Local Government Finance (No. 2) Bill

HL Deb 10 May 1982 vol 430 cc77-109

8.6 p.m.

House again in Committee.

Clause 2 [Limitation of precepting powers]:

[Amendments Nos. 16 to 18 not moved.]

Lord Bellwin moved Amendment No. 19: Page 2, line 18, leave out subsections (2) and (3).

The noble Lord said: I spoke to this amendment earlier and I beg to move.

On Question, amendment agreed to.

The Deputy Chairman of Committees (Lord Wells-Pestell)

As Amendment No. 19 has been agreed to, I cannot call Amendments Nos. 20 to 23.

[Amendments Nos. 20 to 23 not moved.]

[Amendment No. 24 not moved.]

Clause 2, as amended, agreed to.

Lord Bellwin moved Amendment No. 25: After Clause 2, insert the following new clause:

("Substituted rates and precepts.

.—(1) Subject to subsection (2) below—

1. (a) a rating authority may make a rate for a financial year in substitution for a rate previously made by it for that year; and
2. (b) a precepting authority may issue a precept in respect of a financial year in substitution for a precept previously issued by it in respect of that year.

(2) The estimated product of a substituted rate or precept shall not exceed the estimated product of the rate or precept for which it is subsitituted (the "original" rate or precept); and for the purposes of this subsection the product of a substituted rate or precept shall be estimated by reference to the same gross rateable value as the product of the original rate or precept.

(3) Section 12(6) of the General Rate Act 1967 (which requires a precept to be issued or notificed before the beginning of a financial year) shall not apply to a precept issued by virtue of subsection (1)(b) above.

(4) Where a precept is substituted by virtue of this section any rating authority which has made a rate by reference to the original precept shall under subsection (1)(a) above make a substituted rate by reference to the substituted precept and in relation to that substituted rate the estimated product of the original rate shall for the purposes of subsection (2) above be treated as reduced by the difference (if any) between the estimated products of the original and the substituted precepts.

(5) Where a rate or precept is substituted by virtue of this section any sum paid to the rating or precepting authority in respect of the original rate or precept (including any sum paid by way of an instalment or other part payment) shall—

1. (a) to the extent to which it would have been payable if the original rate or precept had corresponded to the substituted rate or precept, be treated as paid in respect of the substituted rate or precept; and
2. (b) as to any excess, be repaid if the ratepayer by whom that sum was paid or, as the case may be, the authority to which the precept was issued so requires.

(6) Where repayment of any amount is not required under subsection (5)(b) above that amount shall, as the rating or precepting authority may determine, either be repaid or—

1. (a) in the case of an amount paid in respect of a rate, be credited against any subsequent liability of the ratepayer for rates in respect of the hereditament in question;
2. (b) in the case of an amount paid in respect of a precept, be credited against any subsequent liability of the authority to which the precept was issued in respect of precepts issued to it by the precepting authority.

(7) This section applies whether or not the original rate or precept was validly made or issued but shall not be construed as authorising the substitution of a rate or precept for one made or issued after the passing of this Act in contravention of section 1 or 2 above.").

The noble Lord said: I spoke to this amendment earlier and I beg to move.

On Question, amendment agreed to.

Lord Bellwin moved Amendment No. 26: After Clause 26, insert the following new clause:

("Proceedings in respect of rates and precepts.

.—(1) The validity of a precept shall not be questioned except by an application for judicial review; and the validity of a rate shall not be questioned except as aforesaid on any of the grounds mentioned in subsection (2) below.

(2) The grounds referred to in subsection (1) above in the case of a rate are—

1. (a) that any part of it was made for financing expenditure which the rating authority could not lawfully incur;
2. (b) that it was made by reference to a precept which was wholly or partly invalid; or
3. (c) any other ground not based on facts relating to a particular hereditament or to the inclusion or exclusion of any particular person in or from the rate.

(3) If on an application for judicial review the court decides to grant relief in respect of a rate or precept it shall quash the rate or precept whether the ground of invalidity relates to the whole or only to a part of it.

(4) Subsection (1) above is without prejudice to the making of an application for judicial review in any case in which it could be made apart from that subsection.

(5) Section 7 of the General Rate Act 1967 (appeal against rate) shall have effect subject to the foregoing provisions of this section, and accordingly the court shall not under that section amend or quash a rate except in relation to a parricular hereditament.").

The noble Lord said: I spoke to this amendment earlier and I beg to move.

On Question, amendment agreed to.

Lord Mottistone moved Amendment No. 27: After Clause 2, insert the following new clause:

("Limit of increase in rates for non-domestic sector.

.—(1) Where the rating authority makes an increase in the rate the percentage of this increase shall not in respect of non-domestic hereditaments exceed any percentage increase provided for by the Secretary of State under the Rate Support Grant in accordance with section 54(4)(d) of the Local Government Planning and Land Act 1980.

(2) In this section "rate" and "rating authority" has the same meaning as in section (1) above, "non-domestic hereditament" means a hereditament which is not a domestic hereditament as defined in section 48 of the General Rate Act 1967.").

The noble Lord said: With the permission of the House I should like to speak also to Amendment No. 88. Before starting to speak to my amendment, I should like your Lordships to recall the remarks of my noble friend Lord Bellwin with regard to the business rate, when he was speaking to Clause 1 stand part, many of the points of which thoroughly endorse the fact that the business rate must receive proper consideration at this stage. The other point made by my noble friend —to my surprise, although perhaps I have been missing things—was in relation to Amendment No. 15, when he said;: Business rates will continue for the foreseeable future". So I believe we have a problem. As was said in the Green Paper, the rates under consideration are only those for domestic rates and that we therefore have to think rather carefully how the business rates are dealt with.

The purpose of my Amendment No. 27 is to restrict the rates for buisness, to limit them each year to the Government's inflation assumption in the rate support grant settlement. It is referred to in Section 54(4)(d) of the Local Government Planning and Land Act 1980. The CBI, who advised me on this amendment, have been discussing with the Government for some time the case for imposing such a limit. Their representations have been prompted by rapidly rising rates, which have increased as a proportion of the real inflation-adjusted profits in recent years and particularly since 1980–81.

The noble Lord, Lord Bruce of Donington, when speaking on Amendment No. 2 incited me to respond by talking about business rates—and I am sorry not to see him in his place. I remember that among other things he said that the business rates, after all, had to pay for the roads and refuse collection and all sorts of things. Well, that is true, but the business ratepayer pays at a higher poundage than the domestic ratepayer, yet he benefits less from the provision of services. In addition he usually has to pay relatively more for the services he uses, such as refuse collection, than his domestic counterpart.

I will not go over the pros and cons of this amendment because I did so at Second Reading in columns 653–4 of Hansard of 22nd April. Perhaps I may conclude my introduction of this amendment by saying that the arguments used against the proposal for a ceiling on business rate increases have in the past been that it reduces local autonomy and that it would result in an intolerable burden on the domestic ratepayer. However, the counter-arguments run, the ability of local authorities to collect rates from the domestic ratepayer will not be affected, and the fact that the cost of marginal expenditure decisions will fall on domestic ratepayers will in fact greatly enhance local accountability. In practice, it is unlikely that there will be a large increase in the burden on domestic ratepayers, as the increased accountability that arises will be a powerful influence in limiting excessive expenditure.

I am sure that the philosophy behind that remark will appeal to the Government, who repeatedly on other amendments have been making the point that it is necessary in certain areas where local authorities have gone off on a trip to restrict their excessive expenditure. For authorities where the domestic contribution to total rate income is small, the possibility of large increases falling on the domestic ratepayers could be softened by the use of an equalisation grant. I think that is enough to demonstrate the importance of this amendment in supplementing what I said on Second Reading. I beg to move.

Lord Bellwin

I wonder whether my noble friend would permit me—but, if he thinks it would be confusing, of course I will not do so—in speaking to this Amendment, No. 27, and to No. 88, to cover also Amendments Nos. 30,31 and 89.

Lord Mottistone

I would in fact find it confusing. I do not want to offend my noble friend, because I hope he is going to agree, but the subject matter of the other amendments is really quite different and they need fighting on their own account.

Lord Bellwin

Of course, I entirely accept that. May I say that underlying all these new clauses is the point that high rates can harm employment and development prospects in the areas where they are levied? My noble friend has very commendably looked at ways in which the impact of these high rate levels on the business community can be reduced. I suspect he will not be surprised that I cannot say today that the principle and the drafting of his new clauses are acceptable and that I commend them to the House. But I should like to establish clearly—and indeed I hope that all that I was saying earlier established clearly—that we take very seriously the plight of commerce and industry in some areas and that we take very much to heart what is said to us on the subject by the CBI, by firms and individuals, and indeed by my noble friend this evening.

However, I am not convinced that a ceiling on business rates, as proposed in the new clause in Amendment No. 27, would achieve our aim of getting very high-spending authorities to cut back. The effects of a single percentage limit on increases in business rates would be diverse and could mean cuts in expenditure for some authorities but increases in others. Moreover, it could in some cases put an intoleable burden on domestic ratepayers, who would have to finance the balance of an authority's expenditure.

The abolition of supplementary rates and precepts will enable both non-domestic and domestic ratepayers to plan their budgets free of any fears that they may be faced later in the year by heavy, unexpected demands for supplementary rates. This measure, together with our determined efforts to secure continued reductions in local authority spending, should benefit all ratepayers, including those in the business sector.

The point to remember, though, is that extra protection for some ratepayers inescapably means an extra burden for those who do not benefit from the ceiling, or the relief or the exemption involved. Any such large-scale relief as those proposed by my noble friend for non-domestic ratepayers in the new clauses in Amendments Nos. 27, 30 and 31, would mean that the extra burden would fall on the domestic ratepayer, who himself will he hard-pressed in many instances. For this reason alone, I fear I could not agree this afternoon to the principle of relief for commercial hereditaments proposed in the new clause in Amendment No. 30, which we will come to later. Also, as drafted, the new clause would provide relief for commercial but not industrial premises. I am not convinced that that distinction, whether or not deliberate on my noble friend's part, could be justified.

