LOCAL GOVERNMENT, PLANNING AND LAND (No. 2) BILL

HL Deb 10 October 1980 vol 413 cc722-834

11.33 a.m.

The PARLIAMENTARY UNDERSECRETARY of STATE, DEPARTMENT of the ENVIRONMENT (Lord Bellwin)

My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.

Moved, that the House do now again resolve itself into Committee.—(Lord Bellivin.)

On Question, Motion agreed to.

House in Committee accordingly. [The LORD ABERDARE in the Chair.]

Clause 60 [Grants in respect of rebates under the Rating (Disabled Persons) Act 1978]:

On Question, Whether Clause 60 shall stand part of the Bill?

Lord ROSS of MARNOCK

This is a Bill which applies to Scotland as well as to England and Wales. I should apologise for my sporadic interventions but I can explain my difficulties. I look first at the Explanatory Memorandum to find those Parts of the Bill which apply to Scotland and I search in vain. Paragraph 20 of the Explanatory Memorandum says: All the provisions of the Bill are applied to England and Wales". That is not true. Clause 39 does not apply to England and Wales at all. Then it goes on: Parts III, IV, XI, XIII, XVI and XVII apply in their entirety to Scotland". And then: Parts I, V, IX, XIV, XV and XVIII apply in Scotland only in part". It will be noticed that Clause 60, which is in Part VII of the Bill, is not there at all. So, by implication, Part VII (Clauses 60 and 61) does not apply to Scotland. But then you read Clause 60 and discover in it a reference to Scotland. When we come to Clause 61, which is the only other part of Part VII, there is no mention of Scotland and at the end it does not say whether or not it applies to Scotland to guide unfortunate Scottish Members. In fact, the whole of it does apply to Scotland but it took me a long time to discover that, having been misled in my simple confidence in the draftsmen and in the Crown Office particularly to ensure that Scottish lawyers and Scottish Members of Parliament and Scottish Lords who are interested would know what is what. It is really not good enough.

When we come to the grant in respect of rate rebates to the disabled, I should like to ask how much the Government presently pay in respect of this? This provision is increasing it to 90 per cent. except for the discretionary increase of £1.50 which local government in Scotland can give. I do not recollect any regulations going through the House by the Secretary of State in respect of this although he has regulation powers at the present time. May I be told how much the Government presently pay, how are the local authorities reimbursed, and how are they going to be reimbursed? Is it a specific grant for Scotland—I am not going to tread into foreign fields in respect of this—or is it part of the block grant? We are fairly familiar in Scotland with the block grant through the rate support grant, and the calculation is entirely different from England's; and I do not want to spur on the Scottish office into producing another mongrel Bill such as the one we have. May I have information about that?

Lord MORRIS

My understanding is that this is a United Kingdom law and any general public law must apply to the whole of the United Kingdom unless specifically excluded.

Lord RENTON

May I intervene before my noble and learned friend rises? I find this is a very obscure clause in any event, quite apart from what has been said by the noble Lord, Lord Ross of Marnock. We have no explanation of it in the Explanatory Memorandum—and paragraph 8 is the relevant paragraph of that memorandum. I think that if, on an important matter of this kind affecting the help given by the local authorities to disabled people, we are enacting anything at all, then it should be set out in a way which can be understood in Parliament and outside it without cross-reference difficulties being involved. If it cannot be set out in the clause itself, I feel that the Explanatory Memorandum should give some kind of help whereas none is given in this connection.

Baroness DAVID

May I make a comment on the clause? I agree with the noble Lord, Lord Renton, that there are certain obscurities about it, but whether it is a gesture to the disabled or to the local authorities one welcomes it. But I cannot resist saying that if this is meant to give some help to the disabled, then nevertheless, the other cuts in local government expenditure are making things worse for the disabled. The district councils with housing cuts cannot give money for improvement grants to houses in the way they did, nor money for adaptations to make houses easier for the disabled to live in with such aids as ramps. There will be less money for new builds when special houses could be built, and the power to lend to disabled owner-occupiers is reduced when they might want to do something to improve their houses. Where the counties are concerned, the cash limits on the counties, particularly on social services committees, mean that what they can do for the disabled is very much less, too. They may be getting something here but they will lose it elsewhere.

The LORD ADVOCATE (Lord Mackay of Clashfern)

I am obliged to my noble friend Lord Morris for making the point that where one has a United Kingdom statute and no express provision is made excluding Scotland, then it applies to Scotland. That is the position as far as this clause is concerned. It is true that the explanatory memorandum has been somewhat left behind in the process of amendments and so on which has taken place, and I very much regret that. But certainly the clause itself applies to Scotland.

The intention of this clause, both for Scotland and for England and Wales, is to do something to help the local authorities in connection with the disabled, namely, to provide a duty on the Secretary of State to pay out to the local authorities 90 per cent. of the grant which the local authorities in turn have made under the Rating (Disabled Persons) Act 1978. That is the purpose of this provision. I think that some reference to the 1978 Act is really necessary because it is a provision requiring the Secretary of State to make good to the local authority 90 per cent. of the grant that they make under that Act. Therefore I must say, with all respect to my noble and learned friend, that I think it is reasonably plain what is intended here.

If I may answer the noble Lord, Lord Ross of Marnock, my understanding is that this power is a new power and that no duty of this kind was in existence previously. So this is a new duty to assist the local authorities by giving a specific grant to relieve them of 90 per cent. of their expenditure under the 1978 Act.

Lord ROSS of MARNOCK

The Lord Advocate says it is a new power, but 1978 was two years ago. Does he mean to say that this was placed on the statute book and that no use was made of it by local authorities?

Lord MACKAY of CLASHFERN

I am very sorry if I have not explained the situation. The 1978 Act gave the local authority power to make grants to the disabled. That expenditure therefore fell on the local authorities, and what I have sought to try to explain is that this provision places a duty on the Secretary of State to relieve the local authority of that expenditure to the extent of 90 per cent. That is a new provision; it puts a new obligation on the Secretary of State to make that relieving provision. I hope I have made it clear this time.

Lord ROSS of MARNOCK

It is quite clear, but that expenditure by local authorities last year would be relevant expenditure in respect of rate support grant. So the Government should have some information as to how much money was spent by local authorities in this case. If we do not know that figure then we do not know the likely cost to the Government of this generosity. It may well be that these disabled people got their rent rebates under the normal rent rebate scheme, which is related to income. Before we give plaudits to the Government for generosity we must know exactly how much it is going to be. Somebody must have made some calculation as to what it is going to be for England and Wales and how much for Scotland.

Lord DAVIES of LEEK

This is relevant to the notes which the Minister kindly provided, which say that increases in rebates made at the discretion of the authority will not be grant-aided. Will that not upset the whole applecart?

Lord MACKAY of CLASHFERN

So far as I am concerned, I am not particularly keen to get plaudits at this minute, so if that is the purpose of the information then I do not mind that I have not got it to hand.

Lord ROSS of MARNOCK

We want to know.

Lord MACKAY of CLASHFERN

I want to deal with the point that the noble Lord, Lord Davies, has made. The obligation laid on the Secretary of State by this provision is to relieve the obligatory element, not the discretionary element. If the local authority give an extra discretionary element then that is not covered by this. The provision is intended to relieve the local authorities of 90 per cent. of what I might call obligatory expenditure under the 1978 Act.

Lord RENTON

I am sure we are indebted to my noble friend for his lucid explanation. As he has indicated, a good deal of time would have been saved if the explanatory memorandum had helped us at all. I am grateful to him.

Clause 60 agreed to.

[Amendments Nos. 123 to 128 not moved.]

Clause 61 [Grants in respect of caravan sites for gipsies]:

On Question, Whether Clause 61 shall stand part of the Bill?

11.45 a.m.

Lord ROSS of MARNOCK

Can the Scottish Office tell us, since this is going to be applied to Scotland, the number of local authorities that have evinced an interest in providing caravan parks for gipsies in Scotland?

The Earl of AVON

Scotland is covered by the grant provision, by dint of Clause 164 (2) of the Bill, that is, Scotland is not excluded from Part VII. I have not got the information for which the noble Lord has asked, but I will let him have it.

The MINISTER of STATE, SCOTTISH OFFICE (The Earl of Mansfield)

I can answer the noble Lord. No doubt I should have collaborated with my noble friend before the Committee sat. As the noble Lord is well aware, under Section 5 of the Local Government (Scotland) Act 1966 my right honourable friend the Secretary of State is empowered to reduce rate support grant in certain circumstances. I am sorry; I have got the wrong section.

Lord ROSS of MARNOCK

Nothing much to do with gipsies.

The Earl of MANSFIELD

In the circumstances, I think I will subside because I do not wish to take up the time of the Committee leafing through English and Scottish paper. My noble friend or I will write to the noble Lord, Lord Ross, before the next stage. I apologise to the Committee.

Lord AVEBURY

Can I assist the noble Lord by pointing out that the 1968 Act does not, in fact, apply to Scotland?

Lord ROSS of MARNOCK

It does apply to Scotland.

Lord AVEBURY

No, it does not.

Lord ROSS of MARNOCK

Oh, yes, it does. I took the trouble to look it up.

Clause 61 agreed to.

Viscount RIDLEY had given notice of his intention to move Amendment No. 129: After Clause 61, insert the following new clause:

("Grants to voluntary organisations

.—(1) The Secretary of State may, with the approval of the Treasury, make out of money provided by Parliament grants to any body which in his opinion is a voluntary organisation whose activities consist of or include working in the interests of gipsies.

(2) Any grant under this section shall be made on such terms and conditions (if any) as the Secretary of State may, with the approval of the Treasury, determine.

(3) In this section "voluntary organisation" means a body, other than a public or local authority, the activities of which are carried on otherwise than for profit.")

The noble Viscount said: On the understanding that the whole matter of gipsies will be debated later on in the Committee stage, I beg leave to withdraw this amendment.

Baroness STEDMAN had given notice of her intention to move Amendment No. 130: After Clause 61, insert the following new clause:

("Designation of areas

.—(1) In section 12 of the Act of 1968 (designation of areas of counties and London boroughs as areas to which provisions of section 10 of that Act prohibiting unauthorised camping apply) the following subsections are inserted after subsection (1)—

"(1A) In the case of an application by the council of a county an order under subsection (1) above, instead of designating—

1. (a) the area of the county; or
2. (b) in a case to which section 190(3) of the Local Government Act 1972 applies (modification of this section where area of county borough designated before 1st April 1974), the area not previously designated;

may designate the area of any district or group of districts in the county.

(1B) Where the area of a county borough was (before 1st April 1974) designated under this section and that area forms part only of the area of a district, subsection (1A) above shall apply as if the area of that district did not include the designated area."

(2) In subsection (5) of section 12, for the words "for that area" there are substituted the words "who made the application for the order".")

The noble Baroness said: On the same understanding, I beg leave not to move this amendment.

Clause 62 [Expenditure to which Part VIII applies]:

11.48 a.m.

Lord MISHCON moved Amendment No. 131: Page 54, line 41, leave out ("prescribed expenditure") and insert ("expenditure on capital account").

The noble Lord said: I think it may be for the convenience of the Committee if there is debate on Amendments Nos. 131 to 137, which of course includes the clause stand part. I understand the Minister agrees that that may be a convenient way of the Committee dealing in one broad aspect with the principles behind this part of the Bill, and in particular Clause 62 and those that follow.

Lord BELLWIN

I entirely agree with that, but I think this might also cover amendments on Clauses 63, 68 and 69, which actually cover Amendments Nos. 142, 146, 147, 149, 156, 165, 166 and 167. I believe they are all covered in the same way.

Lord MISHCON

The noble Lord is certainly inviting a long speech at the very commencement of this matter. If I find that in any remarks of mine I have not covered matters which do arise on the following amendments he mentioned, I know that the Committee, with its usual courtesy, will allow me to come back. I do not want to burden the Committee with too long an address. It may be convenient, now that we have reached this vital stage in the Bill, if I start by using a summary, and I cannot do better than quote from notes on clauses in regard to the epoch-making nature of the provisions now before the Committee. Notes on Clauses, by way of an introductory note, say as follows: These 13 clauses introduce a new system of control over local authorities' capital expenditure. Clause 62 defines the authorities to which the control system will apply and introduces a definition of capital expenditure. Clause 63 makes it the duty of the appropriate Minister to give each authority an annual allocation for capital expenditure and provides for the use of capital receipts and for a degree of flexibility between years. Clause 64 empowers the Minister to direct what proportion of their allocation an authority may divert to any project of national or regional importance. Once having made an allocation to an authority, the Minister is allowed, under Clause 65, to withdraw it in so far as it relates to payments not already made and those which the authority is not already contractually bound to make. Clause 66 defines capital receipts and enables authorities to supplement their allocations be whatever proportion of these receipts may by specified by regulation by the Secretary of State. Clause 67 places on the Minister of Transport or the Secretary of State, as appropriate, the duty of notifying authorities of their allocations before the beginning of the year concerned. Clause 68 permits two or more local authorities to make an agreement. If the Secretary of State considers that an authority has failed or is likely to fail to keep their expenditure within their allocation, he is empowered under Clause 69 to direct the authority not to make any further payment in respect of capital expenditure in excess of their allocation, and not to enter into contracts above a certain size without ministerial consent. Clause 70 provides that payments made in contravention of directions issued under Clause 64 or 69 are ultra vires; but the transactions carried out in contravention of such directions are not invalidated on that account alone. Clause 71 sets out the principles to be followed in valuing different types of capital expenditure transaction. Clause 72 deals with the GLC. That is my own paraphrase. It is not in the Notes on Clauses in that form.

Clause 73 provides that any regulations made under this part of the Bill shall be made by statutory instrument subject to Negative Resolution by either House. Clause 74 deals with the timing and extent of the implementation of this part of the Bill. If I may be permitted a personal note, for over 20 years it was my privilege and indeed my joy to be in local government: first of all in connection with the second largest metropolitan borough of London, where I had the doubtful joy—but it certainly was a privilege—immediately after the war of being the chairman of its finance committee; and thereafter, in the county of London, both in the London County Council and later the Greater London Council, where I had both the joy and the privilege of chairing many committees and of being chairman of the council itself.

I only mention this because local authorities, their members and their officers have had a pride in the service that they have been able to give to the community. It is a pride which is somewhat different from those who belong to national assemblies. However great be the prestige of either House of Parliament, it was always the thought of people in local government that whereas legislators in Parliament enacted statutes and, by Affirmative or Negative Resolutions, dealt with regulations made by Ministers, it was the member of the local authority, assisted by his officers, who carried out the social services throughout the country. They were the people who did the job on the ground. They were not responsible for debates on the legislation which permitted them to do it; they did the vital job.

They encouraged, as a result of that, men of considersble stature and goodwill, both at member and officer level. It was obviously the practice of people in local government, I found, to regard national government as "big brother". That was inevitable. But at least it was the fraternal relationship of "brother" even if national government had a massive size and therefore was entitled to the description of "big".

Under this provision, under this part of the Bill, we go away from the relationship of "brother" and we get to the stage of "daddy" government treating local government as a little child, handing out to it spending money and telling the child that at least it can apportion the spending money so handed out between liquorice allsorts and bars of chocolate as the child may see fit. But the spending money by way of capital expenditure and capital provision, even though the local authority can deal with it and gather it in without imposing any liability upon national government as such, is no longer going to be the province of a local authority.

Local authorities have been accustomed, obviously, not to be profligate and borrow money without the sanction of national Government. But where they could raise it themselves without the necessity for that consent, they were permitted to do it. It was the ratepayers, the citizens of the local authority within the local authority area, who would decide at election time whether the finances of the local authority had been properly managed or not.

This is a very different situation that we face when we now come to this part of the Bill. I gave the very good summary that was contained in the Notes on Clauses—I have no need to repeat that summary again—as to the complete revolution that takes place under this part of the Bill in the whole relationship between government and local authorities—local authorities now being so much minimised in status as a result of the provisions of this Bill.

I come now to the Minister and then to the actual amendments with which we have to deal. It will be my purpose to say that the division that ought to take place here should be on the question of whether Clause 62 shall stand part of the Bill. If Clause 62 falls then the whole policy behind this part of the Bill will fall with it. On the unlikely assumption—as I hope—that I shall not succeed in that endeavour, it will be my duty, obviously, to move amendments in order to try to make this part of the Bill as workable and practicable as possible.

I said I was going to have a word, with the permission of the Committee, about the Minister who will be answering me in due course. In a very short period of time he has earned the respect and indeed the affection of this House, as he did in the field of local government, where he had also great respect and great affection. It is extraordinary of course—if I may put it this way—that "City Councillor Jekyll" has become "Mr. Minister Hyde" because I cannot imagine a sturdier fighter against this part of the Bill had the noble Minister remained at his place of eminence in the local authority world. I cannot imagine him standing it for one moment.

I can almost hear that urbanity of his, which is almost peculiarly rural—if the Committee will forgive the seeming paradox—being disturbed completely if some Minister had dared to impose upon him, as a local authority representative, what these clauses mean. So I come to the submission to the Committee which my noble friends and I make without any apology whatsoever. We look not for any political support at all. We look for the support of those who feel that local authorities cannot be trampled upon in this way. I said the other day, and I do not apologise for it, that if provisions like these are passed by Parliament, then one had better alter the name "local authorities", because I do not know what authority they are left with. As I said, they ought to be called "local agents for the national Government". If that is what the Government want, and that is what the nation wants through its representatives, then that is just what they will get. They will get a poorer type of person as member, and a poorer type of officer, because their discretions will have gone, except as to the priority that they can put upon the money that is meted out to them in this extremely restricted way.

It is now my duty to turn to the amendments, and I shall then leave it to others to continue this debate. I ought to say that it is not a question of this being a voice of mine, or of my noble friends alone. The voice that I am trying so hard, on behalf of local government, to exercise before your Lordships today is the voice of the Association of County Councils, as was expressed, the Association of District Councils, the Association of Metropolitan Authorities, the Metropolitan Boroughs Association and, to a very great extent, too, the voice of the Greater London Council—all the great authority associations within the whole country. Should national Government be pitted in this way against local government throughout the country, or should this House exercise its right, having already passed many provisions of this Bill, to say in regard to this part of the Bill: "Let us cry halt. This is going miles too far"?

On the basis that, unhappily, the Division will fail—and I hope that that is a wrong forecast—it will be my duty to move the various amendments and I can do that, and explain the reasoning for them, extremely quickly. If I may take the Committee to Amendment No. 131, that merely substitutes the words "expenditure on capital account" for the words "prescribed expenditure". The reason for that is that Schedule 9 sets out what the Government feel to be the proper definition of "capital expenditure" which they wish to cover.

For generations, local authorities have known what capital expenditure is and, if it happens to differ between one local authority and another, there is no cause for concern in that. If "revenue expenditure" is called "capital expenditure" by some authorities, or vice versa, the whole expenditure is, under the provisions of this Bill, controlled and curtailed, anyway, and therefore in the ultimate no possible harm is done. But for this schedule to set out these various descriptions of prescribed expenditure is unnecessary. One ought to leave the local authorities, and those who look after the presentation of their accounts, to decide what is expenditure on capital account and what is not.

I ought now to deal with the schedule on the basis that that amendment is not successful, because if it were, and one left out subsection (2) on page 55, at line 11, then Schedule 9 would apply. I can deal very briefly with the other amendments up to No. 137 by saying this. In the schedule, governed by these provisions and therefore being the specific purposes which are deemed to be capital expenditure, are items such as renewal or replacement in the case of land, plant or equipment. Obviously, once you have expended capital on land, plant or equipment, the renewal or replacement of it becomes a revenue item and not property a capital item. That is the reason for this amendment. You cannot have it twice, as it were, and restrict and govern it twice, when you are merely renewing or replacing plant.

That brings me to the close of the observations that I wanted to make on the amendments themselves. But I cannot stress sufficiently that the main burden of my speech this morning is to ask for support from all parts of the Committee for the proposition that this part of the Bill, in dealing with capital expenditure and limiting it, controlling it, and hedging it around as it does, without the slightest discretion for local authorities, except as to the way in which they deal with their expenditure and imposing upon them penalties, ultra vires provisions and goodness knows what, is wrong. That is my view, and the view of so many who have served in local government and enjoyed it, and who want to see their successors—if I may put this pompously, although I hope that it does not sound too pompous—ofthe same stature and order as they believe they are themselves. I ask that the sympathy of this Committee be given to the proposition that here we must stop and here we must say, "This cannot form part of a local government Bill". I beg to move.

12.8 p.m.

Lord EVANS of CLAUGHTON

May I say, first, that I greatly admire the very constructive and very helpful way in which the noble Lord. Lord Mishcon, has put forward this series of amendments to initiate what I hope will be a very important and memorable debate in your Lordships' Committee. It is a further example, as in the case of the block grant discussion that we had yesterday, of the movement by Her Majesty's Government down the road to democratic centralism, so far as local government is concerned. I sometimes blink and think to myself: Is that the Government Bench? Should not such proposals and Bills come forward from a fairly Left-Wing, centralised Labour Government, particularly in the case of the block grants and this part on capital expenditure? There is the feeling that there is a role reversal here, which is very disturbing.

As I am sure will be stated later, and as was stated so clearly by the noble Lord, Lord Sandford, and the noble Viscount, Lord Ridley, in this area, where local authorities previously relied upon loans to fund their capital expenditure, each year, they have kept within very tight limits and have not gone beyond the Government's wishes in the field of capital expenditure. It is not as though this is a justified attempt to control profligate local authorities. In the field of capital expenditure by loan, local authorities have kept well within the Government's spending directives. Therefore it seems to me that this kind of change is unnecessary. The existing arrangements work very well, and so far as I know there has been no complaint from the Government in the annual public expenditure White Papers about local authorities going beyond the capital borrowing requirements of the Government.

The second point that worries me is that by its nature capital expenditure cannot be considered on a year-to-year basis. Capital expenditure and capital planning have to be done over a period of years, yet the proposals enshrined in these clauses require that a local authority's capital expenditure shall be treated on a year-to-year basis with no undertaking of any kind that any capital expenditure permitted this year will be carried forward to a second year. So far as I know from fairly long experience in local government, you have got to plan capital expenditure over a period of years. So there is bound to be uncertainty in capital planning and no guarantee of continuity for local authorities. There- fore, I cannot see how, with the best will in the world, any local authority, particularly the larger ones, can plan and manage its capital programmes.

