Local Government Finance Bill

HL Deb 24 February 1987 vol 485 cc102-54

3.26 p.m.

Lord Skelmersdale

My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.

Moved, That the House do now again resolve itself into Committee.—(Lord Skelmersdale).

On Question, Motion agreed to.

House in Committee accordingly.

[The LORD ABERDARE in the Chair.]

Clause 7 [Restrictions on rating and precepting]:

Baroness David moved Amendment No.23: Page 6, line 29, leave out from ("with") to end of line 30 and insert ("the following provisions of this section")

The noble Baroness said: In speaking to Amendment No.23 I speak also to Amendments Nos. 24, 25, 26, 27, 28, 29 and 39. The purpose of this key group of amendments is to allow flexibility in the final setting of the rate and precept limits and to introduce on a very tight time-scale an element of discretion for the Secretary of State before the rate-cap formulae in Schedule 2 are finally fixed. This will enable account to be taken of changes in the local authorities' financing position since December 1986, when the Bill was published. It will also allow the House to be assured that, in the absence of the normal order-making process for rate limitation, the position of local authorities is being fully taken into account.

As regards the Rates Act procedure, there are serious objections to the lack of discretion for the Secretary of State. These arise from considerations of, first, practicality and, secondly, natural justice. Under Clause 7 as it stands the precept and rate limits for authorities will be fixed by the formulae contained in Schedule 2. The schedule applies common formulae to groups of authorities with the inevitable result that the effect varies among these authorities. A number face serious disadvantage as a consequence of the standard formulae.

The setting of limits by a formula is quite at variance with the usual procedure under the Rates Act. Under that process the setting of expenditure limits in the summer is followed in autumn/winter by a process of redetermination. Authorities make representations as to the level of rate or precept limit proposed. After the completion of that process interim maximum limits are announced. There is a final stage of discussions in mid to late February as to the levels of final maximum limits. That is intended to deal with changes to authorities' financing positions which only take place towards the end of the financial year.

The best example of this is the level of an authority's reserves, which can vary substantially towards the end of the year in relation to any over- or under-spending against its budget. The anticipated level of reserves is taken into account at the earlier stages in arriving at the interim limit, and the final total of reserves would clearly be significant in relation to the actual impact of that limit in the following year. This last stage of discussion, referred to in a court case in 1985 as "statutory negotiations", is intended to iron out difficulties of that kind.

In debates on what became the Rates Act 1984, government spokesmen made it clear that the extensive process of discussion was intended as a safeguard against arbitrary decision-making. The introduction of the present Bill on 18th December effectively halted the process half way through redetermination. Eighteen of the 40 authorities affected by Schedule 2 had applied for redetermination and the Secretary of State's response was awaited at the time of the Bill's introduction. The Secretary of State must have been aware at the time the representations were being made that he would be bringing in this Bill, but there was no mention of it then to the local authorities. No response has been given to these representations.

The Government state that representations have been taken into account in the formulae. Quite apart from the fact that the limits are still inadequate for many authorities, it is difficult to see how a series of formulae can constitute a response to individual applications. The whole purpose of the Rates Act process from redetermination onwards is to take account in the individual limits of the precise circumstances of each authority.

A number of authorities which did not seek redetermination were intentionally awaiting the further stage of discussions before making representations. Since the Bill has stopped the whole process, it is clear that the representations of the majority of authorities will not be given serious consideration. In addition to that, I mentioned last night a letter dated 20th March 1986 to Margaret Hodge from the Secretary of State in which he gave an assurance that in later years, that is, from 1987–88 onwards, he would consider the implications of changes in grant entitlement resulting from the removal of the temporary safety net when calculating rate limits for those years. It is worth noting that in this Bill the Secretary of State has prevented himself honouring that assurance by the terms of Clauses 6 and 7 which mean that the position of individual authorities cannot be considered prior to settling a rate limit.

The practical implications of the Bill for authorities will be serious. The formulae in the Bill were fixed at the date of publication, which was 18th December, and no opportunity exists to vary them after Royal Assent. Therefore, no account will be taken of changes in budgetary position, including the level of reserves. In the same way, there will be no opportunity for the Secretary of State to remedy any error of calculation or adjust to any new developments without further primary legislation.

In their representations, local authorities have drawn attention to the serious implications for services in many areas as a result of the limits proposed. The amendment suggests that the Secretary of State should have a proper opportunity to assess those representations at the time of the year when he would normally make his final decisions and when the financial proposition of authorities arising from the current year is becoming clear.

As regards its operation, the amendment recognises the extremely tight timescale that now faces both Ministers and local government. Upper tier local authorities are obliged to set their precepts by 10th March and lower tier authorities by 31st March. Royal Assent to the Bill is likely to fall at some time before 31st March although if this amendment were accepted there would be little objection from authorities to proceeding to Royal Assent at the earliest possible date. It is already clear that upper tier authorities will have to fix their precepts before Royal Assent and it is possible that lower tier authorities will face the same problem.

The difficulty is not confined to rate-capped authorities but affects all authorities which are in receipt of block grant, since the 1987–88 RSG settlement cannot proceed until after Royal Assent. I should like to ask the Minister when he replies to give us an assurance that the 1987–88 settlement will proceed in good time for authorities to know its contents before they make their rates by 31st March. The difficulties caused to local authorities by this Bill on the eve of rate-making are enormous. In these circumstances the amendment seeks to put forward a practical timetable that recognises the time constraint but also avoids the dangers to both government and local authorities when legislating in haste for fixed formulae without a proper opportunity for review as to their practical effect.

The procedure in the amendment would be as follows. Immediately after Royal Assent and the laying of the RSG report, the Secretary of State would serve a statement on each authority covered in Schedule 2. The statement would set out their preliminary limit and invite representations within a timescale specified by himself. This timescale could quite reasonably be a matter of only a few days, given that most authorities either have already made representations or are on the point of doing so. After the period for representations, the Secretary of State would take them into account and set out maximum limits for each authority, which would not be less than the interim limit, in an order. He is thus enabled to take account of the individual circumstances of authorities. Authorities would be notified of the limits. As with the present rate-capping orders, the order would require approval of the House of Commons.

Clause 8 of the Bill already makes provision for substituted rates or precepts. In circumstances where a rate or precept has already been made and the Secretary of State then proposes a different limit after hearing representations, the amendment cross-refers to that clause and makes provision for the issuing of substitutes. In the event of any decision of the Secretary of State as to a final limit being challenged successfully in the courts, the amendment makes similar provision for substituted precepts or rates.

It will he seen that the whole process could take a matter of only two to three weeks and that both the timescale and the contents of the order remain at the discretion of the Secretary of State. The amendment preserves certainty around the rate-making process. It also causes no noticeable inconvenience to ratepayers whose bills for 1987–88 will not fall due until after those processes are completed.

The amendment is a practical compromise between the lateness of the timescale and the need to allow some discretion to the Secretary of State in order to avoid the worst effects of arbitrary decision by formulae. In explaining this series of amendments I have kept to the general principle and purposely not entered into details of how the formulae will affect different authorities. That can be discussed in reference to later amendments. We ask that the promises that were made when the Rates Act 1984 was passing through Parliament should be kept and that natural justice should be seen to be done. Services of many varying kinds to thousands of men, women and children will be affected by the decision on this series of amendments. I hope that the Minister will be sympathetic to them. I beg to move.

Lord Kilmarnock

The main objection to the formula funding, triggered off by this clause and described in more detail in Schedule 2, is that it over-rides the redetermination procedure in the Rates Act 1984, so that all flexibility to take into account special circumstances in different areas and different types of authority is removed. Pledges given under the 1984 Act are, frankly, being torn up, and under the Bill as drafted, authorities will not be able to enter into discussions on a proposed maximum rate. For previously rate-capped authorities, expenditure levels are frozen: for newly capped authorities it means a 2 per cent. increase; and there is a flat 4 per cent. increase for all police authorities regardless of their particular needs. Therefore, we argue that these formulae are excessively rigid. The Bill as drafted means that it will be impossible for the Secretary of State or the authorities to make adjustments once the Bill has been passed without new primary legislation being introduced. That seems unsatisfactory for the Secretary of State, for the authorities and, if I may say so, for Parliament itself.

The principal amendment in this group, as the noble Baroness, Lady David, has so lucidly explained, seeks to reintroduce some element of flexibility by proposing a preliminary limit and inviting representations within a time limit over which the Secretary of State retains control. It could be very tight but at least it gives some opportunity for authorities to make representations over a change in their circumstances, or in consideration of extra or special expenditure which has occurred or is likely to occur. All that could be done within a matter of two or three weeks.

One of the worst features of the clause is that the redetermination procedure has been overridden. The noble Baroness mentioned that, had authorities known in advance that a legislative formula to determine expenditure levels was being contemplated and that there would be no challenge available to them, many more would have submitted information earlier. There is some evidence to show that those that applied for redetermination of expenditure levels have had their representations largely ignored.

I have already referred to the discrimination under these formulae among different types of authority. There appears to be some discrimination against ILEA, to which I shall come in the next batch of amendments. It is the only rate-capped education authority not to be given an additional factor to deal with the financial consequences of the final teachers' pay settlement.

This all takes us back to the fact that the Secretary of State had no need to introduce a Bill of this type. It is another instance of a nightmarish morass of complications brought about by excessive central government control of local authority spending. The Secretary of State could easily have introduced a very simple Bill in November or December to rectify the illegality on the block grant, a measure that I think all parties in the Committee would have supported. He has chosen instead to get himself and us into this morass which we are trying to do something to rectify. On those grounds, we support the amendment.

Lord Underhill

I support my noble friend in her group of amendments. In her concluding remarks she said that the amendments propose a practical compromise. It may be recalled that on Second Reading I drew attention in particular to the effect that the procedure in the Bill would have on the new joint passenger transport authorities. I agree with the noble Lord, Lord Kilmarnock, that we shall go in detail into the various formulae on the next batch of amendments.

I want to deal with the criticism levelled at the Government for abolishing the redetermination process, in many cases after authorities had gone to considerable effort to submit their cases for redetermination. In response to that criticism the Government have argued that the cases submitted in support of redetermination applications were considered in detail in setting the percentage increase for each type of authority. That was a very important statement.

The Association of Metropolitan Authorities has challenged this claim generally but, in particular, because of the shortfall of some £26 million that has been clearly identified in relation to the six passenger transport authorities. There is now specific evidence clearly demonstrating that the redetermination applications have not been taken into account in setting the 12 per cent. all round increase in the expenditure for the PTAs. This relates—I have to refer to the body—to the South Yorkshire Passenger Transport Authority. It will have to bear £5.5 million in 1987–88 as a result of the transfer scheme that set up the authority' s public transport company under the Transport Act 1985, of which all Members of the Committee will be aware.

The Department of Transport knows fully the elements making up these costs. About half the £5.5 million is attributable to changes made in the transfer scheme imposed by the department. In common with other PTAs, South Yorkshire's expenditure level has been increased under the Bill by 2 per cent., yet the costs associated with the transfer scheme made for it by the department amount to 12 per cent. of the original expenditure level. The extent of these costs was not known at the time that the original expenditure level was set, yet the standard formula ignores that fact.

Perhaps I may give the Committee the timetable. On 19th June 1986, South Yorkshire was given a provisional expenditure level for 1987–88 of £45.2 million. On 22nd July the PTA was informed that its expenditure level was £45.7 million. On 31st July, nine days afterwards, the PTA was told by the department of the modification that it intended to make to its company transfer scheme. The department assured the PTA that the effects of the transfer scheme and the department's modifications would be taken into account by the Secretary of State when he set the expenditure level and precept limits for 1987–88. Then 16th October was the deadline for submission of determination.

South Yorkshire PTA applied for redetermination of £55 million. The key component in its case was the transfer scheme costs imposed by the modifications made by the department. So far so good. On 13th January this year the PTA was informed that the Bill would give a revised expenditure level of £46.6 million, a 2 per cent. increase, but a shortfall of £8.4 million.

I am using this case to prove beyond question that the Government have not reflected the redetermined applications in setting the 2 per cent. increase to PTAs' expenditure levels, and the same can be said of all the other formulae in Schedule 2.

The Minister must explain to the Committee in the light of this evidence—similar evidence can be provided for the other passenger transport authorities—the claim that all applications for redetermination by PTAs were taken into account in the decision to increase their expenditure levels by the standard 2 per cent. This would justify the compromise scheme proposed in my noble friend's amendments.

3.45 p.m.

Lord Skelmersdale

I noted with interest that the noble Baroness introduced the block of amendments without condemning rate-capping. I understand that it is her party's policy to abolish rate-capping, should it get into power. I can only hope that her measured tones in introducing the amendments indicate a change of heart for her party in this respect.

I thought that we agreed in Committee yesterday that the one objective that we all have in the Bill is to secure certainty in local authorities and that the Bill had been drafted with this objective in mind. I regret, therefore, to have to tell the Committee again that the effect of the proposal in the amendments is to create delay and continuing uncertainty about what rate and precept limits in the areas of designated authorities will be.

We shall no doubt be considering the substance of rate and precept limits on the debate on the next set of amendments. That is one point on which I can agree with the noble Baroness, Lady David. I suggest that the points that the noble Lord, Lord Underhill, has raised would be more pertinent in that debate than in this one, if he agrees. I will concentrate, therefore, on the procedures that we have adopted for 1987–88 alone.

As my noble friend Lady Hooper explained on Second Reading, it would simply not have been possible to carry through the normal rates legislation procedures, given the need for the Bill. Our aim throughout has been to give authorities the maximum of certainty in fixing their rates and precepts, given the need for the Bill. We have therefore provided that authorities will be notified as soon as is reasonably practical, after the rate support grant report for 1987–88 is laid before another place of the rate and precept limits that will apply to them.

I assure the noble Lord, Lord Kilmarnock, that my right honourable friend the Secretary of State for Education and Science took full account of the costs of the teachers' pay settlement in deciding the formula for ILEA in the Bill. It was unnecessary to include a separate "T" factor for ILEA because it is in a class of its own and so clearly has it own formula.

If I may stay with the noble Lord, Lord Kilmarnock, because of the total expenditure problem, we have had to roll up the normal rate limitation procedures and adopt the formula approach. We shall be discussing that in detail with the next block of amendments.

In deciding on the formula, we have taken account of the representations made, including those on redetermination applications. What we are doing is for one year only. It is not ideal, but the Government believe that it is the least undesirable course open to us. The Secretaries of State concerned with precept limitation have already written to those authorities explaining to them the effect of the formulae. If those authorities have to set their rates or precepts before the Bill is enacted and the report laid, they will know clearly what will be expected of them under the formulae and can act accordingly.

As the noble Baroness well knows, we announced our firm intentions for the 1987–88 settlement on 13th January. We intend to make the 1987–88 rate support grant report immediately upon Royal Assent to the Bill. We hope to make the report before 1st April 1987.

No sensible authority would, with all that knowledge at its command, issue a rate or precept at a level which would require a substitute one to be issued following Royal Assent. The Bill therefore gives absolute certainty to local authorities and their ratepayers. Under the Local Government Act 1986, local authorities have by law to make a rate by 1st April, as the noble Baroness said. As she also said, the last date for precepting authorities is 10th March under the general rate legislation.

As I have said, nothing but gross uncertainty would come from this set of amendments. Authorities would not know until possibly long after the Bill is enacted what their rate or precept limit was to be. There would also be uncertainty for ratepayers, who would not know how large their bills were to be. I do not accept that continuing uncertainty is necessary or a desirable price to pay for the flexibility in the rate limits which noble Lords opposite seek through this amendment. Accordingly, I can do no other than recommend the Committee to reject the amendments on the grounds that they will produce chaos and confusion where certainty is the objective agreed on on all sides of the Committee.

Baroness David

I am disappointed that the Minister has not seen the point of these amendments. He upbraided me for not having mentioned rate-capping. I was saving the Committee's time by sticking to the matter in hand.

Lord Skelmersdale

I sought to say that I was delighted that the noble Baroness did not raise the matter of rate-capping.

