Local Government Finance Bill

HL Deb 04 July 1988 vol 499 cc93-138

Consideration of amendments on Report resumed. Schedule 8 [Non-domestic rating: pooling]:

Lord Hesketh moved Amendment No. 177B:

Page 126, line 3, leave out from ("above") to end of line 4 and insert— ("(1A) Such a calculation shall be made on the basis of the information before the person making the calculation at the time he makes it; but regulations under paragraph 4 above may include provision requiring a calculation under paragraph 5(2) or (3) above to be made on the basis of that information read subject to prescribed assumptions.").

The noble Lord said: My Lords, this is a straighforward, almost technical amendment. It deals with the calculation of the provisional contributions that local authorities will be required to pay into the national non-domestic rate pool during the year. These are provisional, because obviously many relevant matters, such as the level of irrecoverable losses in collection, and any changes in rateable value during the year, will not be known in advance. There will be a conclusive calculation after the end of the year; meanwhile, payments on account will be based on authorities' own estimates of the amount they will eventually have to pay into the pool.

It is obviously important that authorities should make those estimates on a consistent basis. It would not be right if one authority could effectively obtain an interest-free loan from all other authorities by deliberately underestimating its likely contribution. The Bill of course already contains, in Schedule 8 paragraph 4, power to make rules for how the contributions are to be calculated, but this does not cover the need to set consistent standards governing the method by which the provisional estimates are arrived at. This amendment fills that gap. I beg to move.

Lord Graham of Edmonton

My Lords, we can see some merit in what the Government are seeking to do, but will the Minister explain why the Government persist, throughout the Bill, to build in further complications and refinements of this kind? More scope for complications will be involved in this matter. The amendment is not as straightforward as the Minister tried to make it appear. We should like to know the riason d'être for the amendment at this late stage in the Bill. What evidence has accrued, what experience has been gained and what advice has been tendered to cause the insertion of the amendment at about the fifth opportunity in the passage of the Bill through both Houses? What has happened in the past two or three weeks to cause the amendment?

Lord Hesketh

My Lords, the noble Lord, Lord Graham of Edmonton, referred to complications and refinements. The best answer I can give is that the amendment is a refinement rather than a complication.

Lord Graham of Edmonton

My Lords, the Minister answered part of the question. What has caused the refinement to be thought necessary at this stage in the progress of the Bill? The Minister is entitled to say that all the pieces of the Bill are coming together and will fit and work better, and I would accept that. However, I am intrigued to know why, at this late stage, the Government are adding this further refinement to a requirement which will be difficult for local authorities to handle.

Lord Hesketh

My Lords, I can add little to what I said in my original description. For the benefit of the noble Lord, Lord Graham of Edmonton, I shall repeat that it is obviously important that authorities should make estimates on a consistent basis. It would not be right if one authority could effectively obtain an interest-free loan from all the other authorities by deliberately underestimating its likely contribution.

On Question, amendment agreed to.

Lord Graham of Edmonton moved Amendment No. 177C:

Page 127, line 19, at end insert— ("(6A) The Secretary of State shall inform all local authorities, the local authority associations and such other bodies as he considers appropriate of all calculations of population made under the regulations and shall take into account all representations made by such persons or bodies to him before making a final determination of population figures for use in connection with this Act.").

The noble Lord said: My Lords, I beg to move Amendment No. 177C standing in the name of my noble friend Lord McIntosh. The Minister is entitled to tell us that this is the second bite at this cherry, but we were not satisfied by what the Minister said earlier. The basis of the calculations of population is important. We wish to know whether the Government have rethought their arguments about the premises upon which the population estimate will be made. I should like to know what the Minister says before I say more. I beg to move.

The Earl of Caithness

My Lords, the purpose of the amendment moved by the noble Lord, Lord Graham of Edmonton, would be to require the Secretary of State to inform local authorities and other bodies of the calculations made under regulations which define relevant population and to take into account representations made by those bodies before making any determinations.

I apologise to the noble Lord if I did not make myself clear, or was not as helpful as I should have liked to be; but as I have explained on earlier occasions we intend that the relevant population used at a number of places in the Bill should be essentially a measure of the taxable capacity of the area concerned. As we debated last week, a number of groups of people will be excluded from liability to pay the community charge, while students will have to pay only one fifth of the amount. The figures we use for distributing grant and the NNDR must take account of that, otherwise areas with a high number of students, for example, might lose out.

The regulations will explain how that calculation is to be done. We shall be discussing the regulations with the local authority associations. There is a possibility that they will be debated. There will therefore be a full opportunity for representations to be made about the regulations which set out the way the calculation is to be done. Once the regulations are in place, the calculations under them will be a matter of arithmetic; 80 per cent. of the number of students in the area will have to be subtracted, for example. I do not think it is necessary for the Secretary of State to go through formal procedures before he makes that calculation.

I dare say that, as now, we shall send local authorities copies of all the data which is used in their grant and NNDR calculations so that they can reproduce them themselves and satisfy themselves that everything has been done correctly. In this case, I imagine that many of the figures will be provided by the local authorities themselves. They are best placed to count the number of students claiming the benefit of their partial exemption.

Lord Graham of Edmonton

My Lords, I am grateful to the Minister. He has told us that consultations will take place with the local authority associations, that the basis upon which the calculations will be made will be explained to them and that they will understand the procedure. Will the Minister tell the House now upon which basis the calculations will take place? The Minister is telling us that that is part of an ongoing consultation and refinement, and that once the regulations have been arrived at Parliament will be told in one way or the other what has been agreed.

We recognise that we cannot be precise about every detail on the face of the Bill. The Government say that the local authority associations are the right bodies with whom to discuss these matters. We are not arguing about the Bill's philosophy; we are arguing about what the Government say on the face of the Bill. If the Minister is telling us that the basis of the calculations can be influenced by the evidence that is put forward, and can assure me that he and his colleagues will be out to satisfy the local authority associations, which have a big responsibility in representing their members—the ACC, the AMA, the ALA and the ADC—I shall be satisfied that when they are satisfied the Minister will have done a satisfactory job.

I should like the Minister to help them to understand the position. The Minister understands that many of our amendments are inspired by their worries. He knows how this place works. We do not pretend to dream up ourselves every amendment that we put down.

8.30 p.m.

The Earl of Caithness

My Lords, I did not imagine that the noble Lord did.

Lord Graham of Edmonton

My Lords, illusions are shattered every night here. The Minister and I play our part to keep that process going. We are talking about equity, but we are also talking about fairness. Local authorities have a big responsibility to ensure that when the Bill becomes an Act it works. They are anxious to get it right. I am not being offensive when I ask the Minister for an assurance that the consultations which will take place will be real and earnest, and not a charade. Sadly, it is sometimes the case that on other occasions with other Ministers consultations have been a sham. I should like the Minister to give us a little more help on this matter.

The Earl of Caithness

My Lords, with the leave of the House I shall try to exemplify the position. The basis for the population figure is clear; it is the taxable capacity of the area. That will depend to some extent on your Lordships' amendments or agreement to the Bill. If the noble Lord, Lord Graham of Edmonton, were to say that he would not press any further amendments to change the taxable capacity of the area, I should be able to help him a little sooner than I am able to help him. That is the broad position. The detail as regards the best way to assess that figure is the legitimate area for discussion with local authority associations.

I cannot guarantee that they will be 100 per cent. satisfied because the AMA may want something different from the ADC. But of course we shall discuss that so that we reach the right and fair balance which, I am sure, is in the interests of all local authorities involved, as indeed those of the Government and those who have to pay for this provision.

Lord Underhill

My Lords, can the Minister tell the House what is meant by the taxable capacity of an area? I am sure that many of us would like to know precisely what is meant by that. Although there is provision here to notify each charging authority of the amount and the population, is there any opportunity for them to make representations?

The Earl of Caithness

My Lords, I am sorry that I have not made myself clear to the noble Lord, Lord Underhill. We have been through this matter at great length in Committee and again on this occasion. However, I shall try once again to explain the position. We are talking about the population in the area. That is the basis of the figure.

Lord Graham of Edmonton

My Lords, where will the figure come from?

The Earl of Caithness

My Lords, the figure will come from the local authorities to some extent and from the information that we have in the department. That is the basis on which the population, which is the taxable capacity of an area, is arrived at. But we then have to take into account the number of students, as a result of the amendments which were agreed earlier last week. Then the nurses have to be taken into account as well. We must take those goups into account in order to arrive at the correct figure. That is the figure that we must discuss, and the best way to discuss it is with the local authority associations.

