Lords Sitting of 22 April 1982

Preamble
The House met at three of the clock (Prayers having been read earlier at the Judicial Sitting by the Lord Bishop of Liverpool): The LORD CHANCELLOR on the Woolsack.

Local Authorities: Subsidies from Rates
Lord Belhaven and Stenton: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they will use their powers under Section 137(4) of the Local Government Act 1972 to lower the ceiling of 2p on the rate which local authorities are permitted to raise for charitable and public service purposes, which in the case of Greater London already permits the raising of £40 million, and whether they consider that subsidies to such publications as Lesbian Line and London Gay Teenage Group fall within the purposes of Section 137 of the Act.
The Parliamentary Under-Secretary of State, Department of the Environment (Lord Bellwin): My Lords, my right honourable friend the Secretary of State for the Environment does not propose to reduce the present limit of a 2p rate product on expenditure by local authorities. This section provides a useful flexibility for authorities. I accept that this flexibility may, on occasions, lead to use of public funds for purposes which many may consider undesirable or even deplorable and that is a matter on which the authority concerned will be answerable to its electorate. Ministers have no authority to rule whether particular subsidies are within the law, but I would stress that if the district auditor considers expenditure illegal or unreasonable he may initiate action at any time.
Lord Belhaven and Stenton: My Lords, I thank my noble friend for that reply. Is he aware that the GLC has a continuing policy of giving grants to all sorts of questionable organisations and publications, and that this is scandalising the hard-pressed ratepayers of London who see their money being used for openly immoral purposes? This is a matter—
Several noble Lords: Reading!
Lord Belhaven and Stenton: —which must concern all the people in the country and not just the people of London.
Lord Bellwin: My Lords, I am aware of the concern which exists at the present time, not least by people on all sides of local government, and I thank my noble friend for drawing this matter to the attention of the House in the way he does.
Baroness Birk: My Lords, is the Minister aware that we on this side are pleased to hear him make
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a categorical statement that the ceiling is not to be reduced? Is he aware also—as, evidently, his noble friend is not aware—that the bulk of the money which is spent by the GLC under this section goes to industry and commerce, and that a great deal of the other money goes to organisations such as the St. John Ambulance Brigade, tenants' organisations and legal resource centres, with a certain amount also going to servicing police and other committees? Would the noble Lord not agree that the small amount that remains must be left to the discretion of the local authorities? As he rightly said, is it not then up to the electors themselves to make their own representations?
Lord Bellwin: My Lords, in fact, all the spending, on whatever purpose, is up to the local authority to decide. The point that I think my noble friend was making was whether or not it was considered to be a fair, proper or reasonable application, and that is why I made the observation that I did.
Lord Strabolgi: My Lords, following what my noble friend has said, are the Government also aware that a great proportion of this money also goes to help music and the arts, out of all proportion to the small peripheral publications which are mentioned in the Question?
Lord Bellwin: My Lords, I would give the same reply as I gave to the noble Baroness, Lady Birk. But I think it would also be proper to say that, regardless of the amount of money, there is concern on the point that my noble friend raises and, I think, proper concern.
Lord Mowbray and Stourton: My Lords, disregarding the issues of this Question, will my noble friend the Minister say that he does not approve of Lord Belhaven's use of the verb "scandalising"?
Lord Bellwin: My Lords, I am not sure what my noble friend is trying to get me to say. I thought, frankly, that the use of the word in this context was not inappropriate.

Playgrounds and Playing Fields
3.5 p.m.
Lord Davies of Leek: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they will encourage local authorities not to sell off playgrounds and playing fields when schools are closed but rather preserve them for use by children.
The Parliamentary Under-Secretary of State, Home Office (Lord Elton): My Lords, no. This is for local authorities themselves to decide.
Lord Davies of Leek: My Lords, am I right, or is my hearing failing? Did the noble Lord say, "No"? Is he aware that if he said that he will not encourage

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local authorities not to sell off playing grounds, we are undermining the future of Britain? The playing fields of Britain are important for the men of the future, and not only from Eton. Most of the men of the future do not come from Eton. May I point out—
Noble Lords: No!
Lord Davies of Leek: My Lords, I said "May I". May I ask the noble Lord whether he is aware that in the country districts of England, far from England's countryside being an adventure playground, the streets of the villages are limited? When a village school closes and the village playground goes, because of the intense agriculture and farming, children cannot kick a ball around.
Noble Lords: Speech!
Lord Davies of Leek: My Lords, will the noble Lord, therefore, please encourage local authorities? Will he help to keep a register of playing fields in local areas that should be kept alive, and thus encourage the National Playing Fields Association and the noble Lord, Lord Luke, who for 30 years has been the chairman of that organisation?
Lord Elton: My Lords, the noble Lord has amply demonstrated not only the acuteness of his hearing but also the fact that there are some games that one can play without any playing fields at all. I think I should point out to the noble Lord that it does not always follow that an abandoned school has its playing field in the area where playing space is most needed, and the best thing may be to sell that and buy another one in a better place. The only people who can decide that are the local authority—not central Government. As to the need for an actual reduction in the number of schools, I think I should remind the noble Lord that in his own part of the country, and indeed all over the country, it is considerable. The department carried out a study of school buildings, which was published in 1977. That resulted in an estimate that, by 1986, there would be over 3 million primary and secondary school places surplus to requirement. We do not, of course, intend to close all of them, but the target is 1·3 million.
Lord Davies of Leek: My Lords, is the noble Lord aware that he has given the number of primary school places? It is the number of playing fields that I am interested in.
Lord Elton: My Lords, maybe the noble Lord's hearing is not as good as I thought it was. I said primary and secondary schools.
Lord Balfour of Inchrye: My Lords, may I ask the Minister whether, in view of the fact that in the technological years ahead leisure will be one of the most important things we can have in this country, and can teach people to use, it would be wise for the Government to regard every open space as precious for the future, and not to desecrate it by building, if it is possible to avoid doing so?
Lord Elton: My Lords, I have great sympathy with the emotional appeal of what my noble friend has said, but the fact remains that there are some open spaces that are not much use. One of the virtues of the new regulations which the department has brought out is that the only area which will count towards a minimum play area for a school is one which can be used for team games, and which can be expected to be usable for seven hours a week. That does not mean that there will not be flower beds, coppices and so on, but it does mean that all the play space that is available is usable. When that sort of space becomes available, no doubt there will be a very strong case for its retention for public use. But the people who can determine whether it is the best place for public use are not central Government, nor the Department of Education, but the local authority.
Lord Stanley of Alderley: My Lords, I wonder whether my noble friend is aware that one of the problems when a school closes is that the trustees of that school's playing ground cease to get any rent? Therefore, they cannot pay any rates to the local authority and they have to sell the playing ground. I wonder whether my noble friend could tell me what action, if any, the Government, or local government, could take to allow these playing fields to remain playing fields?
Lord Elton: My Lords, I understand the noble Lord's difficulty. I can tell him that there is statutory provision for local authorities to give discretionary rate relief in respect of charitable bodies. If the noble Lord will bear with me, I shall try to give him more particular information in writing.
Baroness Birk: My Lords, will the Minister bear in mind that the standard which has been laid down is that there should be six acres of recreational or free ground for every 1,000 people in the population? If the Minister accepts that this is so—and I gather this is a generally accepted doctrine—will he not go back to my noble friend's original Question, which was to encourage local authorities not to sell off playgrounds and open spaces, since, particularly around urban areas, this means even more crowding and far less open space, which is detrimental to the social life of the community?
Lord Elton: My Lords, I shall not remind the noble Baroness of the celebrated London case which took place under the jurisdiction of the previous Administration. I will merely say that where there is a shortfall in the requirement of the ratio of space to people the local authority is under an obligation to meet that requirement. And if it has surplus school playing fields available to it, that is a means by which it can do it. It should not be done by central Government.

The Falkland Islands
3.12 p.m.
Lord Molloy: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they have any statement to make on the situation in the Falkland Islands.
The Minister of State, Foreign and Commonwealth Office (Lord Belstead): My Lords, I repeated yesterday in your Lordships' House a Statement made in another place by my right honourable friend the Secretary of State for Foreign and Commonwealth Affairs. The Government will continue to keep Parliament informed.
Lord Molloy: My Lords, in view of what the noble Lord has just said, I believe and hope, with the leave of the House, that we ought to leave it at that for the time being.
Lord Belstead: My Lords, I am grateful to the noble Lord and agree with him.
Lord Jenkins of Putney: My Lords, is the noble Lord aware—
Several noble Lords: Order!
Lord Jenkins of Putney:—that not all of us are content to leave it at that for the time being? Is the noble Lord aware that the United Nations Resolution 502, which the Government claim as their licence for action, calls upon both Britain and Argentina to refrain from the use or the threat of force—
Several noble Lords: Reading!
Lord Jenkins of Putney:—in the region of the Falkland Islands? Are not both the task force and the maritime exclusion zone in breach of that resolution?
Lord Belstead: My Lords, the sending of the British task force is fully covered by Article 51 of the United Nations Charter. However, in saying that to the noble Lord, may I add that my right honourable friend the Foreign and Commonwealth Secretary's journey to Washington and all the efforts of the British Government are designed to secure a peaceful settlement.
Lord Brockway: My Lords, may I ask the Minister, first in reference to Resolution 502, whether or not the first demand is the cessation of hostilities? In that situation, would it not be good to secure such a cessation so that a truce can be made while negotiations are taking place? Secondly, would the Government support the idea of a United Nations presence in the Falklands, with a peace-keeping force to replace the Argentine occupation?
Lord Belstead: My Lords, at the present time I do not think that it would be for the convenience of the House to pursue these matters.

SCHOOLS COUNCIL FOR THE CURRICULUM AND EXAMINATIONS
Lord Denham: My Lords, at a convenient moment after 3.30 this afternoon, my noble friend Lord Elton will, with the leave of the House, repeat a Statement
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which is to be made in another place on the future of the Schools Council for Curriculum and Examinations.

Local Government Finance (No. 2) Bill
3.15 p.m.
Lord Bellwin: My Lords, I beg to move that this Bill be now read a second time. The Bill has three purposes. First, it abolishes supplementary rates and precepts. Local authorities will therefore have to set their rates or precepts for complete financial years. Secondly, it enables the Secretary of State to protect from any general loss of grant local authorities which meet their individual spending targets. Thirdly, it sets up an audit commission to be responsible for the audit of local authorities in England and Wales.
Part I of the Bill abolishes supplementary rates and precepts and ensures that local authorities cover their estimated expenditure needs for each complete financial year by making a single rate or precept, beginning with the financial year 1982–83. Let there be no sorrow over the demise of supplementary rates. The power to levy supplementary rates or precepts has existed for a long time in England and Wales but there has never been a similar power in Scotland. And in England and Wales successive generations of local authorities have taken the view that supplementary and unexpected rate demands part way through the year are highly undesirable. Domestic ratepayers expect that the rate demand they receive at the beginning of the year tells them their total liability for that year. They budget accordingly. And unbudgeted, unexpected supplementary demands can only cause quite unreasonable confusion and financial difficulties, especially for those on low incomes. Until recently, local authorities of all political persuasions have recognised this and made every effort to avoid such unfortunate and unpopular demands.
Equally, for non-domestic ratepayers who have no local voice by which they can protest, the effects can be extremely harsh. Industry and commerce cannot plan their budgets efficiently and effectively if they are suddenly called upon to meet unpredictable supplementary rate demands. We really cannot and must not turn a deaf ear to the cries of firms who see such unexpected drains on their resources as a real danger to their continued existence, let alone growth. We are talking about the potential effect on employment as well as individual firms' prosperity. We should not forget that. All ratepayers are entitled to expect financial stability from their local authorities.
The majority of local authorities are still able and determined to manage their financial affairs prudently, effectively and responsibly. They still feel that the last thing they wish to impose on their ratepayers is a demand for a supplementary payment on top of the one budgeted for and announced at the beginning of the financial year. So it is a power that has rarely been used—that is, until recently.
The financial year 1981–82 saw a sudden flurry of supplementary rates and precepts, not from the vast majority of local authorities by any means. But a significant number of local authorities raised supplementary rates or precepts on their own account, often following changes of political control. The unfortu-

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nate effects of these unexpected rate demands on local ratepayers are clear. But there was also a more wide-ranging defect. A large proportion were levied—and I have to say nearly all—by Labour authorities to finance increases in expenditure plans in direct defiance of the Government's request for reduced expenditure. As a result, many millions of pounds were added to the total local government overspend in 1981–82.
Traditionally, local government, regardless of political colour, has respected central Government's right to set national targets for expenditure and has cooperated voluntarily to enable those targets to be achieved. The current irresponsibility has put this traditional relationship at risk because no central Government could allow such a position to continue. But this Bill does not set a limit for local government expenditure. It does not limit the rate which a local authority may levy.
Clauses 1 and 2 simply ensure that each local authority plans its expenditure for the whole year, sets its single rate accordingly, and then lives within the means it has planned. This is the practice of the vast majority of prudent, responsible authorities already. So let us have no tears for supplementary rating; it is a power which the majority of local authorities have never wished nor needed to use—even in times of crisis—but which a minority have now made clear they will abuse.
Turning to Clause 3, it is of course important to ensure that no doubt arises as to the credit-worthiness of English and Welsh local authorities in the new circumstances. This is essential for the lenders, the authorities, and their employees. The Government also recognise that there may be times when a local authority will face a quite sudden and unexpected demand on its resources (for example, following a natural disaster) which cannot be met by its contingency funds. In such circumstances special temporary borrowing approval may be sought from the Secretary of State under Schedule 13 to the Local Government Act 1972. But, since this provision does not apply to the Greater London Council, although it applies to all other English and Welsh authorities, Clause 3 ensures that similar provision is made for the GLC. As for all other authorities, such consent will be given only where it is absolutely essential for the expenditure to take place to meet unavoidable commitments. A condition of any borrowing approved in this way will be that it should be repaid out of revenue income within the first quarter of the following year.
Before I move on to Part II of the Bill, your Lordships may be aware of the commitment made by the Government during the course of the Bill's Committee stage in another place to bring forward amendments to clarify the position of rating and precepting authorities, and of ratepayers, in the light of the complicated rating issues which were raised by this House's ruling in the GLC/Bromley case. In particular, provisions will be needed to cover powers and duties to reduce a rate and to make refunds where a precept or rate is found to be unlawful. I am sure your Lordships will wish to know that local authority associations are being consulted on the best means of achieving our objective of clarifying and protecting the position of
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both rating authorities and ratepayers. I will be tabling the necessary amendments in good time for our discussion in Committee of Part I of the Bill.
Part II of the Bill is necessary because some local authorities have been unwilling to work voluntarily within the Government's public expenditure guidelines. The aggregate overspend in 1980–81 was such that we decided we had to take action. We therefore reduced the total amount of grant available for distribution by £200 million. This was necessarily indiscriminate and affected authorities that had reduced their expenditure just as much as it did those authorities that were in fact responsible for the overspend. Under the legislation then in force, there was no way of it being otherwise. But Section 59 of the Local Government, Planning and Land Act 1980 provided a way of adjusting the grant payable to an individual authority. We therefore proposed as early as January 1981 to use this means of protecting the grant entitlements of authorities that individually met their targets if there had to be a general reduction of grant because of aggregate overspending in 1981–82.
In December 1981 my right honourable friend announced the principles on which a similar scheme would, if necessary, operate in 1982–83. In view of the importance of these proposals, we have taken the opportunity presented by this Bill to seek specific statutory authority for the grant adjustment they involve: in essence, that is what Part II of the Bill is about. There was some concern expressed when the Bill was introduced in another place, but the powers provided for in the Bill went beyond those suggested by our present proposals and could be used in conjunction with those contained in Part I of the Bill to reduce the amount of grant payable to an authority after it had made its rate for the year. My right honourable friend the Minister for Local Government and Environmental Services therefore made it clear that this was not our intention and introduced amendments which will, for future years, require the principles on which a differential grant holdback scheme is operated to be spelled out in advance in the Rate Support Grant Report for the year in question. He gave an assurance that for 1981–82 and 1982–83 we do not intend to implement differential holdback schemes more severe than those already announced. I hope that those assurances have gone some way towards allaying the fears felt by some local authorities.
I should perhaps warn your Lordships that the Government may find it necessary to introduce further amendments in Committee—not, I must make it clear, so that we can change the proposals we have already made, but in order to make sure that the safeguards we have built in already at the request of local authority associations do not prevent us from carrying out our existing policy; in particular, the exclusion of certain categories of expenditure from the calculation of performance against target. None of these amendments will affect the central purpose of Part II, which is to make express provision for adjustments to the grant entitlements of individual authorities for the purpose of encouraging those reductions in the overall level of local government expenditure that the Government think necessary, having regard to general economic conditions.
Part III of the Bill provides for the setting up of an

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audit commission. Noble Lords may ask why we should change the existing audit arrangements. We have done so for three reasons: to make audit more independent, to enhance the audit function, and to provide for greater public accountability. Audit must be an independent process and must be seen to be independent from central and local government. I would therefore argue without apology that it is right and proper to set up the audit commission as a separate, independent body responsible for local government audit. One of the duties of the commission will be to appoint the auditors to each local authority. This represents a change from the present system whereby local authorities appoint their own auditors, and I know that this change has attracted adverse comment. I would reply, firmly, that independent appointment is an important part of the audit process, especially for bodies where so much public money is involved. The principle of independent appointment is widely observed elsewhere in the public sector. Nationalised industries, the National Health Service and many other public bodies have their auditors appointed by the sponsoring Minister. Central Government departments are themselves audited by the Comptroller and Auditor-General, who is quite independent of the departmental Ministers. It seems to me to be quite right that auditors for local government also should be independently appointed.
I wish to stress that the Government intend local government itself to be well represented on the membership of the commission, together, we hope, with a range of other interests. Indeed, one of the aspects of the Bill that I would especially commend to your Lordships is that in future local government will be able to play an important and central part in the policy direction of the audit system—a role for which the present arrangements do not provide. So nobody can say that we are in some way cutting local government out of decisions about its audit system—quite the contrary, in fact.
Independence from central Government is just as important. At present the district audit service is staffed by civil servants and organised as part of the Department of the Environment. We believe that there should be a clearer separation of audit from central Government, which establishing the commission will achieve. However, Parliament has a legitimate interest in statutory bodies of this kind. It is for that reason that the Bill provides for the Secretary of State to be given certain powers in respect of the commission—for example, to appoint members and to give directions. Such powers are well precedented. We regard these powers as constitutionally necessary to ensure a proper degree of ministerial answerability to Parliament.
I should like to turn now to the enhanced role of audit, particularly in the field of value-for-money auditing. Value-for-money auditing is not new, but it is an area where practice is developing. Under the Bill, the auditor will for the first time be given an explicit duty to consider value-for-money matters. Closely linked with the value-for-money element in the audits of individual authorities will be the commission's statutory responsibility to carry out more general studies across a range of local authorities. These will help identify best practice in the provision of local
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authority services, and will be an important tool for individual auditors. And, of course, they should prove valuable to local authorities themselves.
I am in no doubt that this greater emphasis on value-for-money audit represents a thoroughly worthwhile advance for local government. I know there has been concern that, in his value-for-money work, the auditor may trespass on what are essentially matters of political policy rather than audit matters as such. I should like to assure your Lordships that this is neither the intention, nor, in the Government's view, the effect of this Bill. The Bill has been amended in another place to make this point even more clear. And my right honourable friend the Minister made a statement in the other place to confirm the position.
In the context of value-for-money audit, it would be appropriate for me to say that the Government envisage greater use of the private sector in local government audit under the commission. We consider that the private sector has a great deal of valuable experience to offer, especially in the field of value-for-money work. We do not say, of course, that the private sector will have nothing to learn from existing local government audit practice; on the contrary, we recognise the special expertise of the district audit service. But we think the two can complement each other, to the benefit of local government as a whole.
This brings me to our third objective—that is, improved accountability of local authorities to their electorates. The Bill achieves this improved accountability by requiring the auditor to consider whether a report should, in the public interest, be made immediately rather than at the end of the audit. It gives local government electors wider rights of objection. In future, local electors will be able to object about an matter on which the auditor can make a report rather than just issues of illegal or improper expenditure, as at present. And a strengthened audit function as a whole can only improve the quality of financial information available to ratepayers, and, for that matter, to elected members.
I have so far dwelt on the changes which are envisaged for local government audit. But I should stress that the independent position of the auditors themselves will not be changed by the Bill. There is no question of auditors coming under the control of the commission. At present, auditors are answerable to the courts for the way in which they discharge their statutory functions. That will continue to be the case.
I should touch briefly on an amendment which the Government envisage to Part III of the Bill. It arises from an amendment tabled in another place by, among others, the chairman of the Public Accounts Committee, and the chairman of the Treasury and Civil Service Committee. As many noble Lords will know, it would have required the commission to carry out studies of the effect which actions by central Government have on the economy, efficiency and effectiveness of local government services. It would have been for the Comptroller and Auditor-General to consider these studies, and to report to Parliament. This amendment was withdrawn in another place, but only after a commitment to table an amendment in your Lordships' House, after full discussion with interested parties. All I wish to do for the present is to reaffirm the Government's intention to table such an amendment.

