HC Deb 03 March 1987 vol 111 cc760-828 5.19 pm
The Minister for Local Government (Dr. Rhodes Boyson)

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

This Bill contains four measures. First, it contains provisions to prevent authorities from using advance and deferred purchase schemes to avoid the Government's capital expenditure controls and store up major future commitments. Secondly, it gives local authorities powers to provide financial assistance to the private sector to provide rented housing accommodation. Use of the powers will be subject to the agreement of my right hon. Friend the Secretary of State for the Environment. Thirdly, it makes minor adjustments to the arrangements for paying block grant relating to expenditure on further education. Finally, it contains measures to make the land register system more effective.

This is a further local government Bill. It is the same cast, but a different play. We do not move around. so we cannot say that we are in rep. However, the House must blame, if it blames anybody, a minority within local government for the Bill. Particularly in the case of the provisions dealing with advance and a deferred purchase, we have been forced to take action because of the breakdown, from a small minority of the local authority side, of consensus. There used to be an acknowledgment by local government that central Government govern in the national interest, but that has been challenged by a handful of reckless authorities. This handful of authorities is tarnishing the reputation and honourable traditions of the majority.

Central Government take a view of what can be afforded by way of public expenditure. I remember that. in 1976, when I sat on the Opposition Benches, the Labour Government, under pressure from the IMF, had to tell local government that it must reduce its expenditure substantially across the board. It is difficult to do this when budgets have already been set, but local government made significant reductions in its spending because it automatically responded to central Government priorities when it came to safeguarding the national economy.

By the same token, the then Government felt able to ask for cuts. They did not have to wield the weapon of statute. It is a sad reflection on what has happened in some parts of local government in recent years that such consensus has disappeared. Nowadays, it is necessary to bring the weight of Parliament to bear before any local government worthy of the name is carried out in certain parts of London under hard Left control, including in my borough of Brent. I see the right hon. Member for Brent, East (Mr. Freeson) here. This also happens in other major cities.

Let us look at this against the background of advance and deferred purchase schemes. Such schemes have a long and reasonably respectable history, but recently they have been transmuted by a minority of authorities into creative accounting devices as a means of evading the Government's spending controls on a grand scale. In that guise, those devices are borrowing masquerading as expenditure.

My right hon. Friend announced on 22 July, as hon. Members will remember—that was the day in 1918 that the Allied forces crossed the Marne in France—that he would be introducing legislation to stop this abuse. These schemes make use of a bank or other intermediary to transfer expenditure artificially from the year when the work is done, and is normally paid for, to an earlier or later year. The interest is rolled up and the first payments deferred, usually for at least three years.

If indulged in on any scale, as in some authorities, the devices store up massive problems for ratepayers, regardless of future election results. The recent Audit Commission report on the management of London's authorities identified eight boroughs that have entered deferred purchase arrangements amounting to over £550 million. The Government deplore the use of any creative accounting device that leaves ratepayers facing huge bills in the future. We consider it reckless and imprudent. It mortgages the future to save people facing up to reality now.

Some authorities are relying on an incoming Labour Government to bail them out of the financial consequences of using these devices. They will have to wait a long time. However, out of interest, let us spend a few moments exploring just what the Labour party would do if it were in power. I trust that this afternoon we shall hear what the Labour party would do about creative accountancy as it is now and as it may be if other authorities went on with it and we did not legislate.

In a speech to the Association of Metropolitan Authorities' annual conference last year, the hon. Member for Copeland (Dr. Cunningham), whom I see in his place, made an important statement. Far be it from me to take biographical details from him, but I shall honour him with quotations. I have the full speech here, with the correct page marked.

Mr. William Cash (Stafford)

My hon. Friend used the expression "creative accountancy", and we have come to hear that expression a great deal. Does he not agree that, not only in the context of the Bill but in many other sectors of accountancy, the expression "creative accountancy" means nothing more or less than cheating?

Dr. Boyson

It is financial cheating in so far as money that should be paid that year in total is rolled forward for somebody to pay in a minimum of three years, and sometimes up to 10 years, later. I have illustrations of the number of years in some cases. Such authorities are living off the future generation and taking on commitments for which they will not have to foot the bill. That is wrong and the Government deplore it. I was quoting from a speech made by the hon. Member for Copeland to the AMA. I am not sure where the conference was.

Dr. John Cunningham (Copeland)

In Newcastle-upon-Tyne.

Dr. Boyson

That is a good north-east location.

I shall not read all that the hon. Gentleman said, because I do not have the time. If the hon. Gentleman wishes a copy of his speech, I can provide it to him. He said : There can be no blank cheques, no easy money. No hon. Member would disagree with that, and perhaps we can take it as the text for our debate today. So far, so good. That is an admirable sentiment, but what does it mean in practice?

We get a further clue from the Labour party's latest policy document, which I have with me, unleashed at its local government conference in Leeds recently. The document proposes manipulating the control system to ease the problem of the handful of reckless authorities that have indulged in these schemes. Page 51, paragraph 7.3—I like to be helpful to hon. Members by providing information — of the Labour party's document "Local Government Reform in England and Wales", which is a draft consultative paper, says : The sensible solution is to recognise that capital expenditure under deferred purchase arrangements has already taken place. Those two quotations are completely different. Would a Labour Government be legislating as we are against creative accountancy? If we were in opposition, we would support such moves because we also do not believe in blank cheques.

Mr. Jack Straw (Blackburn)

I am grateful for the opportunity to come back on this point. The direct answer to the questions is that in government we would review the situation. [Laughter.] There is no point in laughing at this, as Conservative Members are. We do not know, and neither does the Minister, the full extent of indebtedness of individual local authorities until that indebtedness arises in a particular year.

Secondly, I should have thought that the Minister would approve of the point that the expenditure incurred should be counted in the year in which it takes place rather than in any future year. Thirdly, if these authorities are as reckless as the Minister suggests, how does he explain why the Government-controlled Public Works Loan Board has not been reducing its lending to London boroughs such as Haringey? It has increased lending to these boroughs quite dramatically in the past four years so that, for example, in Haringey's case, 50 per cent. of its debt four years ago was accounted for by the board while today 82 per cent. is accounted for by the board. Why have the Government increased their lending to such boroughs if they have been so reckless?

Dr. Boyson

I am delighted that the Labour party, if in government, would be considering what to do. The hon. Gentleman is right to say that the document states that the capital expenditure will be charged for that year, but what will happen in future years? Will extra money be given to the authorities or will they have to contain their budgets?

Mr. Reg Freeson (Brent, East)


Dr. Boyson

The right hon: Gentleman may not like that, and I gladly give way.

Mr. Freeson

Earlier on, the Minister said that there are situations—there have been plenty in the past and there are plenty today—when the use of the deferred purchase procedure is quite reasonable and produces good results. I am almost quoting the phrase that he used. Is it not perfectly possible for individual local authorities to work out, with the help of the director of finance, a likely programme of capital spending over a given run of years—providing the Government do not interfere too much with that spending—so that authorities may judge the profile of expenditure?

That spending may go up or down over a period. To an extent, it is possible to adopt the procedure to even out — not to always increase — the burdens over a run of years. I used that method many years ago when I was a chairman of finance in my local authority. No great harm, if any, was done, but a great deal of good was done.

Dr. Boyson

When local authorities used that procedure responsibly—not involving great amounts—it was fair enough, but things have run amok. Hon. Members will recall the article in The Guardian on 19 November 1986. The hon. Member for Newham, North-West (Mr. Banks) now reads the Sunday Telegraph, but I read The Guardian. Under the headline: Councils facing £2 billion catastrophe after election, Labour warned", John Carvel, the political correspondent, wrote: This problem of 'suppressed' expenditure was likened yesterday by one member of the report team to a financial time bomb which could explode on a Labour government if Neil Kinnock wins the next general election. I have a list of deferred purchase schemes undertaken by local authorities and known to the Department of the Environment. It includes £100 million borrowed by Hammersmith, £100 million borrowed by Camden, £100 million borrowed by Sheffield and £100 million borrowed by Manchester. Nothing will be paid back for three years, and that will leave a bill—

Dr. Cunningham

What about Torbay?

Dr. Boyson

Torbay is not on that list, but I would welcome any information from the hon. Gentleman.

The right hon. Member for Brent, East (Mr. Freeson) may say that the procedure has an honourable history, but nobody knows the extent of the spending at present; that is why the Government are stepping in. The hon. Member for Blackburn (Mr. Straw) accepted that, if the Labour party was in government, it would be considering the problem. We are all concerned about the problem. The loans must be paid for by the ratepayers. Where will the banks rushing to put up money for the schemes stand when the burden turns out, as it may in some cases, to be more than ratepayers can reasonably be asked to bear?

I wish to reiterate what my right hon. Friend the Secretary of State for the Environment said in answer to a written question from my right hon. Friend the Member for Guildford (Mr. Howell) on 19 February. He said : A local authority's debt and its creditworthiness have always been its own responsibility. The Government do not stand behind local authority debt." — [Official Report, 19 February 1987, Vol. 110, c. 743.]

That type of recklessness must be curbed. To deal with the problem, clause I and schedule 1 of the Bill define the time at which an authority will be treated as incurring expenditure against its spending ceiling by reference to the time at which works are carried out, regardless of when payments are actually made. The new provisions apply to all works carried out under arrangements to which an authority becomes committed after 22 July 1986.

Mr. Tony Banks (Newham, North-West)

I wish that the Minister would cease to use the pejorative term "reckless" when referring to arrangements that have been made by local authorities with respectable lending institutions. When a bank decides whether to lend money to a local authority, it takes into account all the factors, including the ability of that borough to pay back the money that it borrows. Who is the Minister accusing of recklessness — the local authority that borrows or the bank that lends?

Dr. Boyson

Every bargain requires two sides — the lender and the borrower. The reason I repeated what my right hon. Friend said is that we will not stand behind that form of local government debt.

Mr. Straw

The Government never have.

Dr. Boyson

It is a good thing for all to know. I am glad that I have the unanimity of the House, as that is always pleasant.

I consider it reckless for local authorities to undertake commitments that they cannot meet at the time and roll them forward on to future ratepayers five or 10 years ahead. The ratepayers will have to pick up the bill from the limited income of the local authority and pay for what is being spent at the present time.

Mr. Banks

I am fortunate to be a member of the Treasury and Civil Service Select Committee. When one studies international debt, it is apparent that a number of the banks that lend to local authorities in London arid around the country also lend to Third-world countries. The banks often lend at a rate that is grossly in excess of their capital. Who is being reckless — the country that borrows or the bank? Who is being reckless—the local authority or the lender, the bank?

Dr. Boyson

I have put on record my views and those who read them must learn. I must point out the recklessness of one London borough that follows an antiapartheid policy, but which has borrowed from a bank in Paris, which is financed from South Africa. Very odd things are going on. The hon. Gentleman may consider that reckless—

Mr. Banks


Dr. Boyson

The regulation-making powers will enable my right hon. Friend to make exemptions from, or to modify, the provisions in the Bill if that is seen to be necessary. My right hon. Friend has promised an exemption to allow authorities to continue to use deferred purchase schemes prudently for their original purpose—

Mr. Freeson


Dr. Boyson

I must finish this—I am not finishing a sentence, let alone a paragraph, at the moment.

The original purpose was an occasional, one-off project that would be difficult for a local authority to accommodate within its spending ceiling for a single year. The exemption will be restricted to one project, not exceeding a given value, per authority in a specified period. I will announce the precise details of the exemption during the passage of the Bill. I am willing to give way to the hon. Member for Brent, East if he till wishes to intervene.

Mr. Freeson

I am grateful to the Minister. I accept that the Minister intends to introduce the details during the Committee proceedings, but it would be useful to have some idea of the criteria that will be used. If there are cases where the excessive use of such procedures builds up an indebtedness in a few years, well above reasonable levels, that is not very prudent. However, there will be other cases where there is likely to be a downturn in basic expenditure on capital programmes and it would be perfectly reasonable for an authority to undertake such schemes. Is that the type of guidance that will be issued?

Dr. Boyson

I have listened to what the hon. Gentleman has said. I cannot go into more detail. We are concerned about small authorities facing large expenditure in one year. Such expenditure may be easily covered by a large authority through its rate income, but in the case of a small authority the cost must be spread over a number of years. We are bearing in mind the fact that a small district council may have heavy capital expenditure in one year.

I turn now to the provisions in the Bill that deal with the financial assistance for private housing and the statement made on 5 February by my hon. Friend the Minister for Housing, Urban Affairs and Construction. It is the Government's wish to widen the variety of landlords providing rented housing. Our aim is to increase the choice for the substantial number of people who want or need to rent their homes. We want to re-establish the right to rent.

In many areas, the supply of privately rented accommodation has simply dried up. In 1951 there were 6 million privately rented homes in England, whereas today there are 1.6 million. The numbers are declining by an estimated 70,000 a year.

A combination of statutory rent controls and private landlords' inability to compete with other subsidised forms of housing has forced many of these landlords out of business. In some areas, local authorities are virtually monopoly suppliers and their provision of housing has some of the worst characteristics of old monopolies. There is restricted access to rented housing and little choice. Tenants get a low standard of service and poor value for money. That is not true of all authorities, of course. Some manage their housing effectively and I pay a tribute to them. [Interruption.] Hon. Members may disagree, but I visited a council housing estate in my constituency on Sunday and heard the complaints of the tenants. They took advantage of my coming and showed me rooms that were continually damp, and other things, and they had written to their authority.

I realise that there have been bad landlords, but in the north, from which many hon. Members come, the old ambition of the Lancashire working class was to retire on three houses. They would live in one and spend their old age on the income from the other two. Since the House insists on more information, I will tell hon. Members that I grew up in 18 Hoyle street in a house owned by a person who lived five doors further up the road. My father is dead now, so I cannot find out what we paid, but we lived in harmony with the landlady. The house was whitewashed every year and was in a very much better condition than many council houses that I have seen.

Mr. Straw

The Minister said that it was the ambition of Lancashire working-class families to retire with three houses, in one of which they lived, with the other two from which they gained income. That could only ever apply to one in three families. What about the other two out of three families who lived in private rented accommodation?

Dr. Boyson

I will answer mathematically. They had to save up to the age of 40 to 50 before they could buy their houses. So the first 50 years were spent in the two out of three group and they then moved into the one out of three group. The average age of death was 75 so it was only necessary to buy at the age of 50, and 50 was known as the house-buying age. That may not be understood by all hon. Members.

Mr. Michael Brown (Brigg and Cleethorpes)

Is not the point in answer to the question of the hon. Member for Blackburn (Mr. Straw) that there are hundreds of thousands of young people who are here in London homeless and who want access to rented housing accommodation, and that they are the other two thirds who yearn for the day when this Conservative Government will deregulate new lettings?

Dr. Boyson

I am very grateful to my hon. Friend, for whose clarity and strength of view on this matter I have great respect.

We want to give tenants greater choice. We want less municipally provided housing and more rented housing provided by other agencies. This Bill will help to achieve the second of those objectives. It gives local housing authorities a new and specific power to give financial assistance to private landlords, including housing associations. The aim is to stimulate the provision of rented accommodation by the private sector, using predominantly private sources of finance.

I see this as an important step in developing the role of local authorities as "enablers" rather than providers of housing. That is the same attitude as we have on competitive tendering. They provide the services, but they do not need to run them. Under this new power, they can use public money to draw into the provision of rented housing larger amounts of private investment. Every pound of public investment can lever two or three pounds of private investment. They can help the private sector to develop rented housing schemes which might otherwise not have been economically viable, and they can help tenants by keeping rents down to affordable levels. The most appropriate form of assistance may be annual revenue grants: these would enable an authority to make its assistance conditional on the maintenance of acceptable standards by the landlord. But other forms of assistance may be appropriate, depending on the circumstances, and the Bill provides for this.

The financial help which will be possible under this Bill is aimed at the new breed of responsible landlords who are now beginning to let under the assured tenancy scheme—landlords who have been approved by the Secretary of State. They comprise housing associations and offshoots of building societies and pension funds, as well as property companies and developers. The all-party support which the newly extended scheme has attracted for assured tenancies in recent months is a great fillip to our efforts to rehabilitate the reputation of responsible private landlords. We think that financial assistance given under the new power might be particularly appropriate for the support of developments involving assured tenancies.

I urge all authorities to make the maximum use of the new power. This is, however, subject to an important proviso. As my hon. Friend the Minister for Housing, Urban Affairs and Construction said when announcing these proposals to the House on 5 February, we do not intend that financial assistance should be used simply to featherbed the private sector. Nor would we want the new provision used as a device to provide more municipal housing in a private sector guise.

The Bill therefore provides that the use of the new power and of any existing powers which are capable of being used for similar purposes should be subject to the consent of my right hon. Friend the Secretary of State. The criteria which we propose to use when considering applications for consent were set out fully in a consultation document sent on 5 February to all local authorities and a variety of other interested bodies. We have invited views on these criteria and on other aspects of these new powers by 31 March. I would emphasise that we are ready to listen to views from both local authorities and the House, this afternoon, about how the new powers can best be used.

Sir George Young (Ealing, Acton)

Would my hon. Friend say what the position is about those proposed deals involving housing associations and local authorities in the private sector where an umbrella agreement had been entered into shortly before my hon. Friend's statement but where section 9 consent from the housing association had not been secured? What is the position about those proposed deals?

Dr. Boyson

I take the point that my hon. Friend makes. I know that he is concerned about a particular scheme in the Ealing area, along with our hon. Friend the Member for Ealing, North (Mr. Greenway). The Department is looking at the material, which has only just come to us from Ealing. I also take the point regarding the Housing Corporation having to give permission for this. This has already been mentioned to me earlier today and I shall pass the information on. But at the moment I cannot say whether it had been sealed before midnight on 5 February or had not been completely sealed, in which case it would come under these regulations. As soon as a decision has been made by the Department, I will let my two hon. Friends know.

Mr. Michael Meadowcroft (Leeds, West)

It is not just Government Members who are concerned about this, because my colleagues in Tower Hamlets have been caught by the same position. Is it not slightly unusual to put something out for consultation and while that is going on to bring forward a Bill for Second Reading? Could the Minister give us some indication of what he proposes to do in Committee with regard to the particular clauses if the result of his consultation is not available in time to be enacted through the various clauses as they come forward in the Committee? The Committee stage may well be completed before we get the appropriate decisions.

Dr. Boyson

I know that Parliament has been considering this for some time and it is quite an accident that this is linked with certain other matters. The date 5 February is an important one, as the hon. Member will agree. It was the birthday of Sir Robert Peel and also of John Dunlop, the pioneer of the pneumatic tyre. It was the day that General McArthur re-entered Manila—at the same time I was serving in the East Indies fleet—and we all remember Guantanamo. So it was a very significant choice of date.

Mr. Harry Greenway (Ealing, North)


Dr. Boyson

I have not finished yet, unless my hon. Friend would like to help me, in which case I do not need to finish that bit.

We have given them until 31 March for that consultation. It is 3 March today and I hope that we shall be going into Committee in about a fortnight's time. I should not imagine that this Bill will get through as speedily as the last one, which got through in two sittings in the other House.

Mr. Greenway

I am just trying, Mr. Speaker, to interpret my hon. Friend's answer. Does he mean that, until his Department has had a chance to look at the situation, he will ask the Housing Corporation to withhold section 9 consent to any of these proposed deals?

Dr. Boyson

If the deal was not settled before midnight on 5 February, it does not stand. I shall look into what my hon. Friend said, but I understand that the deal had to be fully settled and legally tied up before midnight on 5 February. I believe that the Department is looking into the material that has only just come from Ealing to find out whether that is the case. I take the point that the Housing Corporation has to give permission, and we shall be considering the matter with that body.

The criterion of risk seems to us to be critical, and some of the schemes already put to us by local authorities are unsatisfactory in that respect We are trying to encourage the provision of rented housing by the private sector, and that means that the commercial risk of any development should rest substantially with the private sector investor. Schemes under which the local authorities give an open-ended guarantee to meet the whole of any difference between costs and income would not normally be acceptable. In such schemes, I he private investor takes no risk because the local authority stands fully behind the landlord. That is barely distinguishable from ordinary local authority borrowing — the private investor relying not on the landlord's creditworthiness but on the local authority. Such use of guarantees can be simply a device to evade normal controls over local authority borrowing—controls that all Governments have found it necessary to maintain to regulate the volume of public spending.

That does not mean that guarantees are unacceptable per se. A limited arrangement under which a local authority guarantees an agreed proportion of the financing cost may be perfectly reasonable, but the main burden of risk should lie in the private sector. Furthermore, authorities should not have to carry the risk of overruns in construction costs, inefficient management or unexpected repairs. The private investor should shoulder the risks.

Clause 2 provides a new power for local housing authorities to give financial assistance, including grants, loans and guarantees, to housing associations and other private landlords in connection with the provision of housing for letting. Clause 3 contains the requirement for local authorities to obtain the consent of the Secretary of State. That applies both to the new power in clause 2 and to any existing local authority powers. The clause has effect from 6 February 1987. It specifies a number of exemptions from the need to obtain consent.

Mr. Freeson

In the past two or three years agreements have been fairly extensively negotiated on the initiative of housing associations and the like. Is the Minister saying that in future only a proportion of the capital costs involved can be subject to a local authority guarantee, rather than the general overall guarantees that have been negotiated? Is he saying that an important criterion will be that local authorities will be allowed to guarantee only a proportion of the burden to be carried by the financial institutions? Does he realise that that will wreck about £500 million-worth of expenditure that has already been the subject of negotiations? Will that not now be put at risk by the Minister's decision?

Dr. Boyson

I should have thought that the Labour party would agree that, if housing is built largely with private money, the private investor should take the risk, and should not be covered by public guarantees. I thought that the Labour party believed that private enterprise should be private enterprise and should not be socialistically guaranteed.