Nevertheless, the Government have already taken some comparatively small but, we hope, useful measures to give specific assistance with non-domestic rate bills in the Local Government, Planning and Land Act 1980. Using order-making powers under the Act, the Government have reduced the amount of empty property rates chargeable on non-domestic property to 50 per cent. of the normal rate; and have given a range of smaller businesses the right, which previously only domestic ratepayers had, to pay rates by instalments. These powers also give us the flexibility to vary further the ceiling on rates on unoccupied property and to increase the number of businesses eligible to pay by instalments in response to changing circumstances.

Just a word on the Green Paper to which my noble friend made reference, Alternatives to Domestic Rates. It is true, as I said earlier, that this applies to the domestic sector, but we have always said that whatever measures are taken—and there will be measures taken—we should have to ensure that business ratepayers were safeguarded from any authority which, following reform of the domestic rate system, sought to maintain excessive spending policies by loading the marginal cost on to the non-domestic rate poundage. We will certainly have this very much in mind. In the light of what I have said, I hope my noble friend will accept that the Government are keeping the problems and needs of business ratepayers very much in mind. We are anxious about it, and I hope that what I said earlier will illustrate this. Perhaps in those circumstances he may feel able to withdraw his amendment.

Baroness Birk

I listened very carefully to what the noble Lord, Lord Mottistone, said and what the Minister said in reply. Indeed, from the reply, the noble Lord, Lord Mottistone, might have felt that perhaps he should have supported the amendments moved from my Bench and also by the Alliance relating to considering the Bill and reassessing the legislation every year in relation to this part of the Bill as well. The Government would have had a chance to look at it and it would also have furthered the noble Lord's case as regards the Government getting on with their assessment of what local financial policy should be.

The Minister quite rightly made various points on the Green Paper as regards the rates and also the services provided to industry. One point which he did not make, and which I think is very relevant in this area, is that the domestic rate increases have been rather greater than the non-domestic rate increases. We have seen a decline in real value of the domestic rate relief grant. This would put an unfair impact on domestic ratepayers in authorities which have a high percentage of non-domestic rateable values, for example, Westminster and the City of London.

Although we are not anxious just to squeeze industry, which would be wrong and in any case an extremely unproductive view to take, I think we must agree that the amendment tabled by the noble Lord, along the lines of the Minister's reply, is right at that point, but its effect as regards domestic rate increases and industrial rate increases puts the whole matter rather out of focus at the moment. Until the Government, or a Government, come up with a new and fresh look at the whole situation it would be wrong to take the amendment in its present form on its own. So if the noble Lord is thinking of dividing the Committee on this amendment, I think I ought to break the news to him that my noble friends and I find reluctantly that we shall not be able to support him.

Lord Evans of Claughton

Briefly, I appreciate the problems that industry and commerce suffer under the present rating system. Until comparatively recently it could be said that the level of rates was not a problem for industry. I still think that the level of interest charges is probably a greater problem for industrial concerns than the level of the rates. I do understand the situation. In the part of the world where I live we are continually receiving deputations and delegations from commercial, industrial and shopping interests asking that something be done about the very high level of rates which commercial and industrial hereditaments have to pay.

I do not think that the proposal that the noble Lord puts forward is one that we could support at this stage. The Green Paper is, of course, about domestic rates and not about non-domestic rates. However, I am chairman of a working party within my own party on the subject of financing local government and one comes back, I am afraid, all the time to the point that the remedy for the industrial ratepayer—as it is, I think, for the domestic ratepayer—is a change in the way in which we finance local government. I really cannot see that the rating system can be tinkered with much more to produce the kind of results that the CBI and, indeed, all kinds of interests want. I think that there must be a root and branch reform of the rating system.

I suspect, from my own researches, that one of the big difficulties will be encountered, in finding a fair way in which to require industry and commerce to pay for the services they receive without imposing too heavy a burden upon them. I suspect that this will be a very difficult and more serious problem than finding remedies like local income tax for the domestic ratepayer, and whether it be by addition or a supplement to the corporation tax I do not know.

I have a great deal of sympathy with the desire of the noble Lord to reduce the burden that industry and commerce suffer. But I do not think that this proposal would be fair in relation to other ratepayers. We will have to wait to find some form of reform of rating which would be fairer to industry and to all people who pay rates. Quite frankly, that must be the only way out. As the noble Baroness, Lady Birk, has said, one could not support this amendment in its present form.

Viscount Ridley

I should like to add that I agree with the last speaker. We come back to the reform of the whole system of local government financing. The amendment is in a sense premature. Although we have enormous sympathy with the business ratepayer who is literally being squeezed very hard, I think that Members on the Benches opposite and members of the Labour party have not realised how serious this squeeze is—they may deny that, but it is I am sure a fact. I hope that the Government, while not accepting the amendment, will take the opportunity yet again to reinforce their wish to those who make the decisions to get on with the root and branch reform of local government finance, otherwise we are all wasting our time.

Lord Molloy

We in the Labour party understand very well the predicaments of local government because we have been more involved in local government throughout the length and breadth of Great Britain than at any time when the Tory party were—

Lord Mottistone

Perhaps the noble Lord would address his remarks to business in local government and not just to local government itself.

Lord Molloy

I was just coming to it. The point I was trying to make is that I hope it will not be considered audacious for me to defend my party from the Benches opposite in this noble House, because I shall carry on doing that as long as God gives me breath. Noble Lords opposite must realise that and the quicker they do so the better. I shall continue with what I have to say. I have as much right to be here as any noble Lord opposite.

What gives us very grave concern is the massive interference in local government which existed on these islands before there was a national Government of the present Conservative Administration. What is worrying many businessmen, small factory owners and small businessmen, is that they are seeing the rate support grant cut, which is, roughly speaking, a fair method of taking money from taxpayers and ratepayers to assist local authorities, particularly those which are in very difficult circumstances. Local businessmen and local industrialists realise that their local authority, to make good some of the cuts imposed on them by central Government, will have no alternative but to raise the rates both for the industrial ratepayer and the domestic ratepayer. Until we understand that and get that quite clear, the very good points made by the noble Lord, Lord Mottistone, will not really be understood.

I have a great deal of sympathy with the noble Lords' submission, but the problem has been put not only on the domestic ratepayer but also on the industrial ratepayer. The men in industry understand, company directors understand that they have to find the money for some of the things that they wish to do in their local authority. The money has been taken away from the central grant by Mr. Heseltine and therefore their local authority will look for other ways and naturally they are looking to local industry to make a bigger contribution. I should like to say this to the noble Lord, Lord Mottistone. He wants to put the blame fairly and squarely where it belongs and that is on the shoulders of this Conservative Government.

Lord Bellwin

The noble Lord will not be surprised if I spring up to tell him that I, too, will speak as often as I like and whenever I like to defend the policies of my party. The fact is that I disagree with him absolutely and totally. It is not grant that decides the level of funds that are available to a local authority; it is the rate at which it spends. I can recall having served—the noble Lord may sneer, but I can recall being in local government when our rate support grant was reduced from 66 per cent. down to 61 per cent., an enormous reduction of 5 per cent. The fact is that it was always those same authorities who managed, who somehow ordered their affairs, who did things better, who got better value for money, who went on providing services at a rate which did not impose upon their industry and commerce the kind of burdens that were being imposed upon them by other authorities who did not care so much about value for money and those things that some Members opposite care about so little. So when we discuss matters in this Bill, as we are doing, and try to make progress, I suggest that it helps if we do not start to make political party points, because I can assure the noble Lord that on this subject I know every bit as much about it as he does.

Lord Molloy

Before the noble Lord sits down, I would point out that the point was made by his noble friend behind him and I believe that he had every right to make his attack on the Labour Party. I committed the grave offence in the noble Lord's mind of defending the Labour Party. When this country was in similar circumstances in the 1930s under Conservative Governments, there was, and there had to be, a release of rates up to 50 per cent. for industrial ratepayers. In other parts of the country there were queues of domestic ratepayers miles long, as in Merthyr Tydfil, where it took people eight or nine hours queueing outside the county court to answer summonses for not paying their rates. That is a situation which I do not want to see arise in this country again, and that is why I made the points that I made in response to the very able and sensible way in which the amendment was moved by the noble Lord, Lord Mottistone.

Lord Underhill

There are two brief points that I should like to make on this amendment. I agree with practically every criticism that has been made on the amendment put forward by the noble Lord, Lord Mottistone. But, in considering the whole question of the difficulties of commercial and industrial ratepayers, one other matter has been overlooked. The lack or absence of adequate services and facilities provided locally can itself have an effect upon the position of employment in particular areas. That must be taken into consideration. The criticism that I would make of the noble Lord, Lord Bellwin, is that he continually refers to extravagance in local government. We know that there must be some tightening up, and there will be subsequent clauses which deal with this. But we must not get away from the fact that local government has cut its real spending by 21 per cent. in the last five to six years, whereas central Government have increased their expenditure by 8 per cent.

The noble Lord ought not continually to knock local government as if it is the only extravagant spender, whereas we know that the services provided by local government are of the utmost importance, not just to members of the Labour Party, but to the whole community, and that local government services must be kept at a sufficient level which can not only affect the livelihoods of people, but which can also have some effect on their employment.

Lord Bellwin

I do not knock local government. First, I query very much the figures that the noble Lord mentioned, but apart from that I do not continually knock local government. Quite the contrary, I have every bit as much interest in local government as has the noble Lord—some might think even more so. But I am concerned when I see things happen within local government that I know are harming it and harming its future. When there is this inability of central and local government to work together, then it is local government as well as central Government that is harmed. At the end of the day it is central Government that prevails to the detriment of local government. I did not talk about extravagance; I talked about levels of spending what we can afford and what ratepayers can afford. The ability to pay does not come into this whole debate at all, but it is certainly having its effect upon business and commerce. It is at our peril that we fail to recognise this.

