient, or it may be the reverse, but in any event the size of the central Government figure will be the single greatest determinant. For that reason I look for something that will reduce Government support to the level at which it balances out needs requirements and resource equalisation. That would be the minimum level of central support. I would wish to see local authorities granted greater accountability for their actions by linking their expenditure much more to the moneys that they are able to raise. I realise that in saying that, Mr. Deputy Speaker, I am talking about matters that are not related exactly to the Bill.

The relationship between central Government and local government is and has been confused, and the confusion has not lessened in recent years. I recognise that a Government have an absolute right to lay down the legal framework within which the local authorities operate—we must concede that to the Government of the day—but I have always been rather more concerned about the right of government to lay down policy priorities within that relationship. There is a difficulty in the Government of the day laying down policy priorities because of the problems that attach to them being able fully to appreciate the individual priorities of about 400 authorities, and because I want there to be some sense, purpose and meaning behind the principle of individuals standing for election and being elected as members of local authorities. In that sense I wish to see the relationship between local authorities and central Government become much clearer.

I wish also to echo a suggestion which has been made elsewhere on previous occasions. It is scarcely novel, but I wish to put it on record. In any event, it is the first time that I have raised it in the Chamber. I can see advantage in the House having a Committee that is charged with examining central Government and local government relationships in the context of any proposals that appear to effect the constitutional relationship. I should like that proposal to be considered and examined. Relationships have changed in recent years and local authorities are seen now, and far more than in 1979, as the agents of the Government of the day. That must be right in many respects because local authorities are the deliverers of so many services, and it must be right for the Government of the day to be able to require by law that a number of tasks are carried out. There are many other areas, however, that are grey and the net effect of changes over recent years seems to be that the ability of local authorities to determine has been reduced. I am not sure whether that is a good thing. I say that when a Conservative Government are in office. If in some God-forsaken century we have a non-Conservative Government I shall make the same comment, but perhaps in even stronger terms.

Mr. Terry Davis

We shall give the hon. Gentleman a job.

Mr. Squire

I shall still be a Conservative.

The House should be interested in the relationships between local authorities and central Government and between Parliament and local authorities. I want to see these relationships improve, but there are few in local government who believe that in recent years we have seen an improvement. Some councils have acted stupidly and some have had their share of idiotic behaviour, and that should be recognised, but the majority of councils continue to seek in their limited way to undertake the duties and functions for which they were elected. I wish them godspeed in their task.

6.26 pm

Mr. Bill Michie (Sheffield, Heeley)

The Secretary of State tried to explain in his opening remarks that the Bill is a validating measure. It has already been said, however, that the Bill goes much further than that. It extends the Secretary of State's powers in a sweeping fashion and undermines the position of the courts when reviewing Ministers' actions. It introduces even more controls on local authorities.

Surely sufficient controls have been placed on local authorities over the years. Since my arrival in the House in 1983 I seem to have spent a great deal of my time listening and speaking in debates on local authorities and much less time listening to and participating in debates on what central Government should do to get out of the present economic mess and reduce unemployment. The Government have imposed restraints on the advertising activities of local authorities and the functions of local authorities and have abolished county councils.

The Government are obsessed with the notion that this place knows better than local authorities, and having spent many years in local government I know that that is not the position. I remain convinced that the members of any party in a local authority can still provide a much better service in a democratic system than can central Government.

The Bill makes it clear that there is no control over the Secretary of State. More control is to be placed on local government while there is to be less control on the Secretary of State. Indeed, there will be no parliamentary restraint on him. When the Bill is enacted, he will not have to lay orders within the terms of this measure and he will be able to act without parliamentary scrutiny. That means that there will be no control. It cannot be said that the Bill will produce greater democracy and accountability.

It is made clear in the Bill that the Secretary of State is seeking to validate past acts and to protect himself. If local authorities had acted in the same illegal way, would they have enjoyed the same charity and understanding as we are expected to extend to the Secretary of State? I do not believe so. In such circumstances local authorities would be described as irresponsible and a threat to democracy and the Government might even suggest that we should abolish them. It appears, however, that the Secretary of State is able blithely to justify his own actions at the expense of local government.

Local councillors do a tremendous job and it must be increasingly difficult for them to motivate themselves to serve local citizens and their authorities when so many constraints are placed upon them. I attended a meeting of Sheffield city council when it debated the Bill last week, and there were expressions of concern from Labour, Conservative and Liberal councillors. Attention was drawn to the damage that is likely to be done to city councils and town councils throughout the country. Sheffield recognises that enormous damage is likely to be caused. The Bill will destroy the present process of financial planning. It will withdraw the right to have the financial circumstances of a city council taken into account. It will deny the constitutional right of judicial review of decisions taken by the Secretary of State. The city council has make it clear to the Minister that it cannot provide the basic acceptable level of services, spelt out to him not only by the city council but the chamber of commerce.

I have a copy of a letter from the Sheffield chamber of commerce to the Minister. The letter is not partisan. It makes it clear that the chamber of commerce understands that the Local Government Finance Bill, 1986—published on 18 December 1986—will set aside the previous procedures for rate re-determination laid down in the Rates Act 1984, and would thereby appear to ignore the representations made to you by the Sheffield Chamber delegation". That delegation was led, of course, by Mr. Stokes, the president. The letter continues: If this assumption is correct"— this is the chamber of commerce asking the Secretary of State— please let me know, because I would not like to think that our time had been wasted. The letter goes on to state: An unfortunate by-product of the new Bill is the fact that no formal announcement about the Rate Support Grant Settlement will now be made until later in January, whereas it had previously been anticipated in November 1986. To a Council facing as many budgetary problems as Sheffield, this delay is counterproductive, as it will provide certain elements on the Council with the excuse to do nothing about tackling the deficit which the Council has to meet in 1987/8. Instead of certainty about the size of the cuts, there is now uncertainty, and this is definitely the wrong background for budgetary planning. As a Chamber, we will continue to press the City Council to budget in a responsible manner, but at the same time, I must register the comment that the Government's present timetable for new legislation has not helped this process at all, and indeed, has been distinctly unhelpful. That comment does not come from a Labour council or any other party that is opposed to the Conservatives; it comes from the Sheffield chamber of commerce.

Those are the facts. No one could run a business in the way in which the Government expect local authorities to operate. No one can make predictions when, frankly, it is not known, according to the whim of the Secretary of State, when grants are likely to come to pass and what their level is likely to be.

The legislation will affect places such as Sheffield, which is already suffering a tremendous level of redundancies because of the decline in engineering, steel production and matters of that nature. A 15 per cent. cut will mean another 4,200 jobs being lost within the local authority itself. Therefore, it will not help the rate of unemployment and certainly will not help the morale of the city. It will mean further cuts in the education budget in which there are bound to be problems. It is not only the chamber of commerce or the Labour party in Sheffield who are worried about this, but the Conservative opposition who, quite rightly, put up their own budget. Even they found that, despite significant savings and cuts, they could not match the Government's rates demands. The Conservative opposition could not do it, and they accepted the facts.

Amongst our delegation to the Minister to discuss this matter was the hon. Member for Sheffield, Hallam (Sir J. Osborn). He stressed that Sheffield could not cope with the present restraints. That remark was completely ignored, as has already been said. While we debated the issue, the Bill was being printed. That is an insult not only to the delegation but to the city council and the citizens of Sheffield.

I now refer briefly to the likely effect of the legislation on south Yorkshire services. Some of my colleagues also wish to raise issues of this nature. If the Bill as it stands is passed, the current high standards of fire cover and local transport networks in south Yorkshire will certainly be jeopardised. There was a meeting of Sheffield and south Yorkshire Members of Parliament with the officers of the south Yorkshire authorities. We discussed matters relating to transport, fire and the police. One matter that arose and that we believed to be serious was whether the South Yorkshire fire and civil defence authority could have manning levels that would allow it to spend only £21.2 million, which is more than £1 million less than requested. It could mean that the fire service could not carry out its statutory duties, according to the requirements of the Home Office. I should like the Minister to bear this point in mind. If we limit an authority's finances and it cannot carry out its duties according to Home Office levels, there must be some more hard talking. It does not help when the fire service was refused a meeting with the Minister. To this day, that meeting has not taken place.

Surely the Secretary of State must take into consideration the fact that the fire service is in serious danger of being unable to carry out its statutory duty. It also has the problem of whether it can protect the property and the life and limb of people in south Yorkshire. In my constituency, a retained fire station is likely to close because of financial restraints. Its closure will mean a considerable difference to fire services in the area. It is an area in which there is an old folks' home, a school and high-rise flats. I wish to know whether the Government, and the Secretary of State in particular, have fully considered the possible dangers to life and limb posed by these financial restraints. Has a pure accounting exercise been carried out by the Treasury that the Secretary of State must administer? Lack of cash will mean that the new multi-million pound fire station in Sheffield will not be able to open. What sort of economic sense does that make? Lack of cash will mean redundancies of 30 to 40 firemen in south Yorkshire and no new recruitment. It will also mean the mothballing of the training school and no replacement of any personnel or vehicles.

I wish to refer briefly to the transport system of which south Yorkshire is very proud. It is no longer under the same control since the abolition of the county council. There is no doubt that there will be a further reduction in services in south Yorkshire. Concessionary fares will be threatened. Services such as Saturday shopping services, early morning services and business services will be reduced. It will mean, because Sheffield is rate-capped, that the transport system cannot be subsidised to help people to do their shopping or engage in other activities. It will mean the delay of better rail services, including more frequent local trains and improved services in the Dearne valley. In the final analysis, it will mean that the services of which the city and south Yorkshire are proud will be quite unrecognisable when the final crunch comes and the financial restraints are fully implemented.

This is a bad and dangerous Bill. It is bad because it does not help local democracy. It is dangerous because it will affect life and limb in Sheffield and south Yorkshire. The Bill is disliked by all parties in local Government and by those in private business. The Government have made many mistakes in local government. They should now drop this Bill to avoid another.

6.38 pm

Mr. David Amess (Basildon)

Since I have been a Member of the House, I have interested myself in matters concerning local government, and local government finance in particular. As I represent the constituency of Basildon and live daily with some of the bizarre activities of the local authority, perhaps it is inevitable that I should interest myself in these matters. Several hon. Members have already mentioned the amount of local government legislation that has passed through the House during the past three and a half years. They seem to resent the interference. There is no doubt that the traditional relationship between local authorities and central Government has changed in a regrettable fashion. Unfortunately, a minority of local authorities have refused to accept the result of the 1983 general election. I am sure that several Opposition Members are embarrassed by some of the actions taken by the local authorities to which I refer.

Mr. Tony Banks

Though I do not wish to debate the point that the hon. Gentleman made, does he not agree that the change in the relationship started in 1979 with the election of the Conservative Government, and that since 1979, particularly in relation to finance, in which the hon. Gentleman is so interested, the rate support grant from central Government has fallen each year?

Mr. Amess

The hon. Gentleman will be pleased to hear that in my brief speech, I shall take up the specific point about the rate support grant settlement. He highlighted the 1979 election, but he makes my point for me. Over the decades, local councils have accepted the result of general elections because they believe in democracy, so, if the hon. Gentleman is right, it is unfortunate that somehow they resented the result of the 1979 general election and carried that resentment through into disgraceful behaviour in several areas. However, as the hon. Gentleman rightly said, we should not digress along that road.

I agreed with my hon. Friend the Member for Milton Keynes (Mr. Benyon) who, like myself, represents a new town, about the complexities of local government finance. He called it byzantine. However, I disagreed with my hon. Friend in his remarks about the community charge and the Bill now going through the House, which concerns the change in the rating system in Scotland. I support the Government on those two issues. I applaud and take my hat off to the Government in that at long last we have a Government who have had the guts and courage to take a firm decision on that matter. Inevitably, the system will be extremely successful throughout the country and very popular.

Since I have been a Member of this honourable House, we have had three Secretaries of State for the Environment. When I listened to each deliver his rate support grant settlement, so complicated were they that I thought what brillant people those men must be. I wonder how many of us humble Back Benchers understand the way in which the rate support grant settlements are calculated or, more importantly, how many of our constituents understand the complexity of those settlements. I hope that the civil servants concerned with those matters understand what they are recommending to their Ministers.

That being said, I have no doubt that the Bill will be helpful for both the Government and the local authorities, in working together on the rate support grant. The greater clarity in definitions of expenditure and income and the specific formulae now used to calculate expenditure of the councils will lead to less ambiguity and hence less conflict in the calculations of the Government and the local authorities. That will also help local authorities to project with greater certainty what the size of their grant will be, so that they can more easily calculate their expenditure for the future.

I was particularly interested in clause 1(4), which requires local authorities to itemise in detail the various things on which they are spending ratepayers' money. It is at this point that I wish to quote briefly from a letter sent just before Christmas from three Labour party supporters to the Leader of the Opposition in the House of Lords. They say: We were life-long Labour voters until we were faced with the almost unbelievable fact that the Labour Party in Haringey has become a cover for the anti-democratic left, who are abusing the education of our children with the apparent aim of undermining our families and democracy. We have been told by Bernie Grant and others that Haringey is only a test case, and that other boroughs are soon to be subjected to similar treatment.

Mr. Ron Leighton (Newham, North-East)

Will the hon. Gentleman explain why he is laughing while he is saying those strange things?

Mr. Amess

I am certainly not laughing in the sense that I regard this as being a matter for a joke, but I am simply smiling wryly. Not many hon. Members have addressed their remarks to the detail of the Bill, but they have picked up peripheral points. It will be interesting to see how many hon. Members who follow me address their remarks to subsection (4). It highlights these points, which I fully accept are rather embarrassing to Opposition Members and make them feel a little uncomfortable.

The letter goes on: We hear that Hackney, Ealing, Islington and Lambeth already have our problems. As my hon. Friend the Minister for Local Government has said, the local authority that serves his area in Brent should be mentioned in that vein. The letter goes on: It is of course very difficult to discover precisely what is going on in nursery and primary schools"——

Mr. Leighton

Who was the letter from?

Mr. Amess

The letter continues: but we enclose a copy of 'The Play Book for Kids about Sex'". The hon. Member for Newham, North-East (Mr. Leighton) groans. I understand his groaning because, as I said, such matters embarrass Opposition Members and make them feel uncomfortable. But frankly, "The Play Book for Kids about Sex" is extraordinary and any parent would be horrified to think that in 1987 any local authority of any political party was prepared to spend ratepayers' money on the disgraceful contents of that booklet.

Another book written by Rachel Tingle, published by Pickwick Books, goes into great detail, and this shows the amount of money that is spent by certain local authorities that are fascinated by the subject of sex. It has been in existence from time immemorial. I do not know why such matters have to be written about in books for young children and why ratepayers' money has to be spent in that way when all Opposition Members plead for more resources in their local authorities. That is disgraceful and reprehensible. I know that Conservative Members will wish to pay tribute to the Government for what they have done in the Bill. Subsection (4) will require local authorities to list such expenditure in future. Therefore, it will be possible for those matters to be brought to the attention of the public.

I am also pleased to see that there is provision to continue the rate capping of local authorities. It is important to control their spending, and rate capping, as we have found in my constituency of Basildon, is an effective way of doing so until the community charge system can he implemented. I, for one, look forward to that very much, as do the majority of my constituents.

This is the point that I mentioned to the hon. Member for Newham, North-West (Mr. Banks). We must not forget that many councils do not misuse the ratepayers' money and have kept their spending well under control. One such council is Essex county council. The hon. Member for Blackburn (Mr. Straw) will be interested in this point. Over the past five years Essex county council has spent less than what was suggested in the Government's projections. However, the rate support grant has steadily decreased, from £148 million in 1983–84 out of a county budget of £464 million, to £110 million for 1987–88 out of a budget of £574 million. Unfortunately, that represents a loss of nearly £40 million and a percentage loss of over 10 per cent. of Essex county council's budget. We in Essex cannot afford that loss. In 1983–84 the rate support grant was 31 per cent. of the budget. In 1987–88 it will not even represent 20 per cent. of that budget. That is a significant and serious loss to the ratepayers of Essex.

Mr. Ian Wrigglesworth (Stockton, South)

I am following the hon. Gentleman's speech with great interest, but I find it difficult to square what he just said about how his county has been penalised with what he said earlier in support of the Bill about the certainty that would come about as a result of its passage through the House. Is he aware that there have been massive turn-abouts and cuts in Government support for Cleveland county which make long-term planning of budgets impossible, apart from causing deprivation?

Mr. Amess

I thank the hon. Gentleman for making that valid point. If he allows me to continue a little longer, I shall help him to square those remarks when I reach my specific point.

The rate support grant for Essex has fallen, although the county council has not been an overspending authority. According to the statistics compiled by the Audit Commission, Essex county council has spent 20 per cent. less per person than the average for English counties and it has spent 15 per cent. less per person than the average for similar counties. The English counties' average was £351.91 per person, the average for similar counties, called the family average, was £345.93 per person and Essex county council spent £331.46 per person.

The council has also taken significant cost-effective measures to increase the savings to local ratepayers. Since 1979–80 Essex has consistently made savings—these remarks are addressed primarily to my Front-Bench colleagues—totalling about £75 million. Fuel bills have been cut by £33 million, we have a severe problem of falling school rolls, so the surplus school places have been taken out of use, saving £15 million, cleaning costs have been reduced by £3 million and the school meals service has been rationalised, saving £5 million. Clearly, we have striven to get better value for money.

Mr. Jack Straw (Blackburn)

As Essex is my native county I have listened to the hon. Gentleman's catalogue with great interest and it confirms what those of us who have lived in Essex have always known—that it is one of the meanest counties on record. Will the hon. Gentleman confirm that because of that record of meanness the Conservative vote in the 1985 shire county elections sunk to a historic low?

Mr. Amess

I am glad that the hon. Gentleman made that point, although I am beginning to regret making these remarks because I am probably helping him with his speeches in Committee. I am probably saving him having his researchers find up-to-date facts about Essex county council. I regret that the Conservative party lost control of the council and the ratepayers of Essex now regret the hung council. If ever there was proof that a hung Parliament and hung councils are disastrous, it is in Essex. I invite hon. Members to come to Essex to find out how it does not work. I thank the hon. Gentleman for helping me make that point.

Despite the fact that the cost of many programmes that must be funded by the council is increasing faster than the rate of inflation, for example, because of the expanding need for care of the elderly and larger police forces to combat crime, the council's projected spending remains at or below the rate of inflation and well within the limits of Government expectations. If the rate support grant is reduced, it will leave a deficit of £28 million and Essex county council will have no alternative but to increase the rates by a considerable sum.

Just as local authorities which overspend and misuse their funds should be penalised, so local authorities which stay well within the guidelines should be rewarded. I emphasise that point to my hon. Friends on the Front Bench. Essex county council is such an authority and its grant should not be reduced this year from the previous figure. I hope that my right hon. Friend the Secretary of State for the Environment will reconsider Essex county council's rate support settlement to correct that obvious injustice.

