HL Deb 09 April 1984 vol 450 cc900-1024

2.50 p.m.

The Minister of State, Department of the Environ-ment (Lord Bellwin)

My Lords, I beg to move that this Bill be now read a second time. This Bill is designed to protect and strengthen the position of ratepayers, both domestic and business, in high expenditure and high rating areas. It is about the Government's economic policy. We were elected in 1979 in order to revive the economy, to restore the ability of this country to earn its living in the world, and to cut inflation and taxation by reducing the burden of public spending. We still have some way to go, but we are succeeding.

Let me briefly mention the economic arguments for the Bill. The basic case is straightforward. We cannot afford to relax in our control of public spending. All the pressures are upwards. Local government accounts for no less than a quarter of all public spending. It is therefore such a significant proportion that it must be kept under control, and nobody has seriously questioned that.

Some people have argued that the figures which we are talking about for overspending are too small to matter. They talk disparagingly about an overspend of "only" £770 million—only 4 per cent. But if all programmes were overspent to this extent, the total overspend would be nearly £5 billion. The overspend is not the full story, for in recent years public expenditure plans for local authorities have had to be uplifted by about £1 billion for each of 1982–83 and 1983–84, and by £500 million for 1984–85.

We are told that total local government spending has fallen as a proportion of GDP. Well, yes. But that is because local government capital spending has dramatically collapsed. The problem is—and has all along been—with current spending.

Let us look at the manpower figures. Local government total manpower fell by 4.2 per cent. from June 1979 to June 1983, although some of the high spenders actually increased. Now the overall numbers are on an upward path again. By comparison, Civil Service numbers have been reduced by 13 per cent, in a similar period, with the DoE cutting its staff by a massive 26 per cent.

When we came into office in 1979 we found that the volume of local authority current spending, then at its highest point ever, was set to rise further by around 6 per cent. over the four years to 1982–83. That was inconsistent with our policy objectives. We asked local government to cut the volume of its current spending in 1981–82 to a level around 5½ per cent. below the outturn for 1978–79—over a period of three years, less than 2 per cent. per annum.

But what happened? Not only was it not cut, but local authorities as a whole actually increased their spending. In 1983–84 local authority budgets ran 4 per cent. above 1978–79 spending in volume terms. In cost terms, taking account of general inflation, the increase is 9 per cent. In cash terms local government is now spending £2½ billion—yes, billion—more than we had planned for at this stage.

Yet these average figures hide what has been happening in individual authorities. The average increase in current spending since 1978–79 has been 86 per cent. But although some authorities have managed to reduce real spending, and more have held it virtually steady, others have made major increases: Islington and Greater Manchester by 105 per cent.; Greenwich by 114 per cent. Hackney by 154 per cent.; and, of course, the GLC, at the top of the list, by 185 per cent.

Year after year our spending plans have had to be revised upwards to allow for overspending. The overspend in 1984–85 is in excess of £850 million. And. most significantly, last year and this 75 per cent. of the budgeted overspend is accounted for by fewer than 20 authorities.

We have not come to this without trying to alter approaches. For four years we tried to rely on the traditional approach of exhortation and local democratic accountability. Goodness knows, we tried. We introduced a new grant system which made high levels of spending more expensive. We introduced a specific system of targets, so that authorities should know exactly what was required of them, and grant penalties for overspending them. We even proposed that there should be a system of town polls so that local electors could decide whether they wanted to support a particular level of rate. But that was not acceptable to Parliament.

However, although there have been successes as a result of these changes, the big spenders have simply carried on spending and put the resulting load on to their ratepayers. This could not continue. The figures speak for themselves. For simplicity, I am using 1983–84 figures to avoid confusion. Between 1979 and 1983 domestic rates increased by 91 per cent. compared with a 55 per cent. increase in the RPI.

I hope that no one will say that that is because of grant percentage reductions. We did not see that effect when they were reduced in the past, and the harsh fact is that if authorities had met their targets, then rates would have gone up by less than the rate of inflation in each of the last four years. Even within the overall figures, in 10 authorities rates have gone up by more than 145 per cent. since 1979–80. The GLC rate rocketed by 118 per cent. in just two years. In inner London in 1983–84 the average borough rate was 52½P in the pound. Yet in Camden it was 78p, in Islington 94p, in Greenwich 99p and in Southwark 116p. The figure for Lambeth was 91p, but for adjoining Wandsworth it was 20p—some difference!

In Leeds we used to be proud that we had the lowest rates of any major city in the country, and a high level of services too. In Leeds, now under Labour, the number of committees and sub-committees has rocketed, decisions take longer to obtain, the number of staff—not manuals or teachers—has gone up by more than 500 and inevitably (need I say it?) the rates have more than doubled, but the services are not better.

There are those who say that rates on industry do not matter—that they are a small part of turnover or whatever. Frankly, I find remarkable the attempt by some to minimise the impact of rates on industry and commerce, Those people should get out into the real world and talk to those who actually have to pay. They will tell you that rates can make the difference between staying in business and going out of it. That is the message that I hear from the CBI, from chambers of commerce, and particularly from individual businessmen in areas like Sheffield, where rates per employee in industry have gone up between 1979 and 1983 from £255 to £787. Just think what that does to their competitive ability. Is it any wonder that firms are queuing up to leave Sheffield?

I could quote a long list of examples to illustrate the effect of high rates, and if necessary I shall do so later in the debate. Meanwhile, for the moment, I offer just one. The London Chamber of Commerce and Industry trend survey last year said that one in six companies said that they had relocated in the last five years because of high rate increases or the promise of lower rates elsewhere.

To stand on the high ground and say, in the face of all this, that rates do not matter is an insult to the intelligence. Something has to be done to counter-balance the lack of accountability, especially in the small number of irresponsible authorities whose activities I have illustrated.

Part I of the Bill provides for the selective rate limitation scheme. This is the scheme which we believe is needed urgently. It enables the Secretary of State, on criteria which he will have to report to the other place, to designate authorities which are spending excessively, and, after designating them, to propose expenditure levels for them. We shall doubtless debate at later stages what the criteria will be. They will depend on local authorities' budgets for the given year. But they must be drawn up on general principles applicable to all authorities in a class. That is a safeguard against arbitrary selection.

In another place my right honourable friend the Secretary of State has illustrated the kind of criteria which we believe will be appropriate. They are likely to involve the use of grant-related expenditure (GRE) levels, which assess the cost of providing a standard level of service, and are therefore a good way of comparing the spending of different authorities. Let me say at once that it is not a precise basis for assessment, but we are talking only of those spending far, far above it, and so this means that the GRE is a perfectly valid figure to use.

We may, additionally, use a comparison with an authority's expenditure target, or some other relevant measures. We have made it clear—and I want to put it on the record here again—that we intend to select only between about 12 and 20 of the highest spenders. Once expenditure levels are proposed for selected authorities, they can argue for a higher figure in the light of their particular circumstances. Once an expenditure level is finally fixed, and after the rate support grant settlement, the Secretary of State will set an upper limit on the rates or precept which these authorities can levy.

Let me hasten to add that, contrary to the dreadful distortions in the campaign advertisements and the wild stories put out by our opponents, this will not interfere with how the money is spent. As ever priorities, deciding on what resources are spent, will be for the authority to decide. Only the total overall expenditure will be constrained, and I think that really does need highlighting. Where authorities disagree with the rate limit set, then the Secretary of State must seek the approval of the House of Commons by means of an affirmative resolution order. That is a very genuine safeguard.

The Bill provides that authorities can only be selected for rate limitation if they are excessive spenders. Authorities will be exempt from the selective scheme if their expenditure is less than £10 million a year, or below GRE. The figure of £10 million may be increased, but not reduced, by parliamentary order. These are major and very important exclusions. They are much misunderstood and have been played down by the opponents of the Bill. If the Bill had been in operation in 1983–84 they would automatically have excluded 355 out of the 458 authorities in England and Wales—about three-quarters. That means that all but 16 members of the ADC would be automatically exempted. Yet how often do I hear representatives of tiny authorities, spending £3 million or £4 million a year, worrying about being rate capped!

My Lords, some say that the Bill will not work. Others actually say that there will be increases in public spending as a result of the Bill. That really is nonsense. By this Bill we are restricting the spending of the highest spending authorities. There will therefore inevitably be a reduction in the amount of public expenditure. Even now, before enactment, the Bill is working. Look at the rate decisions being made for 1984–85. The average rate increase will be less than 6 per cent., the lowest for 10 years. That shows what can be done.

We have demonstrated that on certain reasonable assumptions local government current spending in 1983–84 could have been £350 million lower in that year if selective rate limitation had then been in operation. The savings could be even greater because of the shadow effect on authorities who are not selected and who wish to avoid possible selection in the future.

I totally reject the claims that this level of savings will mean cutting into the provision of essential services. The expenditure levels will be reasonable and there is always what I call the third option. Those particular authorities who will be affected are, by definition, the big spenders. Overall they have made no cuts in the past. They have actually added staff—great numbers of them in some cases. So for them especially it is not just a choice between high rates and cuts in services; millions of pounds can be saved by cutting out waste, reducing restrictive practices and improving efficiency, but the will has to be there.

The authorities selected will be those spending so far above the level of other authorities that savings must be available. Of course, we recognise the needs of many of these authorities. That is why their GREs are high, reflecting those needs. But their spending is out of all proportion. They need to increase their efficiency of operation. For example, why should the cost of refuse collection in Hackney be more than twice as much as in Wandsworth? If 22 authorites can put their refuse collection or cleansing services out to tender, and save £35 million, why cannot others follow their example? Let no one doubt but that the opportunities are enormous and nowhere more so than in the high spending authorities.

I would now like to turn to Part II of the Bill, which provides for the general rate limitation scheme. I emphasise, first, that the Government hope that Part II will never have to be used. I am confident that the selective scheme, combined with the existing system of block grant, targets and the other pressures on spending, will ensure that local government spending will come much more closely into line. I cannot stress too much that these are reserve powers.

However, the selective scheme is designed to deal with present circumstances. The situation could change. A number of local Labour councils are now in the hands of extremists. Their influence and numbers are growing, and there is no will or ability among the national leadership to curb them.

Several noble Lords


Lord Bellwin

I am quite prepared to sit down if any noble Lord wishes to stand up. What if the present irresponsible behaviour of the few spread to 60, 80 or 100 authorities? It is that kind of circumstance for which Part II is designed. It would be disastrous if we had to come back to Parliament for a whole new Bill, with the time delay that would be involved, before we could then take effective action.

That is why Part II is in the Bill. It intensifies the pressure on non-selected authorities for moderation, and acts as a deterrent against wider overspending. And, my Lords, to put it quite simply, the general scheme is complementary to the selective scheme, and I believe it is the straightforward thing to do, to put the package as a whole before Parliament.

Even so, it is right that powerful safeguards are built into the general scheme. It could only be introduced after affirmative resolution approval by both Houses of Parliament. There would have to be a full and extensive debate and approval in each House. The Bill also provides that the local authority associations must be consulted before introduction of the general scheme. The Government would not then be given these wide powers unless they had made a very good case for them. Further, we have provided for the possibility of exemptions. At present the Bill simply says that authorities spending below a prescribed amount could be exempted. But we intend to go further.

My Lords, this Bill is about curbing the high and irresponsible spenders—those with bad records. It is not meant for those who try and who, in the main, succeed in running their affairs responsibly. The Secretary of State has undertaken that we will provide for this in the Bill. It will give me great pleasure in due course to give details of what we propose. But I can tell your Lordships that we have accepted the principle that those with an established record of meeting the guidelines set for them will be expressly excluded from the operation even of the general scheme.

I know that voluntary organisations are concerned about our proposals. They fear that authorities who are rate capped might have to cut their support for voluntary work. This Government strongly believe in the work of the voluntary sector. This is why Section 64 grants by central government to the voluntary sector have been doubled in three years. Any authority that is rate capped will only be so because it is spending way above any reasonable level. It will have plenty of scope for reducing its spending. There need be no risk to sensible levels of spending on voluntary services, unless of course they deliberately want to make it so.

As I have said, even under rate capping, decisions about priorities will remain a responsibility of local councillors. When the chips are down, I simply do not believe they will sacrifice genuine voluntary work—whose value everyone acknowledges—in order to carry on with their high spending nonsenses; certainly they will not need to do so.

Part III of the Bill deals with reforms of the rating system. They are less controversial, but they are not unimportant. They will help business, by giving them a statutory right to be consulted about rate levels, and all will have the new right to pay their rates by instalments. Domestic ratepayers who do not now receive rate demands, such as council tenants, will receive specific information about the amount of their rates going to different authorities, and information to help them judge the performance of their local authorities.

My Lords, as I come towards the end, let me touch on the constitutional position. It is referred to in the amendment and I will come back to it, but for now let me say just this. This Bill is not unconstitutional and authoritarian. If anything is unconstitutional, it is the behaviour of the minority of councils at whom this Bill is directed.

Local authorities are not sovereign governments. They are creatures of statute. There was a convention in the past that local government would manage its affairs within the broad guidelines established by central government and approved by Parliament. One way or another, local government always managed this in the past. That constitutional convention is breaking down. A minority of authorities flatly refuse to accept it. It has only happened since 1979 and it has become more marked with the taking over of some Labour councils by the hard left. It is in these last five years that we have seen the rapidly growing deterioration of established conventions. This Bill will restore by statute the position which hitherto has rested on convention.

The present collapse of the convention is spectacularly highlighted by the abuse of Sections 137 and 142 monies, which permit wide discretion in spending. Yet lavish pouring out of millions—I repeat, millions—on left wing so-called newspapers, on huge advertisements, on propaganda and campaigns, is somehow justified by talk of "the right to explain policies"; and this from councils which claim they have insufficient funds to provide essential services. The propaganda is full of wicked and sinister distortion. The millions involved is an outrage to all sense of reasonableness; it is an insult to the reputation which local government properly claimed in the past.

I refute entirely this charge of constitutional change. We are doing nothing more nor less than protecting the ratepayers, and the Government's overall position on public spending. We are doing what must be done, precisely as we promised in our general election manifesto.

We accept that should Part II of the Bill ever come to be implemented—and we hope it will not—that would mark a change in the relations between central and local government. But it is a long leap from that point, to say that such a change is unconstitutional. We do not have a written constitution; it is a feature of our constitution that it evolves, and Parliament oversees the process. Surely, no one can argue that we can never properly make these changes, regardless of the consequences of inaction or the damage which is being done to other aspects of the constitution? Some argue, and I agree, that because we do not have a written constitution, extra care should be exercised in making changes. This Bill follows four years of strenuous effort to achieve the Government's policy by all other means, short of intervening in this way. We have not rushed into this; but it is now necessary.

The Bill has been fully discussed in another place. There were no fewer than 30 Committee sittings. Yes, there was a guillotine, because of deliberate Opposition time-wasting.

Noble Lords


Lord Bellwin

My Lords, I hear the moans, but let me just say that one Member alone spoke to one point for no fewer than four and a half hours.

The amendment suggests a review. That always sounds reasonable. But it would take time that we have not got. The problem is with us now. Let me not sound negative. As the Secretary of State has said, never say never again! But is there a genuine likelihood of any review finding a solution for the immediate—I say again, immediate—problem which faces us?

We will doubtless be told of those who oppose the Bill. But you may be assured that there is no shortage of support for it. Industry is in favour; chambers of commerce favour it; and above all, the people, the ratepayers and taxpayers—those who actually pay—favour it!

Noble Lords


Lord Bellwin

You will all have your turn, my Lords, in due course. I am sure. With 40 speakers the list is very impressive.

As I finish, many people have asked me if, with my ingrained local government background, I am personally in favour of the Bill. I will be frank. I deeply regret the necessity for these measures. They should not have been needed. We promised to act, we said precisely what we would do, and the majority for action in the country, 10 months ago, was massive. The final majority for it in another place was an overwhelming 125. So yes, I do support these measures, reluctantly, but unequivocally and wholeheartedly. I ask your Lordships to do the same, and to give the Bill a Second Reading.

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

3.15 p.m.

Baroness Birk

My Lords, I beg to move the amendment standing in my name on the Order Paper. The amendment reads, at the end of the Motion to insert: but this House believes that it will result in damaging constitutional changes in the relationship between central and local government, will undermine the authority and responsibility of local councillors and will gravely weaken local democracy and accordingly calls upon Her Majesty's Government to embark on a thorough reform of local government finance. Before I start my speech may I say how much I am looking forward to the maiden speech of my very old and noble friend Lord Bottomley.

The Minister, if I may say so without sounding patronising, did an extremely good job on a very sticky wicket. He managed to surmount the quite natural reaction to much of what he was saying. The doubt I have about it, apart from the substance of the Bill and the speech, is that it seemed to me that what he was dealing with was much more the detail of what is being proposed than the fundamental changes in the relationship between central and local government which are proposed by the Bill. In our view, and also in the view of many outside this House this change represents a weakening of the principles which have guided the development of local government and which have been maintained by Parliament over the years. Parliament and local government have evolved together over the centuries as parts of our democratic system for involving people in their own governance. Up to now each local authority has had the right and the duty to decide its own expenditure and the level of taxation to maintain that expenditure. For this the local authority has always been answerable to its electorate. It is something of which we in this country feel very proud.

It has never been Parliament's intention that local authorities should spend what central government decide. If it had, they would not have been given the right to tax, but a grant, as health authorities are given a grant. However, local authorities, unlike health authorities are elected. They have always varied in their choice of how much to spend, and on what. In the new-found jargon there has always been overspending and underspending, if by that is meant that there are authorities spending more or less than central government would have chosen. But that is the role of local government where each authority makes its own decisions on its level of expenditure.

The Government propose to restrict that right. That is the fundamental change. Restrict that right and one restricts the right of the local electorate to make their own choice on the level of services for which they are willing to pay. If the Government are concerned about the length of time before the electorate can express itself, the way to go about that is to decide to have more frequent elections, even having annual elections, so that the electorate can speak more frequently.

The local electorate will, in effect, only be able to vote for choices of which central government approves, and local authorities will be accountable to their electorates for decisions that are not of their own making. Survey evidence produced by the Institute of Economic Affairs in 1979 showed that 63 per cent. of the population are opposed to a reduction in rates if that means fewer services. It will be said that the change is not fundamental because the powers will be used against only a few authorities. The Minister stressed that point. Therefore, it has been widely asked, particularly in another place, why the general powers are in the Bill.

The fundamental change is that those powers, whether selective or general, should be used against any authorities. Breach that principle and the door is open to endless extension. If in principle the powers can be used against 18 authorities, there is nothing in principle against their being used against 38 or 58 or 78 or 278 authorities. Indeed, in another place in Committee, the Government, in answer to questions which became almost like a Dutch auction, refused to give any number at which they considered that one should then say, "Stop!". The powers were open, even on the selective part. Once powers conceded in central local relations are extended, there will always be a crisis to justify that extension. Breach the principle and the powers certainly will be used.

When Parliament passed the Local Government, Planning and Land Act in 1980, targets and penalties were never even mentioned. I think that targets were considered to be what one shot at in target practice, and penalties were what one had on a football field. Yet, within six months, they were announced by the Secretary of State; and each year they have grown in extent and severity. Nobody envisaged when that Act was passed that within three years a local authority spending 9 per cent. above target could be in danger of losing all its grant. What matters is not what Ministers say that they will do, but what the legislation gives them power to do.

Our amendment describes the change as having damaging constitutional consequences. The issue is a constitutional one. Indeed, the Secretary of State himself has recognised this. If Part II raises constitutional problems then so does Part I because it raises the same issues but on a selective basis. Yet the selective scheme can be as general as the Secretary of State wishes to make it and the general scheme can be as selective as he decrees. The Minister said—and, by the way he used his voice, emphasised—that the general powers are there only as a reserve. I think that I have shown (and it is very easy to see and understand) that there really is no demarcation line between these two propositions.

The constitution is involved because the Bill changes the relationship between the only elected bodies in this country, Parliament and the local authorities. To say that an issue is constitutional does not mean that a change should never be made; but it should be made only with great care, great deliberation and great trepidation; and, too, only when a very strong case has been made out. This supersedes any manifesto commitment. That case has not been made. The fact that one authority here and another authority there spend more than the Government want them to spend is not a case for a change of this tremendous sort. This is not something that should be dealt with in political terms—and I hesitate to say it—in almost a trivial way. We are talking about constitutional issues. We are not talking about what X did here and Y did there. There are other ways of dealing with that, as I shall suggest.

Because the case has not been made, so many of the Government's own Back-Benchers in another place, including an ex-Prime Minister and a former Conservative Secretary of State for the Environment, have condemned this Bill in terms which make the amendment I am moving almost complimentary. At different times the Conservative Secretary of State, the right honourable Michael Heseltine, Mr King and the present Secretary of State are on record as supporting, with a certain amount of passion, the autonomy and the necessity of the autonomy of local authorities.

Further, the Bill has united local authority associations in an unprecedented degree of critical co-operation which reflects the deep despair of their constituent parts—be they metropolitan authorities, district councils or country councils—who all support the amendment. Indeed, today the Leader of the Association of County Councils, Mr Lewis Moss, has said that the amendment is not sponsored by the ACC. I quote: The wording accords with our policy and therefore the ACC hopes that Members of the House of Lords will support it". The White Paper (Cmnd. Paper 9008) which preceded this Bill stated: We live in a unitary and not a federal state. Although local authorities are responsible to their electorates, they derive their powers from Parliament". In a unitary state Parliament has provided for a division of powers. In federal countries and in unitary states with a written constitution, that diffusion of power is protected. Without a written constitution Parliament must be the safeguard against undue concentration of power. This centralising concept comes, strangely enough, from a Conservative Party which has departed drastically from traditional Tory principles—a departure which will have Disraeli, Salisbury and many other past keepers of the Tory conscience turning incredulously in their graves. The noble and learned Lord who normally sits on the Woolsack seemed to me to touch very much on this point in his Dimbleby lecture, the "Dilemma of Democracy" when he referred to elected dictatorship.

The unitary state argument does not make the case for the Bill. Rather, it reinforces the need for caution. What then is the case? The Government argued, as did the Minister most strongly, on economic grounds. But that case has never been satisfactorily made out. Local Government expenditure is not out of control. It represents today only 25 per cent. of public expenditure; whereas 10 years ago it was 30 per cent. It is central Government expenditure which is increasing, not local government expenditure. The alleged overspend in 1983–84 was £770 million or about 3 per cent. Such a degree of overspend in the context of total economic management is insignificant. It is only 0.6 per cent. of public spending. That degree of overspend is less than in any year since the present block grant system was introduced in 1980; and there would not have been that degree of overspend had their not been serious consecutive cuts in Government grant to local authorities.

In any event, local government expediture does not affect the public sector borrowing requirement. Unlike central Government, local government expenditure has to be covered by income; so that local authorities cannot budget for a deficit and therefore there is a negligible inflationary effect. Indeed, if such powers were important to the management of the economy, one would expect the economies of federal countries like Germany to be unmanageable since, by definition, such powers are not available to them. But, of course, they are not. The Government argue that there is a weakness in local accountability. Many pay rates who do not vote and many vote who do not pay rates. Not only is this a massive attack on the principle of universal suffrage, but what it proposes does nothing to strengthen local accountability. Rather, it weakens it. Local authorities will be accountable at local elections not for their own decisions but for the Secretary of State's decisions. That creates a confusion at the heart of local accountability. Faced with a weakness in local democracy, the proper response is not to weaken it further but to strengthen it.

I must tell the Minister that he is absolutely wrong if he thinks that those of us on these Benches, or I think anywhere in the House, take the view that "Rates don't matter". We believe that they do matter. This is why we believe that what is required is a reform of local government finance that will widen the tax base of local authorities. It may well be that governments of both main parties neglected too readily the findings of the Layfield Committee. The issues involved are too important for both sides of the House not to admit that mistakes have been made. It is no part of our case that all is well in local government finance. This is the fifth Bill introduced into Parliament in four years on this matter. There have been eight different systems of grant and local government finance in that short period. This very instability is a measure of the gravity of the problem. What is required is not yet more ill-thought-out legislation but to find a new basis for local government finance.

Obviously, we should all be concerned about the effects of the proposals on the services provided by local government. The proposals are bound to mean a reduction in those services. In spite of what the noble Lord the Minister said, and with great respect, while he may believe that himself, the situation is impossible; the finance, the statistics and the economics make it completely impossible if, without its being amended to a very great extent, the Government carry out what they want to do. I repeat, the proposals are bound to mean a reduction in those services. The White Paper on Public Expenditure shows that the Government are seeking a reduction of over 10 per cent., which cannot be obtained from a few authorities alone. This is why the Government want the general powers in hand. Nor can reductions of that order be achieved without cruel cuts in services. Inevitably home-help, teachers, highways maintenance, libraries, help for the elderly, the young and many other services must be cut back. Furthermore, because certain statutory services have to be protected such as police and fire services and debt charges, those cuts will inevitably fall most harshly on discretionary services such as contributions to voluntary bodies which will affect the survival of many organisations with which many noble Lords are closely involved.

It is no good the noble Lord the Minister giving us his goodwill and his promise that it will not affect the voluntary services—it will. The voluntary organisations know this. Many have written to noble Lords in this House. They are not affiliated to the Labour Party; many have no great love for it, but are deeply concerned about the future of their own voluntary bodies. Expenditure on the arts, in which many Members of this House are keenly interested, is always on the hit list in thin times and will suffer another devastating blow from the effects of this Bill.

The Opposition could have opposed the Second Reading. Those outside this Chamber find it hard to accept that we are not rejecting the Bill entirely. It is a constitutional Bill. This House is the guardian of our constitution. Yet it is also a constitutional convention that we do not exercise our full parliamentary powers on the Second Reading of a Government Bill, especially if it appeared in the manifesto. On the other hand, it is unique for a manifesto commitment to be so strongly opposed by the Government's own supporters. One of the reasons why I feel so strongly about it is that one of the most important ingredients in the quality of local government is the calibre of the people prepared to stand for election. This House is peopled by noble Lords who have served for many, many years on local authorities all over the country. The Bill will weaken the authority and responsibility of local councillors and talented, able people will not be prepared to become involved with local government if they are to be only the agents of Whitehall.

My Lords, the noble Lord the Minister referred to local authorities as creatures of statute. I find that a rather offensive remark about local authorities. They are elected bodies, and the councillors representing them are people acting in the best interests, as they see them, of their local authorities. They do not like to feel they are impersonal creatures of statute, but rather that they are men and women doing their best in communal work. The 1971 Conservative White Paper on Local Government Reorganisation recognised the need for a vigorous local democracy. I quote: … a genuine local democracy implies that decisions should be taken—and should be seen to be taken—as locally as possible. We have moved a long way away from that.

My Lords, the Opposition are going to respect the convention. Our amendment does not deny the Bill a Second Reading, neither does it even delay the Bill. The amendment conserves a careful and strict regard to the conventions of this House. However, the conventions do not require this Chamber to remain silent on issues that are of grave concern in this House, another place, and even beyond. As we have always said from every Bench, this House is a guardian of our rights, constitution and civil liberties—and also the speed with which things are done in another place. Indeed, if this House were to agree to the Second Reading without giving expression to those views, it would be failing gravely in its responsibilities not only to the House itself, but to the other place and to the country at large. Our amendment is expressed in very moderate terms, but its whole purpose is to sound a note of admonitory caution to the Government. By its very nature, your Lordships' House has a duty to do that, otherwise it will be failing in its historic task. We hope the Government will accept this and will listen to the many voices among their friends in local government who are expressing such grave concern.

Finally, my Lords, I know the Alliance stands with us on the amendment. I hope that Cross-Benchers who have a wide variety of experience in this and every other sphere will also join us, as I hope will the bishops who have great experience of social problems. I ask Government supporters to respect their consciences to remember the real traditions of the Tory party, and, some of them at any rate, to join us in the Division Lobby. I beg to move.

Moved, as an amendment to the Motion, That the Bill be now read a second time,—at the end to insert: "but this House believes that it will result in damaging constitutional changes in the relationship between central and local government, will undermine the authority and responsibility of local councillors and will gravely weaken local democracy and accordingly calls upon Her Majesty's Government to embark on a thorough reform of local government finance." —(Baroness Birk.)

3.36 p.m.

Baroness Stedman

My Lords, from these Benches we would like to thank the noble Lord, Lord Bellwin, for his introduction of the Bill, but to reflect that he has done nothing to assuage our fears or to quell our apprehensions about it and we will have no fears at all about going into the Lobby tonight in support of the amendment.

My Lords, this Bill does nothing at all to redress the failure of Government to solve the problem of local government finance. The Bill deals with the balance of power between local and central Government and it overweights that balance in favour of central Government. If confers much too great a power on the Secretary of State, because it will be within his discretion to determine what are the criteria for action to be taken. If, as many Ministers have said, the general powers would be invoked only in extreme cases, why, then, have them in the Bill at all? Why cannot the Minister come to both Houses of Parliament and ask for powers if he needs them in extreme cases? But even if that part of the Bill were given up, the Minister could still abuse the whole of local government finance. It is the basic principle that is in question.

My Lords, this Bill seeks to limit the rights of local authorities to decide on and set the local rates. According to the Secretary of State under selected powers in Part I, some 12 to 20 authorities would be subject to Government control of rates. But this is not what is said in the Bill. There is no limit to the number of selected authorities, apart from the £10 million small budget exclusion for most district councils. If this Bill is in force for long, since that £10 million is enshrined in statute, within a year or two, on inflation alone, many more districts will find themselves capped unless the Minister is willing to put the appropriate increase order before the House.

My Lords, under the general powers all authorities could have their rates directly controlled from Marsham Street. Whatever the noble Lord, Lord Bellwin, may say, this is a fundamental constitution change. Parliament has established local authorities with the right to decide on and levy their own rates. This tax is used to finance policies decided by democractically elected local authorities after they have given full consideration to their local problems. By attempting to take such wide-ranging powers, the Government are concentrating political power to an almost exceptional degree. We do live in a unitary state, but until now there has been a conscious dispersal of power. It is this diffusion of power which is both a value and a safeguard. Parliament should hesitate before concentrating greater power in central Government; and the sweeping away of the freedom of local authorities to prepare their own budgets and to levy their own rates merely because they do not accord with the Government's views focuses on the real danger of that kind of centralisation.

On these Benches we do not condone the excessive spending of a few authorities, but the fact remains that every authority is different and has different problems. It is at least interesting that seven out of the ten authorities in the analysis, prepared by the Department of the Environment Inner Cities Directorate, of the most deprived authorities in the country are now likely to be rate capped, making their deprivation even worse. The Secretary of State has said that if this Bill were operative today some £200 million would be saved by rate capping. The noble Lord, Lord Bellwin, I am sure, will tell us that that is a lot of money; but out of a total of £12 billion rate expenditure, and taking the total national expenditure of £126 billion, this really is a sledgehammer to crack a nut. The criteria for rate capping must be clearly defined in the legislation. Just to have a reserve power is not good enough. I do not deny that the present Ministers may have good intentions, but if we are to legislate then we must legislate for restraints on a bad Minister who might use his powers much more unwisely in the future.

The Government are taking away from local government the right to levy the rate which it, and not Parliament, considers necessary to carry out its statutory obligations. The expenditure of local government must be justified by its statutory functions, and that right of local government has existed for nearly 400 years. The only real freedom that local government has is its power under Section 137 of the Local Government Act 1972. The powers accruing to a Secretary of State under this Bill amount to an unprecedented increase in central Government power at the expense of the authority at present wielded by local councillors. These ministerial powers not only relate to the global expenditure of a local authority but they also allow direct interference by the Minister in the day-to-day running of the council.

These proposals have been overwhelmingly condemned by the three associations as a fundamental constitutional threat. The link is being broken between the responsibility for the provision of services and the accountability to the local community through the ballot box. No longer will local government be an instrument of local choice for experimentation and for initiative, responsive to local needs. I say again that we do not support the policies of the high spending authorities, but the record of local government overall does not warrant the draconian powers that are being taken under this Bill. Is not the real reason for the Bill the fact that the Government raised expectations about the abolition of domestic rates and later about the reform of local government finance, and it is because the Government have been either unwilling or unable properly to reform local government finance that we have had this Bill foisted upon us? What we need is not piecemeal interference in local government's powers and finance: we want to have a long, cool look at the functions we require local government to carry out, at what is the best structure to do the job, and at how best it can be financed. We might then make a proper assessment of any reorganisation that is necessary.

There have already been numerous grant systems, and in this House we spend hours and days arguing about GREA (grant-related expenditure assessment), clawback, tapers, multipliers, triggers, waivers and penalties. The local authorities were promised that the then hold-back and penalty systems would affect only a few councils, and yet the ACC tells us that this year 23 of their 37 members are affected, and next year all their members could be.

Many of us were suspicious when GREA first raised its head. The Ministers opposite asserted that it was just a test of an authority's need to spend, and they admitted that it was a rough form of justice and would be used only as a means of helping to allocate grant, and not to control expenditure. Past Governments have created the present situation by inflating the grants over the years, and now that the grants are less the rates have to rise. Some authorities overspend very much, but that should not mean that every authority must suffer. Does the Minister not accept that local government is in the mess that it is today because up to 1974 Governments had an expansion of grants, thus making local authorities less accountable to their ratepayers?

A previous Act reduced the target and penalty systems, and in this Bill we have yet another weapon with which local authorities can be taxed on their expenditure. A colleague of mine commented in another place: We understand that the Government feel that they need belt and braces, but to require a stout piece of string as well seems to be going rather far". Even if we persuade the Government to withdraw the general powers in Part II, that does not save an increasing number of authorities from being penalised under Part I, unless the Government are willing to write in a limit to the list of 20 authorities. As the Bill stands one could argue that the reserve powers are not necessary, but if they are removed it does not save more than the 20 high spenders from being capped. This is precisely what happened under targeting in the Local Government Finance Act. It was said then that only a handful of authorities would be affected; yet now, in 1984, that handful has reached 150.

What will be the criteria for rate capping? In another place the Secretary of State produced a table of 11 possible circumstances, or combinations of circumstances, and he also said, in col. 218 on 27th March in another place: We shall eventually choose the criteria for those principles in the light of the most up-to-date information". This is much too open-ended. The list may or may not be used; the principles can be changed by a Secretary of State at any time, and new principles can be invented. Every local authority faces different problems, different issues, different concerns, and has a different political make-up. Rate capping is supposed to reduce Government spending to what the Secretary of State considers reasonable. What is not clearly stated is whether the GREA or target is what he considers reasonable. How did the Government arrive at targets? GREA we can understand, but what yardstick or formula has been used to work out the target for each authority? Was it, as many of us suspect, a purely arbitrary figure for each authority? We cannot accept arbitrary criteria. Local authorities have a right to know how the targets are assessed and the Government have a duty to make their reasons easily understandable.

What will be the criteria against which an authority will be judged? How will the target figure be arrived at? How will the Government arrive at a figure which denotes excessive overspending? What account will be taken of how much of that expenditure is on-going from previous years' decisions on capital spending, probably at the Government's behest? There must be consistent and understandable rules for setting the targets. We cannot depend on the arbitrary whims of the Secretary of State, or indeed of any Secretary of State. We all helped to create the precedent under the 1980 Act of the Secretary of State interfering in local government, and I remember the late Lord Greenwood saying then that if any Secretary of State wanted a precedent for interfering in local government then the Secretary of State at that time had given him the fullest scope.

The Secretary of State has said that central Government power must be invoked to protect ratepayers against extravagant, overspending authorities. It seems monstrous to me that any authority spending far below GREA should be liable to grant penalty yet that is what is happening in my county of Cambridgeshire, which is slightly over target. So let us spend a little time looking at Cambridgeshire, which is illustrative of many county councils today.

In 1984–85 their GREA exceeds the budget by 3.5 per cent. If they were to spend up to GREA—what the Government deem to be fair expenditureper capita on the statutory services—they would have to spend £7.1 million more, which would then result in a grant penalty of £28.5 million and a rate of 177p instead of the agreed 142p. Incidentally, that 142p includes 50p which is directly attributable to changes in Government grant. Their target for 1984–85 is £ 194.5 million. Their GREA exceeds it by £11 million, and yet to get to target in 1984–85 the budget would have had to be cut by a further 2 per cent. or £3.9 million. If these cuts had been made across the board, it would have meant a job loss of 275 and a cut of £3.9 million.

