Lords Sitting of 10 February 1982

Preamble
The House met at half-past two of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers-Read by the Lord Bishop of Exeter.

Mentally Handicapped Children: Accommodation
Lord Campbell of Croy: 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 what further progress has been made in removing mentally handicapped children from large hospitals.
The Parliamentary Under-Secretary of State, Department of Health and Social Security (Lord Elton): My Lords, the number of children resident in all mental handicap hospitals and units has fallen from 7,100 in 1969 to around 2,000 now. Very few are at present being admitted for long term care, so we expect the numbers to continue to fall. In addition, we have asked health and local authorities to co-operate in planning alternative forms of care. We have also launched a scheme for voluntary agencies matching pound-for-pound money spent by them in getting mentally handicapped children out of large institutions. The funding for this is £1 million over four years.
Lord Campbell of Croy: My Lords, I thank my noble friend for that Answer. Is he aware that the Government's recent announcement on policy was welcome to all concerned with the best interests of mentally handicapped children? While a small proportion of such children may need the care and attention of a hospital, will the Government make sure that the difference between mental handicap and mental illness is clearly recognised? Most children who are mentally handicapped can live outside a hospital and should be enabled to do so.
Lord Elton: My Lords, I am grateful for my noble friend's comments. Our awareness of the distinction between mental handicap and mental illness has been made manifestly clear in the amendments which we have put into the Mental Health (Amendment) Bill, at present before your Lordships' House. On the question of getting mentally handicapped children into the community, I would take the opportunity to commend to your Lordships a small blue book which was commissioned from Ann Shearer to show the various ways by which this can be done. I have a few spare copies if noble Lords are interested.
Lord Wells-Pestell: My Lords, may I ask the noble Lord the Minister whether I have understood him correctly: that about 5,000 mentally handicapped persons have left institutions and, presumably, have returned to the community? Is the noble Lord
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able to say where they have gone? Have they gone home? Or have they gone to other institutions run by voluntary organisations or local authorities? And can the noble Lord say whether the department are satisfied with the care they are getting now?
Lord Elton: My Lords, the Question addressed itself to children and the figures I gave related to children. However, there has been a steady move into the community of all age groups. They go to local authority provision, to voluntary provision, to private provision and, in some cases, into individual homes. The supervision of all but the latter is normally the responsibility of the local authority concerned. I am not aware of any defects in that provision. If the noble Lord has reservations, 1 should be very glad to hear of them.
Lord Winstanley: My Lords, bearing in mind the fact that some children, mentally handicapped and otherwise, have to remain in hospital for long periods, would the noble Lord the Minister agree that we ought to do everything possible to develop more small family based hospital units, and that we ought to do something to halt the continual closure of small hospitals, something which has been going on for very many years?
Lord Elton: My Lords, I agree entirely that some children, sadly, will have to stay for a long time in institutions. I agree also that those institutions are usually better when they are small than when they are big. That is part of the Government's point of view. I can endorse what the noble Lord says in that respect.
Baroness Masham of Won: My Lords, may I ask the Minister how many local authorities are undertaking fostering schemes for handicapped children, and whether these are working well?
Lord Elton: My Lords, there is a growth in fostering schemes for handicapped children. At present it is on a fairly small scale. I think that the experience of those authorities which at present are running schemes will be of great benefit to other authorities who, I hope, will follow their example.
Baroness Faithfull: My Lords, may I thank the Minister for his mention of voluntary organisations. If local authorities are in financial difficulties—and many of them are—may I remind the noble Lord that the voluntary organisations (I am vice-chairman of Dr. Barnardo's) are running special small units for mentally handicapped children in the community? I would only say—
Several noble Lords: Question!
Baroness Faithfull: My Lords, is the Minister aware—he must be aware, because he is giving us pound for pound! May I thank the Minister for the trust which he puts in the voluntary organisations which are doing this work.
Lord Elton: My Lords, I am even more aware than I was before of the value of this work. The noble

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Baroness will be aware of the high regard in which she is held by this House in that it allowed her to trespass for so long!
Lord Wallace of Coslany: My Lords, is the noble Lord aware that the Government's very welcome amendments to the Bill which is at present before the House will make this matter very important and urgent'? Will he hear in mind that it is possible that some extensions to local hospitals, as indicated by the noble Lord, Lord Winstanley, could be the answer for those children who are in need of hospital care?
Lord Elton: My Lords, in reply to the noble Lord's question I ought perhaps to say, although the noble Lord is well aware of it, that the Bill relates only to detained patients who do not impinge very significantly upon what we are looking at this afternoon. However, I will bear carefully in mind the rest of what the noble Lord has said.
Lord Glenamara: My Lords, will the noble Lord say a little more about the pound-for-pound scheme? Does it apply to capital works or to current expenditure or to both? And will it apply to such excellent voluntary institutions as the Maclntyre Homes in Bedfordshire, of which I am sure the noble Lord is aware?
Lord Elton: My Lords, while I cannot give the position on an individual scheme, I can say that in general principle the pound-for-pound scheme is basically a one-off payment for capital expenditure, for the conversion of buildings and such like. But there are occasions when we are prepared to look at schemes where there is an initial revenue expenditure which is heavy, and which a voluntary organisation might not undertake in view of the risks entailed, but we think the risk is worth taking to see whether the scheme works. It is for capital schemes, basically.
Lord Auckland: My Lords, in support of the figures which my noble friend has given, will he undertake to try to ensure that the 2,000 children who are still in these large institutions will be as far as possible put into villa-type care, where the wards concerned can be made to look far more cheerful and suitable for children than can the large institution?
Lord Elton: Yes, my Lords; we are well aware of the advantages of small units. They have to be considered in conjunction with any medical requirements that the children may have and the possibility of providing them in small, separate units. I am very well aware of the advantages of having these places near the children's homes.

Farmers and Non-Farm Businesses
2.44 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 how many
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non-farm businesses have been started by farmers on their farms over the past three years.
Lord Sandys: My Lords, I regret that this information is not available. There appears to have been a considerable increase over the last decade, and especially in the past year or so, in the number of farmers who are involved in tourism. Some are providing recreation and sports facilities but few seem to be starting craft and light industrial enterprises on their farms.
Lord Davies of Leek: My Lords, while thanking the Minister for that reply, may I ask him whether he is aware of the importance of the agricultural industry to British balance of payments and the need to keep viable agriculture going in this country? Furthermore, is he aware that tourism and the establishment of caravan sites, et cetera, are of paramount importance, particularly to the farmer with the small acreage, in creating a viable economy for the farmer and his wife? If possible, would the Minister tell me whether the Ministry and the tourist organisations are still encouraging these activities in small farms; and, if so, he may know the number of farms which over the past 10 years have had these facilities given to them? I hope that the Government will continue to give them.
Lord Sandys: Yes, my Lords; the Government are very well aware that the effects of agriculture on the balance of payments have been very beneficial. With regard to the number of farms involved in tourism, this has doubled over the past 10 years, the noble Lord will be glad to hear, from about 12,000 to 24,000. In addition, over 1,500 provide agricultural sports facilities on their farms.
Lord Sandford: My Lords, I too would like to thank my noble friend for his answer to the noble Lord's Question, although I believe he would agree that it was somewhat incomplete and slightly approximate. I should like to ask my noble friend three questions. First, does he recall the Wildlife and Countryside Act (although he may not want to recall it) in Section 51(I)(b) and (c) of which Parliament laid upon the Ministry of Agriculture statutory duties of making provision for the giving of advice to farmers, on the one hand, and to statutory agencies and Government departments, on the other hand, about the diversification of farm enterprises? Would he agree that, with that duty laid upon them, it is incumbent upon them to inform themselves about this process in rather more detail? Thirdly, if some three or four months after the next agricultural census, which I believe is to be taken in June this year, I put down a similar Question, can my noble friend say whether it could be answered rather more precisely?
Lord Sandys: My Lords, I have to inform my noble friend Lord Sandford that the section to which he refers, which was known as "the Sandford amendment" and bears his name, is Section 41(1)(b). My noble friend will be glad to hear that the Ministry has taken urgent action over this. There are seven specialist advisers and 70 staff engaged in offering advice at a local level. As to a further Question to elucidate the numbers of those involved in this parti-

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cular activity, I believe it might be a little early if my noble friend put down a Question in June, but I will take advice.
Lord Northfield: My Lords, with reference to the starting of light industrial and craft enterprises in farm buildings, does the noble Lord recall the Department of the Environment's circular asking planning authorities to be less strict in allowing such applications? Is the noble Lord aware that we still get rumours, and indeed cases, where local planning authorities are being very restrictive in allowing these conversions to take place? Will the noble Lord check whether that circular needs some further follow-up action in order to encourage local authorities to relax their restrictions in this matter?
Lord Sandys: Yes, my Lords. So far as the application of the regulations to farm buildings is concerned, I would like to remind the noble Lord that there is a particularly successful project at the moment in Cumbria, at East Fellside, of which he may be aware, which concerns precisely this area. It may indeed lead other local authorities who may be reluctant to take up this particular type of activity to do so. I will certainly draw to the attention of my right honourable friend the circular and the need for some action in this regard.
Lord Kaldor: My Lords, is the Minister satisfied that the various forms of diversification of farming communities do not have any detrimental effect on agricultural productivity?
Lord Sandys: My Lords, I think in this regard diversification so often is a matter of choice for the farmers concerned, and I think it is best left in their hands.
Lord Hunt: My Lords, just in case any of your Lordships are not familiar with Section 41, and in the light of the exchanges between the noble Lord, Lord Sandford, and the Minister, would it be in order for me to mention that Section 41 has particularly to do with the national parks? Will the noble Lord the Minister bear in mind the particular importance of the implications of the noble Lord's original Question to the national parks, and the need for farmers working and living in the national parks to have opportunity and encouragement for this diversification?
Lord Sandys: My Lords, yes. I will certainly draw my right honourable friend's attention to the remarks the noble Lord has made and to the earlier exchanges.
Lord Davies of Leek: My Lords, may I ask the noble Lord whether he is aware that in parts of the country, for example in the Peak District, most of the visitors to these farm sites and other sites are paying particular attention to the amenities of the national parks and are now beginning to treat them in the way they should be treated by citizens going into these beautiful areas?

Discrimination against Women: UN Convention
2.53 p.m.
Baroness Trumpington: 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 what progress has been made towards ratification of the United Nations convention on the limitation of all forms of discrimination against women.
The Parliamentary Under-Secretary of State, Foreign and Commonwealth Office (Lord Trefgarne): My Lords, we expect soon to be able to take a decision in respect of the United Kingdom domestic position on ratification. It will then be necessary to consult in detail the Channel Islands, the Isle of Man and the dependent territories to establish whether they would wish our ratification of the convention to apply to them.
Baroness Trumpington: My Lords, while thanking my noble friend for his reply, may I ask him whether he is surprised that I am surprised at the excessive delay in ratifying this convention, bearing in mind that the leader of the United Kingdom delegation announced in her speech to the 137 nations at the United Nations World Mid-Decade Conference in Copenhagen in 1980, that the United Kingdom did not sign conventions unless they intended to ratify them?
Lord Trefgarne: My Lords, the studies that preceded our signature of this convention were intended only to establish as quickly as possible that there was sufficient probability of our being able to ratify the convention for us to be justified in signing. Ratification, on the other hand, involves entering into precise legal obligations, and we need to compare the convention in great detail with our existing law and practice. Before signature the dependent territories were only asked whether they objected to us signing. They must now carry out their own detailed comparison of the text of their laws. As to whether I am surprised at the attitude of my noble friend, the answer is, no.
Baroness Birk: My Lords, this type of Question has been asked many times before. Is the Minister aware that we always get the answer that it will soon be ratified? Could he perhaps explain what is meant by "soon"? Is there going to be some sort of limit to the time the Government take to consider it, and then, when it goes out to all the other areas to which he referred, how long is that going to take? Is it not true that this Government, and previous Governments, have been dragging their feet on this? Can he say how many nations have in fact ratified the convention, apart from signing it?
Lord Trefgarne: My Lords, I do not think that I would accept that we have been dragging our feet on this matter. The signature took place only in July last year, and the processes of consideration

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and consultation are indeed very long and complex. There are a number of difficult matters which arise following this convention. As to the number of nations which have so far ratified, I think the number is about 20, but I have not got the precise figure before me.
Lord Morris: My Lords, may I ask my noble friend whether he has found any difficulty in reconciling the views of the United Nations on this subject with that of a far higher authority? I refer, of course, to the Divine discrimination of the Almighty.
Lord Trefgarne: My Lords, when your Lordships' House is reformed so that bishops answer from this Box, that will be a suitable occasion for that question.
Lord Stewart of Fulham: My Lords, would not ratification involve that succession to hereditary titles would always be to the eldest child, irrrespective of sex?
Lord Trefgarne: My Lords, that is indeed one of the matters which has to be considered.
Lord Winstanley: My Lords, would the noble Lord the Minister be kind enough not to forget discrimination against men, in terms of retirement age? Is he aware that women live to a much greater age than men—something about which the Government can do little— but are nevertheless entitled to draw their retirement pensions five years earlier?
Lord Trefgarne: My Lords, that is a matter which no doubt will be exercising my noble friend Lady Trumpington.
Lord Beloff: My Lords, is the Minister aware that in the preamble to this remarkable document it says that the eradication of domination and interference in the internal affairs of states is essential to the full enjoyment of the rights of men and women? Would there not, therefore, be something of a hypocrisy if Her Majesty's Government were to hasten to ratify a convention in respect of which most of the ratifying states are, at the moment, the Soviet Union and its allies?
Lord Trefgarne: My Lords, I am not sure that I would want to be drawn down that particular path at this juncture. I would repeat, in all seriousness, that this is a very complicated matter; there are a number of very detailed and complex implications for our own laws, and also, as it happens, for the law of Scotland, which is not, in every respect, the same as ours. But we will certainly proceed as quickly as we properly can.
Baroness Trumpington: My Lords, will my noble friend be aware that his reply, alas! will be most disappointing to many women's organisations, and to the UN agencies?
Lord Trefgarne: My Lords, I am aware that my noble friend wishes this matter to proceed more
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quickly than it has done. We certainly wish it to proceed as fast as possible, but we do have to take into account the difficulties that we face.
Lord Leatherland: My Lords, will the Minister also take into account the fact that considerable discrimination exists at present against men? As a student of the national press, he will know that a fortnight ago a woman streaker at a football ground received very pleasant publicity in the national press, whereas yesterday it was reported that a man streaker, also at a football ground, was fined £100.
Lord Trefgarne: My Lords, I am reminded of the dictum of Oscar Wilde that there is only one thing worse than bad publicity, and that is no publicity.

Ex-Prisoners of War: Deducted Pay
2.59 p.m.
Lord Clifford of Chudleigh: 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 publish the letters from the Treasury giving the instructions whereby officer prisoners of war in Italy and Germany had deductions made from their pay and that those deductions should be paid to the Treasury.
The Minister of State for Defence Procurement (Viscount Trenchard): My Lords, there was no such instruction. In answer to the Unstarred Question on 20th January, I described the policy and system for pay deductions and the arrangements for refunds after the War. I am, however, placing in the Library copies of the three Service Instruments in which the policy regarding deductions from pay was promulgated.
Lord Clifford of Chudleigh: My Lords, may I ask the Minister this: If there were no such instructions, why did these things take place? And would he not now agree that deductions from pay were made from all officer prisoners of war concerned, and that, where lager money was paid—and in many cases it was not, and what was paid was irregular—the value was infinitesimal compared to the deductions made over here? Would he not also agree that, in contradistinction to the Allied and Dominion Governments, the money deducted from officer prisoners of war in this country was handed over to the Treasury instead of being returned to the rightful owners?
Viscount Trenchard: My Lords, the noble Lord took part in the debate on the Unstarred Question and I spoke for 30 minutes, I regret to say, in reply to that debate. I believe that all of the points that he has raised were fully answered in that Unstarred Question and I really have nothing further to add. For the benefit of the House in general, let me say that I made clear in my Answer that deductions were made according to a policy which was known throughout the war. Refunds were considerable and widespread. Some credits did

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come through during hostilities to officers' accounts in this country. There was no settlement with a partitioned Germany in a situation of unconditional surrender, and Her Majesty's Government, therefore, accepted the full liability and, clearly, any credits that were available for dealing with all the prisoners of war according to the policy concerned.
Lord Shinwell: My Lords, is the Minister aware that the Answer which he gave to the noble Lord, Lord Clifford of Chudleigh, and the addendum—for which he was not asked—have only increased the mystery about this affair? In the absence of any communication between the Treasury or any Government department and the Ministry of Defence or the War Office, it is impossible to reach a conclusion about this matter. In the circumstances, ought we not to have the letters—if there were any—which passed between the Treasury or any other Government department and the Ministry of Defence and the War Office so that it is possible for us to reach a conclusion and, if it is regarded as desirable, to meet the claims of the prisoners of war?
Viscount Trenchard: My Lords, I did refer to a number of documents and a number of letters and referred noble Lords' attention particularly to the reports of the Public Accounts Committee and the Comptroller and Auditor General at the end of the period during which all these questions, under two Administrations, were considered. I am seeing my noble friend Lord Kimberley, who raised the Unstarred Question, and some of the members of his unofficial committee tomorrow, as I promised I would do. Dependent upon that meeting, it may seem helpful if we give fuller answers to the many points which he has raised and which they have raised in documents that they have sent to us. The documents are not complete. The two Governments of the time clearly considered all these matters. There are no individual records left and there is no conceivable way of telling individual entitlements today. As I said during the debate on the Unstarred Question, I do not regard it as a service to anyone concerned to raise expectations which I believe cannot possibly be fulfilled, and I do not believe that the expectations were justified.
Lord Shinwell: My Lords, how is it possible for the Minister to declare to your Lordships' House that two Administrations dealt with this matter and reached a conclusion about it? Is he aware that, as Secretary of State for War, I am also aware of what happened during the war from 1943 onwards? I was also Minister of Defence, and from a particular search through the columns of Hansard for the other place I find not a single reference.
Viscount Trenchard: My Lords, there are many references and, in fact, since the Unstarred Question have found a great many more references in Hansard throughout the war years. Indeed, I am wondering whether the noble Lord has read my answer to the Unstarred Question. However, I shall also write to him in relation to his own part at that time when he himself was not involved in this question.
Lord Bruce of Donington: My Lords, is the noble Viscount aware that his replies this afternoon still leave the whole question in a thoroughly unsatisfactory state? Is the noble Viscount aware that, although he replied specifically that no instruction had been sent by the Treasury in this regard, he did not, in fact, precisely answer the Question, which referred to letters from the Treasury containing instructions? Is he aware that some slight advantage might be taken by certain civil servants as to the semantic differences between those two terms? Will he now say that no letters were sent from the Treasury to the departments concerned on this matter? If he cannot answer that question in the negative, will he give the House an assurance that such letters as were sent by the Treasury on this matter will be published? Is he aware that, in the absence of such letters, the whole House will wonder how it came about that some of the money landed up in the Treasury?
Viscount Trenchard: My Lords, the noble Lord also took part on the Unstarred Question, although he was unable to stay until the end of the debate. But I did answer all the points that he has raised on that occasion and, on a short Starred Question, to elaborate further is extremely difficult. There was no instruction from the Treasury, and I said that, I think, twice in my speech in the debate. There was considerable correspondence. only part of which has been preserved, and I mentioned a number of Ministers who had been involved in parts of the correspondence. I also mentioned an interdepartmental committee and I drew the noble Lord's attention—I do not know whether he has read them—to the Comptroller and Auditor General's report and to the Public Accounts Committee's report. I think that on a Starred Question I cannot go further.
If the House feels that I have not dealt fully with the Question. and—what is important to me—if the noble Earl's unofficial committee, which I meet tomorrow, as I promised I would, feels, after the pretty exhaustive studies that I and my colleagues have undertaken, that I have not answered the questions, and that there is purpose in having an inquiry and that an inquiry could lead anywhere, rather than raise false expectations for no good purpose, then the House could press me or I might even suggest something.
Lord Mayhew: My Lords, might it not be helpful, however, if, when the noble Viscount places in the Library the three Service documents to which he referred, he also places the minutes of the crucial interdepartmental committee to which he has referred, which took the decision which is so widely criticised in many parts of the House?
Viscount Trenchard: My Lords, in the Unstarred Question debate the noble Lord did, indeed, ask me that question. I undertook to consider the degree to which the publication in the Library of further documents or drawing the attention of the House to further documents in a situation of incomplete documents, though very considerable documents, would be helpful. I promised to come back to him

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on that occasion. If I may, I want to leave the matter until after tomorrow's meeting and the discussion, so that I can take note of whatever the noble Earl's unofficial committee says to me as to whether it would be to the advantage of the House to publish much more or not.
Lord Segal: My Lords,—
The Chancellor of the Duchy of Lancaster (Baroness Young): My Lords, I think that we have had now a very long time on these Questions and that it is the feeling of the House, as we have important business to deal with, that we should move to the next business.
Lord Segal: My Lords, may I ask the noble Viscount—
Several noble Lords: No!
Lord Segal: My Lords, may I ask the noble Baroness the Leader of the House whether it is in order for a Member to ask a Question before his name has been called by the Table?
Baroness Young: My Lords, I understand that the answer to that Question is that it is a very unusual event.

Taking of Hostages Bill [H.L.]
Lord Trefgarne: My Lords, on behalf of my noble friend Lord Carrington, I beg to introduce a Bill to implement the International Convention against the Taking of Hostages, and for connected purposes. I beg to move that this Bill be now read a first time.
Moved, That the Bill be now read a first time—(Lord Trefgarne.)
On Question, Bill read a first time, and to be printed.

