HL Deb 18 July 1983 vol 443 cc1004-16

4.44 p.m.

The Minister of State, Department of the Environment (Lord Bellwin)

My Lords. I beg to move that this Bill be now read a second time. It has a single objective even if the legal niceties involved are inevitably a little more complex. I will endeavour to explain that aim, and how the Bill seeks to achieve it. This Bill was first introduced into another place in the previous Parliament; but because of the early dissolution, it failed to complete all its stages there. It has now been reintroduced, and comes before this House largely unchanged.

The purpose of the Bill is to remove a doubt which local authorities have brought to our attention about their ability to make grants towards certain urban development projects. This doubt has come to light in the particular context of the Government's Urban Development Grant initiative. It applies more generally, however, to a potentially wider range of projects involving either the acquisition of land or any building works on land which local authorities may wish to grant-aid, using Section 137 of the Local Government Act 1972. I am sure that the House is by now fully acquainted with the Urban Development Grant Scheme. The essential characteristic is that by using relatively small amounts of public resources —local authority contributions, backed by a 75 per cent. Government grant—considerably greater sums are levered from the private sector in support of projects aimed at the regeneration of our inner cities.

When the Bill was read a second time in another place on 7th July, my honourable friend the Under-Secretary of State for the Environment was able to announce a further batch of 21 UDG projects, making 93 approvals in all to date. These projects represent a total investment of £216 million, of which £173 million comes from the private sector. It is because we wish to avoid any unnecessary delay to these schemes that the legal doubt about the authorities' own powers to assist in this way should be speedily resolved.

Let me now seek to explain the nature of that doubt and how it has arisen. Local authorities have long had powers to make loans for the acquisition of land, and the carrying out of works on land, including the erection of buildings. In England these powers are embodied in Section 3 of the Local Authorities (Land) Act 1963, and there is an equivalent Scottish provision. These powers are extensively used by local authorities in, for example, assisting local firms to provide themselves with new premises. Local authorities also have a much more general power to incur expenditure for the benefit or improvement of their area. This power is subject to an annual expenditure ceiling equal to the product of a 2p rate and is hence often referred to as the twopenny rate provision. It is contained in Section 137 of the Local Government Act 1972; and, again, there is an equivalent Scottish provision.

Last year, after a great deal of discussion, into which I need not go now, Parliament did two things in the Local Government (Miscellaneous Provisions) Act. First, it confirmed that Section 137 could be used inter aliato make grants for local industry and commerce. Secondly, it widened the scope of the 1963 Act so that local authorities could make loans not just in respect of land that they owned or had sold, but in respect of any land. I hasten to reassure your Lordships, that both these changes were made with the full support of the local authorities themselves, and indeed at their request.

But they have had an unfortunate if unintended result. The general power in Section 137—the twopenny rate provision—is however only available where there is no other specific power, whether or not subject to conditions or limitations, which authorises them to incur expenditure for the same purpose. As noble Lords will realise, it is not an easy matter to say what is or is not the same purpose. But one or two local authorities represented to us that if they had power under the 1963 Act to make loans, say, for the erection of buildings, they could not use Section 137 to make grants for the same purpose, which is exactly what they want to do in many UDG schemes. The Government's own legal advice agreed with this interpretation, which is why the Government decided to introduce this measure, as a matter of urgency, to make sure that they could use Section 137 to make such grants.

Let me now explain how the Bill achieves this purpose. It does so by providing that certain powers shall not be regarded as restricting—in the way I have described—the power in Section 137. The powers concerned are Section 3 of the Local Authorities (Land) Act 1963 for the reasons that I have already given, and also any enactment in a local Act for which the Bill provides powers for the Secretary of State to designate in an order.

Your Lordships may wonder why it is necessary to refer to local enactments in such general terms, or to have a designation procedure. The answer is straightforward: we simply do not know at this stage what provisions in the many local Acts which exist may inhibit the use of Section 137 to further urban redevelopment projects. We must rely on the local authorities themselves to tell us when they find an example, so that my right honourable friend can make an order to remove the inhibitory effect. But we have provided safeguards to ensure that the order-making power is exercised only when, and to the extent, it is needed. So that if, for example, one local authority to whom the local Act applied wanted the order but another did not, then the order could be made only to apply to the former. Similarly, the Bill provides that the local authorities concerned must be consulted beforehand. My honourable friend has already given an additional assurance, in another place, that the department will also keep the local authority associations in touch with any points of principle which arise in the use of this order-making provision.