Lord Graham of Edmonton

My Lords, do I understand that taxable capacity relates to population'? Is it the number of heads or portions of heads upon which the tax shall be levied? Therefore, we are down to being satisfied that the population figure is an acceptable basis. The Minister may recall that earlier we were arguing about the up-date validity of the census of population figures, and when that comes into effect. As we all know, quite apart from the inner London areas or the inner city areas, some dramatic changes are caused by shifts of population. Basildon, Harlow and Stepney and other areas have grown quite dramatically. We understand that syndrome. Is the Minister telling us that, as near as possible, there will be an attempt to seek satisfaction from the people who represent those populations, and that the basis of the figure is fair even though it is bound to fluctuate from the time that the Minister sets the figure based upon whatever decisions have been taken and whoever is included or excluded?

If we consider the London borough of Enfield where I live, the population figure will be based upon a census which is adjusted each year as the town hall seeks to bring its electoral register up to date. That occurs on 10th September.

Is the Minister telling us that the taxable capacity will be based upon the best means of satisfying the authorities that the population is, as near as makes no difference, the right one and is up to date? The Minister will understand that we are talking about a number of situations which may occur where people will be a part of the population but will seek to avoid going on to the register.

We have already discussed the situation of people who leave home in order to avoid the community charge. But situations will occur where the taxable capacity will be affected in one area or another, depending upon what the Minister may call the wilful refusal or the avoidance of people going on to the register. This is the last time that I ask the Minister to help me in this respect. He has been very helpful so far in everything that he has said.

The Earl of Caithness

My Lords, I hope that I shall explain for the last time that the taxable basis will be the number of people liable to pay the community charge. As I have said before, this is where the consultation with local authorities is the best way of defining that, taking into account the very valid points that the noble Lord has raised.

Lord Graham of Edmonton

My Lords, the very valid points that the noble Lord has raised is as good a peg as I shall get upon which to beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The Earl of Caithness moved Amendment No. 178: After Clause 58 insert the following new clause:

("Death

(1) The Secretary of State may make such regulations as he sees fit to deal with any case where a person dies and at any time before his death he was (or is alleged to have been) subject to a non-domestic rate.

(2) Nothing in the following provisions of this section shall prejudice the generality of subsection (I) above.

(3) The regulations may provide that where before his death a sum has become payable by the deceased but has not been paid his executor or administrator shall be liable to pay the sum and may deduct out of the assets and effects of the deceased any payments made (or to be made).

(4) The regulations may provide that where before his death a sum in excess of his liability has been paid (whether the excess arises because of his death or otherwise) and has not been repaid or credited his executor or administrator shall be entitled to the sum.

(5) The regulations may provide for the recovery of any sum which is payable under the regulations and is not paid.

(6) The regulations may provide that proceedings (whether by way of appeal under regulations under section 51 above or otherwise) may be instituted, continued or withdrawn by the deceased's executor or administrator.").

On Question, amendment agreed to.

Schedule 9 [Non-domestic rating: administration]:

Lord Hesketh moved Amendment No. 179: Page 130, line 16, leave out ("including") and insert ("which may include").

On Question, amendment agreed to.

Lord Hesketh moved Amendments Nos. 180 to 184 en bloc: Page 130, line 20, leave out ("payments on account may") and insert ("in prescribed circumstances payments on account must"). Page 130, line 22, leave out ("may") and insert ("must"). Page 130, line 37, leave out ("within a prescribed period beginning with") and insert ("on the day after the end of a prescribed period which begins with the day of). Page 130, line 41, at end insert— ("(3) Any reference in this paragraph to a payment on account of an amount is to any payment (whether interim, final or sole) in respect of the amount."). Page 130, line 49, at end insert— ("(cc) allowing a bankruptcy petition to be presented.").

On Question, amendments agreed to.

[Amendment No. 185 not moved.]

Clause 59 [Hereditaments]:

[Amendments Nos. 186 and 187 not moved.]

Lord Hesketh moved Amendment No. 188: Page 34, line 30, leave out subsection (10).

On Question, amendment agreed to.

Clause 60 [Owners and Occupiers]:

[Amendment No. 189 not moved.]

Clause 61 [Domestic property]:

Lord McIntosh of Haringey moved Amendment No. 189A: Page 35, line 44, leave out ("or").

The noble Lord said: My Lords, some noble Lords will recall that this was a matter which caused some astonishment in Committee when it became apparent that there could be a quite new imposition on those who used a spare bedroom for occasional bed-and-breakfast use. It was not at all clear at that stage whether the tourist industry had been properly consulted.

At that time it was not clear at what level of use there would be the possibility of a non-domestic rate being added to the community charge for those who provided that very valuable service. I believe that I referred at the time to the fact that this was not the only example of a possible difficulty. Another very major example is the case of child minders who use a front room of their house for the very valuable purpose of minding children for mothers who go out to work. They may do that for a limited number of days a year, and they may only provide a service for a very limited number of children. The noble Lord, Lord Glenarthur, promised at that stage to write to me very quickly and he was good enough to do so on 15th June. I am grateful for that response.

Having considered the matter, I thought that it was as well to put down our amendments. I have no doubt that they will be faulted in drafting terms. However, the issue is important. There should be a de minimis provision for child minders, bed and breakfast accommodation and so on to avoid the spectre of community charge registration officers or non-domestic rating registration officers (if that is the correct term) rushing around the country looking for bed and breakfast signs in handwriting rather than those which are printed, and spying on children arriving at homes at 9 o'clock in the morning rather than leaving them in the hope of finding a transgression.

The two amendments specify the principal use of accommodation as living accommodation and the Secretary of State is given the opportunity to prescribe in regulations a level which will be the maximum level to provide a service such as child minding or accommodation for persons whose sole or main residence is elsewhere. This simple amendment is in line with thinking that the Government have acknowledged on other issues. It recognises both business and social realities. I hope that the amendments will commend themselves to the Government. I beg to move.

Lord Stanley of Alderley

My Lords, I believe that I put up this hare originally and it ran faster than I expected, helped by the noble Lord, Lord McIntosh, and my noble friend.

I have also received a copy of the letter which my noble friend wrote to the noble Lord on this matter. I am grateful for the information that it contained and particularly, as I understand it, that the Government intend to treat bed and breakfast accommodation in a de minimis way. I am rather frightened of using that term since my noble friend Lord Renton has pulled it apart. However, he is not present in the Chamber to give me a Latin lesson.

I am glad to learn that de minimis uses will not attract a national non-domestic rate. However, I am still at a loss as to how the Government intend to treat holiday accommodation—either self-catering flats or houses. Your Lordships may remember that at Committee stage we proposed that such accommodation should be dealt with under the national non-domestic rate. I hope that my noble friend will be able to give me an assurance tonight that that will happen when the regulations are published.

I accept that, as always, there may be a grey area as to what is a holiday let. Therefore, I ask my noble friend whether, before the regulations are published, his department will consult and give due weight to the views of the tourist associations and other interested parties, including the farming organisations. Perhaps my noble friend will be prepared to say that the Government recognise the importance of holiday lets as alternative sources of income in rural areas, expecially as food production is often frowned upon today.

The Earl of Caithness

My Lords, I am glad that the noble Lord, Lord McIntosh, has tabled these amendments because they give me an opportunity to place on record a decision which the Government have taken following the debate in Committee on 13th June. Your Lordships may recall the noble Baroness, Lady Stedman, asked my noble friend Lord Glenarthur how a house would be treated under the new system if part of it was used on a casual basis to provide bed and breakfast accommodation to holidaymakers. My noble friend replied, quite correctly of course, that bed and breakfast accommodation should be subject to non-domestic rating. This led to what I think I might fairly describe as a minor storm of protest from, among others, the noble Lord, Lord McIntosh, and my noble friend Lord Jenkin of Roding. They made the point rather forcefully, that it makes no sense to attempt to rate domestic property which is used on a very casual basis for a non-domestic purpose.