I want local government to work better. All those I know on all sides—and I know very many leaders on the Labour side—are also concerned, but they are equally concerned—and I hope that the noble Lord will take this from me—about some of the activities of their own colleagues in other authorities who make it hard for everyone who has the interests of local government at heart, as I certainly do.

8.35 p.m.

Lord Mottistone

Perhaps I may conclude this debate around my amendment because, with the greatest possible respect to all sides, there has been quite a lot of talk which has had nothing to do with it. Perhaps noble Lords and the noble Baroness, Lady Birk, will forgive me if I do not respond to her points, which I do not think were strictly on the lines of the amendment.

The particular points that I should like to make are general. One of the dangers of high business rates is that they are moving the businesses away from the big cities. That is bad for life in the big cities. I hope that local government in cities will realise that the more they squeeze financially the small businesses in particular, and the not-so-small businesses, the more they will send away the available jobs within their area and the more they will make themselves destitute. Whether this is the right answer is another matter, but I honestly think that the Government on the one hand and the local authorities on the other must watch the implications of squeezing businesses.

I was very much concerned about two things. The first was the fact that my noble friend's advisers had put my three amendments together. Perhaps I may say to him that if I think they can be taken together, I shall always tell him. If this happens again, perhaps he could note that, because I think that they are separate points. Furthermore, it is bad news for me because it sounds as though he has a brief to turn them all down and I thought that I might get one out of three. Apart from anything else, I think that that is bad debating. I am sorry to have to criticise the way this has been handled, but perhaps my noble friend will note that I shall always let him know if I think amendments can be taken together, unless, of course, it is absolutely obvious, as in the case of a consequential amendment.

What I did not like was the fact that he said this amendment—I think it was this amendment, but it may have been one of the others—related to commercial and not industrial ratepayers. It is not supposed to. If that is so, perhaps he will be good enough to let me know where it is wrong. When my noble friend specifically answered this amendment, he in fact answered many points which I had already made; that is, I had provided the answer to what he was saying to me. Therefore, if he could look at the earlier part of his speech against what I said, he might find that there is a bit more in this which he could accept than he thinks. I am quite prepared to accept that the wording could be improved, but I should have thought that, whatever other noble Lords may have said, there was room here for something on these lines to provide this limit so that there is some sort of a future.

We, as domestic ratepayers, live in our houses and, because there are many of us, when the rates go up they are relatively shared. But some of the businesses unexpectedly get tremendously clobbered, regardless of supplementary rates: as from one year to the next they get clobbered and they do not know what will happen next. So it is very difficult for them to work out a five-year plan as to how they will develop their business if, shall we say, in year three there is a substantial increase in rates, which is a substantial cost. I know that they can be set off against tax, as the noble Lord, Lord Bruce, said, but it is all part of the cost. It does not of itself mean that there is not money to be spent out. Therefore—and I am not trying to incite the noble Lord, Lord Molloy, to his feet—one of the underlying feelings about having a restraint on the non-domestic rates is in order that businesses can plan. I should like to suggest to my noble friend that he makes some sort of slightly more encouraging answer to me on this particular point. I shall then—with the aid of a letter telling me why I am commercial and not industrial—table another amendment at the next stage of the Bill and have a bash at that.

Lord Bellwin

I do not know about this having a bash at things—it is getting very close! Of course, I shall certainly write to my noble friend and we will sort out this business of commercial and industrial. I think that we had better sort out also the particular amendments on which we are speaking, because, so far as I am concerned, I confess that there is some confusion, although I am sure that that is not the case for my noble friend—he obviously knows exactly what he has in mind.

I stated in general where we stood on this whole matter. In fact, everyone who has spoken, regardless of the politics, has an understanding that this is something that we had better recognise. I think we do recognise it because it concerns everything that we are all troubled about. There is no lack of sympathy—I hate to use the word because that implies that you just brush it off, and I do not mean that at all.

I said that in any review, and indeed the review that is going on now, we would have to keep in mind the position of the business and commercial ratepayer. The noble Lord, Lord Evans, rightly said how hard it is, and yes, it is, but even so, we cannot walk away from it; it is part of this whole scene. I assure your Lordships and my noble friend Lord Mottistone that we are thinking of it in that way, and if we have to get down to splitting out these amendments I shall do everything I can to try to be helpful.

Lord Mottistone

I thank my noble friend. With the proviso that if the picture looks right I shall perhaps come back again at Report stage, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 3 [Borrowing powers]:

Lord Mottistone moved Amendment No. 28: Page 2, line 29, leave out from ("(2A)") to end of line 33 and insert ("The reference in sub-paragraph (1) above to money borrowed by a local authority includes a reference to the interest for the time being payable in respect of that money.").

The noble Lord said: This is a different subject, so do not think that it is all back to the same argument. My amendments which relate to the last one come later. Clause 3(1) of the Bill provides that interest payable on local authority borrowing is a first charge on local authority revenues. It does so by adding to paragraph 11 of Schedule 13 to the Local Government Act 1972, where money borrowed is already secured as a charge on a local authority's revenues.

In making this addition I understand that the Government's purpose has been to reinforce and maintain the existing excellent credit-worthiness of local authorities as borrowers, given that after the passage of this Bill they will no longer have the ability to raise revenue by way of supplementary rates at any time in the year. I wholeheartedly support this objective; whether noble Lords opposite do is another matter. Indeed, I would suggest that we all ought to support it. However, I wonder whether interest should be preferred to principal.

The majority of prospectuses issued assume "money borrowed" in the 1972 Act covers interest as well as principal debt, and that these two elements are secured as equal charges on a local authority's revenues. Since the 1972 Act does not specifically mention interest, it might be useful to clarify this point, and the amendment I have tabled does exactly that. My amendment would underline the credit-worthiness of local authorities and would be acceptable and welcome to the lending institutions. It also has the merit of being simple. Since it would have the same effect in meeting any anxieties about local authorities' future credit-worthiness as the Government's original subsection, I would ask my noble friend to consider accepting my amendment to the Bill.

Lord Bellwin

I am grateful to my noble friend for the careful thought he has clearly given to this matter. As he rightly says, our intention has been to ensure that no doubt should arise as to the credit rating of local authorities. Money borrowed, as my noble friend has said, is secured as a charge on local authority revenues by the 1972 Local Government Act. It is not entirely clear whether interest as well as principal debt is covered by the term "money borrowed", although I am aware that many existing prospectuses state as much because the term "interest" is not specifically used.

The need for local authorities to be seen to be absolutely credit worthy, as indeed they are seen to be in this country, is not contentious, and considering what steps might be taken to reinforce this standing the Government had, as the Committee will have seen, adopted the Scottish model for securing interest as a first charge on revenues. I have certainly been interested in studying the amendment proposed by my noble friend. On reflection, it seems to have several advantages. First, it clarifies and confirms the position which many had thought already existed, fitting in neatly with the existing legislation. As a result, it avoids any problem of discrepency between existing and future prospectuses for stock issues. Thirdly, I understand that it would be seen by those who are interested to provide all necessary guarantees of local authorities' credit-worthiness. For these reasons, I thank my noble friend for helpfully putting this forward, and I am pleased to be able to tell your Lordships that the Government can, and will, accept my noble friend's amendment.

Lord Bruce of Donington

We are very pleased to note that the noble Lord opposite has been, for the first time this evening, a little amenable to some suggestion from the Back Benches; of which side, for the moment, is immaterial for our purposes. We most certainly felicitate the noble Lord, Lord Mottistone, on obtaining this concession from the Government. I was a little curious to know why this amendment was put down at all. So far as I am aware, the credit-worthiness of British local authorities throughout the United Kingdom has never been subject to question.

Local authorities throughout the United Kingdom enjoy a very high credit rating indeed, in contrast to perhaps some of the less fortunate cities in the United States who have been in some difficulties. I just wondered why there should be this sudden anxiety that possibly our own local authorities might perhaps be subject to the same kind of economic circumstances that obtain, or did obtain, for example in the state of New York. I should be glad if the noble Lord would give the backing to what I think I now assert correctly, that local authorities in the United Kingdom are of the utmost credit-worthiness in any event, and that in all save the theoretical sense the assurance given in this amendment is not really necessary at all.

If the noble Lord will restrain himself for just a little longer, might I suggest more particularly that one way in which the credit rating of local authorities could be established and seen on a firmer basis—and we shall come to this in Part III of the Bill—is if it were a requirement for local authorities' accounts to incorporate an account of the assets that they actually possess and which are in the ownership of the people of the local authority, in fact governed by the local authority.

So far, as the noble Lord knows perfectly well and it has been pointed out in the Layfield Report, the existing form of accounts does not require any accounting for assets possessed by a local authority in a balance sheet form. I do not want to raise the matter any further now, because it will arise in Part III of the Bill, but I should like the noble Lord to give some assurance to the public at large that, by and large, and with obvious varying fortunes, our local authorities in the United Kingdom have a credit rating second to none in the world.

Lord Mottistone

Perhaps my noble friend would allow me to bring us back to my amendment. The main point is that the paragraph we have sought to remove had interest as the first charge on the revenues. My amendment sought to make it even handed between the prinicpal and the interest, and that is the only purpose of it. This great long political speech, all about Second Reading, is no doubt relevant, but it is not relevant to my amendment.

Lord Bellwin

That is the point. It is really a question of putting the interest and principal as equal charges on local authority revenues for all loans. This removes any ambiguity that there may be in the 1972 Act, which in fact does not mention interest specifically, and reproduces existing practices. I understand that the money market now considers this amendment acceptable and indeed preferable to the original proposals they were making. Of course, as I sit down, I endorse what the noble Lord, Lord Bruce, says. It does no harm to reiterate that because, as there are changes, even restrictions on supplementary rates and so on, people wonder, sometimes worry; so it does no harm to restate the position.