Baroness David

The Minister said that the amendments will make everything happen very much later. I gave a practical timetable which would not take long. It could all be done in a matter of two or three weeks. Authorities would much rather have uncertainty for that length of time if they knew that at the end they would receive fairer treatment. Do I understand that the rate supplementary report may not be in time for local authorities to study it before they have to make their rate on 31st March?

Lord Skelmersdale

It depends entirely on the speed of progress of this Bill through Parliament.

Baroness David

We know the timetable fairly well. My noble friend Lord Underhill gave an example of the unfairness that would be caused to local authorities by the timetable to which they will have to work, and the lack of notice about the representations that they made. In some cases, as the noble Lord, Lord Kilmarnock, said, they made no representations because they hoped to have the opportunity later. It is unfair to a large number of authorities and to the people for whom they provide services.

I seem to have made no impression on the Minister about the seriousness of the objections. This is a matter of principle. What was promised in the Rates Act 1984 has not been kept to; it may only be for one year, but one year is a long time to have grant reduced and not to have the chance to make clear the position about reserves and so on. I believe that I have no alternative but to press the amendment.

3.55 p.m.

On Question, Whether the said amendment (No.23) shall be agreed to?

Their Lordships divided: Contents, 100; Not-Contents, 141.

DIVISION NO.1
CONTENTS
Airedale L.	Bottomley, L.
Alport, L.	Briginshaw, L.
Amherst, E.	Brockway, L.
Annan, L.	Campbell of Eskan, L.
Ardwick, L.	Chitnis, L.
Banks, L.	Cledwyn of Penrhos, L
Beswick, L.	Collison, L.
Birk, B.	David, B.
Blyton, L.	Dean of Beswick, L.
Bonham-Carter, L.	Dennington, B.
Boston of Faversham, L.	Diamond, L.

Donaldson of Kingsbridge, L.	Lloyd of Kilgerran, L.
Dowding, L.	Lockwood, B.
Elwyn-Jones, L.	McCarthy, L.
Ennals, L.	McNair, L.
Ewart-Biggs, B.	Milford, L.
Ezra, L.	Morton of Shuna, L.
Falkender, B.	Mulley, L.
Falkland, V.	Murray of Epping Forest,
Fisher of Rednal, B.	Nicol, B.
Fletcher, L.	Northfield, L.
Foot, L.	Ogmore, L.
Gallacher, L.	Oram, L.
Galpern, L.	Phillips, B.
Gladwyn, L.	Pitt of Hampstead, L.
Graham of Edmonton, L.	Ponsonby of Shulbrede, L. [Teller.]
Grey, E.
Hampton, L.	Prys-Davies, L.
Hanworth, V.	Raglan, L.
Harris of Greenwich, L.	Rathcreedan, L.
Hayter, L.	Ritchie of Dundee, L.
Henniker, L.	Robson of Kiddington, B.
Heycock, L.	Rochester, L.
Hirshfield, L.	Ross of Marnock, L.
Hooson, L.	Serota, B.
Hunt, L.	Shepherd, L.
Hunter of Newington, L.	Silkin of Dulwich, L.
Ilchester, E.	Stedman, B.
Irving of Dartford, L.	Stewart of Fulham, L.
Jacques, L.	Strabolgi, L.
Jeger, B.	Taylor of Gryfe, L.
Jenkins of Putney, L.	Taylor of Mansfield, L.
Kagan, L.	Tordoff, L. [Teller.]
Kennet, L.	Underhill, L.
Kilbracken, L.	Wedderburn of Charlton, L
Kilmarnock, L.	Wells-Pestell, L.
Kirkhill, L.	Wigoder, L.
Kissin, L.	Williams of Elvel, L.
Lawrence, L.	Winstanley, L.
Leatherland, L.	Winterbottom, L.
Llewelyn-Davies of Hastoe, B.
NOT CONTENTS
Aldenham, L.	Denham, L. [Teller.]
Allerton, L.	Denning, L.
Ampthill, L.	Derwent, L.
Auckland, L.	Drumalbyn, L.
Bauer, L.	Dundee, E.
Beaverbrook, L.	Eccles, V.
Belhaven and Stenton, L.	Eden of Winton, L.
Beloff, L.	Effingham, E.
Belstead, L.	Ellenborough, L.
Biddulph, L.	Elliot of Harwood, B.
Borthwick, L.	Elliott of Morpeth, L.
Boyd-Carpenter, L.	Enniskillen, E.
Brabazon of Tara, L.	Faithfull, B.
Brightman, L.	Fanshawe of Richmond, L
Broadbridge, L.	Ferrers, E.
Brougham and Vaux, L.	Ferrier, L.
Broxbourne, L.	Fortescue, E.
Bruce-Gardyne, L.	Fraser of Kilmorack, L.
Butterworth, L.	Gainford, L.
Byron, L.	Gardner of Parkes, B.
Caccia, L.	Granville of Eye, L.
Caithness, E.	Gray of Contin, L.
Cameron of Lochbroom, L.	Greenway, L.
Campbell of Alloway, L.	Gridley, L.
Campbell of Croy, L.	Halsbury, E.
Carnegy of Lour, B.	Harmar-Nicholls, L.
Carnock, L.	Hesketh, L.
Cathcart, E.	Hives, L.
Chelwood, L.	Holderness, L.
Cornwallis, L.	Home of the Hirsel, L.
Cottesloe, L.	Hood, V.
Cowley, E.	Hooper, B.
Cox, B.	Hylton-Foster, B.
Craigavon, V.	Kaberry of Adel, L.
Craigton, L.	Killearn, L.
Cromartie. E.	Kimball, L.
Cullen of Ashbourne, L.	Kimberley, E.
Dacre of Glanton, L.	Kinnaird, L.
Davidson, V. [Teller.]	Knollys, V.
De La Warr, E.	Lane-Fox, B.

Lauderdale, E.	Portland, D.
Layton. L.	Rankeillour, L.
Lloyd of Hampstead, L.	Renwick, L.
Long, V.	Rodney, L.
Lothian, M.	Romney, E.
Lucas of Chilworth, L.	St. Davids, V.
Lurgan, L.	Saint Oswald, L.
McFadzean, L.	Sandford, L.
Margadale, L.	Sandys, L.
Marley, L.	Sempill. Ly.
Marshall of Leeds, L.	Shannon, E.
Maude of Stratford-upon-Avon, L.	Sharpies, B.
	Shaughnessy, L.
Merrivale, L.	Skelmersdale, L.
Mersey, V.	Strange, B.
Milverton, L.	Sudeley, L.
Molson, L.	Swinton, E.
Monk Bretton, L.	Teviot, L.
Morris, L.	Thorneycroft, L.
Mottistone, L.	Torrington, V.
Mzunster, E.	Tranmire, L.
Murton of Lindisfarne, L.	Trumpington, B.
Norrie, L.	Vickers, B.
Nugent of Guildford, L.	Vivian, L.
O'Brien of Lothbury, L.	Westbury, L.
Onslow, E.	Whitelaw, V.
Orkney, E.	Wise, L.
Orr-Ewing, L.	Wolfson, L.
Pender, L.	Wynford, L.
Peyton of Yeovil, L.	Young, B.
Porritt. L.	Young of Graflham, L

Resolved in the negative,and amendment disagreed to accordingly.

4 p.m.

[Amendments Nos. 24 to 28 not moved.]

Clause 7 agreed to.

Schedule 2 [Rates: maximum limit]:

[Amendment No.29 not moved.]

Lord Underhill moved Amendment No.30: Page 10, line 39, leave out ("(EL T—(BG + E))") and insert ("(EL x 1.348)-(BG + E)").

The noble Lord said: It will be useful if under Schedule 2 I deal with Amendments Nos. 30 to 35, which concern the formulae.

I am sorry that the Minister did not deal with the points I raised on the example of South Yorkshire PTA, because I was not dealing with the PTA as such but with the whole question of the lack of consideration of redetermination and the fact that that PTA had not had the opportunity to have its points considered. I am surprised that the Minister did not deal with this matter in reply to the amendments from my noble friend, because it vitally affects the position of those amendments and the Government's intention. On my noble friend's amendment, the Minister also said that we must remove any uncertainty; or if he did not say "remove any uncertainty" he said that there must be certainty.

Before going into the details of Amendments Nos. 30 to 35 I must refer to a letter which was sent out only yesterday—the first day of the Committee stage—to a large number of authorities by the Department of the Environment, that is, to almost all those affected by Schedule 2. Some authorities received it only today. Others, including the AMA, have not yet received it, or at least they had not received it by the time I was given this note.

Two further errors are now admitted by the Department of the Environment in connection with this matter. I do not think the Committee would wish me to read the whole of the letter, but that letter to all those authorities, dated 23rd February, says: For 1987/88 there was an error in the calculation of the grant-related expenditure assessment for the rate fund revenue account contribution to the housing revenue account for certain authorities. This has consequential effects on some other GRE assessments, the grant related poundage at GRE and on multipliers".

They say that they enclose the corrected versions of the tables. In paragraph 3 the letter reads: The departmental paper on the 1985/86 Report also contained an incorrect expenditure figure for one authority which affects grant related poundage for spending at GRE".

Those are two very serious matters. It means that at the very time we are considering the formulae, at the very time we are considering these amendments, we find that the DoE has to send out another communication with two very serious corrections. I hope the Committee will forgive me if I am a little hesitant, but I have had to work on notes which have been hastily drawn up as a result of this letter, which has not yet been received by my association but which was received by some authorities and conveyed to the association. These notes were given to me just shortly before we went into the last Division.

The effect of the two errors relates directly to Schedule 2 of the Bill with which we are now dealing with my six amendments. They change the figures for block grant specified in the Bill as BG and thus the figures for maximum rates and precepts. So at this very late stage the Committee is being told that the Government are changing the purport of the determination in Schedule 2. How can the Committee agree to that when the Government are changing their mind even at this very late stage of the second day of the Committee?

Secondly, it appears that Tyne and Wear Fire and Civil Defence Authority only yesterday set its precept at the maximum produced by the formulae in the Bill, which is covered by the amendments, but using the 13th January figure for BG and not that of the 23rd February correction. Can the Minister say what he now expects Tyne and Wear Fire and Civil Defence Authority to do? Presumably they would be expected to remake their precept. At what cost?

Thirdly, the Government could not have been aware of the full implications for authorities of their determination in Schedule 2 when they changed the figures at this late stage of the proceedings. This admirably illustrates the folly of the Government trying to set rate limits for authorities in this Bill rather than relying on Rates Act procedure, which would enable late information such as this, or that coming from the authorities such as balances, rateable values and so on, to be properly taken into account when setting local authority maximum rates. If ever there were justification for not turning down the amendment which my noble friend moved, surely that is it.

Now we are in the position of having to look at the formulae laid down in Schedule 2. We find that the previous rate-capped authorities have no uplift at all. That is in paragraph 2(1) of Schedule 2. The newly-designated rate-capped authorities have an all-round uplift of 2 per cent; the metropolitan police authorities an all-round uplift of 4 per cent; metropolitan and London fire and civil defences authorities an all-round uplift of 2.5 per cent; and the metropolitan PTAs, to which I have already referred, an all-round uplift of 2 per cent. ILEA is the only one where the affairs of the authority could have been taken into consideration because there is only one ILEA. However, there the uplift is only 0.06 per cent. My noble friend Lady Ewart-Biggs will be dealing specifically with the position of ILEA.

Instead of setting a maximum rate or precept for the individual authorities we are now presented with these flat-rate formulae for each category of authority. The amendment seeks to increase the respective formula for each group by an amount equal to the highest bid made by an authority, on individual redetermination, which is now taken away by the Bill. The common expenditure uplift currently in the formulae as set out in the schedule takes no account whatever of the representations made by individual authorities to Ministers for increases in their expenditure levels to take account of their local circumstances. By substituting the highest percentage increase sought by different types of authority these amendments ensure that no authority loses out by the common percentage uplift approach.

Ministers will say that they have taken account of the representations that have been made to them and that the uplift factors reflect this. I have given evidence on the previous amendment that that could not possibly be so. We now have the latest situation with the two corrections which the department sent out only yesterday. There are substantial differences in the expenditure level offered to rate-capped authorities, and in their bids for increases. There is no consideration given for any local needs or circumstances, such as the effects on some of the joint fire and civil defence authorities which have all been given an all-round 2.5 per cent. increase.

Spending at that level is very serious. Time does not permit full details to be given but all these fire authorities will have shortfalls. For example, the shortfall for Merseyside will be £1.4 million, for South Yorkshire £1.5 million, and for West Yorkshire £2.9 million. We are talking about shortfalls for joint fire and civil defence authorities—very important bodies. These shortfalls involve a large number of cutbacks. They include such factors as not filling staff vacancies to the levels recommended by the Home Office and possibly no replacement of essential operational appliances and equipment.

South Yorkshire has prepared a very detailed document, which no doubt the Minister has seen, arguing the whole of its case and what this block formula process means to it. The problem of manning appliances, the lack of equipment and the lack of trained men could be extremely serious. I say that not only because of the evidence we have before us, but as one who has served for a number of years in the National Fire Service. What will be the attitude of Her Majesty's Chief Inspector of Fire Services on these cutbacks if some of these essential matters cannot be put forward by the civil defence authorities?

On 26th January the Secretary of State stated that the Minister of State at the Home Office was to meet the South Yorkshire authority to discuss matters of concern. I have not heard from South Yorkshire whether that meeting has taken place. But what does it mean? Does it mean that the EL set out in Schedule 2 can be varied by the Minister after meeting the authority? If so, how can it be done? It could have been done if the Government had agreed to my noble friend's amendment, which unfortunately noble Lords have rejected. We then find under the common formula for the joint police authorities that they have all been uplifted by an all-round 4 per cent. We have the position of West Midlands Police Authority with a shortfall of no less than £3.7 million. Service developments cannot be accommodated. It seems inevitable that the increase in police officer establish-ment of 88 posts, which has been supported by the Home Office, must be delayed.

I have mentioned the general position of the PTAs with an all-round increase of 2 per cent. At Second Reading I referred to the concern of two other PTAs in addition to South Yorkshire. I remind noble Lords that Greater Manchester, under the block formula scheme which we are seeking to amend, will receive £11.4 million less than it needs to spend during 1987–88. This size of shortfall can be met only by reductions in spending on subsidised bus networks and/or concessionary fare schemes. The Minister of State for Transport has agreed that improvements are vitally necessary in the introduction of additional tendered bus services in Greater Manchester. He agrees that the PTA is faced with a shortfall. However, the department is reluctant to ensure that the authority has the resources it needs to do that.

Tyne and Wear bitterly complains that the standard formula means that little or no consideration has been given to its individual needs. There is a general complaint about the adoption in the formulae of the use of rateable values instead of the penny rate product, but we shall be dealing with that in later amendments.

The Committee has rejected the revised procedure for the current year. Based on the criticisms here—on the lack of consideration of individual needs, and the two corrections that the department had to make only yesterday—I would suggest that even at this late stage there is time for the Government to realise that something urgent has to be done. If they do not like Amendments Nos. 30 to 35, and the figures that I put forward, they can put their own amendments and figures at Report stage.

4.15 p.m.

Lord Kilmarnock

While agreeing with a great deal that the noble Lord, Lord Underhill, said, I want to talk mainly about Amendment No.35, which deals with ILEA. I understand that the noble Baroness, Lady Ewart-Biggs, will also give her party's position on that.

I want to make it clear from these Benches we believe that ILEA has brought some—I repeat, some—of its woes upon itself by creative accounting and by putting off the evil day when it would have to face up to the redeployment and retraining of teachers above authorised numbers. Instead it has kept some of them idle while there have been shortages in other schools. It is partly because ILEA has been dilatory in putting its house in order that it is now faced with a very severe financial shortfall indeed. I say that so that the Committee can be clear that I am not speaking from an ILEA brief and that I have some criticisms of ILEA.

