Local Government Finance (No. 2) Bill

HL Deb 22 April 1982 vol 429 cc650-75

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 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 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 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. 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 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 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 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- 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 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- 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- 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 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 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 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? 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 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 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 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. 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 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 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- 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 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 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 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.