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Its precise form has yet to be decided, because the promised consultations are still to be completed. But we do intend that your Lordships' House and another place should be enabled to have a proper debate on the important issues involved.
With that, I also conclude my comments on the Bill as a whole. I look forward, as always, to hearing your Lordships' views in debate. I commend the Bill to your Lordships as a measure which will encourage responsible and effective local government. I suggest that the Bill is worthy of your Lordships' support, and I beg to move.
Moved, That the Bill be now read a second time—(Lord Bellwin.]
3.35 p.m.
Baroness Birk: My Lords, may I first thank the Minister for his full exposition of this Bill and, if I may, apologise if I cannot be here at the end of the proceedings, depending on the time, as I have a longstanding engagement which I have explained to the Minister. I hope we will finish in time because I would very much like to hear the winding-up speeches.
This Bill comes to us from another place having seen many changes in its passage. Indeed, I think that calling it a No. 2 Bill could be said almost to display lamentable numeracy; with the demise of the No. 1 Bill and the changes in Committee, this version has evolved as a fourth or fifth version in the Government's latest attempt to shackle local authorities to their monetarist theory of reducing public expenditure. The Minister's fine and eloquent words will not really cloak what is one of the major points underlying the Bill.
That said, there have been some important changes made during the passage of the Bill in another place, and this Bill is now a rather less disastrous attack on local government than the Government's earlier efforts. The Government have listened to the case being made by the local authority associations and have in some areas responded in a positive manner. For this, it is only fair to say, credit is due. Let us hope that the same good sense is continued in your Lordships' House while we are considering this Bill, and that the Government will then agree—when they are in the process of rewriting parts of the Bill with the amendments they are themselves to bring forward—to change it further so that it is improved rather more, as it is still a very highly unpalatable piece of legislation.
Like other interested noble Lords, I have received comments on this Bill from all three major local authority associations: the metropolitan authorities, the county councils and the district councils. The interesting thing about it is this, that all three of them—one is under Labour control and two under Conservative control—remain opposed to this Bill. It takes a great deal to unite local government in this country in this way, particularly when the associations we are talking about cross party lines. So let us see how the Government have managed to achieve this feat with this particular Local Government Finance Bill that we have here.
As the Minister has explained, Clauses 1 and 2 take away from local authorities the right to levy supplementary rates. This, do not let us forget, is a con-
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stitutional shift away from the partnership that has always existed between central and local government. It has often been said that people pay their taxes in sorrow and their rates in anger. Supplementary rates must then be paid in a great rage. Clearly, supplementary rates are unpopular, and not least for the 32 English local authorities which levied them in 1981–82.
My Lords, those councils did not undertake the exercise lightly. The supplementary rates were levied to finance grant reductions the Secretary of State had made—unlawfully, as it turned out—and which he is now seeking to legalise retrospectively in this Bill. They were levied to protect essential local services; they were levied to protect schools, housing, social services, from the ravages of inflation that the Government's economic policies have inflicted upon local government. And they were levied to finance changes in policy for which newly elected Labour authorities had a clear electoral mandate.
Local authorities have had the power to levy supplementary rates since at least 1601—that is, going right back to the beginning of the 17th century. It is true, as I think the Minister said, that this power has rarely been used, and even in the exceptional circumstances of 1981–82 only 32 out of 412 English local authorities levied them. The Government have made out no real case for this power to be abolished. Whatever they might say, the real answer is that it gets them off two hooks. First, it disingenuously confuses the issue of supplementary rates defined in the traditional manner—that is, the local authority coming back for another bite of the cherry during the year—with the Government's earlier attempt to impose referenda on local authorities. Supplementary rates for referendum purposes were defined as "supplementary" to the Government's limit. Secondly, it gets them off the hook of what to do about rates in the long term. All of the local authority associations have been concerned about the lack of flexibility which will result from this. They are concerned as to what they are going to do if there are riots in their areas, if there are emergencies, like flooding and snow. This runs through the comments and anxieties of all the local authority associations.
While sitting listening to the noble Lord recommending this Bill to the House, I was wondering what different tack he would be on if he were not the Minister in the Department of the Environment, but still the leader of Leeds Council. I think that, with his very great experience, ability and success as a local government man, he would have been hammering on those doors so hard objecting to most of what is in the Bill.
The Government's Green Paper on rates provides no firm answer as to what is going to happen and what the Government will do about rates, although the Prime Minister did make a rash electoral promise to abolish rates. It was also said that this is an interim Bill which will be in action while it is decided how to reform the rating system. If that is really so, then why is this not being promoted for a limited period? Perhaps the Minister can tell us about that. Again, the local authority associations think that this should be the procedure; but it is not. At the moment it is down for ever, for as long as the Government last—

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unless of course, the Government feel that they are only in government for a very short interim period themselves, in which case we can do something about this legislation when we return to power.
Let us now look at the Bill again. Not only are Clauses 1 and 2 unnecessary, but they are retrospective, which is generally considered in this country as legislative anathema. The Government will have to make out a very good case for retrospection if this House is to approve the Bill. I am talking not only about my noble friends behind me, but about people in various other parts of the House. The ratepayers of Bedfordshire and the councillors of Bedfordshire County Council also await the Government's statements on this part of the Bill with interest. It is true that the Minister for Local Government said, in Standing Committee on 2nd March, that the Bill will invalidate retrospectively supplementary rates or precepts for 1981–83, including those made prior to 1st April, and amendments will be brought forward in this House.
However, it is not quite as simple as that. Doubts still remain, and other legal opinions are not anything like as certain as the opinion upon which the Minister for local government is acting, and their opinion is that the legality is extremely questionable. I think that these points will be raised by noble Lords in this House and can be pressed quite substantially.
Clause 3 appears innocuous enough on the surface. It is to make sure that interest payable on money borrowed by local authorities shall be the first charge on the local authorities' revenue. But it is only necessary because, for the first time, local authorities are to lose some of their revenue raising powers—that is to say, the supplementary rates. Thus, two possibilities result from this, both of which are extremely serious and cannot be skated over. Either local authorities start borrowing to finance revenue expenditure—a very slippery path that New York went down a few years ago—or they could become insolvent. In that case the Government are trying to protect the money brokers in the City at the expense of local authority employees, who will be less well protected than the private sector employees in the event of their employer becoming insolvent, because the private sector employees' wages will still continue to be a first charge on revenue.
Clause 4 is extremely complex and likely to become more complex as it receives further consideration in Committee. Part I of the Bill changes the law that dates back to 1601. Part II of the Bill, consisting of just Clause 4, changes the law that dates back to 1980—the Local Government, Planning and Land Act. That Act introduced the frightfully complicated and mind-blowing block grant system. Now, after only one year of operation—no, during its first year of operation, because the Bill is retrospective and changes the law for the financial year ended 31st March 1982—the Government seek to change the system yet again. The clause talks about "expenditure guidance" being given by the Secretary of State to individual local authorities. That is just a euphemism for the Secretary of State setting an expenditure target for each local authority. And if local authorities do not obey those targets, they will lose grant. So do not let us have any misunderstanding about this.
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How will the Secretary of State set those targets? If the 1982–83 process is anything to go by, only a few cognoscente will understand. In setting targets for 1982–83, by order, in anticipation of the enactment of this Bill, the Secretary of State fell foul of the Select Committee on Statutory Instruments, and quite right it was, too. I cannot imagine many people understanding the process or the Secretary of State's description of "skewing" and "iterative processes". "Skewing" evidently means where the target consists of two components: GRE and 1981–82 performance against target. The "iterative processes are that the total of targets has to equal total expenditure—I do not even understand it myself and I cannot read my writing. Whatever effect this Bill has on local government, those words and some of the language certainly have a very destructive effect on the English language. But will the Secretary of State and his officials be in a better position with their skewing and iterative processes to assess how much each local authority need to spend or how much the electorate want them to spend?—of course not.
Furthermore, the action of the Government, in setting restrictive targets for the very inner city areas which they were so concerned about last year, means that the cuts in the RSG hit them harder, and so less money in real terms will go to those areas than, in fact, has done this year; and this, at a time when the Secretary of State is personally taking such an interest, particularly in Liverpool, does not really seem to make very much sense, and certainly is socially disastrous.
We understand that further fundamental amendments will have to be made to this clause to legalise the targets already set for 1981–82 and 1982–83. If that is so, this House will have to examine them very carefully indeed. But it would, of course, be very much better if the Government were to drop the whole idea of trying to set targets for individual local authorities. Each time they try it, they step into a legal minefield of their own creation. Local government finance, it seems, is providing a growth industry to the legal profession and for the paper-makers. Each time we have a new copy of this Bill the price increases. This will continue through the Committee stage. Therefore there are two groups of people who will probably make something out of it, but not the ratepayers and the general public.
Part III of the Bill sets up the audit commission. The local authority associations have all expressed very grave concern about this. Not only does it take away the local authorities' right to choose their own auditor, but it will result in auditors being imposed upon them. At present local authorities can either use the district auditor or go to firms themselves. They have the opportunity to go to outside firms, and many of them do so. Therefore, the private sector is certainly not totally neglected in this way. Moreover, it replaces the present arrangements for auditing local authorities with a quango appointed by the Secretary of State.
In the past, since they came to office, the Government have shown themselves to be very adept at cutting quangoes. In fact, they played a sort of numbers game. I remember with great sorrow that a small committee attached to the Department of the Environment was cut immediately and saved no money. It

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was concerned with bird life in the royal parks and comprised a group of four or five dedicated people who cost not a penny to the department but who gave us some knowledge, which we would not otherwise have had, of the rare birds of the parks. The committee which I set up for sculpture in the royal parks, which also cost nothing and which had the services of very distinguished art historians and sculptors, was also done away with.
Should not the Department of the Environment remember that it is also concerned with the quality of life and not just with all this financial miasma which does not seem to result in any increased quality of life but in a great deal of sorrow and complication? According to the Bill, the Secretary of State may have to "consult" the local authorities and other bodies about the audit commission, but in the final analysis it is he who appoints people to the commission. If he will not mind my saying so, the Minister had the gall to stand there and say that this is a body which would be more independent. It will not be independent at all. It will be boxed in in every way. It will be boxed in in its constitution and in what it does; the local authorities will be boxed in as to what sort of choice they will have or will not have. Therefore, to call it independent seems to me to be interpreting the word in a rather extraordinary way.
As time is going on, I should briefly like to quote some of the views of the Association of County Councils. They are rather good. They say that they,
"regret the refusal of the Government to accept at Committee stage an amendment which would have permitted local authorities to retain the right to appoint their auditor".
The Association of District Councils—and this too is a Tory body—says:
"There is no evidence that the present arrangement has been inadequate or in any way detrimental to the independence and effectiveness of external audit of local authorities' accounts".
The Association of Metropolitan Authorities says this:
"It takes away from local authorities the right to appoint their own auditor".
This view has been expressed accross the board. I think and hope that a number of Conservatives in this House will be as concerned as a number were in the other place who spoke up during the stages of the Bill in that place. There is a very real danger that this commission will be the financial handmaiden of the Secretary of State. He will have the power to direct it to undertake extraordinary audits of individual local authorities. In Clause 20 the commission will have the duty to undertake efficiency studies of local services. This extends the audit into what could be very dangerous and emotive areas, areas which local authorities now deal with through LAMSAC. It is ironic that, at the moment when the Government intend to set up an audit commission to undertake this work, they are to withdraw £500 million from LAMSAC.
The really basic danger is that this commission is under the direction of the Secretary of State, and this applies from whichever party he might come. It is this that deeply concerns and worries local authorities and the local authority associations. It is not a party political point; it is a question of the increasing dominance of central Government at the expense of local democracy. It reduces financing powers for local
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authorities; it means direct interference in the grant and expenditure of local authorities and the imposition of the Secretary of State's "hit squads" from the audit commission looking at the local decisions of local communities. This is really what this Bill is about.
In the guise of complicated financial changes, it is the Secretary of State in Marsham Street who is, once again, imposing his will on local councils. The grip of more and more central control over local government is now almost reaching strangling point. Local authorities are becoming more and more the impotent agents of central Government. This is very demoralising people of high quality and ability from taking on local councillors. One certain way of eroding local government to the point of feebleness is by discouraging people of high quality and ability from taking on the job of councillors, and thereby losing the indispensable experience of local knowledge and sensitive contact. If they are to be reduced to puppets of this sort, it will be very difficult to find men and women of sufficient calibre to come forward.
This, as I think I have made clear, is a bad Bill in what it seeks to do, in its retrospection and even in its drafting. We shall oppose it and endeavour to make substantial changes to this unhappy piece of legislation.
3.56 p.m.
Lord Evans of Claughton: My Lords, I should like to join the noble Baroness, Lady Birk, in congratulating the noble Lord the Minister on the clear way in which he defended the indefensible, but he did it very capably and we wish him well. I, too, may conceivably, if we make this debate drag on long enough, have to leave before the end, but I trust that that will not be the case.
From these Benches we have over the years consistently opposed the erosion of local democracy and freedom represented by the legislation that this Government have introduced ever since they took office in 1979. It is hardly surprising that one should have this difference because, as I think I have said before in your Lordships' House, the Secretary of State's philosophy and attitude to local government is totally different from that of my party and myself; in that financially at least, and, I think, on a broader basis, the Secretary of State, as the noble Baroness has suggested, seems to want to reduce local government to being purely a local agency of central Government. As she has rightly said, there will be nothing like the attraction for people of ability to come in and be part of a mere agency with no independence or power of their own.
Very clearly this Bill, even as amended so far, makes fundamental changes in the constitutional and financial relationship between local and central Government. On Clauses 1 and 2, in my opinion the Government have taken an extremely serious step in eroding the autonomy of local government. As the noble Lord the Minister suggested, knowing who the Secretary of State was, I agree that it may have been tactless for so many local authorities to impose supplementary rates this year. But, broadly speaking, over the years supplementary rates have been used only in ertremis. I very much regret that this power is being taken away. As far as I can see, powers to levy supplementary rates and precepts have been totally abolished without any concessions of any kind whatever being made. So local authorities which are fire and police authorities

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have, for instance, no flexibility at all to meet index-linked increases in salaries and wages granted by central Government. They have no flexibility to deal with totally unpredictable occurrences, such as riots and floods, and no ability to deal perhaps with more predictable economic factors, such as hyper-inflation.
I hope that the Government will introduce amendments to clarify—as I think the noble Lord the Minister indicated they probably would—whether supplementary rates or precepts made before 1st April this year but relating to 1982–83 will be rendered unlawful retrospectively by this Bill. I must say and underline—and it is the view probably held very broadly in your Lordships' House—that to act retrospectively in this field would be totally wrong and contrary to the spit it of the constitution of this country. My hope is that the Minister will be able firmly to reassure us during the Committee stage.
I understand that during the Report stage in another place the announcement was made that amendments of some kind would be tabled here. We shall obviously have to look at them very carefully. I hope that the Minister will also clarify statements by his right honourable friend that these provisions are temporary. As the noble Baroness, Lady Birk, said, we should like to know how long is "temporary" and how "temporary" is to be enshrined in legislation. Is it to be imposed for one year, or is it to be brought in by order? These are the kinds of things that it is important to establish.
Part II, the block grant, is the linchpin of the whole Bill, and the part of the Bill that has given the most trouble and continues, as has been said, to give the most trouble. What local authorities need more than anything in budgeting is reasonable certainty as to the level of the revenue they can expect to receive. This clause, as originally drawn, included a system of differential holdback—if I may use the appalling jargon—of grant, which meant that local authorities would not have known the amount or the basis on which money was being withheld from them for failing to reach the "target" set for them by the Government until after the start of their financial year. I think we all welcome the fact that this appalling proposal has now been withdrawn.
As the Bill stands, I now understand that local authorities in future will know how much grant they stand to lose before they complete their budget and so can fix a rate taking any loss of grant into account. Since they will no longer be able to levy a supplementary rate because of the first part of the Bill, they will presumably levy a higher rate to make sure that the unexpected occurrences, to which we have referred, are taken into account. So it may be that the very legislation that the Government are introducing will create a position where budgets and rates are at a higher level than they would otherwise have been to cover the problems brought about by the absence of supplementary rating.
On this clause, we all on this side are left with many doubts and uncertainties. The legislation will be retrospective for the financial year 1982–83. There are still legal doubts about the validity of some parts of the 1982–83 and 1981–82 targets which will mean, I believe, further redrafting. In particular the amendment to Clause 4 by the addition of subsection (5) is unsatisfactory. The alteration was, I believe—if I
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could believe that anything was well intentioned—well intentioned to protect local authorities from the prospect of being forced into a level of expenditure determined by the Secretary of State. This alteration however could now bear extremely hardly on classes of local authorities. There does not now seem any way in which the Secretary of State can apply differential standards to, say, metropolitan counties, with their particular problems—for instance, police, inner urban problems and transport—without applying the same changes, the same standards to, say, shire counties, which have entirely different problems and whose biggest expenditure item is in the field of education. What must be made clear—and I hope will be—is that the multiplier will apply to all local authorities of a class and not to individual local authorities or to all local authorities.
The complexity and uncertainty that I and the noble Baroness have mentioned underline two principles. First, I believe that Governments will always get into difficulties, and will deserve to, when they interfere with the affairs of democratically elected and constituted local authorities. Secondly—and this is very important—there is the need to carry out a root and branch reform of local government finance to enable local authorities to raise far more of their own money through new and their own resources, and perhaps a reformed rating system, so that local authorities are no longer so unhealthily dependent on central Government grants.
I hope that what I regard as the disappointing Green Paper, Alternatives to Domestic Rates, will produce much more imaginative legislation in due course so that the rate support grant will become purely an instrument for equalisation, which should therefore reduce the grant element from the present over 60 per cent. of a local authority's resources to perhaps under 25 per cent., provided we can raise finances in other and newer ways like the local income tax and other systems which have been discussed in the Green Paper.
Coming now to the last part, Part III, covering accounts and audit, I oppose this totally. I could not believe what I heard the noble Lord the Minister say in defending this particular part. In my experience from 25 years in local government—and the noble Lord the Minister and many other noble Lords will perhaps have had longer experience than I—the district audit service was a great success. It was widely respected. It was totally independent and disinterested, and it did a first-class job.
The Secretary of State has given the sop to the local authorities of a form of consultation, but basically he has retained power to himself, as the noble Baroness has said, to run the audit commission as a quasi Government quango. He can give it directions which it must obey. The commission is wholly appointed by the Secretary of State, and the appointment of its chief officer must be approved by the Secretary of State. Local authorities, and several Members of your Lordships' House, are going to be somewhat cynical about the Secretary of State's and the Minister's claim that it will be an independent body. If that is independence, I wonder what bondage is?
Finally, the refusal of the Government to allow local authorities to choose their own auditor from an approved Government list strikes me as a petty inter-

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ference with the liberty of local government. I warmly hope that the Government will change their mind on this. They have had universal disapprobation of this proposal from all the local authority associations. I understand that in another place there were, as the noble Lord the Minister mentioned, suggestions that the examination of local authority accounts should come under the aegis of the Comptroller and Auditor-General, and therefore under the direct scrutiny of a Select Committee. I gather from what the noble Lord the Minister has said that he is bringing in amendments to this, but at this point I would have certain strong reservations about that, too, as a further interference with the sovereignty and freedom of local government.
When we discussed the Local Government, Planning and Land Bill, I condemned large parts of it but said that there were some good parts to it. But I am afraid I cannot even give that crumb of sympathy for this totally misconceived, totally wrong and totally illiberal piece of legislation. We shall oppose it all the way through.
4.8 p.m.
Baroness Stedman: My Lords, as the noble Lord, Lord Bellwin, has said in his courteous introduction to the Bill, Part I provides for the abolition of the supplementary rates and precepts and requires local authorities to make their rates and precepts for a complete financial year. I believe that most noble Lords in the House would accept the Government's right to control the overall spending of local authorities, but frankly this second attempt at legislation, though different from the No. 1 Bill, is really no better than the first.
At present, early in the year the Secretary of State issues to each local authority the grant settlement which supposedly gives to each authority enough information for them to calculate what grant it can expect to receive for the coming year, given certain spending levels. The local authorities then set about preparing their budgets. They levy a rate to make up the difference between the total expenditure and their probable grant income. In normal circumstances, this has worked, but, in practice in the last three years, most authorities have spent most of their time revising their budget to suit the whims of the Secretary of State. Given normal circumstances, the difficulties only came if there was anything which could not be foreseen at the beginning of the year and which caused a local authority to overspend—for example, the uncertainty of interest rates caused by a change in the national or even the world economic climate, or climatic conditions of floods and snow and perhaps damage to sea defences.
It is true that the Secretary of State has allowed an escape clause to let him give his personal sanction to an authority to undertake temporary borrowing and to repay the loan out of their next year's rate. But surely what will really happen is that local authorities will build in a cushion to their budgets to allow for those unforeseen circumstances, and their ratepayers will be asked to pay much more because there is no guarantee that the Secretary of State will not change his mind as to grant levels or that interest rates might increase or that some major disaster might occur.
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In addition to those reasons there are other factors outside Government control: inflation can outstrip Government assumptions on pay and prices, assumptions which have been properly followed in computing the initial budget of the authorities; changes by Government in the powers and duties of local authorities during the year; a Government reduction of an authority's level of grant after the start of the year; the rates of national insurance and other imposts that can flow from Government budgets; following local authority elections, they may need to finance some new policies or higher standards on which they have been elected by the voters in their area; and there could also be a much lower than expected income from fees and grants as a consequence of running into a recession.
In the event of the revenue raised by the main rate and precept proving insufficient due to unforeseen circumstances, Part I represents a break in the fundamental tradition of local authorities that revenue expenditure is financed in the year in which it has occurred. The power to go cap in hand to the Secretary of State for permission to borrow for revenue expenditure must surely damage the credit-worthiness of local authorities. Authorities should have the power to borrow without the consent of the Secretary of State when the need to borrow arises from circumstances outside their control or, at the very least, when the need to borrow arises directly from the actions of central Government.
We are talking about a period of 15 months between the announcement of a grant settlement and the end of the financial year to which it relates. There is no assurance as to grant levels and I believe a clause should be included which would absolutely prevent a Secretary of State from reducing grant levels during a financial year in order to give local authorities some degree of security and stability. The Government really should take more time to think through the real effects of this legislation and not rush into it simply because they wish to impose it immediately.
Way back in November, the Secretary of State was reported as saying that he would accept a clause in the Bill limiting its life to two or three years, as the proposals were designed, as the noble Lord told us, solely as a temporary measure. Like the noble Baroness, Lady Birk, and the noble Lord, Lord Evans, I am interested: do the Government intend to honour that commitment and introduce their own new clause?
We do not like Clause 4 because it changes the whole emphasis of the way in which the grant mechanisms can be used. The powers given to the Secretary of State put him in the potential position of direct conflict with individual councils which choose not to reduce their expenditure. If the Secretary of State reduces the grant and then refuses to allow a local authority to borrow temporarily, the expenditure of that authority will have to be reduced. And if the councillors failed to agree on the reduction and the council decided that it would finance the expenditure by temporary borrowing, that temporary borrowing would be illegal and the councillors would be liable to a surcharge and possibly to disqualification. Such a decision would also put the treasurers of local authorities in a very invidious position because they must refuse to borrow where the borrowing is illegal, so they could not carry out the wishes of their councils.