However, punishing ILEA as drastically as the Government plan to do has the drawback that it also punishes the children of London. At least some of the treatment being meted out to ILEA is unfair and causes great concern. The noble Baroness, Lady Ewart-Biggs, in her Second Reading speech gave some very good instances of how certain schools would be specifically affected. The position therefore of ILEA—however it is brought about—gives ground for considerable concern, and in our view the Government's approach to that authority is far too draconian.

There are two main points about which I wish to ask the noble Lord, Lord Skelmersdale. The first point is on the question of the teachers' pay settlement. In our earlier debate the noble Lord said that that matter had been taken care of in the ILEA formula, and I shall come to that in a moment. However, the fact is that those costs are being made available to otha authorities through the RSG block grant. That distribution mechanism ensures that ILEA, which faces the largest share of those costs, would receive no financial benefit at all. I understand that the Secretary of State has not responded to the authority's request for specific funding of any agreed settlement.

I also understand that since that meeting a paper has been tabled by the grants working group under which the ILEA share of the grant for teachers would be distributed elsewhere and ILEA would receive none of the grant. That situation would result in non-inner London authorities receiving an additional block grant while inner London ratepayers would be expected to pay the full cost of settlement. That surely cannot be right.

In relation to other education authorities, there is the T formula which is intended to take into account the effect of the teachers' pay award on rates and which is based on proposals by the Secretary of State. As regards rate-capped local education authorities the T factor is worth between £1.1 millon and £4.9 million in rate income. However, as I have already said, the Inner London Education Authority does not receive a T factor because DES officials say that the cost to the ratepayer of the teachers' pay award is allowed for in the precise multiplier of 1.006 in the formula in Schedule 2.

Turning to Schedule 2, one sees that the factor of 1.006 is the lowest for any type of authority listed in that schedule. There is listed 1.02 for metropolitan passenger transport authorities; 1.025 for civil defence authorities and 1.04 for police authorities. Therefore the authority faced with the biggest cost for pay rises will be credited with the smallest factor under the schedule. That surely must be wrong. Will the noble Lord, Lord Skelmersdale, say how he imagines that ILEA will be able to meet the pay settlement other than through increasing its precepts on the ratepayers? I shall be very interested to hear the noble Lord's answer to that question.

The second factor relating to ILEA which obviously causes concern is County Hall. My understanding is that the authority has received notice to quit County Hall by 31st March 1988 and that the London Residuary Body is currently offering the buildings for sale. Apparently there is at present no agreement for the authority to share in any receipts from such sales and there is no additional prescribed spending allocation for the purchase of future accommodation. Will the noble Lord, Lord Skelmersdale, explain how it is conceivable that ILEA can live within that formula when it will be faced with the costs of relocation—presumably somewhere in central London—and when apparently it will not share at all in the proceeds of the sale of County Hall, if and when that takes place? I must say that that matter baffles me, and I believe that it baffles many other people.

That situation seems to be inherently unfair when one considers that the inner London ratepayers funded the initial costs of County Hall prior to 1965 and that they continued to pay their full share of capital maintenance costs to date. It is possible that the Government intend to accommodate ILEA elsewhere without additional cost to the authority. Perhaps the Government will make available a special fund so that inner London ratepayers will not be required to meet a new burden in respect of accommodation, which has until now been provided. I should very much like some enlightenment from the noble Lord, Lord Skelmersdale, concerning that point. As regards those two points in particular, it seems to me that there is no way that the Inner London Education Authority, which I have criticised for a certain dilatoriness, will be able to live within the formula set out for it in the Bill. I very much hope that we shall have some answers in respect of that matter.

I repeat that even if the authority has dragged its feet to some extent in doing certain things which it ought to have done—and that is my belief—I am convinced that the authority must not be crippled to the extent of penalising the education of children in London to an even greater degree than exists already. There must be a compromise on the matter: ILEA must move towards the Government and the Government must move towards ILEA. There will otherwise be a further decline in standards in London schools which we on these Benches cannot contemplate with any equanimity. I should be most grateful if the noble Lord would comment on those points.

Baroness Ewart-Biggs

I should like to add a few words to what has already been said by the noble Lord, Lord Kilmarnock, and I should like to speak specifically to Amendment No.35. I shall speak from my base as a governor of ILEA and I shall deal with one or two matters which the noble Lord has not mentioned.

I should like to reiterate that the purpose of the amendment is to amend the precept formula to produce a precept income of £1,068 million as opposed to £942 million at present. That figure falls within the range of the authority's redetermination for 1987 and 1988. The proposed limit would leave a budget gap of £125 million, which is 12 per cent. As the noble Lord, Lord Kilmarnock, has said, that is a very large sum of money which must be cut. The gap will require service cuts of approximately £71 million.

The gap has been caused in two ways. First, the DES underestimated for a number of areas of unavoidable costs such as provision for inflation, pay increases, reserves and so on. Secondly, the spending costs of at least £71 million will be necessary in ILEA's direct spending on education. The authority has costed what budget cuts of £50 million would bring about and the following would result. First, two staff vacancies out of every three would be frozen, including teachers; secondly, there would be a reduction of 6 per cent. across all budget heads, other than those fixed in the short term; thirdly, for students charges would increase by at least 10 per cent.

During the Second Reading debate I gave an example of how the cuts would affect particularly a primary school, where there would be the loss of at least one teaching post by the end of the year. In larger schools with above 300 pupils two teaching posts would be lost. As the noble Lord, Lord Kilmarnock, has said, that would have a very great effect on the services provided by those schools for the children. From the point of view of maintenance one must remember that a great number of schools in the inner London area are quite old and therefore maintenance is very important. The moment that a school building starts to crumble the situation will be very serious. With budget cuts of only £50 million maintenance in all schools would be cut by as much as 60 per cent. The effect would therefore be disastrous.

During the Second Reading debate the Minister unfortunately talked constantly of ILEA being a very high-spending authority. The noble Lord did not mention that what comes out of that high spending is very much to the benefit of students and children attending those schools. I should like to remind the Minister of one or two records of achievement which have been generally accepted as coming from ILEA schools. For example there is very close co-operation with business. There is a greater degree of teaching involving computers and there are extensive language courses. There is also a strong parent-teacher involvement which has been used as an example in other education authorities. There has been great access to further education with 260,000 adults attending courses.

As the noble Lord, Lord Kilmarnock, said, these achievements should not be endangered by an arbitrary spending limit which is the objective of the Bill. I hope the Minister recognises that although the authority has spent a large amount of money, it has had some very remarkable results. I hope that he will listen to the arguments put forward in Committee.

4.30 p.m.

Lord Silkin of Dulwich

I should like to point out a printing error in Amendment No.30. No doubt the Minister has already had his attention drawn to it. The formula set out in Amendment No.30 is not in line with the formula as set out in the relevant part of the schedule. There is a "T" which ought not to be there. Does the Minister wish to tell me that he has already observed that error?

Lord Skelmersdale

I am very grateful to the noble and learned Lord. The error has been pointed out to me. However, while he is speaking about the primary formula, as we might call it, in this block of amendments, will the noble and learned Lord say whether or not the amendments intend line 40 to remain as printed in the Bill; namely, divided by rateable value?

Lord Silkin of Dulwich

I certainly cannot answer at the moment, but I am sure that my noble friends will be looking at that point in order to give an answer. As regards Amendment No.30, the Minister is aware of the error and I assume that nobody has been put in any difficulty as a result. Perhaps the amendment can be read as not having a "T". Without weakening the force of the speeches of my noble friends and the noble Lord, Lord Kilmarnock, which all go very much to the merits of these amendments, I should like to talk about the extraordinary circumstance resulting from the two letters of 23rd February sent by the department to the chief executives, to which my noble friend Lord Underhill has already referred.

In the debate on the last series of amendments my noble friends urged that there should be some further opportunity for the local authorities to make representations however short the time available. As I understood it, the Minister's reply was, "No, because there is a need for certainty". The certainty that apparently exists is one which has the result that between 13th January—the date a letter was sent from the department to the chief executives, the letter which is referred to in this latest correspondence, enclosing the paper setting out details of the Secretary of State's intentions for the 1987–88 rate support grant settlement—and yesterday, errors have been discovered which alter the picture.

As the Committee has heard, the Tyne and Wear authority has already acted upon the original letter. It is a pity that when the Minister replied to my noble friend's introduction of those amendments and relied upon certainty, he did not mention the letters which were sent yesterday and which disclosed the degree of uncertainty that apparently existed. For all we know, there may be a great deal more uncertainty in the future. If two errors are discovered within a matter of a month or so while the Bill is actually proceeding through Parliament, who knows what other errors there may be?

This is a matter of very great importance to which the Minister must immediately give his attention. The whole future of discussions on the Bill will be tied up to some extent with the question of how certain we are to assume the contents of the Bill to be. Are they to be changed? Are the two errors, specifically referred to in the letter, validated, or will they be validated by the provisions of Clauses 4 and 6? Alternatively, will they escape from the validation which we debated at such length yesterday?

Much of the argument put forward by the Government rested upon the basis that there must be certainty—what certainty when we are faced with amendment of the Bill on the hoof, as it were, as it goes through Parliament? Even the figures which have been given to the chief executives by the department on the authority of the Secretary of State are changed as we proceed. What we had regarded, subject to the amendments that we have moved, as being certainty, at least as regards the figures in the Bill, we now find cannot be trusted.

I hope that before the Minister even gives his attention to the specific contents of this amendment, he will, as a matter of principle, tell the Committee what the Government propose to do about the serious errors which destroy the whole fabric of the legislation which we are discussing.

Baroness Gardner of Parkes

I am sorry that I was called from the Chamber and that I was not here when the amendment was introduced. I have, however, heard a great deal of discussion including a rather emotional speech concerning ILEA and what might be the effect of rate-capping on ILEA. I believe that ILEA has to be continually rate-capped if inner London is to survive at all in terms of its resident population, certainly until such time as the rating system may be changed.

The population in inner London consists largely of elderly people. Although a great many of these elderly people are on rate rebates and therefore not directly affected, a great many do not receive a rate rebate. They are people who have scrimped and saved, who have been careful over the years and who find sudden and violent increases in rates a terribly heavy burden for them. They are the people who suffered so badly before the Rates Act 1984. I believe that it was because of the tremendous jump in the rate year after year in respect of the Inner London Education Authority, even more so than the Greater London Council, that the Rates Act was introduced.

As the Committee is aware, I was a member of the Greater London Council. In its final year a budget was passed after greatly prolonged argument. It was a budget which the Conservative members of the Greater London Council had insisted upon. That budget was well below the rate-capped level. Yet, within that final year we were unable to spend even the amount that was passed, much less the extra 2p in the pound that would have been allowed by rate-capping. It was more generous than the budget we actually passed, yet we ended the year with a great surplus. Because of rate-capping, a great deal of thought had to be given to good housekeeping principles.

In all my time at County Hall I represented an outer London borough. Each outer London borough runs its own education authority. I believe the education provided in the outer London boroughs was very adequate indeed. ILEA has a good reputation, particularly for handicapped children and special cases, but it does not have a good reputation for ordinary education. Sadly one of my children suffered under the ILEA system because I thought it was wrong not to use the state education system. Instead I found that, although money was being splashed around, care and thought were not.

Having listened to the points made—which I think were valid and sincere points from the noble Baroness, Lady Ewart-Biggs—I believe that there is a strong case for rate-capping for ILEA to continue to enable inner London to remain viable and to allow boroughs such as Westminster, which are considered to be rich and wealthy yet have control over only a very small proportion of their rate every year as local expenditure is so restricted and limited, to keep the rate within people's means. I believe it was 14p from £1.35 in the past. It has perhaps changed a little now with the abolition of the Greater London Council. But the ILEA rate directly affects everyone living in the inner city because the amount is so great.

I think that rate-capping each time will be carefully considered. It will not be a purely arbitrary decision. It will mean that the authority concerned, in this case ILEA, has to look carefully at its expenditure and plan good housekeeping. That will be to the benefit of all those paying rates and receiving the services.

Lord Kilmarnock

I always listen to the noble Baroness with care because she usually talks a great deal of sense. But I should like to ask her on this occasion whether she agrees that, if the Government do not make special allowances to ILEA to cover the Secretary of State's new round of teachers' pay awards—which is the situation we were debating while she was out of the Chamber—precisely the problem she fears will come about. The precept added to the rate, which is paid by the elderly people she is so concerned about, will rise. Therefore this is an argument in favour of at least helping ILEA to cope with the Secretary of State's new pay awards.

Baroness Gardner of Parkes

When I was in the Chamber earlier this afternoon I thought I heard the Minister say that it was not correct that there would be no help for ILEA to meet the teachers' pay awards. Perhaps we could ask him to repeat that. I was here and I thought he made the statement that ILEA would not go unaided.

Lord Kilmarnock

I should of course not speak for the Minister, but what I thought he said was that that is already covered in the formula to be applied to ILEA in Schedule 2. In my speech, and I think also in the speech of the noble Baroness, Lady Ewart-Biggs, we cast doubt on that proposition. Indeed we are eager to hear from the noble Lord, Lord Skelmersdale, on that.

Lord Graham of Edmonton

The noble Baroness, Lady Gardner of Parkes, has far more experience both of ILEA and the GLC than myself, but in commenting upon the ability of ILEA to control its affairs, she should look carefully at the recent report by the Audit Commission. It criticised expenditure by local authorities, but it said nothing about ILEA. My noble friend Lady David took the opportunity in a recent debate not to laud ILEA because we know there are problems. But we should be careful. Those who have studied the matter in detail recently with a critical eye have not been able to criticise ILEA about the management of its money.

Baroness Gardner of Parkes

I find the point made by the noble Lord interesting. I think he is referring to the recent audit report which we debated. I agree with what he said about that, but we had another report some months earlier which stated that ILEA was the most expensive and least effective education authority in the country: in other words, the worst value for money.

Lord Graham of Edmonton

It has the worst problems too.

4.45 p.m.

Lord Barnett

I hope the Committee will not mind ill make a brief intervention. I did not intend to do so. I listened with great interest to the noble Baroness and, like her, I do not wish to get involved in the emotive nature of the debate. But I should like to say a word about the practical problems involved in this part of the Bill as it now applies.

I had a little experience in another life, as it were, in squeezing local authority expenditure. In no way do I wish to apologise for that because I thought that what I was doing at the time was right and necessary. I entirely take the point that the noble Baroness was making, but I am concerned that, even assuming that the Government are right to rate-cap the local authorities that are affected in the way described, can it be practical to do so at such short notice? I hope that at the time when I was cash limiting local authorities and others of my friends I took account of the practical nature of being able to do the job. Here, as I understand it, if the level of rate-capping set out in the Bill applies. we are now very near to the start of the year 1987–88 and, for example, one way or another, ILEA will have to find in the region of £125 million. That is something like 12 per cent. of its total budget.

Even assuming that the noble Baroness and the Government are right and the levels of expenditure of ILEA both for 1986–87 and in the past were far too high—for reasons which she has argued in the past and argued again today and which I do not necessarily accept or ask anyone else to accept—it is asking a lot to expect a local authority now, for a period a few weeks ahead, to make plans for cutting 12 per cent. off its budget. Inevitably, even if it tries to do it, the net result will be either chaos or expenditure at the beginning of the year (which inevitably it will not be able to cut because it could not do it in the time), and therefore the cuts coming later in the year would have to be so excessive as to make nonsense of what the Government are hoping to achieve even if they want to achieve it later. All I ask the Committee to understand is the practical nature of imposing cash limits, which is what this is in effect, in so short a space of time.

When I had—I nearly said the good fortune—the misfortune to be Chief Secretary to the Treasury and I sought to impose cuts on my colleagues, at no time did I seek to do so a few weeks from now. I sought to do so usually at least a year later so that one could plan for it. It seems to me that what the Bill is trying to impose—I am not getting into the emotive nature of the argument—is totally impractical. I ask the Minister to reply to the practical point, as well as all the emotive and other questions that have rightly and properly been put to him by my noble friends. I hope he will deal constructively with the practical problems that will face ILEA and other local authorities in the next few weeks to bring their budgets within the levels that have been spoken of.

