Local Government Finance Bill

HL Deb 10 March 1987 vol 485 cc940-84

2.56 p.m.

Read a third time

Clause 2 [Rate fund revenue accounts: further provisions]:

Lord Skelmersdale moved Amendment No.1: Page 3, line 18, at end insert— ("(4A) Before making a specification under subsection (4) above the Secretary of State shall consider the practices mentioned in subsection (3) above, but such a specification may override those practices.").

The noble Lord said: My Lords, Amendment No.1 fulfils the undertaking I gave at Report stage to bring forward an amendment to Clause 2(4) which would ensure that while it would still be possible for specifications under Clause 2(4) to override proper practices, my right honourable friend would consider the proper practices referred to in Clause 2(3) before he made any such specifications

There has been some misunderstanding that the government amendment would also give my right honourable friend powers to override proper practices. It is not the government amendment which provides for this; it is the Bill itself. As I have explained in earlier debates that we have had, the Government believe it is necessary for the specifications to override proper practices; indeed that power is already in Clause 2(5). But what the government amendment does is to make it clear that there can be no possible conflict between the provisions of the amendment and those of Clause 2(5). It does this by including the phrase: such a specification may override those practices", which will be the subject of the next amendment. I beg to move.

Baroness David moved, as an amendment to Amendment No.1, Amendment No.2: Line 4, leave out ("but such a specification may override those practices.").

The noble Baroness said: My Lords, I must confess to feeling that I have been conned. We were always worried by the powers conferred on the Secretary of State in Clause 2(4) as were the local authority associations. In Committee we tried to delete the subsection altogether, and on Report we tabled a very modest amendment which inserted at the end of the subsection: and in doing so shall have regard to the practices". When the Minister said that he would accept the amendment in principle and come back with his own amendment on Report, I thought that we would get a real improvement. However, I find the reverse

I should like to comment on what the Chartered Institute of Public Finance and Accountancy has to say. It was concerned about the powers to be given to the Secretary of State for the Environment in order to enable him to decide what should or should not count as a local authority's income or expenditure. However, the institute did not ask for any amendments to be made to the Bill because, on balance, it considered that the requirement for any decisions to conform to proper practices offered some protection against arbitrary action. Now it sees the situation very radically changed by the government amendment to the Bill. The new subsection (4A) says that: the Secretary of State shall consider the practices mentioned in subsection (3) above, but such a specification may override those practices". The institute is deeply concerned that the Secretary of State should have such freedom, and so are we. Although the Secretary of State may not intend to abuse these powers, the wording of the amendment would allow the Secretary of State to undermine the integrity of all or any local authority's accounts. Surely it cannot be right that a Secretary of State can direct a public body to do something which he knows to be inconsistent with proper practice. Yet that is exactly what the amendment would enable him to do.

The government amendment would also come into conflict with Section 15 of the Local Government Finance Act 1982, which requires a local authority's auditor to, satisfy himself… that proper accounting practices have been observed in the compilation of the accounts". I hope that, as the institute has such strong feelings, as well as the local authority associations and the Opposition, the Government will think again about their amendment and accept the deletion that we have proposed. I beg to move.

3 p.m.

Lord Denning

My Lords, this is an important point involving the independence of auditors. In Clauses 1 and 2 of the Bill there are references to proper practices to be observed by the auditors in the compilation of the accounts—the proper practices.

In order to discover the reference, one must turn to the Local Government Act 1982. There one finds that the Audit Commission is set up especially to audit and deal with the accounts of local authorities. Section 15 expressly refers to the proper accounting practices. It says: an auditor shall by examination of the accounts and otherwise satisfy himself… that proper practices have been observed in the compilation of the accounts". Therefore it is the duty of the auditor to observe that proper practices have been involved in the compilation of the accounts.

In reading the Bill as it stands at the moment, I understand that when the Secretary of State deals with the matter under Clause 2 and makes specifications as to what is and what is not to be entered in the accounts, he will abide by the proper practices which are to be observed throughout. I did not read subsection (4) as enabling him to do anything other than specify what is the proper accounting system according to the proper practices observed by accountants.

However, the amendment goes so far as to mean that the Secretary of State can override the auditors as regards the proper system of accounting. That seems to me to be entirely contrary to principle. In a sense, an auditor is like a judge; he is a judge of accounts in the same way as an ordinary judge is a judge of men. As with a judge, it is the duty of an auditor to be impartial and independent of authorities—whether or not it is the local authority—and also to be independent of the Secretary of State. Indeed, the 1982 statute requires a code of practice to be issued and approved by Parliament. It has been approved and I have a copy of it here. Under the heading "Independence" (of this very commission) it states: In order that the auditor's opinions, conclusions, judgments and recommendations will be and will be seen to be impartial, the auditor and the audit staff must be independent of the authority and maintain an independent and objective attitude of mind". When the auditor comes to his decision indepen-dently, in accordance with the code of practice, and, in so far as he can see, in accordance with this statute, is his decision then to be overridden by the Secretary of State? That is what the present amendment enables the Secretary of State to do. I ask your Lordships to support the amendment to the amendment and not allow the Secretary of State to override the judgment and decision of the auditor. I approve the amendment to the amendment.

Lord Campbell of Alloway

My Lords, I seek clarification on this matter. Surely, as regards the speeches that have been made, we are moving a long way from the essential point at issue. Surely this is not a question of the Secretary of State approving what he knows to be an improper practice, as I believe it was put by the noble Baroness, Lady David. Surely and assuredly this is not a question of impugning the independence of auditors, as I understand it was put by the noble and learned Lord, Lord Denning. Is this not just a question of essential sound administration? Is this not a question of conferring upon the Secretary of State the power to resolve any conflict between the respective practices when it is common ground that there is no uniform practice?

If that be the intention of my noble friend the Minister's amendment, then to accept Amendment No.2 would surely afford a prescription for continuing uncertainty and disorder in these complex affairs. One is almost tempted to refer to the "arcane mysteries" of local government, where the definition of the very terms is in doubt and the methods—practices—of implementation inevitably vary because of the unintelligible definitions to which the noble and learned Lord, Lord Denning, has already referred. If that analysis is right—and I seek your Lordships' help on that matter—then surely the Government's amendment ought to be adopted.

Lord Simon of Glaisdale

My Lords, the basis of the speech with which your Lordships have just been favoured by the noble Lord, Lord Campbell of Alloway, is that there is no uniform practice. However, with all respect to him, that is quite wrong: there is a code of uniform practice. It is laid down in Section 14 of the 1982 Act to which my noble and learned friend Lord Denning referred. Under that Act a code of audit practice must be laid down by the Audit Commission, and it must embody the best professional practice. There then follows the section to which my noble and learned friend and the noble Baroness referred; namely, Section 15. Under subsection (1)(b), the auditor shall satisfy himself that the proper practice has been observed—proper practice as contained in the code.

Lord Campbell of Alloway

My Lords, I am grateful to the noble and learned Lord for allowing this intervention. It may save a little time. I am fully aware that there is a code of practice. The noble and learned Lord is quite right, and I am fully aware of that fact. I am also fully aware—and this is the substance of my speech—that the implementation of the practice varies. It is that variation which forms the basis of my speech. However, I am aware of that fact and I am grateful to the noble and learned Lord for allowing the intervention.

Lord Simon of Glaisdale

My Lords, if the noble Lord was aware that there is a code of practice, it seems to me quite impossible that he should say that there is no uniform practice. It is laid down by the Audit Commission and has to be observed. There are variations, but they are variations that are made in between the periods of parliamentary review. I come back to the fact that the auditor shall satisfy himself that the proper practice has been observed, and that proper practice is the practice laid down in the code prepared by the Audit Commission.

Those words, "the proper practices", are taken up by the Bill and under the amendment the Secretary of State has to consider them, but he can override them. What the noble Baroness is concerned with is that there should be no such overriding. That seems to me to follow from the whole structure of the 1982 Act. It seems to me that my noble and learned friend is quite right in saying that the Secretary of State is given a discretion which runs quite contrary to the 1982 Act.

So much for the legal position, but the constitutional position also arises. At Report stage I dealt with the argument that this Bill avoids and obviates litigation. I ventured to suggest that the possibility of litigation is inherent in the rule of law. It must be possible for the citizen to say, "I do not accept that you, the Executive, should be judge in your own cause. I say you have got the facts wrong, and there are independent courts which can determine the matter between us. I say you have got the law wrong, and those courts will apply an abiding code." There must always be in the background the possibility of litigation. In other words, there must always be the possibility that the citizen can challenge the Executive before an independent court.

I went on to say that of course you can always avoid litigation. Take two traders running an account: Of course litigation can be avoided if one says to the other, "Well, each of these is a matter for dispute, but we can avoid litigation if you give me a blank cheque." That is what the Bill does for the Secretary of State.

But he now goes further. He says that one of the parties to that account can say, "The account need not necessarily be compiled according to proper accountancy practice. I reserve the right to override that proper accountancy practice." I shall therefore without hesitation support the amendment.

Lord Renton

My Lords, I say with great respect to both noble and learned Lords that the speeches they have made appear to me to be speeches against the inclusion in this clause of subsection (4), which gives a power to the Secretary of State to specify kinds of expenditure or income to be regarded as of a revenue nature.

Lord Simon of Glaisdale

My Lords, if the noble Lord will allow me, surely subsection (4) is subject to subsection (3), whereby the practices must be "proper practices".

3.15 p.m.

Lord Renton

My Lords, I was just coming to that. Subsection (4) is not being challenged. It gives power to the Secretary of State to specify kinds of expenditure or income which are to be regarded as of a revenue nature. It seems to me that that may necessarily involve overriding at any rate variations of existing practice. That possibility is envisaged in the last line or so of subsection (3), to which the noble and learned Lord, Lord Simon of Glaisdale, has just referred.

Having described the practices which are to be considered—and they are the "proper practices", and incidentally there is no reference to the Act of 1982—he is required also (and these are the operative words) to take: into account variations of practice occurring from time to time". I do not think that the noble Baroness can claim, as she did just now, that she was taken by surprise. If we read what my noble friend Lord Skelmersdale said at Report stage, he made abundantly plain what the Government had in mind, and he invited your Lordships to have it in mind as well, when he said on 5th March at col. 726: The purpose of this power in the Bill is to make specifications to enable us to deal with situations where there is doubt as to what is required by proper practices. If we are to give this power to make specifications at all, it is surely inherent in that power that the Secretary of State may find that there is a practice, or more likely a variation of a practice, which has to be overridden. If we do not accept that proposition there seems to be no point in giving this power to make a specification.

My noble friend has included in his amendment these words which the noble Baroness says should be left out: but such a specification may override those practices. He has come clean. He has made it abundantly plain that that is what is necessary, otherwise there would be no point in having a power to make the specifications. So, if we were to leave those words out, and if somebody seeking guidance were to refer to the speeches of the two noble and learned Lords, they would find that the Secretary of State was bound by the practices which Parliament has invited him to consider. That would be a contradiction. I go so far as to say that it would be a nonsense. Therefore, I hope that my noble friend Lord Skelmersdale will stand by his amendment in its entirety.

Lord Silkin of Dulwich

My Lords, I wonder whether I might say a few words about the speeches of the noble Lords, Lord Campbell of Alloway and Lord Renton. There are parts of those speeches with which I would not disagree. I agree with the noble Lord, Lord Campbell of Alloway, that if there are no proper practices then in those circumstances the power to specify would be a perfectly sensible one. I would only add in relation to that that if a situation exists in which there are no proper practices, then it is wholly unnecessary to put in the Government's amendment the provision that: such a specification may override those practices", because there are no practices to override. You do not need to have that at all.

The noble Lord, Lord Renton, drew attention to the possibility that in certain circumstances there might be more than one proper practice. I quite agree. I would not seek in that situation to prevent the Government from choosing between one proper practice and another proper practice. After the debate in Committee the Minister, in kindly writing to me, drew attention to what I think is probably the same point, but put in a slightly different way. He said that a dispute might arise between accountants as to whether a practice which is advocated is proper or improper. That arose because in my speech in Committee I referred to what appeared to me to be the possibility that the Government were seeking to create practices which were improper. I felt that was something to be avoided.

The noble Lord the Minister said in relation to that that there might be a situation in which accountant A thinks that a proposed practice is proper and account-ant B thinks it is improper. If a practice is improper the Government should be at liberty to choose the proper practice as against the improper. I should not disagree with that. It is absolutely right, but all that the Secretary of State would be specifying would be a proper practice. He would not be specifying something other than a proper practice.

The amendment goes much further than any of those situations in that it gives the Secretary of State power by specification to override all proper practices. It does not say that his specification must at least be in conformity with one of several possible proper practices—the case put by the noble Lord, Lord Renton—nor does it deal only with the case put by the noble Lord, Lord Campbell of Alloway, where there happened to be no proper practice. As it is framed, it seems to me clear enough that the amendment would mean that where one had any number of practices in relation to a particular situation (all of which may be perfectly proper) it is open to the Secretary of State by specification to say that he will not allow any of those and the only thing he will allow is what he specifies, even though that may be quite improper in the eyes of accountants.

That is the evil that we on this side are very much concerned with, as I think are noble and learned Lords on the Cross-Benches. It may be simply a matter of some further amendment which could be made in another place to make absolutely clear that the Secretary of State cannot specify in that way. Subject to an assurance that that will be done, certainly we on this side of the House are sufficiently concerned about this matter to adhere to the amendment to the amendment.

Lord Kilmarnock

My Lords, before the noble Lord rises to reply I should like to say that we on these Benches are also extremely concerned about the additional power which the noble Lord seeks to import into the Bill at Third Reading. It would seem to us that the powers the Government have equipped themselves with in the Bill are perfectly adequate.

