HL Deb 09 June 1975 vol 361 cc12-34

3.2 p.m.

The LORD PRIVY SEAL (Lord Shepherd)

My Lords, I beg to move that this Bill be now read a second time. I am well aware that this Bill has been the subject of much criticism, both in Parliament and in the Press, but I believe that a good deal of this criticism is misconceived, and I will, I hope, outline a strong case for legislation, and I suggest that the lines of this Bill are about right. This Bill is very much a clearing-up measure required to deal with the problem of failure to implement legislation now repealed. We on this side have unfortunately inherited the problem—a problem arising out of legislation introduced by noble Lords opposite—and to which I suggest there are no simple answers. Nevertheless, there can be no doubt that whatever Government were in office, some measure would have to be introduced to resolve this problem. I am reinforced in this view, because in another place Members of the Opposition fully admitted that the present law was inadequate for this situation and that if they were now in Government they would need to introduce measures for a similar purpose.

The legislation to which I refer is the Housing Finance Act 1972. I do not want to weary or provoke noble Lords with a history of the opposition of my Party and of local authorities to this Act. Suffice it to say that this opposition was basically two-fold. First, that Act took away the right to fix rents for their dwellings from elected local authorities. This was a right they had exercised for 50 years or more under many different Governments. Instead, this function was to be performed by non-elected, non-accountable rent scrutiny boards. Secondly, there was the haste and some confusion with which the Act was brought into force. The Act came into force only two weeks after Royal Assent, on 10th August 1972, the height of the holiday season, and required rent increases to be made some six weeks later.

As noble Lords will be aware, rent increases require a resolution of the full council, as well as four weeks' notice to the tenants. So, with the best will in the world, authorities were faced with a desperately tight timeable. This inordinate haste in introducing new and disliked legislation was compounded by the confusion caused by the Newcastle Amendment. This Amendment, introduced at a late stage, enabled the Secretary of State to authorise a lower rent increase if he was satisfied that the mandatory one would cause rents to exceed the fair rent likely to be determined by the rent scrutiny boards. In the interests of their tenants, many authorities applied for such authorisations. These applications led to prolonged discussions in many cases, with the inevitable result that the date for making the rent increases went by before any decision was given.

Under the rigid provisions of the 1972 Act, rent increases not made on their due dates could not subsequently be made up. Where an authority can convince the district auditor that there were reasonable grounds for delay in implementing a rent increase, there is no surchargeable loss. Our concern, however, is with the cases where the failure to put up rents within the timetable set by the Housing Finance Act resulted from a delay for which the district auditor would not find reasonable grounds; and would hold that the losses were due to misconduct and therefore those responsible should be surcharged. The outcome of all this is a probable surchargeable loss of rent income of some £1½ million in 18 or so authorities—of which Clay Cross was only one and about which I will have more to say later—and there are about 400 councillors who are possibly responsible. These figures are estimates only from information available to the Department of the Environment.

I know that in another place we were subjected to criticism for introducing legislation before all the facts were known. But, as your Lordships know, it is the independent district auditors who will eventually decide whether there is any misconduct, after hearing all the parties concerned, and not the Government. Whatever the final figures turn out to be, we have inherited the problem of how to deal with these cases and that is what this Bill is all about. And in case it should be alleged that this problem has been brought on our heads by encouraging authorities to defy the law, I would remind noble Lords of what I said in Committee on the Housing Finance Bill: I said in my opening speech that believe the law, good or bad, should be obeyed. But I am not certain yet whether the noble Lord, Lord Drumaibyn"— who led for the then Government— fully appreciates the really strong sense of outrage that exists in local authorities throughout the country, irrespective of their political persuasion. I do not think the noble Lord appreciates that; nor does he appreciate the deep bitterness among councillors, in areas where housing conditions are difficult, that they are being called upon to carry out a political policy which is utterly obscene and obnoxious".—[Official Report, 27/6/72; col. 866.] That was, and still is, the view of my Party—that laws must be obeyed whatever we may think of them. We are most certainly not condoning this misconduct.

As we see it, there are three main ways of dealing with the problem. First, we could let the existing provisions of the law dealing with local authority losses take their course. That would mean surcharging these losses on the persons responsible and so seeking to make them good in this way. The disadvantages of this course are two-fold. First, in the circumstances of this particular affair it would be unwise and unfair to rest on this method of recovery. It would be unfair on two grounds. First, because such surcharges are made jointly and severally, anyone with some resources—for example, a businessman or perhaps a professional person—could be bankrupted by having to pay not only his own share of the surcharge, but that of his fellow councillors who had limited resources. Secondly, it would be unfair because the incidence of such surcharges might also be most uneven, since an authority with 10,000 dwellings which was late in implementing a rent increase would clearly have a loss ten times greater for each week of delay than one with only a thousand dwellings, and yet the number of councillors would not be ten times greater.