I support the Bill in the hope that the subject will become better understood and that Essex county council's rate support grant will not only become more comprehensively understood, but, most important, be more acceptable.

6.55 pm

Mr. Ron Leighton (Newham, North-East)

The lack of support for the Bill from Government Back Benchers is startling. I thought that we might have had support for the Bill from the hon. Member for Basildon (Mr. Amess), who is a political refugee from Newham, but after his opening sentences his speech was a long paean of complaints about how the Government are ill-treating Essex, like the rest of us, although it has made all the cuts imaginable.

I have been invited to a meeting on 18 February where the chief speaker is to be Mr. John Banham, the new director-general of the Confederation of British Industry. The title of the address is, "Should local government survive?" which is relevant, in view of what is happening, but perhaps a more appropriate title would be, "Does local government still exist?"

Local government has been stifled and throttled by the Government and the Bill is the last straw. The Government are reducing it to a farce and an absurdity. Under the Bill, all power is to be centralised. The Secretary of State is arrogating to himself sweeping, dicatorial powers. The Bill undermines the position of the courts in reviewing Ministers' actions. If that persists it will become increasingly difficult to get people to serve in local government because they will be mere puppets or, as the hon. Member for Hornchurch (Mr. Squire) said, mere agents, cyphers who are unable to make policies.

The Secretary of State is destroying local democracy, turning it into a sham and undermining local civil leadership. He is taking powers to dictate a council's expenditure, ignoring local authorities' assessments of local needs and plans to meet them. This meddling and intervention from afar is creating an impossible position. Local government is treated little better than a criminal if it seeks to exercise its own choices or to invoke the moral authority of its election. That devalues and poisons the democratic process. What is the point of electing local councillors if they are to be powerless and everything is to be decided by diktat and intervention based on arid, arcane formulae from Whitehall?

Previously, we always had a balance between local and central Government, but that is being disrupted and destroyed, causing great damage to our public life. This is causing bitterness and alienation among people with a lifetime of service to local government. Nowhere is greater damage and havoc being caused than in the London borough of Newham which is being placed on the rack by this Bill.

While the rate support grant proposals of 3 December 1986 gave more money to the wealthy Conservative boroughs, it took £6 million away from Newham. It is certainly true that Unto every one that hath shall be given…but from him that hath not shall be taken away even that which he hath. While Newham is wrestling with the gravest problems—the downward spiral of inner-city decay—from which it is desperately trying to escape, the Government are robbing it of millions of pounds. That is their contribution to our plight.

First, the borough is rate-capped, which is supposed to limit the rate burden. Then, the Government impose a multi-million pounds cut in rate support grant, thus putting pressure on the rates. To do both simultaneously causes a financial disaster. Is that what the Minister wants? The Government proposals are crazy and irresponsible. If the Bill goes ahead, I view the future of the borough with foreboding.

There are conditions in Newham which look like a riot waiting to happen. Some of us have sought to ameliorate these conditions, but the Government, through this Bill, are sabotaging those efforts. They are throwing lighted matches on to the tinder. I say to them publicly today that that is highly irresponsible.

The Bill could wipe out the £5 million now being given by the borough to voluntary organisations to alleviate the bleakness of life for many local people. Is that what the Minister wants? That is what will happen. There would also be cuts in basic services such as education, and there would be large-scale sackings. Is that what the Minister wants?

It is frustrating for me, as a constituency Member of Parliament, making appeals in this Chamber for an Adjournment debate—in this House as I did a few weeks ago about homelessness in the borough and deputations to the Minister giving the facts—when Ministers seem blind and deaf to our needs and give no evidence or sign that they care a jot about the welfare of Newham and its people.

What is Newham's position? If Ministers listen to nothing else that I say, I hope that they will listen to this point. I should like to think that the Government are interested in this issue.

Newham's original budget for 1986–87 was £167.161 million. The expenditure was rather more—about £170 million. The forecast level of expenditure for 1987–88 is £194.7 million. That figure would give a standstill budget with a continuation of present policies and commitments. The expenditure level set by the Government is based on a formula set on the original budget for 1985–86. Here is the rub, and I hope that the Minister will listen. The 1985–86 budget is an unrealistic basis for rate capping because it was distorted by special accounting measures. That was accepted by the Minister's Department, and is the reason that he allowed us to come for redetermination.

We met the Minister to discuss redetermination and asked for a redetermined expenditure level of £175 million. The Minister was complimentary—he said that we were polite and courteous and put a reasonable case. I note that the Minister is nodding. However, before we received any reply from the Minister we were overtaken by the new Bill, with an even worse proposed expenditure level of £157.4 million. I ask the Minister to believe me when I say that that puts Newham into a desperate position. To be precise, the proposed expenditure level is £10 million less than this year's budget. It is £18 million less than the amount applied for on redetermination. It is £33 million less than the forecast expenditure level for 1987–88.

Put another way, the new implied expenditure level is 3.6 per cent. above GREA, while the original budget for 1986–87 was 18.4 per cent. above GREA. What the Government are asking for and demanding from Newham is a 15 per cent. cut. I beg the Minister to believe that that is wholly unrealistic. Both the finance director and the chief executive of the London borough of Newham told the Under-Secretary on 19 November last year that that reduction was unachievable, even if the will were there to achieve it. Even to attempt it would mean unnecessary chaos and major diseconomies, as, for example, the cost of redundancy payments.

The Government are imposing a standard formula on all authorities of a certain class. That overrides individual circumstances. It is grossly unfair to have a standard formula for all authorities regardless of their circumstances. Why do the Government come forward with such an idea? The only explanation I have is that the Bill would be hybrid were that not the case. The Minister is nodding. The reason for the outrageous proposal that all authorities should have a 2 per cent. uprating is so that he can remedy his legal position. That is why he must bring something forward quickly.

The Secretary of State said that local authorities could not come to his Department, as they did previously to the Minister of State, because there would not be time. The Government have got themselves into a legal fiasco. To clear it up quickly, as this Bill seeks to do, leaves no time for us to come back to the Government and for them to look into the cases of individual authorities. Therefore, although the Bill is grotesquely unfair and inequitable for the London borough of Newham, it must be the victim and suffer for the incompetence of the Government.

Mr. Tony Banks

I am grateful to my hon. Friend, who is making a good case. Does he not share with me the feeling that, when the three Newham Members of Parliament went to see the Minister to apply for redetermination, we were wasting our time because by then, at the end of November, he must have known that the Bill would come before the House and that there would be a class increase in terms of expenditure limit and, therefore, the particular plea from Newham would be disregarded?

Mr. Leighton

I am driven to that conclusion. I do not like to take a cynical view of our parliamentary processes. I would have liked to think that there was a serious purpose and that the Minister was serious. I do not like to think that he was just stringing us along while he knew all the time that, regardless of what we said, he would not take a blind bit of notice and that the whole thing was to be overtaken by the new Bill. Its appalling formula that he must use to prevent the Bill being hybrid crucifies Newham. That is the only conclusion that I can reach.

One reason why the Bill is unfair is that no allowance is made for the need to restore balances. Because of the need to restore Newham's balances, our expenditure level on that account alone will be reduced by a further £2 million. In particular, as the formula is based on a distorted year, it brings about an unrealistic, absurd and grotesque result.

Is it legitimate or prudent for the Government to place such an imposition on the people of Newham? A table that I gave civil servants to give to the Minister shows that, of the different case examples of the 20 rate-capped authorities, Basildon is 70.5 per cent. above GREA; Thamesdown 62 per cent.; Greenwich 38 per cent.; Camden 35 per cent.; and Newham is right at the very bottom at 1.6 per cent. above GREA. That is ludicrous and outrageous. It is completely crazy and monstrously inequitable.

If the 1985–86 Budget were adjusted to take account of the special accounting in that year and the formula were then applied, Newham would be 10 per cent. above GREA. We would be roughly half-way in this table. The borough could live with that, and something of that nature has to be done. I hope that the Ministers have listened to what I have said and taken it on board. There must be a more reasonable approach and a more rational formula.

One of the worst features of the Bill is that for the first time there is no appeal. We cannot meet Ministers, as we normally do, to ask for redertermination and to ask them to consider cases on their merits. We have heard that this is because they do not have time because of the legal fiasco. The whole thing is to be steamrollered through, regardless of the consequences, without any proper examination of the details of Newham's case. I hope that that aspect will be looked at again in Committee.

By far the best thing, since the Secretary of State has found that he has been acting unlawfully and there is now a hiatus, would be to take the opportunity to abolish rate capping. If it is persisted with, the formula must be amended in such a way as to ensure that justice can be done to authorities such as Newham. This must be a priority in Committee, if Second Reading is given. I shall table amendments to that effect. If such adjustments are not made, I advise the Government that the consequences in Newham will be dire and catastrophic.

7.12 pm

Mr. John Watts (Slough)

When my right hon. Friend the Secretary of State for the Environment announced his intention to introduce the Bill I felt a sense of deja vu, because just under 12 months ago we had before us another Local Government Finance Bill which was designed to plug loopholes in the operation of block grant and legitimise what had gone before. It is right that we should legislate to confirm action that is past. No useful purpose would be served, and it would not serve the interests of local authorities, by overturning all settlements made under the 1980 Act. Chaos would ensue.

Equally, it is legitimate for the Government to include in the Bill measures to prevent local authorities from cooking the books. We normally refer to this as creative accounting, but that still means cooking the books. There is nothing terribly reprehensible about that. In my days as a London borough leader a certain amount of creative accounting was undertaken. I venture to suggest that when my hon. Friend the Under-Secretary of State was leader of a London borough there might have been a little shading of the figures, even in the true blue and upright borough of Wandsworth.

When the Government detect that the books have been cooked, either to screw more grant out of central funds or to benefit one authority at the expense of others, there is no reason for the authorities which are caught out to cry foul or for Members of Parliament who represent those constituencies to suggest that there is anything improper in the Government stopping up a loophole. I venture to suggest that Labour Members would not be protesting if my right hon. Friend the Chancellor of the Exchequer were introducing a clause into the Finance Bill to stop a tax loophole—some lacuna in tax legislation that had been exploited by those wishing to minimise their tax liabilities. Similarly, it is legitimate when the Government seek to prevent local authorities from increasing their entitlement to grant at the expense of other authorities or the taxpayers.

Mr. Straw

From time to time Finance Ministers announce that from the day of their announcement some particular financial transaction will be unlawful, so the legislation is retrospective to the day of the announcement. However, can the hon. Gentleman think of any occasion when there has been a financial transaction that was lawful at the time, certified as lawful at the time by the accountants, but some years later Parliament has legislated to make that action unlawful?

Mr. Watts

The hon. Gentleman will know that the opinion of the auditor on a matter of taxation carries no weight, and even if a tax assessment is accepted and it is subsequently found within six years that some error has been made, that can be overturned. The hon. Gentleman introduced the opinion of the auditor, but that has no relevance to the legitimacy or validity of the action that has been taken.

Mr. Spearing

What the hon. Gentleman is suggesting is more serious. He is suggesting, in the equivalent to his analogy, that the Chancellor of the Exchequer could come to the House and introduce a Bill which says that he and not the courts will decide the application of the Finance Bills of the previous three years, and he and not the courts will decide the determination of the Finance Bill for that year and succeeding years. Is that not a reasonable analogy for how the Bill applies to local government?

Mr. Watts

No, it is not. From what my right hon. Friend the Secretary of State said when he introduced the Bill, the hon. Gentleman's description does not fit what the Bill sets out to do.

Mr. Spearing

That is what is in the Bill, not what the Secretary of State said about it.

Mr. Watts

The hon. Gentleman will make his own speech and his own points. I should like to get on with mine.

It is not just this year that legislation has been necessary to stop up loopholes in the block grant mechanism. The Bill is merely the latest evidence of the near total failure of the 1980 Act to provide a sensible, certain and fair basis for distributing rate support grant. In 1982 we had to have a Bill to introduce penalties because the mechanism of the block grant had failed to restrain extravagant authorities from pushing up their expenditure. It had not provided the sharp accountability between authority and ratepayer that the architects of the 1980 Act had intended. Events proved that that did not work either, and so in 1984 we had to introduce rate capping. Both penalties and rate capping have, at best, been a limited success in restraining the excesses of high-spending authorities.

While I am perfectly content and think that it is right for us to legitimise, within the Bill, the settlements that have gone before, I am less happy that we are continuing for the next and ensuing years the continuation of this discredited system of grant distribution. To that extent, I look upon the Bill as a missed legislative opportunity, because it does not address the most serious problems of the rate support mechanism.

My right hon. Friend the Secretary of State has promised that we shall have legislation to abolish domestic rates, to introduce a community charge and to review the grant system, at the latest in the first Session in the new Parliament. I am optimistic, and I like to place emphasis on those words "at the latest" and to harbour some hope that the legislation will come earlier. Unlike my hon. Friend the Minister for Milton Keynes (Mr. Benyon), I do not have reservations about the community charge or his optimism that the rating system could be adapted to provide us with an acceptable mechanism for raising local government taxation. The day when we carry through a major reform of local government finance cannot come too soon for me.

The urgency about removing the uncertainty relating to previous years' settlements would not allow this Bill to be replaced by the thoroughgoing reform that was foreshadowed in the Green Paper, and it could not be enacted within it. It would be completely unrealistic of me to ask my right hon. Friend to introduce such a reform. However, I remain to be convinced that it would not be possible in the Bill to deal with reform of the grant system. For past years we should thereby legitimise what had happened, but for future years—perhaps not for the financial year 1987–88, but for the financial year 1988–89 and thereafter—there would be a different system for distributing grants.

The block grant mechanism that was introduced by the 1980 Act is fundamentally flawed. For six years, as leader of a London borough, I grappled with the problems that the block grant system imposed and came up against some of its major difficulties. It is based upon a specious sophistication that ultimately fails to provide a sensible assessment of needs or a fair basis for distributing grants. In one year, the calculation of the grant-related expenditure assessment for library services was based upon the square footage of retail floor space. There may be some relationship between shoppers and those who use libraries, but the connection is not so close or obvious as I would expect. That is what I mean by "specious sophistication".

There is also the major flaw of poundage equalisation. If the system worked perfectly and delivered the results that its architects designed it to deliver, the result would still be unfair to ratepayers in areas with high rateable values, such as my county of Berkshire. If all authorities delivered exactly the standard of service envisaged by GREA, and if the rate was therefore levied at the same rate in the pound in every authority, some ratepayers would face bills twice as high as those faced by ratepayers in other parts of the country because of the wide disparities in rateable values, which in no way are reflected in differences in levels of income.

Mr. Meadowcroft

Does the hon. Gentleman not accept that that has never been the way to compare like with like in different local authorities? A better measure would be the rate paid per head of population or per hereditament. The valuation differs, but a much better equalisation process is to look at what is actually paid.

Mr. Watts

I think that the hon. Gentleman supports my point. Even if the system succeeded in equalising the rate poundage between authorities, which is what it tries to do, the rate bill faced by an individual domestic ratepayer would be twice as high in the Greater London area as in Yorkshire and Humberside. The average domestic rateable value in Yorkshire is 30 per cent. below the national average, while the average domestic rateable value in Greater London is 30 per cent. above the national average. Even if the system achieved what it set out to achieve, the result would be extremely unfair.

The attempt to equalise rate poundage leads to the inexorable transfer of grant away from areas of high rateable value per head, such as my county of Berkshire, and, I suspect, Essex, to which my hon. Friend the Member for Basildon (Mr. Amess) referred in his speech. Because of the way in which the block grant mechanisation works, it has the effect of weakening the accountability of local authorities to their ratepayers. Changes in grant, which have a major effect on the level of any rate increase which has to be levied, may bear no relation whatsoever to the expenditure decisions of a particular authority.

In Slough and in Berkshire we are faced with the conundrum that Berkshire county council, which has consistently spent below its GREA, has lost grant year after year. Under my right hon. Friend's latest proposals, if it spent at GREA in the coming financial year it would he £9 million worse off than if it had spent at GREA in the current financial year, while the borough of Slough has had its rate support grant increased from £1 million to £4.5 million during a period when the Labour-controlled council has trebled the borough's rates. For the minority of my constituents who are ratepayers there is some compensation from the fact that, as the county has lost grant, the borough has gained, but it is only partial compensation, because my Labour-controlled borough council uses the grant to spend more rather than to pass on the benefit to ratepayers in the form of lower rate bills.

There is an urgent need to scrap this completely discredited block grant machanism. It is a leaky old tub that has needed to be patched up so many times that it is now difficult to identify which are the patches and which is part of the original structure. It does not require any further patching; it requires scrapping.

The Green Paper "Paying for Local Government" contains proposals for a new grant system that is designed to help to improve local accountability and to provide a simpler and more stable system to assist local authorities with their financial planning. As other hon. Members have said, this is a matter of considerable importance. The proposal is that there should be two elements of grant—a needs grant, to compensate authorities for the higher costs which some of them face in delivering services, and a standard grant, which would be distributed on a simple per capita basis. I hope that the weighting of the grant distribution will be mainly towards the standard grant.

By and large, the costs of local authority services are related to population. Across a local authority area, such as a county, distribution on a population basis provides a reasonable measure of the need to spend. Whether one has a large number of elderly people, or a large number of children, there are needs to be met through expenditure, albeit by different services. A per capita system meets those needs. Similarly, in the more rural parts of a county, additional costs arise because of sparsity of population, whereas in the more built-up and densely populated urban parts of a county, such as my constituency of Slough, additional costs arise because of the concentration of population. However, if one takes the county as a whole, those factors even out. Probably, therefore, only a small needs element is required to reflect the exceptional additional costs that are borne by some authorities which diverge too far from being a microcosm of the country as a whole. To distribute as much as possible on a per capita basis would be both fairer and more readily understood by the electorate, and it would have the effect of strengthening the accountability of authorities to their electors.

The changes in the grant distribution mechanism could be enacted separately from the legislation that would be needed to scrap domestic rates and introduce a community charge. I do not believe that the two parts of local government finance are inextricably linked. Those who have doubts about the community charge, such as my hon. Friend the Member for Milton Keynes, might agree that as a first step this is one way in which it would be possible to move to a different basis for distributing the rate support element. There is a more urgent need for reform in that area than perhaps there is in the wider aspects of local government finance reform, although I remain firmly committed to and firmly support all the Government's proposals.

I should like to see the community charge introduced as soon as possible, because it would strengthen accountability and ensure that every adult living in the area of a local authority would have to contribute to the cost of the services that he uses. It would move us away from the system in which those who demand and use the services can be entirely free of sharing any of the burden of financing them. I shall certainly not be satisfied until my right hon. Friend comes to the House with proposals for a thoroughgoing reform of local government finance. Ratepayers in Berkshire and in other areas adversely affected by the present system should not be burdened one day longer.