The only other provision to which I need draw attention in introducing this Bill is the brief reference in it to retrospection. This provides that in relation to Section 3 of the Land Act the Bill will have effect as from 1st April of this year, and that any order designating a local Act may similarly have effect from 1st April of the year in which it is made. This provision was incorporated into the Bill when it was reintroduced into this Parliament to meet some concern which has been expressed about the position of local authorities which had made payments, under UDG schemes in particular, in this financial year—and hence after the Bill was first introduced—but before it could receive Royal Assent. I am sure your Lordships will regard this limited degree of retrospection as both practical and reasonable.

I have endeavoured to explain as clearly as I can the very simple purpose of this Bill. There is however one last point that I should perhaps make for the sake of completeness. This is to remind your Lordships of the undertaking that my honourable friend gave on 7th July in another place to look at how best extra publicity for Section 137 could be brought about. This was in response to concern over the way in which some local authorities may be misusing their discretionary power conferred by the section. He said, we had it in mind to include details of Section 137 expenditure in the summary of accounts that we propose local authorities should prepare in future. We shall be consulting the local authority associations shortly about our detailed proposals so that we can implement the change at the earliest possible moment".—[Official Report, Commons, 7/7/83; col. 436.] My concern this evening is to commend this Bill to your Lordships as essentially a technical measure to fill an unintended but important gap in local government's armoury to tackle the regeneration of our inner areas. It is in that spirit that I commend this Bill to your Lordships.

Moved, That the Bill be now read a second time—(Lord Bellwin.)

4.54 p.m.

Baroness Birk

My Lords, on this occasion the Opposition are able to welcome the Bill put forward by the Minister and we are doing nothing to impede its progress. We are also pleased to see that the Bill has taken note of what was argued in Committee in another place on the first Bill, before the election, so that it makes it retrospective to 1st April 1983. This is essential and I am pleased to see it incorporated in the Bill.

The Bill, as the Minister so clearly explained, is attempting to clarify the law relating to Section 137 of the Local Government Act 1972. I think, but it is probably better if there were no doubt—there is a school of thought that there was no existing doubt—that this was clear and it could have gone ahead with, if necessary, the courts having to sort it out if anybody objected. On the other hand, I can see that it caused a certain amount of anxiety among many local authorities. Therefore, while one does not want to add to legislation, even in the smallest form as this is, it is still better that it should be completely clear.

However, there are several points relating to the use of Section 137 in the fields of industrial and economic development to which the Minister has not addressed himself. First, there is the general unsuitability felt by many individuals, local authorities and some of the local authority associations, certainly the AMA, of having to rely on Section 137 to legalise the valuable work undertaken by local authorities to rejuvenate and energise their local economies. It is a provision normally associated with providing bus shelters or projects of a much smaller kind.

During proceedings on the Local Government (Miscellaneous Provisions) Act 1982, I remember arguing to give local authorities far greater financial flexibility and higher spending on economic development in their areas. That is essential to revitalise the inner city areas. Although some progress was made in that Act, as the Minister pointed out, it did not go as far as many of us had wanted, as far as the product of a higher rate. When one is dealing with industrial and commercial measures and trying to improve them and put them into an area to improve both the quality of life and the employment situation in an area, that is different from some of the other more cosmetic although equally important but smaller services that we are discussing. There are already problems with the 2p limit itself. The limit is not on the rate that a local authority can levy, but on the expenditure it may incur. That means that the Government's urban development grants count against the limit.

In bringing forward this legislation. the Minister is attempting to help the urban development grants scheme which the Bill does, but he could help more by using the powers available under Section 44 of the Local Government (Miscellaneous Provisions) Act 1982 to exempt urban development grants from the calculation. The Minister could then tell local government that what counts against the limit is not the gross expenditure before deduction of the grants, but expenditure net of the grants. With the UDGs available at 75 per cent. the use of this power could make an enormous difference to the amount of economic development work a local authority could undertake. It would enable it to stretch its economic and industrial limbs in a way which it cannot when it is inhibited by the Section 137 provisions.