Another concern of mine is this. I gather that at the Report stage in another place a promise was made that changes would be made. The present proposals extend capital expenditure into interests such as leases in property and goods on annual terms and are counted as capital transactions of an amount equal to the freehold value at the time the interest was acquired. I had understood that the Government were to put down amendments to change that. As any of us who are engaged in local government know, the opportunity to expand in terms of capital by leasing goods or property is an expanding means of enabling local authorities to keep going in periods of extreme financial stringency.

As the noble Lord, Lord Mishcon, has said, I hope that we shall defeat Clause 62, but if that does not happen I should like there to be changes so that capital allocations can be planned over three years in order that local authorities have the right to supplement capital allocation from revenue, which has always been used by local authorities and which is made illegal in this Bill, so as to allow trading undertakings which make profits to use those profits to expand those particular trading organisations. I am thinking of organisations such as airports, but that tends to make one give a hollow laugh if one lives in the Merseyside area where the airport loses £1.5 million a year. However, I gather that generally airports do make profits, and it seems wrong to me that one should not be allowed to use those profits to expand and improve the airport and other trading undertakings of local authorities. I hope that the Government will come up with some change, as they said they would, so as to alter the proposed basis of valuation of leasehold interests.

Finally, I cannot see any need for a change in the law. The present law dealing with borrowing works perfectly well. Local authorities have kept within the limits. It seems to me that the Secretary of State is obsessed with making changes for their own sake. All innovations are not improvements. This one is the very opposite and could be a potential disaster and another reduction in the freedom of local government. Therefore, I hope that your Lordships will ensure that Clause 62 does not stand part of the Bill.

12.15 p.m.

Viscount RIDLEY

I should like to add my own support to what was said by the noble Lord, Lord Mishcon, and the noble Lord, Lord Evans of Claughton, in hoping that this part of the Bill will be left out so that we can all get on with more important things like planning. I say this because I believe, as has been mentioned, that the present system is extremely accurate and very well understood. It has worked for many years, with some faults, of course, but they could be dealt with. The present system is understood and has resulted in very accurate control indeed of the capital expenditure of local authorities over a considerable period. I cannot give an exact figure but in terms of percentage of out-turn to estimates, it is exactly the same. This shows how efficient it is. There may be faults in it, as I have said, which could be dealt with, but I do not believe that the new system will produce anything more accurate or anything like as democratic.

I had hoped that the reforming zeal of this Government might have run into the sand by now, because they have been going at it quite hard during the last 18 months. They should stop here. I think they should be satisfied with what they have done. There are amendments which again should sugar the pill, but may I dwell on what I believe to be the basic fault in the system; namely, the shift of control from borrowing to spending?

The first thing which is likely to prove extremely dangerous to the country and to the economy is that the incentive to realise assets which local authorities may have owned for a long period—surplus land, for instance—and to use them for something more needed in the modern world will be threatened by the clauses in this part of the Bill. If one has a piece of land which one wishes to sell, very often it has been the case that this has been put into the capital fund to be spent on something else. Under the new system this can be done, but for the first time the Secretary of State is taking powers to stop it being done if he so wishes. The Secretary of State may never use those powers and this one certainly would not; but the powers will be there and the incentive is definitely threatened by this part of the Bill.

Secondly, the flexibility that exists—that is, using some of the rates to put into capital, and vice versa—disappears, too. Again, none of this may happen but there is a threat of it. The use of capital receipts and of rates to build up capital funds is threatened.

Finally and briefly, the noble Lord, Lord Evans of Claughton, has already mentioned that planning for the future is made extremely difficult by the short-term nature of the powers inherent in this part of the Bill. There is a certain carry-over and we hope to improve that by the amendments we have put down on this point. But it takes a long time not only to get projects off the ground but also to plan and to build them. It is said that to build a new road takes 39 steps. It takes seven years. If you start a new road and leave it half finished it is not going to be much use to anybody. There must be, therefore, a longer-term commitment, if a project is started, that the capital allocations to finish it shall always be forthcoming. This is threatened by the Bill. Therefore I should like this part of the Bill to be rejected. The present system has been extremely efficient. It has done everything that the Government have wanted it to do—it has controlled total capital very carefully—and it is perfectly adequate for the moment.

Lord SANDFORD

It grieves me to have to get up once again and say that the Government's proposals in this field are opposed by all three associations. The reasons why we are opposed to them have been made very clear by the three speakers who preceded me. All spoke for different sectors of local government.

The fact of the matter is that there is no evidence yet—my noble friend will no doubt bring it forward if there is—that local government has been any more remiss in this field of capital expenditure than in the fields which we discussed yesterday. Nor is there any evidence which has convinced the associations that the new system is inherently better in its working than the old system.

Previous speakers have not mentioned this, but it is fair to say that a few con- cessions have been obtained so far which will make things a little easier; namely, freedom to abrogate the main blocks of expenditure—housing, education, transport, and so on—and to use the total sum for whatever capital purpose the local authority thinks fit. That is a gain. It is also a gain to have some freedom to continue using capital receipts, as at present, on top of allocations. It is also a gain to have the minor items of equipment costing under £5,000 excluded. It is also a gain to have the housing cost yardstick and the Parker Morris minimum housing standards scrapped. Indeed, that is particularly valuable for the district councils that are the main housing authorities. But that does not overcome the fundamental objection to the proposed system of expenditure control relying on expenditure control year by year, as opposed to the flexibility of the borrowing control, and that is because this new system will involve all the local authorities—each of them—in being required to keep within fixed annual allocations, albeit with a 10 per cent, tolerance. As my noble friend has said, we cannot run capital projects on that basis.

Furthermore there is the objection—and I shall not go all over it again because my noble friend has just done so—that Clause 69, which I think is embraced in this debate, gives the Secretary of State far too wide powers of discretion when a local authority overspends. There is really no evidence to show that those wide powers are required on the basis of the performance of local authorities in the past. So, despite the concessions, I must say that the present proposals to control capital expenditure, as well as borrowing, are still inherently unacceptable as an unnecessary restriction on local authorities' powers. It really is very bad for the whole system of local government that we are being asked to swallow this.

12.22 p.m.

Lord PARRY

I had intended to speak to a later clause, but as there is a general debate and as regional airports have been specifically mentioned, I now intend to ask your Lordships' Committee to hear the submissions that I should like to make. It is necessary to cite the Addison Rules. The Committee will know that I am chairman of the Wales Tourist Board and a member of the British Tourist Authority. Neither of those bodies is a party to the remarks that I am about to make, although they might not necessarily disagree with them. Naturally, I have informed the office of the Secretary of State for Wales of the submissions that I am about to make. I have also given the noble Lord, Lord Bellwin, notice of the problem that I wish to raise with your Lordships' Committee.

The matter arises out of the general context of regional airports and I wish specifically to speak about the problem as it affects the Cardiff—Wales Airport. There is no provision in the Bill for a specific allocation to airports operated under a consortium arrangement. Each local authority individually will receive its block allocation and a proportion of that, under the heading "other services", may be allocated by the authority to airport capital expenditure. In that way capital expenditure on the airport will have to compete with other services for the limited capital allocation.

Bearing in mind the arrangements for financing between the constituent authorities, it will be necessary for each of the constituent county councils—in this case they are Mid, South and West Glamorgan — to agree to a specific allocation for the capital programme of the Airport Joint Committee. That could give rise to difficulties in terms of priority of allocation within the individual local authorities concerned. Furthermore, it is considered unreasonable that the capital allocation for the airport, which as a regional airport serves a considerably wider area, should not be calculated independently of that for the three constituent county councils, whose allocation will be based on criteria unrelated to the airport needs.

The case has been made by JACOLA—that is, the Joint Airports Committee of Local Authorities—that airports, as trading organisations, should be considered outside the block allocation. Because an airport is a commercial operation, there is a case for excluding investment in airport infrastructure from public sector expenditure control, because that investment is made with profitability in mind. That argument has not proved acceptable to the Government and it appears that airports, with certain exceptions referred to below, will receive no special treatment under the Bill. JACOLA has argued too that, as a trading organisation, an airport should be able to use surpluses on its trading account to finance capital expenditure without counting against the overall allocation. That is of no immediate significance to the Cardiff—Wales Airport, as we are not yet in a profit situation.

The Airport Joint Committee does not support the view that local authority airports as a whole should be excluded from control, but it does consider that capital expenditure on regional airports designated in the Government's White Paper on Airports Policy should receive special consideration and should be exempt from capital expenditure controls under the Bill. Should total exemption from control not prove acceptable, then the Airport Joint Committee will urge that regional airports should receive wider specific exemption by regulations made by the Secretary of State under Schedule 9 to the Bill.

The Bill already makes provision for the Secretary of State to direct that a specific part of the aggregate approval shall be spent only on a specified project of national or regional importance, and I guide the Committee to Clause 64. The Government have indicated their intention to allocate a proportion of the overall expenditure allocation for airport projects of this nature. That earmarked allocation will be available for, as it says: significant capital expenditure on the expansion or improvement, in line with national airports policy, of operational facilities at airports fulfilling a national or regional role. That fits very much into the Government's own expressed intention of wishing to off-load from the major airports to regional airports some of the traffic passing through. At (b) it says: exceptional capital expenditure required by national regulatory authorities to meet national or international standards of health, safety or security. It is my contention that that definition embraces only major capital expenditure needed to sustain the primary function of the airport, such as new terminal facilities, runways, navigational equipment, et cetera. It is not intended to cover expenditure on such items as noise insulation measures, car parks and staff facilities. Such capital expenditure is outside the definition and will be dis- tributed to local authorities in the normal way as part of the "other services" block allocation.

The Cardiff-Wales Airport is the designated regional airport for South Wales and the South West of England and, as such, major capital expenditure, in accordance with the above definition, would qualify for a specific allocation. Routine capital expenditure, however, would still have to be met from the "other services" allocation to the individual local authorities. Representations are being made to the Welsh Office to secure that, if possible, all prescribed capital expenditure on the airport will be subject to a specific allocation to the Airport Joint Committee.

I appreciate that the Minister may not this morning be in a position to give a detailed reply to the detailed point that I have chosen to make, but I shall be perfectly happy if he is prepared to let me have an answer to that. He will probably wish to consult with his colleagues, the Secretary of State for Wales and the Secretary of State for Scotland. I am grateful to the Committee for allowing me to insert that matter at this point.

12.29 p.m.

Lord BELLWIN

I should like to deal with the last matter because, in a way, it is a specialist one. My information so far as the airports are concerned is that the Department of Trade, following representations which have been made, is intending to arrive at the appropriate method of ensuring that adequate resources are available for all essential capital investments at major local authority airports. In fact, that expenditure would then he covered under the category of "special projects of national importance".

For myself, I have tremendous sympathy with the point which the noble Lord, Lord Parry makes. Indeed, I have had some correspondence and discussions with the noble Lord, Lord Hill of Luton, who is also deeply interested in this matter. As it stands at present, I think that it is still to some extent on the table as regards exactly what is to be done. But, frankly, what I have seen I find very encouraging as one, who himself, was one-time chairman of such an airport. I had to be concerned with its affairs and its finances and its running—and indeed its opportunities, which I think in many ways are exciting. When the noble Lord, Lord Evans, speaks of Liverpool losing money, although I am open to correction I should have thought that arguably it is the only one that does because all the others do extremely well. I do not know how Liverpool manages to do it. He must tell us some time.

Coming to the rest of this important debate on this very important financial aspect of the Bill, I should like to say first that I much appreciate—as I always do—the kind remarks which the noble Lord, Lord Mishcon, made about me. I will try to deal with some of the individual amendments, although I know, of course, that the purpose of this debate is to expedite discussion—and I hope it will. Nevertheless, as we come to some of the specific points later on I will answer the details such as the ultra vires point, the trading profits point and so on, in some detail. At present I think I had better speak to this amendment and to the general principles to answer what has been said so far.

As the noble Lord, Lord Mishcon, said, this amendment is one of ten which would have the effect of substantially weakening the control over local authority capital expenditure which is an essential part of the proposals in Part VIII of the Bill. It strikes at the heart of the new proposals to such an extent that I fear there must still be some serious misunderstanding about the need for the new proposals, their effect and the very real benefits which they offer to local government. Having listened particularly to my noble friends Lord Ridley and Lord Sandford, I make that statement with more feeling than I might have done before. Therefore I hope the Committee will understand if I reply to the amendment against that wider background. I think it would be inappropriate to deal with this amendment in a narrow fashion.

One of the primary responsibilities of Government is to secure a proper balance in the use of resources between the public and private sectors. This is particularly important where capital investment is concerned but there is currently no statutory power for the Government to control the capital investment of local authorities. There is only a control on borrowing and that control has proved ineffective in recent years because authorities have shown themselves able and willing to finance capital expenditure from internal resources over and above the levels provided for in the Government's public expenditure plans. Local authorities have also provided capital assets, including municipal offices and buildings, by such means as leaseback arrangements, under which the cost has been hidden as revenue expenditure instead of capital.

I entirely agree with the noble Lord, Lord Evans, and others who have intimated that local authorities have had a generally good record in keeping down their capital expenditure, but it is only fair to say that a considerable part, indeed if not all of this, is probably due to the constrictive effect of the existing detailed borrowing and project controls. Even so, I recognise that total capital spending has fallen substantially in recent years and that the total capital spending of local authorities has not been very far from the provision in the Government's spending plans. But within that performance it is significant that local authorities have tended to underspend on some services, particularly on housing, and to overspend very substantially on those areas in what is called the locally determined sector where they have been free to supplement their borrowing approvals by contributions from the rates. The locally determined sector borrowing allocation was reduced each year by the previous administration in an attempt to allow for the use of revenue finance, but each year local government used enough extra money from the rates to push total LDS spending well above the Government's plans.

That situation was less serious at a time when there was over-generous housing provision—over-generous in the sense that it was more than local authorities needed or wished to use. We now have more realistic provision for housing and there is no longer any "fat" within the housing provision to offset overspending in other areas. Hence the need for the new system. However, it would be wrong to regard these proposals as simply an extension of Government control, and I am sure I do not surprise the noble Lord, Lord Evans, when I say that by no means do I accept his reference to our moving down the road to what he called "democratic centralism". This is a package of changes which seeks to reflect more accurately the respective concern of central and local government than does the present system and it offers authorities—and I say this deliberately—an unprecedented freedom from detailed control by central Government.

Let me explain. This is so important to understand because any assessment of what we are seeking to do must be measured against the present position and what some noble Lords have said they wish to see retained. At the present time approval for capital expenditure is given in a confusing variety of ways. It can be by block borrowing approvals, as in the personal social services or the locally determined sector; by a combination of block expenditure ceiling and specific borrowing appeals as in housing; by approval of building starts, as in education, or by a combination of grant and borrowing approvals, as in transport and some minor services. Local authorities have often and long complained about this unco-ordinated hotch-potch of control procedures. They have also always complained about the amount of detailed control to which their capital expenditure is subject—even down to having the very design, size and costs of individual projects crawled over in minutest detail by vast armies of people in Whitehall.

That is the position as it is at the moment. It is costly, it causes delays and it is frustrating in the extreme; and I wonder, when noble Lords tell me about the present system, whether they really know, by working within it as I have had to do, just how frustrating that can be. For every single thing you want to do you have to go to Whitehall and there are masses of forms to be filled in. Noble Lords would be astonished if they could see how many, and that is what local government has to do today. It is frustrating, it is wasteful, it costs money and staff, and although local government thinks it has freedom in fact it has no freedom because if it is not approved for key sector approval then it may not borrow. The local government officers have to come to London and, as I said at Second Reading, it is British Rail which would most fear for this because local authority officers will not be using their services as often in the future.

Lord MISHCON

I wonder whether the Minister would kindly give way for one moment. Is he really telling the Committee that all the local authority associations of this country do not know their business?

Lord BELLWIN

I am not saying that at all. What I am saying, as one who has spent so much of his life working in local government and having tried to get through capital projects as we went along, is that I know the frustration that exists, and I suspect that much of the great pressure on members who are opposed to this comes because in fact they have not had to do the day-to-day nitty-gritty work, whereas for those who have to do it it is part of their day-to-day routine.

Our new proposals will change all that. Ministers will have a duty to make allocations of prescribed expenditure for each authority. This will be far from the rigid control which some people have made it out to be, and most important to note carefully is that an authority will be able to increase its allocation in not one but a number of ways: by a 10 per cent. carry-over between years; by use of capital receipts from the year in question or any previous year. I should like to say to my noble friend Lord Ridley that I did not take his point because in fact there is a complete freedom to continue to use capital receipts that are in a capital fund or that there may be in the future in any capital fund. I am glad to advise him on this, and I make no bones about it that when I was in Leeds I made extensive use of capital receipts. It is right that local authorities should be able to use their resources to the best advantage, because what better can there be than to look at capital resources and to say "I could do better. If I had the money from disposing of one thing I could apply it another". Therefore the use of capital receipts is an incentive for an authority. It must be a good thing for an authority to use its resources and this Bill will in no way restrict that. On the contrary it gives that as an additional allocation on top of what may be allocated for authorities to use.

As to that, the only restriction on capital receipts will be on certain housing receipts on the sales of council houses and repayments of mortgages. Only 50 per cent.

of those will be able to increase allocations, because obviously the scale of receipts there is likely to be very considerable. In addition, allocations can also be switched from other authorities anywhere in the country. What a new breakthrough that is. You can go to any authority in the country who may have an allocation more than it wishes to use and, by agreement, you can have that allocation. This is a flexibility that, to my mind, is of enormous importance.

Allocations will also carry with them an automatic borrowing approval. Once you have the allocation you do not have to come to Whitehall again to get borrowing approval. The total allocation with all these additions can then be used for any purpose. Local authorities will be free to decide their own priorities, not merely between projects but even between services. For the first time ever it will be the local council, not Whitehall, which will decide in any year whether the need is for schools rather than roads, or old peoples' homes rather than council houses. Project control will be a thing of the past except for projects of national or regional importance. I must say that this is an enormous breakthrough for local authorities. It is a degree of freedom which, when I was in local government, I never dreamed Whitehall would concede. It is only when you have to work within it that you can appreciate the extent of it. The noble Lord, Lord Mishcon, said that I was a Jekyll and Hyde. He said it in such a nice way that no one could possibly take offence. But I would repeat what I said on the financial proposals yesterday. If I did not believe that this was not only good but a real advance for local government, I could never put it in the way I do. It is what I always wanted, and I believe in the end it will be an enormous boon to local government.

To try to come to a conclusion I say that in return for all this all we are seeking is a ceiling on the aggregate of local authority capital expenditure. If I may come quickly to the details of this particular amendment, which refers to prescribed expenditure, it is simply expenditure which is subject to control. The term, "prescribed expenditure", is new in this context, but the expenditure to which it refers will be familiar to local authorities because it covers all types of expenditure which authorities include as capital in the statistical returns they make to my department. I finish by saying that it is essential that the expenditure which is to be controlled should be related to assets on which payments are to be made, not to the method of finance. I will not try to deal with the other points in detail. I hope I have emphatically said why I feel this is not just something desirable; I think it is a great breakthrough for local government, and I hope the Committee will support it.

Lord SANDFORD

The Minister speaks very convincingly from a long experience in local government, but may I ask him this. Bearing in mind the fact that these proposals have been with us for a long time now and the Bill has been before Parliament from the beginning of the year, how is it that, if these proposals do have the merits the noble Lord claims, he and his colleagues have so far totally failed to convince the associations of these merits? Surely there must be something that accounts for that. That is the first point. The second point is this: Given that fact, and it is an undoubted fact, would it not be wiser, if he thinks there are such merits and virtues in these proposals, to spend a bit longer to convince local government that they do in fact exist?

Lord BELLWIN

If I may just answer that point, the very fact that my noble friend Lord Ridley was uncertain about the intentions with regard to capital receipts is very significant. I said yesterday on the other financial proposals, and I say it now, that there continues to be considerable misunderstanding as to exactly what we propose. The very fact that capital receipts can be used to the extent that they can is so important, and yet when I am asked why so many people in local government still seem to be unhappy when I am so enthusiastic, I must come back and use that as the basic answer; that there continues to be considerable misunderstanding. I venture to say that if the discussions that go on were more objective and more willing to look in detail at exactly what the proposals are, I think we might have less misunderstanding.

Viscount RIDLEY

I must accept what my noble friend says about capital receipts. I apologise if I got it wrong. The Bill, when it originally came to this House, did include that; there is some concession for which we are grateful. A few more bones would help, too.

Lord NORTHFIELD

I have listened with interest to what the noble Lord, Lord Bellwin, has said, and said as far as I am concerned reasonably convincingly. But I wonder whether he appreciates that the trouble arises not only from a failure to get across the principle of what the Government are doing here but a failure to communicate the content of what they propose. In other words, the difficulty the Committee is in, and many local authority members are in, is that they read Clause 63(1), which seems to give the Minister total power to designate any figure about capital expenditure and to impose it on the local authorities. Then we come to all these amendments, all the worries of local councils all over the country; my amendments, for example, dealing with the need for local authorities to be able to spend on industrial development. The Government have given no clue as to whether in using Clause 63(1) they will be taking account of these sorts of things in arriving at the total to be imposed on the local authorities. I wonder if the noble Lord realises that many of us who understand the principle, and have sympathy with what he is saying, nevertheless end up in difficulty, because he has never spelled out how these powers are to be used on sensitive matters which local authorities and others think they will be denied from using under the powers of Clause 63(1).

Lord BELLWIN

As far as I know, Clause 63 refers to the total overall amount that will be allocated, but I say again that within those sums the authority gets its first time ever opportunity to decide where its priorities are. I hope the noble Lord, Lord Mishcon, will not mind my saying that that should not be belittled; it is an enormous thing. We always wanted to spend it as we felt best; we felt that we knew better than Whitehall where our priorities were. We wanted to be able to do this very thing.

To take Lord Northfield's point, I do not know if the failure to put the detail over is the fault of central Government, local government or anybody. I take what he says as a fair point; I must accept it if he says it. I cannot say other than that, if that is so, it is to be regretted.

What I have said is the fact and that is why I believe this is not the ogre it has set out to be, but quite the contrary. I have spoken to many people, and when I said this the last time I was told "name some"; I can name any number of people who take my point entirely about this—many, many who doin local government.

Baroness FAITHFULL

I speak as a former chief officer of a local authority. I apologise to the Minister because I still do not understand the question of flexibility as between one authority and another. Do I understand that, if reference has to be made for capital expenditure to the Department of the Environment, money can be transferred from one authority to another authority because one is spending too much and another too little? I just do not understand this point.