Lord Boyd-Carpenter

The noble Lord, Lord Barnett, was a very distinguished Chief Secretary to the Treasury and many of us admired the work he did there—perhaps more of us on this side of the House than on the other. I speak with some experience of the matter.

Lord Graham of Edmonton

That is true.

Lord Boyd-Carpenter

I am infinitely obliged to the noble Lord, Lord Graham. I am glad I carry him with me for once: that is most reassuring to me.

I think the noble Lord, Lord Barnett, slightly overstated his case. It is not fair to suggest that the figures to be provided for the local authorities concerned are suddenly now bursting upon their astonished gaze only a few weeks—the noble Lord used the phrase "a few weeks"—before the beginning of the financial year. This Bill has been through another place. This Bill was in another place a considerable time ago. The figures have been available for some time. The noble Lord is on a bad point when he suggests that figures which were known towards the end of last year are inapplicable to the coming financial year.

He must remember from his days at the Treasury that most of the figures for the estimates were discussed, debated and settled in the months of November/December for the forthcoming financial year in April. I do not have with me the exact dates when this Bill was in another place but it was some weeks ago, and not wholly out of line with that. Therefore for once in his distinguished career I think the noble Lord is overstating a case. I believe that the time the local authorities have had, dating back from the time when these figures were first known, is not unreasonable.

Lord Barnett

With great respect to the noble Lord, who is an equally distinguished predecessor, if I may put it like that, of both my position as Chief Secretary and my position as chairman of the Public Accounts Committee, I am surprised. What he is saying is that those involved in local authorities should have taken account of a piece of legislation not yet on the statute book. What I was saying is not what the 1986–87 Budget should have been, in accordance with what the Government would have liked, but what it actually is. Taking that as the starting point—as it is—then there has to be a massive cut starting from 1st April. That is the main point, and indeed the only point, that I was seeking to make—the practical nature of the problem.

Lord Boyd-Carpenter

I was also dealing with the practical nature of the problem. But surely the noble Lord is being impractical when he says that local authorities should not pay attention to a public Bill, published and introduced by a government with a substantial majority, all the facts and details of which have been known for some considerable time. Is he suggesting that they should simply hide their eyes from it and say that they will pay no attention to the Royal Assent? You cannot carry on government that way, and it is utterly unrealistic and irresponsible to try to.

Baroness David

I wonder whether I may remind the noble Lord of when this Bill was introduced.

Lord Boyd-Carpenter

Please.

Baroness David

It was published on 18th December, which was the day when both Houses, I think, were going into recess. There was then the Christmas holiday, and the Second Reading of the Bill was not until 12th January. It was rushed through another place; there was no Report stage and it was guillotined at the Committee stage. It has not been published for all that long.

Lord Boyd-Carpenter

I am much obliged to the noble Baroness for giving me the exact date. I knew it was before Christmas some time. However, the figures she has given completely destroy the statement of the noble Lord, Lord Barnett, that it was a matter of only a few weeks. It is a ridiculous exaggeration to describe the period from 18th December to 1st April as only a few weeks. It is a substantial period. What is more important, as I was trying to say, is that it is a period very much in line with the period in which most spending departments learn from the Treasury of the likely provision to be made for them for the forthcoming financial year. It is not at all out of line with that; nor, I repeat, is it properly described as a few weeks.

Lord Bellwin

If anyone can join in just on this one narrow topic, let me say that I very much agree with what my noble friend Lord Boyd-Carpenter has just said. The Committee may say, "Well, he would, wouldn't he!". I almost invariably have that great pleasure, and it gives me no trouble at all. But I think that he has a valid point. If we are talking about the amount of time that authorities have by way of advance notice, I have to say, as I have said before in your Lordships' Chamber on more than one occasion, that I think back over the years to the amount of notice we used to be given by way of information when I was in local government. Believe me, the time that is given now is far, far longer than we used to receive.

I thought that my noble firend's point was a valid one when he talked about the Bill coming before Christmas. In practical terms the authorities know more or less whereabouts these numbers are going to be. It is only because of the need to regularise what has been going on that there has been a delay. However, it is not a delay in their having the information but a delay in validating what they have to do.

Lord Graham of Edmonton

I very much hope the Minister will appreciate that this amendment is an opportunity to accept a compromise and still leave the opportunity for the Secretary of State to determine that which I fear he is determined to determine. We are talking about determination. It is all very well to say that the time from 18th December until now—just over two months—is adequate: from December to January to February. If you take out the Christmas break—the Minister should contain himself because we shall give him an opportunity to speak—you have a situation in which on 18th December, under the guise of correcting errors, a completely new concept is introduced. It was not a question of dealing with money but of changing the whole basis of the system—that is, the right to apply for redetermination.

A great many authorities were in the process of considering their reactions They were chopped off without the opportunity. What the Minister has with this series of amendments in a very short time-scale—a matter of two or three weeks—is a method by which he could ameliorate what we suspect on this side to be very, very sharp practice.

The noble Lord, Lord Boyd-Carpenter, hits the nail on the head, as he always does. A government with a substantial majority, when they issue an edict or a diktat are entitled to be taken seriously. And of course on 18th December the Government said what they were going to do, not that they were going to invite those affected to consider what was proposed. They said, "This is what we are going to do". What we are trying to do, as the noble Lord, Lord Barnett, properly said, is to point out the grave consequences for some authorities caught in a tight time-scale.

The series of amendments we are debating will, in my view, provide the Minister with the opportunity still to take the action he intends to take—which we still think is wrong—and will alleviate the feeling in many authorities that they have not been treated fairly. I hope the Minister will be sensible in responding and will not merely say, as others have said, "They knew what they were doing: they knew the consequences". This is basic democracy and we believe that the Government have been basically undemocratic.

Lord Kilmarnock

Before the noble Lord winds up, with respect to the noble Lords, Lord Boyd-Carpenter and Lord Bellwin, it is not only a question of time but also a question of money. If you have a matter of weeks to decide how you are going to implement a change or a cut of 2 or 3 per cent. maybe you can do it; but if you are required to implement a whopping 12 per cent. cut, it will certainly take you two or three months to work out how you are going to do it and even then you may not be able to do so. I think the time and money factors must be taken together.

5 p.m.

Lord Skelmersdale

After that vigorous debate I can hardly believe that now I can actually speak for myself rather than having Members of the Committee putting words into my mouth. I was particularly interested in the speech of the noble Lord, Lord Graham, who suddenly reminded us after this long and, as I say, vigorous debate that we were talking about a series of amendments. What we are discussing of course are alternative formulae to what is proposed in the Bill. My noble friend and I on numerous occasions now have explained why we had to use formulae. We have admitted that it is not the most perfect position, in the Voltaire sense, but nonetheless we have now agreed in Committee on a Division that formulae are required.

Let us look at the individual formulae. The first point that was mentioned was the letter which issued yesterday from the Department of the Environment about two errors in rate support grant for 1987–88 and 1985–86. I acknowledge that the department yesterday wrote to all local authorities about two small errors in the calculation of grant announced by my right honourable friend the Secretary of State on 13th January this year. But at this point I ought to break off to comment on the vigorous exchange between my noble friend Lord Boyd-Carpenter and the noble Lord, Lord Barnett, which resulted in what I can only describe as a bit of a mix-up.

The noble Lord, Lord Barnett, suggested that rate-capping was done at short notice. Nothing, but nothing, could be further from the truth. All authorities were told not in January, not in December, not in October but in July last year that they were going to be rate-capped. That is hardly a short period. My noble friend Lord Boyd-Carpenter made this point very strongly indeed and I am extremely grateful to him for so doing.

So far as the fire and civil defence authorities are concerned, the expenditure limit for 1978–79 was considered. The figures were announced in July—again in July—by the Government. The matter was then discussed with each authority to take into account the previous year's experience. The decision is usually at the end of the year and that is exactly what happened this year. There was no time wasted by anybody. I shall return to that in a minute.

But for 1987–88 there was an error in the calculation of grant related expenditure assessment for the rate fund revenue account contribution to the housing revenue account for certain authorities. The Opposition majored on what I think was described as the Department of the Environment's error. I suggest that it comes rather oddly from noble Lords opposite to talk about uncertainty when they propose a whole series of amendments which would throw local government and ratepayers into what I can only describe as a ferment of uncertainty. As I said, the department very much regrets the errors and has acted swiftly to draw the consequences of these to authorities' attention so that they can take them into account.

But how does that affect the Bill? That is the crucial question. The answer is, not at all. The change simply affects the amount of block grant to be used in each authority in its formula and hence the amount that it has to raise from the rates to finance its spending. The individual formulae are not affected. They stand and they will remain.

As to the amount of the errors, I do not know whether the Committee is interested, but they affect eight of the 20 rate limited authorities and nine of the 20 precept limited authorities. In the case of the precept limited authorities, the amounts are 0.01 or 0.02 of a penny in the pound. For the rate limited authorities, the maximum change is less than one penny in the pound. The point is that the errors require no amendment whatsoever to the Bill—not even a tiny one. They relate to decisions which the Secretary of State has not yet taken and therefore, to use the jargon, are not judge-proof by any part of this Bill.

Looking at the amendments one sees immediately that they are very inflationary indeed—a 34.8 per cent. uplift in Amendment No.30, a 34.8 per cent. uplift in Amendment No.31 and an 11.05 per cent. uplift in Amendment No.33. Now I know that the Opposition really are the party of spend, spend, spend. Not content with the £3 billion extra which the Government have made available to local authorities next year, these amendments propose vast inflationary increases on the rate and precept limits of all designated authorities. I must tell the Committee straight away that there is absolutely no way at all that the Government can accept them.

My noble friend Lady Hooper and I explained at Second Reading why we have to adopt for 1987–88 only the approach to rate and precept limitation contained in the Bill. It simply would not have been possible to carry through the normal Rates Act procedures, given the need for legislation on the definition of total expenditure. The Government had to get cracking and have got cracking, and the method chosen was by the formulae as printed in the Bill.

In reaching their decisions on the formulae, the Secretaries of State took account, as in any normal year, of all the information available to them about the designated authorities. They took particular note of applications for the redetermination of expenditure levels. The representations made at meetings about those applications were carefully considered. Of course, given the need for the formula approach, limits cannot be precisely tailored to individual circumstances as in a normal year. But so far as is possible they reflect decisions that would have been taken under Rates Act procedures.

The Government are in no doubt that they must protect ratepayers by holding down rates and expenditure. Some noble Lords may have seen last Friday's Evening Standard, now called the Standard. The headline read, "Rates frightening, admits Labour". This was not opposition party policy, I hasten to say, because the following article started, Ealing Council's Labour leader admitted today that the possibility of an 80 per cent. rate rise this year was frightening". Ealing is not even rate-capped.

We must retain rate limitation to encourage authorities to cut out waste and inefficiency or other unnecessary burdens on their ratepayers. Many of the authorities which have been selected for rate limitation in 1987–88 have been selected for a second or third year and have shown little inclination to respond to the pressures of this necessary discipline, for that is what it is. We must therefore maintain those pressures. Authorities which are newly selected are high-spenders rightly subjected to restraint.

I have already explained to the Committee that the selection was done in July last year for the newly rate-capped authorities. But I ask the Committee to look at Brent. It was first rate-capped in 1985–86, as was a whole range of other authorities. I do not see that the local authorities in question have had the slightest bit of delay in knowing, either those which had previously been rate-capped or those which were being rate-capped for the first time. Precept limitation for three years of the new authorities set up by the Local Government Act 1985—that is to say, the passenger transport authorities, fire and civil defence authorities, the police authorities and ILEA, about which we have heard so much this afternoon—was designed to constrain spending and prevent the burgeoning of new bureaucracies.

I must tell the noble Lord, Lord Underhill, that I am advised that the Tyne and Wear authority has not yet issued its precept, which is rather contrary to the information he gave to the Committee. Quite honestly, I do not know what the answer is. If we had as a Member of this House someone who was on that authority, we could get a definitive answer. But the noble Lord's advice is quite clearly contrary to mine—

Lord Underhill

I am certain I said that yesterday it decided on its precept. I ask the Minister what he suggests Tyne and Wear should now do, because it may have acted quickly. I do not know whether it sent out the figure last night, but it does not matter whether it did. It met yesterday and decided on its precept based on the previous information supplied by the Government.

Lord Skelmersdale

As the Committee well knows, I am not expert on local authority procedure, but I understand that such a thing can be corrected by a subsequent meeting. If I am wrong, I shall tell the Committee as soon as practicable.

Lord Underhill

Again I am sorry to interrupt the Minister. Of course that can be done, but in the meantime somebody has to work on new figures based on the corrections that have been sent out. There is a cost involved for the Tyne and Wear authority and its representatives in so doing.

Lord Skelmersdale

So there would be if we changed the formula. I shall return to that matter in a moment. For the South Yorkshire Passenger Transport Authority, the fixed costs were, I am advised, fully taken into account in the decision on a 2 per cent. uplift which is given in the formula under the Bill. Again so far as South Yorkshire is concerned, the Government believe that if concessionary fares do not change and if rail fares rise nearer to the level of bus fares, the uplifted expenditure limit—that is, the expenditure limit plus 2 per cent.—will require only small reductions in subsidised bus services. If the will is there, the means are there.

I believe that I heard the noble Lord, Lord Kilmarnock, correctly when he said that some of the treatment meted out to ILEA is unfair. I agree with my noble friend Lady Gardner and I say in addition that some of the treatment meted out by ILEA is quite unfair. I thought that the noble Baroness, Lady Ewart-Biggs, put a very rosy view of ILEA in using the particular to describe the general, which was a point taken up by my noble friend Lady Gardner.

Lord Kilmarnock

I did not in fact put a rosy view of ILEA's performance.

Lord Skelmersdale

I am sorry. Was I gabbling again? I always like to be told when I am gabbling! I intended to say that the noble Lord, Lord Kilmarnock, referred intitially to ILEA but that it was the noble Baroness, Lady-Ewart-Biggs, who in my opinion was generalising from a particular case. I have no doubt that the case which she quoted is absolutely correct.

I think I am right in saying that both the noble Lord and the noble Baroness referred to County Hall. The ILEA precept formula took account of the rent which the London Residuary Body has said it will charge ILEA next year. The formula is based on an overall judgment of what it is reasonable for the authority to achieve, having regard to its high levels of spending.

So far as concerns ILEA and teachers' pay the Government have proposed that the extra grant for teachers' pay should be paid as block grant, as that is the normal means of channelling government support to local authorities. My right honourable friend the Secretary of State for Education and Science assumed when deciding the formula in the Bill that ILEA would have to cover the whole of the cost of the teachers' pay settlement from the precept. However, he also took account of the buoyancy in the penny rate product for the inner London area.

I say again that ILEA's formula takes account of the teachers' pay settlement. The formula allows ILEA to raise a total of £942 million against an expenditure level set in July of £915 million. The formula was set in the light of all the financial circumstances of the authority.

I therefore must say that the amendments before us would drive a coach and horses through any notion of spending constraint. The Government are clear that they cannot accept the increases in spending levels implied by them. As they stand. they would mean an increase in the expenditure of the 20 authorities selected for rate limitation in 1987–88 of £762 million and increases of those precepting bodies designated by law of police authorities, £18 million; transport authorities, £45 million; fire and civil defence authorities, £29 million; and ILEA, a whopping £122 million. That is quite unacceptable both to the Government and, more importantly, to ratepayers.

I thought on the last amendment, and indeed in some speeches on the present amendment. that no notice was going to be taken of what I can only describe as the poor ratepayers. We see here a total of £976 million or nearly billion to come from the pockets of ratepayers in only a small area of the country. Many of the authorities are in London and we debated their waste and inefficiency the other day. I cannot and will not advise your Lordships to accept amendments which pour money into wasteful and inefficient authorities at the expense of their local ratepayers.

