§ 3.39 p.m.
§ Reports received.
§ Clause 3 [Substituted rates and precepts]:
Lord Hill of Luton moved Amendment No. 1:
Page 2, line 22, leave out subsection (4) and insert—
(" (4) Where a precept is substituted by virtue of this section any authority which has made a rate by reference to the original precept—
§ The noble Lord said: These amendments stem from the Committee stage of the Bill. In the special circumstances that a county council as a precepting authority made precepts on its district councils before 1st April, when this legislation becomes law with its retrospective qualities the money collected from the district councils will have to be returned by the precepting authority to those councils and the councils will have the responsibility of distributing the excess rates that flows from that supplementary precept to the ratepayers. The point I raised was that this could prove a very expensive business. It is inevitable, it is right, but it is difficult.
§ Some people have paid their rates for the year in question to their district council, some have paid nothing, some have paid some instalments but not others; some people have lived for a time in the area of the district council but have departed to other areas, and vice versa. I raised the point that the cost of this complicated and rather expensive process should not fall on the district council, which did no more than obey a precept and transfer money to the county council, the precepting authority.
§ The noble Lord, Lord Bellwin, promised to examine the point, so that no unfair burden should fall on a district authority for something for which it had no responsibility whatever but acted properly in obeying the precept at the time it was issued. To help in the process of finding a solution, I set down Amendment No. 1, with which is closely associated Amendment No. 48, which makes the parallel changes in the schedule. Without going into wearisome details—and I ought to say that I am indebted to the department for helping in this complicated process of drafting—the first amendment is to Clause 3, which repeats the existing provision, and adds a new provision to give rating authorities power to recover from a precepting authority the additional rate collection costs arising from substitution of a new rate for an old one. The second amendment, No. 48, which should be discussed in association with the first, inserts a new paragraph in Schedule 1 dealing with the recovery of costs in transitional cases on the same principle.
§ So I would hope that the Minister will find himself able to accept these amendments, as providing a way of avoiding the imposition of an improper burden on district authorities, whose only sin was to pay promptly to the precepting authority, and whose task now is not only to repay that money but to repay the excess rates that have followed in the district because the precept involved money which could only be raised by the annual rate. That was the problem, and I venture to put forward these amendments as a solution to that problem, placing the responsibility where it fairly belongs, on the precepting authority, and not upon the individual authorities who have done no more than follow the proper practice of obeying precepts. I beg to move.
The Parliamentary Under-Secretary of State, Department of the Environment (Lord Bellvvin)
My Lords, as the noble Lord, Lord Hill, rightly reminds us, I said previously, when he originally raised this matter, that I was sympathetic to the point of view he then 301 expressed, and I did undertake to look into the matter. May I say at once how much I applaud his assiduity in pursuing this? He has clearly given the most careful consideration to the matter, and I consider his approach to be most constructive. I think I would perhaps add to what he has said that the concern here is about the equity of additional costs falling on the rating authorities in the circumstances which he has outlined, and that that concern is clearly understood. I am very pleased, without more ado, to say that the Government entirely accept this and we are pleased to accept these amendments to the Bill.
§ Baroness Birk
My Lords, before this is entirely accepted as it is, it seems to me that it is not quite so clear and straightforward as appears. There are three questions I should like to ask the Minister which I think should be cleared up. First of all, on the question of definition, who is to say what are the increased costs incurred by the rating authority in issuing a revised rate as a result of a substituted precept? Secondly, how are the administrative expenses going to be defined? That is rather a wide phrase. Then, it would seem to me there is a problem in disentangling the rates and the precepts. For instance, what happens when both the rate made for the district council's own purposes and the precept are substituted? How will the extra costs be apportioned?
Earlier Government amendments resulting in Clause 4(3) of the Bill increased the likelihood of substituted rates and precepts. I think we all agreed that substituted precepts will be, Clause 4(3) not withstanding, a rare occurance, and that costs of rate collection are part of the district council's expenditure for block grant purposes. Therefore, the district council will receive grants on the extra costs anyway. On the other hand—and this might be the case in Bedfordshire—the expenditure might attract penalties.
Thirdly, if all the districts in the country have to go through this exercise, the cost to ratepayers remains the same; it is only a question of whether the cost is in the precept or the rate. I should have thought, therefore, that the amendment was not necessary. All it does is further to complicate this already complex Bill. I must tell the Minister that if I had had another day I would have given him notice of these points that I was going to raise, but no doubt he will have them in mind himself. We on this side of the House are very doubtful whether these amendments are necessary and whether they do not further complicate something which is already complicated enough.