Lord BELLWIN

It is allocations, or parts of allocations, which can be transferred to any authority in the country at all. That is so exciting, frankly, if you think about it, in the opportunity it provides, that I can well understand that my noble friend, as an officer, finds it hard to grasp in the first instance.

Baroness FAITHFULL

If I may rise again, I should find it exciting if I were the recipient, but whether I would find it quite so exciting if I was the one who had to give, I am not quite sure. However, I am most grateful to the Minister for explaining it to me.

Lord DIGBY

I wonder whether the Minister could give us some idea as to how this allocation will be made. Will it be on a basis that the country can afford £X divided among all the authorities? Or will the Government go in detail into whether such an authority needs, for instance, so many schools, so many social projects, and so on? There appears to be a 10 per cent. tolerance and I am not clear whether this is to allow some flexibility for local authorities, or whether it is to allow for the fact that spending and budgets are not likely to be the same. It is worrying to local authorities from quite a different point of view, which has been advanced by most people. If an allocation is granted, I believe that the maximum will also tend to be the minimum and there will be great pressure for that to be spent, although it may not be absolutely essential.

Lord BELLWIN

Very simply, the allocations will be built up in this way. Just as now, individual services and functions will make their bids. For example, an authority may say that it wants to do so much in education, so much for housing, so much for social services, the environment, and so on. The blocks will be built up exactly as they are now into an aggregate total within what it is felt each service would like to see spent. That will then be made into one total aggregate. It will come as an allocation of that aggregate, but the difference is that it will now be up to the authority—although it will be specified as to how it is built up: so much for education, social services, et cetera—to disregard that if it wishes. It will be entirely up to the authority so to do. That is how it will be done. That is not very different from the present system. The difference can be seen when one starts to decide how one applies the allocation of monies.

Perhaps I could say what is, as far as I am concerned, pretty much a last word on it, unless we do get into the detail. We must remember that this is a package deal. It is a considerable reduction in detailed control in return for a clearer method, if you like, of overall control. That is what we are setting out to do.

I am sure that it must be acceptable and understandable to your Lordships that there has ultimately to be some overall control, not least in the importance that attaches to general control of public expenditure. So we come to this package deal to give these freedoms in exchange for an understanding that there has to be an overall ceiling.

Lord MISHCON

If I sound it correctly, I think that possibly the Committee has reached the stage when it may want to say whether or not it thinks that the Government should think again before it flies in the face of all the local authority associations of this country and local government throughout the country. I repeat that there should be an opportunity to think again and talk again, which is the only thing I ask of the Committee and of those who have spoken from all sides of the Committee in favour of what I tried to put before. In those circumstances, if it meets with the convenience of the Committee, I propose to withdraw my Amendment No. 131 and not move my Amendment No. 132, to give the Committee an opportunity to divide immediately on the main matter, which is, of course, to leave out the clause.

Amendment, by leave, withdrawn.

[Amendment No. 132 not moved.]

12.55 p.m.

On Question, Whether Clause 62 shall stand part of the Bill?

Their Lordships divided: Contents, 95; Not-Contents, 61.

CONTENTS
Abinger, L.	Cork and Orrery, E.	Freyberg, L.
Alexander of Tunis, E.	Cottesloe, L.	Gainford, L.
Alport, L.	Craigavon, V.	Geddes, L.
Ampthill, L.	Croft, L.	Gowrie, E.
Armstrong, L.	Cullen of Ashbourne, L.	Greenway, L.
Avon, E.	De Freyne, L.	Hailsham of Saint Marylebone, L. (L. Chancellor.)
Balerno, L.	Denham, L. [Teller.]
Bellwin, L.	Digby, L.	Hanworth, V.
Belstead, L.	Drumalbyn, L.	Hastings, L.
Bessborough, E.	Eccles, V.	Hatherton, L.
Birdwood, L.	Effingham, E.	Henley, L.
Boardman, L.	Ellenborough, L.	Hornsby-Smith, B.
Bridgeman, V.	Elles, B.	Hylton-Foster, B.
Brookes, L.	Elton, L.	Ilchester, E.
Caithness, E.	Evans of Hungershall, L.	Kinloss, Ly.
Cathcart, E.	Ferrers, E.	Kinnaird, L.
Chelwood, L.	Ferrier, L.	Lauderdale, E.
Colville of Culross, V.	Fraser of Kilmorack, L.	Long, V.
Loudoun, C.	Mowbray and Stourton, L.	Sempill, Ly.
Lyell, L.	Murton of Lindisfarne, L.	Sharples, B.
MacAndrew, L.	Northchurch, B.	Spens, L.
McFadzean, L.	Nugent of Guildford, L.	Stanley of Alderley, L.
Mackay of Clashfern, L.	Orr-Ewing, L.	Strathcona and Mount Royal, L.
Macleod of Borve, B.	Pender, L.	Sudeley, L.
Mancroft, L.	Renton, L.	Suffield, L.
Mansfield, E.	Richardson, L.	Swinfen, L.
Margadale, L.	Robbins, L.	Trenchard, V.
Marley, L.	Romney, E.	Trumpington, B.
Middleton, L.	St. Davids, V.	Vaizey, L.
Monk Bretton, L.	Saint Oswald, L.	Vaux of Harrowden, L.
Morris, L.	Sandys, L. [Teller.]	Vickers, B.
Mottistone, L.	Selkirk, E.	Vivian, L.
NOT-CONTENTS
Amulree, L.	Galpern, L.	Noel-Baker, L.
Ardwick, L.	Gardiner, L.	Oram, L.
Avebury, L.	Glenamara, L.	Pargiter, L.
Aylestone, L.	Gosford, E.	Parry, L.
Balogh, L.	Greenwood of Rossendale, L.	Peart, L.
Beaumont of Whitley, L.	Hale, L.	Pitt of Hampstead, L.
Beswick, L.	Hall, V.	Ponsonby of Shulbrede, L.
Birk, B.	Hampton, L.	Rochester, L.
Blease, L.	Hatch of Lusby, L.	Ross of Marnock, L.
Boston of Faversham, L.	Henderson, L.	Segal, L.
Bowden, L.	Hill of Luton, L.	Simon, V.
Brockway, L.	Houghton of Sowerby, L.	Stedman, B.
Cledwyn of Penrhos, L.	Irving of Dartford, L.	Stewart of Alvechurch, B.
Collison, L.	Janner, L.	Stewart of Fulham, L.
Cooper of Stockton Heath, L.	Kilmarnock, L.	Stone, L.
David, B.	Kirkhill, L.	Strabolgi, L.
Davies of Leek, L.	Leatherland, L.	Underhill, L.
Denington, B.	Llewelyn-Davies of Hastoe, B. [Teller.]	Wallace of Coslany, L. [Teller.]
Elwyn-Jones, L.		Whaddon, L.
Evans of Claughton, L.	Lovell-Davis, L.	Wigoder, L.
Gaitskell, B.	Mishcon, L.

On Question, amendment agreed to.

Resolved in the affirmative, and Clause 62 agreed to accordingly.

Schedule 9 [Prescribed expenditure under Part VIII]:

1.2 p.m.

Lord BELLWIN moved Amendment No. 132A: Page 147, line 41, at end add: ("(bb) the reclamation, improvement or laying out of land;").

The noble Lord said: Paragraph 1 of Schedule 9 sets out the various types of expenditure which are regarded as being capital in nature and which are the subject of the controls embodied in Part VIII of the Bill. It has been the Government's intention that the list of activities contained in paragraph 1 of the Schedule should summarise as faithfully as possible what is conventionally and generally understood as being "capital expenditure".

It has come to our notice that the list as presently drafted does not include work on the reclamation, improvement or laying out of land. However, derelict land clearance, site preparation and environmental improvement are included in the statistical returns at present used by local authorities to show their capital payments and outturns per financial year. The amendment is therefore required to bring paragraph 1 of Schedule 9 into line with accepted accounting practice. I beg to move.

[Amendment No. 133 not moved.]

Lord MISHCON moved Amendment No. 134: Page 147, line 42, after ("conversion") insert ("major").

The noble Lord said: I shall not detain the Committee long. The dividing line between repairs and improvements is obviously a difficult one to define. One can think of works such as rewiring which could, under the Bill, be construed as capital but which local authorities would charge to revenue. I think that all the associations are unanimous in their view that only major improvements—for instance, where council houses are substantially changed internally to modernise them—should be treated as capital. Therefore, the amendment seeks to add the word "major" before the word "conversion". I beg to move.

Lord BELLWIN

I understand the reason behind the amendment but I do not believe that it would be of any real help to local authorities. It would, for a start, introduce uncertainty about the extent of the controls. The word "improvements" itself is not capable of any very precise definition—although we intend to help authorities by indicating that we would not regard as an improvement anything that is required merely to keep a structure in use for its existing purpose. But having decided broadly what is an improvement an authority would then have to decide what constituted a "major" improvement. There could be no guarantee of consistency between authorities and, in consequence, no guarantee of consistency in the coverage of the control or the reporting of expenditure or improvement works. This would not be acceptable.

Nor would the amendment allow authorities in general to increase their capital expenditure. Expenditure which is excluded from control will still have to be contained within the national provision for capital expenditure by local authorities. Consequently the aggregate amounts available for allocation to authorities will have to take account of the estimated amount of uncontrolled expenditure. This could require reductions in the amounts available for allocation, and so reduce authorities' freedom to decide their own priorities since each of them would have to take their pro rata share of the reduction, no matter how little, or how much, they spent on the items excluded from control.

Lord MISHCON

Having heard the Minister expatiate on this problem I do not intend to carry it any further at this stage. I ask the Committee for leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord MISHCON moved Amendment No. 135: Page 147, line 43, leave out ("renewal or replacement").

The noble Lord said: I have wearied the Committee already in the course of my introductory remarks with the reasoning behind this amendment, which is of course that "renewal or replacement" of land—and exactly the same applies to machinery and plant in the subsequent amendments—should be a revenue item and not a capital item. As Amendment No. 137 is the same as 136 but is worded somewhat more clearly in carrying out the effect of 136, when I come to that amendment I shall not be moving 136 but shall move 137 in its place. I beg to move.

Lord BELLWIN

This amendment would remove from control under this part of the Bill expenditure on the renewal or replacement of any capital asset and also on the installation of movable and immovable plant, machinery and apparatus. The present national accounting practice is to count expenditure on all those items as capital expenditure. If the Government were to accept these amendments, a substantial loophole would be created in the control over the totality of local authorities' capital expenditure as it is conventionally understood.

It is true that when a local authority has to scrap a vehicle, for example, and replace it with a new one, the net effect on the authority's stock of capital assets is nil. However, and leaving aside the question whether the replacement is in fact necessary, the local authority's expenditure on the replacement has to be financed, directly or indirectly, out of ratepayers' pockets. This still has the effect of diverting capital resources from the private to the public sector. The exclusion of such expenditure from control under the new system is, therefore, considered to be unacceptable.

I know that the noble Lord understands exactly the points I am making, and I hope he might feel they have the relevance I suggest they have.

Lord MISHCON

I certainly understand the clear words of the Minister. I said before that the relationship of big brother and little brother in the case of national government and local government has now been altered to that of father and child. I now feel that it is almost that of stepfather and stepchild when it gets to the stage of national government saying to local authorities, "Of course you might be naughty and you might cheat, and might in fact replace and renew in order to try to evade the capital control." When we get to this stage I am reminded of the speeches that were made earlier. I ask for the Committee's leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 136 and 137 not moved.]

Lord MISHCON moved Amendment No. 138: Page 147, line 47, leave out ("of a capital nature") and insert ("for a specific capital purpose").

The noble Lord said: This is an obvious point which I hope the Minister will accept. It is to deal with payments that might be made of a capital nature to a voluntary body, a task and duty and sometimes a pleasure which local authorities do from time to time in the course of their duties. If one makes a general grant to a voluntary body it obviously should not be assumed to be of a capital nature, unless it be for a specific capital purpose, and I suppose a local authority could be caught by this in this way. If a grant were made to a voluntary body for its general purposes, be it a theatre or whatever, and subsequently in the theatre's accounts against a capital nature there was a note, "We owe this to the beneficence of the local authority", it might be deemed to be a payment of a capital nature. But if it were not made for a capital purpose directly by the local authority it would not be so deemed, and that is the purpose of the amendment. I beg to move.

Lord BELLWIN

Paragraph 1(e) of Schedule 9 refers in general terms to "grants and advances of a capital nature". This would obviously exempt any grants or advances that may be made for purposes in the nature of current expenditure, for exemple, wages and salaries, costs of operation, maintenance and repair. Beyond that, it will be for individual authorities to decide for themselves whether a grant or loan is of a capital nature. In making their decisions, their main criterion will be whether, if they (rather than the recipient of the grant or loan) were the spending agents, they would regard the expenditure as being of a capital nature.

In the absence of any precise, agreed definition of "capital", it is neither necessary nor desirable to be more restrictive than this. In any case, in attempting a greater degree of precision, the amendment might exclude from control grants or advances which are for general capital purposes—and are therefore of a capital nature—but which are not demonstrably for a specific capital purpose. I suppose I must resist the amendment, although I confess personally that I should like to talk it through elsewhere. Thus, while I cannot accept it and cannot make any commitment about it, I should like to discuss it further elsewhere.

Lord MISHCON

I am grateful for what the Minister said and, in the circumstances, beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

1.14 p.m.

Lord BELLWIN moved Amendment No. 138A: Page 147, line 48, at end insert ("or Passenger Transport Executives").

The noble Lord said: The inclusion within Part VIII of the Bill of capital expenditure by passenger transport executives makes it necessary to ensure that any capital payments by local authorities to PTEs do not also score as prescribed expenditure. If they did, there would be a danger that the cost of some schemes would be counted twice, once as the grant by a local authority to a PTE and again as expenditure by the PTE. The amendment, by excluding grants and advances to PTEs from the definition of prescribed expenditure, will ensure that this does not happen. I beg to move.

[Amendment No. 139 not moved.]

Lord MISHCON moved Amendment No. 140:

Page 148, line 1, leave out paragraph 2 and insert— ("2. Expenditure under paragraph 1 above is not prescribed expenditure for the purposes of this Part of this Act if it is less than £50,000, or such larger amount as may be prescribed by regulations. The figure shall he reviewed annually and amended in line with price movements in public sector capital expenditure").

The noble Lord said: I ask the Committee to concentrate, as I move this amendment, on the fact that expenditure which is not taken into account under the de minimis rule under the Bill looks as though it will be limited to the extraordinarily small sum of £5,000, if one is to take for granted some of the guidance which has already been issued by the Ministry in regard to the likely amounts under the de minimis provisions. I suppose it would just enable a local authority to be patriotic and buy one of the new Mini Metros, but that is about all it could do, and in order to be realistic the amendment provides for £50,000 as being a much more proper and practicable figure.

Viscount RIDLEY

Does the noble Lord envisage the larger sum being used to buy a Rolls-Royce instead?

Lord BELLWIN

There is alreday an exclusion for de minimis expenditure in paragraph 2 of Schedule 9 to the Bill. This was introduced in response to the criticism that under the original proposals—those were the ones which confused my noble friend Lord Ridley on the original proposals about capital receipts—local authorities would have had to account for individual purchases of even the most trivial sort (typewriters, ashtrays and so on) against their annual allocations for capital expenditure. In terms of administrative and accounting costs, it would make little difference whether the limit was £5,000 or £50,000; but the higher figure would make the control system much less effective, since a much bigger proportion of local authorities capital expenditure would be exempted.

It may not have been appreciated that expenditure which is excluded from control will still have to be contained within the national provision for capital expenditure by local authorities. Consequently, the aggregate amounts available for allocation to authorities will have to take account of the estimated amount of uncontrolled expenditure. This could require reductions in the amounts available for allocation, and so reduce authorities' freedom to decide their own priorities since each of them would have to take their pro rata share of the reduction no matter how little or how much they spent on the items excluded from control. With a threshold of £5,000 per item this should not be a problem, but exclusion of items under £50,000 could have a serious effect on allocations.

The Secretary of State already has power under Schedule 9 to alter the de minimis limit if he sees fit. Price movements in public sector capital expenditure could be reflected in any such alterations. I do not know what confidence that gives to the noble Lord, Lord Mishcon, or to anyone else for that matter, but it is there and I would hope it would always be used sensibly whoever was using it.

Lord MISHCON

It is quite correct that the confidence which the Minister thought might not be transmitted from his Bench to mine in fact has not been so transmitted because in his remarks he did not mention any sort of figure. I was wondering, if he thought £50,000 was too much in regard to the vehicle and plant allowance with which we are dealing now, whether he had in mind any other figure than the £5,000 I mentioned.

Lord BELLWIN

No. The £5,000 figure is the one that is there and is the one to which I am obliged to stick. I fear I cannot go beyond that.

Lord MISHCON

I am sorry to rise again, but do so only to pursue the point for one moment. I mentioned that the figure of £5,000 was an indication that had been given in, I think, a document; I do not think that it is actually in the Bill. Therefore, I was hoping that instead of it just being left in vacuo, the Minister could state that the minimum prescribed sum would be £5,000. At least it would be some indication as to where we stand.

Lord BELLWIN

I am sorry that I gave a wrong impression there; the noble Lord is quite right. No, I cannot give a figure at the moment. I knew of the £5,000 figure. I just assumed that it was there, but it is not. What would be helpful would be for me to say that when the decision is taken regarding the final figure I think we should want to see what exactly the noble Lord, Lord Mishcon, has said. I assure him that I shall see that what he has said is brought to the notice of colleagues before these decisions are made.

Lord MISHCON

In those circumstances, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

1.21 p.m.

Lord MISHCON: moved Amendment No. 140A:

Page 148, line 5, at end insert— (" .—(1) Expenditure in connection with a trading undertaking of an authority to which this Part applies is not prescribed expenditure for the purposes of this Part of this Act if it is financed from the proceeds of that undertaking.

(2) In sub-paragraph (1) above "trading undertaking" means—

1. (a) any railway, light railway, tramway, road transport, water transport, canal, inland navigation, ferry, dock, harbour or pier undertaking;
2. (b) any telephone undertaking;
3. (c) any aerodrome;
4. (d) any market undertaking;
5. (e) any undertaking for the provision of entertainments under section 145 of the Local Government Act 1972 or any local enactment;
6. (f) any undertaking for the supply of district heating; or
7. (g) any civic catering undertaking.").

The noble Lord said: A correction to the wording of this amendment will be found in the supplementary list to the Third Marshalled List, and I should be grateful if the Committee would kindly turn to that supplementary list. It will be seen that one of the amendments in that list alters the word "proceeds" in the fourth line of Amendment No. 140A to "profits", and another of the amendments adds (h) any exhibition or conference centre'

So far as I can see this amendment is rather in line with amendments in the name of the noble Lord, Lord Hill of Luton—I believe that those amendments are Nos. 154 and 158—and therefore it may be for the convenience of the Committee, and I hope for the convenience of the noble Lord, if we can look at those amendments now, and so realise that one is dealing with precisely the same point. I also understand that the noble Viscount, Lord Ridley, has down an amendment that deals with this point, and no doubt he will remind me of the number of it so that I can indicate it—

Viscount RIDLEY

No. 141.

Lord MISHCON

I am so grateful. I should have noticed it myself, since it is listed so close to the amendment with which we are now dealing. Thus I can be very brief in the hope that the voices of other noble Lords, instead of my voice, will be heard on this matter.

The amendment deals with the point regarding the trading undertaking of an authority having the right, for the purposes of this Bill, to finance from its own profits—and I underline the word "profits"—the trading undertakings in question. These trading undertakings are set out in sub-paragraph (2) of the amendment. I am therefore relying on the very simple point that so far as I understand this arrangement is allowed in nationalised industries.

The Minister has been at great pains to say how local authorities ought to be excited (if I may use his word) about the provisions of this Part of the Bill. In those circumstances there is every reason why they ought to be treated on the same level as nationalised industries and not put in a difficult position in comparison with them. I hope that the Committee will feel that this is a most sensible and proper amendment. I believe that other noble Lords will be speaking on this, and therefore it is unnecessary for me to say any more at this stage. I beg to move.

The DEPUTY CHAIRMAN of COMMITTEES (Lord Nugent of Guildford)

It may be for the convenience of the Committee if I combine with this amendment Amendments Nos. 140A, 140B, 140C and 140D.

Lord BELLWIN

Rather unusually I should like to take separately the amendments of my noble friend and the noble Lord, Lord Hill of Luton, because I think there are certain aspects of them that are somewhat different. This applies especially to the point of the noble Lord, Lord Hill, about regional airports, where I think there is a rather special situation. However, I entirely take the point that there is certainly a connection.

The thinking behind the amendment is presumably that trading undertakings need capital investment to remain competitive and that such investment can be financed out of income without cost to the rate-payer or taxpayer. However, what on the face of it seems to be a very logical proposal raises serious difficulties. Is it, for example, intended that such expenditure should not rank as public expenditure? Local authority trading undertakings have long been regarded as part of the public sector and their expenditure counts as part of the local authority sector for expenditure control purposes. I cannot see why that should be changed.

A local authority trading undertaking may make a profit, although very many of them do not. But if they make losses, who foots the bill?—the rate-payer and the taxpayer of course. In this respect the local authority trading undertaking is very different from that of the private sector trader, who carries his own risk. For this reason I am sure that it is right for the expenditure of local authority trading undertakings to continue to be treated as part of public sector expenditure. It would be possible, of course, to treat this as part of public expenditure and yet exempt it from control.

Looked at this way, the amendment would exempt from control a civic theatre, for example, while still maintaining control for, say, refuse disposal facilities. But even worse than that, the amounts available for allocations of expenditure to local authorities generally would have to be reduced to allow for the effect of uncontrolled expenditure. So those authorities without trading undertakings would have even smaller allocations within which to finance their waste disposal expenditure.

The amendment speaks of expenditure financed from the "profits" of trading undertakings. Originally the amendment referred to "proceeds", and then we would have talked about the meeting of items out of revenue, and not necessarily in the same year. We recognise that the new control system could cause problems for the operation of regional airports. That is why I wanted to discuss the matter separately, since we have been considering it very carefully, and perhaps I can come to it as we move through the Marshalled List. I say again that, though on the face of it this amendment seems to be very sensible and logical, I submit that, for the reasons that I have given, it in fact poses more serious difficulties than might be thought at first look, and so we cannot accept it.