The noble Lord. Lord Underhill, expressed concern about fire and civil defence authorities. But I assure the Committee that my right honourable friend the Home Secretary is satisfied on the information available to him that the precept limits for those authorities derived from the formulae in the Bill should be sufficient to enable them to maintain adequate minimum standards of fire cover.

So far as the West Yorkshire Fire and Civil Defence Authority is concerned, I think that it is germane to point out that on the basis of the latest report from Her Majesty's Fire Inspectorate, my right honourable friend the Home Secretary is satisfied that the authority will be able to maintain an adequate level of fire cover. The Government remain committed to the minimum standards of fire cover. The problem in West Yorkshire has not come about as a result of local government reorganisation.

The formulae in the Bill are correctly and properly arrived at and there is no reason for any authority, whether designated by law or by straightforward means, to be frightened of them. They are doing exactly what was intended in putting pressure on those authorities to be as efficient as they possibly can be. If it is necessary, as it has been with some authorities, to rate-cap them for three years—for example, Greenwich, Hackney, Haringey, Lambeth, Islington, Lewisham, Southwark and Thamesdown, to say nothing of Basildon—then the ball must surely be in the court of those local authorities.

I cannot suggest that the Committee accedes to these amendments.

5.15 p.m.

Lord Underhill

I should first like to thank the Minister for giving a far better reply than that given in the other place. I turned up there before the debate started on similar criticisms of the formulae, and frankly the reply was disgraceful in that it hardly referred to any of the points raised. There had been a wide debate dealing with particular authorities and also with joint authorities.

Having thanked the Minister for dealing with some of the points, I saw no sign of any apology to the Committee or to the local authorities for errors which were communicated yesterday. Also, when we were at Committee stage yesterday, could a statement not have been made that the errors were there so that we would know where we are today instead of having to hastily cobble speeches together? Even my own association had not received the letter this morning. It would seem to be treating this House with scant courtesy or no courtesy at all in that no such statement was made during Committee stage yesterday.

I am informed that the errors made change the figures for block grants. Block grant is featured as BG in every one of the formulae. Therefore, there must be some effect and authorities will now have to look carefully at what they will do.

The noble Lord referred to South Yorkshire. However, he has not replied to the criticism I made on the previous amendment concerning the fact that certain information on expenses of transfer to the private transport company, with modifications laid down by the department, could not have been known when the formula was fixed. If I have his words down correctly, the noble Lord said, "We took into account all the redeterminations and meetings". It is therefore strange that authority after authority is complaining either that it has not had the opportunity of redetermination or that little account has been taken of its particular needs. That is what we attempted to do in the previous amendments and the Government were given that opportunity with those amendments of a compromise which would enable them to satisfy the local authorities for this year.

The Minister again repeated the word "certainty". By heavens, we have got this Bill as a result of lack of certainty. We need not have had all this complication; we could have had a simple Bill and everyone in the Committee would have voted for a Bill to put the law back as it is. Instead, we have all this complication.

Frankly, in the light of these errors about which authorities had to be circulated yesterday, and in the light of comments that have been made, I should have liked the Minister to say that he would take another look at the formulae to see whether some changes could be made. I gave him that chance in my first speech, but he rejected it.

Therefore, in protest at the way this matter has been treated and at the way local government has been treated, I believe that we should ask the Committee to divide on the issue. I am only sorry that many noble Lords have not been in the Chamber to hear the debate and to appreciate that this is one more shambles created by an error on the part of the Government.

5.20 p.m.

On Question, Whether the said amendment (No.30) shall be agreed to?

Their Lordships divided: Contents, 71; Not-Contents, 144.

DIVISION No.2
CONTENTS
Alport, L.	Llewelyn-Davies of Hastoe, B
Ardwick, L.	Lockwood, B.
Barnett, L.	Longford, E.
Blyton, L.	Lovell-Davis, L.
Boston of Faversham, L.	McCarthy, L.
Bottomley, L.	Mclntosh of Haringey, L.
Briginshaw, L.	Mishcon, L.
Brockway, L.	Molloy, L.
Bruce of Donington, L.	Morton of Shuna, L.
Campbell of Eskan, L.	Mulley, L.
Carmichael of Kelvingrove, L.	Murray of Epping Forest, L.
Cledwyn of Penrhos, L.	Nicol, B.
David, B.	Northfield, L.
Dean of Beswick, L. [Teller.]	Phillips, B.
Dowding, L.	Pitt of Hampstead, L.
Elwyn-Jones, L.	Ponsonby of Shulbrede, L.
Ennals, L.	Prys-Davies, L.
Ewart-Biggs, B.	Rea, L.
Falkender, B.	Rhodes, L.
Fisher of Rednal, B.	Ross of Marnock, L.
Gallacher, L.	Sefton of Garston, L.
Galpern, L.	Serota, B.
Gifford, L.	Shepherd, L.
Graham of Edmonton, L.[Teller.]	Silkin of Dulwich, L.
	Stewart of Fulham, L.
Gregson, L.	Stoddart of Swindon, L.
Hayter, L.	Taylor of Blackburn, L.
Heycock, L.	Taylor of Gryfe, L.
Howie of Troon, L.	Taylor of Mansfield, L.
Jacques, L.	Underhill, L.
Jeger, B.	Wedderburn of Charlton, L.
Jenkins of Putney, L.	Wells-Pestell, L.
Kagan, L.	Williams of Elvel, L.
Kilbracken, L.	Wilson of Rievaulx, L.
Kirkhill, L.	Winterbottom, L.
Lawrence, L.	Ypres, E.
NOT CONTENTS
Ailesbury, M.	Brougham and Vaux, L
Aldenham, L.	Broxbourne, L.
Aldington, L.	Bruce-Gardyne, L.
Alexander of Tunis, E.	Butterworth, L.
Allerton, L.	Caccia, L.
Auckland, L.	Caithness, E.
Bauer, L.	Cameron of Lochbroom, L.
Beaverbrook, L.	Camoys, L.
Bellwin, L.	Campbell of Alloway, L.
Beloff, L.	Campbell of Croy, L.
Belstead, L.	Carnegy of Lour, B.
Biddulph, L.	Carnock, L.
Borthwick, L.	Cathcart, E.
Boyd-Carpenter, L.	Chelwood, L.
Brabazon of Tara, L.	Cork and Orrery, E.

Cottesloe, L.	Lucas of Chilworth, L.
Cowley, E.	McFadzean, L.
Craigavon, V.	Margadale, L.
Cranbrook, E.	Marley, L.
Cromartie, E.	Marshall of Leeds, L.
Cullen of Ashbourne, L.	Maude of Stratford-upon-Avon, L.
Dacre of Glanton, L.
Davidson, V. [Teller.]	Merrivale, L.
De La Warr, E.	Mersey, V.
Denham, L. [Teller.]	Milverton, L.
Derwent, L.	Molson, L.
Dilhorne, V.	Monk Bretton, L.
Drumalbyn, L.	Morris, L.
Dundee, E.	Mottistone, L.
Eccles, V.	Mountgarret, V.
Effingham, E.	Munster, E.
Ellenborough, L.	Murton of Lindisfarne, L.
Elliot of Harwood, B.	Newall, L.
Elliott of Morpeth, L.	Nugent of Guildford, L.
Elton, L.	Onslow, E.
Enniskillen, E.	Orkney, E.
Erne, E.	Orr-Ewing, L.
Erroll of Hale, L.	Pender, L.
Faithfull, B.	Peyton of Yeovil, L.
Fanshawe of Richmond, L.	Porritt, L.
Ferrers, E.	Portland, D.
Ferrier, L.	Rankeillour, L.
Fortescue, E.	Redesdale, L.
Fraser of Kilmorack, L.	Renton, L.
Gainford, L.	Renwick, L.
Gardner of Parkes, B.	Rodney, L.
Glenarthur, L.	Romney, E.
Gormanston, V.	St. Aldwyn, E.
Gray of Contin, L.	St. Davids, V.
Greenway, L.	Saltoun of Abernethy, Ly.
Gridley, L.	Sandford, L.
Haig, E.	Sempill, Ly.
Halsbury, E.	Shannon, E.
Hanson, L.	Sharples, B.
Harmar-Nicholls, L.	Skelmersdale, L.
Harvington, L.	Stodart of Leaston, L.
Hesketh, L.	Strange, B.
Hives, L.	Sudeley, L.
Holderness, L.	Swansea, L.
Home of the Hirsel, L.	Swinton, E.
Hood, V.	Thomas of Swynnerton, L.
Hooper, B.	Thorneycroft, L.
Hunter of Newington, L.	Tranmire, L.
Hylton-Foster, B.	Trumpington, B.
Kaberry of Adel, L.	Vickers, B.
Kimball, L.	Vivian, L.
Kinnaird, L.	Whitelaw, V.
Kinnoull, E.	Windlesham, L.
Lane-Fox, B.	Wise, L.
Lauderdale, E.	Wolfson, L.
Layton, L.	Wynford, L.
Lindsey and Abingdon, E.	Young, B.
Long, V.

Resolved in the negative and amendment disagreed to accordingly.

[Amendments Nos. 31 to 35 not moved.]

5.29 p.m.

Lord Elwyn-Jones moved Amendment No.36:

Page 11, line 19, leave out sub-paragraph (2) and insert— ("(2) EL is—

1. (a) in the case of an authority whose maximum limit is determined by reference to paragraph 2(2) above, the higher of—
   1. (i) the level for the authority's total expenditure in the relevant year which before the passing of this Act was determined and notified to the Authority under section 3(1) and (3) of the 1984 Act,
   2. or
   3. (ii) its GRE for the financial year 1987/88 plus 7.5% where GRE is the amount shown as the grant related expenditure in relation to the authority in the Rate Support Grant Report for England for the financial year beginning in 1987; and
132
2. (b) in the case of all other designated authorities the level for the authority's total expenditure in the relevant financial year which before the passing of this Act was determined and notified to the authority under section 3(1) and (3) of the 1984 Act.")

The noble and learned Lord said: I rise to move Amendment No.36 and I shall be concentrating very considerably on the constituency of Newham, which I had the honour to represent for 29 years. I should add that if the amendment is agreed, as I have every confidence it will be, there will need to be an appropriate consequential amendment to the block grant in the formula so that it relates to the new expenditure levels arising from the amendment.

The amendment is designed to give all newly selected rate-capped authorities an expenditure level within the formula in Schedule 2 to the Bill, which is the higher of presently determined levels or the Government's grant-related expenditure assessment for the local authority, plus 7.5 per cent.

I raise the matter in particular in the interests of Newham but it also will have an effect on Brighton, where, by happy coincidence, I reside and accordingly should declare an interest as a ratepayer. It would also be of benefit to Gateshead. It is a curious trinity and very worthy folk live in all three places; but particularly worthy are the folk I had the honour to represent.

The amendment is of major importance to Newham because it is faced with an almost unique injustice arising from the provisions of the Bill. The council is required by the Bill to cut its expenditure to a level closer to the Government's grant-related expenditure assessment for the authority than any of the 20 rate-capped local authorities, despite this being the first year of rate-capping. The council is required to reduce its rates by 26 per cent. That is twice the reduction required of all but one of the other rate-capped councils and over three times the reduction required of 15 of the rate-capped councils.

While 16 of the rate-capped councils are allowed by the Government's formula to spend over 10 per cent. above the Government's GREs for their areas, and seven of these can spend over 20 per cent. more, Newham is required to reduce its expenditure to only 3.7 per cent. above its GRE. I submit that that is a gross unfairness that results from the application of a standard formula to local government expenditure—something which we have complained about more than once during the course of the debate on the Bill. The outcome would face the Newham council with a desperate situation and only an amendment to the Bill on the lines proposed will ensure that the borough is at least treated on the same basis as the other rate-capped authorities.

The London Borough of Newham, comprising the former county boroughs of West Ham and East Ham, covers about half the East End of London, including the Royal Docks. The council is the education, housing and social services authority for one of the most deprived parts of this country. According to the Department of the Environment's own analysis of the 1981 census, Newham has the second highest intensity of urban deprivation of all the 365 local authority districts in England. It faces in the matter of housing what can only be described as a housing crisis. Over 45,000 of its dwellings are unfit, or lack basic amenities, or are in need of substantial repair.

The council is experiencing the fastest increase in homelessness in London. The number of household nights, as it has been described—a curious term of art—in bed and breakfast accommodation has risen from 588 in 1981 to 25,000 in 1985; and to over 100,000 households in 1986. That is the reality. Of course the drain on the council's revenue resources arising from that is substantial. The level of human misery that it causes is incalculable.

Newham is almost unique, in that it ranks higher than most of the inner-London boroughs on indicators of inner-city urban deprivation, but it is an outer London borough with the additional expenditure problems and responsibilities of being an education authority. Simple comparisons of expenditure with other local authorities, particularly in London, are therefore not realistic. Newham has tried to spend wisely in order to meet the problems of the borough and to defend its services. It has paid a high price for that because block grant has been reduced substantially.

In order to maintain services in this deprived area rates have had to be considerably increased. The average domestic rate bill is the seventh highest in London and because of the low rateable values in the area the actual rate in the pound is now the highest in London. It is an unavoidable necessity and not something that the council desires. It is a consequence of the very high level of need which I have endeavoured to describe—without, I hope, too much emotion, although I feel it—and the reduction of government support.

The Government may say that their support to Newham through block grant will increase if the council spends less, but that is not an answer to the borough's expenditure needs. I doubt whether it will be said by anyone in the Committee that Newham is a profligate spender or a so-called extreme council. I do not suppose that that will be said about Newham and its problems, but, if it is, it will be a piece of defamation.

The proposals in the Bill exacerbate all the problems that I have mentioned by putting Newham in a Catch-22 situation which, I submit, only the amendment can resolve. The Government proposals make an additional cut of nearly £9 million to this deprived borough. That is £9 million which is desperately needed for local services that need not be cut if Newham is treated on the same basis as the other rate-capped authorities. I submit that the technical case for the amendment is fair and I will endeavour to explain it, although algebra has never been among my highest intellectual attainments.

Newham council is being rate-capped in 1987-88 because its expenditure in 1986-87 was more than 12.5 per cent. above the Government's GRE figure—it was 18.4 per cent. above—and because expenditure between 1985-86 and 1986-87 had increased by more than 4 per cent. However, the Government figures—I hope the Minister will agree with this—significantly under-estimate the council's true expenditure in 1985–86 because they are not adjusted for the council's legitimate use that year of special accounting measures. When adjustment is properly made on that account it shows that the increase in expenditure between 1985–86 and 1986–87 was 4 per cent. and not the 15 per cent. that is shown in government figures.

The amendment that I am moving will accommodate the justifiable readjustment of Newham's anomalous position without Newham gaining relatively or absolutely at the expense of the other authorities. The amendment will be without cost to the Government and will still involve a reduction in council expenditure and a 6.2 per cent. reduction in rates for Newham ratepayers for the year 1987–88. I must stress that there is no special advantage for Newham over and above the other authorities by reason of this amendment because the authority will still be required to cut its expenditure more closely to GRE and reduce its rates by a greater amount than 18 other rate-capped authorities will be obliged to do. However, this reduction will be to a more realistic and fairer level for the authority itself.

I submit that it is unjust that Newham should have to suffer disproportionately by reason of what is supposed to be a piece of tidying up legislation. That is how it was so innocently described, and what a tidying up it is! The social effects of cutting so deeply into local services in Newham, as the provisions of the Bill will do, will be extremely serious and must be treated as something that is far more important than a mere local problem. I make no apology for raising this matter as a Newham problem. It is clear that East London, or almost half of it, is one of the most deprived areas in the country, with consequent effects doing more serious damage to public order and the public wellbeing than occurs in many other inner city areas; and heaven knows there have been adequate warnings about that situation.

I urge the noble Lord, Lord Skelmersdale, to look at this matter not only sympathetically but fairly, because what is proposed in the Bill not only is contrary to natural justice but offers grave damage to a long-suffering part of our population. I beg to move.

5.45 p.m.