The second disadvantage of letting the law take its course is that surcharging these losses is likely to be unproductive. May I remind noble Lords that surcharge is not in law a punishment, like a fine. It is merely a means of recovering a loss, or unlawful expenditure. The persons concerned are surcharged with the amount of the loss, no more and no less. In the cases with which we are concerned the results of surcharging would probably be that only a small amount of the losses would actually be recovered, since most of the councillors concerned are unlikely to have the necessary financial resources. If that happened, then the part of the surcharged amount not recovered would fall on the rates, where it would be met by the ratepayer and the taxpayer through the rate support grants.

What would be the effect on the councillors concerned of attemping to recover the losses from them? Many would stand to be declared bankrupt and to lose their possessions, even their homes. And at the end of this painful process only a small fraction of the £1½ million would have been recovered. These are men and women who have willingly given unpaid service to the community, some for many years. For the most part, they are not militant extremists. They acted according to their own ideas of what was right and wrong. That does not excuse what they did, but, I suggest, should be taken into account. They were misguided; but they were not corrupt. They were not feathering their own nests. Not only would it be they who would suffer, but their wives and children.

There is another consideration. Surcharges of over £500 attract an automatic disqualification from civic office for five years. Our information is that in most, if not all, defaulting authorities the surcharge would be over that amount. So we have to take into account the probable disqualification of some 400 persons, who, as I have said, have willingly given unpaid and for the most part good service to the community. The acrimony resulting from this procedure, and its prolongation through the period of appeals and by-elections would, in the Government's view, and, I hope, that of the House too, create political strife and bitterness at a time when, above all, we need national unity in this country and a greater sense of co-operation within the regions and the local authorities themselves. It would put a very real strain on the relationship between central and local government. I find it hard to believe that any noble Lord would really support that method of tackling the problem. We on this side certainly cannot.

A second way of dealing with the problem would be to make good the losses by central Government funds. But we consider that for central Government to pay for losses caused by defiance of the law would be quite wrong and tantamount to condoning that defiance. Locally incurred losses must be made good locally. Again, I cannot conceive of any noble Lord supporting that method.

So I come to the solution proposed in this Bill. It is based on two principles. First the lost rent income must be recovered. But this must not be at the expense of the taxpayer. The losses were incurred locally, so they must be made good locally. Secondly, the responsibility for making good the rent loss must be that of the local authority for the area concerned, since the loss arose out of a local authority decision. And the local authority must also decide the method of recovery under the options open to it under the Bill.

In other words, we are proposing that the local authorities should have a second chance to make good these losses. We consider that in the difficult and messy situation with which we are faced this is the best solution. The normal surcharge procedure will be replaced by recovery from rents, or from rates. The £11 million, or whatever is the precise figure, will be made good and the books put right.

I must point out to your Lordships that this is no painless, soft option. Although the councillors will be relieved of the burden of surcharge, they will have to explain to their electorate why they are having to impose the extra burden of recovery. The financial consequences of what happened two or three years ago will have to be explained locally, and there may well be political consequences to face as a result.

Before I turn to the actual provisions in the Bill, it might be helpful if I were to explain why it will not apply in Scotland, where there were similar late implementations of the 1972 Act. The reason is simply that the law relating to audit is quite different there in two major respects. First, it is the Secretary of State who decides whether any surcharge should be made. Unlike the district auditor, he has a much wider discretion either to make no surcharge at all or, as a result of recent legislation, to make a surcharge of any sum up to the amount of the loss or unlawful expenditure. Secondly, there is no automatic disqualification in Scotland following a surcharge. So the Scottish law already has the necessary provisions to deal with the problem.

I return to the main provisions of the Bill. They are based on the existing law relating to audit in Part X of the Local Government Act 1933, which governs the audit of local authorities' accounts up to the end of the financial year 1973–74. Accordingly, the district auditors will continue their audits in the normal way right up to the point where they have to decide whether they must make a disallowance or surcharge for any failure to implement the Housing Finance Act.

Clause 1 provides that at this point, instead of surcharging, the district auditor will issue a certificate in respect of any rent lost, stating the amount and the persons he would otherwise have sur- charged. This certificate will be subject to the same appeals procedure as for a surcharge, and will not become effective until that procedure is complete. Subsections (3) and (5) of the clause provide similar arrangements for any cases of surcharge, for a failure to implement the 1972 Act, made after the first introduction of this Bill in another place. There have in fact been no such surcharges so far.