§ Viscount Ridley
My Lords, I think I would be expected, on behalf of the county councils, to oppose quite strongly this amendment, but I cannot do so because there is a great deal of merit in the equity, as the noble Lord, Lord Hill has said, and it is difficult to argue against principles. But I think it is a pity that this amendment has been brought forward very late in the day. The noble Baroness, Lady Birk, has given many of the objections to it, and I would endorse what she has said. Secondly, I think there could have been much more consultation on the detail. Finally, I would say that it only serves to highlight what we have pointed out so often: the totally unsatisfactory nature of the precepting system. I hope that this will be the last occasion w hen we have to 302 debate it and that something can be put in its place so that it is not necessary. I have one further question. How it is it to be determined whether a supplementary precept is the fault of the county council or something beyond its control?
§ Lord Bellwin
My Lords, if I may, with the leave of the House, speak again, may I say that if one looks at the basic intention behind what we are proposing, it is in any case to take up the very point that my noble friend Lord Ridley made—namely that, if we did not have supplementary rates and precepts, then there would not be a problem such as we are finding now to put the situation back into shape satisfactorily. Of course, that is the Government's intention and we make it quite clear that we wish to see the abolition of the right to impose supplementary rates and precepts. Once that has been done, presumably on this Bill receiving Royal Assent, then the problem will not arise.
We have a specific situation here which we looked into carefully after this matter was raised, as it was, by the noble Lord, Lord Hill; and, as I have said, we felt that there was equity in what he was saying, that it was right and that therefore we should be willing to accept it. That is why we are so doing.
As to cost, unhappily at the end of the day the costs will fall on the ratepayers anyway, as they always do, but it seems fair to us that in this instance the expenditure should be borne by the precepting authority rather than the rating authority and count against the block grant target of the former rather than the latter. We feel that it would not be right to penalise the rating authority in such cases. Clearly there will have to be some discussion with the parties on the way in which the nuts and bolts of this will be sorted out.
The noble Baroness, Lady Birk, is right to raise the question of how exactly we shall deal with it, and she clearly says that that is something into which I cannot go. At least, I cannot give her a satisfactory answer today, but I am sure she knows that we will pursue it and, when we get further clarification on this, we will make sure that she is kept informed.
§ Lord Davies of Leek
My Lords, may I ask the noble Lord a question, through I am not sure whether or not it is relevant? There is now a tendency for local authorities to borrow from overseas. Would this Motion that we have had put before us, which seems to have been accepted, in any way affect borrowing from overseas? No local authority in history has ever reneged on paying. How would this affect foreign borrowing by local authorities? If it does, or if it has nothing at all to do with that, will the noble Lord please let me know?
§ Lord Bellwin
My Lords, I do not know whether I come to speak yet a third time, other than to say that to the best of my knowledge in no way would that be a problem.
Lord Bruce of Donington
My Lords, may I question the noble Lord a little further on this point? It will be only a very short point. My noble friend asked him how he was going to define "administrative expense", a term which will appear in the Bill in due course; and of course under Clause 12 of the Bill the auditors will require some specific particulars on how this is 303 defined. I wonder if the noble Lord could deal with that, or would he prefer to leave it until Third Reading?
§ Lord Bellwin
I rise for the fourth time, my Lords, to say that quite clearly I would prefer this to be dealt with at Third Reading.
§ On Question, amendment agreed to.
§ 3.53 p.m.
Lord Gainford moved Amendment No. 2:
Page 3, line 11, at end insert—
(" ( ) Where a person as tenant or licensee of any premises—
he shall, where a rate affecting those premises is substituted by virtue of this section, be entitled to recover or, as the case may be, liable to make good so much of any payment or deduction as he would not have been liable or entitled to make if the original rate had corresponded to the substituted rate; and any sum which he is entitled to recover as aforesaid may, without prejudice to any other method of recovery, be deducted by him from any rent payable by him to the person by whom that sum was received").
§ The noble Lord said: My Lords, first I must apologise for an error which appeared on the Marshalled List of Amendments. My name has been printed as "The Earl of Gainford", and this may have caused some confusion when I heard what I thought was my name being called out in the slight melee of noble Lords leaving the Chamber at the beginning of the Business. In moving this amendment I wish to speak also to Amendment No. 46. My noble friend the Minister introduced into the Bill at the Committee stage in this House amendments which, among other things, ensure that refunds are made to ratepayers where a rate or precept is found to be invalid and a lower rate is substituted when the original one or supplementary rate or precept falls on Royal Assent.