Mr. Freeson

Answer the question.

Dr. Boyson

I am answering the question. If housing is built by one of the private bodies that I have listed, that body should take its share of the risk. We do not want to socialise private enterprise. Without the risk factor, it would become corrupt, and I am sure that the hon. Gentleman would not wish that to happen. [HON. MEMBERS: "Answer."] I have answered clearly; I am not running away from the question. Private enterprise is not private enterprise if it does not carry any risks. I know the definition—

Mr. Tony Banks


Dr. Boyson

This is the hon. Gentleman's second time, and his last. He will have to wait until I have finished if he wants to say any more.

Mr. Banks

It is my third time, so I am even more grateful. The Minister asked why a local authority should guarantee or underwrite a scheme undertaken by private enterprise. But that principle is established throughout the capitalist economy. Through the Export Credits Guarantee Department, for example, the Government underwrite private transactions between suppliers in this country and buyers abroad.

Dr. Boyson

I do not wish to get involved in credit for overseas trade.

We are a radical Government, and we believe that private enterprise should stand on its own two feet. It may amaze Opposition Members that we take that view. Indeed, there is a look of horror on Labour Members' faces.

Clause 4 sets out the way in which the Secretary of State may exercise consent powers. In particular, the clause provides for the matters that the Secretary of State may take into account during the transitional period before the Bill comes into effect. A number of authorities have come forward with schemes since 5 February, including Winchester, which is a Conservative-controlled authority, Tower Hamlets, which is alliance-controlled and Castle Morpeth, which is Labour-controlled. The popularity of the scheme is clearly spreading rapidly throughout the country.

Clauses 5 and 6 deal with the arrangement known as pooling, whereby the costs of advanced further education are shared between local education authorities. Neither clause reflects a change in policy. They are designed to allow the pooling system to operate as intended by the Government and as expected by local authorities.

Clause 5 is technical and amends part I of the Local Government, Planning and Land Act 1980, which provides for the transfer of block grant between England and Wales. The purpose of that part of the 1980 Act is to ensure that the costs of advanced further education are shared equitably between authorities in England and Wales, and the proposed clause would more accurately reflect that purpose.

Clause 6 will allow my right hon. Friends the Secretaries of State for Education and Science and for the Environment to recalculate allocations from the advanced further education pool for 1981–82 as originally intended, and to adjust the block grant of local education authorities accordingly. The local authority associations asked that the legislation be so amended, and we think it right to meet their request. The provisions will be spent when the adjustments have been made. On 7 July 1986, the hon. Member for Denton and Reddish (Mr. Bennett) asked for such a provision, and Lord Irving of Dartford also requested the change. This clause should therefore be non-controversial, although I am glad to see with us my hon. Friend the Minister with responsibility for advanced further education.

At the beginning of my remarks I referred to recklessness; at the end I refer to the scandal of idle land. Land that lies unused and neglected in public hands is a particular outrage, as public bodies have a special duty to use the resources available to them economically, efficiently and, above all, for the common weal. We have already made a determined attack on the problem in order to get such unused land back into use. Under the 1980 Act, we set up registers of unused and under-used public land, with the result that an important part of the problem has been quantified for the first time. Of the 150,000 acres registered since 1980, about one third have been removed, most because the land has been brought into use by the owners or sold. There are now 99,000 acres on the register that need to be tackled.

My right hon. Friend the Secretary of State has intervened to secure a substantial programme of disposals, using his powers under the 1980 Act. We have initiated statutory procedures on 175 sites, 110 of them in 1986. However, our increased use of the statutory procedures has led us to the belief that what has proved an elaborate, cumbersome and time-consuming process should be speeded up and made more efficient. That is why we propose, in this Bill, to take powers to improve the quality of the information about the idle land in the registers, and to streamline the procedures for securing disposals. That is what clause 7 and schedule 2 are designed to do.

One key feature of the new provisions is that they will enable my right hon. Friend the Secretary of State for the Environment to modify or revoke a direction to sell that appears inappropriate in the light of the owners' representations, without much ado or further delay. At present we would have to issue a further notice of a direction, consider further representations to that further notice, and only then decide whether to proceed, not to proceed or to go back to square one with a further notice, and so on ad infinitum. This is subject to the safeguard for the owner that such a variation can only reduce the area of land to be sold, or be in response to the owner's representations. Any wider variation would still require the old full procedure.

The other key feature is that our powers to obtain information about land are clarified and, to some extent, increased, particularly by a right of entry on to registered land.

Mr. Straw

What does that mean?

Dr. Boyson

I shall explain it to the hon. Gentleman. I would not want him to pass the evening wondering what I meant. At present, we have no right of entry, so we cannot even go and look through binoculars. We can only look through binoculars from a tower some distance away.

Mr. Tony Banks

We have 110 of those in Newham.

Dr. Boyson

I saw them last week. I thought that there were 113, so three must have gone since then. However, the hon. Gentleman's mathematics may be better than mine.

At the moment we have no right of entry. It is interesting that the hon. Member for Blackburn should have asked me that question, and I welcome it. I obtained the information only this morning and I can now pass it on to an astonished world. It appears that when we issued a directive, the public body that owned the property visited it and found, to its amazement, that people were already using it. Therefore, in future we can go and look as well. It came as a shock to the public body to learn that the property was registered. That is why the Bill gives a right of entry on to registered land.

Owners will be placed under a duty to tell us if our information is wrong or out of date. Provided that public bodies maintain their own records of land efficiently, that should not present them with much difficulty, but it will enormously assist our task in maintaining the registers as a useful tool for developers and others needing to know about idle land.

This speech has been a long haul for a short Bill. The Bill contains important provisions that will protect the ratepayer and improve the effective use of public assets. I commend it to the House. As I said earlier, I began with a reference to recklessness, and 1 end with a reference to scandal.

Dr. Cunningham

I intervene only because the Minister keeps referring to these matters as scandals. I should put it on record first that all local authorities, regardless of political control, have been acting quite properly within the law. There is nothing scandalous about that. As the Minister has used the word "scandal", I ask him to comment on what is happening in the Conservative-controlled borough of Merton, where, without any committee decision and against the standing orders of the council, the Conservative leader of the London borough of Merton has instructed the officers secretly to expend £100,000 of ratepayers' money on the Pollard's hill estate, but the expenditure can be agreed only if it is done before 19 March.

I should like the Minister to ask his civil servants to inquire into the behaviour of the Conservative leader of the London borough of Merton. It has come to our notice that not only had he issued those instructions without any committee decision, but that it may not be unconnected with the fact that a by-election is taking place at the Pollard's hill ward in Merton. If the Conservative party does not hold that seat, it will lose its control of the council. As the Minister is talking about scandals, will he look into that matter?

Dr. Boyson

I was unaware of any by-election in Merton. However, I shall certainly look into the point that the hon. Member for Copeland has made. The hon. Gentleman seems to object to the word "scandal". I do not think that "scandal" means something that is illegal. I do not have the Oxford English dictionary with me, but 1 stand by the word "scandal" as well as the word "reckless". Scandal means something that upsets people and everybody says, "Shame." I am sure that my hon. Friends would also shout, "Shame," in the context of idle land. If one incurs a great deal of expenditure that has to be paid for by ratepayers in three, four, six, seven, eight, nine or 10 years, it is a scandal and it is wrong. I am sure that most people would think that. I am sure that the hon. Member for Copeland, at the bottom of his heart, also thinks that. I believe that the Bill will meet that problem, and on that ground, as well as for other reasons, I commend it to the House.

6.7 pm

Mr. Jack Straw (Blackburn)

This is the third occasion in six weeks on which the House has had the doubtful pleasure of debating a Second Reading of a local government Bill. The Second Reading of the Local Government Finance Bill was on 12 January. No sooner had it gone to the Lords, than we had the Second Reading of the Rate Support Grants Bill on 4 February. That Bill had hardly found its way upstairs into Committee before the Secretary of State announced on 18 February that the Local Government Bill, which we are debating this evening, was to be published.

In 1974, just after the Minister had entered the House, he made a speech that is worth repeating because he roundly attacked his party's reorganisation of local government in London and elsewhere. He said: One of the reasons for much of the cynicism of the public towards politicians is that people feel that no one in politics is prepared to admit that has made a mistake".—[Official Report, 5 July 1974; Vol. 876, c. 822.]

It is a great pity that the Minister and his hon. Friends did not accept his advice, because the present chaos into which local government finance has been plunged is a direct result of one major misjudgment and mistake by the Government compounding another. If we are to talk in hyperbolic terms of scandal, the real scandal is the chaos into which local government finance has been thrown by the Government and the fact that this Bill will be the 43rd Bill to affect local government since the present Administration came to power in 1979.

Not a week passes without local authorities having to cope with another change, whether it be by Bill or administrative fiat. No sooner had this Bill been published than local authority chief executives received a missive, dated 23 February, from the Under-Secretary of State for the Environment, responsible for local authority expenditure and rates, apologising for what he described as two small errors that we have discovered in the calculation following inquiries from local authorities. Because of those two small errors, which amounted to millions of pounds for individual local authorities, tables F, G and I of various papers sent out had to be resubmitted to the authorities.

The Government criticise the efficiency of local authorities and we have heard that again this afternoon. However, the Government are the single greatest source of inefficiency. No set of institutions can run efficiently when the rules of the game are literally changed week by week. The fact that there are three Bills on exactly the same subject, local government finance, proceeding through Parliament at the same time is a testament to the extraordinary and unrivalled incompetence of Ministers at the Department of the Environment. There is nothing in this Bill that could not have been included in the Rate Support Grants Bill and there is nothing in that Bill which could not have been included in the Local Government Finance Bill.

The story of this Bill is the story about the dog that did not bark. We were promised a mountain of a Bill. Instead, the Government have brought forth, if not a mouse, a rather mangy gerbil.

In October, I spent one afternoon watching the Secretary of State make his keynote speech to the faithful at the Conservative party conference. I have to say that my heart went out to the Secretary of State.

Mr. Michael Brown

It was a good speech.

Mr. Straw

That is a matter of opinion.

Dr. Cunningham

He did not receive a standing ovation.

Mr. Straw

My hon. Friend has stolen my line. As he said, it was almost the only speech from a Minister that failed to earn a standing ovation.

Mr. Michael Brown

That says a lot about how good it was.

Mr. Straw

My impression of the Conservative party conference is that if one were to read out the Ascot telephone directory, one would gain a standing ovation. I do not know why the Secretary of State failed in that respect, except that he had the misfortune to speak after lunch.

The centrepiece of the speech was his proposal for legislation on privatisation of local authority services and competitive tendering. The Secretary of State repeated that promise in the debate on the Queen's Speech on 17 November. His ever loyal, if hapless, lieutenant, the Under-Secretary of State, repeated that pledge again in a speech to a Local Government Chronicle seminar on 4 February. The Under-Secretary of State said that the new Bill will introduce a regime of compulsory competitive tendering and separate accounting for the provision of six major services which were first mentioned in the 1985 consultation paper.

The Under-Secretary of State may smile. Throughout his speech, he spoke as if the Bill had already been drafted. He told his audience time and again what the Bill would contain. There was no qualification and no hesitation. Two weeks later the Secretary of State came to the House and had to announce that that major part of the Bill and two others were to be dropped, on the incredible grounds that there had been insufficient time to draft the necessary legislation. The argument that it is drafting difficulties alone which led to that section of the Bill being dropped does not bear examination. I am glad to see the Minister smile along with his colleague, the Under-Secretary of State.

Dr. Boyson

Pleasantness of nature.

Mr. Straw

Yes, that may be, and an understanding that the Government told a bit of a whopper.

In his statement to the House on 18 February the Secretary of State said: we did not know at the time of the Gracious Speech that we would have the problem of total expenditure which, as the House will acknowledge, proved to be an exceptionally complex and complicated matter."—[Official Report, 18 February 1987; Vol. 110, c. 920.] That was incorrect. The Secretary of State knew on 17 November, when he made his remarks on the Gracious Speech, about the problems of total expenditure. It is true that we had to drag the information out of him as to when he knew, but in two successive interventions on the Floor of the House he admitted that he knew at the end of September, even before his speech to the Conservative party conference, that there was a major problem on total expenditure and that he knew by the end of October, two weeks before his speech on the address, about the advice of the Attorney-General that there would have to be legislation.

In any event, if that policy is so important to the Government, what have the Secretary of State and his predecessors been doing for the past two years? It is two years this month since the Government first published the consultation document, to which the Under-Secretary of State referred in his now inoperable speech of 4 February.

In the consultative document on competition in the provision of local authority services, issued with a great fanfare in February 1985, those consulted were invited to send in their comments on the proposals, to arrive no later than 30 April 1985. What have Ministers been doing since 30 April 1985 if the legislation is so important?

Mr. Tony Banks

In fairness to the Government, there have been many changes in Ministers in the Department of the Environment since that time.

Mr. Straw

That is true, but my hon. Friend will know that the constitutional theory, at least, is that Ministers are like a seamless robe—as one bows out, another bows in.

Mr. Meadowcroft

All roads lead to Boyson.

Mr. Straw

My hon. Friend the Member for Newham, North-West (Mr. Banks) may be suggesting that the two previous Secretaries of State were lukewarm about the idea and did it only by way of a gesture towards their Right wing. However, there has been a clear-out of any reasonable people. We now have zealots in the Department of the Environment to deal with local government. The present lot are the Right wing of the Conservative party. They believe in the nonsense contained in the consultative document; they believe in the wholesale privatisation of services.

When the Under-Secretary of State comes to reply, I hope that he will tell us what he was doing. No doubt when he got into the office after recovering from the shock of the call to No. 10, he said to his officials, "Let me have all the stuff on privatisation." Indeed, he has claimed credit elsewhere as the inventor of privatisation. That is one of his great claims to fame. We will listen to his reply to the debate with great interest because he has yet to explain how he came to make his promise to the local government seminar on 4 February in which he told the country what the Bill would contain in detail. Did he make that speech with the approval of the Secretary of State?

Mr. Tony Banks


Mr. Straw

The Under-Secretary of State says that he will have a chance later, but I would be happy to give way.

Was that speech made with the approval of the Secretary of State? It was certainly billed by the press office at the Department of the Environment as a keynote speech. It went out on official Department of the Environment paper. I assume that the press officer tells the Secretary of State what he is doing, if it is anything like the old system. Had the Bill been drafted? One or two of us were made aware that the Bill was fairly thick. Are we to believe that two weeks before the Secretary of State came to the House and made his announcement it was all off, that nothing at all had been drafted? Is that what we are expected to believe? I put it to the Minister that there were duplicated drafts of the Bill, clause by clause, in the Department. Is that true? Of course it is true and they know it is true; we can tell from their smiles.

The idea that it is all down to drafting is utter nonsense. Perhaps when the Minister comes to the Dispatch Box he will come clean and tell us what he knew on 4 February and what changed in the intervening days. It was clear that it was nothing to do with drafting difficulties. In our judgment the real reason for the removal of a major section of the Bill is that at the eleventh hour the Secretary of State woke up to the damaging electoral consequences of such a measure after, as the Local Government Chronicle put it, the private and powerful warnings of Conservative opposition. It has been said that the slogan of Right-wing Ministers is "the next move forward." It has now become "the latest move backwards".

With regard to the other sections of the Bill, the excuse about drafting difficulties has no foundation. As my hon. Friend the Member for Bootle (Mr. Roberts) said on 18 February, those sections of the Bill dealing with so-called political publicity by local authorities had not only been drafted. but were published and debated by the House a year ago. The Government should have the grace to admit that these proposals have now been dropped because of the united opposition of the local authority associations, including the Conservative-controlled Association of District Councils. Given the Government's outrageous use of the central Government publicity machine for wholly party political purposes, the Government may have developed some sense of shame about the restrictions on the freedom of speech of councillors — including Conservative councillors — that they were seeking to impose.

The Minister was also coy about the omission of contract compliance provisions from the Bill. Why have they been dropped? Have they been dropped because of drafting difficulties? Were they dropped because of an argument that has been well reported between Environment Ministers, on the one hand, who wanted all contract compliance conditions declared unlawful and Employment and Home Office Ministers, on the other hand, who declared their support for authorities which, for example, used provisions in race relations legislation to enforce equal opportunity employment practices by councils?

Good relations between contractors and local authorities are essential. That is why the Association of Metropolitan Authorities has been holding discussions with the CBI and the Building Employers Confederation to discover whether there can be voluntary agreement on the acceptable boundaries of contract compliance provisions. I hope that the Minister will support those discussions in the same way as the Opposition have supported them.

Another previously promised section of the Bill to which the Minister made no reference relates to another pledge by the Under-Secretary of State in a written answer on 3 December 1986, when he said that provisions relating to…(the 'Local Ombudsmen') will be included in the Local Government Bill."—[Official Report. 3 December 1986; Vol. 106, c. 684–85.] The Under-Secretary of State in his written answer itemised nine amendments to strengthen the powers of the local ombudsmen. They related especially to the need to ensure that local authorities, when they are served with a second report by local ombudsmen, must consider that report and cannot simply pigeon-hole it as they can at present. The amendments included other provisions to give local ombudsmen power over the housing functions of the Commission for the New Towns and other sensible practical changes in the way in which the local government ombudsman conducts his business. All those proposals were sensible and uncontroversial. The House needs to know why they have been omitted.

I now want to consider what is left in the Bill. The Minister sought to make much of the advanced and deferred purchase schemes by local authorities. However, the truth is that the Government have been two-faced about local authorities' borrowing through those arid other schemes. Publicly, as the Minister did today, they seek to damn such borrowing; privately, they have encouraged it. Much of the money so borrowed has been spent on building new homes, renovating old homes and on non-housing construction projects from the improvement of road systems to the building of sports halls. Most of the work has been carried out by private contractors. That borrowing has maintained thousands of jobs within the construction industry and greatly improved the profits of construction companies. Once again, the Government have willed the end but refused to will the means.

The Government have not simply encouraged all kinds of additional borrowing — additional to authorities' principal allocations—but they have budgeted for that borrowing. Why else was £700 million deducted from auhorities' housing investment programme allocations for 1986–87? Why has £1,200 million been deducted this year as the Government's own estimate of what authorities will spend from accumulated capital receipts and other sources of finance? The Government are expecting authorities to borrow in that way. They have made a judgment about how much the authorities will spend and they have deducted that from the money that would otherwise be allocated by way of housing investment programme allocations. The Government have done that because of their obsession with the size of the public sector borrowing requirment.

We do not need any lectures from the Government about the true size of the borrowing by local authorities. The Government are in pursuit of the shibboleth of the money supply figures. They have overfunded. In other words, they have borrowed £17.5 billion through the purchase of commercial bills to get the money supply figures down and then lent that money on to commercial companies. If a Labour Government had done that, we would never have heard the last of it. However, because a Conservative Government are borrowing at about 2.5 times the nominal size of the PSBR, we hear virtually nothing about it.

If the borrowing position of the authorities to which the Minister referred is reckless, why is the Public Works Loan Board increasing its lending to those authorities" The Minister has not answered that question. He may want to send a missive from the Dispatch Box. Why, in 1983, did only half of Haringey's borrowing come from the Public Works Loan Board when last year 82 per cent. came from the board? I will give way to any other critic of the so-called reckless councils. Why have the Government increased their lending to the authorities? Is there no one on the Government Benches who can answer that question? I offer the Minister the opportunity to answer, and I will give way. He obviously does not know the answer.

Dr. Boyson

Purely and simply, the Public Works Loan Board is lending to those bodies reasonably and well. However, over the past six months to a year recklessness has crept in. Presumably, the Labour party is aware of that recklessness. Sheffield is borrowing £100 million and over seven years it will have to pay back £175 million. If that is not reckless, I do not know what is. I noticed that the hon. Member for Blackburn (Mr. Straw) pulled out his cuttings of the comments made by my hon. Friend the Under-Secretary of State for the Environment. He also quoted from speeches that I have made, and I do not mind that at all. However, no mention has been made about what action the Labour party would take. The comments of the hon. Member for Blackburn are a smokescreen to hide the fact that the Labour party has no policy to deal with this matter. The Opposition have been condemning what has been happening, but they have no policy. Would the Labour party introduce a similar Bill? I believe that it would. Although it may not be hypocrisy, it would be ill advised for the Opposition not to admit that today.

Mr. Straw

I have answered that point before, and I will answer it again. The Minister seemed to refer to page 52 of the consultative document. However, it has only 28 pages. We have spelt out in great detail, and I will repeat for the Minister, what the Labour party will do.

Dr. Boyson

Tell us what the Opposition would do, because the country is anxious to know.

Mr. Straw

The country is very anxious about the chaos to which the Government have reduced local government finance.

The Minister had no answer to the fact that lending to Labour-controlled local authorities by the Public Works Loan Board had increased. That will continue. Nothing has happened in the past six months to change that. Since 22 July last year — more than six months ago — local authorities have been on notice that such arrangements for advanced deferred purchase would become unlawful. The Minister has not answered that point.

In the debate on housing and homelessness three weeks ago, we were treated to a lecture from the Secretary of State about the merits of the free market and the perils of buying shirts in Moscow where no such free market is alleged to exist. No man believes in a free market more than the Secretary of State and no one believes less in Government interference. As he rightly reminded the House two weeks ago and as the Minister reminded us again today, local authority debt is not backed by central Government. Everybody knows that except, apparently, Ministers. The authorities are on their own.

As my hon. Friend the Member for Newham, North West said in an intervention, not only has the Public Works Loan Board been happy to lend the authorities money, but many of our leading financial institutions have also done so. Those institutions are not charities. Indeed, they are packed full of the Secretary of State's friends. They do not lend money unless they are satisfied that they will get it back, and they must have been satisfied about the financial probity of the authorities before they lent them millions of pounds. Why does the Secretary of State think that he is in a better position to judge the risk than such financial institutions?