In 1985–86 Cambridgeshire expect to be 4 per cent. over target on present trends. That would mean double the losses and double the cuts and, since teachers cannot be made redundant under a year, the major service cuts could not realistically be planned before 1985–86. My county council have acted responsibly and have planned their expenditure to meet their statutory obligations, the established norm and the Government's standards in other services. Yet by spending more than their target they could lose £4.5 million in penalties and in 1984–85, if they were to spend to GREA, they would lose £28.5 million in grant.

It is 10 years since I came to your Lordships' House and Cambridgeshire were adjusting their budgets then. They have been doing so ever since and every year there is less room for manoeuvre. The only decisions left to them now are the really hard ones which directly affect the quality and the quantity of services. As I said, they are well below GREA but just a little over the target, and to get to that figure this year they made cuts and savings amounting to over £1 million and used £800,000 from interest earned on their balances. There is now nothing left to cut. If the Government continue with their obsession with targets, then they must be realistic, take account of the persistently low spenders and make sure that some allowances are made for past performance and that they are not penalised.

The targets seem to be based on past spending, and thus they punish low spending authorities like Cambridgeshire who, for the past 10 years, have been doing exactly what the Government have asked them to do. Present spending plans could mean that the rates would go up from 142p today to 182p by 1986–87, and yet only 2p of that would be due to new spending. I do not think that Cambridgeshire object to a fair reduction of grant, and they would play their part in further reductions when the other authorities had matched their existing achievement. But the council, who are Conservative controlled, have announced that they will not voluntarily reduce expenditure simply to make good the inability of Government to bring down the high spenders.

Why cannot the Government see how unfair it is to penalise the low-spending shire counties, in order to keep within the global sum allowed to the DoE by the Treasury? What they are doing is penalising the low spenders to pay for the high spending of some other authorities. In a sense, this is not a Department of the Environment problem but is one for Government. The Treasury must be made to understand that they may have to find money to cushion the low spending authorities over a period to enable the high spenders to make a properly phased adjustment.

Rate capping must not be available to use against the low spending and the economically efficient authorities. The target must reflect the growing population of Cambridgeshire. Otherwise the so-called overspending will increase and with it even greater penalties in the future. Our population is growing by 3 per cent. per annum and, if spending grows by only 1 per cent. over the next three years, it will mean a £10 million overspend in 1986–87 and on today's figures grant penalties of £24 million or another 26p on the rates.

As I have said, we on these Benches do not accept the spending priorities of some authorities and we would say that perhaps some of the things they do lead to unreasonable expenditure. But let us also be honest and say that the removal of all these kinds of nonsenses would not have any really dramatic effect on the spending level of the authorities concerned. Yes, my Lords, they can cause annoyance and irritation to many of us, but in terms of real spending levels they do not have all that much impact.

The arguments about spending levels should be settled by the electors of those authorities. When local councils cease to have control over their local revenue, and if they are no longer free to set their spending levels and their rate levels at the figures they feel to be appropriate, then they have lost the right to be called an instrument of local government. Today many officers and elected members in local government are seriously questioning the continued value of their role, and local government will not retain the interest and the commitment of these dedicated and experienced people if they do not have the right degree of autonomy to do their job.

Can we not learn that hasty and ill-conceived actions do nothing but destroy the stability of local government? We know, and the Minister knows, that with all the goodwill in the world many authorities could not get down to a much lower figure in one year only. Time must be allowed for councils to do a phased reduction of expenditure, because sensible and progressive local government cannot be organised on uncertainty.

The Secretary of State is in favour of freedom for local government so long as that freedom is used in exactly the way he wishes. What he has not realised is that overspenders, and indeed under-spenders, are not the result of either Left-wing or Right-wing conspiracies. They are inherent in local government as we have known it, because they derive from the right of an authority to make its own assessment of its need for expenditure. We need a system of responsible elected local authorities and local government must be maintained and strengthened. Central Government cannot take all the decisions. The major urban and rural problems must have that diversity of approach represented by a local government which accepts that no two authorities are exactly alike or have exactly the same problems.

I do not want to end up going down the path towards no genuine local government and no real means of redress against a centralist Government. I do not want to end up with quangos and boards and no one knowing where he is going. All of us would be the losers. Over the years local government has been a success story and we have no reason to be apologetic about it. To it we owe our public education system, the community aspects of the Health Service, municipal housing, the police and fire services, consumer protection, personal social services, help for the elderly and disabled and much more in the way of services which help to improve the quality of life. All this we owe to local government.

I believe in local government and many Members from all sides of your Lordships' House have served, or are serving, on local councils, as I did for nearly 30 years. I am sure that they, like me, recognise its importance. I ask them to join with us tonight to support the amendment and to work through the Committee stage in order to make this Bill more acceptable; to seek a time limit on Part I together with a review of local government finance; to seek really adequate parliamentary safeguards; to limit the number of authorities to be designated for capping; to specify the criteria to be used, and to get the general powers in Part II withdrawn. I believe that this Bill, if so amended, would find favour in another place.

4 p.m.

Lord Harris of High Cross

My Lords, we do not have any Whips or scorpions on the Cross-Benches. Therefore I cannot pretend to speak for my noble friends, many of whom I look forward to hearing later in the debate before this day comes to its end. For myself, in the absence of radical reform to contain Government spending, I am content, with no more reluctance than that expressed by the noble Lord, Lord Bellwin, to support the Government in their effort to set some limit upon those I have come to regard as local, political pickpockets. Against the noble Lord, Lord Bellwin, I must say that I wish that a similar statute, however draconian, might be devised to limit the power of central Government to raise taxes, which everywhere damage economic efficiency and inevitably, therefore, reduce employment prospects for our people.

The noble Baroness, Lady Birk, referred to an IEA survey in 1979 which showed a majority opposed to reductions in rates if that involved fewer services. As I understood the thrust of the case put by the noble Lord, Lord Bellwin, it is that expenditure can be cut, and often cut very significantly, without any reduction in services if the laggards come up to the performance of the better councils. The amendment expresses concern about local democracy. I want to ask: what about the corrosive bitterness, the friction, the disrepute, the lack of social cohesion that has marked the post-war growth of all forms of Government spending? Democrats, in my view, should be more worried about the needless politicisation of so many decisions that could be peacefully resolved by choice in the competitive market, if we so wished. It is revealing that we do not have to curb, curtail or cap the local Co-op, for the simple reason that they cannot inflate their costs and pick our pockets to pay for goods and services which we do not wish to buy from them.

I have always acknowledged that the Government have to dip their hands fairly deeply into our pockets to provide essential public services, including help for those who are not able to help themselves; but the whole of my criticism is that the greater part of public spending has nothing to do with the relief of poverty. That is why I argued before the Layfield Committee 10 years ago that we should rely much less on Government and much more on the real democracy of the market where everyone votes each day between alternative suppliers by choosing how to spend his own money.

By comparision, special pleading about local democracy strikes me, frankly, as pure fantasy. Of all local spending, I have calculated that only £1 in £7 comes from the domestic ratepayers, of whom only one in three, or perhaps one in four, pays full rates. At the same time, industry and commerce provide on average half of the total of rates—in some areas they provide 70 per cent. or even 80 per cent. of the rate income—yet they have no votes; while the Government provide half as much again as the ratepayers and are then resented for interfering. When taxation is so sharply divorced from representation it is no wonder that the dominant pressure is to spend, and to spend more of other people's money.

I believe that a far more fundamental violation of local democracy has long been complacently perpetrated by both the Labour and Conservative parties in loading councils with multiplying statutory duties which local citizens have to endure and help to finance, whether they like it or not. Alas! it is unlikely that the political opponents of this Bill would be keen to show their interest in decentralisation and democracy by joining me in giving real autonomy to local councils in deciding the scope and financing of their functions, including the freedom to raise charges, for example, for libraries, schools and other services. Instead, rather than giving local authorities real choice and real responsibility, both parties have come to impose their detailed policies on all councils, which have become little more than agencies for decentralised administration. It is recognition of that sad fact which explains why such half-hearted voting as occurs in local elections is overwhelmingly based upon national policies and no longer on local issues or personalities.

So long as we acquiesce in this puppet role for local authorities, it is inevitable that central Government should wish to encourage efficiency in the local administration of public policy. Where the local Co-op is required to cover its costs by selling in a competitive market, the local council can finance reckless overspending by passing the bill to impotent ratepayers. The present lack of either a market discipline or of an effective electoral sanction explains why local government is so disgracefully overmanned throughout its entire operation. Its total payroll has increased from under 2 million in 1961 to around 3 million at the present time, or one in eight of the entire labour force. Of its budget—above £30,000 million—80 per cent. goes on wages and salaries. In education, employment has doubled, despite fewer children, with only half actually engaged in teaching. In other services there are wide variations in unit costs which do not reflect differences in the quality of services. Where contracting out has enabled more precise comparisons to be made, we find reductions in cost commonly of 20 per cent., 30 per cent. or 40 per cent.

I want to ask the Government why they do not make competitive tendering compulsory as in the case of building and the direct labour organisations. Why should councils resist the kind of economies that market forces have already imposed on private enterprise, with such great benefits in the fight against inflation? I do not believe that Sheffield or Liverpool will improve local employment by maintaining overmanned council jobs, because the additional cost to ratepayers must simply reduce private spending and employment in the market sector outside.

Why should we pay the slightest attention to all the special pleading which has come through our letter boxes during recent weeks from many of those who are responsible for this overspending? There has been impressive evidence, as the noble Lord, Lord Bellwin, said, in favour of this Bill from the CBI, the chambers of commerce and from large numbers of businessmen whom I have been able to consult. The question is: who will speak for the other victims—the unorganised and oppressed millions of ratepayers—for whom rates can be as much as 10 per cent. of their net incomes?

I conclude with some revealing evidence which NALGO omitted to send to your Lordships but which came to light as part of its £1 million campaign to oppose the so-called "cuts". Before going public, NALGO commissioned a professional research organisation to test opinion on local government among what it specified as "broad left" sympathisers in three areas: surburban Chester, depressed Sheffield and mixed Westminster. It was to be a qualitative assessment, based upon group discussions and prompted by NALGO tapes and advertisements. The unpublished report, obligingly leaked by the Guardian last year, revealed that the findings were diametrically opposite to what NALGO must have hoped. Thus, there was constantly expressed strong opposition to high rates; there was acceptance that private enterprise was more efficient; there was recognition of overmanning; there were complaints about lazy home helps and doubts, if you would believe it, about social workers. Public attitudes towards NALGO were also explored and found to be even less flattering. The report quotes such judgments as bureaucratic, politically motivated, selfish, greedy and destructive.

To avoid further embarrassment, I shall give only one quotation of direct relevance to this debate: Jobs for the boys had seemed to become more important to unions than the good of industry and the country as a whole. From behind the rhetorical smokescreen about local democracy the evidence of NALGO's unpublished research shines through to confirm the evidence of everyday observation of councils such as the GLC, Sheffield and Liverpool. People have rumbled that the self-serving inefficiency of the less responsible councils will not easily be avoided without extreme Government measures. They want protection against the last of the big spenders. I support this Bill as offering some modest prospect of relief for these otherwise defenceless ratepayers.

4.10 p.m.

Lord Bottomley

My Lords, it accords me a personal pleasure to take part in the debate opened by the noble Lord, Lord Bellwin, and opposed by my noble friend Baroness Birk. My first speech in Parliament was delivered in this Chamber. It would have been my wish that my maiden speech in your Lordships' House would have been about the Commonwealth. There was an opportunity for me to take part in such a debate when there was the recent debate on foreign and commonwealth affairs, but it was not possible for me to do so. As chairman of the Attlee Foundation, I had long been committed to take the Chair for the Attlee lecture delivered by Mr. Kenneth Harris. However, with my long association with local government I felt entitled to take part in today's debate.

For 20 years I was a member of the Walthamstow council, and was mayor of the town, During the last war I was deputy regional commissioner for the South-East of England, co-ordinating the work of 96 local authorities. For many years I was a full-time official of the National Union of Public Employees. When Prime Minister Attlee asked me to join his government I naturally assumed that it would be as a local government Minister. When it was possible for me to speak freely to him I asked why he had not done so. Tartly, he replied: "It is time you got away from drains and dustbins." He went on to say that there would have been a danger, too, with my knowledge and experience, that I would argue with the experts. The job of a Minister is to listen to the views of the experts and help them to make up their minds and come to a decision consistent with what the public will accept.

The Bill aims to give central government two key powers. First, there is a selective power to pick out a number of local authorities and fix a top limit for their rates. Secondly, there is a general power to control the rate demands of all local authorities. It enables the Secretary of State to use those powers on the basis of principles not spelt out in the Bill. The powers given to the Secretary of State are remarkable. He can determine the principles and then depart from them. He can order a local authority to run down its balances without himself having to face the consequences. These powers will not be subject to parliamentary scrutiny or approval. It gives more power to Ministers and civil servants than the elected representatives over the budgets and services of towns. The Bill is a negation of the long tradition of local government independence. This view is strongly supported by local authority associations, the professional press and the academic world.

The Bill is a threat to individual freedom and local democracy. It is an affront to local and parliamentary democracy. Under the Bill a local authority will no longer be able to make its own expenditure decisions. It will only be able to make expenditure decisions of which central government approves. The Department of the Environment is not equipped to assess detailed local needs in the way in which they are now scrutinised by local people. It cannot be right in a democracy for more and more powers to be vested in the Executive rather than in Parliament itself or in locally elected representatives of the people. That is precisely what would happen if this Bill becomes law. Local electors will no longer be able to vote for councillors to carry out the expenditure policies approved by the electorate. If this legislation comes into being it cannot be ruled out that some future Government of a different political persuasion may use similar powers to penalise authorities who underspend, and force them to increase their rates.

Local government initiative has been responsible for much of the social progress in our country. Walthamstow council, of which I was a member, introduced the selective school. This school system pioneered raising the school leaving age to 15 years. The only major development in sewage disposal was the development of the activated sludge process which was invented and worked by the Sheffield city council. It is now universal and used all over the world. School meals were first introduced in the city of Bradford; and the noble Lord, Lord Bellwin, will know that it was the city of Leeds which introduced traffic lights. The first domestic smoke control was introduced by the city of Manchester. I could give many other examples, but perhaps I may give this final example because it concerns my old constituency. The first isolation hospital in the country was built in Middlesbrough and it was not until 20 years later that central government introduced a Bill to enable local authorities to follow that example. We should not forget that it was local authorities who pioneered many of the public utility undertakings—water, electricity and gas.

This Bill, as has already been said, will be a blow to the practice of partnership between local authorities and local voluntary organisations. Local authorities will be compelled to give priority to statutory require-ments and to meet the needs of their own staff. The Bill is unlikely to make any major changes in the total of public expenditure. It is likely to promote a good deal of administrative chaos and uncertainty in rate fixing. Some years ago I travelled with Lord Redcliffe-Maud to America and we discussed local government. It is sad that over the years no Governments have taken up the recommendations that he made and which were subsequently supported by the Layfield Committee report. Local government would have been much better today if those recommendations had been accepted. A healthy local democracy demands that local authorities should enjoy a genuine degree of financial independence. This Bill goes against those recommendations.

The Government assert that local government expenditure has been excessive. That is not so. During recent years local government spending has gone down by 3 per cent., whereas central government spending has gone on increasing. A former Conservative chairman of the GLC has written to me saying that he opposes this Bill. He further said that he was giving up local government. It is sad that a hard working, conscientious public servant should be so disgusted that he has decided to give up local government work.

This Bill will add to the country's most pressing problem—that of unemployment. Rate capping threatens the livelihood of 3,300 fire fighters, 12,000 teachers and 7,000 police. It could mean the loss of some 11,500 residential places for children and the mentally handicapped, and of 8,000 day centres. It may mean 66,000 homes without home helps, and the loss of 55,000 meals-on-wheels. If this Bill becomes law, it will be a sad day for social democracy. There is today a challenge to Parliamentary democracy. Vigorous, democratic and independent local government is an indispensable part of our democratic society.

4.20 p.m.

Lord Boyd-Carpenter

My Lords, the noble Lord, Lord Bottomley, knows without my telling him what a personal pleasure it is for me to follow him in this debate and therefore to have the first opportunity of congratulating him on that most interesting and impressive maiden speech. The noble Lord and I have sat opposite each other for more years than anyone looking at him would deem possible. I have always admired his grasp of the detail of the many subjects with which he has dealt in his long and distinguished career.

He has also shown this afternoon that he has the quality of courage, since there are very few people in this House or outside it who would dare to challenge an incumbent Prime Minister as to the reasons for one's appointment to one department rather than to another, as he confessed he had done. I know I speak for all of your Lordships in saying that we greatly welcome the noble Lord's arrival in this House and are certain that he will contribute very much to the experience, wisdom and quality of our debates.

As the noble Baroness on the Front Bench opposite has observed, and as the noble Baroness on the Liberal Benches commented, there are today some people in the party to which I happen to belong who are inclined to think that the policies of the Government are somewhat—I think the "in" word is—abrasive, and to hanker after the old days of consensus. I am not one of those, and I believe that one of the reasons why the Government, and the Prime Minister in particular, command so loyal and determined a following in the country is the fact that the Government and the Prime Minister say what they intend to do and then get on and do it. This is, perhaps, something of an innovation in English public life. This Bill is an example of that. It was spelt out in detail in the manifesto, and it is in accordance with the Government's pledge and promise to the electorate, on the basis of which the Government were returned by a very large majority to another place, that the Bill comes to us.

The Bill comes to us because—as I have been trying to say to your Lordships—ours is a Government which seek to carry out the mandate they have been given by the people. The noble Baroness, Lady Birk, made—I hope she will allow me to say—a most gallant and ingenious attempt to justify the extraordinary hotchpotch of an amendment which she has put on the Order Paper for this House to decide upon a little time from now. She started by suggesting—as some of the less well-informed outside bodies which have been deluging your Lordships with expensively-printed propaganda material lately have done—that this Bill was unconstitutional and that there was (and I think that I got her words exactly right) a constitutional right in every local authority to spend what it liked and to tax its ratepayers as it liked.

That view really will not stand up to analysis. As has already been pointed out, we have a unitary system in this country. The Queen in Parliament is sovereign, and local authorities—like every other organisation in this country—are subject to the will of Parliament expressed in the proper and appropriate way by statute. What the noble Baroness failed to realise (rather surprisingly, in view of her experience) was the part played in our unwritten constitution by conventions. Conventions are, I suggest to your Lordships, what make our unwritten constitution work. As my noble friend Lord Bellwin reminded your Lordships, it has for many years been the convention that local authorities, although they have the power in law to raise rates almost without limit, did in fact not raise them, nor raise their spending limits, out of line with the wishes indicated to them by the Government of the day. That was a convention.

That convention has now been broken. The history of your Lordships' House reminds us of what happens when people break conventions. For a couple of hundred years, your Lordships' House had not touched a Finance Bill. In 1909, this House was so infuriated by the one produced by the late Mr. Lloyd-George that they threw it out. Inevitably, as happens in this country when you break a major constitutional convention, judgment comes upon you. Within two years, your Lordships' power to deal with financial matters was reduced to a mere shadow.

What has happened in this case, I suggest to your Lordships, is that in the past few years a number of local authorities—politically motivated and almost without exception controlled by the extreme Left (who are much more of a worry to the noble Baroness than they are to me)—have pushed up expenditure and rates to excessive levels and have therefore violated that convention. No Government can accept that, since the function of managing the British economy is the function of central government. When one has local government expenditure in excess of 20 per cent. of total public expenditure (indeed, somewhere near 14 per cent. of gross domestic product) no Government discharging their own task of managing the national economy can allow the discharging of that task to be thwarted by other bodies acting in a totally conflicting way.

Our present Government—and I do not want to go into detail because I know this is controversial, but I ask your Lordships to accept it as fact—are pursuing a policy of restraint in public expenditure; control of public expenditure in an endeavour, which has so far proved highly successful, to combat inflation. When faced with a challenge of this kind, where local authorities have pushed their expenditure up and have taxed their ratepayers excessively in a way that conflicts with the Government's policy, your Lordships may remember Bernard Shaw's play, The Apple Cart, in which it is, I think, the king who observes: When two men ride a horse, one must ride behind". In matters of financial management and economic policy, it is the local authorities who must ride behind. If they had continued to ride in accordance with convention, following the direction given to them by the organisation responsible for economic policy, it might not have been—probably would not have been—necessary to introduce this Bill. But they have defied that convention, and, as always in this country when constitutional convention is defied, retribution follows.

It goes further than that. All of us in this House are concerned that the economics of the country should be restored and that our trade and industry should be restored. But your Lordships cannot overlook the fact that today the rate burden on business premises alone—between £5 billion and £6 billion a year—is higher than the total yield of corporation tax upon industry and business. It is a very heavy burden being imposed on business, in complete conflict with the policy of Her Majesty's Government, which is to stimulate investment and the development of industry by lightening that burden. No Government with any self-respect can accept that challenge.

I would only remind your Lordships perhaps of one particular example—that of Sheffield. In a poll taken of those businesses and industries in Sheffield which had had to cut their manpower in the past two years, 48 per cent. directly attributed some part of their cut in manpower to the heavy level of rates. This could be repeated all over the country.

When the noble Baroness talks about local democracy, it sounds just a little sour in the ears of those who are trying to run industry and businesses and who are subjected to taxation of this sort, in respect of which they have no vote whatever. No taxation without representation is said to be an old principle, going back to certain teatime activities in Boston. But when you have industry hampered in this way and unable to raise a finger in its defence, and when you have these rates falling on businesses which may actually be making a loss (since no account is taken, as national taxation takes account, of profitability), it is understandable that industry should, as it has through the CBI, urge my noble friend to take action.

Then we should consider the domestic ratepayer. The domestic ratepayer actually pays less in rates overall than the business ratepayer; but some of them—a minority—who pay the full rate find this a very heavy burden. But it goes further than that. Through business and through the domestic ratepayer, it affects the whole level of employment in certain areas. At County Hall across the river the Greater London Council has displayed until recently a great poster: "London's unemployed, 350,000", or whatever the figure is. There has always seemed to me to be a somewhat Freudian element in the action of putting up that poster, since some at any rate of that unemployment is a direct consequence of its own activities in raising the level of rates. Offices are moving out of London—moving to the lower rated areas of what is now called the M4 valley. They are moving out from central London very largely because of the burden of rates both on their offices and works, on the one hand, and on their employees if they live in that area, on the other hand.

There again, is it really suggested that the Government of the day, who are responsible for economic management, should sit by and do nothing? Is it suggested that we should await yet another inquiry, such as is put forward in the proposed amendment? The noble Baroness knows as well as anybody that such an inquiry—aided no doubt by the attendance of learned counsel—would last for three or four years; there would then be consultation for another two or three years. We are talking of 10 years before any change would actually be in effect. In the present situation of this country, with the present state of our economy, a delay of that sort is not acceptable, and, I would suggest, could not be acceptable to such a Government.

Lord McIntosh of Haringey

My Lords, will the noble Lord forgive me? Can he point out the reference to an inquiry in the amendment? I cannot find it.

Lord Boyd-Carpenter

My Lords, I am assuming that even a dictatorial person like the noble Lord would not alter the system of local government without having an inquiry of some sort; but if I wrong him, I wrong him.

Seeing the noble Lord reminds me of one matter which I had intended to mention. We have been told—and indeed we have received masses of correspondence from various worthy and excellent organisations that fear this, perhaps justifiably—that if local authority public expenditure is capped the local authorities may decide that the first priority for capping is the grants to these organisations. In the light of the activities of some local authorities it may well be so, but it need not be. The extravagance of certain local authorities at the moment gives ample room for economy.

Let me, as the noble Lord has reminded me, refer to the Greater London Council. I do not know whether your Lordships know that among the organisations which receive grants of ratepayers' money from the GLC are the London Gay Teenage Group, Lesbian Line, London Lesbian and Gay Centre, English Collective of Prostitutes and London Gay Switchboard—I do not know what that is. The GLC also decorates our press by taking pages, one of which reproduces 12 likenesses of the Secretary of State for the Environment. Handsome man though he no doubt is, that seems to me slightly excessive as an expenditure of ratepayers' money. Having no police powers, it none the less sets up a police committee, staffs it and spends money on it. There are many directions in which the GLC, were it to continue—and your Lordships know that it is the prayer of most London ratepayers that it may not—would undoubtedly find room for economy. It could do so in all these directions without cutting out the useful grants to useful voluntary bodies. No one knows that better than the noble Lord, Lord McIntosh of Haringey.

The amendment which will be before us at the end of this debate is a very curious one. Your Lordships will no doubt have studied it, as I have, with close on incredulity. I would like to end by asking a question of the noble Lord who is to reply on behalf of the Opposition. In view of the fact that this Bill featured conspiciously in the Government's mandate less than a year ago, and in view of the fact that it was passed in another place by a large majority, does he regard it as consistent with the role that the Labour Party thinks is suitable for this House, for this House either to reject or seriously or heavily to amend it? He should recall that in answering that question he may well be setting a precedent which years hence under another Government may not be without value.

4.38 p.m.

The Lord Bishop of London

My Lords, reference has already been made to constitutional issues raised by this Bill, and to the way in which it affects, for example, the rights of local electors, not least by the noble Lord, Lord Bottomley—and I, too, should like to congratulate him on his admirable and informative maiden speech.

I begin by pursuing these aspects a little more deeply and by seeking to show what underlies them. It is clear from a study of human society that it has ever been necessary for man to store the results of his work and to arrive at some method of co-operation by which they are shared as need arises. Even in primitive food-gathering societies this is made necessary by the vagaries of crops, the uneven distribution of resources for man to realise, or the possible incapacity of the food-gatherer or hunter to meet the needs of his family. Reliable accounts of even the simplest food-gatherers show that, apart from all commercial instinct, economic life is penetrated by mutual aid.

What is necessary in such circumstances becomes increasingly necessary as civilisation becomes more complex. The greater the complexity, the greater the dependence of individuals, families, groups, nations, upon each other. The greater the dependence, the greater the need for established and accepted principles if the right balance is to be achieved between the just claims of individuals, associations and governments respectively. Such associations above the individual level are, I would suggest, not merely the creation of statute: they do represent a very natural and human instinct that we do group in various levels within our society for various purposes and we cannot treat them simply as if they were creations of statute.

Such a balance must have as its aim the maintenance of the common good by means of which a society is to help its members in the realisation of tasks which they alone cannot sufficiently achieve. There is a well established principle of Christian social thought which evolved through attempts to achieve this balance and which I would wish to commend to your Lordships today. I think you will be familiar with the principle, perhaps not with the title. It is called the principle of subsidiarity. That rather ugly term is of comparatively recent origin, having been coined in this century; but the truth it represents has been expressed and appreciated for a long time past. This principle states that social institutions, which include those of the state, have an auxiliary and complementary function concerning the tasks and needs of the smaller groupings and individuals. That means to say that on the one hand institutions must leave to smaller groupings and individuals what they can do by their own proper power, and that on the other hand they must assist the smaller groupings or individuals where they are unable to accomplish a necessary or socially desirable aim.

The principle was stated formerly in these words: Just as it is wrong to withdraw from the individual and commit to a group what personal initiative and industry can achieve, so too it is an injustice, a grave evil and a disturbance of right order for a larger and higher association to arrogate to itself functions which can be performed efficiently by smaller and lower societies. In other words, it is an injustice to deprive an individual or a smaller group of the possibility of acting upon his, her or its potential, and to reduce their activities or responsibilities to those which are below it.

It follows from this principle that not only shall the responsibilities and powers be properly attributed, it also follows that those who exercise such powers and responsibilities shall properly represent and be accountable to those whom they represent and who have immediate knowledge and experience of the needs which are to be met at the respective levels. It is because I believe that this Bill does not adequately take account of this principle that I must express my concern from these Benches today.

I fully accept that central government have a responsibility to relate the realised resources of the country to its spending. I use the phrase, "realised resources" to express the product of man's transformation of natural resources which are to be used for the common good. I use that phrase, "realised resources" rather than the word "wealth" because of the association of the latter with the word, "wealthy" with its unfortunate overtones.

I accept—indeed I have frequently affirmed—that need and desire do not alone create those realised resources to enable them to be fulfilled and they must be related to work and production. I certainly do not support unwise or prodigal spending. But I do not believe that action which is necessary to curb that must be such—as I believe to be the case here—as to penalise those who are not guilty.

But the way in which the Government seek to exercise their responsibility in this Bill, in my judgment infringes this principle of subsidiarity. I believe it is just far too blunt an instrument. I believe it undermines the responsibilities which those engaged in local government and those whom they represent should exercise. I do not say that the rating system does not need drastic reform. That is not the point at issue. I believe it does need to be reformed and reformed in a way which increases responsibility and realism in the face of local needs, rather than the reverse. It is for these reasons that I shall find myself constrained to vote for the amendment in the name of the noble Baroness, Lady Birk.

I now wish to draw your Lordships' attention to the likely effects of this Bill in two specific areas: education and assistance to voluntary agencies. Education in this country has always been and still remains statutorily the responsibility of local government—and long may that be so. Certainly in recent years there has been a significant shift towards more central control. Because of the proportion of expenditure on education, I believe the effect of this Bill must inevitably serve to increase that shift. I accept that the Department of Education and Science has responsibility for major matters of policy and I should like to take this opportunity of expressing my appreciation of the present Secretary of State for Education. But may I just point out in passing that there is actually nothing to say in the Bill to which Secretary of State it refers? That seems to me a little strange, but I have assumed that it is Environment and I make it clear that I am talking about the Secretary of State for Education and Science. I should like to express my appreciation for the way in which he is so willing to discuss such matters of policy with Churches, and particularly those who are actually involved in the maintained system. Indeed, we appreciate that very much.

I maintain that the implementation of central policies, particularly in education, must take full account of the social needs of the localities. That is the great strength of having education statutorily a matter for local authorities. As chairman of the Board of Education of the Church of England, I am given good opportunity to see the widely differing needs of the various authorities. I find it difficult to see how adequate account will be taken of them if the proposals in the Bill are implemented. Let me take an example from my own area. As Bishop of London I have opportunity to experience constantly at first-hand the educational needs of London, both in the area of ILEA and in the boroughs. In mentioning the ILEA, may I say how relieved I was to hear of the decision that it should be an elected body.

Reference has already been made to the most deprived areas. I would point out that of the 10 listed in the document of the Department of the Environment, seven are in the ILEA area. Although most of the boroughs have problems, it is in the ILEA areas that they are felt most acutely. May I give a few facts. The population density in the ILEA area is double that of any city in Britain and a quarter of the pupils are from single parent families. Twice as many children than the national average qualify for free meals. The number of ethnic minorities means that there are 147 different mother tongues represented in the schools in the ILEA area. I know of one of our own Church schools, not large, where there are children of 31 nationalities.

I must also mention that the cost of providing for children in these very difficult inner city areas is met wholly from the rates. With respect to the noble Lord, Lord Harris of High Cross, the point about percentage rates in relation to overall expenditure is of no help whatever to those who are seeking to meet the needs of such areas. Whether there are savings possible without grave social damage is a matter of debate among the parties in the ILEA. I am not going to be judge of the extent of the effect that they might have. I can say, however, that I have looked at the ILEA budget. I have seen set out ways in which a budget of nearly £900 million could be reduced by £120 million if the target for 1984 had been met. I have looked at ways that this might be achieved. I find it most alarming. I see immediately the effects of some of this reduction in the very schools that I visit in inner London. I do not see how a reduction of that magnitude could be achieved without serious social effects on what already is a very difficult area. While some control is necessary, the arbitrary capping of rates is not the right way to ensure that proper account is taken of such problems with the least possible harm to the community in London.

I have already referred to the decision taken that ILEA should be an elected body. It seems to me strange that that principle should be accepted while, at the same time, the responsibility of those who will be elected to provide what in their judgment is right, necessary and proper for the schools of London should be restricted. I could go into more detail about London, but I just wish to say this. Whatever may be said about over-expenditure elsewhere, when I go round the schools of London I am humbled, amazed and thankful to see what the teachers are able to do under the most adverse conditions. I would wish to take this opportunity of paying tribute to them and to all those who help in our education service, not least in other areas as well as in schools. For example, much is being done to alleviate the problems of unemployment through the further education programme in London as a whole.

My second specific point relates to the assistance given by voluntary agencies. There is little doubt, I think, that if the Bill is passed and implemented, one group that will suffer will be the voluntary, community based agencies. And if I may say so with respect to the noble Lord, Lord Bellwin, he is speaking from one side, while I am speaking as one whose almost entire life has been concerned with voluntary agencies. I know how they are normally treated when the pinch comes. I have no illusions about that. I have heard policies in the past, and I believe them when they are fulfilled. That is not to undermine in any way the integrity and intentions of those who make them. It is simply an economic fact of life that, when the pinch comes, it is those who do not have any statutory responsibility and those who have no rights who have to suffer.

Great play is made, and has been made by the noble Lord. Lord Boyd-Carpenter, of the fact that some grants are made by some local authorities to some extreme organisations. No one would, I think, deny that. I know perhaps a little more than the noble Lord does about some of those he mentioned as they have on occasion been somewhat troublesome. However, they are very unrepresentative. I would ask your Lordships to believe that. They are quite unrepresentative of the way in which most financial support is given to voluntary bodies. If rates are capped, a number of key voluntary bodies, including church-based bodies in places like the London boroughs, may well be threatened with severe cuts in their grants. These bodies are doing invaluable work with groups such as single-parent families, in training people in the local community in bereavement counselling, in work with specialist groups, and in all manner of ways—marriage support, care of prisoners' families and so on.

The support of public funds provided from a local base in local authority funding is vital to the continuation of genuine community-based voluntary work. The Government say that they are committed to the work of voluntary bodies. The recent cuts in another area, in funds made available to Mode B training schemes for unemployed young people, predominantly with community-based voluntary organisations, has undermined our confidence in that commitment. It confirms our fear that rate capping might well have the same effect.

To return to my main point, however necessary the objective that this Bill is intended to achieve, I must regard the method as defective in that it fails to fulfil the principle of subsidiarity and to take proper account of the legitimate interest of the various levels in community responsibility. As a matter of natural justice and for the harmonious and healthy working of our society, I believe that these proposals must be re-examined.

4.58 p.m.

Viscount Ridley

My Lords, it is my duty to give the House this afternoon the views of the Association of County Councils as its President for a little while yet. Although I hope that many noble Lords will have found time to read the notes sent round by the ACC, among all the other documents being circulated that may not have been possible, so I should like to pick out some of the main points as I see them. Almost all that I say will reflect the association's thoughts.

It will come, I think, as no surprise to your Lordships to hear that those comprising the Association of County Councils are strongly united in opposition to the Bill. Their views can be summarised by saying that they believe the Bill to be unnecessary and counter-productive. To take the first of these, the Bill is unnecessary because the Government have overstated the problem. My noble friend Lord Bellwin, in his excellent opening speech, fired a barrage of statistics at us. I was not able to get them all down, but he left out one, and it must be mentioned.

In comparing rate increases over recent years with the rate of inflation, it has not been adequately acknowledged that the Government grant has been reduced from 61 per cent. in 1978 to 53 per cent. in 1983. This has effectively transferred the equivalent of 2p in the pound income tax from the taxpayer to the ratepayer. No wonder rates have become high! I am sorry that the Conservative Party's leaflet, entitled A Better Deal for Ratepayers, which we have also circulated, makes no acknowledgement at all of this fact. The argument will not be helped by incomplete figures. It is the Government's money, of course, and they can vary the percentage if they wish. But they can give ratepayers a better deal by the stroke of a pen by reversing this trend at any time. Similarly, they can reverse the situation whereby the business or non-domestic rate, at 57 per cent. of the total, is far too high. I agree that it is far too high, but the percentage is hardly the fault of local government itself, and it lies within the power of central government to alter it.

The present system of targets, GREAs, et cetera, is biting very hard but has not yet had enough time for its full effect to be felt. Even so, the average increase in rates for this new financial year which we have just started is around 5½ per cent., which is very close indeed to the rate of inflation. I do not think this is due to the fear of rate capping, and we disagree when the Secretary of State says that it is the shadow of this Bill which has caused this lower figure. It is due to the savage penalties which councils faced if they had not, nearly all of them, made serious efforts to reduce expenditure. It is also a very real tribute to the great success of the present Government in reducing inflation, which has obviously had a substantial and beneficial effect upon the costs incurred by local authorities.