§ I would like to commend my noble friend and his colleagues for the care they have taken in drawing up Clause 3 and Schedule 1. I understand that local authority associations have been fully consulted to ensure that they will be workable. However, I feel that they are lacking in one respect and that there is nothing to ensure that a rate refund reaches a tenant where the tenant does not pay rates directly to the rating authority but pays a rent inclusive of rates to his landlord. One would hope that in the normal way the landlord would ensure that the tenant would get his refund, and in the case of most tenants in the private as well as the public sector I am sure this would be so.
§ If it were not so, however, the tenant might be forced into all the problems and expense of a court case because, as I understand it, he has no clear right simply to withhold from his regular rent payments the excess which he has paid. This does not seem right and I would hope that my noble friend could accept my amendment which ensures the tenant's right to get his money back when a refund has been made to his landlord. I will explain this in more detail. The addition to Clause 3 allows the tenant or licensee to recover from his landlord, for example by making deductions from future payments of rent, 304 any amount that has been overpaid because a new and lower rate has been substituted for the original rate. It also makes provision for the converse situation where, perhaps because the landlord has omitted to pay the rates, the tenant is making deductions from his rent, having had to pay the rates direct to the rating authority.
§ I have had experience of this myself. About 25 years ago I happened to be a tenant of a landlord who either could not or would not pay the rates, and so I received demands from the local authority. I dealt through my solicitor whenever a rent or rate demand came. I sent it to my solicitor who then wrote back telling me exactly what I should pay and he kept a check on my payments. However, in the case where too much has been deducted the tenant will receive the refund directly and must make good the excess to the landlord. The equivalent addition to Schedule 1 ensures that the tenant can get back sums paid in respect of supplementary rates. I hope that noble Lords will find this in no way contentious and that my noble friend will be able to agree that it merely takes the existing amendment the necessary step further. I beg to move.
Lord Bruce of Donington
My Lords, we on this side of the House are generally in support of the sentiments which have been expressed by the noble Lord, Lord Gainford, in moving, but we have some questions to ask which I am quite sure the noble Lord will be able to answer. Could it be the case that is given by the noble Lord who moved the amendment that the tenant would have his own rights under common law in any event if excessive deductions had been made or, on the other hand, the authority would have the right on the basis of the deductions being insufficient? I just wonder whether the noble Lord could answer that point and say that it may perhaps depend upon the nature of the contract between the landlord and tenant anyway.
§ Lord Bellwin
My Lords, may I say first of all that we consider this is a helpful proposal and I am grateful to my noble friend Lord Gainford. The intention here extends the protection afforded by Clause 3 and Schedule 1 to those ratepayers who do not pay their rates directly to the rating authority but pay them instead as an addition to, or as part of, the rent payment to their landlord. Clearly since the Bill as it stands gives the landlord, if he is a direct ratepayer, a right to recover excess payments, it is only fair that these should be passed on to the tenant if he originally footed the Bill. I agree with my noble friend that there can be no contention over that.
I would hope that in nearly all cases where this is necessary the refunds would come about by voluntary agreement between landlord and tenant. Nevertheless, I accept that if there are problems without the amendment it is not clear that the tenant would have the right to make good his loss either by deduction from future rent payments or in some other way by making deductions; for example, he might put his contract with the landlord at risk because the circumstances in which rent may be withheld are extremely limited.
The area of landlord and tenant law is extremely complicated, and so I am relieved to find that the amendment proposed is so simple. It merely states 305 the entitlement of the person who originally paid a sum towards the rates to receive any excess refundable and ensures that, if necessary, rent may be withheld to make good the excess. This is, of course, without prejudice to any more agreeable method of achieving a satisfactory refund.
The amendment also deals satisfactorily with the situation where a rate has to be replaced, or falls on Royal Assent. The amendment to Clause 3 deals with the case where the rate has to be replaced and the addition to the transitional schedule deals with other cases. With regard to the point which the noble Lord, Lord Bruce of Donington, made about whether the tenant in any case would not have certain rights under common law, I point out that of course tenants do have rights under common law, but it can do no harm to make it explicit in this way on this point, and I am sure that the noble Lord would be happy about that. My officials have looked carefully at the amendments and I am content that they add to the provisions of the Bill without further complicating unnecessarily the whole difficult area of landlord and tenant law. Therefore, I am happy to tell my noble friend that the Government are willing to accept these amendments.