As a result of that debate, we took a very careful look at the issues at stake. Our conclusions were set out in a letter dated 22nd June to the noble Lord, Lord McIntosh, copies of which I have placed in the Library. For the benefit of those members of your Lordships' House who have not seen a copy, I should like to summarise what I said. I do not believe there is any disagreement in principle between the Government and the noble Lord, Lord McIntosh, on the treatment of bed and breakfast accommodation. A house which is given over for the whole of the summer to the provision of bed and breakfast accommodation to holidaymakers clearly ought to be subject to non-domestic rating, just as a hotel will be rated. It would lead to quite unfair competition if we were simply to exempt holiday bed and breakfast accommodation from rating.

I think it is clear therefore that the concerns expressed in Committee rest not so much on a point of principle as on practical and administrative considerations. The crux of the argument is that it would not make good administrative sense to attempt to bring within non-domestic rating one or two rooms in a private house which are offered as bed and breakfast accommodation for very short periods. As I have explained to the noble Lord in my letter, this is a view, which is shared by the Government. It has never been our intention that the de minimis use of domestic property to provide bed and breakfast accommodation should lead to that property being asessed for non-domestic rating. We have taken the view that, in practice, such properties would escape rating just as they currently escape classification as non-domestic property and therefore retain the benefit of domestic rate relief.

Having reconsidered this question in the light of the concerns expressed in Committee we have reached the conclusion that it would be preferable not to rely on the expectation, however well-founded, that these properties will simply slip through the net. We believe it would be clearer and fairer to provide expressly that where the use of domestic property for a non-domestic purpose does not materially detract from the domestic use, that should not result in that property being rated. We shall be able to give effect to this decision by use of the order-making power in Clause 61(9). Before making an order we shall consult the local authority associations and representatives of the tourist industry.

I hope that, in the light of these very clear assurances, the noble Lord, Lord McIntosh, will agree to withdraw his amendments. His amendments mention only two non-domestic uses—childminding and bed and breakfast—whereas I am sure he will agree we ought to cover all small-scale non-domestic uses. I appreciate that he would prefer to have the matter dealt with expressly on the face of the Bill; but in fact his own amendments reflect the fact that it will be necessary to make regulations in order to specify the level of non-domestic use which should be disregarded. This is simply not a matter which can be dealt with immediately without consultation with all the interested parties.

My noble friend Lord Stanley of Alderley has returned to a question that he first raised at Committee stage; namely, the treatment of holiday-let self-catering accomodation. As my noble friend Lord Glenarthur explained in Committee, the treatment of this kind of accommodation is far from being easy or clear cut. We are concerned with property which, on the one hand, is used for the purposes of living accommodation and would normally be domestic, but which on the other hand is run as a business and arguably, like other business premises, should pay the national non-domestic rate. As my noble friend Lord Glenarthur, also explained, the position is further complicated by the fact that many self-catering properties are let to holidaymakers during the summer and to more permanent guests during the winter.

In view of the difficult issues at stake, my noble friend Lord Glenarthur indicated that the Government had not yet taken a final decision on whether self-catering accommodation should be treated as domestic property and subject to the standard community charge, or as non-domestic property and subject to rating. My noble friend Lord Stanley quite understandably pressed for a decision to be taken by Report stage. As a result the Government have given considerable further thought to the issue, and I am therefore in a position to announce our decision in principle on the treatment of holiday-let self-catering accommodation.

Our decision is that such accommodation should, in principle, be treated as non-domestic property and should therefore remain in non-domestic rating. I know that is a decision which will be welcomed by my noble friend and by others who spoke on this issue at an earlier stage, including my noble friend Lord Radnor. We shall give effect to this decision by use of the order-making power in Clause 61(9) of the Bill.

I should, however, add two qualifications to what I have just said. The first is that property which is used to provide holiday let accommodation for only part of the year will not necessarily remain in rating for the whole of the year. For example, property let to holidaymakers in the summer and to permanent residents in the winter will be rated in the summer; but it will not be rated in the winter, because the permanent guests will pay the personal community charge.

The second qualification concerns single units of holiday let accommodation. There is a practical problem so far as these are concerned which is as yet unresolved. The problem is that, although it is relatively easy in most cases to distinguish between a block of holiday let flats and a block of residential flats, it is by no means so easy to distinguish between a cottage which is used as holiday let accommodation and a cottage which is used as a second home. This is, as I have said, a practical difficulty rather than one of principle; but it is potentially a significant one, because we do not want to oblige the valuation officer to value all second houses merely in order to catch those which are used for holiday let purposes. The Government's decision, in principle, that holiday let, self-catering accommodation should be left in rating is therefore subject to further consideration about the treatment of single unit properties.

I know that my noble friend Lord Stanley will welcome the Government's general decision on self-catering accommodation, which meets the concern he raised in Committee. I hope that he will accept that further consideration is necessary before we can reach a final decision on the one outstanding issue—the treatment of single unit self-catering accommodation.

Lord Stanley of Alderley

My Lords, with the leave of the House, I should like to thank my noble friend for that statement. I did not realise how complicated the issue was when I raised it. I am glad that in principle he accepts that those properties should be rated under the non-domestic rate. I am very grateful for his efforts and for the efforts of his department.

Lord McIntosh of Haringey

My Lords, I too should like to thank the noble Earl for his response to my amendments. I accept that on this occasion the need for additional consultation makes it more appropriate to use order-making powers rather than have this on the face of the Bill. I think that that is entirely proper. I shall withdraw my amendments on that basis with renewed thanks.

Before I do so I should like to raise an issue about child minders which I think that I should have raised earlier. I do not think that I can expect the Minister to answer now, but perhaps he will be good enough to write to me. The issue I should like to raise is that of child minders who, as self-employed people, claim an amount for their rates against their tax liability. I understand that the common practice is that they can claim one-tenth of their rent and rates liability against tax. The National Childminding Association is concerned about the risk that that might come to an end with the community charge legislation.

As I said, I do not expect the Minister to reply now. That would be quite unfair, but I should be grateful if he would write to me in due course. I am glad to see him confirming that he will. On the basis of his response, I beg leave to withdraw Amendment No. 189A.

Amendment, by leave, withdrawn.

[Amendment No. 189B not moved.]

Lord Ross of Newport moved Amendment No. 189C: Page 36, line 1, after second ("is") insert— ("(a) ").

The noble Lord said: My Lords, we spent much of the afternoon seeking concessions and exceptions in respect of charities. We were told that if those amendments had gone through it would have cost the non-domestic rate fund some £ 80 million. I am trying again with an amendment which would give some finance back to the Government. I wonder whether there has been any change in the attitude of the Department of the Environment.

It seems an extraordinary concession to exclude private residences and nursing homes from non-domestic rating. We know that the nursing homes in particular are highly profitable. That is confirmed by the enormous pressure which is put on local authorities—particularly in my part of the world—for planning consent to convert hotels into nursing homes. Vast sums of money are available for the purchase of the buildings if that consent can be obtained. It seems extraordinary that they should be excused from paying the non-domestic rate.

I shall not flog that horse a second time at any length because I have raised this issue before. However, I thought that it was worth one more attempt to see whether there had been any second thoughts.

I should also like to say that I welcome the Minister's statement on the question of holiday lets. That applies in my part of the world every bit as much as in other places. I think that the clarification on that point will be welcomed in the Isle of Wight. I beg to move.

Lord McIntosh of Haringey

My Lords, before the Minister replies, perhaps I may add my general support to the point made by the noble Lord, Lord Ross. The position which we have tried to adopt in respect of this Bill as regards those issues which concern care in the community—that is the issue of the community charge or rates status of those who might be in hospital, being cared for at home, or in a nursing home—is that so far as possible the Bill should be neutral. The provisions of the Bill should not in any way affect the medical judgment as to whether any individual is better off being cared for in a hospital or nursing home or being cared for at home.

It seems to me that the amendment of the noble Lord, Lord Ross, points to the possibility of a breach of that principle. In other words, nursing homes run for profit may appear to be attractive as an alternative to more professional care or care with a higher medical content just because the tax status and the status in respect of the community charge or the national non-domestic rate is different from what it would be if the individual were a patient in a hospital rather than a nursing home which is not run for profit. I hope that the Minister will be able to assure me that that is not the case and that in this respect—as it ought to be in all others—the Bill is medically and socially neutral and does not affect the other considerations which ought to be predominant in relation to the issue of care in the community.