I am not defending the present system as a perfect system. It was described by a former Secretary of State for the Environment, Mr. Geoffrey Rippon, on the Second Reading of this Bill in another place, at col. 196 on 17th January, as: a complex, unscientific muddled mess". It is no substitute in itself for a permanent solution to the problem of local government finance, which sadly seems to be as far away as ever. As an example, perhaps, of the absurdity which now prevails, the GLC's decision to reduce its rates by 7½ per cent. this year has in fact meant penalising everybody else by a grant loss of £100 million all round. There is, I suppose, more joy in Whitehall over one sinner that repenteth than anywhere else.

The association understands the Government's concern about the handful of local authorities which have not operated within national economic and social policies. I have said before that I, personally, can see very much the need for capping those authorities now threatened with oblivion. My experience between 1972 and 1974 showed me what can happen if that does not take place. However, I believe that it is wrong to deal with this problem by making a further fundamental shift of emphasis towards the centre. It is acknowledged that this is a shift of power to the centre, and a significant transfer. We are going down a one-way street with double yellow lines on either side. At the end of the road sits "the gentleman in Whitehall knowing best". If that is what we want, then, okay, let us have it. But we must recognise what we are doing.

The Government say that the selective scheme will affect only some 12 to 20 authorities. If the Bill is to proceed, the selective powers should be confined to that number, or to something very close to it, and there is a task for this House in that respect. There must also be a very important job for this House in defining the principles on which authorities should be capped under Part I. It is not good enough to leave it to the whim of any Secretary of State, as the Bill now does. It is only too easy to move the goal posts in the middle of the game. It is also doubtful if the affirmative resolution is a sufficient safeguard in a heavily whipped House of Commons, or in what seems now to have become a heavily whipped House of Lords as well.

The Government have indicated that the GREAs will be used as criteria by which to decide whether an authority is liable for capping. But quite apart from the fact that they were designed for quite a different purpose, they can themselves be altered by the Secretary of State, again at the stroke of a pen. There is, for instance, nothing in the Bill to stop any future Government so altering the GREAs that they could, for example, cap the rural shires very severely while allowing inner cities to spend far higher sums without capping, or, indeed, vice versa, so that the Bill could be used for political manipulation.

One of the fundamental problems which we examined in great depth when I sat on the Layfield Committee was the assessment of need in local government. We concluded unanimously after a long time—and I admit that it was a long time ago—that accurate assessment of need really cannot be carried out at the centre: it has to be done with at least the concurrence of those operating the services. But I am afraid that that is what the Bill now before us provides.

As regards the Bill being counter-productive, I point out that we are told that the object of the Bill is to reduce the totality of local expenditure. There may be no quarrel with that, but I do not believe that the Bill will do that if the electorate pressurises local authorities to spend up to the figure which would invoke rate capping, and that well may happen. As a Member of another place put it in the debate on Second Reading, a rate cap will be a "virility symbol" essential for a local authority to show that it is doing its best for its citizens. Nor do I believe it will have very much effect if only 20 authorities are to be capped. If we remove the GLC, ILEA and the metropolitan county councils from last year's overspend because they are likely to go anyway—and I am not becoming involved in that matter—the rate cap would only have saved under 2 per cent. of the total had it been operative, as we are not told it will be operative, in 1983–84. So I believe that there is a real danger of raising expectations which cannot be fulfilled. Also there is the possibility that an authority will provoke rate capping in order to be able to justify its policies and its decisions and explain its problems and plead its case with the Government. Indeed, my noble friend Lord Bellwin suggested himself that this could happen, and expenditure might rise in total for yet another reason under that heading.

The Bill would also be counter-productive because it could result in two possible trends which I think the Government may live to regret. Once it becomes law, especially if the general powers are to be there, every failure in the local government system, every school which is closed, every drain which remains blocked, even,' pavement which is cracked, every lane which is not cleared of snow and all the other things which do not get done, will all be blamed on the threat of rate capping, and responsibility will be thus transferred from local authorities, where it should lie, to Whitehall. There must be some electoral consequence of that in due course.

Secondly, there is a real danger of creating an atmosphere in which people think that the power of local councillors to make decisions will be so reduced that people of sense, experience and moderation will be reluctant to offer themselves for election, and the way will be left open for extremists to take over the system. This is not true. We do not think that the power of local councillors will be reduced. However, there are people who think that that is now happening, and that is what will do the damage. Indeed, it has already happened to some extent. I think that Members of this House are the most sensible, the most experienced and, by and large, the most moderate people in the land. Therefore, they should all be sitting on local councils. There are now very few Members of this House who sit on local authorities of any kind, but there used to be many more. That is an example of what is going on.

Therefore, I hope that the Government can tell us that they recognise these dangers and that they will face up to the fact that if this Bill is to proceed it must only be as a temporary stopgap until we can reform the system in a more accountable way, as has been said so often during our debates in this House, both in February 1982 and in October 1983.

Of course there is public anxiety about the rate levels, and rates are very unpopular. Of course Ministers and Members of Parliament will receive complaints about rates, and the phrase "rate capping" has an immediate and wide popular appeal. So would a Bill to promote "income tax capping", and even more so "beer tax capping", which would be an equally popular slogan. I remember, again during the time of the Layfield Committee, a witness who one day accused local authorities of: dangling a bottomless pit in front of the ratepayers"— a difficult thing to do and a graphic phrase. I fear that the Government at this time are in danger of waving an impossible target in front of ratepayers. The way in which to control local spending in the long run is to increase control by the electorate and by the ratepayers and to reform the rating system. As I said myself last October and as I repeat, I believe that this Bill is a classic case of treating the symptoms and not the disease.

5.8 p.m.

Lord Irving of Dartford

My Lords, I am delighted to be able to congratulate my noble friend Lord Bottomley on a very successful maiden speech. I have been very fortunate to be a friend of his for more than 30 years through his long and distinguished career in another place. I am sure that his experience, as a successful Board of Trade Minister and as a Colonial Secretary at a most difficult time, will make his contributions here of great value, and I hope that we shall hear him frequently.

I am one of the Members of this House—few though there may be—referred to by the noble Viscount, Lord Ridley. I am still, after 32 years, a member of a local authority and associated with a number of organisations related to local government, including NALGO. The Bill with which we are dealing today is important because, on the admission of the Secretary of State during the Third Reading debate, it would mean, a significant change in the relationship between central and local government".—[Offical Report, Commons, 28/3/84; col. 325.] This change makes it a constitutional issue, a matter which always gives rise to concern among Members of this House.

According to Mr. Edward Heath in another place on the Second Reading, the Bill was a breach of an important Conservative principle, which is: to seek the widest dispersal of power". I am sure that it is also a matter of importance to many people who are not members of the Conservative Party.

These arguments may not have carried weight with the Government in another place, but I suggest that, as this House has often regarded itself as the custodian of what constitution we have, noble Lords will wish to consider whether they ought not properly to ask the Government to think again before taking this massive step in a direction which we believe would be very damaging.

On the Third Reading in another place Mr. Patrick Cormack put this change in powerful terms when he asked the Secretary of State whether he would be happy: if the tables were reversed and the Secretary of State was a Labour Member, and the electorate, in revulsion at what was being done, decided to elect a great many Conservative authorities and their will was immediately rejected, expunged and revoked by Government? If this happened, we would have the noble and learned Lord who sits on the Woolsack calling again for a written constitution to protect the nation from an elected dictatorship. Of course, some of us warned the House and the Government in 1980 that the draconian powers that they were taking then would have shocked Tories if they had been taken by a Labour Government.

George Jones and John Stewart, two of the most distinguished academics in the country—one a professor of government at the LSE and the other a professor of local government at the Institute of Local Government Studies at the University of Birmingham—have said in their recent book, which is perhaps one of the most powerful books ever written on local government, that: The history of central and local government relations from 1979 to 1983 was a record of over-hasty legislation, many of whose main provisions had to be withdrawn or revised. The four Bills led to eight grant systems and is evidence of instability that should provide a warning. Ill-considered legislation in a constitutional area can have unintended consequences". Then they went on to say that the period shows how the pressures—inevitable when central Government's and local authorities' areas of responsibility are confused—drive central Government controls and powers once "introduced" into new uses, even though the possibilities of such uses were denied when the powers were first introduced. Therefore, it can be predicted that powers against a few over-spending authorities will in time come to be applied to more and more authorities as the pressure for central intervention grows.

Further reserve powers will become actual powers and set a regular annual limit to local government rate increases. The moment for sober consideration of such proposals is now, before the powers are obtained. Afterwards it will be, and is always, too late. I believe that that moment is now. There is clear evidence of this kind of progression and change of mind. On 17th May 1982, in answer to a parliamentary Question, the Secretary of State for Defence said: I have not at any time proposed grant related expenditure assessments as the target for individual authorities". Earlier, on 8th July 1980, the Secretary of State for Employment said: Some people have suggested imposing individual cash limits on every authority … when the public funds have been distributed, it is then a matter for individual local authorities and their councillors as to what their expenditure decisions are. It is their choice between services, their choice as to the volume of expenditure on those services, and their choice as to the rate level that they decide to impose"— to which I think we can almost say, "Amen".

The Conservative-controlled Association of District Councils says of the GRE assessments: They are grossly unsuitable as individual targets because of the numerous and significant anomalies they contain". The Secretary of State proposes to go back on these solemn undertakings, as Clause 2 of the Bill clearly says that grant-related expenditure is now to be used as a test of overspending. The noble Lord, Lord Boyd-Carpenter, had some fun at the expense of the GLC. I do not want to deal with the GLC because I am sure that the noble Lord, Lord McIntosh of Haringey, as a member of that body, will speak on that matter. But I wonder whether the House and the Government realise how massive some of the cuts are that they are demanding, especially of some of the high-spending authorities.

Let me take the case of Hackney. The grant-related expenduture to Hackney is £59.25 million, and its budget is £81.34 million. Is it supposed that a cut of £21 million can be imposed on Hackney, one of the poorest areas in the country, without cuts of such magnitude that some services would cease entirely and areas of administration collapse with misery, deprivation and massive job losses?

However, this measure also imposes a serious problem of split accountability. As the Association of County Councils says: The local authority will be accountable to central government for keeping to its expenditure within the financial limits whilst remaining accountable to its own electors for providing individual services which Parliament has determined that the local authority should provide. This is an intolerably muddled and unsatisfactory position". How do the Government justify the Bill? They say that in 1983–84 local authority budgets are running 4 per cent. above the 1978–1979 spending, in volume terms. But the reason that these proposals were introduced could not have been that the spending of local authorities was greater than in the past. Indeed, it was less. Certainly, nobody could seriously argue that overspending of under 4 per cent. creates serious economic problems for the Government and, indeed, for the nation—at least, to justify these dramatic and constitutional changes.

Local spending has fallen in real terms. While central Government current spending has risen as a share of national income from 27 per cent. to 29 per cent. in the last five years; the local government share has fallen from 10.5 per cent. to 10.2 per cent. Overall, local government current expenditure, in cash terms, has increased by 90 per cent. in the same period, but similar central government expenditure has increased by 93 per cent. 1 think we are entitled to ask, which is out of control—who is profligate?

An accumulated loss to local government of about £9 billion has occurred between 1978–79 and 1984–85; without these reductions by the Government, and with the decline in the economy, tax increases of at least 3p in the pound would have been necessary. Instead, the burden has been shifted to local government, and therefore falls on the people who. in the main, benefit from local government services—the aged, those relying on social services, and indeed the young.

Sir Ian Gilmour put it bluntly on "The World At One" on 17th January: The reason the rates go up every year is because the rate support grant is cut". The Chancellor of the Exchequer recently said that since 1979 local authority expenditure has risen by 9 per cent. more than prices generally. This is true. But the equivalent figure for central Government expenditure in the same period is 13 per cent. The Chancellor also said that the yield of non-domestic rates had doubled in the period. That is also true. But the yield of central Government taxation has also doubled from £43 billion to £87 billion.

The Secretary' of State says that only a small number of authorities need fear these proposals. Many of these so-called hit list authorities are recognised by the Government as having special problems. They are partnership councils. Rate control in these areas renders nonsensical the most important aspect of inner city policy. More than £400 million is pushed by the Secretary of State and his colleagues into special projects in the very councils where he now hopes to save hundreds of millions of pounds. In reality, the Secretary of State would have to act against several dozen authorities to make worthwhile savings, unless he intends to decimate services and jobs in the conurbations and cities.

However the Secretary of State tries to take the sting out of the Bill for the purpose of this debate, this is why the general powers will have to be used. His decision not to activate Part II and the argument that they are merely reserve powers, does not square up to the calculations made by Mr. Noel Hepworth, the Director of the Chartered Institute of Public Finance and Accounting, the municipal treasurers' professional body, who in a very good article in The Times on 16th January said: The argument about which authorities should be controlled and what lists should be used is exceedingly confused". He also shares the view—and this is the important part—that these proposals are unlikely to produce immediately, or in the foreseeable future, reductions in spending to the level the Government apparently require. The Secretary of State has never been able to answer this statement made on accounting, and not on political, grounds.

Thus, with the broken assurances of the past, anyone who goes along with these assurances now is rather in the position of a second marriage, which Samuel Johnson described as a triumph of hope over experience—although with perhaps worse hope than in the case of a second marriage. Nye Bevan used to say, "Why look in the crystal ball when you can read the book?" The book is there to be read—the muddle and confusion of the last four years; the betrayal of solemn assurances and the expertise of the professional accountants. This is why all local authority associations have said, "Enough is enough".

If the Government had really been concerned for the impact of rates on industry—and I personally think they should have been—the very survey quoted by a Member earlier showed that rates are a relatively small part of their costs, and a number of other items like VAT, interest rates, and energy in the control of the Government make a much bigger impact on Government costs than rates.

Of course, if they wanted to do something they could have done a number of things. They could have done what they had already promised twice to do: reform the rating system; or they could have had a revaluation, which has not taken place since 1973; or they could, if you like, have given a measure of derating to industry.

The idea that all authorities under £10 million would escape overlooks the fact that this figure would be quickly eroded by inflation, so almost nobody is safe as inflation-proofing is not built into the system. The Association of County Councils says that the implementation of the Government's proposals appears to be based on expediency and would result in an unacceptable concentration of power in the hands of the Executive rather than Parliament, and a further weakening of local democratic control—and the price is too high.

The extraordinary thing is that the local authority associations, predominantly Tory dominated, believe that the legislation will not work and will not achieve the Government's objectives—this is the point I want to make—and they have from the start been willing to co-operate in helping the Government to achieve their objectives. It is a strange and indeed a pathetic sight to see the anguish of many of the most experienced people in local government, loyal Tories like Mr. John Lovell, chairman of the Association of County Councils, and Mr. John Morgan, chairman of the Association of District Councils, not only good Tories but honourable men, who cannot go along with their own party and their own Government because they believe that the proposals would damage the whole fabric of our local government system.

The proposals leave untouched the fundamental issues of local government finance. They do not alter the dependence of local authorities for over three-quarters of their income on taxes that do not bear clearly on the local electorate; namely, the non-domestic rate and national taxes that finance central grants. They do not strengthen but rather weaken the accountability of a local authority to its electorate. They do not clarify the role of local government in our society or provide it with a stable framework in which to operate.

All these are urgent and important matters which should have been dealt with, but there is no evidence that any of these proposals were deeply considered, that their implications were worked through, or that there was consultation with those who work within local authorities or study their activities. The view of Professors Jones and Stewart is that they were adopted in ill-considered haste as a means of meeting an immediate electoral problem, the writing of the party manifesto. I believe that, whatever attachment people have to party manifestos, in this case that devotion would be misplaced. This is not the way to conduct government or to make some of the biggest changes we have had in recent years, and I hope that noble Lords will support the amendment in the Division Lobbies tonight.

5.24 p.m.

Lord Thorneycroft

My Lords, I rise briefly to support the Bill. It gives me an opportunity of saying how much I enjoyed the speech of the noble Lord, Lord Bottomley. I have counted him as a friend over many years and I am indebted, as he knows, to him for one or two acts of kindness which I do not forget. I hope that we shall hear him on many future occasions.

May I say that I share to the full the reluctance expressed by the noble Lord, Lord Bellwin, at the introduction of this measure. I support it for one reason only. I support it because I see no other option open to the Government. The noble Baroness, Lady Birk, invited me and others to embark upon a thorough reform of local government finance as an alternative. Willingly, my Lords, if I had any idea how to do it. But Layfield does not know how to do it. The noble Baroness does not know how to do it. I am damn sure the Government do not know how to do it. As an alternative to a serious measure it seems, if I may say so, a little odd. If I could have a private word not with the noble Baroness, Lady Birk, because she is not here, but with the noble Lord who is to wind up for the Opposition—

Several noble Lords

She is back.

Lord Thorneycroft

I cannot see her. If I might have a private word with the noble Baroness—to which I would ask the Government not to listen too closely—she has followed legislation on local government matters over many years, and she may have held the view that some of the measures introduced by my honourable and right honourable friends have not been an unqualified success. The view has been expressed. I express no view myself, but the view has been expressed. Those were measures where the Government knew, or thought they knew, what they were trying to do. To urge them to introduce a measure when they plainly will not know what they are trying to do seems to me to be a recipe for disaster, and that we should be invited to vote for such a cause is surely a little unwise.

To return to the Bill, I can remember the time—and something that the noble Viscount, Lord Ridley, mentioned recalled it to me—when great families of all political persuasions played a large part in the local government of this country in great cities like Liverpool and Birmingham. They took a deep interest in the administration of their local communities, there was not a great deal of party politics in it, and the conventions were observed.

The decline in local government from those standards is due, I think, not to local government itself; it is due to central Government. Under all parties we have sought to do too much. We have interfered grossly in the affairs of individuals and institutions in every part of the country. As the frontiers of the state have advanced, so the responsibility of local citizens has declined.

Today the centre provides more than 50 per cent. of the cost of what is going on, and 60 per cent. of the remainder is provided by non-domestic ratepayers. The gearing—if I can use such a word—of responsibility between what one would have liked to spend and what one will have to pay is something like 5 to 1. This is not a system of local government. It has become practically a licence to print money. No one could seriously say that it could go on in that way.

The wonder is not that it has become somewhat frayed at the edges. The wonder is that it has worked as well as it has; and that it has worked as well as it has is of enormous credit to councillors of all political parties who have exercised a great deal of common sense in the way they have done things. Indeed, between 1974 and 1983 central Government expenditure, expressed as a percentage of the gross domestic product, went up from 33 per cent. to 37 per cent., while local government expenditure went down from 32 per cent. to 25 per cent. There is a lot to be said for leaving things in local hands.

Nevertheless, 16 authorities have demonstrated that it is practicable to exploit the system that has arisen in local government. They have grossly abused their powers and the weaknesses of the system. They—and broadly almost they alone—are responsible for the £¾ billion gap between what the Government think was reasonable and what in fact is happening. Something like 400 councils have been carrying on, trying to do their best, with everybody shouting, but keeping the thing by and large within the bounds of what is reasonable. Not only have those spending authorities spent far too much money, but, as my noble friend Lord Boyd-Carpenter pointed out, they have flaunted their power to exploit the ratepayer. They are spending money on Babies against the Bomb, Irish Women's Group, the Lesbian Line, the Southall Black Sisters, the. London Gay Teenage Group, Campaign to Curb Police Violence and masses of others. Against that background it was neither politically nor economically possible for the Government to do nothing. Therefore, very regretfully, I find myself having to support the measure.

It is not a measure of reform. It is basically a damage limitation measure. It deals not with the causes of what is wrong with local government today; it deals with the effects of what is wrong with local government today. I am unqualified in my support but I am bound to tell the Government that I share many of the doubts expressed by my noble friend Lord Ridley in the powerful speech which he addressed to your Lordships' House.

I do not see much good coming on the swing of policy decisions from the town hall to Whitehall, of power moving from local councils to Westminster. I agree with the noble Viscount that the time will come when those who sit in Westminster will not think much of that arrangement either, as they become increasingly responsible for what is going on in every corner of the country. I regret the gradual phasing out of the fine tuning which was possible in a local administration to meet the requirements and needs of a local community, to all the computer complexities of grant-related expenditure and the rest which we shall be compelled to rely heavily upon.

Therefore, what are we left to do? Surely we cannot embark on the unchartered seas, uninquired into, of reforms of local government expenditure. It is not in any practicable way an alternative for the Government to adopt. I think that the Government should do something else; they should begin to think deeply about the relations between local government at one end and the centre at the other. We ought to think on an all-party basis and not on a single-party basis. One way or another all of us, whatever Government are formed in this country, will require an effective local government institution with which to work. I see no profit in quarrelling all the time about the differences as to how they should be set up. A real effort should be made to reach some accommodation.

Of course we should look at the reform of local government finance; not, for heaven's sake, the abolition of the rates. I think that that folly has been abandoned by the Government. It was a folly because it distracted our minds from the real problem which exists, which is how to build a system of local government finance based largely on the rates, and probably rates paid over a somewhat wider area. But these things are controversial; they are difficult and can be done in my judgment only if some effort is made to discuss among all parties what should be acceptable, so that a party of any political complexion will have some local authorities reasonably established with which to deal.

It is against that background that I think that the worst thing possible is to divide the House at this moment on that issue. The real contribution that can be made by your Lordships' House would be for the Government to express a willingness to consult; to think; to co-operate on an all-party basis to try to find some way through these difficulties, and for the amendment to the Motion to be withdrawn.

5.35 p.m.

Lord Marsh

My Lords, I should like to join with others in congratulating the noble Lord, Lord Bottomley. We have known each other now for a time in excess of 30 years; indeed, after my election to another place in October 1959, on the day I left my office the noble Lord, Lord Bottomley, returned to the National Union of Public Employees, took over my secretary, my car and my office. Since those days the National Union of Public Employees has changed a great deal. We found it possible to do a solid job of work without some of the actions which have characterised it in recent years.

It is also true that local government has changed since those days; the day of the full-time councillor, frequently living on his expenses and acting virtually as an untrained, unqualified executive on a day-to-day basis. The politicisation (a word I practised for some time before daring to use it in this Chamber) of local government is a relatively new phenomenon. In large parts of the country even now, outside the big metropolitan areas, there is an apolitical approach to local problems which does not exist in other places. Every speaker has agreed that there are serious problems in the financing of local government. The amendment calls on Her Majesty's Government to embark on a thorough reform of local government finance. I think every speaker has supported that. The noble Lord, Lord Thorneycroft, in a characteristic speech, less enthusiastic than some I have heard him make, drew attention to how important this sort of reform is and how difficult it is to do.

I agree with the need, but it would take years. It is easy to argue that it should have been done. It was not done by either party, and if we go down that road—I sincerely hope we shall—it will be a period of years before anything can be obtained from it. The situation among some of the high spending authorities is far too urgent, far too serious, to allow it to continue while one sits back writing papers about a possible total reform.

Some action, in my belief—I make no secret of my total support for this Bill—has to be taken now to restrain some of the crass irresponsibilities of some of the local authorities, irresponsibilities which they support from the rooftops and for which ordinary people have to pay. It is not surprising to me that the Bill has produced almost hysterical opposition from many members of local authorities. Nothing produces a solidarity more total, more moving and more sincere than a good old-fashioned vested interest. That is true of all of us, whether we are trade unionists, industrialists or whatever. We have a go at defending that which we are enjoying.

There is no doubt that, like small children let loose in a sweetie shop, some local authorities are thoroughly enjoying themselves at present at great expense to everybody else. What is unusual about this particular campaign is not that people in those local authorities who have devoted their lives to local government react in this way—it is unlike the campaigns of any other vested interests—but that not a penny of it comes out of their own pockets. It is a classic example of the way in which there is now a confusion about the ultimate owner of the public purse.

In my view, it is perfectly right and proper for a member of a local authority to campaign against the Government and to combine in so doing, but if people wish to run what is essentially a political campaign they should join with others of like mind and finance it themselves. They should not raid the rates any time they feel like taking a few thousand pounds to help out their particular cause. It is another example of the growing willingness on the part of some municipal moguls to regard the rates as a method of financing their pet causes. Some of these causes are good causes.

The point is well taken that you can list all the loony activities that go on among a small group of local authorities, and exclude those from the majority, and many of the other causes are very good. But there is no limit to the amount of money that any one of us in this Chamber could spend on good causes, passionately believing in them. But, unfortunately, there is a limit on how much money is available for spending on good causes. I find very worrying, even in this debate, the way in which there has been a suggestion that somehow the odd few hundred million pounds does not matter if it goes by the way. It matters very much. Once the odd few hundred million—and that itself is quite interesting: one reads that there will be savings of only £300 million a year; but £300 million is an awful lot of money that an awful lot of people work awfully hard for—is regarded as something that does not matter, then it does not matter if it is £400 million or £500 million. The whole basis of financial control then goes out of the window.

It has been argued that this Bill is a direct affront to democracy. The amendment is couched in pretty heavy terms: this House believes that it will result in damaging constitutional changes in the relationship between central and local government, will undermine the authority and responsibility of local councillors and will gravely weaken local democracy"— a sort of mugging of the Magna Carta! These constant references to local democracy and this picture which is painted of the pubs full of people discussing the county precept is not true. Those Members of this House who have served in politics know full well that it is not true. Local elections take place on the basis of national issues. One may regret that; it may be unfortunate. A noble Lord shakes his head. But I should be very interested to do a survey in this House to find out how many noble Lords know what is the county precept in their district. I should certainly be interested to know how many people in the street know that. People do not follow local elections on the basis of the size of the county precept or the level of expenditure directed to refuse disposal. They vote as to whether they like the sitting Government or do not like the sitting Government.

Labour local authorities tend to produce Labour Members of Parliament and, I would suspect, in those far off days when Members of this House had the democratic right to vote for Members of Parliament before they became elevated to this place, those on the Conservative side of the House predominantly voted for Conservative authorities and those on the Labour side of the House predominantly voted for Labour authorities—with the exception of members of the Alliance who have more catholic tastes on these occasions. If there is an argument about local democracy it is an argument as to whether Parliament shall retain the control over public expenditure, whether Parliament has the ultimate responsibility for the macro-management of the economy.

It has been said many times that local government is responsible for 25 per cent. of all public expenditure. How can noble Lords say that expenditure on that level is irrelevant to the macro-management of the economy? It is as much part of public expenditure as is state expenditure. And both parties have been increasingly concerned about their inability to exercise any sort of control over this massive element in the national economy. In the last few years a number of local authorities have abandoned any pretence of responsible finance management. This is where things have changed. It is very easy to poke fun at some of the dafter causes which some of the authorities, a minority, regularly indulge in; to argue that they are unimportant because they do not mean very much, they do not cost very much. It is said that the total savings are likely to be only a few hundred million pounds each year. I do not believe that that is so. I believe that this Bill would make very much larger savings because it would force a level of financial responsibility on some of the local authorities which does not exist at the present time.

Responsible financial control is not just about sophisticated management techniques and levels of authorisation of expenditure. Successful financial control of the vast sums of money by any standard spent by local authorities depends on the right attitude of mind at all levels and the example set at the top. If there is a sloppy attitude to financial control in any business, it will have a sloppy result at the end of the day. How do you get a sense of financial responsibility in handling other people's money when the leaders of some local authorities fight publicly and boast of their aim consciously to bankrupt their own local authority? How can you persuade young people working in a finance department, young executives who take their job seriously, when the governor goes on television and says, "One more heave and we can put the whole thing in the knacker's yard"? It really is an extraordinary approach. When Mrs. Frances Morrell, chairman of ILEA, insists on using an ILEA chauffeur driven car to take her daughter to school, that sets the attitude to public expenditure right through the organisation. If the chairman can do that, how can you argue about other people entertaining their relatives on the rates? It is not just the amount involved; it is the total lack in a very small group of local authorities of any attempt to control public expenditure.

Take the recent discovery that some 20 mildly delinquent children have been sent to a private institution on the Island of St. Vincent. After a time there were rumours of drug abuse which proved to be untrue. No fewer than five social workers were flown to St. Vincent to investigate these rumours in response to 20 children. When they got there it was a bit of a problem to carry out the investigation because the kids had gone to Venezuela for a couple of weeks' canoeing. People laugh, but the answer to it by the local authority, when they were challenged, was, "Ah, you would never believe it but it is actually cheaper to keep them there than in council care in London"—and that justifies it. It does not justify it at all.

The right reaction, I would suggest, for an authority which finds it can fly children to a private school in the Caribbean cheaper than keeping them in Lewisham would be to investigate the cost structure of Lewisham social services; not just simply to say it is cheaper, but to see why it is cheaper. It would be surprising if Members of this House found it was cheaper to send their children to the Caribbean to be educated; even those noble Lords who educate their children in Windsor, which one would have expected to be more expensive than the Caribbean.

A few weeks ago the Liverpool council advertised the post of rector of Liverpool Polytechnic at a salary of £30,000 per annum—a worthy post. They drew up a short list of six. One of the candidates was invited from Australia at a fare of £1,600. The £1,600 is not very much but, again, it demonstrates to everyone in the authority that you do not have to bother when it comes to council expenditure. A few weeks ago Mr. Ken Livingstone spelled out the course on which the high-spenders were embarked. I have an affection for Livingstone which I seek desperately hard to keep under control. He is about the only extreme left-winger I have ever met with a sense of humour. He has great charm and capability. He speaks his mind. He made a speech on 2nd March about this Bill. He said: Irrespective of the odds, Labour councils have no option but to refuse to comply with the new laws. No one can really expect the Tories to go through all this trouble just to shave 3 per cent. or 5 per cent. off existing council budgets … The Labour movement must begin now to build support in the trade unions and the wider community for a policy of total defiance to the Government's measures… If rate-capping becomes law we should present budgets which ignore the Government limits and continue with our manifesto programmes based on no cuts, no job losses, and no rent or fare increases". Is the challenge to local government, or is it to Parliament itself? Can it really be said, if a local authority leader can get up and say, "We will defy the law, bankrupt other local authorities", that it is local government who are being persecuted by this piece of legislation?

In the light of statements like that, how does anyone believe that any government could fail to take up such a challenge? How can anyone, with the knowledge of what is going on now, and the knowledge of what is intended, believe that we can sit back for several years while we look at the overall financial structure of local government? There is a lot to be done in that area, but these are matters for the future. The problem is now so urgent that while there may be a better way of dealing with this problem in the short term, I do not know what it is. Nothing anyone has said today has caused me to believe we can wait for years. I believe that the general public need this Bill because they need the limited protection that it will provide.

5.50 p.m.

Lord Broxbourne

My Lords, may I start briefly, but cordially and sincerely, by adding my mite of congratulation to those so fittingly expressed, with characteristic felicity of phrase, by my noble friend Lord Boyd-Carpenter to the noble Lord, Lord Bottomley. The noble Lord, Lord Bottomley, was for many years an ornament in the other place, as some of us know. Very soon your Lordships will appreciate that their great loss is a great gain to this House.

This Bill, moved with clarity and cogency by my noble friend Lord Bellwin, has aroused much controversy and has attracted much criticism, most of it misconceived in my submission. In the forefront of the indictment stands the charge of unconstitutionality, a grave charge indeed in a parliamentary democracy. That charge figures at the outset of the Opposition amendment, which refers to "damaging constitutional changes". It figures in the submission of the Association of County Councils. It figures in the submission of the Association of Metropolitan Councils, which describes it as a "major change in our constitution", and "one of the biggest constitutional changes in modern times". It is this grave charge which I seek to meet and to rebut, within the constraints of a short speech. I shall confine my observations strictly within the constitutional issue.

My Lords, before plunging in medias reas I have two brief points to make. First, I cannot reasonably be accused of any lack of sympathy with local authorities or unawareness of the workings of local government. Like the noble Lord, Lord Irving of Dartford, I am a long-time vice-president of the Association of District Councils. I only hope that at the next annual general meeting the noble Lord will not move that I be struck off by reason of the speech upon which I am embarked today!

Many years ago, for reasons lost in the mists of time, I was chairman of the Conservative Party National Advisory Committee on Local Government. In professional life I have advised and appeared for many local authorities in rating and in other matters, as well as for citizens in dispute with them, though not, I hasten to say, both in the same cases.

My Lords, the second short point I would like to make by way of preliminary is that I certainly respect the points of view of critics of the Bill expressed in this House, in the other place and, indeed, elsewhere. In this House we have listened to the notable speech by the noble Viscount, Lord Ridley, the distinguished president of the Association of County Councils, who put his case with characteristic force and moderation. In the other place, and referred to by the noble Baroness, Lady Birk, as a former Secretary of State for the Environment, the right honourable and learned gentleman the Member for Hexham spoke with great authority, of course, and when I tell the House that he started his professional life devilling for me, noble Lords will appreciate that anybody who could overcome so heavy an initial handicap must be of exceptional quality indeed. But while respecting and giving due weight to his views and those of others having only marginally less authority, and having considered them carefully, I have come to the conclusion that the Bill is not vulnerable on constitutional grounds.

The criticism that Ministers are acting in breach of constitutional propriety would only be valid if by this Bill they were derogating from an entrenched and established right of local authorities to exercise unfettered rights in matters of rating. But that is not so. In our constitution, neither local authorities nor any other bodies enjoy entrenched rights of this sort limiting our basic constitutional principle of the sovereignty of Parliament. Such entrenchment is characteristic and is perhaps a necessary feature of the constitution of federal countries. It is spelled out in a written constitution and designed to preserve the rights and autonomy of individual states from encroachment from central government; and such, of course, is the constitutional structure of the United States and other federations. But that is not the case here. The United Kingdom is a unitary state. It operates with an unwritten constitution and has no entrenched provisions. To some this may be a matter of regret; but it is a matter of fact, and the absence of entrenchment is the price paid for the advantages of flexibility and the capability to respond speedily to the will of the people, Rousseau's volonté général.

My Lords, the constitutional position of this country is clear enough—no written constitution, no entrenched rights. Instead, we have the sovereignty of Parliament, and this, together with the rule of law, constitutes what Dicey called the twin pillars of our constitution. The sovereignty and omnipotence of Parliament, as the basis of our unwritten constitution, is and must be absolute. It used to be expressed in the maxim, Parliament can do anything except make a man a woman or a woman a man"— although your Lordships may think that the marvels of modern surgery have somewhat depreciated the value of that exemplar. Prima facie this Bill is a legitimate exercise of the sovereignty of Parliament. Therefore, we must ask the question: is there anything in the nature of the history of rating as a form of local taxation which makes it otherwise? I believe there is not. For that, there are two reasons.

The first derives from the history of the matter. There is a widespread belief that rating as an instrument of local government has its roots deep in history. Of course, that is somewhat of an exagger-ation. Certainly it is not part of the common law of the country. As my noble friend Lord Bellwin said, it is a creature of statute. I am sorry that the noble Baroness, Lady Birk, found this phrase offensive. In fact, it is somewhat of a truism in these matters, and the noble Baroness does my noble friend too much honour if she describes the authorship of it to him. As she pursues her studies in the course of the Bill, the noble Baroness will no doubt become more familiar with it.

The origin of rating is to be found in the Poor Relief Act 1601, one of the last statutes in the last year of the Elizabethan era, levied by what we now would call the rating authority, then known by the unlovely name of "overseers". The Act reads oddly to modern ears but its language heralds the beginning of the modern welfare state. The first object of this "weekly taxation", as it was called, was to finance the accumulation of sufficient material to "set the poor on work"; secondly, to "relieve the lame, impotent, old and blind unable to work," and the third was to put out children to be apprentices. That Act remained on the statute book until the General Rating Act 1967, a consolidating Act bringing together the law enshrined in 30 statutes, starting with the Act of 1601.

Your Lordships will, of course, know that the Act of 1601 started our welfare state on a local basis then, but of course that was not for ideological reasons but for logistical reasons: the constraints of time, space and movement. The modern welfare state, however, as we now call it, has emerged on a national or central pattern, with local authorities acting primarily on an agency basis, carrying out the duties imposed by Parliament. The financial position reflects the statutory position. Parliament imposes the obligations and meets half the cost of local government. It cannot therefore plausibly be said that the history and origins of rating and local government give any credence to the suggestion of unconstitutionally in this measure.