We also agree with the noble and learned Lord, Lord Silkin, that the additional subsection (4A) which the noble Lord wants to write in goes much further than is necessary. Not only does it give him the power to invoke his own subsection (4), where he may specify certain kinds of expenditure which are to be regarded as of a revenue nature, and so on, but it also enables him to override all the normal and proper practices which are contained in subsection (3). Therefore it goes far further than the scope he needs to accomplish his purpose. On those grounds, if this amendment is pressed to a Division we shall support it in the Division Lobbies.

Baroness Fisher of Rednal

My Lords, may I ask one question? I do not want to enter into the debate because my interpretation of what the Government intend to do is that if proper accounting practices have taken place and have satisfied the auditor, the Government say, "That is not important. We are here and we decide what is right and what is wrong". That is how it was put to me. Will any of the specifications made under this clause apply to the financial year beginning in 1987?

Lord Skelmersdale

My Lords, perhaps it would be as well to put this amendment to the Government amendment, and indeed the whole Government amendment, into context. When I persuaded the noble and learned Lord, Lord Silkin, at Report stage to withdraw an amendment in favour of a Government amendment which I promised and which is the subject of Amendment No.1 today, the amendment I persuaded him to withdraw was to add at the end of subsection (4): and in doing so shall have regard to the practices". In other words, what I said at the time was quite clearly that my right honourable friend could not make specifications without knowing what the practices were.

I agree with my noble friend Lord Campbell of Alloway that the specifications enable doubts to be resolved. My noble friend Lord Renton quoted my words at Report. The purpose of the power to make specifications is to enable us to deal with situations where there is doubt about what is required by "proper practices". This very purpose means that the specifications cannot be subject to proper practices. The specifications must be effective in situations of doubt. These may include situations not only where there are some differences of view about whether one proper practice is more appropriate than another—a point that my noble friend Lord Campbell raised—but also where accountants hold such diametrically opposed views that some regard a practice as both appropriate and proper while others are so strongly opposed to it that they regard it as improper. I agree with my noble friend Lord Renton. The Government amendment with the words which noble Lords opposite—

Lord Bruce of Donington

My Lords, may I—

Lord Skelmersdale

My Lords, may I just finish this one point and then I shall give way? I was saying that I agree with my noble friend Lord Renton. The Government amendment with the words which noble Lords opposite clearly find offensive makes explicit what was previously implicit in the Bill. There is no additional power in this amendment.

Lord Bruce of Donington

My Lords, I am grateful to the noble Lord for giving way. The Minister has just said that there exist conflicts among members of the various accountancy professions as to what is proper practice. Will the noble Lord kindly provide an example of what one set says, or two or more say, on concepts which are in opposition to one another?

Lord Skelmersdale

My Lords, I did not quite say that. What I said was that the whole purpose of this power to make specifications relates to where there is doubt in the future, so that the whole of local government operates under one specification in regard to the accounts in Clauses 1 to 3 of this Bill.

I was saying that this amendment gives no additional power in the Bill, so when the noble Baroness says that she has been conned I find that a little hard to take. The specification must be of certain effect, even where a body of opinion among accountants holds that the specifications are contrary to proper practices. If this were not so, the specification-making power would not fulfil its purpose. Indeed, if the specifications were of uncertain effect whenever a group of accountants, however small, thought that they were contrary to proper practices, where would we be?

The accountancy profession has many virtues—indeed the noble Lord, Lord Bruce of Donington, is an exemplar of them—but dull uniformity of opinion, if indeed it is a virtue, is not one of them, I would suggest. That is why the specifications must be able to override proper practices, although, as 1 have said before, we have no intention of making specifications contrary to generally accepted practices.

The noble and learned Lord, Lord Simon, raised the point again on this narrow issue of the Bill, as he did on Report when we were discussing the thorny subject of validation, of my right honourable friend putting himself above the law. But specifications under this clause are of course subject to judicial review in the normal way. We are not talking in this part of the Bill about avoiding litigation at all.

Several noble Lords mentioned Section 23 of the 1982 Act. There is a power for the Secretary of State to make regulations on accounts. There is no requirement for those regulations to conform to proper practices; yet Section 15 requires the auditor to satisfy himself that the regulations and any other statutory conditions are complied with, as well as satisfying himself that proper practices have been observed. The short answer is that in the end the auditor will have to have regard to the specifications in the same way as he must have regard to any other statutory requirement. He could not fault an authority for following the law.

However, the Acts of 1980 and 1982 are about auditors and what we are talking about now are the practices operated by accountants in local authorities. I have to advise the House that the code to which the noble and learned Lord, Lord Simon of Glaisdale, referred is indeed about audit. It is a code of audit practice, prescribing the way in which auditors are to carry out their functions. It does not deal with how accounts are kept. Therefore the provisions of the Bill do not run contrary to the 1982 Act. As I explained, Section 15 of that Act requires the auditor to satisfy himself that regulations under Section 23 of the 1982 Act and all other statutory provisions applicable to accounts are complied with. I emphasise that there has been no change in the Government's approach. Clause 2(5) has always been in the Bill and makes proper practices in subsection (3) have effect subject to specifications.

I must confess that the noble and learned Lord, Lord Silkin, somewhat confused me, because I understood him to say, would not object to the Bill overriding proper practices if they are different". He was picking up the point made by my noble friend Lord Campbell of Alloway. But in that situation some proper practices, by definition, would have to be overridden. Therefore why are the words in the government amendment offensive to noble Lords opposite?

Lord Silkin of Dulwich

My Lords, before the noble Lord sits down, I wonder whether we could put the question the other way round. He is saying that those words are not necessary because they are already inherent in the Bill. If they are not necessary, why does he want to put them in?

Lord Skelmersdale

Because, my Lords, they remove a doubt and, as I said earlier, they make explicit what is already implicit in the Bill. Therefore I cannot see why there are grounds for complaint.

Lord Bruce of Donington

My Lords, as an accountant who has had some 50 years in general practice and who can, I hope, therefore speak with some knowledge of the matter under review—

Lord Tordoff

My Lords, with respect to the noble Lord, the Minister has wound up. This is the Third Reading of the Bill and I should have thought that was the end of the matter.

Baroness Fisher of Rednal

My Lords, with the leave of the House, will the Minister answer the question I posed to him?

Lord Skelmersdale

My Lords, yes. I am sorry. With the leave of the House, we intend to apply some specifications for 1987–88.

Baroness David

My Lords, everything the Minister has said has made me feel that we were rightly suspicious about these subsections in the Bill all the time. I am very glad of the support I have had from noble and learned Lords and also from the noble Lord, Lord Kilmarnock, whose name indeed appears on the amendment. We are not satisfied with the Minister's reply, nor with the brave words of his supporters on the Government Benches. I think we must test the opinion of the House.

3.35 p.m.

On Question, Whether the said amendment (No.2), as an amendment to Amendment No.1, shall be agreed to?

Their Lordships divided: Contents, 96; Not-Contents, 118.

DIVISION No.1
CONTENTS
Airedale, L.	Brockway, L.
Amherst, E.	Brooks of Tremorfa, L.
Annan, L.	Bruce of Donington, L.
Ardwick, L.	Carmichael of Kelvingrove, L
Avebury, L.	Chitnis, L.
Aylestone, L.	Cledwyn of Penrhos, L.
Banks, L.	Cudlipp, L.
Beswick, L.	David, B.
Birk, B.	Davies of Penrhys, L.
Blease, L.	Dean of Beswick, L.
BIyton. L.	Denington, B.
Bonham-Carter. L.	Denning, L.
Boston of Faversham, L.	Diamond, L.
Bottomley, L.	Donaldson of Kingsbridge, L.
Briginshaw, L.	Elwyn-Jones, L.

Ewart-Biggs, B.	Mayhew, L.
Ezra. L.	Mishcon, L.
Falkland. V.	Molloy.L.
Fisher of Rednal, B.	Morton of Shuna, L.
Fitt, L.	Nicol, B.
Foot, L.	Northfield, L.
Gallacher, L.	Ogmore, L.
Gladwyn. L.	Oram, L.
Glenamara, L.	Phillips, B.
Graham of Edmonton, L.	Pitt of Hampstead, L.
Hampton, L.	Ponsonbv of Shulbrede, L. [Teller.]
Hanworth. V.
Hayter, L.	Prys-Davies, L.
Henderson of Brompton, L.	Rathcreedan. L.
Henniker, L.	Reilly, L.
Hirshfield, L.	Ross of Marnock, L.
Houghton of Sowerby, L.	Rugby. L.
Hunt. L.	Sainsbury, L.
Irving of Dartford, L.	Seear, B.
Jeger, B.	Serota, B.
Jenkins of Putney. L.	Silkin of Dulwich, L.
John-Mackie, L.	Simon, V.
Kearton. L.	Simon of Glaisdale. L.
Kennet, L.	Stallard, L.
Kilmarnock. L.	Stedman. B. [Teller.]
Kirkhill. L.	Stewart of Fulham. L.
Leatherland, L.	Strabolgi. L.
Listowel, E.	Taylor of Blackburn, L.
Llewelyn-Davies of Hastoe, B.	Tordoff, L.
Lloyd of Hampstead, L.	Underhill, L.
Lloyd of Kilgerran, L.	Wallace of Coslany. L.
Lockwood, B.	Wigoder, L.
McCarthy, L.	Williams of Elvel, L.
McNair, L.
NOT-CONTENTS
Ailesbury, M.	Gibson-Watt, L.
Aldington, L.	Gormanston, V.
Alexander of Tunis, E.	Greenway. L.
Allenby of Megiddo, V.	Gridley, L.
Auckland. L.	Grimthorpe, L.
Beaverbrook. L.	Hailsham of Saint Marylebone. L.
Belhaven and Stenton, L.
Bellwin, L.	Halsbury, E.
Beloff, L.	Harmar-Nicholls. L.
Belstead, L.	Hesketh, L.
Bessborough, E.	Hives, L.
Biddulph, L.	Home of the Hirsel, L.
Blyth. L.	Hood, V.
Borthwick, L.	Hooper, B.
Boyd-Carpenter, L.	Hylton-Foster, B.
Brabazon of Tara, L.	Inglewood, L.
Brougham and Vaux, L.	Kaberry of Adel, L.
Broxbourne, L.	Killearn, L.
Butterworth, L.	Kimball. L.
Byron, L.	Kinloss, Ly.
Caccia, L.	Kinnaird, L.
Caithness, E.	Kinnoull, E.
Cameron of Lochbroom, L.	Lane-Fox, B.
Campbell of Alloway, L.	Lauderdale, E.
Campbell of Croy, L.	Layton, L.
Carnegy of Lour, B.	Lloyd-George of Dwyfor, E.
Carnock, L.	Lovat, L.
Chalfont, L.	Manchester, D.
Chelwood, L.	Margadale, L.
Cottesloe, L.	Marley, L.
Craigton, L.	Merrivale, L.
Cullen of Ashbourne, L.	Mersey, V.
Davidson, V. [Teller.]	Middleton, L.
De Freyne, L.	Milverton, L.
Denham, L. [Teller.]	Molson, L.
Dormer, L.	Morris, L.
Dundee, E.	Mottistone, L.
Eccles, V.	Munster, E.
Effingham, E.	Murton of Lindisfarne, L.
Ellenborough, L.	Nugent of Guildford, L.
Elliot of Harwood. B.	Orr-Ewing, L.
Elton, L.	Pender, L.
Erroll of Hale, L.	Portland, D.
Fanshawe of Richmond, L.	Quinton, L.
Gainford, L.	Reay. L.

Renton, L.	Strange, B.
Richardson, L.	Strathcarron, L.
Romnev, E.	Sudeley, L.
Roskill, L.	Terrington, L.
St. Aldwyn, E.	Teviot, L.
Saint Oswald, L.	Tranmire, L.
Sanderson of Bowden, L.	Trefgarne, L.
Sandford, L.	Vaux of Harrowden, L
Sandys, L.	Vickers, B.
Schon, L.	Ward of Witley, V.
Selkirk, E.	Whitelaw, V.
Shannon, E.	Wise, L.
Sharpies. B.	Wolfson, L.
Skelmersdale, L.	Young, B.
Stodart of Leaston, L.

Resolved in the negative, and amendment to the amendment disagreed to accordingly.

On Question, Amendment No.1 agreed to.

3.44 p.m.

Clause 4 [Validation for past and general provision for future]:

Lord Silkin of Dulwich moved Amendment No.3:

Page 5, line 16, at end insert— ("and within 28 days after the passing of this Act and thereafter after the making by a court of any such decision, the Secretary of State shall lay before Parliament a report setting out each such decision and the effect upon it of this section.").

The noble and learned Lord said: My Lords, I beg to move Amendment No, 3 and with the leave of the House will take with it Amendment No.4. These are corresponding amendments to Clause 4 and Clause 6 respectively. Your Lordships will have very clearly in your recollection the debates that we had on Clauses 4 and 6 in relation to the major point of principle in this Bill; that is, the extent of the retrospective validation provisions.

At the Committee stage, an amendment was moved to restrict fairly heavily those provisions and after a very substantial debate it was defeated by four votes. On Report, a rather less restrictive amendment was moved and discussed and that was defeated by two votes. We have resisted the temptation to secure parity by moving yet another amendment on similar lines. We have accepted that the view of the House, however narrow, is that the wider provision should be permitted, much as we regret it and wrong as we believe it to be.

But having accepted that view, we then set out on a damage limitation route. We said in circumstances where the Secretary of State has performed in the past a number of actions which may fall within the provisions of Clause 4 and Clause 6—that is to say, which, although illegal, are validated by this legislation—it must surely be right that both Parliament and local authorities should know, if not what all those actions by the Secretary of State are, at least what decisions consequent upon those actions have been made by the courts and will, by virtue of the provisions of this legislation, be upset and of no effect.