Mr. Jeremy Hanley (Richmond and Barnes)

My hon. Friend has unrivalled experience in running a difficult Greater London borough and I should like to put on record my admiration for the way in which he ran that borough for many years. For that reason, it would be interesting to me and to the House to hear his opinion of the way in which the new rating system might affect businesses.

Mr. Watts

Perhaps that is slightly outside the scope of the Bill, but insofar as as I can I shall respond to my hon. Friend. The uniform business rate proposed in the Green Paper will generally be beneficial to business, because it will provide certainty about the level of contribution which businesses will be required to make towards the cost of local authority services. The rate at which that tax can be increased will also be limited through indexation. It will put an end to the anomaly of two identical businesses on opposite sides of the road, one luckily in Wandsworth and the other unhappily in Lambeth, one of which pays two or three times as much as its competitor.

Generally the effect will be beneficial, but during the transition, especially in the south-east, one must expect rateable values to rise as a result of revaluation. There must be some dampening of the effects if an additional substantial burden is not to fall on businesses over a fairly short period. As a long-term reform it will be beneficial and will certainly remove from Labour authorities the opportunity to treat the business ratepayer as a milch cow.

I eagerly look forward to the day when my right hon. Friend comes to the House with his full package of reforms. However, I suspect that that day is still some way off and I urge my hon. Friends to consider whether it would be possible to bring forward the rate support grant element of the reform so that ratepayers in Berkshire and in the areas of some other local authorities, mainly in the home counties, with high rateable values, and which are penalised year after year by this pernicious block grant system, can be relieved of that burden and no longer be subject to this discredited and unfair system.

7.33 pm

Mr. David Clelland (Tyne Bridge)

This Bill says as much about the Government's apparent conception of the functions of Parliament in passing legislation as it does about the web of complications which now form the system of local government finance. The Government appear to hold the view that legislation and the introduction of law is almost entirely about the imposition of the prejudices of Ministers on individuals and organisations, whereas the majority of our people still harbour what the Government may regard as a rather quaint and outdated view, that the law has something to do with justice.

As clear a view as may be found that the Government are more concerned with prejudice and political dogma than with justice can be obtained by an examination of the Government's record in the area of local government in general and local government finance in particular. In the very first point of the Bill, the explanatory and financial memorandum says: Relevant expenditure and total expenditure, which are essentially elements of the rate support grant and rate limitation systems in England and Wales, have been calculated in a way which conflicts with the legislation concerned. The Government might have been a little more economical with words because all that means is that the legisation is not in accordance with the law or, to put it another way, it is illegal.

The Government and their supporters have had a lot to say about law breaking in the area of local government finance. The surcharging and disqualification of councillors who were said to have broken the law was greeted by gloating and much amusement by Conservative Members. What crime did the councillors commit? They supported a policy that was designed to delay the setting of a rate in the full knowledge and belief at the time, and having been advised to the effect, that such a course of action was entirely legal. However, judges subsequently decided that their actions had not been entirely legal and they were surcharged and disqualified from office.

Conservative Members added insult to injury by hurling abuse and accusations of disrespect for the law with a venom that only they are capable of harbouring and which has poisoned their minds against our local government system. But what is the attitude of the same Members, the same Government, when some of their own friends are found—not for the first time—to have broken the law? There are no cries of horror now, no pontificating about the sanctity of the law, no statements the law must be obeyed and that no one is above the law. We had no paternalistic reminders that ignorance of the law is no defence.

When councillors were surcharged and disqualified, their defence that they thought that they had been acting legally was dismissed. Yet when a former Secretary of State for the environment, the right hon. Member for Henley (Mr. Heseltine) admits in this House: I have spent £30 billion of taxpayers' money illegally."— he is allowed to make a joke of it.

What is the response of this Government of law and order, the self-professed protectors of justice and fair treatment for all? The Secretary of State for the Environment said to the right hon. Member for Henley: I thought for a moment that my right hon. Friend was going to offer to pay. I assure him that I would not suggest that for one moment. I do not suggest that we should apportion blame in this matter. There has been a distinction between what people thought the law was and what it is. We can easily put that right".—[Official Report, 16 December 1986; Vol. 107, c. 1055.] Of course this Bill is designed to do just that, to legalise what was previously illegal in order to get Tory Ministers off the hook, while for less serious and certainly far less expensive breaches Labour councillors are branded as blatant law breakers.

Mr. Watts

Is the hon. Gentleman arguing that the law should remain as it is, which is not as it was thought to be? If he is, does he not accept that he is arguing that every settlement made under the 1980 Act should now be undone? Does he not accept that that would lead to chaos in local authorities because there would be uncertainty not just about the coming year's rate support grant, but about everything that has happened for the last five years?

Mr. Clelland

I am pursuing an argument which outlines the Government's hypocrisy and double standards. Later in my speech I shall tell the hon. Gentleman how the Bill itself will cause considerable chaos in some local authorities.

Far from being a protector of the law, the Tory party manipulates, uses and abuses the law in order to pursue its own narrow political prejudices and as a weapon against its political opponents.

On average, one Act of Parliament during every year of the Government's term of office has concerned the financing of local authorities and each Act has claimed to clarify, improve or otherwise enhance the system.

Although it could be argued with some justification that measures must be taken to shield local authorities against the possible consequences of the Government's illegality during the past few years, this latest Bill only serves to emphasise the way in which local services are being made to pay for increased central Government expenditure and the increased centralisation of power. To justify their actions, the Government make spurious accusations of overspending and profligacy.

However, to put it simply and to deal with the generality rather than with the specific point that was made by the hon. Member for Basildon (Mr. Amess), what has happened is that whereas in 1979–80, £61 of every £100 of local authorities' relevant expenditure was met by the rate support grant, today only £46.40 of every £100 is provided by the Government. Therefore, to spend the same £100, local people have to contribute £54 in comparison with the £39 that they were expected to contribute in 1979. That is an increase of 35 per cent. in the local contribution without one penny increase in expenditure.

Add to that the effects of inflation, the continuing and increasing demands and the increased expenditure arising from Government legislation, and it is not hard to see why rates have increased while services have suffered, and why the areas with the greatest need have had to suffer the greatest increase in rates to protect services and continue with such improvements as they can. The fact that many of those councils are in the north should come as no surprise, especially given the latest reports on the north-south divide. Only two or three weeks ago, the Prime Minister denied that that divide existed. Of course, we know now that the divide exists and we also know that the Government's policies have aggravated and accentuated it.

The divisions are also evident in local government finance. Indeed, only a few short weeks ago, the Secretary of State for the Environment announced what he called "new guidelines" based on what he said was "more up-to-date information" for the distribution of Exchequer grants to local authorities. His "more up-to-date information" was apparently gleaned following representations from Tory-controlled councils and his "new guidelines" meant losses of about £20 million to the northern regions and a gain to the likes of Surrey, Hampshire and Bedfordshire.

Nowhere in the Bill is there any recognition of the existence of the seriousness of the north-south divide or any sign that the Government intend to do anything other than continue to undermine local government finance and accountability. They undermine local finances by the restrictions and legal entanglements contained in legislation such as is proposed, and by setting limits on expenditure which are based on complete ignorance of the real needs and priorities of an area. They undermine accountability by interfering with the priorities as they are perceived by locally elected representatives, and by replacing elected bodies with appointed boards and, in too many cases, political sympathisers.

If local government means anything, it means the right of local people to build and develop their communities in their way. The Government have eroded those rights and prevented local communities from raising their finances and deciding their priorities. In so doing, they have transferred power from local people to the Secretary of State for the Environment who now has, as the Bill confirms, dictatorial power to decide the financial fate of local councils and, in consequence, the standards and levels of essential services as well as the employment prospects of thousands of ordinary people in the public and private sectors.

The Bill should be rejected by the House for the ill-conceived, hastily drafted and dictatorial measure that it is, as well as for the very good reason that it threatens even further cuts in jobs and services in many inner-city areas. I am concerned especially about the effect that it will have on the northern region in general, and on Newcastle and Gateshead in particular. Both authorities, despite being recognised as areas deserving special assistance through inner area partnership, are rate-capped by the Government. The expenditure levels that were proposed by the Secretary of State last year were totally inadequate to meet the existing needs and current levels of service let alone to allow any improvement.

The new proposals in the Bill take no account of the real needs of the two councils and, indeed, clearly show that the representations made to the Secretary of State on 24 November 1986 by my hon. Friends the Members for Gateshead, East (Mr. Conlan), for Blaydon (Mr. McWilliam) and me, together with members and officers of Gateshead council, fell on deaf ears. Of course, it is now clear that even as we faced the right hon. Gentleman across the table in Marsham street, he was fully aware of the proposals to be brought forward in the Bill. Yet he allowed the Gateshead representatives to travel all the way down to his office—at a not inconsiderable cost in money and time—knowing that their journey could achieve nothing. Like the hon. Members who represent Newham constituencies, we wasted our time in seeing the Secretary of State.

Mr. Spearing

I am grateful to my hon. Friend for what he has just said. What was the date on which he and his colleagues came down from Gateshead to visit the Secretary of State?

Mr. Clelland

The date was 24 November 1986, two months after the Secretary of State, as he told us this afternoon, was aware of the problems in the legislation.

My hon. Friends and I put the case clearly and forcefully, to the Minister, saying that his proposals would mean a shortfall in excess of £10 million in Gateshead's finances as a result of the special accounting arrangements of the previous year. He accepted that by agreeing to meet us in the first place. However, he has not taken on board one of those points. In the Bill he proposes a formula which will force a reduction in the council's revenue needs of more than 12 per cent. or £12.5 million in 1987–88.

I put it to the Secretary of State—at least I should have done so had he been here to listen—and to the House that there is not an organisation in this country which, having been squeezed to the limit, could make reductions of that magnitude without serious and harmful effects on those who rely on it for services or employment, or both. For those reasons and for others that have been put forward by my right hon. and hon. Friends and others, I urge the House to reject the Bill.

7.46 pm

Mr. Brian Sedgemore (Hackney, South and Shoreditch)

I must confess that I gulped when I saw the Bill. On the basis of what the Secretary of State told us on 16 December last year, I expected a modest little Bill which would make lawful the illegal expenditure of £60 billion and put the law back to what we had all previously thought it had been. If that had been the case, we could have had a little bit of fun tonight scoring a few party political points, and then we could all have gone home.

However, the Bill is not like that at all. It is one of the most extraordinary Bills that a Secretary of State has ever attempted to put on the statute book. In bringing it to the House the Secretary of State has shown the sort of regard for the laws of the country that one would expect of a member of the Italian Mafia for the laws of that country.

The Bill is written as though the courts do not exist and as though there is no such thing as the rule of law. At a stroke the Bill wipes out administrative law over an entire area of local government finance. The Bill makes it clear that the Secretary of State sees the laws as a pestilential nuisance to be swept aside by the arrogance of the present Conservative majority. It is based on a philosophy that is deeply and profoundly offensive to the democratic process, and it enshrines in statute the proof that in the late 20th century Conservatism and authoritarianism have become synonymous in this country.

Extraordinarily, the Bill creates a regime in which it is deemed, not only that the Minister knows best, but that he knows everything. He can do what he likes under the Bill and can even say what is, and what is not, expenditure. When the Secretary of State uses a word, he says that it means what he says it means, neither more or less. No matter how stupidly, unfairly, arbitrarily, ridiculously, perversely or viciously he acts, the courts cannot intervene and they cannot review his actions. The courts cannot consider unreasonable behaviour, maladministration, negligence and brazen political chicanery. I cannot remember a Minister coming before the House with such a Bill.

Indeed, the Bill sets out to make a complete ass of the laws of the country. I ask the House to consider the position of the London borough of Hackney in relation to redetermination. Thanks to the Secretary of State, the entire process has been a judicial farce. The London borough of Hackney did not intend to apply for redetermination, but it was taken to the courts by a ratepayer. After a protracted, expensive action, it settled. Queen's counsel then told the council, "You must apply for redetermination because it would be wholly unreasonable for you not to do so." At precisely the moment when Queen's counsel was telling the London borough of Hackney that it should apply for redetermination, and at a time when no law had changed, the Secretary of State for the Environment stood at the Dispatch Box and said that there would be a formula. He said that there would be no such thing as redetermination because it would be unlawful.

How, in a sensible society which believes in the rule of law, can Queen's counsel insist that it would be wholly unreasonable not to ask for redetermination while the Secretary of State insists, under the same laws, that it will become unlawful to ask for redetermination? Either we have an insane Minister who should be carried away by the men in white coats, or we have the politics of "Alice in Wonderland." "Off with his head!" "But he does not have a head." "Then he will not mind it coming off, will he?" What sort of politics are we engaging in? The Secretary of State comes to the House and says—he did so today—"All that we are doing is making the law what we thought it was before." In many respects that is manifest nonsense, and it will damage boroughs such as Hackney.

Before we started to debate the Bill, resources were calculated on the basis of expenditure levels, balances and the product of a penny rate. Now all that has been swept aside and resources will be calculated on rateable value. Everyone knows that in a borough such as Hackney rateable value will produce more resources than will the product of a penny rate. That is a major change from which Hackney will suffer.

Clause 4(3) says that the Minister will determine rate support grant on the basis of information given before the latest supplementary report. If more accurate and up-to-date information becomes available, the Minister will ignore it. What an extraordinary state of affairs. If the Minister ignores such new information, the London borough of Hackney could lose about £2 million. In 1984–85 it entered into joint financing arrangements with the district health authority on behalf of the DHSS. Before the latest supplementary report the estimate of disregards was £10.75 million, but now there is more up-to-date information. The outturn of disregards is £12.25 million. Therefore, the poorest borough in Britain faces a potential loss of £2 million because of delays by a Government Department and because of this legislation. It is unbelievable.

I give the analogy of two people taking an examination. The first person writes a brilliant paper in immaculate prose. He spends all his allotted time—three hours—doing that paper. The second person writes a dreadful paper in almost incomprehensible English, but he hands in his paper after three quarters of an hour. The Secretary of State for the Environment says, "I will fail the first person, who did so brilliantly and used immaculate prose, and I shall give a first-class honours degree to the second person, who produced such rubbish written in incomprehensible English, because he handed me his paper first." That is nonsense, and for the Government to allow a local authority to lose millions of pounds on that basis defies comprehension.

On 16 December the Secretary of State made it clear that, in his view, it was unlawful to make a rate fund contribution to a special fund if that led to a deficit on the rate fund. He wrote to some authorities about that, but he did not write to the London borough of Hackney, so it is not concerned with the warnings that he mentioned today. But Hackney has a major problem, and I ask the Minister who will reply to the debate whether he can solve the conundrum created by the Bill.

In 1982–83 the London borough of Hackney set up a special fund. In 1983–84 no contributions were made to that special fund, but a deficit was incurred in that year. If it is unlawful to make a rate fund contribution to a special fund which results in a deficit, is it unlawful to have a special fund which is in credit in a year in which a deficit arises? If it is not unlawful, can the Secretary of State—from my reading of the Bill, I suspect that he can—deem it to have been unlawful? If he can perform that absurd trick, Hackney will lose a further £4 million. Therefore, under a Bill which, apparently, will make no difference to what has gone before, the poorest borough in Britain could suffer a loss of £6 million in rate support grant.

Tomorrow we shall discover by how much the Government will expect Hackney to cut its expenditure. I shall not guess now, but it could be about £15 million. Perhaps the Minister can tell Hackney how it can fulfil the statutory obligations that it is barely fulfilling now because it cannot spend enough money on them.

At the general election the Labour party will be targeting two key Government figures. One will be the chairman of the Conservative party, the right hon. Member for Chingford (Mr. Tebbit), especially after his statement, which apparently he denies having made, that no one with a conscience would vote Conservative. The other person will be the Secretary of State for the Environment. Together, they represent the Right-wing loony tendency of the Cabinet. The epigram with which the Secretary of State leaves the House and the country is that no one with a respect for the rule of law could ever again vote Conservative.

7.57 pm

Sir George Young (Ealing, Acton)

I listened with interest to the speech of the hon. Member for Hackney, South and Shoreditch (Mr. Sedgemore). He destroyed a potentially good case by exaggeration—a tendency to which he has resorted before. Of course there are problems in Hackney, and no one who knows the borough would deny it, but if he cares about a solution to those problems I hope that he will exhort the local council to pursue more vigorously partnership with the private sector in housing and in jobs. I hope that it will take up more enthusiastically the money that is on offer from the Manpower Services Commission, the youth opportunities programme, and the rest, and that it will examine how the town hall is run to see whether some economies can be made there.

I support my right hon. Friend the Secretary of State. I do so with a twinge of sympathy, because whoever is to blame for the fact that we must have the legislation, it is certainly not him. Indeed, he has borne with fortitude the burden of getting the Bill through the House.

There has been a consensus in the House that if ingenious loopholes have been disovered by a minority of local authorities, which have disadvantaged the remainder, it is perfectly legitimate for any Government to try to stop those loopholes. In response to an intervention by my hon. Friend the Member for Hornsey and Wood Green (Sir H. Rossi), the hon. Member for Copeland (Dr. Cunningham) conceded that.

There has also been consensus on the legitimacy of clarifying matters if it emerges, as it has, that what we all thought was the case turns out not to be so. I am a vice-president of the Association of Metropolitan Authorities and I have received its briefing, which says: The Association is anxious that the distribution of Rate Support Grant is put on a proper legal footing. There is an element of consensus and I shall develop the differences in a moment.

Mr. Tony Banks

My hon. Friend the Member for Copeland (Dr. Cunningham) made it quite clear that he did not accept that there had been abuse. The hon. Gentleman must be clear about that. My hon. Friend said that that was what was being said by Conservative Members and that local authorities might well have been able to find loopholes. That is rather different from abuse.

Sir George Young

If the hon. Gentleman reads what I have just said, he will find that I said that there was consensus in that, if ingenious loopholes had been opened up and used by a minority, it is perfectly legitimate for the Government to put that right. I was in the Chamber when the hon. Member for Copeland disagreed with the statement that it was an abuse. I am trying to identify the consensus before demonstrating the differences.

The differences are based on the argument that the Bill goes further than building on the consensus, removing abuses and clarifying the law. The AMA's case goes further, and I should like to consider its objections and those of Opposition Members.

The AMA complains that the Bill is too complex and difficult to follow. I am a non-lawyer and find all legislation complex and, having dealt with some local government legislation, I have to say that it is no exception. All local government legislation on rate support grant is complex. It follows inevitably that when one tries to impose a new interpretation on existing legislation, it will be complex. Although the Bill might be complex, that is not a legitimate reason for hon. Members to vote against it, as invited to do by the AMA.