Viscount RIDLEY

The noble Lord, Lord Mishcon, said, quite rightly, that my amendment is almost the same as his, although, if I may say so, by being shorter and wider it is a good deal better. It is actually saying the same thing. It is really saying that if the local authority makes profits, and manages its businesses profitably, it ought be allowed some of the rewards of those profits I should have thought that that would have appealed to the present Government more than would most of the amendments in the name of the noble Lord, Lord Mishcon.

Lord SANDFORD

May I join in this debate, in particular to support my noble friend Lord Ridley, because I think that the claims that he is making for his amendment over and above Amendment No. 140A have something in them. I think that Amendment No. 140A is opening up an important topic that needs to be dealt with, but I believe that my noble friend's amendment does it in a more all-embracing way.

When the matter of civic airfields is considered I would urge my noble friend to take them all into account. I have been particularly asked by the County of Derbyshire that the East Midlands Airport at Castle Donington should be included in any consideration of this matter. I think that the case has been well made and I should not want to add to it.

Lord MISHCON

By way of a personal explanation, may I tell the noble Viscount that he is absolutely right; that as a rule the shorter the amendment, the better. The only reason for the long-windedness of mine in setting out in heads (a) to (h) the various undertakings that I have in mind was that I was trying to appeal to the beneficence of the Minister who might say, in regard to the broad principle that is contained in Amendment No. 141, that he could not accept it, but who, on looking down the list, with that beneficence had decided that a special case attached to one or other of the categories that I had mentioned. That is the reason, therefore, for the setting out of the various undertakings.

Still in that hope, I wait for his reply because I am wondering whether there are not certain exceptions to the general rule that he wishes to impose, which he might be prepared to consider, included in the list from (a) to (h). If he said that that were so, I personally would be prepared to withdraw my amendment; it is obviously for the noble Viscount to decide what he would propose to do with his.

Lord BELLWIN

Trying to be helpful, I have looked through but I fear—I am in fact trying to take all these together—the principle stands. In fact we have others, by the noble Lord, Lord Northfield, as well, really covering the same general point, though not quite the same. In fact, they are not the same. No, I feel I cannot be helpful on this. There are many implications that flow from it. One of them is that one could envisage a scene where authorities would say, "If this is a way to try to increase our capital allocations, we should be setting up more trading operations to try to earn some profits"; and the mind boggles at the thought of where that could lead. Another direct consequence of accepting the amendment would be that, as I have said, the amounts available for allocation to local authorities generally would have to be reduced to allow for the effect of uncontrolled expenditure; and what effect that would have upon authorities which do not have any trading undertakings!

Lord HALE

Would the noble Lord permit me to ask him a question? I apologise humbly, but I have not said a word and I have been here pretty well from the start. I have wandered through masses of papers; I have been sent for by various people; I have been asked to attend various committees, and I should like to go to see my sister in hospital at some time, but for the moment I am trying to find what clause we are discussing. I sat here while my noble friend opened this discussion with a remarkably good speech, but, unhappily, he did not say very much about figures. He read out the headlines from the instruction. Could he tell me: Are we on Clause 75 of the Bill?

Lord BELLWIN

We are on Schedule 9, attaching to Clause 62.

Lord MISHCON

It is Amendment No. 140A.

Lord BELLWIN

Trying to be helpful, may I say that the whole principle of using profits, as my noble friend has just said, is an absolutely acceptable one on its own, and, although I cannot accept the amendment and can give no commitment, I think this is another of these areas where I should like to talk about it further with colleagues. Therefore, I would give that assurance, but without any commitment, as I know would be understood. If that is of any help at all, that really covers the point of the amendment set down in the name of my noble friend Lord Ridley, too.

Lord MISHCON

I think the Minister is trying to be helpful, and I am sure he will have a special look at, for example, category (a), which is the question of transport, where he has, upon another occasion and wearing another hat, talked in very moving terms about the independent rights that he would love to give in regard to transport undertakings, and how it would be so good if they could be profitable and people could be encouraged to make them profitable. So I hope that is one area at which he might look. I am grateful to him for what he has said, and in view of that assurance I am perfectly prepared to ask the Committee for leave to withdraw my amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 140B, 140C and 140D not moved.]

[Amendment No. 141 not moved.]

1.35 p.m.

Lord EVANS of CLAUGHTON moved Amendment No. 141A:

Page 148, line 5, at end insert— ("Expenditure in connection with the reclamation of derelict land which is to be grant aided by the Secretary of State under the provisions of the Local Government Act 1966, as amended by the Local Employment Act 1972 and this Act shall not be prescribed expenditures for the purposes of this Part of this Act".).

The noble Lord said: I move this amendment to Schedule 9. It is quite different from the subject of the previous amendments. It seeks to exclude from the general controls on capital expenditure set out here the programme for reclamation of derelict land because, first, the derelict land programme applies to a limited number of areas only, and can be a significant element of total capital expenditure for some authorities—it applies very much to the area from which I come on Merseyside—and, secondly, the mechanisms currently in mind for making capital allocations to local authorities will not require this special need.

Reclamation of derelict land will, as the Bill is drafted now, I think, form part of the prescribed expenditure under regulations to be made by the Secretary of State; and it is understood that allocations of prescribed expenditure will be in five blocks, two of which apply to metropolitan counties, transport and other services. The derelict land programme will form part of this latter block, as I understand it. The latest information suggests that the Secretary of State intends to make allocations to individual authorities under the "other services" block by a formula based on population and past expenditure—a procedure which will not take account of significant increases in the derelict land programme for a few authorities.

The derelict land programme for St. Helens, on Merseyside—I am sure it applies to other inner urban areas—is quite enormous. For instance, in Merseyside County Council's case there are virtually a thousand hectares of derelict land which require treatment, and special arrangements have been made to step up the derelict land reclamation programme with the full concurrence, support and backing of the Department of the Environment. As an indication of what I am sure is the kind of programme which is probably going to occur elsewhere, on Merseyside, where the growth is very large, in the 1978–79 financial year 21 hectares were reclaimed at a cost of half a million pounds. In the agreed 1981–82 programme—agreed with the department, again—the area reclaimed is to be 50 hectares, at a cost of £1½ million.

So with the concurrence of the department of the noble Lord the Minister, I underline once again, we on Merseyside face a threefold increase in the size of the programme next year which Her Majesty's Government expect to be accommodated within an "other services" block allocation compiled without any reference to this agreed increased need; and tentative calculations suggest that the "other services" block allocation could be less than £5 million next year, against a programme bid from county departments of more than twice that much. The £1½ million derelict land programme would of itself take about one-third of the total allocation in that block. Faced, then, with this situation, my county council will have to either forgo a significant part of the derelict land programme—already, I boringly repeat again, agreed and supported by the Department of the Environment, and 100 per cent. funded by them—or severely reduce the share of other county council services, which is already inadequate for needs.

The remedy suggested in this amendment is to exclude the reclamation of derelict land from the global controls under the Bill. This means that the derelict land programme would be treated separately but without any loss of Government control, because each scheme would continue to require individual approval for grant purposes. Rather than exclude the programme in this way, the Secretary of State could accommodate the requirements of authorities which have a derelict land problem by assurances along, perhaps, these lines; to agree to exclude the derelict land programme from prescribed expenditure when he makes the regulations—it is understood that he intends to exclude police and probation in any event, and perhaps he would consider that—and, secondly, to amend current thinking on the formula for distribution of the "other services" block so as to take account of priorities for reclamation of derelict land.

I am sorry to have made what is a fairly technical kind of speech, but I think that if your Lordships ever travel through or in the Merseyside area you will see the need, which the Department of the Environment concedes, for really urgent action to recover and reclaim derelict land. If the Merseyside county council has anything to be proud of (and it has many things) it is the very considerable change for the better that it is making in the appearance of the environment in areas which are suffering terribly, not only from unemployment and the general quality of life, but by the appalling nature of the surroundings of derelict docks, derelict railway sidings, derelict coal spoil areas—areas which often look like parts of the moon. It is wonderful to see the work that has been done to improve the quality of the life of the people who live in the area. It would be a tragedy if that kind of initiative had to be brought to an end because of what may be an unintentional outcome of the prescribed regulations. I hope that the Minister can give the assurances that we seek to me and to other noble Lords who live in and have connections with the regions to which I refer.

1.41 p.m.

Lord BOWDEN

May I follow briefly what has just been said. I want to concern myself not only with the serious problem of derelict land in the whole of the North-West but a problem even more alarming and potentially much more expensive: the problem of dereliction underground which is always apt to be forgotten. I refer to the basic problem of maintaining in something like working order the whole of the infrastructure on which civilised living depends. I refer to the roads, particularly to the sewers, to the water supply and to all the other basic amenities of life. The problem of derelict land has become notorious over the years. The noble Lord who is sitting behind the Minister debated this subject with me about 10 or 15 years ago. At my request, he went to see some of it and was shocked to find how bad it was.

Now I must bring to your Lordships' attention this problem of the total collapse of many of the main sewers in the districts to which we are referring and, particularly, in Manchester. It has now become so bad that half the traffic in the city is brought to a standstill by holes in the road, some big enough to take a double-decker bus. The reason that they get so big is that the lid is held up while the ground below erodes because of an unusual form of reinforcement consisting of cobblestones, tramlines and tarmac which will last for a very long time in spite of the pounding of the traffic, but which ultimately gives way.

I could mention half a dozen examples, but the most striking case that I can bring to your Lordships' attention occurred last week when I saw that some wretched firm had had to call in the official receiver because it had been cut off from all its potential customers by an enormous hole in the road. It filed a petition in bankruptcy and they are now wondering who they can sue, if anybody. The total expenditure required to transform and maintain this vast connection of underground workings is enormous. The Manchester Corporation spent half a million pounds on it last year and I think that it should have spent 100 times as much.

I have to ask specifically how this sort of work is to be funded. How are we to retain any semblance of civilised life in the North-West unless the underground workings are kept in repair? This problem to which I refer is in the North-West. I am sure it will occur all over the country and before long it might even occur in this capital city of ours. It is of enormous importance and I do not think that anyone has come to grips with it.

I raise it with a great sense of urgency although I cannot claim to understand how much should be done and when. But the Minister should know that men are available to do the work. There is an enormous number of civil engineers who are unemployed and who could get on with doing the job if they were provided with the necesssry resources and if they were not required to live on the resources available to them from the Department of Health and Social Security—the dole. We are keeping men in idleness when enormously important, desperate and urgent work must be done if great cities of the kind from which I come are to survive.

I can quote an important historical parallel with which I might perhaps amuse your Lordships. About 2,000 years ago the City of Rome had to endure inflation at a rate of 13 per cent., which is not very high by our standards but it lasted for 100 years. During that time the price of corn rose 300,000 times in the City of Rome. It became impossible to levy taxes and public works, and, in particular, the repair of the sewers, were neglected. The main outfall of the great sewerage system there was blocked, the Forum was flooded; more seriously, the Pontine Marshes were flooded: mosquitoes bred throughout the city and there was an outbreak of malaria which left the population of Rome decimated. The barbarians came in and the dark ages supervened.

It is worth reminding ourselves of this awful historical parallel because, unless we are careful, there will be no local government because there will not be any local cities surviving in a habitable state. Despite the fact that perhaps I must be the only person who has spoken in this debate who has not spent his life in local government, I have observed some of its shortcomings. The most important shortcoming of this Bill is that there is no mechanism in it, so far as I can see, to make it possible for the basic work of these great cities to be kept going.

The noble Lord, Lord Sandford, and I debated another matter of which I should like to remind your Lordships. That was the raising of the flood defences of London—and this comes almost into the same category as the renewal of the sewers of the districts to which we are referring. Following upon the debate in this House the defences were raised by three feet. Last January the tide came up and overlapped the level of the old defences by about a foot. Because the work had been done, the tide went down and nothing happened. If it had not been done the water would have come into London, the Inner Circle railway line would have been flooded, the water might have got into the Embankment station and the Bakerloo Line and from there it would have gone to goodness knows where. Hundreds of millions of pounds worth of damage might have been done. But we were able, by pressure from this House, to persuade the authorities to raise the level of the flood defences, and so nothing of that kind happened.

The problem of the maintenance of all the works, the great capital works of all the great cities, is not covered, so far as I can see, in any part of this Bill. Of course, some parts will come under the heading of special capital grants; but many are in the grey area between capital and maintenance. For example, if you renew a sewer, are you maintaining it or are you rebuilding it? This could make a great deal of difference to the way in which it is financed. Some of the sewers were put down about 150 years ago, 50 years before the London sewer system was put down. London sewers are newer and better built than are many in the areas to which we are referring, but the problem will arise here sooner or later. I beg the Minister to try to explain, so that the local authorities can understand it, how these important works, capital or maintenance (whichever term you prefer to use), would be financed and how it would be possible to maintain some form of local government in the sense that there will be something left for the locals to govern.

Lord DAVIES of LEEK

To a tired and slightly overworked Committee, I should like to bring in a point as somebody with a short experience of local government who was on a committee for a number of years investigating the problem of mining subsidence in Britain. It was the Turner Committee. I know what that cost some of us who lived in mining areas, particularly in the Midlands, in Stoke on Trent. I know how many hundreds of thousands it cost the authorities. Derelict land underneath. Here what I am saying is apposite. Some of the cities and councils are vandals themselves. They are knocking down old cottages and houses in mining areas; the land subsides; who takes the responsibility? The Coal Board will have left the pit and now it is no longer worked, and the board leaves the problem. The problem has now been cited. It need not be expanded, but I hope the Minister will take note that this is a problem that ought to be considered somewhere in this area.

Lord HALE

May I utter just one or two words? I have had memoranda from a large number of local authorities, in particular letters from the Central Manchester Metropolitan Borough and from the Oldham District Council, which of course is part of the metropolitan borough. So far as this Bill is concerned, I think both of them have got a pretty good record of co-operation with the Government as far as they could. My trouble is that I can show medals, but I think my mind is going and I find it very difficult to master the complexity of the documents. I had 25 years as a member of the Leicestershire County Council. Castle Donington has been referred to by the noble Lord. That is where the problems—

Lord BELLWIN

I wonder whether the noble Lord would give way? I am terribly anxious not to interrupt, but the matters being talked about are of immense interest. This is a Committee, and I think we should try to discuss these matters separately elsewhere. We have an enormous programme yet before us on this Bill. I do not wish to be disrespectful but I wonder if the noble Lord, and perhaps other noble Lords who might have wanted to speak on this, would allow us to move on this particular point? If it is felt that we should debate this elsewhere, we can make arrangements so to do. I wonder whether the noble Lord would agree with that?

Lord HALE

I heard the noble Lord make the same statement either yesterday or the day before yesterday, and I thought how excellent a suggestion it was. If only one could persuade people that Her Majesty has to open Parliament on a certain date, that the Lords are battling as best they can against a very difficult Bill, with expert speakers who understand it! I agree entirely with every word the noble Lord said. I will have them copied out and sent to most of my correspondents.

Lord BELLWIN

The points that the noble Lord, Lord Bowden, raises are of immense importance and the mind almost boggles when one contemplates the enormity of what has to be done. Sometimes I suspect that no one even wants to talk about it, because it is such an enormous problem. I understand the points which the noble Lord, Lord Davies of Leek, makes. I have been to Walsall and have seen mining subsidence there. I know of the problems of Manchester. Sometimes holes just appear in the road. Basically, sewers are a problem for the water authorities rather than local authorities, but that is not to say that it is just going to go away. If everyone said, "Oh, it's not my table", as the waiter says, nothing would ever happen. It is very helpful that the point has been made, but at the end of the day I would have to say that while we should not turn our backs on it, because it will not go away—it is we who will go away—this is not the place for it, if I may be excused for moving on to the amendment on its own.

The amendment would put grant-aided expenditure on reclamation of derelict land outside the scope of the new system. However, the new system is intended to apply to the totality of local authorities' capital expenditure, no matter how it is financed. So long as local authorities keep their total capital spending within fixed limits they will be free to decide for themselves how to finance it, whether from borrowing or out of rate income or by leasing or by the use of accumulated funds or by applying any grant that may be available from central Government, and also which service to support with the resources at their disposal. Activity such as derelict land claims attract grant-aid as an inducement to authorities to carry them out. The North-West area, to which the noble Lord referred, is arguably probably the outstanding area in the whole country where this has to be done; I believe that is so. Grant-aid will continue to be available under the new system—100 per cent. grant in the case of certain derelict land clearance; and I think the area to which the noble Lord referred is included now. Even beyond the 1982 situation it has now been declared an area and therefore will continue to receive 100 per cent. grant.

But authorities will not be given special expenditure allocations for grant-aided activities, and any grant-aided expenditure will have to count against an authority's aggregate allocation. For example, although an authority might be able to get 100 per cent. grant for carrying out some derelict land reclamation they might prefer to forgo the grant and use their expenditure allocation for other purposes. I know that this is not what the noble Lord would wish, and I know that his amendment seeks something else; it seeks it as an addition. But I fear I cannot help him with that because, without going into the detail that I have before me, I want to say that at the end of the day it will be the ratepayers who will have to acquiesce in the spending decisions that are made by local authorities. It will not be Government who will have to decide whether or not the priorities are right. So I fear I cannot help the noble Lord with this, although I have tremendous sympathy. I have spent a long time looking at this derelict land situation myself—actually going over the ground in the North-West—and that is why I speak of it as I do.

Viscount RIDLEY

I am sorry to prolong this, but I have some experience of derelict land above ground, which the noble Lord, Lord Evans, has mentioned, and I want to support him very strongly. Northumberland, the county of which I was chairman for many years, has an unrivalled record for clearing away the scars of the mining industry, and I think what the noble Lord has just said will be regarded as a very serious blow to the very intensive programme which is nearly completed in the North-East at least, if not in the North-West. I hope he can think again, because the 100 per cent. grant has made it possible to do a tremendous amount of work on one of the few things that can be done for the depressed areas of this country. It was thanks to the Government, through the noble Lord, Lord Sandford, when he was a Minister on this very Bench, that we got so much done, and it would be a pity if this Government were to bring all this to a stop.

Lord BELLWIN

I must not give a wrong impression. There is no intention at all of bringing this to a stop. The 100 per cent. grant continues, certainly up to 1982, and thereafter to all areas that are declared designated. The Government have taken a very open-handed way of designating. I may be open to correction on the point I am about to make; it may be that what I say will bring in lots of applications of which I know not, but I do not know of areas where there really is need where there has been a refusal to designate. This is one area where, in my view, there has been a very liberal approach in terms of allocation of the resources, because, as my noble friend has said, it is a matter of major national importance.

Lord SANDFORD

I am grateful for my noble friend's allusion to the time when I was Minister for slag heaps and a few other things like that. Although the noble Lord, Lord Evans, introduced that as the main theme of his remarks, we are not concerned here with the capital programmes for repairing holes in the road or protecting ourselves against flood damage or subsidence or anything like that. If I may say so, the issue we are grappling with is how to control capital expenditure in these fields. The point which still remains to be answered—and perhaps my noble friend would consider answering this by correspondence rather than verbally now, if it is easier for him—is what should happen when we have a programme which hitherto has been largely controlled by grant. That is to say, the scale, the nature, the extent and the position of derelict land reclamation is now wholly controlled by the Government issue of their 100 per cent. grant, and previously by 75 per cent. grant. That is the way it is done at the moment. On top of that, we are now going to have superimposed the capital grant allocations provided for in Part VIII of this Bill. What is not yet clear to me—I do not know whether it is clear to the rest of the Committee—is how these two systems can be made to mesh together satisfactorily.

I apologise to the Committee for introducing yet another topic, namely, national parks, but if I do it now it will save me having to raise it on clause stand part. I have had representations from the national parks whose expenditure—capital and revenue—is controlled, again, by 75 per cent. grant from the department. All the necessary discussions about what should and should not be allowed in any one year go on in that connection. It will be very tedious, to say nothing more, if the process of discussion and negotiation has to go on once again in the process of capital grant expenditure as well, particularly in the case of national parks where the capital involved is very small. Perhaps my noble friend would like to consider this matter and give us a brief answer now but a longer one by correspondence.

Lord BOWDEN

Before the noble Lord rises to that bait, may I ask him whether he could include in his reply some assessment of the problem of combining the repair of the dereliction underground with the maintenance of the main roads. Inevitably, the two have to be dealt with at the same time. On the other hand, the budget from which they come is different, one is dealt with by the water board and the other is dealt with from the funds of the city. It is because they are so inextricably intermingled, and allocation of costs is so difficult, that I raise this point at this stage of the Bill.

We have an enormous problem of dereliction underground, as the Minister knows, but we cannot allow the work to be delayed because the allocation of funds for renewal has to come from two different pockets. It is the basic problem of co-ordination, and the even more serious problem of the extra funds which are going to be needed from somewhere, to which I hope the Minister will address himself and to which he may reply either in writing or in some other way when he answers the noble Lord, the ex-Minister for Slagheaps!

Lord MISHCON

I thought that the point raised by the noble Lord, Lord Sandford, was an essential one for the understanding of this Committee. In case, with his modesty, he thinks he is the only person who did not understand what the position was, may I tell him that many of his colleagues on the Committee share his position. I hope therefore that because this affects our thinking in a quite fundamental way the noble Lord the Minister will not accept the invitation to deal with this matter in writing but will give a full explanation to the Committee now, if he feels able to do so.

Lord BELLWIN

I welcome the opportunity because it illustrates the point that came from the debate we had before. There is so much misunderstanding or lack of knowledge for whatever reason—and there is no point in going into why that is now—that it leads to the fears and anxieties that were expressed before.

I can explain this. The way the whole allocation system will work is that it will be up to the authority to make its bid. It will decide within its areas what are its capital requirements. It may be that it wants so much for education, in which case that will be one area that will be considered. It may be that it will have derelict land that will be a priority for it.

It will put forward a list of bids of all the capital requirements that it has within its area. Then those bids will be considered. Whether they attract grant or not does not matter. If they were to get an allocation granted to them, which I said before would set out what it covered, it would include—in a hypothetical area—x amount for derelict land clearance, and for that it would get 100 per cent.

If the authority, having received it, decided it did not wish to spend it—despite the fact that it may have put it forward in the first place—it would be up to them to use that allocation for something else having received the total, although of course they would not get the grant. That is fair enough. That is the way that it would work. It will build up to a total and within that total made up of constituent elements—if I can call them that—that will be specified and set out, it then will be for the authority to choose whether or not and how it decides at the end of the day to make its spending. It seems fairly clear to me. I will elaborate, if necessary; but I think it is straightforward. I accept that it could have been misunderstood, that it brings forth the argument of a grant on top of an allocation. It is as I have said and is fairly straightforward.