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The practical consequences of this legislation are also important. If, after considering the initial budget, the Secretary of State decides that the expenditure of a local authority should be reduced, information about changes in grant are unlikely to be available before June. By June a local authority's options to curtail expenditure are very much limited. For example, if those cuts were to be made in what is perhaps the biggest single item of local authority expenditure, teachers' salaries, by June it would not be possible to reduce the numbers until the following Christmas because of the teachers' conditions of service.
Thus, to achieve the reduction in expenditure, four times as many teachers would have to go at Christmas as would have been necessary if the expenditure cut required had been known when the rate settlement was originally announced. All that that would do would be to unbalance the teaching labour force, cost a lot of redundancy pay and involve local authorities in re-employing most of the teachers the following April because the full year financial effect would be far greater than was needed. No right-minded authority would do that, but instead would make excessive cuts in text books, library and class materials and in the maintenance of buildings and grounds.
I am also concerned about the Government's use of grant-related expenditure assessments. They were originally intended for use in block grant distribution only. Now they are used for Government spending targets for individual authorities. Even for block grant purposes their use was very suspect and unreliable. If the Secretary of State really intends to use them, then those assessments must be made more stable and much more acceptable to the local authorities. Thus, Clauses 1, 2 and 4 taken together put the local authorities, I believe, in a position of subordination to the Secretary of State in Marsham Street.
Neither have we been persuaded that the proposed audit commission is such a tremendous extra safeguard for local democracy. The present statutory independence of district auditors from central and local government is and has been a reasonable safeguard for the ratepayers. The proposed commission is a very different animal with its chairman, vice-chairman and members all appointed by the Secretary of State, who will be able to fix the fees, to require an extraordinary audit and to direct the commission in the discharge of its functions. That is not a formula for an independent watchdog on behalf of the ratepayers. It is more a lapdog of the Secretary of State. We are not opposed to the idea of a commission, but we would want to see that such a body was really independent, with no overtones of central control and with generous representation for local government; "well represented"—as referred to by the noble Lord, Lord Bellwin—is not sufficiently reassuring. The Bill tries once again to make local government accountable to Whitehall, whereas we see democratic decisions and control working downwards to the local people and not upwards to the Secretary of State in Marsham Street.
The noble Lord, Lord Bellwin, will recall that for some months he has been considering how best to assist parish councils in expenditure on concurrent
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services, and I regret there still appears to be nothing in the Bill that will help parish councils. It should not be an impossible task to sort out how district councils pass on that part of their rate support grant to parish councils where they provide the services.
The precepts of the parish, town and community services—and there are over 8,000 of them—which are met wholly by rates levied on the ratepayers of those councils, are taken into account when the size of the block grant payable to district councils is determined. But none of that relevant grant has to be paid to parish councils, and neither is it credited in such a way that the parish ratepayers gain some benefit. Instead it goes to the district ratepayers, even though it was the parishes which bore the initial expenditure. That is grossly unfair, and all the ministerial sympathy in the world does not help us solve the problem.
It was over a year ago that I suggested that the Secretary of State could make regulations as to how RSG attracted to district councils for parish council expenditure could and should be passed on to the parish council. The noble Lord then said that he would look into it, but we have heard no more, we have seen no action, and there is nothing about it in the Bill. Is the noble Lord intending to introduce a new clause, or to make a statement about making enabling regulations?
During the Secretary of State's period at Marsham Street he has changed the grant position four times, and the present formula makes the old RSG and regression analysis look like a child's game of ludo. The whole of the Secretary of State's three-year tenure seems to have been spent in one assault and attack after another, causing grievious and actual bodily harm to local government. This is still a bad Bill, and a dangerous Bill, and we shall join with the noble Baroness on the Opposition Front Bench, and the noble Lord, Lord Evans of Claughton, in trying to make it more acceptable before it leaves our House.

The Schools Council for the Curriculum and Examinations
4.22 p.m.
Lord Elton: My Lords, with the leave of the House, I should like to repeat a Statement being made in another place by my right honourable friend the Secretary of State for Education and Science about the future of the Schools Council for Curriculum and Examinations.
The Statement is as follows:
"With permission, Mr. Speaker, I wish to make a Statement about the future of the Schools Council for Curriculum and Examinations.
"My right honourable friend the Secretary of State for Wales and I have considered this matter in the light of Mrs. Trenaman's report, which we published in October, and the comments on it. We are grateful to her for her review. It has prompted us to give fresh thought to the two functions of the council and the best ways of performing them.
"These functions concern the system of examinations at 16-plus and 18-plus, and the development of the school curriculum. We have concluded that a single body, constituted as an elaborate net-

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work of committees on the lines of the Schools Council, is not well placed to carry out both functions.
"On examinations, radical changes are required. Greater attention needs to be given to the coordination and supervision of examinations at 16-plus and 18-plus. Ministers need independent authoritative advice on how these examinations might best serve national aims for education. We shall soon need advice on the national criteria now being developed for the 16-plus examinations. The Schools Council is a large body constituted from the nominees of many interest groups. We need a small body comprising persons nominated by the Secretaries of State for their fitness for this particular important responsibility.
"My right honourable friend and I will accordingly discuss with the local authority associations the establishment of an Examinations Council, appointed and funded by the Secretaries of State. I am circulating in the Official Report a note setting out the proposed composition and functions of this council. Copies of the note are available in the Vote Office.
"Curriculum development is a practical and professional activity which goes on continually throughout the education system. This activity needs to be reinforced by a national body with the limited task of identifying gaps, helping to fill them, and assisting with the dissemination of curricular innovation. Such a body—a School Curriculum Development Council—needs to reflect the many interests concerned, particularly the teachers. Its constitution should promote the sensible ordering of priorities, and efficient operation. My right honourable friend and I will discuss with the local authority associations the establishment of such a body. We envisage that it would be appointed by the Secretaries of State after consultation, that it would be financed jointly by local and central Government, but on a more modest scale than the Schools Council, and that most of its members would be teachers. Details of its proposed composition and functions are also set out in the note circulated in the Official Report.
"We will also discuss with the local authority associations interim financial support for completing the necessary existing work of the Schools Council. As the new bodies come into operation, we would bring to an end our financial support of the council. We hope that many of the expert staff of the council will be ready to join the new bodies.
"My right honourable friend and I are ready to discuss our proposals with the teachers' organisations and the other bodies who nominate members to the council's committees. We hope that everyone will co-operate with the local authorities and ourselves in the new arrangements we propose. Our aim is to improve the quality of the examinations system and to promote the effective development of the school curriculum."
My Lords, that is the end of the Statement.
Following is the information referred to:
FUTURE OF THE SCHOOLS COUNCIL: PROPOSED NEW BODIES
1. This note gives details about the two bodies proposed in the Statement made by the Secretary of State for Education and Science on 22nd April.
Examinations Council
2. This would co-ordinate and supervise the conduct of examinations at 16-plus and 18-plus. Its functions will be:

(a) In regard to the activities of the GCE and CSE boards:

to ensure that syllabuses and procedures for assessment at 16-plus are in accordance with the national criteria which are to be proposed by the boards and considered by the Secretaries of State;

to approve new A-level syllabuses and revisions to existing syllabuses;

to monitor the comparability of standards of both 16-plus and 18-plus examinations;

to engage in research necessary in support of these activities; to consider appeals by individuals;

(b) To advise the Secretaries of State on the validity of national criteria for examinations at 16-plus and generally on how the examination system, at both 16-plus and 18-plus, can best serve the needs of the education service and its clients.

3. This body would be formed of about 10 to 15 people drawn from within and outside education, appointed in a personal capacity and unpaid, of good standing in their fields and reflecting a broad spectrum of knowledge and experience. The body will carry out its difficult and important functions through an expert staff. The members will be appointed by the Secretaries of State, after consultation with the interests involved. The body will be funded by the Government.
School Curriculum Development Council
4. Its functions would be:

(a) to inform itself broadly of what curriculum development is currently going on;

(b) to judge its adequacy and to identify gaps and likely future needs;

(c) to stimulate, within a modest budget, work to meet the identified needs; and

(d) to promote the dissemination of curriculum innovation, whether stemming from its own work or from that of others, where adequate means do not already exist.

5. The body might have a majority of teachers in a total membership of about 20, appointed by the Secretaries of State in a personal capacity and unpaid. Some two-thirds of the teachers might be selected from lists of names submitted by the teachers' organisations, and these lists, together with names proposed by other bodies, would also be taken into account in appointing the remaining teachers members. Other members would be appointed to reflect appropriate interests: in particular the local education authorities, further and higher education, industry and commerce. Departmental officials would not be members of the council, but the Secretaries of State would wish to appoint assessors.
6. The Secretaries of State propose that its funding will be partly by the Government and partly by the local authorities collectively. Some of the Government funding would be by way of specific commissions.
7. The council would appoint its own staff.
4.26 p.m.
Baroness David: My Lords, I should like to thank the Minister for repeating the Statement, and we, too, are grateful for Mrs. Trenaman's review of the Schools Council, but we are surprised that despite the gratitude that the Secretary of State expresses, he has ignored her recommendation for a national body dealing with both curriculum and examinations. The Schools Council is to be abolished. Instead of Mrs. Trenaman's recommendation for a streamlined council, with the number of committees reduced and the numbers on those committees reduced—with which we were in complete agreement—there are to be two councils—one on examinations and one on the curriculum. The Secretary of State will apparently have great powers of

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patronage, as the appointments are to be entirely in his hands. This means very much greater control by Ministers and the department.
Which is to be the more important council? I guess the examinations one. I ask, are there to be any teachers on this council? There is no mention of that in the Statement. Will the Examinations Council determine the curriculum?—because that we believe would be most unfortunate and deplorable.
In paragraph 4 the Statement says, on examinations, that radical changes are required. After recent announcements on the 16-plus, one wonders very much what the radical changes will be. Can the Minister enlighten us as to what is meant by that? Is the Examinations Council, which is comprised of only 10 to 15 people, to give—I quote from the Statement—the
"authoritative advice on how these examinations might best serve national aims for education"?
The 16-plus and the 18-plus are mentioned in the Statement, but the 17-plus is not. Are they, too, to be within the province of the new council?
The Curriculum Council, the Statement says, is to identify gaps and likely future needs. Will there be the resources to fill those gaps, if they are identified by the new council? The recent HMI report on the schools would suggest that there would not be the resources.
Lastly, with regard to consultations, were there consultations with the local authority associations before this Statement was drawn up? Since they contribute half the funds for the Schools Council, it would seem right that they should have been consulted. I should like to know the answer to that. Is this really a consultation document? Is it a document that is going to be discussed properly by all involved, and will the Secretary of State be willing to make any changes in his proposals if they do not seem acceptable to all the parties?
Lord Beaumont of Whitley: My Lords, we, too, should like to thank the Minister for repeating the Statement, and we should like to give it a broad welcome. While not sharing the Government's total reaction against quangos, we believe that very often they are cumbersome bodies with too much to do and with aims that are too muddled. We think that the suggestion of two separate bodies with very specific aims is an intelligent and useful one. Nevertheless, there is the problem of the relationship of each body to the other, which has been mentioned by the noble Baroness, Lady David. How are they to connect with one another? Which of the two is to have the greater influence? It would in particular be an extremely bad thing if it were the new examinations body that was going to make the running.
I think there is a very wide appreciation now that the education system in this country is very severely hampered by the influence of the universities all the way down in secondary education, and this change would seem as if it might work to reinforce that rather than to relieve it. It might, therefore, for instance, work against the present movement for education for capability and for the arts in education.
So, on the whole, a welcome to this scheme, but I think there are some undoubted snags and we should like to know a bit more about that. There is just one question in particular. Noble Lords will not have
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had the note that has gone with this Statement, but among the functions of the Education Board is that of considering appeals by individuals. Whereas, of course, it is always welcome, not least on Liberal Benches, that there should be appeals from decisions of all kinds, is it being suggested that there should be a major setting up of appeals from examination results, or what does this particular phrase mean? But on the whole we give a general welcome to the scheme.
Lord Elton: My Lords, I am grateful to the noble Baroness and to the noble Lord for their reception of this Statement, more so perhaps to the noble Lord than to the noble Baroness. I note that they both approached it with a certain reservation, which is understandable because it is a new document. I can confirm to the noble Baroness that this is in fact an occasion on which Parliament is the first to know the intention of the Government, and the discussion will take place in the light of the Statement which has been made this afternoon in both Houses. She asked about the composition of the Examination Council. This body, it is envisaged, would be formed of about 10 to 15 people drawn from both within and outside education; appointed in a personal capacity, and not paid; of good standing in their fields, and reflecting a broad spectrum of knowledge and experience.
The noble Baroness referred to radical changes. Of course, the final recommendations on the 16-plus examinations are in formulation, and it is our intention to have this new body ready to advise the Government around the turn of the year, when we expect those to be available. The 17-plus is a separate issue, and at this stage, at least, will not come under the purview of either of the new bodies.
The noble Lord, Lord Beaumont, was anxious about the question of the curriculum development aspect of the work being overshadowed by examinations. I think the Government have sufficiently often made the public and the House aware of their own concern that the curriculum should always remain at the centre of the educational system. I have probably responded to all the points that I am able to among those that noble Lords have brought before me at this stage. I think the noble Baroness is going to return to the charge, but I shall resume my seat.
Lord Kilmarnock: My Lords, I, too, should like to thank the noble Lord for repeating the Statement made in another place. Our welcome I think rather depends on the relationship that the two new bodies are going to have—a point made by the noble Lord, Lord Beaumont of Whitley. The Schools Council, after all, was the Schools Council for Curriculum and Examinations. In fact, it was given a new constitution in March 1978—that was only four years ago—and one wonders whether it is really necessary to change the arrangements so radically in such a short time. No body is perfect, of course, and the Statement refer; to an elaborate network of committees; but, after all, the Schools Council was concerned with both functions—that is both curriculum and examination—and it is quite possible that some of this elaboration may have been necessary.
I wonder whether it is really necessary and desirable

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to separate curriculum and examinations to this extent. Our education system is, as the noble Lord, Lord Beaumont, has said, examination-led, and it should be the other way round: the exam should be the child of the curriculum, rather than vice versa. I am slightly concerned that this trend may possibly be accentuated by the new proposals.
However, since the Government propose a separate examination body, could I ask the noble Lord three questions? First, are the Government going to shelter behind the new body as an excuse for dragging their feet in the unification of GCE and CSE exams, to which they are committed? Second, will the Government consider proceeding rapidly towards a new vocational or pre-vocational examination at 17, along the lines recommended by the Mansell Committee? Thirdly, will the new body give serious consideration to the Schools Council's proposal for an I-level to run concurrently with A-levels? This was a very valuable suggestion, in my view, which was made by the Schools Council, and I hope it simply will not get lost in the reorganisation.
Lord Elton: My Lords, I am also grateful to the noble Lord for his reception of this Statement. He asks whether it was necessary to carry out such a drastic simplification so soon. I think it might be worth saying that one of the anomalies of the Schools Council is that it was not actually a council at all. It was made up of a finance and priorities committee, with 28 members; a professional committee, with 37 members; and a convocation, with 56 members. That brings it to 121. In addition, there were an examinations committee, a primary curriculum committee, a secondary curriculum committee, a committee for Wales, a publications committee, a parents' liaison group, a further education liaison group and a world of work liaison group, bringing the total number of committee posts up to 305.
That total does not include observers or assessors; nor the members of the 15 subject committees, or the four monitoring and review groups; nor the projects steering groups. The subject committees alone add a potential 231 further members. I recognise that the work is complex, but I think the noble Lord will recognise that the machinery was complex and that there was danger in this of diffusion of the work. Indeed, this is what the Government felt was happening. The appointment, as the noble Lord said, was made in 1978. I need not remind him that this Government came into office in 1979. I think we have operated, if I may say so, with both prudence and despatch in bringing forward this proposed reform at this time.
Baroness David: My Lords, I did ask one question which was not answered by the noble Lord, and that is whether there were to be any teachers on the Examinations Council. The noble Lord read out from the note, which I had read before because I was kindly supplied with it, where it says specifically that on the Curriculum Council there will be teachers; but it does not say that in relation to the Examinations Council.
Lord Elton: My Lords, the noble Baroness knows as well as I do from the note that the people will be appointed after discussion, and at this stage, therefore,
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it is not possible for me to say who they will be. Also from the note she will know that they will be appointed from both within and without education. I would be very surprised indeed, as would the noble Baroness be, if the people from within education did not include any teachers.
I did not reply to the second of the questions asked by the noble Lord, Lord Kilmarnock, about the 17-plus examination. I had intended to make it clear that that is without the purview of the present arrangements. He also raised the point about the A-levels. I regret to say that I have lost the point and will have to write to him, unless he would like to remind me of it now if the House would forbear.
Lord Kilmarnock: Very briefly, my Lords, I asked the noble Lord whether the Schools Council's proposals for an I-level, an intermediate level, to run alongside and concurrently with A-levels, was still under consideration.
Lord Elton: My Lords, this is something which is under consideration. I could not now tell the noble Lord.
Lord Robbins: My Lords, may I ask the Minister to expatiate a little further on the relationship between the two bodies which the Statement says are to be constituted. I did not gather from the Statement or from his elucidatory remarks any conception of this future relationship. Who is to be top dog?
Lord Elton: My Lords, the proposals that the Government have, where they are fairly clear in our minds, are proposals for discussions with local authorities and other interested bodies. I would expect the relationship to develop in the light of those discussions. They do relate to each other, but I would remind your Lordships that we are talking about curriculum development and not curriculum policy. That may seem a subtle distinction, but it alters somewhat the importance of the curricular aspect of the examination function. Both bodies will work to my right honourable friend. My right honourable friend is very well seized of the interrelationship between these two aspects of the work of the current council. It is one of the criticisms that one hears of the existing Schools Council that this relationship is not sufficiently closely reflected in its current workings. I think the noble Lord may be assured that this important aspect will not be lost sight of.
Lord Cledwyn of Penrhos: My Lords, in view of the fact that the Secretary of State for Wales is responsible for education in Wales in its totality, would it not have been appropriate to set up comparable councils in Wales to deal with examinations and with curricula? To what extent was thought given to this? Is the noble Lord aware that there is a strong tradition of education in Wales, that there are national educational bodies in Wales and that there was expectation that the Government would have given consideration to the Welsh identity in this respect? It was a new opportunity for them to do so. Will the noble Lord convey this view to his right honourable friend if his right honourable friend has not already thought of this?