By this amendment we are seeking to ask the Secretary of State in relation to any decisions of the court which have already been made—and there cannot be any doubt whatever as to what those decisions are—to inform Parliament of those decisions within what we think is the perfectly reasonable time of 28 days from the passing of the Act, since he must be aware of the decisions and the effect of those decisions upon the validating legislation.

That will have the result that not only will Parliament be aware of what this legislation has done and be in a position in any particular case, I suppose, to debate it if it so wishes, which is right and proper, but—and perhaps in this context even more important—local authorities which are not directly concerned with a particular decision will know that the decision, in the view of the Secretary of State, is of no effect and therefore that, if they agree with the Secretary of State's view, they will be able to take no account of that decision. It must be right that local authorities should know of these matters so that they can order their steps accordingly.

Of course, in the ordinary case of legislation of this kind, it arises because a particular court decision has been made contrary to the view of the Secretary of State and it is that decision which is to be set at nought, so everybody knows where he is. Here we have a whole row of possible decisions. I do not know what they are and I am not sure whether the Minister knows what they are. For example, do they include the recent decision in the Greenwich case? I do not know. Perhaps the Minister will tell us whether that decision is one which is affected by this legislation.

The Minister stated on a previous occasion that there is either the intention to appeal or to give consideration to an appeal. If that is so, perhaps it is thought by the Secretary of State that the Greenwich decision will not be affected by the legislation. There is hardly any reason to appeal if the decision is to be set at nought in any case. I mention that because it is the kind of problem that local authorities will be involved in unless they are told clearly of the court decisions which are involved and which will be set at nought by this legislation.

The amendment deals not only with decisions taken before the passing of the Act but also with decisions made after the passing of the Act. I think that the Minister agreed with me during our discussions at Report stage that, as lawyers say, cadit quaestio in relation to those decisions, because decisions made after the passing of the Act would necessarily have regard to the legislation. Nonetheless, it is the Government's legislation which speaks of, before or after the passing of the Act". It is only for that reason that the amendment has been framed in such a way as to require the Secretary of State to inform Parliament not only of decisions which are no longer effective and which have already been taken before the Bill becomes law, but also, should there be any, of decisions taken after the passing of the Bill which are equally set at nought as a result of this legislation.

I am sure that the House will take the view that this is a very modest request which is perfectly reasonable in the circumstances. I hope that the Minister will have no hesitiation in saying that he accepts the amendment

Lord Campbell of Alloway

My Lords, this amendment, like all amendments, has to be seen in perspective. To start with, surely the decision of the court referred to in Clause 4(6) relates to a handful of outstanding cases which are in the pipeline. At most there will be perhaps a dozen, as the noble and learned Lord, Lord Silkin, has shrewdly said. We do not quite know, and for the purpose of making a short speech I shall assume that there are between half a dozen and a dozen.

By virtue of Clause 4(1), the deeming provisions apply. Therefore, what is the useful, practical purpose of this amendment? It is said that the other authorities ought to know. I agree with the noble and learned Lord; they ought to know, and that is common ground. What I cannot understand is why the Secretary of State should have to lay a report on each decision before Parliament so that other authorities will know. After all, there are law reports and there is the press. One can get a transcript of a High Court judgment. I am not trying to be difficult or to take small points. However, I do not see the necessity or the logic of the reasoning.

Furthermore, why should Parliament, including your Lordships' House, be concerned with any report of such cases. I am not sure whether in the circumstances parliamentary procedures are apt or requisite. Why should the Secretary of State have all the trouble of laying a report? It is not simply a question of the trouble to the Secretary of State. Your Lordships may, well think—I do not know—that it is not appropriate for the Secretary of State to lay before Parliament and to advise Parliament on questions of mixed fact and law, for such would, in effect, be the result.

Lord Silkin of Dulwich

My Lords, I am obliged to the noble Lord for giving way. Surely it must be the province of the Secretary of State to inform Parliament and local authorities of his view. That view will dictate the question of whether in future he will oppose the decision of the court on the ground of "no effect".

Lord Campbell of Alloway

My Lords, I am grateful to the noble and learned Lord. I approached this cautiously because he was of course a Law Officer. I said: "Your Lordships may well think". I have some doubts about that, because I suggest for the consideration of the noble and learned Lord and your Lordships that it does not lie within the province of the Secretary of State to interpret or expand upon any decision of the judiciary by any means such as a report to Parliament. If Parliament seeks advice, I always thought that that would lie within the province of the Law Officers who advise the House objectively without wearing the hat of whichever party it may be.

I find it difficult, as your Lordships will have understood, to discern the purpose of the amendment. The useful purpose and the justification for it is not understood. So far as I am aware, although your Lordships may know otherwise, it creates an extraor-dinary precedent of questionable value, applicable only to a mere handful of cases.

Perhaps I may knock the constitutional issue on the head once and for all. As the noble and learned Lord, Lord Silkin, so objectively accepts and has accepted throughout the Committee stage, the Report stage and again today, there is no constitutional issue unless Clause 4(1) is too widely drafted. I am very grateful to the noble and learned Lord for taking the point and nodding. That is the way that the debate has run between these Benches and noble Lords opposite. It is the crossfire from the Cross-Benches which has confused the order of the debate. Ignoring that crossfire and taking the point of the noble and learned Lord, Lord Silkin, who has felt all the way through as he feels today on the straight, objective and totally reasonable constitutional issue, and taking the point that that issue has now been lost (albeit by a narrow margin) and that the House has decided that Clause 4(1) is not too widely drafted, there is no constitutional issue.

Lord Denning

My Lords, I should like to support the amendment. I take the simple instance of a judge in a court of first instance who gives a decision and who is overruled by the Court of Appeal. The law is then known to all and the reasons have been given by the judge of first instance. Everyone knows the reasons why it has been overruled. The same reasoning applies here. A decision is given by a judge on the law as he understands it and on the facts as he understands them.

By this Act that decision will be rendered inoperative for reasons not previously disclosed. Is it not right that the reasons his decision is inoperative should be recorded and made known? It is perfectly simple to lay the report before Parliament. It is no trouble to anybody. It is simply like the record of a Court of Appeal reasoning. I support the amendment.

4 p.m.

Lord Harmar-Nicholls

My Lords, I do not think that it is as simple as the noble and learned Lord suggests. If the Minister was committed to making a report of his decisions, it would have to be done as a report with all the paraphernalia within departments that goes with a report. I do not think it is as simple as the noble and learned Lord suggests and in most cases it would put an unnecessary burden on the department that had to do it.

I intervene in what is usually a lawyers' argument because I recognise this amendment as a ploy. It is a ploy as old as the hills and as old as Parliament itself. One would accept everything the noble and learned Lord, Lord Silkin, has said if this stood alone and if there were no ways of finding out the reasons for a report and what was behind a decision. I would agree with him if it stood alone and there was no way of getting at it. But this is being passed within the parameters of Parliament itself and all the powers are there—Question Time, special debates and opportunities for interested Members to have contact with the Minister in a way that always has to be answered in detail. The noble and learned Lord argued that it is right that it should be known how the decision has been arrived at, but instead of formalising it in the form of a report it is already within the parameters of the parliamentary procedures, about which we all know and which have been operating for a long time.

The noble and learned Lord and I sat in another place for a good many years. Such an amendment would not usually come up on Third Reading there. Generally speaking, to try to pretend that something stands separate and alone and ignore all other safeguards which Parliament and its procedures already provide is not looking at the matter correctly. If there were an obligation to put in these reports I do not think it would be as simple and as inexpensive as was suggested by the noble and learned Lord who has just sat down.

Lord Skelmersdale

My Lords, we seem to be becoming a little emotional this afternoon in this Chamber. A "con" was the word used on the last amendment; a "ploy", says my noble friend. Perhaps I may try to be a little more rational and say that in my hands I hold a report. It is commonly known as Hansard. It is of course the House of Lords Official Report. In answer to the noble and learned Lord, Lord Silkin, to whom I listened with great care when he moved his amendment—and I have to say that for the first time I have understood what noble Lords opposite are getting at in proposing it—I remind the House of what I said on 23rd February last, at col. 78 of the Official Report of the Report stage of this Bill. I said that the Greenwich multiplier case, is about a future decision which the Bill does not validate at all". We all make great play of the Official Report in this House. We use it as a work of reference that is always current. If that report is not read and understood both by ourselves and by our miscellaneous advisers, what hope is there for any other report such as the one which we are being asked to consider in these two amendments?

The noble and learned Lord wants Parliament to know about any decisions of the court which are overridden by Clause 4(1) and Clause 6, and what effect those clauses have on the working, or the making, as it says in the amendment, of those decisions. It may be helpful therefore if I explain again what Clause 4(6) and Clause 6(4) actually do. It is important to bear in mind that Clause 4(1) and Clause 6(1) to (3) only validate certain things done before the passing of the Bill. The noble and learned Lord said that he was tempted to have another crack at validation but decided that this was not (dare I use the word?) proper. Anyway, for whatever reason, he has admitted that he decided not to do it today.

Those clauses do not validate anything done after the passing of this Bill. We have also explained that if a court hears a case before the passing of this Bill, the correct course is for it to ignore the provisions of the Bill and to judge the case on the existing law. That is what has happened in the Islington and Greenwich cases which the Government have conceded on the basis of the existing law because of the total expenditure problem, and that is why the Government are in the process of conceding the case brought by South Yorkshire Passenger Transport Association.

However, once the Bill receives Royal Assent it will be an Act and the courts will have to take it into account in reaching their decisions and give effect to its provisions. The reason for the reference to court decisions after the passing of the Act, a matter about which the noble and learned Lord, Lord Denning, asked, in Clause 4(6) and Clause 6(4) was to deal with the remote possibility of a decision being given after the passing of the Bill in a case which was argued fully before the passing of the Bill and therefore did not and could not take account of the provisions of the Bill. It was to complete, if you like, the validation exercise which we have discussed at such length over previous stages of the Bill.

The purpose of Clause 4(6) and Clause 6(4) was therefore to make it absolutely clear that things declared ultra vires in cases such as those in Greenwich or Islington were to be validated by the provisions of Clause 4(1) and Clause 6(1) to 6(3). We did not want to leave scope for argument about this. But I stress again that future decisions are not affected by the Bill and that after Royal Assent a court will take account of the provisions of the Bill and give effect to them in the normal way.

I must echo the question of my noble friend Lord Campbell of Alloway to the noble and learned Lord, Lord Silkin. What would this report, or, if there were more than one, these reports, do? I do not know of any court decisions in rate support grant cases at the moment which are contrary to Clause 4(1). Nor do I expect any to be heard before Royal Assent. I do not expect any to be heard after Royal Assent to be contrary to Clause 4(1) because they will have to take account of the provisions of the Bill—the validation provisions.

In relation to Clause 6(4), we already know about the Greenwich, Islington and South Yorkshire Passenger Transport Association cases. We have already discussed them in detail and at length. I cannot see what purpose any report mentioning them would have. Again, I do not expect any other cases to be heard before Royal Assent. Any cases heard after Royal Assent will not be contrary to Clause 6(1) to 6(3) because they will take into account the provisions of the Bill. I ask again; what purpose would such a report serve? Parliament could do nothing about it.

Finally, I suggest that there is an important point to make about the report to which the noble and learned Lord has referred. He asked the Secretary of State to set out the effect on each decision of Clause 4(1) or Clause 6(1) to 6(3), as the case may be. It is not—I agree with my noble friend Lord Campbell—for the Secretary of State to declare the effect of his legislation on such decisions. It is for the courts themselves to do this. This Bill, like any other, will be interpreted by the courts. If there is argument, it is for them to decide the effect of its provisions. I do not consider therefore that it is at all appropriate to require the Secretary of State to report to Parliament on the effect of the provisions of a particular decision taken in a particular court. For all those reasons I urge the noble and learned Lord to withdraw the amendment.

Lord Silkin of Dulwich

My Lords, I certainly do not intend to do that and I have no doubt that we shall want to test the matter. I was asked: what is the purpose of the report? The noble Lord, Lord Harmar-Nicholls, made the process of a report by the Secretary of State sound a little like passing legislation through all stages of Parliament. The Secretary of State is perfectly well aware today which cases being heard in the courts he regards as being made ineffective or partly ineffective. There may be a few more cases between now and the passing of the Act, but in all probability there will not be. If a judge made more than one finding it is possible that one of the findings would be ineffective as a result of this legislation and other findings would be effective.

All that we are asking is not some great departmental farrago but something which I should hope is within the powers of the Department of the Environment without having to correct itself a fortnight later; that is, to set out case one, case two and case three and the view that the Secretary of State will be following in relation to those cases: for example, that this case is wholly ineffective, the next case is ineffective except to the extent of a particular matter which is not affected by this legislation, and the other case is not affected at all. That is so simple that it is difficult for me to understand why such a tremendous fuss is being made.

I have been asked what advantage will be served. It will involve local authorities who are directly affected and who, in any case, might be privately informed; but much more important it will serve to make others, who will know of such cases as the Greenwich and Islington cases mentioned by the noble Lord, aware of what are the Secretary of State's views with regard to the future of those cases. It is nothing more than that.

It will also make Parliament aware, and if Parliament takes a view that raises a question of principle we will be able to raise that question. The only reason for the report to Parliament is that that is the most convenient way of doing it. It is absurd for the Minister to ask: what is Parliament's concern? If he can suggest some other way of accomplishing the same objective, well and good; but he seemed to object altogether to the whole idea of the Secretary of State coming out into the open and saying, "This is the view that I take on certain cases which the courts have already heard". It makes one suspicious that there may be something behind this when the Minister rejects a very simple, innocent and modest suggestion which we have made for the purpose of improving the way in which a difficult Act will be administered in the future. It is not in any sense what the noble Lord, Lord Harmar-Nicholls, referred to as a ploy, if indeed I understand what that term means; and I am not sure that 1 do.