There may also be minor losses, other than rent, arising out of a failure to implement the Housing Finance Act. Examples of these are interest charges incurred through borrowing as a result of loss of rent income, or the expenses of advertising opposition to the legislation. All this subsidiary expenditure will have been incurred and, if the district auditor finds it surchargeable, he will not make a surcharge, but the cost of these items will be borne wholly by the rates without any subsidy. This is provided for in Clause 7.

Clause 2 requires the local authority to make good the amount in a rent loss certificate, once any appeals have been disposed of and the certificate becomes effective. This clause also provides one method for recovering the amount, which is by a general rent increase. Where reorganisation has taken place, this can be over the whole of a successor authority's area, or over only the defaulting area. The choice of area is entirely a matter for the decision of the local authority responsible for recovering the loss. Secondly, the recovery must normally be completed within five financial years. It can of course be completed more quickly if an authority so wish. But where the recovery is made over the defaulting area only and spread over the full five years, the burden per tenant should not amount to much more than a few pence a week—in nearly all cases less than 10p.

Clause 3 provides the alternative method for recovering the amount in a rent loss certificate. This is by charging it to the rates. Again, this charge may be spread over the whole of an authority's area or over only the defaulting part. It may also be charged over five years. It could, if the authority so decides, be charged over a shorter period. However, if an authority decides to charge the amount to the rates, it may do so only at a specially convened meeting. This is to provide a proper opportunity for public discussion on the merits of charging the ratepayers rather than the tenants. It is also possible to charge part of the amount to the rates and part to rents.

We now come to Clause 4 which terminates the disqualification from civic office of any councillors who have already been surcharged and so disqualified as a result of a failure to implement the Housing Finance Act. A great deal of attention has been focused on this controversial clause. It is common knowledge that it applies to the 11 former Clay Cross councillors, who were disqualified on 7th October, 1973, as a result of lost rent income.

May I make the Government's position absolutely clear on these former councillors? Not for one moment do the Government approve of their continued defiance of the law; and their conduct is reprehensible. So why have we included this provision in the Bill to terminate their 5-year disqualification? We have done so in the interests of consistency and fairness to all—and I stress "all"—those councillors who failed to implement the Housing Finance Act on time.

We understand that there are about 400 councillors in all at risk. Of course the majority have not been disqualified because the audits of their authorities' accounts have not yet been completed. Neither for that matter has the ordinary audit at Clay Cross. What happened there was that the previous Government's Secretary of State ordered an extraordinary audit in November 1972, or a mere six weeks after the first rent increase was due. I am not questioning his undoubted right to do so. I am simply pointing out that of the 18 or so authorities who were culpably late in implementing rent increases, only at Clay Cross was there an extraordinary audit resulting in a surcharge and consequential disqualification. In these circumstances, it did not seem to the Government to be fair or consistent to remove the possibility of disqualification under Clause 1 from the councillors of the remaining authorities for a similar failure, and at the same time allow the disqualification of the former Clay Cross councillors to continue.

Our objective in framing this Bill is to wipe the slate entirely clean and to clear up this mess in all its aspects. We would not have been meeting this objective had we done nothing about the Clay Cross disqualification. I must emphasise, however, that the Government have never proposed that the £7,000 surcharge which gave rise to these disqualifications should be remitted, or that public funds should be used to discharge this liability. The surcharge was upheld by the courts and we have no intention of overturning that decision retrospectively.

I am of course aware that these same persons, and some others, have recently been surcharged again, for matters quite unconnected with the Housing Finance Act, and for amounts of over £500, thus leading to disqualification. My information is that the former councillors who would be covered by Clause 4 have not appealed against these recent surcharges and the time allowed to them for appeal has expired. Where does this leave Clause 4? There is absolutely no intention on the part of the Government to relieve these recent surcharges or the disqualification flowing from them, and the clause to which I have referred does not do this.

I have argued, and would still continue to argue, that on grounds of consistency Clause 4 should remain—the wiping clean of the slate. But the recent developments I have described clearly create a new situation which the Government are looking at. As the time to appeal has only recently expired and most of us have been involved in events about which I shall shortly be making a Statement, I regret that I can say nothing further. However, I undertake that, by the time this Bill reaches Committee stage, I shall be able to report to your Lordships the Government's view on the future of this clause.

The remaining clauses are largely supplementary. They deal mainly with accounting and subsidy arrangements. They provide for the necessary adjustments to accounts consequent on the recovery procedures in the Bill. They also ensure that no surchargeable expenses or losses arising from failure to implement the Housing Finance Act fall on the taxpayer.