The Minister asked what we would do. First, we would not start from such a point, and indeed we did not. We had a sensible relationship with local government. I remind the Minister that he and his colleagues voted for the 1980 Act which we opposed. The Conservatives voted for it on the basis that it would produce a new and improved relationship between central and local government. It has done no such thing. In its report, published at the end of January, the Audit Commission said that creative accountancy was an inevitable consequence of the chaos into which the Government had plunged the rate support grant system.

Mr. Michael Brown

The hon. Gentleman talks about the relationship between the previous Labour Government and local authorities. That Labour Government had the good fortune to be dealing with responsible Conservative-controlled local authorities. This Government have the misfortune to have to deal with irresponsible Labour-controlled local authorities led by people like the Labour candidate in last week's Greenwich by-election. That is the problem that we have; and, indeed, the Labour party has the same problem in dealing with such people.

Mr. Straw

That is not the case. I have experience of some of these so-called responsible Tory councils. Many of them were highly irresponsible, for example, in neglecting the needs of the homeless and in failing to meet social need. The difference between this Government and the Labour Government is that we respected the autonomy of local councils, whether they agreed with us or not, whereas this Government seek to control any institution with which they disagree.

I shall now deal with clauses 2 to 4 which relate to housing. We were treated to a lecture by the Minister of State about the need to re-establish the right to rent and about how there has been a decline in the private rented sector. For their own advantage, Ministers ought to look again at what happened after rents were decontrolled in 1957. The then Parliamentary Secretary to the Ministry of Housing and Local Government, the right hon. Member for South Down (Mr. Powell), moving the Second Reading of the Rent Bill in late 1956, said in terms—the Minister can look at the Second Reading debate, but I know it almost by heart—that the Bill to decontrol the private rented housing would reverse the decline in the private rented sector. That was the clear promise of decontrol. However, it was followed by the swiftest decline in the rented sector that there has ever been.

If Ministers seek to decontrol the private rented sector again—they are being coy about their real intention this side of the election—that is what would happen. We have no objection to responsible private letting by institutions by way of assured tenancies. Our support for assured tenancies did not occur in the last two weeks. I was on the Committee that looked at the Housing Bill in 1980 and we fully supported assured tenancies at that time. We object to the evils of individual private landlords.

The Minister talked about Lancashire. Two weeks ago, in the Mill Hill area of my constituency, I was called across the road by an old lady and asked to look at her house. Its condition was Dickensian. She had a galvanised tin bath in which she was expected to bathe, and one cold tap. I saw an oil lamp on the dresser in the scullery and I asked, "What is that for, love?" She said, "That is to go to the lavatory with." The lavatory was 10 paces across the yard and it was frozen up and had no electric light. That house was rented from a private landlord. That is the reality of private landlordism, and that is why the Labour party has opposed the evils of private landlordism. I also discovered that that old lady paid about £10 a week in rent. That was £10 too much for the conditions in which she was living.

I am happy to say that, not least because of representations that I made, a housing association has now agreed to buy the property and the woman will be rehoused. The idea that somehow the welfare of our people would be served by reversion to private landlordism and that if rents were decontrolled the homeless in London could pay the rents that the overheated market demands is utter nonsense.

Mr. Michael Brown

Surely Opposition Members who represent constituencies in places such as Newham and Islington recognise that it is the shortage of rented accommodation that drives up the price and gives rise to vast numbers of young homeless people. The hon. Gentleman and I are probably about the same age. When I first came to London, after I graduated from university in the early 1970s, I found that many people who leave college or university and come to work in large cities like London are unable to obtain housing or rented accommodation because the present rent legislation means that only a certain amount of rented accommodation is available. The prices go sky high and a whole raft of young people in their teens and twenties and early thirties cannot be housed. If rents were decontrolled, prices would come down and people like that would be able to get accommodation.

Mr. Straw

This is a crucial point and I hope that I can teach the hon. Gentleman something. I do not say that in any derogatory way. In London and elsewhere, the price of rented accommodation is determined by the price of owner-occupied accommodation. The two are not separate. The average price of a house, even in Walthamstow, is £60,000. Whether one buys such a house for renting or for owner-occupation, it means that even to make a 10 per cent. return on capital—and in practice if a landlord is borrowing money at an interest rate of 15 per cent. he will want a return of 18 or 20 per cent. — a landlord would have to charge at least £6,000 a year. That is £120 a week for an ordinary three-bedroomed terrace house in Walthamstow. That is the reality. That is what the market rent would be. No one would be willing to rent out properties like that unless he could recoup his investment. A landlord would be better off putting his money in national savings.

There is a shortage of accommodation in London and people are homeless, because, unfortunately, they had to accept the advice of the chairman of the Conservative party and come to London to search for work. They then had to register as homeless people. Changing the regime for private renting by individual landlords will not solve that problem.

Mr. Jeremy Corbyn (Islington, North)

My hon. Friend is making an excellent point about this problem. In my constituency there were a large number of privately rented flats and rooms occupied mostly by low-paid single people or by low-paid or unemployed families. Now those people are being persuaded—I use the word advisedly—to leave those places so that they can be converted into up-market flats or second or city homes for the wealthy. Those tenants are literally forced on to the street and come under the care of the local authority, if the local authority can provide anything.

There is a great increase in homelessness, but there is no increase in the number of homes available at cheap rents. Decontrol has forced those people on to the streets and caused homelessness. It is the enemy of good housing and working-class people. We need much more money spent on local authority and social ownership schemes to provide cheap rented houses for the people who need them, not for the yuppies that the Conservative party wants to bring into central London.

Mr. Straw

My hon. Friend makes the important point that the more there is decontrol, the worse the position will become, not better. That was the economic fact of life that Conservative Ministers and many Conservative Members discovered to their shock after the passage of the Rent Act 1957. I repeat that it was said that that was introduced to expand the supply of private rented accommodation, but it had exactly the opposite effect.

The Government say that they would like to encourage local authorities to enter into co-operative arrangements with private institutions such as housing associations and building societies to provide housing for rent or sale. Most authorities, whatever their political hue, have taken the Government at their word and are actively working in cooperation with the private sector. The best but by no means the only example of that is Sheffield, which has developed an imaginative scheme with the housing association and the Nationwide building society to build 2,000 houses, of which 1,200 would be available the local authority, 200 to the housing association and 600 would be for sale. However, unable to keep their fingers out of anything, the Government's response has been not to praise the authority but to seek to control it.

In his statement and consultative document, the Minister claimed that he would provide "new powers" for local authorities. However, as far as we can see, that is disingenuous nonsense, because we see no new powers, only new controls. Nobody that we have consulted can find a single additional, substantive new power in the Bill that the authorities do not already have. However, instead there is the most horrendous system of controls, at a time when the Department made much of the fact that it is abandoning detailed project control over schemes wholly in the public sector. Much of the detail of those provisions will have to be examined in Committee.

I ask the Minister to advise us whether the authorities are correct in fearing that the provisions in those clauses could make many of the bed-and-breakfast arrangements for homeless people unlawful; that the schemes that the Government say that they encourage, by which authorities take on short leases of private property to accommodate homeless families could be rendered unlawful, as could some community care schemes.

How many staff will the Department of the Environment need to vet the thousands of applications for consent? How does the Minister intend to implement his pledge in the so-called consultative document to take account of the local authorities' comments received before 31 March, when, according to the Whips, by that date the Bill will have completed half its stages? The more we look at these clauses, the more we are led to the conclusion that they are motivated by ideological spite against the local authorities, not by any significant problem which has arisen.

Clauses 5 and 6 take us into the arcane area of further education pooling. It is all to do, I am told, with the need to make lawful the rolling process to cap the pool. Happily, those clauses have been agreed with the local authority associations and they need not detain us.

Clause 7 relates to land held by public bodies, and it also contains a schedule, which we shall examine in detail in committee.

The Government were elected in 1979 on a pledge to reduce the controls on local authorities—to set the town halls free. However, 43 Bills later, the Government have enmeshed local authorities and themselves in a tangled web of restrictions and controls without precedent in this country, without equal in the Western world.

Time and again, the Government have sought to override the wishes of local electors and their councils, in the name of democracy. However, I remind the House that all the local councils in this country have a mandate that is far more recent than that of the Government. All the London boroughs, which were so woefully abused by the Conservative party, had full council elections last May when, almost without exception, the Labour party sharply increased its share of the vote and its number of councillors. True accountability of local councils can only be achieved through the ballot box. The Labour party is not afraid of that test, although the Government may be.

Elsewhere in the country, outside London, there are annual electoral tests for local councils in almost all districts, through the retirement by thirds of district councillors, and all-out elections in the fourth year of the shire councils. In London, since the abolition of the GLC, there will now be an electoral test only once in four years. That period is far too long.

In its consultative document on local government, which was published last month, the Labour party proposes electoral tests for all districts and London boroughs each year by rotation. I challenge the Government to bring forward legislation to do that. If they do, and if they are ready to discuss its provisions cooperatively and in advance, we shall raise no impediment. Indeed, we shall welcome it. It would be one of the few local government Bills for which the Minister would receive the acclamation of the House.

We understand the problems that the Conservative party faces, and appreciate that its local base has been severely eroded. The centralisation of local government has been paralleled by the centralisation of the Conservative party. That was spelt out in a perceptive article in last Friday's Spectator, which stated: Poor electoral results have meant that many Conservative supporters have found themselves out of office in local government …many long standing Conservative workers believe that they have not had what they would regard as a proper recognition for their years of service …can the Conservative party really survive without these sort of people in the longer term? How long can it succeed in national elections, if it is an ever decreasing force in local life and politics?".

In 1974, in a much better speech on local government finance than he has made today, the present Minister said: I believe that at some point in the future we shall have to return to local government units which are answerable to people within a measurable distance."—[Official Report, 5 July 1974; Vol. 876, c. 822.]

The Minister believed in local accountability then. Why does he not do so now? This is a bad Bill, born of the Conservative party's new centralist tendencies. We shall vote against it.

6.46 pm
Mr. Michael Knowles (Nottingham, East)

If I may, I should first like to turn to a point made by the hon. Member for Blackburn (Mr. Straw) about the large number of local government Bills. That is easily explained by our parliamentary system. In other countries the problems that have arisen would have been dealt with by executive fiat, in one form or another. However, in our system, if a case goes to court and the law turns out not to be what people think it is—even if they have acted upon that presumption for many years—the only way in which that can be remedied is to pass another Act of Parliament. That explains the large number of Bills that go through the House, not just in relation to local government but in many other areas also.

Mr. Meadowcroft

The hon. Gentleman is arguing for a written constitution, rather than defending the present system.

Mr. Knowles

That may well be so and I am tempted to stray because we may find some common ground there. There are good reasons why a written constitution should be considered. Indeed, I took part in a vote the other week, as did the hon. Gentleman, that would have incorporated features of that.

However, the point made by the hon. Member for Blackburn was that relations were easier between the central Government and local government under the Labour Administration. Although in some ways that was true, the reason for it was simple. Most of that time was a period of expansion and much of our local government machinery over the years was built up during times of expansion when central Government, for good or ill, and in my view ill—

Mr. Corbyn

I thought that it was supposed to be expanding now.

Mr. Knowles

Central Government used local government machinery for a large part of the welfare state which was built on an endless expansionary network. However, when money was short the system suddenly had to be tightened up. I well recall that in 1979 the then Secretary of State for the Environment my right hon. Friend the Member for Henley (Mr. Heseltine) told local government that finances would have to be tightened and that there would have to be a downturn in expenditure. At the time, all the local government associations said that they had always delivered when local government and national Government had gone to them. That was the proud boast of local government, but it failed to deliver. That Secretary of State has since said that he regretted his decision not to incorporate that provision in legislation. It was another 18 months before that nettle was grasped.

People will recall that during that same period of the Labour Government, Tony Crosland said that the party was over and in a sense it was. Both local government and the Labour Administration cut capital expenditure, not current expenditure. Indeed, the country is still recovering from the savage cuts in capital expenditure made at that time. That has been the problem in local government time and again.

All too often when one calls for cuts in local government capital expenditure is cut because it is easy to cut something in the future that people do not see the necessity for today. If current expenditure is cut, one can be sure that the beneficiaries of that current expenditure will immediately bring pressure to bear, and they do. Therefore, the easy step is always to mortgage the future and that is what has happened.

That is what has happened and is now being called creative accountancy. It is the endless deferment of the costs of capital expenditure, leaving a reasonably free hand for current expenditure. The time will come when those bills must be met—in many cases in two or three years' time. Some London boroughs may feel the pressure by the end of this year. In two or three years' time local government units could face a real crisis of finance because those bills will become due.

We have seen what has happened in other countries. The best examples come from the United States where precisely the same tragic path was followed: the future was mortgaged in order to maintain current expenditure. The best known example is New York, but it also happened in Boston and Chicago. When the horrible moment of truth arrives one is talking of cutting current expenditure, not by 5 per cent. in a year, which good management can cope with, but by 25 per cent. or even 40 per cent., as those American cities had to do. Some of our cities may face that if the Government do not pass the Bill and impose some sort of control over deferred payments.

I am worried that the Government may have left the legislation too late already and that we shall see some local government units go to the wall. When any local government unit starts to default on payments and must go to Carey street, the whole of local government will be affected together with its status on the money markets. Indeed, that may affect the whole of government. This is not a negligible problem, considering what it could portend. It could produce a real crisis.

The hon. Member for Newham, North-West (Mr. Banks) mentioned lending and asked who was reckless—the banks or the local authorities. The truth is that both probably are. Certainly, Margaret Hodge has written to colleagues saying that mortgaging the future is a high risk strategy, because not only does it depend on a change of government, but it also depends on a commitment by the Labour Front Bench to bail us out when they return to power. Will they do so? Neither local government nor we have heard any specific pledges.

Mr. Corbyn

As the hon. Gentleman mentioned the leader of my borough council perhaps he will answer this question. If he were a councillor in Islington and faced long housing waiting lists, rapidly increasing demands on social services and pre-school provision and a whole host of serious social problems, would he seek to carry out the mandate that the electorate gave him to do something about those problems, or exacerbate them by dismissing home helps and meals-on-wheels workers, increasing housing waiting lists and ignoring social problems? If he were to do the latter, he would merely bring on the day of the most awful social deprivation, instead of trying to find a way out. Moreover, he would do so when the Government in power were not even prepared to recognise that the problems existed in the first place.

Mr. Knowles

Let me go through the various points of that statement. First, I would not have stood on such a mandate. At the end of the day one can spend only what one can afford and the sooner the country realises that, the better. That was proved in London by my hon. Friend the Member for Southampton, Itchen (Mr. Chope) when he was leader of Wandsworth council. The contrast between Wandsworth and Lambeth has been drawn endlessly. Conservative-controlled boroughs have proved that throughout the country. Moreover, when it comes to the delivery of services at the front line, their delivery is better than that of neighbouring Labour-controlled authorities. A willingness to recruit endless numbers of local authority staff and compassion do not go together.

I was speaking about the recklessness of local authorities and banks. I have no background in banking and I do not worship at the shrine of banks. Indeed, I have doubts about their judgment, considering some Third-world countries to which they have lent in the past and other areas of their lending. I suspect that, just as the banks expect someone else to bail out Third-world countries when those countries get into trouble, so they expect someone else to bail out local government when it gets into trouble and, consequently, to bail them out too. The banks, too, are taking a gamble that may not come off.

I am sorry that the hon. Member for Blackburn (Mr. Straw) has left the Chamber, because he made an impassioned speech about housing and said that having housing controlled by the private sector inevitably leads to shortages. That could have been a tremendous speech made by the Labour Front Bench in 1950 or 1951 against removing controls on food. We have three necessities in life: shelter, clothing and food. It is a historic irony that one of those is controlled by local government mechanisms. I ask hon. Members to picture a system with council food committees, a council food officer and a council clothing officer. Can we imagine how well dressed and well fed our people would be? We know what the result would be.

Mr. Meadowcroft

The hon. Gentleman's analogy falls down. The problem with housing is that a permanent supply cannot be created because land cannot be created. An everlasting supply of food and clothing can be created with good management skills and production, but that cannot be done with housing.

Mr. Knowles

But private enterprise brings other factors into play. The greatest factor that raised our housing standards had nothing to do with the creation of land; it was the electric tramway. More land became available on which to build houses and people could still get to work. We preclude developments to freeze society in a certain mould—the mould at the end of the first world war—and so long as we do so, we shall not solve the problems of our cities.

We froze rents during the first world war for the best of reasons. In 1918 the Government intended to release them but did not and they only slowly released them in the 1930s. When they were released, blocks of flats began to be built, and indeed one can still see the blocks that started to be built before the second world war. Before that came fully into effect we got into the second world war and rent control was imposed again. We have lived with the awful consequences ever since. We must grasp that nettle. I hope that this Bill is a step in a strategy to that end. If it is, there is some hope for homelessness and solving the problems of housing in this country. If it is not, it is yet another tinkering with the problem.

Mention has been made of the postponement of parts of the Bill as it was originally drafted. The hon. Member for Blackburn has postulated various reasons as to why parts have been put off. I suspect that I share a sense of relief with various other Conservative Back-Bench Members. We do not wish the Secretary of State to shoot our fox. I am sure that that thought would never have occurred to the Secretary of State. There is a lot of political mileage in this yet. Once this legislation has been drafted can we get it absolutely right this time?

I remember the words of a previous Secretary of State in a debate similar to this. I said that I could see loopholes in the Bill being discussed. He said that that was no doubt true, but that we must draft laws on the basis that we expect people to comply with them, that we should not expect people to try and deliberately break the law. The Secretary of State must have the laws drafted with precisely that in mind. If they cannot be that watertight it is as well to defer them until such time as we can get them that watertight.

7.1 pm

Mr. Reg Freeson (Brent, East)

I shall concentrate my remarks on clauses 2, 3 and 4, although I could perhaps preface them with a brief reference to the matters with which clause 1 is concerned. Much play has been made of that by the hon. Member for Nottingham, East (Mr. Knowles), the Minister and others.

I make it perfectly clear that I hold no brief for irresponsible financial management by any local authority or for any authority or any Government that consciously conduct their financial affairs in such a way as to create burdens that they cannot foresee being carried sensibly in two or three years from now. That does not, in my view, justify the sort of interference that the Government seek to introduce in clause 1.

Some local authorities probably behave somewhat irresponsibly or thoughtlessly in that respect, but they are a tiny minority. There can be no justification for introducing this catch-all legislation that will cover all local authorities, whoever they are, and whatever sort of schemes they may be trying to introduce. The legislation cannot be justified because two or three local authorities may be behaving in a way that the Government do not like and therefore the Government consider that they should all be brought under this sort of control.

I do not wish to concentrate my remarks on clause 1, or on any clauses other than those concerned with housing. Let me say straight away that the announcement of this legislation on 5 February and the implications of clauses 2, 3 and 4 halted a whole series of major housing schemes using private finance that had been pioneered by housing associations and local authorities. Although most of the local authorities concerned were Labour authorities, there were also some Conservative authorities. Tower Hamlets, which is alliance-controlled, has also been involved.

On 5 February when the Minister for Housing, Urban Affairs and Construction made his announcement with which today's Bill deals under those clauses—ostensibly clause 2 was forecast—I quote the Minister's words on that occasion— to give local authorities an explicit statutory power to provide financial assistance to the private sector, including housing associations in order to assist in the provision of rented housing using private finance In making that statement, the Minister stopped all such schemes not signed by midnight that day. They would in future need his permission. We must presume that the permission will be forthcoming only when this legislation gives him the power to give such permission. He has no authority to give such permission until the legislation is passed.

What was the consequence of that? As I have said briefly, and as I shall spell out in rather more detail, the Minister halted several major housing schemes using private leasing arrangements that had been pioneered by local authorities and housing associations. He said, in effect, that they would not proceed even in the future under this legislation without four conditions applying. I summarise what is a detailed series of conditions that are set out in the consultative document that I have read. They are: that the financial risk should rest with the private sector that assistance which includes guarantees by local authorities, among other methods, should not amount to more than 30 per cent. The Minister came very near to confirming that in his reply to my intervention earlier this afternoon. The conditions continued: that the private sector must own and maintain the housing, and that if local authority land is involved, the land should not be sold freehold or on a lease of not less than 99 years. Other factors will be taken into account which I shall not proceed to deal with. I wish to spell out the results of this legislation already, not in the future but as we debate the Bill this evening. As a result of the legislation it is estimated by the National Federation of Housing Associations that £500 million-worth of privately financed schemes have been brought to a halt or are at risk.

It is interesting to observe in passing—this is not in any way an insignificant point — that the Building Employers Confederation in recent documentation urging the input of £500 million-worth of capital expenditure in the public sector, calculated that that would produce an additional 60,000 jobs directly and indirectly.

Mr. Ron Leighton (Newham, North-East)

Sixty-two thousand.

Mr. Freeson

I am corrected. Sixty-two thousand jobs will be created directly or indirectly as a consequence of new building, refurbishment, furniture, fittings and all the other things that go with such building activity or come as a consequence of it. Under cover of pretending to introduce or to encourage more private finance, the Government have put a block on it and have prevented the potential for 62,000 jobs being created as a result of such investment.

Sheffield city council's scheme has been mentioned. It seems that, with good fortune and very hard work, that scheme got in before the midnight bar came down, but for many schemes that has not been the case or, at the least, the housing associations and the local authorities concerned are doubtful and worried about whether they got their schemes through in time.

I shall quote the director of a major housing association in my area which has pioneered, after 18 months to two years of hard work, such private finance schemes with the local authority. Malcolm Levi, director of the Paddington Churches housing association, which is one of the major associations active in my borough and in the inner-city area of north-west London generally, said: It's a great shame that the combination of housing associations, local authorities and private sector money providing schemes for the homeless have now been stopped in their tracks.