We believe this matter should be put to the test of whether the House is prepared to incorporate into the Bill an improvement which will do no more than allow people affected in one way, directly or indirectly, to know where they stand in the future. It is nothing more than that.

4.13 p.m.

On Question, Whether the said amendment (No.3) shall be agreed to?

Their Lordships divided: Contents, 98; Not-Contents, 119.

DIVISION No.2
CONTENTS
Airedale, L.	Birk, B.
Amherst, E.	Blease, L.
Ardwick, L.	Blyton, L.
Attlee, E.	Bonham-Carter. L.
Aylestone, L.	Boston of Faversham, L
Banks. L.	Bottomley, L.

Brockway, L.	Leatherland. L.
Brooks of Temorfa, L.	Listowel. E.
Bruce of Donington. L.	Llewclyn-Davies of Hastoe, B
Caradon, L.	Lloyd of Kilgerran, L.
Carmichael of Kelvingrove, L.	Lockwood. B.
Cledwyn of Penrhos, L.	McCarthy, L.
Cudlipp, L.	McGregor of Durris. L.
David, B.	McNair. L.
Davies of Penrhys, L.	Mayhew, L.
Dean of Beswick, L.	Mishcon, L.
Denning, L.	Molloy, L.
Diamond, L.	Morton of Shuna, L.
Donaldson of Kingsbridge, L.	Nicol, B.
Elwyn-Jones, L.	Northficld, L.
Ewart-Biggs, B.	Oram, L.
Ezra, L.	Phillips, B.
Falkland, V.	Pitt of Hampstead, L.
Fisher of Rednal, B.	Ponsonby of Shulbrede, L. [Teller.]
Fitt, L.
Fletcher, L.	Prys-Davies, L.
Foot, L.	Rathcreedan, L.
Gallacher, L.	Rea, L.
Galpern, L.	Reilly, L.
Gladwyn, L.	Rugby, L.
Glenamara, L.	Sainsbury, L.
Graham of Edmonton, L.	Seear, B.
Greenway, L.	Serota, B.
Grimond, L.	Shepherd, L.
Hampton, L.	Silkin of Dulwich, L.
Hanworth, V.	Simon, V.
Harris of Greenwich, L.	Stallard, L.
Hatch of Lusby, I.	Stedman, B. [Teller.]
Henniker, L.	Stewart of Fulham, L.
Heycock, L.	Stoddart of Swindon, L.
Houghton of Sowerby, L.	Strabolgi, L.
Hunt, L.	Taylor of Blackburn, L.
Hutchinson of Lullington, L.	Tavlor of Mansfield, L.
Irving of Dartford, L.	Tordoff, L.
Jeger, B.	Underhill, L.
Jenkins of Putney, L.	Wallace of Coslany, L.
Kearton, L.	Whaddon, L.
Kennet. L.	Wigoder, L.
Kilmarnock, L.	Williams of Elvel, L.
Kirkhill, L.
NOT-CONTENTS
Alexander of Tunis, E.	Ellenborough, L.
Allenby of Megiddo, V.	Elliot of Harwood, B.
Auckland, L.	Elton, L.
Beaverbrook, L.	Erne, E.
Beloff, L.	Faithfull, B.
Belstead, L.	Gainford, L.
Bessborough, E.	Gibson-Watt, L.
Biddulph, L.	Gormanston, V.
Blyth, L.	Gray of Contin, L.
Borthwick, L.	Gridley, L.
Boyd-Carpenter, L.	Grimthorpe, L.
Brabazon of Tara, L.	Hailsham of Saint Marylebone, L.
Brougham and Vaux, L.
Broxbourne, L.	Halsbury, E.
Bruce-Gardyne, L.	Harmar-Nicholls, L.
Butterworth, L.	Hesketh, L.
Byron, L.	Hives, L.
Caithness, E.	Home of the Hirsel, L.
Cameron of Lochbroom, L.	Hood, V.
Campbell of Alloway, L.	Hooper, B.
Campbell of Croy, L.	Hylton-Foster, B.
Carnegy of Lour, B.	Ilchester, E.
Carnock, L.	Inglewood, L.
Chalfont, L.	Ingrow, L.
Chelwood, L.	Kaberry of Adel, L.
Cottesloe, L.	Killearn, L.
Crawshaw, L.	Kimball, L.
Cullen of Ashbourne, L.	Kinloss, Ly.
Davidson, V. [Teller.]	Kinnaird, L.
De Freyne, L.	Lane-Fox, B.
Denham, L. [Teller.]	Lauderdale, E.
Drumalbyn, L.	Layton, L.
Dundee, E.	Lindsey and Abingdon, E.
Eccles, V.	Lloyd of Hampstead, L.
Eden of Winton, L.	Lloyd-George of Dwyfor, E.

Long. V.	Sanderson of Bowden, L
Vlargadale. L.	Sandford, L.
Vtarley. L.	Sandys, L.
Vterrivale, L.	Selkirk, E.
Mersey. V.	Shannon, E.
Middleton, L.	Sharpies, B.
Vlilverton, L.	Skelmersdale, L.
Vlontagu of Beaulieu, L.	Slim, V.
VIorris, L.	Somers, L.
Vlottistone, L.	Stodart of Leaston, L.
Mowbray and Stourton, L.	Strathcarron. L.
Vlunster. E.	Sudeley, L.
Vlurton of Lindisfarne, L.	Terrington, L.
Slathan. L.	Teviot, L.
Nugent of Guildford, L.	Teynham, L.
Orr-Ewing, L.	Torrington, V.
Portland, D.	Tranmire. L.
Quinton, L.	Vaux of Harrowden, L.
Reay, L.	Vickers, B.
Renton, L.	Ward of Witley, V.
Richardson, L.	Westbury, L.
Romney, E.	Whitelaw, V.
St. Aldwyn, E.	Wolfson. L.
Saint Oswald. L.	Wyatt of Weeford, L.
Salisbury, M.	Young, B.

Resolved in the negative, and amendment disagreed to accordingly.

4.20 p.m.

Clause 6 [Validation of past acts]:

[Amendment No.4 not moved.]

Clause 7 [Restrictions on rating and precepting]:

Lord Skelmersdale moved Amendment No.5:

Page 6. line 39, leave out ("and").

The noble Lord said: My Lords, I trust that it will be convenient to the House if I speak also to Amendments Nos. 6, 9, 10, 12, 13, 14, 17, 18, 19 and 20. The major amendments, Nos. 9, 10, 12, 13, 14, 17, 18, 19 and 20, are all to Schedule 2 of the Bill. They either fulfil the undertaking that I gave at Report stage to bring forward an amendment to the formula for determining rate limits for newly selected authorities or are minor drafting amendments in the light of the helpful amendment to Schedule 2 brought forward by my noble friend Lord Renton at Report stage.

Amendments Nos. 5 and 6 affect Clause 7 and are consequential on the amendments to the formula in Schedule 2. As I explained on Report, in the light of the information available to us, including the matters which the noble and learned Lord, Lord Elwyn-Jones, brought to the attention of the House, we concluded that the formula for determining the limits for newly selected authorities should be amended so as to give such authorities headroom to spend up to at least a level equivalent to their grant related expenditure plus 9 per cent. I undertook to bring forward an amendment for newly selected authorities for which the figure of grant related expenditure GRE x 1.09 exceeds expenditure limit EL x 1.02, so that the formula then in paragraph 2(2) of Schedule 2 would apply with the addition of an R factor.

Amendment No.14, together with consequential amendments Nos. 5 and 6, would achieve that. On the basis of the current intentions of my right honourable friend the Secretary of State for the 1987–88 rate support grant settlement, these amendments would result in an increase of some 3p and 44p respectively in the intended rates for Gateshead and Newham.

The amendments in this group ensure that my noble friend's approach to the drafting of Schedule 2 is fully carried through. I am sure the House will agree that the schedule commencing with definitions and explanations of the terms in the formulae, followed by the formulae themselves, is an improvement in clarity of drafting and ease of comprehension. I am most grateful to my noble friend. I commend these amendments to the House, and I beg to move.

Lord Elwyn-Jones

My Lords, I am most grateful to the noble Lord, Lord Skelmersdale, for these amendments. To say that I understand them fully and clearly would be a gross exaggeration, but I understand the purport of them to be beneficial in particular to the areas of Newham and Gateshead. There have been useful discussions, if I may say so, and it is gratifying that they have borne some fruit. The amendments that the Minister has brought forward will remove the anomalous position in which Newham in particular was adversely placed compared with other rate-capped authorities by the Bill's original proposals. It is a very harassed area and I know that this improvement will give some comfort to those who would otherwise have been anomalously and adversely affected.

Lord Renton

My Lords, I leave aside the amendments that follow from the valuable represent-ations made by the noble and learned Lord during the earlier stages of the Bill. I should like just to refer to the general function of your Lordships' House as illustrated by what has happened to this schedule. That function is a divided one. I moved certain amendments, which had the support of both sides of your Lordships' House, in order to improve the understanding of the second schedule but, being a mere Back-Bencher and not a draftsman, all that I could do was to move the fundamentals. I realised that there would have to be some tidying up by the Government. That has been done and I am grateful to my noble friend, who has shown an open mind on this matter. I think that your Lordships' House can justly claim that on this very complicated matter it has performed its function well as a revising Chamber.

Baroness David

My Lords, I want to make just one comment about these amendments as they affect Newham and Gateshead. I am absolutely delighted that the Government have listened to the pleas of my noble and learned friend and that there has been a change in the formula which affects Newham and Gateshead. However, the House ought to be fully aware of the fact that the amendments put forward by the Government do not mean that they are presenting more money to Newham. In fact Newham will lose grant as a result of these amendments. What will happen is that these authorities will be entitled to ask for more money from their ratepayers. They will have more to spend but the extra will be coming from the ratepayers and not from the Government. Before too big a "thank you" is given to the Government, it is important that we should all be aware of that fact.

Lord Skelmersdale

My Lords, as I moved the amendment, I think it appropriate if I parry the iron fist in the velvet glove of the noble Baroness, Lady David, that has just appeared across the Dispatch Box. The Government have provided only an upper limit for the raising of amounts of rates from individual ratepayers from the rate-capping exercise. It is entirely within the powers of the rate-capped local authorities and precept limited authorities not to spend up to that rate. If they spend the full amounts, clearly they will lose grant, but not all rate-capped authorities do so. The noble Baroness may remember the case of Newcastle, which was rate-capped for the first time last year. Newcastle had a head limit and managed to levy a rate well under it.

Lord Somers

My Lords, there is one final matter that I should like to raise. I think that those mysterious initials are comprehensible to most people who read the Bill but they may not be understood by all. Would it be a good thing if a translation of them were given in the clause which includes the other definitions?

Lord Skelmersdale

My Lords, with the leave of the House, perhaps I may say that when the noble Lord actually sees the Bill he will find that each of the—I was going to say "anachronisms" but that is the wrong word—acronyms in the Bill are defined. I think that that will solve his problem.

On Question, amendment agreed to.

4.30 p.m.

Lord Skelmersdale moved Amendment No.6:

Page 6, line 43, at end insert ("and (d) the amount which in accordance with that Schedule he estimates as DBG in relation to the authority (in a case where DBG is a component of the maximum limit in relation to the authority).".

The noble Lord said: My Lords, I beg to move.

On Question, amendment agreed to.

Baroness Davidmoved Amendment No.7:

After Clause 8, insert the following new clause: ("Compensation to Authorities. .—The Secretary of State shall reimburse a local authority for—

1. (a) any additional expenditure incurred or expenditure rendered abortive by it as a consequence of the provisions of this Act:
2. (b)expenditure incurred by it as a result of any change between 14th January 1987 and the laying of the report under section 7(5) of this Act in the information provided by the Secretary of State in connection with the calculation and determination of block grants to that authority.").

The noble Baroness said: My Lords, this new clause, with a consequential amendment to Clause 15, is intended to raise issues relating to compensation of authorities left unresolved at Report stage. Amendment No.17 then raised practical instances of extra expenditure incurred during the Bill's passage. Amendment No.8 sought to raise the issues of principle. This new clause is intended to provide for compensation wherever it arises under the Bill.

At Report stage Amendment No.8 sought to provide for compensation to authorities which had incurred extra expenditure as a result of the retrospective provisions relating to accountancy practice under Clause 5. The Opposition made it clear that the costs were likely to have been small but that the principle was nonetheless an important one.

The Minister left the position unclear. He said that Clause 5 would not mean that authorities would need to undertake expensive re-presentation of their accounts. That is accepted. However, it does not rule out the possibility of some costs. Furthermore, the Minister added an intriguing rider (at col. 753 of the Official Report) when he said that, although he understood the intention of the amendments to provide compensation, this certainly is not the right place to put them". In other words, he appeared to concede that there was a possible role for compensation provisions in the Bill.

My noble and learned friend Lord Silkin raised the question of possible extra cost arising from the retrospective validation provisions in Clauses 4 and 6. The Minister did not answer this point other than to say that the amendment before the House did not refer to these clauses.

Amendment No.17 at Report raised the issue of compensation for authorities which have incurred cost as a result of the DoE's revision of the 1987–88 block grant figures. The date of 14th January in the amendment refers to the day after the letter issued by the DoE on 13th January 1987 which announced the Secretary of State's firm intentions for the 1987–88 RSG settlement. In speaking to the amendment I drew the attention to the administrative chaos caused by the DoE's revision of local authorities probable grant entitlements for 1987–88 which were notified to the authorities in a letter posted 23rd February. I gave some examples of the difficulties and inconvenience caused to a number of authorities—Hounslow, Sunderland on behalf of the Tyne and Wear fire and civil defence authority and Newcastle.