This is an example of the Government seeking discretionary powers from Parliament and then not using them. Clause 1(3) will give the Government more discretion, this time to discriminate between local Acts and local authorities using general Acts. Can the Minister tell me at this stage whether the Government will use this discretion? They have not so far used the discretion they have under Section 44. If they do not use it it will mean that many local authorities are at a disadvantage because they are unable to implement some of the local Acts.

Finally the Bill has to be seen in the context of the Government's overall policy towards local government. Today we are discussing the powers of local government to spend within the product of a 2p rate: a fairly small sum, we agree; but, even so, the Government have given the impression of trying to be helpful about this. How does this helpfulness square with what the Government are planning to impose on local authorities after the summer?

Since the Bill first appeared we have seen the Tory manifesto and the Queen's Speech, in both of which a Bill has been promised which is not concerned just with the marginal problems of the 2p rate but with the Government's plans to legislate to take away the local authority's freedom to levy any rate it chooses. I am sure the Minister will say that those powers are aimed at only a few overspending authorities, but many of those alleged overspenders—this is on the Government's own criteria and includes Conservative as well as Labour authorities—are authorities many of whom are doing most for industrial development in their areas and who stand to benefit most from this Bill.

Finally, the Bill clarifies the legal hurdles which always lay hidden in most legislation and, therefore, as I have said, we will give it an easy and speedy passage. It should take any doubts out of urban development and facilitate the excellent work that many local authorities are endeavouring to carry out in this area; but, without sufficient financial means and vigorous local government, these efforts may be legally blessed but in practice could be nugatory.

5 p.m.

Lord Beaumont of Whitley

My Lords, I should like to thank the noble Lord who introduced this Bill for his explanation of it. It is a Bill which I think will get widespread support in this House and certainly from these Benches—not that we think that necessarily it has been produced in the most satisfactory way or that we are entirely happy about everything in it. But basically it is a Bill to give more power to local authorities to do work which is necessary to be done. This is fairly unusual for this Government and we are delighted that they are taking these steps. The objective is admirable: the improvement of the inner city and the use of our resources in order to make that improvement. Unfortunately, in order to do it apparently we have to produce some slightly convoluted legislation dealing with where it is a matter of debate as to what controls need to be imposed on the local authorities in their use of the monies which they can raise.

It is the philosophy of the party which I represent and that of our noble allies on the Back-Benches that we would like to see as much power as possible given to local authorities and that one way of enabling this to be done is to produce a better and more democratic way of electing the authorities so that the kind of extremist use of funds which has been referred to, and which is the target of some of the measures which have to be introduced, is no longer possible. I have already written to the Minister on this matter regarding an interchange that we had the other day. I do not know whether he intends to say something about it today, but I very much look forward to that. But, given that we are where we are and that we start with this unsatisfactory system, the Bill obviously needs support.

I think that one or two very minor points should be taken up. I understand that my noble ally, the noble Lord, Lord Kilmarnock, is intending to take up the point which Mr. Cunningham proposed in the other place when this Bill came up before the election, a point which had to do with how one controlled the use of monies which could be used under this Bill if there were extremist authorities which wished to use them in ways which obviously would not be fitting and, in particular, if they wanted to use them in an extreme political way. I hope that the noble Lord, Lord Kilmarnock, will not only deploy arguments about this but will actually manage to get from the Government some commitment about the same matter. That I think is the main point.

Another point is the retrospection which the noble Lord, Lord Bellwin, mentioned. In this particular case, I think it is a very mild retrospection although we on these Benches usually pride ourselves that this is something which we do not let pass easily. But it would be picking at nits to make objections on this particular matter. I congratulate the Government on their desire to see that local authorities can go ahead with the kind of work for which this Bill clears the way. I only regret that there is not a sounder basis of local government finance and local government elections on which we can build something much more radical and which would give much more power to local authorities.