Following the Minister's statement, Stephen Hill, a director of the Samuel Lewis housing trust, said: We are bitterly disappointed because we have been working on schemes for the last 18 months. Now all that work has gone down the drain. We could have provided homes which would be cheaper than bed and breakfast. That is an understatement. My borough has to spend millions of pounds a year on keeping homeless people in bed-and-breakfast hotels of poor standard. Hundreds of those people—I do not exaggerate—would have been taken out of that sub-standard accommodation and rehoused in good flats under a privately financed scheme, which one or two of the major housing associations and the borough have negotiated over the past 18 months, but that has been blocked because of the Government's action.

A consortium of four housing associations has been negotiating for £120 million on the Eurobond money market through the brokers Merrill Lynch to finance private leasing schemes. Hyde housing association, the Nottingham Hill housing trust, the United Kingdom housing trust and the South London family housing association intended to use £50 million of the total raised to fund a development of 600 homes in Tower Hamlets built by Samuel Lewis and the East London housing associations and arranged by the United Kingdom housing trust, which was also responsible for the Sheffield project. The remainder was to be divided between the other associations' schemes. That development is now at risk, to say the least. It is extremely doubtful that it will proceed.

The future of other deals using the same procedures to obtain other Eurobond finance are in doubt. The South London housing association says that its two schemes with Southwark and Lewisham are unlikely to go ahead. One was a scheme to convert the Amos estate in the London docklands, a plan which had the full backing of the London Docklands Development Corporation. Following the Minister's announcement, it is thought unlikely that the consortium will be able to use Eurobond money. The finance was conditional on the local authorities being able to provide the guarantees.

Richard Smillie, director of the East London housing association, doubts whether housing associations will be able to enter into many leaseback schemes in the future. He says: The City is extremely cautious about leasing money for these schemes. We need the Government to agree to guarantees if we are to be able to raise the money from private sources. So much for those signs of the immediate consequences of the Government's action. Hundreds of millions of pounds of private finance have been blocked. Excellent housing schemes, imaginatively conceived and worked on for months and sometimes for more than a year, have been blocked.

What about the general position, even in the future? I listened with great care, although with some difficulty at times, to what the Minister said about the Government's policy, just as I did when the Minister made his announcement on 5 February, and I have read the consultative document. It seems that the Government—the Minister confirmed this today in reply to my intervention — believe that the main way to get the private sector involved again in housing is by ensuring that the market takes most of the risk. I shall not go into the detailed pros and cons of that, but shall just state what all observers have concluded for months and years—this is cloud-cuckoo-land. It is potty. I have said so before, and I mean it. Everyone who has observed and studied the scene knows that it is potty. That is not a condemnation of getting private clients into housing, but it has been recognised by all observers of the scene, apart from those who indulge in windy rhetoric in places such as this and elsewhere, saying that private finance — mainly institutional money of one kind or another — will come back into housing, as I wish it would, only if the right mechanisms are created. It will do so significantly —it may happen a little on the margin in other ways—only if we separate investment from provision and housing management.

If no one else has produced studies on this, I should think that the Government at least would have studied the report a year or so ago by the committee chaired by the Duke of Edinburgh which went into this matter. Its views were representative of institutions, house builders, housing associations and all manner of private and public sector bodies. On pages 27 and 28, the report states: We believe it is desirable effectively to separate the investment and provision aspects of providing rented housing. We do not think that major financial institutions will be interested in providing and managing rented housing. They might well, however, be willing to invest"— the word "invest" is italicised to make clear the point about which the committee speaks— in its provision if it were built and managed by some secure body, and if their investment yielded an attractive return. The report continues: We believe that suitable vehicles for such investment include index-linked housing bonds or units in a specially formed unit trust. It refers later to an intermediary body standing between the investor and the approved landlord which would actually use the money to provide and manage the housing. The 'wholesaler' might draw in large sums of money, then lend them out in smaller chunks to the local authorities, housing associations, commercial bodies"— for example, assured tenancy bodies— and so on, which would be responsible for provision of the housing. Building societies might well be an ideal instrument, acceptable both to the investors and to the organisations borrowing, to carry out this wholesaling function. I could read other extracts from the report, but I shall not.

Since Labour left government, I have spent a lot of time pursuing ideas that I was pursuing while in government, directly involving myself in discussions with the building societies, pension funds, housing associations and other bodies with the aim of achieving such joint enterprises. Now the Government say, "Perhaps there should be a 30 per cent. guarantee only, or perhaps it should be 40 per cent. or a lesser proportion." Financial institutions will not lend money at risk but will seek a 100 per cent. guarantee, what the Government call an open-ended guarantee, either from the Government—which the Government will not give — or from a local authority or some other local sources. I am not concerned where that is, but they have said they will accept local authorities. These schemes have been negotiated with great effort, much imagination and hard work.

The Government have now turned around, firstly blocking financial institutions for an indefinite period until this Bill is passed, and requiring them to seek approval in the Department of the Environment by detailed centralised project control. Secondly, the Government say that approval will be granted to schemes only where there is a limited guarantee, if there is one at all. That Government intervention will drive some schemes into negotiating some insurance cover. That will not be easy and, even where that is achieved, will add unnecessarily to the cost of the housing provision because of Government intervention.

Mr. Christopher Hawkins (High Peak)

I have also looked into private financing, including building and housing associations. Even if the Government and perhaps a local authority give a financial guarantee, the Treasury has an idiotic definition of the PSBR, which means that the whole of that expenditure counts on the PSBR even if all the money is put up by the private sector or a building society. Would the right hon. Gentleman like to comment on how much that is blocking the problem?

Mr. Freeson

The hon. Gentleman should not tempt me too far down that road. I started to get a little uppity about that with my then fellow colleagues in the Treasury when we were in government. I do not want to go into things here which I should not be talking about in these circumstances. It is an idiotic convention or rule. After several years of pressure, there have been signs that the Treasury has begun to relent a little on two or three schemes coming forward. The Minister on a previous occasion referred to them in this House. The Housing Corporation has been encouraged to become involved in putting housing association grant schemes together with private finance. The Treasury will not insist on categorising the private capital along with the housing association grant, as it is all public expenditure.

I remain unclear whether that is general policy, or is confined to the £20 million announced recently in this connection. I have never seen any reason why the rule should not be done away with. There should be a reliance only on the contingent spending of money. It is possible to calculate what has actually been spent in the event over a number of years and to say that is what should be slotted into the PSBR for a given year. I hope that the blocking action of certain Treasury rules, which have no financial or economic merit, will be ended if we can sustain sufficient pressure across the party divide. That is my answer and I agree with the hon. Member for High Peak (Mr. Hawkins).

The Minister has made the announcement. The Bill is as much a Treasury Bill as a Department of the Environment Bill, although no Treasury Minister is on the Front Bench. I suspect it is as much, if not more, the Treasury initiative which has led to the introduction of these controls, pernicious as they will turn out to be. I trust that better sense will prevail in Committee and on Report and in another place, and that, at best, the controls will be withdrawn from the Bill by the clauses being voted out or at least will be watered down to reduce the controls that the Government are seeking to impose.

I trust, secondly, that the controls, if they are retained, are not retained in such a fashion as to make it more difficult for housing associations, local authorities and financial institutions to get together. The only way we will garner private capital resources into housing, be it housing for rent or other projects to refurbish our cities, is by encouraging rather than restricting the mechanisms of the housing associations and local authorities, which should be congratulated and not criticised for what they have been doing.

The Government have said that they want more private funding for rented housing, but Government actions are cutting that funding. Funding will be reduced, not increased, despite all the rhetoric. The Government have said they want to see funding widened and yet it is cutting it back. The Government should put their actions where their mouth is and ensure that the money is provided and not restricted.

The Government should drop the idea that we can go back to some imagined dream world in which all sorts of private sector people financed, provided and managed housing. That housing was pretty inadequate and that was why so much of it was cleared away by local authorities. But that will not happen, even if it had not been rubbish. The only way to get good housing is by creating the kind of mechanisms that the housing associations, the local authorities and the financial institutions have been using and with which the Government are now interfering. That policy should be reversed. Let us give them free rein and encourage them to do it. More housing will be provided and public sector expenditure will, I hope, be increased.

7.26 pm
Mr. Nicholas Budgen (Wolverhampton, South-West)

The right hon. Member for Brent, East (Mr. Freeson) has addressed the House from his background of a great wealth of experience in housing. He knows, better than most of us, the difficulties and complexities of that subject in which he has immersed himself. To him this Bill is an irritation and a damaging limitation on what he describes as local democracy, whereas to many hon. Members on the Government side, the Bill is a disappointment —which we recognise perhaps most of all by our absence —and a recognition of the difficulties and complexities of controlling from the centre the vagaries of local government.

To many of my constituents in Wolverhampton this Bill, if they have noticed it, is more than a disappointment, it is a cause of deep frustration. Many of my constituents wonder how it is that Wolverhampton council can parade itself by reference to the figures as a moderate council which has not yet been rate-capped and in the immediate future may not be rate-capped but which nonetheless is able, within the very loose constraints of rate capping, to demonstrate its prodigality and generosity to the narrow interest groups which the Labour-controlled council in Wolverhampton regard as its captive friends.

It is an extraordinary thing that, when one looks at those local authorities that have been selected for rate capping, there are our old friends Newcastle, with 26.41 per cent. over grant-related expenditure, Camden with 53.11 per cent. over grant-related expenditure, and one notes with interest Brighton with 13.31 per cent. over grant-related expenditure. Yet when one considers the figures, one will see that Wolverhampton is 3.4 per cent. below grant-related expenditure. Does that show that this has been a vicious doctrinaire Government, determined to take all local discretion from the elected councils of the land? Within the allegedly tight restriction, the Wolverhampton council now proposes to raise its rates by 15 per cent., and that is deeply resented throughout the town.

Since 1979, the Wolverhampton council has not only acted most generously in response to the demands on its conventional services but has introduced new areas of activity. For instance, contrary to the rhetoric in the House, the Government pursue a fairly interventionist policy towards industry. But it is not sufficiently interventionist for the Wolverhampton council. Since 1979, it has engaged in its own forms of industrial support. It has also extended its activities by support for ethnic groups. [Interruption.] My hon. Friend the Member for Leicester, East (Mr. Bruinvels) said, "And in Leicester, too."

Council support for ethnic groups in Wolverhampton has become more expensive. As you know, Mr. Deputy Speaker, much of that expenditure was supported by grants paid under section 11 of the Race Relations Act 1976. That expenditure was justified on the basis that the persons who benefited from it were immigrants. Of course, the population in Wolverhampton is no longer an immigrant one. It is a second-generation population, sometimes even a third-generation population. Therefore, the council is no longer able to claim some of the grants that were available under section 11. Of course, to use grants, many people have been employed, but the council has a policy of no redundancy for all its employees. When the Home Office says that there must be a reduction in section 11 funding, there can be no question of making redundant those who were funded by section 11 money.

Wolverhampton, in spite of its considerable former immigration population — at any rate, its Commonwealth population—in common with all other areas of the country, has been hit by falling schools rolls. Of course, an effective local authority that did not regard education as, in part, a way of employing as many teachers as possible would have thought of ways of reorganising secondary education. Wolverhampton council has displayed a great deal of subtlety in the way in which it has sought to reorganise secondary education.

Since 1979, the council has put forward two proposals for reorganisation. As the House knows, the Secretary of State for Education and Science has only limited powers. He can either accept a whole proposal or reject a whole proposal. The Secretary of State has twice rejected proposals for reorganisation of secondary education in Wolverhampton because they included proposals for the abolition of the girls grammar school, a selective single-sex school which, of course, Tory Secretaries of State for Education and Science on the whole rather wish to preserve, and which is anathema to Socialist-controlled councils. The council proposes also to abolish a good comprehensive school called the Regis comprehensive school at Tettonhall in my constituency. That is very useful as far as the council is concerned. Its plans for reorganisation would have led to substantial economies being kicked out by the Secretary of State. The council knows that they will be kicked out because they include proposals that no Tory Secretary of State for Education and Science will countenance. The council will say, "But we have been prevented from taking economy measures by central Government."

Again, when one looks at the way in which the council conducts itself in relation to the activities of central Government, one will see that there is a need for reform. For instance, fun has been made by some commentators of the way in which central Government, in what may be an election year, bustled forward with their cold weather payments, even before their own indicators required such payments to be made. Whatever opportunism may have been undertaken by central Government, it was not good enough for Wolverhampton council—my goodness me, no. It had to make its own cold weather payments. It had to demonstrate that, however generous central Government might be with taxpayers' money, it could be even more generous.

Mr. Tony Banks

What was the reaction of elderly people and pensioners in Wolverhampton who received the extra additional weather payment?

Mr. Budgen

I have no doubt that they were absolutely delighted to receive it, in just the same way that business men who receive various handouts as part of the council's industrial policy are delighted. Most people are prepared to receive money that is lawfully handed over to them. Unfortunately, one usually finds that they say, "Thank you very much," for the money, and, when they find that the money that they have put into their right hand pocket has come out of their left hand pocket, they get frightfully angry.

As everybody knows, expenditure on legal aid is rising. One constantly hears of the way in which the Lord Chancellor recently pointed out that legal aid is an aid not only to litigants but to lawyers. That is not good enough, of course, for the Wolverhampton council. There was a tragic incident a short time ago in the centre of Wolverhampton. A young black Rastafarian, who was allegedly acting in a criminal way in a shop, was arrested by two police officers. He died during the arrest. There were riots on two days, in protest at what was alleged by many people, including the acting leader of the council, Councillor Bilson, to be bad behaviour by the police—bad behaviour which was wholly inappropriate.

To demonstrate that the council was on the side of black Rastafarians and against the police, the leader of the Labour group on the council said that the council would pay for the travel expenses of the mother of the deceased who lived in New York. He arranged for her to be transported from New York to Wolverhampton so that she might look after the interests of the deceased. It was also arranged that legal aid should be provided for the estate of the deceased so that Mr. Paul Boateng might be employed as solicitor to the deceased and, no doubt, pursue his vendetta against the police. That will probably not cost a very large sum of money, compared with some of the other activities. However, it demonstrates that in the opinion of many people the Government have imposed restrictions upon local government that are too lax and that they still give local government extraordinary discretion to abuse taxpayers' and ratepayers' funds, the consequences of which are regarded gravely and seriously by the people of Wolverhampton.

The level of rates acts as a major disincentive to those who might invest in industry in the west midlands. The level of rates has the effect of lowering the value of housing in residential areas. As people with money are less inclined to live in Wolverhampton, there is a knock-on effect in the shops. Far from describing this Government as being viciously restrictive in their attitude towards local democracy, the mood of my constituents, in the face of the 15 per cent. increase in rates with which they have now been saddled, is that there should be tighter control. They cannot understand whey a council that behaves in his way should still be 3.4 per cent. below its grant-related expenditure. They cannot understand why, so long after 1979, there is still no requirement to tender for so many of the council's services.

It is difficult to understand why, even under our unwritten constitution, there is no proper demarcation between the activities of central Government and those of local government. If there is a system of central legal aid funding, why is it lawful — if it be lawful — for Wolverhampton council to pay the legal aid costs of Mrs. McCurbin? If there is a system of making severe weather payments through central Government, why is it lawful for a local authority to make its own severe weather payments to a selected class of ratepayers? This Government have not yet solved these problems, but they have to face them.

I dare say that the reform of the rating system will create many difficulties, but I give my unreserved support to one of the Government's proposals—that everybody should pay something towards the rates. The more I see the way in which people in Wolverhampton behave, the more I regret the fact that some people, who are paying nothing towards their rent and nothing towards their rates, constantly demand more and more services and more and more employment by the local authority, in the sure and certain knowledge that they will not have to pay for any part of that which they demand.

There may be very many good arguments about how to shift the burden of local taxation, and I do not suppose that the balance will ever be precisely right between the private individual and industrial and commercial ratepayers. We may never even get it right as between those who rent houses and those who own houses, but I am absolutely certain that this Government are right when they say that in future everybody, but everybody, must make some payment towards local expenditure. That would go some way towards imposing discipline and saying to those who demand services, "If you want those services you must pay something towards them."

7.45 pm
Mr. Michael Meadowcroft (Leeds, West)

We have an easy task this evening because of what is not in the Bill. I am wondering whether the hon. Member for Wolverhampton South-West (Mr. Budgen) was addressing himself to what is not in the Bill rather than to what is in the Bill. If his local authority is as appalling as he described, why are his Conservative colleagues so incompetent that they cannot defeat the sitting council? I suggest that the hon. Gentleman ought to address himself to that question.

It is not realised that everybody contributes towards the rates. Every customer in a shop and every employee in a company makes a contribution towards the rates—not necessarily directly, but indirectly. Some time ago the Confederation of British Industry asked its members to tell their employees that every £10,000 extra on the rates means that one job is lost and to make the point to customers that increases in prices are in part are due to the rates. Nobody escapes paying rates. Rates are paid in other ways than simply through the rates payment to the local authority.

We are not debating a Bill that might have provided us with more fun, but that would have taken longer. We are not dealing with competitive tendering, trying to limit political propaganda being paid for on the rates, or contract compliance. We await with interest the exigencies of the system that will produce draftsmanship that will include those points in a future Bill. Nevertheless, this attenuated Bill is no more worthy of support than such a Bill would have been. It further restricts and constrains local government and does not deserve support on Second Reading.

I am worried not just about the centralising tendency of the present Government, who go too far anyway, but about the suggestion that centralisation should be extended. Local government is not a servile lackey of central Government. It ought to be and must be an equal partner in a healthy constitution. If we move away from that position we remove that part of our constitution which guarantees the possibility of peaceful change in our towns and cities. Local self-government is the rock of our survival as a democratic state. Central Government, even more than local government, must recognise that fact.

As regards clause 1 and schedule 1, I accept that some local authorities have gone well beyond the bounds of legitimacy in their creative accounting. I accept that some local authorities are at a stage that will require some retrospective action if they are to be bailed out. At some point whether it is the Minister for local Government, a Labour Minister or myself, someone will have to do something about it. In the end, local people, not elected councillors, will suffer.

I want to make clear, as I have on previous Bills, what I believe to be the distinction between legitimacy and illegitimacy on expenditure. It is perfectly legitimate for a local authority to manipulate its accounting processes, if it can continue to maintain that expenditure indefinitely within the ideology of the Government who are in office—in other words, if it is not mounting up a debt that can only be paid by retrospection. That is perfectly legitimate. I do not understand why local authorities, with all their resourcefulness, should not be allowed to do that. However, when they are banking on a change of Government to one who will say, "These are our friends in local government; we will bail them out retrospectively," that is illegitimate, and I would not be prepared to countenance that as part of any philosophy which I could endorse.

Mr. Tony Banks

An additional dimension to the problem is that, even in the prevailing ideology of this Conservative Government, there is no consistency that local authorities can use, for the simple reason that—as we have heard time and again and as the hon. Member for Brent, North (Dr. Boyson) knows — we get a local government Bill almost every week, which changes the accounting practices. That is another dimension to which the hon. Member for Leeds, West (Mr. Meadowcroft) has to direct his attention.

Mr. Meadowcroft

I am quite happy to direct my attention to that, because it enhances the argument that local government is so diffuse and diverse that no Bill can ever control all the different aspects of local government. The Government are chasing a mirage if they believe they can control it. They will not. It will break out in some other way, and other ways will be found to get round the restrictions that are imposed by the Bill.

The difficulty of the hon. Member for Newham, North-West (Mr. Banks) was raised in an intervention by the hon. Member for Islington, North (Mr. Corbyn), who told us about the wonderful expenditure of his local council. I endorse that, of course. All the items of expenditure that he set out were beneficial to the local ratepayers in his borough. The problem is that it is no use my spending money on things that are wonderful and then seeing my bank manager and saying, "All the things that I have bought are worth while; they are all splendid things that have benefited my family and community." He would turn round and say, "That is splendid, but you do not have the income to meet the expenditure." If the hon. Member for Islington, North is correct, there is no city in the world, whether it be Calcutta, Dacca or whatever, that cannot solve its problems by simply spending money. That cannot be done. At the end of the day, we must find the income to meet expenditure.

The article by Councillor Hodge in New Socialist in January, which pleaded with the Labour Front Bench to rescue local authorities from the problems of having held up the dented shield for so long, was very good, and it set out the matter very honestly. However, we cannot continue a policy that requires retrospection to bear it out.

Local government has been culpable in different ways, collectively. One of the things that, in retrospect, local government should have done was to grab with both hands the Layfield report on finance. The report had many faults and it was defective in many ways, but the local authorities concentrated on those defects instead of realising that this was a way in which they could have got financial independence, could have gone along with local government reorganisation and obtained a powerful base which no Government would have been able to upset in the long term.

Mr. Freeson

I can assure the hon. Gentleman that although it was true at the time—I was in government at that time—that local authority representatives did not welcome the report, neither did the Treasury. It would not welcome it today either.

Mr. Meadowcroft

I remember it vividly. I urged at the time that it was the best solution that would be put forward and that local authorities should have grabbed it. It may be, as the right hon. Gentleman says, that it would never have gone through Parliament. Nevertheless, local authorities were culpable in not grabbing what was put forward and moving with it at the time.

The other matter which is interesting in this context is the change that took place in the constitutional position of the treasurer as a result of the 1972 Act. Prior to that, the treasurer was the city treasurer, not the council treasurer. He had the legal authority to refuse to carry out an instruction from his local authority which he believed to be against his fiduciary responsibility. That was taken away by the 1972 Act. The Government should look carefully at what occurred there, because it added to the problems that were faced in endeavouring to control local authority expenditure.