Lord SANDFORD

That may or may not have satisfied the noble Lords, Lord Evans, and Lord Mishcon. I do not want my noble friend to spend any more time in Committee dealing with my point. But it does not answer it. For instance, in the case of the national parks there is one park with about nine authorities represented on it and another with four. If its programme is going to be subject to the decision of four or five separate authorities as to what they are going to do with their capital allocation it will not work. I leave it at that at the moment.

Lord EVANS of CLAUGHTON

I understand only too clearly what the Minister is about. I understand and I am sure he understands that with the approbation and encouragement of the Government we on Merseyside have not been so advanced as in Northumberland. We have a backlog of dereliction to catch up to do with historical pre-reorganisation matters. I do not need to go into that now. We have agreed a three-year programme, looking ahead, with the full approbation of the department which will take virtually the whole of our other services grant.

Lord BELLWIN

When making the application, it will be for the authority to make its case, and the total allocation that it will eventually get—if its case is a good one—will be higher to take into account that very point.

Lord EVANS of CLAUGHTON

What the Minister is saying is that we will get a higher allocation than perhaps another county or district council because of the greater problems we have to confront about dereliction. I am glad to hear that. That was something I had not realised, frankly—

Lord BELLWIN

I had better say for the record: If the case is made. It will be adjudicated upon by those who come to those decisions.

Lord EVANS of CLAUGHTON

I am sure that Hansard will be read very carefully in certain parts of the country. I am delighted to receive that point. I still think that it would be preferable that the derelict land programme could be left out of the prescribed expenditure calculation. I understand there are certain areas—the police and probation services, for example—but I would have thought that derelict land, though different from the police and probation services, is very much what gives those services the jobs that they have to do in very many cases, and the general environment in which they live. I would have thought that it would be within the Government's policy that this should not be included in the prescribed expenditure setting.

The Minister has tried to be as helpful as he can—as he always is. The problem will be that with this very high commitment to expenditure on derelict land there is a danger that other services in Merseyside—which already has a lot of call on its services—might suffer or we would have to reduce the derelict land commitment. I do not think that I would serve the interests of this Committee, my own case or that of other people who share my problem, in dividing the Committee. I should like to go back and look a this. I suspect I will have an opportunity of raising the matter again at a later stage. On that basis, and with some disappointment, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

2.9 p.m.

Lord NORTHFIELD moved Amendment No. 141B:

Page 148, line 5, at end insert:— (" . Expenditure in connection with grants and advances designed to preserve and create employment opportunities within small firms in the private sector is not prescribed expenditure for the purposes of this part of the Act; provided that such expenditure does not exceed 50 per cent. of the total capital cost of the project in the case of grants or 90 per cent. of the market value of the asset acquired in the case of an advance.").

The noble Lord said: The purpose of this amendment is to exclude from prescribed capital expenditure spending on grants and loans to help create employment in the localities. For the purposes of this short discussion I shall take it that there is agreement in all parts of the Committee on the need to help particularly small businesses. Local authorities have had an honourable tradition in this matter and should certainly be allowed some function on it in the future.

The amendment arises primarily from a letter in The Times from the noble Lord, Lord Seebohm, on 13th August. Here I would say to the noble Lord, Lord Bellwin, with whom I have been exchanging remarks about the problem of getting across how the system will be applied, in practice—and I am sure this is the problem—that the letter from Lord Seebohm shows precisely the kind of misunderstanding which, in all parts of the Committee, we have been urging him to remedy. Lord Seebohm, writing in The Times said: If the Bill if passed in its present form"— and he is talking about a fund to help industry in Southwark— that fund will become defunct". He went on: It is clear that the allocations likely to be given to local authorities will be inadequate to finance ail of their fundamental, basic, traditional and local services, let alone more recent initiatives, such as funds to aid the development of local industry". So the trouble with the system—and at that point he did not know how these totals are to be built up—is that local authorities will never be given any money to do this kind of thing again. That is the fundamental fear of many local authorities.

The noble Lord, Lord Seebohm, had a second and subsidiary point which is perhaps of greater importance. He said in the letter that the other thing that worried him with respect to this £3 million revolving fund in Southwark, which is a very important fund—the Minister may have seen the advertisement in The Times by the borough yesterday, to draw our attention to it today—is that this fund was established years ago and it has been able to assist 150 firms and thus create or preserve over 2,000 jobs. It is a very worthwhile piece of local initiative, which I am sure those in all parts of the Committee who want to help small businesses will applaud. But what Lord Seebohm says is: Repayments of past advances from funds established by local authorities comprise principal and interest. However, the interest element of such repayments will not be treated as a capital receipt"— that is in a later part of the Bill— and will not, therefore, be able to be added to the local authority capital allocations".

He fears first, that there will never be any money for this kind of thing again, and secondly, that the interest on this fund cannot be used in future to give further and new capital advances to help industry, because it will be totally eaten up in the system and will not be added to the total. I hope that the Minister can answer that subsidiary point, as well as pointing again to the possible misunderstanding on the principal point. I hope it will be the case that local authorities can use the interest on such funds for future capital advances.

I come to this issue for a second reason. I am president of a body called the Federation of Industrial Development Authorities. That is comprised of about 60 local authorities who are anxious about their future role in terms of industrial development. They have had an honourable role and want to continue it. I am sure that their concern as a federation arises for two main reasons, apart from the general misunderstanding about the principle to which I have drawn attention by the example of Lord Seebohm's letter.

The first is that local authorities know that Sir Wilfred Burns has been chairing a committee about the whole future of the local authorities' role in industrial development. What they are concerned about is that this seems to be on the back of a general unwillingness by Government to see a role for local government in industrial development. They do not know the outcome of the Burn's Committee's inquiry; they do not know what decisions the Government have made on the basis of that report, and they fear—and "fear" is again the appropriate word—that the general restrictions on capital expenditure will be used to squeeze them totally out of any role in helping with small industry, in particular, within their borders.

There is one final reason why they are concerned as a federation. In the case of grants and advances to industry in the rural areas, there is the body for which I have been responsible in my time; namely, COSIRA. That is a Government agency to lend money, but there is no such body to help small businesses, in particular, inside urban areas. So this is a job which has been done, on occasion, by local authorities to their great credit. They are concerned that the capital expenditure control system will not be used to squeeze them out of a role which they have had to fulfil, through being the only lending agency, in many cases, and perhaps a lending agency of last resort, given that banks are increasingly unwilling.

I therefore sum up in this way. I hope that the noble Lord will answer me in at least one of two ways, if I may anticipate his reply. I hope that, first, he will say that a suitable figure will be included in a local authority's expenditure total, to allow them to have a role in lending and in making grants to small industry. In other words, that this could well be one of the constituents for which they would make a bid, and that there is no predisposition and no prejudice on the part of the Department of the Environment to prevent them both from making such a bid and from having it included in their total of allowed capital expenditure. So if the noble Lord can say, "Yes, it is a proper constituent of the future total and we have no prejudice against it", then I am sure that a great deal of fear will be put at rest.

Secondly, I hope he will make it clear or that amendments can be moved to make it clear, that in a case such as the fund at Southwark, which has done so much good for small industry, it will have utter freedom to use the interest on past loans to provide future loans, without in some way being nobbled or lost in the total business of controlled capital expenditure. I hope that the noble Lord can reassure me in one or both of those ways. I beg to move.

2.17 p.m.

Lord BELLWIN

I must say that the contribution of the noble Lord, Lord Northfield, was extremely interesting and important. I am glad that he made the point about the necessity for clarification. The intention of Government is, by no means, to restrict especially the areas that he mentioned, or to which the noble Lord, Lord Seebohm, referred. In his letter to the newspaper, Lord Seebohm automatically assumed what the allocations would be. He said that there would not be sufficient allocations. But how did he know that there would not be sufficient allocations? On what did he base that supposition? Presumably, it was a fear that he had, and if he had expressed it as a fear that would have been fair. But to say that it will not be sufficient was rather jumping the gun.

It is just another instance of a fear and a misunderstanding and I accept that, because, at the end of the day, the battles will have to be on the making up of the allocations. That is where the arguments must take place. An authority may say that the allocation is not enough and will give reasons. That is what one would expect. It is what is done now and it is what one would expect to happen in future.

I cannot answer all the noble Lord's points, although I shall try to cover the point about interest because, at first hearing, it seems a very valid argument. But one has to realise that when local authorities borrow money the interest that they pay on it does not count as capital expenditure when it goes out. Therefore, when interest comes in as a payment to them it, equally, cannot count as a capital receipt. I think that that is a fair argument.

But what can be done to be helpful? If one looks at the regulations which are referred to in sub-paragraph 4(a) of Schedule 9, there is possibly a glimmer of hope for the kind of situation to which the noble Lord referred. If the case is made out—and it would be to argue at the time of the allocations being made—there may be a specific special expenditure. You may get outside the prescribed expenditure category in that way. I should have thought that was where the debate should take place. I have no hesitation in saying that there will be many such points as this which will require debate and discussion by interested parties, and the Government will gladly have them.

I stress again that the last thing that we want to do is to have an adverse effect upon the kind of bodies, the kind of organisations, the firms to which the noble Lord's amendment refers. We want to be helpful to them. It is part of our basic philosophy. If it proved to be, as he said, that they were adversely affected, then of course we should have to have a look at it. But I hope that what we have set down now will give scope for this kind of explanation, discussion and action where it may need to be taken.

Lord NORTHFIELD

Before the noble Lord the Minister sits down, could he deal with the point about Sir Wilfred Burns committee? Local authorities are very anxious to know whether the outcome of that inquiry is to be that they are to lose their traditional role. To hear the contrary would greatly reassure them.

Lord BELLWIN

Yes. Of course, I do know the committee and what it is doing. I cannot give the answer to the question which has been asked but I take very much the point. In that it is a cause of concern, to the extent that the noble Lord suggests, I will go and talk to Sir Wilfred and put this to him. I will find out.

Lord SANDFORD

I dare say that the noble Lord, Lord Northfield, as other members of the Committee, will be somewhat reassured by what the noble Lord has just said. Nevertheless, I feel that I have to read to him part of this letter from the chief executive of Derbyshire County Council, a man who can be safely assumed to have read Schedule 9, paragraph 4, before writing it and to have taken advice from his other officers. He writes in these terms: The Government's proposals will be disastrous for one of this county council's most successful economic development policies. For over ten years we have built industrial sites, advance factories and lent capital to industrialists and have created over 9,000 jobs. This has been done without cost to the ratepayer by re-investing capital receipts. All this will be stifled by civil service control unless the Bill is modified to allow authorities to supplement their capital allocations by capital receipts". That is what he says. He may be ignorant, he may have misunderstood. The noble Lord can tell us which is the case. But the fact remains that when he wrote that letter not so very long ago, that is what he thought. If the chief executive of Derbyshire County Council, who are very active in this field, thought that only a week or so ago, we are in a serious state because these proposals are creating that impression. I beg the noble Lord to take account of it.

Lord BELLWIN

Heaven forbid that I should say that the executive in question was ignorant. But, yes, he does misunderstand; he does not know. The fact is—I have said it several times today—that capital receipts are an extra on top of the allocations. That applies to receipts you may now have in a capital fund and to those which you may come to have if you decide to acquire them. Therefore what can I say? When a chief officer of the standard to which my noble friend refers does not know—and recently—then surely I am right again when I say that it is not the Bill which is at fault; it is not the intention on this aspect of it which is at fault but the understanding of it. Where the responsibility lies for it not being understood is another matter entirely. I do not seek to place the blame for that upon the chief executive concerned, or upon anyone else. I think it just highlights the point that everybody involved had better make sure that there is proper understanding about the intentions.

Before I sit down, I should like to comment on the reference to the Bill being a disaster for the particular organisation concerned. I see nothing in the Bill which will adversely affect them, because they will continue to have the facility to do in the future precisely what they have been doing until now.

Lord SANDFORD

I hope the Committee will agree with me that if somebody as distinguished as the chief executive of one of the main county councils has misunderstood the Bill to that extent, the loyalties of Parliament are being strained very considerably in being asked to allow a Bill to go on to the statute book while that is the state of misunderstanding.

Lord NORTHFIELD

I am most grateful to the Minister for what he has said, and in a moment I shall withdraw the amendment. However, I should like to make two comments. First, may I stress to the noble Lord, Lord Sandford, that in my subsidiary point upon Lord Seebohm's letter I was talking about the receipts of interest, not the capital receipts. I very much hope that, despite what the noble Lord the Minister has said he will have a look at this point and, if necessary, write to me to give any reassurance or explanation that he can. He nods his head, and I am grateful for that assurance. Secondly—I make this comment to the noble Lord, Lord Sandford, and to your Lordships—I feel bound to say that the problem is that this Bill is being judged against a background in which the Government are heavily criticising local government expenditure in general. Therefore, it is being assumed, perhaps too easily according to the versions we now hear from the noble Lord the Minister, that this capital control will be a means of drastically curtailing and reducing some very worthwhile expenditure that is going on at the moment. That is the problem In addition, there is the Burns Committee hanging over these authorities' heads and making them feel that even this part of their activity is under general threat.

Lord BELLWIN

I should say regarding the Burns Committee that I have been notified that the report is with the Secretary of State. It has just gone to him. That gives the noble Lord an indication of where it is at present. Before I sit down, in fairness to the chief executive to whom my noble friend referred one has to say that why he misunderstood can be understood. What I have said today about the intentions regarding capital receipts were not in the first proposals. That is probably what has led to a great deal of misunderstanding. Not everybody realises the extent of the concessions and the movement that the Government have made. That is probably the reason why, and, if so, I think that the misunderstanding is very understandable. Certainly I regret that very much.

Lord NORTHFIELD

I am going to withdraw this amendment, but I take this short debate as indicating to local authorities that there is no reason why they should not bid for the opportunity to have some capital available to make grants and advances to small industry in their areas, as they have always done in the past, and that they should not take the general framework of the Bill as in any sense preventing them in principle from continuing with this very useful role in our community. Because the debate has been so helpful, I am delighted to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord BELLWIN moved Amendment No. 141C: Page 148, line 6, leave out ("or a London borough council") and insert (", a London borough council or the Common Council of the City of London").

The noble Lord said: Paragraph 3 of Schedule 9 excludes the investment of a superannuation fund by a county council or a London borough council from the control over capital expenditure. Superannuation funds are operated by local authorities only as trustees for their employees, and expenditure from these funds is not treated as part of public expenditure. It is right therefore that they should be completely outside the new controls. It has been pointed out that the Common Council of the City of London also invests a superannuation fund under the Superannuation Act 1972. The amendment is therefore needed to put the fund outside the scope of the capital expenditure controls as well. I beg to move.

Schedule 9, as amended, agreed to.

Clause 63 [Expenditure which authorities may make]:

[Amendment No. 142 not moved.]

2.30 p.m.

Lord MISHCON moved Amendment No. 143: Page 55, line 17, leave out ("for each year") and insert ("for a period of three years and the Minister may subsequently vary the allocations made for the second and third years by an amount but may not reduce the provisional allocations made for the second and third years by more than 20 per cent.").

The noble Lord said: Members of the Committee will observe Amendments Nos. 143, 144 and 145, the latter being in the name of the noble Viscount, Lord Ridley. The sense of the amendments is the same. Indeed, it follows the line of the speech made by the noble Viscount which was so much welcomed before. Members of the Committee may wonder whether this is an auction sale, by virtue of the fact that they will see that I am responsible in part for an amendment which talks of 20 per cent. in Amendment No. 143, 10 per cent. in Amendment No. 144 and the noble Viscount, with his usual sense of compromise, has mentioned 15 per cent. in his amendment.

The principle of the amendments is this—and I believe that I am almost quoting the words of the noble Viscount when I say that capital projects for most local authorities are a pretty long-term affair which require a lot of planning and often a substantial period to carry them out. Therefore, any practical regard for the work of a local authority—and certainly a large one—must take this into account and would never have a system where one went from year to year without knowing what the capital provision was going to be in the second year or the third year, after one had been decided for the first.

This provision to enable a local authority properly to carry out its capital projects may commend itself to the Committee as being extremely sensible and I hope that the only doubt in your Lordships' minds would be as to whether the leeway ought to be 10, 20 or 15 per cent. If that were the only matter I should lean immediately towards the compromise of the noble Viscount, and I should be perfectly happy if the Minister were to agree to that compromise; but so vital is this amendment in the view of all the local authority associations that I shall want to test the view of the Committee by a Division if unhappily the Minister cannot concede.

Viscount RIDLEY

I have already spoken on this subject when we debated Part VIII of the Bill. It is an absolute coincidence that I have managed to get halfway between the two figures selected by the noble Lord, and equally I should be happy to settle for any of those figures. The ACC feel strongly on this and it will not increase the total amount of public expenditure involved. It just means that we can look ahead, with the certainty that a project can be finished. I support any of these amendments.

Lord RENTON

This is a very important point that has been raised by these three amendments, especially the first two and I should like to support Amendment No. 143 or alternatively No. 144 or a striking of a balance between the two. In the county of Cambridgeshire which, owing to its enormous and rapid increase in population, has a large capital development programme they have in fact a financial control system of their own based on a 3-year medium term plan, and it really is essential to plan capital expenditure for more than a year ahead. To that extent, the Bill does not seem to be satisfactory if it means what it says. If that is not done, it is not possible to get an even flow of projects. Also, if one does not have a 3-year plan one may incur costs of development and design and planning which become wasted, and for that reason an adjustment such as this is necessary. These amendments recognise the need for central Government to make adjustments in the second or third years if the state of the national economy requires it, and I should have thought that 15 per cent. or 20 per cent. was about the right kind of adjustment that it would have been reasonable to have made.

Lord BELLWIN

Having in the past spent many years working forward budgets over periods of years, wondering what the allocations would be, adjusting them when we did not get what we thought we should get, of course I am very sympathetic, but there really are problems. It is argued that for an efficient capital programme one must have a figure for three years ahead; in fact that is not quite so in practice. It would be impossible to give firm allocations for longer than a year ahead without pre-empting Cabinet decisions because, as I am sure your Lordships will know, they work on the basis of a one-year period. However, we have given local authority associations an informal assurance that wherever possible we will indicate what resources are likely to be available for the major service blocks in future years and the associations recognise that these indications will not be binding commitments, but nevertheless they will be helpful to the local authorities and will give them an indication.

Amendment No. 143 suggests the figure of 20 per cent. and it will be apparent that if that was unacceptable Amendment No. 144 would be even less acceptable because as the noble Lord, Lord Mishcon, so graphically put it, it is almost like an auction—"Do I hear 30 per cent.?" No Government could accept this sort of restriction on their ability to control such a substantial sector of public spending, nor is such a restriction necessary for the effective operation of the new capital expenditure system. However, we shall try to give as helpful an indication as we can about future allocations.

I entirely accept the remarks that have been made and I mentioned in my opening remarks that I had wrestled with this problem of forward planning of capital. We shall use our best endeavours to give the best possible guidance. For example, we could include an indication even of the resources which are likely to be available for the main service blocks and what allocations local authorities may expect in future years in respect of committed expenditure on service blocks. I know they would understand that this cannot be a binding commitment but in view of the system of how the Cabinet decides its spending at the present time that is as far as we can go. However, in my own experience it would be just about far enough to be able to plan sensibly and if in the second or third year one had to adjust, that could be done. I recognise that the proposals are an attempt to make things better.

Lord RENTON

I find a conflict between what my noble friend has said, so generously, about the intentions of the Government, which would indicate a degree of flexibility, and the total inflexibility of subsection (1). I cannot believe that he finds it satisfactory that this Bill should get on the statute book with that conflict between the inflexibility in the Bill and the flexibility of what he intends. I do feel that the noble Lord should say to the Committee that he will consider this matter further between now and the next stage.

Viscount RIDLEY

We have heard a good deal about my noble friend wrestling with this subject when he was a councillor in Leeds. I am still a councillor and I am still wrestling with it. I may be the only councillor in this Chamber at the moment. So I know what I am talking about, too. The noble Lord said that the Government cannot react to long-term decisions on expenditure but do it from year to year or, one might say, from hand to mouth. At the moment if one gets approval under the present system for a large project, say a school or a by-pass which is likely to take three or four years to construct, if loan sanction for the whole project is given regardless of how long it takes to complete, that would spread over several financial years. That means forward planning. The authority knows it can finish the school or the by-pass once it has approval to go ahead. Surely we are asking not even so much as that. I do hope the noble Lord will take this away and look at it sympathetically.

Lord BELLWIN

All I can say is that I will take very careful note of what has been said. We will look at it closely, and if there is any practical way in which we can do something, as has been suggested, then of course we will look at this sympathetically, because I know the problem. I cannot go further because I fear as I stand here now that it will not be possible to do all that has been requested. But I will certainly have a look at what my noble friend and other noble Lords request.

Lord MISHCON

I feel a very vital principle is involved here, and I wanted to try so hard and did try so hard to extract some comfort of a practical nature from what the Minister said. He talked in terms of wrestling in his capacity as a city councillor. I think he must realise he is now in an all-in wrestling contest but on the other side, and those of us who are still in the ring, as it were, are trying to get local authorities on a practical basis. I am not trying to claim any special privileges for them. We feel that a tremendously important principle is involved.

Perhaps the Minister could concede this, that he is willing to go back to consider what can be written into this Bill, as the noble Lord, Lord Renton, said, in order to see that subsection (1) is made more flexible. Then I would willingly withdraw and see what happened. But, if the noble Lord the Minister is saying that he feels that nothing can be written into the Bill at all but he is prepared to see what sort of situation could arise in the future which might make him more flexible in what he said to local authorities, I am afraid that really is not good enough for a legislative body. I would press him gently, not hard but gently, to go that one stage further and say that he would consider putting something into the Bill. I ask for no undertaking except that he will consider it. If he would give that I would be happy to withdraw; otherwise I must ask the Committee to divide.

Lord BELLWIN

I am absolutely prepared, if necessary, for the Committee to divide on this, but I did think I had said that as I stand here I do not see that it is possible for us to do as requested but I would try to ascertain if I was wrong, if it was possible. Having sympathy, I would look at it again. But if I am giving the impression in any way that I am going to do something that I might not be able to do, I do not want to burke the issue and have it again on Report. I would have thought there were moments when the kind of indication I have given might be considered to be acceptable, because I have never taken anything away on any of the Bills I have done that we have not looked at carefully. But I do not want to store up problems for Report; I think we already have enough. If we have to divide, we have to divide, but, even if we do and whether we win or lose, we will still look at it.