My Lords, the partial amnesty contained in this Bill is not unknown in our history. We have a long-standing tradition of tempering justice with mercy in the administration of the law. Even since Shakespeare's days we have recoiled against always demanding the full pound of flesh. While I do not propose to go into a long history of precedents, we do have before us such examples as the Audit (Local Authorities) Act of 1927, when Mr. Neville Chamberlain was faced with a very similar act of defiance of the law by some London boroughs. It was he who, in his Second Reading speech in relation to that Act, coined the phrase of wanting to wine the slate clean, with no ragged ends", which is exactly our philosophy, too, in this Bill. And there are continuing examples in the administration of justice in this country of the exercise of mercy and compassion; for example, through suspended prison sentences, the Parole Board and the use of the Royal prerogative of mercy. Such acts of mitigation of penalties are a time-honoured and integral part of our constitutional system.

What we are proposing in this Bill is not so very different in character. While it has to be done by Statute, in my view it falls into place as characteristic of the British approach to these matters. All the same, I would not seek to justify this Bill on the basis of precedents but on the clear requirement to deal with a mess in a way which takes account of the practical realities and is reasonably fair and consistent.

In commending this Bill to your Lordships for a Second Reading, may I conclude by saying again that there was agreement in another place that some legislative provision is necessary to clear up this problem. The Bill was very thoroughly considered there–17 hours in Committee on a Bill of 9 clauses. There were also substantial areas of agreement—for example, that the rent loss should be made good locally, and that the rule of law should be tempered with mercy.

Nevertheless, we fully recognise that there are still considerable areas of disagreement. Arguments were put forward forcefully and with conviction by those seeking to amend the Bill in another place. Basically, they turn on matters of opinion as to which of several options would best achieve the basic aim of the Bill. We believe that the Bill proposes the best solution to the problem. My Lords, I beg to move that the Bill be now read a second time.

Moved, That the Bill be now read 2a,—(Lord Shepherd.)

3.30 p.m.


My Lords, I am sure the House is grateful to the noble Lord for his exposition of the provisions of this measure, although I am bound to say that I am left in complete doubt as to the future of Clause 4 which is its most controversial item. I regret that he has not dealt fully, or at all in my mind, with the constitutional principles involved. Therefore, I hope that I may be forgiven if I take a little more time in discussing this constitutional background than I would ordinarily do on a Monday afternoon on a Second Reading. In my opinion, this is probably the most important constitutional Bill which has come before this Parliament, at any rate during the present Session. It is therefore necessary for me to fill in certain background details which the noble Lord either did not mention or dealt with extremely summarily. In my view, before the House is asked to give a Second Reading to a measure of this kind it is entitled to be told something more of the context in which it is being asked to legislate, and the persons for whose especial benefit this legislation is designed.

The Party opposite is always—or perhaps I should say usually—loud in its denunciation of privilege, but this Bill, in the strict and etymological sense, is a privilegium; that is to say, a special piece of legislation designed for the benefit of a particular class of person and not for the benefit of the general public similarly placed. The general law regarding surcharges on councillors who have exceeded their powers is contained at present in the Local Government Act 1972, which for this purpose superseded the Local Government Act 1933, but with allowances for changes in the value of money which are very similar to the earlier Act.

For reasons of date which I will not go into, but which the noble Lord the Leader of the House partly explained, most if not all—and I think all—of those who can be advantaged by this Bill have fallen foul of the earlier legislation and not of the Act of 1972, so that we are either wholly or in the main dealing with the earlier legislation. But the distinction is unimportant, because I think it is safe to say that at all material times the general law provided that in the event of councillors exceeding their powers by incurring unauthorised expenditure, certain consequences would follow, subject to an appeal to the court to relieve them of those consequences of their unauthorised expenditure if they had acted reasonably or in the genuine belief that they were acting within the law. If this law operates in any way harshly or unreasonably, I concede that it is reasonable and right to ask Parliament to amend the general law to the extent that it acts unreasonably or harshly. If the injustice had become apparent only retrospectively. I should have been prepared to consider retrospective relief with some degree of sympathy, subject to the fact that the legislation, both of 1933 and of 1972, already allowed the courts—which I should have thought were the proper tribunal—to relieve councillors if they had acted reasonably.

