HL Deb 29 January 1985 vol 459 cc588-93

4.41 p.m.

Lord Brabazon of Tara

My Lords, with the leave of the House. I will now repeat a Statement being made in the other place by my right honourable friend the Secretary of State for Transport. The Statement reads:

"With permission, Mr. Speaker, I shall make a statement about the recent court judgment concerning the payment of grants to London Regional Transport by the Greater London Council.

"The Government took over responsibility for London Regional Transport on 29th June 1984, part way through the present financial year. Before we took over, the GLC had budgeted and precepted to pay grants to London Transport for the whole of 1984–85. Parliament therefore granted powers in Section 49 of the London Regional Transport Act for the GLC to be directed to continue paying grants to LRT until the end of March 1985.

"Accordingly I made a direction on 29th June 1984, on the facts known to me at that time, requiring the GLC to pay a total of £281.3 million in grants to LRT in instalments up to the end of this financial year. The main factors which I had in mind in determining this figure included the GLC's decisions about revenue and capital grants to London Transport for 1984–85; LRT's financial needs for the remainder of the year, as assessed at that time; and the GLC's decision that LT should lease £27 million of assets, which imposed future liabilities on LRT. This was in accordance with the Government's intentions, as I made clear during the passage of the legislation.

"The House will be aware that the direction was subsequently challenged by the GLC and has recently been quashed by the High Court. It is clear from the judgment that the court took a different view of the way in which the powers under Section 49 of the London Regional Transport Act should be exercised from that which I told Parliament that the Government intended in taking the powers in the first place.

"The effect of the judgment would be to reduce the money available to LRT by over £50 million at a very late stage in the financial year. A corresponding amount would accrue to the GLC. The Government regard this as contrary to the interests of ratepayers and LRT's passengers.

"After studying the terms of the judgment, I have concluded that any new direction which could be made under the existing legislation either would not accomplish what was originally intended or would be vulnerable to further legal challenge, thus failing to resolve the damaging uncertainty which now exists over LRT's financial position for 1984–85 and beyond. Nor am I confident that an appeal would satisfactorily resolve the problems over the interpretation of Section 49 which the judgment has brought to light.

"In the circumstances the Government consider that the matter can only be settled by the authority of Parliament. I shall shortly introduce new legislation to enable Parliament to determine once and for all the amount of grant to be paid to LRT by the GLC in 1984–85, and thereby ensure that the original purpose of Section 49 of the London Regional Transport Act is carried out".

My Lords, that concludes the Statement.

Lord Underhill

My Lords, I wish to thank the noble Lord for repeating the Statement made in another place. Noble Lords will have noticed that in the fourth paragraph the Statement says: the court took a different view of the way in which the powers … should be exercised". That does not give a full account of the position revealed in the court hearing on 11th January.

In his judgment Mr. Justice McNeill said that the Secretary of State had exceeded his statutory authority, had wrongfully asked for £10.2 million too much in his original demand, and, although this sum had been paid by the GLC, had wrongfully failed to deduct it from his demand. In addition, he said that the Minister had wrongly included in the demand the sum of £20.8 million for future London Regional Transport leasing repayments which were not covered by the relevant section of the Act. Additionally, a further sum in the demand arose from mistaken assessment of the possible performance of LRT because money which the GLC had contracted to keep down fares had not been used for that purpose.

The ruling of the court was that the Secretary of State's action was "unlawfully, irrationally and procedurally improper". I say nothing more about that. The judge added that it was not reasonable to expect the GLC to pay the demand at the expense of other services.

It would appear that there were three alternatives facing the Government. The first was to accept the situation and confirm the lower demand on the basis of the judgment—but, of course, that might have led to fare increases unless they were prepared to guarantee increased grant. Secondly, there could have been an appeal against the judgment, but obviously the Government lawyers did not want that despite the fact that on a number of occasions the Secretary of State, and the Minister of State in the Committee stage of the Local Government Bill, emphasised that no comment could be made on the matter because it was the intention to appeal. But an appeal would have been protracted and could have upset the Government's intended timetable on rate-capping.