My second reason why rating is not an exception to the general rule of the sovereignty of Parliament derives from the basis in law of the power to levy rates. Essentially, as my noble friend said, the power is a creature of statute, as indeed is most local government. The power has no long lineage, in our context, deriving initially from the Act of 1601 via the Municipal Corporations Act 1835, and arriving at the General Rating Act 1967. It is all statutory; and what Parliament has given in the exercise of its sovereignty Parliament can clearly alter and amend in the exercise of the same sovereignty, without committing any constitutional outrage.

The constitutional propriety of the Government's approach is emphasised and proved beyond a peradventure by the fact that the purpose and content of the Bill lies fair and square within the parameters of Parliament's particular and peculiar responsibility as controller and custodian of the national finances. This is because more than half of local authority net spending is met by Exchequer grant—in other words, moneys voted by Parliament and paid for by the taxpayer. In these circumstances, to deny to Parliament the right and power to protect the taxpayer would be to separate responsibility from power; and we know whose prerogative such separation is said to be.

There is certainly no constitutional principle involved here. Indeed, it could more plausibly be argued that a constitutional breach would be involved if Parliament abdicated its power and responsibility and forswore its opportunity to protect the pockets of the taxpayer and the citizen, to whom it owes electoral responsibility.

There is one further constitutional principle involved and that, too, supports the constitutional propriety of the Bill. That is the ancient and basic principle of our unwritten constitution: "no taxation without representation". This, through the centuries, has been taken to mean that the duty to pay taxes lawfully imposed confers a parallel right: the right to a voice, however small and indirect, in the decision that leads to their imposition. That right is expressed in the form of a vote at the election of those who impose the tax. That principle is notably breached in rating, as we have it today, in that of the half, or nearly half, of the money for local expenditure raised locally (that is other than by the Exchequer grant) nearly 60 per cent. is contributed by those with no voice in the election of those who impose the rate—notably by industrial and commercial firms, whose views on this matter are well known and understandable.

It may be, of course, as many have said, that a long-term solution to this particular problem might be found in some alternative method of raising the money to fund local expenditure; but that time is clearly not yet and not much hope derives from the many studies undertaken, including the very authoritative Layfield Report under its distinguished chairman.

I conclude by saying this. I would not claim perfection for this Bill; nor, I imagine, would my noble friend or his colleagues. After nearly four decades of experience of legislation, including some Bills of my own presentation, I would think that a perfect Bill was extremely unlikely. I see my noble friend Lord Thorneycroft has one exception in mind with which we were both concerned; but I think it is right to say, as a general proposition, that you do not look for perfection, more particularly in the earlier stages. But, albeit not perfect, this Bill is entitled to a clear acquittal on the main charge of unconstitutionality. Its purpose is praiseworthy and its content appropriate for the attainment of its purpose. Of course it can be improved, and your Lordships will have the chance to improve it. I am sure that its consideration by this House will be characterised by a desire to improve and a willingness to amend. At this stage, however, and in that confident expectation, I would respectfully commend the Bill and its content to the House.

6.6 p.m.

The Lord Bishop of Southwell

My Lords, may I, too, begin by congratulating the noble Lord, Lord Bottomley, on his maiden speech? He has an affection, as I have, for a part of the world which ecclesiastically is called "London over the border" and where I spent some very happy years. The main argument against the bishops sitting in the House of Lords is this—that those most constant in their attendance get a certain worldliness by their position there, rather than any largeness; that they do not make good Life peers, and do lose their influence over their clergy so far as they assert themselves in the House of Lords. There is not a bishop on the bench who has ever discussed the question of the franchise, the question of democracy from a spiritual point of view at all, or who has ever spoken on such a question with anything like the authority, for instance, of Lord Shafiesbury". Your Lordships will have realised that those are not my words but a quotation from the Spectator of exactly a hundred years ago.

However, whatever your Lordships' view may be about the performance of the present Bench of Bishops, I hope you will view it in the light of our proper role. I have never found that role better enunciated than by Archbishop William Temple in his book Christianity and Social Order. He said: The method of the Church's impact upon society at large should be twofold: the Church must announce Christian principles and point out where the existing order at any time is in conflict with them. It must then pass on to Christian citizens, acting in their civic capacity, the task of reshaping the existing order in closer conformity to the principles. For at this point technical knowledge may be required and judgements of practical expediency are always required. In short the Archbishop was saying that, the Church may tell the politician what ends the social order should promote but it must leave to the politician the devising of the precise means to those ends. This, I believe, is the proper role of a Lord spiritual. Whether I can stick to my last is something quite different, but I shall try. My concern is that I shall be judged not as being either for or against this Bill, but as asking basic questions which should determine our view whichever side we take.

The first point at issue regarding this Bill is where decisions should be made. Have central government the right, perhaps even the duty, to control decision-making further down the line at county or even district level? The point of principle here is surely the value we put upon each individual as a person. Christian principle puts the highest value on the individual. He is a child of God, of absolute worth independent of his usefulness to society. The state exists for the citizen, not the citizen for the state. The first aim of social progress must be to give the fullest possible scope for the exercise by the individual of those powers and qualities which are essentially personal, and the chief of these is his capacity of exercising deliberate choice. It would seem to be a cardinal principle of democracy, to put it no higher, that the state has the duty to maximise the opportunities for personal decision-making and to remember that the concentration of power and choice in a few hands is, in principle, harmful.

The second issue is that we are being asked whether local authorities are to be trusted or coerced. The principle at issue here would seem to be that policies must be made on the assumption that unregenerate man is essentially self-centred. We are dealing not with an ideal society, but with individuals and groups all of whom, in greater or lesser degree, are seeking to promote their own ends. The dynamics of society is a maelstrom of competing self-interests. The duty of the Government must then surely be to ensure that the best checks and balances are in operation to prevent the worst excesses of self-interest.

Personal freedom can never be unlimited. Indeed, it requires self-discipline, and the function of law is surely to be a sort of schoolmaster to educate the indisciplined. The aim of the Government in this Bill in seeking to curtail the powers of local authorities, has at least this to say for it; namely, that self-discipline is essential, and if it is not being exercised then discipline has to do its educative work.

The third issue raised by this Bill is the issue of consequences. It is said that the financial consequences of this Bill will be unthinkably damaging. This need not be so. In my own diocese, our work is in large part dependent on the voluntary contributions of individu-als. There is much work that we feel to be essential, but we do not have the money to do it. We live in stringent times: but that is not all loss. Stringency makes you define priorities and prevents you from planning in a slovenly way and from being extravagant. We have found that the shortage of money exerts a godly discipline and can be a spiritual advantage.

Having said that, there comes a point when for lack of any resources the work folds up. One particularly vulnerable area, as others have pointed out, is in the field of education. It is expected that the Inner London Education Authority, as we have been told, may have to do without about £120 million. That is a lot of money by any standards, and cannot but have vast consequences upon children and those who teach them. Some teachers are already overwhelmed with the difficulties that they face. Larger classes and fewer resources, if that is what will result, will increase stress and diminish education. I feel that the Church and the state, too, are failing the younger generation. We do not give the young the priority which they deserve. Was it not Winston Churchill who said in wartime, There is no better investment than putting milk into babies"? Surely the principle at stake here is that we are as responsible for the consequences of our actions as we are for the actions themselves. (That is why I personally can never be a pacifist). The Government in this Bill are not free to be selective about which consequences they will take into account and which they will not. I personally agree with the monetarist policy of the Government: they are keeping us out of the doghouse. But no Government can ignore the results of their policies on people, particularly the people who are least able to look after themselves.

One result of this Bill will surely be that local authorities will use the limited money which they receive or can raise on those things which they must statutorily provide, and there will be little or no money for supporting good work done, often economically and with great personal devotion, by people working for voluntary organisations. The Government are surely right in wanting to encourage initiative and self-help, but the one thing which voluntary societies cannot do without is money. They have none of their own; they have to beg for it.

We all get a horrific number of appeals for the support of good causes of one kind and another. The Government must accept responsibility for the consequences of their actions in limiting the expenditure of local authorities. It is people and agencies who are least able to help themselves who will be the first to suffer. Age Concern, for which I have some responsibility locally in Nottinghamshire, has movingly expressed its anxiety that there will be less help available at a time when, for instance, an attempt is being made to care for the mentally and physically handicapped in their own homes, rather than in institutions. If support for projects such as this is denied, where are we?

The Churches often provide back-up for the social services, without which the social services would find it hard to cope. In Nottinghamshire, a considerable and much admired contribution is made by the Church in the field of adoption, but this is heavily dependent on money from local government sources. Perhaps I might be allowed to underline one other principle in the words of the Bible: Judge not that ye be not judged. For with what judgment ye judge ye shall be judged, and with what measure ye mete it shall be measured to you again". I quote from the Authorised Version, as it appears to be the version most of your Lordships prefer.

I ask the Government whether it is really wise to concentrate power in their own hands centrally in London. Should the government of our country fall into less scrupulous hands, men will find a tool well fitted for their purpose. The dispersal of power, so that those who exercise it can be more easily watched and so have to be more accountable, is surely prudent if nothing else. I have no doubt that in some strange translation of the Scriptures our Lord's words have been translated as: What is sauce for the goose is sauce for the gander". Your Lordships will have observed that I live in Nottinghamshire. The limits which the Government have imposed on the budgets of both city and county have been carefully observed. We are, on the whole, a law-abiding people. At least, we know that it is foolish to pay heavy penalties if we can avoid it. Our fear is, however, that we shall not know how to avoid being penalised, because the proposals in this Bill give such general and sweeping powers to the Government that we may find ourselves playing the game by a different set of rules, of which we have not been previously appraised, and find ourselves inadvertently overspending.

Trust is a very precious commodity. Destroy it and it is hard, if not impossible, to restore. Would it not be wise for the Government to seek to promote mutual trust rather than aggravation? We are all in the business of trying to do the best for our country and our people. Would it not be best to mobilise goodwill, rather than create conditions that discourage, impoverish, and inflame tempers?

I fear that I may not have kept fully to the role which I originally described. I have done my best. All of us here in this House feel very strongly about this Bill. All of us will be speaking, to a certain extent, from the standpoint of self-advantage or prejudice. Too much is at stake for us to act in unprincipled or misguided ways. Surely our task is to think and think again, and to think on the Floor of this House in Committee, until we get this matter rightly resolved.

6.20 p.m.

Baroness Faithfull

My Lords, may I, too, congratu-late the noble Lord, Lord Bottomley, on his maiden speech. I presume to intervene in this debate on the basis that during my 40 years of professional life I have spent 18 years in the Civil Service, 20 years in local government and two years with voluntary organisations. During my time in local government, I was a chief officer for 18 years. May I therefore say to the noble Lord, Lord Marsh, that I do not have a vested interest—or, if I do, it is in the government of this country as a whole.

The Bill poses a dilemma, particularly for those of us who support, and support to the full, Her Majesty's Government. I would suggest that the Bill seeks to do the right thing the wrong way. I say, "the right thing" because, as has been said by my noble friend the Minister, the policy of Her Majesty's Government is to reduce public expenditure in order to reduce the domestic rate, which would benefit all ratepayers. Furthermore, as has been said by other speakers, such a policy would reduce the high commercial and business rates over which owners of businesses have no control. In some areas—and only in some areas—high rates are hampering productivity. I know of two firms in the Midlands which have closed down, due to the burden of rates, thus producing less rates for the local authority concerned and adding to the unemployment in the area. As for local authorities which are not conforming to the fiscal policy of Her Majesty's Government, it could be said that in some cases, though not all, they are undermining, for political and other reasons, the democratic system of the government of this country.

As I have already said, I believe that the Government are seeking to do the right thing the wrong way. First, the Bill reduces local authority responsibility and therefore accountability. I agree with the right reverend Prelate that philosophically, psychologically and emotionally this is bad. I wonder whether my noble friend the Minister has calculated how much extra money central government will have to spend because local councillors, believing that it is not their responsibility and that it is outside their control will refer people making complaints about their local services to central government.

Secondly, the strength of government in this country has been the interplay between central government and local government. Managerially, we have been fairly clear as to the role of each. Central government has laid down social policies and set standards, while local government has administered those policies and dealt with domestic issues to meet local needs. Those needs affect the day-to-day life of the citizens of this country, and they vary from city to city, from town to town and from rural area to rural area. Will not the Bill disturb the balance between Whitehall and town hall? Thirdly—this point has been mentioned by the noble Lord, Lord Bottomley, and by other speakers—will the Bill not be something of a Pandora's Box? Should there, in future, be a government of a different complexion, would we then be so pleased to have centralised so much of our local government?

Other noble Lords have spoken about Part II of the Bill. In the interests of time I shall not repeat what they have said. However, I believe that Part II is superfluous. Many other speakers have spoken about voluntary organisations. Is the Minister able to say how he can ensure that local authorities will meet the needs of the voluntary organisations under Section 64? The policy of Her Majesty's Government has been to support voluntary organisations and the use of volunteers from all sectors of society. Does not the Minister consider that, realistically, rate capping will not necessarily help the voluntary organisations? The noble Lord, Lord Boyd-Carpenter, said that there is not sufficient time to set up a Royal Commission. There have been so many commissions, including those of Lord Redcliffe-Maud and Layfield, that this would be quite unnecessary.

In a debate which was held earlier this year—initiated by the noble Lord, Lord Beloff—I suggested that an all-party Select Committee of both Houses should be set up to consider the position. Perhaps other action could be considered. What can the Government do, as an alternative to rate capping, to prevent excessive spending and to protect the ratepayer? First, could they not continue to use, but with greater stringency, the grant weapon by reducing the proportion of local expenditure financed from grant aid? Secondly, because in the short run the accountability arrangements in local government are not working well, in particular for non-domestic ratepayers, the Government could concentrate on ways of protecting them either by a system of local or national rate capping for non-domestic ratepayers only.

Thirdly, the Government could make use of their inspectorate—the Home Office, the Department of Health and Social Security, the Department of Education and Science, as well as the Audit Commission—to point out ineffective spending, spending which is frequently justified on the grounds of "policy" but without any analysis of the expected and resulting benefits. Again, an alternative approach would be to accept the selective powers but to put a time limit on their use, pending a thorough review of local government finance, particularly into ways of increasing political and consumer accountability.

I cannot support the Bill. I understand why it has been brought here, but if we go forward with it as it stands I believe that we shall live to rue the day.

6.29 p.m.

Lord Kilmarnock

My Lords, in the seven years during which I have had the privilege of sitting in your Lordships' House, this is one of the worst Bills, if not the worst, that I have yet seen, whatever the provoca-tion for it in certain cases. I dare say that some of your Lordships who have sat here for 10, 15 or 20 years can say the same. The noble Lord, Lord Broxbourne, made a powerful speech in defence of its constitutionality; but, just thumbing through, alarm bells start jangling: … in making any such re-determination, the Secretary of State may depart from the principles referred to in subsection (2) above … The duties of an authority under subsection (6) above shall be enforceable at the suit of the Secretary of State". These words are taken from Clause 3. In Clause 4 we find: An order under subsection (4) above may relate to two or more authorities". In other words, it is open-ended and there is precious little parliamentary control.

The noble Lord, Lord Broxbourne, spoke about the sovereignty of Parliament; but there are only three provisions subject to the negative procedure of the House of Commons and only one requiring the affirmative procedure. Your Lordships are to be consulted once, and only in relation to the general powers. Would the conventions by which we are bound allow us to prevent or delay this alarming extension of central government powers? I very much doubt it.

The powers of the Secretaries of State have increased, are increasing, and ought to be decreased. I refer not only to this Bill (in which it is most flagrantly apparent) but also to most other departments of state. To talk of "rolling back the frontiers of the state" rings a bit hollow when one gets a Bill such as this. A few civil servants may have been sacked, but that is about all it amounts to; and all the while, the powers of the Secretaries of State have been making increasing inroads into most aspects of our national life.

This is not only my view or the view of Opposition parties. It is the view of the Association of County Councils who say in their briefing: The striking point about this Bill is the total absence of any limitations on or controls over the powers to be conferred on the Secretary of State". Again, they say: The principles on which designation of authorities or determination of expenditure levels will take place are not set out in the Bill; these principles do not have to be approved by the Houses of Parliament". As regard the general powers, the associations say quite rightly: A debate on an order is no substitute for the time-honoured and tested procedure of Second Reading debates on principles, followed by more detailed examination in Committee". It is a sad day when a Conservative Government devoted, as I had always supposed, to the best of our past practices, brings such a Bill before Parliament.

I turn to matters more specific. This Bill if passed in its present form would have disastrous consequences for the personal social services which are already under such heavy pressure with inadequate funds. In the current year, taking an average of all London boroughs (both inner and outer) the grant-related expenditure assessments for social services were 78 per cent. of actual expenditure, indicating a cash shortfall in essential services of some £130 million. And social service expenditure is not incurred for fun; it is incurred because of genuine distress or deprivation. London is the subject of the Government's wrath for daring to be a sprawling old city with the standard problems of a large conurbation—and those associated with capital status on top—and for daring in large part to disagree with the Government's politics.

Let us turn to a less sinful area—for example, Cambridge, about which the noble Baroness, Lady Stedman, spoke so effectively. As she told us, to get to target in 1984–85, Cambridge would have to cut a further £3.9 million from their already highly responsible budget. If the cut were applied on a strictly pro rata basis between all the services, education would lose £2.5 million and 155 staff, while social services would lose £0.4 million and 35 staff. Who comprise that neutral word "staff"? They are in real life men and women in charge of residential homes for the elderly, in charge of children in care, working with the mentally ill, and making it possible for the frail and elderly to stay in their own homes through the home help service. As it is not likely that education would bear its proportional share, because there are statutory regulations to educate children, and anyway it takes a year to make a teacher redundant, the social service cut would probably be larger—say £0.6 million or £0.7 million and 50 staff. The following year those cuts would probably double if Cambridge wanted to avoid a 4 per cent. overshoot of target.

This is already a desperate plight and it will be made worse by this Bill. Councils have statutory obligations; obligations under a host of Acts of Parliament. Among them are the Education Act 1944, the Local Government Grants (Social Needs) Act 1969, Local Authority Social Services Act 1970, the Local Government Act 1972, the Housing Act 1974, the Housing (Homeless Persons) Act 1977, the National Health Service Act 1977, the Child Care Act 1980 and the Residential Homes Act 1980—to name only a few.

Are the Government going to come before Parliament to repeal all those Acts and a few others, too, so that local councils can stay within their externally-imposed targets? No, of course they are not. Even the present Government do not have the stomach for that. So what will happen? Authorities will strive, first of all, to comply with their clearly-defined statutory obligations. Some feel that they are already getting close to the risk of challenge in the courts—for example, on education for children with special needs, minor road maintenance, and footpaths. Authorities will concentrate, naturally enough, on their inescapable duties and will withdraw further and further from the grey areas where their statutory duties are less well-defined.

On the whole, the statutory balance— understandably—leans in favour of children. As far as adults and the elderly are concerned, local authorities are empowered to provide a wide range of services, including residential places, but there is no duty to guarantee any specific levels or standards of service; levels are therefore bound to deteriorate, particularly for the mentally ill and handicapped and the elderly frail.

One successful mechanism particulary under threat is the joint financing between health authorities and local authorities, revised only recently by the Health and Socal Services and Social Security Adjudication Act 1983, in Section 28A. Although nothing is said in the Bill, I understand it is intended that joint financing arrangements (which are essential to the Government's Care in the Community policy) should be excluded from assessment of whether a local authority is spending above its target for so long as the scheme is being funded by both types of authority. But there is a catch, for as soon as the costs are borne entirely by the local authority, those costs will become part of that authority's general spending and will count against target. These "time-expired" schemes as they are called, will cost boroughs belonging to the ALA some £4 million in extra expenditure in 1984–85, which will count against target. If I am wrong then perhaps the noble Lord, Lord Bellwin, will correct me when he comes to wind up.

I give notice, if he does not correct me, that I intend to table an amendment to correct this injustice towards authorities which have shown willingness to collaborate with the health service. The truth of the matter is that the Government want to save money on the NHS by shifting more of the burden onto the local authorities without allowing them the adequate means for the job. There are already some other worrying signs. It was reported in the press recently that in Oxfordshire, health authority schemes involving joint funding for priority services in the community were underspent by £1 million. What is the reason for that? Does the Minister not agree that the local authorities in the area were probably unwilling to enter into partnerships which would eventually land them in the dock for overspending on community care?

The Government have not begun to understand the implications of their own decision to encourage Care in the Community. This was glibly seen as a smart way out of expensive institutional care, without any real thought about how an inherently desirable shift in the location of care was to be paid for. Worse than that, this Bill will not allow local authorities to make adequate provision for that scheme, even if their electors want it.

I turn now to the potentially even more devastating effects on voluntary organisations. This aspect has already been mentioned by the right reverend Prelate the Bishop of London and by the noble Baroness, Lady Faithfull. The present Government have done much to support the work of voluntary organisations and have encouraged them to play an active pan in joint health and social services finance arrangements. But this Bill will tend to negate and perhaps even terminate such developments, which have been of such value in providing both residential and day support for the elderly, in assisting one-parent families and all kinds of other areas of this nature. Because of the statutory priorities I have indicated, local authorities will reduce and even withdraw their contributions as a result of rate limitation. This will have a downward multiplier effect on contributions from other sources.

Even if rate limitation were applied to a relatively small number of authorities, they would be likely to be those in parts of the country with high levels of deprivation, where there is a concentration of voluntary organisations. Even those authorities not in the direct firing line are likely to give priority in funding to their directly-employed staff to whom they have legal and moral obligations. That point has been made by the noble Lord, Lord Bottomley. The financial partnership between local government, central government, trusts, corporate donors and the local community in support of the voluntary sector will be threatened. At risk are many local projects or organisations receiving multiple or dual source funding.

For example, the urban programme projects are funded 25 per cent. by local government and 75 per cent. by the DoE, but the DoE contribution is contingent on the LA contribution. Among the projects threatened with closure are the Wycliffe Day Centre for the Mentally I11 and the Frail Elderly in Leicester; North Tyneside's Key Enterprise Workshop providing therapeutic employment for people who have suffered from mental illness—and, goodness knows, mental illness is on the increase; a women's refuge in Southend; the CAB in South Shields, and so on. I could give your Lordships a list as long as my arm, but I want to mention briefly one statutory body—the probation service—which, if this Bill becomes law and if the metropolitan counties are abolished, will have to link with a larger number of reluctant paymasters in the shape of rate-capped boroughs and other smaller authorities which will simply not be able to carry the burden. Have the Government thought this one out?

Is it not the case that a reduction in the efficacy of the probation service would adversely affect the Home Secretary's policies on community-based alternatives to imprisonment, and very probably developments in crime prevention in the inner cities? Will the Government offer special help for the probation service if it cannot obtain sufficient funds under the new system? Can the noble Lord answer me that? I could go on to talk about the threat to primary schools, to books and equipment, to adult education, to youth services and to many other services, but the right reverend Prelate the Bishop of London has already made a powerful speech on that sector and I shall not follow him down that road.

All this turmoil, all this upheaval and all these uncertainties and anxieties—are they worth it to save £200 million to £300 million a year, or about 0.1 per cent. of GDP, if that is what they will save? With great respect to the noble Lord, Lord Marsh, it will certainly be impossible to save the £770 million supposed overspend without a swingeing cutback in services that could hardly be called frills—meals on wheels, incontinence laundry services, and so forth. Those things are at the coalface of life.

In view of the fact that local government expenditure has risen more slowly than that of central government, can financial savings have been the real motivation behind this proposed legislation which has incurred such vast resentment and criticism through-out the country and within the ranks of the Government's own party? No, it cannot. The Bill is not directed primarily at expenditure considerations but is rather a weapon—a blunt and clumsy one at that—in the civil war that central Government has unleashed on local government.

None of this was necessary. If the Government wanted to restrain the behaviour of a few irresponsible authorities, they did not have to start capping rates or abolishing elections. They had a tool ready to hand—proportional representation in local government elections. The noble Lord, Lord Boyd-Carpenter may laugh, but as Sir Ian Gilmour pointed out in an article in the Guardian on 2nd April, at the last GLC election Labour won less than 42 per cent. of the vote yet gained a majority. Much the same happened in West Yorkshire, Merseyside and Greater Manchester where Labour won under half of the vote but gained 60 to 70 per cent. of the seats. Under PR Labour could have governed only with the support of one of the other parties and moderation would have ensued. Whatever the merits or demerits of PR for our national Parliament, and whether the "strong Government" argument holds up or not, there can be little doubt that local government would benefit enormously from a less politicised and more consensual style of management. I think that was at the back of the mind of the noble Lord, Lord Marsh, at one point in his speech. That would have been a far better course than this really lamentable Bill that the Government have put before us. The Government, as Sir Ian Gilmour said, "would be preserving local democracy, which should be a conservative objective".

We shall get there in the end, but, in the meantime, we have this Bill which we shall strive to amend and ameliorate clause by deplorable clause at later stages. As a first step, and as an earnest of our intentions, I urge all of your Lordships, from whatever quarter of the House, with an interest in safeguarding our freedoms from further incursions by predatory Secretaries of State, to vote for the amendment moved in such moderate and persuasive terms by the noble Baroness, Lady Birk.

6.43 p.m.

Lord Beloff

My Lords, I do not know how well acquainted the noble Baroness, Lady Birk, is with the Yiddish language but there is at least one word that she probably does know and that is the word "chutzpah" which is usually translated as "cheek" or "brazen effrontery". In any event, that was the word which welled up in my mind when I read her amendment, because whatever one may think of the merits or demerits of the Bill—and we shall all be tired of its merits and demerits before this Session is much older—it is clear enough that for the Labour Party to present itself in a formal amendment as a defender of local democracy is straining credulity.

I have only to mention the fact that it was the Labour Party which insisted, through legislation, on imposing non-selective education upon all local authorities, whatever the wishes of those local authorities or their electors. One can well imagine how keen noble Lords opposite will be on local democracy supposing that the directly elected ILEA, having got rid of Mrs. Morrell and her friends, thinks that perhaps London could do with a few grammar schools for its bright children in all the communities. Therefore, let us not have that. It is paralleled, of course, by the spectacle, which I see when I attend meetings on this subject, of bearded, corduroyed gentlemen, who only yesterday were cheering Mr. Benn's demands for the total abolition of your Lordships' House, getting down on their knees to ask us to assert our constitutional rights to amend legislation.

On this side of the House I regret to say that there are people, with genuine convictions, in favour of local democracy; regrettable in that they may, through their devotion to this belief, fall into the socialist trap which has been laid by the Opposition in the form of this amendment. I would only appeal to them to avoid this trap and to consider that, whatever their views may be, they are not identical to the views which we have heard expressed from the Opposition Benches.

There is, I am afraid, in all these subjects—and notably perhaps on this side of the House—a degree of nostalgia whenever local government is talked about. Some people defend the present structure with the same vehemence as their spiritual or physical ancestors no doubt defended the unreformed municipal corporations or the government of counties by quarter sessions; or as their more remote ancestors in the reign of Henry II, crouching before the fires in their ancestral halls, muttered about "the creeping centralisation of these damned itinerant justices". There will always be people who get their history wrong. As the noble Lord, Lord Broxbourne, pointed out, there is no constitutional issue involved in the sense of the amendment. What it comes to is that no one in this country has, or ever has had, the right to raise money from his fellow citizens by compulsory means except under the authority of Parliament. That is what the lawyers mean by "creatures of statute". The county councils—or the metropolitan councils, if you like—are simply the most recent examples of the power of Parliament to delegate its tax-raising powers, which it alone has, to elected representatives of the people, just as in centuries before the 19th century they were exercised by delegation through people who were not elected at all.

The noble Lord, Lord Bottomley, whose maiden speech I, too, much enjoyed, referred to academic opinion. I should like to introduce one academic quotation by my late and very distinguished colleague, Sir Llewellyn Woodward, in his volume in the Oxford History of England entitled, The Age of Reform and the chapter which is called, "The Organisation of a Civilised Social Life". He states: The development of an honest, competent and properly supervised system of local government stands out as one of the most original features of the 19th century". I call the attention of your Lordships to the phrase "properly supervised". That passage was not written in the light of this debate. In fact, it was published in 1939. But it does encapsulate the British experience; that there is, and must be, a necessary collaboration between central government and the organs of local government. In the event of a clash between them the priority must naturally rest with the centre which holds the constitutional authority, but for most of the time there need not, and should not, be a clash since both sets of authorities are primarily there in order to serve the interests of the individuals: not the interests of councillors; not the interests of employees of local government associations: not the officers of the association of local government associations—but the ordinary citizens.

This interaction is unavoidable. It has been mentioned by, I think, the noble Lord, Lord Irving, that local government as a spender of excessive sums does not come out so badly, because over that period central government also increased their expenses. I think that it is well known to your Lordships that the major reason for this increase has been the increased burden of unemployment on the central Exchequer. But that unemployment itself, as was pointed out by the noble Lord, Lord Harris of High Cross, and others, is in part the result of the abuse of the rating system by local authorities; so that in a sense the expenditure of central government is a by-product of the excessive expenditure of local government, and one cannot seriously try to dissociate the two.

I think that most noble Lords would agree that if we could find some resting place in this long dialogue—some system of financing local government which would eliminate these clashes that arise—all of us would be better pleased. Probably one ought to be thinking about this, though that is no reason for postponing the action, the immediacy of which the noble Lord, Lord Marsh, called to our attention. I think it is important if we do this that we should look very carefully at the nature of this country and at the system which it has inherited, because we cannot begin in this, or indeed in any other field, as though we were starting from scratch.

I thought it conspicuous in the paper circulated by the Association of District Councils—one of the documents which did most to persuade me that this Bill must be right—that it talked about a so-called "European charter" insisting upon a high degree of local autonomy; and the United Kingdom, by the reckoning of the people who drafted this document, comes out very badly. There is apparently more central control in the United Kingdom than in other European countries. But if we leave aside the federal system in Germany, is it not the case that the reason why we have more central control is that we have much more local activity and many of the services which are provided locally here are in fact centrally provided in other countries, so that this issue of control does not arise? I think that those who deluge us with printed material might do some homework.

We have to think of the situation that we confront. The noble Lord, Lord Irving, referred us to, in his view, two very eminent political scientists, Professors Jones and Stewart. I had always thought that they were simply the representatives to the academy of NALGO, but clearly I was wrong. They are answered I think, if not directly, in an article by a much more distinguished political scientist, Dr. Nevil Johnson of the University of Oxford, in The Times today which I heartily recommend to your Lordships.

But there are in the situation, if you start analysing it, only three points. These are the points which have made it impossible so far to carry out either Layfield or any of the other suggestions that have been made for modifying the system. First, because this is a relatively small and in many senses a homogeneous country, the citizen expects equality of service wherever he is. This means that it is no good saying that we are going to give the kind of autonomy which will enable one local authority to spend more, let us say, on the aged, and the other more on the children, because the ratepayers—the citizens—of the local authorities will say, "We must have the best in each service of what is observable elsewhere"; so the system of equal services means an inevitable upward pressure on spending targets.

The second point is that, because we are not only a homogeneous population but very closely packed, and moving in our daily lives, businesses and professions between one local authority area and another, there is no form of taxation that has been devised other than rates which can treat localities as localities. We move; real property does not move. That is the root of the failure to devise a satisfactory system of local income tax and a satisfactory sales tax such as it is possible to practise when you are 200 miles from the next shopping centre, and so on.

The third and final point, which has been frequently referred to in this debate, and I therefore need not enlarge upon it, is that, desirable as it may be for the council's ultimate responsibility to be to its own ratepayers and citizens, this cannot be the case given the distribution of the rate burden and the fact—which we must cling to and which the noble Baroness emphatically dealt with—of our commitment to universal adult franchise. If everyone in a borough or county above the age of 18 has a local government vote, that will not correspond in any degree to the differentials in the rating burden either as between private citizens or, still more, as has been pointed out, between private citizens and business. Therefore, there probably is no way in which we can simply assure responsibility by saying that it is a matter for the voters.

We can in Parliament, even without proportional representation—the King Charles's head of the noble Lord, Lord Kilmarnock, comes out with the most unfailing regularity—in our general elections vote for a Government formed, let us say, by noble Lords and their friends opposite who will be in favour of a greater degree of redistribution of income or one who would favour a lesser redistribution of income and other things that go along with these. That cannot be done within the current framework of local government. Therefore, though I agree that a permanent system is what we need, I feel that it would be most misleading to regard our search for it as a reason for not taking the measures that we now need.

6.58 p.m.

Lord Northfield

My Lords, I hope that in this clash of extreme opinions from the two sides there is room for somebody standing more to the middle in this argument. At least, that is where I shall try to stand this evening. If one takes a rather longer historical perspec-tive, we all end up somewhere with the noble Lord, Lord Thorneycroft. In a sense this unhappy Bill is everybody's fault and nobody's fault. It is everybody's fault, including all of us in this Chamber, because in the past 10 years we have not got right the boundaries between the powers of local government and the powers of central government—a matter to which the noble Lord, Lord Thorneycroft, referred.

In the period from 1972 to 1974, by common consent and with all of us behind it, we carried out a so-called reform of local government. We made much larger units. We gave those larger units a stronger sense of status, stronger ambitions, an expanding role and a greater sense of responsibility, and, as the noble Lord, Lord Kilmarnock, said, we also heaped on them all sorts of statutory duties. It is not surprising that that happened at that time, because it was part of that early 1970s feeling of rising expectations and optimism about the never-ending period of growth. We can see that, in a sense, we got it wrong at that time, or at least we sowed the seeds of our present problems. If one looks at it this way, local government expanded from employing 2 million people in 1963, to 2.9 million 20 years later—a near 50 per cent. increase in people employed as part of that expanding work of local government that we all went along with and probably openly supported at that time.

In a sense, it was also nobody's fault, if one looks at this longer historical perspective, that all of this went wrong. What happened was that in the 1970s along came the oil price rise, the fantastic levels of inflation, the breakdown in our society of co-operation on wages and price restraint, the beginnings of world recession and the exposure of the essential backwardness of British industry. Great Britain Limited was pretty well "clapped out", as we discovered when world recession and the one-world economy, with other leaders more efficient than ourselves, began to show us how much regeneration we had to do. It is not surprising, and it was nobody's fault in a way, that a Government—and I believe a Labour Government would have had to do the same—had to come along and say, "To some extent we have to restrain these ambitions of the more optimistic, and the period of rising expectations of the 1970s, in the interests of reconstructing Great Britain Limited".

I think that is the essential historical background of how it has all changed in a decade; and what we are now facing, in my view, is a Bill that results from that about-turn that we have all had to do. With this in mind, what can one say briefly about the Bill?

I guess it is popular in many areas; there is no doubt about that. I would also say it is an exaggeration to make a great constitutional issue out of capping a dozen out of 450 local authorities. I would go so far as to say that a lot of these high spending local authorities—and I do not treat it as quite a joke in the way that the noble Lord, Lord Marsh, did, although many of his examples were not only funny but also telling—if they want to buck the trend, if they want to say, "No" to Governments, if they want to exert these new powers that they thought they had attracted to themselves in the 1970s, they are their own worst enemies.

I take one example that I have been able to examine for myself in the last few days. There is a body called LAMSAC. This is the local authority body, managed and run by the local authorities, offering efficiency packages—good local authority practice sold to them in packages. This is a body that has done very good work indeed. It provides this sort of advisory service in a series of what are called packages. It is run by a local nine-man board. It is working successfully. It has (for example) sold one of its packages on how to be efficient in collecting refuse to 223 local authorities. In one borough alone, the borough of Southwark, it saves that borough £700,000 a year in showing it how to run that service efficiently. Similarly, it saved a million pounds a year in Havering. It has packages not only for refuse collection but for assessing the housing staff you need, assessing the staff you need for architectural services and so on; and it is, I repeat, a local authority own-provided service.