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Meanwhile, can he say what Welsh representation it was intended that there should be on these committees?
Lord Elton: My Lords, I shall be happy to take to both my right honourable friends, the Secretary of State for Education and Science and the Secretary of State for Wales the concern which the noble Lord has put before the House. The Secretary of State for Wales was a party to all these arrangements, and the document carries his approval as it does that of my right honourable friend. I would say that this House and the Government are aware of the distinctness of Welsh culture and the tenacity with which certain Members of this House feel it necessary to defend it. At the same time, we are seized of the strength which can derive from single institutions covering both the Kingdom and the Principality if the Welsh ingredient is preserved therein.
I cannot say what individuals will be appointed after consultation but both my right honourable friends will be keenly aware of the noble Lord's aspirations and the spirit of education in Wales. I am certain that that will not be lost sight of.
Lord Cledwyn of Penrhos: My Lords, are the Government now proposing to bring Scotland within the scheme?
Lord Elton: No, my Lords. The Scottish system appears to bring benefit to the Scots, I believe, sufficient for it not to be added to by their being brought into the English system. I should not like this to be thought of as an English system, because it is also a system which embraces the people of Wales, is it not?
Lord Beloff: My Lords, since the Minister has received some criticism on the Statement, may I, from this side of the House and particularly from those who have been concerned about the deterioration in standards of schooling, give a very considerable welcome to the thought of a new beginning. I think it was essential, if we were to break out of what some might regard as a vicious circle, that we should have two new bodies to look afresh at these two main components of our educational system. One hopes in particular—and I think I gathered this from the Statement; although I should be glad to be reassured—that the new body on examinations will be able to have a fresh and thorough look at the ill-starred proposal for amalgamating the two 16-plus examinations.
Lord Elton: My Lords, if I may say so, the noble Lord behind me has laid a curate's egg. I agree with him that a new beginning is a welcome occasion. I must say that I do not share his anxieties about the 16-plus which we debated with such closeness even under the last Government. I think it is very agreeable that having got out of the morass then proposed, we have arrived at something for which there can be general support. The other factor which the noble Lord will find strengthens his argument is that, when it was proposed within the Committee on Education, Science and the Arts in the other place that the Schools Council should be abolished, that proposal was rejected by one vote only.
Lord Beaumont of Whitley: My Lords, the noble Lord did not answer my question about the appeals procedure envisaged for this small examination body and how broad would be its scope.
Lord Elton: My Lords, that is a possibility embraced within general policy. I cannot permit the noble Lord to pin me down more closely. It is one of the things that will be discussed.
Baroness Denington: My Lords, may I ask that the Secretary of State in making the appointments of those other than educationalists should give serious thought to appointing industrialists from the various aspects of industry, as it is surely essential in this day and age that we get a much closer relationship between the needs of the workplace and education?
Lord Elton: My Lords, I am obliged for that thought. It has been on our minds to see—and it is difficult to say this without appearing to diminish the stature of education—that the product is something which suits the consumer. Otherwise, children of talent will find that, because their talents have not been developed in the right direction, they cannot be employed as they should. I shall put that before my right honourable friend.

Local Government Finance (No. 2) Bill
4.49 p.m.
Second Reading debate resumed.
Lord Hill of Luton: My Lords, if I may, I will submit to your Lordships two points, one general and the other specific, which stem from the consideration of this Bill. Two years ago, when we were discussing the No. 1 Bill, the noble Lord, Lord Bellwin, again and again assured us of his faith in local government and asserted that nothing was then occurring in any way to damage its autonomy. I suspect that many of your Lordships, as I did, accepted those assurances. His colleague, Mr. Toni King, perhaps went a little further when he said in another place:
"I challenge anyone to tell me that our proposals actually undermine the basic automonv of local government".
High sounding words! But I think it is our task now to examine the proposals in this Bill in relation to that basic question of local autonomy: in other words, how do the assurances of 1980 stand up in relation to this Bill in 1982?
I want to examine it in relation to the experience of one authority which is characteristic of the experience of others. Let us take this year, 1982. In the early part of 1982, the district authority in question received an estimate of the block grant that it was subsequently to receive. On the basis of that estimate, it founded its rate, which has been issued. In due course it will receive confirmation of that estimate. That will be in September; not this year but next year. There will be a provisional estimate at the beginning of this year; a final decision in September of next year. If some authorities have been naughty and excessive in their expenditure, then the amount will be less than the estimate. What is named in September of next year

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will be less than the estimates submitted to the authority in the early part of this year.
As your Lordships know, there will be no question at that time of a supplementary rate; the authority will have to borrow with the consent of the department and then repay the borrowing in due course. The first question that I ask myself is: is that consistent with the autonomy of local government, imprisoned as it were by a block grant calculation that very few people understand—I, for one, do not—and with a timetable of this kind between the estimate and the certainty?
I am bound to say that I regard this financial aspect of what is now proposed to be a definite if temporary—for the Bill is described as interim—reduction in the autonomy of local authorities. Of course, some other words have been used. By the way, I think that the noble Lord, Lord Evans, raised a point—and I think the noble Baroness raised an associated question—that this kind of system is an invitation to local authorities to raise by rate more than they need to build up balances as against the day when they need the additional moneys but are denied the power of a supplementary rate. Of course, they will. To that extent, it would defeat the purpose that the noble Lord described in his initial speech.
My experience in local government goes back 50 years in the sense that I was then a local government officer and I put in a spell at housing and local government. Also I was for 15 years independent chairman of a local authority Whitley Council. I am sure of this. Any diminution in the role, in the autonomy, of local authorities in this country, even for an arguable economy for a short period of time, will permanently damage the democratic structure in this government based as it is on central and local government. I confess that by the very mechanics of this system, by the very arithmetic of it—unintelligible for the most part—these things represent in total a limitation of the autonomy of local authorities.
There were some other observations by Mr. Tom King. He said two years ago that when the funds had been distributed it was then a matter for local authorities and their councillors as to what their expenditure decisions were. He said that it was their choice between services, their choice as to the volume of expenditure and their choice as to the rate levels that they decided to impose. That was two years ago. That was said in defence of the other Bill. Is it true today? Will it be true when this Bill has been passed? The answer is too self-evident for one to give it.
I believe that we are seeing the beginning of the whittling away of the independence of local authorities. One other factor—it may come surprisingly from me—is that there are to be some local government elections. What if a party going to those elections submits proposals involving increased expenditure? We may all be in favour of general economy, but we are all in favour of expenditure under some heading. But what if the party explains it clearly and explicitly to the electorate, wins an election and goes back to the town hall? What is it to do? It cannot have a supplementary rate, although it deliberately put forward a policy of increased expenditure. All it can do is ask the permission of the civil servants in Marsham Street
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to raise a loan. Is that an interference with the autonomy of local government? I can see no other answer but an affirmative one to that question.
The second point that I want to raise has already been touched upon and it is the specific point raised by Clause 2 of the Bill which says that a precepting authority shall not have power to issue a supplementary precept, and so on. Subsection (3) says that this clause has effect in relation to any financial year beginning on or after 1st April 1982. My Lords, is that retrospective? The Ministry lawyers say, Yes. Legal advisers to two of the districts in the County of Bedfordshire say, No. It must be cleared up. In the case of Bedfordshire the precept was issued before 1st April. The money has been gathered in instalments. What happens if this is retrospective? Four district councils in Bedfordshire want some money back. Some ratepayers who have already paid their rates want some money back. It is of first class importance to make absolutely plain whether this is retrospective or not.
The alternative is an expensive battle—in which only the lawyers will be in profit—as to its exact meaning. The House is entitled to say to the Government: "There is ambiguity in this important clause even if it affects only one local authority. Please remove the ambiguity. If it is retrospective, if it covers the supplementary precept issued by the Bedfordshire County Council in respect of which payment has been made of first instalments by four district councils within its area, please make it clear that it is retrospective and that the money which was illegally paid to the Bedfordshire County Council, and possibly too by the ratepayers, will be returned, and that there is power to return that money".
I hope that it will not be thought because, as I understand it, only one county council issued a supplementary precept before this April date that that is not worth general legislation. It is, my Lords. There should be no ambiguity as to what this Bill means when so much money is involved. In the case of Luton, the sum involved runs into millions by virtue of this supplementary precept. So I would urge the Government to make it absolutely plain and—dare I say it? even in spite of their lawyers' advice—to remove this ambiguity and to deal with the consequences that arise from its retrospective character.
I end as I began: I am sure there are many like myself, with no party political views today, who are beginning to feel that the process has begun—with the best possible motives, in the interests no doubt of the national economy and of discouraging excessive expenditure by local authorities—despite the assurances that were given and accepted two years ago, of whittling away the autonomy of local authorities and submitting authority (I say this without offence to the Civil Service, for which I have a great respect) to Civil Service bureaucratic decisions in Marsham Street, because no Minister can possibly undertake the detailed scrutiny of the work involved in the relationship between the department and local authorities. I think we would do well to search hard for these minor and often arithmetical changes that nibble away at the autonomy of local government, for in the long run we should greatly regret the lowered strength and the lowered capacity of local government and the transfer

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of its functions, directly or indirectly, to central Government.
5.2 p.m.
Lord Mottistone: My Lords, it is always a pleasure to follow the noble and eminent Lord, Lord Hill of Luton; but what he has just been saying has tended to remind me of listening to him on the radio many years ago as he tells us about the ills of government. I should like to thank my noble friend Lord Bellwin for clearly explaining this Bill to us. He had a fair amount of "flak" from every Bench since then, and I must say the crocodile tears from the Benches immediately opposite made me think—perhaps I am wrong, but has no Labour Government ever been accused of taking away the autonomy of local government at any time in its career? Really, the Government are trying to do what they had to do against the problems of the day, and I wish them well in trying to do that.
Baroness Birk: My Lords, would the noble Lord give way? Of course, he is right when he says that every Government is accused of taking away autonomy; most Governments do take a bit away and give a bit. This is quite a different case, and I think he must look at it in the same way as the noble Lord, Lord Hill, did, as something quite out of the ordinary. This is a whole sequence of provisions destroying the independence of local government.
Lord Mottistone: My Lords, I have heard that before too. I am advised by the CBI, and I was delighted to hear my noble friend Lord Bellwin so clearly recognise the problems of the non-domestic ratepayer when he made his introductory speech. It is becoming increasingly acknowledged that business has a strong case for having its rate burden alleviated on many grounds. First, there have been many problems in recent years such as company closures, unused capacity and unemployment, due in the main to rising costs and falling profits. Business rates have contributed to that. They have risen, as a proportion of real profits, from 16 per cent. in 1969 to over 50 per cent in 1980; both figures apply before tax and interest have been paid and exclude North Sea activities.
Secondly, business rates bear no relation—and I have made this point before in your Lordships' House—to ability to pay, since there are no subsidies or rebates for businesses in financial difficulties and there is no link with profits. The business ratepayer pays at a higher poundage than the domestic ratepayer, yet he benefits less from the provision of services. In addition, he usually has to pay relatively more for the services he uses, such as refuse collection, than his domestic counterpart. Domestic rates are subsidised by a government grant (domestic rate relief) of 18.5 pence in the pound, which is equivalent to £850 million per annum at 1982/83 prices. In 1981/82 the yield from rates was £4.8 billion from the domestic sector and £5.2 billion from business. In 1982/83 business will pay close to 5.9 billion, and it should be noted in passing that business now pays more in rates than in corporation tax.
Thirdly, rates are a tax on property. As things stand, business can only reduce the rate burden by cutting down on the premises it occupies or by moving.
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The former is often not possible and the prospects for moving to another local authority area are also limited. Oil refineries and chemical plants, for example, cannot be moved at will and companies need to think long and hard before leaving a well-trained and experienced workforce.
There are three possible ways within the Bill in which business might be helped. These are: the introduction of an element of derating for business, a ceiling on business rate increases and a rating relief for hereditaments partially used—
Lord Hawke: My Lords, if I might interrupt my noble friend for one second, is there not another method, which is to give business people a vote so that they can turn out extravagant councillors?
Lord Mottistone: My Lords, my noble friend Lord Hawke will not be aware that we have looked at that, and the fact is that you cannot give them an effective vote which carries any weight at all, so to go hack to that does not solve the problem. The main argument against derating is probably cost, which would have to be funded by central government. However, if the finance could not be raised in any other way the subsidy to the domestic ratepayer should be reduced and spread evenly between the domestic and business ratepayer. An advantage of that proposal would be that it would he in line with the Government policy in reducing business costs and increasing local accountability.
With regard to a ceiling on business rate increases, this has been discussed by the CBI with the Government for some time. Representations have been prompted by rates increasing faster than inflation and the proposal is that they should be limited each year to the Government's inflation assumption in the rate support grant settlement.
Finally, with regard to rating relief for hereditaments which are partially used, my noble friend the Minister will remember this as "mothballing relief", which we tried to persuade him to adopt in the Local Government, Planning and Land Act 1980. The principle is straightforward and allows reduced rates on industrial premises which are unoccupied, rather like private houses. This enables businesses in times of recession to retain their factories and other businesses rather than to sell them off, so that they are ready for the upturn in the economy. I shall be putting down amendments to include these points in the Bill and of course they may require an amendment to the Long Title; that I appreciate.
We note with gratitude in today's Times that the Government are to make payments totalling over £2 billion to non-domestic ratepayers who should have received relief because part of their properties may lie in an enterprise zone. It is hoped that this appreciation of the need for fair treatment of business will be reflected in the Government's response to our amendments. In conclusion, it is hoped most fervently that the Government will make every effort to provide the much needed practical help to industry which the country so desperately needs at this time.
5.10 p.m.
Lord Irving of Dartford: My Lords, I am sorry that

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the noble Lord, Lord Hill of Luton, has left the Chamber, because I wanted to say what a privilege it is to speak in the same debate as the noble Lord. I think that he was one of the best Ministers of Local Government that we have had since the war and my local authority, although not of the same political persuasion, has always looked back with gratitude to what he did particularly in respect of atmospheric pollution in North-West Kent and a number of other matters.
This Bill has had a chequered career, almost as chequered as the Local Government, Planning and Land Act of 18 months ago. In fact, it is difficult to recall two Bills which suffered so acutely in their passage through the Houses of Parliament. Seldom has a Bill been introduced, withdrawn, reintroduced, amended, re-amended and, we hope, further amended in this House. Happily, a number of the most unacceptable aspects of the Bill have been dropped. The referendums, which were originally at the heart of the Bill, have gone. Selective mid-year holdbacks, which would have made it difficult for a local authority to predict its income, because the Government were taking power to change the rules halfway through the year, have also gone.
However, despite these changes, the ADC, of which I am a vice-president, still finds the Bill objectionable, because it represents a belief that the people in Whitehall know best—a view which I am sure the noble Lord, Lord Bellwin, would have contested if a Labour Government had introduced a measure of this kind. As my noble friend Lady Birk said, he would have been in the march from Leeds to West-minister to oppose it most strongly. It just shows what a transformation there is for one in moving from local government to Westminster. I am sorry that the noble Lord did not do what I did, and kept a foot in both camps. He might have kept his equilibrium a little better.
The Bill rests on the view that central Government, which cannot be said to manage its own expenditure very well, is the only defence for the ratepayer against unreasonable rate demands. I want to make two points. First, the ADC and I accept that the Government of the day must be in control of the overall budget of cash and manpower in the country—not just during the recession, but all the time. Otherwise, no economic planning is possible.
To answer the noble Lord, Lord Mottistone, of course there is need for control, but the local authority associations, 18 months ago and again now, offered their co-operation in seeking to help the Government to achieve their objectives, but were swept aside. So there is no co-operation there, where it could be real and effective and could help the Government to achieve, in terms of the national budget, what they are entitled to expect. We certainly believe that local government should be accountable, but down to the ratepayer—otherwise, local government will atrophy—and not up to the Secretary of State. The Bill does nothing to strengthen local democracy or even to increase its efficiency.
What the Government have done, on the admission of the noble Lord, Lord Bellwin, is indiscriminate and some of us feel this very strongly indeed. Most local authorities are highly responsible, and some of those
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who get into difficulty usually have problems that ought to be faced up to in another context. I speak in two capacities, one as the chairman of the finance committee of a district council, where in 1981–82 the borough rate did not rise, and where in 1982–83 the borough rate dropped by 1p. Indeed, we kept our budgeting within the volume target set to us by central Government.
Despite compliance with central Government's requirements, and also very firm discipline, we were at the same time able to finance a new project which will be opened in September. It is a new theatre hall which will cost £5 million, but when it opens only £1/2 million will be outstanding to be paid and we shall owe that £1/2 million to ourselves. I believe that our new hall, which will be called the Orchard, will be a centre for the arts in the South-East. It is already apparent that it will be very popular indeed. The point I am making here is that this kind of initiative and this remarkable achievement will no longer be possible with the regimes that have been imposed by the Local Government, Planning and Land Act last year and this new Bill now.
Lord Bellwin: My Lords, would the noble Lord please explain to us why this will no longer be possible?
Lord Irving of Dartford: My Lords, the fact is that such a scheme, with the targets set on revenue and the restrictions on capital expenditure, would not be within the capacity of a district the size of ours, or indeed of any local authority at all. If the noble Lord says that if we put up a similar scheme next week he will approve it, then I shall accept that we are being misled. But everyone in local government knows that that is not possible. The revenue expenditure will be set by target, and is already being set by target. Also, capital expenditure is limited to £5,000 as a top figure without the permission of the Minister. So the effect will be to prevent people of ability from coming into local government and making the best of local government, with local initiative responsible to a local democracy.
Secondly, I am also a vice-president of the Council of European Municipalities and, as a result, have had some contact with local government systems in other parts of Europe. Our local government system has been admired by people in many countries. It has been admired, because of its independence—an independence which has virtually disappeared. I speak as someone who really believes in local government and local initiative. It has an important part to play in the health of our democracy, both centrally and locally, and I regret its passing.
Although welcoming the withdrawal of the original Bill in December, and the amendments made at Committee stage and on Report on 5th April, the ADC remains concerned about certain aspects of the Bill and will seek to amend it as it passes through this House. It believes that Parts I and II should be regarded as a temporary interim measure of central Government control, pending fundamental changes in the system of local finance. We do not believe that the Government would have introduced such ponderous interim solutions if they had had permanent solutions available on which they could decided. But we still believe that

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Parts I and II should be interim soultions and not permanent solutions.
In this respect, the association has already submitted constructive views on financial reforms, aimed at strengthening the constitutional status and role of local government by increasing local accountability, reducing dependence on central subventions and providing locally controlled sources of income. An approach on these lines would, in the association's view, be far more likely to meet the Government's objectives than the present ever-tightening expenditure controls that we see today.
Part I—Rates, precepts and borrowing—abolishes the power of local authorities to make supplementary rates. The association's main concern is that district councils no longer have this reserve power—because it is a reserve power, which has been used very infrequently in the past—to deal with unforeseeable reductions in income, or additions to expenditure brought about by emergencies, disasters or severe weather conditions. Without it, local authorities will have to be over-cautious and, as the noble Baroness, Lady Stedman, said, they will build in a cushion, which means that estimates will be greater than they need to be.
The association is also concerned about the situation, as the noble Lord, Lord Hill of Luton, said, in Bedfordshire and will wish to be satisfied that the proposed Government amendments to the Bill will remove any doubts about the retrospective invalidation of supplementary rates or precepts in respect of 1982–83, whether made before or after the commencement of the year.
Part III of the Bill establishes the audit commission for local authorities in England and Wales, which will be responsible for securing the audit of accounts of local authorities and certain other bodies. The ADC remains in principle opposed to the proposed commission. The association recognises the importance to local government of an independent, impartial and effective external audit system, but it has been widely recognised and widely acknowledged, both inside and outside local government, that the district audit service has been independent of both central and local government. By statute it is given this independent status which has inspired confidence in both local government and the public. The ADC cannot see the justification or necessity for the proposed audit commission. It could only add considerably to a local authority's already substantial audit costs and would not be seen by the public to be any more independent and impartial than the existing district audit inspectorate.
The main justification for the commission is said to be the need to develop and expand audit effort in local government, particularly value for money. The ADC does not accept the fact that the audit commission is the right vehicle to achieve the Government's value for money objectives. It supports the wish to improve efficiency and cost effectiveness but points out that the annual report of the Chief inspector of Audit and local authorities' own bodies, such as the Local Authorities Management Services and Computer Committee—LAMSAC—which have an impressive record, are a better basis for this kind of development. Moreover, the publication of an annual report by the Chief Inspector of Audit, coupled with the work of the Advisory Council on Local Government, which was set up in 1979, provides an adequate means of high-
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lighting issues of general public interest and concern, including value for money, encouraging local authorities to improve their efficiency and effectiveness.
So far as membership is concerned, the association believes nevertheless that if the audit commission is to be established there should be proper consultation with the local authority associations—and not from a list. Indeed, it believes that as local government will have to foot the Bill and make the largest input into the success of this new commission, it ought to have a majority of the places on the commission. And it will seek, during the passage of the Bill, to bring that about.
It is a great pity that the choice of auditor is no longer going to be available to local government. There is no evidence to suggest that the district audit service and the local audit has not served local government well, effectively and impartially. The important thing is not its structure but that standards are maintained upon which local government and, above all, the public can rely. It makes the whole business of the commission wholly unnecessary.
One more point I want to mention is the amendment which was moved on Report and which was supported by the noble Lord, Lord Bellwin, in his opening speech. The association will oppose the view that the Comptroller and Auditor-General should be involved in district audit and value for money studies. His direct involvement would require an unacceptable change in the existing constitutional relationship between local government and Parliament. Local authorities are directly elected and are autonomous bodies answerable to their electorates for the discharge of their statutory powers and not to Parliament or to Ministers. The association feels, and fears, that this latest move, and the undertaking given by the noble Lord, Lord Bellwin, could be the first step towards parliamentary control of individual local authorities through the Comptroller and Auditor-General. This would have serious consequences for local autonomy and accountability. The ADC will look critically at the Government's own proposals in the light of these constitutional implications. Our view is that it would be a retrograde step, and we oppose it. The Bill is a bad Bill. We in the ADC will do our best to amend it as it passes through this House.
Lord Monson: My Lords, before the noble Lord sits down, I wonder whether he could answer one question. He spoke of this Bill as being a threat to local democracy. Would he not agree that, so long as such a high proportion of local government electors pay no rates or receive rent rebates, central Government must intervene to protect those who are liable to pay rates, because those who pay no rates, or whose rates are being heavily subsidised, have no incentive to vote against extravagance?
Lord Irving of Dartford: My Lords, neither I nor the local authority associations have objected to a review of the sources of local government finance. We have been saying for many years that it is an absolutely essential part of the re-organisation of local government. But this has never been done. Most of the points which the noble Lord has raised could be dealt with by a change in the way in which rates are