The Earl of Caithness

My Lords, I am grateful to the noble Lord, Lord Ross of Newport, for raising this matter again. Notwithstanding the fact that we discussed it in Committee, I think that it is right and proper that it should be raised again because it is undoubtedly a matter of concern to the noble Lord.

We are opposed to these amendments because they breach one of the basic principles that underpin the whole Bill; the principle that non-domestic property is property which is not used as long-term living accommodation. The effect of the amendments would be that property which is clearly used as longterm living accommodation would be subject to non-domestic rating. That would be illogical.

Further, the amendments would result in properties that were used for exactly the same purpose being treated quite differently under the Bill according to the nature of the organisation by which they were run. The effect of this would be discriminatory and would increase the costs of private homes.

We also oppose the amendments because they would have the effect of taking away from those in residential care homes a benefit which the Government agreed to give when, after strong pressure from your Lordships' House during the passage of the Scottish legislation, they agreed to exempt residents of such homes from the community charge.

Contrary to what the noble Lord, Lord Ross of Newport, suggested, the amendments would serve little purpose in terms of revenue raising.Most such homes benefit at present from exemption from rates under the Rating (Disabled Persons) Act 1978. Although the original intention of the Act was not to benefit old people's homes at large, it has been interpreted in this way. If privately run residential homes were reclassified as non-domestic property and therefore subject to rating, it would be extremely hard to justify not maintaining the provisions of the 1978 Act—in other words, to justify not exempting them from rating. I am not clear whether the noble Lord is inviting us to remove that concession.

Finally, if rates were imposed, they would simply be passed on in charges to the residents of these homes, many of whom are by no means well off and some of whom will of course be receiving state benefits. Rates are a tax on property, not on profits. Like all overheads they are passed on to the customer before profit. Taxes on profits, on the other hand, are not passed on to the customer— here the resident—in increased charges. I suggest to the noble Lord that if he wants to make a tax on the profits of a company more effective, which I think was his idea, notwithstanding the fact that he said at Committee stage that most of them were very well run, the way to do it is not through the rating but through the taxation system.

Lord Ross of Newport

My Lords, I am grateful for that answer. I am still not terribly convinced by it. I admit that the concessions were given in the first instance for the highest motives. I think that they have been abused. I think the time will come when the Government will appreciate that this concession was generous and ought to be withdrawn. It certainly upsets local authorities in a very big way, particularly in my part of the world. However, I accept that this explanation has been given and there is no point in dividing the House at this stage. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 189D not moved.]

Clause 62 [Interpretation: other provisions]:

[Amendments Nos. 190 and 191 not moved.]

Clause 63 [Charging authorities affected]:

9 p.m.

The Earl of Caithness moved Amendment No. 191A: Leave out Clause 63.

The noble Earl said: My Lords, in moving this amendment I wish also to speak to Amendments Nos. 191 B to 191E inclusive, 192A to 192M inclusive, 193A and 193B, 203A to 203C inclusive, 204C, 218A and 218B, 220A, 241EA, 241EE and 241EF, 241 FK, 241 FL and 241FM, 243ZA and 243CA, 246ZB to 246ZD inclusive, 246ZF, 250A and 250B. I believe that makes 42 amendments. I start with Amendment No. 191A. Your Lordships will recall that when we considered the provisions contained in this part of the Bill during Committee stage we had a lively discussion on the merits of dual running of residual domestic rates and the community charge over a four-year period in the 10 inner London authorities. The arguments that certain of your Lordships made then for the abandonment of these provisions have since been repeated and reinforced in further representations made by a number of the authorities involved.

We have reflected long and carefully on the points made. We have noted that the authorities affected were unanimously of the view that they neither wanted nor needed the cushioning effect of dual running. We also noted that they felt that it would be very difficult for them to cope effectively with the two systems of charging, particularly in view of the other new responsibilities that they would be taking on.

In addition, it was suggested that with dual running being limited to 10 authorities, it would be difficult to recruit or buy in the skills needed to maintain residual domestic rating.

These points were by no means new to us, although the force with which they were put at this fairly late stage in the progress of the Bill came as something of a surprise. We have always accepted that more work would be involved in managing the two systems and provided extra grant for that. The case for maintaining residual rating has always been to protect the charge payer from excessive charges during the early years of the new system. The benefits of doing that have to be balanced against the kinds of problems to which I have just referred. I am pleased to say that this balance now appears to be shifting. There are signs that expenditure levels in the authorities concerned are coming down. Last week my right honourable friend the Secretary of State published new exemplifications of charge levels based on authorities' 1988–89 budgets. These showed that in all the authorities within dual running spending is going down, in some cases by quite significant amounts.

Moreover, as the noble Lord, Lord Graham, pointed out in the debate in Committee, there are signs of a new realism emerging in London local government. We have been somewhat reassured to note that a number of authorities are beginning to develop plans that will bring their spending down to more realistic levels. If present trends continue there is a prospect that these reductions will be carried through into sustainable charge levels.

In the light of that emerging picture and on the likely levels of community charge, it seems that we can respond to the insistent requests of the authorities themselves and many Members of your Lordships' House that the provisions for the dual running of domestic rates and the community charge should be dropped from the Bill. I therefore propose that we delete from the Bill Clauses 63 to 81 and Schedules 10 to 12. A number of lesser consequential amendments are required elsewhere.

In dropping these provisions so that all authorities will move straight over to the community charge in 1990, in the words of the noble Lord, Lord Hayter, in Committee, we are putting the onus squarely on the local authorities from the outset. We shall be taking a keen interest in how the community charge is implemented and the level at which it is set throughout the country, but nowhere more so than in the 10 authorities.

We believe that with prudent spending it will be possible to keep charges down to tolerable levels. However, if not, and rises get out of line, we shall be prepared to take whatever further steps are necessary to protect the charge payer.

Before I finally move the amendment, may I say what a pleasure it is to remove something from a Bill rather than add to it. I beg to move.

Lord Graham of Edmonton

My Lords, I say sincerely to the Minister that those who outside the House bring to our notice their real concerns want me to express their appreciation of what has been announced tonight. It is a great puzzle to them that, as the noble Lord has said, there is nothing new in the background or the facts. There is an impending collision inside many local authorities which are seeking to grapple with what the Minister and his colleagues have heaped upon local councils. That has been as plain as a pikestaff for the last six months.

I used the term "new realism". Part of that new realism is of the Government's own making; namely; the rate capping process—and not only that, but also the charging process which has been capped. As a consequence it was quite clear that the figures have altered upon which these various matters were judged. The facts which the noble Lord, Lord Hayter, and I brought to the Minister at Committee stage certainly made a very powerful argument, but the Minister then said no. He is now saying that there has been a steady drip from various sources until finally, very late in the day, the Government have decided not just to listen, because they have been listening all the time, but to act.

I can assure the Minister that the burden which is carried not least in the treasurers' departments of authorities—London as well as elsewhere—must have been the final argument that convinced him. I do not move among officials and treasurers but among politicians in London. They obviously try to make sure that their boroughs are run as effectively and as efficiently as possible. The way in which they could see their administration being affected as a result of the dual running, not at a political but bureaucratic and administrative level, was a nightmare indeed.

I am glad to say that the Minister and his colleagues have recognised that. Whatever the final weight that has been added, it is in the lap of the gods. We can only guess. Most, if not all, of those that were left were members of the association of London authorities. That is one burden which they have had removed from their shoulders over the next few months. They are very grateful indeed.

Lord Boyd-Carpenter

My Lords, I find myself for once in agreement with the noble Lord opposite. I am delighted to tell my noble friend how glad I am to see these proposals. From the beginning the dual system looked as though it was going to be complicated and difficult to operate and very difficult to justify in principle. It seems to me a great improvement to move straight over to the new system.

The noble Lord opposite referred, as did my noble friend, to the new realism which has assisted the provision of this amendment. I think that what is meant is that local authorities are already beginning to look more carefully at their expenditure. It is perhaps the kind of advance reaction that they are making to the proposals of the Bill. Even in advance of the Bill becoming law, they are becoming more truly accountable, and this is introducing the new realism.

I am very glad indeed that my noble friend and the Government have decided to act on this and to get out of the way this cumbrous, intermediate system and go straight over.

Lord Ross of Newport

My Lords, we on these Benches very much welcome this change of heart. The situation was too complex. I think that the Government have come to the right decision. We are delighted with the announcement that has been made this evening.