Let us have a look at some of the overspenders in the light of this example. I telephoned LAMSAC and said, "Tell me what the following authorities have used of your services". Answer: Basildon, top of the spenders, nothing (it has never been near LAMSAC); Lambeth, nothing; Camden, a small efficiency survey of no great importance on bonus calculation; Greenwich, a small audit, no full package; Hackney, only a job evaluation of professional staff; Islington and Lewisham, nothing. In Southwark, yes; it is used to good effect—the package that I have mentioned, saving them £700,000 a year. Brent, a small one: job evaluation of professional staff—and so on. If you want to buck the trend and say that you want to spend high—and I respect a great deal of that from the history that 1 have been outlining—at least you should set out to say, "We are doing it as efficiently as we can, and we will go through all the tests you like to prove it". But when great figures like that, £700,000 or a million pounds, are at stake in one service alone, I believe it is right to say that others in that list of overspenders should be using that service, especially as it is provided by their own local authorities through a co-operative effort.

So I say first, then, that I cannot see a great constitutional argument, and I think some of these big spenders who will not face up to this need to draw back from the heady days of the 1970s, perhaps, are to some extent their own worst enemies.

But then I come to the other side. There is something to be said against this Bill as a permanent piece of legislation. For all the dangers that the noble Baroness, Lady Faithfull, for example, and other speakers, mentioned in this debate, it is not right to put on the statute book a Bill of this kind for all time, to enable small numbers of civil servants to dictate to local democracy in the way that this Bill can be said to do. My own view is that the right way forward—and here is my middle position coming out—is to limit this Bill in this Chamber to, say, three years' operation, and then to say afterwards, just as we do with the Northern Ireland legislation, that if the Government want it renewed they should come forward every year with a justification, with an affirmative resolution to have it carried on beyond that point.

Yes, I took the point made by the noble Lord, Lord Marsh, and even the point made by the noble Lord, Lord Thorneycroft, that you will not rush this Government or any government into a reform of local government, and into getting these boundaries of power right all over again, overnight. But the more I see in business life and in professional life the more I know what a timetable does. Give this Government a Bill for three years and it will work like the devil to find the right solution, rather than come back in three years' time and say, "We have still no solution for this knotty problem that the 'seventies and 'eighties have put on our plate".

So I think we could limit it to three years. I think we could then ask for it to be renewed only by affirmative resolution. This is a role that your Lordships' House can carry out, if I may say so. We have done exactly that on telephone tapping. We passed an amendment which forced the Government to make a statement saying, "All right; we admit we have not really got it right so far, and we will now introduce a proper Bill". I suggested exactly this approach, although the House did not listen to me (and I am not complaining), on the issue of selling local authority old persons' dwellings. I said, "The problem is that the Government have not got a policy for housing the elderly; if we put an awkward amendment into the Bill it will force the Government to come along and say, "All right; we will now find a policy for housing the elderly and the ones who cannot afford to house themselves". I think we can do exactly the same in this Bill if we play our cards correctly. We can say to the Government, "You can have this Bill for a certain period, but then you must work doubly hard to find a more lasting solution which is more in line with our democratic traditions."

I have one further and final point. If you look at these authorities that are overspending by the Government's standards, what are they? I think the noble Lord, Lord Kilmamock, (and I think one of the Bishops, too) said that they are nearly all on the Government's list of most deprived urban authorities. They are nearly all of them struggling hard to keep up with the deprivation that many of them have as inner urban authorities in decaying cities. Just look at the Government's own list of most deprived local authorities. I give them in the following order, the Government's own list of the top 20: Hackney, Newham, Tower Hamlets, Lambeth, Hammersmith, Haringey, Islington, Brent, Wandsworth, Southwark, Manchester, Camden, and so on.

It is no coincidence that those authorities are the high spenders. In many cases they are struggling to try to keep up the level of services that they believe will counter the deprivation and decay that is all around them, although, as I stated earlier, not with the greatest efficiency that I should like to see. I hope that when we look at the longer term solution we will examine whether local government as such, even with partner-ship programmes, even with special grants to the most deprived areas, even with extra money—£450 million, I think it is—in the urban programme, is really capable of tackling some of these most deprived and decaying urban areas.

I speak feelingly because my new town of Telford is not a new town by one standard. It is a vast reclama-tion project of a "clapped out", dying industrial area. I know what it has taken in terms of years and money to regenerate that area to the new beginnings of prosperity. I do not believe that many of the local authorities in this country are capable of doing the job of reviving some of the most dying areas of this nation. We may well have to move over, as I have often said before, to some form of roving urban development corporation. After all, the Government set up at least two urban development corporations, on the principles of the new towns, to tackle parts of London and parts of Liverpool. We may need one to go round without coercive powers helping the other cities that are most deprived to revive themselves.

I come back to where I started. I believe that we encouraged all this optimism and these expectations in the 1970s. I believe that we had to damp them down. I believe that the high-spending local authorities most concerned have a case, but not a very good one when you look at the way they have behaved themselves in regard to LAMSAC and other things I could have mentioned. We have to look more fundamentally than ever for the right solution. That might involve something more than simple local government attention to social conditions and the conditions of decay and deprivation which are making some authorities want to spend more than the Government think is right. I hope that this sort of view will be taken into account in seeking a more long-term solution.

7.12 p.m.

Baroness Vickers

My Lords, I should first like to join with other noble Lords in congratulating the noble Lord, Lord Bottomley, not only on his maiden speech but also on the splendid service that he has given to the other House and now to this House and to the Government of the country as a whole. I recall that, as Commonwealth Secretary, the noble Lord was very much liked in all the different countries and that he and I had several jaunts together—on business, of course. We have tried to work hard for the Commonwealth Parliamentary Association ever since.

I have always understood that it was a Conservative tenet that local authorities should be reasonably autonomous in that, provided that they adhered to major economic and other policies of central government, they were free to attempt to meet local goverment problems largely out of locally raised taxation; in other words, from local rates. In Wiltshire, we have formed a committee with the CBI, local farmers, managers of factories and so on, in order to help local government and to help people to understand what local government is all about. It has been very successful. We have been able to put before local councillors ways in which the rates could be lowered, and particularly to co-operate with them in the work that they are doing.

This Bill tempts a government to be a dictator. When the Bill is on the statute book, it will give all future Secretaries of State the power to dictate to local authorities. That may be acceptable so long as the dictator is benevolent. But with changes of government happening so often nowadays, so much power in the hands of the Secretary of State may not be acceptable in the future to everyone concerned.

This is what I am concerned perhaps to see changed in the Bill. I should like to draw attention to the fact that supporters of the rate capping proposals point to alleged inefficiency in local government as the need for central government to take a more direct role on what is essentially a local issue. However, the following factors place the performance of local government in its true context. During recent years, local government spending has declined by 3 per cent. in real terms while that of central government has increased considerably. Local government spending has taken a much smaller proportion of the GDP and of public spending since 1974–75.

I should like to deal particularly with the smaller councils as they may be facing some difficulty. I should like to give the example of Plymouth. By any number of comparative indicators, the performance of Plymouth city council compared with other compar-able non-metropolitan district councils points to a relatively efficient organisation. It has the lowest net cost of all services per capita, the lowest manpower complement per 1,000 population, the lowest rate levy for 1983–84 and the best performance of expenditure compared to the grant-related expenditure assessment. Notwithstanding this, the proposals in the Bill, particularly the general or reserve scheme, could well mean that a ceiling is placed by central Government on Plymouth City Council and other councils like it—a rate levy irrespective of their performance in recent years vis-à-vis other comparable authorities.

Since the original rate-capping proposals were announced back in August 1983, a number of subtle changes have been made which will exacerbate the proposals and which to date have received little publicity. Originally, any local authority spending below its grant-related expenditure assessment or with a budget of less than £10 million, as mentioned by the Minister, would be excluded from the rate-capping proposals under both selective and reserve schemes. The subtle change now introduced is that these thresholds apply only to the selective scheme, and that if the reserve scheme is introduced, they will have no effect at all.

I should like to talk about the workings of the Bill. The Secretary of State has to lay before the House of Commons the report which names the authorities designated for rate capping and the principles he has used. The order fixing the actual rate capping for individual authorities has to be laid in draft and approved by resolution of the House of Commons. The speed with which the arrangements would have to be done creates much anxiety for the local authorities. The mechanics entail a great deal being done in a very short time. The Secretary of State first has to have the information on which he can decide which authorities shall be designated. He has to decide, presumably some time in the late autumn, in which financial year he will do this, mainly on the basis of past expenditure, perhaps assuming that no local authority will be able for practical purposes to bring down expenditure suddenly. If he confines himself to blatant cases, he may be on reasonably safe ground.

Next, he places the report before the House of Commons designating the authorities for rate capping. He then decides the maximum he will allow each of them to spend, translates this into the maximum rate which may be levied or, in the case of counties, fixed by precept on the districts. He has to do this as soon as practicable after the rate support grant announcement; say, late December. A local authority may then ask him to fix its total expenditure at a higher level and he can increase it. But, if he does, he can impose on the authority, such requirements relating to its expenditure or financial management as he thinks appropriate". This will mean, I suggest, some very hasty negotiations and ad hoc decisions because the local authority will meanwhile be having to finalise its own budget in sufficient time to fix its rate or precept before the middle of March.

The power to lay down conditions for increasing the amount of expenditure is allowed in the Bill. The actual ceiling, unless agreed with the local authority concerned, must be fixed in a statutory instrument approved once again by the House of Commons. The tightness of the timetable seems to be recognised, as the Bill proposes a power to fix an interim maximum expenditure. The trouble about this is that, if the Secretary of State ultimately accepts that he has fixed too low a figure and increases it, a supplementary rate will have to be levied.

The Bill provides, understandably, that if a rate is levied or precept made above the level fixed, it is invalid. However, it must be a serious question whether this will lead to financing difficulties for all local authorities. Those lending to local authorities have always been able—and this is a very important point—to rest secure in the knowledge that a local authority will always have the power to levy a rate to meet its liabilities. This reassurance to banks and financial institutions may be killed by this Bill. The money market is extremely sensitive to credit-worthiness, and if only one authority places itself in jeopardy this could lead to borrowing difficulties for all. Even the difficulties of New York last year caused serious questions here for a time.

While total local government spending is of legitimate concern to central government, this Bill will damage irretrievably the long-established principle that local authorities are responsible to their electorate for the amount they spend. Henceforth, ratepayers in areas so designated will have to look to central government for a remedy. All shortcomings in the levels of service will be laid at the door of central Government; there will be an annual bargaining with civil servants as to how much may be spent and, if they are allowed to spend more, authorities may be told exactly how they can spend it. They will also have to furnish further information to the Secretary of State if he requires them to provide it. At a time when there is genuine and justified concern about the lack of accountability to ratepayers, it is felt that this Bill will both damage that sense of responsibility and put in its place a responsiblity to central government.

It is the beginning of making local authorities the creatures of central government. It is no answer to say that rate capping may be applied to only a few local authorities; it can be applied to them all. This answer can be tested against the Government's previous statements on grant holdback. In the 1980–81 Rate Support Grant Order the Minister stated in regard to grant holdback: It is intended that the power should be exercised—if at all—in such a way as to affect only a very small minority of authorities". In 1983–84 the number of local authorities suffering holdback is 153. The percentage of authorities penalised in each of the past four years has grown from 2 per cent. to 17 per cent. to 31 per cent. to 37 per cent. This is hardly likely to give the authorities any confidence in a selective scheme for rate capping.

Furthermore, Part II of the Bill contemplates the possibility of the Secretary of State making an order under which all local authorities would be treated as designated as subject to rate capping unless he specifically exempted them. Part II of the Bill is scarcely comparable with the assertion that the Bill is directed at only a small minority of local authorities. It clearly contemplates the possibility of the vast majority of local authorities having their maximum expenditure fixed by central government. I am mentioning all these points because they are points which we can take up in Committee, and I hope that we shall be able to put down some amendments which may relieve some of the anxieties of the many local authorities.

7.24 p.m.

Lord Spens

My Lords, I can be brief because everything that I wanted to say has already been said far more eloquently by other noble Lords. I support the Bill because I believe that our democracy is based here, in the sovereignty of Parliament, and I believe that that is the only true democracy in this country. As the noble Lord, Lord Broxbourne, explained, that sovereignty is absolute. It is not limited. It is not limited either by a written constitution or by any form of federal constitution. It is absolutely absolute and as such is operative by Her Majesty's Government.

We have heard a lot of special pleading, not least from the right reverend Prelate the Bishop of London, about special need for expenditure not to be limited by Her Majesty's Government. However, the noble Lord, Lord Marsh, explained very successfully how those arguments were spurious. I am not inspired by cries that local democracy is being destroyed. There is no local democracy where the electors can vote for councils but have to pay for only a very small proportion of the money that those councils propose to spend. As the noble Lord, Lord Boyd-Carpenter, said, taxation without representation is not democracy.

Therefore, I oppose the amendment. The Bill will not result in any damaging constitutional changes. Our constitution is intact; it is centred here at Westminster, and no damage to it will occur. As for undermining the authority and responsibility of local councillors, I point out that it is they themselves who, in a very few cases, have damaged their own constituents by acting irresponsibly as to the amount they have decided to spend. Thirdly, the charge that the Bill will gravely weaken local democracy is quite false, because I do not accept that there is proper local democracy where the proportion of expenditure actually paid for by the electors is less than 15 per cent. of the total bill expended by councils.

Finally, I liked the suggestion of the noble Lord, Lord Northfield, that there should be a limit on the duration of the Bill. The noble Lord suggested three years. Perhaps that might be a little short. But I agree with him that it should be a temporary measure and not be absolutely permanent. I hope that Her Majesty's Government will give that matter quite serious consideration. Before I sit down I should just like to say that, in view of his excellent speech, I wonder how the noble Lord, Lord Northfield, will vote on the amendment.

7.28 p.m.

Lord Vaizey

My Lords, I also want to address myself to the amendment which was so ably moved by the noble Baroness, Lady Birk, and I want to follow the noble Lord, Lord Spens, in speaking a little about constitutional issues which seem to loom very large in the amendment. As this House is a defender of the constitutional freedoms of our fellow citizens, it seems to me right that we should address our minds to that particular question.

It seems to me that what my noble friend Lord Bellwin said from the Front Bench is irrefutable. The relationship between local and central authorities in this country has always been perfectly clear. Elected local authorities have, for most part, been created by statute for the past 100 years. They have been controlled by statute and they have exercised their powers within those statutes. The doctrine of ultra vires has very strongly limited the power of local authorities to go outside the strict terms of the statutes which give them their powers. Moreover, the powers of the local authorities have radically changed. They have changed even within the eight years that I have been a member of your Lordships' House. Since the war they have lost, for the most part, responsibility for health; their education responsibilities have also been radically changed; and housing has become the major activity of many authorities which previously were not housing authorities. They have also lost responsibility for electricity, gas and water.

To talk about the relationship between central government and local government as having been fixed at about the time of Magna Carta, and as being the absolutely solid base of our constitution, seems to me to fly in the face of the evidence. I must say that I was convinced by the argument of my noble friend Lord Bellwin on that particular point.

I do not think that anyone would disagree with the argument that in the longer term there is a need for a rethink of the local government structure that we now have, and especially of its finance. We have distinguished Royal Commissions which might well form the basis for a rethink of this question. But, as the noble Lord, Lord Northfield, so ably said, no party in this House has a particular monopoly of wisdom about the structure of local government. It is very difficult to get it right, precisely for the reasons that my noble friend Lord Beloff gave. People in this country, whether they live in Cumbria, Cornwall or Charlton, expect the same level of services, but they have different capacities to pay.

In a unitary system like ours, how one gets a degree of diversity of method of provision while getting uniformity of standards is something to test even the political genius of my noble friend the Leader of the House. It seems to me that it is a question of squaring the circle to a quite remarkable degree, and it is not surprising that every party has failed that particular test. But that is a matter for long-term consideration.

As the noble Lord, Lord Marsh, so ably argued, the task of this Bill is an urgent one. It must be tackled now for urgent and prior reasons. Why? Because a group of councils has determined to act extremely. It has determined to break the constitutional convention which hitherto has governed the relationship between local authorities and central government. I was saddened, and indeed surprised, to see in particular people on the Opposition Benches, who are members of the moderate Labour Party, supporting these councils. I believe that it was the noble Lord, Lord Northfield, who mentioned a list of authorities which have a large proportion of deprived people living within their boundaries. He pointed out that in many respects the list of authorities which will be rate-capped is the same. It might be supposed that the argument is that because they were deprived, they were spending more and therefore they were being rate-capped. But in many cases the essential issue in the equation has been the destruction of the old Labour Party which ran those boroughs and the election—often by very dubious means—of far Left parties.

Let me take as an example my own borough of Greenwich, where I was born, raised and brought up; or the Inner London Education Authority, which educated me, my sister, my mother and my father when it was the London County Council—and it was a great pity that it was ever abolished—and which I had the great privilege of serving as a co-opted member. It was a moderate authority, just as Greenwich was a moderate council. Now they are spending money like water, and to argue that they are raising the standards of public service in those communities is just not the case. It is not true that the Inner London Education Authority is any longer the model of education service for the nation as a whole, as it was when I was a pupil in the London County Council schools. It is not. It is an extravagant authority, badly run and ill-served by its present leadership. That is the first reason why these extremist councils have deliberately taken on the Government, as that amiable character Mr. Livingstone has said. Like the noble Lord, Lord Marsh, I am very fond of Mr. Livingstone; he is a typical Londoner, and I like him for that. But that does not mean to say that I have to support his arguments, which are preposterous.

Furthermore, it is essential to clawback the £300 million or so. To talk lightly of £300 million as if it is nothing, as if it is just pence that one is handing out, is the recipe for the financial ruin upon which this nation embarked, as the noble Lord, Lord Northfield, quite rightly said, when we had these enormously raised expectations in the early 1970s which coincided with the world economic crisis. We no longer have the means to spend the money to support those vast and elaborate expectations. As my friend Tony Crosland said on a memorable occasion referring to local government, "The party's over".

I also totally fail to share the view of my noble friends Lady Faithfull and Lady Vickers that an issue of principle is raised by rate-capping. It seems to me that no local authority has ever had the power to spend as much as it likes on what it likes. That, quite simply, happens to be, and has always been, against the law, let alone the constitution. It has just been straight-forwardly illegal.

What we are arguing about here, as is argued about in virtually every statute affecting local government—and there must be dozens of them which pass through Parliament every year—is where we draw the boundaries between what the central decision-making power is and what the local decision-making power is. In each case it seems to me that that is a matter of pragmatic decision rather than an issue of high political principle.

I want to turn very briefly to the speech of the right reverend Prelate the Bishop of Southwell. He said that this Bill would adversely affect the services in the deprived areas. Quite honestly, in the face of the evidence, I find that difficult to believe. Is the right reverend Prelate aware that the pupil-teacher ratio has improved in every single year in the last 15 years during this period of economic retrenchment? To talk about cutting back in education when the amount of money being spent per pupil in real terms has been steadily rising is, with great respect, just not the case. What we have seen—and we have seen it in the Inner London Education Authority—is frivolous and wasteful expenditure on extremist measures of the most intolerable kind: a kind which I venture to suggest many of your Lordships would not willingly subject your children to.

Is the right reverend Prelate aware—and I do not necessarily ask for an immediate answer—that his quite right and doctrinally absolutely correct advocacy of the doctrine of responsiblity of the individual for his own life and his own decisions, is not the same in any argument that I can think of as arguing that great metropolitan authorities purporting to represent millions of people should have the right to spend what money they like. How one moves from the doctrine of an individual taking a decison about his own life and his own resources to the doctrine of Mr. Livingstone and his friends taking decisions about what happens to all of us who live in London seems to me to be an unexamined assumption in the right reverend Prelate's otherwise extremely moving and important address.

With great respect, I think that the arguments about local responsibility are based upon a misunderstanding of the role and status of local government in our constitution, and they rest on the paradox to which the noble Lord, Lord Harris of High Cross, drew attention, which is that if one is concerned about individual responsibility, the only way to give people individual responsibility is to leave them free to spend their own money as they like.

That is precisely what the Bill is about, as it is intended to stop this constant escalation of rates, which are now pauperising whole ranges of our population in the inner cities, where there are deprived people living on supplementary benefit in order to pay the extravagant rates which are levied by the local authorities. The road to pauperisation is not the road to individual responsiblity, and I very much hope that argument will not be directed against this Bill.

7.39 p.m.

Lord Milford

My Lords, I have a great many questions which are niggling in my head. Why has this Bill come about at this moment? Where are we going? Why is there this attack on the welfare state now? Why are the Government prepared to alienate the thousands of welfare workers, many working in voluntary' organisations?—for the recent mail of so many of your Lordships indicates their fear and their worry that they will not be able to carry on if this Bill becomes law.

Why is this Government onslaught on our democratic local government insititutions taking place? Are the central government hungry for more power, more control, to weaken any opposition to what they think British society should be? We must look at the Government's basic aim: the Tory philosophy that society must be a capitalist one, and that Britain must be made safe for capitalist business interests.

The battle over rates is nothing to do with alleviating any financial burden on the local people. It is to lower the rate money to be spent on social services so that there will be more to help local business. Does not this avowed aim link up with dismantling the nationalised sector of industry and the drive for privatisation? This is not a Bill in isolation. This Bill fits into the whole of the Government strategy to impose their image on Britain.

The right of ordinary people to elect their representatives on a local council, to choose him or her, who they think will look after their needs, can be frustrating to a central government which want to impose on us local government authorities who will carry out their wishes and their policies. To them, grass-root democracy can be a threat. So this Bill is to cut back local democracy. For decades the British people have slowly been advancing to more, deeper, democracy; towards true democracy, where fundamental power is in the hands of ordinary local people. And it will be up to them to decide where the money is to be spent. They would know what the people in their area need.

I can remember how thrilling it was when I was a councillor for several years to be able to work with the people and ask the people what they needed. These people would tip the scales towards the aims of more hospitals and hospital staff, more buses, more schools, more decent houses: and away from the vast expenditure on Trident and other weapons, and on a larger and larger army of police. Already we have had 300 police to protect the eviction of 30 Greenham women, and thousands of police to surround the miners and stop them going into other counties. Already we are going backwards. We are giving up some of our democratic rights.

This capping Bill insists on limiting local authority spending and not taking into account what is needed in the particular locality, be it housing repairs, accommodation for homeless families, aid for the elderly (and we must remember that the elderly are fast increasing in numbers) of children's welfare and education. Instead of tackling such needs as these, the Government are possessed by the question of finance and expense. On expense, what of the army of unemployed created by the Government costing?

The Minister's speech contained no reference to people, no deep concern for the needy, the old, the handicapped. It was an inhuman performance, I felt. What about the voluntary organisations and the wonderful people who run them? I can thank the Government for giving me one thing that has affected me personally. Because of the fear and horror of what this capping Bill will mean to their institutions and organisations, I have been invited to visit and to see what wonderful work these voluntary organisations are now doing, and what less grants, or the cutting off of grants altogether, will do to them. During these visits I have met wonderful, devoted, committed people doing a terrific voluntary job for society. This Bill will almost certainly put paid to most of their work. I have had a vision of what a real democratic welfare state could be.

Again, I have been in touch with some aspects of the work of the GLC, particularly on the question of racialism. This year is the year of the Defeat of Racialism, and the GLC has organised a tremendous drive to get rid of racialism in London. I live in the borough of Camden. Its Committee for Community Relations has written in despair over how this Bill will prevent it from providing a service to the community, from helping it to continue to assist the black community. Since the Government have withdrawn many hundreds of millions of pounds from authorities in the London area, including Camden, the only alternative if they are to carry out their anti-racialist work has been to raise the rates.

If this Bill becomes law, Camden tells us that it will have to cut back drastically on voluntary organisations and its work on the ethnic minority community. The conclusions of a letter I have had from the Camden committee are as follows: The future of our organisation and our work is seriously threatened by your proposals. Many ethnic minority organisations will vanish without trace because of the lack of funding. The effect on community relations appears not even to have been considered by your Government but is likely to be disastrous". But, again, the Minister did not appear to show any human emotion about such situations in his speech.

We are only at the first stage of the Government onslaught on local government and democracy, and it cannot be just coincidence that this Bill is brought on alongside the Government's announced intention to review the whole structure of social benefits.

7.48 p.m.

Baroness Gardner of Parkes

My Lords, much has been said in this debate, and I do not therefore intend to repeat points that I might well have made at an earlier stage. I support this Bill and believe the stage has been reached where only measures as strong as this can help the hard-pressed ratepayers. The case put by industry is well known to me, and I have spoken in this Chamber before on the impact of rates, particularly in central London, and the way in which businesses are moving out.

Like most Members of this House, I have been bombarded by pieces of paper from all sorts of groups and organisations pressing their own cases. I attach much weight to the CBI evidence of the importance of this Bill to future industrial prosperity. As a member of the Greater London Council I also receive letters, usually from individual constituents, and these have made clear to me where my sympathies must lie; with the hard-pressed ratepayer, domestic as well as business.

The domestic ratepayer has no alternative but to pay whatever rates are demanded. If you have no means to pay you get a rate rebate. If you have a hard-earned, hard-saved small amount of money, you see this being swallowed up by rate demands, and then see the money being used for purposes you think of as being either frivolous, wasteful, or just plain wrong. You can do nothing about it. My support for the Bill lies in the fact that I know how much it will mean towards helping these people.

We heard earlier in the debate that the co-ops succeed because they have to be aware of costs. As a shopper the individual has the option to buy or not. There are ways to economise; they may be difficult but there is a free choice. With rates there is no choice. You pay your rates or eventually you face imprisonment. I believe that under the Bill someone will be able to refuse to pay above the permitted limit, if anyone attempts to levy rates beyond that.

I congratulate the noble Lord, Lord Bottomley, on his excellent maiden speech, but one of his remarks worried me. I hope the Minister will allay my fears in due course. This was the remark that in the course of time these powers could be used to force up the spending of low-spending authority. The Minister's remark in his opening speech, that even the thought of this Bill was having an advance effect, may be true. But I should like to point out to your Lordships that the seeming reduction in the GLC precept from over 39p to 36p in the pound is nothing but a confidence trick. For the last two years the GLC has collected excessive rates from Londoners. Now it creates the illusion of a reduction by giving them back a little of their own money, while in reality increasing expenditure by over £100 million in a single year.

At a meeting a few months ago of the GLC special committee—the committee against abolition—the Conservative side suggested that it might be time for the GLC to consider moderating its policies and its expenditure. This was flatly rejected. Reference has been made in the debate to the GLC police committee; although the authority has no police responsibility, it has such a committee, more thought of as the anti-police committee.

I well recall the meeting at which a grant application for setting up a monitoring police group was to be considered. An application for £40,000 plus was before us in one of the boroughs described in this debate as deprived. The GLC member was an old Labour member who had represented the seat for many years. The chairman asked if the committee would delay the decision until the member arrived as he would like to seek his views. The member arrived and was asked his opinion. He replied instantly. He said "I would not like it at all. I think it would be very divisive. We have no problems with the police in my constituency. No, I ask you to turn it down". The chairman said: "Thank you for your views". The grant was approved instantly.

To put the expenditure of this police committee into context, for 10 month from April 1983 to the end of January 1984 there were 72 applications for funding for anti-police activities, all but one were approved and £697,838 was granted. The women's committee refused five of 325 applications in the same time. Those approved were to cost over £4,700,000 and the total grant approved in that 10 months was £34,900,000 plus—just under £35 million. I mention these figures because many noble Lords who have spoken are imagining that we are talking about small sums of money. These are anything but inconsiderable.

The right reverend prelate the Bishop of London told us that this Bill would undermine responsibility. I am convinced it is because there is such a degree of irresponsibility already that this Bill is necessary. My dental surgery is in Islington; one of the deprived boroughs quoted as benefiting from ILEA. He may see things from a different angle to me. In over 25 years I have seen the precept for ILEA go up and up—it is 80p in the pound today—but not the educational standard, which has worsened since it went comprehensive.

When we interview applicants for the job as chairside assistant we apply two simple tests. First, we ask them to write their own name and address on a piece of paper. Most manage that, although sometimes it is hard to read. Secondly, we give them 10 patients' cards and ask them to file them in alphabetical order. The failure rate if about 75 per cent. What is wrong with the inner London education system that even the most basic standards are not achieved? The outer London borough that I represent, Enfield, provides a better education at something like half the cost. Many of the people living in that borough have moved there from inner London because they were not satisfied with the future offered to them in central London.

It is simplistic to think that the seven most deprived boroughs cause their own problems. They do now, but they are the result of socialist policies pursued over the years which produced vast areas of council housing, such as in Tower Hamlets, without industry, business or local opportunities for employment. Efforts to reverse the situation are proving very difficult and money is being thrown away in ill-considered and extravagant schemes.

The noble Lord, Lord Northfield, made the point in his speech that the divisions and barriers between local authorities and Government were unclear. They never used to be unclear. The GLC seems to have established conventions from 1964 to 1979, and it is only since then that it has attempted to be a mini-parliament; debating Liverpool, apartheid, Northern Ireland and all sorts of topics which have nothing to do with the running of London. It is this type of effect that has caused this Bill to become necessary. I regret that it should be so, but I see no alternative. I support the Bill.

7.57 p.m.

Lord Monson

My Lords, I take genuine pleasure in being able to support the noble Lord, Lord Bellwin, wholeheartedly at last, certainly on the general principles of this Bill though not necessarily on every tiny detail.

Almost exactly 3½ years ago I moved an amendment to the Local Government, Planning and Land (No. 2) Bill which effectively introduced the principle of rate capping, albeit with a flexible foil cap like that on a milk bottle rather than a wired-down champagne cork. More precisely, the aim was to limit rate rises to the rise in the cost of living index, unless the Secretary of State with the approval of the House of Commons, as shown by affirmative resolution, decided otherwise in a particular case. I was ably supported from the Government Benches by the noble Lord, Lord Ellenborough, whose expertise in these matters is far greater than mine and whom I look forward to hearing later this evening. However, we were told—albeit in the most courteous manner characteristic of the noble Lord, Lord Bellwin—that, apart from the predictable technical defects of our amendment, such an idea was totally unthinkable and wholly unacceptable to the Government.

Now at last, the Government have seen the light. The sinners have come to repentance; for which millions of ratepayers all over Britain will be grateful. This is not to say that rate capping is a perfect long-term solution; and to this strictly limited degree I agree with the noble Baroness, Lady Birk.

Obviously some improved method of financing local government is desirable in the longer term, but it is not proving easy to find the right method. The noble Lord, Lord Beloff, gave us a few reasons why this should be so. Even if we were to get rid of the practice of representation without taxation, which is at the core of the present problem, we should still have taxation without representation to contend with, by which I mean the dilemma of the business ratepayer. My noble friend Lord Harris of High Cross and the noble Lord, Lord Boyd-Carpenter, both dealt with this point.

It is possible to conceive of a situation in which every local government elector is, at the same time, a local government ratepayer or a local government taxpayer, but nevertheless an extravagant high spending council is voted into power—possibly as the result of a promise to create some 10,000 or 15,000 new jobs. Such an eventuality would be vastly less likely than under the present dispensation, but it could still happen on rare occasions. In such circumstances, business rates would soar, businesses would be driven out of the area, unemployment and poverty would soar in consequence and it is central Government that would have to step in to pick up the pieces. It is impossible to conceive of circumstances where central Government could totally wash their hands of what goes on in local government, unless a region like the self-styled "People's Republic of South Yorkshire" were literally to become a wholly self-governing and, therefore, self-financing republic; and I do not think that that is very probable.

Some people have claimed that this Bill is unconstitutional. Frankly, this is rubbish. I think that the noble Lords, Lord Boyd-Carpenter and Lord Broxbourne, said as much. We have no written constitution in this country. Our unwritten constitution evolves automatically year in and year out, according to the demands made on it. Our present system of local government, is I believe, no more than 100 years old. France traditionally has a far more centralised system of government than we have ever had in this country or are likely ever to have, even after this Bill becomes law. But surely, nobody would claim seriously that France is a dictatorship.

For this reason I think that we should resist all attempts to limit the general powers contained in Part II of the Bill. Why should not ratepayers in Conservative-controlled areas, in the unlikely but nevertheless possible event of their councillors being extravagant; why should not ratepayers in Liberal-controlled areas and even those in Independent-controlled areas,—inconceivable though it would be for Independents to put a foot wrong!—be protected just as much as ratepayers in 20 Labour-controlled areas? Any agreement to restrict these powers would risk giving credence to Labour claims that Labour councils are being singled out for victimisation.

Let us look again at exactly why this Bill is necessary. If any Chancellor of the Exchequer were overnight to put up the price of beer by as much as 6 pence a pint or to raise the annual road fund licence by as much as £20 per annum at one fell stroke, there would be hell to pay and the survival of the Government might well be threatened—even though neither of these measures would add more than £20 per annum to the average family's expenditure. However, let that same family's rates go up by five times that amount, by £100 per annum, and there would be an almost, not quite, deafening silence. People will generally put up with it and, indeed, it is considered rather bad form not to put up with it. The reason for this is obvious. Virtually everybody pays tax at the national level. Even non-smoking, teetotal, non-motoring, retirement pensioners pay VAT on many of their purchases. In contrast, only a small minority of the electorate pays rates and even fewer pay rates in full. Until this anomaly is removed it is vital that ratepayers retain the protection conferred by this Bill.

May I make one point to the right reverend Prelate the Bishop of London, who was understandably concerned about the dwindling resources that would be available for certain worthy voluntary bodies. Is it not more seemly for the ratepayer to make donations voluntarily to such organisations—which this Bill will enable him to do by leaving more of his own money in his own pocket—than that he should be forced to do so unwillingly, at one remove, through the agency of the local authority?

I am bound to say that it is a pity that the form of this Bill has to be restrictive rather than permissive; in other words, that the local authorities are forbidden to ask for more than X or Y. From every point of view, not least the public relations point of view, it would have been better if instead the ratepayers had been absolved from the legal requirement to pay more than X or Y so that, for example, a ratepayer whose rates last year totalled £800 would not legally be required this year to pay more than £840, assuming inflation at 5 per cent. His council could still demand as much as they liked, perhaps £900 or £1,000 or £1,200 and, if the ratepayer wished, he or she could pay the entire sum. But he would not be obliged to pay more than £840.

The noble Baroness, Lady Gardner, seemed to be under the impression that the Bill already provides for this. I hope that she is right and that I am wrong, but that is not the way I interpret it. Technically difficult though this might be, it would have made the Bill even more widely welcomed and, what is more, it would have prevented the dangerous possibility, to which the noble Lord, Lord Bottomley, drew attention in his magnificently delivered maiden speech, of a future Government of an opposite political persuasion to this one forcing councils to spend more rather than less. However, it is probably too late to do anything about this now, assuming that I have interpreted the Bill correctly.

My Lords, I have always believed that this Bill should have been entitled the "Ratepayers' Protection Bill". It would make its purpose far more easily understood by the general public, and even more popular than it promises to be already. But I read not so long ago that the honourable Member for Hampstead, Sir Geoffrey Finsberg, had independently come to much the same conclusion and had suggested that it should be entitled the "Protection of Ratepayers Bill." I think that his title trips slightly more easily off the tongue than does mine. I therefore propose to table an amendment to change the Short Title of this Bill to that suggested by the honourable Member for Hampstead. I hope that your Lordships will seriously consider supporting it.

8.9 p.m.

Lord Campbell of Alloway

My Lords, with deference to those of your Lordships who oppose the principle of this Bill, and in particular to those with years of experience in the affairs of local government, such as the noble Baroness, Lady Stedman, and other noble Lords, surely the speech of the noble Lord, Lord Harris of High Cross, on the meretricious aspect of local democracy, met a main criticism; and, surely, no doubt the exposition by my noble friend Lord Boyd-Carpenter on the constitutional position, the overall economic policy and the business wastelands devastated by high rates, met another. As to the constitutional issue, not only do we have a unitary system but to carry a reasoned amendment against the Government in the circumstances could, in itself, constitute a serious breach of convention.

The power to levy rates but not to tax derives from the Municipal Corporations Act 1835. To say that the institution of local government is but "a creature of statute" means only that it has no prerogative or common law powers. There is no pejorative connotation whatsoever, which the noble Baroness, Lady Birk, appeared to resent. It is the challenge of this mere handful of "city states" to central authority which accounts for three-quarters of the overspending which must be met. For not only have the traditions of local government broken down, as stated by my noble friend Lord Bellwin: the traditions are openly flouted and traduced by these high spenders, afflicted by the motivations of Marx or the madness of Thrasyllus, who, as noble Lords will remember, went down to the Piraeus to imagine that all ships which entered the port were his own. Unless we now codify what was conventional we shall do no more and no less than to abrogate constitutional government, and we shall sell out to those whose interest lies not so much in the lawful conduct of local affairs but in acts of civil disobedience and confrontation. As every other measure, every other effort, including exhortation, has failed, there must be a compelling case for the introduction of these interventionist measures of selective incidence.