I have little doubt that what is needed so much in so much of our politics is more and more decentralisation. The more that Government look at things and set up vast authorities and bodies to administer from the centre, the more we get lost in a maze of bureaucracy; whereas if you go down to the grass roots and allow the people there to see what needs to be done and to see the resources that they already have—and in these cases the resources so often are the resources of manpower, which in these days, unfortunately, are only too obviously idle and available—the more we are able to devolve that kind of power and the better I believe it will be for the welfare not only of the local authorities but of the country as a whole. I am quite certain that we should be moving in that direction. This, I suppose, is a tiny step in that direction and therefore deserves our support.

5.6 p.m.

Baroness Gardner of Parkes

My Lords, I have put down my name to speak on this topic simply because of the commencing phrase of the Title, which reads: An Act to remove certain restrictions on the powers of local authorities under Section 137 of the Local Government Act"; and because I am aware from previous debates in this House of the great discrepancy in the amount of money which is represented by a 2p rate. We have had debates and comments at earlier stages in this House and I have listened with great interest to those from areas outside London who have said (as the noble Baroness, Lady Birk, has said) that to them a 2p rate was barely enough. Sums quoted were perhaps £20,000 or £30,000. I have every sympathy with those authorities. I think that they have every intention of spending the money raised by their 2p rate well and wisely and in doing a lot of local good.

However, I think that I must again draw attention to the very different situation which exists in London. A 2p rate in the Greater London area, raises £38.8 million. That is a subject of quite a different size from that which we would be considering in other areas. For that reason, I would ask the Minister to ensure that, particularly in terms of a vast expenditure like that which at the moment is so uncontrolled in its use, this should never be increased beyond the 2p. If there is ever an increase for some areas then, it should be done in such a way that a ceiling or a capping should exist upon this expenditure, because it really is not in the interests of the ratepayer to have sum as large as £38.8 million unwisely spent.

In the city of Westminster, a 2p rate for two of the major oil companies' offices represents £21,000 or £26,000. To the large store in Oxford Street, a 2p rate represents £22,000. That is as much as the whole of some authorities raise with their 2p rate under this section. The head office of a large chain store group which has a rateable value of £2 million finds that to them a 2p rate represents £47,000. Two of the largest hotels would have to find an extra £9,000 or an extra £11,000. The Westminster Chamber of Commerce have worked out that, for every business space occupied in London, roughly £1,000-worth of rates are payable for every staff member. Therefore every extra 2p, every extra £1,000 on your rates is putting more jobs at risk.

There are also unseen and perhaps unconsidered rates which have to be met by ratepayers in London. When you realise that the London Electricity Board pays a rate bill of £26.5 million a year, that is £17 for each domestic ratepayer in London, and more for each commercial ratepayer. People who pay their electricity bills and find those costs high do not realise that they are actually paying more because they are also paying for the rates that are paid by the London Electricity Board. Ninety per cent. of all the rates paid in Westminster are paid by the business community; and so, the Minister having mentioned that extra publicity was to be given concerning Section 137 expenditure, I should appreciate some comments on whether he meant that this was to be publicised as a good thing or a bad thing. I should like to know more about that because it is important for the ratepayers, who do not have the choice of refusing to pay their rates; that is a statutory obligation and it has to be met. I should also like to be assured that more ratepayers will not be forced out of London in 1984.

The Minister mentioned that this Bill would remove doubts and I think that it is very timely and necessary. As I see it, it is intended to regularise a situation that already exists, and, in that sense, the retrospection is no problem at all. But, referring to some of the points which were made by the noble Baroness, Lady Birk, such as variation and how local authorities felt inhibited by Section 137—sadly, some local authorities do not feel so inhibited. Even last week the Minister answered a Question and said that he relied on authorities which were to be abolished to act in a reasonable way between now and then. Only a day later 1,055 new staff were taken on. Who could say that was reasonable? I just feel that I should like to place these matters on record and to ask the Minister for an assurance that these points will not be overlooked—that is, the point of the vast difference between authorities and the difference in the amount of money that is produced by a 2p rate.

Baroness Birk

My Lords, before the noble Baroness sits down, since she commented on some of the points I made, I am sure she would agree that even the authorities who are getting in, as she quite rightly said, a much larger amount of rates have tremendous demands made on them, with larger populations. Their geographical position and also their needs for expansion and the possibilities for industrial and commercial expansion are very important, not only locally but nationally as well. I think the noble Baroness knows too much about it all to stand on what sounded at times rather like generalisations. I hope she did not mean to generalise about the whole of London or the whole of these big cities.