The next complaint concerns the powers being given to the Secretary of State. The AMA complains that the Bill goes further than it need in that regard. The Bill has to address the Secretary of State's powers to replicate the existing provision. The Bill redefines the Secretary of State's powers in the light of the information to which my right hon. Friend referred. My understanding is that the definition does not tilt the overall balance away from local authorities towards the Secretary of State, which is the charge that has been made. It simply replicates what exists at the moment. I reject that argument against the Bill as well.

The AMA complains about "proper practices" and says in its briefing: It seems unsatisfactory to place so much emphasis in this Bill on 'proper practices', when those practices are not defined. I understand that the Bill does not define proper practices because the Government do not intend to dictate to local authorities what their accounting practices should be. As much of the criticism of the Government is that they interfere too much, it is a little inconsistent to criticise them for not defining proper practices.

The AMA objects to the legal protection being given to the Secretary of State. The Bill affords protection, but hon. Members have gone slightly too far in their interpretation of what that protection is. The protection applies to the Secretary of State and future decisions of the courts, but only future decisions in respect of decisions by the Secretary of State that have already been taken. It does not give immunity in respect of future decisions. That is a much narrower definition of legal protection than has been given by some hon. Members.

The AMA objects to clause 5, which concerns intermediate areas, and alleges that it could mean grant losses for several local authorities. If some local authorities lose grant, I understand that that is because they have abused the existing conventions. It is only right that the majority of local authorities, which have observed those conventions, should not be penalised as a result of the activities of a minority. If they incur grant losses, I am sure that the decision can be defended.

The AMA's final range of complaints concern rate capping—clauses 7 and 8 and schedule 2. If we are to get a rate from rate-capped authorities by 1 April, the procedures to which they would have been entitled have simply to be compressed. If they were not compressed, the authorities would not be able to fix a rate by the date laid down in law. This is a provision for just this year. In 1988 all the existing procedures will be observed. It is a temporary suspension of some procedures, and entirely necessary if local authorities are to fix a rate by the necessary date.

I am conscious of my responsibilities as a vice-president of the AMA, but I did not find its briefing wholly persuasive and I intend to vote in favour of the Bill.

Several hon. Members have said that if only we had a slightly better system to distribute rate support grant we would not need this rather complex amending legislation. Nobody is more in favour of a simplified rate support grant procedure than I am. I confess that, despite having spent some five years in the Department of the Environment, I never fully grasped the intricacies or RSG. Each time an official tried to explain it to me I found that such grasp as I had was beginning to weaken and I had to invite the official to stop, in case I discovered that I did not understand it at all. I understood the housing aspects of RSG, however, for which I had ministerial responsibility.

There is a dilemma here. If we have a simple system, the chances are that it will not be very fair, and that if we have a fair system, it will be extremely complicated because it has to reflect all the differences in needs and resources of local authorities. Given a choice between simplicity and equity, I plump for equity.

I listened with interest to speeches which commended the new system of a uniform business rate and a community charge. If we do that, we are still left with the problem of how the Government distributes their share of the grant. Community charge simply replaces the domestic rate with another system and does not finance local authorities in their entirety.

I believe that we will be left with a fairly complex. RSG system. I voted with enthusiasm for the new system, which is to be introduced in Scotland, but I remain agnostic about its extension to England. I should like to see it up and running in Scotland before I decide whether it is the answer to all the problems associated with funding local government.

The London borough of Ealing is one of the local authorities which is affected by the provision on intermediate years in clause 5. Ealing is not rate-capped this year and many ratepayers hope that it will be rate-capped for 1988, in view of the authority's decision to go ahead with expenditure plans which look like putting the rates up by some 60 per cent.

There is a dilemma between giving local authorities and ratepayers more responsibility and the legitimate reaction that the Government should protect ratepayers from local authority abuses. Rate capping seems to be the right solution in the few cases when authority is abused.

In November I wrote a letter to the leader of the Labour party, who lives in Ealing, pays rates in Ealing and voted for Ealing council. I asked him fairly straightforward questions—whether he endorsed Ealing council's decision in five areas. Nearly two months later, I am still awaiting a reply. It is uncomprehensible that the leader of the Labour party, with all the resources available to him, finds it impossible to respond to a letter from another Member of Parliament on a matter as sensitive as this. Whatever influence the hon. Member for Norwood (Mr. Fraser) has, I hope that he will use it to persuade his leader to answer that letter. Having said that, I will, with enthusiasm, vote for the Second Reading of the Bill.

8.10 pm

Mr. Terry Davis (Birmingham, Hodge Hill)

As my hon. Friend the Member for Newham, South (Mr. Spearing) showed in his intervention, and as I shall seek to show in a few moments, the hon. Members for Slough (Mr. Watts) and for Ealing, Acton (Sir G. Young) have completely misunderstood the true nature of the Bill.

I do not blame the hon. Gentlemen for any misunderstanding because they have been misled and misinformed by the Secretary of State for the Environment who has misled the House in three important respects—in his statement on 16 December and in his speech today. I do not say that he has misled the House deliberately. Any such allegation would be out of order. However, as I listened to the Secretary of State for the Environment I became increasingly convinced that he does not understand the existing legislation and that he does not understand his proposed legislation. As a result of his misunderstanding, he has misled the House of Commons.

I shall be specific. First, in his statement on 16 December, the Secretary of State for the Environment sought to persuade the House that he is proposing to make a minor change to deal with "a highly technical problem". Those were his very words. He said: The Bill will simply seek to return to the legal position that everybody, including all local authorities,"— I emphasise the words "all local authorities"— thought existed. It was the Government who spotted the error, so the credit should go to the Government for having identified a legal weakness and for having sought immediately and honourably to put it right."—[Official Report, 16 December 1986; Vol. 107, c. 1054.] That statement was not true. The city of Birmingham council had a totally different understanding of the law as it existed before and as it exists now, before this Bill becomes an Act of Parliament. It is now clear that the city of Birmingham council was right, and that is why we have the Bill. The city of Birmingham council understood the law as it was and is, and it was the Secretary of State for the Environment—and quite possibly some other local authorities—who misunderstood the legal position.

The Bill is not intended to return to the legal position as it was understood to be; it is not intended to return to the legal position as it is; it is intended to return to the legal position as the Secretary of State says that it is, and there is a very big difference.

I followed the speech of the hon. Member for Ealing, Acton, with great interest, and I agreed with many of his earlier remarks. The hon. Gentleman used the word "abuse". He used the word in two contexts and tended to confuse its meaning. In the first use of that word, he was referring to those local authorities which had engaged in what he described as abuses in their accounts. As my hon. Friend the Member for Copeland (Dr. Cunningham) explained at the Dispatch Box today, the city of Birmingham council did not engage in any abuse. It made expenditure which it was entitled to make, and which was regarded as expenditure for the purposes of grants and in line with current law. That is not an abuse.

I must tell the hon. Member for Ealing, Acton that I thought it was common ground between all parties in this House that all individuals, companies and councils are entitled to arrange their affairs according to their own judgment of what is to their advantage under the law as it is at the time of taking those decisions. It is not right to describe those decisions as abuses, and it is not right to legislate retrospectively to change the law. That is one of the points that is wrong with this Bill, and one of the points on which the Secretary of State has misled the House of Commons.

I come to the second point of misinformation. The Secretary of State, in his speech today, said that no change was proposed for previous years, but that is not correct. The Bill will make it possible for the Secretary of State to change the definition of expenditure for previous years, and that is retrospective legislation.

The hon. Member for Slough, who has served on several Standing Committees dealing with Finance Bills, evaded the challenge from my hon. Friend the Member for Newham, South, who asked him to say on what occasion any Chancellor of the Exchequer, in this Government or in any previous Government, had legislated retrospectively on a tax matter and changed the law as it applied to a decision taken in the past.

As my hon. Friend the Member for Blackburn (Mr. Straw) said from the Dispatch Box, it is common practice to change the law regarding tax with effect from the time that the Chancellor of the Exchequer makes a statement, but he does not change it retrospectively. If people have succeeded—through what some hon. Members have called ingenuity, but what in truth can be described as a correct understanding of the law—in maximising their income, which every individual or council is entitled to do, then it is wrong to change the law retrospectively to reduce that income. That is what the Government are doing. They are retrospectively invalidating expenditures that were made by some councils; expenditures that were made legally by those authorities as far back as 1983–84. The decisions of those councils have, in many cases, been certified by the Audit Commission and private auditors. The city of Birmingham council had been certified by no less than Price Waterhouse, which wrote to the Department of the Environment and said: We have considered this issue in some detail and have concluded that the contribution is a lawful charge. It cannot be stressed too much that the city of Birmingham council has not acted illegally and has not abused the law. It has acted according to the law as it was at the time of those decisions. Even worse, this Bill does not change the law in that respect; it gives the Secretary of State the right to change the law—to redefine expenditure. The Secretary of State is to be given the power to prescribe that certain items of expenditure will no longer count for grant purposes. He has written to the city of Birmingham council and given notice that he intends to change those definitions affecting the city of Birmingham as far back as 1984–85, and it has been calculated by the city treasurer that that will cost the city of Birmingham £8 million.

I tell my hon. Friends from the borough of Newham, who have spoken with such feeling about the effects of this Bill on their borough, that the city of Birmingham will lose more in absolute and proportionate terms than Newham from this decision. Indeed, I tell my hon. Friend the Member for Tynebridge (Mr. Clelland), who referred to changes in the proposed rate support grant settlement and to the northern region losing £20 million, that the city of Birmingham alone will lose £39 million as a result of the changes that were suggested in the third consultation document.

The third point on which the Secretary of State has misled the House today was when he described this Bill as having the objective of "the maximum certainty" for local authorities. It will not provide certainty for local authorities. The hon. Member for Ealing, Acton said that this Bill does not change the balance between central Government and local government. He is also mistaken and is misleading the House. This Bill changes the balance because it changes the powers of the Secretary of State. It gives the Secretary of State for the Environment the right to decide what is legitimate expenditure for a council to undertake and what expenditure will be taken into account in determining the rate support grant. That means that there will be uncertainty.

I have myself discussed this matter with the city treasurer in Birmingham, and he tells me that he is now totally uncertain about what advice to give a city council, on a non-political basis, about city finances, because he does not know what decisions the Secretary of State will take in the future to redefine what is and what is not legitimate expenditure for the city council. We will not know for five years after 1983–84 what was legitimate expenditure in 1983–84. The decision to refuse to validate all previous decisions up to the date of the Secretary of State's statement to this House on 16 December is deplorable. At the very least all retrospective proposals should be dropped from the Bill and all past decisions which have been certified as correct and legal by auditors should be accepted. How can any local councillor of any party now take a decision on the basis of knowing what the law is and what law will be applied to the decisions that he takes?

I come now to a point that is not in the Bill but which is a direct result of the Bill. As I have already pointed out to the House, the Bill gives the Secretary of State the right to take decisions which he has already told us will cost Birmingham £8 million. That is not the first such decision that we have had from the Secretary of State. Last year, the Secretary of State pushed through the House a Bill which became an Act of Parliament in the autumn and changed the basis of the rate support grant. That decision was taken and the Bill put through the House as a result of the city of Birmingham council going to the court and obtaining a judgment in its favour. The Secretary of State changed the law retrospectively to rob the city of Birmingham council of the legitimate fruits of its success in the court.

The Secretary of State believes that the law should be what he says it is, not what the judges say it is. As I have said before, I do not object to the Secretary of State proposing a change in the law for the future. All Governments are entitled to take that action. But I do object to any Government changing the law retrospectively and robbing a successful claimant of his award in a court of law. That cost the city of Birmingham £7 million.

Then there is the decision, foreshadowed by the third consultation document about the rate support grant, to reduce the rate support grant for Birmingham for the coming year by £39 million. That was the second such decision.

Now we have the third episode in the Secretary of State's vicious vendetta against Birmingham which will cost Birmingham £8 million.

At the very least, it is about time that the Secretary of State started to take legal advice from the solicitors who advise the city of Birmingham council. They have a better idea of the law than his advisers in the Box or in the Department of the Environment in Marsham street. If he came to Birmingham, we could tell him what the law is. But the Secretary of State will not accept what the law is. He prefers to change it retrospectively.

This is a bad Bill and we should all vote against it.

8.22 pm

Mr. Peter Bruinvels (Leicester, East)

I am pleased to rise in support of the Local Government Finance Bill, particularly as I nominated Leicester city council to be rate-capped at the beginning in line with the Rates Act 1984. It was rate-capped and it was a worthy candidate for that.

The hon. Member for Birmingham, Hodge Hill (Mr. Davis) talked about abuses. There certainly have been abuses in local government, and that is a sad fact of life. That is why we need to keep changing the rating system, the rate support grant and other matters relating to the rates. Indeed, that is why, in the long term, we must abolish the present rating system and introduce the community charge. The ratepayers have been getting a raw deal and something must be introduced as quickly as possible.

In the meantime, I am particularly worried about the lack of any provision in the Bill for a clawback. A council like Leicester, which is rate capped one year can in the next year legitimately cause the rates to shoot to a new high level in order to claw back what it had hoped to receive in the first year but which it had been denied. That blatantly defeated the Secretary of State's will and I hope that it will be considered again.

Local government finance is complicated. I was present when my right hon. Friend the Secretary of State made his statement to the House on 16 December, when he said that he was the only one who fully understood the matter. I can fully appreciate the problems that exist. However, it is urgent that we should have a full and proper control of rates, once collected. That is where we are going wrong now.

The Bill will legitimise the rate-capping provision of the Rates Act 1984. Therefore, it will guarantee that Leicester was properly rate capped, signed and sealed. In the meantime, we must look at the accountability requirements before setting the rates. The Bill seems to provide no direct rules to ensure that all local authorities present to businesses in the area a proper consultation paper so that the business community can have a real say in deciding the level of rates. Like my hon. Friend the Member for Slough (Mr. Watts), I want to see one uniform business rate in the future, but in the meantime that accountability should be introduced into the Bill as soon as possible—I hope, in Committee.

There is no provision in the Bill for value for money. All councils should be fighting for value for money, whether in reducing their spendng on energy to provide more money for house repairs and some council house building. Some formula is required for that.

It is important that all local authorities should publish details of some of their nutty schemes. The amount of money that can be spent on any loony scheme should be part of the annual financial report, whether it be the Leicester city council's go gay policy, establishing a lesbian and gay unit, additional creches, twinning with Nicaragua or renaming the Welford road recreation ground the Nelson Mandela park. It is only right that such escapades, which are deeply offensive to my constituents, should be properly priced. Therefore, I welcome the provision for that in clause 1(4). I cannot, as yet, find in the Bill any particular requirements relating to partisan and political public relations, another costing that will need to come under clause 1(4).

It is a fact of life that in Leicester the chief executive's department is growing like Topsy. It is overmanned, overpaid and overspending. The Leicester Mercury, in an editorial a few days ago, highlighted the fact that a qualified assistant engineer would be paid about £11,200 a year, while a poverty low-pay officer would receive a minimum salary of £14,000, yet no real qualifications were specified for such a post. It is possible for a local authority to pay more for a political posting than for one which helps the entire community. An engineer would not be tempted at £11,000, while every citizen of Leicester will probably be tempted to become a poverty low-pay officer with a salary of £14,000.

As my hon. Friend the Member for Slough said earlier, steps must be taken in relation to creative accounting and deferred payments. Leicester should have been rate-capped last year—1985–86—and it should be rate-capped this year—1986–87—but, because of deferred payments and working closely with certain banks, it has got round the law. We want to see proper payments for local government. Certain local government Acts and Bills that have previously been brought before the House should now be legitimised. It is also clear that the rate limitation system can be made to work and can make local authorities sit up and realise that they cannot spend everybody else's money with impunity. Despite the introduction of the rate support grant and the rate limitation system some Labour local authorities have been able to scoot round the provisions and make the ratepayers pay in full the next year. There has been an excessive waste of ratepayers' money.

There is no doubt that there is no real voice for the business community. I appreciate that the Bill does not provide an opportunity for reintroducing the business vote, but that would have been the best way forward. Labour Members always argue that business men already have a vote wherever they live. However, most business men cannot afford to live in Leicester because their rates went up by 80 per cent. this year. Most have moved into the county, where the rates are considerably less. Labour Members may laugh, but those business men are the people who provide the real jobs in Leicester which are desperately required. It is depressing that they should move out into the county because they cannot afford the high rates.

I support the Bill, but I call for guarantees that we shall have value for money in the period up to the general election, for guarantees that once the Scottish dimension has been properly examined we shall get away from the current rating system and ensure that with the community charge there will be a just and equitable means for levying rates on all ratepayers.

It seems that wherever there is a Left-wing council, few people—only about 30 per cent.—pay rates. The rest are funded by the taxpayers. There is not a truly representative voice. High rates kill jobs and deny the opportunities for expansion.

The introduction to part II of the Bill says that it will have no effect on central Government manpower. I only wish that that were true of Leicester city council. The Labour council said that once rate limitation was introduced there would be a tremendous loss of jobs, but all that we have had is a massive increase in the number of jobs provided by the city council. The Bill might offer the council and the chief executive the opportunity to take on even more employees. That would be bad for the city's ratepayers.

The Bill is vital and will ensure that until we do away with the rating system ratepayers will have a voice. I urge Ministers at the Department of the Environment to look again at rate capping and at the needs of Leicester, where local people desperately want to see value for money. The scope of rate limitation should be widened to cover other councils and the district auditors should have more power. Councils have used deferred payments and other methods to get round the law, and action needs to be taken urgently. If we act now, ratepayers will be justified in voting Conservative in the May elections.

8.30 pm

Mr. Richard Caborn (Sheffield, Central)

The speech of the hon. Member for Leicester, East (Mr. Bruinvels) was illiterate in terms of comprehending what local government is about and the role that it plays in local economies and in the national economy. It was the hon. Gentleman's usual cloud-seven speech, drifting away into oblivion.

The so-called Left-wing council in Sheffield has been rate-capped under the Rates Act 1984. On 6 November a delegation from the Sheffield chamber of commerce and the hon. Member for Sheffield, Hallam (Sir J. Osborn) came to London to put to Ministers the case that Sheffield could not manage on the £259 million budget set by the Government.

It has been useful in the past two years to have the involvement of the chamber of commerce and the business community. They have discovered the disastrous situation facing local government finance and have said that it would be impossible to run a business in the manner in which the Government are asking local government to operate. The president of the chamber of commerce told its annual meeting that nobody could run Sheffield city council on the level of expenditure determined by the Government. That view manifested itself in strong representations that there should be a redetermination of the Sheffield budget.

A delegation from the local authority pressed its case on 25 November and on 17 November all Sheffield Members, including the hon. Member for Hallam, who is a Conservative, made representations to the Government. That was the day after the Secretary of State's statement to the House. We were told that the decision on redetermination would be known during the second week in January, but when we returned after the Christmas recess we found that the redetermination process had been flattened.