The Rating System
3.11 p.m.
Lord Boyd-Carpenter Lord Boyd-Carpenter rose to call attention to the problems involved in the system of local rates, and their impact at current levels on domestic, industrial and commercial ratepayers; and to the suggestions for improvement contained in the Green Paper Alternatives to Domestic Rates (Cmnd. 8449); and to move for Papers.
The noble Lord said: My Lords, some 18½ years ago on an October afternoon in 1963 I was sitting on the platform at a Conservative Party Conference in Blackpool waiting, as Chief Secretary to the Treasury, to reply to a debate proposing reforms of the rating system. I had ready with me a pronouncement to be made on behalf of the Government of Mr. Harold Macmillan as to their policy on reform of the rating system. Perhaps I may interpose, as this is Mr. Harold Macmillan's 88th birthday, to say that I am sure your Lordships would wish to send him a message of very many happy returns.
Noble Lords: Hear, hear!
Lord Boyd-Carpenter: My Lords, as it so happened, just before I rose at that conference my noble friend Lord Home of the Hirsel, then the Earl of Home, arrived from London holding a piece of paper which the 5,000 or 6,000 people in the hall knew contained the decision which Mr. Macmillan had made as to his future and the future leadership of the country and of the Government. Your Lordships can well imagine that because the iron convention, which dominates these conferences, prevented my noble friend getting up and reading it at once, and inflicted instead my long, carefully thought-out, much argued-over Government pronouncement on rates, my observations on that occasion commanded remarkably little attention. Indeed, even The Times, which was most kind to me, remarked:
"Never before have 25 minutes of the Chief Secretary seemed so long".
It is a happy coincidence that my noble friend Lord Home of the Hirsel is here this afternoon, though I do not think that he contemplates a similar intervention. I refer to that strange little episode because it illustrates —I think quite vividly—what a long-standing issue this is: the issue with which the Government's Green Paper seeks in part to deal and the issue with which the Motion, which I have just moved in your Lordships' House, also seeks in part to deal. It indicates perhaps that certainly most of us would be wise—as I certainly hope to be—to approach this subject with a certain diffidence, with a knowledge that every possible alternative has been discussed, mulled over, thought about and, on the whole, dismissed; and that, therefore, we are in an area where it is very optimistic to expect quick or easy solutions.
It is also an area of very great importance. Local government spending in this country in the year just ending amounted to £30 billion, which, as a matter of interest, is about a quarter of total public expenditure or some 6½ per cent. of the gross domestic product. Of that £30 billion, some £5 billion is financed by payments, rents, charges, fees, et cetera to local authorities, leaving £25 billion divided between the block grant provided by the Government, and the rates raised from domestic ratepayers, on the one hand, and industrial and commercial ones on the other. Of that large sum, the current Government contribution by way of grant amounts to 57 per cent. and this leaves, in addition, the rest of the expenditure to be found as to 19 per cent., or £4.8 billion, by domestic ratepayers, and as to some 24 per cent., or £6 billion, by industrial and commercial ratepayers.
I am sorry to have inflicted figures on your Lordships, but I think that those figures set the scale of the problem about which this afternoon your Lordships' House is embarking on a discussion. The Motion has been framed to go wider than the Green Paper. As your Lordships will be aware, the Green Paper is entitled Alternatives to Domestic Rates; but your Lordships will also be aware—if only from the figures that I have just submitted to your Lordships—that domestic rates actually amount to only a minority, though a substantial minority, of the rate payments, and that rates on commercial, industrial and other non-domestic premises are the larger figure—24 per

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cent. or £6 billion. for my part, must express my regret that the Green Paper does not directly deal with this, the larger part, of the rate burden. I think that that is unfortunate.
The Green Paper deals with it indirectly, but does not seek—and I trust that my noble friend Lord Bellwin will not think that I am being unfair—directly to deal with the question of rates on non-domestic premises, which is the larger element in rate payments. However, I hope that your Lordships' House will feel able—as it is enabled to do by the terms of the Motion —to discuss this, because rates on commercial and industrial premises, which I shall, if I may, deal with first, are of very considerable importance to industry and commerce.
They certainly constitute a very substantial burden on industry and on commerce. They add to industry's costs and thereby, to the same extent, diminish its competitiveness. They work through into increased prices and so work towards stimulating inflation. They are a very substantial factor. They are also subject to certain peculiarities. Of course, they take no account of capacity to pay. A trading company which is losing money receives no reduction in its rates. Its rates are based on a valuation related to the premises it occupies, not to the profitability or otherwise of its operations. It is clear that in the case of companies already in difficulties, this burden is one not to be underrated. I call in aid on this the CBI which, in a statement it issued very recently, uses some very clear words indeed:
"Rates have become a growing burden on companies. Given the large increases in recent years, rates paid by industrial and commercial companies as a proportion of their real inflation adjusted pre-tax profits, excluding North Sea activities, but before deduction of interest, have risen from around one-sixth in 1969 to well over one-half in 1980."
It is also to be recalled as a matter of history that, when this country was last going into a major world recession, in 1929, the Government of the day decided to de-rate industry in respect of three-quarters of its liability for rates. Your Lordships may recall that, though that was modified some years later in the late 1930s, some clement of industrial de-rating actually survived until the year I referred to at the opening of my speech, 1963. It is at least for consideration whether the expedient thought right by the Government of the day in 1929, in a somewhat similar world situation to that of today, should necessarily be dismissed today.
There is the further consideration which some of your Lordships may think important, that whereas the individual domestic ratepayer has a vote and can vote one way or the other if he wants policies liable to increase or decrease the expenditure of his local authority, industry and commerce are disfranchised; they have no vote. The abolition of the business vote some years ago, itself a trivial element in the electoral roll, has left them without any franchise, any vote, and indeed rates on these premises are perhaps an example of that taxation without representation which was in another context responsible for the foundation of the United States.
There is therefore a considerable problem in respect of rates on commercial and industrial properties. I would ask my noble friend Lord Bellwin, when he comes to reply, to deal if he will both with the reason
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for their exclusion from the Green Paper and with the Government's ideas as to whether, in parallel with their consideration of domestic rates, or otherwise, they are giving consideration to the very severe burden which rates, particularly in some areas, impose on vital commercial and industrial activities.
I now turn to the subject of the Green Paper: domestic rates. Here again the problem is not without its complexities. The system has been under the strain which any system of taxation is under when the levels of taxation rise, and rise as sharply as they have done. By way of example, my noble friend Lord Bellwin gave me an Answer in this House a few months ago in which he reported that a number of London boroughs in the current year had increased their rate poundage by 50 per cent.—and that at the end of a series of years in which there had been substantial preceding increases. The system, therefore, good or bad, is being tested under a much greater strain than it has ever had to bear before. It is not perhaps surprising that it creaks a little at the seams.
It has also suffered some damage to its credibiiity; particularly in view of the fact, of which your Lordships are only too well aware, that recently a precept sought to be imposed by the Greater London Council was ruled to be ultra vires and invalid by this House in its judicial capacity. This has had the corollary of raising doubts in many ratepayers' minds as to the complete authority of rate demands that they receive. I have no doubt that others will have been disturbed by the fact, to which my noble friend referred yesterday, that, where some of them had in fact paid in respect of this unlawful demand, some of the local authorities concerned have not seen fit to refund the money unless it has been expressly demanded. All this obviously increases the difficulty of the general situation, about which, of course, this debate is mainly concerned.
One must remember that any system of taxation has its rough edges. Any system of taxation is unpopular. There is a saying—I forget who originated it, but it is a true one—
"To tax and to be loved, no more than to love and to be wise, is not given to man".
No one who has been associated, as I was at one time, with the processes of the levying of taxation can be wholly unconscious of the fact that all tax systems are unpopular, and therefore to some extent one tends to discount criticisms when considering the problems of various forms of taxation.
I shall be interested to hear what some of your Lordships—particularly those like my noble friends Lord Ridley and Lord Sandford, both of whom have, as the House knows, enormous experience of local government—have to say about this matter. I suggest that there are three criteria which, so far as possible, should apply to any form of local and perhaps national taxation. They are, first of all, that a public body that spends public money should, so far as possible, have to take the responsibility, and indeed the unpopularity, of raising it. I believe that to spend public money which some other authority has had to face the odium of raising deprives one of a wholesome discipline.
Secondly, those who are taxed should have a chance of expressing their views periodically on the policies which will determine the level of the taxation to which

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they will be exposed. Thirdly, I believe that as large a proportion as possible of those who benefit from the expenditure so financed should be at least conscious of the way the money is being raised and the inconveniences that causes. To depart from those criteria risks a lack of discipline in the system, given that it is always the problem, as your Lordships are only too well aware, of all democracies, central or local, that the major pressure is for expenditure, and that it is therefore, if a balanced policy is to be followed, particularly desirable that there should be counteracting pressures to the greatest extent possible in order to maintain some balance.
I throw out those three suggested criteria to your Lordships. Your Lordships will he aware that, in some respects at any rate, the present rating system does not measure up to them, although of course in others it does. There is a peculiar problem with which I shall not detain your Lordships for more than a moment; that of two-tier authorities, where it is extremely difficult to apply those principles.
The next point that I think your Lordships will want to consider is this: what proportion of the expenditure of local government should be raised by it, and what proportion should they receive by way of grant from the central Government? At the moment, of the rate-and grant-borne expenditure, the figure is 57 per cent. from the Government. That has been arrived at purely pragmatically as a result of considerable negotiations. I do not know whether your Lordships feel, as I must say I am inclined to feel, that the Government's contribution is rather high in relation to the total if the system is to operate effectively or efficiently. But we have got to this figure not as a result of any conscious decision of any Government or any individual, but simply as a result of the working of the machine, and it might be quite useful if your Lordships were to consider that in the course of this debate.
The other general question of principle is this: given that the rating system is under great pressure, given that the money that local authorities have felt bound to raise has risen, is the present division of function in respect of the financing of services the right or the ideal one?
There are two national services which are in part funded by local authorities out of the rates—education and the police. It is at least arguable that the present division of financial responsibility for those services is not necessarily one that is suitable for all time, particularly perhaps in the case of services such as those where national standards of quality have to be insisted on by the central Government. Is it not conceivable that a larger share, perhaps the whole share, of responsibility for the finance of those activities should be transferred to the central Government, with of course a compensating reduction in the block grant? These are large questions on which your Lordships may express very differing views.
I come to my final subject matter—namely, the alternatives suggested in the Green Paper. For my part, I am not enthusiastic about a local income tax. Income tax is already high and there is no reason to believe that if a local income tax was superimposed upon it, the central Government would make any sacrifice by a reduction of their share. But there are more fundamental objections than that. One is that, if you use
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the Inland Revenue and its methods of assessment for a local income tax, all you are really doing is providing an assigned tax and there is very little local element in it.
Then there is the very practical point that many people, perhaps the higher earners who would be liable for the higher levels of tax, often do not live in the areas where they earn their living. You would therefore find that the residential areas would do extremely well out of a local income tax—the Sunning-dales, Haslemeres, The Wirral, to take a few areas almost at random—whereas the central areas of cities would find they did not raise very much revenue in that way. I hope the Government will not look very seriously at a local income tax.
There is more perhaps to be said for a local sales tax, but here I would quarrel with the Green Paper when it says that it would be applicable only to the 60 top-tier authorities. Cross-border shopping, to use the phraseology of the Green Paper, would undoubtedly arise and it might add a little excitement to the housewife's life. A sales tax is immediately perceivable by the taxpayer and therefore meets at least one of the criteria I was mentioning to your Lordships; so I think a local sales tax—not perhaps covering the whole area of VAT but somewhat selective in its application, mainly to what can generally be described as luxuries— has something to be said for it.
So, at a modest level, has the other alternative mentioned, that of a poll tax. There is something to be said for a poll tax at a modest level but related to the electoral register. It, at least, is understandable and perceivable. At any acceptable rate it could not, of course, anything like replace local rates. As the Green Paper brings out, it would, on the contrary, simply be a supplement either to local rates or to some other form of local taxation, but it might be quite a useful supplement and it is certainly suggested in the Green Paper as one of the possible alternatives.
I am sure the Government have done right to put forward for consideration a Green Paper about domestic rates and I only regret, as I said earlier—I will not weary your Lordships by repeating it—that they have not gone forward so far as to put forward similar ideas in respect of commercial and industrial rates. I think most of your Lordships will feel, as I do, that there is a long way to go over this whole issue. The present rating system goes back to the end of the reign of the first Queen Elizabeth. It has lived a very long time. It has not been replaced, not, I think, because people have been over-enthusiastic as to its merits, but because any alternative which was better or less had has not been able to be arrived at with any measure of agreement. I have no great confidence that we have reached a stage of such general agreement yet and I suspect that this debate will make that painfully clear.
I remain somewhat sceptical. I must tell my noble friend, as to whether out of all these discussions, right and necessary as they are, any really radical solution by way of change will emerge. It may well be—I hope it will be—that if the rating system itself remains in essence, considerable amendments, improvements and modernisations can he effected in it. I think even its strongest defenders do not pretend that at the moment it is a perfect instrument for raising

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the very large sums of money which it raises; but I suspect—and this is a purely personal opinion-that at the end of the day it is probably near the position at which we shall arrive.
This House has probably more knowledge and practical experience on this matter than any other body—not excluding those who operate in other parts of the building—in this country, and, if your Lordships' combined knowledge and experience can be brought to bear on what is to all our fellow citizens a subject of the very greatest importance, then this debate will have proved worth while. My Lords, I beg to move for Papers.
3.37 p.m.
Lord Mishcon: My Lords, the noble Lord, Lord Boyd-Carpenter, has the gift of taking hold of a subject, which in other hands would lead to a dull exposition, and infusing into it a delightfully controversial shaft of light so that it becomes a sparkling subject of discussion, and he has done that this afternoon. Indeed, we are indebted to him for introducing this debate on the general subject of rate reform and for directing our attention to the Government Green Paper, issued as recently as 16th December and referred to in the Statement made on that day by the Secretary of State for the Environment in another place, and repeated in your Lordships' House in the rather more cajoling terms of the Minister, the noble Lord, Lord Bellwin.
The noble Lord, Lord Boyd-Carpenter, is right in that the system of rating is certainly not new in our history. It can generally be regarded as originating in principle, if not very salubriously, in the Statute of Sewers 1531, a few years before the gracious Queen Elizabeth I ascended the throne. The principle certainly seems to have stood the test of time. It has of course had its critics, even from the commencement. When, in 1601, a compulsory rate was introduced to take the place of voluntary alms-giving in local parishes, the Pilgrim Father, John Robinson, described the new rate in a manner which anticipated with commendable succinctness the noble Lord's speech; he said that it should,
"more fitly be called a malevolence for the ill-Will it is paved with".
The idea of reviewing the problems created by the rate system is also no novelty; they have merely taken on a fresh emphasis with differing economic and social factors. The problems of the rating system were recognised at the very commencement of this century; they were reviewed as a whole by the Kempe Committee which sat between 1911 and 1914 and which issued a report in 1914 entitled The Final Report of the Departmental Committee on Local Taxation. There has been an alteration in England, Wales and Northern Ireland as to who makes the valuations on which rating assessments are computed. There have been financial changes in 1925, 1929, 1948, 1958 and 1960, but all of them dealt merely with certain aspects of local government financing, and not with the principle of the rating system as such.
Following upon conditions not dissimilar from those currently and most graphically described by the noble Lord, in 1976 the Labour Government set up a committee of inquiry, its terms of reference being:
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"To review the whole system of local government finance in England, Scotland and Wales, and to make recommendations".
It was chaired by a very distinguished lawyer and expert in the field of local government, Mr.—now Sir —Frank Layfield, QC, and it was a very strong committee. If I may say so, I was surprised that the noble Lord, Lord Boyd-Carpenter, in the course of his most interesting and lucid speech, did not once refer to that committee. I see that during the past few weeks the present Government have asked Sir Frank to fulfil yet another important public function. The Layfield Committee reported with admirable expedition and with a thoroughness and clarity which deserve our recognition and gratitude even now, some six years later.
In my view, since the committee sat nothing has happened which is not covered, at least in general terms, by the evidence that the committee examined, the reasoning that it advanced, and the conclusions to which it came; nothing, that is, except that a Conservative Government are now in power, bearing upon their broad back the burden of a somewhat reckless 1974 election manifesto which, without proper examination or inquiry, such as was undertaken by the Lay-field Committee, undertook that the domestic rating system would he abolished within the normal lifetime of a Parliament and that it would be replaced by taxes,
"more broadly based and relating to people's ability to pay".
In 1979, despite, and indeed without reference to, Layfield, the manifesto promise in regard to abolition of the domestic rating system was repeated, but with a safeguard relating to timing.
"Cutting income tax",
stated the 1979 manifesto,
"must take priority for the time being over the abolition of the domestic rating system".
Despite the rather obvious political temptation held out to me, I shall not comment on the first part of that sentence. But we see at this stage that wiser counsels have prevailed. NO doubt they have been prompted by the stern reminders to the Secretary of State—they included many from this House and from another place, from members of all political parties—that democracy in local government in this country is a flower to be gently watered, and that it should not have its petals plucked one by one.
The Secretary of State has apparently now decided not to bring in hasty legislation based on rigid proclamations inherited from the two manifestos, for he realises that he might yet again—and I repeat, again—have to withdraw that legislation in the face of parliamentary opposition. He has opted instead for a discussion document. At the moment the Government proposals as to how they would carry out their firm manifesto commitments are not before us.
The Secretary of State has decided indeed to water down the deliberate manifesto phrase that the domestic rate system is to be abolished, as will be seen by his statement on 16th December last, at the time that the Green Paper was issued. I quote from column 309 of the Official Report of another place:
"Our election manifesto restated our determination to reform the domestic rating system. I am today publishing, together

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with my right hon. Friends the Secretaries of State for Scotland and Wales, a Green Paper on alternatives to, and possible reforms of, the present system of domestic rates. The present system contains anomalies and unfairness. In publishing the Green Paper, the Government reaffirm their long-standing commitment to reform".
Reform, my Lords, not abolition; the difference is not one of semantics.
After calling for comments by 31st March—a date, I would incidentally observe, which gives a very short time for such comments, especially for local authority associations which have to consult before they come out with their final comments—the Secretary of State said, at column 310:
"We shall then aim to produce proposals for a system which would remedy as fully as possible the shortcomings of the existing system of domestic rating and which would command the widest possible acceptance in the country as a whole".
The noble Lord, Lord Boyd-Carpenter, has emphasised what he considers to be wrong with the domestic rating system. While I would not go all the way with some of the points that the noble Lord has made, I certainly would not dispute that there are defects and elements of unfairness and that there is certainly room for reform. But in regard to the principle of domestic rating let me quote from paragraph 4.5 of the Green Paper itself, at pages 12 and 13. With your Lordships' permission, I shall read that short paragraph:
"The present system of domestic rates is workable and reasonably well-understood by the public. There is therefore no doubt about the system's practicability, though a number of technical criticisms have been levelled against it in recent years. These criticisms and ways in which they might be met are discussed later in [certain further] paragraphs. Although there are wide variations between areas in rateable value, the tax base is sufficiently large to support revenue requirements. The cost of administering domestic rates (including rate rebate administration and valuation costs) is estimated at £120 million in 1981–82 (2½ per cent. of yield). There is little scope for avoidance or evasion because rates are a tax levied on fixed property. There is a great deal of administrative experience with the present system and a highly-developed body of statute law".
The Green Paper then discusses some sensible possible modifications of the system. The Layfield Committee had of course gone into all the criticisms of, and weaknesses in, the rating system, but still came down in favour of retaining a reformed system based on strict periodical valuations on the capital value of the hereditament, and not on the hypothetical rental value which has so many disadvantages apparent to every one of us who has studied the subject. I personally think—it is a purely personal view which in no way represents the considered view of the opposition—that there is much soundness in what Layfield recommends, and I hope that the Government will not be trapped by their own recklessness in the two manifesto statements to which I have referred, but will consider very carefully the possible advantages of sensible reforms to the system, rather than feel themselves bound by their previous doctrinaire statements to abolish it.
Layfield also made out a strong case for an additional—and I emphasise, additional—source of local revenue which would retain a measure of local independence from central Government and which would be available to major spending authorities. The noble Lord, Lord Boyd-Carpenter, referred to it, and very fairly voiced his own criticisms of such a system.
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It would be by way of a local income tax, and the committee dealt in a very businesslike way with what this would mean in cost and administration. I agree that the idea needs a lot of investigation, but I think it merits it; and, naturally, care would have to be taken to see that those less fortunate would have the same protection as they now have in the present rating system.
There is one factor which can easily get distorted in considering the so-called injustice of the present rating system. It is the belief that many have—and one would naturally have inferred it, if I may say so, from the noble Lord's speech—that domestic rates have gone on rising as a proportion of personal disposable income. That is in fact not true, and I borrow the figures given in the Financial Times of 17th December last. In 1938–39 they accounted for 2·71 per cent.; in 1960–61 the percentage was 2·01; in 1970–71, 2·45 per cent.; and last year it was about 2·2 per cent. As the Financial Times points out:
"Of course these are average figures and there are variations from area to area but that is a separate question from the one of whether any better system can he found of raising local revenue".
No fresh alternatives to the rating system as against those advanced by the Layfield Committee are to be found in the Green Paper. The noble Lord, Lord Boyd-Carpenter, mentioned those alternatives, and, if I may, I will briefly do so as well. As for a local sales tax, it has so many disadvantages, not least among them being that it levies a tax on all regardless of means, possibly contravenes EEC regulations and invites, in a small country such as ours, as the noble Lord amusingly said, dashing over local government boundaries in order to pay a lower rate. That certainly has been the experience in the United States.
The noble Lord also mentioned another alternative, that of a poll tax. That would be a poll tax for those on the electoral register, and it is computed to work out at some £100 a head. As the noble Lord rightly pointed out, that, of course, would not suffice to raise the whole of the necessary local finances. This, again, has the transparent injustice of not differentiating between rich and poor, and presents serious administrative difficulties if one tries to do so. There is also the administrative problem attached to those who move residence from one local authority area to another; but perhaps the greatest objection of all is that it amounts to a tax for a vote—a most unsavoury principle for us to introduce into our constitutional fabric and at this stage of our democratic development.
Lastly—I have already referred briefly to the question of local income tax—there is the possible alternative that local government should receive a percentage of national taxation. In dealing with that suggestion I can do no better, if I have your Lordships' permission to do so, than quote from paragraph 66 of Chapter 15 of the Layfield Report, at page 300:
"Much turns on the value which is placed on local democracy itself. Central responsibility would tend to undermine the role of the local councillor. Most of the contact between government departments and local authorities would probably be between officials. Local government officers would therefore tend to regard themselves as increasingly answerable to government departments rather than council committees. In such circumstances it would be difficult to predict what the full consequences of adopting explicit central accountability would be upon local government that has been developed from an historical basis

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of local accountability by locally elected members. But it is likely that the main role of councillors would be to press the government for more grants to meet the needs of their areas. Shortcomings in local services could be blamed on the inadequacy of the grant, as they are increasingly at present".
If I may say so in parenthesis, there appears to be no difference between 1976 and 1981 in that regard.
"Ministers and their officials would become answerable to Parliament for local services. While local authorities might still retain a measure of discretion in the provision of services, their role would be a delegated form of local administration for which political responsibility clearly rested at the centre".
I turn very briefly to industrial and commercial rating, about which the noble Lord, Lord Boyd-Carpenter, said many things which deserve respectful attention and not mere dismissal by political rhetoric. 1 am sure that later in this debate other noble Lords will deal more particularly with this aspect of the rating system and with the noble Lord's argument, but let me, if I may, remind the House what Layfield recommended. It was that the relative rate burdens of domestic and commercial and industrial properties should be determined by the Government as a matter of national policy, having regard to the burden of rates on both sectors; that the relative burdens should not be changed between revaluations, and that that relationship should not be open to change as part of the grant settlement; that rating should be applied to the widest possible range of properties, which should include agricultural land and buildings; that the method of assessment on public utilities should be in the hands of an independent body, and that Crown property should be assessed in the same way as other similar property except where there were compelling reasons against.
These reforms would go far to relieve the burden placed on commerce and industry, to which the noble Lord referred. Doubtless, too, more could and should be done on the basis of the recent Peterborough experiment—and I would remind your Lordships that Peterborough happens to be a Labour-controlled council—where representatives of commerce and industry have brought themselves in close touch with local authorities with a view to matters to their mutual advantage being investigated and discussed in a thoroughly sensible and civilised manner.
That brings me to my concluding point, and, if I may say so, I regard it as of the greatest importance in this debate. Those in your Lordships' House this afternoon who, as I gladly did, spent many years in local government will know full well that you cannot usefully discuss local government finance and alterations to the rating system as an isolated subject. Concepts of the respective roles of central and local government, the independence and accountability of local government, the quality of local government membership, the standard and extent of local government services, the needs of all our citizens and of industry and commerce, all impinge on an overall study of local government finance and how monies should be raised for it to discover whether—and, if so, what—reforms should be made in respect of the present system.
My Lords, if the Government deal with rate reform without proper consideration of these matters and without conceding their essential relevance to any reform of local government financing, they will do so to the grave detriment of the majority of our people and
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of a proud local government tradition which, over the centuries, has been such a worthy part of our national fabric.
4 p.m.
Baroness Stedman: My Lords, I, too, am grateful to the noble Lord. Lord Boyd-Carpenter, for giving us the opportunity today to consider the Government Green Paper. I have listened carefully to what he said and to what was said by the noble Lord, Lord Mishcon. I would go a long way with the ideas of both noble Lords on how local government ought to be accountable and I would agree with many of the points put forward by the noble Lord, Lord Mishcon. However, I must correct him over Peterborough. Peterborough was a Labour council at the time the report to which he referred was commissioned. It is now a hung council and the balance of power lies with the Alliance. Perhaps that is an omen of things to come.
Lord Mishcon: My Lords, while not in any way agreeing with the noble Baroness as to the omen, I am grateful to her for the correction. I only hope that my description will be accurate in the future.
Baroness Stedman: My Lords, that remains to be seen. Local government expenditure today is a very hot potato and there are heated arguments everywhere as to where the money is to come from to pay for what local government rightly has to do or feels it ought to do. I make no apology for once again stating my belief that central Government, in order to manage their economy, do not need to control local government expenditure. It needs two controls only: central Government should determine the amount of the grant that they give to local authorities and how much they are able to borrow. Within those two constraints, local government expenditure can and should be left to the local authorities to determine, so long as that expenditure is financed by local authorities' own taxes for which they have to he accountable to their own electorate. On the question of accountability I would agree with the noble Lord, Lord Boyd-Carpenter.
It is central Government's attempts today to take over the responsibility for expenditure which has led to the increasing confusion and uncertainty and is going a long way towards ruining responsible local government. If we are going to strengthen local government, then we have to strengthen the local government finance; because the local authorities should have a greater degree of financial autonomy by a reform of local finance. We and our colleagues in the Alliance would like to see such reform going hand in hand with a reform of the voting system for local as well as national elections to ensure that the make-up of local councils genuinely reflects the views and the balance of opinion among the people whom they represent.
As the noble Lord, Lord Boyd-Carpenter, has said in opening, the possible reform of rating procedures has been with us for many years and we all had hoped for some proposals from Layfield. Rating reform seems to attract as many, or more, suggestions as does the future of this House. It covers everything from abolition to reform. Like all other parties, the SDP would favour and would support a sensible reform of local government finance.