Precepting authorities have to issue their precepts by 10th March—that is, today. Therefore, at the present time the information on which they base their precepts will have to be in accordance with the latest informa-tion from the DoE. This information might be changed before the RSG report and the notice required under Clause 7(5). The Minister in reply, having stated (in col. 768) that he did not accept that some authorities might have to convene extra meetings, corrected himself in respect of Tyne and Wear fire and civil defence authority.

This new clause therefore seeks to deal with the overall question of compensation and to ensure that ratepayers do not suffer further cost arising from the mistakes of a Government who claim to be committed to curbing public spending. I beg to move.

Lord Skelmersdale

My Lords, these amendments seek to introduce a new clause into the Bill which would require my right honourable friend to make payments to local authorities by way of reimbursement for either additional expenditure incurred or expenditure rendered abortive by the Bill or for expenditure incurred as a result of any change we have made to my right honourable friend's intentions for the forthcoming rate support grant settlement as announced on 13th January. I hope that the noble Baroness will agree with me at this point that I have the position right so far.

On report we had two debates on the question of my right honourable friend reimbursing—compensating was the term used at that stage by noble Lords opposite—local authorities for additional cost arising from certain provisions of the Bill or from changes to the firm intentions. I said then that I believed the amendments to provide for such compensatory payments which the noble Baroness, Lady David, had moved were wrong in principle and unnecessary. I have listened to the debate this afternoon but I am afraid that I have not been persuaded to change my views. The single fact is that if local authorities have incurred additional costs because of the Bill or because of changes to the firm intentions—I accept that in some cases such costs have indeed arisen, albeit small for the most part—these costs have been incurred by authorities exercising their own responsibilities towards which it would be quite wrong for central government to make any specific contributions.

At the root of these amendments I detect two propositions. both of which I believe to be false. The first is that the Bill and the changes to the firm intentions have resulted in local authorities having to act in ways which they would otherwise not have contemplated and having to incur considerable extra costs to their ratepayers as a result. The Bill is all about maintaining the status quo. and I do not accept that what we are doing is causing significant changes to the way in which local authorities run their accounting systems and calculate their figures of relevant and total expenditure. Perhaps I may remind the House that the rate fund revenue accounts that we are requiring authorities to keep will be very similar to, if not the same as, the non-statutory accounts authorities have in general kept in the past. Clause 2(3) of the Bill provides that the practices to be followed by authorities are those which were applicable to authorities' accounts—and here I quote from the Bill— kept by local authorities for the year beginning in 1986 for the entry of items of the same kind as those falling to be entered in rate fund revenue accounts, but taking into account variations of practice occurring from time to time". The Bill should not cause material additional expenditure.

On the changes to the firm intentions we very much regret the inconvenience that they have caused local authorities, as I made clear at Report stage. The changes are unwelcome, but we cannot go so far as to say that these changes are requiring local authorities to act in a way which no one could have contemplated. The charges simply do not warrant us making the payments which the amendments would require.

I have read today about Brighton. That is a local authority which reportedly spent 10 hours last Friday fixing a rate and is having to repeat the exercise. The changes to the firm intention were announced last Thursday, and last Thursday also the noble and learned Lord, Lord Elwyn-Jones was putting forward an amendment to the formula in Schedule 2 to the Bill which would have affected Brighton's rate limit as well as Gateshead's and Newham's. On Thursday noble Lords opposite were clearly contemplating the possibility of changing Brighton's limit and on Thursday we announced the changes to the firm intentions. The changes to the firm intentions involved reducing Brighton's intended rate limit by 0.01p in the pound; the amendment of the noble and learned Lord would have increased the intended limit by 0.3p. In short, regrettable though they are, the changes we have made have not resulted in authorities having to act in ways no one contemplated.

I remind the House that it was not only Brighton's intended rate limit which noble Lords opposite were seeking to change. They were seeking to change the limits for the 20 rate-capped authorities and for the 20 precept limited authorities referred to in Schedule 2 of the Bill. These are not just a few changes, but a gargantuan number—no fewer than 40, which I regard as a gargantuan number. I am sorry to disappoint the noble Baroness, Lady Fisher, but I do so regard them. As I said last Thursday on Report the changes have not remotely required authorities to rethink their budgets to any significant degree.

I said that I detected two false propositions underlying these amendments. The second is that the whole saga of the total expenditure problem which has necessitated the Bill and of the 1987–88 rate support grant settlement has been viewed by noble Lords opposite in black and white terms with government as villain and local government as blameless hero manfully bearing the burdens arising from the actions of a guilty government.

The real world is simply not like that. I accept that we made some minor errors in the firm intentions. I have on behalf of the Government regretted them. But as to the changes arising from the Greenwich court case, should we have planned on the basis that we would lose the case? The firm intentions for the settlement were based on a proposal that we would correct the error which I would point out to the House involves assuming that Bromley did not inherit responsibility for any roads from the GLC, whereas obviously they did. My right honourable friend is appealing against the judgment, but in the meantime it is only right that we should submit to the ruling of the court.

I am not seeking to apportion blame or to say that some how all this is local government's fault. Rather what I have said demonstrates the futility of any approach which involves seeking out guilty parties who should be made to pay. There is no question of bad faith. Government and local government together have found, themselves in a situation where neither would want to be. This regrettably has caused inconvenience, and difficulties, to both. But there is no case for one party trying to shift its burdens on to the other.

At the outset I said these amendments were wrong in principle and unnecessary. I hope I have demonstrated to the House why this is so and I recommend the House to reject the amendments.

Baroness David

My Lords. I think the Minister does protest too much! I am glad that he now admits that there have been difficulties and inconveniences to the local authorities. There have been various statements—on 13th January, 23rd February and then on 5th March. There have been constant changes, and although the blame may not be entirely on one side (it very seldom is) in these cases it is local government which has suffered because of the actions of central government, the Department of the Environment and the Secretary of State.

Last time I pointed out a number of cases in which there was real inconvenience to local authorities when extra meetings had to be called which incurred extra costs—for example, in attendance fees for councillors. I hope that I have made the Minister understand. I think from the length of his reply that perhaps he does understand that there have been many difficulties caused by these changes. The rates are still not set and cannot be set until the Rate Support Grant Report is made after this Bill becomes an Act.

Local authorities have had a lot of trouble to put up with. I shall not press these amendments but I am glad that I moved them because it is only fair that somebody should speak up for the people who have had to suffer the inconveniences. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 15 [Expenses]:

[Amendment No.8 not moved.]

Schedule 2 [Rates: maximum limit]:

Lord Skelmersdale moved Amendments Nos. 9 and 10: Page 11. line 34, leave out from ("formula") to end of line 36 and insert ("(found in accordance with paragraph 4 below). (2) The maximum limit in relation to a designated authority shall be expressed in pence; and parts of pence shall be calculated to two decimal places only, after adding one hundredth where (apart from this subparagraph) there would be not less than one thousandth."). Page 11 line 37, leave out ("2 above") and insert ("4 below").

The noble Lord said: My Lords, I spoke to Amendments Nos. 9 and 10 with a previous amendment. I beg to move them en bloc.

On Question, amendments agreed to.

4.45 p.m.

Baroness Davidmoved Amendment No.11: Page 11, line 41, leave out sub-paragraph (3) and insert— ("(3) BG is the aggregate amount (if any) of the block grant estimated to be payable to the authority for the relevant financial year and for this purpose the effect (if any) of sections 62 and 63 of the 1980 Act (adjustments) shall be ignored.").

The noble Baroness said: My Lords, in speaking to this amendment, I should like also to speak to Amendments Nos. 15 and 16. These amendments may look formidable on the Marshalled List; but I should like to say that they are not so bad as they look. I hope that I can make the intention behind the amendments intelligible. The amendments are the direct result of the latest statement by the Secretary of State on rate support grant matters. They deal with one, perhaps unintended, effect of the Secretary of State's changes to the 1978–88 rate support grant.

On 13th January 1987 the Secretary of State gave local authorities his firm intentions for 1987–88 RSG. On 23rd February he changes these intentions as the result of: two small errors that we have discovered in the calculation". That is a quotation from a letter to chief executives from Mr. A. C. B. Ramsay of the DoE.

Then on 5th March the Secretary of State wrote to say that he was changing the block grant multipliers as a result of the recent finding in the Divisional Court. That was the Greenwich case. The result of this was to increase the block grant entitlement of some of the rate-capped authorities to whom Schedule 2 applies. But applying increased grant entitlements to the formulae in Schedule 2 means that the maximum rates go down because no change is taking place to the uplifted expenditure in the Schedule 2 algebra.

The worry for these rate-capped authorities is this. The Secretary of State has given notice of appeal against the judgment which forced him to increase the grant entitlements of authorities to whom Schedule 2 applies. What will happen if he wins? Or, what will happen if he loses and then decides to change the law to validate his original proposals for grant? It should be noted that the Secretary of State's last attempt to change the law following the victory against him in the courts became the Rate Support Grant Act 1986, which was the very cause of his downfall in the Greenwich case.

The authorities are very concerned at this uncertainty; and with this uncertainty I am sure the Minister will sympathise. They see a very high risk of their recent gains in grant being ephemeral—here today and gone tomorrow. But, they would be stuck with maximum rates on the basis of a higher grant figure. The results could be to force expenditure down below even the uplifted expenditure levels in Schedule 2.

The amendments seek to protect the authorities from these changes. They would enable the authorities to levy rates on the lowest figure for block grant variously supplied to them by the Secretary of State. The unintended cuts that would otherwise be made are significant, equivalent to a rate in thepound of 8.32p in Greenwich; 1.86 in Hackney, 1.75p in Islington, 0.63 in Lambeth, 4.37p in Lewisham, 5.53p in Tower Hamlets and smaller amounts elsewhere.

In replying to this—and I wonder whether the Minister would like to listen—can the Government deal with the following points: First, had they foreseen this result of their changing determination of block grant; secondly, even if the Government say they would wait for a supplementary report to implement any "clawing back" of the increased grant announced on 5th March, and that supplementary report would not be made until later years, would not authorities still have to cut expenditure to "balance their books" in 1987-88? Thirdly, if these amendments are technically imperfect—but if the Government accept the points that we are making—is not the only thing to do at this late stage (and the need to do it at this late stage is the Government's fault) to accept these amendments and then to amend them in the other place?

We want certainty for these authorities before they have to fix their rates for this year. If the Minister can give an assurance that the situation will not be changed in the course of the year, whatever happens to the court case, and that he will have no more legislation to validate other things, then we shall be happy. I beg to move.

The Deputy Speaker (Lord Aylestone)

I must point out that if this amendment is agreed to, I cannot call Amendments Nos. 12 and 13.

Lord Renton

My Lords, I should like to ask the noble Baroness to explain two words in her amendment because I do not think they are necessary. They are in the first line of Amendment No.11; namely, the words: "(if any)" in relation to the block grant. the aggregate amount (if any) of the block grant", Every block grant is an aggregate of its constituent parts, so every block grant must be an aggregate. Therefore, the words "(if any)" must be unnecessary.

Baroness David

My Lords, the noble Lord, Lord Renton, has me puzzled here. I am afraid I cannot answer his point. I have no adviser sitting in a Box who can give me the information I need. I am afraid I shall have to write to the noble Lord later and explain this matter.

Lord Renton

My Lords, I understand the noble Baroness's position. We have all been in that situation from time to time and I sympathise with her.

So far as concerns the amendment, the Deputy Speaker said that if this amendment was accepted he could not call Amendments Nos. 12 and 13. That would be, at least, a pity, and I should have thought really a great shame if we could not move Amendments Nos. 12 and 13 because they seem to be necessary consequentials to the exercise of amending the second schedule.

Quite apart from that, I was puzzled that this amendment was capable of being discussed at all, because I read the record of the Report stage and there does not seem to have been a firm undertaking by my noble friend Lord Skelmersdale to introduce a government amendment or to consider a further amendment on these lines. So in a sense we are not breaking new ground but we are rather stretching, as I understand it, the Report stage rules for the discussion of amendments.

Baroness David

My Lords, if the noble Lord will allow me to intervene, the reason that this amendment could not be brought before was that it arose out of the Statement made by the Secretary of State on 5th March, which was the day we had the Report stage. So this is absolutely the first opportunity to bring in an amendment which would deal with that situation.

Lord Renton ;

Yes, my Lords. I quite understand, and I am much obliged to the noble Baroness. I shall be interested to hear what my noble friend has to say about this, but on the face of it I should not have thought that the point was of significance in relation to the Bill as a whole and certainly not of sufficient importance to outweigh the disadvantage of Amendments Nos. 12 and 13 not being called.

Lord Underhill

My Lords, I should like to add a few words in support of my noble friend's amendment. I hope that when the Minister replies he will be able to deal with the three points on which my noble friend asked for definite replies from the Minister, and particularly her second point regarding supplementary reports. I am certain that my noble friend Lady Fisher will appreciate the letter that she received from the Minister, and I should like to read the last but one paragraph. The letter is dated 9th March and it states: Authorities also know that these reports". —which are supplementary reports will affect the grant paid to them in some future year—for example, we have indicated that adjustments to the block grant for 1983/84 as a result of the next 1983/84 Supplementary Report will be made in 1988/89 and will therefore affect the grant paid in that year. However, as I mentioned above, we have as yet taken no decisions on such specifications and before doing so we shall consider all the representations made to us". I wonder how many noble Lords, including myself, really understand what that means. The whole purpose of this Bill is supposed to be to clarify the situation and to help to straighten out any difficulties or misunderstandings that there may be. I wonder how a local councillor would explain the point raised by my noble friend in moving her amendments that an increased grant entitlement—that is more finance from central government—will nevertheless lead to a situation where the maximum permitted rate is lower. I wonder how the average local councillor will explain that to his electorate.