A case has been made by industry, commerce and the public representatives of all parties. Even the proposed Conservative amendments to the resolution passed by Sheffield city council called for a cut of only £15 million, compared with the £41 million cut that the Government are imposing.

People from Sheffield have come to London and tried to put the case to the Government. They were invited by the Government to put the case for redetermination, and the community put a lot of effort into making that case. It is deplorable that the Government's only response is to introduce a Bill stopping that sort of discussion.

The hon. Member for Leicester, East spoke about audits, and I remind him of what was said about the so-called Left-wing Sheffield city council. In February 1985 Mr. John Banham, the Controller of Audit at the Audit Commission, told the Institute of Housing conference that Sheffield was "well-managed". He said: Other cities could learn from Sheffield which provides outstanding value for money. That authority has been vindictively attacked by the Government and is one of the most deprived areas in the United Kingdom. I represent the constituency with the highest youth unemployment in the United Kingdom. Our local authority will be denied resources for putting safety valves into the community and relieving some of the hardships. The council faces the impossible task of trying to run the city with a reduction of £41 million in its budget.

Sheffield has a major unemployment problem, particularly among young people, but it also has one of the largest aging populations in the United Kingdom. Those are serious problems, and the community wanted to put them before the Government, but we now face a potential 15 per cent. cut in the number of council employees—about 4,200 jobs. Bearing in mind that the council has responsibilities for some compulsory expenditure on, for example, the courts, cuts in other departments could total about 20 per cent.

The situation is desperate. I hope that the Government will accept what has been said by Labour Members. The Government have been advised to take certain legal manoeuvres to prevent consultations in the future, but I think that they should take further legal advice to find a mechanism to allow such discussions to continue. They should at least seriously consider amendments that will be proposed in Committee.

The north-south divide has been forcibly portrayed in the media over the past two or three weeks. If the Government continue taking resources from the north of England, and particularly from the inner cities, they will wreak havoc.

Much play has been made by Conservative Members of the legal manoeuvrings of local government. That complaint cannot be lodged against the joint boards in the areas of the disbanded metropolitan county councils. They have no reserves, because they are brand-new authorities. They could not have done any creative accountancy, because they were not there last year. There is no fat to lose, because nothing has been put into the coffers. We are talking about new authorities, yet some, like south Yorkshire, face rate capping.

To some extent, my hon. Friend the Member for Sheffield, Heeley (Mr. Michie) has mentioned the fire service. When we spoke last Friday to the chief fire officer for south Yorkshire, a black and dismal picture emerged. He is seriously concerned that he cannot meet the statutory obligations that have been laid down by the Home Office. It is all right for advisers and others not to take much notice, but they could be responsible for the deaths of people in south Yorkshire if the emergency services cannot come up to the minimum laid down by the Home Office. It is about time that there was a little more consultation between the Home Office and those who decide the expenditure levels.

During the past 12 months, transport has seen a 225 per cent. increase in fares, with 1,300 redundancies and a 10 per cent. reduction in the number of services. The Government have totally ignored our case for redetermination, and as a result we shall have £9 million less. That will mean a considerable number of redundancies. Moreover, the position on tendering will become very difficult. Indeed, the situation in south Yorkshire is desperate. The Government are creating more poverty. All the evidence shows that the north should be given support, but the Government are operating in the opposite direction and are vindictively starving south Yorkshire and, in particular, Sheffield of resources.

8.41 pm

Mr. Nigel Spearing (Newham, South)

When the Secretary of State made his statement on 16 December, I acted from memory and reminded him that with regard to London Transport, the judge had said that charging Londoners extra millions of pounds was illegal, improper and administratively incompetent".—[Official Report, 16 December 1986; Vol. 107, c. 1055.] The Secretary of State took exception to what I said, and I now wish to make a correction. Mr. Justice McNeill said that the Secretary of State had acted unlawfully, irrationally and procedurally improperly in giving a direction".—[Official Report, 19 February 1985; Vol. 73, c. 877.] I am sorry that the Secretary of State is not in the Chamber, as he should attend the debate more. But it is little wonder that any local authority or citizen should put the worst possible interpretation on his actions and on the power that he is grasping for himself. When the Secretary of State made that statement, I said: Will he take into account the needs of inner-city areas such as Newham in his means and needs formula?"—[Official Report, 16 February 1986; Vol. 91, c. 1056.] Of course, the Secretary of State did not reply to that.

Newham sent two deputations to the Secretary of State and his Ministers, and we have also heard from colleagues representing Sheffield, Birmingham and the north-east. I suggest that it was deliberately deceitful of the Government to give boroughs that sent deputations the impression that there would be a continuing redetermination at a time when the Bill was already being prepared. Indeed, as has been said, Ministers even saw a deputation the day after the statement had been made. If there had been provision in the Bill for adjusting the formulas in schedule 2, it might have been a different matter. But instead, the Secretary of State will say different things to different authorities at different times in respect of different times in respect of different times in the past and different times in the future. It is like Alice in Wonderland, only I think that she would have said, "I say what I mean and I mean what I say." No Secretary of State, supported disreputably by his right hon. and hon. Friends, has ever taken such overwhelming powers in order to overrule the legitimate judgments of the court.

I turn briefly to the determination of the grant and the capping formula in schedule 2. My hon. Friend the Member for Newham, North-East (Mr. Leighton) made it clear that Newham's standstill budget for the coming financial year would be about £190 million. The total expenditure permitted by the formula will be about £154 million. However, if the proper formula had been used to take account of the exceptional conditions prevailing, a fair figure would have been £167 million: about 10 per cent. over GREA instead of the 1.5 per cent. quoted by my hon. Friend the Member for Newham, North-East.

I should like to ask the Secretary of State some questions, and if the Minister cannot answer them, I should like to be given a written reply. As the Minister comes from St. Andrew's house, I do not expect a reply now, although I expect him to be able to answer my sixth question. I should like the Secretary of State's signature to be on that reply. First, are the Government requiring Newham to make a 15 per cent. reduction in its expenditure? We all believe that to be the case. Secondly, if not, what is the figure? Thirdly, is there any greater reduction anywhere, and if so where, and what are the other reductions? I think that I am asking fair questions that should have been covered by the Secretary of State in his speech. Fourthly, were the figures given in the table that my hon. Friend the Member for Newham, North-East mentioned, and which is now in the possession of the Secretary of State and his advisers, broadly correct? Fifthly, if the formula was amended to discount the effects of a difference of accounting on the base expenditure, would Newham be eligible for GREA plus 10 per cent., as shown in the manuscript amendments to that table which is in his possession?

I believe that answers to those questions should be given by the end of the week. Members of Parliament and the public in Newham require the Secretary of State to answer in his capacity as a Minister of the Crown and not as a dictator or would-be dictator.

I shall now ask my sixth question, and I hope that the Minister will reply to it. I shall pause in order to allow him to do so, as it is a reasonable question, and he should know the answer. Will the right hon. Gentleman agree to amend the formula in Committee to give Newham at least a GREA plus 10 per cent. figure? If the Minister wishes to intervene, I shall give way. If not, that question should be answered in writing as it is capable of a reply now.

There may be a solution to one of our major mysteries. Tonight, speeches have been made by hon. Members representing Essex and Berkshire. Each of them complained that the Government were dealing harshly and unjustly with them despite the harsh economies that they admitted that they had made. What reason can there be for a Conservative Secretary of State to take such steps? I am forced to draw an unwelcome conclusion, which is that the Secretary of State and those around him, including the Prime Minister, are bent on the destruction of local government as we know it in the United Kingdom. They are taking a leaf out of extra-parliamentary political books and are trying to push through a Bill when the House is half empty and the reporting level is not strong. That Bill will bring local government further into disrepute for reasons that it cannot prevent. The usual method of discrediting something that is wholesome is to generalise from the particular to try to persuade others that it is wrong when all the time it is the discreditor who is wrong. I believe that that is what the Secretary of State and his friends are trying to do. I shall say that inside and outside the House until the allegation is denied and some evidence is produced that it is not the truth.

The Bill is more likely to come from a political party of the extreme Right that does not believe in parliamentary democracy than from any other direction. It stems from views that we would expect from a Fascist and not from a Secretary of State who claims to favour parliamentary democracy.

8.50 pm

Mr. Roy Galley (Halifax)

The Bill is vital, because without it we shall be faced with legal and financial chaos. The exaggerated rhetoric that we have heard from Opposition Members is unjustified. We have had to listen too often to speeches about the end of civilisation being nigh. They have claimed so often that the end of local government is nigh. The crying of wolf has gone on for rather a long time and we have ceased to believe them. They have failed to produce any concrete evidence to support their claims.

A number of justified concerns have been expressed this evening, however. Some of them are based on points of principle and some relate to the redetermination process. Surely it has emerged from the debate that there is an urgent need for a more lucid and comprehensible system of allocating resources between local authorities. The system is complex, and my right hon. Friend the Secretary of State for the Environment has accepted that. In global terms the allocations are understood only by the Almighty and two individuals. The Almighty is not communicating very directly with the Department of the Environment, and perhaps the reason for the lack of communication is the involvement of the Bishop of Durham.

One person who I understand fully comprehends the system is my hon. Friend the Member for Edinburgh, South (Mr. Ancram), the Under-Secretary of State for Scotland. Unfortunately, my hon. Friend forgot about it the morning after the system was explained to him, and the gentleman who explained it to him and made him understand it is now a raving lunatic wandering around the bowels of Marsham street, and, if not there, in the Scottish Office, muttering that his GREAs and expenditure limits do not equate and, oh lackaday, that his block grant has declined yet again.

It is extremely difficult to understand what is going on and extremely difficult for local authorities to plan the basis of their future expenditure, and that is borne in upon us every time that we debate local government finance. The formulae are too complicated and relate to abstract national data which sometimes can operate quixotically from one authority to another. We need to have formulae that can relate more directly to the needs of individual authorities. Having established a set of formulae, we do not want the rapid changes which have taken place over many years in the allocation of resources. No sooner does a local authority think that it understands how much money it will receive than another factor changes the allocation of resources so that its financial planning is constantly nullified. We need greater stability and the formulae must bear a relationship to the needs of authorities. Surely it is not beyond the mammoth intellectual might of the Department of the Environment to set up a system that will give us a reasonably equitable base and annually make pro rata changes to that base.

Many references have been made to the way in which the Bill aborts or circumvents the redetermination procedure. Last year, with the establishment of joint boards, there was considerable hassle about the allocation of resources to police, fire and transport authorities. It seemed in the discussions that took place last year and early this year that we were beginning to overcome some of the problems, but everything has been put back into the melting pot. The result is a stream of problems as we consider parochially the allocation of resources.

I do not hold any brief for the West Yorkshire passenger transport authority, which has placed far too much emphasis on political point scoring rather than providing services for the general public of west Yorkshire, but it is not an inefficient wastrel, as some of the other authorities are or have been. Yet I accept that it has had difficulties. Some progress was made with the redetermination of its expenditure limit for this year but the consequence of my right hon. Friend the Secretary of State for Transport agreeing to the redetermination was a loss of block grant, which meant that no financial benefits would be passed on to the ratepayers of west Yorkshire. When we compare the finances of the authority with those of others, we find that the amount of grant as a percentage of its expenditure limit is only 14 per cent. That is the lowest percentage of any passenger transport authority. The grant-related expenditure of Tyne and Wear as a percentage of its expenditure limit is 90 per cent. and in west Yorkshire it is 70 per cent. If we compare the block grant as a percentage of expenditure limit, it is 70 per cent. for Tyne and Wear and only 14 per cent. for west Yorkshire.

There is a series of disparities between passenger transport authorities and it seems that there is neither rhyme nor reason for this when one engages in a comparative exercise that embraces the fire, police and transport authorities in one metropolitan area with those of another. There are passenger transport authorities that have a higher proportion of expenditure covered by block grant than that of west Yorkshire and it is not possible to come to any rationale on which to base the transport services for west Yorkshire.

West Yorkshire has had great difficulty in understanding the present system and in trying to obtain a sensible redetermination. The situation is especially difficult for the West Yorkshire fire authority. Questions have been raised about its efficiency and I have been concerned to ensure that its resources are used as appropriately as possible. Bearing in mind the performance of other authorities and Home Office guidelines, it seems to be a reasonably competent authority, yet we were faced with the possibility this year in one stage of the redetermination procedure of a shortfall of £1.7 million in maintaining services at their current level. The difficulty that arose, when one examined the comparative figures, was that, of all fire bodies, west Yorkshire had the highest rate in the pound and next to the lowest level of total grant. It seems to be nonsense that the grant-related expenditure and the expenditure limit are determined at entirely different levels.

As the redetermination procedure progressed, we hoped that our representations to the various Departments would bear fruit and that we would be able, at the very least, to maintain our services in west Yorkshire at the current level. All of a sudden, just as some sense and coherence are entering the procedure, the Bill seeks to abort the basis of that redetermination application. Therefore, on the basis of the figures in the Bill, we will receive only half of what is required to ensure that current services are maintained. It is nonsense that where a relatively efficient authority, according to Home Office guidelines and a report of the chief inspector of lire services, needs additional resources to improve fire cover throughout west Yorkshire. The redetermination process has been stopped, to the considerable disadvantage of residents of west Yorkshire.

Would it not have been possible, instead of the algebraic formula in schedule 2 that resembles an O-level algebra paper, to enshrine in the Bill some more sensible, individual basis for redetermination? Instead of treating the authorities on a class-by-class basis, the legislation should seek to deal with some of the individual problems, such as those faced by the fire authority in west Yorkshire and the passenger transport authority.

I make two pleas to my right hon. Friend the Secretary of State in regard to the Bill. First, I plead that he use this opportunity to inject into the Bill a comprehensive, comprehensible, coherent system for 1987–88 that, as far as possible, will relate to the needs of individual authorities. My second plea is for a determined attempt to make sure that the system is more readily understood and simplified, primarily so that ratepayers and authorities may know from year to year on what basis they are to make their calculations.

9.1 pm

Mr. Allen McKay (Barnsley, West and Penistone)

I wish to follow the remarks made by the hon. Member for Halifax (Mr. Galley) about the effects of the Bill on transport and, in particular, on the fire service in south Yorkshire. It is time for the Secretary of State to look again at the problems that will be caused by the Bill. I do not like retrospective legislation. It smacks of Victorian attitudes. I admit that if there is something wrong with the law it must be put right, but it should be put right for the future and not retrospectively just to get somebody off the hook.

After objections were made about the cuts in the South Yorkshire fire service, the Home Office decided that an investigation should be carried out. The result was a minimum requirement for statutory cover.

I spent 12 years in the South Yorkshire fire service as a retained fireman. At the time, one of the things of which we in South Yorkshire were proud was the efficiency of the fire service and the ability of its personnel to turn out and to be at a fire within five minutes for category A and B fires, and within 15 minutes for category C and D fires. We prided ourselves on a three-minute turnout from all retained stations and from all full-time stations. We had a service that was second to none. We also had a highly qualified service. Therefore, we had a proud record. I t was a record on which the public could depend.

The Bill seeks to stop the Secretary of State from redetermining the expenditure that has been allocated to the fire service. For the first time, fire cover in that area will be suspect. Thirty of 40 full-time men will probably be made redundant. Some already clapped-out appliances will continue in service. The fire service has not had a new appliance for the past two years. New appliances will certainly be needed in future. The old appliances that are being kept in use will need to have more and more money spent on them, to keep them in service. More than that, one has to consider the time when they will be off the road and out of the way.

Machines that should carry six men will carry four. Machines that should should carry four will carry three. Machines that should carry two will carry one. That will happen if the Bill is not altered. Those are not the local politicians' figures: they are the Home Office's figures. They are the statutory figures. One Department is saying what the minimum fire cover should be, yet the Secretary of State is making sure that it cannot be provided. An area is at risk. Two things are essential when a fire takes place. One is the quickness of the response, and the second is the efficiency of the service that responds. The amount of fire damage depends on the response. Every 15 seconds during the three minute turnout time, the damage increases tremendously.

It is no fault of the Government, but in south Yorkshire, ironically, since they came to power, the loss of life caused by fire has doubled. The call-out rate has increased from 10,000 to 15,000 calls per year. That is why I say to the Secretary of State, please look at the situation again, because he is putting that service into disrepute, but more than ever he is putting the people at risk.

9.7 pm

Mr. Tony Banks (Newham, North-West)

The hon. Member for Dewsbury was absolutely correct when he drew attention to the fact that hardly anyone can honestly claim to understand how local government finance works—[HON. MEMBERS: "It is Halifax."] I beg the hon. Gentleman's pardon. His constituency is Halifax.

Mr. Galley

I hope that the hon. Gentleman is not confusing Dewsbury with Halifax because Halifax is a much more pleasant place than Dewsbury or even Newham.

Mr. Banks

I cannot believe that any place that the hon. Gentleman represents is more pleasant than Newham, but we shall pass quickly over that point.

Wherever he comes from, the hon. Gentleman was right to say that few can honestly claim to understand how local government finance works. Looking at schedule 2, one realises that the Secretary of State can hardly be described as Euclid, but I should be interested to see him try to explain to the House in words that even I can understand the way in which the formula will work, because it is gobbledegook. All that we know is that the impact on the borough of Newham will be horrendous. It is no surprise that the leader of Newham borough council, Councillor Jones, wrote to the Secretary of State and said that if we have to endure the cuts that are determined for us in the Bill, there will be social disruption on the streets of Newham. I cannot believe that even this Secretary of State wants that.

The Bill is grossly unfair. On 16 December the Secretary of State said the accepted approach…did not…correspond to the statute". When the Secretary of State found that out, he merely brought in retrospective legislation to correct the position. Of course, this Secretary of State has been at odds with statutes before, certainly in the McNeill case. Whereas Secretaries of State can come to the House and inroduce retrospective legislation, when councillors try to do their best to protect jobs and services and find that they are acting in a way that does not correspond to the statute, they find themselves surcharged and driven from office. That is what makes the Bill so grossly unfair, and that is why I am delighted that the Labour Front Bench made it clear that the incoming Labour Government will abolish personal surcharge for local councillors.

If the Secretary of State's euphemism for law breaking was breathtaking, his claim in the same statement that he was the only person who is quite certain what the law is"—[Official Report, 16 December 1986; Vol. 107c. 1051–55.] was downright absurd. The right hon. Gentleman is the most arrogant and indolent of all Her Majesty's Ministers. He proved that when he came to the Dispatch Box, made a great dash for the post and clearly revealed that he did not understand the legislation to which he was asking the House to agree. He has no idea of what the law was or, indeed, will be, if the Bill is passed. We have already had a list of amendments correcting the mistakes in the Bill and that is even before we have had a chance to discuss it in Committee.