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The noble Lord, Lord Boyd-Carpenter, referred to the burden that the present system places upon the non-domestic ratepayer. That could be an arguable point and I know that some of the large local businesses in my own area feel that they are hardly done by. But, in spite of that, I believe that industry does get value for money when one looks at the services that the local authority provides for industry. We have the provision and maintenance of roads, which are the basis of modern industries' communication network; the protection of industrial property from the risk of fire and advice on fire prevention. Local authorities provide the basic primary and secondary education, as well as training and retraining schemes, to help maintain an educated workforce. It is the polytechnics and the colleges of further education which run specialist courses to meet the needs of industry and commerce within their areas. Many local authorities have built and are still building small factory units or are converting older, larger premises into properties for use by small firms. If the rates were cut this would mean cutting some of these services; and that could have a very profound effect on industry's productivity, profitability and competitiveness in the long run.
It is a fact that rates, in total, represent a very small part of the cost structure of industry. A recent issue of the Monthly Digest of Statistics showed that rates have grown less quickly since 1975 than has the price of manufactured goods, or the retail price index or the cost of materials or fuel used, or the average earnings in manufacturing industry. Nevertheless, at the heart of the problem is the fact that five times as much revenue is obtained from taxes which do not bear on the local elector (the national taxation and the non-domestic rate) as from the purely domestic rate.
At this time when central Government and local government relations are at such a low ebb, local government finance moves from crisis to crisis and a fundamental reappraisal of local government finance is absolutely essential, as is a review of the powers and duties of central Government and local government.
The Green Paper, in my view, has in some ways missed the opportunity to put greater emphasis on the need to strengthen local accountability and to strengthen the real basis of local government finance. Today's problems in local government go far beyond financial resources and how they are apportioned. Layfield did consider what kind of relationship was desirable between central Government and local government. Layfield was concerned about local accountability and looked at the form and nature of the various Government grants. Layfield looked at alternatives to the non-domestic rates, and even at possible alternatives to rates. My quarrel with the Green Paper is that, while it considers some of these issues, it does so only in the context of alternatives to domestic rates. It also looks at the options, in my view, from too much of an administrative point of view. No alternative should necessarily be ruled out because there may be administrative difficulties and any such possible difficulties should not be allowed to become an obstacle to political decisions. Good administration and administrators can find the means to express and carry out the political will of Parliament.
I am inclined to agree with the Government on their rejected options: the duties payable on petrol or
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alcohol or tobacco or a local vehicle excise duty, and possibly the pay-roll tax. But I should like to see more investigation into the working of a local income tax and a local sales tax so that we can see whether it would not be possible to introduce some form of local income tax or sales tax relevant to all types of authorities and not just to the major ones referred to in the Green Paper.
Have the Government looked at the possibility of keeping the domestic rate, transferring the proceeds of the non-domestic rate to central Government and then raising the balance from local income tax or local sales tax? I accept that, geographically, we are not a large country and that it would be easier to indulge in cross-border shopping than it is in the United States, where distances are much greater. It may not be possible to predict with accuracy what such a tax would yield year by year; and I accept that it may not be electorally popular to keep a form of rates and add another tax to bring it up to the amount required.
Some people object to a local income tax in that it can never be made as perceptible to the local voter as domestic rates. That may be true, but that is why it should not totally replace the rates. I believe that a local income tax could be more perceptible to local voters than the present system of grants and non-domestic rates. Moreover, the introduction of a local income tax would bring it home to more people than at present that they were contributing large sums to local government.
The local authorities would have to inform their voters of the rate of local income tax, and considerable publicity would be given to the decision setting the tax rate. The sum taken for local government can also be indicated on wages or salaries slips. Some would argue, no doubt, that the introduction of local income tax marked an increase in direct taxation. This might be so if local income tax replaced domestic rates but not if it is only used to replace grants and non-domestic rates.
The burden on each individual could remain the same. He would merely pay in local income tax a part of what previously he was paying as national income tax, which was used for grants and other purposes by central Government. The non-domestic rate could be in the form of a tax payable to central Government and available for distribution by them for equalisation purposes.
Have the Government seriously looked at the basis of assessment and considered whether it should be changed from a rental to a capital valuation? It rates only four short paragraphs in the Green Paper. Capital valuation may just be more comprehensible to the public; and, long-term, that option with a small local income tax might be the easiest to operate but it may not be the best way for the community involved. The Government's election promise was to abolish rates. Have they considered so doing and raising it all from local income tax assuming they may still have to find something like a 33 per cent. Government grant for equalisation between authorities?
I hope that the Government will remain open-minded, listen and heed the representations made to them. I hope that they are going to extend the time for those representations if the need is felt for that to happen.

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Britain is already a highly centralised state. It would be a disaster if central Government in their efforts to bring to heel a small handful of big spenders took steps to increase centralisation still further. The danger is that Government may be encouraged along this path by disgruntled ratepayers in certain local authorities. Instead of calling in the Government to protect them, they ought to be campaigning for measures that would invigorate local responsibility and accountability, and not erode it.
I hope that local government itself and its associations will make a positive reply and will stand up and be counted to ensure local accountability and less dependence on central Government finance. There is an immense fund of good will with all parties wanting to change the present system and to ease the burden on the non-domestic ratepayer We want a fair and equitable system of taxes, whatever form they may take, and the Government should be ready to cash in on the goodwill and the readiness of all parties and all sections of business and commerce to co-operate and consult as widely as possible. Let us hope at the end of the day, my Lords, that we shall get a system of paying for local services which will keep local government local, which will recognise and minimise interference from central Government, and which will make local authority members really accountable to their own electors.
4.15 p.m.
Viscount Ridley: My Lords, I am sure that the whole House will be particularly grateful to my noble friend Lord Boyd-Carpenter for the splendid way in which he has introduced this debate on what is after all a somewhat tedious subject but one which I do not think has been very much debated in your Lordships' House before.
I should declare two interests. The first as a member of the Layfield Committee—and I am sure that the passage quoted by the noble Lord, Lord Mishcon, was written by me, although it is so long ago that I cannot be quite certain! That report, as your Lordships are aware, was published in 1976 and nothing whatever has been done about it since. If there is to be blame for this, it could be apportioned equally, because we had three years of a Labour Government which did nothing and we have had three years in which this Government have done nothing either.
My other interest is as president of the Association of County Councils. As they have not yet had time to consider the Green Paper in detail—indeed I think they are anxious to hear what your Lordships have to say before they do so—I have today, perhaps uniquely, an opportunity to give my own personal views. Anything I may say may very well be denied by them lock, stock and barrel.
This is the third Green Paper that we have had in 10 years on the subject. As I have said, during this decade little or nothing has been done to reform the system except perhaps recently to make it more complicated and more unintelligible than it was 10 years ago. I would remind my noble friend Lord Boyd-Carpenter, who started his speech with a quotation from his activities in 1963, that the 1964 Conservative election manifesto said prominently that rating reform
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was badly needed. Alas, he did not win that election. Whether he would have done anything if he had, remains a matter of mystery.
In Layfield, we said that if nothing was done there would be a steady drift towards centralisation away from the localist situation, from local government to central Government. Even if that has happened for sound and understandable reasons, I think it is true to say that if the Layfield Committee were still sitting today every one of the members would say that his worst fears had been fully justified. Now is the time to grasp the nettle and for the nation to establish a much needed system which gives local government as much financial independence as possible consistent with the overall management of the economy which is the responsibility of central Government.
There is much criticism about the total expenditure by local government. Again, my noble friend Lord Boyd-Carpenter gave figures slightly different from the figures I have; but never mind that, they were interesting figures. It must be said that the cost of local government is not local government itself but the services which Parliament has asked it to provide—principally education. I personally believe that almost all the services would cost far more if local government ceased to exist and they were provided centrally, quite apart from the implications such a system would have for our democracy. Although I have no wish to inflict statistics on your Lordships, it must be mentioned at this point that since 1975–76 up to 1981–82—six years—the expenditure of local authorities as a whole in this country has gone down by 21 per cent., whereas the expenditure of central Government has gone up by 8 per cent. Let me put that, if I may, into the debate.
I therefore reach the conclusion that we need to find a system which allows local government to raise its own needs by some form of tax so far as possible. In an ideal solution the central Government would only need to intervene for two distinct purposes: First, the equalisation of resources between richer and poorer areas of the United Kingdom so that the less prosperous places did not suffer from an inadequate tax base. Secondly, for the relief of individual poverty which must always remain the responsibility of the state. At the moment the consumer of these local government services pays not nearly enough and the taxpayer too much. The present unbelievably complicated system means that the actions of local authorities are becoming effectively divorced from those who pay for them. It is only too easy to ask for more roads and schools if someone else pays. The 1980 Act, as some noble Lords warned at the time, did nothing but make matters more complicated.
I will give your Lordships only one example of its actions. It was announced in another place that the GLC would receive an extra £60 million grant when they climbed down over their cheap fares policy—and I have no intention of discussing that matter—but that £60 million has now to come out of a total grant paid to all other local authorities. So perhaps it is true to say that the parable of the Prodigal Son comes home to roost at last.
Like other noble Lords who have spoken, I am also disappointed that the Green Paper is specifically confined to domestic rates. It is not, in my view possible or even reasonable to keep these separate from the

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non-domestic rate. Indeed, it is most significant that most of the complaints one hears about the rating system and the level of rates come from the industrial sector, whereas Layfield was set up in 1974 as a result of considerable concern about the inflation of domestic rates at that time. But if industry feels itself aggrieved at this moment, it is not, in my view, entirely blameless. Far too few businessmen or entrepreneurs ever stand for election to councils and attempt to put forward their views. I remember not very long ago addressing a group of industrialists who were complaining about the rate levels in my part of the world, and I said to them: "There are 15 seats coming up on the county council within five miles of here next year: which of you is going to stand and put your views to the electors?" Not one of them took up that suggestion. So to some extent they have only themselves to blame.
The Green Paper very properly lays stress on two very important principles. We might call them the ugly sisters: accountability and perceptibility. While we search for the Cinderella who fits the shoe of the perfect tax, these two ugly sisters are always there and we have to pass their scrutiny. To mix my metaphors even more, they are to my mind the acid test of any new system we wish to have.
The worst of many problems now faced by local government is the fact that almost nobody turns out at local government elections and the apathy of electors (under 30 per cent. in most cases) is a sad thing. I believe it is only possible to attempt to remedy this by gradually placing as much of the burden as possible on the electors themselves, who must then be expected to react to extravagance or indeed to its opposite on the part of councils or councillors in the best possible way, and that is by voting. The terrible complication of the stream of legislation which Parliament is now trying to digest and which is giving great agony in another place this very day, should theoretically become unnecessary and the electors will actually sit up and take notice of what is happening. It is a sad and ironic fact that the activities of Mr. Ken Livingstone over the last 12 months have in all probability done more to put local government before the public than anything which has happened since Mr. Dan Smith put the North-East of England on the map in no uncertain way.
The Green Paper looks at many options and combinations of taxes. To me, its central conclusions are inescapable. There is no real solution which is totally fair: nor will there ever be. But some form of property tax is likely to be as fair as anything else and to remain an essential part of any future system. Rates are not regressive: they are cheap to collect and difficult to avoid. I do not wish to weary your Lordships by repeating the arguments in the Green Paper for or against the other taxes which are discussed. Mostly, but not entirely, they fail completely to pass the test of accountability and perceptibility, and I congratulate the authors of the Green Paper, particularly on the invention of that excellent word "lumpiness" —a word for which we in Layfield searched for weeks and failed to find. It says in one word so much that we wished to say—that you cannot raise taxes except by lumps, and that makes it very unaccountable. So it is a good addition to the large jungle of local govern-
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ment finance jargon from which we suffer, and is far better than that other horrible new word which has crept in—"GREA". In my view, it makes local income tax quite useless for the purpose. Added to this is the very important question of where you pay: where you live or where you work? A sales tax can equally be dismissed for the very good reason that the boundaries between our authorities are so very close in these Islands, and anyone who has seen the liquor stores on the boundaries of American states where, within five yards of the boundary, everybody is selling liquor in the cheapest state will realise what a nonsense this can make.
It is absolutely vital, after equalisation by the Government for the disadvantages in the values which we are taxing people, that the electors can discern the expenditure of one authority relative to another. I do not think this happens at the moment. I go on further, and I would say that it is quite impossible, if we are to have perceptibility, that one authority should precept upon another authority—the county or region in Scotland, precepting upon the district. Therefore they have two separate sources of finance, one for each tier of local government. I personally believe that a reformed rating system is capable of supplying the majority of the needs in local government of the higher-spending tier—again in this case the counties and regions and, in the metropolitan areas, the metropolitan districts.
I suggest that the following reforms should be looked at most carefully, as they would make the rating system much fairer than it is now. First, there should be capital valuations as opposed to rental valuations, and this has already been mentioned. Also there should be more regular revaluations—the present Government have dropped them altogether, but it is noticeable that they still continue in Scotland. Thirdly, there should be the gradual elimination of the domestic rate relief, since it blurs the effect of rates on electors and puts the burden more heavily on the industrial sector. It is notable that the domestic rate relief is not really necessary in Scotland, and in Wales it has just been halved. Of course we should continue a system of rate rebates for the less well-off, which is at present funded 90 per cent. by central Government and I think that should be continued as a political decision by the Government of the day, although the process of reclaiming your rates is quite unnecessarily complicated.
It is then open to the Government to partially de-rate industry, thus shifting yet further the burden on to the shoulders of the electors who actually use the services. The extent to which industry is de-rated will have to be a political decision, and the reintroduction of the business vote I do not think is the answer. If we are to continue to charge rates for industry and commerce there could be a way found to connect any de-rating to the relative prosperity of such industry, reviewed at regular and fixed intervals. No doubt it would be difficult but I do not think it would be impossible and, of course, I go on to add that in the context of non-domestic or industrial rates there has for long been no logical reason whatever for excluding agriculture, if all other industries are to pay rates.
But I believe there must be two provisos to this suggestion. First, rating must be confined to agricul-

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tural buildings and not land, because land is the raw material of the industry. Secondly, such re-rating should be compensated for, at least partially, by lessening the capital gains tax burden which falls particularly heavily on the agricultural industry at the moment. The lower spending tier—in England the non-metropolitan districts or the metropolitan counties —therefore would need another source of income, so that the electors could then see where their taxes were being spent.
Of all those systems mentioned in the Green Paper I believe the poll tax, or conceivably some form of pay roll tax, seems to be the best if we could somehow overcome the major snag that it is a tax on voting if the electoral roll is used as a base. I do not believe it is impossible to find a way of doing this. This is not the time to explore the details but I think that a poll tax, fairly based, would be the best possible source for the second tier. This is an option which I am certain that my noble friend Lord Sandford will mention later, and he will say that the rates should remain for the lower spending authority and the poll tax for the higher spending authority.
This is again a matter of political judgment, but there should be two separate sources of taxation for two separate tiers of local government while we continue to have those. The average sum needed for the districts at the moment to fund by poll tax would come to approximately £25 per head per annum. I do not think that would be regarded as a crippling tax and it would be highly accountable and perceptible, and would do something to meet the genuine criticism that all rates fall on the occupier of the house and not on the other wage-earners who live there.
Then there is the principle that local government should not pay for that over which it really has no control, such as grants for higher education and—although I realise it is a controversial matter—the police. Secondly, there is an even more controversial suggestion that at least part of the very substantial bill for the salaries of teachers (which form a very high percentage of local government costs) should be taken over by central Government and negotiated nationally, as they now are. But of course this means that the Government must recognise that education remains a local service, and nobody in the local government world would trust a Government of any colour to stick to their promises.
A major problem is that almost any system we may suggest would put London in a more or less favourable position as compared with the rest of the country, but I do not think that this is a reason for doing nothing. It must be necessary to do something different for London; it is the capital city and it requires a special area of study, in the same way as Parliament legislated quite separately for the reform of local government, and created the GLC by a different Act of Parliament. It is not for me to pursue the details of that today, but I think it would be perfectly possible to consider London as a special case, if only to deal with the very serious problem of London Transport, of which your Lordships are well aware. At the same time, one must ask whether the GLC is necessary any more.
It is difficult to cost these proposals, because there are so many political decisions inherent in them,
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but I think they would probably mean—and I recognise that they would mean—a significant rise over a period in the cost to the domestic ratepayer. Of course, that is not popular, and never would be, but, as my noble friend Lord Boyd-Carpenter has said, no tax is popular, nor should it be. It is worth noting that, at this moment, the average domestic ratepayer throughout the country—and we know how averages can be misleading—pays about £4.50 a week for the services that he gets. I believe that to be the cost of 90 cigarettes or thereabouts, for which he gets education for as many children as he can produce, the roads, the police force, the fire brigade, the social services and so on. I do not think that that can be regarded as bad value for money. So a slight rise over a period, which would be accompanied by an equivalent reduction in general taxation, would not be the wrong thing to do.
I believe it is vital to move in this way, if we are to preserve our local democracy. I very sincerely hope that the Government will start to do something about these problems, and that we shall not have another Green Paper in five years' time. It is absolutely urgent that we take action now, with all possible speed, because we cannot go on in local government as we are doing now, which threatens to lose us the entire system.
4.35 p.m.
Lord Brooks of Tremorfa: My Lords, I echo the grateful thanks which have already been expressed by previous speakers to the noble Lord, Lord Boyd-Carpenter, for introducing this debate. He was certainly right when he said that this House has within it a great deal of local government expertise. Indeed, that expertise has already been demonstrated by the speeches of my noble friend Lord Mishcon, the noble Baroness, Lady Stedman, and the noble Viscount, Lord Ridley. But, of course, all this experience presents us with a grave danger of too much repetition and I shall try to be as brief as I possibly can.
Having established, as its starting point, the basic premise that there is widespread discontent with the rating system, the Green Paper Alternatives to Domestic Rates develops three major themes. These are, first, improvements to the existing domestic rating system; secondly, alternative forms of local taxation and, thirdly, the assignment of Government revenue to finance local authority expenditure. It is interesting to look at these alternatives, in the light of the conclusions of the committee of inquiry into local government finance, under the chairmanship of Sir Frank Layfield.
The Layfield Committee identified as the single overriding consideration the need for a clear decision as to whether control of local affairs should continue to drift towards the centre, or whether steps should be taken to ensure that a local autonomy was retained and strengthened. To achieve this end, the Layfield Committee considered it vital that the level of Exchequer grant to local authorities should be reduced and suggested, as one means of achieving this, the introduction of a local income tax to finance a significant proportion of local expenditure.
The argument of the Layfield Committee and of the local authority associations, who seek to protect the

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autonomy of local government as it has developed over the centuries in this country, is founded in the belief that many services can be much better run at the grass roots level, rather than being subject to central decisions and dictates. If there is to be any real degree of local interest in these services, the funding of them must, of necessity, be at the discretion of locally elected representatives. Without this, services will rapidly become subject to rule and regulation by civil servants in London, who would prescribe standards of service for which Government funds would be made available.
The Layfield Committee clearly laid out in their report the way in which the progressive increase in the proportion of expenditure met by Government grant has tended to influence the extent to which Whitehall found it necessary to intervene in the provision of services. The Layfield Committee also made the point that, because this had been done in a progressive fashion, the methods being used by Government to achieve this influence had not been designed for the purpose and, therefore, did not achieve it to any satisfactory extent.
The facts about the proportion of expenditure met by grant are sometimes a little difficult to establish. In 1982–83 in England, grant will constitute about 56 per cent. of net relevant expenditure, whereas in Wales it will still provide about 72.5 per cent. of this expenditure. However, net expenditure conceals the fact that a significant proportion of spending by local government is met by fees and charges levied on those who use services. Some of these fees and charges are being fixed at an economic level. Something like one-quarter of the gross expenditure of local authorities on services other than housing is met by fees and charges, and one means of further reducing the extent of Government in local authority finance would be to release the controls which are still operated on the charging freedom of local authorities.
The improvements to the domestic rating system which are identified in the Green Paper have much in common with the proposals of the Layfield Committee. Layfield made it clear that they could not see that it would be possible to continue operating the domestic rating system on the basis of notional rental value, since the evidence on which those values were based was becoming tenuous in the extreme. The proportion of houses on which a true market rent, as opposed to a local authority rent or a controlled rent, is paid, is minimal and there are many areas throughout the country where there is no genuine rental evidence in respect of many types of property. Although it would cause a degree of upheaval when first introduced, capital valuation would have the considerable advantage of being much more readily recognised by ratepayers, and would probably be more readily susceptible of regular reassessment. Raising some £5,000 million, as it does, it is difficult to see any circumstance in which the domestic rating system could be abolished.
The Green Paper identifies three significant local taxes which it considers might be a practical proposition, either as an alternative or as a supplement to domestic rates. The local sales tax and local income tax both have the major disadvantage of being highly complex to introduce, so that it is unlikely that either could be in operation before the 1990s, at the very
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earliest. In respect of local income tax, too, the opposition of the Inland Revenue to any move in this direction must create a major problem. For the local sales tax, there is the added problem that it may very well be contrary to the requirements of the EEC.
The third form of local revenue which is mentioned is a poll tax, and although this, too, has disadvantages, not least the possibility that it would be seen as a tax on the right to vote, it has some advantages, not least the possibility that its collection could be linked with the collection of rates, since most local authorities now maintain their electoral registers on the same computer on which they maintain the rating system. A poll tax might get over the objection that many of those who vote on the level of provision of local services do not pay directly for that provision.
The Green Paper does not deal specifically with non-domestic rates, but it is clear that there is a considerable pressure for some form of limitation on the extent to which non-domestic rates can be increased, while those who pay them have no direct vote. One possibility here might be to say that non-domestic rates could be levied only at the rate of the grant-related poundage at grant-related expenditure, which is the basis of the new block grant system.
To sum up, although the Green Paper does not make any firm proposals, it could he deduced that the authors favour the possibility of retaining an improved and modernised domestic rating system supplemented by a poll tax at a modest level which would ensure that all voters were required to contribute to the cost of local services. For my own part, I would support a relatively simply change from the present notional rent value to a system of capital valuation. This was the method most favoured by Layfield and would have the least harmful effect on local government and local democracy.
4.41 p.m.
Lord Thorneycroft: My Lords, the whole House will agree that this is a very valuable debate—all the more valuable for the balanced and very able way in which it was opened by the noble Lord, Lord Boyd-Carpenter, and for the quality of the contribution which those experienced in local government, like the noble Viscount, Lord Ridley, the noble Baroness, Lady Stedman, to whom I listened with interest, the noble Lord, Lord Sandford, and many others will have made. It will shorten and simplify my argument if I say to the House what is already known to my noble friend Lord Bellwin: that I have consistently opposed the idea that the abolition of domestic rating is a sensible objective to take. The right objective to take is the improvement of local government and the finding of a sensible solution to its finance.
The reasons for that attitude are twofold. First, it is not wise to abolish something unless you are quite clear what alternative you have to put in its place. Anybody who has studied either the Kempe Committee Report of 1911 or the Layfield Report and, indeed, anybody who has read the Green Paper will have come fairly clearly to the view that there is no very obvious alternative. Indeed, having read those reports one understands why rating has existed since 1600 and why it looks as though it may go on, at least in some form, for a period ahead.