Lord McIntosh of Haringey

My Lords, I hope that it will not be thought that our support for these proposals—which has been known for a long time —implies agreement with what the noble Lord, Lord Boyd-Carpenter, has just said. The reason why rates have been coming down in certain London boroughs is rate capping. I suppose that the noble Lord is not fully aware of the effects of that.

In many parts of London very serious damage is being done to local services. There are boroughs in London which are drastically reducing their provision for nursery schools and adult education, for example. There are boroughs which are having to increase the price for services such as meals on wheels. There are certainly boroughs around the Greater London area which have been cutting out systematically, and without any educational justification, the number of teachers in each school. A loss of one, two or even more teachers per school is not uncommon. There are many important and valuable services which are being lost as a result of the cuts imposed by the rate capping process.

I should not like the word "realism" to be applied to that. I think that these are deplorable moves backwards in the provision of local authority services and should not be prayed in aid as a justification for the changes which the Government are now proposing.

Lord Boyd-Carpenter

My Lords, before the noble Lord sits down, may I say how sorry I am that he insists on attributing all the credit for the new realism to the Government and denies any of it to the local authorities.

The Earl of Caithness

My Lords, perhaps I may thank all noble Lords for the welcome that has been given to our new proposals. The noble Lord, Lord Graham, said that it was late in the day. However, better late than never. It shows that we continue to listen through to the end of the Bill. Perhaps I may say what a delight it is to have my noble friend Lord Boyd-Carpenter back on our side.

On Question, amendment agreed to.

The Deputy Speaker (Lord Strabolgi)

My Lords, does the noble Earl wish, with the leave of the House, to move the rest of the amendments en bloc?

The Earl of Caithness moved Amendments Nos. 191B to 191E:

• Leave out Clause 64.
• Leave out Clause 65.
• Leave out Clause 66.
• Leave out Clause 67.

On Question, amendments agreed to.

Clause 68 [Liability]:

[Amendment No. 192 had been withdrawn from the Marshalled List.]

The Earl of Caithness moved Amendments Nos. 192A to 192M:

• Leave out Clause 68.
• Leave out Clause 69.
• Leave out Clause 70.
• Leave out Clause 71.
• Leave out Clause 72.
• Leave out Clause 73.
• Leave out Clause 74.
• Leave out Clause 75.
• Leave out Clause 76.
• Leave out Schedule 10.
• Leave out Schedule 11.
• Leave out Clause 77.

On Question, amendments agreed to.

[Amendment No. 193 had been withdrawn from the Marshalled List.]

The Earl of Caithness moved Amendments Nos. 193A and 193B:

• Leave out Clause 78.
• Leave out Clause 79.

On Question, amendments agreed to.

[Amendment No. 194 had been withdrawn from the Marshalled List.]

Schedule 12 [Residual rating: administration]:

[Amendments Nos. 195 to 200 had been withdrawn from the Marshalled List.]

[Amendment No. 201 not moved.]

[Amendments Nos. 202 and 203 had been withdrawn from the Marshalled List.]

The Earl of Caithness moved Amendments Nos. 203A to 203C:

• Leave out Schedule 12.
• Leave out Clause 80.
• Leave out Clause 81.

On Question, amendments agreed to.

Clause 84 [General and special expenses]:

The Earl of Caithness moved Amendment No. 204: Page 50, line 8, leave out paragraph (a).

On Question, amendment agreed to.

[Amendments Nos. 204A and 204B not moved.]

Clause 87 [Information]:

The Earl of Caithness moved Amendment No. 204C: Page 51, line 19, leave out (", 9 or 12") and insert ("or 9").

On Question, amendment agreed to.

Clause 88 [Levies]:

9.15 p.m.

Lord Underhill moved Amendment No. 205: Page 51, line 45, at end insert ("except in the case of a levy by a metropolitan county passenger transport authority:").

The noble Lord said: My Lords, this amendment is in the name of myself and the noble Lord, Lord Teviot. In moving Amendment No. 205 it may be convenient if I also speak to Amendment No. 207. As noble Lords are now aware, the Bill includes provisions for a change in precepting by passenger transport authorities to that of levying. That means that the sum requested will be billed to the district councils.

Efforts were made at the Committee stage and earlier in the Report stage to retain the precepting procedure for PTAs. That proposal was supported by noble Lords from all parts of the House. Nevertheless, the decision was contrary to what we wanted because many noble Lords had not heard the sensible arguments that had come from all sections of the House. The Bill also proposes that the Secretary of State shall be empowered by regulation to impose a maximum limit on levies.

The Transport Act 1985 gave the Secretary of State power to lay down the expenditure of each of the PTAs for a transitional period of three years. As the noble Lord, Lord Jenkin of Roding, stated in his two excellent speeches, we are still in the third year of those three transitional years. If the Bill remains as it is, that control for three years will in effect be extended indefinitely by the power of the Government or the Secretary of State to impose a maximum limit on levies which will include those of the passenger transport authorities.

On 18th December last the Secretary of State stated that 1988–89 will be the third and final year in which the amounts charged to ratepayers in metropolitan areas for their public transport will be automatically controlled. That might suggest that the amendment I am now proposing will receive the support of the Minister and his right honourable friend the Secretary of State. I pointed out at Committee stage that passenger transport authorities will now have their expenditure controlled in two ways: first, by the provision to impose a maximum limit on the PTA's levy and, secondly, the possibility of community charge capping which the Bill permits. This could cause a district council to cut down its support for transport expenditure. I emphasise as strongly as I can that this is an unacceptable degree of central government control over the expenditure of the important passenger transport authorities.

What were the Government's arguments against that amendment at Committee stage? At col. 97 of the Official Report for 13th June the noble Lord, Lord Brabazon—who I am pleased to reply to the debate this evening—said: I can assure my noble friend"— that was the noble Lord, Lord Teviot— and the Committee that we have no present intention of using this power to set limits on PTA expenditure. Indeed, we would not wish to do so except in very exceptional circumstances—both because of the very absence of a statutory mechanism for consultation and appeal. I draw attention to the reference to the absence of provision for appeal to which I shall return later.

The first amendment attempts to exempt a passenger transport authority from the provision for setting a maximum amount on a levy by a PTA. The argument of accountability is used, yet we have argued time and time again that the levy will be determined by the elected councillors appointed by their district councillors to the PTA.

The second amendment, Amendment No. 207, takes up a point made by the Minister that there is the absence of a statutory mechanism for consultation and appeal. At col. 98 on the same date the noble Lord said: I can assure him"— that again is the noble Lord, Lord Teviot— that in the remote event—and I emphasise that it is remote—of our proposing to use the power to impose a maximun on the levy, we should discuss the matter fully with the PTA concerned before final decisions were taken".

That is surely a step forward, but it is not good enough. Other local authorities have the right of appeal against determination. During the three-year provisional period the PTAs have had the right to ask for a redetermination of the pre-set level, and for the current year, five out of six PTAs accepted that right of appeal to the Secretary of State for redetermination. Therefore the present procedure would suggest that Amendment No. 207, asking for the provision to be made for the levying body to appeal to the Secretary of State against any decision he may make to impose a maximum amount on a particular PTA, is one which would appeal to the Minister.

I beg leave to move Amendment No. 205. At the same time, I hope that the points I have raised on Amendment No. 207 will be considered by the Minister.

Lord Brabazon of Tara

My Lords, I have to say that I was a little surprised to see these two amendments tabled by the noble Lord, Lord Underhill. When we debated similar amendments tabled by my noble friend Lord Teviot in Committee, I felt that I had reassured him and the Committee of our intentions with regard to the setting of maximum limits on the PTA levy.

It may assist the House if I briefly repeat now the assurances I gave to my noble friend in Committee. On the question of retaining the power to limit PTAs' levies I gave the assurance that we have no present intention of using this power to set a maximum limit of PTA expenditure. Also, I assured the Committee that we would not wish to use the power except in exceptional circumstances and that we had no intention of using it to operate a dual system of charge and levy limitation.

The noble Lord, Lord Underhill, has now tabled Amendment No. 205 to disapply the power to set a maximum for the PTAs, but I could not assure the Committee and I cannot now assure the House that we would never have cause to use the power. I repeat that it is not our present intention to do so, and it is a very remote possibility that we ever would, as we firmly believe that the change to billing will lead to increased realism in PTA budgeting. But I am sure the House will appreciate that in later years it may prove a useful power to have in reserve.