This is not what the Government have, in fact, deliberately chosen to do. No alteration in the general law is proposed. In no other case is it going to be said that councillors ought to be relieved, either for the present or the future or for past misdemeanors. One must assume, therefore, that the Government have considered the general law and concluded that it operates justly. I am not sure that I agree with that, as I shall be saying when I look at some of the provisions of this Bill. What we are being asked to do in this House is not to amend the general law, but to pass a privilegium, a special piece of privilege to relieve retrospectively a particular group of persons who have broken one particular law, and because ex hy[...]othesi we now know that they have not appealed to the court procedure one must conclude that they have all acted unreasonably and have all acted in the knowledge that what they did was not authorised by law.


My Lords, I am sure that when the noble and learned Lord speaks of "all" he will recall that I referred to 400 councillors. The only ones who could have appealed are those at Clay Cross. The others could not yet appeal, because their cases have not been dealt with by the district courts.


My Lords, I am wholly unimpressed by that intervention. Because they have not yet been surcharged it will be open to them to appeal when the surcharge comes, and they will be relieved by the courts under the general law if they have acted reasonably or in the honest belief that what they did was authorised by law. I therefore say again to the House that what it is being asked to do is to relieve a group of persons who have broken the law, about whom it is fair to assume that all of those to be relieved, since no appeal has been lodged, have acted unreasonably and in the knowledge that what they were doing was unauthorised by law. If they have acted reasonably, or in the honest belief that they were doing that which was authorised by law, albeit mistakenly, they can go to the court like any other councillors—if they have become surcharged after the passing of this Bill—without recourse to this Bill at all. They need to have recourse to this Bill only if they have acted unreasonably and in the knowledge that they have acted in a way unauthorised by law.

My Lords, I therefore make as my first point that this Bill suffers from an incurable defect. If it had been a Bill for the amendment of the general law because the general law was too harsh, one could have considered the first Amendment on its merits: but no such claim is made. The Bill is doubly suspect, because it so happens that the particular group of law breakers to be privileged in the way that I have described belong to a Party caucus devoted, at least nominally, to the support of the Labour Party. In other words, they are the present Government's own supporters and the Act which they deliberately broke unreasonably, and with the knowledge that they acted in defiance of the law, is a law passed by a Parliament with a majority of the Party opposite to the Government.

In the light of this fact, which was not touched on by the noble Lord, we must examine its provisions and see how far we can remove its objectionable features. But at the end of the day, the Bill is drawn in such a way that it is a privilegium and I should have preferred the Government, if they had thought it necessary to do so, to make any necessary proposed changes in the general law and not to seek to assist a group of their own supporters in a matter which was controversial as between the Parties.

The Bill is entitled the Housing Finance (Special Provisions) Bill. This is a misleading Title and I suspect that it is intentionally misleading. There are no special provisions in the Bill relating to housing finance; it is a straightforward bill of indemnity; that is to say, its main purpose is to relieve certain persons retrospectively from the consequences which would otherwise fall on them for breaking the law. As the noble Lord, Lord Hale, reminded us when the policy was first announced by means of a Statement in the House, there is nothing intrinsically wrong about an Act of Indemnity as such. Of course, it is of the nature of an Act of Indemnity that it should operate retrospectively; so that, so far, there is nothing to complain of. What makes the Bill unique, so far as I know, among Acts of Indemnity, is not its retrospection, but the fact that it is the only Act of Indemnity passed within living memory with the intention and the effect of removing from the consequences of law-breaking persons who have deliberately abused their official position by defying the law unreasonably and knowing what they were doing.

Owing the intervention of the noble Lord, Lord Hale, at the time the Statement was made, I asked a Question of the Government for Written Answer, which was replied to by the noble and learned Lord who sits on the Woolsack. He gave me a list of Acts of Indemnity passed since the war and the rough circumstances in which they were passed. The list was a long one and I have been through it; but I have not been able to find a single case which had the feature to which I have drawn the attention of the House. If I am wrong I shall be corrected. I believe this Bill to be unprecedented in recent times in the respect that I have stated; but if there is a precedent, then I am quite confident that it is one which should not be followed.

I was very sorry to hear the noble Lord the Leader of the House cite as a precedent the pre-war Bill, the Audit (Local authorities) Bill 1927. That is not a precedent at all, and I will now tell the House why it cannot even plausibly be put forward as one. That was a case in which, I think, the Poplar Borough Council had paid wages well above the market rate. They claimed to believe—and since one of them was the late Earl Attlee I have no doubt they claimed honestly to believe—that what they did was authorised by the law. Certainly, they had grounds for that belief based on the fact that the law did not give a maximum beyond which they must not go. They were surcharged by the district auditor. They appealed from the district auditor to the High Court. The High Court dismissed the appeal. They appealed from the High Court to the Court of Appeal. The Court of Appeal allowed their appeal. The Government of the day or the authorities—or I think it may have been a private citizen—appealed from the Court of Appeal to the House of Lords. The House of Lords reversed the decision of the Court of Appeal. They then went, as they honestly believed they were entitled to go, to the Minister who, under the Act, had concurrent jurisdiction. The Minister allowed their appeal on the basis that they had acted in good faith and he removed the consequences. Some village Hampden then went to the Divisional Court which reversed the Minister on the grounds that he had no jurisdiction once the councillors had taken the way of appeal via the courts rather than direct to the Minister.