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My second objection to that approach is that the complete abolition of domestic rating would quite obviously have to be accompanied by, effectively, the abolition of industrial rating. We could not conceivably leave industry, which is complaining enough already, to carry the burden of anything which was then imposed by the local authorities upon it. In that case the total amount of money to be raised from somebody would be of the order of £11 billion. It is the equivalent of twice the tax revenue from North Sea oil and it begins to get slightly outside the realm of possibility.
Perhaps I could simplify the argument by saying that there is one way in which rates could be abolished: by taking the responsibility for raising revenue away from the local authorities and putting it into the hands of the Treasury. I admit that that is an over-simplification of most of the suggestions, but quite a number of them go a long way in that direction. In my judgment, it would be a very costly thing to do. It would make a nonsense of tax reductions as a principle of policy. But I do not think that the argument against it is money. The argument against it is a deep constitutional argument.
He who pays the piper calls the tune. My noble friend Lord Boyd-Carpenter said that those who spend the money should have the responsibility, and the unpopularity, of raising it. There is great force in that argument. Indeed, he went further: It may be that the central grant is already too big for the purposes of a really effective and perceivable responsibility. Therefore it would be wrong to turn to central financing, and I reject it.
Obviously I am in favour of examining the various alternatives as a supplement to rates. By all means let us look at a poll tax. I, like the noble Viscount, Lord Ridley, do not have overwhelming objections to a poll tax—though not to the £100 which is the total amount necessary for the removal of domestic rating. But it is arguable that it is regressive and that it is based on voting. I can see that one could use arguments against it. But one could also use arguments for it: that if you want it to be perceivable it has to be a bit regressive and it has to be recognised by those who vote. But at least it is a form of tax which, as part of the system, might be examined. With the noble Lord, Lord Boyd-Carpenter, I share some doubts about some of the other forms of tax which have been suggested. None of the alternatives which have been described would in any way provide an alternative to a large sector of revenue for local authorities having to be found by a domestic and industrial rating system. My noble friend Lord Bellwin will probably agree with that. So I would drop the idea.
I welcome the title of this Green Paper. It is not about the abolition of domestic rates. It deals with the reform of the rates. Reform of the rates and finding ways of discounting the rates where there are fewer people in the household are possible lines of examination, but we should not take their abolition as an objective.
May I add two points. As the noble Lord, Lord Boyd-Carpenter, has said, this is, in a way, about more than the abolition of domestic rates. My first point is that the objective should be the maintenance
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of local government in this country. The House of Commons is an important place. It is the centre and heart of the government of the United Kingdom. But it is flanked at one end, and I hope it will continue to be flanked, by a second Chamber, here in the House of Lords, which plays a valuable part. I happen to think that it is probably playing a valuable part at this moment in a debate of this character. It is flanked on the other side by a huge network, which has existed in one form or another for centuries, of local government and local administration. It is of immense importance that those various parts of our constitutional system should be preserved. This is infinitely more important than the details of the discussion about rates and the rest of it. Therefore, I should like my noble friend to assure me that the preservation of an independently financed, widely democratically used system of local government is a major purpose of Her Majesty's Government.
My second point relates to finance. I should like to touch upon something that the noble Baroness, Lady Stedman, said about it. I do not know that I would go quite so far as she goes about the role of central and local government finance. The centre must always have a great deal of interest in what is being spent. Certainly, I cannot see that it is possible to have an independent system of local government with the centre claiming to control in every detail what is being spent there. What are people voting about in local government if it does not affect spending in some sort of way? I do have some feelings on that subject. Sometimes, in the newspapers and in Whitehall, local government spending is talked about as though it is exactly the same sort of thing as every other sort of spending. In some senses it is, but the Government already effectively control capital expenditure by local authorities, so far as I can see, and, so far as current expenditure is concerned, I am against high expenditure, particularly at the present time, but high expenditure that is directly matched by rates does not in my judgment increase the money supply. It has no effect on M3 and it has nothing to do with public sector borrowing.
Before we talk broadly about Government spending, I really do consider that serious, in-depth consideration of what we are talking about would be very valuable. I believe we should then come to the conclusion, or might do, that Governments cannot control every detail. Governments may seek partly or powerfully to influence what is happening in local authorities, but there is a limit to what they should otherwise do.
I have only two final observations. I agree that the system that we have has been widely abused. Systems are often abused. All my life, local authorities in one form or another have managed to subsidise a bit of transport, the children going to school, or the old age pensioners. It was left until quite recently to see the system so abused and abused on such a scale that there was a public outcry. There are some local authorities, although they are fairly few in number, of which noble Lords on all sides of this House would say that the power that they have at present is being abused; we would all agree about that. But it is a terrible thing if the abuse of some part of a country's institutions is to lead to the abandonment of those

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institutions altogether. That is to play into the hands of the enemies of the state, it really is.
What we should do is to try to ameliorate the position, exercise our influence, make some checks and balances—but fight all the way if we can to keep the broad basis of an independent, democratic government here available. I was brought up in the days of Herbert Morrison in London. I hope that it is not too controversial to say that I am horrified to see the gap between London under Herbert Morrison and what is happening at the present time. It is a measure of a drift to decadence which should not be allowed to influence us in the way in which we run local government.
It is always tempting at these moments to try to solve things by widening the argument and to say, "We could do it if we could reform the whole of local government." I have no doubt that anyone looking at local government today could think of some reforms which might be usefully made. But I would say just one word of caution. In constitutional terms, we have only very recently reformed local government. It takes years for such reforms to settle down. I am not saying that we should change nothing, but that, in the middle of a situation in which the system is badly financed, we should not start other major reforms which will sweep in popularity with the Welsh, whip in a few votes from the Scottish Nationalists and talk about regionalism in Yorkshire. We have enough on our hands without taking that on as well. Let us try to solve the problems we already have.
If ever a debate gave a government a chance, this one does. I have never heard a House so unanimous in its desire to improve local government; one in which there was such an absence of partisan argument; or one in which no one is trying to score points against anyone else. Do not let us hear about objectives of abandoning the rating system. Let us talk about the great things and about the opportunities for local government, for the service which all these men and women throughout the country can give, and let us try and get right the relationship between the centre and local government. Then, we shall go down as people who are making a contribution to the future of this country.
4.57 p.m.
Lord Sandford: My Lords, I am grateful to the noble Lord, Lord Boyd-Carpenter, for introducing this debate, and I must express to him my personal thanks for the compliments he paid to my noble friend Lord Ridley and to myself about our experience in local government. In the case of my noble friend Lord Ridley, that compliment was entirely justified—but it is less so in my own case. However, my experience does go back to 1963, the year mentioned by the noble Lord. At that time, I was serving as the chaplain to the rural district council of St. Alban's. I took advice on how to fulfil this role and I was told, "You look at the mayor, you look at the councillors, you look at the officers—and then you pray for the people of St. Alban's." Today, I would add that one looks also at local government finance, and prays for the people of St. Alban's.
We were dealing with this subject at the end of last year, when my right honourable friend the Secretary of
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State for the Environment came to another place on 16th December and made the statement to which the noble Lord, Lord Mischon, has already referred. On that day, with characteristic common sense and flexibility, my right honourable friend withdrew the Local Government Finance Bill No. 1. In the course of doing so, as the noble Lord, Lord Mischon has said, he restated that Her Majesty's Government would not just reform domestic rates but would make progress with their commitment to the "reform of the whole rating system". That indeed, is what must be attempted.
As the noble Lord, Lord Mishcon, also said, that takes us back to the Layfield Committee report: the Layfield Committee was set the task of reviewing the whole system of local government finance in England, Scotland and Wales. As my noble friend, Lord Thorneycroft has just reminded us, that involves initially the primary, basic question of whether we want local government or the slow drift and easy slide to centralism—which has already gone a good deal further since then— to continue to the point where, as the noble Baroness, Lady Stedman, said, we have virtually no local democracy left at all, but have nationalised all our local services?
The reason why this drift goes on is because to reverse the trend is extremely difficult. It requires a new, sustained commitment, sustained over many years, to shift in the other direction. Although that is the fundamental, radical and basic change needed, I personally welcome this Green Paper because it does two things. First of all, it opens up the topic for discussion, and we can focus on the specific points in it. Secondly it provides us with an opportunity to make a start on the process of a more radical reform on a broader front in due time. So I would say this is a very timely debate, and it does enable us to engage ourselves at the outset of what I hope will be a long haul back to a saner situation.
My Lords, a reform of the domestic rates as a start is, I think, an apt point to begin, because the first step in seeking to defend local democracy against this slide to centralism involves a look in the first instance at this system. As has already been said, in the rating system, we have not a bad system, but the best system that anybody has yet been able to devise, a really local system, a system which is cheap to collect and administer, hard to evade, yet certainly capable of further improvement. I would like to say, and to confirm to my noble friend, that the 331 members of the Association of District Councils, both the councillors and the officers and their respective Members of Parliament, are all hard at it trying to see what agreement can be reached among them as to the kind of changes in the domestic rating system they would like to see. But it is already clear—my noble friend Lord Thorneycroft has just said as much—that this rating system is greatly overburdened and has been grievously abused, and, as my noble friend Lord Boyd-Carpenter just said so graphically, it is indeed creaking at the seams.
So we have to go back to Layfield. The first task, as he and his committee recognised, is to lessen the burden on the rating system at the same time as we seek to improve it. My belief is that one of the ways to do that is to use the rates, a good system, to support the

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tier of lower spending authorities, something which the Layfield Committee identified as a useful option. The latest calculation we have made in the Association of District Councils is that in England, at any rate, district councils throughout England could carry out their present functions with either two-thirds of the domestic rates, or two-thirds of the non-domestic rates or about one-third of the two systems of rates combined.
Layfield also showed that rates, even if both domestic and non-domestic were combined, would never on their own be able to support the tiers of high spending authorities, the authorities which carry the education services, social services and expensive items like that, and that those tiers would always need additional support of one kind or another. They would need another local source of income because of the known defects of any system of central Government grant. At present they have to rely, as we all do, on the irksome system of rate support grant, from which we all suffer. For this tier, the high spending authorities, it is a question, therefore, of reforming or replacing that system of central Government rate support grant. For the tiers of lower spending authorities, primarily the shire district councils, it is a question of removing the rate support grant system altogether and allowing members of that tier to rely solely and wholly on rates, but needing for their present purposes to rely on only a proportion, or a far lower demand, thus reducing the burden on the rates.
So it seems to me that we might do worse than follow Layfield along these lines: first of all, take a firm decision and make a sustained commitment to the defence of local democracy by a decisive move to local accountability and a halt to what is virtually the nationalisation of local government that is going on at the moment. Secondly, seek a real limitation of the burden which is being placed on the rates system and is turning a good system into a bad system, by allocating it mainly in the long term to the lower spending tier of local authorities. Thirdly, undertake a thorough reform of that rating system, starting, as the Government propose, with the domestic rating system, but not hesitating to go on, as my noble friend Lord Boyd-Carpenter has recommended, to a thorough look at the non-domestic rating system as well. To move to an entirely new system of local taxation for the high spending tiers of local authorities, local income tax was recommended by Layfield but, I notice, is not now recommended by my noble friend Lord Ridley, with temporary and provisional alternative support to the present system of grant in the meanwhile, particularly in respect of teachers' salaries, police services and so on.
Anything alone these lines would pose a considerable challenge to the lower tier authorities, and the shire districts in particular; they would be the first to have to demonstrate the advantages and the benefits, but also the challenge, of undiluted, unprotected local accountability and undiluted local democracy and the rigours and the unpopularity of real local choices about financial priorities. r have no doubt that as a result of a decision like this there would be wide variations of services, more charges for services; many different ways of doing things would arise and develop,
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and the usual demands for Ministers to intervene in some way or another would undoubtedly be intensified. But my own very strong belief, and I believe it is shared by quite a few others, is that this is the way, or some other way like this, in which we must go. My strong belief is that to turn away because the task of reforming local government finance is a difficult one is tantamount to admitting that local democracy is too difficult for us, and it is tantamount to surrendering too much of our lives to bureaucracy.
5.7 p.m.
Lord Sefton of Garston: My Lords, while I think that this House needs to congratulate the authors of this Green Paper, even though it has been suggested that they missed what to some is a very important part of the question of rating in this country, i.e. non-domestic rating, I find in Chapter 10 that not only did they not ignore the question of non-domestic rating but also made some rather revolutionary suggestions as to how that problem should be tackled, covering at least two full pages in doing so. One of the suggestions is a single national non-domestic rate poundage which would apply equally to each local authority. I mention that only to show that in fact the authors of the Green Paper did deal with that problem.
It raises the question of whether or not the complaints being raised by that sector of our community have a real base, and I do not believe they do. If one looks very closely at the work of councillors and local government officers, and at local government itself, in major conurbations, at the jobs they have to tackle and pay for, I think one could without detailed research—and excepting education, and even parts of education could be included—say that most of the work of local authorities arises from, or is concerned with, the non-domestic ratepayer. Certainly the major problems in a place like Merseyside are occasioned by, and have been occasioned by, the impact of an industrial area inside Merseyside. I think it would be true to say that the whole of the problems faced, on the question of slum clearance, congestion, both traffic and otherwise, in fact fall at the door of the private sector in industry. Local government have to resolve them. I do not accept for one minute that there is any undue imbalance in making the non-domestic ratepayer pay for those services.
The other reason advanced for changing the rating system concerns the question of equity. I have heard it suggested that it is wrong perhaps that the head of the household should be responsible for paying all the rates: the complaint is that only the ratepayers pay. But if we examine that proposition a little closer, is it really true? Do we really suggest that, within a family residing in a house, the cost of providing that house is not shared equitably among the members of the family? Is it suggested that by the introduction of some kind of a regulation or law the "fair shares" payment inside that family will be rectified?—of course it is not. As an expenditure rates are no different from the expenditure on rent and food. My experience tells me that they are shared very amicably and very fairly by all members of the family. Even if the residents inside a particular house are not members of the family and are only lodgers, I suggest that they will not remain in that house very long if the ratepayers in

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the house discover that in fact they are not paying their fair share of the costs of keeping the house. So I do not accept the argument that rating is in some way a wicked, iniquitous form of tax.
I think that local government should offer its very sincere congratulations to the noble Lord, Lord Thorneycroft. When he spoke about preserving the independent local government structure and the necessity not to go in for one fell swoop of reorganisation in matters like this, but to allow it to evolve slowly and carefully with the principle in mind of what we want to achieve and retain, he said all that the local authorities and the local authority associations should have been saying for the last 30 or 40 years. Indeed, the fact that over the last 30 or 40 years the local authority associations have not really tackled the problem of the relationships between local government and central Government has meant that local government has been considerably weakened and has seen a diminution of its powers that should never have taken place.
We cannot in my opinion possibly talk, as my noble friend Lord Mishcon said, in isolation about rates or about resources for local authorities, without talking about the whole complex problem of local authorities. Yet what has happened throughout my experience of 30-odd years of local government? Repeatedly we have discussed the matter in isolation. Even when we discussed the question of local government reorganisation we again did it in isolation from the very real problem.
One of the major problems facing local and central Government today is the question of law and order. Is anybody going to suggest that the present system of maintaining law and order is having a better result than the system that obtained pre-1964? If he is, then he has not any experience of Merseyside, Liverpool, Brixton or Bristol. The real truth is that the present system of preservation of law and order is not preserving it as well as was done before 1964. Indeed, 1964 was, in my opinion, the year that posed more danger to a vigorous independent system of local government in this country than any other year: it was the year of the police amalgamation. It marked the first step in the centralisation of police forces and along that road we arc now seeing some of the problems that have arisen—not only of course in the police.
The noble Lord, Lord Boyd-Carpenter, referred to the suggestions being made that perhaps there would be a solution in the gathering together of resources to make the whole cost of education go to central Government. Only yesterday in the Daily Telegraph we saw the suggestion being made that perhaps that is the way in which transport should go. Certainly the police have not stopped where they are at present—oh! no, because technically, from a professional point of view and looked at from the point of view of the police service, the present arrangement of police authorities is not a good one. No chief constable will say that the organisation of the police force as at present constituted is a good one. Perhaps I may give your Lordships one single example: within Merseyside the Cheshire police authority earlier penetrated right into the social and economic area of Merseyside in the form of Ellesmere Port. So the desire and the argument for a
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further extension of police powers over a more logical area, looked at from the point of view of the police authority, will grow.
Today we are debating the question of local government finance at a time when not even one local authority association has made up its mind as regards what it wants to do about it. They are still considering the matter. They have been considering it for a long time because fundamentally the problem which the country faces is that nearly everybody seems to be looking at the situation from the point of view of a vested interest. There is no real desire in the local authority associations today to look at the problem from the point of view of the community on the basis of having a proper relationship between central Government and other forms of government. Still to use the words "local government" is to use a misnomer.
Viscount Ridley: My Lords, will the noble Lord give way? I think that the local authority associations spend their entire time debating the relationship between local and central Government and they are deeply worried about it, whichever party is in power.
Lord Sefton of Garston: My Lords, the local authority associations may discuss this. I can give a few examples where local authorities, which are the constituent members of local authority associations, put their own vested interests well before the interests of the community at large. The 1964 Police Bill gave us a very good example in Merseyside, where the choice as regards which local authority the minutes of the police authority should go in front of lay between the Bootle authority and the Liverpool authority. What happened?—it was suggested that the appropriate local authority for those minutes to go in front of, in order that the local authorities would be well-informed about the activities of the police authority, would be the Liverpool City Council because that was the larger council of the two. Bootle vetoed it because the Bill said that unless there was perfect agreement it could not happen. The consequence was that the minutes of that police authority never came in front of any local government body.
That example can be repeated over and over again. The reason why the district to which I have just referred, Ellesmere Port, was kept out of the Merseyside conurbation in a local government sense, was purely because the interests of Cheshire County, rather than the interests of the Merseyside economic region, were predominant. One has only to sit in company, as I have done, with district councils and county councils in the metropolitan areas to realise the bitterness which exists between the two of them because they are both fighting for the preservation of power. In a situation like that, someone else must look at the overall problem and decide what to do.
My opinion is that it would be foolish and wrong for the Government to bring forward any proposal for changes in rating at this stage. I think that the only way in which it can be done is to bring it forward in the context of, "Just what do we expect of government?". There must be a recognition inside local authorities that they cannot assume complete freedom to spend publicly-raised money as they want on every single object that they want. I think that somehow or other we must establish the principle that the econo-

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mic affairs of the nation are rightly left to central Government and that when, in fact so-called local government begins to handle problems that impinge tremendously upon the management of the national economy, there must be a new form of government established within that area.
This inevitably points out the necessity to have the type of government that matches the problems that are faced in that other area. If ever we are looking at the need for anything at all, we are looking at the need for a regional form of government which would handle the problems associated with that particular area. If local government is not prepared to examine that problem and come up with the answers, it will be the main loser. There are several services—water in particular—which have been taken out of the realm of local government purely because local government would not reshape itself in order to handle the problem. The police is another service. If the impact of educational expenditure upon rates and upon the national economy continues to be as high as it is, it will be only a very short time before education is taken out of the hands of local government. The fire service will follow that. We shall have a whole succession of eliminations from the field of local government which, at the end of the day, will reduce local government to a cipher.
In fact, this country needs a new look, not at local government in isolation from central Government, but at government. I do not believe that in its present form this House should remain in existence. I believe that there is a need for a second Chamber for I do not think that at the moment the other place is running this economy. I do not believe that it is fitted to run the whole vast arena of publicly-owned utilities and publicly-owned organisations. It cannot possibly devote the time to them.
We need a second arm of Government to look at that problem. There is no reason at all why a second Chamber could not be established in some form or another in order to manage the involvement of central Government in the localities, which is where it is needed. Perhaps I could give one last example, again, from Merseyside. As recently as 1945 when Merseyside ran its own electricity undertaking, there was no problem; and, measured in terms of the development of local government, that is a very short period. There was no problem because it was profitable; it served an area which was easily defined. But it did not serve the whole of the social and economic region upon which Merseyside depended. There came a need to establish electricity lines into the hills of Wales, which were an integral part of the Merseyside conurbation.
Therefore, it became necessary for Government to change the form in regard to electricity distribution, and Manweb was established. Manweb is no longer related to local government, and the control of Manweb is practically impossible from a central Government point of view because liaison takes place only once a year, at Budget time. It is a very rough method of controlling a publicly-owned asset. The House of Commons never bothers itself with it; the House of Lords cannot effectively bother itself with it. We need to establish a new relationship between central Government and the localities, and I consider that the main
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people who should be playing the role in re-establishing that new connection are, in fact, the local authority associations.
My plea is: leave the rating system alone; leave the financing of local government alone; but for the sake of the interests of democracy in this country, the local authority associations should, at this moment, be sitting down together, looking at the powers that they have lost and looking at the way of achieving a return of those powers to where they belong, inside the locality.
5.24 p.m.
Lord Mottistone: My Lords, I hope that the noble Lord, Lord Sefton, will forgive me if I return to a debate on my noble friend's Motion rather than the subject upon which he has been addressing us. I am, indeed, grateful to my noble friend for this debate. I think that it is most timely and, if I may say so, he introduced it with his customary skill. I hope he will forgive me and that, indeed, your Lordships will forgive me, if I leave before the end of the debate to keep an appointment, which I am unable to avoid. I hope also that my noble friend Lord Bellwin will forgive me.
I have to declare an interest in that I am advised on what I have to say by the CBI. Although Chapter 10 of the Green Paper says that it will not go into detail about non-domestic rates, I agree with the noble Lord, Lord Sefton, that it then proceeds to go into quite a lot of detail. That is probably the only matter on which I agree with him, but I certainly agree with him on that point. Under the heading of "Non-Domestic Rates", I would invite your Lordships' attention to paragraph 10.1, which gives the proportions of contributions to local expenditure made by the Exchequer, by non-domestic rates and by ordinary domestic ratepayers. From that one can see that the non-domestic ratepayers pay appreciably over half of the locally-raised rates.
Of course, I fully admit that it is a matter of opinion precisely what the detail is, but I would suggest to your Lordships—notwithstanding what the noble Lord, Lord Sefton, said—that the services that are gained by business people in a community are nothing like half the services available; they are much more like a quarter. However one looks at it—and I have been studying carefully a paper produced by the CBI which shows how the services are used—it really looks that way.
The noble Lord mentioned education as possibly being an area which is of less value, shall we say, to the business people than it is to ordinary householders. That is arguable because, of course, employers require educated people in a district in order to be able to employ them to do particular tasks. Perhaps I may tell your Lordships a story of how people educated at the expense of a local authority are not always quite so good as they should be. I remember about 10 years ago dealing with a business premises in one part of England in which the local personnel officer told me that he had tremendous difficulty with girl employees in an electronics factory, because they did not seem to understand numbers. These girls were being asked to wind 100 ohm resistors and that sort of thing, and they did not know the difference or the significance between 100 and 1,000.

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The personnel officer went to the headmistress of the local school and asked why this was. She said that the trouble was that from the age of 14 these girls discovered something splendidly new which they had not noticed before. Noble Lords should not forget that I am talking of 10 years ago, so perhaps this happens a little earlier now. This new thing was called "boys". She said that they sat in class just thinking about boys and did not listen to what they were being taught. Therefore, they left school—and there was no examination—unable to tell the difference between the figure 100 and the figure 1,000.
My friend the personnel officer thought that he might be able to do something about this. He took these girls into class and gave them lessons in arithmetic. It was quite remarkable how quickly they picked up all that was necessary in order to be able to do their jobs perfectly satisfactorily and to understand what was being talked about. The reason that they could not do their work was that they had been sitting in class thinking about boys; the noise went on in the background—or so the headmistress said—and the information was there, but it was not ready to be plucked out because they were thinking of other things.
In this respect I am saying that the business concerned had to re-educate these people in order for them to reach the standard required, and it was a pretty elementary standard at that. Therefore, it is not fair—as some people have said—to say that businesses are irresponsible in how they deal with these problems; nor is it fair that they should be expected to bear the whole cost of an educational system which does not produce what they need. One could pursue those arguments further, but, to return to the question of the relative share of the rates, there is no doubt that the business rate is proportionately higher than it should be.
The question is, what to do? I would suggest to your Lordships—and I think all noble Lords who have spoken have agreed on this point—that the present domestic rating system is the best that we can evolve as a fundamental and as a basis for the production of rates. The CBI agrees with that, as a basis. Indeed, there are the constitutional reasons referred to by my noble friend Lord Thorneycroft, and the practical reasons that were drawn to our attention by the noble Lord, Lord Mishcon, in paragraph 4.5, to underpin that argument.
However, that being so, the question is then, how are we to redress the balance between the contribution made by business premises and that by domestic ratepayers? I would suggest that it is not reasonable for householders, and indeed the taxpayers, to be expected to bear more of the share of the rates, or the share of the total local expenditure. This causes me to look to the other methods referred to in the Green Paper. Here I would agree with other noble Lords who have made the point that the local sales tax is a non-starter. It would have all sorts of deplorable practical effects on a day to-day basis. Local income tax really does not look good. Assigned revenue has, as some noble Lords have pointed out, the serious risk that it would have an indefinable effect on the balance of responsibility as between the local authority and central Government, and is thoroughly undesirable for that reason.
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It seems to me, however, that the poll tax has possibilities, and I think that other noble Lords have felt that too. This needs a good look at. If we are going to try to redress the balance between the domestic ratepayer and the business ratepayer, and not increase what the domestic ratepayer has to pay, it could be that if we introduced a poll tax to effectively reduce the share of the local contribution of the business contributor by about a half—we would not have to go to the figures mentioned in the Green Paper, but somewhere in that direction—it would have two advantages. Apart from the fact that it would help us to meet this difference, the poll tax would also suffice to meet a justifiable complaint—and I recognise a lot of the force of the argument of the noble Lord, Lord Sefton, in this respect, that in a lot of households effectively the rates are shared between the earning members of the population within the household, but this is not always so—that it is the householders who bear more than their share of the weight of the domestic rates.
It would be reasonable, therefore, to have a poll tax, which seems to be one which could be administered satisfactorily. It has been suggested that this would have difficulties and implications in regard to the electoral roll, but I would draw your Lordships' attention to paragraph 7.5 where, for a gross expenditure of, I think, £21 million throughout the country, it should be possible to keep these two separate. I am not sure that it would be necessary in any case, but clearly there must be some different identification between the two lists: one for electoral purposes, and the other for taxation purposes.
Whatever this may be, the important point that I should like to leave with your Lordships is that the present balance of contribution by the non-domestic ratepayer is unfair in relation to the services he obtains. Secondly, the way in which it is calculated has grown up over the years and definitely needs a look at all on its own account—this is not tackled in the Green Paper—to make a more rational approach as well as making a fairer one. If, as I believe it is, it is undesirable in any large way to change the contributions that are made, either by central Government on behalf of the taxpayer or by the domestic ratepayer, then I suggest that a poll tax might be a useful way of filling the gap.
5.36 p.m.
Baroness Platt of Writtle: My Lords, I welcome very much the initiative of the noble Lord, Lord Boyd-Carpenter, in moving for Papers on the problems involved in the system of local rates. Also, like other Members of your Lordships' House, I enjoyed the delightful way he introduced the Motion. We are a very adult democracy. We are described as the Mother of Parliaments. Perhaps we are also the father of local government. Local government has been at work in this country, as I have heard today, certainly from early times but perhaps nearer to its present form in the late 19th century.
It began to creak at the seams, and there was reorganisation in 1974. I welcomed that reorganisation on a two-tier basis because it meant the involvement of local councillors in the affairs of their community. Finance was not rationalised at that time, and ever