Lord RENTON

I hope we shall not divide at this stage. I am sure my noble friend has given an undertaking to consider the matter further which ought to satisfy us for the time being. I would be very much afraid that a division might close the matter.

Lord MISHCON

I know how reason-able the noble Lord, Lord Renton, is and I should love to follow him, but I have a horrible idea that I should be

[Amendments Nos. 144, 145, 145A and 146 not moved.]

2.53 p.m.

Lord BELLWIN moved Amendment No. 146A:

weak in defence of local authorities if I accepted an assurance which really meant very little. In those circumstances and with deep regret, I am afraid I have to ask the Committee to divide.

2.46 p.m.

On Question, Whether the said amendment (No. 143) shall be agreed to?

Their Lordships divided: Contents, 51; Not-Contents, 71.

CONTENTS
Airedale, L.	Denington, B.	Noel-Baker, L.
Alport, L.	Elwyn-Jones, L.	Northfield, L.
Ardwick, L.	Evans of Claughton, L.	Parry, L.
Ayebury, L.	Gaitskell, B.	Peart, L.
Aylestone, L.	Galpern, L.	Pitt of Hampstead, L.
Balogh, L.	Gardiner, L.	Ponsonby of Shulbrede, L. [Teller.]
Beaumont of Whitley, L.	Hacking, L.
Beswick, L.	Hale, L.	Ridley, V.
Blease, L.	Hall, V.	Ross of Marnock, L.
Boston of Faversham, L.	Henderson, L.	Simon, V.
Bowden, L.	Ilchester, E.	Stedman, B.
Brockway, L.	Kilbracken, L.	Stewart of Alvechurch, B.
Bruce of Donington, L.	Kilmarnock, L.	Stewart of Fulham, L.
Collison, L.	Leatherland, L.	Stone, L.
Cooper of Stockton Heath, L.	Llewelyn-Davies of Hastoe, B.	Underhill, L.
Cromartie, E.	Masharn of llton, B.	Wallace of Coslany, L.
David, B. [Teller.]	Mishcon, L.	Wigoder, L.
Davies of Leek, L.

NOT-CONTENTS
Abinger, L.	Elles, B.	Mowbray and Stourton, L.
Alexander of Tunis, E.	Elton, L.	Murton of Lindisfarne, L.
Ampthill, L.	Faithfull, B.	Northchurch, B.
Armstrong, L.	Ferrers, E.	Nugent of Guildford, L.
Avon, E.	Fraser of Kilmorack, L.	Porritt, L.
Balerno, L.	Gainford, L.	Richardson, L.
Bellwin, L.	Gowrie, E.	St. Davids, V.
Bessborough, E.	Hastings, L.	Saint Oswald, L.
Belstead, L.	Hatherton, L.	Sandys, L. [Teller.]
Birdwood, L.	Henley, L.	Selkirk, E.
Bridgeman, V.	Hornsby-Smith, B.	Sempill, Ly.
Caithness, E.	Kinnaird, L.	Sharples, B.
Cathcart, E.	Lauderdale, E.	Spens, L.
Chelwood, L.	Long, V.	Stamp, L.
Cockfield, L.	Loudoun, C.	Stanley of Alderley, L.
Cork and Orrery, E.	Lyell, L.	Strathcona and Mount Royal, L.
Cottesloe, L.	McFadzean, L.	Sudeley, L.
Croft, L.	Mackay of Clashfern, L.	Suffield, L.
Cullen of Ashbourne, L.	Macleod of Borve, B.	Swinfen, L.
Daventry, V.	Mansfield, E.	Trefgarne, L.
Denham, L. [Teller.]	Marley, L.	Trumpington, B.
Digby, L.	Middleton, L.	Vaux of Harrowden, L.
Drumalbyn, L.	Morris, L.	Vivian, L.
Ellenborough, L.	Mottistone, L.

Resolved in the negative, and amendment disagreed to accordingly.

Page 55, line 22, at beginning insert ("Subject to subsection (3A) below,").

The noble Lord said: I spoke to this amendment with Amendment No. 155A. I beg to move.

Lord UNDERHILL

I have no desire to detain the Committee unduly, but there is a question which I should like to put to the noble Lord the Minister arising from this subsection. In yesterday's debate I raised the question that the Minister already has authority to determine the proportion of transport capital expenditure of a county council which shall be met by borrowing, and that part of the amount not met by borrowing may be included for consideration for transport supplementary grant.

I fully accept what the Minister has said and that there is no firm decision taken on the future of TSG and the block grant. But there are items in Schedule 9 which materially affect transport under quite a number of headings. Will these provisions in any way affect the transport supplementry grant?—because that could also affect the whole consideration of payment based on transport needs. Will it preempt a decision on TSG? Has this matter been fully considered? If the noble Lord the Minister feels that he cannot fully reply this afternoon, I shall understand. Perhaps he could let me know?

Lord BELLWIN

I am grateful to the noble Lord. I certainly shall let him know.

On Question, amendment agreed to.

[Amendment No. 147 not moved.]

Lord MISHCON moved Amendment No. 148: Page 55, line 27, leave out ("10 per cent") and insert ("20 per cent").

The noble Lord said: I beg to move Amendment No. 148. We have discussed previously the question of flexibility and it is perfectly true, as the noble Lord the Minister said, that some flexibility has in fact been put into the Bill in the course of the proceedings in the other place. But, in one respect, it is thought by the local authority associations that there is a greater need for flexibility and that is in the proposed 10 per cent. carry forward as between years. It is felt that this is really too small, especially when matters are affected so much by such things as natural catastrophes, and so on, which may occur. It is thought that the proper thing to do, the proper practical course, is to have a 20 per cent. margin, and that is the reason for the amendment.

Lord DIGBY

I was going to ask whether this did, in fact, apply to the carry forward. Surely it is as regards the main 10 per cent. that latitude is allowed? I should like to repeat my question as to whether this 10 per cent. is because of actual payment differences or whether it is to give latitude to local government?

Lord BELLWIN

I am grateful to my noble friend because that is correct. This refers to the 10 per cent. that is built into the Bill: the carry forward is something else. So, without my going through my speaking notes, maybe that explanation would get the noble Lord to where he wants to be without the amendment.

Lord MISHCON

I am not quite sure that it does, but I am deeply grateful for the very light way in which the reprimand was administered. I feel that in both cases, as regards both the carry forward and the main structure, 10 per cent. is too low. I think that I am right in saying that the local authority associations take that view as well, and that the flexibility ought to be extended to 20 per cent. That was the burden of the amendment. However, for not having made myself abundantly clear, I apologise to the Committee and accept the correction which was well administered.

Lord BELLWIN

May I briefly say that we believe that considerable flexibility is conferred by the facility for virement between services and authorities and by the ability to supplement allocations by the use of capital receipts, the chance to use allocations from other authorities and so on. But in any case the figure of 10 per cent. can be changed by regulation if experience were to show that that were desirable.

Lord MISHCON

In the light of what has been said and the fact that I do not think I can carry it further at this stage, I should like to look carefully at what the Minister has said. But at this stage I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 149 not moved.]

2.59 p.m.

Lord MISHCON moved Amendment No. 150: Page 55, line 31, after ("time") insert ("but not later than 1st November in the year to which the allocation relates except with the prior agreement of the authority concerned").

The noble Lord said: I beg to move Amendment No. 150. Here I move to a matter which is, I think, of some practical importance—

Lord BELLWIN

I wonder whether the noble Lord would give way? It might save the noble Lord's throat and the Committee's time if I were to tell him, and no doubt—I hope—to his pleasure, that the Government are prepared to accept this amendment.

Lord MISHCON

My voice has been saved, but what is now going to happen to my heart I cannot tell the Committee. Possibly, in view of the shock that has been administered to it, I should sit clown at once and thank the Minister for this, the first of his gracious replies.

On Question, amendment agreed to.

3 p.m.

Viscount RIDLEY moved Amendment No. 151: Page 55, line 35, leave out from ("receipts") to end of line 36.

The noble Viscount said: I shall move quickly while this mood lasts. My point is the same as that in Amendment No. 152 in the name of the noble Lord, Lord Mishcon, and others. My Amendments Nos. 160, 161 and 162 are also consequential, so at least we have the merit of making progress. Earlier the Minister said that I was confused about the business of capital receipts which has been mentioned a great deal. If I am confused, I am not the only one; everyone is confused. As I understand it—and I may be wrong—the point is that Clause 66, which we have not yet reached, states quite unequivocally that capital receipts can be used by authorities as they arise. That is the great improvement that was made between the No. 1 Bill and the No. 2 Bill.

As I understand it, the parts of Clause 63 which are removed by my amendments are, in effect, saying, "Yes, you can have capital receipts, but"—as I was saying earlier— "the Minister may stop you applying them". In this series of amendments I wish to see the Minister's powers curtailed and the spirit and essence of Clause 66, when we reach it, to be what really counts. I beg to move Amendment No. 151 and to speak to the other amendments that go with it.

Lord BELLWIN

The main objective of the new control system is to ensure that the Government have the ability to contain total capital expenditure by local authorities within a national cash limit. By its very nature, a cash limit is a firm figure. By removing the Minister's power to limit the proportion of capital receipts available to supplement expenditure allocations, the amendment would reduce the Government's ability to safeguard the cash limit from being broken. In the absence of this power, the only recourse to prevent a national overspend would be to cut expenditure allocations to allow for the use of capital receipts. In that any reduction in allocations would probably have to be made pro rata in relation to all authorities, this would have the inequitable effect of penalising those authorities which had the least accumulated capital receipts. The concession on capital receipts is intended to help individual authorities, but it cannot be allowed to increase expenditure in aggregate above the planning levels in any year. An assessment is made, and we really cannot go beyond that.

Lord NORTHFIELD

is not this another case where the Committee and the local authorities will misunderstand unless the Minister is slightly more forthcoming? What he said is—and I paraphrase it and perhaps distort it, but, if I do, I am sure that he will correct me—that only if total cash limits are exceeded shall we want to use this as a reserve power. But, as the Bill is drafted, it does not read like that at all.

Under the Bill as drafted it sounds as though at any time the Minister can capriciously simply say, "You cannot use all your net receipts; I think it should be 50 per cent." without giving any reason. If the Minister could, in fact, say that it will only be in emergencies of that sort and nationally-difficult situations of cash limits that this power would ever be used, I am sure that a great deal of the unrest would come to an end.

Lord BELLWIN

I am very grateful to the noble Lord, Lord Northfield, because my understanding of it is exactly as he has said. I am thankful that he has put it as he has.

Viscount RIDLEY

I shall not press this amendment. I still think that the spirit of the agreement to use capital receipts is watered down by this clause, but I shall withdraw the amendment.

Amendment, by leave, withdrawn.

The DEPUTY CHAIRMAN of COMMITTEES (Viscount Simon)

I am told that Amendment No. 152 is identical to Amendment No. 151.

Lord MISHCON had given notice of his intention to move Amendment No. 152: Page 55, line 35, leave out ("or to such proportion of those receipts as may be prescribed,").

The noble Lord said: It is not identical, but in exactly the same way as the noble Viscount has spoken, so do I. Therefore I shall not move the amendment.

[Amendment No. 152 not moved.]

Lord MISHCON moved Amendment No. 153:

Page 55, line 36, at end insert ("; and (e) an amount for the year equal to the product of a rate of 2p in the pound for their area; and (f) any amount applied from funds established under S. 29 of the Local Government (Miscellaneous Provisions) Act 1976; and (g) any amount received by way of grant or loan from the EIB, ERDF; and (h) any amount applied to capital purposes from the proceeds of local lotteries,").

The noble Lord said: One of the things that are of great advantage to local authorities is the flexibility which they manage sometimes by their own ingenuity to obtain from revenue contributions and special funds. In the past most certainly, as many of us know, these have been used to supplement borrowing allocations and to build up funds for special projects in the local authority areas. The overall public expenditure forecasts are scarcely affected by these supplementary provisions and, as I understand it, the local authority associations believe that the Government have already got unto themselves sufficient controls through the borrowing and grant mechanisms without also con- trolling those items which, as I said, are matters which come into the local authorities' coffers as a result of their own efforts.

At present local authorities are not able to obtain the full benefit of grants and loans from the EEC because the loan sanction which they receive for locally-determined schemes is reduced pound for pound by the amount of such grants or loans. I am advised that the local authority associations believe that this is inconsistent with the reasons why such grants and loans are made in the first place, and they believe that in the future capital allocations should be supplemented by monies made available through the EEC to give local authorities the benefit of such funds.

As I understand the Bill at present, money spent out of lottery receipts is not counted as relevant expenditure for grant purposes, and in this context I refer to Clause 59(4), but is treated as prescribed expenditure—namely, coming within the schedule that we have been discussing this afternoon—for the purposes of capital controls. It cannot be accepted, say the local authority associations, that such expenditure is public expenditure, and therefore needs to be controlled, but it is money donated by the local people for special projects in the area which would probably otherwise not be undertaken. It is for those reasons that this amendment is moved.

3.8 p.m.

Baroness STEDMAN

I should like to support my noble friend on this amendment, particularly on paragraph (f). Here again, I am perhaps referring back to something that happened last night when I talked to the Committee about the growing population in a county like Cambridgeshire with a new town in it and where the population has increased by 10 per cent. over the last six years and our rate support grant has reduced by about 20 per cent. We are afraid in Cambridgeshire that while the Government up to now have failed to take any notice of our growing population, perhaps the capital allocations that we shall receive are likely to be insufficient for us to be able to finance the projects we need to meet the demands of that increasing population.

The amendment now before us provides a number of sources of finance outside the scope of new controls. Perhaps paragraph (f), which refers to the capital fund, is the most significant so far as Cambridgeshire is concerned. In that county we have established a fund by very careful savings on revenue and by disposal of surplus land, and it is only reasonable that an authority that has managed its financial affairs prudently in the past ought to be able to reap the benefit to finance any much needed development it needs outside that which is allowed by Government. I hope that the noble Lord will look at this favourably.

Viscount RIDLEY

I support this amendment. My own amendment, No. 155, is almost exactly similar. In some extraordinary way we seem to follow each other in a ping-pong game across the Chamber. We in the ACC feel that modest relaxation of this kind would be of tremendous help to local authorities in giving them some discretion to be able to do some of the things that are not totally necessary at first sight: things like helping an arts centre, permissive things under the legislation, all of which are trivial in terms of the context of the total need for the curtailment of Government expenditure. The total allocation will not be affected by this. You will have that flexibility which makes it worth while for people sitting on local authorities. It would be of great help if this were carried. If 2p was thought to be too much, would the Minister consider a 1p compromise? We seem to be ready to make concessions almost anywhere.

Lord NORTHFIELD

There are precedents for this sort of thing in rating at the moment of 1p or 2p for particular purposes. I hope that the Minister will accept at least that part of the amendment. It would apply very helpfully to local authorities that I am interested in; namely, those that are anxious about industrial development. It would be the sort of thing they could use on special schemes, for example, that had not been successful in building up the total that the Government will allow on special schemes, to give grants and special help to small businesses. It would be a very good use of a 2p rate. I hope that that sort of thing would appeal to the Minister.

Lord SANDFORD

The district councils will be glad to support this approach by the other two, but in this particular case I think I favour the proposal from the AMA coming from the Benches opposite.

Lord BELLWIN

The amendment of course would weaken the control of the total level of authorities' capital expenditure. It has to be borne in mind that the total product of the rate of 2p in the pound for local authorities in England and Wales is about £280 million. That is the amount by which paragraph (e) of the amendment could cause the national cash limit for local authorities' capital spending to be exceeded. The figure would be even higher if one added the amount standing to the credit of any funds established under Section 28, as well as grants and loans received from the European Investment Bank, the European Regional Development Fund, and proceeds from local lotteries.

The objective is so very much to give the Government an effective means of controlling the totality—and that is very much the key word—of local authorities' capital spending really no matter how this spending is financed. If any particular source of finance were excluded from control, the only way for the Government to safeguard the national cash limit would be to reduce the total amount available for distribution, and that would be unfair on any authority which did not happen to benefit from whatever source of finance was to be excluded.

We believe that the Government should say to each authority, "Here is your expenditure allocation. It is a cash limit. You may not overspend against it, but you may finance your spending from whatever sources you choose. And, of course, within the fixed limits you spend the money as you wish". The Bill will enable us to say this and mean it and to have the additional flexibility to manoeuvre that we have talked about so much today.

I am sympathetic to the point made by the noble Lord, Lord Northfield, as he suspected I would be. Whether or not there is any case for taking the compromise that my noble friend suggested, I do not know. Certainly, as I am here today, I have no such mandate to accept this at all. I certainly cannot accept these amendments. But as I have said, in one or two other directions we will talk over what has been said and think carefully especially of those two points.

Lord NORTHFIELD

May I draw the noble Lord's attention to the sort of thing I have in mind that the noble Viscount, Lord Ridley, is perhaps too modest to give as an example. In his own county of Northumberland he has a special scheme to give special grants to small industry in the area. I believe the noble Viscount was probably the originator of that. Let us take that sort of scheme. It may well not commend itself in the arguments between Northumberland and Marsham Street as to be allowed in the year's capital expenditure. But if somebody wishes to pioneer, try things out and show other parts of the country how useful such things can be, they must be given some freedom to pioneer, otherwise all pioneering will be stifled in Marsham Street. I therefore hope the Minister will look precisely at what the noble Viscount has pioneered and will agree that it is the sort of thing a 2p rate could allow to happen.

Lord BELLWIN

Of all the Members of the Committee, the noble Lord, Lord Northfield, has shown by his earlier remarks that he has an appreciation of exactly how this is proposed to work, yet he indicates that, at any rate for the moment, he has forgotten all that. Within the allocation that is given my noble friend has the power to use his money in any way he wishes, and his only problem in the first instance will be to try to get the figure as high as possible within the discussions which presumably will normally take place.

Baroness STEDMAN

The Minister says his noble friend will have the right to use his allocation as he wants. That is all right if his allocation is big enough to start with. In counties like Cambridge-shire, where our population is going up and our allocation is going down, we need the sort of help this amendment would give.

Lord BELLWIN

Or better salesmen to sell the idea.

Lord MISHCON

I wonder where we are? This is something about which the various local authority associations feel very fervently and the AMC, as the noble Lord, Lord Sandford, said, has put down a very reasoned amendment. I am not quite sure where the Minister has taken us. His general expression of benevolence is always welcome, but one asks for some practical result from that benevolence and I am not sure we have got one. If the Minister is saying that, having heard the discussion, he is prepared to have further discussions with a view to seeing whether the spirit of the amendment can be carried through—namely, that apart from the 2p rate part of the amendment, the funds that come from elsewhere will not be counted, as it were, against the local authority—then I am perfectly prepared, because I think it would be the wish of the Committee, to withdraw the amendment. But if he is saying that—I am sure he will not regard this as offensive—simply as a way of getting rid of the discussion this afternoon and it will never be resumed from a practical point of view, then I would not be doing my duty if I did not ask the Committee to divide. Can the Minister be a little clearer in what he is saying so that my noble friends and I can make up our minds?

Lord BELLWIN

I can only repeat what I said a little earlier when the Committee divided—it may have the same result or it may not—namely, that I cannot accept the amendment for the reasons I have given. I talked the other day about thinking aloud, which is perhaps something one should not do, but I do so because I sometimes find it interesting, and as my noble friend Lord Mottistone said, I am always very courteous to myself when I do so. I cannot accept the amendment and I have explained why, and if noble Lord's opposite feel they must divide, then that must be their decision.

As for the point made by my noble friend—that if it cannot be 2p then perhaps it could be 1p—I would remind him that that would be £140 million. I thought the point made by the noble Lord, Lord Northfield, was a good one and I would want to talk further about that in any case. Other than that, while I realise this is not particularly helpful to the noble Lord, Lord Mishcon—and the last thing I want to be is unhelpful—the decision must be his.

Lord MISHCON

I understand that and I know the Minister with faltering steps is trying to come some way near me. Perhaps I can offer him a helping hand. Is he able to say, forgetting for the moment paragraph (e), that he is prepared to look at paragraphs (f), (g) and (h), hopefully constructively? I ask him for no more than that. On that undertaking I would be prepared to withdraw the amendment at this stage. I ask for no other undertaking, and if he could give that assurance I should seek not to divide the Committee.

Lord BELLWIN

It is easy to say "Yes", sit down and go away, but I must be absolutely frank about this. Paragraph (h), for instance, happens to

appeal to me, but perhaps it will not appeal to those with whom I discuss the matter. Paragraphs (f) and (g) do not appeal to me because they create all kinds of other problems and raise all kinds of precedents that could be a great problem. So again I am sorry but the noble Lord will have to decide.

Lord MISHCON

Since lotteries appear to be the only thing that appeal to the Minister, I think that we had better have the lottery of a Division right away.

3.21 p.m.

On Question, Whether the said Amendment (No. 153) shall be agreed to?

Their Lordships divided: Contents, 41; Not-Contents, 70.

CONTENTS
Airedale, L.	Glenamara, L.	Ponsonby of Shulbrede, L. [Teller.]
Ardwick, L.	Hale, L.
Balogh, L.	Hatch of Lusby, L.	Ridley, V.
Beaumont of Whitley, L.	Hunt, L.	Ross of Marnock, L.
Beswick, L.	Janner, L.	Simon, V.
Bowden, L.	Kilbracken, L.	Stamp, L.
Brockway, L.	Kilmarnock, L.	Stedman, B.
Collison, L.	Leatherland, L.	Stewart of Alvechurch, B.
David, B. [Teller.]	Llewelyn-Davies of Hastoe, B.	Stewart of Fulham, L.
Davies of Leek, L.	Mishcon, L.	Stone, L.
Denington, B.	Northfield, L.	Underhill, L.
Elwyn-Jones, L.	Parry, L.	Wallace of Coslany, L.
Evans of Claughton, L.	Peart, L.	Wedderburn of Charlton, L.
Gardiner, L.	Pitt of Hampstead, L.	Wigoder, L.