Baroness Birk

My noble friend Lord Bruce was making a relevant point, not a political speech, because when he spoke of the credit-worthiness of local authorities, he was pointing out that because one of their revenue-making possibilities is being taken from them—they cannot levy supplementary rates—people who are in a position to lend them money are becoming scared. That is why the provision was in the Bill and has now been polished up a little by the noble Lord, Lord Mottistone. In other words, it is not so much his amendment against which we are arguing—he has made it neater and more polished—but the original clause, and my noble friend was right in what he said about that.

Lord Bellwin

We could spend all night discussing a point of that kind, so I shall be brief. I am sure the noble Baroness, Lady Birk, is not seriously suggesting that the raising of a supplementary rate in one year would seriously affect the credit-worthiness of a local authority; and the noble Lord, Lord Bruce, explained how credit-worthy local authorities really were. I agree, and of course we are talking about something which has a year's run. It is a point—I made it myself a few moments ago—in terms of the totality of creditworthiness, and I do not think I need say more.

On Question, amendment agreed to.

Clause 3, as amended, agreed to.

8.52 p.m.

Lord Bellwin moved Amendment No. 29: After Clause 3, insert the following new clause:

("Interpretation and commencement of Part I.

.—(1) In this Part of this Act— financial year" means a period of twelve months beginning with 1st April; gross rateable value", in relation to a rating or precepting authority, means the aggregate of the rateable values of the hereditaments in the authority's area; precepting authority" means an authority having power to issue a precept either to a rating authority or to a county council; rate" means a general rate except that—

1. (a) in the case of the City of London, it includes the poor rate; and
2. (b) in the case of the Inner Temple and the Middle Temple, it means any rate in the nature of a general rate levied in the Inner Temple or the Middle Temple, as the case may be;

rating authority" means any authority having power to make a rate under section 1 of the General Rate Act 1967; supplementary precept" means a precept which is issued by a precepting authority—

1. (a) in respect of (or of part of) a financial year in respect of which it has already issued a precept; and
2. (b) by way of addition to and not in substitution for that previous precept.

(2) Sections 1, 2 and (Substituted rates and precepts) above have effect in relation to any financial year beginning on or after 1st April 1982.

(3) Schedule (Rates and precepts: transisitional provisions) to this Act shall have effect in connection with the coming into force of sections 1 and 2 above").

The noble Lord said: I have spoken to this. I beg to move.

Lord Hill of Luton

For clarification, I would refer the Minister to subsection (2) of the proposed new clause, which says: Sections 1, 2 and (Substituted rates and precepts) above have the effect in relation to any financial year beginning on or after 1st April 1982". Does that mean that it has effect in dealing with any action taken before 1st April, or that it affects anything which may have been done before 1st April but which does not come into effect until after 1st April? I should be grateful for his advice on that because a good deal hangs on it.

Lord Bellwin

As soon as the noble Lord said "a good deal hangs on it" I began to wonder; one must double check everything in that situation, and I know he would want me to do that. My interpretation—I think this touches on the point we were discussing earlier—is that it is what was in effect before the date 1st April 1982, but I shall confirm that and contact the noble Lord.

On Question, amendment agreed to.

8.54 p.m.

Lord Mottistone moved Amendment No. 30: After Clause 3, insert the following new clause:

("Rate relief for commercial hereditaments.

.The following section shall be inserted after section 19 of the General Rate Act 1967:— 19A.—(1) The rateable value of commercial hereditaments shall, for the purposes of valuation lists in force at the appointed day as from that day, and for the purposes of subsequent valuation lists, be ascertained as follows:—

1. (a) In the case of a commercial hereditament shown in a valuation list as being occupied and used wholly for 91 commercial purposes, the rateable value of the hereditament shall, subject as hereinafter provided, be taken to be eighty-five per cent. of the net annual value thereof:—
2. (b) in the case of a commercial hereditament shown in a valuation list as being occupied and used partly for commercial purposes, the rateable value of the hereditament shall, subject as hereinafter provided, be taken to be an amount equal to eighty-five per cent. of the net annual value shown in the list as apportioned to the occupation and user of the hereditament for commercial purposes, together with the whole of the net annual value so shown as apportioned to the occupation and user of the hereditament for other purposes.

(2) Where before the appointed day a rate has been made for any rating area in respect of a period beginning before, but terminating on or after, that day, the amount of the rate payable in respect of the occupation of a commercial hereditament shall be calculated as if the rate made had been two rates, the first being a rate in respect of the part of the period terminating on the day preceding the appointed day, and the second being a rate in respect of the remainder of the period, and as if the amount in the pound of the rate made had been apportioned between those two rates, in the case of a rate made in respect of a year in equal parts, and, in any other case in the proportion which the number of days in the first part of the period bears to the number of days in the remainder of the period. (2) In this section references to a commercial hereditament are references to a hereditament (not being a dwelling house with or without any garden, yard, forecourt, outhouse or other appurtenance belonging thereto) whose net annual value falls to be ascertained under section 19(2) or (3) of this Act."").

The noble Lord said: With the permission of the Committee, I will speak at the same time to Amendment No. 89. This is another way of approaching the subject we have been discussing, but it is not to be viewed with disrespect for that reason. It is being suggested here—again, I am advised by the CBI—that there should be 15 per cent. de-rating for business. Though we believe there is a case for total de-rating for business, like there is for agriculture—and in particular for small businesses, who have to compete on level terms with agriculture—we recognise there would be funding difficulties, as business is expected to contribute about £5.9 billion to the rates in 1982–83. De-rating of 15 per cent. would cost approximately £850 million in that financial year and would have the effect of putting the business ratepayer on a par with his domestic counterpart, who benefits from the present subsidy to the domestic sector, which is known as domestic rate relief.

At present, business ratepayers pay at a higher poundage and in general benefit less, as I said in relation to my last amendment, from the provision of services from local authorities. The CBI's view is that if the finance could not be raised in any other way, the subsidy to the domestic ratepayer should be reduced and spread evenly between the business and domestic ratepayer. I cannot say whether there is any noticeable fault in the amendment as drafted, but with a long amendment of this kind, expert parliamentary draftsmen might find other ways of doing it, and if my noble friend does not wish to accept the amendment on those grounds, he might be able to give assistance to produce another amendment to be tabled at the later stage of the Bill.

Lord Bellwin

As I intimated when discussing the previous amendment in the name of my noble friend Lord Mottistone, we are in some difficulty because this proposed new clause as drafted would provide relief for commercial but not industrial premises, which is not what he has in mind. However, I said when we spoke of this before that I would clarify the position for him, and that I have done. For the reason I gave earlier—our concern because when someone somewhere gets relief, somebody else has to pay for it—relief of 15 per cent. for commercial hereditaments would throw an extra burden on the domestic ratepayer.

That brings us back to the whole debate regarding the reform of the system and the position in which we find ourselves now. I am sure my noble friend would wish to look at the amendment again, in view of what I have said about it, and while I in turn undertake to do the same—so we can get the amendments in this sphere clarified—I must intimate that what I have said represents the philosophical concern we have at this time, not least bearing in mind the question of looking at the whole scene (as I have mentioned more than once today) which is perhaps the most important aspect of it.

Lord Bruce of Donington

I need not delay the Committee on this. I am sure the noble Lord, Lord Mottistone, will take it from me—I am sure he is well aware of the fact—that rates in the commercial profit and loss account or commercial trading account, whichever it may be, are in the nature of a fixed charge. Although, like other charges, they go up with the rate of inflation, they are classified as a fixed charge. From that it follows that if the turnover of one's enterprise is continually expanding, or is even maintained, the rates, together with other fixed charges, are a far less proportion of the burden.

Would not the noble Lord agree that very largely it has been the stagnation of consumer demand, reflecting itself in manufacturing output in this country, that has led to lower turnovers? Consequently, lower turnovers mean that the fixed charge operates at a far greater proportion of the company's gross profitability than it otherwise would. Would he not also agree that if it were possible to produce an expanded demand in all sections of commerce and industry in this country—which the pursuit of sane economic and monetary policies would produce—the problem to which he has very rightly drawn attention would largely disappear?

Is not the noble Lord aware that even as we are sitting here this evening there are very many commercial firms busily trying to move into London, despite the high rates here? If he looks at the property sections of the Financial Times, he will find that the phenomenon to which he is referring is limited mainly to those areas where the Government's economic policy itself has caused local devastation.

Lord Mottistone

I would take issue with the noble Lord on two points. First, in concentrating on the question of whether or not a business is doing well, he has said that rates go up only in proportion to inflation, but the fact of the matter is—and this is the problem—that rates have been going up very much more than that. That is exactly what the whole of the Bill is about, so far as I can guess. In certain parts of the country rates have gone up by a considerable amount. They might be shown by the accountants in the fixed parts of a firm's obligations, but in fact the rates have crept out of that classification and have become a particularly serious factor—

Lord Bruce of Donington

I thank the noble Lord for permitting me to interrupt him. Is he not aware that since the year 1975–76 it is precisely the domestic rates which have risen at a higher rate than those in the commercial and industrial sector? Is the noble Lord aware of that?—because unless he is aware of it, he cannot approach this question in the right way. I must remind the noble Lord—though I am quite sure that he realises it—that whereas the domestic ratepayer has to pay rates out of taxed income, commercial and industrial enterprises are allowed to charge their rates for income tax or corporation tax purposes, whichever is the most appropriate to the circumstances.

Everybody would like to see the commercial and industrial ratepayers relieved and see them be more profitable. I should like to be able to follow economic policies that would help to restore their turnover, but one must have a sense of proportion, as the noble Lord, Lord Bellwin, has already pointed out. One must study the interests of the domestic ratepayers as well. I hope that the noble Lord, Lord Bellwin, who is of notoriously generous sentiment, will not succumb too much to the very attractice blandishments offered to him by his noble friend this evening.