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since our problems have multiplied. There has been a great sense of uncertainty. Under the last Government there was a system of regressional analysis which was a mystery to everybody, and operated rather like Russian roulette: one was never sure who was going to be hit next.
The grant-related expenditure, in my experience, is better. It perhaps needs refining, with more emphasis on population and less on social factors, but even then there is no certainty. As chairman of a finance committee of one of the larger local authorities, may I say that there have been five possibilities of change in our grant-related expenditure during this present financial year, when above all what we need is stability. Of course, officers and members should be seeking economy throughout the year, but rebudgeting twice during a year is a waste of people's time and takes them off their proper task of performing the duties that Parliament places on local government.
I am glad that the Local Government Finance (No. 2) Bill has now taken out the question of supplementary rates—so far as I am concerned that is anathema—and that now the question of referenda has also gone. I also welcome the possibility that now there will be less changes in grant after a budget has been placed. My noble friend Lord Mottistone has spoken about the question of industry. The impact of a supplementary rate for industry has been particularly difficult, and in the same way the impact of rebudgeting in the middle of a financial year for a local authority is equally difficult.
There are fundamental problems: industrialists who are trapped under high spending authorities with no vote; taxation without representation. As many of your Lordships have mentioned this afternoon, that is not part of the remit of the Green Paper, although Chapter 10 explores ways of improving the situation. The idea possibly of an industrial de-rating, or a gradual removal, as my noble friend Lord Ridley has suggested, of the domestic element seems to alter the balance, and might be a good idea.
Another problem is that of the single person not using many services—perhaps a widow on her own—living in a semi-detached house, and in the other half of that house there are four wage-earners. Naturally, she looks with some resentment at the fact that they are paying the same rates as she is. Of course, if you look at it on a broader front, they are paying taxes which are part of the revenue of local government. Also, the question of payments for services is perhaps a lifetime one; one is at school, one is having children who will be at school, and of course everybody is using the roads, and that is one particular way in which industry especially wants to see a good road-building programme. We have the police and the fire services. The elderly widow who is on her own may have had a family who have now fled the nest, and she may later want home helps or to go into an elderly people's home. Thus, one must look at the financing of local government as a lifetime's contribution.
Another problem is the non-buoyant nature of the rate; this has been exacerbated by the fact the successive Governments have not revalued. Yet another problem is the fact of different rateable values for the same sort of house in different parts of the country, although the people who live in them may be negotiating the same
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national wage structure. At the end of Chapter IV are various suggestions for improving in detail the situation giving rise to those kinds of problems, and I hope the Government will look carefully at them. Certainly regular revaluation is important, as is rationalisation across the country. Then there is the suggestion that we might move away from a rental valuation, which is a very artificial thing, to a capital valuation, which at least can be subject to market forces. That is particularly interesting now, with council houses being sold so that we have a method of evaluating council house values.
As other noble Lords have pointed out, the Green Paper highlights another argument, quite apart from finance. It is the centralist-localist argument. It seems to me that assigned revenues—income tax collected centrally, the central control of education expenditure or of teachers' salaries—are creeping centralisation. I must emphasise that I do not argue with central Government setting policies to manage the economy as a whole. Obviously, that is their responsibility and they must carry it out; and of course central Government must legislate for the duties they place on local government, which they in turn must carry out.
Having said that, I must say that I am—and I am proud to be associated with my noble friend Lord Thorneycroft—quite unashamedly localist. There will be faults in any system, whether it be central or local government; any human system will be wrong in some aspects, and indeed people must make mistakes in order to learn. For that reason above all, we must not concentrate power; it must be spread. It seems to me that it is part of the adult nature of our democracy to share power, and that goes for parish, district or country, be they met. or shire. Many people serve in it, gather experience in doing so and protect freedom by so doing, and provide the nation with variety of provision. They are not remote; members and officers are met in the shops, are seen at local functions, and they can be got at. They can be telephoned and written to. They hold public meetings and they are certainly not faceless; they are criticised in local papers most weeks. Their council and committee meetings are open to the public and press and their minutes are in the libraries.
I wish to start to reply to my noble friend Lord Mottistone on the question of industry. I speak as a former chairman of education, now the chairman of finance of a large authority who have made great efforts to speak to industry and to involve industry in our education system so that the young people who leave our schools are fit for employment and so that our colleges for further education provide the courses that fit industry's needs. Indeed, when we were cutting expenditure, it was one of our industrialist chairmen of governers who particularly wrote to me saying how important our further education was to them that we should have modern equipment and modern courses to serve industry so that it might be allowed to flourish and contribute to the economic upturn of the country. That, therefore, is another way in which local government can co-operate with industry in the way it should.
It seems to me that, if we have creeping centralisation, the civil servant in room 53 will decide, and of course

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he will have changed his job before seeing the results of the policies he initiated. His children will not be at the local schools, which are at risk of closure, and in my view he does not know best. It is important to encourage local people of judgment and responsibility to serve and learn how to run the local services, carrying out the duty placed on them by Parliament. As noble Lords have pointed out in the case of the GLC appeal, they should hear in mind all the time their fiduciary duty to their ratepayers. Local councils have a pretty good record of controlling expenditure and, above all—and this is most vital—they are subject to the ballot box.
What are the answers at any rate to some of the problems? I put forward a few suggestions with considerable humility. The Green Paper is not very enthusiastic about any of the solutions and, as many of your Lordships have said, the Green Paper tends to come back to the rates, to the well-tried practicability of the system and its qualities from the point of view of accountability and financial control and which nevertheless, give a reformed domestic rating system a claim to consideration along with the other alternatives.
One of the strengths of the rating system is its perceptability. Because rate poundages are not buoyant and have to be reset every year, there must be a tendency for local authorities to consider very carefully the level of expenditure to be incurred when it is known that it will be expressed as a flat poundage to the local electorate, and that is a very important aspect which encourages responsibility. So I, like many other noble Lords, would prefer to keep a reformed rating system. It needs to be revalued regularly or else perhaps to be based on a capital basis, and certainly some refinements could improve it.
What else might go with it or be combined with it? Layfield recommended a local income tax and, at the time, I felt that was a good solution. But as Layfield pointed out in 1976, it would cost £100 million and would take an extra 12,000 civil servants to carry it out. That, as my noble friend Lord Ridley pointed out, has not been adopted by a Government of either party and therefore I cannot see much hope of its being adopted today. So, like other noble Lords, I move towards a poll tax, combined with reformed rates. I believe it is important that it should be only a proportion of the revenue needed. A poll tax would be highly perceptible, as the Green Paper says, possibly even more so than domestic rates. That should tend to strengthen the accountability of authorities to their electorates.
Like rates, a poll tax would produce a predictable yield. Also like rates, it would lack buoyancy and an annual re-setting of the tax rate would be necessary, and that would make the tax even more perceptible. The tax rate could be altered in comparatively small steps so that the yield would not be "lumpy", to take up a point made by my noble friend Lord Ridley; I am sure that is a fascinating new word we shall hear very often in the coming months. A poll tax could provided a stable and predictable source of income and would be readily adaptable for use in conjunction with an equalising Exchequer grant.
If a poll tax were combined with another tax, the rate per head could be much lower than the £120 per adult that would be needed to replace the entire
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present yield of domestic rates, perhaps £25 or £30. It is interesting to compare those figures with other lump sums. The average quarterly electricity bill is £43, a colour television licence is £46 and the vehicle excise duty on a car is £70 a year, for example.
Furthermore, the lower the level of a poll tax, the less the likelihood of tax evasion, and that seems to me to be an important matter, since it would overcome one of the great problems that I mentioned earlier: that of the widow on her own compared with four wage-earners in the house next door. They would be paying towards the services that they use, and I would hope that would mean that more people would vote for local people at local elections. Even in The Times leader one day it was suggested that people voted in local elections against the Government of the day. That does not encourage responsible local government, and the more people vote for their local councillors, the more they will obtain the services or the economy that they require, or a balance between both.
So I hope that these solutions will encourage that responsibility, and that men and women of judgment will stand for local government, whether as elected members, or indeed to serve as professional officers, because both are essential. If one takes responsibility away from local government, then the standard of people involved will inevitably fall.
As many of your Lordships have said this afternoon, in choosing alternatives to rates we must not bow to passing difficulties. Inflation is the problem that the Government are tackling, and when it is overcome rating will not be such a burden. I submit that we must create a stable and predictable financial base for local government and encourage members and officers of responsibility to serve. That method of finance should be clearly perceptible and result in accountability to ratepayers and, above all, should remain local.
5.52 p.m.
Lord Ellenborough: My Lords, there is indeed little doubt that the problems of the rating system are one of the top issues of the day, and I, too, am much indebted to my noble friend Lord Boyd-Carpenter for giving us the opportunity to debate this important subject. After listening to the 10 speakers before me I am rather reminded that the other day someone said that there are about as many schemes for reforming the rating system as there are for reforming your Lordships' House. If that is the case, perhaps it does not augur very well for reform of the rating system!
For many years I have been closely connected with one of the main ratepayers' associations, of which I am the president and hope that your Lordships will forgive me if therefore I speak on behalf of domestic ratepayers, in the belief that I understand many of their views. From my experience, I think it true to say that, whereas 10 years ago there were still many people prepared to defend our traditional rating system in both principle and practice, today it is becoming increasingly hard to find those who are prepared to defend it, though I must admit that it has indeed been defended by many of your Lordships in today's debate.
I have noticed the difference at ratepayers' meetings, in that whereas a few years ago meetings were rather

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sparsely attended by a few committed, mostly middle-aged or elderly people, now attendances are large. All classes and ages are present, including a great many and enthusiastic young people and their grievance and worry is directed against the existing rating system whereby far too much revenue is drawn from too few electors, many on fixed incomes, eroded by escalating inflation over many years, and many just outside the limits of the rate rebate system.
It is felt that the present system is regressive and anomalous. The occupants of two identical houses may pay the same in rates, although one house may be occupied by a single person on a low income making little claim on local government resources while the other contains three or four people with high incomes and using the services to the full. This is a point that has been mentioned by my noble friend Lady Platt of Writtle. Moreover, the present rating system shields too many electors from the financial consequences of their representatives' extravagance.
I feel that for far too long over the years there have been successive Green Papers, consultative documents, reports from official committees and so on. What is now needed is some action and some implementation of positive government policy. I would suggest—and I am fairly sure that this has the support of virtually all ratepayers' associations in the country—that two courses of action should be taken: an interim measure and a long-term commitment.
The first measure that we think should be taken, as an interim, though there are indeed objections in principle, is the introduction of a poll tax, which has received some support this afternoon. The obvious objection to a poll tax is that it is inequitable as between taxpayers with different levels of income—and that is the main objection to the existing rating system. However, a local poll tax would at least be a useful interim measure to spread the cost of local government services over a much larger number of residents than does the rating system. I would hope that such a tax could be introduced fairly soon, provided—and this is an essential proviso—that Her Majesty's Government agreed to implement it only as an interim measure after having pledged themselves to the introduction of a local income tax and the abolition of the rating system in the long-term.
Since a poll tax would be payable by every resident over 18 and by those actually in receipt of a minimum income—although there would be some obvious exceptions and inevitable evasion—it would bring into the local taxation net a very large proportion of those people (that is to say, non-ratepayers) who at present escape having to make any contribution to local services of which they make use. No doubt such a tax would be based on the electoral register and it might, therefore, be impracticable to identify those under 18 who are in receipt of earnings, but there are not very many of them at the moment.
There are, then, many objections to such a tax, but I feel that the present position is so out of hand that drastic action is needed, and while the unfair existing rating system continues, as presumably it must for many years yet, there can be little cause for real complaint by most people, for the payment of a sum which
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might be the equivalent of, say, the present television licence.
I now turn to local income tax. I believe that many people and organisations which have given thought to the matter now accept local income tax as a front runner for any fundamental reform. It is the only tax based on income as an alternative to the present system under which the amount paid by the occupant of a residence has become increasingly dissociated from his income, except in the case of the minority whose incomes are so low that they currently benefit from rate rebates.
Of course, there are people who have some kind of vested interest in the present system. For example, rather naturally some local government officers would prefer to continue the present tried and tested system—but, nevertheless, the failed and outdated system—from the viewpoint of ease in collection, rather than have responsibility for implementing a new system, and thus for overcoming the initial snags which inevitably would accompany any drastic change. There are also those non-ratepayers who would lose their present immunity from contributing directly to local government finance; that is, those who do not pay rates because they are not "statutory occupiers", although still entitled to benefit from the costly local government services provided for them.
As far back as 1974 the National Union of Rate-payers' Associations thoroughly examined all possible alternatives to domestic rates and came out in favour of a local tax based on a person's net income as calculated for the purpose of national income tax, because this would eliminate the need for the duplication of the main and the most difficult, time-consuming and manpower-using requirement of tax; namely, the assessment of taxable income. Ratepayers' associations, in the main, are still convinced that a local income tax is the only viable alternative to the domestic rating system, for it fully meets the requirements of fairness, perceptibility, accountability and elasticity.
On the subject of accountability, I would briefly mention the Layfield recommendation that counties should issue their own demand notes, which could of course be sent out together with the district council's demand notes. I feel that this is important so as to make it quite clear to the local taxpayer just who was responsible for spending the bulk of his money, and thus removing the odium which at present attaches to the district councils and, in London, to the London borough councils, who at present demand and collect the money for both the first and the second tier authorities. I would greatly hope that this particular recommendation might be adopted by Her Majesty's Government in any legislative proposals that may be put before Parliament as it is an essential link in the chain of accountability.
I rather feel that the administrative difficulties mentioned in the Green Paper are over-estimated. The Green Paper refers to problems associated with determining a place of residence if a local income tax applied. However, information on a place of residence is already required in the case of all persons who pay income tax, whether by making a formal income tax return or through PAYE. As for the collection of local income tax in relation to interest not taxed at source, there should not be any difficulty as where the amounts are

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not excessive it is done by deduction through personal allowances due to an individual and is thus reflected in the PAYE code number, which determines free pay. I would also point out that the Green Paper has overlooked the fact that the Inland Revenue staff required to implement a system of local income tax would be mainly at the clerical level, while the staff of valuation offices released as a result of the abolition of the rating system would be mainly qualified valuers on a much higher rate of pay.
As regards the timescale which is suggested in the Green Paper and which would be necessary to implement a new system, it does not greatly discourage those who have been pressing for a fairer system for so many years—even decades; I think my noble friend Lord Boyd-Carpenter mentioned at least two decades, going back some 20 years. I think it is a tragedy that so many years have been allowed to pass by while the pros and cons of rating reform have been debated and it has become obvious that the case for the abolition of the domestic rating system is so great. Against this background, the time-scale envisaged in the paper for the implementation of a new system is small in comparison and moderately acceptable to those who understand the complexity and size of the undertaking. I would have thought that a little determination could surely improve upon the Inland Revenue estimate of 1990. I very much doubt whether anything could be done until well into the next Parliament, so in any case it would probably be somewhere towards the end of the current decade.
Of course, no one likes paying taxes of any kind. However, if a national income tax is regarded as a fair and equitable way of raising a large proportion of national taxation it is indeed difficult to see quite why a local income tax should not be so regarded for the purpose of obtaining that part of the total cost of local government. My understanding is that local income tax works well in several countries, and it is therefore hardly a great innovation. It appears to work quite well in such countries as Canada, Finland, Norway, Italy, Sweden and parts of the United States of America. If it works satisfactorily in those countries surely it can be made to work here, where there is a much longer and deeper-rooted tradition of local self government.
While ratepayers' associations are strongly in favour of local authorities having a meaningful degree of self-government, I would mention that the National Union of Ratepayers' Associations supports the transfer to central Government of most of the cost of those services which are really, today, "nationally created". Today both the education service and, I would say, the fire service are really as much national services as are Her Majesty's defence forces. The cost of education accounts for about 40 per cent., or nearly half, of local authorities' expenditure, and there is really very little discretion left to local authorities in any important aspect of the service. If the cost of education and the fire service were, not altogether but mainly transferred to the national Exchequer, and reduced rate support grants of some kind were applied to the cost of the remaining local government service, then the total amount to be funded locally through income tax would be significantly reduced. Yet the basic principle that the level and kind of expenditure
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on truly local services should be decided locally in the light of local conditions and circumstances would be preserved.
It is obvious enough that such an important and far-reaching measure as the abolition of domestic rates and the substitution of a local income tax cannot be effected except after much thought and care. However, I would press Her Majesty's Government to set in motion a process which will result in the abolition once and for all of the totally discredited property tax known as domestic rates. My noble friend Lord Bellwin is not present at the moment, but I would remind him, as has been mentioned this afternoon, of the pledge in the Conservative 1974 manifesto, which quite categorically stated:
"Within the normal lifetime of a Parliament we shall abolish the domestic rating system and replace it by taxes more broadly based and related to people's ability to pay".
To sum up, what the vast majority of domestic ratepayers now want is, first, a local tax system based on the ability to pay, not on the size, content and location of property owned or lived in; secondly, national services, such as education, to be paid for largely through the national Exchequer, thus leaving local tax for local services; and, third and lastly, the cost of the locally-funded part of local authorities' expenditure to be shared by all local residents in receipt of an income, and not by local ratepayers as under the present system.
6.9 p.m.
Baroness Fisher of Rednal: My Lords, perhaps I, too, may thank the noble Lord, Lord Boyd-Carpenter, for initiating this debate. I must say that I do not go along with a lot of what he said, but, then, no doubt he would not expect me to. Nevertheless, I enjoyed the way in which he put forward the points in which he believes, and perhaps I might take the opportunity now to put the points on which I disagree with what has been said in this debate. I think we are left in no doubt that the country is faced with an economic crisis, that unemployment keeps on rising and that this causes anxiety and unhappiness to individual families.
The closures of steel plants and of national, multinational and international concerns which are taking place in various parts of the country obviously cause serious and dire financial consequences to local councils when the rates are diminished through those closures. But no consequence will be more serious than a response to the present crisis that, in effect, will destroy the main principle on which our Government is authorised. I fully appreciate the need of local government and national Government to work in co-operation together, but also I defend the right of the local authority to determine its own level of expenditure so long as it is financed by its own rates and is properly accountable to its electorate.
That is why I am concerned that the Government seem to think that they are going to be able to fix norms or figures or certain controls on expenditure levels. I am not convinced that the national Government, of which-ever colour, creed or party, can know the correct solutions to the many complex problems facing the various groups of local authorities. Needs vary from locality to locality; and not only do needs vary but also the aims and wishes of the people who live in the different areas. If local authorities are given the support

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of their electorates to provide a higher standard of service which is financed by local rates, then, in my view, they should be praised.
My Lords, let us remember that it was (and is) local government that in many instances has been the innovator, and has been so approved by the worthiness of its local initiative and the benefits to its local community, that national Governments have taken up many of those innovations. I well remember—and it was brought to my mind clearly when the noble Lord, Lord Sefton, talked about water—as a member of the Birmingham local authority, how proud we were of our Elan Valley scheme and Cleawen Valley scheme, bringing that beautiful water from Wales for the benefit of the City of Birmingham. It was a costly business for the ratepayers but that was an innovation that was set up and which supplied fresh water not only for the citizens of Birmingham, but also made sure that industry at that time had sufficient water for its use. Obviously, this is a part of local government which is perhaps lost for ever. Nevertheless, it has benefits for other local authorities that were not in the fortunate position that Birmingham was to be able to raise the money.
My Lords, since we are talking about local rates, I am getting a little fed up with talk of there being an immense burden being placed upon industry, a burden which they are finding almost impossible to bear because of increased rates; and this is causing unemployment. I have heard nothing this afternoon to tell me that local rates and the increase in local rates are causing unemployment. All I have are figures supplied to me by the Association of Municipal Authorities (of which I am vice-president) that 48 per cent. of the firms who in a survey were asked to give reasons for unemployment, said it was part of the general recession and a lack of confidence in the economy; 13 per cent. said it was Government policies which created unemployment; and another 13 per cent. said that unemployment had been caused by high interest rates. Nobody at all mentioned the rates. Then, in Tyne and Wear, the local authority decided to analyse the unemployment returns from the Department of Employment during last year. The most commonly quoted reason for unemployment was lack of demand or reduced demand for firms' products. Rate increases did not feature at all in regard to redundancy that had been caused.
I think that we ought to kill the myth that increased rates cause unemployment. I feel sure that noble Lords will agree with me that local government is, of necessity, fully aware of the profitability of industry in its particular areas. Many of us who are situated in this capital for many hours a week and many noble Lords living in the capital city have only the New Standard to rely on as the local paper, but local authorities up and down the country are well served by their own local press which is full of the problems confronting their particular areas. Therefore, unemployment and redundancies are fully covered and are brought to the attention of local councils (if they do not know about them already) as is the need to make sure that their rate increases are not making industry any more unprofitable.
Therefore, I think I ought to say at this stage that
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I followed the noble Lord, Lord Boyd-Carpenter, very closely when he was speaking about rates in this context; but I think it ought to be stated clearly that rates are a property tax, they are not a profits tax; they are two distinct and separate issues, and therefore it is wrong for industry to be linking them together.
Lord Boyd-Carpenter: My Lords, perhaps the noble Baroness will allow me to intervene. She is perfectly correct in saying that rates are a tax related to property, but, in the case of companies, they have to be paid for out of the profits; and on the figures that I gave to the House earlier, the total rate burden has risen over industry as a whole from one-sixth of pre-tax profits to one-half.
Baroness Fisher of Rednal: My Lords, I have listened again interestedly to what the noble Lord, Lord Boyd-Carpenter, has said, but I think that those figures were a different set of figures from those used by the noble Baroness, Lady Stedman. We bandy figures around because we get them from different sources. I think that the figures used by the noble Baroness, Lady Stedman, as to the burden of rates on most businesses show that they are a very low proportion of the total costs. Anyway, that burden of the rates would be passed ultimately to the consumer; and therefore I do not accept the argument used by the noble Lord, Lord Boyd-Carpenter.
Let us remember that it was in 1969 when the so-called business vote was abolished. But that vote has been transferred into a very powerful pressure group representing business, industry and commerce, and their voice is most vociferous not only at national level but at the local level. It was the noble Viscount, Lord Ridley, who spelt it out. There is ample opportunity for election to local councils from all levels of management in industry and commerce if those concerned wish to serve in the actual decision-making of raising rates at local level.
I am reminded of something which the noble Lord, Lord Sefton, said on the effect of limiting rate rises on industrial and commercial property. Like him, I felt that the Green Paper went into considerable detail on this point. I want to draw the notice of the House to paragraph 10.3, where the de-rating of industry is mentioned. It clearly states:
"All of the measures mentioned above would lead to decreases in local revenues which, to the extent that they were not made good from national taxation, would fall on the local domestic sector".
Are we really saying that just over 50 per cent. which the industry pays can really be placed on the shoulders of the domestic ratepayers? It is important for us to realise when we are talking about the de-rating of industry that something has to take its place and it would have to be from the Government Exchequer.
I want to go back to domestic ratepayers. Let us get quite clear the percentage of rates that are paid. The AMA, who gather their own statistics from the local authorities, give a figure of 45·1 per cent. as the share of the total rates paid in England and Wales by the domestic ratepayer, as against 54·9 per cent. by the non-domestic industry/commerce sector. It is fair enough that there is nearly a 50–50 spread of the income which local authorities receive. If I may go back to the domestic ratepayers, and particularly one group, when