The third alternative was to introduce new legislation. It is made clear in the statement that that is what the Government intend to do. Is this not retrospective legislation? The demand was required to be made at the end of June. The Statement makes it clear that it was made on 29th June 1984. The demand will be reckoned as from June, which was the date on which LRT took over its responsibilities for the remainder of the financial year.

The judge also said that the GLC had a legitimate expectation that it would be consulted about the demand but that that had not happened. I ask the Minister why the GLC was not consulted. What undertakings will be given about this type of consultation for the future? When will the legislation be introduced? What will be the expected timetable for the legislation?

What will be the position of the GLC budget? It would appear obvious that it cannot proceed with its budget with the substantial figure of at least £50 million, and possibly as much as £73 million, unresolved. Will the GLC's inability to prepare a budget because that significant sum is left unresolved affect rate-capping (which includes the GLC), the order for which the Government are to introduce tomorrow?

Lord Diamond

My Lords, we on these Benches would like to record our gratitude to the Minister for repeating this Statement. The Minister will be glad to know that I have no questions to ask beyond those which have already been put so well by the noble Lord who has just spoken. We on these Benches take the view that a Minister acts in good faith until the contrary is proved, that he acted in good faith in the actions he took and thought that he was carrying out the will of Parliament. It appears that he was not carrying out the will of Parliament and therefore the matter must be clarified. I am most grateful to him and to the Government for the decision they have taken to reintroduce this matter to Parliament so that all these issues and allegations can be fully debated and fully discussed in both Houses. To my mind, that is the proper way of carrying on.

However, I should be grateful if the noble Lord the Minister would, if he can at this stage, indicate what view the Government take about the possibility of retrospective legislation. That is indeed a most important matter of principle. Obviously it can well be argued that the Government are not capable of tracking back where Parliament has passed a law which is capable—in the Government's view, because they are not appealing—of one interpretation only. Therefore I should be grateful for a fuller explanation of that aspect of the matter.

Lord Brabazon of Tara

My Lords, I should like to thank the noble Lords, Lord Underhill and Lord Diamond, for their reception of the Statement. I shall try to answer some of the questions which have arisen. The noble Lord, Lord Underhill, asked about overturning the court's decision, or about the fact that we did not agree with the court's decision. Perhaps I may expand slightly on our view on that. After studying the judgment, it was clear to us that the courts take a different view of the way in which the powers under Section 49 of the LRT Act should be exercised from that which we intended in taking the powers in the first place. The Government are not criticising the court's decision or attempting to overturn it. On the basis of the court's judgment we have simply decided that it would be in the best interests of passengers, ratepayers and taxpayers to clarify the legislation rather than to make a new direction under the existing legislative provision.

On the question of appeal, it is quite true to say that my right honourable friend the Secretary of State gave notice of his intention to appeal when the judgment was delivered. That is quite correct. However, the first priority must be to give certainty to LRT and GLC about the grant to be paid in respect of 1984–5. Having carefully studied the High Court judgment, the Secretary of State concluded that an appeal might still leave problems over the interpretation of the existing legislation and that in the circumstances the right course was to clarify the legislation. It is the only course which will give much-needed certainty about LRT and GLC's financial position.

The noble Lord, Lord Underhill, and the noble Lord, Lord Diamond, asked about retrospective legislation. I can assure noble Lords that the Bill will not be retrospective. The GLC will not be asked to pay more than it would have had to under the original direction.

I am afraid that that is all I can say on the matter at the moment. As noble Lords know, the Bill will be coming out very soon—"Very soon" is the answer to Lord Underhill's question as to when. Until that happens, I really cannot expand on it any further.