Central Government have a right to set out the total amount of borrowing that they regard as sustainable nationally and to negotiate with local government how much of that should fall within the local government sphere. Beyond that figure, it is up to local authorities to determine how best and how successfully they can raise and use that money, and beyond that they should not go.

Clauses 2 to 4 deal with housing and have a worthy aim. The problem with the aim is that it is no good without the means of fulfilling it. It is an aim of the Bill to draw private money into housing and to endeavour to utilise the good will of many people in the private sector—the building societies, insurance funds and pension funds—who are interested and concerned and not just trying to get their hands on some extra money in an exercise of bloated capitalism. I have spoken to many such people myself. The Bill, as fashioned now, will prevent that aim from being achieved.

It is no use saying that private bodies should take on the responsibility and risk. That would be fine if public authorities, whether central or local, could command the money. They cannot. We are crying out for the money to come into housing. We are desperate. All over the country, whether it be Newham, Leeds or Tower Hamlets, we desperately want money to come into housing. We shall find it impossible, whatever public money we could divert and devote to it, to resolve the problems of the fabric of our housing, let alone the problems of homelessness or of bed-and-breakfast accommodation. We need this extra money.

We are clamouring to draw money into housing, but we are saying to people, "The terms that you have negotiated with the local authorities are not acceptable to us. The people in London will stop these resources from corning in." I suspect that it is not possible to prescribe in a Bill such as this the means by which, on any uniform basis, the deal can be done between one local authority and a financial institution. Again, it is so diverse and diffuse. Therefore, this problem of how to draw three organisations together—the public and private sectors and the housing associations—is so delicate that the relationship cannot be prescribed in a Bill of this nature if it is to succeed.

Mr. James Hill (Southampton, Test)

Surely the hon. Gentleman would support the Minister's statement of trying to get institutions into the private rented sector? Is it not a fact that financial assistance may not be necessary, in as much as the property may already be owned by the local authority or may be land which is surplus to requirement? There are many ways in which local government can help private institutions. My hon. Friend the Minister said that perhaps a 30 per cent. grant could be made available. That will not be on every transaction; it will be on very rare transactions.

Mr. Meadowcroft

I am prepared to go along with what the hon. Gentleman has said. The Bill is not only concerned with that aspect. The Bill is saying that the underwriting has to be carried out by the independent organisations as well. The 30 per cent. may have some validity, and so may other questions of tenure. The question to which the Minister has been addressing himself is the underwriting. He wants the financial institutions to take that risk. It may be that they are too cautious and that they ought to take more of the risks, but our problem is so acute we should look at it in a more delicate way, rather than simply say that we can prescribe it by statute.

Dr. Boyson

I am grateful to the hon. Gentleman for giving way, because it is difficult, however long we speak, to cover all aspects. One factor in this is that the 30 per cent. which is coming from the Government and the 70 per cent. which is coming from the private sector should mean that the rents that are chargeable are such that on the 70 per cent. they get a fair return. The 30 per cent. that is put in by local authorities is an "affordable rent". It should be 30 per cent. more than an open market rent.

Mr. Meadowcroft

The problem is that, once one has interfered in the market, whether it be by fair rents, and taken out scarcity, one has upset the market anyway. I shall not go along the road of deregulation, because there are other problems with that, particularly in the City, but I understand what the Minister says.

The hon. Member for Southampton, Test (Mr. Hill) is saying that in a sense our developments are only worth what return of rent we can get from them. It is no use a local authority saying that it has properties on its books at £20 million if the rent is only £1 million, because that means that they are worth only £10 million. If one wants to deal with a private institution and one knows that the properties need £5 million spent on them, then. they are worth only £5 million to the private institution. Local authorities might have to write off £15 million, so the book value is wholly irrelevant. The properties might not even be lettable. The problem arises as to how one sorts out the future from the past, because in so many places the past is a tremendous millstone stopping the private institutions from coming in.

Mr. Hill

Surely the whole focus of what my hon. Friend the Minister was saying was about enabling local authorities to get rid of sub-standard housing—in many cases, perhaps, high rise blocks of flats. The hon. Gentleman is right. The book value of those is so low in some cases that some authorities have had to pay additional sums to demolish the buildings. The private sector alone can carry out such developments, on the understanding that it gets a fair return on rents for improvements.

Mr. Meadowcroft

I take that point. I am trying to look at broader perspectives than rehabilitation. In the interest of other hon. Members, I shall not give way again.

Mr. Leighton

Hear, hear.

Mr. Meadowcroft

I am glad that I have support for something.

It is an insensitive aspect of the Bill to suggest that there should be some consideration of what kind of tenants one has on the basis of whether they can pay. To say that one has to have regard to how many people will be in receipt of benefit runs counter to all sensitive management and will hurt those most in need. We already know that 75 per cent. of people in housing association dwellings are in receipt of housing benefit.

I find the catch-all provisions of clause 4, which virtually give the Secretary of State a free hand to bring in any kind of secondary legislation by allowing him to do anything that he believes to be necessary to constrict housing, is unacceptable.

The Bill also deals with education and capping the pool. I had some involvement with that in local government, and I found it then as complex as I do now, although I understand that this provision is relatively uncontroversial.

Clause 7 deals with land. In this day and age, particularly in areas under great stress, the hoarding of land is immoral. It is monstrous for people to hoard a substance that one cannot create, presumably with the prospect of making a quick killing in the future. That is immoral, and it should not be allowed. It is unacceptable. This happens not just with public authorities but with private people. We should be able to deal with it. I agree with registration and I do not object to the provisions in clause 7.

I am, however, concerned about the length of notice that is to be given to owners before officers can enter. I am concerned about the rights of owners and of possible abuse by those exercising the power of entry. Perhaps we could take account of that in Committee.

The register needs two improvements. One is that there might be a distinction on the register between land registered as available for development within five years and that which is not. Secondly, to deal with the point made by the hon. Member for Leicester, East (Mr. Bruinvels), I would wish the register to deal with land held in private hands. If we are ceasing to make a distinction in housing between public and private land as set out in clauses 2 to 4, I do not see why we should allow private owners of land to be feather-bedded in this way. Why do we treat them differently?

In politics, as in physics, laws apply. Newton's third law applies in politics. For every action there is an equal and opposite reaction. Whatever local government does, central Government will do it worse, and whatever the Government do, local government will do worse still. So the nonsense continues. Political problems require a political solution, not a solution by repression. The Government are in the Paul Daniels school of politics. They think that they can produce a Bill out of a hat and that will solve the problem of what is going on in local government, but that just does not happen.

The Leader of the Opposition may be the only bull I know who carries his own china shop around with him. He carries it from by-election to by-election. However, that is of no value if one cannot solve the problems in the way that one would wish. I cannot understand why the Conservatives, who can identify the horrors of local government so vividly, have so little faith in their local candidates and associations and no trust that they can defeat these appalling councils. Instead, these local politicians have such inferiority complexes that they turn to the Government to do the job for them.

Accountability to local electors must be enhanced. That is the real test of local government, not constraining, constricting and repressing it. Accountability should be developed and that is the right path down which to go. The Bill goes in the wrong direction. It is another repressive measure that will not succeed and should be defeated.

8.5 pm

Mr. Lewis Stevens (Nuneaton)

I was surprised at some of the comments by the hon. Member for Leeds, West (Mr. Meadowcroft). I never thought of politics as being as logical as the laws of physics. He spoke about his general approach to local government spending relative to central Government's ideas. That is all very well as a theoretical aspect, but, following his argument, at the end we come to the point where some action has to be taken by central Government when local government does not fit in. This Bill, like other local government Bills, would not be necessary if councils and local organisations worked in an acceptable manner. However, when there are abuses of the system, action is necessary.

The Bill is concerned with the provision of rented properties. There is heavy regulation of such properties, which restricts their provision. We know that the restrictions are there to ensure that the abuses that we sought to get rid of in the early 1960s are not permitted to return. So often, our legislation is concerned with the prevention of abuses of the system. Often, those who abuse the system think that they have a good reason for so doing.

This is not just a matter of political colour. Some councils dominated by the Opposition party do not come into the category of high spenders, so do not need to find ways to fiddle the books. They carry on much more reasonably. Others take all the advantages that they can find in any system to get the maximum. I accept that they are not acting illegally. I have heard Opposition Members argue about what happens in business and how people look for ways around this, that or the other. Over the years, Labour Governments have attempted to bring in restrictions to close what they call the loopholes on that.

The important thing about the first part of the Bill is that it has undoubtedly been put in to answer a system of borrowing money that definitely increases the amount of the PSBR, puts forward, although not too far, the repayment problem, and creates a false impression. That is legal but it must be stopped if local government accounting is to fall properly within what is accountable in the short term and in the best way for total local government expenditure. It is only as a result of such abuses that the Bill has become necessary. The hon. Member for Leeds, West made an important point when he said that when we squeeze local government in one place, something else breaks out somewhere else. That is always a possibility with any system, whether it be local government or some other part of the law.

Within the general attitude to creative accounting, I believe that there has been a deliberate practice of finding ways round the restriction on capital expenditure. Some authorities have greatly exaggerated that practice, with the result that it has impaired their financial management. I have always questioned how far local government should go in its borrowing to finance particular projects. I have always held the view that local government finance should he considered within shorter-term borrowing. I do not believe that some local authority expenditure in the past 40 years—including over and above borrowing—has represented the most economical way of running local government finance.

Times have changed and we no longer have the expanding economy of the 1960s, which some local authorities thought could continue for ever. The escalation of costs and spending was, on occasions, out of control.

The Bill is concerned with the borrowing practices of local authorities. Many people in the financial world have thought that, if they were lending to local government, there was absolute security. They believed that, no matter what happened, Government would fork out for the local authority debts. They believed that there was no way in which Government would not step in—Government of any colour — and pay the debts of local government. Despite the absence of such a commitment, it is understandable for many people in the financial institutions and others outside this House to believe that if local government borrowed money it was as safe as central Exchequer borrowing. It is certainly not as safe.

The Bill also seeks to deal with the combined efforts of the private sector and local authorities with regard to the provision of housing. The provisions in the Bill are not as black or as preventive as has been claimed tonight. The Government are trying to encourage co-operation between the housing authorities and the private sector in financing projects. A local government contribution of 30 per cent. would help towards the prospect of a better return than present on the private sector money invested especially in the rented sector.

I am not suggesting that if one got rid of rent controls, a mass of private rented accommodation would become available at a reasonable rate. Some believe that total deregulation would provide satisfactory and quality accommodation. I do not believe that it is as simple as that. I do not believe that there should be total deregulation; we need some controls and regulations. However, present regulations deter private investment in the housing stock.

One thing that disappoints me about the Bill is that, unlike previous announcements, it contains no provisions relating to restrictions on contracts. Such restrictions would have been a most important area covered in the legislation. It must be in the interests of ratepayers and people in the community to know that their councils act in a responsible financial manner. I do not believe that local councils should allow their prejudices to influence, unwarrantedly, the placing of contracts for whatever purpose—for roads, equipment or anything else. I do not believe that it is reasonable for local councils to take that attitude.

It is certainly true that local authorities express their views on central Government and on what the Foreign Office or any other Department has done. Local authorities express their views on many things regarding privatisation and all the rest of it. I believe that it is to the detriment of ratepayers if such prejudice is incorporated in the placing of contracts. Perhaps when my hon. Friend replies he will be able to say whether there is a possibility of discussing this in Committee.

I appreciate that other items that have been omitted should also be considered, such as the use of rates for propaganda purposes and competitive tendering. I appreciate that, with regard to competitive tendering, there may be difficulties in providing satisfactory legislation—that is satisfactory from a legal rather than a principled viewpoint. I can understand why competitive tendering is not incorporated in the Bill.

Competitive tendering is extremely important. I do not believe that it would represent a threat to a local council's direct labour organisations. Some direct labour organisations are very efficient. Indeed, the report of the auditors in my local authority is very favourable about some of the services provided by such bodies. It is important that competitive tendering becomes more common and results in a much more practical and democratic process within an authority to the benefit of that authority. It would not mean that, automatically, private firms would be brought in to do the work.

The Bill also deals with land held by local authorities. It is wrong that local authorities hold land for which there is no immediate or anticipated purpose within a reasonable future. This difficulty is especially acute in city and urban areas, but it also applies to some rural areas. Some local authorities hold land for no particular purpose—land that is needed for all sorts of projects. I believe that local councils should be encouraged—if they do not do so, action should be taken — to make such land available.

I do not believe that some of our schools—primary, middle or senior—need all the land that is designated for them. However, I am not suggesting that we should chop off an acre just because it is there. Often that land is a useful local amenity. I believe it is important to introduce legislation that puts at the forefront the need for local authorities to declare the purpose they have in holding land and to make possible the action needed to release that land deemed to be unnecessary to the local authority. A decision on unnecessary land would be an important qualification in the legislation.

I believe that this Bill introduces positive restrictions on local authorities. Essentially, it imposes those restrictions on those authorities which have deliberately taken advantage of the existing system to the detriment of their ratepayers and of local government in general.

8.20 pm
Mr. Ron Leighton (Newham, North-East)

For nearly eight years we have had antagonism and a virtual state of war between central and local government. We have had one Bill after another until we have almost lost count. I think that my hon. Friend the Member for Blackburn (Mr. Straw) counted 43. We are suffering from legislative indigestion. Even the parliamentary draftsmen cannot keep up; hence this truncated Bill.

The Department of the Environment regularly falls foul of the law. Unprecedented and sweeping powers have been arrogated by the Secretary of State and more are taken in this Bill. There has been an unheard of centralisation of state power, but not of the wisdom to exercise it. Elected councils have been turned into mere ciphers. The Government have moved the burden of local government finance from the taxpayer to the ratepayer.

When this Government came to office, rate support grant was 61 per cent. It has been slashed every year since then and is now only 46 per cent. So, while in 1979 for every £100 of local government finance, £39 had to be raised in rates, now, for that same £100 of expenditure, £54 has to be raised in rates. That is an increase of 35 per cent. in rates for the same expenditure. That is the reason why rates have gone up, but, while central Government make the cuts, it is local government that gets the blame.

I want to address myself briefly to the position of the London borough of Newham and to use it as an analogue and an example. Mine is an inner-city area in east London wrestling with a legacy of deep-seated problems. I will not take the time of the House by cataloguing details of the borough's social economic and environmental deprivation. I do not have to tell the Government about this, because they have told us. The figures from the Department of the Environment reveal that, with one exception, we are the most deprived local authority in the whole of England and Wales. Our difficulties are greater than those of eight of the nine authorities which have been given partnership status and therefore extra resources. This is a serious source of grievance locally. Expenditure per head in Newham is considerably below that in comparable areas. I am concerned that Government action should not exacerbate and compound our difficulties.

In the 20 February issue of The House Magazine the Home Secretary wrote an article in which he said: we cannot complacently wait for the next spark. Dereliction, disinvestment and despair in inner city areas need to be and will be tackled. For whatever reason, there have sprung up pools of disaffected youths in some of these areas and we must do our utmost to see that the springs of discontent are dried out, that the pools are not replenished.

This is the whole point. The Government's local government policy is threatening to make the dereliction in the borough worse and to take funds away from the voluntary groups working with the disaffected youth. That cannot be right. Government policy threatens to cause a crisis in Newham. Where is the sense in that ? Any alleged savings could easily be swallowed up by the Home Office in the extra costs of maintaining law and order.

I was very pleased that the Minister of State accepted my invitation to visit Newham last Friday, when he had the opportunity to meet those principally concerned—the elected members and officers charged with administering the borough. He will have observed that they are reasonable, decent people, wrestling as best they may with intractable problems. He will have noticed that Newham is not a profligate or wasteful authority. The Audit Commission recently made a report. I am critical of the methodology of that report. However, it covered two groups of authorities, one of which it criticised and the other of which it did not. The Minister will know that Newham was in the group that was not criticised. It is an authority which is seeking to be responsive to local opinion and to achieve an efficient delivery of services. I hope that he felt that his visit was instructive and worth while, and I very much hope that something constructive will emerge from it.

The Government have decided to rate-cap Newham. This is not the time to debate the principle of that. I am opposed to rate capping, but Newham is not asking for the ability to raise its rates. The borough is aggrieved about the way it is rate-capped, the formula on which the rate capping is based and the base year that is used, which results in such a freakishly harsh effect. The infamous algebraic formula in the Bill now in another place was cobbled together in haste to meet the Government's legal problems. They were not of our making, yet we are expected to suffer because of them.

I hope that the Minister will agree that a standard, common formula saddled on disparate authorities must lead to anomalies and to uneven and grossly unfair results. In Newham's case it leads to a 26 per cent. rate reduction —twice that of all but one of the other rate-capped authorities and more than three times that of 15 of the other 20 authorities. Furthermore, 16 of the others can spend 10 per cent. above grant-related expenditure, seven can spend 20 per cent. above GRE, but Newham can spend only 3.7 per cent. above. I do not think that the Minister will pretend that that is fair or evenhanded.

The legislation of 1984 recognised that. It allowed—great play was made of this at the time—redetermination, that is, appeal to have cases looked at on their individual merits. Last year six authorities appealed and they got increases of between 2.2 per cent. and 7.7 per cent. In other words, some attention was paid to individual and local circumstances. We came to see the Minister to do the same and we still feel sore that, although he listened to us, he knew that a Bill was coming to take away the right to redetermination because of the Government's stampede to get out of their legal fiasco.

Something has to be done, and I hope that the Minister learned in Newham that the main cause of our difficulty is the base year of 1985–86. The Government under-estimated what the council spent in that year by about £15 million. That is where things have gone wrong. The budget of that year was distorted by completely lawful and legitimate special accounting, about which the council has been absolutely and completely open. Basing the Government's standard formula on that year's distorted budget means a cut of 15 per cent. of the amount above GRE in one year. That is an unreasonable and absurdly unrealistic cut.

What is to be done? The Government could not easily accept amendments that would wreck the Bill now going through the other place—I accept that—but they could accept the modest amendment moved by Lord Elwyn Jones, and I should like to give the Minister six reasons for looking upon it favourably. First, it would be a "class" amendment and so would not cause hybridity. Secondly, it would affect only three authorities. Thirdly, Newham would not gain at the expense of others. Fourthly, it would not cost the Government anything. Fifthly, it would mean that Newham would still have a cut in rates by 6.2 per cent. Sixthly, Newham would still have a cut in expenditure.

Those are six very good reasons for looking favourably upon that amendment. I do not claim that this would be a perfect solution, but it is something with which the borough could cope, with which it could live. It is my duty as a constituency Member to say that, unless something of this sort is done quickly, the Government will cause a crisis in the borough. Why do that? Who would gain from it? It would undermine the locally elected civic leadership. It would badly damage morale among council staff. It would cause cuts in education, environmental services, housing, social services and much else which would excaberate inner city decay and bring distress to my constituents. I call upon the Minister, after seeing the situation at first hand, to take action now to avert that iniquity.

8.29 pm
Mr. Peter Bruinvels (Leicester, East)

I was interested in what the hon. Member for Newham, North-East (Mr. Leighton) said about rate capping. As I am someone who believes very strongly in rate capping, obviously we would disagree widely on the need for it. But it is an uneviable position for any constituency Member of Parliament to have rates levelled at 80 per cent. as happened in Leicester last year and, as is, I understand, to happen in Ealing in this coming year.

I urge my hon. Friend the Minister to look at the way in which creative accounting has been used to deflect the wishes of the community. I know that the hon. Member for Newham, North-East (Mr. Leighton) genuinely represents his own constituents, but I can say that my constituents felt let down when one year there could be rate capping imposed and in the next year, to recoup it, it was possible to whack in a tremendous increase of 80 per cent. and now, in local government election year, with the use of creative accounting, deferred payments and general liaison with the banks and other financial institutions, it has brought forward a 4.9 per cent. rate rise. Anyone in the House can understand why that is. In local election year it is obviously a great opportunity to get the most votes out of the electorate.

I would say to any hon. Member that if a local authority wishes to put the rates up to such a high level it should be fair and put that proposal in the manifesto. It is all very well for local authorities to say that they have a mandate to do this or that. However, in my own local authority only 30 per cent. of those who voted Labour pay rates in full. That is a significant fact. That is why, when community charges are introduced at a later date, it will be important to give the electorate a proper say in the running, administration and the levying of rates in their area. I look forward to that with great enthusiasm.

I say to my hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen) that we must all stand for what is to be paid in local expenditure. It is necessary to have regular monitoring. That is why this Bill is so important. I do not deny, and my hon. Friend the Under-Secretary of State knows, that I am disappointed that the Bill does not embrace propaganda on the rates or, at this time, competitive tendering. He, like me, has been active in the Right wing of the Conservative party and sees it as an important principle that we should get value for money. We should have the opportunity to compete fairly and we should certainly monitor the expenditure, which has been going crazy, like Topsy, in many ways. Local government expenditure has got out of hand. The hon. Member for Leeds, West (Mr. Meadowcroft) made that very point.

Every local authority wishes to act in a responsible way but proper checks to prevent any abuses by local authorities; any devices brought forward to advance and defer purchase schemes, and payments to get round the present capital expenditure control system, must be particularly important now. Creative accounting and the using of reserves must be stopped. I believe that matters have got out of hand.

We should look at the typical local authority of Leicester and the extravagance taking place there. I know that my hon. Friend the Minister is fully aware of the fact that at the moment there is no control over whether a local authority such as mine is twinning with Nicaragua or appointing a twinning officer at more than £13,000 a year. That is paid for by the rates with no consultation or advance notice that it is to be done.

There is no control over the creation of nuclear-free zones. There are more than 170 such zones in the country. That was not part of any mandate. It never appeared in any election address. Local authorities should stand ashamed of such partisan and political propaganda. There were no undertakings to do those things.