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we discussed and debated in this House the Housing Act, on this side it was clearly stated that rents of council house properties would increase dramatically. We know that for two years now, rent increases have outstripped the rate of inflation by a very considerable margin. A large number of local authorities this year are expected to show an overall surplus on their housing revenue account.
It is one thing for the Government to assume rent increases for the purposes of limiting their own direct contribution to housing; but unless the Secretary of State decides to change the basis of the block grant regarding housing, council house tenants will be contributing indirectly through their rents a greater contribution to the general rate fund than any other of the domestic ratepayers in a particular locality.
My final point will be on education. We are all aware that the education service is the "big spender", and I listened to the noble Lord, Lord Ellenborough, when he raised no objections—if I heard him correctly—to Annex B entitled, Financing the Education Service. If we read that annex, on page 68, paragraphs 4 and 5, say:
"There are various possibilities for alternative ways of financing the education service. Only the major alternatives are outlined here.
Financial responsibility for the education service could be removed altogether from local authorities. This would involve a radical change from the present position … Local accountability, whether by the continuation of the present local authorities' education committees, or otherwise, would have to be reconsidered".
I think it is true that many noble Lords in this House who have a great interest in and a great knowledge of education would not be very happy if that was to happen, but that is an alternative and it is spelt out clearly in the Green Paper. Although I served in local authorities for a great number of years, I do not think local government is perfect, but then neither do I think that national Government is perfect. There has been waged a very large, a very long and a very effective campaign to damage the reputation of local government in this country, and to create the impression of ineffective and inefficient local authorities recklessly squandering public money. That I deplore.
The majority of people that serve the local authorities do so to the best of their abilities in the grave and difficult circumstances in which they operate. I support the noble Lord, Lord Thorneycroft, when he says that local authorites should be able to work alongside national Government; but national Government should support local authorities, try to influence them but not control them.
Therefore, it is my main worry that this Green Paper, the deliberations arising from it, and the suggested possibility of substantial future reforms, is a disguise. It is a cover-up for the Government to operate more and more complex control systems and to tighten up control over local government spending generally, which will result in the loss of local democratic responsibility and accountability.
6.26 p.m.
Lord Gisborough: My Lords, the House will be well aware of the excessive rise in rate demands over the past three years from certain councils. Some local
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authorities have continued spending as if there was no recession and have just passed on the cost of their extravagance to their ratepayers. There is a local authority—and it is not the only one—in which expenditure has increased in each of the past three years, and where the penalties are now represented by a rate rise equivalent of 24p. As one CBI commentator said, it seems to be the intention of every committee of the council to employ more people next year than those currently in post. This is an attitude which has pervaded many councils—perhaps it is a minority, but there are many of them.
While industry has had to slim down traumatically to become competitive and to survive, local authorities have been asked to cut their expenditure to reduce the resultant rate burden on industry. Most authorities have done so, but some of the others have either been unable to do so or have deliberately chosen not to do so and have continued to expand their staffs.
Rising rates have reduced the ability of industry to be competitive, have increased local unemployment and have threatened the existence of many businesses and driven many out of business. Big business pays a huge rates bill. One example is British Steel, where an interim rate demand of 15p in October put £1 per ton on the price of steel. That made it that much less competitive in a highly competitive situation.
The noble Baroness said that rates do not affect employment. I can assure her that they do. I have personal knowledge of the hotel industry in a small way. I can assure her that the margins there have been driven purely by the excessive rate demands so low that staff have been laid off and are down to a minimum. Maybe we are talking about only two or three people, but this goes round everybody. Everybody lays off two or three people and with a big industry it is a lot more.
Little wonder that areas with the highest rates often have the highest unemployment; and, furthermore, businesses are deterred from moving into the area. But the spending increase continues. What is perfectly clear is that, no matter what penalties may be devised by the Secretary of State, some councils continue to care little about rate demands so long as their spending demands can be satisfied. But, so long as there are councils that will just continue to spend regardless of the effect on rates, regardless of penalties or employment, then more is needed than Government exhortation. More is needed than Government penalties. The councils need putting on the Secretary of State's financial leading rein.
Only if there is inability to declare an ever-increasing rate demand will some councils act responsibly to their ratepayers and to their industrial ratepayers in particular. Naturally, it is desirable to keep local financing local—and we all want that—with a maximum autonomy to local authorities, which must be and must always remain the long-term aim. But, so long as some councils remain in a mood to abuse the system and so long as the recession continues to bite hard on industry, the Government should protect industry from excessive rates by keeping the tightest control on authorities that it can obtain.
With regard to London Transport, which is so heavily subsidised by Government funds, it ought to be taken from the GLC and made into a corporation like British

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Rail. When the cheap fares were introduced, it was quickly seen how great was the conflict of interest between Londoners and distant commuters, and it would be far better if it were nationalised.
The other London matter that I hope the Secretary of State will look into is the question of education in London. The GLC is far too big now, and education would be much better in the hands either of boroughs or groups of boroughs—
Lord Mishcon: My Lords, I hesitate to interrupt the noble Lord but I am sure that he wishes to be correct in his facts. London education is in the hands of ILEA and not in the hands of the GLC.
Lord Gisborough: My Lords, that is absolutely right: I thank the noble Lord. I would say it should be taken out of ILEA, which is I believe the same size, or nearly the same size—well, I would still take it out of ILEA and give it to the boroughs or to groups of boroughs. I would certainly hope that the groups could be much smaller because, whichever party is in power in ILEA, there is always one-half of London which is having the sort of political education it does not want; and therefore it would be much better to have it in sections. Having got rid of ILEA, I was going on to ask: why keep the GLC? It would be very popular to get rid of the whole thing, having got rid of ILEA.
With regard to raising local government finance, one thing which is common to all the alternatives is that while these alternatives may solve inequity in rates they would create other inequities just as great, as well as demanding new and expensive bureaucracies to administer them. I therefore favour the present rating system, with its comparative simplicity and its great perceptibility, for all its faults. But there are two main faults of rates that I think can be corrected. First, there is the question of the commercial rates, which are now so high as to endanger competitiveness and to reduce profits and employment and thereby reduce the tax base. I believe the aim should be to de-rate all commercial properties by perhaps 50 per cent., or whatever could be arranged. The extra competitiveness, increased profits and employment that would result would create the additional tax revenue to allow the Government to fund the reduced rate yield by grants to local authorities. That would be a substantial contribution towards getting industry going again. Furthermore, it would be easy to determine how much each local authority had lost in rates by the de-rating, which could form the basis for a Government grant to that local authority. But the increased proportion of central grant to locally-raised rates would also give the Secretary of State a greater measure of control, should he wish to use it, over a spendthrift council.
Secondly, there is the question of the second income-earner in a house where of course only the householder pays rates. I think one must remember that the second wage-earner already pays income tax and a substantial proportion of the income tax he pays is paid out again by central Government to local authorities by grants; so it cannot be said that the second income-earner does not contribute to local authority expenditure. What can be said is that, since it is so indirect, he does not
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realise that he is contributing. Perhaps there could be some small surcharge on income tax and the surcharge could represent the amount devoted to local government. It would be no more than a public information exercise, and should have no effect on the overall rates of tax or on the method of collecting it. My Lords, it is interesting to read of the alternative to rates—poll tax, local income tax, sales tax and so on—but any large change would just divert resources, cost a great deal, and end with as many anomalies as there are under the present rating system.
6.36 p.m.
Lord Beaumont of Whitley: My Lords, like other noble Lords who have taken part in this debate, I should like to thank the noble Lord, Lord Boyd-Carpenter—slightly half-heartedly, I must confess, but I do particularly thank him—for raising the subject because it is a most important one and one which it is absolutely right that your Lordships' House should debate at this time. I also thank him for the very impressive and enjoyable speech with which he introduced the debate. But as a result of his introducing it I find myself having to speak from these Benches on the subject instead of my noble friend Lord Evans of Claughton. Unfortunately, my noble friend is unable to be here. As your Lordships will be well aware, he has very considerable knowledge of local government and it is probably a sadness to most of us that he is unable to contribute today. However, he is kept in Birkenhead partly by the rail strike and partly by the fact that he is not able to drive a car because he is suffering from that most illiberal complaint—more like a Tory complaint—of gout. We must feel sorry for him, but I feel almost more sorry for myself. It is for this reason that I have stepped into the breach rather at the last moment, and was not able to be here during all the previous speeches. I apologise for that, but I was able to hear the opening speeches and, of course, I will read the ones I have missed—not least that of the noble Baroness, Lady Stedman, if only because one is always interested to find out what one's allies believe.
I am cast in the situation today of putting forward the case which the Liberal Party has held for a long time. However, your Lordships should not settle back and think that I am going to embark on a disquisition on site value rating: I am not going to do that, because the proposals which the Liberal Party are putting forward at present on site value rating, which we think has got to come sooner or later, we would at the moment think might be rather more helpfully applied as a national tax, as site value taxing. Therefore, we are very involved in the debate which is going, on today and which has its exposition in the Green Paper and in the report before that.
I think there is no pretence on any side that any of us thinks the problem is an easy one to solve. We all have different ideas (in fact, we have heard very many of them this afternoon) but I think there is one way in which one can possibly make the problem seem a little simpler—and when I say "seem" I do not mean by just avoiding the real problem but by stating one's real priorities. I think the very real priority in this field, which has been echoed by one or two speakers today—among others by the noble Baroness, Lady Platt—is that of devolution, and it is to this that my party most

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firmly comes back. It is to the local government of this country that we must try to give as much independence as possible and as much opportunity as possible to run their own affairs. But there is no way of doing that, if you have a national grant level which is running at something like 60 per cent. Therefore, if you start from the basis that the national grant must come down to something much more like 30 per cent., then the alternatives with which one is presented come rather more sharply into focus and give one a better ability to judge what is, and what is not, practicable.
In the past few years central Government have been getting more and more jammed up. Year after year we see it in your Lordships' House, when complex Bill after complex Bill comes before us in the summer and keeps us up till late into the night. Every year Whips, of whichever Government, get up and say that it will be different next year, and sometimes it is just slightly better, but not on the whole. The work that we have to do here suffers from galloping inflation. Time after time when you look at what we are doing, you see that we are putting more and more on central Government, which could, by a stretch of the imagination—and it is a stretch of the imagination that I am talking about—be put out further and further towards the people who have to live with the decisions. That is what we must strive to do.
I have mentioned once before in your Lordships' House—I shall not dwell on it now, but produce it as a small example the study that was made of Hatherleigh, a small town in West Devon, by Ann Glyn-Jones, who was working on behalf of the local council and the local university. Her book Rural Recovery: Has it Begun? shows clearly—and the more clearly because she does not spell out all the implications of what was happening—that there were two factors inhibiting growth in that area, which had been designated a growth area. One was the capacity of the local sewage works, and the other was the necessity of always referring back to the county council and to London. The traffic up and down, in addition to costing money, which was raised in Hatherleigh or round about, and spent on the bureaucracy before coming back, delayed decisions so that very often nothing was done. If Hatherleigh had controlled its own finances, it would be a lot more prosperous today. If we take this idea that, whatever happens, we must push out decisions more, so that the people have control over their own lives, certain things follow, and it becomes a little more easy to see what the local taxes might be.
But before turning to local taxes, may I say one word about the grant? In this speech I am trying to put over very briefly what is the Liberal point of view. Therefore, when calculating the grant, and deciding what the central grant should be towards local government, even at a rate of 30 per cent., I come back to the amendment which my noble friend Lord Evans put forward in the Local Government, Planning and Land (No. 2) Act, which I am sure the noble Lord, Lord Bellwin, will remember. That proposed that, instead of the immensely complex system of calculating grant, which there is at the moment, there should be a fairly simple system based on units of population. It would not be a poll tax, as such, because what we are talking about is money coming from central Government, but based on units. Once the system is based on units,
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you can adjust the amount given in grant to any part of the country, according to its needs. That is the way in which you should start and it is easily calculated.
Having started from there, and having got a grant rate of 30 per cent., it is important that the rest of the money is raised at local level—and seen to be raised at local level—and councils should be answerable to the local electorate. We have no objection to the taxes being very visible, indeed. It is probably important that, at any rate for the time being, there should be a partial reliance on the present rating system which, if it does not carry the whole burden, could quite well be one of the tools that we use for raising money, together with local income tax. I should particularly like to plug local income tax today, because it could be a much simpler matter than it seemed to be in the past, and it is dealt with in the Layfield Report.
The impasse that happens, because of calculating local income tax and national income tax together, is what causes a lot of the problems and objections that have been put forward. There is a case for a perfectly workable system whereby, while most people continue to pay most of their national tax through PAYE, a small local tax could be paid on an annual return basis. The only link between the two would be that the taxpayer would complete a single return in duplicate, sending one copy to the Inland Revenue and the other to the district council. The return would need to be redesigned, so that the process of completion would be carried to the logical conclusion of calculating tax liability. The Inland Revenue would check the calculation and, as well as demanding or refunding any adjustment to the tax collected by PAYE, would inform the district council in a small minority of cases when the tax return showed the wrong total liability.
I am sorry to inflict those technicalities on your Lordships, but I quoted that example in full because it avoids the objections to local income tax imagined in the Green Paper, which are that local authorities would have to run a separate income tax assessment system in parallel—which they would not do under this system—or that the Inland Revenue would have to transfer large quantities of confidential information to them. In fact, if you ran it in this way neither of those would happen—
Lord Mishcon: My Lords, I am sure that the noble Lord will forgive me for interrupting, but his contribution is, as always, so interesting that I want to be sure I understand it. When he said that confidentiality is answered by this system, he remarked that a return would have to be made to the local authority, How, therefore, is confidentiality covered?
Lord Beaumont of Whitley: My Lords, I thought that the noble Lord had caught me out. The taxpayer would normally be paying his tax through PAYE. The tax return which he would send annually would be dealing with the total of tax—just the bare total. That would not demand the kind of confidentiality which is talked about in the Green Paper. It is not just the totals, is it? The totals are not nearly so important for confidentiality as all the things that go to make it up, which is what goes into the

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files of the Inland Revenue. The noble Lord does not look as though he is convinced.
Lord Mishcon: My Lords, my looks reflect my mental state.
Lord Beaumont of Whitley: My Lords, I was afraid of as much. In fact, though, I think that the argument holds water. However, we must both read Hansard tomorrow.
I have outlined these matters because it is important to get them on the record and to get the stance which my party holds also on the record. This is a very important area. But it is devolution which really matters: giving back power to the people. Many Members of your Lordships' House would go a very long way with that. Indeed, a number of members of the Government would also go a long way with it. One of the troubles with much of the present legislation is that Ministers like the Secretary of State, Mr. Michael Heseltine, who would like to give more powers to local government find themselves increasingly squeezed by circumstances into doing exactly the opposite. We have got to break that circle by a number of means. We have got to give back more power to local councils and to do it in quite a forthright and tough way. We have got to make certain that much of the taxation raising is actually in the hands of local government and that local government is answerable to the people.
Along with that—and very importantly along with that—is reform of the electoral system so that we do not have a situation in which a single block party is in power for years and years, which as we know happens all over the country at present, but a much more fluid situation whereby councillors are more answerable and whereby there are not cities and towns which one knows will solidly return the same party. The situation must be more responsive to what the people want. If we approach the problem in this way, we shall find that none of the technical problems proves to be insurmountable.
6.52 p.m.
Lord Marshall of Leeds: My Lords, I believe that the House will be in the debt of my noble friend Lord Boyd-Carpenter for having initiated this debate. So far as I am concerned, I should like to walk under the coat tails of my noble friend Lord Ridley, who said, as he always does, rather disarmingly, that he had an interest to declare, and then went on to declare his presidency of the Association of County Councils and other distinguished associations. I might walk, as I say, under his coat tails and declare an interest as a vice-chairman of the Conservative Party organisation, with a kind of tenuous responsibility for local government. I had the pleasure to serve for two years under the distinguished chairmanship of my noble friend Lord Thorneycroft. One day I was waxing eloquent on the very great benefits which local government had conferred on the community. I was discussing with him how all the sewers and the drains were built in the Victoria era to counteract typhoid and other such horrible diseases. I went on to say that the Victorians called local government "government of the drains".
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My noble friend Lord Thorneycroft frankly replied, "Yes, it is an area in which you seem to move most easily".
In view of the hour, however, I shall not trouble your Lordships with the subject of lumpiness. I make no apology for saying that one of the heritages of this country is a strong and virile system of local government. with a wide measure of independence. I believe that effective local autonomy and accountability depend in turn upon an independent source of taxation. We have heard that since 1601 local government has derived revenue from a system of rating which is essentially a system of property tax that is operated and understood in most parts of the world. Indeed, I believe it is true to say that representative democracy has sprung directly from the ability of elected members to exercise taxing powers and to be accountable to their electorate for their decisions. Without its own revenue raising capability, local government, as a most important part of our constitution, would wither away, to become merely an agent of the centre. At the same time it has been acknowledged, I believe, that central Government in discharging its duty to manage the national economy has to be able to influence the overall level of local government expenditure.
The present Government came to office, as we heard, with a commitment—albeit a qualified commitment—to abolish domestic rates, "but only to the extent that this was not to take precedence over the other changes in the national system of taxation". Successive Governments have experienced the greatest possible difficulty in finding a suitable alternative local tax which not only matches the merits of rates but which also either does not clash with their overall tax strategy or does not prejudice Government's major economic objectives, including, as at present, the requirement to reduce the level of public expenditure.
In that regard, and in view of what certain noble Lords may have said, it is fair to say that in spite of some of the emotive things outside this House which are said about local government, and in spite of some of the emotive headlines one reads in certain sections of the press, to the effect that local authorities cannot or will not meet Government's financial spending targets—sometimes referred to as "savage cuts"—the plain fact, the unemotional fact, is that the bulk of local authorities have either achieved or have come to within spitting distance of achieving the Secretary of State's targets—and without too much pain. By "the bulk of local authorities" I mean Conservative controlled authorities, Labour-controlled authorities and those with no overall political control.
To return to the subject in hand, of the three possibilities which the Green Paper identifies, the first two—local sales tax and local income tax—are said to be likely to affect adversely the present balance of taxation across the board. The reasons are there for all to see if one reads the Green Paper. However, I shall not weary the House with the many reasons which are quoted in the Green Paper. There are other human reasons why a local sales tax is apparently a non-starter. The technological know-how of our country may significantly have helped America to put a man on the moon, but apparently it will not make it possible to programme the new VAT computers for a local sales tax until 1988. So we see that there are difficulties

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about living in the modern technological world. The third possibility, a poll tax, would have, I think, a smaller impact on the basic economic objectives of Government, but I think that there may be problems. There are certainly problems of evasion and avoidance.
It is said in the Green Paper that we might have recourse to the electoral rolls. If that is so, this would have one very happy consequence; it would mean that the Members of your Lordships' House would escape liability in common with aliens. The poll tax would, like rates, he a truly local tax and would be the only alternative which would facilitate local assessment, local administration and local collection. It seems beyond doubt that replacing rates with a single alternative would be administratively complicated, difficult or costly and in most cases, both.
The Green Paper provides the clearest possible testimony that in present circumstances, domestic rates simply cannot be abolished, and that, even if a poll tax were to be introduced at a modest level, domestic rates would still be required to provide a substantial revenue for local authorities. Nevertheless, it has to be accepted that domestic rating needs overhauling. There is a need to be able to show that the rate burden is distributed more equitably. The Green Paper makes suggestions for reform which, again, are there for all to see. Examples are, capital values; the possibility of offsetting rates against income tax; and the other possibilities for change listed in Chapter 4, such as including wage earning non-householders, the restructuring of domestic rate relief, and the like.
The advantage of these matters is that all these possible reforms are capable of short- or medium-term implementation, and in my view there is a case for doing something urgently. On the evidence of the Green Paper alone, the way ahead would seem to lie in the pretty urgent reform and modernisation of the domestic rating system by some of the possibilities I have mentioned, combined possibly with the introduction of some variant—a poll tax at a modest level. This solution would retain the benefits of the present system and would ensure the continuance of healthy, strong and accountable local government. The ratepayers need reassurance that any modernised rating system will be fair and will be seen to be fair. This assurance would be reinforced by the value-for-money emphasis implicit in the proposed audit commission which is referred to in the Local Government Finance (No. 2) Bill.
Meanwhile, it is in my view grossly misleading—and this is being done all over the country by certain people—to make party political capital by promising to abolish domestic rates as though the full stop came there. Many people to whom I speak believe that there is a move to abolish domestic rates promised by this party or that party. There is no question in their minds that there will be some alternative rate in its place; no, there will just be the abolition of domestic rates. That is cruelly misleading, and it would be wrong to imply that the impost of domestic rates can simply be lifted from the shoulders of those who occupy their own domestic property without the imposition of any alternative tax.
Lord Mishcon: My Lords, perhaps the noble Lord, Lord Marshall of Leeds, will give way. He did
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remind us of the eminent position he held as vice-chairman of the Conservative Party. I am sure that, in those circumstances, the noble Lord has read every Conservative Party manifesto. If there is anything misleading, perhaps the noble Lord will look at his party's manifestos for 1974 and 1979, which very clearly and unequivocally stated that the domestic rate was to be abolished.
Lord Marshall of Leeds: My Lords, I am obliged to the noble Lord, Lord Mishcon for saying that. It is not the easiest of matters to refer to a commitment of 1974.
Lord Mishcon: And 1979, my Lords.
Lord Marshall of Leeds: I beg the noble Lord's pardon, my Lords, but the 1979 commitment was a qualified commitment. I was very careful to say that the qualified commitment said, that it was hoped domestic rates would be abolished, provided that should not take precedence over any changes in the present income tax. The commitment was qualified. Of course, the noble Lord, Lord Mishcon, should remember better than I the 1974 Conservative Party manifesto.
Lord Mishcon: My Lords, I am sorry to detain the House but the noble Lord, Lord Marshall of Leeds, is casting aspersions on my age and is being somewhat charitable to himself, when he says that r would remember the 1974 manifesto and he would not. If the noble Lord will look at the precise wording of the 1979 manifesto he will find that it is not as he said. It was in fact said that the abolition of the domestic rate would have to give way to a reduction in taxes, from the point of view of income tax, purely from the point of view of the time schedule that the party was setting itself.
Lord Marshall of Leeds: My Lords, I cannot accept that. I do not have the document in front of me and I am very sorry that the noble Lord, Lord Mishcon does not take too kindly to the dissimilarity of ages between us; although, of course, I was only joking. A careful reading of the 1979 manifesto will show that the commitment was a qualified commitment. If the noble Lord wishes to take the point further, as he has the document and I do not, he would have to take the opportunity to read out what it said. I believe he would find that I am correct and he is wrong.
Lord Mishcon: My Lords, I did read it out in my speech. I did quote it, but I refuse to detain your Lordships' House any longer.
Lord Marshall of Leeds: My Lords, what I was saying was that those who are so vociferously in favour of abolishing the rates, either domestic or non-domestic or both, are not so articulate in suggesting the alternative source from which the revenue would be derived. If one considers the figure of £4·8 billion from domestic rates and £6 billion from non-domestic rates, it is a considerable amount of money. The abolitionists do not take the trouble to turn round and say where that amount of money is to come from, and it is a vast amount of money to have to raise. It is for that reason

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that I believe it better that efforts should be concentrated on improving a tried and tested system rather than pursuing the illusion of untried taxes which may well have unfortunate and unexpected results.
I turn for a moment to non-domestic rates. So far as they are concerned, no intention has ever been expressed by Government about their continued existence, although, with the squeeze on profits during the continuing recession, both business and commercial ratepayers are much more aware of rate demand notes. At the same time, I believe it is fair to have regard to what was said by my noble friend Lord Mottistone—that there is not such a big difference between the amount raised by commercial rates on the one hand and domestic rates on the other. The figures are £4·8 billion and £6 billion; nearly the same figure. I am not against shedding tears for those who are in business and having a tough time, but at the same time the domestic ratepayer has no ability to set off against his income or profits the amount of rates he has to pay, while business and commerce have. That is a significant relief. Again, I believe it would be difficult to contemplate what would happen; if the non-domestic ratepayers were helped or if the non-domestic rate was abolished, the increased impost on the domestic ratepayer would be very considerable indeed.
So I would have thought there was an immediate case, and an urgent case, to grant relief, for allowing temporary and properly controlled exemptions for unused parts of business premises described in the Green Paper as "mothballing relief". I think that ought to be something to be put in hand. On the other hand, I think new properties and new businesses could be given temporary exemption until the business has successfully got off the ground. Lastly, I think the right to pay rates by instalments should be extended to all ratepayers. This would have the effect of easing the cashflow problems, not only of the ratepayers concerned but of the rating authorities generally.
A particular problem associated with the industrial and commercial sector is, of course, the shift in rental levels since the last revaluation in 1973. I think it is better to talk of these things than just to do as those who read CBI papers sometimes do, just say "Get rid of unfair rates". Let us see what could be done to make them fairer. As a consequence some commercial ratepayers, particularly small businesses, are currently paying more rates than they should or they need.
The Green Paper addresses itself to the problem of the effects of a non-domestic revaluation, and it addresses itself also to the problem of predicting that while some business occupiers will pay more on a revaluation of non-domestic property, others will pay significantly less, including the older, large, labour-intensive industries and the older steelworks, and slightly less in the case of local shops, older offices in some cities and newer steelworks.
This problem has been recognised in the Government's announcement that a partial revaluation of non-domestic property in Scotland will take place in 1983. In a letter to The Times on 28th January 1982 Mr. Brian Hill, the secretary of the Rating and Valuation Association, urged the Government to announce an intention to carry out a similar non-domestic revaluation in England and Wales.
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The last such revaluation in England and Wales was carried out in 1973; the last one in Scotland was in 1978. Many businesses would greatly welcome such a statement of Government intent. I wonder whether my noble friend Lord Bellwin when he replies—as he will reply with his customary skill and courtesy—would give some indication of the Government's intention on the question of the possibility of a revaluation.
My Lords there is, therefore, some urgent need to reform and overhaul the rating system, both domestic and non-domestic, but at the side of that—and here I agree with the noble Baroness, Lady Stedman—it is, I would have thought, essential in the slightly longer term that the reform of the entire fabric of the financing of local government, including domestic rates, non-domestic rates, as well as grants and charges, should be given a thorough-going and earnest consideration. I think over-reliance to such a large degree on Government financial support is not good for the continuing health of local government.
In conclusion, I look back more in sorrow than in anger to 1973, when the then failure, when reforming the structure of local government, to do anything about the reform of the financial base of local government was the greatest possible mistake, a mistake that never should have happened, a mistake that should not be allowed to happen again.
7.14 p.m.
The Parliamentary Under-Secretary of State, Department of the Environment (Lord Bellwin): My Lords, I, too, should like to start by congratulating my noble friend Lord Boyd-Carpenter for initiating this debate and for his own extremely valuable and indeed facinating contribution to it. I am sure he will have been very gratified by the last 41¼ hours of debate to which we have been listening. I would only say to him that I would be very intrigued to know what it was that he was going to say in 1963, at that moment in time, but perhaps he will tell me privately later on. Of course, he reminded us of how long the form had been on the table, as indeed did the noble Lord, Lord Mishcon, and one or two other noble Lords. I had it here in front of me. too, that rates in non-statutory forms have been around a long time and clearly they have been a highly durable tax.
Recently, however, concern about problems associated with the system has mounted. Rates are keenly topical because of their impact, in high-rate areas, on business and commerce and on domestic ratepayers. They are topical, too, because, in the Green Paper which we have been discussing today, the Government have just reaffirmed their commitment to reform of the domestic rating system. I assure your Lordships who have spoken this afternoon that what has been said about all aspects of rating will be considered with great care, and that points which have been made will be taken seriously into account as an important part of the Government's consultations on the Green Paper.
My Lords, in the mid-1970s the reorganisation of local government was followed by unprecedented rate increases: 20, 30, 50, 60 per cent., and even more in some cases. This brought almost a new dimension to the whole thinking about rates as an issue. As the noble Lord, Lord Mishcon, said, the Government of the