Turning to the question of a right of appeal to which the noble Lord's Amendment No. 207 refers, I assured my noble friend in Committee that were we ever to use the power to impose a maximum on the PTA levy we would discuss the matter fully with the PTA or PTAs concerned. There would be no question of simply imposing a limit without allowing the PTA a chance to present a case for a higher one. In fact, the noble Lord's amendment would provide a statutory right of appeal not only for the PTAs but for all levying bodies against the limit set on the size of their levy.

As I explained in Committee, the primary purpose of the power to set a limit on levies is to enable the replication of existing statutory limits on existing levying bodies. Many of those statutory limits are expressed in terms of the existing rating system and could not be carried into the new system without specific provision. It would not be appropriate for large numbers of such minor boards to have a statutory right of appeal. A typical levying body may have a present limit on its levy set at less than a penny in the pound. A statutory right of appeal is not only out of scale with the expenditure concerned but is also inappropriate to a simple continuation of existing limits.

I am sorry that the noble Lord, Lord Underhill, and my noble friend Lord Teviot have not found my earlier assurances to be satisfactory. I can only repeat to the House that we see the power to set a limit on the PTA levy very much as a reserve power for use in extremis, and in the remote event of our using it we should wish to discuss its application fully with the PTA concerned. I trust, therefore, that the House will accept the assurances that I have given and that they are more than adequate to meet the noble Lord's concerns.

Lord Underhill

My Lords, the difficulty of dealing with the comments made by the Minister is that they are made in such an agreeable way that they suggest everything is nice and cosy and that we need not worry at all, but it may be remembered that at the Committee stage the amendment would have cut out the provision of all maximum levies by levying bodies, whereas we are now merely wanting to except the PTAs. While it is nice to hear the Minister say there is no rush, indeed, no intention to use the reserve power, we do not know how long the present Secretary of State will be in office. Secretaries of State for Transport seem to have changed more quickly than other members of the Government. We therefore want to know about the future. If the Government have no intention of using the power, why not include the exemption of the levy on the PTA in the Bill?

The Minister says they want the levy because they believe it will make for more accountability. We have already debated this at some length. No one can convince me that councillors elected by popular vote and appointed by their district councils to be representatives on a PTA are any less accountable than under the procedure in the Bill. If the Government really thought that, there would be direct election for PTAs as happened with ILEA, which is now abolished. The councillors are elected representatives appointed by their district councils and responsible to them.

The Minister says finally that this means that all levying bodies would have the right. If his dislike of that is because some relatively small, unimportant bodies would have the right, I should like the Minister himself to bring forward a proposals that the appeal would be for PTAs only. If it is possible for a PTA to ask for a redetermination of the precept maximum applied for three years and the last year is now up, why should the opportunity for application for redetermination henceforth be continued?

We have considered carefully what the Minister said. It will be the question of appeal and redetermination that we wish to bring forward on Third Reading. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The Earl of Caithness moved Amendment No. 206: Page 52, line 8, after ("Act") insert ("(originally or by way of substitute)").

On Question, amendment agreed to.

[Amendment No. 207 not moved.]

The Earl of Caithness moved Amendment No. 207A: After Clause 88, insert the following new clause:

("Special levies.

.— (1) This section applies as regards any body—

1. (a) which has no power to levy a rate by virtue of regulations under section (Rates: power to abolish or modify) below, or
2. (b) whose power to levy a rate is modified by regulations under that section.

(2) The Secretary of State may make regulations conferring on any such body power to issue in respect of prescribed chargeable financial years and in accordance with the regulations—

1. (a) a special levy (to be so called) to such charging authority as is prescribed as regards the body concerned, or
2. (b) special levies (to be so called) to such charging authorities as are prescribed as regards the body concerned.

(3) The regulations may include provision as to the body's expenditure, or the proportion of its expenditure, which may be met from the proceeds of a special levy or special levies.

(4) The regulations may include provision—

1. (a) as to when special levies are to be issued;
2. (b) imposing a maximum limit on special levies;
3. (c) as to apportionment where a body issues special levies to more than one charging authority;
4. (d) conferring a power to issue special levies by way of substitute for others;
5. (e) as to the payment (in instalments or otherwise) of amounts in respect of which special levies are issued;
6. (f) conferring a right to interest on anything unpaid.

(5) The regulations may include provision requiring a charging authority to treat as special expenses any expenses needed to meet a special levy issued to it.

(6) The regulations may include provision—

1. (a) that a charging authority making calculations under section 109 below (originally or by way of substitute) may anticipate a special levy;
114
2. (b) as to the treatment as special expenses of amounts so anticipated;
3. (c) as to the treatment of any special levy actually issued.

(7) The regulations may include —

1. (a) provision equivalent to anything in section 35 above or in sections 82 to 86 above (subject to such modifications as the Secretary of State thinks fit);
2. (b) provision amending or adapting any provision of this Act in consequence of any provision included under subsection (5) above.").

The noble Earl said: My Lords, in moving Amendment No. 207A, I wish to speak also to Nos. 222A, 231A, 233N, 246ZA, 246ZE, 246C, 247B and 250C.

The noble Lord, Lord Ross of Newport, raised the question of Wimbledon and Putney commons early in Committee. I said that I could not quite remember what our answer would be but that I had remembered it the day before. Here is the answer. There are a number of private Acts giving various bodies the power to make a rate or levy in precept generally for the upkeep of roads, street lighting and such things as garden squares and public open spaces. These Acts rely heavily for their operation on elements of the present rating system, most commonly the use of rateable values in the valuation list as a base for levying or apportioning the charge. There is no problem where these bodies are established levying bodies. We would ensure that they would be able to issue levies under the regulations made under Clause 88. In other cases the body may currently make a rate on local residents.

While the Bill will not specifically preclude such arrangements continuing—only rates under the General Rate Act are repealed—the abolition of domestic rates means that domestic rateable values will cease to be maintained after 1st March 1990. The valuation list will therefore become progressively out of date as new dwelling houses are built and existing ones altered and demolished. Domestic rateable values will therefore become an equitable base on which to levy a rate. We therefore propose that bodies constituted under a private or local Act with a power to levy a rate should, if they so wish, be allowed to be special levying bodies. This group of amendments gives effect to that proposal.

Briefly, the effect of giving special levying body status would be to enable the body to make a levy on the appropriate charging authority or authorities in its area to cover administrative and operational expenditure. Charging authorities would recover amounts through the community charge. It will be necessary initially to consider whether special levying body status is appropriate and also what safeguards need to be included in the scheme. These may cover such items as limitations on the amount of the levy. Existing powers are often limited in this way.

There may also need to be directions as to how the charging authority is to treat the special levy for charging purposes. In circumstances where a rate is levied on non-domestic as well as domestic property it will be necessary to provide for the non-domestic rate to continue so that community charge payers do not have to bear an additional burden. Where special levying body status is considered appropriate, those bodies affected will be notified and given an opportunity to make representations about any aspect of the proposed scheme before it is made. I beg to move.

9.30 p.m.

Lord Underhill

My Lords, in broad terms we can see no objection to the proposals contained in the new clause. However, this method of financing—especially in the case of Wimbledon Commoners and other bodies—appears to be anachronistic in the light of what is supposed to be a wide-ranging reform of local government finance. It also seems strange that the House has had to wait until the Report stage before the Government have realised that such a provision must be made.

It may be helpful to ascertain from the Minister whether any of the proceeds of the non-domestic rate— which will be organised in a national pool—will be available to the bodies which formerly enjoyed part of the proceeds of the local business rate as well as the domestic rate. Can the Minister make clear whether the sum available to, for example, the Wimbledon Commoners, which is an important body, will be not less than that currently available to it?

In connection with the proposed new clause after Clause 131, can the Minister give assurances that any modifications of the powers to abolish or modify rates will not adversely affect the position of the Wimbledon Commoners?

The Earl of Caithness

My Lords, I can give the noble Lord, Lord Underhill, the assurance that he is seeking in that the revenue to be raised will not be less than is currently available to such bodies. I believe that the noble Lord highlights a valid point; namely, in dealing with private Acts there are difficulties which must be taken into account. These were by no means last-minute thoughts; they were problems which we knew had to be resolved. However, we were so busy arranging concessions to the noble Lords and other Members of your Lordships' House that it has taken rather longer than we had hoped to reach this point.