NOT-CONTENTS
Abinger, L.	Elles, B.	Morris, L.
Alexander of Tunis, E.	Elton, L.	Mottistone, L.
Ampthill, L.	Faithful1, B.	Mowbray and Stourton, L.
Armstrong, L.	Ferrers, E.	Murton of Lindisfarne, L.
Avon, E.	Fraser of Kilmorack, L.	Northchurch, B.
Balerno, L.	Gainford, L.	Porritt, L.
Bellwin, L.	Geddes, L.	Renton, L.
Belstead, L.	Gowrie, E.	St. Davids, V.
Bessborough, E.	Hastings, L.	Saint Oswald, L.
Birdwood, L.	Hatherton, L.	Sandys, L. [Teller.]
Bridgeman, V.	Henley, L.	Selkirk, E.
Caithness, E.	Hornsby-Smith, B.	Sempill, Ly.
Cathcart, E.	Ilchester, E.	Sharples, B.
Chelwood, L.	Jeffreys, L.	Spens, L.
Cork and Orrery, E.	Kinnaird, L.	Stanley of Alderley, L.
Cottesloe, L.	Lauderdale, E.	Strathcona and Mount Royal, L.
Croft, L.	Long, V.	Sudeley, L.
Cross, V.	Lyell, L.	Suffield, L.
Cullen of Ashbourne, L.	Mackay of Clashfern, L.	Swinfen, L.
Daventry, V.	Macleod of Borve, B.	Trefgarne, L.
Denham, L. [Teller.]	Mansfield, E.	Trumpington, B.
Digby, L.	Marley, L.	Vaux of Harrowden, L.
Drumalbyn, L.	Middleton, L.	Vivian, L.
Ellenborough, L.

Resolved in the negative, and amendment disagreed to accordingly.

3.29 p.m.

Lord HILL of LUTON moved amendment No. 154:

Page 55, line 36, at end insert— ("(e) an amount for the year equal to the Authority's entitlement of profits of a trading undertaking owned by that Authority individually or as a member of a Joint Committee of Local Authorities.").

The noble Lord said: The noble Lord, Lord Bellwin, in the course of his unending labours at this Committee stage, has repeatedly stated—and I have no doubt it is his honest belief—that the general overall effect of this Bill is to add to the freedoms of local authorities and not to diminish them. I would put that belief of his to the test in relation to this amendment; and perhaps I may speak to No. 158 at the same time, for they are two legs of the same argument. Put simply, the argument is that where a local authority running an undertaking makes a profit on it—not a universal experience, but it happens—it should be free to dispose of that profit as it thinks best in the interests of the local people. It is as simple as that.

I am not proposing that that freedom should exist in relation to borrowed money or to money spent from the rates. The basic freedom that I am seeking—one that is now enjoyed—is that the authority making a profit on its own under-taking shall be free to dispose of that profit as it thinks fit. I do not see that this involves any interference with the battle against inflation. It does not involve public borrowing and I think it can be argued that it does not involve public expenditure in the sense in which those words is normally used.

May I put it to the test in relation to an airport? Although this amendment of mine relates to trading undertaking generally. Perhaps I may put it to the test in relation to an airport that I know best; the airport at Luton. Luton is a town with a population of some 150,000 people. It runs its own airport, two million people a year use it and it made a profit last year of £2¼ million. In the current year it is using that profit partly, to the extent of £1 million, to relieve the rates by 3p in the pound and partly to put to a reserve fund for the rebuilding of its terminal building, which is absolutely essential. The number of passengers has grown steeply over the years and there are many pressures which ought not to continue.

That re-equipped airport involves an expenditure of about £6 million, as it is now estimated. No doubt the rebuilding of the terminal building will take three or four years. Luton wants to save those profits and to use them for that rebuilding. Why in Heaven's name should it not be allowed so to do? Really this question must be answered. Why? Is there an argument of the national interest, of the battle against our economic troubles? What is Luton to do with the £6 million if it does not use it for that purpose? Should it throw it into the relief of rates? —which I suspect will be more inflationary than using it on the rebuilding of its terminal building. That is the real test. I think I need not embellish the general principle any more.

I know what the Minister's answer is going to be. It has been circulated to local authorities who run airports, circulated by the Department of Trade. It has gone out. I saw a brief summary of it in the Financial Times last week. The Minister's answer is going to be that under capital expenditure, Block 5, there is to be an amount for such services as airports; it is going to permit inter-availability of expenditure under that heading. It is not going to permit, by the way, money spent on sound insulation and it is not going to permit money spent on parks at the airport—and it is going to be on the one-year principle. Much has been said about that; but how can a single contract be put out for the reconstruction of this terminal building costing some £6 million on the basis of a one year approval? But I am back to the main point. Why should not Luton, without the permission of anybody in Marsham Street, use the profits on their airport to re-equip their terminal building and to do many other things which need to be done? It really does raise a point of simple principle that should be resolved here and now.

As I have said, this applies to all local authority undertakings. Bless my soul, the Government are pressing nationalised industries to do just this—make some profit and set it aside for capital use. The Government are requiring the airports of the British Airports Authority to do just this—reinvest profit in capital development. It is a simple proposition and I think the Government should accept it. It is no good, though, pretending that one solves the problem in the terms of the circular issued to airport authorities, from which I have quoted, for the control of Marsham Street is still there. Fancy saying in advance that it is not to be used for sound insulation when that is the problem at some airports. The control is still there. There is a movement in the direction of more freedom, more prospect of money for airports not making a profit, but it still hamstrings the airports that are making a profit.

I would say to your Lordships that it is not an assault on the general propositions of the Bill. I think we should get away from expressing one view and going into another Lobby on party grounds, something of which we are all guilty from time to time. We should look at it as a simple proposition of commonsense, one likely to encourage local authority undertakings to seek more efficiency and more profit. It is a simple principle. There is nothing useful to result from bringing the civil servants in Marsham Street into a decision as to the disposal of the profit of a profitable local authority undertaking. I hope we shall regard this as a simple principle of great importance, and leave with such authorities the freedom that they are enjoying today.

Lord SANDFORD

Luton is a distinguished member of the Association of District Councils and I must rise in support of the noble Lord, Lord Hill. The malaise in the national economy which makes it necessary to have this legislation at all is the malaise which has arisen as the result of our spending more than we have earned, and spending it before we have earned it. The provision the noble Lord, Lord Hill, is moving is for freedom for an authority which has an undertaking that has already earned some money to spend it, after it has been earned, on the profitable undertaking. I submit that that fact alone wholly and completely puts that operation outside the ambit of the controls that we are having to discuss now.

Lord BELLWIN

On the general subject, we had a debate a little while ago; I think it was on an amendment of the noble Lord, Lord Northfield, or perhaps the noble Lord, Lord Mishcon. We discussed the question of trading profits being allowed to supplement in the way that is suggested. I hope the Committee will excuse me if I do not repeat the reasons I gave for saying that, while it sounded terribly attractive and very logical when one started to look at it more closely there were seen to be problems and it was not just that simple. I said that although we did not accept it, for the reasons I gave, nevertheless there was such an extensive degree of logic involved that we would like in any event to think about it. That is where I left it. On that aspect of this amendment I say the same again. There is a difference because frankly we do not consider that regional airports are part of the normal run of trading undertakings. We recognise, as I tried to indicate to the noble Lord, Lord Parry, and accept entirely that the development of major airports round the country should not be completely haphazard but should be carried out in accordance with a sensible national and regional strategy.

May I say what a delight it is to listen to the noble Lord, Lord Hill of Luton, who knows so well—probably far better than I do—that the Government has this attitude to airports. This means that we shall have to make sure that the special needs of the authorities responsible for airports of regional importance—and obviously Luton is one—are reflected in capital expenditure allocations made to those authorities.

This is not something that comes upon me anew. I have had correspondence with the noble Lora, and I have been making inquiries. I am able to say that I am confident that we are going to be able to make arrangements to ensure that this is done. Whether or not it is done in the particular form of the amendment, at this moment I cannot say. I have not the slightest doubt that the noble Lord will be able to tell his friends in Luton that, as to what they propose, I am sure it will be all right—and for me to say that at this point is quite a commitment to be making.

Lord HILL of LUTON

It may be indelicate to press the Minister further. However, I should like an assurance on the document issued by the Department of Trade. It asks, by the way, for bids by next Wednesday but I am not criticising what might seem to be a little anticipation of the enactment of the Bill in its present form. When the noble Lord says that fresh consideration will be given, I should like an assurance that consideration goes beyond what is contained in this dicument, and this does not represent the fruits of any preliminary consideration on which the final answer will be based.

Lord BELLWIN

I do not know the particular document but I know within our own Department what our attitude is. I say again that I am confident that he is going to get where he wants to be in any case.

Lord HILL of LUTON

Before any other questions are asked—in case the Treasury is too awkward in the re-consideration, as promised, and hoping that the fruits of this further thinking will be available before the Report stage—I seek permission to withdraw the Amendment.

Amendment by leave withdrawn.

[Amendment No. 155 not moved.]

Lord BELLWIN moved Amendment No. 155A:

Page 55, line 38, at end insert— ("(3A) Nothing in subsection (3) above authorises an authority to make payments if to make them would fall outside the powers the authority have apart from that subsection.").

The noble Lord said: I spoke to this amendment on Amendment No. 146A. I beg to move.

On Question, amendment agreed to.

[Amendment No. 156 not moved.]

3.44 p.m.

Lord DAVIES of LEEK moved Amendment No. 157: Page 56, line 22, at end insert— ("(9) Notwithstanding the provisions of subsection (3) above, if an authority acquires an interest in land, other than the freehold interest therein, with the intention of disposing of an interest in the same land to another person for industrial use, to the extent that the authority have not so disposed of the interest by the end of the financial year in which the original interest was acquired, the amount that would otherwise have been counted as a payment in respect of prescribed expenditure in that financial year shall not so count until the following financial year.").

The noble Lord said: I will try to be brief and avoid any philosophical points. We are all tired, particularly the Minister. North Staffordshire County Council and many other county councils who are concerned do not want every inch of their life managed. I should not like local government in Britain going towards the system I have seen in the United States of America, having town managers and management systems. The amendment seeks to ease a practical difficulty which would face authorities under the present wording of the Bill. It does not seek—looking at both sides of the Chamber—to introduce any significant change in the Government's policy.

Local authorities have been playing an increasingly important role within the overall policies of successive Governments to encourage small businesses, and we in this House are so concerned that the noble Baroness, Lady Sharples, has organised a little committee on small businesses on which I have the pleasure to serve. In particular, the authorities have secured the advance provision of small factory units, either for sale or to let, and the provision has filled a gap where demand has not been satisfied by the private sector. Small units of below, say, 2,000 square feet are less attractive to the private sector than larger units, because risk, occupancy, turnover and management costs are comparatively higher.

Over the last few years, because of constraints on finance available for capital outlay, authorities have tended to move away from arrangements whereby they directly finance the factory units. Instead, they have been securing the provision of such accommodation by taking a head lease on units provided and financed by a developer and then sub-letting to small industrialists. This practice has been successful in providing small units, because it transfers the risk and management problems from the developer to the authority.

Under the present provisions of this Bill, the full open market value on a freehold basis of the advance factory units would count against the authority's prescribed capital expenditure limit for the financial year in which the head is taken out; and I notice that one of my noble friends has put down an amendmen-with which I agree. Upon the accommodation being sub-let the authority would be able to credit against their capital expenditure limit the full open market value of the sub-lease and this, in theory, should offset the initial charge from the head lease.

However, the problem is created by the time factor, and this we have discussed on other aspects of this Bill. Authorities will incur a substantial charge against their prescribed limits, if, having entered into a head lease, they fail to sub-let within the same financial year. The consequences for the authority of failing to sub-let within the financial year could be a substantial overspending of the prescribed capital expenditure limits. For example, a small development on a site of five acres, with 50 per cent. coverage, would have a value in excess of £2 million.

With such large sums and so many timing factors outside the control of the authority, as regards both the head lease and the sub-lease, it is unlikely that they will take the risk of entering into such an arrangement when the provisions of this Bill are enacted and, therefore, will not encourage small businesses. That is the rub of what I have just explained. If, late in a financial year, it seems unlikely that sub-leases can be completed by the deadline, it will be difficult to make corresponding savings elsewhere in the capital programme. Capital outlay cannot be turned off in an instant like water from a tap.

Another important factor is that Section 123 of the Local Government Act 1972 requires that, except with the consent of the Secretary of State, an authority shall not dispose of land for a consideration less than the best that can reasonably be obtained. It may be difficult to demonstrate that this law has been complied with, if the authority are forced to accept terms that might not otherwise be acceptable, simply in order to avoid contravening this Bill and the capital expenditure controls.

However, it is accepted that authorities should be encouraged to think carefully before supporting risky projects for which private sub-tenants may be hard to find. The amendment would, therefore, still require authorities to count the value of the head lease against prescribed expenditure to the extent that the accommodation has not been sub-let by the end of the following financial year. This is, therefore, an important practical issue which the Government are asked to recognise, either by accepting this amendment or, I hope, by making similar provision in regulations made under Schedule 9 to this Bill. I should like to expand what I have said but time is on the wing. I beg to move.

3.50 p.m.

Lord NORTHFIELD moved Amendment No. 157A as an amendment to Amendment No. 157: In last line leave out ("the following financial year") and insert ("either of the two following financial years.").

The noble Lord said: This concerns what we in the trade call the head lease problem—that is, trying to help developers to build particularly small units by the local authority taking a head lease and then being responsible for the subletting and management. I know that the Minister's answer will be that in another place the Government proposed an amendment, after earlier discussion, that has now resulted in subsection (4) of Clause 66. That subsection says that when they finally dispose of the sublease they will be given a capital credit; therefore it will work out in the end. I can almost paraphrase what the noble Lord is going to say. He will say, "Yes, we have largely met this point in Clause 66".

I want to draw his attention to two points. It is all very well to say, "In Year 1 you will suffer because this taking of the head lease will count towards your capital expenditure, but you will get it all back in Year 2 when you have sublet the lease and got a tenant for the factories". But that is not good enough, for this reason: It will deter local authorities from entering wholeheartedly into this sort of thing. My goodness! if anything has been proved about small business—I have repeated this so many times in your Lordships' Chamber—the fact is that it is the provision of factory space which does more than anything else to get them moving. This is the one thing which they cannot afford for themselves. It is when they see factories built and know that they can immediately take a tenancy that small businesses get going. That is self-evident from the whole of our national experience.

So we desperately want to encourage, if we can, local authorities to do this head-leasing in order to persuade developers—this is Government policy, after all—to come in with the main capital and to leave head-leasing and sub-leasing to the local authority as a means of encouraging the process. Therefore, anything which deters the counting of the capital expenditure in the first year because of the chance of not getting a capital receipt in that year should be avoided wherever possible.

Secondly, not only does the Bill as drafted put that deterrent in the way of a local authority from taking this bit of risk in Year 1; also it encourages them—and I draw this specifically to the attention of the noble Lord—to sublet at lower than the market value in order to get rid of it quickly. That is very bad indeed. As chairman of a new town corporation I am exhorted at the moment by the Government to let all industrial factory space at the full economic rent, or as near as I can get to it. The last thing, therefore, that we want is to have a local authority which has got this head lease subletting in a hurry and being prepared to let it go at any rent it can get within that one financial year in order to avoid the penalty of counting that expenditure against its prescribed expenditure.

The Government did not go far enough in the other place for the two specific reasons I have spelled out, and I hope that they will feel able to go this amount further. My amendment gives them two years in which to get rid of the lease rather than the one year suggested by my noble friend, but I must confess that either would suit me so long as it would get us along the road towards solving the problem.

Lord SANDFORD

I am grateful to both noble Lords for introducing the topic, and I should like to confirm that a very large number of districts are actively engaged in trying to help small businesses to get started. I would ask my noble friend to give us some guidance on what help is available, either in this clause or elsewhere, in order to deal with the problem which arises for local authorities as a result of the time lag which almost always occurs—sometimes it is quite long—between laying out the capital and getting it back in the form of receipts.

Lord BELLWIN

Dealing with the first amendment, although the principles are similar it is a complex amendment. It provides that where an authority take the lease of land which they intend to sublet for industrial use, they will not in respect of the year in which they acquired that interest be treated as making any payment for so much of the land as has not been sub-let by the end of that year. Only in the following financial year will they be treated as having made payments for that un-let land. The effect of the amendment would be to exempt from control all expenditure on the acquisition of industrial land by leasing in any year insofar as the authority concerned do not sub-let that land by the end of that year. This is quite unacceptable as it would mean that part of a local authority's capital expenditure would not be subject to control in the year in which the expenditure was first undertaken by the authority. This would seriously weaken the Government's ability to ensure that authorities' total capital spending in a particular year remained within the overall limits authorised for that year.

I recognise and share the wish of all three noble Lords to help local authorities assist in the provision of land for industrial development. Of course, that is an absolutely common desire. The Government have already taken steps in another place to achieve this aim by amending the Bill to provide that a local authority shall be able to treat as a capital receipt the value of land sub-let. This should be particularly helpful to authorities who want to sub-let industrial land. I do realise that some difficulties over timing may arise where a local authority take the headlease of an industrial estate (say) in one financial year and do not succeed in sub-letting all the factory units within that year. It is considered however that each local authority's capital expenditure must be recorded in the year in which it occurred; otherwise the Government will have no real control over the total volume of capital resources expended in any one year.

The amendment is intended to modify Amendment No. 157 and it provides that where an authority take the headlease of land which they intend to sub-let for industrial use, only in the financial year following that in which they take the head-lease will they be treated as having made payments for so much of the land as has not been sub-let by the end of the year in which they take the headlease. Amendment No. 157A is even less acceptable than the earlier amendment, as it would mean that part of a local authority's capital expenditure would not be subject to control in the year in which it was first undertaken, nor even in the year after that, but only two years after the event. This would weaken still further the Government's ability to hold the total volume of capital resources expended in any one year to within planned levels.

Having said that and explained why I cannot accept the amendment, I should want to look closely at what has been said, and particularly at the arguments made by the noble Lord, Lord Northfield, and indeed the points made by the noble Lord, Lord Davies of Leek. I am sure the Committee would accept that it is a complex point. It is not something which can be quickly grasped at first hearing, or even at first reading, as I have found when looking at the amendments originally. I cannot accept them for the reasons given, but shall read what has been said, and if as a result of that we wish to have a discussion with noble Lords who have raised the matter, we will do so, and whether it would lead to anything else would depend on what then took place.

Lord DAVIES of LEEK

I am grateful for the manner in which the Minister has replied. I do not want to make a party political point because the whole world has difficulties at the moment, but I am sure that if unemployment is going to increase many local authorities—indeed all local authorities—will be called upon to try to make individual efforts to help entrepreneurs to start little businesses, and the object of the Staffordshire county council and other intelligent ones like them is do do just that. In view of the manner in which the nobel Lord has answered me, and with the understanding that they will look at this as we go along, I think at this hour and in view of the tiredness of the Committee, which has worked hard, I will, with permission, withdraw the amendment.

The CHAIRMAN of COMMITTEES (Lord Aberdare)

We have to deal with Amendment No. 157A first.

Lord NORTHFIELD

I am delighted to withdraw my Amendment No. 157A, because I found the assurances of the Minister very helpful.

Amendment to the amendment, by leave, withdrawn.

Lord DAVIES of LEEK

I beg leave to withdraw Amendment No. 157.

Amendment, by leave, withdrawn.

[Amendment No. 158 not moved.]

Lord NORTHFIELD moved Amendment No. 158A:

Page 56, line 22, at end insert— ("(9) Notwithstanding the provisions of subsections (1) to (4) above, expenditure incurred in the acquisition of an interest other than a freehold interest in land shall not be prescribed expenditure if it is acquired in order to further the construction of any industrial building not exceeding 250 square metres in gross floor area.").

The noble Lord said: We can deal with this briefly. I wonder whether the noble Lord, Lord Bellwin, would agree to take this one in with the discussions on the others which he offered on the last amendment. In effect, this is an alternative way of looking at help that might be given to the local authorities in trying to build small units for industrial purposes. This amendment would imply that a local authority that took a head lease in order to facilitate construction of small units under 250 square metres should not have the cost of that lease counted against it in totalling up its prescribed expenditure for the year. That is a pure alternative or another possible way of helping the situation compared with the amendment moved by my noble friend Lord Davies of Leek. If the noble Lord would say that he will look at them both together before the next stage, I would be very happy to withdraw this amendment.

Lord BELLWIN

I must, in all frankness, say this on the same basis as before, that I cannot accept the amendment. I thought some of the points were interesting in that they were very complex and I said I wanted to look at them again. On that basis I hope the noble Lord will feel able to withdraw this amendment.

Lord NORTHFIELD

I am quite content. I take the Minister's word on this matter. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 63, as amended, agreed to.

Clauses 64 and 65 agreed to.

Clause 66 [Capital receipts]:

4.2 p.m.

Lord BELLWIN moved Amendment No. 158B: Page 57, line 16, at end add ("or Passenger Transport Executives").

The noble Lord said: This amendment is a necessary consequence of the proposed inclusion within Part VIII of capital expenditure by Passenger Transport Executives. Because the capital expenditure of the PTE will itself be prescribed expenditure, it is necessary to ensure that any capital grants and advances by local authorities to PTEs do not also score against the allocations when they are made, or as capital receipts if they are repaid. A later amendment to Schedule 9 will ensure the first of these objectives. This amendment brings about the latter. I beg to move.

On Question, amendment agreed to.

[Amendments Nos. 159 and 160 not moved.]

The CHAIRMAN of COMMITTEES

I have to point out that if Amendment No. 160A is agreed to I cannot call Amendments Nos. 161 or 162.

Lord BELLWIN moved Amendment No. 160A:

Page 57, line 42, leave out from ("treated") to ("as") on line 2, of page 58, and insert— (",or shall be treated to an extent specified in the regulations, as if they were mentioned in subsection (2) above in addition to or in substitution for those so mentioned; (dd) that classes of assets shall be treated, or shall be treated to an extent specified in the regulations,").

The noble Lord said: Under paragraph 4 of Schedule 9 the Secretary of State is empowered to make regulations providing that the control system shall not apply to expenditure incurred in specified circumstances and to expenditure for a specified purpose. The Government intend to use this power initially to exclude from control expenditure on law and order services and also the acquisition of plant and equipment, including vehicles, which are acquired by leasing and where the leasing arrangements do not provide the option for the local authorities to acquire ownership of the assets.

If the Secretary of State provides that expenditure incurred in specified circumstances and expenditure for a specified purpose shall not be prescribed expenditure, it is logical that he should also provide that assets acquired by means of such decontrolled expenditure should not be treated as generating capital receipts on disposal. We had intended that Clause 66(5)(d) should allow the Secretary of State to make the regulations necessary to provide that assets acquired by means of any de-controlled expenditure should not be treated as generating capital receipts on disposal. However, I understand that the phrase "class of assets" is not wide enough for all circumstances. Hence the need for this amendment, which will ensure that consistent arrangements can be made both for the acquisition and for the disposal of capital assets in particular circumstances. I beg to move.