Lord Bellwin

I shall not say much on this point, but I believe that in all fairness it should be remembered that if a domestic ratepayer cannot afford to pay his rates, he can obtain a rate rebate. If an industrial or commercial person cannot afford to pay his rates, then he must cut back his staff and his business, move to another area where the rates are lower, or go out of business. So I must say in all fairness that the matter is not quite so simple, as I am sure the noble Lord knows.

Lord Mottistone

Perhaps I will be allowed to continue with my speech, having given way to the noble Lord. If he wishes me to give way to him in future, perhaps he will not go on for quite so long, because it is rather irritating to find that one has forgotten what he said and so one cannot properly reply to him. However, based on what I do remember of what he said, I would say that it is all very well bringing in the domestic ratepayer, but everybody is in favour of the domestic ratepayer. I am in favour of him because I, too, pay rates. But in fact people do not secure the right balance of the problem of staying in business as a business ratepayer. That is what the argument is all about. It is a matter of getting that into the right proportion and I suggest that the basis of my amendment is to try to ensure that the matter is dealt with fairly in the future.

I do not think that my noble friend gave me a terribly good answer, though it was fairly good, considering his brief. As I understand it, this was the amendment that covered commercial, but not industrial, businesses, and perhaps he is going to get me right on that. Perhaps we shall come back to the charge at the next stage of the Bill, with an improved amendment on which we shall have been advised by my noble friend. We can then tackle the matter on its own account. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

9.6 p.m.

Lord Mottistone moved Amendment No. 31: After Clause 3, insert the following new clause:

("Rating relief for hereditaments partly used.

.There shall be added after section 25 of the 1967 Act the After Clause 3, insert the following new clause: 25A.—(1) This section applies where—

1. (a) the whole or part of any hereditament, which has been and remains constructed or adapted for use as a factory, mill or other premises of a similar character for use wholly or mainly for industrial purposes, is not so used (the unused part); or
2. (b) the whole or part of a hereditament comprising a commercial building is not used for the purpose for which it has been used remains constructed or adopted for use (the unused part)

provided that in either case no other use is made of the unused hereditament, but notwithstanding that the building or plant or machinery therein, or appurtenant land is or continues to be maintained in a workable condition. (2) In this section, references to a hereditament comprising a commercial building are references to a hereditament (not being a dwelling-house or a hereditament having a floor space not exceeding 240 square feet and used as a lock-up garage) whose net annual value falls to be ascertained under section 19(2) of this Act. (3) If the rating authority is satisfied upon application in the prescribed form being made to it that

1. (a) either paragraph (a) or (b) of subsection (1) above applies in respect of a hereditament and
2. (b) the unused part under the said subsection (1) is sufficiently identified in the prescribed form then it shall request the valuation officer to apportion the rateable value of the hereditament between the unused part and remaining part of the hereditament; and if the apportionment made by the valuation officer is agreed by the authority and the occupier, then as from—

1. (1) the date upon which the unused part became unused; or
2. (2) the commencement of the rate period in which the request was made

whichever is the later, until the event in subsection (4) below occurs the value apportioned to the remaining part shall be treated for rating purposes as if it were the value ascribed for the hereditament in the valuation list. (4) The event referred to in subsection (3) above is whichever is the first to occur of the following:

1. (a) any of the unused part becomes used;
2. (b) a further apportionment of the value of the hereditament is made;
3. (c) the person in occupation of the hereditament at the time that the apportionment under this section is made ceases to be in occupation.

(5)(a) In determining whether the unused part is sufficiently identified for the purpose of paragraph (b) of subsection (3) above the rating authority shall have regard to the requirements of the valuation officer in determining whether he could reasonably carry out the apportionment mentioned in subsection (3) above if requested so to do and if either the applicant or the valuation officer is dissatisfied with the decision of the rating authority he may apply to the local valuation court who on hearing the applicant, the rating authority and the valuation officer or such of them as choose to appear before it may confirm or reverse the decision of the local authority. (b) No appeal shall lie from the decision of the local valuation court. (6) Without prejudice to any other statutory rights vested in any person where an application has been received by a rating authority it or the valuation officer or both of them may at any time enter upon the relevant hereditament to satisfy itself or himself or themselves that the unused part is or has been or is likely to remain unused and such right of entry shall continue until any of the events mentioned in subsection (4) above occurs. (7)(a) Where at any time in any period during which it has been represented to the rating authority that part of a hereditament is, was or will be an unused part as defined above that part or any of it was not in the opinion of the rating authority unused as so represented the authority may require rates to be paid in respect of the whole hereditament as if none of it is, was or had been during the relevant period an unused part and may require interest to be paid on the said amount of rates at such reasonable rate as may from time to time be prescribed by the Secretary of State as if the whole of the said amount of rates had been due on the first day upon which any part of the rates in respect of the unused part would normally have fallen due if no application under section (1) above had been made. (b) Where a rating authority requires an amount to be paid by way of rates under subparagraph (a) above the said sum shall be paid, without any option to pay by instalments under section 50 of the 1967 Act, on such date following the notification by the rating authority to the person liable for the rates on the hereditament upon which the next normal payment of rates on that hereditament falls due or if there is no such date on the thirty first day after the said notification and allowance shall be made for any rates already paid on the part of the hereditament which was not represented to be unused. (c) Where an amount falls to be paid under this subsection all rights and remedies shall be available to all parties concerned as if the said amount was a normal amount of rates and all time limits shall apply having due regard to the date for payment specified in paragraph (b) above. (8) In this section

1. (a) the prescribed form shall be such form as the Secretary of State shall from time to time prescribe as being necessary for the proper application of this section.
2. (b) The Secretary of State shall issue regulations governing procedures for appeals under subsection (5) above.
3. (c) The Secretary of State shall exercise his powers under this section by Statutory Instrument which shall be of no effect until approved by a resolution of both Houses of Parliament."").

The noble Lord said: I should have thought that this amendment was not quite in the same class as the last two amendments, and I am particularly sorry that my noble friend's advisers bracketed it with the others. This amendment seeks to achieve what we tried to persuade the Government to adopt in the 1980 local government Bill—that there should be "moth-balling", or a means of not paying rates on unoccupied business buildings, with the specific object of ensuring that factories, parts of which had to be shut down, could at least remain part of the business and not be sold off. They could be opened up again when business improved. People can do this in relation to their own houses, and it seems only reasonable that it should apply to businesses, too, in particular in these times when businesses are finding the general situation difficult, and when we all hope—I imagine even noble Lords opposite hope—that things will get better as times goes on. It seems to me that what we have here is a very reasonable type of argument, and what is more, the amount of money involved is no where near as great as the several hundred thousands, or the millions, of pounds that we were talking about in relation to the earlier amendments.

The other feature about this new clause is that the earlier part of it, up to and including subsection (4), explains the rules under which it should work. Then, subsections (5), (6) and (7) go into some detail by way of giving powers to the local authority to recover unpaid rates on any business which cheats. There is a lot of it there to make quite certain, because it would be quite easy to cheat inadvertently, in that you might re-occupy part of your factory and forget that you were not paying rates on it, and then have to come up for air and decide upon it. Subsections (5), (6) and (7) make that extremely clear.

Finally, it gives power to the Secretary of State to embody these rules in regulations and to make sure that the thing is kept under what might be called his day-to-day control. I would have thought, therefore, that of all the amendments (in addition to the one that my noble friend accepted) that I have laid before your Lordships' Committee today, this is the one which deserves the most favourable consideration. I beg to move.

Lord Bellwin

I am sorry I have to disappoint my noble friend. I think the "moth-balling relief" suggestion is really a very interesting one, and I know that my noble friend feels very strongly that such measures would do much to mitigate the effects of economic recession on industry and commerce. But, likewise, he will know from the debates of his proposals on this subject during the progress of the Local Government Planning and Land Act 1980 through your Lordships' House that although the Government, as I have said more than once this evening, are more than sympathetic to the plight of businesses which are forced to shut down all or part of their premises temporarily, we do not consider that this measure is one which will be workable in practice.

I have already referred to the question of the cost to the remainder of giving relief to selected ratepayers. I do not think it would be helpful to dwell in detail upon the other reasons why we have doubts about this measure—my noble friend will recall them only too well from our previous debates—but there are difficulties in the fact that the relief proposed would cover all industry and all commerce, not only those in need; and there would be a conflict with fundamental rating principles making for inconsistency, not to say inequity. Then there are the practical difficulties of defining "out of use" and of inspection and enforcement. which I submit would be formidable.

I think—in fact, I know—I understand exactly what my noble friend is trying to achieve with this, and I really do have great concern for the situation which he describes, because so many people are now raising it all over the country at all levels. But I just do not think that this is a way to go about it. It may well be that we ought to talk more, perhaps, about other options or whatever, but I fear I could not accept this amendment from my noble friend, although in saying that I hope he realises my sharing with him of the concern.

Lord Bruce of Donington

I rise merely to say that on this matter the noble Lord, Lord Bellwin, has expressed sentiments identical to my own. It will therefore be unnecessary for me to detain the Committee further. I entirely agree with his approach to this, and I would suggest respectfully to the noble Lord, Lord Mottistone, that this is just one of the factors that one has to consider when one tries to formulate proposals for a new method of raising revenue for local authorities.

Lord Mottistone

I listened with great care to what my noble friend had to say, an I am sorry that his noble friend opposite (who I must so describe as he had the same viewpoint), Lord Bruce, took the same view. I know the arguments against it—unfairness, difficulty to enforce and all that sort of thing—and we should not forget the fact that ordinary domestic occupiers of premises can have reduced rates for unoccupied premises, so there is a precedent for how to run these things; but I took the trouble to draw particular attention to subsections (5), (6) and (7), because I think that when you look at it through the eyes of the central, official world of Westminster you probably do not think of it in terms of real people.