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levied. I should be happy to join with the noble Lord in getting that change accepted by the Government as soon as possible.
5.26 p.m.
Baroness Platt of Writtle: My Lords, I thank my noble friend the Minister for his clear exposition of this Bill. It has been substantially altered since first-seeing the light of day, and that is a relief to many of us, especially the dropping of the clause to require a referendum before levying a supplementary rate. There are those who would have liked to keep the power to levy a supplementary rate, but until a few years ago a supplementary rate was a rarity. And for many of us it is an anathema as it presents, as my noble friend the Minister said, an unexpected bill to ratepayers in the middle of a financial year which could be a considerable burden both to firms and to individuals.
Another improvement is that in the original Bill the Secretary of State had the power to alter the block grant entitlement to an authority during the financial year. This has now been amended. In the same way as an unexpected bill is a shock to ratepayers in the middle of a financial year, a change of this nature is very difficult for a local authority to absorb. It is vital that local authorities should know the grant they are to receive well before the beginning of a financial year so that they can prepare a sensible budget, exercise proper forethought and then adhere to the budgetary plan throughout the financial year. The reverse has been the case in the last few years and this has not contributed to responsible budgetary control by economical councils. Changes made in the middle of a financial year are always more drastic and arbitrary as there are only a few remaining months in which to cut expenditure. I know that the Association of County Councils is especially pleased that the Government have recognised the need for certainty for local authorities in their budget-making process. We all hope that the amount of block grant will be announced earlier this year.
Part III of the Bill establishes an audit commission for local authorities in England and Wales which will be responsible for securing the audit of the accounts of local authorities and certain other bodies. The Association of County Councils is opposed to the establishment of a commission to assume responsibility for the audit of local authority accounts. This provision will transfer the work of the district audit service to the commission and another quango will have to be set up.
One of the abiding strengths of the present audit system for local government is the statutory independence which the district auditor enjoys. Nobody, either in central or local government, has power to influence him in the execution of his duties. This independence has produced a totally impartial audit service which over the years has gained the respect and confidence of local authorities and their electors. The association feels that the Government have not made a convincing case for replacing these tried and tested arrangements. While the Government have agreed to the inclusion in the Bill of provisions for consultation with the local authority associations and individual local authorities, where appropriate, never-
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theless the Secretary of State has retained to himself effective power over all significant aspects of the commission's functions.
The association greatly regrets the refusal of the Government at Committee stage to accept an amendment which would have permitted local authorities to retain the right to appoint their auditors chosen from a list previously approved by the commission. The removal of this right changes the present carefully balanced constitutional and legal position and fails to recognise the essential democratic accountability of local authorities to their electorates. The association remains opposed to the principle of the establishment of the commission, but, should the Government continue with their proposals, the association would wish to see even at this stage amendments which will achieve a greater measure of independence for the commission and a framework more in keeping with the constitutional position of local government. I know that my noble friend Lord Ridley, who unfortunately is unable to be present today, will wish to refer to the association's apprehensions in detail at Committee stage.
I welcome the statement made by my noble friend the Minister that local government will be closely involved in the commission. Speaking from personal experience in Essex, we are one of the 14 local authorities to which the Secretary of State has already appointed private auditors as their district auditors. Until now, we have always used the District Audit Service, with whom we have an excellent relationship, in seeing that our accounts are prepared in a proper manner and respecting fully our fiduciary duty to our ratepayers. We were, therefore, anxious about the appointment of a new firm of private auditors. After representations to the Secretary of State we met our new auditors before a final decision was made. As a result, we now feel that we can build a similarly good relationship with them; to see that we do carry out value-for-money exercises in co-operation and operate responsibly and economically. We are grateful to the Secretary of State for this opportunity. We are also unique, perhaps, in that our private auditors are going to operate at local level in co-operation with the district auditor. We feel that is very valuable, in bringing both services to work together. However, in the last resort it must always be the councillors who are elected and who are responsible to the ratepayers, and the auditors should not usurp that function and try to dictate policy. This is a fundamental aspect of local democracy which I feel good private auditors will recognise. I believe that, if the Bill could provide for councils to choose their auditors from an approved list, this would enable better relationships to be set up to the benefit of local authority accounting procedures.
This Bill still seeks to control further local government from the centre. I am aware of the difficulties which the Secretary of State has suffered in his proper exercise of central Government control over the expenditure of local government. A few councils have not followed the normal co-operation between central and local government, and have increased local government expenditure against the wishes of the Government. I very much regret this as it is leading to further detailed central controls of local government as a whole. My own deeply-held view, which I have already ex-

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pressed in your Lordships' House on several occasions, is that the success of, and the degree of responsibility exercised by, local government depends on the calibre of the people involved. Good officers will only be attracted into the various professions involved if they feel that they can exercise their talents reasonably widely. Members with extensive experience of life, both in the voluntary and commercial and industrial fields, will serve only if they too feel they have worthwhile responsibilities to carry out. Too detailed control will encourage neither, and only the mediocre will take part to the detriment of local government.
I welcome the Government's Green Paper on alternatives to the rates, as does the Association of County Councils. I hope that rates will be retained, although reformed in some of the ways suggested. I hope, too, that a poll tax will be brought in to provide the proportionate revenues needed by local government so that people contribute to the services they desire. The noble Lord, Lord Monson, was asking a moment ago how people can affect local government, and it seems to me that this would be one way in which they could affect local government. This Bill's underlying intention is to encourage responsible attitudes in local government towards its ratepayers—and that still does include a great deal of freedom for local government. Instead of more detailed control I feel that a reasonable poll tax as part of local government revenue would encourage the whole electorate to take a greater interest in the way in which local government spends its money. This must be democratically desirable and much more likely to encourage people of intelligence, innovation and responsibility to serve as both officers and members so that local government—a vital part of the democratic system in this country—continues to be well administered.
5.37 p.m.
Lord Bruce of Donington: My Lords, the House is is indebted to the noble Lord, Lord Bellwin, for having introduced this Bill. He will forgive me if I am bound to point out to him that the Bill has not really received a considerable degree of support among your Lordships. Aside from the somewhat muted support from the noble Baroness, which was carefully circumscribed by the qualifications which she gave, the noble Lord the Minister has received no support at all. The noble Lord, Lord Mottistone, who I observe is no longer with us, used the opportunity not to discuss the Bill itself but to give us the considered views of the Confederation of British Industry, which I do not consider are particularly relevant to the Bill at this stage.
The speech made by my noble friend Lady Birk relieves me of the necessity of going very deeply into the contents of the Bill. My noble friend was thoroughly supported in practically everything that she said, not only by the noble Lord, Lord Evans of Claughton—who I thought dealt very effectively with the retrospective legislation aspect—but also by the noble Baroness, Lady Stedman, who made a devastating speech which dismantled practically every argument which the noble Lord, Lord Bellwin, was able to put forward. We were also indebted to the noble Lord, Lord Hill of Luton, for having exhumed from the public records some of the Government's earlier
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pronouncements in favour of local government freedom, which their action since then has almost completely destroyed. We were also indebted to my noble friend Lord Irving of Dartford for having presented the views of the Association of District Councils, as indeed we were to the noble Baroness, Lady Platt of Writtle, for giving us some outline of the views held by the Association of County Councils.
With regard to Parts I and II of the Bill, I shall have very little to add to what has been said by so many of your Lordships. Indeed, one hopes that from across the party Benches in the House, from the Benches opposite, from the Cross-Benches, as well as from the Benches behind me and to the side of me, we may be able to induce the Government to make a number of important changes to the Bill at Committee stage. Let not the noble Lord think, in spite of the dulcet tones with which he addresses us, that he can persuade all of his noble friends to agree with him, unless of course he applies the party whip which will enable him possibly to maintain certain sections of the Bill intact. From our point of view, it looks as though we are in for an interesting Committee stage in which all kinds of things might happen.
As to Parts I and II of the Bill, let us be quite clear as to what fundamentally we are talking about. We are, of course, really talking about a transference of wealth, a transference of resources from one section of the population to the other. What ultimately we are talking about is the further impoverishment of the poor for the benefit of the rich. And I will explain to the noble Lord precisely why. The difficulties into which local authorities—and not wholly Labour local authorities—in the United Kingdom have been put have come about precisely because central Government have sought to impose upon them financial constrictions in support of an economic and financial policy which now lies wholly discredited throughout the country. This is what it is all about.
The difficulties, and indeed the supplementary rates that have been levied, have been caused fundamentally by the drive by the Government to reduce their own proportion of local government expenditure so as to throw the burden on the local authorities; then in support of their monetarist dogma discouraging them from raising further funds beyond the Government's own financial constraints. The noble Lord, Lord Bellwin, will undoubtedly say, as indeed he has said many times, that this Government have made more money available in real terms to local authorities than has been the case before. What he does not realise is the devastating impact upon the conditions of people living within these local authorities brought about by the economic, financial and industrial policies followed by his Government.
What local authorities are now faced with is a position where, in order to keep within the financial constraints, they are having to make considerable inroads into their educational services, into their domiciliary services, into other social services all the way along the line. The effect of that is this. You cannot ill-treat a local authority; a local authority has no personal identity which it is possible to injure. What you can do is to injure people. What has happened during the last three years is that the economic, industrial and financial policies of the Government

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have meant a growing amount of poverty in the United Kingdom, a growing amount of unemployment. I do not say this provocatively, either. There is a growing amount of social distress which in terms of the work of local government has brought an increased demand upon their services. Therefore, there has been an increased need for local authority services against a background of rigid financial constraint.
Over the last few years, the last three years in particular, not only has the real money wage of the bulk of the British people gone down—and the noble Lord, if he is in any doubt, should refer to the Taxes and Prices Index upon which his Government set such store in the heady days of August 1979; there has also been a reduction in the social wage, which is taken into account in determining the overall standard of life within which an individual exists at this time. So both the real wage and the social wage have gone down at the same time as the real wage, the real income, the real salary, the real bonus, the real compensation of the higher income groups has gone up.
That is what I meant when I said that all this Bill really effectively does in political terms is to assist in the inevitable process which the Tory Party desperately needs to conceal, that the rich get richer and the poor get poorer. That is why the next Government will repeal these provisions, together with the other provisions which form a part of the whole financial structure organisation as between central Government and local government, which have been the hallmark of the present Administration.
I now pass to Part III of the Bill which envisages the establishment of an Audit Commission. Let me say at once that any efforts by any Administration, including this Administration, to get value for money in the services that local government provides, or indeed that any other industry or national service provides, will immediately have our support. It is quite right that the noble Lord and the noble Lord's Government should address their minds to this question. Indeed, for some time there has been in existence the audit inspectorate, with its team of district auditors, who have up to now performed the audit function. They comprise qualified accountants from a variety of approved accountancy bodies, and they comprise also a number of people who are not in fact qualified by professional standards but who by now have accumulated such experience in the work that they are every hit as efficient as those who are qualified.
It is common ground, I believe on both sides of the House, that the district audit service has done very well indeed and has given local authorities a good and impartial service. No noble Lord here this afternoon has offered any criticism at all, and rightly so. Up to now, however, local authorities have been able to choose: they can either have a district auditor, or, subject to certain conditions, they can themselves engage independent firms of auditors in private practice, provided that they have the suitable qualification.
Before I proceed further to discuss this matter, it is proper that I should disclose quite frankly a personal interest. I am a practising chartered accountant with a firm called Halpern and Woolf who have tenders at the moment outstanding with the auditor inspectorate in Bristol. It is well, therefore, that the Houses
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should know that that is so. I am, indeed, hopeful that the House, on the basis of my observations so far and, indeed, on other business in this House, will accept the fact that I shall endeavour to give my views precisely as I feel, and precisely as I believe, regardless of any interest that I may hold indirectly as a result of my active membership of the firm to which I have referred.
Not only has this part of the Bill brought the conception of the new Audit Commission into being but it has also brought forward a completely new function for auditing and I am talking now in the statutory sense. Under Clause 9(1) (c) the auditor is required—whether he be a district auditor appointed or a private auditor—to satisfy himself:
"that the body whose accounts are being audited has made proper arrangements for securing economy, efficiency and effectiveness in its use of resources".
This is an audit responsiblity that is not given to the auditors appointed to audit the accounts of public companies in industry and commerce or even to private industry and commerce. All that the auditor is required to do is to certify, after his examination, after his questioning and after the explanations that have been given to him, that the accounts presented to the shareholders of the company—whether it be a PLC or a private company—show a true and fair view of the company's affairs. It is not normally, under British company law, any part of the responsibility of an auditor to come to any conclusion as to whether the company:
"has made proper arrangements for securing economy, efficiency and effectiveness in its use of resources".
If that were otherwise, audit reports on companies all companies—would run to levels which it would be difficult for Tolstoy's novels to compete with in size.
It has always been the responsibility of the directors of a company to take steps to ensure that that company makes:
"… proper arrangements for securing economy, efficiency and effectiveness",
and nobody else's. Ultimately, of course, they are responsible to the shareholders in a general meeting. I ask myself whether it is wise that this responsibility for ensuring:
"proper arrangements for securing economy, efficiency and effectiveness".
should be taken out of the responsibility of the local authority itself, of its officers and its councillors. I am also minded to ask myself: If this is to be the responsibility of district auditors in the future, in addition to other responsibilities, to which I shall come, is there any real reason why central Government should not subject themselves to these particular disciplines? If there has been any exceeding of targets of expenditure, if there has been any considerable increase above budget targets and so-called forecasts, which has been the most guilty—local authorities in the United Kingdom or central Government? If there are to be benefits which flow from the Audit Commission in the appointment of firms of outside auditors with a view to ensuring that proper arrangements are made for securing economy, efficiency and effectiveness in the use of their resources, why should that not apply to the Department of the Environment?

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I should love to go inside the Department of the Environment in order to determine whether they are using their resources properly, efficiently and so on. Why should they be exempt? Why not apply it to the Ministry of Defence? If the Audit Commission is of such advantage, why should we restrict its operation in this way and deny the public the benefit of it?
As has been said on two occasions during the current debate—and I do not want to detain the House too long—the one difficulty about the Audit Commission is that it is liable to receive directions from the Secretary of State. I do not know how that will fit in with the competence of the Audit Commission or, indeed, those who are going to accept the work from local authorities on the recommendation of the Audit Commission itself. I must say that, if I personally were to receive a direction from the Secretary of State as to how I was to carry out an audit, I would tell him to go and get lost, because it would be entirely against the independence of my own profession, the independence, that it has built up over the years and which it has preserved against all Governments and against all interests, in presenting and insisting on the presentation of what it considers to be, and what no one else considers to be, a true and fair view of the state of affairs of the company or the organisation whose accounts it is auditing.
I come back to the point about the value for money audit. There is no reason at all why any local authority, should it so wish, should not have a value for money audit. That, however, should be at the discretion of the councillors themselves. Does the noble Lord really think that councillors on a local authority and the officials on a local authority, are so dumb and insensitive that they themselves do not know what is happening about value for money, except perhaps those who may have a vested interest in the work that is being carried out on its particular behalf? I do not believe these things.
Moreover—and I will leave the remainder of the points for Committee because they are too detailed—let us consider the other responsibilities which are now laid upon the district auditor under Clause 11 of the Bill. I appeal to noble Lords in this House who have some professional and business experience—there are, indeed, many—just to contemplate what the Government are doing, or rather what they propose to do. I invite the noble Lord himself to listen very carefully now to what I am going to say. Clause 11 of the Bill requires:
"At each audit by an auditor under this Part of this Act any persons interested"—
mark this—
"any persons interested may inspect the accounts to be audited and all books, deeds, contracts, bills, vouchers and receipts relating to them and make copies of all or any part of the accounts and those other documents".
Let us say that the auditor already has the books in his possession and is working on them. Let us say that there is one interested person who comes along and says, "Look, under Section 11(1) of the Act I want to see these books and documents relating to this particular matter". The auditor or one of his staff has to stop. He may have to search for papers—they may not all be in exactly one spot—or he may have trouble
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in assembling them. Nevertheless, there could be 50 persons a week who had an interest in this. Let us suppose that there was an organised Conservative interest in the accounts of the Labour-controlled council and 50 individual ratepayers, members of the Conservative Party, on separate days for the next several weeks demanded to exert their rights under this subsection. That would, of course, disrupt the work of the entire audit and, indeed, would be very costly. Then Clause 11(2) says:
"At the request of a local government elector for any area to which those accounts relate, the auditor shall give the elector or any representative of his an opportunity to question the auditor about the accounts".
I appeal to noble Lords who are businessmen, who are professional men and who have any experience in these affairs to contemplate the idiotic nature of this provision. It would mean that an auditor would have to hold himself available at the request of any elector to answer any questions. In the case of a Conservative authority I guarantee to tell the noble Lord that I could organise 500 visits on a local auditor in a month to keep him sufficiently occupied under this particular clause. It is not a responsibility that a shareholder in a public or private company can demand. A shareholder can go along to an annual general meeting where the auditor will, of course, read the report of that public liability company and will answer questions. But the auditor of a company or of a public corporation is not required to answer a question of any interested shareholder or of any interested customer. Noble Lords should consider the expense that would be involved in this on the assumption that the auditor will be permitted to charge on the basis of his own diary records: "Interviewed Mrs. B. from 11 to 12 on the subject of so and so—so many hours", whatever it may be. Noble Lords must consider the expense.
Subsection (3) says:
"… any local government elector for any area to which those accounts relate, or any representative of his, may attend before the auditor and make objections".
In certain circumstances, I wonder whether the auditor will be able to do any audit work at all. This is completely ridiculous. I shall not pursue the point further now. Quite clearly, these are matters which we shall have to clear up in Committee, and, indeed, upon which we, on these Benches, will hope, right across the whole spectrum of your Lordships' House, to obtain support for reasonable amendment of these clauses, which have been drafted without any regard as to the actual procedure that happens in audit. Audit involves work. It involves examination and evaluation of documents; it involves questioning people and all the rest without being encumbered by this kind of thing. As I have said, there are many other detailed points upon this aspect of the Bill.
Viscount Colville of Culross: My Lords, will the noble Lord give way for one moment? I have heard the criticism that he has made about this passage in the Bill, but I am sure that he would like to refresh his memory about the existing provisions in the Local Government Act 1972, of which in my time I have had considerable experience. I am fully aware that they take up a certain amount of time and trouble, but they