In the circumstances it was clear enough that out of a number of very eminent authorities, a number of very sensible people had taken the view that these persons had acted in good faith. Clearly, Mr. Neville Chamberlain was entitled, on the very narrowest view which I have been putting forward, to amend the law in such a way as to give retrospective relief to the unfortunate councillors. As he did so, in a peroration that I shall not quote since I am afraid I shall take too long, he said that the last persons he wanted to benefit were those who had defied the law deliberately. It was unfortunate that the brief of the noble Lord the Leader of the House compelled him to cite an authority which is dead against him.

My Lords, we then come to a most extraordinary circumstance. This Bill is limited to breaches of the Conservative Housing Finance Act, and when the Bill was introduced Parliament was led to suppose that this was all that had to be discussed; but as the Bill progressed through Parliament it has become apparent that this, too, was misleading and, I fear, intentionally misleading. By far the worst of the offenders for whose benefit the present Bill is designed are, so far as I know, the so-called Clay Cross councillors. So far, they are the only offenders whose identity has been disclosed to Parliament or whose liability is certain. We have been told—and the noble Lord the Leader of the House told us again this afternoon—that there may be others. We do not know who they are. We do not know the sums for which they are likely to be surcharged individually, although a very high estimate of the total was given by the noble Lord. What we do know is that they have not been surcharged yet; they may not be surcharged at all; and if they have acted reasonably or in good faith they have a complete defence that they can bring both to the district auditor and to the court.

I will therefore, for the time being, confine myself to the one known case. So far as the Clay Cross councillors are concerned, it has now become apparent that their disregard of the Housing Finance Act was only the tip, as it were, the culminating point, of an extremely ugly iceberg. The councillors, the same councillors whom it is now intended to advantage, had deliberately defied not merely the Housing Finance Act but the financial policies of successive Parliaments, Labour as well as Conservative. They had defrauded their ratepayers—and I do not think that these are too strong words; although their motive appears to have been political rather than financial—of a total sum of not less than £192,000-odd. We now know that there is an additional £52,000 surcharge hanging over their heads; that they have not appealed and do not intend to appeal and cannot now appeal against that surcharge; so they will be disqualified, whatever we do this afternoon, and I suppose they will have to become jointly and severally liable for the moneys.

How much better it would have been, if the noble Lord's arguments had any basis, to have proposed in these circumstances an amendment to the general law. But what began as a constitutional outrage has now degenerated into a ridiculous farce and we are asked to outrage our consciences in a particular matter when, in the only known case, it will have not the slightest effect at all.

The first question which arises out of this is: did the Government know? Did the Government know when they fist sanctioned the policy that the breaches of the Housing Finance Act in the case of the Clay Cross Councillors were only an instalment of what might happen? Did they know that the defiance of the Act was only part of their deliberate defiance of the law? If so, why did they not tell Parliament at the time? Was it in order that they might lead Parliament to suppose that it was only the breach of a Tory Act which was in question? If so, why, when the cat is well out of the bag, do they not now postpone the passage of this miserable Bill, at least until the courts have bad an Opportunity of dealing with the matter? But perhaps it is now too late. Now we know there are to be no appeals the matter must assume an altogether more sinister aspect than when the Bill was originally produced. Why does Parliament have to give an indemnity in respect of the Housing Finance Act alone without being able to know the full extent and seriousness of the other defiances by the Clay Cross councillors? Surely this is treating the whole of Parliament with contempt. We are asked to remove the disqualification from councillors. But how can we do so without knowing the full facts? Is it not better that this matter be referred to the courts? We know that the Master of the Rolls said that the Clay Cross councillors ought to be disqualified in respect of their behaviour in regard to the Housing Finance Act. We have been asked to remove the disqualification, which was openly endorsed by the Master of the Rolls; but there is to be another disqualification about which we are allowed to know nothing, except what has been published in the Press.