Real people, confronted with one or two severe cases drawn under subsections (5), (6) and (7) for somebody who has cheated, as published in the local newspaper, will think twice before they apply for this if they are not absolutely certain that they are going to apply fairly and correctly and not cheat—because that is really what my noble friend was talking about, in the politest language. So I would suggest that this really deserves another look. It may be difficult to quantify cost in this area, but as it will be very selective at given parts of given local authority areas, I would have thought that the relative costs will not be too much. However, they might make all the difference to the small or medium business which needs to survive and could just be helped to do so by being able to shut down half a factory or even a whole one because half a factory is difficult to define, but something manageable, and then this would be something which could make a great difference. It would be a good gesture on the part of the Government towards business to say, "We cannot give you reduced rates or put a ceiling on your rates but we can give you this which shows an earnest of our intention". If I could leave that thought with my noble friend, and in the meantime let us talk about this and see whether we might tighten up in certain areas to make it a starter, I would beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 4 [Adjustments of distribution of block grant.]:

Lord Evans of Claughton moved Amendment No. 32: Page 3, line 10, after ("any") insert ("increase or").

The noble Lord said: It is a pity that we are coming to Clause 4 at this fairly late hour for I suspect that in many respects this is the most controversial and serious clause in the whole Bill. All the amendments here in Part II of the Bill are to do with the adjustment of the distribution of block grants, in other words, holdback. In moving my first amendment, Amendment No. 32, I shall speak to Amendment No. 33. They seek to amend the power which the Government are seeking to give themselves and to any future Government to penalise authorities for overspending and also to give the noble Lord the Minister and his right honourable friends the flexibility to take sanctions against authorities that are spending too little; and I am sure that this will commend itself immediately to the present Government.

Frankly and seriously, while there are authorities, a small minority of them, that overspend and against whom the whole panoply of' this power is sought, there are also authorities which grossly underspend. I have been speaking at meetings with chief executives of some authorities—I should not dare to mention which they are—who are concerned about the extremely low level of spending in which some of the more rural authorities are engaged, almost to the point where they are not fulfilling their statutory or common law duties. I think that the Secretary of State should have this flexibility if he is seeking—I am opposed to the whole concept of holdback as being too centralist—to have the power of holdback; he should also have the power of imposing penalties against authorities that underspend.

At the moment, Her Majesty's Inspectorate of Schools have identified in a report, which was published in the last few days, four education authorities who are not complying with or providing an adequate education service. I know that there is a great guessing game going on as to which those authorities are. I mention that as an example. I think that the Government should seriously consider not only that there are overspending authorities, which I say are not as many as the Minister believes, but also authorities where the residents, the people living in the authorities, are suffering, from an authority which has been overenthusiastic in cutting back local services. I beg to move.

Lord Bellwin

As the noble Lord says, these amendments would allow Clause 4 to be used to encourage increases in local government spending as well as reduction. As such, I should have thought that they were probably unnecessary. Local authorities, in my experience, were never backward at coming forward when it came to increasing their expenditure. I should have thought that these amendments were perhaps redundant in view of the noble Lord's great support for local government independence. I am surprised that he is moving these amendments. They would enable a future Government to determine exactly the level of service that each authority should provide and, despite the criticisms made constantly to me over the last three years that that is what we are trying to do, I have argued staunchly, and would argue, that that is not what we are trying to do. Quite the opposite.

While the overall level of public expenditure is, I am sure, the proper concern of central government—that is at the nub of so many present problems—I am equally sure that local government must be given the greatest possible freedom within that constraint to reach its own responsible decisions. Provided proper attention is paid to the interests of the national economy and so long as local government stays within the parameters set down by central Government, authorities are free to establish their own priorities in the light of local circumstances. Whatever their intention, I think that the noble Lord will concede that these amendments will take away that freedom and will quickly condemn local authorities to be the local agents of central policy. I wonder whether I am missing the point. If so, the noble Lord will tell me. Certainly the amendments indicate that that is so and I would not think that he will want to press them.

Baroness Birk

From what the noble Lord, Lord Evans, said about his amendment, and reading from it, he is saying that the central Government are now tying down local authorities so strictly so far as expenditure is concerned and certainly so far as any increases in expenditure are concerned that he is worried about the level of services that some authorities may be giving or not giving. There may be some truth in that.

We hear stories of tremendous variations which would not appear to be absolutely necessary so far as the authorities are concerned. If that is so, it seems to me that he is saying that if we have this financial straitjacket then the quality of the services ought to be preserved in those authorities which are not spending the amount that they should spend, and people are not getting the value that they should from their local authority.

If that is so, and if I am right in my interpretation of what the noble Lord is seeking to do by his amendment, then it seems to me that the Minister should look at it. Otherwise, the Government should unknit a great deal in this Bill so that there is not the same tight hold on this. What the noble Lord is doing is trying to get the right balance. If you are going to be so strict on any increases, then you ought to be a bit more careful about authorities which are reducing what they are doing for the community. I doubt if the noble Lord is going to press the amendment, but it seems to me there is something in it that perhaps ought to be considered.

Lord Bellwin

If I may come back on this, the fallacy of the point that the noble Baroness makes is that it should not be the amount of money that is spent that itself decides the level of services—least of all by comparison, one authority with the other. So often in the past we have fallen into that trap of deciding that an authority is profligate or the opposite, parsimonious, or providing a good or bad level of service, on the basis of what it spends.

If one looks at the statistics, there are many authorities that provide a very good level of service. If one looks at what they actually spend, it is often far less than others are spending on the same basis. If we take only that criterion of spending, then we often miss the boat and we often label authorities "good" and "bad"in the wrong areas.

The converse is that if you find an authority which is spending a great deal of money on a particular service by comparison with the average or like authorities, it does not necessarily follow that it is giving better services. I shall not go into this now because we are on the fringe of a great subject; but I know many authorities who by any standards—and everybody within local government knows—do not provide a good service in particular areas. Yet their spending is so high. That is all about value for money. That is why it is so difficult, leaving apart the other objections that I made a moment ago. This is a complex subject which we cannot dispose of in the simplest of terms.

9.25 p.m.

Lord Beaumont of Whitley

Of course it is a complex subject. My noble friend's amendment, which no doubt is slightly lighthearted in its intention, nevertheless exposes a very real flaw in the thinking behind this Bill and the various steps the Government are taking. The steps to which the noble Lord on the Government Front Bench is driven in trying to answer this amendment really amount to an attack on his own policies. If we must attack over-spending, why should we not attack under-spending? If money is an important measure, as it apparently is, at the top of the scale, why is it not important at the bottom? We on these Benches would accept that it is not a good measure from either point of view but, if it is not, this Bill should not have been put forward.

I think the first reaction to this amendment of the noble Lord, Lord Bellwin, really underrated the extent to which some services are suffering in the country through under-spending. If you take the report by Her Majesty's Inspectors on the effect of local authorities' expenditure policies, there one is talking not just about what is happening in education but, as they say in the title, the effects of local authority expenditure. That is exactly the point that we are making and which the noble Lord, Lord Bellwin, is trying to brush under the carpet. They say in paragraph 14: In over one-third of the authorities, and especially in the shire counties, district inspectors report changes in the curriculum for secondary school pupils in the form of reduction of range of courses offered. These changes affected pupils of all abilities to some extent, but particularly the less able". If this is happening at a time of growing unemployment, and particularly growing unemployment for the less highly educated and possibly even the less clever in our population, it is something extremely serious. And whereas I am sure my noble friend does not intend to press this amendment, it is in fact pointing out a very real and important flaw in the Government's thinking on this matter, and one which has been underlined by the response from the Government Front Bench.

Viscount Ridley

I am sure that my noble friend Lord Bellwin is right to try to divorce expenditure from efficiency because it is not always a correlation that can be followed; but I wonder whether some of his words will have to be eaten when we reach Clause 20 later tonight.

Lord Evans of Claughton

The prediction made by my noble friend and others is correct: I do not intend to press this amendment to a Division; but philosophically I felt bound to raise this matter, because we have been taken down the road to democratic centralism by the noble Lord, Lord Bellwin, and the Government in this Bill and, going down that road, what is sauce for the goose is sauce for the gander. If you tell people you are going to interfere with their spending plans if they are over-spending, you should also be willing to interfere if you think they are not providing adequate services.

Lord Bellwin

May I intervene briefly to make just one point? I should like to make one point very clear. The Government are not saying they will curtail spending plans at all. What they are saying is, "If you spend beyond certain levels, it is the grant that will be reduced"—because those are the levels decided, whether on the basis of the grant related expenditure assessments or other criteria which we need not go into at the moment; and it is the grant which is being reduced. The authority at the end of the day still has its power, if it so wishes, to spend and to rate. That is where we are today.

Lord Evans of Claughton

I accept that it is hold-back of grant: I do not dispute that. The point I was making in this amendment was the error in the concept of interfering with the independence of local government. I am suggesting that one should carry it to the reductio ad absurdum of saying that if you are going to interfere for over-spending by hold-back then you ought to interfere for under-spending. You should, in fact, be leaving local government alone. But having said that, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 33 not moved.]

Lord Evans of Claughton moved Amendment No. 34: Page 3, line 14, after ("conditions") insert ("and having regard to the ability of every local authority to carry out its duties imposed by or under any enactment or at common law").

The noble Lord said: If I may, I should like, with your Lordships' permission, to speak also to Amendment No. 37. With these amendments I seek to provide an opportunity for the Secretary of State, when reducing grants payable to a local authority because of what he considers is over-spending, to take account not only of the general economic conditions, which are mentioned in subsection (1)(cc), but also of each local authority's requirement to carry out certain duties under the law.