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are not all that dissimilar to the provisions in this legislation.
Lord Bruce of Donington: My Lords, I take the noble Viscount's point. But that Act did not impose on auditors the additional responsibilities that are put on them under Clause 9 of the Bill and which, indeed, in the current circumstances, are likely to ground the gravamen of most complaints; that is, value for money.
Viscount Colville of Culross: My Lords, I am talking about Clause 11.
Lord Bruce of Donington: My Lords, if the noble Lord will forgive me, I do not know whether he was here at the time when I referred to Clause 9, which sets out the additional responsibilities that are laid upon auditors and the additional area, over which inquiries may be made, objections may be raised, and queries may arise. That is the point I make. Within the general atmosphere created by this Bill and all the purposes behind it, I think that these particular clauses will need some very considerable qualification and revision. We shall give this Bill very careful examination during the Committee stage. We know that we shall receive the co-operation of the noble Lord, Lord Bellwin, who is invariably courteous on these occasions and who we hope will be extremely reasonable. Perhaps I may assure him that, as always, we shall seek to be as constructive as we can in these matters. However, I am afraid that we cannot disguise our view—which, on the basis of the debate this afternoon, is the view of the House or of those Members of the House who have been present—that the Bill is a bad and unnecessary Bill.
6.6 p.m.
Lord Bellwin: My Lords, I was very glad to hear the noble Lord say that he knows I shall deal courteously with matters as we go along, but I must say he does not make it easy, does he? We have had an interesting and, in the main, though not entirely, constructive debate, and I am certainly obliged to noble Lords who have spoken. Because I happen to disagree with very much of what most of them said—as I shall try to cover in a moment—that does not mean to say that I did not appreciate what they said and how they said it—mainly how they said it—and that we shall read very carefully what was said.
In winding up, one wants to cover all the points made, but clearly it is not possible. When I am faced with a Bill of this particular kind, which at last is home ground for me, I am tempted at this stage to go into too much detail, and I shall try to resist doing so. Still, let us see how we go. On Part I of the Bill, I cannot accept the suggestion that the abolition of supplementary rates and precepts constitutes an unwarranted interference with local autonomy. Authorities will remain free to set their own spending and rating levels, which is a crucial point. The ban should cause few problems for the vast majority of responsible authorities which manage their finances prudently.
These proposals are the result of the action of an irresponsible minority of authorities which have recently
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levied supplementary rates in order to increase their spending in defiance of Government requests for economies. It must be said that such behaviour not only puts at risk the traditional relationship of voluntary co-operation between central and local government, but it also puts an intolerable burden on hard-pressed ratepayers in both the business and domestic sectors. As my noble friend Lord Mottistone stressed in the case of the business community, many of these people can ill afford further heavy unexpected demands for supplementary rates.
The noble Baroness, Lady Birk, together I think with the noble Lord, Lord Irving, asked what I would have said had I been in my former role in Leeds at this stage and faced with the Bill. I will tell them what I would have said, because I was always very proud of the record, certainly of Leeds, but also of local government as a whole. Indeed, at one time I was vice-chairman of the AMA and charged specially with much of their discussion on financial matters. I repeat that I and the Labour members of the AMA were proud of the fact that we ran our authority carefully; we watched every penny as best we could. We certainly did not spend the money on some of the things that were raised at Question Time today. I am appalled by some of the things that are happening in local government, but I shall not digress.
To talk about supplementary rates was unheard of. I happened to know that there was such a thing as supplementary rates, but in all the years that I was in local government in Leeds it was never mentioned at all. I am asked what would I do so far as supplementaries go. In the first instance, I was totally horrified at the whole business. The noble Lord, Lord Hill, is always a delight to listen to, even if we do not always agree. When he talks about local authorities having their autonomy whittled away by these proposals on supplementary rates, I do not take that at all. In Scotland, for example, they have not power to levy supplementary rates, and have not had them. But they do not say that this has therefore whittled away their local autonomy.
We always took care in contingencies of matters of this kind. We assumed that there would be things that would go wrong. Any prudent authority would do that. But it did not mean that we therefore decided to rate up out of what might happen. This was with ratepayers' money. Our attitude to ratepayers' money was vastly different from the attitude of some of these local authorities—I am glad to say it is only a minority —who seem to have no regard for their ratepayers.
We were told earlier on that this whole business of rates, and so on, is all part of the autonomy, and authorities have the right and have a mandate. I think the noble Lord, Lord Hill, asked us—and, if it was not the noble Lord, he will accept my apology—what about the authority which gets a mandate at elections to come back to increase its spending, and then does come back? What about them? Are they not entitled to do this? They are certainly entitled to tell the electorate what they propose to do, but what they are not entitled to do, nor did we ever do it when I was in local government, is to disregard totally the Government's guidelines about spending as if they did not matter tuppence, because they do.
I submit that the national mandate is a prior mandate.

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It always was and it always must be, if one thinks carefully. All the Labour leaders that I knew and still know agree with me that that has to be the priority. Those who are concerned about local government must go along with me about the future of local government, and the relationship with the centre, and, if we ever get to the point where local government really does not care, and will not have regard to the centre's requirements arising out of the national policy, where will the relationship ultimately be? To me, that is a far greater danger and greater menace to those of us who are interested in the future of local government than anything that we have ever talked about or want to talk about.
Baroness Birk: My Lords, I do not want to hold up the Minister at this stage, but he surely must agree that local government has never been squeezed so dry of funds from the centre as at the moment. This is why these things are happening. There may be some irresponsible people, but that is not the basis of the whole story. They are completely squeezed.
Lord Bellwin: My Lords, two points on that. First, I would remind the noble Baroness of Circular 45/1976, when local government was told, because the IMF had been brought in, that there must be an immediate reduction of 3 per cent. across the board. That is an enormous reduction to make: 3 per cent. across the board against the 5·6 per cent. reduction that we are calling for over three years. Let us keep it in perspective. At that time, what was local government's response? They responded by doing it, because that was the kind of sense of responsibility that they had then, and that still exists today among the majority of people in local government. My concern is about the minority who are not concerned. We have to do something to protect, first, the country's overall spending, and we are talking here of a £1·5 billion overspend in a year. These are figures unheard of in the past. They also have to take care of those who have to foot the bills at the end.
I shall be here a long time if I do not press on. I had better comment on a point that the noble Baroness made, because others did too. Indeed, the noble Lord, Lord Hill, was anxious about this retrospective point. This is in Part I. Clearly the Bill indicates that the ban will operate in relation to any financial year beginning on or after 1st April 1982. In the Government's view, therefore, as my right honourable friend made clear in another place last month, the Bill will invalidate retrospectively any supplementary rates and precepts made for 1982 whether before or after 1st April.
I appreciate the problems that have arisen in Bedfordshire, where the county council issued a supplementary precept for 1982–83. It will automatically fall when the Bill receives Royal Assent. Nevertheless, I can assure the House that, in drafting the amendments we shall be tabling in Committee, we shall deal with matters such as the consequences of an invalid rate or precept. I entirely accept the need for absolute clarity as to the effects of the legislation. This was a point that the noble Lord, Lord Hill, was making. I assure him that it will be borne very much in mind.
May I say on the whole subject of borrowing—the
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noble Baronesses, Lady Stedman and Lady Birk, referred to borrowing, insolvency, and so on—that there is no question of us being on a "slippery slope". If I were to develop the argument on this, I should have to remind the noble Baroness that local authorities in Scotland have never had the power to raise supplementary rates, as she knows. I am not aware that as a result they have experienced any doubts about their creditworthiness when attempting to borrow money. I understand what the noble Baroness says on that, and it is a fair point to make, but I truly do not believe there will be any need for concern on that.
I have listened with care to the comments made on Part II of the Bill. Before turning to some of the detailed points, I should remind your Lordships that the policy which lies behind Part II starts with concern about the national economy, which, as I said a moment ago, is, and always has been, accepted, as the proper concern of central Government. In fairness, it would need to be said that in an expanding economy—and I suggest this was the point the noble Baroness was also trying to bring out when she interrupted me a moment ago—local authorities found it relatively easy to work within the guidelines set down by Government. She knows—I was one of those doing it—that some authorities have found it difficult to comply now.
That is not surprising. It is always more difficult to run an efficient authority than it is to allow sprawling growth to drift into inefficiency. I say gladly that some authorities, usually those with a tradition of efficient and effective management, have responded magnificently. That is the only word to apply to them. But that is precisely why we do not want to penalise such authorities indiscriminately. That is why we have proposed a discriminating form of pressure through the grant on those authorities that are overspending their targets. That is what Part II of the Bill is all about.
I am tempted here to go into some of the points on block grant that I have in front of me. That should be soporific as a suggestion in itself, but I shall hold that back for the Committee stage, except to say that the noble Lord, Lord Hill, described the position of a district authority which he said was typical, and he argued that the very mechanics of block grants represented a diminution in the autonomy of local government.
The position the noble Lord described by which an authority will not know its final grant entitlement until after the end of the grant year is not new. It is not changed in any way by the Bill now before us. Even under the 1974 Act, the conclusive calculation of grant was not made until audited figures were available after the end of the grant year. As the 1980 Act explicitly based grant on out-turn expenditure, it is clear that the final calculations cannot he made until some time after the year in question. Most of the changes will be the result of changes in an authority's own expenditure, and will therefore be predictable. In the circumstances, I really do not think that the marginal changes that remain represent the threat to autonomy that the noble Lord suggested.
The noble Baroness, Lady Birk, and the noble Lord, Lord Irving, asked whether we were dealing with a No. 2, 3, 4 or 5 Local Government Finance Bill, and of course it is easy to make that sort of point. The answer is that one cannot have it both ways. If one

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really wants to have a measure amended, and claim success as an Opposition for what has been achieved in another place and what one hopes to achieve here, then of course the Bill will be amended, and in due course one will be able to refer to it as Bill No. 5 or No. 6, but I hope that will be said as a form of praise rather than criticism. I will take it as such, anyway, until I am told to the contrary.
I assure the House that I accept as very real concern the remarks that have been made by most noble Lords who have spoken, including my noble friend Lady Platt, about the whittling away of local autonomy. I am now referring to Part II of the Bill. I truly do not believe that is so, and I shall comment on that in general when I make my final remarks shortly. In the meantime, I repeat what I said a moment ago; that it was always accepted that one must work within the parameters laid down. I am sure that I will be returning to that point time and again in Committee because it is fundamental.
I would tell the noble Lord, Lord Bruce—in doing so I am grateful to an interruption by my noble friend Lord Colville, who was abolutely right—that the provisions of Clause 11 on the inspection of accounts are already part of the local government audit system and have been, I am told, for 100 years or more. I am sure we shall have much discussion of that sort of topic in Committee, so if Lord Bruce will permit me, I will not go into the nuts and bolts of it today, as I wish to comment on a few matters in general before coming to Part III of the Bill.
The noble Lord, Lord Evans, in, as always, a helpful if critical speech—in answering him I am talking generally about the district audit service—said the district audit service had been a great success, and, frankly, I agree with him. In what it has done it has been a great success. What we are concerned to ensure, however, is, first, that the audit service should continue to be a success and, secondly, that it should do the things it has not done in the past—that it should become more involved in the whole value for money scene, more about which I shall say later. But that is not to criticise either its independence or achievements so far. The aim is to make it even better, and why should we not want to do that?
The noble Baroness, Lady Birk, knows that I always make a careful note of her words. She said the Bill would have an adverse effect on the quality of life. I would remind her that a Tory Government introduced, among other things, the Wildlife and Countryside Bill, which many, including the noble Baroness, would think made a contribution to what she really means by the quality of life, and the same applies to other Bills which this Government have introduced and with which I have been concerned in debating with her. If she will allow me, therefore, we need not make a big thing of that part of her comments.
The noble Baroness, Lady Birk, also referred to LAMSAC and said the Government were not making a contribution. Personally, I have always supported LAMSAC in what it has done. It was financed hitherto 50 per cent. by central Government and 50 per cent. by local government. It was set up to study the O and M, as it were—the workings and management systems—of local government. I won-
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der how many noble Lords know that LAMSAC was not allowed to disseminate to its own members the results of its findings. They could supply them only on request. They must, therefore, do their best to make it known that they have specialised knowledge and information, and that state of affairs has not helped LAMSAC to achieve what many of us hoped it would achieve, but possibly that, too, is for another day.
The noble Baroness, Lady Stedman, thought the Bill was not a better way of providing local democracy. The measure is concerned with local accountability, as part of achieving that in the end, and that is more than just a nuance; much of the Bill is about accountability, and that is the way in which I would answer the point she made.
Part III of the Bill deals with the local government audit. I tried in my opening speech to outline the three main aims; independence of audit, an enhanced role for audit and improved public accountability. I have not heard anything—not even from the noble Lord, Lord Bruce, who was the most detailed on the matter—to convince me that we are achieving less than that. I shall resist the temptation to pick up the various points Lord Bruce and others made, except to make a general comment about value for money, which is an important objective. Those who really are concerned with this issue must appreciate that when we talk about cutting back spending, the first things to cut back on are not the nursery school, the aged persons' home or even the number of teachers. The first question to ask is, "How can we do it better? How can we get more by spending the same?" It may be said that that sounds a trite and pious observation which everybody makes, but the House can take it from me that that is not what happens in most of local government. The first observation to be made in many authorities—not the majority, I am happy to say—when called on by Government to keep spending within certain parameters is, "What shall we cut out?" That is not the way. It is really all about getting more for what is spent, and if this or any other Bill, or any other system of audit or anything else, will help to encourage people (make them, if you like) to be concerned with value for money, that must be right, and I am glad to see the noble Lord, Lord Bruce, nodding in agreement with me on that because that truly is the thrust of it.
The second thrust of the three proposals is the accountability factor. I do not consider it any encroachment on or whittling away of local government autonomy if there is a call for more accountability. Why not make such a call? We never mind laying everything out on the table. Everything is open for inspection, but the problem hitherto has been that while the estimates and accounts are there at the end of the year, few can truly understand them. When the noble Lord, Lord Bruce, looks at a set of local government assessments at the end of the year, even he, with his expert knowledge, while he can understand them, has to plough through them. He would be the first to agree on that. The lay person has no idea what they mean. If we can call for a more simplified method of presentation and ask for more accountability, why should we not do so? Why should local government consider that to be an encroachment on them? I do

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not think they will when they consider that aspect of it, and I hope they will think very seriously about it.
I should perhaps comment on the point the noble Lord, Lord Bruce, made about central Government; the credit of central Government is, as he knows better than I do, a matter for, for example, the Public Accounts Committee and the Comptroller and Auditor General, and I am sure they will read the noble Lord's comments with interest. Indeed, I will ensure that they are brought to their attention, which should please him.
The noble Lord, Lord Irving, thought I should have kept a foot in both camps, including local government, but I am sure he knows that Ministers cannot do those things, even if one wanted to do so. He thought that what we were proposing was indiscriminate. I do not accept that. I would say that the previous position was indiscriminate and that what we are trying to do is not to disadvantage those who are doing those things which it is felt ought to be done.
The noble Lord, Lord Evans of Claughton, and the noble Baroness, Lady Birk, said that what we are proposing would discourage people from going into local government. The noble Lord said that our proposals were misconceived and illiberal. Well, illiberal in one sense they certainly are, as he would expect, but illiberal in another sense they are not, I respectfully submit. Not for one moment do I think that they will inhibit anyone who is interested in local government. If we can, once and for all, get right the relationship between central and local government, people will go into local government in a way in which they have not been doing so for the past 25 years, never mind in more recent times.
The noble Baroness, Lady Stedman, raised a matter concerning parish councils. I suppose I should have realised that she might do that. She asked about the position under the block grant system. She will know that the same point was raised in another place, both in Committee and on Report. The question is not as simple as it might appear at first sight. The powers of parish councils are concurrent with some of those exercised by district councils, and, as the noble Baroness knows, there are serious problems in attributing the responsibility for expenditure to different tiers. It is for that reason that parish council expenditure counts as part of the total expenditure of the district council for block grant purposes. If the noble Baroness wants to press the case that she was making, I suggest that before she does so, she has a long talk with the Association of District Councils, and sees what it says about the matter. The noble Baroness knows enough about this business to know what the association thinks—and it is not the same as the point of view that she was putting forward.
The noble Lord, Lord Hill of Luton, spoke of what my right honourable friend Tom King had said. I am glad to see Tom King in the Chamber, and I am sure that he will read with interest what the noble Lord said. I would not take back anything that I said, or for that matter anything that Mr. King said, during the long passage of the 1980 Bill, I do not believe that our proposals are whittling away local democracy. I make my point, as I did on the national mandate, which I think is all-powerful. I should like to say only one thing to the noble Lord with regard to what he said about local freedoms. In my time there have
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been very few cases where central government have done anything to turn back local government freedom and autonomy. I should like to give the noble Lord one example, which I think is very important. It refers to what we did with capital expenditure controls under the 1980 Act. I say now, as I have said before, that what we did was arguably, or rather unarguably, the greatest attempt to give to local government a freedom that it had never had.
The noble Lord, Lord Irving of Dartford, asked whether we would give borrowing powers in order to do something regarding capital spending. Need I say again that prior to the 1980 Act, if local government wanted to put up a rabbit hutch, it had to come to London to get permission? That was the freedom that local government had so far as capital spending was concerned. On the other hand, today local government is given an overall figure, which it may supplement in any of several ways, not least by capital receipts which they have, and then they can spend the money any way that they wish. That is a freedom that has long been wanted. For a long time I preached for it, and no one will tell me that by comparison with the previous situation, what I have just described is not a tremendous freedom. Perhaps we shall come back to that question another day. I was grateful for the support that my noble friend Lord Mottistone gave me. I understand his concern about the business rate. He will know that we shall feed his comments into the discussions that are now taking place on the whole matter of rating reform; and we shall read his comments with great care.
Finally, so far as the noble Lord, Lord Bruce of Donington, is concerned, what can I say to him? He talked about "The further impoverishment of the poor for the benefit of the rich". Well, that is good party stuff, and I always pay tribute to that, but, frankly, I do not think that it has the slighest relevance to the Bill. But I understand the noble Lord's view—and why should he not make his point? That is what debating is all about. The noble Lord said that I had no support. Well, time will tell. We had no support when we were dealing with block grant. But I challenge anyone now to deny that what we are achieving by way of block grant involves a relative—and I stress the word "relative"—simplicity of understanding compared to the multiple regression analysis basis that applied previously. The difference is astonishing. We now have the 62 factors laid out on the table, and I have the privilege of going through them with authority after authority, who either like or do not like any particular one of them. At least we can have a debate about where the grant comes from. There was no debate previously. One cranked the handle, and if the answer was not right, one cranked it again. Out came the numbers, and that was your lot. There was no debate about that. So block grant is an advance, but we had no support for it at the time.
Of course the noble Lord would not expect me to have agreed with him for one moment when he said that the Government's financial policy is now discredited throughout the whole country. Of all the things he said, that was the one with which I would quarrel most of all. Time will tell how far such discredit has spread. The noble Lord said that the

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next Government will repeal these proposals. What he meant was, the next Labour Government—and that is a vastly different thing! However, I have said enough for now. No doubt from what I have been saying, your Lordships will have gathered that I do not agree with what most of your Lordships have said. I think that this is a splendid Bill. It takes us much further down the road towards better, more open, more accountable local government. With my background I have not the slightest hesitation in saying that I am very proud to support the Bill, and I hope that your Lordships will do the same.
On Question, Bill read a second time and committed to a Committee of the Whole House.