The questions which my noble friend has listed should be answered by the Minister because they are most important. She mentioned the figures of enforced cuts in rates which will be effected by some authorities. I hope that it has not been overlooked by noble Lords that the authorities to which she referred are some of the most deprived authorities with inner city problems. We are dealing with real, vital problems which affect such areas. I am certain that, whatever the Minister says in response to the amendments, he will give firm replies to the three questions posed by my noble friend.

Lord Skelmersdale

My Lords, first of all, the answer to the request of the noble Lord, Lord Underhill, is written down in Hansard for the Report stage, where I made quite clear in answer to an amendment of the noble Baroness, Lady David, exactly what effect rate support grants and supplementary reports had upon the main report and what effect all those things had on local authorities. So I do not think that there is anything obscure about it. Noble Lords, local authorities or officers or officials may wish to read that.

While I am thinking in terms of Lord Underhill's speech, perhaps I may say that the paragraph that he quoted from my letter to his noble friend Lady Fisher explained, I hope quite lucidly, exactly why my right honourable friend has decided to appeal in the Greenwich case. The law as it stands pending the appeal means that the whole supplementary report system, which is a beauty—one of the very few beauties, as I suspect I shall have cause to say a little later on, of our current rate support grant system—is totally undermined by the court's decision on that case. So of course my right honourable friend is appealing.

I must say that noble Lords opposite have used their ingenuity to the full in trying in three amendments now to change the balance in Schedule 2 in favour of the councils and against the hard-pressed ratepayers in the rate capped authorities. This group of amendments cunningly plays on our admitted feelings of regret that certain changes have had to be made to the firm intentions announced by my right honourable friend the Secretary of State on 13th January. We all know why those changes were made and I shall not rehearse the arguments again.

The noble Baroness asked me whether there would be any more changes. I cannot stand here and possibly say anything other than that I have not the faintest idea. Clearly, for reasons which I have just explained to the House, it depends on the result of the appeal in the Greenwichcase.

Baroness David

My Lords, if the Minister will allow me to intervene, surely it would be possible to say, for the benefit of the authorities which want to know what their position is when their rate really must be fixed by the end of March, that whatever the result of the case, this year there will be no change? That is really what we want to know.

Lord Skelmersdale

My Lords, as I have no crystal ball and cannot see the future, how can I possibly make a declaration on that particular score? I have no doubt that the noble Baroness knew that perfectly well when she asked me the question.

The effect of the unfortunate but regretful changes to the firm intentions were forced upon us by a mixture of decisions of the courts and incorrect information on which the calculations were based. For most authorities this effect is, as I have said on an earlier amendment, small. However, my noble friend is quite right in thinking that these amendments would totally foul up the amendment which I have just given, to general acclaim, to the noble and learned Lord, Lord Elwyn-Jones, on authorities rate capped for the first time. There is no doubt about that.

These amendments would lead to some rate bills being unnecessarily high by 4p and 5p in the pound and in the case of Greenwich over 8p in the pound. These are not burdens which should lightly be laid on those already borne by ratepayers in the areas concerned.

I suggest that the House should not forget why we have rate capping in the first place. It is to protect ratepayers from the high spending, high rating policies of a few apparently incorrigible authorities. We are quite clear that that policy must be maintained. The increased rate burdens and the spending implied by the amendments would fall in an entirely arbitrary manner which could not possibly be justified. Why should authority X receive additional spending power where it has had its grant entitlement increased because we have been prevented from correcting the Bromley error?

Some have argued that accepting these amendments is the least that we could do to offset the administrative difficulties that have been created by the changes to the Secretary of State's firm intentions since 13th January. No one is more conscious of these difficulties than the Government. We very much regret them. However, I am not convinced that a range of arbitrary increases in rate and precept limits is the right response.

The noble Baroness made the most amazing suggestion. She said that the only course to take was to accept these amendments and put the matter right in another place. By the time the Bill reaches another place, it will be another place's consideration of amendments made in your Lordships' House.

Baroness David

My Lords, I was saying that if the amendments were technically wrong, then the technicalities could be put right. I was not suggesting that the substance should be changed.

Lord Skelmersdale

I am glad to hear that, because I hope that I have explained to the House why the principle is wrong and not only the technical problems. However, even if the suggestion related to the technical problems, what an amazing idea it is. The noble Baroness obviously wants to cause more confusion to local authorities and I am glad that she withdrew her amendments on compensation which we have just now discussed. In the noble Baroness's book—according to her speeches on the subject—there would have been perfect justification for her compensation amendments.

Baroness David

My Lords, I do not think that the Minister has understood fully the complications which will ensue for some authorities as a result of the Statement made by the Secretary of State on Thursday, 5th March 1987. There will be great uncertainty and the amendments attempted to remove that.

I should like to press the amendment and test the opinion of the House. If we were to win the vote, I think that the Government could do something about Amendments Nos. 12 and 13 when they are considered in another place.

5.2 p.m.

On Question, Whether the said amendment (No.11) shall be agreed to?

Their Lordships divided: Contents, 88; Not-Contents, 118

DIVISION No.3
CONTENTS
Airedale, L.	Ewart-Biggs, B.
Ardwick, L.	Ezra, L.
Attlee, E.	Fisher of Rednal. B.
Aylestone, L.	Fitt. L.
Banks, L.	Fletcher, L.
Birk, B.	Foot, L.
Blease, L.	Gallacher, L.
Blyton, L.	Galpern, L.
Bonham-Carter. L.	Gladwyn, L.
Boston of Faversham, L.	Glenamara, L.
Broadbridge, L.	Graham of Edmonton, L.
Brockway, L.	Grimond, L.
Bruce of Donington, L.	Hampton, L.
Caradon, L.	Hanworth, V.
Carmichael of Kelvingrove, L.	Harris of Greenwich. L.
Clcdwyn of Pcnrhos, L.	Henniker, L.
David, B.	Heycock, L.
Davies of Penrhys, L.	Hooson, L.
Denington, B.	Houghton of Sowerby, L.
Diamond, L.	Hunt. L.
Donaldson of Kingsbridge, L.	Hutchinson of Lullington, L
Elwvn-Jones, L.	Irving of Dartford, L.

Jeger, B.	Ponsonby of Shulbrede, L [Teller.]
Jenkins of Putney, L.
Kagan, L.	Prys-Davies, L.
Kennet, L.	Rea, L.
Kiibracken, L.	Ross of Marnock, L.
Kilmarnock, L.	Rugby, L.
Kirkhill, L.	Seear, B.
Leatherland, L.	Serota, B.
Llewelyn-Davies of Hastoe, B	Silkin of Dulwich, L.
Lockwood, B.	Simon, V.
Longford, E.	Stallard, L.
Lovell-Davis, L.	Stedman, B.
McCarthy, L.	Stewart of Fulham, L.
McGregor of Durris, L.	Stoddart of Swindon, L.
Mackie of Benshie, L.	Strabolgi, L.
McNair, L.	Taylor of Gryfe, L.
Molloy, L.	Taylor of Mansfield, L.
Morton of Shuna, L.	Tordoff, L. [Teller.]
Mulley, L.	Underhill, L.
Nicol, B.	Wallace of Coslany, L.
Oram, L.	Whaddon, L.
Phillips, B.	Wigoder, L.
Pitt of Hampstead, L.
NOT-CONTENTS
Alexander of Tunis, E.	Ilchester, E.
Allenby of Megiddo, V.	Inglewood, L.
Ampthill, L.	Ingrow, L.
Auckland, L.	Killearn, L.
Beaverbrook, L.	Kimberley, E.
Belhaven and Stenton, L.	Kinloss, Ly.
Beloff, L.	Kinnaird, L.
Belstead, L.	Kinnoull, E.
Bessborough, E.	Lane-Fox, B.
Biddulph, L.	Lauderdale, E.
Blyth, L.	Lawrence, L.
Boardman, L.	Layton, L.
Borthwick, L.	Lindsey and Abingdon, E.
Boyd-Carpenter, L.	Lloyd of Hampstead, L.
Brabazon of Tara, L.	Long, V.
Brougham and Vaux, L.	MacLehose of Beoch, L
Broxbourne, L.	Manton, L.
Butterworth, L.	Marley, L.
Caithness, E.	Merrivale, L.
Cameron of Lochbroom, L.	Middleton, L.
Campbell of Alloway, L.	Milverton, L.
Campbell of Croy, L.	Morris, L.
Carnegy of Lour, B.	Mottistone, L.
Carnock, L.	Mowbray and Stourton, L.
Chalfont, L.	Moyne, L.
Coleraine, L.	Munster, E.
Cottesloe, L.	Murton of Lindisfarne, L.
Cowley, E.	Nugent of Guildford, L.
Craigavon, V.	Orr-Ewing, L.
Crawford and Balcarres, E.	Pender, L.
Crawshaw, L.	Portland, D.
Cunliffe, L.	Quinton, L.
Davidson, V. [Teller.]	Reay, L.
Denham, L. [Teller.]	Renton, L.
Drumalbyn, L.	Richardson, L.
Dundee, E.	Romney, E.
Eccles, V.	St. Aldwyn, E.
Eden of Winton, L.	Saint Oswald, L.
Ellenborough, L.	Salisbury, M.
Elliot of Harwood, B.	Sanderson of Bowden, L
Elliott of Morpeth, L.	Sandford, L.
Erne, E.	Sandys, L.
Faithfull, B.	Selkirk, E.
Fanshawe of Richmond, L.	Sharpies, B.
Fraser of Kilmorack, L.	Simon of Glaisdale, L.
Gainford, L.	Skelmersdale, L.
Gormanston, V.	Somers, L.
Gray of Contin, L.	Stodart of Leaston, L.
Gridley, L.	Sudeley, L.
Hailsham of Saint Marylebone, L.	Terrington, L.
	Teviot, L.
Halsburv, E.	Teynham, L.
Hesketh, L.	Torrington, V.
Hood, V.	Tranmire, L.
Hooper, B.	Trefgarne, L.
Hylton-Foster, B.	Vaux of Harrowden, L.

Vickers, B.	Wolfson, L.
Ward of Witley, V.	Wyatt of Weeford, L
Westbury, L.	Young, B.
Whitelaw, V.

Resolved in the negative, and amendment disagreed to accordingly.

5.10 p.m.

Lord Skelmersdalemoved Amendments Nos. 12 to 14. Page 11, line 43, leave out from ("year,") to ("by") in line 44 and insert ("where the estimate— (a) is made").

Page 11, line 46, leave out ("ignore") and insert ("is made without taking into account").

Page 12, line 14, at end insert— ("(7) GRE is the amount shown as grant-related expenditure in relation to the authority in the relevant Report. (8) R is the amount determined by applying the formula— ((GREx1.09)-(ELx1.02)+BG-DBG)x100/RV").

The noble Lord said: My Lords, I beg to move Amendments Nos. 12 to 14 en bloc I spoke to them with Amendment No.5.

On Question, amendments agreed to.

[Amendments Nos. 15 and 16 not moved.]

Lord Skelmersdale moved Amendments Nos. 17 to 20:

Page 12, line 29, at end insert ("3A.—(1) For the purposes of paragraph 2(8) above DBG is the aggregate of the amount (if any) of block grant which the Secretary of State estimates will be payable to the authority for the relevant financial year, where the estimate

1. (a) is made on the assumptions that the authority's total expenditure in relation to the relevant financial year is equal to GRE x 1.09, and that the gross rateable value of its area is equal to RV,
2. (b) is made by reference to the contents of the relevant Report, and
3. (c) is made without taking into account the effect (if any) of sections 62 and 63 of the 1980 Act (adjustments).

(2) For the purposes of paragraph 2(8) above and subparagraph (1) above EL, BG, RV and GRE have the same meanings as in paragraph 4 below. 3B. In this Schedule "the relevant financial year" means the financial year beginning in 1987 and "the relevant Report" means the Rate Support Grant Report for England for that financial year.").

Page 12, line 39, after ("1986") insert ("and if in the case of the authority GRE x 1.09 does not exceed EL x 1.02").

Page 12, line 41. at end insert— ("(2A) In the case of an authority actually designated by the Secretary of State (as opposed to one deemed to have been designated) the appropriate formula is, if the authority was not also designated under section 2 of the 1984 Act in relation to the financial year beginning in 1986 and if in the case of the authority GRE x 1.09 exceeds EL x 1.02— (((ELx1.02)-(BG+E))X100/RV)+T+R")

Page 13, line 9, leave out paragraphs 5 and 6.

The noble Lord said: My Lords, I beg to move Amendments Nos. 17 to 20 en bloc. I spoke to these also with Amendment No.5.

On Question, amendments agreed to.

Lord Skelmersdale

My Lords, I beg to move that this Bill do now pass.

What we have discussed in this Chamber for the past month is a Bill that no one wanted—not local authorities, not the Government, not noble Lords opposite, and, if I may be allowed a personal remark for once, not myself. We have had this Bill for one reason and one reason only; that is, to put the past practice in defining total and relevant expenditure on a firm basis and to enable that practice to continue in future on a proper legal footing. Throughout our debates in this House I believe that there has been an acceptance on all sides that a Bill of this kind has been necessary. Some have argued that the Government could have achieved this purpose by a simpler measure—would that we could!—but no one has challenged the main objectives. Indeed, they have been supported.

I think I can go further still. The approach we have adopted in the Bill—basing the definitions of relevant and total expenditure on a statutory rate fund revenue account—has never seriously been challenged. There have been substantial debates on other aspects of the Bill but not on that. Indeed, I recall that no amendments to Clause 1 of the Bill were put forward in Committee or on Report, or today.