Baroness Gardner of Parkes

My Lords, I thank the noble Baroness for her intervention. Last time, when I gave chapter and verse and named the companies concerned, there was an objection from that side of the House that this should not be done; but I will of course be happy to supply chapter and verse on the facts that I have given—

Baroness Birk

My Lords, that is not the point I was making.

Baroness Gardner of Parkes

My Lords, on the point the noble Baroness was making, for example, about Greater London spending its money well—I presume that is the point she was making—perhaps I may tell the noble Baroness that the Greater London Enterprise Board has created only 44 jobs at a cost of £476,000. That I do not consider an economical use of London's money; nor do I consider a grant to the Black Lesbian Society as being a good use of Section 137 money. I could go through 50 similar grants for your Lordships. I believe that the ratepayers of London are not satisfied that their money is being wisely spent, and that is why there is a demand for the Government to take what I think is, unfortunately, a most necessary action to control the rate expenditure in London.

5.15 p.m.

Lord Kilmarnock

My Lords, this is a sensible Bill for sensible councils: the objective is admirable, as my noble friend and ally, Lord Beaumont of Whitley, has already said. We understand perfectly well that it is directed mainly at urban development grants. We know that local authority associations want it, although the metropolitan authorities appear to have some reservations, and we understand why, in that the urban development grants element of the total expenditure is met 75 per cent. by central Government and 25 per cent. by local government grant, but that advances made by a local authority under Section 137 of the Local Government Act 1972 for this purpose may, strictly speaking, be illegal. Local authorities are anxious to cover themselves against this, though I also understand that some expenditures have already been undertaken under this heading with the simple safeguard of a district auditor's certificate. The Bill would remove any impediment under this heading, but the trouble is that it opens a hole which a coach and horses could be driven through.

Some noble Lords will no doubt be familiar already with the case of the Islington Borough Council, which was advised that the passage of this Bill would enable it to produce a politically-motivated local newspaper that the law does not permit to be produced at present, and that this could be distributed free at ratepayers' expense. Of course we would not object in the least to other Section 137 expenditure under the general heading of employment and industry—I know, for example, of some very worthy schemes undertaken on the other side of the river in Dartford and Greenwich—but we do very strongly object to the type of misuse or abuse of public funds contemplated in Islington. It may be said that this is merely one maverick council and that is not sufficient grounds for subjecting all councils to some additional form of control. It may also be advanced—and indeed it was advanced in Standing Committee C in another place before the Bill fell at the Dissolution of the last Parliament—that the proper remedy for abuses lies in the hands of the electorate. That was a point made by the Association of Metropolitan Authorities. They said that, if the truth of the matter is that local authorities are abusing their freedom to spend up to the product of a 2p rate, it is up to the local electorate to decide what are and are not abuses.

We would accept both points if local authorities were truly representative of their electorates; that is to say, after the introduction of proportional representation for local elections in this country along the lines recently proposed in your Lordships' House by my noble friend Lord Harris of Greenwich and referred to by the noble Lord, Lord Beaumont of Whitley. Pending this, we feel that some safeguard must be written into the present Bill. The noble Lord, Lord Bellwin, said that there was one, but it did not appear to us to be adequate, or the right one. An attempt was made in Standing Committee C to introduce into the Bill an amendment making it unlawful for Section 137 expenditure to be made to any body, whose composition is restricted by constitution or by practice to representatives of one or more political parties, nor to assist organisations or activities calculated to promote a political cause". This fell owing to the difficulty of defining political purposes. A further suggestion was made that the limitation contained in Section 137 should be lifted, but only in relation to development expenditure where both central Government and the local authority are involved. An attempt to give body to this idea was made in a further series of amendments and, at col. 110 of Hansardon 26th April, Sir George Young, speaking for the Government, said this: Against the background of that concern, I am prepared to take away and consider an amendment on the lines of Amendment No. 10. That amendment read as follows: That the power conferred on a local authority by this section shall not apply to expenditure unless that expenditure has been approved by the local authority and by the Secretary of State. Sir George went on to say this: we shall have to consider drafting carefully because we shall want to consult the local authority associations". But what happened. my Lords? As I say, that was on 26th April. The general election followed shortly after, and almost immediately upon the resumption of the legislative process we have the same Bill as before, rushed through the House of Commons in one day, while in this House we are being asked to take it on a telescoped timetable.