I still feel annoyed and aggrieved that at our meeting with the Minister in November where, as the Secretary of State correctly said, we were courteously received and we exchanged our views courteously, we were wasting our time. The Minister must have known that there was no chance of Newham's particular problems being considered in a particular fashion by the Government because the Bill would treat Newham within a class of local authorities. That means that the undertakings given during the Rates Act 1984 are meaningless. Redetermination was supposed to be about going to Ministers, spelling out local difficulties and Ministers making particular settlements. The Minister has still not said that I was misled in believing that our discussion with him was open, honest and genuine and that we stood a chance of reaching a better settlement for Newham than the present one.

The Bill legalises past illegalities and seeks to protect Ministers from future illegalities. It gives those same Ministers unrestricted powers to change the financial rules whenever they want to and without reference to Parliament. This may be our last chance to influence the Government. Thus, Ministers are drawing up the rules and then acting as judge, jury and appeal court in respect of those rules. What trade union or other organisation would the Government allow to do that? They would not. There is no semblance of democracy in the Bill. It reeks of Government authoritarianism and centralisation. It all but destroys local democracy in the rate-capped local authority areas. I am gravely worried about the impact that it will have on Newham when it becomes law.

This is an evil measure proposed by an evil and desperate Government. It will force local authorities to act illegally simply because by obeying the measure they will destroy their communities. Given such a choice, if local authorities defy the Government and refuse to do the Tories' dirty work, the responsibility will lie entirely with this most socially divisive, undemocratic and economically illiterate Government.

9.13 pm

Mr. Jack Straw (Blackburn)

The debate has been characterised by excellent speeches from my hon. Friends the Members for Newham, North-East (Mr. Leighton), for Newham, South (Mr. Spearing), for Newham, North-West (Mr. Banks), for Tyne Bridge (Mr. Clelland), for Hackney. South and Shoreditch (Mr. Sedgemore), for Birmingham, Erdington (Mr. Corbett), for Sheffield, Heeley (Mr. Michie), for Sheffield, Central (Mr. Caborn) and for Barnsley, West and Penistone (Mr. McKay). We would have had a speech from my hon. Friend the Member for Peckham (Ms. Harman), had she not had a baby girl on Saturday because this Bill seriously affects Southwark.

The Bill is about England, Wales and Scotland. Thirteen clauses apply to England and Wales and 2 two clauses, part II, to Scotland. The Under-Secretary of State for Scotland has been present during the debate, but no Scottish Member has spoken. There has not even been a representative from the Scottish Nationalist party. If there were a serious Scottish element in the Bill, an SNP Member would have been present. The only Scottish volunteer to grace our presence tonight is my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar). The question arises as to why the Scottish Minister of State is to reply to this debate rather than the English Minister of State, the hon. Member for Brent, North (Dr. Boyson).

Mr. Meadowcroft

Charisma.

Mr. Straw

The hon. Member for Leeds, West (Mr. Meadowcroft) may say charisma, but I suspect that it is a matter of the algebra at the back of the Bill in schedule 2, and the Government's wise judgment that the Scottish Minister of State can better deal with those complicated formulae than the English Minister of State.

On the face of it, the Bill is highly technical. It takes 17 clauses and 4 schedules simply to state what everyone had thought was already the law, or so the Secretary of State would have the House believe. We should not allow the technical nature of the language of the Bill to obscure from the House and the country the real significance of this measure. The 17 clauses and 4 schedules speak volumes for the incompetence and arrogance of the Government and for their refusal to respect the rule of law.

This time last year the House was in the throes of the Westland crisis. The central player in that crisis from the Government's point of view was the right hon. Member for Henley (Mr. Heseltine) who was once the Secretary of State for the Environment. He started the Government down the road to local council chaos, although his successors as Secretaries of State had been all too willing to follow. When the present Secretary of State made his statement to the House about this Bill on 16 December, the right hon. Member for Henley sought to make light of his former responsibilities. He said in a question to the present Secretary of State: If I understand the thrust of a complex and technical statement by my right hon. Friend, it is that I have spent £30 billion of taxpayers' money illegally. If this judgment is right, I promise him my unswerving and urgent support for the legislation. To which the Secretary of State replied: I thought for a moment that my right hon. Friend was going to offer to pay. I assure him that I would not suggest that for one moment. I do not suggest that we should apportion blame in this matter."—[Official Report, 16 December 1986; Vol.107, c. 1055.] This indeed would be a laughing matter were it not so serious. All of us understand why the Secretary of State does not wish to apportion blame, as he has been a member of the Government throughout the past seven sorry years. But it is the job of this House to determine responsibility; and the responsibility for this farce lies not with officials, legal advisers or parliamentary draftsmen but firmly with Ministers. They cannot claim that they were not warned. The basic Act from which all this trouble flows was the Local Government, Planning and Land Act 1980. That Act was conceived in chaos and it will be recalled by many of my right hon. and hon. Friends that the Bill had to be withdrawn from the other place and resubmitted to this place before it had been debated. Even when the second Bill was debated, the Government learned no lessons from their experience.

At that time, the Financial Times made a withering comment when the Bill finally received royal assent. In 1980 the Financial Times said that in block grant the Government took…principles into legislation before any work had been done to test them in detail. As Mr. King was promoting his principles in committee, horrified civil servants were discovering that the more detailed work they did, the worse the mire in which they found themselves. We now know, continued the Financial Times: block grant will not be any simpler, will not he any more logical, and will also be full of extraordinary anomalies, and potentially unfair and discriminatory factors—all of which will need complicated, sometimes arbitrary, and often crude mathematical factors to iron them out. We, too, have warned the Government during the passage of the 1980 legislation and on every occasion since. We warned them that the increasing centralisation inherent in their legislation would lead to increasing levels of incompetence. We reminded them time and again, of Karl Popper's famous dictum—that while it is easy to centralise power, it is impossible to centralise the knowledge needed wisely to exercise that power.

The defects that the Bill seeks to put right have not arisen as an accident of drafting but as a natural and inevitable consequence of Government policy. They have arisen as a result of the Government seeking to control that which they have no need to control—local authorities' current expenditure financed from their own resources. They have also resulted from the Government using, as an instrument of that control, block grant, for which purpose it was never, and could never, be designed.

In the far-off days of the last Labour Government, such was the consensus around local government finance that in two successive years, rate support grant orders were not even debated, and this decision was made not by the Government of the day but by the Conservative Opposition. Legal challenges to the allocation of the rate support grant were virtually unknown. The simple reason for that is that, while central Government may have sought to influence the levels of local government spending, they never sought to control it. The amount of a local authority's grant was therefore finite. Authorities were not penalised if they spent above some arbitrary limit, so, at the margins, block grant decisions did not have the critical effect that they now have on local authority spending plans and on the size of their rate bills.

All that has now changed. The Government have stumbled from one pit of their own making to another, even deeper. One control has been heaped on another. Alongside the administrative chaos that has been produced has been the Government's frenetic rhetoric about local spending, rhetoric which is oddly hollow and two-faced when we see that at the same time as the Government damn local authority spending, they take credit for the spending levels of local authorities.

Mr. Giles Radice (Durham, North)

On education.

Mr. Straw

As my hon. Friend the shadow Secretary of State for Education reminds us, the Government damn the spending levels of Labour local authorities while taking on themselves their education spending records.

When the Secretary of State made his statement, he said: There has been a distinction between what people thought the law was and what it is. We can easily put that right, and the House can then pass on to more important matters. I hardly call 17 clauses and schedules easy. He also said that the Bill was designed to make no changes in policy, but as far as possible to apply existing policy within a tight timetable."—[Official Report, 16 December 1986; Vol. 107, c. 1051–55.] If that were the case, as my hon. Friend the Member for Copeland (Dr. Cunningham) made clear, there could be little argument about the Bill. The truth is that the Secretary of State was less than frank, and came close to misleading the House. The Bill changes policy retrospectively in two key respects. Also, and more serious, it seeks to avoid the application of the rule of law and the supervision of the courts over the Secretary of State's decision.

Over the past four years, the House has had many opportunities to debate the occasions on which Parliament should retrospectively legislate. All are agreed that Parliament is sometimes justified in making lawful acts that were previously unlawful. No individual or institution is put at a disadvantage by such measures. We also acknowledge, although we may not agree, that sometimes it is necessary for Ministers to announce that, from a particular day, a particular transaction, usually of a financial nature, should be unlawful and that powers to provide for such unlawfulness would be sought and operate from the day of that statement, rather than the day of the Royal Assent. It was about such measures that there were many debates during the course of the abolition Act.

The Bill breaks new ground in local authority legislation. It seeks to make unlawful acts that have already occurred and which were done in the knowledge that at the time they were lawful. My hon. Friend the Member for Birmingham, Hodge Hill (Mr. Davis) has given the House full details of the way in which the Bill will affect the city of Birmingham adversely. Many of us remember that in 1984, contrary to all the complacent predictions of the Conservative party, it was trounced in the local authority elections in Birmingham and the Labour party secured a famous victory.

The Conservative party has never forgiven the city of Birmingham for electing a Labour council. The Government pursued what can almost be described as a vendetta against that city. Last year the rate support grant Bill overturned a court case in which Birmingham had lawfully won an additional £8 million. Under the provisional rate support grant settlement, the grant gain has been taken away from Birmingham by rate capping amounting to £34.9 million. Under this Bill, Birmingham is denied another £7.5 million.

Trying to explain himself away, the Secretary of State said that these authorities would not have received this bit of rate support grant that is in contention in any event, but that is simply not the case. Transfers to special funds are crucial. A sum of money may be treated as expenditure in one year and income in another. Given the operation of the penalty system and the way in which the block grant has operated during the last seven years, the year in which such blocks of money are treated as expenditure and/or as income can have a significant effect upon an authority's block grant entitlement. The Department has always known that that is so. I can give evidence to the effect that sometimes the Department has advised authorities on how to maximise their block grant entitlement by shifting funds from one year to another.

Mr. Ridley

But if there were no funds and the funds that were shifted did not exist, then I am sure that the hon. Gentleman would be the first to agree with me that that was a fiddle.

Mr. Straw

Yes, but since we are considering Birmingham, what the Secretary of State has to explain is how it was that Price Waterhouse, the private auditors appointed by the city of Birmingham, said: We have considered this issue in some detail and have concluded that the contribution is a lawful charge. Price Waterhouse did not say that it was a fiddle. It said that it was a lawful charge. Is the Secretary of State saying that Price Waterhouse failed in its professional duty? Has he reported Price Waterhouse to the professional bodies that are responsible for supervising accountants? Of course he has not. However, he has accused not just the city of Birmingham but Price Waterhouse of a fiddle. I give the Secretary of State an opportunity to withdraw.

Mr. Ridley

The Government would not have paid block grant upon the information that was available to them. If Birmingham or any other authority did not like that, it could have taken us to law. What is more, it would have lost.

Mr. Straw

The Secretary of State says that, what is more, Birmingham would have lost. I ask the Secretary of State to give Birmingham the chance to take him to court. Let us see who is right and who is wrong. Last year Birmingham took the Secretary of State to court and he lost. Therefore, the Government changed the law. If the Secretary of State is now inviting legal challenge from Birmingham, I am sure that Birmingham will be happy to accept his challenge. When the Bill is considered in detail, I hope that the Secretary of State will remove from it clause 4(6) and clause 6(4) so that Birmingham and other cities may be given precisely that opportunity. When the Secretary of State intervened he did not answer my point. He accused Birmingham and its auditors of a fiddle. On that point, he had better either put up or shut up.

The second way in which the Bill is wholly objectionable relates to rate capping. Three years ago, almost to the day, the Rates Bill, which gave unprecedented centralised powers to the Secretary of State, was given its Second Reading. We were told in this Chamber and in Committee that local authorities had no need to worry—that if the Government decided upon provisional expenditure limits, on the basis of their own information for individual authorities, which turned out to be wrong, individual local authorities would be able to offer information about their position and submit it to the Secretary of State and that not once but twice he would reconsider the matter and make a decision on the merits of the case submitted by individual authorities. For two years at least Secretaries of State have sought to judge authorities on the basis of individual merit. Not so now. The process of redetermination has been reduced to a farce by this Bill. Any consideration of the individual positions of local authorities has been abandoned. On 19 December I wrote to the Secretary of State on exactly this point.

Mr. Meadowcroft

The letter was in joined-up writing.

Mr. Straw

Indeed it was in joined-up writing, because it was in my own hand. I asked the Secretary of State about the effect of this Bill on his discretion separately to determine the expenditure limits on certain authorities. He replied that there were standard formulae in the Bill and his letter went on to say: These formulae reflect my views and those of the appropriate Secretaries of State for the redeterminations, if any, which should be made to the expenditure levels which were determined in July 1986. Our views take account of all the information available to us…and the representations we have received since July, including representations made in support of redetermination applications. Frankly, that reply was disingenuous, because it is plain from the Bill and from what the Secretary of State said earlier in this debate that the decisions contained in this Bill are different from the decisions that he would have made had he been exercising his discretion on the merits of individual authorities.

The Secretary of State said in answer to an intervention—I believe I quote him correctly—that the formulae in the Bill accurately, though not totally accurately, reflect decisions that he would have made on redetermination. Can the Secretary of State tell us the difference between accuracy and total accuracy in this matter? Will he provide the House with a schedule showing the decisions that he would have made had he made individual redeterminations in respect of each of these authorities? Is he willing to do that? I will allow him to intervene if he wishes to do so. He has admitted that there is a gap between accuracy and total accuracy. If the gap is significant, will he agree to amend the formula?

My hon. Friend the Member for Copeland (Dr. Cunningham) asked the Secretary of State if it was correct that paragraph 3(2) of schedule 2 gave the Secretary of State the power to revise the expenditure limits for any authority up to the point at which the Bill passes into law. I understand that the Minister of State is to reply to that point. If that is the correct reading of this sub-paragraph, and it appears to be, is the Secretary of State willing to use that discretion to deal with the very real problems that have arisen in Newham and in many other boroughs?

Mr. Spearing

Is my hon. Friend aware that the letter from which he has just quoted can hardly be correct and might even be categorised as deceitful because the table which I have supplied to the Minister and which I will supply to my hon. Friend shows that the range of GREA plus percentage to expenditure limit ranges from Basildon which is 70 per cent. above GREA to Newham which is 1.6 per cent. above GREA. How can the redetermination which the Secretary of State says he has taken into account produce such disparate percentages?

Mr. Straw

My hon. Friend is absolutely correct. These policy decisions are now produced through algebra and buried in a schedule. The circumstances of authorities vary dramatically. It is accepted that Newham is spending barely above the amount set by central Government, yet Newham's redetermination is no different from that of any other authority, regardless of the fact that circumstances are wholly different. But for this Bill, if Newham felt that it was being treated wholly unreasonably it could take the Secretary of State to court. That brings me to the most serious aspect of the Bill—its denial of the rule of law. I hope that Conservative Members who spent much time on the hustings preaching about the rule of law will look at what the Bill proposes and will agree that it is a constitutional monstrosity.

During the proceedings on the Rates Bill, Ministers tried to reassure us that they could not act capriciously or arbitrarily in exercising the wide discretion that they had been given because the wider rule of law required them to exercise that discretion reasonably and because, in any event, the courts would prevent them from making decisions for which they had no power. The judicial supervision of Acts of Government is central to any concept of the rule of law in a democracy, but under this Bill all that is cast aside. Clauses 4(6) and 6(4) state that they shall have effect notwithstanding any decision of a court (whether before or after the passing of this Act) purperting to have a contrary effect. One would expect such a statement only in an authoritarian, totalitarian and dictatorial regime.

The subsections state that the Bill shall have effect notwithstanding any decision of a court purporting to have a contrary effect. But the effect of the clause is not clear. It is not clear on the face of the clause what is being denied judicial supervision. What if an authority went to court to discover the effects of the clause over which the courts have no discretion? Will the Minister confirm that, since the Bill is so obscure, local authorities at least have the right to discover from the courts that over which the courts no longer have discretion so that, by subtraction, they can discover that over which the courts continue to have discretion?

Later tonight, there will be a motion to commit the Bill to a Committee of the whole House and to deny the House the detailed scrutiny of such a technical Bill that can take place only upstairs in Committee. That will be justified on the grounds that the matter is urgent, and I have no doubt that the subsequent threats of guillotine will be accompanied by a similar excuse. Those excuses will not wash, for the Secretary of State has admitted that he knew about this fandango and farce at least four months ago. We have had no explanation of why it took him three months to come to the House and four months to produce the Bill. Many Labour Members have every reason to believe that the Secretary of State deliberately delayed the matter for as long as possible to deny Parliament a proper scrutiny of the amending legislation.

This is a Bill born of the incompetence and arrogance of a Government who care little for local democracy and who know even less. They refuse to listen, not just to the Opposition and to Labour local authorities, but to Conservative local authorities and to those in the House who speak for them. Contrary to the Secretary of State's undertakings, the Bill contains policy changes. It legislates retrospectively to make unlawful decisions which, when taken, were lawful, at a cost of millions of pounds to some authorities. It removes the rights of the courts of this land to scrutinise legislation in a manner almost unprecedented in a democracy. It puts the Government above the law. It is a bad Bill, and we shall oppose it tonight.

9.38 pm

The Parliamentary Under-Secretary of State for Scotland (Mr. Michael Ancram)

We have had a very full debate on the Bill. From Conservative Members we have had a thorough appreciation of the logical reasons for the Bill and for their support of it. From Labour Members we have had synthetic fury laced with tortured sarcasm. We should have expected no more. It is a sign of the paucity of their arguments in the face of this legislation.

This is a highly technical Bill, the details of which will be considered fully in Committee. However, there is a simple principle behind the Bill: to maintain the status quo in the conduct of local government finance in the run-up to the major reforms which we propose, which were welcomed by many of my hon. Friends. This means continuing with the definitions of expenditure adopted in line with the wishes of local government in England, Wales and Scotland and providing, for England and Wales, for the rate support grant settlement and the rate limitation process to be implemented with the maximum of certainty for authorities, given the need for this legislation.

I should like to thank my hon. Friend the Member for Ealing, Acton (Sir G. Young) for his excellent speech of support and for what he said in justification of the Bill. Throughout the afternoon Opposition Members have looked for sinister motives behind every clause of the Bill. I fear that their search will go unrewarded. They would be better occupied assisting the Bill's passage so that local authorities can be sure of receiving the grant to which they are entitled from the start of the new financial year. I should tell the hon. Member for Leeds, West (Mr. Meadowcroft) that that is not a threat. It is a statement of fact and, in the light of it, I hope that he will support the Government's efforts.

The hon. Member for Copeland (Dr. Cunningham) made much of what he called the delay occasioned by my right hon. Friend the Secretary of State. I reject that entirely. If the hon. Gentleman is sincere about his concern at the effect that delay will have on local authorities and their grant next year, we expect him to support our getting the Bill on to the statute book as soon as possible.