In addition to providing for new definitions of relevant and total expenditure in future, the Bill validated my right honourable friend's past actions on rate support grant and rate limitation. This has been a major area of debate. Without going over all the arguments again, I would remind your Lordships of the circumstances which led to this Bill. My right honourable friend had received legal advice that the treatment of relevant and total expenditure which had been operated at the request of the local authority associations since 1981 was incorrect in law. So my right honourable friend did two things: first, he produced this Bill to validate his past actions—all his past actions—on rate support grant and rate limitation; secondly, he took no more decisions, and said he would take no more decisions, until he had new powers which would enable him to continue his existing treatment of relevant and total expenditure.

This was not in my view unconstitutional. You cannot afford only to validate a proportion of those things that need to be validated. We have had constant discussion as to whether it would have been right to validate only those decisions which were directly concerned with total and relevant expenditure. If I on behalf of the Government had bowed to this pressure, this House would have overturned the very purpose of this Bill, which is to give financial certainty to local authorities. Giving my right honourable friend only half a cake on validation would not have achieved that certainty. Litigation would have continued, leading sooner or later to the situation where some local authorities would have grant, which had already been paid, taken away and given to others. What a mess that would have led to. No Government could allow that to happen.

Is what we have done unconstitutional? I say again, What would be unconstitutional would be to validate decisions that had not already been taken. That would be offensive to this House, and rightly so. What we are doing is validating only those things which my right honourable friend has already done. We are not seeking to put my right honourable friend above the law. And I hope on this point at least I have persuaded the House.

There have been other areas in this Bill which the House has considered very carefully indeed. I am grateful to the noble and learned Lord, Lord Elwyn-Jones, for bringing to the attention of your Lordships the position of Newham. It was in the light of the latest information we had about newly selected authorities, including that about Newham, which led us to bring forward an amendment to the rate limit formula for the newly selected authorities. While I fear there has not been a general meeting of minds on rate and precept limitation, I am nonetheless pleased that we have occupied a little common ground in the handling of this amendment to Schedule 2 to the Bill. On Schedule 2, I am also grateful to my noble friend Lord Renton for his most helpful drafting amendments.

We have also amended Clause 2 of the Bill in relation to the power to make specifications about the kinds of expenditure and income which are of a revenue nature. The noble and learned Lord, Lord Silkin, was concerned that my right honourable friend would use his powers to override proper practices lightly. The amendment we have made will mean that my right honourable friend now has to consider what proper practices are before making specifications. This provides in statute some safeguards against any cavalier use of the power, and I would repeat yet again the undertaking I have given that we have no intention of making specifications which are contrary to generally accepted practices.

This Bill will return to another place in a better shape than it arrived here. I am grateful to the noble Baroness Lady David, the noble Lord, Lord Underhill, and the noble and learned, Lord Silkin, for the courteous and constructive contributions they have made to the debates on this Bill. We have also had some vaulable contributions from noble and learned Lords on the Cross-Benches, and I hope that in the light of all that has been said they accept that what we are doing is not unconstitutional.

The services of Lords in Waiting, and in this case the Baroness in Waiting, arc all too rarely appreciated. Not only has my noble friend Lady Hooper's shoe leather worn rather thin on this Bill, but I for one have valued her sane advice on a number of points. and like your Lordships have been made considerably wiser by her words both in the Chamber and outside it.

Returning to the Bill, it will mean that we maintain the status quo on relevant and total expenditure, and as such it is a measure very much in the interests of local government. I commend it to the House.

Moved, That the Bill do now pass.—(Lord Skelmersdale.)

Baroness David

My Lords, we have all agreed that it was essential to have a Bill to clarify the law in relation to the meaning of total and relevant expenditure so that local authorities' accounting could continue in the way it had been doing over the past six years since the 1980 Act was passed. What the Opposition has objected to is that in this Bill the Government have gone much further than that, and in their anxiety not to have further litigation and legislation they have created the most enormous umbrella to put up over the head of the Secretary of State so that he is covered for any eventuality, and freak storm, in the future. Anything done by the Secretary of State as Clause 4(1) says, before the passing of this Act … shall be deemed to have been done in compliance with those provisions". Clause 6(2) says the same.

We have had strong and distinguished support not only from the Alliance and Labour Benches but from the noble and learned Lords, Lord Denning and Lord Simon of Glaisdale, and the noble Lord, Lord Lloyd of Hampstead, and from many others on the Cross-Benches for the amendments put forward to try to improve the Bill in this respect. There were abstentions even on the Government Benches. I cannot think that the Government can have derived much satisfaction from the very narrow victories they achieved at Committee and Report stages. The argument was certainly won by the supporters of the amendments.

I must express my warm gratitude to my noble and learned friend Lord Silkin for the hard work he put in into framing those crucial amendments. In formulating them at Report stage he went a long way to meet the Government's requirements while narrowing the powers that the Bill in its present form gives to the Secretary of State. In fact, he went further than many of us liked in the hope of reaching accommodation with the Government, but to no avail.

The other part of the Bill that causes great distress and anxiety is Clause 7 and its attendant schedule, Schedule 2, dealing with the rate-capped authorities both previously and newly designated. These are authorities which have the worst problems of deprivation. It is just unfair that they should not have had the opportunity to put before the Secretary of State any changes in their financial position that have come about since the publication of the Bill on 18th December last, three months before the end of the financial year.

I am glad that the pleas of my noble and learned friend Lord Elwyn-Jones on behalf of Newham have been listened to, and the situation for that most deprived of authorities has been improved. That authority was lucky to have the persuasive voice of a former Lord Chancellor who represented it for 29 years to speak for it. But the fact is that just because of those pleas and a day's visit by the Minister for Local Government to Newham, its grant entitlement has been changed by an adjustment to the formula. I think this proves the justness of the case that Lord Kilmarnock and I presented at both Committee and Report stages about all those authorities involved. The formulae cannot work fairly for all.

My noble friend Lord Underhill gave examples of their effect on a number of authorities. We shall, I am afraid, in the course of the next financial year have plenty of evidence of what will be the effect of this rigidity on the services provided. It is the recipients of the services we are fussed about. The Government seem to give little attention to them. "The poor ratepayer", is their cry, not the poor child who cannot get into a nursery school or the old person who cannot be provided with a home help or the homeless who have to look at houses standing empty because there is no money to rehabilitate them.

I felt while we were discussing the Bill a great lack of understanding on the Government Benches of what the job of a local authority is as regards the people in the area that it covers and the wish of good councillors to do the best they can for the people they represent. We await anxiously the decision on Birmingham and the 12 other local authorities which, if the Secretary of State does not decide in their favour, may lose extensive sums because of the application of Clause 5 of the Bill. He has agreed that nothing illegal was done by those authorities. I was not quite clear what was the Minister's final response to my noble friend Lady Fisher at Report stage. I know she will say a word or two about Birmingham and I shall leave her to cope with that.

Finally, I must criticise the Government for their incompetent handling of the Bill. We agreed that we had to have a Bill, but between the Secretary of State learning definitely of the necessity for it in October and the publication of the Bill two months elapsed. He kept very quiet in all that time—until two days before First Reading—about anything being amiss at all, even though questions were put to him by my honourable friend, Dr. Cunningham.

Even after the Bill was published, a large number of amendments had to be made. We had some both in Committee and Report stage here. What shocked us greatly was that the letter of 23rd February that went out to chief executives from the DoE saying that there would be revision of local authorities' grant entitlements for 1987–88, appeared to be news to the Minister when we spoke of it on our second Committee day, 24th February, the day the chief executives received the letter. Anyway he made very light of it and said that the changes in rate and precept limits were small. I pointed out the great inconvenience and the uncertainty caused to local authorities by this late notification.

Then there was the Statement that the Secretary of State made in another place on the very afternoon we were starting Report stage, last Thursday. It was to say that, owing to Greenwich having won its court case, the rate supplement grant figures for 1986–87 and 1987–88 would have to be amended so that grant could be paid from the beginning of April. Pages of figures had been sent out to all authorities.

The Minister said that of course the Secretary of State had to respond to the judgment of the court, and that one accepts. But I must point out that Greenwich took the Secretary of State to court because the Secretary of State attempted to correct what was in his view an acknowledged error in the 1986–87 settlement which deprived some London authorities of their full grant. Greenwich did not think that there had been an error but believed that the Secretary of State had made adjustments to the disadvantage of Greenwich and to the benefit of certain Tory authorities. The whole affair has been one of maladministration and incompetence. We shall hardly get this Bill through the House before we start on the next Rate Support Grants Bill later this evening, which brings about yet another change in the way grant is distributed.

It is not the fault of the noble Lord, Lord Skelmersdale, that he has had to deal with these horrors. He has my sympathy over the timing of his arrival as Minister at the department and over the efforts he has had to make to explain and to justify the workings of his department and his Secretary of State. He has my admiration for his good humour. I should like to include the noble Baroness in that. I am grateful for the courtesy that the noble Minister has shown to me and to my colleagues in writing to us and keeping us informed. But, even so, I can express no satisfaction at the passing of this Bill, which marks one more step in the movement of power from local to central government.

Lord Renton

My Lords, this is an unusual Bill. It is a complex and difficult one, but very necessary, and I think that the noble Baroness was quite right and so were her colleagues to accept the necessity for it and to conduct the debates, as they very ably and fairly did, on the assumption that it was so.

Let us face it: mistakes were made not only in earlier legislation, but in the way that it was interpreted by the local authority associations, which were perhaps over-persuasive in getting Ministers to agree with them in what turned out to be a misinterpretation of the legislation. That seems to me to be the reality in the background of this matter. As validation had to take place, it necessarily had to be retrospective.

Two of my oldest friends in the profession (in both senses of the word "oldest") surprised me a great deal when they complained of the retrospective effect of the legislation, for it seems to me to have been inevitable. My noble and learned friend—if I may dare to call him so because he once was really so in the political sense of the word—even talked about the Minister being above the rule of law. I understand that the rule of law is and always has been subject to the sovereignty of Parliament. If Parliament gives powers to a Minister, nobody can complain that the Minister has been put above the rule of law, because Parliament has decided that he should have those powers. That, as briefly as I dare to express it, is the answer I feel it necessary to give to these highly respected noble and learned Lords.

The Opposition have played their hand zealously and with great ability, as I mentioned. I am very glad that the noble Baroness paid tribute to my noble friend Lord Skelmersdale because he has had as difficult a task as a Minister could have in steering this Bill through your Lordships' House. He has shown not only unfailing courtesy and good humour and kept his cool, but he has shown great ability in this complex matter. The tribute paid to him by the noble Baroness was well deserved.

As I said in relation to an earlier amendment, I think that the Bill is a very good example of what your Lordships' House can do on what is essentially a political matter which is bound primarily to concern the decisions and feelings of another place. But we have been able to knock this Bill into better shape and for that I think that both sides of your Lordships' House deserve to be congratulated.

5.30 p.m.

Lord Simon of Glaisdale

My Lords, on a Third Reading in your Lordships' House we generally kiss under the political mistletoe. We congratulate the Minister in charge of the Bill. We congratulate ourselves on improving the Bill and generally there is an air of self-congratulation and pleasure that a measure of importance has passed through your Lordships' House. We can genuinely congratulate the noble Lord the Minister upon his mastery of his material, upon the way he has worked at it and upon his unfailing courtesy. Those of us who intervened on the constitutional issues could only be amazed at the knowledge he had acquired of local government finance and its law. We found the noble Baroness, Lady David, although we knew her background and knowledge, equally admirable and helpful.

As for the measure itself, I cannot really believe that even those who have voted for the Government can be entirely happy at the length to which it has gone in throwing a mantle of exculpation over the acts of the Minister, not merely, as we wished to see, those derived from and connected with and pursuant to the calculations that he had to make, but also over all actions that fall under the wide provisions of what are called "relevant provisions".

I had not intended at this stage to say anything about the constitutional issues. They have been dealt with admirably by two of the greatest lawyers in this House: my noble and learned friend Lord Denning, one of the most eminent persons ever to have held the great position of Master of the Rolls, and my noble friend Lord Lloyd of Hampstead, a Quain Professor of Law. Nevertheless, I must say one word in view of what has been said by the noble Lord, Lord Renton. He suggested that it could not be said that the rule of law had been breached because the Minister had been given power under the undoubted sovereignty of Parliament.

That is a most dangerous doctrine. The British constitution rests on a balance between executive, legislature and judiciary. I cannot believe that the noble Lord has forgotten his own denunciations of the "Henry VIII" clauses. If we give a Minister absolute power to emancipate himself from the control of the courts, we are flouting the constitution. My noble and learned friend and my noble friend were undoubtedly right in that respect. I say again, with all respect to the noble Lord—and I was touched that he referred to our old friendship—that it is most dangerous doctrine. It is constitutionally damnable doctrine.

As I say, I had not intended to deal with the constitutional side. I wanted to say a word about the origin of this trouble that we have had: that is, the drafting of the 1980 Act. I was alarmed the other day to hear a Minister—the noble Lord, Lord Belstead, who is held in universal respect—go out of his way to pay a tribute to the way parliamentary draftsmen do their job. I think he used the word "impeccable". It was some such word, but in any case it was inappropriate and extravagant. The 1980 Act was drafted in such a way that a government could be persuaded that it had meant something contrary to what had been intended and that it could reasonably bear that meaning.

The Renton Committee started their serious consideration of the criticism as follows: Our terms of reference imply a widespread concern that much of our statute law lacks simplicity and clarity. One could hardly have got a better example than the 1980 Act, on which the Government could be persuaded by the local authorities that it meant something different from what they originally thought it meant.

I also note that earlier the Renton Report said this: We must add that little can be done to improve the quality of legislation unless those concerned in the process are willing to modify some of their most cherished habits". There is not the smallest sign of that at the moment. Indeed things are, if anything, getting worse. I remember introducing the discussion of this report to your Lordships' House before we had the benefit of the presence of the noble Lord, Lord Renton. I remember that my noble and learned friend Lord Elwyn-Jones was then Lord Chancellor, and of course his congratulations to the committee were felicitous, his tones (as ever) were mellifluous, his diction was (as always) perfect; but anybody experienced in government could hear through it all the thud of entrenching tools in Whitehall.