The amendment moved in the Standing Committee, which the honourable gentleman appeared to favour, may not be the right one; it may give excessive power to the Secretary of State. But the point I want to make this afternoon is that this House would not be taking its duties seriously as a revising Chamber if it did not devote some considerable attention to a very important and potentially dangerous lacuna in the Bill. Civil servants may regard the Bill as a mere technicality, and the noble Lord, Lord Bellwin, used the same phrase. Ministers may have been misled by their civil servants. I put it as charitably as that. However that may be, I want to ask the noble Lord whether the Government, in consultation with other interested parties, are prepared to bring forward their own amendment along the lines which appeared to be conceded by Sir George Young before the general election. If not, I must tell the noble Lord that we on this Bench shall not be happy to let the Bill through as it stands "on the nod", and shall seek to improve it at the Committee stage.

5.20 p.m.

Lord Bellwin

My Lords, I am very grateful to the noble Baronesses and noble Lords who have spoken on the Bill. Indeed, I am gratified—not an experience that I always have—to have noted the generally satisfactory reception which this Bill seems to have received. I am certainly grateful for that. If your Lordships will bear with me, I should like to deal with the points slightly back to front. They will flow well enough if I respond, first, to the observations made by the noble Lord, Lord Kilmarnock, because his was the only note of major dissension as to any aspect of the Bill. Also, I think it is quite proper that I should comment upon the point that my honourable friend made in another place.

May I say at once that I am well aware of the great concern that many feel, both in your Lordships' House and elsewhere, not about Section 137 but about the misuse of it. I find it sad, as I find many things sad, because I see it as yet another example of how the flouting of generally accepted conventions by individual authorities leads to a call for action which affects all local authorities. Indeed, many of the problems facing local government today, not least its relationship with central Government, rest clearly and heavily on the backs of those relatively few authorities.

I shall not go into the history, as I should like to do, of the original 3d.—the provision which was added to the statute book in 1963. But it is fair to say that the wider power of Section 137, which we are now talking about, has in recent years worked very well. Hitherto, it did not attract anything like the criticisms that have been made of it comparatively recently, and it is what can only be described as the wilful abuses of discretion which have led us to the unhappy feeling that so many have about it today. But having said that, consideration of what I am entitled to call a largely technical Bill does not, in my view, represent the time or the place for action to be taken.

I say again—and I shall come in a minute to the precise observations of my honourable friend in another place—that it is proper to say that the Government are watching these provocative developments very closely. We are already taking steps to require authorities to include in their accounts details of the expenditure being made under Section 137, so that ratepayers can see and have highlighted the matters on which their money is being spent. This will be a useful step. But I say again that I am conscious of the anxieties which this situation is bringing about. When the previous Bill was being considered in another place, the then—

Baroness Birk

My Lords, has the Minister finished on that point?

Lord Bellwin

Almost, my Lords. I just want to respond specifically to the point about my noble friend. When the Bill was being considered in another place, the then honourable Member for Islington, South, put forward a proposal which would require ministerial approval to expenditure authorised by the Bill, in order to try to prevent the possible abuse of Section 137 by some councils, which I say again gave rise to so much justifiable concern. My honourable friend undertook to consider whether it would be possible to introduce such a requirement into this Bill. We considered this carefully as one possible way of dealing with the problem but we did not feel able to incorporate the change into the Bill now before your Lordships.

The question was discussed very thoroughly with the local authority associations. They had serious objections to it on the grounds that, first, it represented a new control over and a serious diminution of local authority discretionary powers. Secondly, they felt that it was not justified by—as they saw it—the relatively limited evidence of abuse which had been brought forward. Thirdly, it would not in fact preclude the vast majority of questionable payments which had been drawn to our attention. Again, I shall not go into further detail as to why we felt that the weight of the argument lay with them; at least so far as this Bill was concerned. All I can do to try to assuage the concerns of the noble Lord, Lord Kilmarnock, is to repeat again that we are not lightly turning away from this and trying to pretend that what is happening is not really happening. If I tried to do that, my noble friend Lady Gardner would certainly make sure that I did not get away with it—not that I want to. Did the noble Baroness want to intervene?