As to the nature of this defiance of the law, there can be no doubt, if ever there could have been any after Mr. Bernard Levin's devastating exposure in The Times—for these were founded in an article in the Political Quarterly, not a Conservative organ, by Mr. Austin Mitchell, and on two interim reports from the district auditor to the North East Derbyshire District Council, the second of which was dated only the 8th May. From these documents it becomes plain that, to use Mr. Austin Mitchell's or Mr. Levin's language, lest it should be thought that I am guilty of some hyperbole, the Clay Cross Councillors had for years, even when, as the authors put it, the Housing Finance Act was "merely a gleam in Selsdon man's eye", been organising their areas as a "miniature Soviet" supported by "ruthless purges" of those of their colleagues whose consciences became squeamish, by a policy of dismissal of their officials when their consciences revolted, including a lady clerk who was dismissed in her absence when attending a conference, the "duress" applied to their "chief finance officer", the tampering with official minutes of the Council—removing his protest that what he did was done by duress—by the public intimidation of their critics against a background of allegations of political favouritism in council house allocations.

My Lords, eight of the 11 original councillors suffered the fate of dismissala—"high mortality rate", as one of the writers described it, because their consciences were too delicate for the caucus. These are the men whom we are asked not to disqualify. These are the Labour councillors for whom the Government have devised an unprecedented Bill of indemnity to excuse them for a deliberate defiance of the law for which Parliament in 1933, and as recently as 1972, has devised a remedy. I share the view expressed by Mr. Bernard Levin, that "there is such a thing as political corruption" as well as financial corruption, and these are the men—again I quote from him, using language which is his and not mine—that they were guilty in that they looted the public coffers with the keys to which they were entrusted under the law, not to fill their own, but to form the community which they were supposed to serve in to a kind of miniature Soviet, a forcing house for their political ideas. I have described them throughout as "Labour councillors"; but of course they were crypto Communists or worse. The Government have been prone to intervene from time to time regarding the Shrewsbury two, but the Home Secretary has withstood this. The pressure may be the hand of Esau, but behind that hairy paw is the silky voice of Jacob in the shape of Mr. Bert Ramelson. This is the background, sedulously suppressed by the Government, against which this Bill is proposed.

I now come to its actual provisions. When a councillor is surcharged, the law provides two distinct consequences. In the first place he becomes liable to recoup the ratepayers—or rather, the local authority—for the money he has cost them. Secondly, if the amount of the surcharge passes a certain threshold —E500 under the 1933 Act, £2,000 under the 1972 Act—the guilty councillor is automatically disqualified for election to a local authority for a period of, I believe, five years, subject to the appeal to the court which I have described. The purpose of this Bill is, first, to terminate any such disqualification; secondly, it is to exonerate councillors from the whole of their potential financial liability if the surcharge was made on or after 7th March last, but not if it was made before, because that would be retrospection condoning illegality, although in each case, as I have sought to show, the act which gave rise to the potential surcharge was done before, and the act was unreasonable and in deliberate defiance of the law. Thirdly, the object is to make the council tenants or, alternatively, the ratepayers, pay the deficit; but the council tenants or the ratepayers at the option of the local authority.

Each of these provisions in its present form is, in my view, completely destructive of the rule of law. Each is deliberately discriminating in favour of the Labour Party's own supporters, if that is what they can be called. While the third part is fair as regards the council tenants who, in the nature of things, were the beneficiaries of the refusal to implement the Act, it is wholly unfair as regards the ratepayers at whose expense the act of defiance was done. As it stands, in my submission to the House, the Bill is a constitutional outrage—again, the language is not mine, it is the language of the present Attorney General, whose name appeared on the back of the Bill when it was introduced into the Commons but who gave this description when he was in opposition and advising the Labour Party about this very matter.

It remains to be asked: What would be the consequences to the rule of law of passing the Bill into law in its present form? Secondly, what can we, as a Second Chamber of the legislators with defined constitutional powers but undefined responsibilities hope to do about it? To the first question it seems to me that the answer is appallingly simple. In its present form the Bill is a direct challenge to the rule of law. The rule of law requires something much more subtle than the mere maintenance of law and order by the police and the criminal courts. It means more again than majority rule or Parliamentary sovereignty and an independent and impartial Judiciary. The rule of law requires, among other things, a Government, a Parliament and local authorities which are themselves upright and free of corruption. I agree with Mr. Bernard Levin that there is such a thing as political corruption as well as financial corruption. In this sense the Clay Cross Council was politically corrupt, and I say that the Government are politically corrupt in condoning the political corruption of the Clay Cross Councillors who are their supporters.