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day responded to concern over the impact of these rate increases by appointing the Committee of Inquiry into Local Government Finance chaired by Sir Frank Layfield. As has been said, the central recommendation of the Layfield report published in 1976 was for the introduction of a system of local income tax to supplement the existing rating system. However, the Labour Government's Green Paper of May 1977 rejected the arguments for a supplementary local income tax; but apart from deciding to move to capital valuation rather than a rental basis for rating domestic property, with a classic example of masterly inactivity they offered no alternative proposals for reform. The present Government, immediately after the task of reducing the heavy burden of direct taxes, are committed to giving high priority whether it be reform or abolition, certainly to radical changes to the rating system.
Lord Mishcon: My Lords, if the noble Lord the Minister would bear with me for one moment, would he kindly inform the noble Lord, Lord Marshall of Leeds—because I did not wish to detain the House any longer—whether my account of the reading of the 1979 manifesto, which he has just paraphrased, was correct?
Lord Bellwin: My Lords, I shall be glad to discuss it with him afterwards. The recent Green Paper is a preliminary to putting the Government's commitment into effect. The Green Paper has, quite understandably, been greeted in some quarters with the comment that it goes over ground which has already been well ploughed by Layfield, and by earlier inquiries, come to that. But, my Lords, the Green Paper does not lay claim to the Layfield Report's breadth or depth in considering local government finance. It perhaps adds one candidate—poll tax—to the Layfield range of serious possibilities for alternative local taxes.
That apart, to understand the way in which the Green Paper moves from what Layfield said about possible new taxes, one has to understand the differences in the terms of reference on which the two documents were prepared. Layfield's were the whole field of local government finance. The Green Paper review is much more specific: to consider alternative ways of raising the £4.8 billion raised at present through domestic rates, towards the cost of local services. The Green Paper directs itself towards an aim which is more clearly defined than ever before. And, for the first time, it has the backing of a firm and unambiguous commitment to reform on the part of the Government of the day. The unfairnesses and, it might fairly be said—despite what the noble Lord, Lord Sefton of Garston, said—the inequities of the present system, have been spelt out many times; indeed, my noble friend Lord Ellenborough referred to some of them. I shall not repeat them today. I think that they are too well known by all concerned.
The alternatives to domestic rates are certainly not easy to establish and all have their limitations and drawbacks. But there can be few who would want to defend domestic rates, as they are today, as a fair form of tax. So what about the options? It is not my intention today, at this stage in our consultations, to say a great deal about the options in the Green Paper and their respective merits. We have said that we
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want to listen and to take careful note of all views and representations, and that we are doing. However, perhaps a word of reminder about the presence of a reformed system of domestic rating as one of the options in the paper would not be amiss. After all, a Green Paper which discussed alternatives to the present system without considering the present system itself, would be like Hamlet without the Prince.
For many years rates have been our only local tax in Great Britain. I have mentioned the unfairness of the tax, but it is only by looking at the established strengths and weaknesses that we have been able to judge what criteria we should apply to possible new systems. In other words, the Green Paper compares each of the options with the others, in common terms which have been derived from a study of the rating system itself.
As I have emphasised, the Government are looking to consultations on the Green Paper to establish a basis for progress towards a system which will be seen to be fair and which will be widely acceptable. I say again—and we all know it—it will not be easy; it will need the most careful consideration and there will be problems to overcome. But that change is needed is now surely beyond question. It is what people want; it is what they expect; and we shall push on as quickly as is practically possible.
In my reviewing the background to our commitment regarding domestic rating, I made the point that many complaints about the rating system stem, as well as from unfairness and anomalies, from the simple fact that, in many places, rates are just too high. I hope that I do not need to remind your Lordships of the Government's view of local government spending at levels that we regard as excessive, or of what we have been doing about it. Whatever shape reform takes, the Government will not retreat from their views on the wider economic importance of local spending and the influence that they seek to exercise over the aggregate of public expenditure, of which local expenditure is, as we have been reminded today, such an enormous percentage.
There are questions here that will certainly not resolve themselves just because we switch from one form of local domestic taxation to another. The Government are, therefore, maintaining their efforts on a broader front to keep levels of spending by local government to what ratepayers and the country as a whole can afford. The impact of high levels of rates in some authorities, both on domestic ratepayers and, as my noble friend Lord Boyd-Carpenter and others so trenchantly described, on industry and commerce, has reinforced our determination to secure continued overall reductions in local government expenditure.
I am glad to see present my noble friend Lord Ridley. He said that he was throwing into the debate that there is nothing wrong with the spending record of local government, and that local government's total expenditure over recent years has actually reduced in real terms, while that of central Government has increased. That sounds all well and good until one examines the scene closely, and it is seen that the truth is that what local government has done—and I was one of those doing it—is to maintain and increase its current expenditure levels while making reductions in its capital expenditure. Between 1974 and this year local

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government reduced its capital expenditure by 65 per cent. I submit that the manpower figures—a more meaningful means of comparison—show that, whereas local government has reduced its manpower by about 4 per cent., central Government have reduced by over 7 per cent., since we came to office—that is, of course, due to the reduction of the Civil Service.
I could talk at great length on the subject of central and local government relations but I shall not do so at this late stage in the debate, although I think that I must refute at least some of the criticisms which have been made of the Government's policies. It is the right and the duty of central Government—in practice they have always had it, and indeed they must have it—to take a view about the correct and affordable level of aggregate local authority spending. Your Lordships have heard me say in the House before that it was always our proud boast in local government that we managed to contain our totality of spending within the parameters set down by central Government, whether we liked their policies or not. We felt that that was an obligation and we were very proud of the fact that for years and years we did just that. We never went more than 1 per cent. over the figure. It is only now that we are seeing for the first time an excess of spending of some £1½ billion in a year by local government—indeed, as my noble friend Lord Marshall of Leeds said, by a handful of authorities; maybe, but that is the totality of it.
What are a Government to do? To walk away and to say, "Well there is nothing we can do", or to be responsible and to say that at least all those—and they are the great majority—who have done their very best to work within the Government's parameters are entitled to have central Government say that in that case they will certainly have to do something about those who do not try; who (if you like) cock a snook at a Government? That is what that particular part of the debate is about.
Reference was made to the basis of the rate support grant system. In fact this Government took over a rate support grant system based on multiple regression analyses so complex that they sometimes appeared to have more in common with Ernie who picks the premium bonds than with authorities' needs and resources. My noble friend Lady Platt of Writtle said that very fairly and I thank her for it.
Now authorities can actually tell why their assessments have gone up or down, because the Government have introduced a block grant system, and although, admittedly, it is still complex, there is no way in which you can contemplate distributing some £12 billion or so among some 400 or so authorities' and not have a system which is other than complex, despite what the noble Lord, Lord Beaumont of Whitley, said—and I shall come to his point again in a moment. The fact is that now the system allows the factors which contribute to its grant-related expenditure assessments to be identified and questioned and openly adjusted from year to year as necessary.
When we talk about local government's freedoms and their erosion I must remind your Lordships, too, of what has been done in the field of capital controls. My noble friend Lord Thorneycroft, to whom it is always an absolute delight to listen, said that controls
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by Government from the centre of all capital expenditure by local government is a fact. It used to be so. It was so when I was in another incarnation. It is not so today. The 1980 Act has altered that. In fact, today local government has a flexibility to spend within an overall ceiling of a kind it never ever had before.
Some of your Lordships have heard me say previously how the trains to London were packed with local government officers who were coming down every day for permission to put up another rabbit hutch in their local authority. That is what they had to do to get permission to borrow—not to get money, but to get permission to borrow. That was the extent of the freedom that we all talked about having and that has now been replaced. In fact it does not stand up. The situation in terms of freedom for local government is a totally different thing today from what it ever was, and I am very proud of that. This Government have got rid of the whole paraphernalia of project-by-project borrowing controls, and have given local government unprecedented freedom to switch resources between services and even between one authority and another.
This brings me to the question of business and commercial rates, to which my noble friend Lord Boyd-Carpenter and, indeed, almost everyone who spoke referred. There is no doubt that high levels of domestic rates can cause considerable individual hardship and unfairness. But, as my noble friend Lord Boyd-Carpenter said, domestic ratepayers have at least some recourse through the ballot box. On the other hand, non-domestic ratepayers can all too often respond to unreasonable rate bills only by ceasing or contracting their operations in high-rated areas and by concentrating new investment outside those areas.
This is, of course, a solution which is often only available to firms in the longer term, and one which can have sad implications for the economic prospects of high-rate areas. In the short term, despite what has been said to the contrary, excessive rates directly hit business profitability, with the inevitable effects on job and investment prospects. This process is plain to see for anyone in touch with businessmen working in, or thinking of working in, areas which have experienced an accumulation of high increases over a number of years. With great respect to the noble Baroness, Lady Fisher—who I am sorry is not here—I think that she is living in a dream world. The fact is that in the particular job I do within the department I have to talk to many people, and I often sit down with local authority leaders to hear what they have to say about what they are actually doing—not what they are contemplating doing—and what they have done, how they have moved out of inner city areas into other areas and the savings that they have made in so doing. Anyone who has had to do that and who receives the unceasing flow of letters that I and my colleagues receive would not seek to put forward the argument that rates just do not matter to businesses.
I should like to show your Lordships something which I used when I was in Leeds. It is a little chart that you turn round. We used it for promotional purposes. In 1976–77, for example, it showed that if you took a factory building in Leeds of a certain size, the rates to be paid would be so much; if we turned the chart

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round, the chart would show that the annual saving in overheads at that time in Leeds compared, say, to Manchester would be £5,006 per year; compared to Newcastle the saving would be £7,050, to Rotherham £4,900, and so on. So there are authorities which are willing to use rates at the other end of the scale to induce people to come. To say that it is just not a factor, is to deny the reality.
I am aware of the arguments that have been put forward on this subject by noble Lords opposite. The noble Baroness, Lady Stedman, also said that rate bills are negligible in relation to other manufacturing costs and have risen no faster than those costs in recent years. I shall not go on about it, but I hope that I have made my point as graphically as I am able. I should like to pick up a point mentioned by my noble friend Lord Marshall as to what the Government have already done to relieve the burden of rates on non-domestic ratepayers. Again, I shall not go through a whole list of measures, but they are there to be seen. I listened carefully to what my noble friend said in his proposal that all ratepayers should have a right to pay by instalments. It is a point, and I think that it is worth contemplating.
My noble friend Lord Boyd-Carpenter and others asked, quite reasonably, why it is that the scope of the Green Paper was not extended to include alternatives to non-domestic rates as well. I must say that the implications for the taxation system as a whole of a change as far-reaching as the replacement of domestic rates by alternative forms of revenue are not easy to assess and the sums of money involved are very significant. To have gone further and considered abolition of non-domestic rates at the same time would have complicated an already difficult task so much as to make it extremely difficult within a reasonable time to formulate proposals for alternative methods of taxation which would enjoy the necessary wide measure of support. We could certainly not have done so within the time-scale of this Parliament.
That is not to say, of course, that the question of the rate burden on commerce and industry is ignored in the Green Paper, as, indeed, has been said by many who have spoken. But any reform of domestic rates must clearly have implications for the non-domestic rating system to which the Government must and, I assure noble Lords, will pay close attention.
I very much welcome the support and encouragement which the CBI, the Chamber of Commerce and others have given to business and commerce to make sure that the businessman's case does not go by default with local authorities. Local business communities must press local authorities to co-opt people with business experience onto committees, where their expertise can be of use. Furthermore, as my noble friend Lord Ridley said, the business community ought also to give its encouragement and backing to business people of high calibre to become involved in local administration as elected members of local authorities. That is a matter that I have discussed with very many people, and I shall not now go over all the arguments and the problems. Nevertheless, if business never feels able to do this, then in a way by default it will forfeit much of the means and the right to complain about the end result which it sometimes receives.
Above all, perhaps a greater involvement by the
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business community can help to make sure that local services represent good value for money. I am open to correction, but I think that only my noble friend Lord Marshall used the term today. Cost effectiveness in local services is surely an absolute requirement. It is more than a question of techniques; it is a state of mind and an essential aspect of political leadership. When economies are called for, cuts in services must be the last option, not the first—though authorities ought obviously to consider whether certain services are too lavish, or, indeed, whether they are needed at all. The first question must be whether the same service could be provided more efficiently with fewer staff or for less money.
A number of authorities have been finding increasingly that often the best answer is to look to the private sector and to contract out what functions they can. There is now growing evidence of very great savings being made by authorities which are getting competitive tenders from the private sector for the provision of certain services. Nothing should be sacrosanct. If local government is serious in its will to get value for money, it must be prepared at least to consider every alternative way of doing it. For the services that they continue to provide themselves, authorities must make the fullest use of sources of specialist help—their own internal management services, audit and specialist committees and possibly external auditors and consultants, as well as the business community.
As I come to the end, I feel that I must make one or two quick observations on some things that were said. The noble Baroness, Lady Stedman, said that the SDP would favour reform of local government finance. We shall certainly look forward with great interest to the detailed spelling out which I am sure that she will present to us, and we shall read it as carefully as we have read the Green Paper today. When it comes, we shall tell her what we think of it—very politely of course!
My noble friend Lord Ridley referred to the cost to local government of the services that Parliament has asked it to provide. There is scope for an enormous variation in the levels of those services and the amount of money that needs to be spent on them in different areas, where the needs are often so different. My noble friend Lord Thorneycroft liked the reference in the Green Paper to reform. I understand that. Hence our open-minded attitude, albeit consistent with doing something, because the time has come to do something. I assure my noble friend that the Government want to see local government preserved; he asked for an assurance on that, and I gladly give it to him. Indeed, if I would not do so, who would? In any case, knowing me as he does, I hope he will agree that I deserve no strictures as regards the desirability of preserving strong local government. Therefore, I thank him for what he said and, as always, I say again, that it was a delight to listen to him.
The noble Lord, Lord Mishcon, referred to the issue of rates as a percentage of disposable income. Surely when he did, he was somewhat missing the point. What he says is quite right; on average, his point was a fair one. The problem is, however, that there are many areas where that percentage is very much higher

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than he said. This is part of the problem which I know he will acknowledge.
The noble Lord, Lord Sefton, does not want the Government to make any recommendations for change. I found his contribution fascinating, as always. I agreed with some of it; I violently disagreed with much more of it. Nevertheless, I found it very interesting. Basically what he wants is regional government, and some of the functions that were previously with local government to go back to them. I understand those arguments well. I probably agree with some of them, but that is a personal view and I had better not go on too much with personal views.
I said what I thought about the thinking of the noble Baroness, Lady Fisher, as regards industry and commerce. She said that the Green Paper was a cover-up by the Government. Had she been here I would have asked her, a cover-up of what? No doubt when she reads Hansard she will write a lengthy letter to me and I shall be glad to answer it. Finally, when the noble Lord, Lord Beaumont, said that what we need is a simple system of grant based on units of population, I thought what about the need to equalise? What about the need to take care of the differing needs, social needs and others, in different areas? Would that it were so simple. Had it been, I can assure the noble Lord that this Government, and the previous Government, the one before that and the one before that, would have done something about it. The fact is, as the noble Lord undoubtedly expects one day to have to find out—some may think he will not have the problem—that when you get down to look at what it all means, it ain't that easy. That is really all I would say about it.
I conclude. The field is wide and the temptation to roam across it is great, but I resist that any further. I should again like to thank my noble friend Lord Boyd-Carpenter. I have taken careful note of what has been said. We shall read it even more carefully, and we shall bear all this in mind as an extremely valuable contribution to the present debate on the future of local government finance.
7.42 p.m.
Lord Boyd-Carpenter: My Lords, I should like to thank all noble Lords and noble Baronesses who have taken part in the debate for making this debate what those who, like myself, have sat through it will feel, as my noble friend Lord Bellwin said, to have been a very valuable one. Indeed, one could say that this was an example of this House performing one of its important functions, because although it would be an affectation to pretend that there were not at times flashes of party controversy, even a little trading in manifestoes, none the less the essence of the debate was a contribution by noble Lords and noble Baronesses with practical experience to the consideration of what all of us appreciate to be an exceedingly difficult and complex problem. If this House can do that, mobilise this amount of opinion, experience, argument, then it seems to me that this House is going to endure and flourish for a great many years to come.
I want to say only three quick things in reply to specific points. The noble Lord, Lord Mishcon, took me to task in the most agreeable way for not
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mentioning the Layfield report. I did not do so for the simple reason that the Green Paper is full of it. It discusses it, and argues it. I did not think it necessary. If the noble Lord feels that I intended any discourtesy to Sir Frank Layfield, or members of his committee, I should regret that enormously. Not least because I have a great respect for Sir Frank Layfield not only as a man of great ability but also as a man of singular discrimination, for he married a charming lady who was once my private secretary.
I come to the noble Baroness, Lady Stedman, who I think genuinely misunderstood my argument about the burden of rates on industrial premises. She is right in saying that most of the costs of industry have risen—energy, labour, and I grant her entirely many of them have risen faster than rates. But that is no real alleviation to the industrialist, because what has not risen, what has diminished both relatively and absolutely, has been the profits. The profit margins and the overall profits have been reduced. As I ventured to intervene in the speech of the noble Baroness, Lady Fisher of Rednal, it is from these diminished levels of profits that these rates have to be paid. Therefore, it is no consolation whatsoever to the hard-pressed industrialist to be told: "Ah, yes, your other costs have risen even more". So I hope that what my noble friend Lord Bellwin has said about looking at the non-domestic ratepayers' position will be followed in due course by proper action.
I was fascinated by the noble Lord, Lord Beaumont of Whitley. He has a wonderful consistency as a Liberal spokesman. To introduce an argument about PR in a debate on rates indicates both consistency and adroitness of a level which one would expect of the noble Lord. It only remains for me to thank very much noble Lords who have taken part. We have in front of us a Motion for Papers. I tell your Lordships frankly that I have enough papers. I do not want any more. Therefore, I must ask your Lordships' permission to withdraw the Motion.
Motion for Papers, by leave withdrawn.

The Bahá'is: Iranian Persecution
7.46 p.m.
Lord McNair Lord McNair rose to ask Her Majesty's Government whether they are aware of the persecution being suffered by the Bahá.'is in Iran and, if so, whether they will use their influence to help these unfortunate people.
The noble Lord said: My Lords, I beg to ask the Question standing in my name on the Order Paper. In doing so perhaps I owe the House not an apology for its wording so much as an explanation. I am, after all, asking a Question to which I already know the answer. I am perfectly aware that Her Majesty's Government do know what is going on, and I am not going to suggest that they have failed, that they are failing, or that they ever would fail to do anything they possibly could to help the Bahá'is and put an end to their mistreatment So why, it could be asked, put the Question? Because, my Lords, I felt that this was a subject on which this House could not decently remain silent any longer.
We are all to a certain extent the prisoners of our own procedures. We do not in this House have the facility of the Early Day Motion. Nor are we in the

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habit of passing declaratory resolutions as is done, for example, in the European Parliament and in the Australian Senate, to mention only two of the assemblies which have collectively condemned the persecution of the Bahá'is. It seemed to me, in other words, that the Unstarred Question was the most appropriate available medium through which we could express ourselves on a subject which has been causing some of us great concern for a long time.
Next I must not forget that I am forbidden by the Rules to thank participants at the end of this debate, and that I must therefore do it at the beginning. I am absolutely certain that my Baha'i friends would wish me to include their thanks with mine. I hope it will not seem invidious to anybody if I say how particularly delighted I was when I heard that the noble Lord, Lord Stewart of Fulham, was to speak. The Bahá'is take no part in party politics. f am never sure whether to envy them or not. Their religion forbids them to do this. We are most of us fairly frequent offenders against this injunction, but not, I hope, tonight. Surely the best way we can demonstrate this is by having contributions from all corners of the House, as I think we shall, and who better could possibly speak from the Labour Benches than their most distinguished and widely respected ex-Foreign Secretary. To all participants, and to those who have stayed to listen, I say, thank you.
I shall not consume your Lordships' time with a long analysis of the historical background to these events. To anybody who wants to find out about that, I strongly recommend a report which will be published very soon by the Minority Rights Group; I have seen the proofs and it is first class.
For tonight's purposes, I hope it will be enough to say that the adherents of the Bahá'i faith, which was first revealed in the 19th century, have been prone to persecution off and on from the very beginning. Their prophet, Bahá'ulláh, knew in his own lifetime and on his own person cruelties and hardships which would quickly have broken any other man, yet he lived to the age of 75, and lived to write, so it is claimed, as much as the total volume of scriptures revealed by all previous divine manifestations.
I shall confine myself to the events since the fall of the Shah and since the assumption of power by the present authorities in Iran. In that time, we believe that 111 Bahá'is have been judicially executed in Iran. An unknown number, additionally, have disappeared or fallen victim to lynch law. This loss of life is the most dramatic and tragic aspect of the problem, but it is far from being the whole of the story. Shrines and cemeteries have been desecrated, private Bahá'i property has been confiscated, people have been dismissed from their jobs and expelled from universities, travel restrictions have been imposed and there is in fact what looks increasingly like a systematic and carefully-thought-out attempt to stamp out the Bahá'i faith by making life for Bahá'is in Iran unlivable.
I may be asked what is the scale of this tragedy, what are the numbers. Although there are now Bahá'i communities in nearly every country of the world, their faith was first promulgated or revealed in Iran and the faith has today in that country about 300,000
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believers, which makes them the most numerous religious minority in Iran. Moreover, unlike the Jews, Christians and Zoroastrians, they receive no recognition, are granted no rights, under the constitution; they are effectively outlaws, fair game for persecution.
What is the answer of the authorities to the charges which I am making? It would he unfair not to examine their point of view. I think they would say that nobody has been executed for being a Bahá'i, while they would admit that a certain number of people who coincidentally happened to be Bahá'is had perhaps been executed for other offences—for being agents of the West, of Zionism, or America, for subversive acts or anti-state activities, for immorality or for having supported the Shah. But those accusations do not stand up to a moment's impartial examination; they are false.
The often repeated allegation that Bahá'is are agents of Israel stems from the historical accident that their headquarters is in Haifa. It was established in Haifa when Haifa was an obscure place in the Ottoman Empire, long before the British mandate in Palestine and even longer before the emergence of the State of Israel. And what about their alleged support of the Shah? Bahá'is are enjoined by their religion to take no part at all in divisive politics but to obey the laws of whatever government they find themselves living under. That means that they can always be accused of having supported the previous régime, in the negative sense of not having actively opposed it.
I suggest that those specious charges fail to conceal the fact that the basis for this persecution is not political but theological. In the field of theology, as behoves a Humanist who is to be followed by a bishop, I tread very delicately. As I understand it, however, the misfortune of the Bahá'is is that in the eyes of fundamentalist Shí'ite Moslems, their faith counts as a heresy. Although they, too, revere Mohammed and study the Koran, just as they respect and study the scriptures and teachings of Moses, Jesus Christ and Buddha, they fall foul of the Shí'ite belief that it was Mohammed who made the final and, as it were, definitive revelation of the divine will, because Bahá'is believe that their prophet, Bahá'ulláh, 1,200 years later, had an equal claim to divine inspiration.
I do not think it would be fitting for me to dispute the right of any religion to nominate its own heretics. Theological disputation is a highly respectable activity and theologians are believed to be unusually adept in the dialectical arts of argument. But when argument gives way to an attempt at either forcible conversion or physical extinction, then I suggest that our common humanity entitles, indeed requires, us to protest and condemn. Moreover, if this were not a case of religious persecution, how would it come about that so many of the Bahá'is who have faced these trumped-up charges have been offered aquittal in exchange for the recantation of their faith, and have refused the offer?In the most literal meaning of the word, this is martyrdom, not in the time of the Roman Empire, not in the Middle Ages, but in the 1980s.
People may wish to know what is this faith for which men and women are choosing to die. I will leave it to the right reverend Prelate to answer that