In my own area, because the Leicester Tigers, a well-known rugby team, went to South Africa to take part in special sporting competitions, the name of the park the team uses in Leicester, known as the Welford road recreation ground, was changed overnight to Nelson Mandela park. There was no consultation and no one spoke to Nelson Mandela to find out whether he approved. That was vindictive and spiteful. The local authority was trying to kick those good ambassadors for Leicester who were playing the best sport in the land. The team had people such as Dusty Hare and Paul Dodge, well known international players, but because of that visit they are to be kicked, effectively, in the crotch—after the game—and they are to be penalised.

My hon. Friends know that section 137 of the Local Government Act 1972 gives many additional powers to local authorities to levy a rate, but it must not be in a partisan way. We must have accountability of councillors. The GLC, Lambeth councillors and others have been fortunate to have surchages levied on them for what they have done. Some of them cannot even stand for office at the moment. I think that that is correct. If one breaks the law, one must face up to the fact that one could be surcharged and lose one's position as a councillor.

There is also the issue of the misuse of inner area programme funds. In my area the Labour-controlled authority never admits that, for every £1 spent, 75p comes from the Department of the Environment. One sees great big signs saying, "Your local council working for you." That money goes to the council's pet project.

The hon. Member for Barnsley, West and Penistone (Mr. McKay), who is sitting on the Opposition Front Bench, is a fair man. He cannot approve of a partisan approach such as that. I am sure he wants to see, as we all do, finance given to help the entire community and not just one part of it. In my constituency there are more than 26,000 members of the ethnic community and because of that a large amount of the funds goes to the ethnic community. I am becoming almost a threatened species by not being a member of the ethnic community. We want to see a fair distribution of those additional funds to the entire community, not just one part of it. The fact that my Labour opponent may come from the ethnic community has nothing to do with it. It is interesting that the money can be misused in a way that might almost be said to be buying votes. That is unacceptable, and that is why a local government Bill has been brought in and is to be welcomed.

We hear a lot about the housing investment programme. In Leicester I believe that it may be misused to help pay for the pet projects and poodles of the Labour-controlled council. I cannot accept that there is a housing crisis in Leicester. I listened to the hon. Member for Leeds, West (Mr. Meadowcroft) talk about the hoarding of land. He condemned it, and so do I. I ask my hon. Friend the Minister to come to Tithe street, in Leicester, East. He should come and see the areas owned by the council which it has not redeveloped, and ask, what is the purpose of that? I suspect that if the council developed it into a nice area and brought more jobs into the city along with new developments, housing developments and housing associations plans, people might come in, take over the projects and vote Conservative. I have a suspicion that that is why those areas have deliberately been allowed to run down. I am not exaggerating. Those are the facts of life.

That is why clause 7 and schedule 2 are to be welcomed. There will be a land register and it will show those empty areas. It is disgraceful that the council in Leicester can be campaigning for additional funds to build more council houses when there are 947 empty houses at present and 77 of them have been kept empty for more than a year. If that land was on the register and my right hon. and hon. Friends in the Department of the Environment were given the power to dispose of it, we could have proper buildings and proper jobs and we could stop some of the bellyaching we get from the council, which deliberately keeps those parts of the city run down for political purposes.

I am interested in the education provision of the Bill. There is no doubt in my mind that additional funds are available to help, yet again, the ethnic community, but they should help the entire community. There are music grants available under section 11 of the Race Relations Act 1976 to teach ethnic music. I see nothing wrong with that, but we should have all sorts of music. There should be more music teachers to teach the entire community. Why should ethnic groups have priority? Any additional help under the Bill that can be given to both the ethnic and non-ethnic communities must be welcomed.

We should look at the county council's education policy and see it justify a proper education policy for the entire community. Perhaps there could be more religious education. That could be paid for from the rates. That is more important today than the "go gay" policies we have in Leicester. At least religious education would promote family life, which is important now when normal people are treated as abnormal and people living outside wedlock are being encouraged and those living within wedlock are being treated as exceptional and rather strange. That is a sad fact of life.

It is important that the Bill comes before us today, because housing developments will be encouraged. I am sad that we cannot deal with propaganda on the rates at the moment. However, I can tell my constituents and anyone else who feels let down that more is to come soon. I have every confidence about that. In the meantime, the Widdicombe committee has reported. Anyone who believes that there is political or partisan propaganda on the rates must use the district auditor. When my hon. Friend the Minister replies, I am certain that he will refer to that. If the controls are tougher, and if the district auditor's address is publicised more regularly, we can catch out those councils which are abusing ratepayers' money. Thousands of pounds are spent every year on propaganda. That is a scandal and the councils will be brought to order over that.

When my hon. Friend the Minister of State introduced the Bill, he referred to competitive tendering. I appreciate that we are not to have that at the moment. However, even my local authority in Leicester is operating a restraint on trade. Organisations which have dealt with South Africa or have a nuclear interest — and there are plenty of companies with defence interests in Leicester which obviously have a nuclear dimension—are being denied their rights to take on contracts. The council insists that companies use the direct labour organisation. I do not knock everyone who works in a direct labour organisation, but it would be the jewel in the crown if we could bring in competitive tendering to ensure the best tendering and the cheapest work and so do away with the amazing questionnaires which small businesses in Leicester guarantee that they do not have time to fill in and compromise their positions.

This is a good Bill which will help to bring councils to check. We have nothing to be ashamed of. The Bill will control public expenditure and stop councils and councillors cheating. Hopefully, local authorities will be more responsible. I would never knock all local authorities because some have done their best. However, the council in Leicester must pull up its socks quickly. My hon. Friends will have the powers in this Bill. The Bill is not a retrograde step and it is not regressive. It will ensure that local authority ratepayers have an absolute say. I welcome the Bill and look forward to its becoming law. I also want to see competitive tendering and the outlawing of propaganda on the rates brought in as quickly as possible.

8.42 pm
Mr. Tony Banks (Newham, North-West)

It was interesting to hear the hon. Member for Leicester, East (Mr. Bruinvels) referring to himself as some form of threatened species. I can only think of him as a species of Leicester leprechraun and I can say that without being accused of being "sizeist" since I am the same physical height as the hon. Gentleman.

The hon. Member for Leicester, East raises the name of Leicester regularly, in the same way that my hon. and learned Friend the Member for Leicester, West (Mr. Janner) raises it. We hear Leicester mentioned in this House almost as often as we hear Newham mentioned. For a change, it would be nice to hear the hon. Member for Leicester, East supporting his own council. His council is democratically elected. It represents the people of the city. Indeed, some of those who voted Labour in the local council elections might even vote Conservative at the general election. From my experience on the GLC over many years, someone like Sir Horace Cutler who was the Tory leader of the council was quite prepared to defend London and attack the Conservative Government in the interests of London.

There is an unfortunate divide in the House. Conservative Members take great delight in attacking their own local councils — mainly, of course, because those councils are controlled by a party other than their own. I should like to see a little more community loyalty, which would involve Tory Members defending their councils. They need not necessarily agree with everything that the councils do, but they could defend the councils rather than take every opportunity to attack them.

I will not speak for very long about the Bill as it is rather like Hamlet without the prince. However, it would be wrong of Opposition Members to make great play of the fact that it is not the Bill that we were all expecting. Frankly, I am absolutely delighted that it is not the Bill that we all expected. Obviously, we will take some pleasure in the general discomfort that will be felt on the Government Front Bench as they hear the criticisms from Conservative Members. I am glad that the Bill does not involve compulsory tendering amendments to the Local Government Act 1986 or controls over contract compliance.

A number of hon. Members, including the hon. Member for Leicester, East, referred to contract compliance as if somehow that was an invidious demand made upon local enterprise and that there was nothing good in it. The way Conservative Members refer to contract compliance, one would think that it had been imported by Labour authorities direct from Moscow. The GLC did much pioneering work on contract compliance. We drew our experiences exclusively from the United States, because we found that the practices adopted there had a great deal to commend them.

Contract compliance is taken from the world's premier capitalist state, not a Socialist state. It is not taken from the sort of country to which one would necessarily expect a Socialist GLC to be looking. We discovered that the way in which contract compliance was used to combat racism and discrimination in the United States was something we could bring into this country. I am glad that the Government are not pursuing the banning of contract compliance.

We have heard a great deal from hon. Members referring to creative accountancy and the reasons why local authorities have adopted such practices. The hon. Member for Leicester, East—I am sorry to give him this additional publicity; we know how much he thrives on it and it is very much his oxygen—referred to the list of problems in Leicester. Indeed, the hon. Member for Wolverhampton, South-West (Mr. Budgen), like the hon. Member for Leicester, East, ran out an annoying list which did not amount to a row of beans in financial terms.

When a local authority is spending money on policies aimed at ending discrimination against gays or lesbians, it is not the amount of money that upsets Tory Members, it is the principle. Even if it was only a matter of a few pounds, it would still offend and outrage them. When local authorities attempt to pursue policies to end discrimination against gays and lesbians, they run up against the accumulated years of prejudice and bigotry in our society. It is not surprising that there has been a backlash against Labour authorities especially in London which have attempted to deal with the problems of such discrimination.

Local authorities have become involved in creative accountancy not because they want that, or because they are "profligate" as I understand the word profligate, but because they are trying to counteract central Government policies. They have found that central Government policies have deprived them of the resources they so desperately need to defend jobs and services in their areas. It is not surprising that boroughs, especially in London, which have become so deeply involved in the various accountancy procedures are precisely those inner London boroughs with the greatest problems. The Government must surely be prepared to acknowledge that.

In a very statespersonlike speech, my hon. Friend the Member for Newham, North-East (Mr. Leighton) spelt out the problems in Newham. On this occasion, we are doing our best to be as nice to the Minister as we possibly can. That actually causes me physical and mental strain. However, I do not wish to upset the Minister too much while he is thinking about the things that he saw in Newham. We want extra resources for Newham. We are prepared to explain the problems to the Minister as patiently as we can so that he can understand our case. If he rejects our case in the end, we can at least say that we tried to demonstrate the problems, but the Minister was not impressed and we did not convince him. However, we did our best. That is because it is the responsibility of Opposition Members who represent Labour boroughs to talk to Tory Ministers. Sometimes we find that a fairly unappetising prospect—not in the case of this Minister, I hasten to add, but in the case of some of his colleagues. However, we have to do it, because that is the democratic process.

With creative accountancy, local authorities have been using the tactics, the techniques, and the skills to try in a democratic and lawful fashion to protect the jobs and services in their areas. They should not be subjected to the sort of vile campaign that they so often have to endure in this House and in the press generally. It cannot be unconnected with the fact that rate support grant, the money that goes from central to local government, has gone down from about 62 per cent. in 1979 to 46 per cent. of local authority expenditure. Even the Financial Times is prepared to acknowledge, and published a fine leader on the fact, that such reductions had a great deal to do with the level of rate increases that local authorities were imposing in order to try to defend their jobs and services,

None of this creative accountancy is unlawful, and it is wrong for Conservative Members to suggest that somehow it is. Indeed, Environment Ministers rather than local authorities have more often been found to be acting unlawfully. Therefore, we do not need any great lectures on legality from the Government.

My third point is about local authorities and their relationship with their communities, the electorate and the government. The hon. Member for Leeds West (Mr. Meadowcroft) and other hon. Members made a good point about this. If those authorities are so appalling, I am surprised that people still vote for them, It is not just a question of whether or not people pay the rates, because I do not think that this necessarily affects their voting pattern. When and if we get around to some kind of community poll tax, Conservative Members will find that what they thought would be a way of opening up these various local authorities to Conservative control will not work.

In terms of voting Labour, there is no direct connection with the amount of rates that are paid. There is nothing advantageous in just sticking up the rates. No one likes to find the rate demand going up by 30, 40, 50, 60, or indeed 80, per cent.

In his speech, the hon. Member for Leicester, East moved around the country and mentioned Ealing. I am surprised and to a certain extent disappointed that his hon. Friends the Members for Ealing, Acton (Sir G. Young) and for Ealing North (Mr. Greenway), who travel mob-handed when it comes to local government Bills, did not come to the House to talk about Ealing's possible 80 per cent. rate increase. The residents of Ealing are probably not delighted about the likely increase, but if one looks, as I have, at what Ealing borough council is doing, one can see why those rates might increase by that amount.

I shall list some of the things that the council has done since May, 1986 when Labour was elected. It has signed deals to acquire 600 new homes to meet the housing crisis; employed extra home helps and under-fives staff; restored free milk to 10,000 first school pupils; taken on much-needed local housing repair teams; recruited 150 extra teachers; begun a £12.1 million programme of road and pavement renewal, including dropped kerbs and new cycle routes; restored grants to voluntary play groups; spent £500,000 on emergency care, responding in particular to the needs of the elderly during the recent cold spell; given schools 11 per cent. more to spend on equipment and books; funded a wide range of new summer play schemes; reduced adult education fees, resulting in a 25 per cent. increase in numbers and started a borough magazine to keep people informed about what their council does.

Mr. Peter Bruinvels

It is political propaganda.

Mr. Banks

The hon. Gentleman says that it is political propaganda. These are good services that the people of Ealing want and need. If the Government had not reduced the rate support grant and did not impose draconian penalty systems on local authority finance, the residents of Ealing would not now be facing an 80 per cent. rise, or whatever the increase will be, in their rates. Let us be clear about this. Local authorities which are given the choice will clearly attempt to maintain the existing level of services in their boroughs. It is wrong for them to be totally and continually castigated in this House and outside.

We have a major problem in Newham. My hon. Friend the Member for Newham, North-East summed it up in an excellent speech. There was a meeting with the Labour group, the Labour party and representatives of the trade unions on Sunday afternoon. My hon. Friend and I were there listening to our colleagues agonising over how they will meet the Government targets.

My hon. Friend the Member for Newham, North-East has made the case that Newham is the second most deprived local authority area in Britain. We have the worst housing situation and the fastest growing level of homelessness in the whole of London. Yet we have been told by the Government that we have to make a 26 per cent. reduction in our rates and must reduce our expenditure by about £12 million from its current level. We are attempting to do that.

The Minister knows what the problems are. He knows from his own officials and from the indices in his Department that we are not exaggerating the position. How can the Minister honestly expect us in Newham to make the sort of cuts that the legislation will require us to make? It cannot be done without risking all the social disruption mentioned by my hon. Friend the Member for Newham, North-East. I do not expect riots on the streets of Newham, but already we have a multiplicity of deprivation in our part of east London. This will make it worse.

The Government may well say, "Why bother about Newham? After all, it is a Tory-free zone." We do not have any Tories on the borough council, but we do not propose to put up any posters at the approaches to Newham saying, "You are now entering a Tory-free zone." If one were being cynical, one could ask why the Government should bother about Newham because in electoral terms there is nothing in it for them. There is no way that the Tories will win any of the seats in Newham—Newham, South; Newham, East; Newham, North-East; or Newham, North-West.

In the name of social justice and social harmony, and in order to try to solve Newham's problems through the ballot box, through the democratic process, the Minister cannot now require us to impose the level of cuts that he proposes. Frankly, it is beyond our ability to make such cuts. He came round with us and saw the problems and I ask him again to consider the case that we made, fairly, coolly and objectively. If he does that, he will end up conceding that we have a case in Newham, and that despite everything that we have said about the Government and that they have said about us, on this occasion they will hear our case and make sure that we have the resources we need.

8.57 pm
Mr. Roy Galley (Halifax)

I congratulate the hon. Members for Newham, North-West (Mr. Banks) and for Newham, North-East (Mr. Leighton) on the way that they put their case. In local government debates we seem to hear ad nauseam about the problems of Newham. It is a compliment to those two hon. Members that the House is so well briefed on the details of the affairs of Newham. However, all that I have heard from those hon. Members suggests to me that a newer and more innovative approach, involving private enterprise and the private sector, would assist Newham, rather than thinking along the tracks and in the ruts about which we hear so much. However, one must compliment them for bringing the affairs of Newham so much to the forefront of the affairs of the House. Only my hon. Friend the Member for Leicester, East (Mr. Bruinvels) is more assiduous in putting local matters before Parliament.

Mr. Leighton

Does the hon. Gentleman accept that there is no antipathy towards private enterprise and that the borough is trying to bring in private enterprise? We want a partnership between central and local government, involving the public and private sectors and the public authorities and voluntary organisations. That is what we are working for and the chamber of commerce supports our efforts.

Mr. Galley

I am delighted to hear those remarks from the hon. Gentleman because they form part of the theme that I shall develop in my comments. It is important to develop that partnership. Too often, I fear, Labour Members suggest that the public sector is the be-all and end-all and that there are no solutions which are not publicly funded. We must get away from that and have a genuine partnership of all the interested organisations in the one locality to try to sort out the problems of that locality and to try to have a meeting of minds.

That brings me to one of the points that I wanted to make in this debate. There has been far too much politicisation — if that is the correct term — of local government during the past 20 years. It has so often been to the detriment of local communities that there has been so much political content in those debates.

The Bill is useful and its provisions relating to housing are sensible. Its provisions relating to the land register are vital and it has other useful tidying-up measures. However, one must regret that it does not get to the root of any of the local government problems with which we have to grapple in the 1980s. I pick up a point made by the hon. Member for Newham, North-West and record my disappointment that the Bill is such a slim measure and that it does not deal with the issues that we hoped to tackle during this Session.

It would have been most helpful if the Bill had dealt with the issues of privatisation, contract compliance and political progaganda on the rates. However, one accepts the difficult problems facing my hon. Friend's Department over the drafting of the legislation and the very heavy burden of technical legislation that he is facing during the Session. Therefore, one accepts, with regret, that it is not possible to bring forward the major measure for which we were hoping. With luck, in the next Session of Parliament we shall tackle those more fundamental issues.

In our debates on local government in the House we tend to lose sight of the functions of local government. we have almost ceased to debate and consider the relevant functions of local government. So often many local authorities seem to set themselves up as mini-governments for their area and regard themselves as having an all-pervading influence on all the relevant affairs. That is a fundamentally misconceived view. In our future local government legislation I hope that we shall address that problem.

One can understand immediately the enormous drafting and practical problems that would be involved. However, if at all possible I should like to see in future local government legislation some measure to set out, curtail and catalogue what is and what is not an appropriate responsibility for a local authority, and to see rather more than we see now aimed at curtailing the amount that local authorities may expend upon other matters. In various sections of the Local Government Act 1972 there are provisions to curtail expenditure on certain aspects. However, in recent years peripheral expenditure has burgeoned. One thinks especially of some London boroughs' activities with regard to equal opportunities, gay and lesbian rights, and a whole host of other aspects where money is spent in a way which is not pertinent to local authorities and detracts from their carrying out the essential functions of local government.

Mr. John Powley (Norwich, South)

I am interested to hear what my hon. Friend is saying. Is he aware that at this moment Norwich city council—not a London borough by any means — is discussing the Government's trade union legislation? Does my hon. Friend agree that that is far removed from being a responsibility of local government? Does he further agree that the council would do better to spend its time and expertise on matters over which it has some direct control than to make pronouncements on matters that are properly the province of central and national Government?

Mr. Galley

My hon. Friend is right, and he graphically demonstrates my point. We need to say to local government that there are certain functions which this House delegates to it and that it is responsible for carrying out those particular functions. We must say that other functions are not the proper concern of local government. If local government wishes to debate, either within its political groups or outside the council, a whole host of national issues, that is up to the political parties, but local government should not spend its time dealing with national considerations at the ratepayers' expense. We need to set out a catalogue of what local government should do, draw a line under it and say, "Thereafter your activities must be curtailed."

Compared with other local authorities, my local authority is moderate and modest in some of its activities. However, recently in the Calderdale authority we have seen campaigns on social security, which have no relevance to the functions of that council. Recently we have, fortunately, seen the authority wind up a committee on health services in the Calderdale area which, again, is not a matter delegated to it by Parliament. We have seen the development of Calderdale foreign policy over a wide variety of matters. We have seen the chief executive, who is properly dealing with housing policy and the regeneration of our area, writing speeches for the leader of the council about South Africa and umpteen other matters. That is wrong. We have seen attempts to name peace parks in our area. That is nonsense and diverts attention from the proper functions of local government.

We have seen to much politicisation of local government and with it too great an adversarial element in the conduct of local government affairs. I constantly return to the words of wisdom of the hon. Member for Newham, North-West. He talked about loyalty to an area and co-operation. I must say to him that co-operation must be both ways. The hon. Member of Parliament and the council must work together, even if they are of different political persuasions. That is the only way to make progress in an area. Far too often, local councillors snipe at the local Member of Parliament if he is not of the same political persuasion, when, if they put their resources together, they could achieve far more.

It is even more worrying that often in this adversarial contest councillors use senior officials to fire the bullets. We are beginning to see an abuse of senior officers. Political debates should be between politicians. Members of Parliament should not be engaged in purely political debates with the chief officers of their local authorities. We need to examine the role of chief officers and define it more clearly. Indeed, I hope that when we consider Widdicombe and further legislation, we shall deal with that. We must consider the functions of chief officers in supporting the council and selling their area.

Surely one function must be to seek the greatest efficiency of services and to persuade the council to use its resources in the best way possible. I can cite a good local example. We have Audit Commission reports which would save over 3p on the rates this year if they were fully implemented and which are supported by many officers, yet they are gathering dust on shelves. If the officers pressed for support for those reports, we would have greater efficiency and more accountability.

The Bill deals in part with capital expenditure controls. Prescribed expenditure often produces a variety of agonies for Members of Parliament. In the Green Paper it is suggested that capital controls should be tied more closely to capital receipts. That is useful but it should be applied in a limited way.