Above all, the rule of law is indivisible. If, with impunity, it is set at nought by one group, it can be set at nought by all groups. In the eyes of the law what is sauce for the Government goose is sauce for the citizen gander. If it be in order for the Clay Cross councillor to flout the law in order to benefit the Council tenant, by what authority does the local Government claim—or the local authority be allowed—to impose on the innocent ratepayer the burden of recouping the guilty councillor for the legal liability he would have incurred but for this Bill? If it be in order for a Socialist Council to flout a Conservative Act of Parliament dealing with housing finance, why should not a Conservative Council defy a Socialist law to abolish direct grant schools or impose comprehension, or for a hospital board to refuse to phase out private beds? These are also matters upon which people feel deeply. They are also matters which are highly controversial between the Parties, and the noble Lord has set a bad example and a bad precedent by suggesting that a Government of the same persuasion as those who have deliberately defined laws should introduce measures giving them a privilegium to be excused from the consequences.

If a Government are going to remove disqualification for corruption in local affairs when incurred by their own supporters after they have victimised or employed duress on the servants of the council, where is it going to end except in the complete demoralisation of local officials liable to be dismissed or threatened with dismissal, as were the Clay Cross Council officials, and of local councillors who, in the one-Party State which is Clay Cross, were denied Party endorsement by the local caucus when they protested at the immorality of what was being done and were thereupon cast permanently into outer political darkness? There is no doubt that this Bill is completely subversive of the rule of law, and the pity of it is that it should be endorsed by the Attorney General and, dare I say it, by the noble and learned Lord on the Woolsack, whom all of us in this House have learned to admire and respect.

The Bill has clearly been drafted so as to make amendment difficult or even impossible. Clearly, it ought to have been rejected out of hand by any self-respecting House of Commons and the Government told to think again. Instead it has been sent up to us with its most objectionable features unaltered, although I rather gathered from the noble Lord's opening that one of its most controversial features is secretly under sentence of death. It is our business to see whether the objectionable features can be removed and by what means. My own view is that most of them can. To my mind, it is wholly objectionable that the disqualifications should be removed in their entirety. But the 1972 Act made the threshold £2,000 and not £500, which no more than reflects the change in the value of money since 1933. Despite the retrospective character of such a measure, I consider that it would be just here to apply the 1972 threshold as more realistic, and Amendments will be put down to achieve this when we get to the Committee stage.

The option to impose on ratepayers the obligation to meet the deficit is, to my mind, wholly objectionable, still more so since I think it has been left to the new council—which is largely of similar political complexion to the old and corrupt council—to decide whether or not to do it. The original defiance of the rule of law was indulged to assist the tenants. It was for the benefit of the tenant that the original breach took place. It is therefore the rent and not the rates which must bear the burden now. The five-year period is not ungenerous—indeed, in my opinion it is probably too generous—and over five years I do not think that the burden upon the tenants will be excessive, viewed as a weekly charge. The noble Lord the Leader of the House put the figure at a few pence per week. I had put it slightly larger, at about 30 pence, but the noble Lord is more likely to be right than I am.

What is to be the position of the councillors' financial liability? Of course, in strict legal theory they ought to pay to the uttermost farthing the whole of the £192,000, or £106,000 if you confine yourselves to the Clay Cross councillors alone and to the Housing Finance Act alone. If they are suffering, their friends and supporters in the country might be asked to contribute to bail them out. I accept, as a matter of fact, that this is unrealistic and the spectacle of a dozen or more hopeless bankruptcies would be extremely unedifying and, incidentally, unjust to the other creditors of those concerned. This is why I suggest that the honest course would have been to amend the general law in such a case and not to provide a privilegium, because this will happen again at some time or other in respect of another Act but the Government have not done that.

I shall seek to put down an Amendment limiting liability to the extent of individual guilt and capability to pay, with a maximum of £1,000, and placing responsibility on a court to adjudicate on these; and, if need be, even to remove the disqualification which ensues, if the court thinks that is right. In this way we shall have a Bill which is both just and compassionate, although it will still be a privilegium, because it will not be possible within the compass of the Long Title to introduce wider Amendments or to alter the Long Title sufficiently widely to do it. I should vastly prefer it if the Government withdrew this Bill and came forward in place of it with one which amends the general law. I could then understand much better what we are being asked to do and why it is justified. But that must rest with the Government and we are bound by the Long Title of this Bill. It is to be hoped, even now, that the Government will think again. If they had proposed a Bill in the terms I have suggested, they would greatly have enhanced their reputation. It is to be hoped that even now they will be prepared to restore their reputation for respectability by accepting the Amendments which I have suggested, or proposing similar and better Amendments of their own with the expert help of the Parliamentary draftsmen.