§ On Question, amendment agreed to.
§ Baroness Birk moved Amendment No. 3:
§ Leave out Clause 3.
§ The noble Baroness said: My Lords, I beg to move Amendment No. 3 which is to delete Clause 3. I wish to make it clear right away that there arc other amendments down which deal specifically with the Bedfordshire problem with which the Minister has assured the House Clause 3 is not largely concerned. Although the Bill is not very welcome anyway, Clause 3 is even more unwelcome than a lot of the rest of it. It does two things. It clarifies the law on substituted rates and precepts, and in the light of the legal uncertainty following recent cases I must say that that part is to be welcomed.
§ However, it goes very much further than that. It is a negation, or at least a postponement at its very best, of local democracy. A local authority will make its rate or precept in March. In May it will go to the electorate on the strength of that rate or precept. Let us suppose that it is a Conservative authority which has kept down its rate or precept at the expense of services. The electorate may, one hopes, reject that administration and return instead a council prepared to reinstate levels of services which have been reduced and to levy a rate to pay for them. What can that newly-returned Labour administration do in the circumstances of this Bill, if this clause becomes part of it? The answer is, nothing—at least until the following year. It must live for the rest of the year with the budget prepared by its predecessors no matter what the wishes of the electorate might be. The authority cannot make a higher substituted rate or precept.
§ The other side of the coin is a little different. Let us suppose that a Labour administration is ousted by a council sharing the views of the present Government. There is a clear electoral preference to reduce expenditure and reduce rates. This clause enables that preference to be implemented straightaway. 306 A lower substituted rate or precept can be made and refunds paid to ratepayers. Hidden in this clause then among the arcane rating law is what I find to be a distasteful piece of political chicanery because it allows democracy to function only in one way; the present Government's wishes can be implemented, but not the other way round. Whatever the Government feel about it or whatever one may feel about the advent of the particular political party that may be elected in the local authority, it should be a two-way system. Democracy should not be just a one-way system.
§ Our objections to this clause go further than that. We are not satisfied that the rating law in this clause is necessarily good law. Subsection (5)(b) requires refunds to be made on request. This is and certainly can become an administrative nightmare. Any excess, no matter how small, shall be repaid and that is on request. This is, of course, as a by-product, likely to increase the costs of administration to the local authority enormously. There is also the problem of ratepayers who might be in debt for past years or for other hereditaments. Refunds still have to be made to them and cannot be offset against other debts. Recalculation of instalments and rate rebates will also present great problems for rating authorities and these problems, quite frankly, do not seem to have been thought out in a Bill which requires a completely substituted rate or precept to be made for only very small changes. It is for that reason that my friends and myself find this clause both objectionable and bad law. I beg to move.
§ Lord Bellwin
My Lords, I am sorry that the noble Baroness wishes to wreck the package of amendments which the Government tabled—tabled may I remind her after full consultation with the local authority associations—at Committee stage. I do not propose to repeat all that I said when the House discussed the issues on that occasion, but I thought 1 made it clear that the package was designed to clarify the position of rating and precepting authorities and of ratepayers, especially where a rate or precept was found to be unlawful.
Our aim was and is an entirely constructive one: to resolve doubts over such matters as the powers of rating authorities to reduce their rates and to make refunds. The noble Baroness, however, is clearly anxious that these doubts should remain by deleting the provisions concerned. Indeed, if Clause 3 were deleted, precepting authorities, because of the time limits on the issue of precepts, would not be able to issue a new precept at all to replace an invalid precept. The precepting authority would be left entirely without any way of financing their expenditure for the year in question.
The noble Baroness complains that Clause 3 would enable an authority to substitute a lower rate but not a higher one. She talked of political chicanery. Let me make it absolutely clear, as I hope your Lordships are now aware, that the ban on supplementary rates and precepts is designed to protect ratepayers from the further depredations of irresponsible local authorities after the start of the financial year. As I indicated at Committee on 10th May, it would hardly be consistent with that basic policy objective to let authorities substitute a higher rate part-way through the year. 307 The noble Baroness and the House will not be surprised to know that as far as we are concerned this amendment is quite unacceptable to the Government.
§ Lord Denham
My Lords, I do not know how long the noble Baroness may be in her reply, but I think that probably the House would wish the Statement to be taken now.