Dr. Cunningham

I am grateful to the Minister for giving way. It is not a question of argument about delay—the delay is a matter of fact. The Secretary of announced today, at long last, that he knew about this four months ago. There is no argument about that—it is a fact. As for letting the Bill go through, if the Minister will remove the retrospective clauses and set in abeyance the punitive restrictions on the Rates Act 1984, we will let it go through.

Mr. Ancram

I shall come to what the hon. Gentleman and the hon. Member for Blackburn (Mr. Straw) said in their speeches. If the hon. Gentleman is sincere about his concern at the effect on RSG, he will support the Bill.

Some of my right hon. and hon. Friends have argued that, rather than bolster the present system, in which faults are widely acknowledged, we should have turned immediately to the Green Paper reform proposals. I have considerable sympathy for that view—it was advanced strongly by my hon. Friend the Member for Slough (Mr. Watts)—but it is impossible to set up that new system and the necessary transitional measures in the time available. Today's debate has shown, once again, the urgent need for such reform. Reform is already being undertaken in Scotland.

I listened to what my hon. Friend the Member for Milton Keynes (Mr. Benyon) said about reform. I agree with him about the appalling complexities of the present system, but I am sure that it will be no surprise to him to learn that I did not agree with him about our proposals for Scotland, which my right hon. Friend the Secretary of State for the Environment has made clear he will bring forward for England. I rather think that my hon. Friend and I may argue about this for some time. We might not reach an agreement immediately, but I am always hopeful that I will in the end convert him.

Mr. Leighton

As the Minister is making the case for great haste and saying that that precludes local authorities from having time to come in for redetermination, does he agree that, in Committee, proper consideration should be given to the cases, such as the borough of Newham, which are harshly treated by the Bill?

Mr. Ancram

My right hon. Friend the Secretary of State heard what the hon. Gentleman said. I am sure that this is a matter that will be discussed during the Bill's further proceedings.

My hon. Friend the Member for Slough, supported by my hon. Friends the Members for Leicester, East (Mr. Bruinvels), for Halifax (Mr. Galley) and for Basildon (Mr. Amess), said that the grant proposals which are implicit in the Green Paper on rate reform would create a simpler system than that which has caused so many problems. I endorse that view. Those proposals are now part of the legislation for Scotland that we are taking through Committee. They are part of a package which depends also on creating greater accountability through the imposition of the community charge. It would not be possible to introduce that element of the package alone now.

The hon. Member for Blackburn asked why I am responding to the debate. I suggest that, under this Government at least, we are still one United Kingdom, of which Scotland is a part. I remind him, not that it would have been evident if he had looked behind him during the debate, that one fifth of the parliamentary representation of his party comes from Scotland. It is quite right, therefore, that Scotland's view should be represented. When my right hon. Friend, the Secretary of State for the Environment, made his statement on 16 December a point of order was raised as to why there was no statement on the Scottish position. The reason was, as my right hon. Friend said today in his opening speech, that in Scotland the problem is much more limited than in England and Wales. At the same time, I believe that it would be wholly wrong if the Scottish dimension was ignored tonight.

Mr. Donald Dewar (Glasgow, Garscadden)

Will the hon. Gentleman say a word or two about the Scottish dimension? I see that the Secretary of State is taking powers to indemnify himself, and to ensure that his actions in connection with section 5 of the 1966 Act should not be called in question. It is not clear to me why he needs that indemnity. Indemnity suggests that something wrong has been done, or at least, that something is likely to be successfully challenged in the courts. Perhaps the Minister will just say what the secret sin is, and what the effect would have been if the law had been properly carried out by the Secretary of State.

Mr. Ancram

I congratulate the hon. Gentleman on getting Labour's Scottish voice on to the record, even this late in the debate. I shall deal with his points, because I think that the provisions regarding Scotland are important, and I want to explain them fully.

The most important point is that the determination of rate support grant in Scotland does not depend in any way on assessments of relevant or total expenditure, but rather on what local authorities ought to need to spend as determined by a process of assessment known as the client group method, which is intended to provide objective assessments of need, taking into account the different circumstances of each authority. It quite specifically does not take account of their actual expenditure, however defined, and because the determination of the Scottish rate support grant does not depend on any assessment of actual expenditure, it follows that the Secretary of State's actions in determining it are not vulnerable on the basis that he might have misinterpreted what can or cannot legitimately be included as expenditure.

However, on examining our Scottish practices in the light of the problems which have emerged in England and Wales, we discovered that we have counted as expenditure transfers between the general rate fund and special funds in assessing authorities' expenditure for the purpose of imposing grant penalties. According to the system we operate, we would also have been prepared to count such transfers as expenditure had they occurred in the accounts of authorities for whom we were proposing a rate reduction.

An examination of the particular cases where rate reductions have been imposed reveals that there were no such transfers of funds at issue. Clauses 14 and 15 are designed to validate past decisions in relation to grant penalties and to allow us to continue to operate as before, both in the case of grant penalties and in the case of rate reductions.

Mr. Dewar

I recognise that the Minister wants these Scottish points properly ventilated. I promise him that I will read with great care the important statement that he has just read.

Will he confirm my impression that he is saying that the Government are seeking indemnity against a set of circumstances which he is satisfied never occurred? If that is so, why on earth do we need clauses 14 and 15?

Mr. Ancram

I appreciate that the hon. Gentleman has never been a great expert on local government finance. He may therefore find my explanation difficult to understand. What I was saying, and perhaps I can put it in simpler terms for the hon. Gentleman, is that on selective action, there has been no occasion, according to our records, where any authority would have suffered because of the interpretation that has been made. However, the situation is different in relation to grant penalties.

It is an important point that there is no Scottish authority in relation to which we have imposed a rate of reduction which has had a greater reduction imposed on it than it would have had if consideration of special funds had been excluded from our calculations. More to the point in relation to grant penalties, if consideration of special funds had been excluded from our calculations, according to our records there are two instances from 1983–84 where authorities would have been better off; that is, their grant reduction would have been less than it actually is. In the case of one of those authorities that applies to the present financial year, so it is still possible for it to avoid paying grant penalties completely.

Again—this is important to put the matter into context—according to our records, in 32 instances exclusion of consideration of special funds made no difference at all to the grant penalties, and in 29 cases the authorities concerned would have been worse off, in many cases substantially so. That demonstrates clearly the point that the method that we have adopted in calculating expenditure for grant penalty purposes and which we propose, as a result of the Bill, to continue, is clearly seen to be in the interests of local authorities. That is presumably why the local authority associations wish this type of interpretation and calculation to be made.

It also underlines the completely synthetic nature of the Opposition's hostility to these measures today. In the light of the favourable impact that that has had on local authorities in Scotland, I shall be interested to see whether the hon. Member for Glasgow, Garscadden (Mr. Dewar) votes against the validation of that tonight. The hon. Members for Copeland and for Blackburn took exception to clause 5 because they argued that it would allow the Secretary of State to make retrospective adjustments to previous years' settlements. They have completely missed the point. Our clear intention is to maintain the status quo and the clause allows us to do that on a proper statutory basis where decisions are to be taken on supplementary reports for the years 1983–84 to 1986–87.

My right hon. Friend has no intention of departing from past practice in that respect. My hon. Friends the Member for Hornchurch (Mr. Squire) and for Devizes (Mr. Morrison) were also worried about that point and I hope that they are reassured by what I have said.

Under existing powers in the Local Government, Planning and Land Act 1980, it is open to the Secretary of State to make new directions about total expenditure before each new supplementary report is made—subject, of course, to the overriding legal requirement to act reasonably. That is the same position as that which will apply to the powers to make specifications about total expenditure when new supplementary reports are made for 1983–84 to 1986–87 after Royal Assent has been given to the Bill. Therefore, there is no type of retrospection which is new to the Bill which is not available already under existing powers. The type and concept are the same. I hope that that firmly answers the points that were made by the hon. Members for Copeland and for Blackburn.

I do not want to repeat the detailed summary of the Bill given by my right hon. Friend at the start of the debate. However, I should underline that there is no intention here to create new structures or impose new burdens on local authorities. The Bill builds on an existing mechanism, which is usually called the rate fund revenue account, and translates into statute what is effectively current practice in defining expenditure. So far as possible, it adopts the wording of the provisions of the Local Government, Planning and Land Act 1980. Hon. Members will, of course, have the opportunity to consider the details in Committee.

The hon. Member for Copeland mentioned the promises about the operation of what is now the Rates Act during and after its passage. He was somewhat wide of the mark on this occasion. We accept that we are not following the Rates Act procedures. My right hon. Friend has explained why we have to adopt, for 1987–88 only, the approach to rate and precept limitation contained in the Bill. [Interruption.] If the hon. Member for Copeland will listen rather than muttering from a sedentary position, he may, yet again, hear the explanation. It would simply not have been possible to carry through the normal Rates Act procedures, given the need for legislation on the definition of expenditure.

Labour Members have sought to argue that the method adopted and the formulae proposed in the Bill are wildly unreasonable. In reaching decisions on the formulae, the Secretaries of State took account, as in any normal year, of all the information available to them about the designated authorities. They took particular note of applications for the redetermination of expenditure levels. The representations made at meetings about those applications were carefully considered. Of course, given the need for the formula approach, limits cannot be precisely tailored to individual circumstances as in a normal year, but, so far as is possible, they reflect decisions that would have been taken under Rates Act procedures, and those decisions are now subject to the scrutiny of Parliament.

Before leaving rate limitation, I should remind the House what it is all about. Some Opposition Members seem to have forgotten its purpose. My hon. Friend the Member for Leicester, East (Mr. Bruinvels) reminded us that the aim of the policy is to protect ratepayers by holding down rates and expenditure.

Some authorities, despite being rate-limited in 1985–86 and 1986–87, have attempted to maintain their high levels of spending and have taken no steps to cut out waste and inefficiency or other unnecessary burdens on their ratepayers. It is right that the disciplines of rate limitation should be firmly maintained.

Mr. Straw

Will the hon. Gentleman give way?

Mr. Ancram

No. I have already given way on a number of occasions.

Where authorities are newly selected for rate capping in 1987–88, my right hon. Friend has proposed some additional flexibility above the original expenditure levels set in July, but the fact remains that those authorities were selected because they were among the highest spenders, and the purpose of rate limitation is to restrain that spending and to protect ratepayers.

The hon. Members for Copeland and for Blackburn asked whether paragraph 3(2) of schedule 2 would enable my right hon. Friend to determine revised expenditure levels for rate-capped authorities before the passing of the Bill. The answer is no. As my right hon. Friend made clear to the House in his statement on 16 December, once he had received the advice on total expenditure, he could not make any further rate support grant reports or complete the rate limitation process until matters were put right and there was new legislation. Thus, at the moment he cannot redetermine expenditure levels, and once the Bill receives Royal Assent there will be, only for 1987–88, a new method for completing the rate limitation process according to the formulae in the Bill.

A number of Opposition Members mentioned the effect of the Bill on court decisions. The hon. Member for Copeland made great play of clauses 4(6) and 6(4). Those provisions validate past decisions on rate support grant and rate limitation respectively. We accept that, until the Bill receives Royal Assent, the validity of past decisions is in doubt. Nothing but further uncertainty would be gained by local authorities challenging those decisions. The Bill clearly and unambiguously provides that challenges against past decisions will be of no effect.

The Bill is not concerned, as the hon. Member for Copeland appeared to be suggesting, with validating future decisions taken in accordance with the provisions of the Bill and the related legislation. Local authorities will, of course, be free to challenge those.

A number of hon. Members mentioned deficit financing. The Bill provides that the Secretary of State may make specifications to discount for grant purposes contributions to special funds against no known liability which create a deficit on the rate fund revenue account and the subsequent drawing down of such contributions. The Bill will put the position beyond doubt. Had the need for the Bill not arisen, the Secretary of State would have taken the action under existing powers. It has been suggested that some sort of conspiracy is involved but, again, Opposition Members are well wide of the mark.

The Bill is not controversial, except in the conspiratorial minds of Opposition Members. It is necessary in the interests of councils which have previously endorsed the principle that it now firmly establishes. It is also in the interests of ratepayers and of good government, both local and national. I ask my right hon. and hon. Friends to support it.

Question put, That the Bill be now read a Second time:—

The House divided: Ayes 247, Noes 179.

Division No. 49]	[10 pm
AYES
Aitken, Jonathan	Bryan, Sir Paul
Alexander, Richard	Buchanan-Smith, Rt Hon A.
Alison, Rt Hon Michael	Buck, Sir Antony
Amess, David	Budgen, Nick
Ancram, Michael	Bulmer, Esmond
Arnold, Tom	Butcher, John
Ashby, David	Butterfill, John
Aspinwall, Jack	Carlisle, John (Luton N)
Atkins, Robert (South Ribble)	Carlisle, Kenneth (Lincoln)
Atkinson, David (B'm'th E)	Carlisle, Rt Hon M. (W'ton S)
Baker, Rt Hon K. (Mole Vall'y)	Carttiss, Michael
Baker, Nicholas (Dorset N)	Cash, William
Baldry, Tony	Chapman, Sydney
Batiste, Spencer	Chope, Christopher
Bellingham, Henry	Churchill, W. S.
Bendall, Vivian	Clark, Hon A. (Plym'th S'n)
Benyon, William	Clark, Dr Michael (Rochford)
Best, Keith	Clark, Sir W. (Croydon S)
Biffen, Rt Hon John	Colvin, Michael
Biggs-Davison, Sir John	Conway, Derek
Blackburn, John	Coombs, Simon
Body, Sir Richard	Cope, John
Bonsor, Sir Nicholas	Cormack, Patrick
Boscawen, Hon Robert	Corrie, John
Bottomley, Peter	Couchman, James
Bottomley, Mrs Virginia	Cranborne, Viscount
Bowden, A. (Brighton K'to'n)	Critchley, Julian
Bowden, Gerald (Dulwich)	Currie, Mrs Edwina
Boyson, Dr Rhodes	Dickens, Geoffrey
Braine, Rt Hon Sir Bernard	Dorrell, Stephen
Brandon-Bravo, Martin	Douglas-Hamilton, Lord J.
Bright, Graham	Dover, Den
Brinton, Tim	du Cann, Rt Hon Sir Edward
Brooke, Hon Peter	Dunn, Robert
Brown, M. (Brigg & Cl'thpes)	Durant, Tony
Bruinvels, Peter	Dykes, Hugh

Eggar, Tim	Lennox-Boyd, Hon Mark
Emery, Sir Peter	Lester, Jim
Evennett, David	Lewis, Sir Kenneth (Stamf'd)
Eyre, Sir Reginald	Lightbown, David
Fallon, Michael	Lilley, Peter
Farr, Sir John	Lloyd, Peter (Fareham)
Finsberg, Sir Geoffrey	Lord, Michael
Fletcher, Sir Alexander	Luce, Rt Hon Richard
Fookes, Miss Janet	Lyell, Nicholas
Forman, Nigel	McCrindle, Robert
Forsyth, Michael (Stirling)	Macfarlane, Neil
Forth, Eric	MacGregor, Rt Hon John
Fowler, Rt Hon Norman	MacKay, Andrew (Berkshire)
Fox, Sir Marcus	MacKay, John (Argyll & Bute)
Franks, Cecil	Maclean, David John
Fraser, Peter (Angus East)	McQuarrie, Albert
Freeman, Roger	Madel, David
Fry, Peter	Major, John
Gale, Roger	Malins, Humfrey
Galley, Roy	Maples, John
Gardiner, George (Reigate)	Marland, Paul
Gardner, Sir Edward (Fylde)	Marlow, Antony
Garel-Jones, Tristan	Marshall, Michael (Arundel)
Gilmour, Rt Hon Sir Ian	Mates, Michael
Glyn, Dr Alan	Mather, Sir Carol
Goodhart, Sir Philip	Maude, Hon Francis
Goodlad, Alastair	Maxwell-Hyslop, Robin
Gorst, John	Mayhew, Sir Patrick
Gow, Ian	Mellor, David
Greenway, Harry	Merchant, Piers
Gregory, Conal	Meyer, Sir Anthony
Griffiths, Peter (Portsm'th N)	Mills, Iain (Meriden)
Ground, Patrick	Mills, Sir Peter (West Devon)
Grylls, Michael	Miscampbell, Norman
Gummer, Rt Hon John S	Mitchell, David (Hants NW)
Hamilton, Hon A. (Epsom)	Monro, Sir Hector
Hamilton, Neil (Tatton)	Montgomery, Sir Fergus
Hampson, Dr Keith	Morrison, Hon C. (Devizes)
Hanley, Jeremy	Morrison, Hon P. (Chester)
Hannam, John	Moynihan, Hon C.
Hargreaves, Kenneth	Mudd, David
Harris, David	Murphy, Christopher
Hawkins, C. (High Peak)	Neale, Gerrard
Hawkins, Sir Paul (N'folk SW)	Needham, Richard
Hawksley, Warren	Nelson, Anthony
Hayes, J.	Newton, Tony
Heathcoat-Amory, David	Nicholls, Patrick
Heddle, John	Normanton, Tom
Henderson, Barry	Norris, Steven
Heseltine, Rt Hon Michael	Onslow, Cranley
Hickmet, Richard	Oppenheim, Phillip
Higgins, Rt Hon Terence L.	Oppenheim, Rt Hon Mrs S.
Hind, Kenneth	Ottaway, Richard
Holland, Sir Philip (Gedling)	Page, Sir John (Harrow W)
Holt, Richard	Page, Richard (Herts SW)
Hordern, Sir Peter	Patten, Christopher (Bath)
Howard, Michael	Patten, J. (Oxf W & Abgdn)
Howe, Rt Hon Sir Geoffrey	Pattie, Rt Hon Geoffrey
Howell, Rt Hon D. (G'ldford)	Pawsey, James
Howell, Ralph (Norfolk, N)	Peacock, Mrs Elizabeth
Hubbard-Miles, Peter	Pollock, Alexander
Hunt, David (Wirral W)	Portillo, Michael
Hunt, John (Ravensbourne)	Powell, William (Corby)
Hunter, Andrew	Powley, John
Jenkin, Rt Hon Patrick	Price, Sir David
Jessel, Toby	Proctor, K. Harvey
Johnson Smith, Sir Geoffrey	Raffan, Keith
Jones, Gwilym (Cardiff N)	Rathbone, Tim
Jones, Robert (Herts W)	Rees, Rt Hon Peter (Dover)
Jopling, Rt Hon Michael	Renton, Tim
Kershaw, Sir Anthony	Ridley, Rt Hon Nicholas
King, Roger (B'ham N'field)	Ridsdale, Sir Julian
Knight, Greg (Derby N)	Roberts, Wyn (Conwy)
Knox, David	Ryder, Richard
Lamont, Rt Hon Norman	Sainsbury, Hon Timothy
Lang, Ian	Shaw, Giles (Pudsey)
Latham, Michael	Shaw, Sir Michael (Scarb')
Lawrence, Ivan	Shepherd, Colin (Hereford)
Lee, John (Pendle)	Shersby, Michael
Leigh, Edward (Gainsbor'gh)	Silvester, Fred