Lord Harmar-Nicholls

My Lords, is my noble friend aware that people listening to the Statement and the comments upon it will have to come to the conclusion that both the courts and the Government are acting in an exemplary way? It is very good. It is important that they are not trying to patch up this difference of interpretation: they are going to bring in new legislation. That is very good and it is an example that I hope people will follow. But I was a little bit puzzled at the last sentence about the retrospective element. I should hate the principle of retrospection to be brought in here. I think retrospective legislation is bad and unfair. Although this may have elements in it which would perhaps justify a certain element of retrospection, I hope the Government will forgo that for the benefit of the higher principle of not having retrospective legislation.

Perhaps my noble friend can put me right: he seemed to say that in his view it is not retrospective, yet he then seemed to say that the decision that they came to when they were interpreting their own Act was that the amount the GLC would be asked to pay would be the same. If the position is that they are asked to pay back the same amount, then that would be retrospective. I think we ought to get that clear, because it would be very sad if this very excellent example of how the courts and governments can work were spoiled by infringing a principle which has nothing whatever to do with it but which is deeply held in many parts of both Houses.

Lord Brabazon of Tara

My Lords, I thank my noble friend Lord Harmar-Nicholls for his remarks. May I try to clarify what I said about retrospection? As I said, we shall have to wait to see what the Bill says. However, I can assure the House that the Bill will not go beyond what the GLC were originally given notice that they might be required to pay in relation to Section 49 of the LRT Act.

Lord McIntosh of Haringey

My Lords, will the noble Lord accept that his answer is quite inadequate from the point of view of the Controller of Finance of the Greater London Council, who has to advise his members as to the likely outturn, in financial terms, of the financial year 1984–5—and that forms a major part of the consideration of the following year's Budget?

The noble Lord will correct me if I am wrong—I ask him whether I am wrong—but as I understand it, the position is that, as of January 11th, the GLC thought it had not got to pay this money and the proposal is that, when and if this Bill is passed, it will again have to pay the money which it had considered as part of its reserves. Will the noble Lord not accept that this is a most unsatisfactory situation and that his answer about retrospection is not adequate for that purpose?

Lord Brabazon of Tara

My Lords, I should say that by our bringing in this Bill, the GLC's anxieties will be settled a great deal more quickly than they would have been had we gone to appeal, with all the procedure in the courts that goes with that.

Lord Diamond

My Lords, of course we endorse that. I have already indicated that we on these Benches certainly endorse the attitude the Government have taken. But I must press the noble Lord a little further on the question of retrospective legislation, as indeed he has been pressed by those on the Benches behind him. Does not the noble Lord realise that, although Parliament can do a great deal, it cannot bail the Government out on every mistake they make? If the Government have made a mistake and have been supported by Parliament, and the court has drawn attention to that mistake, the law is the law as the judge has decided. That covers the period up to the date when the new legislation is brought in or becomes effective. In those circumstances, how can the Government possibly justify coming to Parliament with a proposal which is flatly in contradiction with what the judge has decided was the law of the land at the time the judge was asked to make the decision?

Lord Brabazon of Tara

I would generally agree with the noble Lord, Lord Diamond, about retrospective legislation. However, as I said, we should otherwise have had to go to appeal. By bringing in this Bill, we shall clarify the situation a great deal quicker than we should have done if we had gone to appeal.

Lord Underhill

My Lords, I shall not press the matter further but of course the Government had a fourth way out. They could themselves have made a grant to LRT to cover the difference if they thought there was need for it. But will the Minister consider this point though he may not be in a position to answer? The orders for rate capping are to be laid tomorrow. These will include the GLC. If the GLC cannot complete its budget because this substantial sum is still unresolved, will the Government give serious consideration to withdrawing the order?

Lord Brabazon of Tara

My Lords, I can assure the noble Lord, Lord Underhill, that my right honourable friend the Secretary of State for the Environment will be taking into account all the relevant factors, including this proposed legislation, in arriving at a decision on the limitations of the GLC's rates next year.