I, too, with the noble Baroness, Lady Gardner of Parkes, and with my noble friend Lord Bellwin and others, regret that voluntary means have failed and that legislation should be necessary. But how else shall we prick this bubble and put these cashiers to flight who act in disregard to the minority interests of 35 per cent., who pay full rates? How else shall we who pay over half of the money spent, without any say whatsoever in the spending, meet this challenge to central authority on matters which lie within the province of government? How else shall the burden upon business, which pays about 45 per cent. of the rates, be eased, the exodus stemmed and confidence in investment regenerated, this both in the local and national interest?

With respect to the noble Baroness, Lady Birk, this reasoned amendment appears to proceed upon a series of serious constitutional misconceptions which are then incorporated and elevated into the fabric of the amendment as reasoning. My noble friend Lord Boyd-Carpenter has stigmatised the call for a thorough reform of local government finance as incredulous. He has laid stress on the substantial delay which requisite consultation would involve. In this, I regret I cannot share his view if it relates to the matter of principle. It is a problem which one day can be resolved, which has been ducked for decades; but, of course, as a matter of timing, this proposal affords no viable alternative to the Bill. The noble Baroness, Lady Birk, said that there is (I quote) "something wrong with local government finance"—and so there is. What is wrong is that the delicate mechanism of that constitutional balance in which rights, obligations and conventional restraints are weighed has suffered a rude jolt, and the balance is out of true. This mechanism must be repaired and this balance reset to strengthen, preserve and, indeed, protect the ethos of the institution of local government according to tradition and convention.

As the noble Lord, Lord Bellwin, said, local priorities upon matters which properly lie within the province of local councillors are in no wise affected, and there will be no weakening of local democracy, as was suggested by the noble Baroness, Lady Birk. I take on board the point made by the noble Baroness, Lady Stedman, that there should be some uniform procedure which takes fair account of changes for the setting of targets. No doubt Her Majesty's Government already have this in mind. But this affirmation of authority on the part of central Government in no way damages the relationship between central and local government; quite the reverse. It is only timely and requisite that this measure to preserve such relationship as exists, or did exist, between local and central government according to constitutional custom and usage, should receive the approval of your Lordships.

8.16 p.m.

The Earl of Halsbury

My Lords, if all the propaganda shrapnel which has showered on me in the last few weeks had been metal rather than paper, I should be as full of holes as a pepper pot. I have been trying to learn what it is all about and I am most grateful to several noble Lords who have organised tutorials for various groups in this House—the noble Lord, Lord Sandford, the noble Lord, Lord Tennant, on behalf of the CBI, and even the noble Lord, Lord Bellwin, himself, who gave some of us a tutorial on what is at stake. The hour is late, so I shall be brief. Unrepentantly hawkish as I am, I wholly support the purpose of Part I. A Government must govern; rebellious irresponsibility must be clobbered—to my mind it is as simple as that. We cannot have 400 different councils initiating 400 different national policies for the country at their pleasure. They do not exist in order to be decorative or to have fun kicking their heels and playing politics; they exist for the purpose of relieving central Government of the heavy burden of administering central policy in localities each one of which has unique features differentiating it from its neighbours, and requiring central policy to be modified in the light of local knowledge but sticking as closely thereto as possible. In many of these contexts, party politics, of which we hear so much, are quite irrelevant. There can be no specifically socialist as opposed to capitalist method of sewage disposal.

Having said so much, I come to the first part of the amendment, and here I join issue with the noble Baroness, Lady Birk, over her choice of words when she spoke of power sharing. There is no sharing of power as power is shared between the House of Lords and the House of Commons on a basis of traditional amity between the two Houses. What there is, is delegation of authority—quite another matter. The noble Lords, Lord Boyd-Carpenter and Lord Broxbourne, both hit the nail on the head; what the Queen in Parliament can enact, the Queen in Parliament can rescind—and that is all there is to the matter. One can delegate authority, but not responsibility to the source of one's own; that is simple textbook managerial stuff with which I used to coach junior management when I was part of senior management. Parliament is responsible to the nation, for seeing its delegated powers are properly used. To effect this, it must require delegates to account for their use of it. This is a duty, not an optional extra. Again the noble Lord, Lord Broxbourne, hit the nail on the head when he said that, in effect, delegation without supervision is the equivalent of abdication. I cannot agree with the first part of the amendment. The second part of the amendment relating to the form of local government finance is quite another matter. The one feature common to all the propaganda with which I have been showered is that the reform of local government finance is long overdue. It is a can of worms which no Government has been prepared or willing to tackle. What are we waiting for? Have we not had the Maud report, the Layfield report and three Green Papers on the subject? What are we waiting for—another report recommending still further unacceptabilities? I want to see some action and not just an exercise in hotching the potch.

Central Government are using local government as an agency for implementing national policies. It is not clear to me, in the light of what I have read or been told, whether the terms of this relationship are clear and unambiguous (as they should be) or whether the incredible complexities of the rate support grant—the block grant or GREA—result in central Government welshing or not welshing on their due contributions. How do Government, for example, discriminate between irresponsible high spending, on the one hand, and inadequately supported high-spenders in poor districts, on the other hand? If they have to put an inadequate support grant on to the rates, is it because the nature of the support grant was wrong in the first instance? Because of the complexities of the system, it is quite impossible for the laity to gain any clear opinion on this; and the whole system is so complicated. I cannot imagine how voters in local government—we hear a lot about democracy—can possibly know what they are voting about.

I am most impressed with the unanimity of what I have listened to and heard of. The complexities of it all leave me bereft of any fixed opinion. This being so, I believe that the Government need stimulation by being made aware of the extent of the very general displeasure at the situation that they, equally with their predecessors—there is no discrimination here between one Government and another—have acquiesced in. I shall therefore vote for the concluding phrase of the amendment, excluding its first part, while supporting Part I of the Bill.

As to Part II, I want to say only this. Wherever there is power there is a struggle for the exercise of it. In Cabinet there is a power struggle between Left and Right or between wet and dry, whichever you prefer, and in Ministries there is a power struggle between the Minister and the immortal Sir Humphrey Appleby. In Parliament there is a power struggle for control of the legislature, and also—and this is what I wish to emphasise—there is a continuing power struggle between Parliament and any Government of the day. Governments are always tempted to exercise more power than Parliament think is proper, and Parliament is always tempted to intermeddle with more detail than Government thinks is wise. Somehow the struggle between the two parties has to be resolved, and for this reason I believe that Part II should lapse after a period which would give Government time to reorganise the finances on such terms as would make Part II unnecessary henceforward.

The noble Lord, Lord Boyd-Carpenter, quoted a phrase from Bernard Shaw which he attributed to the King in "The Applecart". May I remind your Lordships of another line from that same King Magnus when he was at loggerheads with his Cabinet? He said: Think once; think twice; for your danger is not that I may defeat you, but that your victory is certain if you insist".

8.24 p.m.

Viscount Massereene and Ferrard

My Lords, I support the Government wholeheartedly. I have been absolutely bombarded, as have many of your Lordships, with volumes of paper. It has been flung at me from all sides and I am almost dizzy with it. However, it has not altered my opinion at all, which was made up long before all these papers came. I do not know whether that is a good sign or a bad sign. People say that wise men change their minds. Perhaps I am not wise, but I have not changed my mind over this issue.

I am going to be very short because almost everything has been said, but I should like to make just a few remarks about the high-spending councils. Certainly I am not going to refer to the vast majority of county councils, who on the whole behave themselves excellently. I think it is unfortunate for them that the few high-spenders, numbering perhaps 12 or 16, have rather let the side down.

Three of the things I have been bombarded about by chiefly Opposition organisations are, first, that the Government's Bill is undemocratic; secondly, it is unconstitutional—we have heard a lot about that—and, thirdly, there is reference to a lack of accountability to the ratepayers. Might I just say that what has really surprised me has been the reference to its being undemocratic because, if you are really to be logical about it, local government is not very democratic. As we all know, only one-third of the electorate pay full rates and I believe that, as regards the GLC and one or two other big metropolitan councils, it is only one member of the electorate out of three who pays rates. You cannot really call that very democratic—at any rate I certainly cannot, but perhaps some noble Lords opposite can.

As we have heard this afternoon, all businesses in fact account for 60 per cent. of the rates. Part of the rates is paid for by the Government and the other part is paid by domestic householders, but, as we have heard, these businesses have no vote and so it cannot be said that that is democratic. Businesses, I understand, according to the CBI, supply nearly 60 per cent. of the rates, and last year I think the sum was £6,000 million.

May I continue for a short time on the GLC? There is no doubt that Mr. Ken Livingstone has a sense of humour, but I think he uses it in the wrong direction. What the GLC budget is I do not know, but presumably it is well over £1,000 million a year. Anyway, I understand it is far larger than that of one or two European countries. Who controls that? Are these men, the members of the GLC, with due respect, really fit to control such vast sums of money? Have they had the experience? By their actions in the last year or two, I would say no.

We heard my noble friend Lord Boyd-Carpenter say that since being in office the GLC had spent £30 million to support some pornographic societies—some appalling societies and organisations. It is absolutely intolerable, I think, for a supposedly responsible council to support such organisations. It would be far better, instead of spending that £30 million on those organisations which are really decadent and pornographic, to have spent it on the disabled—

Lord Birkett

My Lords, will the noble Viscount give way? I listened to the noble Viscount's speech. I cannot believe that he said £30 million. Would he like to confirm that? I cannot believe that could possibly be true.

Viscount Massereene and Ferrard

My Lords, £30 million included quite a number of organisations: yes, I said that—including, I think, Black Power and organisations of that sort. Also there was quite a lot of literature—rather subversive literature. That is most irresponsible.

We have had quoted in this House today the old saying, "No taxation without representation." In fact, many of the electorate in local government have representation but without local taxation, and that is surely undemocratic. I shall now leave aside the question of whether the Bill is democratic or undemocratic. I shall also leave out the constitutional question, because we have heard a lot about that. It is completely constitutional for the Government to act in this way because, as we all know, local government derives all its powers, financial and otherwise, from Parliament.

I should like to point out that health, sewage and water have been removed from local government. If the Government were to remove education from local government, they could easily do that and set up a board. That would relieve local government of a lot of expense. But there has been no cry about its being unconstitutional if that happened. Regarding account-ability, all the Government are doing is ensuring that a very small number of high-spending councils do not overspend, and do not send into liquidation many of the businesses in their areas. I should have thought that by doing that the Government were showing great accountability to the ratepayers—far more account-ability than the councillors.

I consider that quite a few of your Lordships rather exaggerated what the Government are doing in taking responsibility away from councils. As we have heard today, a council abusing the spending ceiling under the selective scheme cannot be penalised unless the House of Commons agrees; and the majority of councils will not come into that. Anyway, councils with a budget of under £10 million will not be affected at all. Regarding the reserve powers, there has to be a resolution of both Houses before they are imposed on a council, so I do not see that that is such a dastardly act by the Government. The Government are really trying to protect councillors from the folly of some of the actions which they might otherwise take.

Before I end, I should like to remind the House that what is in the Bill was in the manifesto. It was hinted at in the 1979 election and was also in the manifesto of 9th June last year. The public were promised that they would be relieved of ever-increasing rates, and the Government are carrying out that promise, so I do not see why anyone should object. I heartily support the Government on this Bill.

8.35 p.m.

Lord Brooks of Tremorfa

My Lords, we do not have before us a Rates Bill. That was promised in 1974 in the event of a Conservative victory in the general election. This Bill seeks to give power to central Government to limit the rate levying powers of local government. The debate that we are having today about local government is not merely on the question of money, as we are led to believe, but on how local authorities use that money and how local authorities rate for local needs. The debate is about the relationship between central and local government, about local government accountability and about the level and kinds of services that local authorities provide.

The narrow terms of this debate have to be challenged. The Government justify this Bill by claiming that local government expenditure is out of hand. But between 1975–76 and 1980–81, local government expenditure in the United Kingdom has fallen by 16½ per cent. Meanwhile, central Government's expenditure has risen by 7½ per cent. But the Government are talking not about the real level of spending, but about whether local government is meeting the targets set for it.

In 1983–84, local authorities in England spent 3.8 per cent. over their target for total expenditure; in Wales the figure was 1.7 per cent. and in Scotland it was 4½ per cent. The targets are meant to be averages and when you look back over the past six years you find that local authorities fluctuated above and below their set targets within what is usually a very small margin. The total level of overspending, or rather deviation from Government-set targets, for 1983–84 is more or less equal to ¾ per cent. of total public expenditure as planned in the February 1983 public expenditure White Paper. So we must not be beguiled by the image of big spending, profligate local government.

The Government make a second claim: rates have shot through the ceiling. Between April 1979 and 1983, rates rose by 91 per cent. and the retail price index rose by 55 per cent. But if you look at local authority spending as a whole—that is, income from rates and grants—it has risen by 54 per cent., which is just less than the retail price index. Government support for local authorities has been sharply reduced and that is why rates have gone up. You cannot pluck a figure out of the air without explanation. Rate rises make sense only when you consider cuts in the rate support grant and the penalty system. The grant percentage—that is, the level of grant as a percentage of local expenditure—has gone down from 66½ per cent. in England and Wales to 52.8 per cent. since 1975. This is a massive transfer of taxation to local rates. Local authorities have had no choice but to increase rates.

The Government make a third claim, which I have heard repeated in this Chamber today: rates are a serious problem for businesses. Much is made of the proportion of rates paid by industry which has no electoral rights in the way that domestic ratepayers do. But how serious is the burden on industry? The noble Viscount who preceded me in this debate said that 66 per cent. of rate expenditure is borne by industry. The noble Baroness, Lady Young, said the same thing some weeks ago. But the director of the London Chamber of Commerce has recently said that it is 40 per cent. We have therefore lost 20 per cent. immediately.

In a learned article today in The Times it has come down to 26 per cent. In my own local authority, rates are distributed in the following proportion for 1983–84: 43 per cent. paid by householders, 27.2 per cent. by commerce, 21.8 per cent. by other ratepayers and 8 per cent. by industry proper. If one looks at local authority spending in Wales as a whole, industry and commerce contribute 12 per cent. of their spending. Those are the facts. For the benefit of noble Lords who keep using this figure of 60 per cent., may I say—the CBI has been told over and over again what they are doing— that they are lumping in the whole of the non-domestic element and saying that industry and commerce are bearing that expense. They are not. They are taking into account local authority buildings, public buildings and buildings for which industry and commerce have no responsibility whatsoever. But what do industry get for the money they pay in rates? What would industry do without the roads we build? What would they do about the refuse which we collect? How does one measure the contribution of youth training and education to industry?

The Rates Bill empowers the Government to select 12 to 20 high spending local authorities for rate capping, and it provides in the much discussed general powers for the imposition of rate capping on all local authorities. But what counts as high spending? Are we to use the grant-related expenditure assessments as the yardstick? If we do, we come up with the wrong list politically, hence the anxious questioning by Mr. Bowen Wells, the Conservative Member of Parliament for Hertford and Stortford in the other place, of the Under-Secretary of State for the Environment in January of last year. He said: Will my hon. Friend undertake that GRE should not be used as a means of keeping under control, or putting a maximum on, expenditure of local authorities, because that denies local democracy? The Under-Secretary of State for the Environment replied: My hon. Friend has got it wrong. That is not the function of the GREA, nor should it be interpreted as such". But if the Government use excess spending over targets, they will be accused of choosing arbitrary figures; so the Government will have to find a way of linking up the hit list to the GREA related method of assessing spending—a little bit of creative accounting or juggling, or even fiddling? What about the practicality of civil servants scrutinising the budgets of local authorities? A bureaucrat's delight, perhaps, but it does nothing for local democracy. It was Mr. Michael Heseltine who, as Secretary of State for the Environment, said: I believe that an effectively functioning local democracy can monitor the activities of local councils far better than civil servants at Marsham Street". Will the Rates Bill save money? Many have argued that the Bill will fail to bring down aggregate local government spending. That is not an argument I intend to enter into tonight. I want to concentrate on the implication that this Bill has for the relationship between the centre and the localities. It was Mr. Tom King who said in the debate about the original block grant proposals: There are things that one could do in local government and ways in which local government finance could be approached which would substantially undermine the autonomy and the freedom of action of local authorities. Some people have suggested imposing cash limits on every authority. That would be a very serious step indeed". The Bill creates a dangerous precedent. It encroaches on a local authority's power to levy its own rates at a level which it thinks appropriate.

Many have said that this is a constitutional issue—hence our special interest as the House of Lords. It is about the constitutional relationship between central and local government. Many of your Lordships may have seen raised recently the question of Her Majesty's role as Head of the Commonwealth. Her title has no constitutional character, nor does it have any statutory responsibilities; but few would challenge her right, her role, her function, as Head of the Commonwealth, to speak on behalf of those countries. It is a convention which is universally accepted. So it is with local government. Central Government lays out the duties, the powers, the national objectives for resources and services within local authorities. Local authorities are elected bodies with powers beyond the mere administration of services. Local authorities are not meant to be the mere agents of central Government. As the Redcliffe-Maud report on local government said in 1969: Local Government is not to be seen merely as the provider of services". No one denies the sovereignty of Parliament, but there are different ways in which that sovereignty can be exercised over local government. For this Government their legitimate concern in local government has come to mean direct control—direct control in the selective power to cap the rates of chosen authorities, direct control to impose such require-ments relating to local authorities' expenditure or financial management as the Secretary of State for the Environment thinks appropriate. We seem to have forgotten what the words "local government" mean. Local authorities are the only elected bodies outside the House of Commons with executive power. They express the diversity of the United Kingdom. They allow our regions—Wales and Scotland—a modicum of autonomy. They are closest to the people they represent. They are best able to assess local needs. They are, above all, the components of a diffused power. We are talking about local democracy—not a perfect local democracy, but not something to be demolished with a sweep of the hand. This Bill embodies a dangerous concentration of power which destroys the very character established by convention over hundreds of years of local autonomy.

My final contribution to this debate is to touch on what rate capping can mean for an individual authority. What happens to a local authority caught in the double bind of drastically reduced block grants and deprived of the power to raise its own revenue? To maintain the services it is obliged to maintain and to cut expenditure is Hobson's choice. What goes on in those circumstances? Nobody is suggesting that old people will be turned out of their homes on to the streets. Children will still be educated. We have heard a great deal about the voluntary sector—the voluntary movement. This is the area which is going to be affected: the local theatres, the local art galleries, the dance groups and the arts centres. In Wales, many national institutions rely on local government for their survival. For those people who cannot rush off to the National Theatre or to the Barbican in London this is the only contact that they have with the arts: the late-night and weekend facilities in libraries, parks, sports centres, youth and old people's centres. I know this from my own experience as chairman of the finance committee in South Glamorgan. These facilities are not just the icing on the cake. Leisure, arts, the environment are what make the difference between life and drudgery.

I am not painting the blackest picture, either. Most of the local authorities on the suggested hit list for rate capping fall into the top 20 most deprived urban areas. Newham is third, Lambeth fourth, Haringey sixth, Islington seventh, and the list goes on. Public opinion is weighted against the Government's proposals. All the local authority associations have rejected the Rates Bill. Major figures on the Conservative Benches in the other place, The Times, the Financial Times, the Guardian are all ranged together in opposition to the Bill. We must not let ourselves be bought off by these concessions. These do not change the substance of the proposals. The Government are implementing their own dogma without regard to criticism. Their rhetoric of freedom is meaningless. Whether it is the sale of our national assets, lock, stock and barrel, to reduce the public sector borrowing requirement or the obliteration of the trade unions, or the botch created by the so-called rationalisation of housing benefits, or the Rates Bill, the Government are plucking issues out of the air in an ad hoc fashion. It is Government by "ad-hoc-ery"; dogmatic "ad-hoc-ery". I simply do not accept that the Government have no alternative but to introduce this Bill. I believe that we have a duty to call for a fundamental review and reform of local government finance.

I finish with this thought. In 1925, Mr. Stanley Baldwin called a special meeting of the Cabinet to discuss a Private Member's Bill which aimed at banning the levies paid by the trade unions to the Labour Party. He had an overwhelming majority in Parliament. Every member of the Cabinet argued that the Bill must be supported. Mr. Baldwin disagreed and said that he would tell Parliament and the nation that his Government were not prepared to use their massive majority to steamroller through a Bill which had provoked acute controversy and bitterness. That is the wisdom which is called for from a Government in those circumstances; it is a wisdom that is lacking in the present Government.

8.51 p.m.

Lord Gisborough

My Lords, I should like to start by congratulating the noble Lord, Lord Bottomley, on his maiden speech. He is an old friend and we had the great fortune to travel through China together two years ago. I, together with many others, was so glad when I heard that he was to join us, and I know that we shall benefit from his wisdom.

I thoroughly support this Bill. We have heard figures—and many figures vary—showing how local authority staff were first cut in the past four years and that their numbers have now started to rise again. We have heard various figures showing how rates have risen more than the RPI—I have a figure of 91 per cent. compared with 55 per cent. Sheffield is up 173 per cent. and Greenwich up 212 per cent. Many others have been quoted. All this has occurred during a recession.

The high rates do bear very heavily on people, particularly in London. There is no doubt about that. I have had much correspondence with people in Chelsea. There are many elderly people living there on fixed incomes who find it extremely difficult to stay in the flats and homes in which they have lived for so long. Some are having to move out and are desperate—particularly in the Chelsea area.

Outside London, high rates have encouraged businesses and domestic ratepayers either to set up work outside areas of high rating or to live outside those areas—making it forever worse for those who are locked into the high rating areas. While industry and householders have been squeezed during the recession, and while industry has had to cut back with great difficulty and streamline itself, some councils have ignored the exhortations of the Government and have let rip with their expenditure, and have deliberately spent on frivolous items.

Whatever anybody says, high rates are a severe threat to industry. My own particular example is an hotel in which I have an interest. During the recession the rates have been increased regularly—we are in a high spending area. We have had to increase prices. This has reduced our business, and we have therefore had to reduce our staff quite considerably. Any increase in profits has always been swallowed up by the rate increase. In fact, our rates are the biggest single cost we have. If local authorities will not respond to the Government's request for moderating their rate increases, then it is high time that such a Bill should be introduced and I wish it all the best luck. Meanwhile, the Bill will not affect all those local authorities which have reasonable rates and have not put them up unreasonably.

I am delighted that businesses are to be consulted by local authorities during the formative process of the rates, but one must realise that the business community has complained each year to local authorities which are high spenders, and not a blind bit of notice has been taken of them. All they have got is a free cup of tea at the meeting. Not only must businesses be able to complain to local authorities but they must have recourse to the Minister if the local authorities ignore their views. We have heard how non-voting business rates pay for something like 60 per cent. of the rate bill. Perhaps this is an acceptable figure during prosperity, but in a recession high rates can be a very serious factor. They have raised costs and have inevitably raised prices, they have reduced competitiveness and volume, and they have reduced jobs. Businesses have no vote, and therefore they must have an effective say in the formulation of rates.

I am glad that an explanation of the rates is to be sent to all householders; that is to say, not only to those who pay the rates. I would like to suggest that this may provide an opportunity for some very political messages to be sent at the same time, and perhaps this point should be taken into account by the Government.

In some boroughs, rents and rates are unpaid by a huge number of householders. I wonder whether consideration should be given to the question of whether it is fair that householders who persistently refuse to pay their rents and rates should be able to vote on how to spend other people's money.

There are other quite genuine causes of concern and I should like to give a couple of examples—both of which apply to my own county of Cleveland. In education, for example, as well as the GRE, rural counties receive an extra weighting on account of the spread of their schools and the inevitable inefficiency of small village schools. Likewise, metropolitan boroughs get an extra weighting on account of ethnic minorities who have to receive extra tuition in the English language and who also have a certain unemployment problem.

In Cleveland, we have no ethnic population and nor do we have any form of spread. Therefore, we receive very little extra weighting. Yet Cleveland has the largest number of unemployed in the whole mainland. In some of the villages having a population of around 3,000, unemployment rises up to 60 per cent. I therefore feel that the county has been correct in devoting extra resources to the schools in such areas, in order to push the young in those villages out of the poverty trap. Surely half of the weighting that is paid in metropolitan areas is in respect of the ethnic element and the other half is for unemployment. While statistically we may not be due the extra weighting, I believe that the enormous unemployment in Cleveland should account for as much weighting as the ethnic population.

Another example concerns the fire risk. I am quite sure that my county could make economies and must do so, but we have some extraordinary statistics in Cleveland. Some 13 per cent. of our land area is a high fire risk—the top risk. Out of 13,000 hectares in the country, 7,000 are in Cleveland. That is to say, 60 per cent. of the high risk fire areas of the country are in Cleveland. In addition, a figure that does not show up on statistics is the extra hazard due to the proximity of the fire risk to habitation. As in Cleveland, there must be other counties with similar problems—particularly Humberside, although on a smaller scale.

In spite of that terrific risk, our high risk fire areas are weighted the same as "A" risk areas, which puts us in a very invidious situation. High risks should really be rated at one and a half times more. The point of this is that it is necessary to be realistic about particular problems, even though they do not show up on statistics—and it will be extremely difficult for Whitehall to generalise over the whole country, as between one county and another.

There is concern regarding the timetable for the budget. The rate capping for 1985–86 is going to be determined and notified in December 1984. This will leave about eight weeks for counties to discuss their rate with the Secretary of State. Most major authorities start thinking about their budget in about October, for completion at the end of February. Therefore, it may be found that the timescale allowed will be extremely tight indeed.

There is also concern about the Minister agreeing the rate with counties. If the rate is not agreed there will be recourse, as the Bill says, to Parliament; but knowing the complexities of local government finance (which many noble Lords know much better than I) and the realities of the parliamentary timetable, I wonder how the detailed arguments for each of the authorities which do not reach agreement with the Miinster will get time to be debated on the Floor of the House in another place.

I now come to those who have talked about the constitution, disfranchisement, making local elections look meaningless, endangering democracy and destroying the very existence of local government. All those phrases have been used, but what nonsense they are. We have heard about the constitutional matter very adequately from my noble friend Lord Broxbourne, and from many others. Rate capping was in the manifesto, and if ever a manifesto was confirmed by an electorate, this time with a huge majority, surely the country knew what it was getting. Central government must be allowed to govern and if the local authorities deny that right they must expect to be forced into it. We have heard about disfran-chisement of voters. Of course, the majority of voters do not pay rates—two in every three. The huge majority of the rates is produced by industry and, of course, by Government. Therefore, disfranchisement already exists.

It is nonsense to suggest, as it has been, that there will be interference in the detail of how local government employ this person or that. It is only the overall limit of cash which is to be controlled. This Bill is only going to legalise the amount of rates to be raised, which was previously accepted by Government exhortation. As Alec Samuels, at the University of Southampton, said, the over-reaction to this has been absurd. Another press report on 17th January said: The attempt to depict rate capping as an attack on the constitution is just humbug.

9.2 p.m.

Lord Broadbridge

My Lords, I wish to urge you this evening to support the amendment in the name of the noble Baroness, Lady Birk. It is not a wrecking amendment and is about the only constructive thing we can do with this objectionable Bill at this stage. For in 1974, or thereabouts, the present Government promised a searching review and reconstruction of the rating system, but they have ducked the issue and now, 10 years later, have got themselves into a corner, to extricate themselves from which they have produced this Bill. Doctors who deal with alcoholism have an expression that all you get if you give strong black coffee to a drunk is a wideawake drunk. Our rating arrangements in this country are in a state of drunkenness and this Bill is the Government's strong black coffee.

The rating system is full of inequities. Council services downstream suffer from financial cuts while town hall staffs grow bigger. But this Bill will not get at that. What administrator wants to administrate himself out of a job? In one inner London borough debt repayment, which has to be met, is 44 per cent. of income. Salaries are a further 31 per cent.—and cutting jobs leads to an even greater expense in redundancy payments in the shorter term. This leaves only a quarter of the total available for consideration for cuts. Much of this goes in providing services which are statutory services—such as child care—and have to be provided by law; leaving an even smaller fraction of total income available for cost saving. I believe that many labour under the delusion that most of the rating bill is a sort of optional luxury, most of which does not really have to be levied, collected and spent. The fact is that nearly all of it has to be spent on debt, salaries and statutory services before we get to the options.

Before I sit down I should like to re-emphasise one more inequity; which is the lack—for want of a better term—of a commercial vote. In this perhaps I have something in common with the noble Lord, Lord Gisborough. Unless you live over your business as an office, shop or an industrial user, you have no say in the election of your council which administers the rates. As a result, in some inner London boroughs about two-thirds of the voters qualify technically as ratepayers without paying full or, indeed, any rates as a result of rate rebate. If you are baking a pudding and forget to put in the plums then you have had it; the only thing to do is to chuck it away and start again with fresh ingredients. That is what the Government should do now. I again urge your Lordships to support the amendment tabled by the noble Baroness, Lady Birk.

9.6 p.m.

Lord Mottistone

My Lords, I should like to include myself with those who have offered congratulations to the noble Lord, Lord Bottomley. It is remarkable that he was able to make what must have been an uncontroversial speech, by our rules, on a very controversial Bill without anyone noticing whether he had or not. Let us hope he gives us splendid speeches in future. I should also like to give my thanks and congratulations to my noble friend Lord Bellwin on the Front Bench. I think that only the noble Baroness, Lady Birk, has done that. I thought he gave a very' good introductory speech to lead us into this Bill. As usual it was a very mild one, although perhaps his winding-up speech will not be quite so mild.

I shall be as brief as I can. To take the amendment first, the constitutional issue was very well dealt with by my noble friend Lord Broxbourne. That, and the undermining of authority and the weakening of local authority features, were very skilfully dealt with by my noble friend Lord Boyd-Carpenter, and, indeed, by many other noble Lords. They have also been dealt with very well in a couple of excellent articles in The Times—one on 29th March by my honourable friend Mr. William Waldegrave, entitled "Power house or parish pump?", and one in today's Times entitled "Rate-capping: why all the fuss?" by Professor Nevil Johnson. I believe that everybody should have read those articles, particularly the second one, before they took part in the debate. Perhaps we should then have had no speeches at all. It was interesting that the noble Lord, Lord Brooks of Tremorfa, included The Times among those who were against the Bill. Those two articles would indicate that it is not wholly against it, or perhaps the noble Lord is misinformed.

I turn now to the Bill. I have been advised on it by the CBI, a fact which I should tell your Lordships. I welcome the Bill for the restraining features of Part I, the reserve powers in Part II and the obligations for consultation with industry and commerce in Part III. A few amendments may come forward on detail, but in principle all those points are much welcomed by industry.

Although other noble Lords have done so, I too should like to say a few words about the effect of rates on industry. It has not perhaps been put in this particular way, and it is worth taking into account. First, business rates as a cost to industry rose by over 75 per cent. between 1979 and 1982, while all other costs to industry, and the retail price index, rose by under 50 per cent. Rates were going up then. The year 1982 seems to be the last full year for which I have figures. The situation has probably become worse since then, particularly in the high spending areas.

Next, business rates do not in the main act as a payment for services. The noble Lord, Lord Brooks, said that they did, but I think that your Lordships will agree that many local public services are not directly used by business. For one thing, some of the bigger companies handle their own refuse collection. For another, education, which, as everybody knows, represents the largest single percentage of all local authority costs, is not of direct benefit to business. It is a benefit to employees who are parents but not to the business itself. It is fairer to say that rates for a business are a tax and not rates in the sense that they are meant to be to the householder. As a tax they do not, as is generally the case with other taxes, relate to ability to pay. For example, corporation tax relates to profits made; income tax relates to the income that somebody gets. But business rates are paid regardless of the profitability of the company, and thus they are a bad tax.

Although I do not go along with the amendment, I go along with many noble Lords who have spoken, including my noble friend Lord Thorneycroft, who say that this Bill is a holding item to deal with a specific point. But I think that the Government—and certainly they have promised to do this in two successive elections—need to go at the whole business of rating again and certainly business rating. Domestic rating is rather different but, as I have tried to indicate, business rating is really a form of taxation. Perhaps it should be treated as such and handled differently for that reason.

It would be very nice if my noble friend the Minister could say that the Government will not drop the idea of looking at rates altogether just because this Bill is before us, but will have it in mind as something to tackle. They may not reach a conclusion. I think that we are all agreed that it is a frightfully difficult matter. We had the business of the Green Paper in the previous Parliament. We did not get very far, except to know what would not do. We must not give up. We must get it solved somehow.

Coming back to business rates, I have one other point to make. An enormous number of the bigger businesses, and indeed many of the smaller ones too, are especially strong in the areas of the high spending local authorities. In supplement to what I have been saying, they are particularly badly hurt by the uncontrolled nature of the rates. In all respects uncontrolled business rates are profoundly bad for industry and hence act strongly to make our industry uncompetitive in the world market, to the detriment of the country as a whole. I think that it is fair to say that it is only when industry is fully competitive that the country has the resources with which to fund all the services—the social services, the National Health Service and all the other local authority services. These are funded only when the country has lots of resources. If these are stultified by hampering the competitiveness of our businesses, the country will not be profitable and the problems that are before us will keep recurring.

There are other small details of the Bill, such as partial business derating, mothballing relief and the abolition of rates on empty business premises, which will be the subject of amendments at a later stage of the Bill. But to sum up, I welcome the Bill for its dealing with a particular, immediate problem. I trust that it will be given a Second Reading without difficulty and that the irrelevant amendment will be firmly rejected by your Lordships.

9.14 p.m.

Lord McGregor of Durris

My Lords, I speak from a double interest: as honorary president of both the National Association of Citizens' Advice Bureaux and the National Council for One Parent Families. It is therefore no part of my intention to make political, party or even controversial points.

The Minister, in his opening speech, referred to the anxieties of voluntary bodies and said that he did not believe (I hope I am quoting him accurately) that high spending authorities "will sacrifice genuine voluntary bodies to their high spending nonsenses". But why should they not? The Minister gave us a catalogue of what he regarded as the follies of such authorities. Surely, on this argument, one folly is as likely as another, and it would be an imprudent voluntary body which did not take that possibility into account. Moreover, I think he was over-optimistic in his account of the possible effects of the Bill. I wish to draw your Lordships' attention to one or two of what seem to be the likely effects of the Bill on the National Council for One Parent Families and on the Citizens' Advice Bureaux, as examples of the hazards which may face voluntary bodies under the Bill.

Let me take, first, the case of one parent families. In 1981, for example, grant related expenditure replaced the rate support grant. As I understand it, this new measure attempts to calculate more accurately all the elements within local government's block grants. One parent families are not used as a general indicator of need but are specifically identified in the calculations relating to certain areas, and the services relating to one parent families are costed out. The rapidly increasing numbers of one parent families are unhappily very seriously underestimated in the calculations of grant related expenditure derived by the department from 1981 Census data. I think it is agreed that the underestimate is roughly of the nature of one-half. This underestimate must be seen in the setting of the fact that, although the national average of one parent families (that is, the proportion which they bear to other families) is 14 per cent., in some of the big spending authorities the proportion ranges from 27 per cent., as, for example, in Wandsworth, to 33 per cent. in Lambeth.

This arithmetic helps to visit the sins of the authorities on the poorest and most vulnerable children, because the highest percentages of one parent families are concentrated in the areas of the biggest spending authorities. Inevitably, such authorities house Citizens' Advice Bureaux serving the most needy people in Britain. These bureaux run on a shoestring. There is a very small number of professional workers who assist and organise the fundamentally important work of the 10,000 volunteers. But a cut in grant locally, which falls upon the numbers of professional workers, has a disproportionately great effect throughout the bureaux in that particular area.