Lord Renton

I wonder whether the noble and learned Lord will be so good as to help us even more. I tried to follow his explanation, which was given in such a pleasing and lucid manner, and it is no doubt owing to my ignorance that I have not entirely succeeded in taking it all in. However, as I understand it, the change that he intends to make to the Bill is not to be found in the first four lines of the amendment at the top of page 3 of the Marshalled List but in the lines which follow: or (ii) its GRE for the financial year 1987/88 plus 7.5%". That is the essential point. Then the following three lines seem to make a difference, which from his point of view is an improvement, to what is proposed already in the Bill. Am I right in thinking that that constitutes the essence of his amendment and is where the real change is to be found?

Lord Elwyn-Jones

I think that is so, with the effect of an additional burden on the local authority that I mentioned in the course of my speech.

Lord Skelmersdale

As I understand it, Amendment No.36, which the noble and learned Lord, Lord Elwyn-Jones, has just moved, takes a rather different track from the amendments that we discussed in the last block. I think that the noble and learned Lord has made clear that this amendment is primarily designed to assist the London borough of Newham, though of course it also assists a few—a very few—other local authorities, as the noble and learned Lord said.

Lord Elwyn-Jones

More than a few local authorities.

Lord Skelmersdale

I was about to question the noble and learned Lord on that very point because in his very interesting introduction to this amendment, to which I listened with great care, I understood that so far as he could work it out himself—and after all it is the noble and learned Lord who is moving the amendment—this applied to all authorities that were rate-capped for the first time in 1987 and 1988. Have I understood the noble and learned Lord correctly?

Lord Elwyn-Jones

But the particular impact is upon those three authorities.

Lord Skelmersdale

So it affects some authorities more than others but it affects all those authorities first designated in 1987–88.

Lord Elwyn-Jones

That is so.

Lord Skelmersdale

In which case of course to that extent it would cover Hounslow and Tower Hamlets as well. I do not think that it will benefit the Committee if I again explain the process through which the formulae were derived. However, I must stress that representations made by honourable Members in another place and by local representatives when they met my honourable friend the Minister for Local Government were certainly not ignored; nor indeed do the Government intend to ignore the very interesting speech that the noble and learned Lord has just made, which will require careful study later. He pointed out quite correctly that Newham spent 18.4 per cent. over the grant-related expenditure assessment in 1985–86, which is one of the reasons Newham was rate-capped in the first place.

Although no one has suggested that Newham is a super-inefficient local authority—a point that was made by the noble and learned Lord—I think that we ought to ask ourselves a few questions about the precise position of the London borough of Newham. The noble and learned Lord said, "Ah, well, it is an education authority". He is absolutely right. That is why the Bill makes special arrangements for local education authorities, and I refer him to paragraph 3(6) of Schedule 2, which states: T is the amount (if any) determined by applying the formula— A[...]B × M × 12 That is all explained elsewhere in the Bill. The T factor applies to Newham as to other selected authorities. It makes an allowance for the additional cost estimated as falling on Newham as a result of the prospective pay settlement for teachers. That is a point about which the noble Lord, Lord Kilmarnock, was asking in reference to ILEA during our earlier discussion. For the purposes of the T factor the costs have been estimated on the basis of the announcement by my right honourable friend the Secretary of State for Education and Science on 30th October.

So of course I accept that it is an education authority, but the noble and learned Lord suggested that with a rate limit at the level in the formula the borough would face real financial problems. I am afraid I must say that he has not convinced me that that is in fact so. The Government recognise that Newham is an area of high need and our grant-related expenditure assessment for that borough is the highest for any of the outer London boroughs.

Against that background I wonder why Newham has not contracted out any services; why it is sitting on nearly 70 acres of unused land; why it reduced rents between 1983 and 1986; why in April 1986 it had 2,420 empty dwellings, and why in 1984–85 rent arrears in Newham were 11.73 per cent. of rates collectable against a class average of 4.2 per cent. On behalf of the Government, I accept that we should take every opportunity to find out the true position. My honourable friend the Minister of State for Local Government is going down to Newham to do just that on Friday. Until then, I am not persuaded on behalf of the Government that this is an amendment that we should accept.

Lord Pitt of Hampstead

Will the Minister not recognise that the real trouble is the formula for grant-related expenditure assessment? If the formula produces a large number of boroughs that are heavily deprived, the formula must be wrong, but we—certainly I—cannot get the Government to look again at that formula.

The formula is obviously wrong. It produces a situation in which the most deprived boroughs in the country are always regarded as those boroughs that spend more than they should. If one considers the boroughs that are very deprived, they are all in that list, so it must be because the GRE is wrong. Why can the Government not look again at the GRE formula?

Lord Graham of Edmonton

I do not know what my noble and learned friend Lord Elwyn-Jones will say in response to the final few words of the Minister. I certainly see some hope. I detect that the Government, instead of just looking at figures and assessments and producing blanket solutions, are prepared to reconsider the application of the formula, in certain instances. I am only surprised that there is not a system in the ministry whereby the consequences on each of the affected authorities can be seen—the horrendous consequences that my noble and learned friend has drawn to the attention of the Committee.

Neither I nor the Minister would claim anything like the detailed knowledge of conditions in a place such as Newham that my noble and learned friend has. I doubt whether in a visit of one day, even with all the good intentions of the Minister of State, that can be put right. One has only to look at the nature of deprivation, particularly in inner London areas, to understand. I have a table here. By all the indices and yardsticks that measure deprivation, the London borough of Newham, to its enormous cost in social unrest and misery, is the second most deprived. The position of Hackney is of course acknowledged. If one takes the basic index, housing index, social index and economic index, the London borough of Newham is near the bottom of the list.

The great puzzle to me is that there is no compassion in the heart of the Minister and his advisers for the local councillors and local officials in their efforts to combat these dreadful problems. The Minister-1 do not know whether fairly or unfairly, but I give him the benefit of the doubt—drew to our attention some of the matters that he believes militate against the London borough of Newham being considered with compassion: land that had not been sold, services that had not been privatised—all the measuring rods of a good and efficient council.

In Newham, people are facing enormous problems. Many would run away and say that the problems are too large, but the councillors, the officials and the civic leaders are having to get on with it. My noble and learned friend pointed out that, horrendously, a reduction of 26 per cent. is called for—a penalty of £9 million, almost £10 million. Someone in the ministry, seeing that that is the consequence, ought surely to have done more than wait until now to send a person with the political clout of the Minister there to look at things.

The reality is that Newham has the lowest domestic rateable value in London. The Minister may say that all this is taken into account with GREA, but as my noble friend Lord Pitt points out if this is taken into account in GREA and still produces this kind of result, then GREA itself must be reconsidered.

Although it is late in the day we are making a special pleading. I am not proud or arrogant. If Newham comes to me, as it has to many others, and asks whether I will plead its case and support my noble and learned friend, I will, because we know what this means on the ground in housing, jobs and social services, and we accept that it is a good case. It has been pointed out that Newham is not a profligate spender. It never figures in the umbrella criticism of wildly extravagant councils doing all sorts of things with their money that are regarded as intolerable by some others. It is a good council, a sincere and a long-established council that knows the needs of its people. It wants a little more help. I hope that the Minister will see that it gets it.

Lord Renton

Having listened to my noble friend and the noble and learned Lord, Lord Elwyn-Jones, I find myself a little surprised at the amount of controversy that has arisen. The noble and learned Lord seems to accept the GRE formula as laid down by Parliament at the Government's request, and as applied. He also accepts—this comes out in the seventh, eighth and ninth lines of the amendment—the system whereby the rate support grant for England is applied to these circumstances. He does not challenge the principles of the report.

However, what he is saying in relation to his former constituency—for which he was I remember a distinguished and zealous Member for many years—is that the formula does not do it justice. To overcome what seems to be his problem—which he is regarding as exceptional, though I must say that I think one could find some other cases where an argument might be made out for saying that the GRE formula does not do the trick—to overcome the defect in the formula as he sees it, he is simply asking for the GRE to be increased by 7.5 per cent. I do now know how that 7.5 per cent. is arrived at. I do not think that the noble and learned Lord has specifically told us. It seems that, in trying to do justice, he thought of a number and included it in the amendment in the hope that it might appeal to the Government and to the Committee. If the Government are to be persuaded, I think that they are entitled to know a little more about how that 7.5 per cent. is worked out, and why.

The only other point I would add is that granted in Newham and various other places the local authorities have problems relating to and resulting from deprivation, surely those problems should and can, so far as possible, be taken care of by the GRE formula, which the noble and learned Lord accepts, because, one of the main factors of the formula is the number of people for whom a service is provided; for example, the number of primary school children. I should have thought that the number of people for whom welfare services have to be provided might be another factor. Bearing in mind the fact that the number of premises from which refuse must be collected is a factor, I should have expected that the formula would cover (we shall be told if it does not) the number of houses which cannot be made the subject of demolition orders and which must continue to be inhabited but which nevertheless are a burden upon local authorities which must continue, even temporarily, their habitable existence.

Bearing in mind that the formula is intended to cover the services and the problem to which the services give rise, to ask the Committee to accept that a mere 7.5 per cent. extra would make up for the deficiencies of the formula may be capable of explanation, but it something which I do not so far understand.

6 p.m.

Lord Elwyn-Jones

First, I wish to deal with the concluding words of the noble Lord, Lord Skelmersdale. I detected sympathy in what he said and a willingness on his part and, therefore, on the part of the Government, to look at this matter again. I am not blackmailing the noble Lord on this matter, but if he is prepared to say that he and his colleagues will now have serious discussions with Newham with a view to reviewing and, if necessary, altering the position which has affected the Newham council so grievously, I am prepared, rather than to go into a prolonged algebraical and political speech on these matters, to sit down. If the Minister will be good enough to give me an answer to that point at this stage, it will be most helpful to our proceedings.

Lord Skelmersdale

I was at pains to point out, albeit comparatively briefly for me, that my honourable friend will be going to Newham on Friday to investigate matters. I am afraid that I can give no commitment as to the result. If the noble and learned Lord would like to take the words that I have uttered in the spirit in which I have uttered them, he will know what to do with his amendment.

Lord Elwyn-Jones

I do not think that at this stage I can ask more of the Minister than that. I await with hope, and a reasonable measure of confidence, the outcome of the visit of his honourable, or is it right honourable friend?

Lord Skelmersdale

My honourable friend.

Lord Elwyn-Jones

If there is a successful outcome to the visit to Newham, he will be right honourable at any time of the day. In the light of that, I shall deny my noble friend opposite the pleasure of an algebraical exposition (if I may say so, to my relief) although there are clear points to be made. In the circumstances and in the light of the Minister's statement, I ask leave to withdraw the amendment.

Baroness David

May I ask the Minister a question? As we have the Report stage of this Bill coming next week rather quickly after its Committee stage, will he be good enough to let my noble and learned friend and me know as soon as possible the outcome of the Minister's visit to Newham on Friday? That will be helpful to us when we consider what amendments to put down on Report.

Lord Harmar-Nicholls

When we reach the Report stage we sometimes read what has been said in Committee, and as there has been general criticism of the formula, it should be on the record that the formula, as it now stands, is 1.5 per cent. above the rate of inflation from the period when it was entered into.

Amendment, by leave, withdrawn.

Lord Underhill moved Amendment No.37: Page 11, line 32, after ("is") insert ("the lesser or).

The noble Lord said: I shall speak also to Amendments Nos. 38 and 40. When I was dealing with the amendments relating to the formulae contained in the schedule, the Minister asked whether Amendment No.40 was still standing. I hope that he was giving me some encouragement that he may be prepared to accept the amendment.

Lord Skelmersdale

May I interrupt the noble Lord? I was trying to prove that I read the Marshalled List.

Lord Underhill

I thought that my hopes might be a bit too high, but I still hope that at the end of the debate the Minister will see the common sense of the amendments. They are designed to provide designated authorities with an alternative factor (RV—rateable value) in each formula in Schedule 2.

The majority of designated authorities have made the point that the expenditure limit under the Rate Acts is translated into a rate limit by the use of an estimated penny-rate product for the area of a rating authority. Precepting authorities also use that estimate in making and issuing precepts. Rateable value calculated by reference to the penny-rate product is in most cases a smaller sum than the rateable value figure derived from the rate support grant report. That is because the former allows for the costs of collection and write-offs and reflects a truer position of an authority's rateable resources.

The Secretary of State should allow authorities to use the normal method if it produces a higher rate limit. That will be made possible by the amendments. In practical terms, the use in the formulae of rateable value rather than the penny-rate products, will mean that some authorities will be unable to finance a level of expenditure assumed in the formulae—that is, originally determined expenditure level (EL x a percentage uplift)—with the maximum rate limits that have been set by the Secretary of State.

The formulae assume that the maximum rate based on RV will bring a higher rate income than that based on a penny-rate product. That is not so. In the case of Sheffield, the shortfall will be no less than £5.27 million. Far from allowing a level of expenditure assumed in the formula (EL x 2 per cent.), Sheffield will be forced to spend at a level even lower than its originally determined EL. In the case of Newcastle, the rate income shortfall will be £4.7 million.

In previous years, maximum rates have been determined by reference to penny-rate products—either the authorities' estimates or those of the Secretary of State. DoE officials say that rateable value has been used because they have incomplete information on penny-rate products. I hope that the Committee will agree with me that that excuse is completely unacceptable and that the Minister will see the fairness, the commonsense and the continuity of practice proposed in the amendments and will therefore be prepared to accept them.

Lord Skelmersdale

This is a remarkably technical amendment, although presented so clearly and fairly by the noble Lord, Lord Underhill. Amendments Nos. 37, 38 and 40 provide that in setting up the formulae we should use in effect whichever is the more favourable to an authority of the penny rate product or the rateable value figure presently included.

I accept that the penny rate products are the amounts normally used by authorities when calculating their rates. Those amounts take account of the likely yield from the rates and hence allow for losses, which are not taken into account if a figure of rateable value is used. But penny rate products for the coming year, by their very nature, involve estimation. If a designated authority did not return its estimate of its penny rate product to the department, we should have to make our own estimate if the formulae contained a term for penny rate products.

I suggest that that would be unsatisfactory to local authorities' own interests because it would introduce uncertainty. Hence we have chosen to use rateable value instead of the penny rate product in the formulae. The rateable value figure is known with certainty as it is used for the purposes of rate support grant reports. That gives a slightly different result from that obtained if we had used penny rate products, but we took that difference into account when considering the appropriateness of the formulae. We chose the rateable value option because that was a figure used for the purposes of rate support grant reports and more importantly in the context of the 1987-88 rate support grant report. It requires no estimation on the part of the Secretary of State, and its derivation is quite clear.

In deciding to do that we were obviously aware that use of rateable value would produce a different result in terms of the spending power which the formula produced from using the penny rate product. We took that into account. I am advised that the shortfall in Sheffield and the other shortfalls which the noble Lord, Lord Underhill, mentioned were taken into account in deciding on the formula. In those circumstances, I suggest to the Committee that the amendments add an unnecessary complication as well as uncertainty to the formula. I recommend that the Committee reject them.

Lord Underhill

It is rather strange that we hear this word "uncertainty" again because, as I said in my opening remarks, in previous years maximum rates have been determined with reference to a penny rate, either the authorities' own estimates or those of the Secretary of State. Yet the Minister has declined to accept this amendment because it would require an estimate. I am informed that it is the estimate either of the Secretary of State or of the authority which has been used before in fixing maximum rates.

We want to give the designated authorities the alternative either to have the penny rate product or to have the rateable value. Many of them have complained about that lack of opportunity. I am somewhat surprised to learn that the Secretary of State has taken into account the position in Sheffield and that he is quite prepared for them to have a shortfall of £5.27 million. It is amazing to hear that he has taken that into account and regards it as quite satisfactory for an authority of Sheffield's standing.