My authority, going back to its Conservative years, has a good record of selling its assets and making the best use of the resources that it has accrued. As a result the assets that it can sell have now been reduced somewhat. It is also the case—looking especially at houses but also at other property—that property values in my area are among the lowest in the country. Therefore, a substantial sale of council houses will produce a smaller net return than would be the case in London and many other parts of the country. Some mechanism must be built into future legislation to deal with that problem.

Finally, I shall deal briefly with some of the housing aspects of the Bill. I greatly commend my hon. Friend the Minister for bringing forward those provisions. There are, throughout this country, large estates that have serious difficulties. There are perennial problems on monolithic estates which we cannot solve by public sector solutions. We must have far more tenant involvment and local management. That does not just mean devloving the management from the housing director; it means that the people living on the estates must make meaningful decisions about the way in which their estates are run.

Mr. Meadowcroft

Where is that in the Bill?

Mr. Galley

There are in the Bill, as the hon. Gentleman knows, provisions for involving the private sector more in housing. We need to involve the private sector, the housing associations and the tenants. We need to break up the enormous housing empires and transfer responsibility in a diverse sort of way back to the people who run the estates and back to more manageable organisations, such as housing associations.

I must close there, despite the intervention from the hon. Member for Leeds, West (Mr. Meadowcroft). I commend especially the housing provisions of the Bill, but I hope that those provisions, and a number of other matters to which I have referred, will be developed much further in the near future.

9.12 pm
Mr. Harry Cohen (Leyton)

Rates are currently a significant source of concern for my constituents in Leyton and for residents throughout Waltham Forest. A substantial rise is imminent of 62 per cent. for domestic ratepayers and 57 per cent. for businesses. That is an appalling prospect. No one is happy, including the local councillors with whom I have talked and who have to make this unpleasant decision.

My investigations have revealed four main reasons for this rise. The first reason is that the Government have savagely cut the rate support grant; for example in the Rate Support Grants Bill that follows this item of business, there will be no recycling of RSG. That effect will be a loss of grant to Waltham Forest of £1,678,000. That will mean 5½p on the rates at a stroke. Then there is the rate support grant cut overall. The director of finance wrote last month about the total local authority expenditure met by grant. He said : In 1979–80 it was 61 per cent., whereas the settlement for 1987–88 is based on a figure nearer 46.3 per cent. Over this period, expenditure has almost doubled, but ratepayers will have to pay 2.7 times"— it is well over that double figure— more in 1987–88 than they did in 1979–80. The leader of the council wrote: If RSG was on the same formula as in 1981–82 (when the present system was introduced), the grant this year would be £20 million higher, and the rate-rise 35 per cent. lower".

The Government have also inflicted penalties. That is a substantial reason for the rise. For every pound that is spent, the Government are insisting that ratepayers are charged £1.64 because of those penalties. It cannot even be said that local ratepayers will get value for money as a result.

The second reason for the rates increase is that the Government have not properly allowed for inflation, which is running at about 3 per cent. Inflation on local authority costs, services and especially wages, which is a large part of the bill, is well above that.

Then there is teachers' pay. The Government are not properly financing the new level of pay that was announced yesterday. They are shifting that bill to the local authorities and to ratepayers.

The third reason for the rates measures is that, before the election last May, the previous council—it was a hung council but to all intents and purposes was controlled by the Conservatives and the Liberals in coalition —deliberately left the cupboard bare by spending £5 million of balances. It used up all the balances and reserves. Even the housing repairs budget was raided for about £600,000. Posts were deliberately kept vacant to save money, which meant that classes in local schools were regularly sent home because there were no supply teachers. Because of that, a 30 per cent. rates rise would have been needed to do nothing, just to stand still and provide the same services.

Before the last council elections, local Conservatives said that, if they were in control, they would cut services by 3 per cent. and still feel justified in raising rates by between 15 per cent. and 20 per cent. The SDP and the Liberals have supported many of the service developments, but do not properly explain what they would do about the rates. Even though the previous council cut the balances, it still left commitments to be funded this year.

The important service developments by the new council are the fourth reason for the substantial rates increase. The council was elected to develop services and this has caused an increase of about 10 per cent. in the budget.

I shall give some examples which reflect the local authority's response to the serious problems. Leyton's housing stock is among the worst 2.5 per cent. in the country for housing problems. The local authority is to put the £600,000 taken from the housing repairs budget back into housing repairs. It will provide £700,000 for permanent supply teachers and £418,500 for school building maintenance and repairs which are badly needed. It will provide £113,000 for social work services in child abuse cases and another £31,000 for legal services in such cases. Only last week, the front page of the local newspaper announced that, unless that money is provided, deaths will occur because of child abuse and child neglect in the borough. The council must be right to respond in that way to the problem.

The council has allocated £100,000 for improved foster care services and £113,000 towards the running costs of a disabilities resource centre. It is concerned with a range of services for community care and is providing, for example, £128,500 for a community alarm system for the elderly, £109,500 to extend home care services for the elderly at risk, £57,500 for improved meals on wheels services and £122,000 on improved staffing in the homes for the elderly. Are any Conservative Members laughing at those services? Are they saying that they are not necessary? Of course not. The council will provide £77,000 to employ extra crew for refuse collection services which have been run down. The council is making up for the urban aid to voluntary organisations which the Government have cut by allocating another £225,000 for special projects. Those are some of the developments which have been promoted by the council.

The 62 per cent. rates increase which results is a harsh burden on local people. It will force many more to rely on rebates. Already, about 50 per cent. of Leyton residents have to have rebates, and this means that they are caught in a poverty trap. Rebates do not help businesses or individuals who are just over the rebate level or those who arc too proud or too worried to claim. One of the ironies of the increase is that the Government fork out for the rebate but have not paid the proper level of grant needed to keep the rates down in the first place.

Comparisons can be made with other boroughs. Rates increases will be huge in three London boroughs in which the Tories were in control last May. Ealing has been mentioned, but rates are also well above average in Hammersmith and Fulham and Waltham Forest. The unfair penalty system effectively says to such local authorities, "You must have the same policies as the previous council, the one that you defeated in the local election." How can that be democratic? How can the Minister justify that as being democratic?

Another comparison can be made with Waltham Forest and Redbridge, the borough next door. There will be a 3 per cent. rates rise in Redbridge compared with 62 per cent. in Waltham Forest. The rates in Redbridge will be half those paid by Waltham Forest ratepayers. Waltham Forest has greater needs and provides better services. That has been the local choice for many years, but it is nowhere double what is provided in Redbridge.

The Tories like to use examples like this as simplistic propaganda in an election year. This unfair situation shows how the Government have cultivated a perverted rate support grant system purely for political purposes. The Government have given to the Tory local authorities and deliberately targeted Labour authorities. This is cheap propaganda but it is expensive for local ratepayers. The Tory Government are principally to blame for the massive rates rise in Waltham Forest and in other areas.

What is needed is an increased level of Government grant to local authorities like Waltham Forest, an end to the spiteful political manipulation of the rate support grant system and to the grossly unfair penalties, and a fairer distribution of grant based on need. Labour in Waltham Forest wants to supply good quality services to the local community at a reasonable rate level. The Conservative Government are deliberately denying and thwarting that.

9.22 pm
Mr. Roland Boyes (Houghton and Washington)

We have had a very interesting series of contributions this evening. My right hon. Friend the Member for Brent, East (Mr. Freeson) identified the positive gains of £500 million expenditure under the Bill in creating, directly or indirectly, 62,000 jobs in the industry and improving conditions for the people who live in the houses. My right hon. Friend the Member for Newham, North-East (Mr. Leighton), in what I consider to be a brilliant speech, defended the unprecedented taking of local power by central Government and illustrated the problems of social, economic and environmental deprivation in Newham. When my hon. Friend mentioned that the representatives on his local authority were responsible, decent people, the Minister of State nodded his agreement, having visited the area.

I share the delight of my hon. Friend the Member for Newham, North-West (Mr. Banks) that the Bill was not expected or anticipated and that a series of services that were to be included have been removed, as detailed by my hon. Friend the Member for Blackburn (Mr. Straw).

My hon. Friend the Member for Leyton (Mr. Cohen) concluded with a vigorous contribution on the problems of his local authority and the financial problems left by the hung council to be dealt with by the present council.

We heard contributions from the hon. Members for Halifax (Mr. Galley), for Nuneaton (Mr. Stevens) and for Leeds, West (Mr. Meadowcroft), and—the only speech I have not heard this evening, for which I would apologise if the hon. Gentleman had bothered to stay in the Chamber — for Wolverhampton, South-West (Mr. Budgen). I was glad that he was able to put on record the positive decision of the Labour-controlled authority in Wolverhampton, whose concern for the elderly by making special payments to protect them in the cold weather spell undoubtedly saved many lives in that area.

I also mention that the leader of the Wolverhampton council, Mr. John Bird, will be our Euro-candidate in the European elections. I realise that the hon. Member for Wolverhampton, South-West will find it impossible to utter the words "European Parliament" with his reactionary attitude. [AN HON. MEMBER: "It is an Assembly."] No, it is a Parliament and it has been deemed to be a Parliament.

We are clearly of the opinion that John Bird will enjoy a good victory in the forthcoming midlands elections. I take this opportunity of wishing him well.

We are discussing a Bill that reminds me of a bus with its wheels taken off. A host of matters that we anticipated have been blocked out of the Bill — for example, competitive tendering, contract compliance and powers to strengthen local ombudsmen and their relationship to new towns. Obviously, Opposition Members welcome that move.

We are debating yet another Bill that affects local government. From the Secretary of State's reply to my hon. Friend the Member for Hackney, South and Shoreditch (Mr. Sedgemore) we know that the Government have introduced 43 Bills that directly affect local government. Many of them are in serious financial difficulties. Whether the Government intended to control spending and cash-raising powers or generally add to the mass of existing legislation, the effect is the same. Hon. Members and officers are finding it increasingly difficult to take decisions that are in the interests of the people that they represent. In fact, Derrick Hender, the local government adviser of Coopers and Lybrand Associates, said : If asked for a statement of key tasks many chief executives would simply state 'survival'. That is no reflection on individuals who struggle against ever mounting odds but it emphasises the pressures caused by political upheaval or indecision, tight resource constraints and a hostile Government attitude.

Local government, like business, needs to plan. It needs to be able to formulate rolling programmes. However, local government has existed in conditions that are a continuing nightmare. Since the summer recess, many Bills have introduced retrospective legislation on matters that have been proved in the courts to be illegal Government actions. Bills have been introduced to rob local authorities of essential cash. In fact, immediately after the Division this evening, the concluding stages of the Rate Support Grants Bill will be discussed. A consequence of this Bill is that a further £400 million to £600 million will be taken from local authorities. Because of grant recycling, local authorities would have shared that sum, but the Government decided to end recycling. In support of that, the Government use dubious arguments, one of which is that local authorities cannot be certain of the amount that they will receive. Therefore, the Government are introducing certainty into local government finance. The uncertainty about how much a local authority will receive is replaced by the certainty that it will get nothing.

The Bill also further increases the power of the Secretary of State and civil servants. That has been a feature of successive Bills, ranging from the abolition of a whole tier of local government to giving increasing powers over local authorities and the power to discriminate between them.

By virtue of the Local Government Bill the Secretary of State will increase his authority and power over local government by the creation of consent procedures on housing and detailed regulations on deferred purchase. The chief executive of a major north-east local authority described the present processes as a continuing erosion of local government, which is a weakening of one of the strengths of our democracy—that politics is able to play a real and constructive role at local as well as at central level in Parliament. Eroding the scope and opportunity for local politics can only weaken the development of a mature and responsible political system. Politicians of all parties should be alert to that trend and seek to reverse it.

There are real dangers and related consequences if central Government continues to abuse the power of local authorities and their ability to serve their communities. In an article on the "Agenda" page of the Local Government Chronicle, George Jones and John Stewart stated : The decision may or may not be agreed with but it should be the right of the local authority to make it and be held accountable for it to its voters. An elected local authority exists to make such choices. There will always be disagreement about the exent of local choice but it is critical that a council should itself decide how to organise its services.

There is a very real need for capital expenditure on our towns and cities. Many of the problems faced by the inner cities—housing, unemployment, social service needs and infrastructure renewal, to cite only a few of them—are horrendous. To begin to solve some of those very real and visible problems requires not only the injection of capital but local authorities which are able to determine needs and priorities and to decide how to make the best use of their scarce resources.

Local authorities spend a considerable amount of time on determining how to make the most effective and efficient use of their resources. This Bill increases the problems that local authorities have to face and therefore the problems, both social and economic, of the people they represent.

In addition, projects that require capital injection—for example, to protect the infrastructure — obviously become worse when starved of funds, and the cost to future generations is on a geometric, not linear, scale. Local authorities are being forced to pass the buck to our children. We have an obligation to provide for future generations. The Government are guilty of neglect, which I shall illustrate by considering the consequences of clause 1.

On 22 July 1986 the Secretary of State made an announcement in the House of Commons about his proposals for the rate support grant settlement for 1987–88. One aspect of that statement concerned capital expenditure. The Secretary of State said : I shall therefore introduce legislation to ensure that prescribed expenditure is incurred in the proper year regardless of when the local authority pays. This will apply to all advance and deferred purchase arrangements, and other arrangements with a similar effect, entered into after midnight tonight."—[Official Report, 22 July 1986; Vol. 102, c. 183.] Clause 1 brings into effect the consequences of the announcement that was made in July 1986 about the Secretary of State's intention to introduce legislation to negate the benefits of advance and deferred purchase schemes.

These schemes were being used by some local authorities as a means of either accelerating or deferring the impact of capital expenditure for prescribed capital expenditure control purposes, but I must emphasise that these activities were perfectly legal.

The words "scandal" and "reckless" were used by the Minister this evening. How can legal activity, supported by hard-headed, competitive business men, be reckless? I shall return to that point in a moment.

A deferred purchase scheme is the means used by a local authority to spend money on a capital project — for example, a sports centre—and to defer the time when the council spends the money over a few years. A financial institution is used to pay another company to build the project over a given period—say, three years—and the council repays the financial institution over, say, eight years. For an authority, in particular a small authority, the building of a major but necessary project—for example, a sports centre—could force major cuts in its planned capital budget. A local authority keeps within its capital allowance by spreading the cost. In effect, the bulk of the planned capital programme can take place in the short term and the sports centre can be built.

It is clear that by such means—strictly legal devices —local authorities have had more flexibility in scheduling their capital projects. Local authorities know quite well that the payments they eventually make will count against their capital allocations in future. However, the Association of Metropolitan Authorities makes two important points. First, the local authority and the finance company concerned are well able to assess the likely calls on the capital allocations of future years. Secondly, the Secretary of State will be substituting his discretion on the wisdom and appropriateness of deferred advance purchase schemes for that of local authorities.

However, on 22 February 1987 the Local Government Chronicle said: 'But City financiers always carefully examined any deferred purchase arrangements before lending', said Jack Halligan of Butler Till. 'The money market has been looking very carefully at named authorities for a long time now, and business has still been carried out'".

Why must this process take place? The problem is that present capital allocations are inadequate. The treasurer of a county council told me in confidence that some local authorities have had to enter into these schemes because capital allocations have been dramatically reduced and the capital expenditure control system does not allow sufficient flexibility to enable authorities to respond to the needs of their areas. The treasurer says: It is not surprising that, faced with appalling problems, some authorities have found these schemes offer the only real alternative to a continued decline in the state of their capital assets. The decline in the state of capital assets is caused by the Government, who are seeking to enforce their harsh regime of controls on the capital expenditure of all local authorities.

Since 1978–79, local authority capital expenditure has dropped by 41 per cent. overall and by 60 per cent. on housing. There are some illustrative figures in the September/October issue of Community Action. Only 33,000 new public sector houses were started in 1985, compared with 170,000 in 1976. Some 39 per cent. has been cut from capital expenditure on schools since 1981, £500 million needs to be spent on maintaining primary schools, and a further £700 million on secondary schools. Spending on local roads has been cut by 34 per cent. in real terms from 1976 to 1983 and £176 million extra needs to be spent on roads just to stand still.

The Association of Metropolitan Authorities has published a table of figures, produced by the Department of the Environment, which shows a massive reduction in gross local authority capital spending from 1976–77 to 1986–87 in real terms at 1984–85 prices. In 1976–77, the figure was £7,898 million and by 1986–87 the gross amount had been reduced to £3,952 million. In reality, the figures have almost been cut in half and mercilessly slashed. The massive swingeing cut is a backcloth to the problems that are faced by local authorities. I shall quote what one person has said: Into what state of decay is our physical environment to be allowed to sink before the Government recognise the distinction between just spending money and investing it to create real jobs and real wealth? Will we have to wait for a typhoid epidemic or some other disaster before the Government will permit essential expenditure on infrastructure in our towns and cities?" — [Official Report, 18 December 1984; Vol. 70, c. 167.] That was the right hon. and learned Member for Hexham (Mr. Rippon).

Clauses 2 to 4 introduce specific statutory powers to give legal assistance to the private sector and require the Secretary of State's consent for the new power. Clause 2 deals with powers of local authorities to enter into leaseback schemes with housing authorities or other bodies through the arrangements which have been made subject to a consent procedure under which the Secretary of State will have to approve the terms of the scheme. These consents can be conditional, unconditional, specific or general as to class benefits, which can be provided and revoked at any time.

The Minister, in considering whether to grant a consent, has to take into account whether an authority should bear the financial burden and risks of acquiring, constructing, concerting, rehabilitating, improving, maintaining or managing any property and he may take into account any other matters that he considers relevant. In short, Ministers may do whatever they wish in terms of granting or not granting consents.

Clause 3 also contains retrospective provisions. Under clause 3(4) everything done by a housing authority after midnight of 5 February 1987 in pursuance of such a scheme which was not signed by that time and which would, after enactment of the Bill, have been subject to the consent requirements of clause 3, is deemed to require such a consent. There is little doubt that the announcement by the Minister for Housing, Urban Affairs and Construction on 5 February 1987 halted some major schemes. My hon. Friend the Member for Birmingham Perry Barr, (Mr. Rooker) said: The Opposition refuse to do that, but the Minister must be aware that his midnight deadline is causing problems up and down the land. I ask the Minister, while he is consulting on the issues, to reconsider whether he needed that midnight deadline last Thursday." — [Official Report, 10 February 1987; Vol. 1406, c. 246.] Again, I ask the Minister to answer the question put by my hon. Friend.

The situation is simply not good enough. No wonder local authority members and officers have such difficulty in administering services when they are treated in such a cavalier way by the Government. It is only because of the devotion and professionalism of the people running local authorities that the system is not plunged into an unworkable morass. It was because of its capable members and officers that Sheffield city council was able to beat the 5 February midnight deadline. The people of Sheffield will benefit greatly by the joint venture between the city council and the United Kingdom housing trust. Some 2,000 houses will be built on land provided by the local authority. Development finance is being provided by the Nationwide building society and a merchant bank. I understand that Ealing council also managed to beat the deadline, but we do not know how many imaginative schemes missed the deadline. We will now suffer the consequences of the Government's action and such schemes may never reach fruition.

This is a bad Bill. It would have been much worse if it had not been gutted by the loss of the clauses that would have contained another major assault on the powers, responsibilities and duties of local authorities. Nevertheless, there is enough in the Bill to affect local government adversely. It will result in less investment in infrastructure, fewer houses being built and consequently more people living in substandard houses, and, even more of a tragedy, an increase in the number of homeless people. The Government's doctrinaire attitude to local government, as illustrated by the number of local government Bills that we have discussed since 1979, is simply strengthening Whitehall and weakening local authorities. This is a dangerous, backward step in the country's democratic process. As a consequence, we shall have no alternative but to oppose it.

9.41 pm
The Parliamentary Under-Secretary of State for the Environment (Mr. Christopher Chope)

We have had a good debate on this short but important Bill. I shall try to answer as many of the points that have been raised as possible.

I thank my hon. Friends who participated in the debate for the good humour which they showed in the way in which they disguised their understandable disappointment that the Bill is much smaller than we would have wished. In case anybody thinks that we were frightened of proceeding with the compulsory competitive tendering provisions, I assure him that every day that goes by we get more independent evidence of the importance of going down that road. The most recent addition to that mass of evidence is the Audit Commission's occasional paper on competitiveness in contracting out local authority services. The conclusion is: The Commission is aware of a wide range of strategies adopted by authorities to avoid tackling the problems of noncompetitive in-house services. Quite apart from any legal considerations, such moves are misguided. There is a massive backlog of work outstanding, on council houses and school maintenance in particular. So non-competitive local authority services are, quite simply, destroying value to no good purpose. The proposals set out above are designed to realise the potential value improvements worth some £500 million a year which seem to be available. It is not necessary for there to be legislation for local authorities to carry out and realise these savings voluntarily. I am disappointed, although not surprised, that Labour Members are not prepared to encourage their local authorities to make those savings, which are there for the asking.

Comments have been made about the disparity between the performance of local authorities in response to what the labour Government were doing in the late 1970s, when they got the economy into such a mess, and what is happening now. It is worth reminding hon. Members that between 1976–77 and 1979–80 there was a 3 per cent. reduction in real terms in local authority current expenditure, whereas since 1979–80 there has been a 12 per cent. real terms increase in expenditure. I do not believe that I am alone in saying that I wish that more of that expenditure had gone on capital projects. If local authorities had controlled their revenue expenditure to a greater extent, more money would have been available for capital projects.

The hon. Member for Blackburn (Mr. Straw) made a number of remarks that cast aspersions upon my right hon. Friend the Secretary of State and myself concerning the circumstances in which this Bill had to be reduced in size. At the time of the Gracious Speech it was not apparent just how much work would be involved in the Local Government Finance Bill. It was that volume of work that delayed the preparation of this Bill. Indeed, my hon. friend the Member for Nottingham, East (Mr. Knowles) stressed the importance of getting the measures exactly right. My right hon. Friend was correct when he said in his statement to the House on 18 February that had we waited until all the provisions we had originally intended to bring forward in this Bill were completed there would have been unacceptable delay of a month or more before we would have been in a position to bring forward this legislation for the House's consideration.