Charities Legislation: Modernisation
6.36 p.m.
Lord Allen of Abbeydale Lord Allen of Abbeydale rose to ask Her Majesty's Government whether they now contemplate introducing legislation to modernise and clarify the law relating to charities. The noble Lord said: My Lords, I beg leave to ask the Question standing in my name on the Order Paper. I should like to begin by saying what a pleasure it is that the noble Lord, Lord Elton, will be replying to the debate. I trust that he welcomes the prospect of speaking from time to time about the straightforward and uncontroversial matters with which his new department deals. He might perhaps think that charity is not an entirely inappropriate subject for what I think is his first Home Office debate. I should like to thank the right reverend Prelate and the other noble Lords who have put down their names to speak in a debate which, though brief, is concerned with what to my mind is a very important subject.
It is perhaps appropriate that we should go on to talk about charities immediately after the Local Government Finance Bill, when it is a feature of our society that the discharge of the social responsibilities of local government depends so much on the contribution of voluntary effort, financial and personal, through charitable organisations. We are very fortunate in this country to have such a wealth of charitable support, and it is a contribution that is recognised by the state in the various tax exemptions which have been conferred. I gladly recognise that though there has remained a certain difference of opinion about VAT, during the last two years certainly very worthwhile additional tax benefits have been given —or are being given—to charities.
All that means that a balance has to be struck between encouraging voluntary effort without stifling initiative and without undue interference from Government, and on the other hand ensuring that the money which the public, as either donors or taxpayers, contributes is not wasted through diversion to non-charitable purposes. But it also means the introduction of a new dimension in charity law. Its traditional purpose was to protect the property and resources devoted to charity, but it has come to take on the role of providing the yardstick against which claims to fiscal benefit are judged, and hence has become subject to new pressures, and has had to face new tests.
I am well aware that the present Government have so
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far taken the view that the basic principles of the existing law and the way in which they are administered remain broadly satisfactory. They have not been shaken in that view by some of the events which have caught the headlines in recent times; for example, the problems arising from disaster funds, the arguments about political activities on behalf of charities and the exchanges which are still going on about the Unification Church, or whatever title it is the "Moonies" use for their organisation.
The Government seem to have taken the view that issues of this kind are merely hiccups in a perfectly satisfactory system. Others have taken the view that they are symptoms of problems which are quite deep-seated. Certainly there is plenty of concern on the part of many charities on a scale considerable enough to lead the National Council for Voluntary Organisations to put in train in the next few weeks and the next few months a fresh series of consultations to assess the need for change. It is also a fact that a Select Committee in another place in 1975, and a committee under the noble Lord, Lord Goodman, in 1976, both thought that changes in the law were called for. Although the Government have made a general statement of policy, I am not aware that they have ever commented in detail on the proposals of these two bodies.
A short debate like this is not the occasion for going through all the issues where change might be considered, and I should like myself to concentrate on two main questions. The first arises from the fact that there is no statutory definition of a charity. Let me say straightaway that I doubt whether it will ever he possible to provide one, but I do not think that anyone would deny that the patchwork we have at present is not without its obscurities and anomalies—I hope all the negatives in that sentence come out in the right way.
One always starts with the preamble to the Statute of Charitable Uses 1601, which gave an indication of the matters then considered to fall within the ambit of charity and which continued to be a source of analogy and interpretation—a bit like the American Supreme Court trying to interpret their 18th century constitution in the light of modern problems. Then, going on from 1601 and pausing briefly with Sir Samuel Romilley in 1804, one goes to Lord Macnaghten in the Pemsel case in 1891. Basing himself on the 1601 preamble and various judicial decisions, he classified charities in four categories: trusts for the relief of poverty, for the advancement of education, for the advancement of religion and for other purposes beneficial to the community. So it seems to me we are in the position, which strikes me as being a little odd, that in order to decide what is a charity the Charity Commissioners and the courts, as I understand it, have regard to a preamble in a Tudor Act which has disappeared from the statute book and to the test of benefit to the community which is laid down in a judicial decision and not in any Act of Parliament.
The Goodman Committee, to which I referred, came down in favour of restating in modern language those categories of activity which are properly regarded as charitable and would be generally accepted as worthy of support; in other words, giving guidance, but without attempting a definition, much as the 1601 preamble tried to do. This approach has considerable attractions. I trust the Government have not closed their

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mind to tackling the problem on these lines; or, if they have, I hope the Minister will be able to tell us why.
I hope, too, that the Government will be prepared to contemplate some rather closer definition of the judicial phrase about "purposes beneficial to the community". There are various activities which have developed as social conditions have changed where there remain doubts and difficulties; for example, the giving of information and advice, counselling, environmental improvement, promotion of the arts, research, unemployment, religions of a kind which Lord MacNaghten cannot have dreamed about, unconventional medicine, race relations and so on. There are even those who have some slight difficulty in seeing how fee-charging public schools and expensive private hospitals meet the test of benefit to the community; and certainly some of the self-help organisations find themselves in difficulties.
The noble Lord, Lord Goodman, who unfortunately cannot be with us this evening, tells me that in his view the position of sport in relation to charity law is chaotic and that the Sports Council would greatly welcome clarification. He also tells me that the somewhat anaemic Act which was passed in 1958 to deal with recreation is not working well. The Charity Commission, for example, seem to have the idea that the provision of facilities for a single sport does not come within the Act, even if the facilities are open to everybody, because a lot of people may not be interested in that particular sport; and the suggestion is that if this is a correct interpretation of the law as it is then the law needs changing.
In this context the particular issue of disaster funds calls for special mention. I find it interesting that the Aberfan appeal was a charity, whereas Penlee was not. I cannot help wondering whether the Attorney-General's helpful guidelines after Penlee may not be filed away and overlooked by those concerned the next time we have a disaster which touches the nation's heart and the contributions start pouring in straightaway. If under the guidelines the fund becomes non-charitable questions of tax arise, and one wonders whether there is not a case for legislation authorising the Home Secretary to declare an occurrence to be a disaster and for a non-charitable fund in relation to that disaster then to be put in the same position as a charitable fund as regards tax in relation both to donors and to trustees.
My second main point I can deal with very much more briefly. It relates to political activities. It is an issue which affects only a minority of charities, but where it does arise it can be quite troublesome. Everyone would agree that an organisation which exists to serve only political purposes or to promote party interests should not qualify; but despite guidance from the Charity Commission I find that there is a good deal of doubt and uncertainty among certain charities as to how far political activity ancillary to a charitable purpose is acceptable, and just where the boundary lies between permissible education of the public and impermissible propaganda.
It so happens that this is not an area where there have been all that many decisions by the courts; and although there has quite recently been an important ruling in the case of the Amnesty International Trust, I am not sure whether even this ruling is going to resolve all the doubts. One organiser put it recently that it
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seemed to him that any organisation which aspired to alleviate the problems of its neighbourhood by any means more rational than a traditional social welfare approach was unlikely to be able to do so both effectively and legally as a charity. He may or may not be right, but I submit to the Government that it would be wrong to ignore the anxieties which a minority of charities have on this issue and the genuine doubts about what is permissible. I would remind the Minister that the Select Committee and the Goodman Committee both looked for some change in the law here.
I have already been speaking for long enough, but before I sit down I should like briefly to mention two other points. One is the quite simple one of the cost of going to the courts to challenge decisions by the Charity Commissioners, a cost which is of such a proportion as to make this remedy of rather limited use. I am aware of two charities which carry out not dissimilar services to the community and wish to merge but who, for some reason, have been refused permission to do so by the Charity Commissioners. They estimate that it will cost them at least £5,000 to go through the process of persuading the courts that the Charity Commissioners have been unduly rigid. I know the problems about legal aid but both the Select Committee and the Goodman Committee thought there was a case here for financial help. I could wish, too, that there was some provision in the statute which enabled the Charity Commissioners themselves to go to the courts for some kind of declaratory judgment on difficult and important legal issues.
My last point relates to parishes (which have been the subject of discussion in the debate preceding this one) in the rather special context of parochial charities for the poor. There are a great many of these and, contrary to popular belief, some of them have quite a lot of money. The Charities Act 1960 made provision for schemes for voluntary mergers but not all that much has been achieved. The noble Lord, Lord Renton, who piloted the 1960 Bill through another place tells me that his view is that this provision has not fulfilled the hopes that were placed upon it. I am, I confess, a little unhappy that if there is a parochial charity with more money than it needs to meet its traditional obligations of helping the poor within the parish, the tendency is to allow it to use the surplus for any other purpose in the parish rather than that it should be merged with charities in other parishes so that the funds can be used for the original purpose of helping the poor but over a wider area. I think there is an argument here for legislation imposing an element of compulsion, but I shall not pursue that point any further this evening. However, I hope that the noble Baroness, Lady Faithfull, will be touching on this topic when she speaks a little later.
I am sorry to have been so long, but, as I said at the beginning, it is an important topic and it is important that there should be confidence in the law and in its administration. I think that Parliament perhaps has concerned itself too little in the past with some of these issues. I think I am right in believing that there has never been a debate on any of the annual reports of the Charity Commissioners. I shall listen with interest to what the noble Lord the Minister and the other speakers have to say. Perhaps I could end with the warning (if that is the appropriate word) that, in the

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case of this debate, the Government cannot count on having heard the last of these issues.
6.54 p.m.
Lord Mishcon: My Lords, the House, as always, will be grateful to the noble Lord, Lord Allen of Abbeydale, not only for raising this important matter but for the manner, clarity and eloquence with which he has done so. I would like to share his joy that the noble Lord, Lord Elton, will be replying to this debate. We have heard that sport is in a doubtful state in regard to charity. But I trust, especially in view of the glorious past in the game of cricket of the right reverend Prelate, that when he follows me in this debate the noble Lord, Lord Elton, will at least take the message back with him tonight—if I may quote the finishing words of the noble Lord, Lord Allen—and not merely present a straight bat in knocking the ball back to the bowler, but rather, either now or in the future, show us a few glorious strokes, preferably on the offside, and that we may have some boundaries to register in future, so that the law, in the language of this Motion, will be both modernised and clarified.
It is right, as the noble Lord, Lord Allen of Abbey-dale, has said, that this is an important subject. I was interested to note from the 1980 Report of the Charity Commissioners for England and Wales that they now have 136, 048 registered charities. So that your Lordships are at least reminded of your Lordships' part in dealing with the question of voluntary organisations and charities, may I say that a debate in this House which took place on 22nd June 1949 receives a preeminent place in the report in December 1952 of the Committee on the Law and Practice relating to Charitable Trusts. That committee was known as the Nathan Committee in view of the fact that the late Lord Nathan presided over it.
I am proud to read, if your Lordships will bear with me, the remarks made from the same position that I occupy at this moment—but it was a question of a far more eminent person making the remarks, I hasten to add. They were remarks by Lord Pakenham (as he then was) in that debate which was on a Motion introduced by the late Lord Samuel. The Motion was:
"To call attention to the need for the encouragement of voluntary action to promote social progress".
In the Nathan Report the debate was described as "historic"; it provided an opportunity for discussing the place of charity and voluntary action in the Welfare State; there was unanimity expressed on the value as a national asset of voluntary action and the charitable role of our citizens; and this was in spite of the extension of public services.
The noble Lord, Lord Pakenham (the noble Earl, Lord Longford, as we know him now) in winding up for the then Government said:
"We have moved far from the era of laissez-faire. We have entered what Lord Lindsay and others have called 'the era of the positive state'. But even at the risk of repetition, I want to make it plain beyond any shadow of misunderstanding that, in the view of the Government, democracy without voluntary exertion and voluntary idealism loses its soul".
That is the end of what seems to me to be a worthy quotation in the context of the Motion introduced by the noble Lord, Lord Allen of Abbeydale.
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The noble Lord, Lord Allen of Abbeydale, dealt with various aspects of the present law relating to charity and drew rather graphically on its history and its ancient origins. Those origins date back to an Act of Parliament of 1601. The noble Lord referred to the definitions in the last part of the 19th century, or, rather the four categories which were given by Lord MacNaghten and which survive to this day. On the definition question which he raised I think it is important (I believe that he would want to emphasise this) that when this matter was reviewed both by the Nathan Committee and by the Goodman Committee, to which he referred, the wealth of legal decisions which had been made over the centuries was referred to with great respect. It was hoped that if indeed there would be a statutory definition, it should be one in simple language which would deal with the categories in the same way that the noble Lord, Lord Allen, suggested, and that definition would allow that great body of case law and precedent to remain, which I think has added so valuably to our legal history and to what can be deemed to be a charity.
There is not the slightest doubt—this Motion refers to modernisation—that that definition, in rather simpler language than has been employed in the 1601 Act at all events, should bring up to date the modern concept of charity; and, as the noble Lord, Lord Allen, said, quite obviously over the century those boundaries have been extended.
The noble Lord referred to one of the charitable categories referred to in the four categories of MacNaghten. He referred to the advancement of religion. It is absolutely right that that is a category—and I should be so interested if the right reverend Prelate the Bishop of Liverpool cared to comment on this, but that must be a matter for him to decide—in which some reform, some clarification, is without any doubt necessary. We have had examples recently. The noble Lord, Lord Allen, mentioned the difficulties in which the Charity Commissioners have been placed regarding knowing what religion is supposed to mean in this context.
I advocate very definitely a respectful attention to the wording of the Goodman Report. I certainly could not better it and I therefore propose, with your Lordships' leave, to quote it. This is what the Committee said on that subject:
"We consider that those seeking charitable status for the promotion of movements, whether religious or not, should be required to satisfy the Charity Commissioners or the court that their advancement is for the benefit of the community according to certain basic concepts which should be established. We would not regard the number of adherents as a principal test of acceptability".
I do not think I could improve upon that wording. I therefore refer the Minister to it, although I am sure he has read that recommendation in the Goodman Report. I hope very much that in his reply he will be able to say something of a constructive nature in regard to that aspect.
There was one matter that the noble Lord, Lord Allen—he could not get everything into his very concise speech—did not mention. That is that although the advancement of education is one of the four categories, the advancement of the arts is not. There is no doubt at all that the Charity Commissioners in many respects find themselves in difficulty when there is an

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application made to them for the registration of a charity where the advancement of some arts is being put forward as the object of the charity. There are many arts that are obviously of general acceptability. But then there is the fringe of certain of the arts, and I personally have experience of one of them where there was a genuine attempt to preserve the art of the circus in this country. An educational establishment was hoped for in order to handle this on a completely non-profitmaking basis, to educate youngsters in the art of circus, and so on.
The Charity Commissioners told me that they found the greatest difficulty, in view of their limitations, in saying that this was an art for the benefit of a section of the community, and they even had doubt whether it was an art at all. There are so many things on the fringe of this subject which obviously ought to be looked into if we are trying to modernise and clarify the law of charity.
I do not intend to add anything to what the noble Lord, Lord Allen, said about political activities. It is a very delicate subject—and the noble Lord, Lord Allen, made this clear in his speech—and nobody is looking for charitable status for those who quite openly—and that is their right—wish to issue political propaganda. When one gets to the type of political activity which is required in order to fight for a definite aspect of social welfare, when one gets political activity which aims to relieve poverty or to advance the arts, then one walks into the very grey area that the noble Lord, Lord Allen, referred to.
Here again, there were some very sensible guidelines, if I may respectfully say so, which were set out in the Goodman Report and which were referred to. This time I promise the House that I shall not endeavour to quote them, because they are exactly the lines to which the noble Lord, Lord Allen, referred. On the question of disaster funds—a matter which again was raised by the noble Lord—I remember that, when the Aberfan disaster befell us, there was a question regarding that disaster fund, not as to whether it was a charity but whether it remained a charity—and this was exactly the point in the Penlee case—when one satisfied the needs of those who were in pecuniary need as a result of the disaster.
Therefore, if one had an over-subscription of funds, could one pass it over to those who had suffered so much in the disaster, the families of those who had died, and so on? Was one doing this within a charitable object covered by charitable status if indeed one went beyond their immediate needs? That is, whether it was £5, 000—which was a figure we have heard of recently in regard to another disaster—or whatever it may be. There is not the slightest doubt that here again, having had two experiences, at both Aberfan and Penlee, when obviously we must go beyond the question of the Attorney General's guidelines, there must be an enactment so that in future the position of a disaster fund is made absolutely clear in law and it has a proper charitable status.
There are two other matters to which I shortly refer. The first one is the question of the Charity Commissioners which as a result of the Nathan Committee and the White Paper of 1955 found themselves with powers and duties under the Charities Act 1960. I want to pay my tribute, as one who has had quite a
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bit to do with the Charity Commissioners, to the courtesy that one always finds when one applies to the staff of the Charity Commissioners for assistance.
I know that those who practise my profession get a little disappointed—and this is serious when there are matters of great need that a proposed charity has to deal with—the time that is taken for the approval of the draft documents of the charity, which have to go to the Inland Revenue, quite apart from the Charity Commissioners. One is very lucky if one gets the registration of a charity through in something under six months. That procedure ought to be hastened. I know that they had difficulties with staff at a time when there were many applications being made for registration, but that situation still obtains. I feel that a little more administrative skill would enable those applications to be handled with more expedition.
Having said that, I suppose it is a little inconsistent if I try to add to their duties; but I hope that, if there were any statute to cover the modern conditions of a charity, the Charity Commissioners would be empowered to make far more inquiries of some of the small charities—but it could apply to some larger ones—to make sure that they are being properly administered. The fact of registration and of having to submit accounts and so on does not mean—unless those are perused and there are powers and duties imposed upon the Charity Commissioners to go a little further—that the charities in this country are being looked at as they should be in order to see that they are properly and sensibly run. That does not mean, of course, that I am advocating interference with the proper discretion of the trustees of a charity to administer that charity.
Lastly, I know that the noble Lord, Lord Allen, was short of time and most likely he would have liked to give very much more attention to the question of what used to be called, I think, "common good funds", national and local. I find myself in precisely the same position, looking at the clock, as I am anxious not to test the patience of the House, since your Lordships would obviously like to hear speakers other than myself. Therefore I am hoping that as a consequence of this debate the whole question of national and local "common good funds" —they have other names given to them—may be advanced by other speakers and, if not by other speakers, then possibly the noble Lord the Minister may refer to the Government's thinking in regard to that important matter later.
I should like to express again my great gratitude to the noble Lord, Lord Allen of Abbeydale, for having raised an important matter. I share his hope that it will not be a question of another Motion moved but that in fact some action will be taken as a result of his contribution to the House tonight.
7.12 p.m.
The Lord Bishop of Liverpool: My Lords, I, too, am grateful to the noble Lord, Lord Allen of Abbeydale, for putting down this Question. I, too, believe it to be extremely timely and I hope that Her Majesty's Government will now consider introducing legislation to modernise and clarify the law relating to charities. Those of us who are concerned with the charitable

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work of the Churches do not agree that the law is tidy or as good as it could be at the moment, and there is a strong feeling that there is a need for a look at the law.
I will concentrate on the experience of the Churches rather than on sport, although I thank the noble Lord, Lord Mishcon, for a nice reminder of the beginning of the cricket season on a pleasant day. Although I have had enough experience of a variety of inner city charities and have found those raising similar questions, I shall concentrate on the charitable work of the Churches and particularly on the great charities concerned with overseas aid. In July 1980, a former Member of your Lordships' House, Bishop Gerald Ellison, led a deputation to the Home Office representing the major Church charities and the National Council for Voluntary Organisations. Bishop Ellison said then that, so far from being happy about the status quo, the leading charities found themselves increasingly hampered in some of their activities, especially overseas, by an over-rigid interpretation of the law of charity. That deputation pressed for greater flexibility in the administration of the law and in the implementation of the reforms recommended by both the Goodman Committee and the Select Committee of another place, which have been referred to previously.
In 1981, the British Council of Churches held a consultation on the Churches and charity law, which was attended by representatives from 22 organisations. Thinking simply of some of the best known and largest charities concerned, it was agreed at that consultation that the activities of bodies such as Christian Aid, Oxfam, War on Want and CAFOD were being seriously hampered by the way in which the law is administered. The Charity Commissioners exercise what have become in effect quasi-judicial powers because of the prohibitive expense of taking their rulings to the courts. I know that staff members of these charities have to spend great amounts of time producing detailed answers to repeated questioning about the causes they support. An organisation like Christian Aid is particularly vulnerable because it operates so openly and publishes quarterly all the grants that it makes. They will tell you that there is an urgent need for a change in the law. Smaller charities simply do not have the staff to persist in such arguments.
It seems to me there will always be many borderline cases in charity law but the borderlines ought to be located in places rather different from where they are today, and that some matters should be made much plainer and more unquestioned than they are today. I am conscious of intricacies of the law, but we need to stand back from those intricacies and look boldly at what should and what should not be regarded as charitable. It should not be a matter of argument that ways and means should be found to make charitable status available to help the poor and disadvantaged. Further, charitable status should be available not only for the relief of poverty but for its prevention. In a common-sense discussion those sorts of statements seem very obvious: yet it is precisely around here that some of the borderline issues are to be located. Charities are told that they must beware of campaigning for political action or of blurring the line between religious purposes on the one hand and changing
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attitudes or providing for social needs on the other.
Let me give your Lordships two examples. The first is one I was myself involved in. Some of us were exploring the possibility that the Church of England might itself promote a special fund to support self-help groups in the black and Asian communities in this country and to provide an educational programme among Church members to change attitudes there towards the black and brown people. We made preliminary inquiries of the Charity Commissioners and were told—I think this may have been a world record—by return of post that the courts have repeatedly held that to seek to change attitudes is not a charitable purpose.
The Chairman of the Central Board of Finance of the Church of England at the time was Sir Arnold France and he was extremely nervous when in discussion with me that the Church of England might lose its charitable status. I think he recognised the brief glint in my eye when it crossed my mind that an educational programme might indeed be furthered by the Church of England losing its charitable status because it was determined to do something to help the disadvantaged.
My second example occurs quite frequently. The Church desires to use the proceeds of the sale of a redundant church building and it thinks that the best community use for that would be to support a housing association or to make church land available to a housing association at less than the best price possible. We in the Churches are frequently put under intense pressure that the moral and right thing is to do just that. The response of the Charity Commissioners has been that Churches hold their land and property in trust strictly for the purposes for which money was originally given—namely, the advancement of the Christian religion.
At that point we come back again to some definitions. They will say it is by virtue of that sole purpose that charitable status is given to the Churches; but the Charity Commissioners have drawn those definitions very rigidly. Only those activities directly associated with the worship of God, such as praise, prayer, preaching and evangelism are deemed to contribute to the advancement of religion. I hope your Lordships might agree that the Churches should have some say in what contributes to the advance of religion, and sometimes we wish to deploy our resources in ways which seem to us to be a natural expression of our religious faith. Yes, my Lords, I believe that we ought to make the attempt to say something about the nature of a particular religion, when charitable status is asked for.
It seems to me that a prime reason for charitable status should be to prevent poverty, as well as to relieve it, and that will mean things like changing attitudes. Repeatedly this issue is raised in connection with charities which seek to help the most disadvantaged groups in our society. It is a proper question, I believe, to ask why the borderline is located there and not, for example, near the promotion of education in private schools.
I am one of those to whom the noble Lord, Lord Allen, alluded, who question that charitable status is appropriate to private schools. They are concerned with changing attitudes. But to many people, the