This is not an issue on which I am prepared to divide the Committee now. I should like to read carefully what the Minister has said. I hope he will accept that authorities which are designated are complaining that they are being compelled to take the rateable value formula whereas they would prefer to have the choice either of the rateable value formula or the penny rate product. However, based on what the Minister has said at this stage, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 38, 39 and 40 not moved.]

On Question, Whether Schedule 2 shall be agreed to?

6.15 p.m.

Baroness David

I said nothing when we came to the end of Clause 7 and the Question whether Clause 7 stand part because I thought that was so closely linked with Schedule 2 that it was better to make my comments now. I am very dissatisfied with what we have heard, both on Clause 7 and on Schedule 2. Possibly because the Minister has never been a local councillor, his understanding and response to some of today's amendments and to the discussion has not been satisfactory; he has not been as understanding as he normally is.

Schedule 2 is linked to Clause 7 and dependent upon it. The Government's argument has been that the exposure of the illegal calculation of total and relevant expenditure, relating to an amount of £68 billion in block grant between 1981-82 and 1986–87, has made it impossible for the normal Rates Act procedures to apply this year. The Secretary of State argues that because of the exposed illegality the normal processes have had to be suspended in respect of 1987–88.

I have spoken previously about what the normal processes are. They involve various stages which have been passed by. In 1987–88 the formal order to be laid before the House of Commons specifying the designated authorities, their expenditure levels and final rate precept level will now not be laid because the process is being conducted by primary legislation; that is, the powers granted to the Secretary of State in Clause 7 and the mathematical formulae for the calculation of expenditure limits set out in Schedule 2. Therefore in the absence of any formal order-making process after the Bill is enacted there is no parliamentary procedure through which the Secretary of State's final decisions on rate precept limits can be challenged.

Our objections to the Bill's proposals are clear. On the grounds of natural justice and financial probity it is unwise for Ministers to destroy all procedures which allow for final and late revision of rate precept levels. The formulae set out in Schedule 2 are calculated on a grossly unfair basis. First, no specific account has been taken of the individual circumstances of particular authorities. Secondly, the applications for redetermination of expenditure levels submitted by a number of authorities have been ignored. Thirdly, authorities were not told to submit information to Ministers on their expenditure level-rate precept position in advance of the Bill being published.

Since the Bill was published on 18th December, Ministers have been arguing that the formulae are immutable. That is what we have heard frequently today. Had authorities known in advance that a legislative form of determining expenditure levels was being contemplated and that there would be no challenge available to interim rate precept levels, many more authorities would have submitted information early. Such authorities have therefore been seriously disadvantaged.

Fourthly, discrimination has occurred within classes of authorities and between classes of authorities. We heard about that just now in relation to Newham. Thus newly rate-capped authorities as a complete group are given a higher expenditure level than existing rate-capped authorities. There has never been any explanation for that. Also, there is discrimination between some of the statutorily rate-capped joint authorities. Police authorities get a higher expenditure level than fire and civil defence authorities, which in turn get a higher expenditure level than transport authorities, which in turn get a higher expenditure level than ILEA.

This clearly reflects the Government's estimation of political priorities rather than any estimate of the true financial position of individual authorities. There is also discrimination against ILEA, which is the only rate-capped education authority not to be given the additional T factor to deal with the financial consequences of any final teachers' pay assessment. I know that the Minister has tried to explain that.

There are no grounds for saying that the Minister needs the mathematical formulae, crudely applied in primary legislation, for the reason that there is no time to go through the normal Rates Act procedures. Mr. Ridley could have introduced a very simple Bill in November or December merely to rectify the revealed illegality on block grant which would have received the support of the Opposition, as I said at Second Reading and again today. Mr. Ridley could therefore have had his Bill. He could have kept the Rates Act procedures on redetermination in place. Indeed, he could have even pleased himself by allowing the parliamentary draftsmen to work on the privatisation Bill which he has now been forced to abandon. I should have thought that for him this was a serious political mistake. But, of course, we do not mind the last one. We therefore feel that Schedule 2 should not stand part of the Bill.

Lord Renton

I hope that the noble Baroness will forgive me if I do not follow her arguments or try to reply to them in substance. I want to make a brief comment about the drafting. It must have saved pages of verbiage to have used the formulae that appear in the schedule. I sometimes wish that we could use the formulae more often. In certain circumstances, they are a very valuable and helpful way of legislating. I therefore welcome the use of the formulae.

I must point out however that we have here an example of the passion of the parliamentary draftsman for putting the cart before the horse. I can perhaps put it this way. It is not until one reaches paragraph 3 of the schedule that one has a clue as to what paragraph 2 might mean. It is a most lamentable habit of the parliamentary draftsman to defer the definitions. These should always come where they facilitate understanding. If the definition is vital to the understanding of a piece of legislation, the definition should come first. This is a prize example.

I hope very much that when we come to Report stage we shall find government amendments which transpose paragraphs 2 and 3 and that all users of the statute will be much happier.

Lord Kilmarnock

We should also like to restate our dissatisfaction with the schedule. It is obviously right to speak on the schedule, rather than on the motion that Clause 7 stand part of the Bill. In combination with Clause 7, the schedule leaves absolutely no machinery for taking account of special or changed circumstances. It must be a disadvantage for the Secretary of State to have to come back to Parliament for any change that he wants to make, or is forced to make, during the coming financial year. There is no presumption on past performance that the Government are right and that they may not have to come back to Parliament yet again. On those grounds, therefore, Clause 7 and the schedule seem to be unsatisfactory.

I should like to return to the ILEA point. In the debate on the block of amendments which covered ILEA, I assured the noble Lord that I was not painting a rosy picture of ILEA. ILEA has definitely been dilatory and there are ways it could have saved money which it has not used. But that does not detract from the point I made to the Minister. I do not see how ILEA will meet the teachers' pay settlement this year on the basis of the formula in this schedule. I am bound to say that the noble Lord has not satisfied me on that point. Nor has he satisfied me as to how ILEA will meet the cost of moving from County Hall.

Those seem to me to be two special, one-off factors which cannot possibly be catered for by the formula in the schedule. I remain deeply unconvinced and dissatisfied with what the noble Lord has said.

On these Benches, we feel that this is precisely the kind of Bill which is bound to come from excessive central government intervention in local affairs. It is extremely complicated and very rigid and unsatisfactory. We do not like it. In a happier world, Bills of this kind would not exist. We very much hope that that happier world will come about quite shortly.

Baroness David

Perhaps I may say one word in response to the noble Lord, Lord Renton. It is not so much the formulae to which we object. In fact our amendments kept the formulae. It is the fact that there was no consultation with the local authorities before they were presented, and there has been no opportunity to discuss them since.

On the other point about EL and so on not being explained until paragraph 3, I am entirely in agreement. I read it through and could not think what it was all about. I hope that the Minister will pay attention to what his noble friend says.

Lord Skelmersdale

That was rather a barbed comment. I have learned from bitter experience over the last six years that when my noble friend Lord Renton speaks about drafting, any sane, sensible Minister ducks—and ducks very rapidly indeed. Yes, of course I shall take up his point. However, he did not develop it.

On looking at the schedule, there are even worse crimes, in my noble friend's book, perpetrated by the draftsman. Paragraph 3(6) explains how the amount of T in paragraph 2(1) is to be calculated. Therefore, I have indeed understood the point of my noble friend. I shall look into the matter and tell my noble friend whether I shall be able to take action.

I cannot but admire the confidence of noble Lords opposite. It is absolutely astounding how they announce over and over again that it would be possible to draft a simple Bill on this issue. If it were a simple Bill, they say, there would be no problems. It would sail through both Houses of Parliament overnight, and all the rest of it. I take that with a pinch of salt. Our debates have surely made clear that this is far from a simple matter. As I have explained on several occasions, it simply was not possible to carry through normal procedures for rate limits and, albeit on a decision of the House which was voted upon, that is why we had to set formulae.

After the expenditure limits were determined in July, as I said earlier, we proceeded to operate the normal timetable for redetermination applications, those applications being returned by the early autumn. Authorities had no reason to believe that redetermination could be submitted in December. The Bill has not cut across the normal process of submitting applications for redeterminations. What it has done is to roll up the subsequent procedures.

In passing, I ought to say something about Sheffield where the expenditure implied by the rate limit is £261.3 million but the expenditure level is—guess what?—£258.9 million excluding teachers' pay. I therefore do not think that the dire effects mentioned by noble Lords opposite will happen in this very special year. 1987–88, for rate-capped authorities. That is why I suggest to the Committee that Schedule 2 should remain part of the Bill.

Schedule 2 agreed to.

Clause 8 [Sanctions]:

On Question, Whether Clause 8 shall stand part of the Bill?

Baroness David

I should like to make a few comments. My purpose is not to challenge the need for some provision for supplementary precepts but to draw attention, first, to the potential penalty on local authorities implicit in the clause, and, secondly, to the difficulties caused to local authorities by the lateness of the Government's timetable which has occasioned the need for the clause.

The clause makes provision for supplementary rates and precepts to be issued by authorities which have already made an initial rate or precept before the passing of the Act. These supplementary issues must be made within four weeks in the case of precepts and within six weeks in the case of rates from the date of a notice served after Royal Assent by the Secretary of State. The clause makes no provision for the cost of the supplementary issues to be met from the Exchequer; they will therefore fall on to the local authorities concerned. We spoke yesterday about the extra costs in which local authorities may be involved.

The Government will no doubt argue that the original purpose of the clause was to penalise any rate-capped authorities which took advantage of an opportunity to make their rates or precepts before the passage of the Act when affairs were, as it were, in limbo. This is no longer relevant because the Bill has proved to be so complex that its progress through Parliament has necessarily taken a little time. All authorities are now potentially placed in difficulty.

The practical position is that all authorities—and in particular precepting authorities—are facing a difficult situation which has been caused by the Government. Precepts must be made by 10th March and rates by 31st March. The 1987–88 block grant settlement and the 1986–87 supplementary report cannot proceed until the Bill is enacted. It is even possible that the supplementary report may be further delayed if judgment is made for Greenwich in its case on Thursday, adding to the uncertainty facing authorities as to their true financial position. I believe that the Minister agrees with that position.

The Bill will not receive Royal Assent until after 10th March, thereby forcing precepting authorities to set precepts without final certainty as to the contraints upon them. Rate-making authorities will have little time before the end of the month to confirm their position and all authorities in receipt of block grant would wish to know that the settlement will proceed before setting rates. This will not be possible for the precepting authorities.

The only way for authorities to avoid this situation is for them to observe rate-cap limits which will not have been approved by the statutory deadline or else bear the penalty of the cost of a supplementary precept. This is a questionable use of the legislative process, amounting as it does both to pressuring authorities and to presuming on the remainder of the parliamentary process. The Government's whole approach since the legal misunderstanding was discovered has been to assume that Parliament would agree the legislation without amendment and to that extent to take Parliament for granted. As we have said previously a simple Bill, designed only to cope with the legal problem, could have been on the statute book by Christmas after an unopposed passage and all this uncertainty avoided.

6.30 p.m.

Lord Skelmersdale

I do not believe that it helps the Committee at all if I continue to repeat myself. However, we are now in what I can only describe as peculiar and particular circumstances.

I re-emphasise that what we have here are provisions which apply only to the next financial year; namely, 1987–88. I declared some time ago—I do not remember whether it was yesterday or on Second Reading—a non-interest in that I have never been a member of a local authority. I do not see that that makes me any better or any worse an individual. However, I am at least able to declare an interest as a ratepayer. The speeches throughout this afternoon by the noble Baroness and her noble friends in connection with this Bill seem to have ignored that aspect totally. We are talking as much about ratepayers as about local authorities and the difficulties of local authorities, which I accept are very real indeed, in some cases.

Baroness David

We are concerned about the people for whom local authorities are providing services.

Lord Skelmersdale

That brings me to the whole subject of changing the local government finance structure, which I long to do and which the noble Baroness has said is desirable. Indeed, the Government intend to do that as soon as they properly can on the basis of the Green Paper Paying for Local Government. However, I do not think that I should go down that track at this time of night.

Authorities will need to make the substituted rates and precepts referred to by the noble Baroness only if they chose to ignore the limits which will fall to be determined under the formulae and about which we have told the authorities. We do not expect authorities to be in that position. We believe that they will chose to act sensibly—which is a point that I made some time ago—but we must make provision in Clause 8 in case they do not act in such a responsible way.

The only other point made by the noble Baroness in what I suppose was a forerunner of a Third Reading or Bill do now pass speech was the lateness of the timetable. The cost of supplementary rates should fall on the authorities concerned if, knowing what their proposed rate limits are—which they do—they nevertheless fix a rate above their limit. The same point applies to precepting authorities. Therefore everything contained in Clause 8 of the Bill is a necessary part of the Bill and I hope that the Committee will agree to it remaining part of the Bill.

Clause 8 agreed to.

Clause 9 [Poiver of specifying: general]:

Baroness David moved Amendment No.41: Page 7, line 45, leave out ("1(6)").

The noble Baroness said: The purpose of the amendment is to remove the power to make specifications from the provisions of Clause 9: the powers in Clause 9(3). Clause 1(6) empowers the Secretary of State to add to the list of accounts in Schedule 1 which are to be treated separately from the rate fund revenue account. Under Clause 9(3) the Secretary of State is empowered to revoke or amend any specifications covered by the clause. Given that specification of an amount is likely to be helpful to the authority, it seems invidious that such a specification can then be amended or revoked. The result would be disruptive to that authority's accounting practices and without any guarantee, even with consultation with the authority, under Clause 9(4).

More generally, since Clause 1(6) is excluded from the need to observe common principles in making specifications wider Clause 9(6), presumably on the basis that it is designed to deal with particular local matters, it would seem better to exempt it from the provisions of the whole clause. I beg to move.

Lord Skelmersdale

I find it refreshing when the noble Baroness asks a straight question which I can understand. We spoke about Clause 9 in discussions on an earlier amendment yesterday (I believe that it was on Amendment No.9, although I should not like to swear to that). Therefore I can say that the consultation power referred to by the noble Baroness relates to specifications in all reports and supplementary reports, except those three to be made immediately on Royal Assent to this Bill. The specifications may be made outside reports, and consultation applies. However, the Secretary of State will consider representations made on reports and supplementary reports to be made immediately after Royal Assent. The purpose of the amendment, as I understand it, is to revoke or amend. It is the usual power relating to specifications and it is to cover mistakes which happen, and have happened, under all governments from time to time. The power must be exercised reasonably, but I do not wish to enter into the discussion of what is reasonable which the noble and learned Lord, Lord Silkin, had with my noble friend Baroness Hooper. Nonetheless, that, as I understand it, is the position and I hope that it answers the question of the noble Baroness.

Baroness David

I shall read what the Minister has said and consider whether I shall take up the matter again. At the moment I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Underhill moved Amendment No.42: Page 8, leave out line 7, and insert ("the local authority associations, any local authority directly concerned").

The noble Lord said: I declare my interest as president of one of the associations. The amendment follows on from the previous amendment dealing with the powers of the Secretary of State to make the specifications or to revoke or amend them. It may be helpful to the Committee if I read Clause 9(4), which states: Before exercising the power the Secretary of State shall consult such associations of local authorities as appear to him to be concerned and any local authority with whom consultation appears to him to be desirable". The amendment would read: Before exercising the power the Secretary of State shall consult the local authority associations, any local authority directly concerned and any local authority with whom consultation appears to him to be desirable". Therefore the important changes are that all the local authority associations should be consulted. That seems to be elementary because they will all be affected by any specification that the Secretary of State makes. Surely it is elementary justice, natural justice, that it should be written into the Bill that the local authority directly concerned with a particular specification shall be consulted. There remains in the Bill the provision that: any other local authority with whom consultation appears to him to be desirable". Therefore we are asking that the Secretary of State shall consult all the local authority associations and the local authority directly concerned. This seems to be such elementary natural justice that I am certain it is one issue which the Minister will be prepared to accept. I beg to move.