Although those facts have been stated on more than one occasion, I am disappointed that the hon. Member for Blackburn has not been prepared to accept them.

Mr. Straw

If those are the facts, will the Minister explain why he categorically told the nation on 4 February that the new Bill would contain all the provisions about competitive tendering?

Mr. Chope

At the time that I made the speech on 4 February, it was the Government's intention to bring forward the Bill as proposed in the Gracious Speech. What changed was the realisation that it would take at least a month, beyond February, to bring the Bill — [Interruption.] I do not know whether hon. Members are disappointed about that. However, I am correct in saying that the extra provisions will be introduced a lot sooner than the Opposition would wish.

Many references have been made to the number of local government Bills that have been introduced. However, as soon as we introduce a Bill there is almost always a universal chorus of, "We want another one." I do not doubt that more local government Bills will be brought forward in due course.

The hon. Member for Blackburn discussed clauses 2 to 4 and he made a serious allegation that should be answered. He asked whether certain types of local authority activity would become unlawful under clause 3. The short-term leasing of property by a local authority for letting to its tenants is not affected by the controls in clause 3. Some leasing schemes which have come to the Department's attention involve the giving of guarantees to housing associations. Schemes of that nature may well require the Secretary of State's consent.

Bed and breakfast arrangements under which local authorities top up supplementary benefit are not affected by clause 3. Care in the community schemes may come within the exemption in clause 3(2)(b) or may be exempted from the need for consent if topping-up payments of the type I have already mentioned are invoked. Otherwise, consent may be needed and my Department will be ready to issue specific or general consents as appropriate for such schemes.

My hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen) made an all-too-rare intervention in the debate on the affairs of local government. He is a master of local government matters and I hope that we will have the benefit of hearing further contributions from him. He quite rightly referred to the frustration that he and no doubt many other ratepayers in Wolverhampton feel about the fact that that authority has increased its rates this year by 15 per cent. My hon. Friend asked why we were not able to introduce rate capping.

Mr. Greenway

What about Ealing?

Mr. Chope

I will come to Ealing in a moment. Unfortunately, Wolverhampton did not comply with the requirements set down by my right hon. Friend for rate capping. [HON. MEMBERS: "Unfortunately?"] I can assure my hon. Friend that the Secretary of State will carefully consider any authority that is spending and rating at high levels when considering the criteria for selection for rate capping.

My hon. Friend referred more widely to the unacceptable activities of his authority. I entirely share his concern, and I trust that the electors of Wolverhampton will take due note and elect next time a council that will concentrate on its proper responsibilities.

It is worth reminding the House of the very short intervention by the hon. Member for Copeland (Dr. Cunningham) in which he made an allegation about Merton council, no doubt related to the forthcoming local by-election. I was surprised at his intervention because he comes fresh from the bruising at Greenwich and is now dreaming another impossible dream that the Labour party will be able to win the by-election in Merton.

I do not know whether the hon. Gentleman was aware that we would be able to make contact with Merton so quickly after his allegation and therefore to answer it, but I can assure him that from the conversations that have been taking place this evening it is apparent that the Merton council officers have been asked to bring forward proposals for expenditure this month throughout the borough to avoid an underspend in the current year. As the hon. Gentleman will know, this is common practice not only among local authorities but also in central Government. I am assured that no special consideration is being given to the Pollards Hill ward. Projects are being brought forward throughout the borough.

I think that this is an important factor in a by-election because the electors in Merton will realise that their council is so prudently run that at this stage in the financial year it has extra resources to put into its programmes.

Dr. Cunningham

I am grateful to the Under-Secretary of State for dealing so promptly with this matter. I want him categorically to assure the House and the people of Merton that the instructions from the Conservative leader of the Merton council, Councillor Cowd, that £100,000 should be spent before 19 March in the Pollards hill ward, which is the ward where the by-election is taking place, will not be followed through, but that the expenditure will be considered on the basis of the problems of the borough as a whole and not just those of that one ward. It is his responsibility, he is the leader of the council and is a Conservative, and there is ministerial responsibility for these matters. Will the Minister give the House that assurance?

Mr. Chope

I cannot give assurances on behalf of Merton council, but I can assure the hon. Gentleman that the Conservatives will retain control of that council when the by-election takes place. It is significant that, whenever we are able to answer the allegations, the ground suddenly shifts and an alternative allegation is put forward.

My hon. Friend the Member for Nottingham. East (Mr. Knowles), in a perceptive speech born of his experience when he was leader of Kingston council, made some excellent comments about the need for local government to behave prudently. He said that in two or three years' time local authorities would have built up massive bills which could only result in either substantial cuts in services or enormous rate increases. He referred to what has been happening in Islington. Hon. Members will know that in Islington there are experts in raising all the "funny money" and in accounting measures designed to disguise from ratepayers the true expense of what is being done. It is estimated that by 1981 Islington will he paying for various creative accounting schemes no less than £11 million a year; and that is on top of the more orthodox debt servicing to which that borough is committed.

The right hon. Member for Brent, East (Mr. Freeson) made a long speech about the various housing provisions in the Bill, but, rather significantly I thought, he omitted to make any reference to the performance of the London borough of Brent on its deferred purchase schemes. In case anybody is in any doubt about the dramatic way in which the use of deferred purchase schemes can result in burdens being placed on ratepayers and citizens many years in the future, I can tell the House that as a result of the deferred purchase schemes already carried out by Brent, some 16 years ahead—that is, after the year 2000—there will be revenue burdens on the Brent ratepayers of £13 million a year. Those burdens will have to be borne as a result of spending which has already taken place but for which the bill has not yet been paid because of the deferred purchase schemes. I understood from the hon. Member for Houghton and Washington (Mr. Boyes) that the Labour party supports the deferred purchase scheme and thinks that the Government have behaved unreasonably in putting an end to them.

Mr. Freeson

Will the hon. Gentleman give way?

Mr. Chope

I will not. This is only a short wind-up speech.

During the debate we have had many reminders of what the Labour party is like when it is in power. My hon. Friend the Member for Leicester, East (Mr. Bruinvels) reminded us that last year the Labour council in his area increased rates by some 80 per cent. but this year, when facing the electorate, it will increase them by only 4.8 per cent.

Mr. Straw

It faced the electorate last year.

Mr. Bruinvels

It lost two seats—a 7.5 per cent. swing in Leicester, East.

Mr. Chope

I am grateful to my hon. Friend the Member for Leicester, East for reminding me that last year the Leicester Conservatives had one of the best local election results anywhere in the country as a result of that massive increase.

We have heard references to Waltham Forest's 68 per cent. increase in rates this year, which is appalling. Hammersmith is talking about a 50 per cent. increase and Ealing is talking about an 80 per cent. increase. As far as I know, none of those increases was referred to in the manifestos put to the electorate of those local authorities.

For those hon. Members who have not seen The London Evening Standard tonight — an excellent newspaper, if I may say so—I should point out that it draws attention to the implications for ratepayers in Ealing of an 80 per cent. increase. It also draws attention to the implications for the health authority in Ealing. The proposed rate increase will add £400,000 to the bill of the health authority in Ealing. That means that some 30 nurses will have to be taken off the staff. That demonstrates that Labour local government in practice is cutting the ability of health services to meet patient need.

The same is true of the massive rate increases on business. For example, the Lyons Tetley company employs a large number of people in Ealing. The additional rate increase will impose the burden of £320 per annum for each employee of that company. That is a totally intolerable burden to place upon employees of any organisation.

During the debate we have heard reference to the Ealing schemes and it has been asked whether they would be caught by the Bill. We are aware of the two housing schemes being planned by Ealing with housing associations and using private finance. Whether the authority entered into legally binding obligations in respect of those schemes before 6 February and therefore does not require my right hon. Friend's consent is not clear. That is primarily a matter for the authority itself and for its legal advisers. However, the housing associations concerned also require the Housing Corporation's consent. My Department has just received from the corporation certain documents relating to the scheme at Drayton Bridge road and is studying those. When we have reached a view I shall let my hon. Friends know the outcome.

This is an important Bill. It is not as large as we hoped at one time that it would be, but it will bring important protection to ratepayers and ensure the effective use of public assets. I commend it to the House.

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

The House divided: Ayes 259, Noes 196.

Division No. 105] [10 pm
Alison, Rt Hon Michael Atkins, Rt Hon Sir H.
Amess, David Atkins, Robert (South Ribble)
Ancram, Michael Atkinson, David (B'm'th E)
Arnold, Tom Baker, Rt Hon K. (Mole Vall'y)
Aspinwall, Jack Baker, Nicholas (Dorset N)
Baldry, Tony Gardner, Sir Edward (Fylde)
Banks, Robert (Harrogate) Garel-Jones, Tristan
Batiste, Spencer Gilmour, Rt Hon Sir Ian
Beaumont-Dark, Anthony Glyn, Dr Alan
Bellingham, Henry Goodlad, Alastair
Bendall, Vivian Gow, Ian
Benyon, William Gower, Sir Raymond
Bevan, David Gilroy Grant, Sir Anthony
Biffen, Rt Hon John Greenway, Harry
Biggs-Davison, Sir John Gregory, Conal
Blackburn, John Griffiths, Peter (Portsm'th N)
Blaker, Rt Hon Sir Peter Grist, Ian
Body, Sir Richard Ground, Patrick
Bonsor, Sir Nicholas Grylls, Michael
Boscawen, Hon Robert Hamilton, Hon A. (Epsom)
Bottomley, Peter Hampson, Dr Keith
Bottomley, Mrs Virginia Hanley, Jeremy
Bowden, A. (Brighton K'to'n) Hannam, John
Bowden, Gerald (Dulwich) Hargreaves, Kenneth
Boyson, Dr Rhodes Harvey, Robert
Braine, Rt Hon Sir Bernard Haselhurst, Alan
Brandon-Bravo, Martin Hawkins, C. (High Peak)
Bright, Graham Hawksley, Warren
Brinton, Tim Hayhoe, Rt Hon Sir Barney
Brittan, Rt Hon Leon Hayward, Robert
Brooke, Hon Peter Heathcoat-Amory, David
Brown, M. (Brigg & Cl'thpes) Heddle, John
Browne, John Henderson, Barry
Bruinvels, Peter Hickmet, Richard
Bryan, Sir Paul Hicks, Robert
Buchanan-Smith, Rt Hon A. Higgins, Rt Hon Terence L.
Budgen, Nick Hill, James
Bulmer, Esmond Hirst, Michael
Burt, Alistair Hogg, Hon Douglas (Gr'th'm)
Butler, Rt Hon Sir Adam Holt, Richard
Butterfill, John Hordern, Sir Peter
Carlisle, John (Luton N) Howard, Michael
Carlisle, Kenneth (Lincoln) Howarth, Alan (Stratf' d-on-A)
Carlisle, Rt Hon M. (W'ton S) Howarth, Gerald (Cannock)
Cash, William Howell, RtHonD. (G'ldford)
Chope, Christopher Howell, Ralph (Norfolk, N)
Churchill, W. S. Hubbard-Miles, Peter
Clark, Hon A. (Plym'th S'n) Hunt, David (Wirral W)
Clark, Dr Michael (Rochford) Hunt, John (Ravensbourne)
Clark, Sir W. (Croydon S) Hunter, Andrew
Clarke, Rt Hon K. (Rushcliffe) Hurd, Rt Hon Douglas
Conway, Derek Irving, Charles
Coombs, Simon Jackson, Robert
Cope, John Jenkin, Rt Hon Patrick
Cormack, Patrick Jessel, Toby
Corrie, John Johnson Smith, Sir Geoffrey
Couchman, James Jones, Gwilym (Cardiff N)
Cranborne, Viscount Jones, Robert (Herts W)
Critchley, Julian Joseph, Rt Hon Sir Keith
Crouch, David Kershaw, Sir Anthony
Currie, Mrs Edwina Key, Robert
Dickens, Geoffrey King, Roger (B'ham N'field)
Dicks, Terry Knight, Greg (Derby N)
Dorrell, Stephen Knowles, Michael
Douglas-Hamilton, Lord J. Knox, David
Dover, Den Lamont, Rt Hon Norman
Dunn, Robert Lang, Ian
Dykes, Hugh Lawler, Geoffrey
Eggar, Tim Lawrence, Ivan
Evennett, David Lee, John (Pendle)
Eyre, Sir Reginald Leigh, Edward (Gainsbor'gh)
Fallon, Michael Lennox-Boyd, Hon Mark
Farr, Sir John Lester, Jim
Fenner, Dame Peggy Lewis, Sir Kenneth (Stamf'd)
Finsberg, Sir Geoffrey Lightbown, David
Fletcher, Sir Alexander Lilley, Peter
Fookes, Miss Janet Lloyd, Sir Ian (Havant)
Forman, Nigel Lloyd, Peter (Fareham)
Forsyth, Michael (Stirling) Lord, Michael
Forth, Eric Luce, Rt Hon Richard
Fraser, Peter (Angus East) Lyell, Nicholas
Freeman, Roger McCrindle, Robert
Fry, Peter McCurley, Mrs Anna
Gale, Roger MacKay, Andrew (Berkshire)
Galley, Roy MacKay, John (Argyll & Bute)
Maclean, David John Price, Sir David
McNair-Wilson, M. (N'bury) Proctor, K. Harvey
McNair-Wilson, P. (New F'st) Raffan, Keith
McQuarrie, Albert Raison, Rt Hon Timothy
Major, John Rathbone, Tim
Malins, Humfrey Rees, Rt Hon Peter (Dover)
Malone, Gerald Renton, Tim
Maples, John Rhodes James, Robert
Marlow, Antony Ridley, Rt Hon Nicholas
Marshall, Michael (Arundel) Robinson, Mark (N'port W)
Mather, Sir Carol Roe, Mrs Marion
Maude, Hon Francis Ryder, Richard
Mawhinney, Dr Brian Sainsbury, Hon Timothy
Mayhew, Sir Patrick Scott, Nicholas
Merchant, Piers Shepherd, Colin (Hereford)
Meyer, Sir Anthony Shersby, Michael
Mills, Iain (Meriden) Skeet, Sir Trevor
Mills, Sir Peter (West Devon) Smith, Sir Dudley (Warwick)
Mitchell, David (Hants NW) Stern, Michael
Moate, Roger Stevens, Lewis (Nuneaton)
Monro, Sir Hector Stewart, Allan (Eastwood)
Morris, M. (N'hampton S) Stewart, Andrew (Sherwood)
Morrison, Hon C. (Devizes) Stokes, John
Morrison, Hon P. (Chester) Thatcher, Rt Hon Mrs M.
Moynihan, Hon C. Thompson, Donald (Calder V)
Murphy, Christopher Thompson, Patrick (N'ich N)
Neale, Gerrard Townsend, Cyril D. (B'heath)
Nelson, Anthony Trotter, Neville
Neubert, Michael Vaughan, Sir Gerard
Newton, Tony Wakeham, Rt Hon John
Nicholls, Patrick Walker, Bill (T'side N)
Norris, Steven Waller, Gary
Onslow, Cranley Walters, Dennis
Oppenheim, Phillip Watts, John
Oppenheim, Rt Hon Mrs S. Wells, Sir John (Maidstone)
Osborn, Sir John Wheeler, John
Ottaway, Richard Wilkinson, John
Page, Sir John (Harrow W) Winterton, Mrs Ann
Page, Richard (Herts SW) Winterton, Nicholas
Parkinson, Rt Hon Cecil Wood, Timothy
Patten, J. (Oxf W & Abgdn) Yeo, Tim
Pawsey, James Young, Sir George (Acton)
Peacock, Mrs Elizabeth
Percival, Rt Hon Sir Ian Tellers for the Ayes:
Pollock, Alexander Mr. Tony Durant and
Powell, William (Corby) Mr. Michael Portillo.
Powley, John
Abse, Leo Buchan, Norman
Alton, David Callaghan, Jim (Heyw'd & M)
Anderson, Donald Campbell, Ian
Archer, Rt Hon Peter Campbell-Savours, Dale
Ashdown, Paddy Canavan, Dennis
Ashley, Rt Hon Jack Carlile, Alexander (Montg'y)
Ashton, Joe Carter-Jones, Lewis
Atkinson, N. (Tottenham) Cartwright, John
Bagier, Gordon A. T. Clarke, Thomas
Banks, Tony (Newham NW) Clay, Robert
Barnes, Mrs Rosemary Clelland, David Gordon
Barron, Kevin Clwyd, Mrs Ann
Beckett, Mrs Margaret Cocks, Rt Hon M. (Bristol S)
Beith, A. J. Cohen, Harry
Bell, Stuart Coleman, Donald
Benn, Rt Hon Tony Conlan, Bernard
Bennett, A. (Dent'n & Red'sh) Cook, Frank (Stockton North)
Bermingham, Gerald Cook, Robin F. (Livingston)
Bidwell, Sydney Corbett, Robin
Blair, Anthony Corbyn, Jeremy
Boothroyd, Miss Betty Cox, Thomas (Tooting)
Boyes, Roland Craigen, J. M.
Bray, Dr Jeremy Cunliffe, Lawrence
Brown, Gordon (D'f'mline E) Cunningham, Dr John
Brown, Hugh D. (Provan) Davies, Rt Hon Denzil (L'lli)
Brown, N. (N'c'tle-u-Tyne E) Deakins, Eric
Brown, R. (N'c'tle-u-Tyne N) Dewar, Donald
Brown, Ron (E'burgh, Leith) Dixon, Donald
Bruce, Malcolm Dobson, Frank
Dormand, Jack Maxton, John
Douglas, Dick Maynard, Miss Joan
Dubs, Alfred Meacher, Michael
Duffy, A. E. P. Meadowcroft, Michael
Dunwoody, Hon Mrs G. Michie, William
Eadie, Alex Mikardo, Ian
Eastham, Ken Millan, Rt Hon Bruce
Evans, John (St. Helens N) Miller, Dr M. S. (E Kilbride)
Fatchett, Derek Mitchell, Austin (G't Grimsby)
Field, Frank (Birkenhead) Morris, Rt Hon A. (W'shawe)
Fields, T. (L'pool Broad Gn) Morris, Rt Hon J. (Aberavon)
Flannery, Martin Nellist, David
Foot, Rt Hon Michael Oakes, Rt Hon Gordon
Forrester, John O'Brien, William
Foster, Derek O'Neill, Martin
Foulkes, George Owen, Rt Hon Dr David
Fraser, J. (Norwood) Park, George
Freeson, Rt Hon Reginald Parry, Robert
Freud, Clement Patchett, Terry
George, Bruce Pavitt, Laurie
Gilbert, Rt Hon Dr John Pendry, Tom
Godman, Dr Norman Pike, Peter
Golding, Mrs Llin Prescott, John
Gould, Bryan Randall, Stuart
Gourlay, Harry Raynsford, Nick
Hamilton, James (M'well N) Redmond, Martin
Hamilton, W. W. (Fife Central) Rees, Rt Hon M. (Leeds S)
Hancock, Michael Richardson, Ms Jo
Hardy, Peter Roberts, Ernest (Hackney N)
Harrison, Rt Hon Walter Robertson, George
Hart, Rt Hon Dame Judith Robinson, G. (Coventry NW)
Haynes, Frank Rooker, J. W.
Healey, Rt Hon Denis Ross, Ernest (Dundee W)
Heffer, Eric S. Rowlands, Ted
Hogg, N. (C'nauld & Kilsyth) Sedgemore, Brian
Holland, Stuart (Vauxhall) Sheerman, Barry
Home Robertson, John Sheldon, Rt Hon R.
Howarth, George (Knowsley, N) Shields, Mrs Elizabeth
Howell, Rt Hon D. (S'heath) Shore, Rt Hon Peter
Howells, Geraint Short, Ms Clare (Ladywood)
Hughes, Robert (Aberdeen N) Short, Mrs H.(Whampt'n NE)
Hughes, Roy (Newport East) Skinner, Dennis
Hughes, Simon (Southwark) Smith, C.(Isl'ton S & F'bury)
Janner, Hon Greville Smith, Rt Hon J. (M'ds E)
Jenkins, Rt Hon Roy (Hillh'd) Snape, Peter
John, Brynmor Soley, Clive
Jones, Barry (Alyn & Deeside) Spearing, Nigel
Kaufman, Rt Hon Gerald Steel, Rt Hon David
Kennedy, Charles Stott, Roger
Kirkwood, Archy Strang, Gavin
Lambie, David Straw, Jack
Lamond, James Thomas, Dr R. (Carmarthen)
Leadbitter, Ted Thompson, J. (Wansbeck)
Leighton, Ronald Thorne, Stan (Preston)
Lewis, Ron (Carlisle) Tinn, James
Lewis, Terence (Worsley) Torney, Tom
Litherland, Robert Wallace, James
Lofthouse, Geoffrey Wardell, Gareth (Gower)
Loyden, Edward Wareing, Robert
McCartney, Hugh Weetch, Ken
McDonald, Dr Oonagh Welsh, Michael
McGuire, Michael White, James
McKay, Allen (Penistone) Williams, Rt Hon A.
MacKenzie, Rt Hon Gregor Winnick, David
Maclennan, Robert Woodall, Alec
McNamara, Kevin Wrigglesworth, Ian
McWilliam, John Young, David (Bolton SE)
Madden, Max
Marek, Dr John Tellers for the Noes:
Martin, Michael Mr. Tony Lloyd and
Mason, Rt Hon Roy Mr. Ray Powell.

Question accordingly agreed to.

Bill accordingly read a Second time, and committed to a Standing Committee pursuant to Standing Order No. 61 (Committal of Bills).