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maintenance of private education is a highly political act, with large consequences upon separate development in the life of the community and upon the schools which poor and disadvantaged children attend.
An old distinction seems to be being repeated. To change the social order is regarded as political. To maintain it is not. We need to be honest with ourselves, rather than label action which we do not agree with, in moments like these, as political. Of course, political activity must have limits set to it in charity law, with more careful definitions than exist at present. But it seems to many of us that the Goodman Report has made helpful proposals in this area.
Perhaps another distinction survives, too. Old and traditional religious charities are acceptable if they try to change attitudes; newer ones are out. I will give your Lordships some examples. The Lord's Day Observance Society has for 100 years been a religious and campaigning body. The Quakers have maintained their peace testimony for 300 years. The Church Missionary Society campaigned vigorously for changes in legislation on the issue of slavery during the 1800s. The administration of the law today has made such proper campaigning more difficult for a charity than it was.
I hope that your Lordships will take seriously how unhelpful the repeated questioning by the Charity Commissioners, with their very large powers, is to the honoured charities that I have mentioned—Christian Aid, Oxfam, War on Want and CAFOD. The case of Amnesty International has added to the difficulties and the nervousness. There is, I believe, an urgent need for consideration of a change in the law, and I hope that the Government will proceed towards preparing such legislation.
7.24 p.m.
Baroness Faithfull: My Lords, not only are Members in your Lordships' House grateful to the noble Lord, Lord Allen of Abbeydale, for setting down this Unstarred Question, but so are many people throughout the length and breadth of the land who are pressing for the modernisation and clarification of the law relating to charity. I would ask my noble friend the Minister, who is to reply, two questions and make one comment.
The first question concerns the structure and accountability of the Charity Commission. Before the Charities Act 1960, the Charity Commission was made up of a parliamentary commissioner who was a MP but not a member of the Government. It was his role to answer questions on the Floor of the House of Commons. In addition, there were not more than three paid commissioners, of whom two were barristers. In 1951, as has been said, the Nathan Committee made a recommendation in its report, concerning the cy près doctrine. As is well known in your Lordships' House, the cy près doctrine is derived from the Norman French, meaning as near as possible. Thus, if the terms of the original bequest became obsolete, an application by the trustees to the commission could be made and the terms of reference changed as near as possible to the original.
The Nathan Committee recommended a change in the doctrine of cy près; namely, that where the original purpose of the charity had ceased to exist, the terms of reference could be extended to provide an effective method of using the bequest available by virtue of the
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gift, regard being had to the spirit of the original gift. The Nathan Committee took the view that the widening of the cy près principle would mean that the commission would, in effect, become more of a policy-making body, able to respond to the needs of the times, rather than a quasi-legal body interpreting the law in each case. This was mentioned by the right reverend Prelate.
To carry out the recommended change, the Nathan Committee sought to alter the structure of the commission so that there should be not less than five, and not more than nine, men and women of standing in public affairs to comprise the commission. The commission would be served by an administrative staff and advised by a committee of experts, only some of whom would be members of the legal profession. I mean no disrespect to the noble Lord, Lord Mishcon. Thus, the commission would be brought nearer to those in the community whom all charities seek to serve.
Four years later, in 1955, a White Paper was issued accepting the wider interpretation of cy près, but rejecting the restructuring of the commission and adhering to the legal flavour of the commission. The effect, unfortunately, was to abolish the MP commissioner and to make the Home Secretary answerable to Parliament. But, as I understand it, the Home Secretary was not to interfere with the policy of the commission. Therefore, the commission was to be isolated from outside scrutiny, as is the Board of Inland Revenue and the Land Registry. The Charities Act 1960 was passed.
In 1975 a Select Committee of the House of Commons expressed concern that the commission was an isolated body, apparently accountable to no one, out of touch with social conditions and a quasi-legal body. To counter this, the Select Committee recommended that a charity tribunal be set up and a standing panel to be drawn from members of local authority social services, voluntary agencies and, I myself would add, the church.
In 1976, as has been stated earlier, the Goodman Report drew attention to the absence of the lay element of the commission and, among many other things, recommended the publication of an annual report. As has been said, it was recommended that appeal from the Charity Commissioners decision on a point of law should go to the High Court but be legally aided. Could my noble friend the Minister indicate whether Her Majesty's Government are likely to structure the commission so as to meet the needs of the community, and further to provide for an element of accountability and initiative?
My second question concerns the accounts of charities. I wonder whether it is realised that the accounts of personal charities need not by law be audited. In principle, the commission scrutinises the accounts of each charity, but we have worked it out that they can really scrutinise those accounts only once every 16 years. I think that the noble Lord, Lord Mishcon, referred to this. I heard yesterday of a local charity yielding £60 per annum, £50 of which was given to the secretary, leaving £10 to spend during any one year. Is my noble friend the Minister at ease over this state of affairs?
Finally, I am grateful to the noble Lord, Lord Allen of Abbeydale, for mentioning parochial charities. I shall seek in the next Session to introduce a Private

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Member's Bill called the Parochial Charities (Neighbourhood) Trusts Bill. Throughout the country money is locked up in parochial charities which is not always used to meet the needs that the original bequest intended—and in some cases is not used at all. For instance, money was left in a number of small charities to provide gruel for the poor of the village. In one place I know there is no village now, and I do not quite know who drinks gruel. There are many people in need in the areas of health, education or poverty whose wants are not met by the statutory services.
However, I would lay a wager that, despite the needs of many in our society, despite the money which is available, the commission, as at present constituted, will not accept the Bill. The hands of the present commissioners are tied. They are asked to operate a hopeless structure which is outdated, isolationist, not accountable to Parliament and, as a quasi-legal body, in no position to initiate policy. Indeed, it could be said that with social conditions as they are today, the present structure—and I underline the word "structure" —of the commission is as dead as the dodo. The structure is extinct. I pay tribute to the individual commissioners and I congratulate Mr. Dennis Peach on his appointment. I sympathise with them over their restricted and outdated role, and hope that Her Majesty's Government will initiate reform and change.
7.32 p.m.
Lord Elton: My Lords, I have listened with very great interest and very great profit to this debate. I am, as are the rest of your Lordships, most grateful to the noble Lord, Lord Allen of Abbeydale, for giving the House an opportunity to discuss a subject which is not often aired in such a considered and rational a manner. The noble Lord, I may say, who made some kind introductory remarks, has always appeared most distinguished to me and he appears to be increasingly distinguished with every move of ministerial post I make as I grow closer to his roots.
We are all agreed upon certain fundamental principles concerning charity law. First, the scope of charity which it embodies must command general agreement and understanding. Charities enjoy considerable privileges. The most notable are relief from most forms of direct taxation and exemption from the rule against perpetuities. Unless they are considered to be morally worthy by the community in general, there is little reason for them to do so. Secondly, charity law must be flexible enough to be able to adapt to the needs of society (that is a continuing theme in what every noble Lord has said so far), to embrace new forms of charitable activity and to discard outdated ones. Thirdly, it must ensure that the wishes of donors are respected so that people who make charitable donations or bequests from purely altruistic motives may do so in the knowledge that their wishes will be respected. Lastly, there must be provisions to ensure that the trustees of charitable funds can be supervised and the funds safeguarded.
I was interested in the conflict of opinions between, on the one hand, the noble Lord, Lord Mishcon, and my noble friend Lady Faithfull and, on the other hand, the right reverend Prelate, because the first two whom I mentioned said that there must be closer
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investigation while the other speaker said, "Let us be less trammelled by supervision". We are all at one in believing—indeed, the noble Lord, Lord Mishcon, waxed eloquent (he waxed, perhaps it might be said, eloquent at second hand, but nevertheless he waxed eloquent) on the matter of voluntary effort being so close to the soul of the nation.
From time to time there is concern about one or other of these aspects of charity law and, at less frequent intervals, that law itself is reviewed. As noble Lords have remarked, there have been three such reviews since the last war. The Nathan Report of 1952 led to the Charities Act 1960. I think the time lapse between the report and the legislation is indicative of the difficulties of legislating in this field. The Act confirmed the Charity Commission's position as a quasi-judicial body, independent of Government, whose decisions are subject to appeal only in the High Court. It also codified and extended its powers. It is by virtue of this Act that my right honourable friend the Home Secretary appoints the Charity Commissioners and presents their annual report to Parliament.
There have also been, as your Lordships know and have mentioned, two further inquiries into charity law since 1960. In 1974–75 the Expenditure Committee reported to Parliament on the Charity Commissioners and their accountability. This was closely followed by the report of the Committee on Charity Law and Voluntary Organisations—the committee so very ably chaired by the noble Lord, Lord Goodman, whom the noble Lord, Lord Allen of Abbeydale, so properly regretted not being able to have in his aid today. The Government considered both of these reports in detail, but concluded that they saw no reason for change in charity law. That conclusion was announced in this House two years ago and it still holds good. Let me briefly explain why that should be. In doing so, I shall refer particularly to the four areas I have just outlined. The first three, as by now I am sure your Lordships will agree, are closely inter-linked.
First, the Government are satisfied that the present legal scope of charity is broadly understood and accepted by the community in general. The fact that it is not embodied in a statute does not, in my view, make any difference. The present law is based on a preamble to the Statute of Charitable Uses of 1601 which set out a list of things which might be deemed to be charitable. What we are looking at, as the noble Lord, Lord Mishcon, in particular, emphasised, is something which is rather vague in outline. He quoted the example of a circus, or the perpetuation of the art (or perhaps it is the skill) of the circus performer being perpetuated by educational means. I rather think that he has put his finger on something which weakens rather than strengthens his case. Where you have an absolutely diamond hard definition there is no flexibility. The inevitable result is that you have people beyond the border which the right reverend Prelate wished so often to push outwards and you are not able administratively or judicially to extend that border if it is fixed with diamond sharpness on the statute book. I see that the noble Lord wants to put me right. He is well entitled to do so, since his knowledge of these matters is so formidable.
Lord Mishcon: My Lords, met with those very courteous words, I almost wish that I was not intervening because I may be showing my ignorance instead of the knowledge which I am supposed to have. The point I was making, and which I believe other speakers were making, on this matter was not that there should be an inflexible definition but that categories bringing the matter up to date should be clearly stated in simple language in an Act of Parliament with the same flexibility as the four categories are now supposed to have and with all the wealth of legal precedents upon which future decisions could be made.
Lord Elton: My Lords, I am much obliged to the noble Lord. What I shall be doing very shortly is reading the record of this debate, and when I do so I shall take that point very much on board.
The list of categories was not intended to be exhaustive and it has never been so treated. Over the years there has been a huge body of case law that has developed which has extended the scope of charity by analogy to suit changing times. In 1891, in the Pemsel case which has already been quoted this evening, Lord MacNaghten classified charitable objects into the four main groups which have been mentioned: trusts for the relief of poverty; trusts for the advancement of education; trusts for the advancement of religion; and trusts for other purposes beneficial to the community—a term, I would think, of considerable elasticity. This is the basic framework used by the Charity Commission and the courts today.
Of course, there are those who disagree with the decisions that have been taken within that framework, but that will happen whatever framework we use and whether or not there is a statutory definition of charity. I would discuss some of the points of contention in a moment, but first I must say why the Government disagree with the Goodman Committee's recommendations, not that there should be a new statutory definition of charity—for the disadvantage of losing the accumulated wisdom of case law and perhaps saddling ourselves with an inadequate and inflexible definition are obvious—but that there should be a re-statement of the old preamble in a new list of charitable purposes I believe this is closer to what the noble Lord, Lord Mishcon, was asking for.
We accept that this might have presentational advantages for the layman, although I would not for a moment suggest that the noble Lord is a layman in this; but we do not think that it is worthwhile. It would not affect the application of the law in any way and in fact might serve to complicate it by introducing new elements of uncertainty and insecurity. Indeed, the historical periods in which the first codification was written, and the date when the noble Lord, Lord Goodman, proposed that it should be put into new language, make me think really that the original codification was, as it were, the Authorised Version of charity law and that what is now proposed is the New English Bible. What I mean is that the contents will be much the same but the expression might perhaps be less elegant and rather longer. I hope I am not offending any theological sensitivities of the right reverend Prelate, because I have no intention of doing that.
May I at this point refer to a matter which has been
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raised by three noble Lords; the question of a disaster fund and recent experience in this field. Following the "Penlee" lifeboat disaster last year, there was considerable discussion, both in Parliament and in the media, about the adequacy of charity law in relation to disaster funds. I dare say that imparted a little impetus to the noble Lord, Lord Allen of Abbeydale, towards the Chamber this evening. The noble Baroness, Lady Ewart-Biggs, among others, has proposed a national disaster fund, but most of the controversy stems from an ignorance of charity law and not from defects in that law. It stems from people's fear that money which they have donated specifically to help the dependants of the victims would be withheld.
The problem was that the trustees wished to obtain charitable status, for understandable if mercenary reasons, to seek exemption from direct taxation for the funds concerned, although not for the income received by the dependants. However, charitable status brings with it the restriction that the beneficiaries may not be made better off than they would otherwise have been. In the "Penlee" case, where eight families stood to share over £2 million, charitable status would have deprived them of a very great deal of money. In the event the question did not arise because the trusts were made out in favour of a smal number of clearly identifiable beneficiaries and therefore did not fulfil the requirement of public benefit. However, there have been in the past disaster funds; notably, the one established after the Aberfan tragedy, where most of the victims were children, which had been granted charitable status but where the money has only been put to limited use, such as improving community facilities; that is, the test of generality is applied. The result of the "Penlee" case has been the issue by the Attorney General of guidance to banks, solicitors and others who may be involved in disaster appeals about the financial implications of charitable status and suggested forms of trust deeds which can be adopted according to the status desired. I do not think that these will be abandoned and forgotten. The principle of the law remains unchanged. While on the subject of disaster funds, I will also answer another question in this context. I understand that the charitable status of the Aberfan disaster fund continues because the remaining funds continue to be applied for charitable purposes within the terms of the trust deed.
As we are now discussing individual cases, perhaps I may turn to the question of sports, where the courts have long held that the promotion of sport in itself is not charitable. It is, perhaps, something that is naturally pursued by the human beings but the promotion of sport may be charitable if it forms part of the curriculum or extra-curricula activities of students at schools and universities. In this context, the noble Lord, Lord Mishcon, asked for glorious boundaries from the right reverend Prelate. Your Lordships may forgive me, and indeed congratulate me, if I manage merely to turn that away into the slips because I was and always have been only a "wet bob".
Perhaps I may now return to public concern about the charitable status of certain religious sects, upon which attention has been focussed for the past year in respect of two organisations associated with the Unification Church. As their status is currently

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being considered and may eventually be the subject of an appeal in the High Court, it would clearly be inappropriate for me to comment on that case. More generally, it has been suggested that religious sects should prove that they are of moral benefit to the community before they are registered as charities and that it is wrong to distinguish between religious sects and organisations which are devoted to moral or ethical advancement without belief in a deity. On the first point, there is considerable misunderstanding. In the wording of the Pemsel classification, there is a clear inference that all four heads of charity require an organisation to be a benefit to the community; in the case of religion, education and the relief of poverty, there is a presumption of public benefit—but it is no more than that. A trust for the relief of a small number of identifiable poor people, for example, would almost certainly not be charitable because it did not extend to a sufficiently large section of the community.
On the second point, there is a difficulty in amending the law to give charitable status by a widening of the religious head of charity—specifially to those aiming at the advancement of ethical or philosophic movements which are not founded on belief in a deity. The difficulty is that it would encourage claims to charitable status from bodies whose ideas of moral or social improvement have a philosophic basis that finds expression in activities which are outside the scope of charity as hitherto accepted.
I believe, my Lords, that I have put that rather mildly. For example, bodies which are essentially political factions or pressure groups must not be allowed to assume the guise of charities. Here again, we come against the boundary definitions which worry the right reverend Prelate, and I must say that I shall be reading his remarks with the greatest of interest in that context as well as in the context of the other matters to which he addressed himself. Although the Government sympathise with the desire of some ethical societies to obtain charitable status, they do not consider that it would be possible to devise an amendment of this nature without creating the loophole which we fear.
Your Lordships have expressed concern about the cost of challenging definitions, and of course challenges will always arise where there is a lack of certainty. The Charity Commissioners do a great deal to avoid the need for litigation by giving free advice and trying hard to get agreement with charity trustees, always subject to complying with the law as the commission finds it.
Turning specifically to political activities, the present limitations seem satisfactory. Obviously, it would be wrong for political organisations to achieve charitable status simply as such. The question is, how far can a charity become involved in politics in furtherance of its ends? The Charity Commissioners produced guidance in their annual reports for 1969 and 1973, saying in effect that a charity may give expert advice on request to the Govermnent, civil servants, inquiries and investigatory bodies, and may promote its own private legislation or support legislation which will be of benefit to it. What a charity may not do is to adopt or support political means of remedying the
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ills it seeks to relieve. The right reverend Prelate takes exception to this. He sees difficulties with the border placed where it is—keeping politics out and trying to distinguish between political and religious objectives.
I think nobody who is within his Church can fail to recognise that there is a political implication for every religious belief and very often a religious implication for every political belief. The danger we seek to avoid is using the national fiscal resources to support overtly political objectives of which the large part of the society from which the fiscal support derives may not approve. So there is a difficulty at least equal to that which he finds, a difficulty for the secular authority equal to that of the religious authority which he represents.
It has been suggested that the commission's guidelines should be more liberally drawn, but we do feel for those reasons that they are liberal enough. The second general principle we can all agree upon is that charity law should be flexible enough to respond to new forms of charity and to discard outdated ones. I think this is best ensured by the case law approach which I have already outlined.
On the question which so closely occupied my noble friend Lady Faithful], she has referred to the cy près process, and it is obviously understood by your Lordships and I will not spend time elaborating on what it is. I think it may come as a surprise to her and to some of your Lordships to know that the Charity Commission at present using this, and with no such compulsion as my noble friend would have, already amalgamates some 1,000 trusts each year. Without additional staff it could not cope with the extra work which compulsion would create. Compulsion would result in money being diverted from the purposes for which it was intended. Voluntary amalgamation is available and arrangements can almost always be found for amalgamation if trustees are prepared to consider the suggestions of the commissioners.
I come finally to the statutory provisions to prevent abuse of charitable status. When the financial benefits are so great, there is an obvious risk that some organisations will want to obtain it for the wrong reasons. Given the care with which the Charity Commission examines application for registration and the criterion of benefit to the community which must be satisfied, I do not think there is a great risk that inherently unworthy organisations will be registered to start with. But, if it appears that they are, I do ask the noble Lord, Lord Mishcon, in particular to reflect on the difference of role between the Charity Commissioners and the High Court. The Charity Commissioners decide whether in fact the objects of the charity are indeed charitable. If they are, it becomes a charity. If it is then not conducted in pursuit of the aims for which charitable status was accorded, it is not the charity which is at fault but it is the fault of the people who run it. The recourse of the commissioners is to remove them and substitute others. If what they have done is criminal, it is not a matter for the commissioners but a matter for the courts. They are not, as it were, a police of charity. If it is thought that there is too little supervision, I merely quote the right reverend Prelate in my defence.

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I think I must draw to a conclusion. There is much more that I should like to say. What I have said would not, I think, be complete if I did not say that in this country we have a splendid tradition of public giving to good causes of great variety and in some cases of no little eccentricity. They do an immense amount of good, and this House can applaud them wholeheartedly. In particular, I think your Lordships should know that successive Home Secretaries have had every reason to be grateful to Mr. Terence FitzGerald, who was Chief Charity Commissioner from 1975 until March of this year and who made a very distinguished contribution as leader of this important branch of the public service. I should also like on this occasion to welcome the new Chief Charity Commissioner, Mr. Dennis Peach, on behalf of my right honourable friend, and, if I may, on your Lordships' behalf as well, because all your Lordships who are present are clearly dedicated to the cause which he now comes to support.
I shall read with great interest and with an open mind what has been said today. I make no commitment; my position is as it was when I came in, that the Charity Commission rests securely upon a satisfactory foundation. But my mind will not be closed when I read what your Lordships have had to say, because I always find after your Lordships have spoken that I have a very great deal to learn. I am grateful to the noble Lord for his Question.

Hampshire Bill [H.L.]
Reported from the Select Committee with amendments.