Baroness Birk

Yes, my Lords. The Minister has in his last remark covered the points that I wanted to draw to his attention: that there has been consultation with the local authority associations and that this will continue. But is he aware that we on these Benches will certainly be very unhappy to see this Bill, which is a small Bill for a particular purpose to legalise something about which there was some doubt, used as a vehicle to do something for which it was not meant to be used at all?

Also, would he agree that, while there are some local authorities which are spending money on certain things with which many of us would fundamentally disagree, they are a minority? It seems to us wrong to generalise and bring into unsuitable legislation something that should not be in this Bill, and on this occasion the Minister has the support of these Benches. I am so sorry to have taken up time, but I thought that I should state that view as this subject arose after I spoke.

Lord Bellwin

My Lords, I thank the noble Baroness for that. She gathers from what I have already said that it is not our intention to introduce anything of the kind into this Bill. But I hope that she agrees with me, and indeed with the other concern expressed. There is a problem here and we cannot turn our backs on it and pretend that it does not exist simply because it applies to a relatively small number of people. I am glad that it is only a small number but there is some evidence that it applies to a growing number of people. Perhaps we may leave it at that for today; but I am sure that none of us is turning our back on that aspect.

I should now like to come to the other side of the coin, which is the suggestion by the noble Baroness, Lady Birk, that we should extend the use of Section 137. As she said, there are people who feel that this should be done, and I have no doubt that there are people who would use it very well. My noble friend Lady Gardner illustrated in the sheer numbers that she mentioned why some authorities could make very good use of an extension. But I thought that her statistics were very relevant. When you talk of any authority which has available this 2p power, that is almost £40 million in a year—I admit that that is the largest—and that puts the whole thing into context. I found that interesting.

I assure her that the concerns which she has are the ones that we also have in mind. If there were to be any further increase in the headroom which is currently generally available to local authorities to use Section 137 to take account of urban programme expenditure, it could only be additional to the netting-off arrangements which were introduced in the Local Government (Miscellaneous Provisions) Act last year, which in themselves gave some extra flexibility. I should just assure the noble Baroness that Section 137 already permits local authorities to net-off the grant that they receive from the department. Section 137(4)(b) lists various disregards; that is, items that do not count against the 2p limit. These include payments corresponding to payments made by the department under the Local Government Grants (Social Need) Act 1969. That is the Act under which we pay urban development and urban programme grants. Only the authorities' 25 per cent. share of grant-aided expenditure in fact scores. If the noble Baroness would like to pursue this further with me, I should be very glad to expand on it in correspondence with her.

My only other comment relates to the point raised by the noble Lord, Lord Beaumont of Whitley, about proportional representation. The noble Lord sees it as a possible solution to the abuse issue. I listened carefully to what the noble Lord said but I am not convinced. I have had the experience of serving in local government in control, in opposition, in majority control and in minority opposition: the whole gamut. I do not believe that there are any other permutations. My experience was that it was not the best form of local government.

I understand the appeal of proportional representation, especially to those who feel that they will never be in a position of control: their only hope is to hold the balance of power. When they hold the balance of power they feel that they may exert some kind of control. I understand and respect that point of view. I know how frustrating it must be to feel that one will never be in control. One leading local government colleague who now sits in another place said that he would never have had the chance to take the chair. As I say, I understand how frustrating that must be, especially to a good local government man. I hope that he will now be a good national government man.

Proportional representation does not, I feel, lead to better government. I accept that on occasion it may mitigate extremism, but so far as my experience goes it is not conducive to getting things done. I could expand on this, because it is a very interesting, almost academic point which is fascinating in itself. Perhaps however your Lordships will not ask me to deal further with it today, though I shall gladly discuss it personally with the noble Lord, Lord Beaumont of Whitley, if he so wishes. I thank noble Lords for their reception of the Bill. I hope it will have a speedy passage through your Lordships' House.

On Question, Bill read a second time, and committed to a Committee of the Whole House.