The best example of this is the conflict between non-metropolitan counties and non-metropolitan districts about the duty to provide a satisfactory education service, and the present Government's continued demand that many of these authorities make what I regard as continued and unacceptably large cuts in spending. Over many years Parliament has placed a vast range of duties upon local authorities to provide education and social services, to maintain the highways et cetera, and the great bulk of local authority expenditure is directed towards fulfilling statutory obligations.

The second of these amendments, No. 37, seeks to ensure that, in exercising his powers to withdraw grant from local authorities and to prevent them from levying supplementary rates or precepts, the Secretary of State must not by holdback prevent local authorities from carrying out their statutory duties and obligations. Unless this amendment, or some other form of words which is satisfactory to the Government's advisers, is carried, it is possible that under Clause 4 many local authorities will be faced with the position where they have no choice but to break the law for not carrying out their statutory duties. Therefore, I hope that Government will take very seriously the amendments which I have put down to ensure that, not only general economic conditions but the obligation to obey their statutory duties are taken into account on the question of the holdback. I beg to move.

Baroness Birk

I thought the idea was that the amendments were being grouped together. Perhaps we can find another copy of the grouping list, which seems to have disappeared. In moving amendment No. 35, I should like to speak to No. 36 as well, because No. 35 paves the way to No. 36—

Lord Evans of Claughton

If I may interrupt, what I was trying to do was to move Amendment No. 34 and speak to No. 37.

Lord Bellwin

I must confess that there is certainly confusion here. The grouping has gone adrift and that is causing difficulties. If the fault is on this side, then I readily apologise. It is important to get it right, if we can.

Lord Bruce of Donington

If I recall correctly, the noble Lord, Lord Evans of Claughton, moved Amendment No. 34 and spoke to No. 37 and, so far, Nos. 35 and 36 have not been called.

Lord Evans of Claughton

No. Amendment No. 34 is in my name. I thought that it would be wise in moving it to consider the same point which comes under Amendment No. 37, which is also in my name. I should not have the temerity to seek to move Amendments Nos. 35 and 36, which are in the name of the noble Baroness, Lady Birk.

Baroness Birk

I am going to have the temerity to move them because they are in my name and that of my noble friend. If the noble Lord agrees, Amendments Nos. 36 and 37 are very much on the same lines. If he does not agree with me, perhaps he will interrupt me now. I am moving Amendment No. 35, if he will agree, and speaking to Amendment No. 36 as well.

The Earl of Avon

If the noble Baroness would speak to those amendments rather than move them, it would be helpful.

Baroness Birk

Yes.

Lord Evans of Claughton

Very well.

Baroness Birk

I am following the suggestion which we received this afternoon from the Government side. As Amendment No. 36 is very similar to Amendment No. 37, it seemed to me that it would save some time if I spoke to them both. I shall speak very briefly, as the noble Lord, Lord Evans of Claughton, has covered the ground.

The way that this block grant works out fails to take regard of the conduct of local administration both in relation to their efforts to control expenditure and in relation to local economic conditions which may well have unequal effects on an individual authority. Legislation imposes responsibilities on local authorities on two levels: first, in those areas in which they are under a duty to provide an efficient service, irrespective of cost, and, secondly, in those areas which local authorities have the power to provide and in which they may operate their discretion regarding the level of provision. The imposition of the Bill in its un-amended form (the wording of the two amendments is different, and I will explain in a moment why I prefer the wording standing in my name and that of my noble friend, as well as the noble Lord, Lord Evans of Claughton, who has his name to Amendment No. 37 as well, which is the alternative wording) could lead to an adverse effect on essential services. Either amendment would serve to retain a high level of central control without unreasonable restriction on local administration when operating in a reasonable and prudent manner in the service of the population in their areas. Without an amendment along these lines, the Bill will ultimately lead to further erosion of local democracy and perpetuate the inequalities in local services. The reason why I prefer the first amendment, Amendment No. 36, is that there the wording is: The local authority have taken all reasonable and prudent steps to avoid an unreasonable increase in expenditure", which is probably marginally better than "an acceptable level" in Amendment No. 37, which also specifically says that the local authority will notify the Secretary of State, whereas Amendment No. 36 leaves it more open. Obviously, the motivation behind both amendments is exactly the same and what they are trying to achieve is the same. Therefore, I shall not say any more about it at this point.

Lord Bellwin

I should like to cover Amendments Nos. 34 and 37 and also to comment on Amendments Nos. 35 and 36. I am glad to have the opportunity to discuss these amendments, which are expressed in similar terms to ones which were negatived during the Committee and Report stages of the Bill in another place. I agree that Clause 4 is concerned with the proper relationship of central and local government and, above all, with central Government's right to determine the overall level of public expenditure and the level of grant support provided by central taxpayers to local services. These are important questions, and I do not want to be accused of failing to address myself to them.

It should be axiomatic that the control of public expenditure is an essential tool of economic management and is the proper concern of those responsible for the national economy. There is nothing new in local government being set expenditure targets. What is new—or, rather, what was new in 1980–81—is the failure of local government as a whole to meet those targets, sometimes by a wide margin. This year initial budgets indicate, as I said earlier today, aggregate overspending of £1½ billion. Faced with an aggregate overspend, the Government reduced the aggregate amount of rate support grant payable in respect of 1980–81 by £200 million. The effect of this was felt by all local authorities, irrespective of whether or not they had met their individual targets, for there was no power to distinguish between them under the 1974 Act.

The 1980 Act, which came into force in 1981–82, provided for multipliers to be determined, which will have the effect of adjusting the grant entitlements of individual authorities. My right honourable friend the Secretary of State therefore made it clear that, if there was continued general over-budgeting in 1981–82, he would once again reduce the grant aggregate, but would use multipliers to make sure that the effects of any general grant reduction were felt only by those authorities which had individually over-budgeted. A similar proposal has since been announced for 1982–83.

It is with this use of multipliers that Clause 4 is concerned; a discriminatory use, certainly—but equally certain, in my opinion, is that it is not an unreasonable one. Nor is it an unreasonable extension of the powers of central Government, for it has only become necessary with, I am sad to say, the failure of local government to maintain the tradition of voluntary adherence to public expenditure guidelines.

I do not wish to repeat the remarks I was making during the passage of the Local Government (Planning and Land) Bill 1980, but I said then, on more than one occasion, how proud we always were that, year after year, local government got, at worse, within 1 per cent. of the national guidelines laid down, and often much closer than that. We managed to achieve that year after year because we felt, and I used to say this when talking to Labour colleagues on the AMA, that Governments have to govern. That was a basic tenet which we all accepted. But now we see, for the first time, a whole new scene—and no Government can let that go by.

The noble Baroness Lady Birk, said that we must look at these amendments in this context. Of course, they sound eminently reasonable; reasonable steps to avoid an unreasonable increase. But their purpose is to undermine Clause 4 and to make the Government's policy unworkable. Who is to say what are reasonable steps? We would say: those steps which are taken to achieve the small, overall reduction in expenditure that is required of local government. Remember, we are talking here of 5½ per cent. over a three-year period. I cannot help but equate that with the 3 per cent. we were given to achieve in one year, in 1976. That puts it into perspective.

Amendments Nos. 35 and 36, as they stand, would make it impossible to ask local authorities to make any expenditure reductions at all. Amendment No. 36 says that reasonableness must be judged: …having particular regard to local economic conditions". But we are concerned with grant. I would argue that the amount of grant support to local revenues is something that must be judged in regard to national, not local, economic considerations. We cannot allow political disagreements to obscure this fact. I will say again that we were always so proud of the fact in local government that we worked within the parameters even if we did not like them—and be reassured that there were times when we hated them. But there it was—Governments had to govern and that is a tradition to which I would like to return.

The second amendment in the name of the noble Lord, Lord Evans of Claughton, seems on the face of it to be eminently reasonable—but only if one forgets that grant is only one source of an authority's income and that statutory services form only part of their expenditure. Authorities can and should take their probable grant entitlement into account when setting their rate. This Bill does not in any way diminish the duty or the right to do so. Councils also have to consider the level of provision of discretionary services, and the Bill does not take away anything from that responsibility either. And above all, because it is the ratepayers' money that they are spending and not their own, they have the duty to see that their services are provided in an efficient and economical way. I simply do not believe that the cuts for which we have asked should be made entirely at the cost of service levels. Most of them—well, I qualify the "most", but a considerable percentage—can, in my submission, be absorbed simply by running the business of the authority more economically.

In conclusion, therefore, I say to your Lordships that these amendments, despite their innocent appearance—I use the word not in any offensive way—would undermine the purpose of the clause; and that the clause and the holdback scheme for which it provides are not at all unreasonable, as these amendments would suggest. Therefore, I ask your Lordships not to approve them.

9.46 p.m.

Viscount Ridley

Before we decide this matter I would like to say something about Clause 4. I think it has given local authorities a great deal of worry since it first saw the light of day. I believe it was substantially amended in another place due to the objections of the local authority associations and might be regarded as possibly a sensible compromise now. I am delighted that my noble friend the Minister has not accepted these amendments, because I think they would destroy this rather fragile compromise between all the interests involved. I do not think anybody would disagree with the Minister's targets, the desire to loose his missiles into the total exclusion zone of overspending authorities to hit the right targets if not to hit everybody. I hope he is successful.

He said something on Second Reading, although I am afraid I was not here to hear it, about which subsequent correspondence leads me to think that he is himself preparing a number of amendments to Clause 4 which may achieve a good deal of the purposes of the amendments we are discussing. Whether he is laying minefields for his own torpedoes, or whether he is trying to destroy the arguments he has just put forward, or whether he is supporting the noble Lord, Lord Evans, I do not know. We have not seen these amendments; they have not been published. It seems to me to be leaving them rather late to leave them to the Report stage in this House in a matter of this great importance.