Lord Renton

I wonder whether my noble friend can explain the meaning of line 7 as drafted? As I understand it, it is the local authorities that will be concerned, rather than associations. If we refer to, such associations of local authorities as appear to him to be concerned", would it be possible, for example, for the local authorities in a particular part of the country to form an association because they felt that they were particularly concerned? From the wording of the Bill as it stands that is a possible interpretation. The Government no doubt have clearly in mind what they intend, but it would be nice to have an explanation.

Lord Skelmersdale

My noble friend Lord Renton gives me a magnificent cue to what I was about to say to the Committee. The amendment seeks to alter a traditional form of wording on consultation. The drafting to be found in Clause 9(4) has been used in legislation for many years. Indeed, it was the party opposite which passed the Local Government Act 1974. Section 1(3) of that Act states: the Secretary of State shall consult with such associations of local authorities as appear to him to be concerned and with any local authority with whom consultation appears to him to be desirable". This Government used the same formulation in Part VI of the 1980 Act. Sections 60(5) and 59(11A) both say that before doing certain things the Secretary of State, shall consult such associations of local authorities as appear to [him] to be concerned and any local authority with whom consultation appears to [him] to be desirable.". Both those Acts remain on the statute book. Now suddenly in 1987 we have, if this amendment were agreed to, an Act which says: the Secretary of State shall consult the local authority associations, any local authority directly concerned and any local authority with whom consultation appears to him to be desirable". Before I say how and why I am amazed at this formulation, perhaps I may turn back to my noble friend Lord Renton and answer his question. Clause 9(4) states: Before exercising the power that is the power to make a specification— the Secretary of State shall consult such associations of local authorities as appear to him to be concerned". That means any associations representing any body of local authorities. It goes on to say that the Secretary of State can also consult individual local authorities which it appear to him it is desirable to consult. I suggest that the point is covered in any kind of formulation.

I am quite amazed at the implication behind the amendment, especially as it was moved by the noble Lord, Lord Underhill. The Bill already contains Clause 9(4), which covers consultation with individual authorities with whom consultation appears desirable. The amendment is a tacit admission that the local authority associations do not or cannot represent their members. I should like to ask in what position that puts the noble Lord, Lord Underhill, who has told us from time to time that he has the honour to be president of the Association of Metropolitan Authorities. Moving closer to home, where does the noble Baroness, Lady David, stand on this particular matter, briefed as she is on local government matters by the local authority associations? I am sorry but I just cannot see the relevance of this amendment and why it should be incorporated into the Bill when the history is very much on the draftsman's side.

6.45 p.m.

Lord Underhill

We have heard some amazing answers from Government Ministers, but to me this is the most incredible. I have in front of me the Hansardof another place for 21st January. Thank God I found it among my documents; I thought I did not have it. At col. 974 Dr. Boyson, the Government Minister dealing with a point raised by the honourable Member for Norwood, said: I give the commitment that the local associations will be seen". That concerns another matter, but he says that they will be seen. I want them to be more than seen.

At col. 976 a Member of Parliament refers to the fact that a Minister gave an assurance that there would be general consultation with authorities. Later the Minister, Dr. Boyson, said: As I said to the honourable gentleman earlier, the Secretary of State will consult local associations and the specification is answerable to the courts.". Therefore on certain matters the Government are prepared to consult the associations. I want to write into the Bill that, whether it be the Association of County Councils, the AMA, or the Association of District Councils, they should all be consulted on the specifications because they are very important issues affecting all local government. I cannot understand why the Minister should resent that any local authority directly concerned should be included.

If there is one authority directly concerned, surely natural justice says that at least that authority should be heard and consulted. Why should it be left to the Secretary of State to decide. Subsection (4) says: any local authority with whom consultation appears to him to be desirable". Whatever may have happened in years gone by, we are now dealing in 1987 with a new pattern of local government finance which has never existed before. However, I shall read very carefully what the Minister has said. We may come back at the next stage after consultation with the bodies concerned. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 9 agreed to.

Clause 10 agreed to.

Schedule 3 [Rate support grant: special provisions]:

Lord Skelmersdale moved Amendment No.43: Page 12, line 31, at end insert ("; and the requirement in section 54(4) of that Act to consult may be satisfied (as regards a determination to be specified in such a Report) by consultation before the passing of this Act.").

The noble Lord said: In moving this amendment I trust that it will be convenient to the Committee if I speak also to Amendments Nos. 44 to 55 inclusive.

All these amendments relate to Schedule 3 of the Bill which is designed to enable my right honourable friends to make the 1987–88 rate support grant reports and certain supplementary reports immediately after the passing of the Bill in line with their announced intentions for these reports.

The amendments are necessary if the schedule is to enable us to make the reports in the way we intend. The amendments will make clear that the extensive consultation we have already carried out for these. reports satisfies the statutory requirements even though it was carried out before the passing of the Bill and will also enable us to use for certain of those reports, and certain estimates of grant entitlements made thereafter, the information about authorities' total expenditure and rateable values which we intend to use and which authorities expect us to use. I commend the amendments to the Committee.

Baroness David

I think I said yesterday that I was grateful to the Minister for writing about the amendments which the Government were about to put down. Again I cannot help commenting that there are a great many of them. It is not really very competent legislation to have to produce such a vast number of lengthy amendments at this stage when the Bill is going through the Upper House. It has already had time in the other House.

On Question, amendment agreed to.

The Deputy Chairman of Committees (Lord Nugent of Guildford)

Unless any noble Lord objects, I propose that Amendments Nos. 44 to 55 inclusive should be put to the Committee en bloc.

Lord Skelmersdale moved Amendments Nos. 44 to 55:

Page 12, line 46. at end insert ("; and the requirement in section 54(4) of that Act to consult may be satisfied (as regards a fresh determination to be specified in such a report) by consultation before the passing of this Act.")

Page 13, leave out line 17.

Page 13, line 44, at end insert—

("Total expenditure 1985–86"

2A.—(1)In doing any of the acts mentioned in sub-paragraph (2) below the Secretary of State shall treat the relevant amount as the amount of an English local authority's total expenditure in relation to the relevant year. (2) The acts are —

1. (a) making any determination or doing any other thing after the passing of this Act for the purposes of any relevant report, and
2. (b) making under section 66(1) of the 1980 Act the first estimate and notification to be made after the passing of this Act as regards the authority concerned for the relevant year.

(3) Where an amount estimated as an authority's total expenditure in relation to the relevant year was submitted to the Secretary of State by the authority—

1. (a) before llth December 1986, and
2. (b) in response to a requirement made under section 65 of the 1980 Act in April 1986.

for the purposes of this paragraph the relevant amount is (as regards the authority) the amount submitted. (4) Where in the case of an authority no amount was submitted as mentioned in sub-paragraph (3) above but an amount estimated as the authority's total expenditure in relation to the relevant year was submitted to the Secretary of State by the authority—

1. (a) before llth December 1986, and
2. (b) in response to a requirement made under section 65 of the 1980 Act in February 1985.

for the purposes of this paragraph the relevant amount is (as regards the authority) the amount mentioned in sub-paragraph (5) or (6) below (as the case may be). (5) Where sub-paragraph (4) above applies in the case of an authority which is not a local education authority, the amount is the amount submitted. (6) Where sub-paragraph (4) above applies in the case of an authority which is a local education authority, the amount is the amount submitted as adjusted by a method determined by the Secretary of State: and the method shall be determined in accordance with principles to be applied to all authorities affected by the adjustment. (7) Where in the case of an authority more than one amount was submitted as mentioned in sub-paragraph (3) above, for the purposes of that sub-paragraph the amount submitted shall be taken to be the latest to be so submitted. (8) In this paragraph "the relevant year" means the year beginning in 1985. (9) For the purposes of this paragraph relevant reports are—

1. (a)the report mentioned in paragraph 1(4)(a) above, and
2. (b)any report proposed to be made in substitution (directly or indirectly)) for the report mentioned in paragraph 1(8)(a) above.

(10) In its application in relation to the Greater London Council, the Inner London Education Authority or a metropolitan county council, this paragraph shall have effect as if the second reference to the authority in sub-paragraph (3) included a reference to the London Residuary Body or (as the case may be) the body established for the metropolitan county by section 57(1)(b) of the Local Government Act 1985.") Page 13, line 48, leave out ("any") and insert ("the"). Page 14, line 3, after ("the") insert ("relevant") Page 14, line 9, leave out ("year for which the amount was submitted") and insert ("relevant year") Page 14, leave out line 11 Page 14, leave out lines 19 to 30 and insert— ("(6) In this paragraph "the relevant year" means the year beginning in 1986. (7) For the purposes of this paragraph relevant reports are—

1. (a)the report mentioned in paragraph 1(4)(b) above and that mentioned in paragraph 1(4)(c) above, and
2. (b)any report proposed to be made in substitution (directly or indirectly) for the report mentioned in paragraph 1(8)(b) above or that mentioned in paragraph 1(8)(c) above.

(8) In this paragraph "the relevant date" means 20th December 1986 in the case of an English authority, or 4th December 1986 in the case of a Welsh authority.

Total expenditure 1986-87 (further provisions) 3A.—(1) Sub-paragraph (2) below applies where before the relevant date a local authority submitted to the Secretary of State an amount which it estimates as its total expenditure in relation to the year beginning in 1986. (2) Where, in making any determination or doing any other thing after the passing of this Act for the purposes of any Report as regards which paragraph 1(2) and (3) above apply the Secretary of State wishes to take into account the authority's total expenditure in relation to the year beginning in 1986, he shall treat the amount submitted as the amount of its total expenditure in relation to that year. (3) For the purposes of sub-paragraph (2) above—

1. (a) if the authority and the Secretary of State agreed before the relevant date an amount to replace any amount submitted, the amount submitted shall be taken to be the amount agreed, and
2. (b) subjectto paragraph (a) above, if more than one amount was submitted before the relevant date, the amount submitted shall be taken to be the latest to be so submitted.

(4) In this paragraph "the relevant date" means 20th December 1986 in the case of an English authority, or 4th December 1986 in the case of a Welsh authority."). Page 14, line 39, leave out ("on 19th") and insert ("in") Page 15, line 8, leave out ("on 19th") and insert ("in") Page 15, leave out lines 9 and 10 Page 15, line 17, at end insert—

("Rateable values 5.—(1) In doing any of the acts mentioned in sub-paragraph (2) below the Secretary of State shall—

1. (a) take into account information relating to hereditaments in the area of an English local authority and their rateable values if the information falls within sub-paragraph (4) below, and
2. (b) leave out of account information relating to such hereditaments and their rateable values if the information does not fall within sub-paragraph (4) below.

(2) The acts are—

1. (a) making any determination or doing any other thing after the passing of this Act for the purposes of any relevant report, and
2. (b) making under section 66(1) of the 1980 Act the first estimate and notification to be made after the passing of this Act as regards the authority concerned for the year beginning in 1985 or that beginning in 1986.

(3) For the purposes of this paragraph relevant reports are—

1. (a) the report mentioned in paragraph 1(4)(a) above and that mentioned in pragraph 1(4)(b) above, and
2. (b) any report proposed to be made in substitution (directly or indirectly) for the report mentioned in paragraph 1(8)(a) above or that mentioned in paragraph I (8)(b) above.

(4) The information referred to in sub-paragraph (1) above is that which was taken into account in making the Rate Support Grant Report for England for the year for which the relevant report is made or the estimate and notification are made (as the case may be).

General 6. References in this Schedule to making determinations or doing other things for the purposes of a report include references to making or doing them with a view to the inclusion of anything in a report whether or not the inclusion is required by any enactment. 7.—( ) Paragraph 4 above shall have effect subject to paragraphs 3 and 3A above. (2) Part VI of the 1980 Act shall have effect subject to paragraphs 2 to 5 above.")

On Question, amendments agreed to.

Schedule 3, as amended, agreed to.

Clause 11 agreed to.

Schedule 4 [Amendments]:

Lord Skelmersdale moved Amendment No.56:

Page 15, line 41, leave out ("In section 56(6) and (7) of the 1980 Act") and insert— ("(1)Section 56 of the 1980 Act shall be amended as mentioned in sub-paragraphs (2) and (3) below. (2) In subsections (6) and (7)").

The noble Lord said: With the leave of the Committee I shall speak also to Amendments Nos. 57,58 and 59.

All these amendments amend Schedule 4 to the Bill so that, where in the other statutory provisions covering rate support grant it is intended to refer to "total expenditure", the provisions do so. In some cases the provisions refer to "expenditure" in cases where the practice has been to construe those references as "total expenditure". Total expenditure is now by statute an artificial accounting concept and is likely to be different from what is expenditure in the true sense. These amendments will mean that Schedule 4 will carry through the necessary amendments to other statutes consequent upon the provisions of the Bill. I commend the amendments to the Committee.

On Question, amendment agreed to.

The Deputy Chairman of Committees

With the leave of the Committee Amendments Nos. 57, 58 and 59 will be moved en bloc:

Lord Skelmersdale moved Amendments Nos. 57 to 59:

Page 15, line 43, at end insert— ("(3) In subsection (8), in the definition of grant-related expenditure, after "notional" there shall be inserted "total".")

Page 15, line 43, at end insert— ("2A. In section 58(5) of the 1980 Act after "in their" there shall be inserted "total".")

Page 17, line 5, at end insert— ("5A. In section 8 of the Local Government Finance Act 1982 (adjustments of distribution of block grant) the following shall be inserted after subsection (4)— (4A) If guidance issued for the purposes of section 59(6)(cc) of the said Act of 1980 is guidance by reference to total expenditure, and if representations in the following behalf are made to the Secretary of State by any association of local authorities or by any local authority, he may—

1. (a) in the Rate Support Grant Report made for any year under section 60 of that Act, or
2. (b) in a supplementary report made for any year under section 61 of that Act,

provide that items of any description or amount shall be disregarded in calculating total expenditure for the purposes of the said section 59(6)(cc) and of determining under subsection (3)(c) above whether or the extent to which local authorities have or have not complied (or have or have not taken steps to comply) with the guidance.".").

On Question, amendments agreed to.

Schedule 4, as amended, agreed to.

Schedule 5 agreed to.

Clause 12 [Interpretation]:

Lord Skelmersdale moved Amendment No.60:

Page 8, line 29, leave out subsection (3) and insert— ("(3) For the purposes of this Part of this Act as it applies in relation to an intermediate year beginning in 1983, 1984 or 1985—

1. (a) "local authority" also includes the Greater London Council and the Inner London Education Authority within the meaning of section 30 of the London Government Act 1963,
2. (b) references to the Inner London Education Authority in section 1(1)(c) above, paragraph (c)below and paragraph 2A(10) of Schedule 3 to this Act shall be construed as references to the Inner London Education Authority within the meaning of section 30 of that Act,
3. (c) the Greater London Council and the Inner London Education Authority shall be taken to be separate local authorities, and
4. (d) "local authority" does not include a joint authority or the Inner London Education Authority established by section 18 of the Local Government Act 1985.").

The noble Lord said: This is a technical amendment. What it does is to make it clear that the references to ILEA in relation to the years beginning in 1983, 1984 or 1985 are to the special committee of the Greater London Council, rather than to the new corporate body established by the Local Government Act 1985. It also ensures that although the old ILEA and the GLC were the same legal entity, they are treated separately for the purposes of Part VI of the 1980 Act, as they always have been in the past.

As this is the last occasion that I shall speak in Committee on this Bill perhaps I may thank noble Lords in all parts of the Committee for their cooperation in reaching this point in the Bill in such an exemplary fashion and for the good temper exhibited by all who have spoken. I include in that particularly my noble friend Lady Hooper who has been scurrying hither and thither at my request for what seems a very long time. I beg to move.

Baroness David

If I may, I shall respond to what the Minister has so kindly said about the good humour with which this Committee stage has been conducted and the speed with which we have got through it, which is rather greater than I expected. Our thanks from this side to the Minister and to the noble Baroness and I hope we shall have a satisfactory Report stage.

On Question, amendment agreed to.

Clause 12, as amended, agreed to,

Remaining clauses agreed to.

House resumed: Bill reported with amendments.