The Citizens' Advice Bureaux face a double pressure from the Bill. Some local authorities will cut back direct grants; some have already told us that they are going to do so; and at the same time some local authorities will restrict their own services to the public. Thus the demands on the bureaux will increase from two sources; because people will come to us for the assistance that they used to get, not only from local authorities but also from other voluntary bodies which have had to reduce their services, too. Thus the CABs face a paradoxical situation. The Government recently responded urgently and most generously to the report of the Lovelock Committee set up to review the Citizens' Advice Bureaux. The Government accepted its recommendations for a substantially increased grant to the national association. But what the bureaux have gained with one hand from the centre they are now in the process of losing from local authorities at the other end.

I have regularly admired the urbane and reasonable responses of the noble Lord the Minister to reasonable arguments. I believe that those of the National Council for One Parent Families and of the Citizens' Advice Bureaux are reasonable and, indeed, irresistible. I therefore ask him to give an assurance that in the transitional period of implementing this Bill the Government will protect the real incomes of such organisations as the Citizens' Advice Bureaux and the National Council for One Parent Familities, and so enable them to maintain their indispensable work.

9.21 p.m.

Lord Ellenborough

My Lords, I, too, would like to congratulate the noble Lord, Lord Bottomley, on what was an excellent maiden speech by any standard and to say, after such a long and distinguished career in another place, how glad we are to have him in your Lordships' House. I fear that in some quarters hearts may sink as to what I am going to say. But no matter what my noble friend Lord Bellwin and other Ministers may say in attempted explanation of the Government's failure to implement the Conservative 1974 election promise to abolish the rates—its postponement or suspension, if not withdrawal of it in 1979—and, finally, saying in 1983 that domestic rates must continue for the foreseeable future, hundreds of thousands of domestic ratepayers believe that they have been very sadly misled and let down by Her Majesty's Government. I regret to say this on the evidence of information reaching the offices of the National Union of Ratepayers' Associations and its vice-chairmen in many parts of England and Wales.

The 1981 Green Paper stated that it was the Government's aim to remedy as fully as possible the shortcomings of the existing system. In that, we have totally failed. The great majority of ratepayers believe that the existing system is unfair and arbitrary. Less than a year ago—last April, in fact—the national union received a letter from the Prime Minister's office which said: The Government remains determined to achieve fair, effective and lasting reforms. We are now in the final stages of preparing our proposals". Nothing really has happened. As always, the same old excuses are trotted out; too little time, better to hasten slowly, lack of agreement, no consensus on an alternative, and so on. However, this matter has dragged on for years and years.

Of course, the poor old ratepayer is taken for granted. There are no flying pickets or Arthur Scargills among the ratepayers. The ratepayer will in the end stump up, no matter how unfair or exorbitant the demand may be. I feel that the Government have lost a great chance, still in their first year in a new Parliament with an impregnable majority in another place, in failing to make a start on the reform of the rates system. It seems to me that there is a defeatist attitude about it. One or two noble Lords seem to think there is something eccentric about it. I believe that the difficulties are much exaggerated. The National Union of Ratepayers have no monopoly of wisdom, but they have examined the matter in the minutest detail over many, many years, and I believe that the proposals with which they have come forward, if studied carefully, are viable.

I appreciate that a complete reform of the rating system might well take some years. Indeed, it probably would take more than the lifetime of a single Parliament. But pending a more radical reform, no doubt involving the introduction of a local income or services tax, surely at least as an interim measure a poll tax could quite quickly be introduced, paid by all adults in receipt of a certain minimum income, and based on the electoral register? In addition there could be a transfer to the national exchequer of most of the cost of the education and fire services, as they are now really almost as much national services as the defence forces.

In the meantime, people feel that they have been fobbed off by the present rate capping Bill which fudges the real problem. Part I of the Bill may stop some of the worst instances of extravagance and irresponsibility on the part of a few of the ultra-lunatic authorities, and for that we must indeed be duly grateful. Nevertheless, the Bill fails to tackle the fundamental enemies of good local government: first, the non-accountability of councillors; secondly, representation without taxation; and thirdly, the inherent inequitability of the existing property tax which is known as "rates".

Under the existing system the accountability of councillors to the electorate is largely non-effective for two reasons. First, about 7 million—I believe it might even be 8 million—local government electors out of about 24 million, do not make any effective contribution towards the local cost of the local services—of which they are very often the principal users—because they are not statutory occupiers of domestic hereditaments. It is, therefore, not surprising that either they do not take the trouble to vote at all or they are perhaps easily persuaded to vote for extremist and non-cost-effective schemes towards which they will be making no direct contribution.

Secondly, in those areas where councillors are elected for a four-year term and where extravagant and unnecessary financial expenditure has been incurred against the wishes of the majority of the electorate, nothing can be done to replace those councillors until the proposals have become a fait accompli. In any case at the end of four years, so short are political memories, the earlier extravagances may well have been forgotten, especially if there is a rate reduction in the municipal year immediately preceeding the local election or—as now in the case of the GLC threatened with oblivion—rates are miraculously reduced as a deathbed repentance.

There is no doubt that, under our present system of local taxation, which is related to the occupation of property, there is an inbuilt tendency to the pursuance of irresponsible and extravagant financial policies at local level. But all those entitled to a parliamentary vote and in receipt of a taxable income contribute to the national Exchequer according to their ability to pay and to spend. Yet those entitled to vote at local government elections can do so either without making any contribution whatever at local level, or some while making a small contribution to the householder towards the rates which would otherwise be payable entirely by the domestic ratepayers in whose houses they are living. In other words, "representation without taxation".

I find it difficult to see how the Government justify the retention at local government level of such a system, which is so completely different from that operating at national level. No amount of rate-capping will make one iota of difference to the fundamental unfairness.

Moreover, the Bill fails to tackle the basic inequality of the present system as between different ratepayers. Even if rate capping prevents excessive expenditure on the part of certain local authorities, the burden of such expenditure as may be permitted will still be spread inequitably among the existing domestic ratepayers, except those whose incomes fall within the rate rebate scheme.

The national union is well aware of many instances where domestic ratepayers, both elderly and young couples, particularly in the London heavily-rated areas, have to bear quite disproportionate shares of the total burden as compared with neighbouring families living in houses of the same size but with many more salary or wage earners. In this context it is only fair to note that there are some families for whom the present system is definitely advantageous; for the total amount of rates payable by them is negligible in relation to their total incomes. Obviously they do not want the system to be changed.

The selective limitation scheme can be accepted as an essentially emergency measure to cope with a very serious situation in a certain number of authorities and for a strictly limited period. I would say that on this basis it is, in fact, welcomed by the great majority of ratepayers, but only as an interim measure pending further really unprejudiced consideration of the fundamental issues which I have already outlined.

However, supporters of this Government, and other people, throughout the country are surprised at the "centralist" policy by which the Government seem to be motivated in putting forward their longer term proposals for a general limitation of rates. It seems to me that traditional Tory philosophy has surely been directly opposed to the concentration of authority in central government as being potentially dangerous to the rights of individuals in the hands of extremists. In fact, in the field of industry and commerce the Government have made considerable headway in reversing this trend.

Now, however, we have an example of the very opposite—as I understand it, a proposed system under which officials and clerks in the Department of the Environment would try to work out in detail the local needs and requirements, under all sorts of different local conditions, of all the local authorities throughout the country; and these expenditure levels would then be authorised on behalf of Her Majesty's Government by the Secretary of State.

Moreover, let us remember that the Government of the day could well be—or perhaps, as I would say, could ill be—a Government of the extreme Left. I therefore appeal to the Government, even at this rather late stage, to make an announcement that, during the lifetime of this Parliament, they will grasp the nettle of rate reform and start to get rid of domestic rates—as was promised in 1974—and once more show that this Government are not frightened of opposing vested interests, wherever they may be found. Let Her Majesty's Government now tackle the basic and generally admitted anomaly of the existing rating system, just as they have recently shown that they intend to tidy up the existing national taxation system.

I take a grain of comfort from my right honourable friend the Secretary of State for the Environment when he said on Third Reading in another place: I do not preclude the possibility that at some future date the search for a satisfactory alternative to rates, which has so far eluded us, will succeed. He went on to say: I hope that we can resume the search, but in the meantime we must get the Bill through Parliament". [Official Report, Commons, 28/3/84; col. 361-362.] I very much hope that my noble friend Lord Bellwin can elaborate on this and perhaps when he comes to wind up give a somewhat stronger indication of what his right honourable friend meant, although I appreciate that he has another 30 or so speakers to take into account. After all, we are fortunate, I think, in my right honourable friend the Prime Minister—a Prime Minister with an indomitable will, capable of surmounting far more difficult problems than this, and no one better able to tell her Ministers that she expects action this day, or, to be practical, action this Parliament. After all, as recently as 23rd December last year the Prime Minister said in another place: Only a minority of the electorate pay rates. That is one of the worrying things about the system". I am not very convinced by the amendment in the name of the noble Baroness, Lady Birk. It is of course cunningly devised, and designed, I have no doubt, to lure all critics of this Bill into their Lobby, but it does smack a little of rather cynical, if not blatant, opportunism. The Labour Party has held office for 11 of the past 20 years and I do not recall any great haste on their part in trying to reform the rating system.

Nevertheless, together with other noble Lords on this side of the House I find myself in a dilemma. I have been President of the National Union of Ratepayers' Associations for many years now, and our consistent and foremost aim has always been a thorough reform of the rating system and, as I have said, we have put forward detailed proposals. I would therefore ask my noble friend, if he can find a moment, to try to give a satisfactory indication whether it is the intention of Her Majesty's Government to make a start in tackling the real issue of rating reform during the lifetime of this Parliament, because that, no less, is what the majority of domestic ratepayers want and have been denied for so long.

9.37 p.m.

Lord Bancroft

My Lords, I apologise in advance for being a bit repetitious, but I shall be brief. As has been pointed out, for reasons which most of us understand and sympathise with, this is a centralising Bill, but there is a limit to what the centre can efficiently and responsibly bear. A lot has already been said about accountability or answerability. I rather like the latter word. It seems to me a real worry under the Bill as it is now drafted.

As has already been pointed out by more than one speaker, the existing arrangements are already messy enough. We have been reminded that the taxpayer at large pays about half the bills of each local authority through the rate support grant. He has no vote at local elections. Industry and commerce pay a considerable share. They have no local vote, and a big and justifiable grievance. Agriculture is derated and generally pays no rates, but farmers and others who work on the land have a local vote. Of the private citizens in a given local authority some pay no domestic rates but all have a local vote. It is indeed a mess.

The effect of the Bill will be to remove local answerability in the case of the designated local authorities. And why? Because the expenditure decisions, and the policy decisions which determine them, will effectively be taken by Ministers and officials of the Department of the Environment in Marsham Street. Opening the debate the noble Lord, Lord Bellwin, in his lucid speech said that the Government's intention was to constrain only the total spending of the designated authorities, not the priorities between their individual services. But the Bill provides at some length for the authorities to appeal against the central decision. The noble Lord used the word "argue". In another place the word "negotiate" was used.

Many of us here have been concerned in different spheres with the control of expenditure, and all of us know that you cannot begin to control the totality of a body's spending, especially when there is a right of argument and negotiation about the decision, without forming a view on the individual items of expenditure and without being drawn into detailed discussions about their proper levels. So let there be no illusion about what will happen in practice.

It is a touch ironic (and I note the point in its sweet charity) that an Administration opposed to bureaucracy and dedicated to the market should selectively reject the democratic surrogate of the market forces—namely the ballot box—in favour of central bureaucracy. In exchange for the forfeit of local answerability will DoE Ministers be answerable to Parliament for the day-to-day running of the councils that they will, in effect, have taken over? Will the relevant accounting officer among the Permanent Secretaries from the Department of the Environment be similarly answerable to the public accounts committee? If the answer is no, where will answerability lie if it is neither at local level nor at the centre? It is a good working rule that too much centralised power breeds irresponsibility both in the locality and at the centre. I submit that the arrangement laid out in the Bill should not be of indefinite duration.

I have to say, too, that I pause at the practicability of Ministers and officials possessing the resources, the information and the time to have properly informed views about the policies and expenditures of individual local authorities. As I have said earlier, I believe that this will, in practice, prove to be inevitable and from the word "go". It is hard enough to second-guess local authorities from Marsham Street. It will be harder still to first-guess them.

I yield to no one in my admiration for the Ministers and the officials in the Department of the Environment, for their ingenuity, assiduity and their indomitability. But even they must look a touch apprehensively to the mountain of detailed work which lies ahead of them. All this is on top of the existing complexities of calculating the rate support grant with its needs element, regression analyses and all that.

I note that the number of extra staff needed in the Department of the Environment is estimated at 45. If 20 local authorites are designated that averages two and a quarter staff" per authoritiy to check, know and argue about those authorities' spending policies and decisions. Even taking into account the quality of the DoE staff, two and a quarter seems flippantly low; that comment would still be apt if the number were doubled.

If the Bill reaches the statute book in its present form there can be no assurance that its wide powers would not be exploited by less benign Secretaries of State or Ministers of State. As time passes, its provisions will be used and could be misused. They will come to be set in concrete. There is another good and unsurprising rule which experience will have taught many noble Lords. It is unsurprising and it is this: for good or for ill, every slope is slippery.

I end with this thought. Most of us recognise and sympathise with the Government's desire to curb the increasingly rum and increasingly offensive excesses of a handful of local authorities. A Bill broadly on these lines is inescapable, but as drafted it will not do. On grounds of answerability, practicability and scope for future misuse could the Bill not be limited?—limited by confining it more to a selective scheme, and limited in terms of time so that its powers have to be renewed or not by substantive parliamentary debate and decision after a defined period of years. It may be several years, indeed, as more than one noble Lord has remarked. This would give time for a review of the system of local government finance, which is longhand for power.

The system has been patched and bodged over the years by a heroic though necessarily capricious succession of emergency repairs. The result is not a pretty or a dignified sight, nor is it efficient. I recognise that yet another inquiry into local government finance is the most desperate of all possible remedies, but the position we find ourselves in is desperate indeed. In the absence of limits of scope and on time, I shall support the rather rococo amendment moved by the noble Baroness.

9.45 p.m.

Lord Sandford

My Lords, how excellent was the advice recently profferred to the clergy to give up politics for Lent. But, alas, when I accepted the presidency of the ADC some four or five years ago I did not stipulate that I should be allowed to indulge in such abstinence. So here I am, to my dismay, and certainly I am sure to yours, up to my neck in politics. My first link with local government began 20 years ago when I was a full-time curate recently invited by one of my parishioners—she was the village postmistress—to be her chaplain. She was then the chairman of the St. Albans Rural District Council—those were pre-reformation days, of course. I had to ask my rector what this new duty involved. "Well, John," he said to me, "You call the council to prayer, you look at the chairman, you look at the councillors, you look round at the officers; and you pray for the people of St. Albans!"

Now, as president of 333 of the 457 councils of England and Wales, I have to enlarge my vision and I look round at the Ministers and the civil servants of the Department of the Environment—and, having served there, I know them pretty well. I look round at the officers and members of the local authority associations and, I look round at your Lordships in your Lordships' House in whose company I have enjoyed working for the past 25 years. I look round and I pray for the local electors and ratepayers of England and Wales, who I believe are getting a poor deal from us. I look at the electors and ratepayers who look to us—and this particular moment they look to this particular House—for a better deal than they have been getting. And my prayer as I look round to your Lordships tonight is not without hope; because I believe that I can convince you that more is needed than just this Bill to put matters right, to put local government finace on a proper footing.

Ministers argue, and argue very eloquently and cogently, that this Bill is needed to curb the extravagant expenditure of a few councils. I agree as much as my noble friend Lord Boyd-Carpenter, as much as my noble friend Lord Bellwin on the Front Bench, that some version of this Bill is indeed needed. But the whole of local government argue—and again I agree with the right reverend Prelate the Bishop of London, with the noble Lord, Lord Harris, and with many others; and Her Majesty's Government do not deny—that a thorough reform of local Government finance is needed, too, and is badly overdue. We all came to that conclusion at the end of the debate instituted by my noble friend Lord Boyd-Carpenter two years ago.

The latter, the long-term, the thorough reform does not exclude the short-term, the stop-gap measure now presented before us. Nor does this measure obviate the need for the longer-term reform. They are not alternatives. Both are needed. The two approaches, the immediate, urgent one and longer-term one, must be brought together and must be held together, must be pursued together. A thorough long-term reform of local government finance cannot be left any longer—for some time, maybe, after this Bill.

We do not have to start from scratch. A lot of the work has been done by Layfield and can be picked up where he left off. It might take some time to complete, but it need not take long to produce its first fruits. The whole process can be progressive. Five or six of the simpler measures are already fully agreed on. A commitment to the undertaking of a thorough reform of local government finance should be a sine qua non of our consideration of the legislation now before us, and it is to this point alone that I address the rest of my remarks—the paramount need for a thorough reform of the financing of local government.

I do not want to dwell on the lack of effort, the failed efforts, the misguided efforts, the unfulfilled efforts and the wasted efforts that go to make up the sorry saga of the last 15 years. They offer endless scope for recrimi-nation and criticism, for wailing and gnashing of teeth generally, but that does not get us anywhere. Better to admit, as my noble friend Lord Thorneycroft has done, that this reform is very, very difficult indeed. It is politically hazardous and most demanding, but I believe it is our duty as a House to insist that Her Majesty's Government return to the charge and press on with it this time, despite the difficulties, until they succeed. I submit that the House has to decide that it cannot allow things to go on any longer as they are.

I know, and the noble Earl, Lord Halsbury, has said it so explicitly, that many of your Lordships have now acquainted themselves with the grotesque complexities of rate support grant as it now stands, with the shifting labyrinth that goes under the simple-sounding name of "target", the grant-related expenditure assessment introduced in 1980 by Mr. Heseltine to help the ratepayers, now being used by civil servants in a way repudiated by Mr. King in 1982 to help Mr. Jenkin in 1984. This is really an absurd situation. Your Lordships are now thus better able to judge for yourselves what a dreadful distraction this repeated kind of legislation is to the generality of councillors, to the officers, to the finance and general purposes committees, to the councils—what a distraction it is from their proper task of exercising their common statutory duties, with their own priorities in the light of their own circumstances, with their own resources to meet their own needs.

Your Lordships also will be aware of the appalling effect this sorry state of affairs is having on the ability of local government to attract and hold able people to serve as councillors. This is a point made by the noble Viscount, Lord Ridley, and many others. This is the factor that more than anything else, as my noble friend Lord Mottistone said, leads to business, industry and commerce feeling that they are becoming disenfranchised from local government. Of course, business must have a say in local government, but not only just through the votes of their individual employees; not just through the occasional consultation which this Bill provides for; they should have their own members in local councils. They should be putting them forward as candidates at elections, to stand and serve as councillors. But, alas, after one look at what is now involved—the constraints on decision-taking, the limits to discretion, the lack of accountability to those who are left—only too many good councillors from business bow out of their council work after one spell, never to return to local government again.

Ministers are asking for tight control over local expenditure. Very good; we all applaud it. But in this Bill they are looking to their Whitehall civil servants to achieve it for them. What a strange place to look for help! There are many more much better allies far closer to hand. They are the earners and owners of the money which has to be taken for their local services. Just start to make councillors more closely account-able to their own electorate whose money they need to spend, then you will see some cost-cutting. Ministers and civil servants would soon be learning lessons in cost-cutting that they would never have dreamed of.

This transformation in thriftiness in councils is not unheard of. We see it happen every time a thrifty, cost-conscious council takes control from an extrava-gant one: Wandsworth, Bristol, Birmingham and Brent are all recent examples. This discipline could be brought into play everywhere all the time. In a system of local government finance such as the noble Lord, Lord Harris, looked forward to, where it was the local electorate which more directly paid the piper, you could be quite sure that they would also call the tune, and a thrifty tune that certainly would be. However, this Bill will not bring that about; far from it.

So what is our duty? What are we to do? Ministers are urging Her Majesty's Government to discharge what they claim to be a manifesto commitment on which they were elected. Local authorities, with unprecedented unanimity, would dearly like us to reject it altogether. The Bill, they claim, imperils local democracy and further weakens their accountability, and, they say, it will not work.

My Lords, we are not going to reject the Bill. There is nothing before us to that effect. We are a revising Chamber. We shall need to scrutinise the Bill with great care. That is certainly our duty; but I would submit that our judgment of this particular Bill depends crucially on Her Majesty's Government's intentions towards a proper and thorough reform of local government finance, and those intentions need to be revealed to us, as my noble friend Lord Ellenborough said just now.

As many speakers have said, it is important for us to remember in Parliament that neither central Government nor local government have any powers at all save those that are conferred upon them by Parliament. As we do our revising work we have an absolute duty to see that each sphere of government—central and local—has its own particu-lar appropriate powers and scale of resources to serve its own respective electorate. I submit, therefore, that we have a very clear duty now, as my noble friend Lord Thorneycroft has already said, to encourage both central and local government to review and to combine their efforts towards a thorough reform of local government finance, so as to restore its proper state of balance, its separate accountabilities and its separate autonomies.

Knowing now, as we do, more clearly the parlous and muddled state of affairs which prevails in local government finance, we must persist in this encouragement. As the noble Earl, Lord Halsbury, said, we must persist, despite the scepticism of the noble Lord, Lord Thorneycroft, until we are satisfied that this Bill, in measurable time, is to be superseded by a successor better suited to the millions of local electors that local government is supposed to serve. So I do not oppose this Bill but, for the sentiments contained at the end of it, I support the amendment and I invite your Lordships to do likewise.

9.58 p.m.

Lord McIntosh of Haringey

My Lords, I have much sympathy with the Government, and in particu-lar with the Ministers who have the job of steering this Bill through your Lordships' House. Here they are: they have brought forward a Bill couched in calm, neutral tones—an administrative measure—and what do they find? They find that noble Lords on all sides of the House react to it in an emotional way. Noble Lords from these Benches and from the Alliance Benches are concerned to defend the social services, the under-fives, the unmarried mothers and their families. They are concerned about voluntary organisations, none of which are referred to anywhere in the Bill. I cannot think where they got these references from.

Equally, it must be said that there are noble Lords on the other side of the House, notably the noble Lord, Lord Boyd-Carpenter, and the noble Lord, Lord Marsh, on the Cross-Benches, who seemed to think that the Bill is about Babies Against the Bomb and Gay Switchboards and things of that sort. There is no reference to either of those in the legislation. The Minister must be feeling that he has been misrepresented. I think it would be as well for us to turn to the text of the Bill to discover what it is about and then look at the implications, rather than drawing wild and unjustified conclusions from the Bill.

Clause 1(1) reads: The Secretary of State may … prescribe a maximum for the rate made … by an authority … which is designated by him". What is "designated by him"? Clause 2(1) states that it is designated, by the Secretary' of State in a report laid before the House of Commons in the preceding financial year"— not, your Lordships will notice, with the approval of the House of Commons, but in a report laid before the House of Commons.

Clause 2(2) reads: The Secretary of State shall not … designate an authority unless it appears to him … that its total expenditure in that year is likely—

  1. (a) to exceed its grant-related expenditure for that year or £10 million, whichever is the greater, and
  2. (b) to be excessive having regard to general economic conditions".
I have heard noble Lords on the Government Benches who were severely critical of phrases like "general economic conditions". They do not seem to think that this has adequate precision for legislation. I wonder why it is that they have not come forward with suggestions that there might be greater precision?

Clause 3(2) states: The power to determine a level for the total expenditure … shall be exercised in accordance with principles determined by the Secretary of State … those principles shall be the same for all authorities falling within that class". Clause 3(6) reads: … the Secretary of State … may impose on the authority in question such requirements relating to its expenditure or financial management as he thinks appropriate". This, I suspect, may be the reason why some noble Lords appear to have the idea that the Secretary of State and his officials will take some part in the determination of the expenditure of individual local authorities. I cannot think where they got that idea, but there is a hint of it in the words of Clause 3(6).Clause 4(2) states: The Secretary of State shall determine that maximum by reference to"— another weak phrase. It is not that he shall be controlled by principles, but that he will determine it by reference to a number of principles in paragraphs (a), (b) and (c).

So what we have is a neutral Bill; a Bill which permits, or does not permit, anything that the Secretary of State may choose to permit or not to permit. The noble Lord, Lord Cockfield, will recall the phrase from recent legislation, when I say that in policy terms the Bill is a perfect and absolute blank. Let us think about the implications of that and think, horror of horrors, that there might be a Left-wing Secretary of State. There might be Ken Livingstone, Ted Knight or, much more likely, David Blunkett, Louise Ellman, Jeremy Beecham or other moderate members of the Labour Party as Secretary of State. They could use this legislation exactly as the Government intend to use it, for controlling wild Left-wing expenditure in order to make it compulsory for local authorities to carry out the kind of expenditure that such a Secretary of State would want.

Because it is neutral, the Bill is capable of being interpreted in the other direction as well, and there is nothing in the terms of the legislation—there may be in the assurances of the Minister, but there is not in the legislation—which makes it impossible for a Left-wing Secretary of State to use legislation of this kind, in order to push through the ideological principles which he or she may wish to push through.

I would remind your Lordships of the parable of the sorcerer's apprentice. The sorcerer left his cave and the apprentice had remembered bits and pieces of the spell. He found out how to order the broom to sweep the cave and how to get the bucket to draw water. What he had forgotten was the spell to turn them off. When the sorcerer came back the cave was flooded and it required the sorcerer himself to reverse the process. This Bill is starting the process of control of local authorities by central Government. It is starting it in a way that the Government cannot from their own legislation stop. I appeal to the Government: remember the parable of the sorcerer. Remember that you have to consider whether you can stop what you have started.

10.4 p.m.

Lord Ingrow

My Lords, I suppose that your Lordships may now be hoping that the end of today's travail is at last arriving. I can only say that in my sporting days I was very accustomed to batting last. The difference was that then one had to make runs that had not been made. Today, so many points have already been made; but perhaps there are one or two left. I share even more strongly than my noble friend Lord Bellwin his views on this Bill. I support it, not with regret but with a good deal of anger that the action of a comparative handful of authorities has made it necessary for a Bill such as this to be introduced.

I was elected to local government in 1946 by a very small majority. At least, I thought it was small. My noble friend Lord Harmar-Nicholls would no doubt regard it as the height of affluence. I served for 20 years on my non-county borough. In passing, I might say that I have no great attachment to two-tier local government, but that is perhaps a matter for another Bill and another day. It was a balanced council politically. I served mainly as education chairman or finance chairman. I have been both poacher and gamekeeper. But everybody on that council, in all parties, accepted the traditions of local government. Nobody was so grand as to think that we could take on the Government of the day, whatever they might be, and put our views in substitution for them. As my noble friend Lord Boyd-Carpenter said, the conventions were there and we followed them.

Since then I have been inundated with paper from various local authority associations, and later I may say something about that. However, the gist of their complaint was the lack of democracy on the one hand, and the lack of individuality, on the other. The question of the power to levy rates has already been adequately dealt with. Its legitimacy has been dealt with by my noble friend Lord Broxbourne. However, I take exception to a phrase in one of the AMA circulars relating to the unconstrained tax-raising powers of local authorities. This seems to me to be nonsense when so much money is provided by other people. One has only the power of the pocket money from an indulgent parent.

Local government has sold the pass on individuality. When one enters local government one finds that one can do very little. There are conditions of service which apply throughout every kind of authority according to its size, and it is very hard to alter them. In the case of schools, for example, there were very keen and tight building limits which applied, per place, to both primary and secondary schools. Having listened to the debate today, one would think that there was a golden age when local authorities had an unlimited amount of money and when they were entirely uncontrolled by central Government. That was not true in my day, and I suspect that it is not entirely true today.

The problem is that the present system of local government election is a travesty of democracy. Much has been made of the voting and the paying. Until it is possible to relate more closely those who vote to those who pay the bill, there will not be effective democratic control. It is also fair to say that no Government can ever again tolerate untrammelled local government expenditure. With the greatest respect, this would apply to the noble Lords opposite if they were to form a Government. I believe that they sought restraint in 1975–76. The brokers men were in on that occasion. However, this Government have a mandate which was overwhelmingly supported last year in the general election. I recall that last year there were complaints that the Conservative manifesto was fairly vague and did not promise very much, but on this issue it was very specific indeed. The manifesto made quite clear what would be done, and I believe that it ought to be supported.

There must be many in this Chamber who, like myself, greatly enjoy the works of Conan Doyle. I am equally sure that there will be many who are familiar with the story in the Memoirs of Sherlock Holmes when the inspector asked him if there was anything to which his attention should be drawn, to which he replied, "The curious incident of the dog in the night-time". The inspector replied that the dog did nothing in the night-time. Sherlock Holmes replied that that was the curious incident.

If you go out into the street today you will not find a great queue of people from industry saying, "Please stop this beastly rate capping Bill". You will not find Sir Terence Beckett, bare fisted, saying, "Please allow industry to be taxed more and more by the Rates Bill". You will not find angry queues of ratepayers wanting this Bill to be stopped and urging to be allowed to pay more and more rates. The interests of the people who pay seem not to have been so strongly stressed today as I would have liked. We have had debates in your Lordships' House recently on the importance of industry and its costs, and I believe that the interests of industry and of the ratepayers should be considered. We are not in fact a local authorities protection society, however much we may like them.

I did some sums just in looking at my own particular town. I found that the rateable value of my business premises had increased by 22 per cent. over the rate of inflation in the past five years. It seemed to me quite a lot. When it comes to all the paper we have been sent, I rather think that the time of all those highly-paid officials might have been better spent on running their authorities more closely, instead of writing the memos we have received. Even too many of the very good councils have, in making their economies, cut capital expenditure and not running costs. The papers we have been asked to believe saying that the powers that be in local government are opposed to this Bill ignore certain facts.

I have received today a signed letter from my own county of Yorkshire. We call it Yorkshire whatever the various local government Bills may have done to divide it up. In that county, we have four county councils—two metropolitan and two non-metropolitan. All the Conservative leaders of those four county councils (one of whom is the leader of the council in North Yorkshire) all the Conservative leaders of the five metropolitan districts in West Yorkshire, all the Conservative leaders of the four Metropolitan districts in South Yorkshire, the Conservative leader of Hull City Council (which is the largest district in North Yorkshire), and the Conservative leader of Hull District Council (which is the largest council in Hull) have urged me in terms rather more blunt than those which I have used that their hope is that the rate capping Bill will be dealt with as soon as possible and passed.

I am very glad that in support of that decision in Parliament last year, as far as I can gather, none of the Yorkshire Conservative Members of Parliament in any way reneged on their election promises in regard to this Bill when in another place. I have been assured by my noble friend Lord Kaberry of Adel—for many years the leader of the Yorkshire Members—that all the Conservative Yorkshire Members as well supported this Bill. I might add that many of those Members won their seats for the first time last year. If, when asked about the rates, they had answered: "We will not do anything about the rates; we shall just let them go up", I suspect that many of them would not then have won their seats.

Anomalies can be sorted out. The right reverend Prelate the Bishop of London said, and I admit, that this Bill is a blunt instrument, but it is made necessary by the fact that speed is the essential part of all this; delay cannot be tolerated. The Bill is urgent because of the financial problems which will accrue if we wait and wait on yet another report. One has, perhaps, the slightly unworthy feeling that those wanting delay are looking for nothing at all to happen.

In the times we have today, any Government who are trying to cut the associations of local government are in for a great deal of trouble. We have a Government who are accustomed to taking courageous decisions, and I believe that they are absolutely right. I believe that we should support this Bill to the full and ensure that we have a better chance in future to get the affairs of local government right.

Lord Grimston of Westbury: My Lords, I had not intended to speak at all in this debate, but this morning I received a letter from one of our higher spending councils which very much infringes upon the ability of people like myself to run businesses. I want to make just one point. The council in question, which is one of our highest spending councils, has invoked the Public Order Act 1936 to add to the already high rate burden. Therefore, having already been a major supporter of this Bill nationally, I feel that this little example should encourage all Conservatives to support a courageous Government.

10.15 p.m.

Lord Evans of Claughton

My Lords, I have the feeling that your Lordships would not welcome at this hour the four-and-a-half hour speech which was commended to us in another place in the course of this Bill's going through the Committee stage. I shall be able to keep my remarks brief because my noble friends, particularly my noble friend Lady Stedman, have put the case from the Alliance's point of view extremely well.

I have some hesitation in daring to cross swords, as it were, with the noble Lord, Lord Broxbourne, because of his much greater expertise than mine in the field of constitutional law. However, none of us on this side say that what the Government are proposing is unconstitutional. We are saying that it is a matter of constitutional importance, which is a different matter. Power is being taken to change the constitution, and this right to change the constitutional position lies with Parliament. One concedes that. In making this kind of change in the relationship between local government and central Government your Lordships, and Parliament generally, must act with care and with deliberation as in the past on the Wales Bill and the Scotland Bill, including the idea of a referendum in that case. That is the point. In dealing with a matter which changes checks and balances we have an obligation to behave with great care and great deliberation.

This Bill, whatever else it does, removes from local authorities which have been set up by Parliament the right to control their own taxes and concentrates Government power to an unprecedented extent at the central level. To me, those are matters of great importance and are a very important constitutional issue. I feel—and several speeches have brought this out—that the Government have allowed themselves to be needled by a small number of highly irresponsible local authorities. There are, as the Minister has conceded in what I must say was a very good speech (there is no point in alienating him at this stage), 12 at the most; and I hope he is not going to increase that number or we shall have another problem.

I was very impressed by the speech of the noble Viscount, Lord Ridley, and that of the noble Lord, Lord Sandford, both of them presidents of local authority associations. I am sure I shall be equally impressed by the speech, when I hear it, of the noble Lord. Lord Underhill, the chairman of the third of those bodies. I intensely admired the speech in support of the Bill of the noble Lord, Lord Thorneycroft. I should very much like to hear him when he is speaking against a Bill.

Turning briefly to Part I of the Bill, the correct level of spending for local authorities is, in my submission, not an objective test but is totally a political judgment. Similarly, there is no objective standard of what is overspending or underspending. What is underspending for Liverpool—an area with many problems—might well be considerable overspending for Surrey. One must look at each of the cases with its own particular problems.

Several of your Lordships have mentioned that the authorities with the biggest problems in terms of urban decay and problems at every level for the people living in the area are also those which are the highest spenders. Let me underline the truth of what was said earlier in the debate. Many of these high spending authorities do not take advantage of LAMSAC and other organisations. That is quite wrong. They should take advantage of them. I concede whole-heartedly that many of the high-spending authorities, without damaging in any way the services they offer, could considerably reduce their costs. That is a truism; I do not think that it is open to challenge. It is a matter to which those high-spending authorities, particularly in the city of Liverpool, should be turning their attention.

What is underspending or overspending today might entirely change with Government policy. I wonder whether your Lordships have ever considered that, if quite suddenly this or a subsequent Government were to change their policy towards the subsidisation (an unpleasant word) of urban transport, authorities which are at present overspenders, like South Yorkshire, would suddenly become underspenders. You cannot assess such things objectively. Grant-related expenditure certainly cannot be tested objectively. As the noble Baroness, Lady Vickers, pointed out, how can a Government find the people and resources to give detailed scrutiny over a wide area to see whether local authorities transgress the rules? We shall need not only a Secretary of State for the Environment but an Under-Secretary for rate capping. It will be a full-time job for a Minister and require a whole new department of local government if we follow this road.

What worries me is, what is to prevent the inclusion of those authorities which may now be basking in the belief that they are excluded and can trot off happily and not be worried by interference from central Government? That could be done by a subsequent Government, or indeed by this Government, in a moment of irritation at the activities of one or two of them. Part I of the Bill could, if sufficient authorities were brought into its purview, become a reserve or a general power in exactly the same way as Part II is proposed to be. If 30, 40, 50 or 60 authorities came into its purview, it would become a general power in exactly the same way as Part II, which is described as a reserve power only. If this is only a reserve power—and I genuinely believe that the Minister, metaphorically with his hand on his heart, means this—I wonder why the Government need now to include it in the Bill. Why not bring it forward as a separate Bill at a subsequent stage if local authorities prove to be recalcitrant?

Under the Bill—and this is why I so strongly support the amendment—at one stroke local accountability will be totally destroyed. As the noble Lord, Lord Sandford, rightly said, councillors of ability are already reluctant to take part in local government in many areas because they have already lost so many of the powers and responsibilities. If this Bill is passed and local accountability goes, why should anyone who is seriously concerned about improving the standards and quality of services in a district bother to get involved in local government at all? One wonders why this Government should not extend their proposals for abolishing elections for the Greater London Council and the county councils to the whole of local government and just have the whole thing as a central government agency.