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question in more detail. I would only say that, to my, I hope, unbiased mind, the religion of the Bahá'is, asserting, as it does, the oneness of the human family and the oneness of God, revealing His will from time to time through his prophets, of whom Bahá'ulláh is not necessarily the last, seems the most comprehensive and the least dogmatically exclusive religion of which I have heard. The moral precepts by which Bahá'is conduct their daily lives should also commend them to us all. It was extraordinarily enlightened, in the middle of the 19th century and in the Middle East, for a religious writer to attach the importance which Bahá'ulláh attached to education, and in particular, because of their influence on children, to the education of women. In short, of all the peoples of this earth, I can think of none less deserving of persecution than the believers of the Bahá'i faith.
That brings me to the most difficult, the most important, and the final section of my speech: the question, what can we do? It is all too easy to lapse into despair and to conclude that the people in charge in Iran today are totally impervious to outside influence or to world opinion. But the Bahá'is themselves do not believe that, and we should surely match our hopes with theirs. They believe that there are already signs that the many representations which have been made are beginning to have some effect, if only in a greater willingness on the part of the authorities to defend themselves, however unconvincingly. If that is so, surely we must redouble our efforts in every suitable form to bring home to those authorities how they alienate the sympathies of the world, and in particular of would-be friends of Iran, by these outbursts of appalling intolerance.
I shall not be surprised if the noble Lord, Lord Trefgarne, makes the point that a direct bilateral approach from Her Majesty's Government to the Iranian Government might merely fuel their suspicions that Bahá'is are all agents of the West, and might therefore be counter-productive. That might be so, and I would confidently leave it to the noble Lord and his colleagues to judge such a sensitive and difficult question.
However, if the direct path is dangerous, there might be indirect paths which we could follow, through the United Nations, for example, or through the Commonwealth Secretariat. If the Moslem countries of the Commonwealth could support the actions of some other Islamic countries in urging moderation, that might be most helpful, and I hope that later speakers may have other suggestions.
My Lords, I have spoken too long, and you have listened very patiently. I should like to end not by urging the Government—they do not need urging—but by saying that I am quite certain that they will lose no opportunity of helping these admirable and endangered people who are facing a threat which, I fear, grows more terrible day by day.
8.3 p.m.
Lord Stewart of Fulham: My Lords, I am very glad that the noble Lord has raised this question, because we live in an age of persecution of many kinds and in many countries, and, as has been suggested, sometimes we feel that if we try to protest about it, we shall make the situation worse. I do not believe that to be
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true. On several occasions when I held office I met people who had managed to get out of tyrannical countries and, without exception, they said that one thing that lifted up their hearts was the knowledge that in free countries voices were raised on their behalf, that their suffering, misery and danger was not completely disregarded by the world.
Furthermore, if we always assume that the right reaction to situations such as this is one of sorrowful silence, we gradually move in our own minds towards thinking that it does not really matter. We ought to realise that there are in the world a great many evils that we cannot prevent, but we ought to make it quite clear that the fact that we cannot prevent them does not mean that by silence we ought to condone them.
Therefore, I believe that the noble Lord, Lord McNair, was entirely right to raise this matter; and there is I think one other reason to mention in this respect. It can no longer be said of persecution that it is purely the internal affair of any country. All members of the United Nations are bound, as countries were not in past centuries, to observe at least certain rules about human rights. The proper treatment of their own subjects is one of their international obligations, and having asserted that principle in the world, we do not want to let it pass into desuetude.
I agree very much with the noble Lord, Lord McNair, about the nature of the Bahá'i people and of their faith. For one who has been brought up in Western religious tradition, knowing the range of beliefs to be found among all those who call themselves Christians, it is rather difficult to put oneself inside the mind of an Eastern faith. But my own impression—I do not want to put it stronger than this—is that studying, reading about, the Bahá'is they reminded me very much, not necessarily in precise teachings, but in temperament, of the Society of Friends. There was the same gentleness, the same rejection of force, the same toleration; and it is certainly true that it has been a firm belief of theirs for a long time that it is wrong to use force against the temporal power, that indeed they will give almost everything in the way of obedience to the temporal power, everything except the renunciation of their own faith. Bearing in mind who is to follow me in the debate, I speak with great trepidation, but I think I am right in saying that that is very much how St. Paul told early Christians to behave.
Therefore, it is extraordinary that against these people the charge of political subversion be raised, and one notices, too, that Bahá'i communities are to be found all over the world. I do not believe that there has been a single country, excepting the charges now made in Iran, where Bahá'i communities have been accused of any kind of treason, disloyalty, or lawlessness, or of being anything other than good, reliable, law-abiding citizens.
Is there anything that can be done about it? It is not easy, and I would not dream of pressing anything on the noble Lord, Lord Trefgarne, because we know how difficult is the situation at present between this country and Iran. I would only ask him to consider whether, with the help of other countries, some kind of approach can be made. I take it also that I am right in supposing that if anyone of the Bahá'i faith manages to get here from Iran and wants to stay here, no obstacle would be placed in the way of his doing so. I

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believe that there are a few who have managed to do that. We have generally taken the view that when people are obviosuly in danger of their lives for their faith they can come here. I trust that I am right in assuming that that is so. I am sure that we shall all wish the noble Lord well in any other steps that he might be able to take to help these people and to remove from the world at least the blot of this particular persecution.
8.9 p.m.
The Lord Bishop of Guildford: My Lords, I count it a great privilege to support the noble Lord, Lord McNair, in encouraging the Government to use their influence to help the Bahá'is now facing vehement persecution in Iran. Without any hesitation I would stand by the speeches which have just been made by the noble Lords, Lord McNair and Lord Stewart of Fulham, and associate myself with the descriptions which they have given of the Bahá'i faith and of the reasons why we should be concerned about them and their situation in Iran today.
However, in my own speech I wish to speak a little from the religious aspects of things, although I know this is somewhat delicate and dangerous because I shall appear as a Christian speaking about Islam. I should like to assure the House that I do not speak from any anti-Islamic point of view; and perhaps I should say by way of personal explanation that only this past week I spent some days in Paris at a meeting of the Conference of European Churches Islam in Europe Committee, of which I have the honour to be chairman. Almost the whole of our meeting was taken up with measures to help the Churches in Europe recognise the great contributions which the Moslem communities are now making to Europe, both in West and East, and to help the Churches respond positively and generously towards them. So in speaking now my concern is primarily for the Bahá'is, but it is also to encourage the Iranian authorities (if it is possible to do so) to act in a way which I think it might well be suggested is in line with the principles and development of Islam.
Many noble Lords will be aware of the status of the Bahá'is in Islamic law. The holy Koran speaks with approbation about the so-called People of the Book, those who follow the one true God and a revelation given to a prophet named in the Koran. Such people are distinguished in Islamic law from other religions and given protected status. Principally they are Jews and Christians, though as the noble Lord, Lord McNair, has said, they also include Zoroastrians. The People of the Book are to be treated with humanity, not disturbed in their public worship; and one of the Traditions of the Prophet Mohammed said:
"He who wrongs a Jew or a Christian will have myself as his accuser on the day of judgment".
Unfortunately, the Bahá'is do not fall into the category of the People of the Book, and this is why they have suffered persecution since their establishment in 1844.
Not only do they lack recognition in the Koran, but they declare their founder, Baá'u'lláh, to have revealed God's Truth, thus contradicting Moslem belief that Mohammed was the last and seal of the prophets, the Prophet par excellence. So the founder himself and
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many of his followers, who were originally Moslems, laid themselves open to the charge of apostasy, for which the penalty, according to some traditionalists, is death. But I would very seriously question whether that law can be applied to Bahá'is today, in succeeding generations. The point has been made that they are law-abiding citizens, and I would think it could be argued that they do not therefore fall within that law.
At this point I should like to quote from a Moslem Commentary on the Universal Declaration of Human Rights, published in Iran in 1966, during the reign of the Shah, by the leader of a Sufi sect, Sultan Hussein Tabandeh. I read it to your Lordships because it will indicate the very severe restrictions upon freedom of religion which conservative Islam imposes. This is the commentary on Article 18 of the Universal Declaration of Human Rights, regarding the right to freedom of thought, conscience and religion. Sultan Hussein Tabandeh says this:
"This Article is largely acceptable but not without difficulties. Freedom of thought, of conscience and of belief is allowable to the extent that it does not clash with the Koran or with Islamic Canon Law … Followers of a religion of which the basis is contrary to Islam, like those who demand Islam's extirpation, have no official rights to freedom of religion in Islamic countries or under an Islamic government … In Islam, religion and politics are not separated: nor can the government be divorced from the official religion. Hence any propoganda for another religion must be prohibited as being contrary both to Canon Law and to State Law".
I would finish with this last quotation, which comes in the course of a long chapter on this problem, in which it says:
"The apostate whose parents are Muslims, and who was born into the Islamic tradition, but after coming of age turns from his religion. For him there is no repentence, since he has deserted his natal faith. He is like a diseased member of the body politic, gangrenous, incurable, fit only for amputation and must be executed".
I bring this quotation to your Lordships because this is a very respectable book, well-publicised, and translated into English; and it indicates, I think, the difficulties of the situation about which we are speaking tonight. It emphasises, I think, the very grave restrictions on freedom of religion which are imposed by conservative Islam and which we see operating in contemporary Iran and in other Moslem countries.
I hope our Government will continue to support the UNESCO resolution of 2nd September with regard to the Bahá'is, and its implementation; but here I take up a point made by Lord McNair in his suggestions as to what might be done. I should like to widen this to suggest that the influence of our Government, both in the United Nations and in direct country-to-country contacts, should be directed towards encouraging as far as they are able (and with great delicacy, because one is aware of the difficulties) the development of more liberal tendencies within Islam—a development which is supported by growing numbers of influential Moslems. I would think this appertains not only to Iran but to other countries which have very close contacts with us in the Arabian peninsula and in Western Asia.
There is a kind of general tendency, I think, that we should be aware of and seek to give some support to, because I believe that such a development would recover a perspective which I think it can be argued is emphasised in the holy Koran itself but which has been overlaid by subsequent tradition. Indeed, the

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essence of the point I am trying to make is to emphasise that it is tradition as it has developed which has caused the difficulties. There is a very significant difference between the provisions of the Traditions for the treatment of minorities and the assertion of Islamic authority and, on the other hand, the emphasis which the holy Koran itself places upon the divine punishment which befalls unbelievers and apostates alike in the world to come.
I ask your Lordships' leave to quote from the Koran (16.106), which is very pertinent to this, as your Lordships will see in a moment, I hope:
"Those that believe not in the signs of God, God will not guide: there awaits them a painful punishment … Because they have preferred the present life over the world to come, they are the heedless ones; without a doubt, in the world to come, they will he the losers … Summon to the way of your Lord and dispute with them by that which is better ".
That implies that religion's task is to tell the truth, but punishment should be left to God himself. That again comes in another chapter, and I could quote many more, but this one will suffice:
"If there is a party who believe in the Message, and a party who believe not, be patient till God shall judge between us; He is the best of judges".
So the general tenor of the Koran itself is that the proclamation of Islam and its triumph depend upon its essential truth rather than upon compulsion, and that the consequences of unbelief are in the hands of God, to be administered by him. The defence of truth is safe in God's hands.
To take it a little further, in one of the most sublime passages of the Koran—the famous Throne Passage, which sets out the majesty and sovereignty of God and distinguishes believers from unbelievers—it is stated quite categorically and unambiguously:
"There is no compulsion in matters of religion, la'ikraha fid-din".
When Islam is most true to its own genius, its will to let God be God, its followers have shown moderation and restraint towards those who have differed from them. Only by tolerance can Islam demonstrate its confidence in the final truth of the revelation that it claims to have received.
I would then, secondly, argue that if the Islamic nations are to play their rightful and honoured role in the commonwealth of nations, they will best do so on the basis of a tolerance which goes beyond some of the excesses that we find in the Traditions. I think that we should accept that there are many influential Moslems in the Western world and elsewhere who would press that the Shari'a law, which is quoted in defence of some of these actions, can itself be adjusted to meet contemporary needs. I will not weary your Lordships with a dissertation on Islamic law but I could substantiate that in other circumstances.
As one example of the kind of developments which are taking place, let me refer to the Universal Islamic Declaration of Human Rights made by the Islamic Council of Europe in September of last year. Your Lordships will see the relevance of this to the Bahá'i situation in Iran. It is produced by a Moslem organisation representing a great number of Moslems in Europe and with close links with Moslem countries outisde Europe. It has been set out, printed and is readily available. Paragraph (x) on the Rights of Minorities reads as follows:
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"(a) The Koranic principle, 'There is no compulsion In religion' shall govern the religious rights of non-Muslim minorities.

"(b) In a Muslim country religious minorities shall have the choice to be governed in respect of their civil and personal matters by Islamic Law, or by their own laws".

Later in Section XII, the Declaration states:
"Every person has the right to freedom of conscience and worship in accordance with his religious beliefs".
My Lords, what I have tried to do (and perhaps it may have seemed that I wandered from the point but perhaps you will see the relevance now) is to say that within the Koran itself the punishment of apostates and unbelievers is reserved to God; it is not to be usurped by man. This is the fundamental principle. The statement in the Koran that I quoted: "There is no compulsion in matters of religion" is a totally categoric, fundamental statement. Then I would go on and say that in the Tradition, as it has been expounded and developed in Moslem countries, there has been a hardening, a reversion, from the sense of tolerance which at the time of the Prophet was extended to the "People of the Book" but by analogy should be extended to others.
There is a new movement throughout the Islamic world seeking to say, "Let us go back to the fundamental principles". If the Islamic nations are to play their part in the commonwealth of nations, then I would plead and urge them that they must understand this principle of tolerance which is embodied in the Universal Declaration of Human Rights. It is only thus that they can play their part.
Therefore, I say let us not simply see this as an isolated instance in Iran, serious though it is—and I believe that it is one of the most profound denials of human rights on grounds of religion in the world today. But I would plead that we use such influence we have to enable Moslem countries in general to develop this tolerance towards others which I believe is part of their own assertion of the sovereignty of God.
I do not speak only about the Moslem countries. I believe that all religions today must learn that the people who do not share the beliefs or practices of any particular religion (other than the one professed by the people concerned) also understand the reality of prayer, have a sense of the presence of God and know His truth; and that we shall only build a tolerant and peaceful world if the religions of the world can learn that.
I have not attempted to make any assessment of the Bahá'i faith, although I share the description already given of it. I do not think that it would be desirable for me to make a kind of profit and loss account of its values. It is now one of the most widespread world religions although its members are few; and there are now 167 Bahá'i assemblies in the United Kingdom—mostly of British-born people. My support for the noble Lord, Lord McNair, derives solely from my deep conviction that freedom of religion is one of the most prized of all human rights, and that to deny it on whatever grounds to any group is to diminish the humanity not of the oppressed but of the oppressor.
I refuse to believe that Islam, which, true to its origins has a great tradition of moderation and tolerance, must persist in denying that human right to the Baháis, who have suffered so much. I believe that it can be only to the honour of Iran if its Government accords toleration to those who are not Moslems. I beg to

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encourage our Government—as they have promised to do in a letter to the British Council of Churches—to use their influence in the United Nations to the utmost on behalf of the Bahá'is; and also to consider some of the points I have made about the whole Islamic world in their dealings with other countries. Only on that broad basis shall we eventually be able to build that world in which there is the real tolerance that we desperately need.
8.28 p.m.
Lord Whaddon: My Lords, may I add my voice in thanks to the noble Lord, Lord McNair, who, I think, does a great service in raising this topic. There may be those who say, "What is the House of Lords doing, concerning itself with some obscure sect thousands of miles away?" If one realises what is going on in Iran, it would take a very hard heart to ignore the plight of the Bahá'is. It seems to me also that we have a phase of history where religious influences are strongly on the increase and are having increased effect on secular affairs. We ignore the developments in religious spheres at our peril. Certainly persecution on religious or political grounds is a grave offence against God and man. It is a most virulent infection which is all too liable to spread.
We are not without experience of its effects in our own country. I was showing some visitors around Westminster Hall and looking at the spot where Sir Thomas More was tried. It is not so long ago, I thought, since we saw similar things in this building. In Ireland today religious bigotry is at the root of many of the problems involving the killing of our own people and our own troops. We ignore these things at our peril. It is right that this subject should be ventilated tonight. The Bahá'is are an outstanding example of a peaceful, innocent people; and the persecution is revolting to any but the most callous conscience.
My Lords, what can we do? There are all too few practical measures that can be taken. One must congratulate the Council of Europe on the resolution that they passed last week expressing their concern and revulsion about the situation in Iran. Perhaps the Government could consider whether the United Nations provides another forum where this question may usefully be ventilated and raise the matter there. The noble Lord, Lord Stewart of Fulham, mentioned the Commonwealth and particularly the Moslem countries of the Commonwealth. Certainly they may have channels of communication into Iran which are not open to the rest of us. I am quite sure that the Government will also consider whether this route could be useful.
One other channel has not been mentioned tonight but it could be extremely important. That is the BBC World Service. My own experience in countries where persecutions of one sort or another have been carried out, such as Greece during the Junta and in certain parts of east Europe—was that the BBC World Service was of most tremendous importance and was listened to with very great respect. Word spread very rapidly among the affected population. I understand that the Farsi broadcasts of the BBC are listened to by large numbers in Iran. Perhaps the Government could use their good offices to suggest—I know that they cannot dictate—that the feelings of revulsion in our country
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might be made clear in the news coverage. This would be a measure of moral support which might be of great comfort to those suffering from this persecution at this time. Those of us who have religious faith should certainly remember them in our prayers and make it known to the Bahá'is that we are doing so.
The lesson of history is that persecution never succeeds in suppressing. Indeed, persecution degrades the persecutor. It only ennobles the victim. If we can get a message across at all to the Shí'a community, it is that what they appear to be trying to do—the elimination of this sect—is directly counter-productive, and that the more they persecute, the greater the standing of and sympathy for the Bahá'is in other countries. From the blood of every martyr there will undoubtedly spring 1,000 new adherents to the Bahá'i beliefs. If they realise this, they may not be so keen to produce new martyrs.
For ourselves in this country there is a lesson. This country has become multiracial and is very rapidly becoming multi-creedal, with new creeds which have only recently been seen in this country. Religious beliefs are extremely important in determining what happens in the secular world. The right reverend Prelate very rightly called for tolerance, mutual respect and conscience. That is absolutely right. We must learn this lesson.
The present trend towards ecumenism among the Christian religions will have to expand and flower into universalism as Britain becomes more involved in other religions of the world. Noble Lords are no doubt familiar with the eight Beatitudes of Christianity. I would suggest that perhaps the time has come for us to consider adding a ninth:
"Blessed be he who admits that he just might be wrong".
8.35 p.m.
Lord Trefgarne: My Lords, I want to start first by echoing the thanks to the noble Lord for raising this matter. But I also want to emphasise that Her Majesty's Government are indeed fully aware of the problems which the Bahá'i community in Iran faces and we are deeply concerned about reports of recent developments there which suggest a more widespread persecution of that community. We are doing what we can to bring home to the Iranian authorities our concern at the state of affaris. We do not wish to interfere in the internal affairs of Iran, but we cannot remain silent when the elementary human rights of a small community are abused.
While our concern and horror at what is happening is justifiable, it is right that we should also try to understand the background against which this persecution is taking place. It would be wrong to imagine that it is a consequence of the recent revolution in that country, though undoubtedly the position of the Bahá'is has been aggravated by the turmoil that political change has brought about.
There are between 150,000 and 300,000 Bahá'is in Iran, and they constitute the country's largest religious minority. Bahá'ism grew out of Shí'a Islam, the predominant religion of modern Iran. It began in the mid-19th century, initially as a development of radical religious ideas, and for a time was tolerated as a dissident but integral element within Islam. But its followers soon made demands that were impossible to

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reconcile with the traditional beliefs of Islam, and the Islamic community of Iran condemned Bahá'ism as a form of apostasy. Since in Islamic eyes apostasy is tantamount to wilful denial of God, it is easy to see how the Iranians have come to regard the Bahá'is as very much different from other religious minorities. As a result, the Bahá'is have never been officially tolerated in Iran: they were persecuted throughout the 19th century and even under the Pahlavis were subject to sporadic harassment. The first Iranian constitution enacted in 1906 made specific provision for the recognition of religious minorities, and listed as such the Jews, Christians of all denominations and Zoroastrians. That was mentioned by the noble Lord, Lord McNair. In this sense, the new revolutionary constitution is no different from that of 1906.
There are many features of Bahá'i beliefs which pious Moslems find offensive but which we in the West would regard as unobjectionable, even desirable. For example, the Bahá'is insist on the oneness of all religions and on the equal status to be accorded to women. In addition, communities of Bahá'is have, through their tendency to cling together and support each other—to their mutual advantage—incited the dislike and envy of the wider society in which they live.
The recent revolution in Iran has not changed this position. In the months leading to the revolution and in the period since, the Bahá'is have suffered a large number of attacks on property and persons. Such attacks are primarily the work of individuals or of groups acting independently, often incited by the Moslem clergy. They are the natural scapegoat for a society rent by revolution, war and religious revival. The fact that they have co-religionists in the West and that their holy places, the Tomb of Baháullíh, is at Haifa in Israel lends a spurious plausibility to the accusations that they are spies or the agents of Zionism and imperialism.
The Iranian authorities have said that if Bahá'is are executed in Iran it is not because of their beliefs, but because of their activities against the state. Yet the Baháis declare that it is a fundamental tenet of their faith that they respect the authority of the political régime under which they live, and their followers are enjoined to support the Government of the day and to take no part in the political process. It is difficult to see how such people can be the subversive and destructive element that the Iranian authorities would have them be.
I have tried to set in historical perspective the maltreatment being suffered by the Bahá'i community in Iran. We can no way condone this. Our concern is shared by many other countries. There is wide-spread revulsion throughout the world at the treatment suffered by this inoffensive community. We, with our fellow members of the European Community, have taken a number of steps to draw the attention of the Iranian Government to international concern about their policy towards the Bahá'is.
We have already taken action at a high level in the United Nations. The United Kingdom expert at the United Nations Sub-Committee on the Prevention of Discrimination and Protection of Minorities cosponsored the resolution which has passed on 9th September condemning the persecution of the Bahá'is in Iran.
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On 28th October last year, our Permanent Representative at the United Nations specifically referred to the Bahá'is in a statement on the draft declaration of the United Nations General Assembly calling for the elimination of religious intolerance. The declaration was adopted on 25th November.
The Ten have also made a démarche to the Iranian Government in Tehran on behalf of the Baháis. The démarche took place on 31st January and had the additional backing of Australia, Norway, Portugal, Sweden and Switzerland. The text of the démarche stressed to the Iranians the extent of international concern about their policy towards the Bahá'is and asked that the Iranians henceforth consider the Bahá'is as a religious minority.
I have the text of that démarche here and perhaps it would be appropriate if I were to read it to your Lordships; it is not particularly long. It reads as follows:
"The Governments of the Ten and of the following countries"—
those are the ones I have referred to—
"present their compliments to the Iranian Ministry of Foreign Affairs".
That is the normal opening in these documents. It continues:
"Without wishing to interfere in the internal affairs of Iran, the Governments of the countries listed above wish to draw the attention of the Iranian Government to the fact that the recent executions of leading members of the Baha'i religion in Iran have been a source of profound disquiet to them and of great concern to public opinion in their countries. In these circumstances, the Governments of the countries listed above wish to draw attention to the relevant provisions of the Universal Declaration of Human Rights and those of the two 1966 Convenants on Human Rights to which Iran has subscribed.
"The Governments wish to receive from the Iranian Government assurances to the effect that those provisions will also be respected in the case of members of the Baha'i religion in Iran, so that they are able to respond to the concern voiced in their respective countries."
We shall continue to take action at the highest level of the United Nations—
Lord Stewart of Fulham: My Lords, may I interrupt the noble Lord? Has any reply been received so far to the démarche?
Lord Trefgarne: No, my Lords; no reply has yet been received. It was delivered only on 31st January, and I think such a reply would not in any event be expected by this time. The United Nations Commission on Human Rights is currently in session in Geveva and indeed the United Kingdom Mission to that organisation is led by my noble friend Lord Colville of Culross. Our Commissioners are considering with our partners what action to take which would be in the best interest of the Bahá'is in Iran. We shall certainly take every opportunity in the future to press home to the Iranian Government our concern about the situation of the Bahá'is in that country.
There have also been some bilateral representations to the Iranians. As your Lordships will know, we do not at present have an Embassy, as such, in Tehran. Our interests are looked after by what is called the British Interests Section of the Swedish Embassy. We have a number of officials in that section and, at our meetings with senior officials of the Iranian Ministry of Foreign Affairs and also with the Iranian

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Embassy in London, we have stressed the public concern in this country about the persecution of the Bahá'is. As I mentioned earlier, of course, the Iranians are signatories to the Universal Declaration of Human Rights, which they signed in 1966.
I want to emphasise that the Government share the concern that has been expressed tonight at the unhappy circumstances which afflict these unfortunate people. I hope your Lordships will agree that the action we have taken is appropriate and I also very much hope that this action will bear fruit in the short or medium term.