Skeet, Sir Trevor	Walker, Bill (T'side N)
Stevens, Lewis (Nuneaton)	Watson, John
Stewart, Andrew (Sherwood)	Watts, John
Taylor, John (Solihull)	Wood, Timothy
Tebbit, Rt Hon Norman	Young, Sir George (Acton)
Thatcher, Rt Hon Mrs M.
Thompson, Donald (Calder V)	Tellers for the Ayes:
Townsend, Cyril D. (B'heath)	Mr. Michael Neubert and
Wakeham, Rt Hon John	Mr. Gerald Malone.
Walden, George
NOES
Abse, Leo	Garrett, W. E.
Adams, Allen (Paisley N)	George, Bruce
Alton, David	Gilbert, Rt Hon Dr John
Archer, Rt Hon Peter	Golding, Mrs Llin
Ashton, Joe	Gould, Bryan
Atkinson, N. (Tottenham)	Gourlay, Harry
Bagier, Gordon A. T.	Hamilton, James (M'well N)
Banks, Tony (Newham NW)	Hardy, Peter
Barron, Kevin	Harrison, Rt Hon Walter
Beckett, Mrs Margaret	Hart, Rt Hon Dame Judith
Bell, Stuart	Healey, Rt Hon Denis
Benn, Rt Hon Tony	Heffer, Eric S.
Bennett, A. (Dent'n & Red'sh)	Holland, Stuart (Vauxhall)
Bidwell, Sydney	Howarth, Gerald (Cannock)
Blair, Anthony	Hoyle, Douglas
Boyes, Roland	Hughes, Robert (Aberdeen N)
Bray, Dr Jeremy	Hughes, Roy (Newport East)
Brown, Gordon (D'f'mline E)	Hughes, Sean (Knowsley S)
Brown, Hugh D. (Provan)	Hughes, Simon (Southwark)
Brown, N. (N'c'tle-u-Tyne E)	Janner, Hon Greville
Brown, Ron (E'burgh, Leith)	John, Brynmor
Buchan, Norman	Jones, Barry (Alyn & Deeside)
Caborn, Richard	Kaufman, Rt Hon Gerald
Callaghan, Rt Hon J.	Kennedy, Charles
Callaghan, Jim (Heyw'd & M)	Kirkwood, Archy
Campbell-Savours, Dale	Lamond, James
Carlile, Alexander (Montg'y)	Leadbitter, Ted
Carter-Jones, Lewis	Leighton, Ronald
Cartwright, John	Lewis, Terence (Worsley)
Clark, Dr David (S Shields)	Litherland, Robert
Clay, Robert	Livsey, Richard
Clelland, David Gordon	Lloyd, Tony (Stretford)
Clwyd, Mrs Ann	Lofthouse, Geoffrey
Cocks, Rt Hon M. (Bristol S)	Loyden, Edward
Cohen, Harry	McCartney, Hugh
Coleman, Donald	McDonald, Dr Oonagh
Conlan, Bernard	McGuire, Michael
Cook, Frank (Stockton North)	McKay, Allen (Penistone)
Cook, Robin F. (Livingston)	McNamara, Kevin
Cox, Thomas (Tooting)	McTaggart, Robert
Craigen, J. M.	Madden, Max
Crowther, Stan	Marek, Dr John
Cunliffe, Lawrence	Marshall, David (Shettleston)
Cunningham, Dr John	Mason, Rt Hon Roy
Dalyell, Tam	Maxton, John
Davies, Ronald (Caerphilly)	Maynard, Miss Joan
Davis, Terry (B'ham, H'ge H'l)	Meacher, Michael
Dewar, Donald	Meadowcroft, Michael
Dixon, Donald	Michie, William
Dobson, Frank	Miller, Dr M. S. (E Kilbride)
Dormand, Jack	Morris, Rt Hon A. (W'shawe)
Dubs, Alfred	Nellist, David
Dunwoody, Hon Mrs G.	Oakes, Rt Hon Gordon
Eadie, Alex	O'Brien, William
Eastham, Ken	O'Neill, Martin
Evans, John (St. Helens N)	Orme, Rt Hon Stanley
Fatchett, Derek	Park, George
Faulds, Andrew	Parry, Robert
Field, Frank (Birkenhead)	Patchett, Terry
Fields, T. (L'pool Broad Gn)	Pavitt, Laurie
Fisher, Mark	Pike, Peter
Flannery, Martin	Powell, Raymond (Ogmore)
Forrester, John	Prescott, John
Foster, Derek	Radice, Giles
Foulkes, George	Randall, Stuart
Fraser, J. (Norwood)	Raynsford, Nick
Freeson, Rt Hon Reginald	Redmond, Martin
Freud, Clement	Rees, Rt Hon M. (Leeds S)

Richardson, Ms Jo	Stott, Roger
Roberts, Allan (Bootle)	Straw, Jack
Roberts, Ernest (Hackney N)	Thomas, Dafydd (Merioneth)
Robertson, George	Thomas, Dr R. (Carmarthen)
Robinson, G. (Coventry NW)	Thompson, J. (Wansbeck)
Rogers, Allan	Thorne, Stan (Preston)
Rooker, J. W.	Tinn, James
Ross, Ernest (Dundee W)	Torney, Tom
Rowlands, Ted	Wainwright, R.
Sedgemore, Brian	Wallace, James
Sheerman, Barry	Wardell, Gareth (Gower)
Sheldon, Rt Hon R.	Wareing, Robert
Shields, Mrs Elizabeth	Weetch, Ken
Shore, Rt Hon Peter	Welsh, Michael
Short, Ms Clare (Ladywood)	Wigley, Dafydd
Short, Mrs R (W'hampt'n NE)	Williams, Rt Hon A.
Silkin, Rt Hon J.	Winnick, David
Skinner, Dennis	Woodall, Alec
Smith, C.(Isl'ton S & F'bury)	Young, David (Bolton SE)
Smith, Rt Hon J. (M'ds E)
Snape, Peter	Tellers for the Noes:
Soley, Clive	Mr. Frank Haynes and
Spearing, Nigel	Mr. John McWilliam.
Steel, Rt Hon David

Question accordingly agreed to.

Motion made, and Question put, That the Bill be committed to a Committee of the whole House.—[Mr. Lighthown.]

The House divided: Ayes 233, Noes 175.

Division No. 50]	[10.15 pm
AYES
Aitken, Jonathan	Carlisle, Rt Hon M. (W'ton S)
Alexander, Richard	Carttiss, Michael
Alison, Rt Hon Michael	Cash, William
Amess, David	Chapman, Sydney
Ancram, Michael	Chope, Christopher
Arnold, Tom	Churchill, W. S.
Ashby, David	Clark, Hon A. (Plym'th S'n)
Aspinwall, Jack	Clark, Dr Michael (Rochford)
Atkins, Robert (South Ribble)	Clark, Sir W. (Croydon S)
Atkinson, David (B'm'th E)	Conway, Derek
Baker, Rt Hon K. (Mole Vall'y)	Coombs, Simon
Baker, Nicholas (Dorset N)	Cope, John
Baldry, Tony	Corrie, John
Batiste, Spencer	Couchman, James
Bellingham, Henry	Cranborne, Viscount
Bendall, Vivian	Currie, Mrs Edwina
Benyon, William	Dickens, Geoffrey
Best, Keith	Dorrell, Stephen
Biffen, Rt Hon John	Douglas-Hamilton, Lord J.
Biggs-Davison, Sir John	Dover, Den
Blackburn, John	du Cann, Rt Hon Sir Edward
Body, Sir Richard	Dunn, Robert
Bonsor, Sir Nicholas	Durant, Tony
Boscawen, Hon Robert	Dykes, Hugh
Bottomley, Peter	Eggar, Tim
Bottomley, Mrs Virginia	Emery, Sir Peter
Bowden, A. (Brighton K'to'n)	Evennett, David
Bowden, Gerald (Dulwich)	Eyre, Sir Reginald
Boyson, Dr Rhodes	Fallon, Michael
Braine, Rt Hon Sir Bernard	Farr, Sir John
Brandon-Bravo, Martin	Favell, Anthony
Bright, Graham	Finsberg, Sir Geoffrey
Brinton, Tim	Fletcher, Sir Alexander
Brooke, Hon Peter	Forman, Nigel
Brown, M. (Brigg & Cl'thpes)	Forsyth, Michael (Stirling)
Bruinvels, Peter	Forth, Eric
Bryan, Sir Paul	Fowler, Rt Hon Norman
Buchanan-Smith, Rt Hon A.	Fox, Sir Marcus
Buck, Sir Antony	Franks, Cecil
Budgen, Nick	Fraser, Peter (Angus East)
Bulmer, Esmond	Freeman, Roger
Butcher, John	Fry, Peter
Butterfill, John	Gale, Roger
Carlisle, John (Luton N)	Galley, Roy
Carlisle, Kenneth (Lincoln)	Gardiner, George (Reigate)

Garel-Jones, Tristan	Mates, Michael
Glyn, Dr Alan	Mather, Sir Carol
Goodlad, Alastair	Maude, Hon Francis
Gorst, John	Mayhew, Sir Patrick
Gow, Ian	Mellor, David
Gower, Sir Raymond	Merchant, Piers
Greenway, Harry	Meyer, Sir Anthony
Gregory, Conal	Mills, Iain (Meriden)
Griffiths, Peter (Portsm'th N)	Mills, Sir Peter (West Devon)
Ground, Patrick	Miscampbell, Norman
Grylls, Michael	Mitchell, David (Hants NW)
Gummer, Rt Hon John S	Monro, Sir Hector
Hamilton, Hon A. (Epsom)	Montgomery, Sir Fergus
Hamilton, Neil (Tatton)	Morrison, Hon C. (Devizes)
Hampson, Dr Keith	Morrison, Hon P. (Chester)
Hanley, Jeremy	Moynihan, Hon C.
Hannam, John	Mudd, David
Hargreaves, Kenneth	Murphy, Christopher
Harris, David	Neale, Gerrard
Hawkins, C. (High Peak)	Needham, Richard
Hawkins, Sir Paul (N'folk SW)	Nelson, Anthony
Hawksley, Warren	Neubert, Michael
Hayes, J.	Newton, Tony
Heathcoat-Amory, David	Nicholls, Patrick
Heddle, John	Normanton, Tom
Henderson, Barry	Norris, Steven
Hickmet, Richard	Onslow, Cranley
Higgins, Rt Hon Terence L.	Oppenheim, Phillip
Hind, Kenneth	Oppenheim, Rt Hon Mrs S.
Holland, Sir Philip (Gedling)	Ottaway, Richard
Holt, Richard	Page, Sir John (Harrow W)
Hordern, Sir Peter	Page, Richard (Herts SW)
Howard, Michael	Patten, Christopher (Bath)
Howe, Rt Hon Sir Geoffrey	Patten, J. (Oxf W & Abgdn)
Howell, Rt Hon D. (G'ldford)	Pattie, Rt Hon Geoffrey
Howell, Ralph (Norfolk, N)	Pawsey, James
Hunt, David (Wirral W)	Peacock, Mrs Elizabeth
Hunt, John (Ravensbourne)	Pollock, Alexander
Hunter, Andrew	Portillo, Michael
Jenkin, Rt Hon Patrick	Powley, John
Jessel, Toby	Price, Sir David
Johnson Smith, Sir Geoffrey	Proctor, K. Harvey
Jones, Robert (Herts W)	Raffan, Keith
Jopling, Rt Hon Michael	Rathbone, Tim
Kershaw, Sir Anthony	Rees, Rt Hon Peter (Dover)
King, Roger (B'ham N'field)	Renton, Tim
Knight, Greg (Derby N)	Ridley, Rt Hon Nicholas
Knox, David	Ridsdale, Sir Julian
Lamont, Rt Hon Norman	Roberts, Wyn (Conwy)
Lang, Ian	Sainsbury, Hon Timothy
Latham, Michael	Shaw, Giles (Pudsey)
Lawrence, Ivan	Shaw, Sir Michael (Scarb')
Lee, John (Pendle)	Shepherd, Colin (Hereford)
Leigh, Edward (Gainsbor'gh)	Shersby, Michael
Lennox-Boyd, Hon Mark	Silvester, Fred
Lester, Jim	Skeet, Sir Trevor
Lewis, Sir Kenneth (Stamf'd)	Stevens, Lewis (Nuneaton)
Lightbown, David	Stewart, Andrew (Sherwood)
Lilley, Peter	Taylor, John (Solihull)
Lloyd, Peter (Fareham)	Tebbit, Rt Hon Norman
Lord, Michael	Thatcher, Rt Hon Mrs M.
Luce, Rt Hon Richard	Thompson, Donald (Calder V)
Lyell, Nicholas	Townsend, Cyril D. (B'heath)
McCrindle, Robert	Wakeham, Rt Hon John
Macfarlane, Neil	Walden, George
MacGregor, Rt Hon John	Watson, John
MacKay, Andrew (Berkshire)	Watts, John
MacKay, John (Argyll & Bute)	Wood, Timothy
Maclean, David John	Young, Sir George (Acton)
Madel, David
Major, John	Tellers for the Ayes:
Malins, Humfrey	Mr. Gerald Malone and
Marland, Paul	Mr. Richard Ryder.
Marlow, Antony
NOES
Abse, Leo	Ashton, Joe
Adams, Allen (Paisley N)	Atkinson, N. (Tottenham)
Alton, David	Bagier, Gordon A. T.
Archer, Rt Hon Peter	Banks, Tony (Newham NW)

Barron, Kevin	Flannery, Martin
Beckett, Mrs Margaret	Forrester, John
Bell, Stuart	Foster, Derek
Benn, Rt Hon Tony	Foulkes, George
Bennett, A. (Dent'n & Red'sh)	Fraser, J. (Norwood)
Bidwell, Sydney	Freeson, Rt Hon Reginald
Blair, Anthony	Freud, Clement
Boyes, Roland	Garrett, W. E.
Bray, Dr Jeremy	George, Bruce
Brown, Gordon (D'f'mline E)	Gilbert, Rt Hon Dr John
Brown, Hugh D. (Provan)	Golding, Mrs Llin
Brown, N. (N'c'tle-u-Tyne E)	Gould, Bryan
Brown, Ron (E'burgh, Leith)	Hamilton, James (M'well N)
Buchan, Norman	Hardy, Peter
Caborn, Richard	Harrison, Rt Hon Walter
Callaghan, Rt Hon J.	Hart, Rt Hon Dame Judith
Callaghan, Jim (Heyw'd & M)	Healey, Rt Hon Denis
Campbell-Savours, Dale	Heffer, Eric S.
Carlile, Alexander (Montg'y)	Holland, Stuart (Vauxhall)
Carter-Jones, Lewis	Howarth, George (Knowsley, N)
Clark, Dr David (S Shields)	Hoyle, Douglas
Clay, Robert	Hughes, Robert (Aberdeen N)
Clelland, David Gordon	Hughes, Roy (Newport East)
Clwyd, Mrs Ann	Hughes, Sean (Knowsley S)
Cocks, Rt Hon M. (Bristol S)	Janner, Hon Greville
Cohen, Harry	John, Brynmor
Coleman, Donald	Jones, Barry (Alyn & Deeside)
Conlan, Bernard	Kaufman, Rt Hon Gerald
Cook, Frank (Stockton North)	Kirkwood, Archy
Cook, Robin F. (Livingston)	Lamond, James
Cox, Thomas (Tooting)	Leadbitter, Ted
Craigen, J. M.	Leighton, Ronald
Crowther, Stan	Lewis, Terence (Worsley)
Cunliffe, Lawrence	Litherland, Robert
Cunningham, Dr John	Livsey, Richard
Dalyell, Tam	Lloyd, Tony (Stretford)
Davies, Ronald (Caerphilly)	Lofthouse, Geoffrey
Davis, Terry (B'ham, H'ge H'l)	Loyden, Edward
Dewar, Donald	McCartney, Hugh
Dixon, Donald	McDonald, Dr Oonagh
Dobson, Frank	McGuire, Michael
Dormand, Jack	McKay, Allen (Penistone)
Dubs, Alfred	McNamara, Kevin
Dunwoody, Hon Mrs G.	McTaggart, Robert
Eadie, Alex	Madden, Max
Eastham, Ken	Marek, Dr John
Evans, John (St. Helens N)	Marshall, David (Shettleston)
Fatchett, Derek	Mason, Rt Hon Roy
Faulds, Andrew	Maxton, John
Field, Frank (Birkenhead)	Maynard, Miss Joan
Fields, T. (L pool Broad Gn)	Meacher, Michael
Fisher, Mark	Meadowcroft, Michael

Michie, William	Short, Ms Clare (Ladywood)
Miller, Dr M. S. (E Kilbride)	Short, Mrs R.(W'hampt'n NE)
Morris, Rt Hon A. (W'shawe)	Silkin, Rt Hon J.
Nellist, David	Skinner, Dennis
Oakes, Rt Hon Gordon	Smith, C.(Isl'ton S & F'bury)
O'Brien, William	Smith, Rt Hon J. (M'ds E)
O'Neill, Martin	Snape, Peter
Orme, Rt Hon Stanley	Soley, Clive
Park, George	Spearing, Nigel
Parry, Robert	Steel, Rt Hon David
Patchett, Terry	Stott, Roger
Pavitt, Laurie	Straw, Jack
Pike, Peter	Thomas, Dafydd (Merioneth)
Powell, Raymond (Ogmore)	Thomas, Dr R. (Carmarthen)
Prescott, John	Thompson, J. (Wansbeck)
Radice, Giles	Thorne, Stan (Preston)
Randall, Stuart	Tinn, James
Raynsford, Nick	Torney, Tom
Redmond, Martin	Wainwright, R.
Rees, Rt Hon M. (Leeds S)	Wallace, James
Richardson, Ms Jo	Wardell, Gareth (Gower)
Roberts, Allan (Bootle)	Wareing, Robert
Roberts, Ernest (Hackney N)	Weetch, Ken
Robertson, George	Welsh, Michael
Robinson, G. (Coventry NW)	Wigley, Dafydd
Rogers, Allan	Williams, Rt Hon A.
Rooker, J. W.	Winnick, David
Ross, Ernest (Dundee W)	Woodall, Alec
Rowlands, Ted	Young, David (Bolton SE)
Sedgemore, Brian
Sheerman, Barry	Tellers for the Noes:
Sheldon, Rt Hon R.	Mr. Frank Haynes and
Shields, Mrs Elizabeth	Mr. John McWiliam.
Shore, Rt Hon Peter

Question accordingly agreed to.

Committee tomorrow.