I have a lot of sympathy with the views expressed by the noble Lord, Lord Mottistone, and the CBI, although I am aware that rates account for only 2.7 per cent. of the costs such as wages and salaries in industry. I concede—as a ratepayer in the city of Liverpool I feel this fairly warmly and strongly—that the payment of rates by industry and commerce can be a grave deterrent, particularly in areas where we can least afford to deter them. I should have thought that the answer would be for the Government to consider—I do not support this view myself—the possibility of industrial derating, as has been done for some time with agriculture, or to make non-industrial rates a national instead of a local tax, and to introduce local income tax, partly to replace that and partly to enable local government to reduce its dependency on central Government grants. But Layfield has set us off in the right direction, and I would think that with compara-tively little additional examination (if any) the lines that were set for us by Layfield could be used to introduce a very thorough reform of local government. I know that I will be accused of producing my noble friend's King Charles' head by saying that if your Lordships really care about making local government answerable to the domestic ratepayer, then you should introduce proportional representation.

I would like to draw the attention of those of your Lordships who are older, like myself, to the problems of the Borough of Sligo in the 1880s and 1890s. There they had to put in a commissioner because the councillors of Sligo behaved very similarly to their fellow Irishmen on the City of Liverpool council. Eventually the Government of the day decided that the only way to make those people behave responsibly and sensitively to the wishes of the people in that area was to introduce proportional representation—since when, I am happy to tell your Lordships, Sligo has never looked back!

There are certain immediate benefits that could be produced. Rates should be assessed on capital, not on rental values; there should be a re-assessment every three or five years; and as 1 have said, local income tax should be introduced. We are the only country in Western Europe that makes our local government rely on one source of taxation. Most Western European countries have two, three, four or even five sources of local government tax. We make our local government rely on one source, and now we intend to go on and cap it. So, in the whole of Europe, we are going to be the country which, after East Germany, is most controlled by central Government. I wonder whether Members on the Government Benches are really very happy about having that kind of reputation.

But I support very warmly the proposal that the noble Lord. Lord Thorneycroft, made: that all parties should get together, in as non-partisan a way as possible to try to find a way of re-financing local government. We have had two reforms of the administration of local government: we have not had a single serious reform of the financing of local government.

The noble Lord, Lord Marsh, in a very powerful speech—with practically every word of which I entirely disagreed—painted an attractive picture of people standing in public houses discussing with excitement the doctrine of the rate support grant and the county precept, and he doubted whether many people did this. Outside Liberal clubs, I think I would probably agree with him. But I also doubt whether during the general election, and before it, people were standing about and saying, "Byjove! I'm going to vote Tory next time because they have this proposal to rate cap in their manifesto". People do not behave like that. What people do is to say, "I want better services and lower taxes". That is the level at which they operate. They do not have these deeply intellectual conversations, either of the kind that Lord Marsh mentions, or the kind that I mention, quite frankly. I personally do not support the doctrine of the mandate. I belong more to the view that Sir Henry Campbell-Bannerman took. When asked how the Liberal Government would rule, he said, "We will be guided by the principles of Liberalism". To me, that is a far better basis for running a country; but we have not had the opportunity recently—not in the spirit of partisanship.

But I want to point out that the present rate capping Bill is opposed. I know it is not opposed by everyone, but it is opposed by a very wide spectrum of public opinion; by academics (which I know immediately condemns the whole thing to many of your Lordships); by such eminent figures as Geoffrey Rippon; by the ACC; by the ADC; by the AMA; by voluntary organisations and by teachers. So there is a very considerable volume of opposition to the form of this legislation. If we were willing to get together, without seeking to win political advantage from it, I am sure that this country, which has been the pioneer of so many reforms of government at every level could come forward with a scheme for refinancing local government capable of being supported by a wide spectrum of people. That is why, at this stage I strongly support the amendment moved by the noble Baroness.

10.30 p.m.

Lord Underhill

My Lords, I must first warmly congratulate my noble friend Lord Bottomley on his maiden speech. While he was doing his valuable council work at Walthamstow, I was in the neighbouring borough doing voluntary political work. I know full well, therefore, the value of his council work. I am sure that his local, national and international experience will make a great contribution to your Lordships' House.

As the thirty-eighth speaker in this marathon debate, I believe that I can safely say that the amendment so ably moved by my noble friend Lady Birk represents a cross-party opinion, and strong cross-opinion, of concern about aspects of this Bill. I am honoured, as already mentioned, to be the president of the Association of Metropolitan Authorities. When the Government asked for responses to their White Paper, the three associations gave somewhat the same view. The counties, the districts and the metropolitan areas were of one opinion in general opposition to the Government's proposals. We are told by the noble Lord, Lord Bellwin, that at a later stage, if the Bill is enacted, the local authority associations will be consulted. The Government took no notice whatever of the united view of the three local authority associations in their criticism of the Government's White Paper on rates.

The noble Lord, Lord Evans of Claughton, has referred to the constitutional position. My noble friend Lady Birk, in moving the amendment, did not say that the Bill was unconstitutional. She said what is said in the amendment. The Bill will result in damaging constitutional changes in the relationship between central and local government. Those relationships are at a very low ebb already, even before the Bill is enacted, if it is to be enacted. I had intended to refer to some of the possible constitutional changes between central and local government if the Bill is enacted. I shall save your Lordships' time by not doing so. However, in all their responses, the Association of County Councils, the Association of District Councils and the Association of Metropolitan Authorities—my two fellow presidents from whom you have heard will, I think, agree—say that the proposals in the Bill will have a far-reaching constitutional effect on the relationships between central Government and local government. That is something that we must avoid.

At this time of night it is not a good idea to introduce quotations. However, there is an important one to which I should like to draw your Lordships' attention. In 1980, when the Local Government, Planning and Land Bill was going through Parliament, the then Minister of Local Government, Mr. Tom King, said in the Standing Committee on 27th March something very important: My Department will not be in the business of saying how much each authority should spend, where it should or would not make cuts or on what it should spend money". He went on: Local authorities are autonomous. They fix their rate systems. I can comment and urge the need for economy. I have some influence over the distribution of public funds, but the ultimate decision on rating and the volume of expenditure of local authorities is a matter for the councillors themselves. Most noble Lords will, I think, agree with that. It is the position to which we wish the Government to return by the House carrying the amendment this evening.

Under the Bill, the Secretary of State will be involved in the detailed budgetry process of a local council. The noble Lord. Lord Bellwin, said that it is not the intention of the Government to interfere with how money will be spent. I would refer the noble Lord to the Explanatory and Financial Memorandum to the Bill. I see that Clause 3 allows an authority to apply for a re-determination of its expenditure level and: enables the Secretary of State to confirm the original level or to re-determine it. and to impose any requirements he thinks appropriate". My reading of that is quite clear. The Minister seems to criticise it and so I shall read it again: to impose any requirements he thinks appropriate". It is the local councillors who will have to face their electors. It is the local councillors who will be accountable to their electors. It would be a tragedy if councillors have to face the electors not with their own scheme, but with a scheme which has been imposed upon them by the provision that I have just read from the Bill.

Reference has been made to the fact that it is nonsense to talk about local democracy being gravely weakened. I am a simple soul. I believe that the Government have every right to determine how much money they will give to local government in the rate support grant. But I then believe that it is up to the local councils to decide the needs in their area. It is up to the local councillors to decide how they will meet the balance of the money. I am a simple soul. If electors are dissatisfied with the policies of their council, then they can change it. But I have been amazed at some of the comments from some noble Lords in this debate tonight, which have been rather disparaging of local democracy in council elections, as if the whole thing is a farce and does not matter. There are people on all sides of this House who have served in local government for years and years and who I am certain will not support that attitude. Local council elections are important and we must never let it go out from this House that we regard them as merely an expression of opinion about which we need not worry. The Government in some of their comments and in this Bill, appear no longer to trust the electors with this decision, and I regret that one or two other noble Lords seem to echo that view.

It is Government action which has really increased the proportion of local authority costs which have to be raised locally. Right at the outset of the debate my noble friend Lady Birk referred to the rate support grant. I will not worry your Lordships with figures. The fact is that the amount of rate support grant given to the authorities in the last three to four years has been progressively decreased. If an authority has less support from central Government, it has only two alternatives: either it can cut services or it can increase the rates. There is no other alternative. The noble Lord. Lord Bellwin, believes that the whole of this can be met by savings, by economies, by efficiency and so on.

The noble Lord, Lord Ingrow, referred to a letter from his council. It so happens that I have a letter from my council and, strangely enough, it is not a Labour-controlled council—it is a council with a very strong Conservative majority in Essex. After referring to the fact that the expenditure, which the council regard as essential to carry out its present services, happens to be more than the target set by Government, the Essex County Council said that either we have: drastic cuts in service provision or exceed the Government's target and incur grant penalties". The chairman of the council, who is not of my political persuasion, said: The point 1 wish to make here is that the Secretary of State for the Environment cannot be aware of or be responsive to the demands and needs of local circumstances as locally elected members are". That leads me to the criteria to be laid down by the Secretary of State. The Bill is completely silent on this aspect, although it has been mentioned that the grant-related expenditure assessments will be the basis for this operation. When grant-related expenditure assessments were first introduced, Ministers time and time again, said that they would never be used as a test for overspending. How will they decide on the needs of each authority? The Minister cannot do it. With all his ability—and I admire his ability and his knowledge of local government—the noble Lord, Lord Bellwin, is not going home at weekends with masses of documentation to decide just what are the needs of every local authority. Nor do 1 believe that the civil servants in Marsham Street, expert as they are, can do it. The noble Lord, Lord Bellwin, said: "Get out into the real world"; and that is what I say: "Get out into the real world, see what the real needs of the community are", and only elected local councillors can do that.

As has been mentioned, a number of local councils and other bodies have written to noble Lords. Most of them set out the massive effect on local rates because of the reduction of block grant. I was sorry that the noble Lord, Lord Bellwin, who I respect, tossed off a few criticisms of a number of authorities. In his remarks the right reverend prelate the Bishop of London referred to the problems of the inner London areas.

Hackney was mentioned by the Minister and by the right reverend Prelate. I want to say just a few words about Hackney, because I did go out into the real world. With my noble friend Lord Graham and the Secretary of the AMA, I spent a whole day in Hackney to see what their problems were. My noble friend Lord Irving has mentioned the financial position, where their GRE is some £21 million below what the council considers its budget to be. Even at this time of night I should just like to give a few figures. According to the 1981 Census 17 per cent. of the people in Hackney are of pensionable age; 22 per cent. are under the age of 15; 10 per cent. share the same bath; two of three do not own a car; Hackney has the highest proportion of single-parent households of any borough in the country; wages are 7 per cent. below the national average and 20 per cent. below the London average; there are appalling housing problems, and I saw some of them; Hackney has the second highest rate of overcrowding; and it has 26.8 per cent. male unemployment.

I challenge the Minister to tell me, to tell this House, to tell the country what is Hackney supposed to do if the amount of money that it is receiving does not enable it to cope with that situation? Yet it is not supposed to increase rates. Do not say that it can save £21 million by economies. That would be nonsense. What does the Minister say?

Then allegations were just tossed off about other authorities, and I cannot possibly deal with them. But how will this position be dealt with when an order comes before Parliament? Will it cover 12, 18, 20 or 30 authorities? How long will be devoted to each one? How long will this House and the other place be able to consider the problems of Hackney, of Islington or of all the other areas, to see whether the Government are right? Parliamentary accountability will be fairly absent.

This Bill will bring centralisation, it will bring more bureaucracy, and it gives massive powers to the Secretary of State. I believe that it is irrelevant to the problems of local councils and, basically, it is irrelevant to the financial problems and economic policies nationally. As the right reverend Prelate the Bishop of Southwell said, the Bill encourages confrontation, and I believe that that is one of the strongest criticisms that we can make of it.

The noble Lord, Lord Boyd-Carpenter. said that the amendment on which we shall vote is a hotch-potch of an amendment. That is echoed on the Government Benches as "Hear, hear". Read it, because the local authority associations agree with the criticisms of the Bill, and they are very moderate criticisms. We are not asking the House to vote against the Second Reading; we are asking the House to express its concern on three or four aspects of the proposals which are very serious.

In reply to the noble Lord, Lord Boyd-Carpenter, who asked me a deliberate question, may I say that it is the job of this House to look responsibly at legislation coming before it and to pass its comments upon it. I hope that noble Lords will do that by carrying the amendment and then, at Committee stage, by making the necessary amendments, at least we shall alleviate some of the worst features of the Bill.

10.45 p.m.

Lord Bellwin

My Lords, the hour is late, the debate has been long, and the passions, I hope, are spent.

Noble Lords


Lord Bellwin

Well then, my Lords, they are not spent and we shall see if we can add a few to them. My passion certainly is not. I have to try to reply as briefly as possible because I suspect that perhaps I know better than most that there is always a moment in time when the talking has to end. May I begin by saying that I am deeply grateful to all who have taken part in what has been a fascinating debate. I too join in the tributes to the noble Lord, Lord Bottomley, on his maiden speech. If I do not respond to the actual points he made, it is because I too do not want to be controversial, but nevertheless I say in all sincerity that we look forward to hearing him many more times in your Lordships' House.

Many good points have been raised today in this discussion on this controversial Bill. I would dearly like to answer each one of them but your Lordships know that that is just never practicable or possible, and I therefore intend simply to take up a few of the main points, and I hope that those whose points I do not mention—and they will be many, with nearly 40 speakers—will acquit me of discourtesy.

This Bill, as I said in opening the debate, is about protecting ratepayers. We have heard much this afternoon and this evening about the constitutional implications. What we have seen over the last few years is a fight by the Government to re-establish the economic position of the country. Local government has had to play its part in that, and the majority of local authorities I say immediately, and again, have done their best to help. It is the small minority which have not, and it is they who have put unreasonable burdens on their ratepayers. The Bill's principal purpose is to put that right, and it is to restore account-ability in those areas where it has all but disappeared from view.

It should be said again that the selective rate limitation scheme is aimed only at a small number—the noble Lord, Lord Evans, will note—of some 12 to 20, or thereabouts, of irresponsible and high-spending authorities. More than 95 per cent. of authorities will not come within a mile of selective rate limitation, and even if an authority is rate limited—and this is a point which still has to be made again and again because the noble Lord, Lord Bancroft, seemed to miss it and so did others—within its overall limit an authority will have the right to decide its own spending priorities. If there is a constitutional complaint to be made, I believe it is against those high-spending authorities and not against the Government.

Yes. the general rate limitation does raise wider issues and if. I say again, it were introduced then it would represent a change in the balance of power between central and local government, and I am not going to spoil what I consider to be a superb case by even the slightest modicum of distortion in any way whatsoever, so I say that because that is the position. But we make, and have made, it clear that we trust that it will never need to be introduced in that—and this is the point—the combination of selective rate limitation and the other pressures on local government spending arising from the grant system will enable the Government's overall economic plans to be achieved.

We have heard much from the right reverend Prelate the Bishop of Southwell, and my noble friend Lady Faithfull, and others, about the worries of the voluntary organisations. I say again, as I did in opening, that we fully recognise the value of voluntary organisations. Indeed, the National Council for Voluntary Organisations say: The present Government has done much to support and encourage the work of voluntary organisations". Nevertheless I know, as has been said, that there are those who are worried about the implications of the Bill. But a huge variation in spending levels between authorities gives me confidence that this worry is not justified. Prudent authorities are meeting their duties and have money to spend on their voluntary sectors. We are only going to cap the outrageously high spenders. And even when they are rate capped they certainly will not be restricted to any one sector of their provision for services.

Again, just look who we are talking about: authorities spending 20, 30, maybe 40 per cent. over GREAs. When one considers these 12 to 20 and the impact and the scope they will have for their voluntary sector, I recognise the concern. It would be wrong not to acknowledge it and to think further, which I promise we will do. But I do not have the fears that have been expressed today.

I shall say a word about something which arguably is the most important point that I consider has been mentioned all the way through. I begin to do that by reminding your Lordships that we are talking about limiting spending in about 12 to 20 authorities. The noble Lord, Lord Irving of Dartford, and the noble Lord, Lord Underhill, in his last remarks, spoke about the problems of Hackney, the self-styled poorest borough in England. He asked, "Will the Minister tell the House what does Hackney have to do?"

I will tell the House what Hackney has to do. It has to look at the 993, nearly 1,000, extra people that it added to its staff in the last 21 months. It has to look at what all those nearly 1,000 people are doing. No cuts—these are additional staff in the last 21 months. That is costing between £8 million and £10 million a year. When it has done that, it has to explain why it now has a public relations department, this poorest borough needing so much, has 14 people to explain its policies; why it has 40 additional people now added to its personnel department. It has to explain why now it has 20 more architects—not 20; 20 more; another 13 quantity surveyors—not 13; 13 more. It has to explain why it is not concerned to do what the noble Lord, Lord Northfield, said that others are doing.

Why it is not even prepared to go to its own local authority association LAMSAC to ask, "Tell me how do I provide my services, not at a worse level, but at the same or a better level, at the same hundreds of thousands, if not millions of pounds, less in cost as other authorities are able to do". Another thing it has to decide is to abandon its dogma about the contracting out of services and say, "Our main concern is the provision of the standards for our people"; because, as to what one of the noble Lords on the Cross Benches said earlier—I think it was Lord Milford—I am talking about people. I am exactly and only talking about people. One should consider the opportunities that exist for these high-spending authorities—and that is the key to the whole of this debate today: the fact that it is the high spenders who have the best opportunities. It is they who have most increased their costs. We disregard that, and say that that is not important, at our peril.

The Audit Commission has now produced a handbook full of ways of saving money. There are others. LAMSAC has to be brought more into the picture and I hope it will be. I am not for a long speech at this time, but just two or three other points were mentioned. May I mention what I thought was a magnificent speech by the noble Lord, Lord Marsh—

Noble Lords


Lord Bellwin

I would think so, would I not, my Lords?

The Lord President of the Council (Viscount Whitelaw)

It was very good, anyway, my Lords.

Lord Bellwin

My Lords, it was indeed very good. He said one thing which nobody who has served in local government can deny. We all know it and I have been on the receiving end like every one of you who has served in local government. You know as well as I do what he said about the ultimate fate of every authority at election time depending upon the national scene. It happens again and again. You can have the lowest rates in the country; you can have the best services, but if the fortunes of your party at Westminster are such, then out you will go despite what you do. All those of your Lordships who have served in local government know it; I certainly do.

I shall not "make a meal of it" because the hour is late. I just reply to the noble Lord, Lord Bancroft, that in a thoughtful and interesting speech he asked: "Dare we be responsible for the day-to-day running of councils; the councils that we will have taken over?" But we are not taking over anyone by this Bill. This is a point that the noble Lord, Lord Evans of Claughton, touched upon and I say the same thing to him, too. What they spend their money on will be the decision for them to take. It is a shame that I have to keep repeating this; but it has to be said because there is so much misunderstanding and anxiety caused by it.

The noble Lord, Lord Bancroft, asked where the accountability would lie. The answer is simple. The Secretary of State will be answerable to Parliament for the expenditure levels, but it will be open to the authorities to apply for derogations. It will be incumbent upon the Secretary of State to ensure that those derogations are considered, that the levels set will be reasonable in the context of what an authority has to provide by way of services. That must also be made clear; because you cannot expect (and we do not expect) that the authorities in one fell swoop will come from their high levels right down to the levels that one would want. So this will be done sensibly and reasonably. You know that is always an obligation upon the the Secretary of State.

My Lords, we have before us tonight a very unusual attempt to amend the Motion for the Second Reading. The amendment moved by the noble Baroness, Lady Birk, refers to constitutional change, to the weakening of local democracy, and calls for a further reform of local government. We have already dealt at some length with the issues of constitution and local democracy and, if I may say so, no one in greater detail or with more authority than my noble friend Lord Broxbourne. For me, my right honourable friend the Secretary of State for Trade and Industry summed it up well enough when he said recently: It is no more a constitutional impropriety to limit the power to rate than it is to grant that power in the first place. Let no one be deluded by the seemingly innocuous wording of the amendment. The idea of embarking on reform is always appealing. It means that you can avoid actually having to do anything and it always sounds so reasonable. But we are men and women of the world. We know that this amendment is anything but reasoned. It is a skilful attempt—and I pay tribute to the noble Baroness for that—to secure the biggest possible anti-Government vote, and, if possible, even to defeat the Government. It has been said, "Who is against the Bill?" I want to say, "Who is in support of the Bill?" Those in support are those who actually have to live and work under the burden of the high spenders. Support, I can tell you, from those areas is rock solid behind the Government.

Again, I want to stress this point because at the end of the day it is the key factor of the whole issue. The Government have the support of those who pay the bills, those who meet the full burden of their rates, of industry, of commerce, of the wealth-creating sector, the country's economic base, without which there is nothing. Their voice has been heard today, loudly and clearly. They support the Bill.

We have heard much about protecting local government. Many of your Lordships have spoken from their personal experience of service on local councils. The noble Baroness, Lady Birk, said that this House is peopled by many who have served in local authorities—and she is right. I am sure that your Lordships know that I, too, have some experience in this field. But I know (and 1 am sure that in their hearts many of your Lordships know) as the noble Lord, Lord Marsh, so rightly said, that local government or at least a part of it is changing. The ACC and the ADC may well believe that because most of their members try to run their authorities responsibly and in the interests of all their ratepayers—and most of them do—let them not be deluded as to what goes on in the other world.

Prudence, caring about where the money comes from, getting the best value for every pound so that you can afford—and that is the critical word: so that you can afford—to spend more on social services and on housing and the voluntary sector and the like: all this means nothing to the people who run the high-spending authorities. Their concern—and it has to be said—is solely with their political ambitions and power. It has been said time and again today that they never try to equate their cries of lack of resources with the vast sums that they lavish on the campaigns, on the political propaganda departments, on their staff crèches and the other lunacies.

I am not going to spoil a good case by going into a lot of detail; but the fact is that much of this spending cannot be held up and justified in terms of anything which is reasonable. When will our opponents speak out about what is happening and about what is being done to the name and reputation of local government?

I finish on this note. My noble friend Lord Thorneycroft said it, and I repeat it: what are the alternatives to this Bill?—to do nothing, to let the spending rip? How many more billions of pounds have to be overspent each year before the opponents of the Bill become concerned? What should we do? Should we abandon the ratepayers in high-rating areas? Have they not put up with it long enough? It might suit the Labour Party in Opposition, but they were not so happy about it when they were in power. Should we alter the electoral system to disfranchise those voters who do not perhaps pay full rates? I agree with my noble friend Lord Beloff; and I think the noble Baroness, Lady Birk, made the same point. That would certainly focus the minds of what would then be the electorate. That would be a truly constitutional change. Is that the price our opponents are prepared to pay? It is not a price we want to pay. I am certain about that.

Should we take services like education away from local government and give them to the central Government? Would that appeal to the AMA and the ACC? The amendment refers to "a thorough reform". As my noble friend Lord Boyd-Carpenter said, reform without a review. Hardly. I groan, "Again? Another one? That is where I came in". We have had so many reviews—there has been the Green Paper on rates, which looked at every known alternative. I do not think many people had even thought about a poll tax before that.

My noble friend Lord Ellenborough might be disappointed, and so am I, but no consensus emerged. The Select Committee on the Environment agreed with that. They thought local income tax was worth another look, but the administrative problems make it only a long-term possibility, and we need to act now. What is called for?—another Maude Report, another Layfield Report, another Green Paper? Nothing is for ever.

The Secretary of State said recently, and I hope your Lordships will note this carefully because it is important: It would be foolish in the extreme to rule out for all time the possibility of a more satisfactory local tax. just as it would be foolish to rule out for all time a more satisfactory relationship between central and local government. I and my Ministers are already hard at work seeing how we can cut a path through what has become an incredibly complicated rate support grant system. That should please the noble Baroness, Lady Stedman, in particular. The Minister went on: I have no doubt whatever that after we have curbed the excesses of the few monstrously extravagant councils and after we have established single-tier local government in London and the metropolitan counties, we will be able to resume the search for a better financial régime for local authorities". That is for the future; that must not be allowed to delay this Bill, the need for which is now. It would take years; to talk of it is not an option. Alongside the criticism, alongside the attacks, the objections, we are entitled to ask for valid and meaningful alternatives. So far they are conspicuous only by their absence. The high spending and high rating problem exists today. We have promised ratepayers protection, and we must see that they get it. The amendment on the Order Paper is a formula for still further vacillation and delay. The constitutional and democratic points are pure red herrings and have been more than fully disproved by this debate. The time has come to face reality in this House. We should start to do so with this Bill. I urge the House to reject this amendment and to give the Bill an unqualified Second Reading.

Lord Kilmarnock

Before the noble Lord sits down—

Several noble Lords

Sit down!

Lord Kilmarnock

—would he reply to me on the point I raised on the probation service?

11.5 p.m.

Baroness Birk

My Lords, it seems to me nearly eight hours since I moved this amendment. I only hope noble Lords will have a very good recollection of it because I fear, with great respect, that the Minister seems to have forgotten some of it, or rather got it wrong.

We have had a very serious debate in this House, and some of the most serious speeches have been made by people who have expressed concern about one aspect or another of the Bill, even those who are in favour of the Bill. In particular, the thread that ran through that concern was the worry about local government finance. I thought some of the most interesting contributions were from the right reverend Prelate, who knew very well the sort of effect this would have on the social lives of people, the community life in local areas.

So far as centralisation is concerned, I think all that needed to be said on that was said by the noble Lord, Lord Bancroft. He was Permanent Secretary to the Department of the Environment when I was a Minister there. He then went on to become head of the Civil Service. If a man in that position expresses his worry to us about the centralisation which this Bill will cause, about the impracticality of it, the concern it will raise and the difficulties it will bring for the department, which he spoke about—and I know he means it—with great admiration and affection, then I would say that it is our duty to listen and to think about this.

The Minister said that the reform sounds reasonable, but what does it in fact mean? I said when I opened all those hours ago that both parties shared the blame for vacillating over local government finance. The noble Lord, Lord Evans of Claughton,—and I think he is right—said that we should bring out Layfield, take the dust off it and have another look at it. The evidence is all there: we just have to move forward and bring some fresh thinking to it. It is no good just saying, "There is nothing we can do". Almost everybody who has spoken has said they think something can be done. Something should be done, and this is what is being asked in this amendment.

The noble Lord, Lord Sandford, said that the most important point is a thorough reform of local government finance. The rest, which the Minister dismissed, has been raised in all parts of the House. So all I would say now is that noble Lords who support this amendment will, in doing so, be fulfilling their responsibilities as members of this House, and also will be doing a great deal for the Government themselves. They really will be helping the Government, because Governments need to be brought up short, if they say that this Bill needs a great deal of amendment. They should do that. The Minister asked: "What should we do?" I will tell him what he should do. He should get together with the three local authority associations, undust Layfield and then say: "We are determined to beat this. We are going to do something about local government finance and not leave it in this parlous state, as in this very unsavoury Bill".

The Deputy Speaker (Lord Murton of Lindisfarne)

The original Question was that this Bill be now read a second time; since when an amendment has been moved, at the end to insert the words on the order paper.

The Question, therefore, is that this amendment be agreed to?

11.8 p.m.

On Question, Whether the said amendment to the Motion for Second Reading shall be agreed to?

Their Lordships divided: Contents, 153; Not-Contents, 235.

Airedale, L. Gainsborough, E.
Alport, L. Gaitskell, B.
Amherst, E. Gallacher, L.
Ardwick, L. Galpern, L.
Attlee, E. Gifford, L.
Aylestone, L. Gladwyn, L.
Bancroft, L. Glenamara, L.
Banks, L. Graham of Edmonton, L.
Barnett, L. Greenhill of Harrow, L.
Beaumont of Whitley, L. Gregson, L.
Beswick, L. Grimond, L.
Birk, B. Hale, L.
Birkett, L. Halsbury, E.
Bishopston, L. Hampton, L.
Blease, L. Hatch of Lusby, L.
Blyton, L. Hooson, L.
Boston of Faversham, L. Houghton of Sowerby, L.
Bottomley, L. Howie of Troon, L.
Bowden, L. Hughes, L.
Briginshaw, L. Hunt, L.
Brimelow, L. Hutchinson of Lullington, L.
Broadbridge, L. Irving of Dartford, L.
Brooks of Tremorfa, L. Jacobson, L.
Bruce of Donington, L. Jacques, L.
Burton of Coventry. B. Jeger, B.
Caradon, L. Jenkins of Putney, L.
Carmichael of Kelvingrove, L. John-Mackie, L.
Chandos, V. Kagan, L.
Chitnis, L. Kearton, L.
Cledwyn of Penrhos, L. Rennet, L.
Collison, L. Kilbracken, L.
Congleton, L. Kilmarnock, L.
Cudlipp, L. Kirkhill, L.
Darcy (de Knayth), B. Listowel, E.
David, B.[Teller. ] Llewelyn-Davies of Hastoe, B.
Davies of Penrhys, L. Lloyd of Kilgerran, L.
Dean of Beswick, L. Lockwood, B.
Delacourt-Smith of Alteryn, London, Bp.
B. Longford, E.
Denington, B. Loudoun, C.
Donaldson of Kingsbridge, L. Lovell-Davis, L.
Elwyn-Jones, L. McCarthy, L.
Elystan-Morgan, L. McCluskey, L.
Ennals, L. McGregor of Durris, L.
Esher, V. McIntosh of Haringey, L.
Evans of Claughton, L. Mackie of Benshie, L.
Ewart-Biggs, B. McNair, L.
Falkender, B. Mayhew, L.
Feversham, L. Melchett, L.
Fisher of Rednal, B. Meston, L.
Fitt, L. Milford, L.
Fulton, L. Mishcon, L.
Molloy, L. Sharp, B.
Mountevans, L. Shaughnessy, L.
Mulley, L. Sidmouth, V.
Nicol, B. Simon, V.
Ogmore, L. Southwark, Bp.
Perry of Walton, L. Southwell, Bp.
Phillips, B. Stallard, L.
Pitt of Hampstead, L. Stedman, B.
Plant, L. Stoddart of Swindon, L.
Ponsonby of Shulbrede, L. Strabolgi, L.
[Teller.] Taylor of Blackburn, L.
Prys-Davies, L. Taylor of Gryfe, L.
Raglan, L. Taylor of Mansfield, L.
Rea, L. Tordoff, L.
Reilly, L. Underhill, L.
Rhodes, L. Wallace of Coslany, L.
Robson of Kiddington, B. Walston, L.
Rochester, Bp. Wedderburn of Charlton, L.
Rochester, L. Wells-Pestell, L.
Ross of Mamock, L. White, B.
Sainsbury, L. Wigoder, L.
Sandford. L. Wilson of Rievaulx, L.
Seear, B. Winchilsea and Nottingham,
Sefton of Garston, L. E.
Serota, B. Winstanley, L.
Shackleton, L. Young of Dartington, L.
Airey of Abingdon, B. Coleraine, L.
Aldenham, L. Colwyn, L.
Aldington, L. Cork of Orrery, E.
Alexander of Tunis, E. Cox, B.
Allerton, L. Craigavon, V.
Ampthill, L. Craigmyle, L.
Arran, E. Craigton, L.
Astor of Hever, L. Crathorne, L.
Atholl, D. Crawshaw, L.
Audley, L. Croft, L.
Avon, E. Cullen of Ashbourne, L.
Barber, L. Davidson. V.
Bathurst, E. De La Warr, E.
Belhaven and Stenton, L. Denham, L. [Teller.]
Bellwin, L. Digby, L.
Beloff, L. Donegall, M.
Belper, L. Donoughmore, E.
Belstead, L. Dormer, L.
Bessborough, E. Drogheda, E.
Bethell, L. Drumalbyn, L.
Biddulph, L. Eden of Winton, L.
Birdwood, L. Elles, B.
Blake, L. Elliot of Harwood, B.
Boardman, L. Elphinstone, L.
Bolton, L. Elton, L.
Boothby, L. Enroll of Hale, L.
Boyd-Carpenter, L. Fairfax of Cameron, L.
Brabazon of Tara, L. Falmouth, V.
Braye, L. Fanshawe of Richmond, L.
Brookeborough, V. Ferrers, E.
Brookes, L. Forbes, L.
Brougham and Vaux, L. Forte, L.
Broxbourne, L. Fortescue, E.
Bruce-Gardyne, L. Freyberg, L.
Burton, L. Gainford, L.
Buxton of Alsa, L. Gardner of Parkes, B.
Cairns, E. Gibson, L.
Caithness, E. Gibson-Watt, L.
Caldecote, V. Gisborough, L.
Campbell of Alloway, L. Glanusk, L.
Campbell of Croy, L. Glasgow, E.
Camegy of Lour, B. Glenarthur, L.
Carnock, L. Glenkinglas, L.
Carr of Hadley, L. Gormanston, V.
Carrick, E. Gowrie, E.
Cayzer, L. Grantchester, L.
Chalfont, L. Gray, L.
Chelmer, L. Gray of Contin, L.
Chelwood, L. Greenway, L.
Chesham, L. Gridley, L.
Chorley, L. Grimston of Westbury, L.
Clinton, L. Grimthorpe, L.
Cockfield, L. Haig, E.
Hailsham of Saint Orkney, E.
Marylebone, L. Orr-Ewing, L.
Halifax, E. Peel, E.
Harmar-Nicholls, L. Pender, L.
Harris of High Cross, L. Penrhyn, L.
Harvey of Tasburgh, L. Perth, E.
Harvington, L. Peyton of Yeovil, L.
Hastings, L. Plummer of St. Marylebone,
Hayter, L. L.
Henley, L. Plunket, L.
Hertford, M. Portland, D.
Hives, L. Portman, V.
Home of the Hirsel, L. Radnor, E.
Hood, V. Rankeillour, L.
Horsnby-Smith, B. Rawlinson of Ewell, L.
Howard of Henderskelfe, L. Redesdale, L.
Hylton-Foster, B. Reigate, L.
Inchcape, E. Remnant, L.
Inglewood, L. Renton, L.
Ingrow, L. Renwick, L.
Jessel, L. Rochdale, V.
Kaberry of Adel, L. Rodney, L.
Keith of Castleacre, L. Rollo, L.
Kemsley V. Romney, E.
Kilmany, L. Rotherwick, L.
Kimberley, E. St. Aldwyn, E.
Kinnaird, L. Saltoun, Ly.
Kintore, E. Sandys, L.
Kitchener, E. Savile, L.
Knutsford, V. Selbourne, E.
Lane-Fox, B. Selkirk, E.
Lauderdale, E. Sempill, Ly.
Lindsey and Abingdon, E. Sharpies, B.
Long, V. Sherfield, L.
Lonsdale, E. Skelmersdale, L.
Lucas of Chilworth, L. Soames, L.
Lyell, L. Southborough, L.
McFadzean, L. Spens, L.
Mackay of Clashfern, L. Stamp, L.
Mackintosh of Halifax, V. Strathcarron, L.
Macleod of Borve, B. Suffield, L.
Mancroft, L. Swansea, L.
Marchwood, V. Swinfen, L.
Margadale, L. Swinton, E. [Teller.]
Marley, L. Teviot, L.
Marsh, L. Thomas of Swynnerton, L.
Marshall of Leeds, L. Thorneycroft, L.
Masham of Ilton, B. Torphichen, L.
Maude of Stratford-upon- Townshend, M.
Avon, L. Tranmire, L.
Melville, V. Trefgarne, L.
Merrivale, L. Trenchard, V.
Molson, L. Trumpington, B.
Monckton of Brenchley, V. Ullswater, V.
Monk Bretton, L. Vaizey, L.
Monson, L. Vaux of Harrowden, L.
Montgomery of Alamein, V. Vestey, L.
Morris, L. Vickers, B.
Mottistone, L. Waldegrave, E.
Mowbray and Stourton, L. Ward of Witley, V.
Moyola, L. Watkinson, V.
Murton of Lindisfarne, L. Westbury, L.
Norfolk, D. Whitelaw, V.
Northchurch, B. Windlesham, L.
Northesk, E. Wynford, L.
Onslow, E. Young, B.

Resolved in the negative, and amendment disagreed to accordingly.

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

11.21 p.m.

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