On Question, amendment agreed to.

Clause 89 [Interpretation]:

Baroness Stedman moved Amendment No. 208: Page 52, line 28, leave out ("in the application of this part to Wales,").

The noble Baroness said: My Lords, in moving this amendment I should like to speak also to Amendments Nos. 209, 219 and 220. With this group of amendments we turn to the question of revenue support grant and the non-domestic rate being paid to the district collection funds. The counties and the other precepting authorities then precept on the collection fund for their total expenditure, net of any specific grants, fees or charges. The bill that is ultimately received by the charge payer will then show one community charge for the whole of the area. This is a departure from the present procedure in England, although in Wales it will remain as it is now.

Under the proposed arrangements there is no direct link between the amount an authority spends and the composite community charge which is levied. Therefore in future a charge payer in England will not be able to see how much he is paying towards a particular authority's services; neither will he be able to judge whether he is getting value for money, nor work out what kind of impact budget decisions have had on the charge payer. This does not offer the accountability which has been widely extolled as a virtue during the passage of this Bill.

The community charge bill will be sent out by the district council in the shire areas. The responsibility for explaining the charge will lay with the district treasurer, with the result that the link of accountability between an authority and its local residents in England will be substantially weakened. This will not be the case in Wales, where the grant and the non-domestic rates will be paid direct to the relevant authorities, with those authorities precepting on the collection fund only for their net community charge. Welsh districts and counties will have their own separate community charge. If they can have it, why cannot we have it in England?

The Bill recognises that the arrangements are not as good as they might be because in exceptional circumstances, if there is a need for an additional grant to be paid at some time during the year, the Secretary of State can direct that a specific local authority may be paid an additional grant.

The Government believe that their proposals in the Bill will remove the need for disaggregation of grant between counties and districts and reduce the instability and complexity of the grant. The instabilities of the current grant system have been aggravated by the present Government over the past years by their systems of penalties, rate capping, safety nets, frequent changes in the way in which GREA is worked out and in grant recycling—and, more latterly, in even the abolition of that.

We have been told that the new grant system will be simpler and more stable; authorities will know their entitlements well in advance; and the needs assessment will be simpler and will not need to be changed so often. All I ask is that the system and arrangements for England should be the same as those which will apply in Wales. Grant and the non-domestic rate would be paid direct to all the main precepting authorities and the collection fund would remain simply to collect and distribute the community charge. We have included in it the metropolitan joint boards, the London-wide authorities and, at the moment, ILEA.

At the Committee stage we considered the format of the community charge bill. These amendments, if accepted, will enable the bill to show a much clearer relationship between an authority's spending and the community charge. Charge payers will easily be able to see which authority is accountable for which services. I beg to move.

The Earl of Caithness

My Lords, as the noble Baroness has explained, these amendments would change the basis of payment of revenue support grant and make it payable direct to the districts, counties, police authorities and fire and civil defence authorities rather than into the collection fund. This would reproduce what happens under the present grant system, and that fact alone should set the alarm bells ringing. The present system is incomprehensible, and the payment of grants to every authority plays a major part in that.

At an earlier stage in our consideration of this part of the Bill we discussed similar amendments, and I outlined the merits of the collection fund. The noble Baroness said that she would read my words and return to the matter on Report, as she has now done. I also took the opportunity to look again at what the noble Baroness said. I hope that I can deal with some of the points she raised, while trying to persuade the House that the Government's proposals are the fairest and most accountable way of dealing with the payment of grant.

The first helpful point to remember is that the payment of revenue support grant is not to help local authorities but to support the local domestic taxpayers in an area. If there were no grant and no business rates, local domestic taxpayers would have to finance all the expenditure of the authorities providing services in their area. This relationship between the taxpayer, as provider of revenue support grant, business and the charge payer is embodied in the concept of the collection fund.

As your Lordships have heard, the fund will receive grants, community charges and non-domestic rates for the area. All authorities providing services in the area will draw upon the collection fund for their reserves. The major focus will be on the actual level of spending of each authority compared with need. I believe, therefore, that this arrangement meets one of the key points made by the noble Baroness that the charge payer should be able to see what each authority is spending. That is precisely what will happen, because each authority will have to ask the fund, and hence the charge payer, for the whole of what it wants to spend.

The noble Baroness is also concerned that there should be a direct link between an authority's spending and the charge levied. We agree that that is vital to accountability and that link will be made. If charge payers see that they are being asked to pay £15 more than the national norm for spending at need, they will be able to see that this is not because of the level of business rates or because the district is getting more or less grant but but because the authorities in that area are spending £15 per adult more than they need to.

The charge demand notice will show which authorities are responsible for that £15 and the authorities will know that if they budget to spend more than their needs assessment every extra £1 will go straight on to the community charge. These amendments would require the payment of grant to each tier of authority and the Metropolitan Police, fire and civil defence authorities and other such authorities.

As I have explained, to pay grant in this way would cause several technical problems in England because of the more complex structure and the range of needs. Every stream of income which under our proposals goes into the collection fund—grant, NNDR and community charge—would have to be divided between all the authorities in an area. There are a number of ways in which that can be done, but whichever we chose it would complicate the system without achieving anything that cannot be done anyway.

Under the system proposed in the amendment, charge payers would be able to see a separate charge figure for each authority, but they will be able to see what each authority is spending more clearly under our proposals. They can compare the district charge with the county charge, but that achieves nothing since the two have different functions and provide services on a quite different scale. They can compare this year's county charge with last year's, but that alone tells them nothing. To understand the difference they would have to look at this year's overspend compared with last year's and look at the levels of grant and NNDR. However, they can do all that better under the system we have proposed. Looking at a rise of, say, £20 in a separate county charge would not show the charge payer why the increase has come about and who was responsible. He certainly could not simply conclude that the county was spending £20 a head more.

I realise that we are asking authorities and charge payers to take a different approach to accountability and assessing financial performance, but I am convinced that the key comparison in our system between the actual charge and the charge if every authority spent at need is simple and easy to understand and will enable more people to take an informed view of their local authority's performance.

We have chosen not to replicate the arrangements for Wales, as your Lordships know. Wales has only two principal tiers and there are no separate police, fire and civil defence authorities. There is a much simpler and more stable grant system which has operated relatively well. There have not been the same disagreements about needs assessments or the split of grant between tiers. In Wales, grant and NNDR will continue to go separately to county and districts, but the charge payer in Wales will receive with his charge demand information to make him aware of the same comparisons of spending per head in relation to need as will be available in England.

Your Lordships should not be surprised to find a different treatment for Wales and England in this respect. For some years Wales has operated a totally self-contained system of local government finance, which has been different from that of England. It reflects the differences of Wales and is tailored to the needs of Wales. After 1990 there will continue to be separate and different systems, and we perceive this as a virtue rather than a handicap. The noble Baroness said that all she wants is similarity between England and Wales. Some diversity of approach is surely to be welcomed when it reflects genuine local differences.

9.45 p.m.

Baroness Stedman

My Lords, the noble Lord has been very persuasive. I am still not completely convinced by his argument. I am still not sure that the charge payer will be able to see from the bill he receives exactly who is providing what and what he is paying for. In the light of having tried three times—I mentioned it at Second Reading; I had a go at the Committee stage and again now—I had better give up my "little Englander" act and withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 209 not moved.]

The Earl of Caithness moved Amendment No. 210: Page 52, line 34, leave out paragraph (c).

On Question, amendment agreed to.

[Amendment No. 211 not moved.]

Lord Teviot moved Amendment No. 211A: Page 52, line 40, after ("is") insert ("a metropolitan county passenger transport authority or").

The noble Lord said: My Lords, in moving this amendment I speak to Amendments Nos. 211B, 216, 217 and 218. The amendment to Clause 89 is to provide for revenue grants to passenger transport authorities. As PTAs are to become levying authorities as a result of this Bill, they lose their direct access to government revenue grant. At present, they are treated in the same way as any local authority. They are, in principle, eligible to receive rate support grant from central government; provided, first, their individual circumstances qualify them for grant; secondly, their spending relative to their grant related expenditure assessment stays within limits set by the Government. This grant is spent directly on public transport, in particular for support for socially necessary bus and rail services, concessionary fares, special needs transport, promotion of public transport, servicing debt on capital expenditure on investment projects. The grant cannot be diverted to other expenditures outside transport because the PTAs are single-purpose authorities.