On Question, amendment agreed to.

[Amendments Nos. 161 to 163 not moved.]

Clause 66, as amended, agreed to.

Clause 67 [Specification of expenditure—supplementary]:

Lord UNDERHILL moved Amendment No. 164: Page 58, line 9, after ("year") insert ("not later than 1st November").

The noble Lord said: This clause deals with the timing of the notification to local authorities of the capital expenditure allocations. The Bill provides that the Minister shall notify that to the authorities before the beginning of the year to which the allocation relates. I am certain that the noble Lord the Minister will appreciate that the point being made is that this is far too vague. He will understand that authorities will have to do considerable preparation and planning in connection with these capital projects, and unless they have adequate time, problems could arise.

The Minister was so very helpful in accepting an earlier amendment dealing with the timing, and I am wondering whether on this occasion he will do likewise and accept the amendment which provides that this notification shall be not later than 1st November in the year previous.

Lord BELLWIN

I say at once that the Government are in sympathy with the intention behind the amendment, which is to give authorities as much notice as possible of their capital expenditure allocations each year. The Government will, of course, announce the specified allocations for authorities for a particular year as early as possible, and in any case well before the end of the financial year before that to which the allocations relate.

We recognise that early notification is necessary for efficient capital programming by authorities. I said that when I spoke—was it yesterday? It seems so long ago. As I have said, I know only too well that they need to know as early as possible. But the only reason why the Government feel that they cannot be bound by a statutory deadline, such as 1st November, for the announcement of allocations, is the fact that the allocations will have to be determined on the basis of Cabinet decisions on public expenditure generally. There is no set time by which these decisions have to be made—so to set a deadline by which the Minister must notify authorities of their allocations really would be inappropriate.

It is intended that the allocations for 1981–82 will be made not later than the announcement of the rate support grant settlement in November. I hope that gives an intimation of the closeness that we would want to get to the date the noble Lord suggests. So, there really is an absolute understanding of the problem. I hope that in those circumstances the noble Lord will feel able to withdraw the amendment.

Lord EVANS of CLAUGHTON

Before the noble Lord replies, I should like to say that local authorities who have spoken to me about this matter have all unanimously, and with great fervour, said that to make any sensible decisions about budgeting and capital expenditure they must know, if not by 1st November, certainly by 31st December. I hope that the Minister will bear that in mind. It is a universal view. He must know himself, probably better than most of us do, that if they do not know by that kind of time local authorities will be in an appallingly difficult situation.

Lord UNDERHILL

I am obliged for the statement by the Minister. It greatly improves what is in the Bill. I accept what he has said. I am certain that, if by any chance the Government slip up, the local authority associations will now follow up this assurance that has been given. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 67 agreed to.

[Amendment No. 165 not moved.]

Clause 68 agreed to.

[Amendments Nos. 166 and 167 not moved.]

Clause 69 agreed to.

Clause 70 agreed to.

4.9 p.m.

Lord EVANS of CLAUGHTON moved Amendment No. 168: After Clause 70, insert the following new clause:

("Connection of Statutory Services in the case of Development without valid planning permission

.—(1) The owner of land or his agent shall possess planning permission for any development under the Town and Country Planning Act 1971 and shall be required to present evidence of such permission to the statutory undertakers before they shall be legally bound to connect electricity, gas and water services to the said development.

(2) Subsection (1) above shall not apply where the development took place four or more years before the request for services to be connected.

(3) Appeal against the refusal of a statutory undertaker to connect a service under subsection (1) above shall be to the local planning authority, and the said refusal is deemed similar to an enforcement notice served under section 88 of the Town and Country Planning Act 1971.").

The noble Lord said: I shall move this amendment briefly, not because I think that it is unimportant—it is not—but because of the lateness of the hour for a Friday. It is a very simple technique which I should have thought would appeal to your Lordships because it would assist in reducing the number of people employed in local government.

This amendment deals with the problem which has occurred in the city of Leeds, with which I think the Minister is vaguely familiar, and indeed in other inner urban areas where property speculators purchase large numbers of back-to-back terrace houses, or that kind of run-down kind of property, and do not go to the trouble of obtaining consent for converting the property for multi-occupation, fill the properties with innumerable families and get them connected to the gas and electricity supplies. Unless there are neighbours who are very vigilent, it may not be noticed for a very long time that, in fact, planning permission has not be obtained.

There are other cases in other parts of the country where tankers carrying noxious fumes have been attached to gas and electricity supplies, which have not received planning consent; and again it has taken a long time to percolate through people's minds that this does not have planning consent. As your Lordships know, it requires an army of inspectors to go in for enforcement proceedings. Therefore, it seemed that a very simple means of cutting through this problem and of cutting through hardship to people, misuse of property and breaches of the law would be to make it a requirement of the gas and electricity undertakings that they would not connect up these services unless the person applying could show a current planning permission.

It seems a very simple and useful device which would avoid the employment of a large number of inspectors and which, as I say, would ensure that property was not misused and districts were not abused in a way that is totally contrary to the planning laws. It seems to me to be a useful amendment which the Government could easily incorporate either in this form, or in some similar form, at a later stage. I beg to move.

Lord BELLWIN

I accept that there are those who would like to see the planning enforcement machinery strengthened, and I also accept that it might appear wrong for statutory undertakers to be legally bound to connect services to unlawful developments. But in fact the cases with which this amendment would deal are very rare, and any problems to which they might give rise are far outweighed by the many practical difficulties that the proposal would create. If the noble Lord, Lord Evans, would be agreeable, I should like to write to him on this, because I have such a lengthy brief on it which outlines all the practical difficulties; and I suspect that at this stage the Committee would be happy if he would so agree, and I shall undertake to do this.

Lord EVANS of CLAUGHTON

I would, with great pleasure. The noble Lord says that it is a very rare occurrence. I can tell him that it happens in the Armley district of Leeds and in places like Liverpool 8 too. However, I am willing to do as he suggests. I look forward to hearing from him.

Lord MISHCON

Will the noble Lord the Minister remember the copy to the noble Lord, Lord Lloyd of Kilgerran?

Amendment, by leave, withdrawn.

Clause 71 (Valuation etc.):

Lord BELLWIN moved Amendment No. 168A: Page 59, line 36, leave out ("in connection with the acquisition") and insert ("on the acquisition; and any reference in this Part of this Act to a payment by an authority shall be construed as including a reference to a payment of an amount so calculated. (1A) A payment of an amount so calculated shall accordingly be treated as an item of account within the meaning of section 161 of the Local Government Act 1972 (powers of district auditor and the court).").

The noble Lord said: This is a technical amendment which is designed to ensure that the present statutory procedures for the audit of local authority accounts will apply to all payments that constitute prescribed expenditure under Part VIII and Schedule 9 of the Bill. I beg to move.

On Question, amendment agreed to.

The CHAIRMAN of COMMITTEES

I have to point out that if Amendment No. 169 is agreed to, I cannot call Amendments Nos. 170 or 171.

Viscount RIDLEY moved Amendment No. 169: Page 60, line 4, leave out ("for the freehold interest in the land").

The noble Viscount said: With this amendment I should like to speak to Amendment No. 173, because it is consequential. We are treating as capital, transactions of leasing and other acquisitions of interests which have hitherto never been regarded as capital expenditure by authorities. The value of the capital transactions to be counted against allocations in such cases is to be the full freehold or other value of the whole property irrespective of the real value of the interest being acquired.

These amendments, while accepting that the Government propose henceforth to treat transactions of this nature as capital transactions, seek only to put a value on them equivalent to the actual value of the interest being acquired rather than the freehold or full use of them. It seems to me perfectly fair if the local authority takes a lease for a certain period that that should count for the actual value of whatever lease is taken and not for the full interest. I hope that the Government will be able to accept the spirit of these amendments.

Lord MACKAY of CLASHFERN

The main purpose of this Part of the Bill is to give the Government an effective means of controlling the consumption of capital resources by local authorities. Where an authority acquire the right to use of occupy buildings or land, they are using capital resources which could otherwise be used by the private sector. As far as the control of public sector investment is concerned, it makes no difference whether the authority own the freehold interest in the property or some other lesser interest so long as they occupy it to the exclusion of the private sector. Therefore, Clause 71(3) provides that where an authority acquire any interest in property which entitles them to occupy the property, they will be treated as having paid an amount equal to the open market freehold value of the property.

However, we recognise that local authoriies may well take relatively short-term leases of property which they would normally regard as including any revenue expenditure for the payment of rent. We believe that it would be right for such lettings to be excluded from prescribed expenditure. We shall therefore provide by regulation under Schedule 9 that leases of up to 20 years will be exempt from control, except in the case of lease/leaseback arrangements where, despite the often short term of the lease, the intention is to acquire an asset permanently rather than merely to lease it for a period. In view of that, I hope that my noble friend will be able to withdraw his amendment.

Viscount RIDLEY

I am deeply grateful to the noble and learned Lord and for the assurance he has given. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

4.17 p.m.

Lord GATNFORD moved Amendment No. 170: Page 60, line 4, leave out ("interest in") and insert ("or other interest in or right over").

The noble Lord said: In moving Amendment No. 170, I also wish to speak to Amendments Nos. 172 and 172A. We have already had some explanation about the valuation, and in moving this amendment I hope to hear some further explanations about the rather extraordinary confusion that seems to arise sometimes and some rather strange interpretations. For example, subsections (3)(b) and (13) read together appear to require even the very limited interest in land to be valued in instances where the freeholder is in possession. Under subsection (3)(a), it seems to me that if one property is exchanged for another, the one taken by the local authority has to be valued as if it was a freehold possession even if it is not. Where there are some favourable exchanges between parties they may all be seriously inhibited, if not precluded, by the valuation principles applied by this clause.

This clause could mean that a local authority would think it prudent to take whatever premises they need on annual tenancies which, because of subsection (11) go in as nil, so that the effects of subsections (3) and (13) can be avoided. Suppose a local authority was to take premises using them for a few hours a day five days a week, perhaps as classrooms or as an old people's club; suppose, further, that the owner is only prepared to enter into an agreement if the local authority will take the premises for a minimum of two or three years. That transaction then becomes a right on interest exceeding one year in duration, and by virtue of subsections (11) and (16) apparently has to be valued as a freehold possession according to subsections (3)(b) and (13). These amendments are an attempt to remedy some aspects of this clause. I shall be grateful to hear my noble friend the Minister give some further explanation. I beg to move.

Lord MACKAY of CLASHFERN

The explanation for the situation here is really exactly the same as that covered by the principle I explained earlier. As for the examples given by my noble friend, I rather think that they, too, are covered by what I said about regulations, because the intention is to deal with the situation whereby, using such devices as he explained in fact the authority is acquiring an interest which is intended to be permanent under the guise of a succession of shortages; and, as I say, the intention is to cover that by regulations.

Lord GAINFORD

I am grateful to the Minister for those assurances and beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

4.21 p.m.

Lord MISHCON moved Amendment No. 171: Page 60, line 4, after ("land") insert ("or such other interest").

The noble Lord said: I shall detain the Committee only briefly because the noble and learned Lord Advocate has already expressed a view on these matters which half rectifies the position, if I may say so with respect. If I understood him aright, he was dealing with a leasehold interest of under 20 years. The position of course still remains that with a long leasehold or even a medium-sized one over 20 years, apparently the notional value is still the freehold, and if there are other interests involved (even to quote a ridiculous situation, a wayleave) presumably again the local authority in its assessments and so on is deemed to have a capital value of a whole freehold interest. I will not detain the Committee now on what is a very technical matter and noble Lords who preceded me have spoken about it in some detail. I hope the noble and learned Lord, especially in view of what was said in another place in Committee about this matter being looked at because it deserved to be looked at, will give an assurance that he will look at the whole question of interests, even those above 20 years leasehold and other interests there might be, and possibly consider the position again.

Lord MACKAY of CLASHFERN

I am content to do that. The explanation perhaps is that the value of the freehold interest is taken as the value, and if it is a question of wayleave I do not think that would apply but I shall be glad to look at the matter.

Lord MISHCON

I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 172 to 174 not moved.]

On Question, Whether Clause 71, as amended, shall stand part of the Bill?

Lord NORTHFIELD

I seem to be one of the few Members of the Committee who support this part of the Bill in principle so I feel justified in detaining your Lordships briefly to ask a question about subsection (7). Can the Lord Advocate say to what sort of circumstances that subsection might apply? It says: Where the acquisition is of an interest in or right over land and the interest or right does not confer a right to occupy the land, the amount is nil". In other words, it will not count against the prescribed capital expenditure of the year. I wonder whether this has anything to do with head leases because a letter which the Federation of Industrial Development Authorities received from the Minister's office at the Department of Industry says, under the heading "Head leases", that there has been an amendment in another place and goes on: The effect of this amendment will be that an authority will not have to accept as a payment charge against its expenditure allocation the value of property which it does not itself occupy or use". I wonder whether that could be a way for local authorities to take a head lease in order to help the disposal by private enterprise, for example, of small industrial premises provided they write in that they have no intention of ever occupying those premises and do not wish ever to exercise such a right to do so and whether it would enable them to get round the whole of the problems we have been raising earlier today in regard to such situations. If it does, it would be helpful to have that spelled out.

Lord MACKAY of CLASHFERN

I think the question depends on the right to occupy. If one has a right to occupy, a mere statement of the intention that one does not intend to occupy would not be sufficient to attract the provision, so the situation that is covered by this subsection, as I understand it, is the situation in which the authority has no right to occupy, and it would not be able to disclaim that right merely by saying it has no intention of doing so.

Lord NORTHFIELD

Let us suppose that that, too, was written in, that there was taken a head lease without the right to occupy; that it is merely in order to be the managing agent, and to help to dispose of those by way of sub-lease?

Lord MACKAY of CLASHFERN

Well, I think that the principle then might be that one had to look at the agreement as a whole to see whether that kind of arrangement was inconsistent with the main idea of the contract or the lease. For example, if a person taking a lease was to contract that he had no right to occupy, it would make nonsense of the main purpose of the contract, and I doubt very much whether the kind of suggestion that the noble Lord has made would in fact work.

Lord MORRIS

It might be helpful to the noble Lord, Lord Northfield, to draw his attention to subsection (15), which quite clearly spells out: For the purposes of this … Act, the right to use any property is to be treated as an interest in the property". Clause 71, as amended, agreed to.

4.26 p.m.

Baroness TRUMPINGTON moved Amendment No. 175: After Clause 71, insert the following new clause:

("Report by District Auditor on value for money

.—(1) It shall be the duty of the District Auditor to make an annual report not later than 30th September in the financial year following that to which it relates, concerning the way in which the financial affairs of a local authority have been conducted.

(2) His report shall disclose any significant loss arising from waste, extravagance, inefficient financial administration, poor value for money, mistake or other cause.

(3) The local authority or development body to which such report relates shall publish it in at least one newspaper circulating in that area.

(4) The District Auditor shall transmit his report to the Secretary of State who shall have a duty to take it into account in determining the authority's block grant for the ensuing year.").

The noble Baroness said: My noble friend Lady Hornsby-Smith has unfortunately had to go to another appointment and she has asked me to take her place. During the whole debate on the Bill we have heard very little about the ratepayer—and that means all of us. I hope that the Minister can give us some reassurance so that the hard-pressed ratepayer can in turn receive reassurance with regard to this clause.

The clause really reflects the strong recommendations of the Layfield Report, which drew attention to a district auditor's limited powers. He can apply sanctions against corruption and criminal wrongdoing, but beyond drawing the council's attention to these matters, he has no real authority to take action against—and I quote from the Layfield Report, waste, extravagance, inefficient financial control, poor value for money, mistakes or other causes".

The amendment deals rather more with minor leaks than with floods, if Members of the Committee take my meaning. The fact that all is not well can be swept under the carpet, or it may be brought to public notice too late. I am not for one moment decrying the splendid work done by those officials who are responsible for the work of our councils, but with the best will in the world they cannot achieve perfection. So often there are awkward facts relating to, for instance, over-manning, vandalism in schools, two computers being used and manned by adjoining authorities, that are never accounted for or even noticed. Then that awkward chap comes along asking even more awkward questions. By that time it is too late. There is also the fact that any discrepancies brought to notice cause enormous offence to the community. The district auditor has no power to insist on action being taken over such discoveries, and this amendment, exploratory by nature, seeks to put this right. I beg to move.

Lord MACKAY of CLASHFERN

We very much understand the aims of the amendment and have considerable sympathy with them. So far as the actual work of the district auditor is concerned, and his duty to report, we feel that the present existing statutory provisions are probably sufficient. So far as publicity is concerned, the idea that the full report should be published in a local newspaper would seem rather costly and perhaps impracticable, in view of the length to which these reports often run, and would probably be no more effective in bringing issues to public attention than is the substantial amount of publicity that auditors' reports already receive through comment in the local press.

However, the Government are very anxious to see that the publicity in localities is sufficient and we are considering whether as part of the provisions in Clause 2 of the Bill relating to the code of practice on the publication of information local authorities should reproduce the auditors' report in their own annual report. We are also reviewing the arrangements for local government audit with a view to seeing whether the impact of the work of district audit among local authorities can be increased, and this is certainly an objective which we share. I think these are the principal matters to which my noble friend spoke in moving this amendment, and I hope this will reassure her.

Baroness TRUMPINGTON

I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 72 agreed to.

4.30 p.m.

Lord MACKAY of CLASHFERN moved Amendment No. 175A: After Clause 72, insert the following new clause:

("Passenger Transport Executives and their subsidiaries

.—(1) For the purposes of this Part of this Act—

1. (a) any payment, acquisition or disposal by a Passenger Transport Executive whose area is either the whole or part of one county shall he treated as having been made by the county council;
2. (b) any receipt, contract or liability of an Executive shall be treated as a receipt, contract or liability of that council;
3. (c) any termination of an interest of an Executive shall be treated as the termination of an interest of that council; and
4. (d) any repayment to an Executive shall be treated as a repayment to that council.

(2) Subject to subsection (3) below, for the purposes of this Part of this Act—

1. (a) any payment, acquisition or disposal by a Passenger Transport Executive established by an order under section 9 of the Transport Act 1968 shall be treated as having been made by all the county councils any part of whose area is within the Executive's area.
2. (b) any receipt, contract or liability of such an Executive shall be treated as a receipt, contract or liability of all those councils; and
3. (c) any termination of an interest of such an Executive shall be treated as the termination of an interest of all those councils; and
4. (d) any repayment to such an Executive shall be treated as a repayment to all those councils.

(3) Subsection (2) above shall have effect in relation to a Passenger Transport Executive and to the county councils any part of whose area is within the Executive's areas subject to and in accordance with the provisions of the order establishing the Executive.

(4) Any reference to a Passenger Transport Executive in subsections (1) to (3) above includes a reference to a company which is a wholly-owned subsidiary of such an Executive, as defined in section 159 (1) of the Transport Act 1968.

(5) References to an authority in this Part of this Act shall he construed in accordance with this section.").

The noble and learned Lord said: This new clause is intended to bring within the scope of Part VIII of the Bill capital expenditure by passenger transport executives in England, including expenditure by companies which are wholly-owned subsidiaries of PTEs. This will be achieved, not by making separate allocations to these but by providing that prescribed expenditure by the PTE will be regarded as if it had been undertaken by the appropriate county council. Perhaps that may be a sufficient explanation of this amendment. I beg to move.

On Question, amendment agreed to.

Lord MACKAY of CLASHFERN moved Amendment No. 175B: After Clause 72, insert the following new clause:

("Submission to Passenger Transport Authority of proposals to acquire certain interests in land or goods

.—(1) Any proposal by a Passenger Transport Executive or any subsidiary of such an Executive to acquire—

1. (a)an interest in or right over land, other than a freehold interest, where the interest or right confers a right to occupy the land; or
2. (b)an interest in or right over goods other than the property in them.

shall be treated as being a proposal involving an outlay on capital account for the purposes of section 15(1)(c) of the Transport Act 1968 (proposals for expenditure involving substantial outlay on capital account to be submitted by Executive for approval of Passenger Transport Authority.)

(2) In subsection (1) above "freehold interest" has the meaning assigned to it by subsection (13) of section 71 above and "property" has the meaning assigned to it by subsection (14) of that section.").

The noble and learned Lord said: This new clause will have the effect of ensuring that any proposal by a passenger transport executive to acquire a leasehold interest in land or property will be a proposal requiring the approval of that executive's passenger transport authority. Again, I hope that this will be regarded as a sufficient explanation.

On Question, amendment agreed to.

Schedule 10 agreed to.

Lord WALLACE of COSLANY had given notice of his intention to move Amendments Nos. 176 and 177. The noble Lord said: Amendments Nos. 176 and 177 are two schedules which appear before four new clauses that I intend to move at a later date. Under those circumstances, with the permission of the Committee and, no doubt, their gratitude, I should like to postpone discussion on these schedules until the fate of my clauses has been determined, which allows me to spend the whole weekend in a state of excited expectancy. I therefore no not propose to move Amendments Nos. 176 and 177.

Clause 73 agreed to.

Clause 74 [Part VIII—supplementary]:

Lord MACKAY of CLASHFERN moved Amendment No. 177A: Page 62, line 5, at end add ("and different days may be so appointed for different provisions and for different purposes; and any reference in any provision of this Part of this Act to the commencement date is a reference to the day appointed under this section for the coming into operation of that provision or, if different days are so appointed for different purposes of that provision, the day appointed for the purpose in question.").

The noble and learned Lord said: These amendments are designed to enable the Secretary of State and the Minister of Transport to make regulations to provide that different clauses in Part VIII of the Bill should come into effect on different days, or that different days should be appointed for different purposes of the same clause. This seems an excellent flexibility, and I beg to move.

On Question, amendment agreed to.

Lord MACKAY of CLASHFERN moved Amendment No. 177B: Page 62, leave out lines 7 and 8.

The noble and learned Lord said: There is the same explanation for this amendment. I beg to move.

On Question, amendment agreed to.

Clause 74, as amended, agreed to.

Lord DENHAM

I think this is probably an appropriate moment when the House might resume. I beg to move that the House do now resume.

Moved accordingly, and, on Question, Motion agreed to.

House resumed.

House adjourned at twenty-six minutes before five o'clock.