I hope that what he has himself said may lead him to feel that these amendments are not really necessary. I am bound to say that the Association of County Councils are gravely disturbed at the thought of any amendments to Clause 4. They believe it to be a workable compromise which has been achieved in the other place and that it would be wrong to tinker with it, if only because some of the exclusions to holdback and some of the powers which the Secretary of State is asking for in the suggested amendments would, as I think, open all sorts of doors and be wrong. I hope my noble friend might agree that it would be better to leave Clause 4 entirely alone for the very reasons that he has just given to the Committee.

Lord Evans of Claughton

I am not dealing with Amendment No. 36, although I know we have discussed it. I am dealing with Amendments Nos. 34 and 37. I can see the argument the noble Lord puts about Amendment No. 36 being a difficult one to enforce and destroying the whole of his holdback proposals, but I really cannot see why he should take this rather unhelpful attitude to Amendment 34. Surely nobody, of whatever political affiliation, would seek to put a local authority in the position where to carry out its duties it had to break the holdback provisions in Clause 4. I hope the noble Lord can assure us that he is going to put down further amendments, or reassure me that my belief is wrong; I hope he can reassure me that local authorities would not be put in the position of having to break the law.

If they were having holdback imposed on them which reduced the level of services they are required by law or by common law to carry out, they would have their grant reduced, they obviously could not impose a supplementary rate, they could not borrow the money because they would have no legal authority; and so if they did make the reduction of expenditure required under holdback, it would be open to individuals to take action against the council for failing to meet their statutory obligations.

I referred to the example that my noble friend mentioned and that I spoke of earlier, of four unidentified local authorities either obviously non-metropolitan counties or metropolitan districts which are being criticised by the inspectorate of schools for not providing an adequate or satisfactory service. If he can reassure me that they would never get into the legal difficulty that I have described of having to break the law in order to comply with Section 4, then I shall withdraw the amendment.

Baroness Birk

Before the Minister replies, I think that we ought to get something clear now. Are the Government going to put down amendments to Clause 4 or not? During his Second Reading speech, the Minister, after referring to Part I, then said on Part II that the Government would possibly be bringing forward amendments. Earlier this afternoon when I complained about the lateness of the putting down of amendments that we were discussing today, I asked the Minister whether any amendments that were going to be put down to Clause 4 would be put down in plenty of time. At that point I must confess that I did not think that we would get as far as we have got this evening.

We are now discussing Clause 4 and spending a considerable amount of time on it. A number of noble Lords have taken part in the debate including the noble Lord, Lord Evans of Claughton, and the noble Viscount, Lord Ridley. It is, apart from anything else, a tremendous waste of everybody's time, if amendments are, at a subsequent stage, going to be moved by the Government and we are all just talking around the subject tonight without knowing what is going to happen. Therefore, I would ask before we go any further whether we can have a straight answer on this question.

Lord Bellwin

I shall comment on the matter raised by the noble Baroness in a moment. But, so that it does not slip my mind, I should like to say this to the noble Lord, Lord Evans, on his point about the statutory duties and his concern that, of course, the statutory duty is so often very flexible: one decides oneself what will be its level. It is always arguable—it is open to challenge if you put it too low, and conversely it could be open to challenge by those who are paying more if it was felt that it was too high. This is a judgment which the local authorities take. Therefore, in my experience, it is not an exact science, if I may put it that way. Also, I make the point that I made earlier—namely, that it might be said that there is an authority which has education as a function.

It might be considered by some that it was not achieving the levels that it should be. The noble Lord will please note that I am not saying that that is because of what it is spending, but because of what it is actually achieving. One could argue that possibly it was, therefore, using money for some other service that ought to be going for the provision of that one. It is a view which it must take itself, based upon the totality of the grant or its rates; or however it raises its income. Therefore, it is hard to say. I do not know in all the years of my experience—and I am open to be guided on this or to be told something on this—of a situation where an authority has been specifically pinpointed as failing in its statutory duty to provide its service levels. I am open to further debate on that.

I turn to the point made by the noble Baroness who categorically asked whether we are moving an amendment to Clause 4. I understand that we are doing so at Report stage. The great difficulty here—I tried to make it clear earlier on when the noble Baroness was pressing me about why amendments have come down so late, and I expressed my concern about that as well—is that we have been under great pressure from another place to do things and to consult. That is the point: it takes time to consult. As the noble Baroness must know from her own very considerable experience of seeing goodness knows how many Bills through this House when she was this side of the Dispatch Box, the parliamentary counsel has to have his say, he has to go through it carefully word for word and then there are colleagues in the departments—the noble Baroness probably knows the drill better than I do. It is a regrettable point. But again one has to offset the point with where we do not make amendments. We really cannot have it all ways. Unless someone tells me something in the next few minutes that I do not know now, my information is that an undertaking was given in another place that by the Report stage there would be an amendment to Clause 4. That is my guidance, but, if I am wrong, someone will tell me in the next few minutes.

Baroness Llewelyn-Davies of Hastoe

I think that I ought to ask the noble Lord the Chief Whip whether he was aware of this undertaking, apparently given in another place, that there would be amendments to Clause 4 at the Report stage, because this is the important point. When we were discussing how far we would try to get with the legislation tonight, we were told first that the department hoped to go to Clause 3, which we agreed. We were then told that we would go to Clause 4 if there was time and if the debate fitted in properly. We now find that we have been debating Clause 4 under a total misapprehension. We did not expect to debate a clause which would subsequently be amended. This is not the way in which Bills are carried through. I know that my noble friend Lady Birk never did this kind of thing when she was in charge of Bills from the Government Bench. I really must ask for an explanation.

Lord Denham

The noble Baroness has asked me to comment on the business aspects of this. I must say at the beginning that never at any stage have we agreed that we would not go beyond Clause 3 today. From business arrangements we were certainly hoping to get up to but not including Clause 5. It is not unusual to make an offer to consider amending a Bill at a future stage, and, equally, it is not unusual, if the consultations have not reached any agreement, not to be able to do it at this particular stage of the Bill. I do not think it would have made a lot of difference whether we reached this particular point tonight or the next day we deal with the Bill. I cannot see what the noble Baroness is worried about.

Baroness Llewelyn-Davies of Hastoe

I am worried about your Lordships' Committee considering a clause which the Government have every intention of altering later on. Surely this is a waste of the Committee's time.

Lord Bellwin

I said during the Second Reading debate—it is obviously on the record—that it might be necessary to introduce Government amendments to ensure that the amendments introduced in another place did not, by accident, prevent us from making those exemptions from holdback that we had already announced for 1981–82. We are very anxious to get this right, and to find a form of words which in no way goes back on assurances given by my right honourable friend in another place and which will ensure that no future Government could use Clause 4 in an arbitrary or capricious way.

Having said that, I understand the point that is being made. I think it is something that everyone would want to see. Clearly, we would want to carry out what we said we would do, but I certainly take the point that I do not know how we can discuss further a clause which I am saying will be altered at a later stage. But then, I do not know how we proceed beyond that.

Baroness Llewelyn-Davies of Hastoe

I am most grateful to the noble Lord. With his usual fairness, he appreciates the point that we are making—not in any antagonistic spirit at all. We understand the haste with which the Government have had to prepare their case, but that is not the fault of the Opposition. I think that I must ask the noble Lord the Chief Whip what he proposes to do now. I should have thought the thing to do would be to stop.

Lord Denham

I cannot quite see the concern tonight over the progress of this particular Bill. I understand that the amendments which we are now discussing are not affected, or are not necessarily affected, by changes that may be made at another stage. Of course, all Governments consider Bills all the way through. The commitment has been given to consider how this particular clause is going to be affected. If the noble Baroness is suggesting that until we know how eventually we might wish to amend this Bill we should put it into cold storage, so to speak, I think that would be an odd way of proceeding. I really cannot see why we cannot discuss these amendments that we are discussing at the moment and take my noble friend's undertaking in the spirit in which it is meant.

Baroness Birk

May I come in on a point of the substance of these amendments. There is a tremendous difference. My noble friend the Opposition Chief Whip is right. If in another place you say that you are going to amend a Bill, it is usually taken for granted that the amendments will be placed before the Committee stage of this House. I really have thought back about this in Government, and I have no recollection of ever having brought forward amendments on Report, having gone through a Bill on Committee which had already been discussed in another place, and when it was known that we were going to bring forward amendments which would have forced this House to miss a stage altogether. This is the point about the discussion. If these amendments are going to be brought forward on Report, we lose a stage entirely.

If it was decided in another place, it really has come as quite a surprise to us tonight to find that we are discussing Clause 4 and amendments will come. It is not correct for the Chief Whip to say that it would not have made any difference to these amendments, because we do not know. We might want to amend the Government amendments, and then we are left with just Third Reading. I do not think that that is good enough. I do not want to put the Minister in a difficult position, but we are being put in an impossible position over this Bill.

Viscount Ridley

May I just add the Minister's own words? He said at Second Reading that he might find it necessary to introduce further amendments in Committee. I agree with the noble Baroness, Lady Birk, that we cannot discuss this clause without those amendments, because I feel strongly on them.

Baroness Llewelyn-Davies of Hastoe

I think that the noble Lord, Lord Bellwin, has a clear understanding of the situation on the Bill and where we are in this particular clause. Might I suggest respectfully to the noble Lord the Chief Whip that the whole Committee would find the situation clearer when we start again if we finished discussing, I think it is, Amendments Nos. 34, 35, 36 and 37, and started again with a clear slate.

Lord Denham

If this is clearly the feeling of the Committee, I shall certainly agree to that.

Baroness Llewelyn-Davies of Hastoe

That is very generous of the noble Lord, and we are grateful.

Lord Denham

I beg to move that the House do now resume.

Lord Evans of Claughton

With respect, I was at the tail end of moving an amendment. Whether that is suspended until Thursday I do not know, but I was in the middle of moving an amendment—extremely well, I thought.

Lord Denham

I think that Lord Evans's amendment is the one over which we are having this difficulty, in which case we will adjourn in the middle of the debate on this particular amendment.

I beg to move that the House do now resume.

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

House resumed.