And so it has proved. One need not go very far back. In the Child Abduction Act, which was passed in order to implement an international convention, the convention was conveniently set out in the schedule, less one article, Article 20. It was admitted by my noble and learned friend the Lord Chancellor and by the noble and learned Lord the Lord Advocate that that article, though omitted, was nevertheless binding on the courts and on the citizen, and would be applied. Why was it not in? It was because it did not fit in with the style of drafting on which parliamentary counsel continue to insist, in defiance of the recommendations of the Renton Committee.

Last Session we considered the Shops Bill. At the instance of the very supporters of the Bill, a whole schedule had to go back for redrafting because it was perfectly incomprehensible. At the end of the Session your Lordships were faced with the Financial Services Bill, and a very experienced noble Lord who I see present today, having held several senior departmental offices, described it to me as "a horror". Your Lordships will remember the protest made at its being introduced in an almost incomprehensible form and having to be virtually rewritten at the very end of the Session in which the House had been brought back a fortnight earlier to deal with it. My own view is that we are unlikely to get any improvement until a Bill such as that is thrown out at Second Reading purely on its drafting, and there is time for it to be brought back in a comprehensible form.

There is only one more thing to say. It is not purely the draftsmen. Behind them lies the Legislation Committee of the Cabinet, and obviously it is not doing its job if incomprehensible legislation, which is an affront to the plea for clarity and brevity made by the Renton Committee, continues to be brought before your Lordships. The Legislation Committee performs no useful function unless it examines the various measures brought before it from a technical point of view and in sufficient time to send them back for redrafting, if they are the sort of measures with which your Lordships have lately been affronted.

I am sorry to have mostly had to say disagreeable things about this Bill and what lies behind it, but I comfort myself by saying that the personalities who have been concerned in this Bill—principally the Minister, but also the noble Baroness and the noble and learned Lord on the Front Bench—are some redemption of what otherwise I cannot but regard as an arrogation of bureaucratic authority.

Lord Campbell of Alloway

My Lords, having been involved in the constitutional issue, and really only on that issue, of the Bill it would be churlish not to wish to acknowledge the most helpful and objective way in which the noble and learned Lord, Lord Silkin, presented his arguments for the Opposition. I say that with total sincerity, having known him since before the war when we were together in the same college at Cambridge. I should also like to congratulate my noble friend the Minister on holding steady under fire from all sides of the House.

I want to make a point on behalf of the Government and those noble Lords of the Opposition who agree with me on the constitutional issue. There is no question, notwithstanding what the noble and learned Lord, Lord Simon of Glaisdale, has just said, of flouting the constitution. There is, notwithstanding what the noble and learned Lord has just said, no damnable constitutional doctrine. At Committee stage the noble and learned Lord, Lord Denning, stigmatised Clause 4(1) as unconstitutional. He charged the Government with putting the executive and the Secretary of State above the law. On Report, it was again said that Clause 4 was unconstitutional, going behind the courts of law and the rule of law.

The noble and learned Lord, Lord Simon of Glaisdale, in a powerful speech in which we were reminded of Bacon and the judges sitting as lions on the throne, and of Coke with the insistence upon the function of the judiciary to curb the abuses of the executive, questioned, as he questions today and has questioned throughout, the basis of Clause 4(1) as eroding the rule of law on which our liberties as individuals depend. He reminded us in this context of Crichel Down. All those considerations—with the utmost respect to the noble and learned Lord—are wholly wide of the mark, for here we are concerned with a situation where the executive admit their error. They assuredly did not in Crichel Down.

Secondly, the extent of the error by common consent cannot be readily established because the very principles are in doubt. As a result of the error, true, some ratepayers may have gained a financial advantage—the individual aspect—and others may have suffered a disadvantage. But this could only be assessed by some form of complex litigation which in fact merges in adjustments to be made one way or another in favour of local authorities. The individual, the executive, Crichel Down—what on earth has that, with respect, to do with this situation? And it is the very width and variety of things that can be done under Part VI of the Act, as was accepted by the noble and learned Lord, Lord Denning, that make it impossible and impracticable to mount a judicial inquiry into the myriad borderline cases—to what end, to what profit, to what individual advantage as regards an abuse of executive power which could affect the individual?

The Government, in seeking retrospective legislation validating provisions for admitted error in administrative matters going back to 1981 which cannot be established in the courts, breach no established convention unless the validating provisions were too widely drafted. Your Lordships have decided that they were not. The only issue at stake, as recognised so fairly, frankly and typically throughout by the noble and learned Lord, Lord Silkin of Dulwich, was whether Clause 4(1) was too widely drafted. That was the basis upon which the noble Lord, Lord Lloyd of Hampstead, presented his views to your Lordships' House. It was the basis which attracted the attention of my noble friend Lord Aldington. But it is not the basis which has attracted the attention of noble and learned Lords on the Cross-Benches.

Your Lordships' decision that Clause 4(1) was not too widely drafted leaves rhetoric about the rule of law and the constitution wide of the mark, and the status of the judiciary as guardians of our individual liberties against abuse of executive power assuredly has not been slighted by this Government. The rule of law has not been called in question by this Government. There has been no breach of constitutional propriety by this Government and no evil precedent, as suggested by the noble and learned Lord, Lord Simon of Glaisdale, has been set or would be set, I suggest, by this Government.

5.45 p.m.

Baroness Fisher of Rednal

My Lords, the noble Lord, Lord Skelmersdale, began by saying that the Bill was to put past practice on a firm footing and to enable that to continue on a proper legal footing. I do not think we would disagree with that. I was going to speak about the complexity of the Bill, but after listening to the great speech which the noble and learned Lord, Lord Simon of Glaisdale, has made I feel sure that he has spelt out quite clearly the complexities and the need for better understanding of legislation. He made a comment about it being the kiss under the mistletoe season. May I say that if he puts forward any more propositions such as he did in that powerful speech, I shall be the first to come and kiss him under the mistletoe.

Lord Simon of Glaisdale

My Lords, may I say that I shall be very pleased to meet the noble Baroness on 25th December next.

Baroness Fisher of Rednal

My Lords, the noble and learned Lord, Lord Simon, will have to stand on a chair to achieve that, or I shall have to sit down. It is unfortunate that the Government have had this great need to keep on changing the grant formula. The constant changes which are taking place make it extremely difficult for local authorities to plan their services. As the noble Lord said, he does not have a crystal ball so he cannot say what will happen in the future. All we have to do is hope that for a period of time there will be some standstill, so that local authorities can look again at the figures and make sure that they can plan ahead. I am not sure that that will happen. I feel—and perhaps I am speaking personally here—that the Government are vindictive towards local authorities. I do not know the reason for that. The work of local authorities is laid down, in the main, by statute. All local authorities are doing in their local areas is to carry out the wishes of the Government. As my noble friend Baroness David has said, what we have been talking about in this Bill are abstract formulae which are often expressed in convoluted language. However, what we are really concerned with is financing to carry out services for people. That is what this Bill is all about. Some local authorities, perhaps including Birmingham, felt that certain services were very necessary and needed to be carried out. It is important, when we think in terms of abstract formulae, such as X and Y equals B over something or other, and minus something else, to realise that all that means is services which can be provided. That is not an abstract way of looking at matters.

I have' mentioned Birmingham on two or three occasions. In replying to me, the noble Lord mentioned the Report stage of this Bill on Thursday, 5th March. The noble Lord has written to me and I was quite surprised when I received his letter yesterday. He said: On reading the Official Report I fear in the event I have muddied the waters rather than shed light on the matter—for which 1 apologise—and I am writing to make the position clear". I accept that apology in the spirit in which it is made. The noble Lord then attempted to make the position clear in convoluted language. The nub of the example was that deficit financing carried out in say 1986/87 would not be covered by a specification made in 1987/88. However, it is in practice not very meaningful to speak of deficit financing 'carried out' in a particular year; an authority may include deficit financing in its accounts relating to a year, say 1986/87, but it may do this either in 1986/87 or in any later year—say 1987/88—until the accounts for 1986/87 are closed. And whilst a specification made in 1987/88 would not affect the block grant paid to an authority in say 1986/87, it could apply to a Supplementary Report in respect of 1986/87 which was made at the same time as or later than the specification and which affected grant paid in 1987/88 or some subsequent year". Now that muddied the waters; I felt that I needed to put my wellies on to get out of the bog!

I think all this bears out what the noble and learned Lord, Lord Simon, has said. While we laugh at these things, they are gobbledygook and we are not sitting here to understand gobbledygook. We are here to listen and understand statutes which are made and which have to be interpreted so that other people can understand them. It is important for us to understand that point and for the people who write letters on behalf of Ministers to understand that.

I am pleased that the noble Lord the Minister wrote to me and I thank him very much for writing. The letter was signed in his absence. However, he approved it and I hope that he does not bear any malice about it.

Before I finally sit down, I should like to say that if the Government ask local authorities to take on care in the community, such as helping people who come out of mental hospitals; if they push over to local authorities the rent rebate scheme (which the DHSS realised was costing them too much and employing too many people, and which was pushed to local authorities to put into operation); and if local authorities are expected to rehouse homeless people and the other things which they are called upon to do, then they must have money to carry out such policies. We must think of those things in passing this Bill.

I wish to pay my compliments to the Minister and to the noble Baroness, Lady Hooper, as well as to my noble friends. I am concerned that in speaking on behalf of Birmingham I was not as favoured as perhaps my noble and learned friend Lord Elwyn-Jones, who sits in front of me. I should have liked to see Birmingham included, as Newham was, in some special consideration, I look forward to that in the future.

Perhaps I may reiterate again what the noble and learned Lord, Lord Simon of Glaisdale, has said and suggest that we follow the proposals contained in the powerful speech which he has made.

Lord Pitt of Hamptead

My Lords, perhaps I also may congratulate the Minister on the skilful and relaxed way in which he has steered this Bill through your Lordships' House. It was a difficult Bill and I admire the way in which he handled it. I also join in congratulating the noble Baroness, Lady Hooper, on her part in this Bill.

At this stage I want to ask the Minister to convey to his right honourable friend the problems that the Government have created for themselves by this attempt to centralise control of local government expenditure. It is that that causes problems. Perhaps we should rethink the whole situation and go back to where we were.

When I joined the London County Council in 1961, we had grants by means of which the government paid a proportion of expenditure on each item. The proportions were agreed. They agreed that we were doing a particular act and they agreed to pay their share. We were sold the idea that if we received the grant in a block, we could use it as we wished. That was the start of the rate support grant as we know it now.

The rate support grant was subsequently used as a means of controlling expenditure by local government in terms of targets and penalties. Finally, we have reached the stage of rate-capping many boroughs. We have found that the formula being used, which is the grant-related expenditure assessment, is obviously not right. What it throws up as expenditure is the expenditure of all the deprived areas of the country. That cannot be right.

Nothing could be more illustrative of that than Newham. Newham has always been regarded as a borough which has been run effectively and efficiently. I remember that when, in 1974, I had some dealings with these matters in County Hall, and when George Boyce was told what our rate precept was going to be, he nearly beheaded me. And yet we end up by saying that Newham is a borough that needs to be kept.

I should like to suggest to the Minister that he puts to his right honourable friend that we must sit back and look at the issue again. What is required is that local authorities should have enough income to carry out the responsibilities which are laid down for them by Parliament, that as far as possible the expenditure should be local and that the local electorate should have control over those councils.

When I was at County Hall we also had annual elections for a portion of the London County Council. Those were subsequently abolished and councils were elected for four years in the same way as Parliament. Until the latter part of the last Parliament local authorities were expected to balance their budgets. If they did not they were able to make a supplementary rate. The supplementary rate was abolished. I remember saying to your Lordships that for the first time it was possible for local authorities to become bankrupt but it was all ignored.

I know what the Government's worries are. I do not pretend that I do not know what the Government's worries are. I am saying that what they have undertaken is too difficult. It is not possible for the centre to be able to control in its entirety the expenditure of local areas. What the Government should look at is how the duties of the local authorities can be balanced by an adequate income with not only the minimum of interference from the centre but also the minimum of grant. I have suggested before in your Lordships' House that local authorities should have both rates and the ability to levy a local income tax. They should be free to decide which and to what extent they will use each alternative. I have always said that there should be frequent elections so that the local electorate can control the way in which this expenditure is used.

I have taken more time than I intended to but I want the Minister to go back to his right honourable friend, whom I know well, and ask him to look at the issue all over again. We are about to pass the Bill. We hope that at least for 1987–88 all is well. We even hope that for 1988–89 all will be well. But let us realise that all is not well in the way in which matters are developing and the way in which many of the authorities are finding themselves in difficulties. This is storing up trouble for the Government. Let us see whether in fact we need to reverse our steps and reduce the extent to which we have centralised and try to make government more local.

Lord Skelmersdale

My Lords, in the past hour or so there has been enough material to keep your Lordships going for at least five Wednesday debates and therefore I think it would be inappropriate for me to respond beyond saying two things. Quite clearly I have not persuaded the noble Baroness, Lady David, and quite clearly I never shall. She spoke again about covering my right honourable friend with an umbrella from any freak storm in the future. She still has not got the point. The umbrella covers my right honourable friend from storms arising from the past.

The second point to which I should like to respond is that of the noble Lord, Lord Pitt. I agree with him that 20 years from now, if we are spared, we shall almost certainly be speaking about local government finance. I do not think he has grasped the point that the Government intend, as they have said in the Green Paper, Paving for Local Government, to have a new system of central government support for local authority expenditure. We must wait until then. I commend the Bill to your Lordships.

On Question, Bill passed, and returned to the Commons with amendments.