Under the Bill as now drafted, all central government grants are paid into a collection account. If they had remained precepting authorities, the PTAs would be entitled to obtain their share of this grant, which would continue to be spent on public transport. However, as they are becoming levying authorities they will not necessarily have direct access to the collection account or to their own source of income. They will levy for the full amount of their expenditure on the districts. The districts will receive the grant but will be able to use it for any purpose they wish. Grants for public transport can be diverted to other purposes. In addition, the cost of public transport to the charge payer will appear higher than it does now because it will be the gross figure, not the figure net of grant as it is now, and will continue for other joint authorities for police and fire.

This amendment seeks to remedy this by ensuring that passenger transport authorities continue to be eligible for central government grant under the same principles or eligibility as would apply if they remained precepting authorities. Amendments Nos. 216, 217 and 218 are to Clause 101 and are designed to give the Secretary of State power to make capital grants to passenger transport authorities for public transport schemes. The Secretary of State already has the power to make grants under Section 56 of the Transport Act 1968, but the criteria that he has adopted for grants under this section are such that no PTA has yet succeeded in receiving grant.

One of the criteria adopted is that schemes must exceed £5 million in estimated cost. Thus it rules out all but the most major schemes. For example, the proposed trolley bus scheme in Bradford in West Yorkshire, which it is estimated will cost about £3 million, is ruled out.

PTAs are almost unique among public sector bodies that provide major services in that they receive no government grant towards the cost of capital schemes. This cannot be right. These amendments would restore the Secretary of State's power to give transport supplementary grant for public transport schemes in the same way that he does for highway and traffic congestion schemes.

In the debate on 20th April on public transport and traffic congestion, initiated by the noble Lord, Lord Underhill, to whom I must apologise soon, it was clear that the former has a vital role to play in the relief of traffic congestion in our towns and cities. It is therefore logical that in considering transport supplementary grant the Secretary of State should take account of public transport schemes as well as highway schemes. For example, bus stations can be an important facility in city centres in relieving congestion, particularly by removing the need for buses to lay-over on the streets, which looks fairly ghastly. One can remember the example in Hereford. The right reverend Prelate for that diocese is not present, but I am sure that he would agree if he were here. Other schemes which can make a similar contribution are interchanges and railway stations.

Finally, our major provincial cities lie in the metropolitan areas and it would be wise to give the Secretary of State this additional power to grant aid smaller public transport schemes which could nevertheless make a significant contribution to the relief of congestion. The power could be extended to cover shire counties as well if the Government felt it appropriate. This would leave Section 56 grant for major national schemes which it is designed to do. I beg to move.

Lord Underhill

My Lords, I support the various amendments moved by the noble Lord, Lord Teviot. He has covered the ground fairly extensively, but I should like to underline two or three points. First, he made the important point that passenger transport authorities were set up only to deal with transport policy, as the name implies, and therefore as single service authorities grants cannot be diverted to other purposes. We know that grants for transport purposes other than to PTAs can be diverted for other purposes. Noble Lords will recall that we have had a debate and Questions in the House about the upkeep of local roads. Highway authorities have to deal with highways and with other problems, whereas passenger transport authorities have to deal only with transport services. The amendments seek to ensure that grants are made to the PTAs.

The noble Lord also said that the amendments would restore the power of the Secretary of State to give transport supplementary grant for public transport just as he does at present for highway and traffic management schemes. The Minister will have to justify why he does not wish to give that same facility to passenger transport authorities. One of the key areas of uncertainty in the change of the PTAs to levying concerns the assessment grant for public transport.

Noble Lords may recall that we referred to the Department of Transport's consultation paper, which announced the proposed change to levying. It stated that the needs assessment would reflect the need for transport services for which the PTAs are responsible. But no reference was made in that document to capital grants, which is one of the important points made in the amendments now before the House. The way in which needs assessment has implications both for PTAs and for the finance of the individual districts is obviously paramount.

We suggest that the best possible solution is that PTAs should continue to be needs assessed and to receive revenue grants from central government. The amendments are designed to urge the Government to accept the proposal and to explain how the system of needs assessment will work. One of the big problems with this Bill is, first, that it is a devil of a problem to understand how GREA works; and, secondly, it is also important to understand how the needs assessment will work for transport services. I have great pleasure in supporting the amendments tabled in the name of the noble Lord, Lord Teviot.

Lord Brabazon of Tara

My Lords, my noble friend has put down two groups of amendments which both, in different ways, have the effect that grant would be paid direct to the passenger transport authorities.

I turn first to Amendments Nos. 211A and 211B. As my noble friend said, they would have the effect of including PTAs within the category of specified bodies. Perhaps it would be helpful to your Lordships if I were first to remind you of what these are. A specified body under subsection (4) of Clause 89 is one for which the Secretary of State may make a determination under Section 91 to pay grant. The grant paid to specified bodies is quite separate to the grant distributed to local authorities under the normal mechanisms of needs assessment. It will be paid separately, and reflects existing arrangements whereby grant is paid direct to certain bodies on the recommendation of the local authority associations.

The key point is that specified bodies are already quite precisely described in Clause 89(4) as bodies which provide services for local authorities. The PTAs' services of course are for the charge payers of the area, not for other local authorities. Let me give the House some examples of specified bodies. One is the Local Authorities Conditions of Services Advisory Board (LACSAB), which advises authorities on employment issues; another is the Local Authority Management Services and Computer Committee (LAMSAC) which provides management services advice; then there are LACOTS—the Coordination of Trading Standards—the Local Government Training Board, and several more. I think your Lordships will see that none of the bodies which are specified bodies is responsible for local authority services in a particular area, and none of them falls into the category of either charging, precepting or billing authorities. They are organisations of a quite distinct type for which special grant arrangements are appropriate.

The grant power is wholly inappropriate to the PTAs. Grant for local services, including public transport, in the metropolitan areas will be part of the normal grant arrangements for local authorities and will be paid into the collection funds at district level. My noble friend's amendment strikes at the root of this principle.

My noble friend and the noble Lord, Lord Underhill, are concerned to avoid PTA expenditure being squeezed due to pressure from the spending needs of other district services. It seems to me entirely appropriate for the individual districts whose representatives make up the PTA to make decisions on spending priorities over their entire range of services but I have little doubt that the districts will continue to attach importance to the provision of socially necessary public transport.

I can see no justification then for special grant treatment for the PTAs, and to include PTAs in the arrangements for LACSAB, LACOTS and the rest would make a nonsense out of the grant structure. If PTAs were to be paid directly, what about the English shire counties, say, or the other levying bodies? They would surely have equal claim. But to do that would be to undermine the whole grant structure of this Bill.

I now turn to my noble friend's Amendments Nos. 216, 217 and 218. These amendments would have the effect of enabling supplementary grant to be paid on public transport capital works undertaken by the passenger transport authorities. I can assure my noble friend that there is already a satisfactory power for direct grant funding of major public transport capital schemes in the PTAs' areas provided by Section 56 of the Transport Act 1968. I shall give an example. Grant may be paid, for example, to the Greater Manchester Light Rapid Transport Scheme. We have just agreed to pay grant for land and preparatory works costs.

Clauses 100 and 101 are designed to permit the continuation under the new system of the existing arrangements for paying transport supplementary grant. TSG is a 50 per cent. grant towards capital projects. In England TSG is paid only on the rolling programme of roads spending. PTAs are not unique in not receiving TSG. Shire districts do not receive the grant and nor do any other authorities in England for public transport.

Unlike the present legal basis for TSG, Section 56 grant funding is unaffected by the other provisions of the Bill and there is therefore no need to re-enact it or to amend Clause 101 in order to provide for grant aid to such schemes.

I have indicated that there are perfectly adequate systems for funding both revenue and capital expenditure on public transport in the PTA areas and I hope that on reflection my noble friend will feel able to withdraw these amendments.

10 p.m.

Lord Underhill

My Lords, before the Minister sits down and the noble Lord, Lord Teviot, replies, perhaps I may ask a question about "specified body" to which the Minister referred. When I look at Clause 89(4) I find: A specified body is any body which provides services for local authorities and is specified in regulations made by the Secretary of State under this subsection; but a body is not a specified body as regards a financial year unless the regulations specifying it are in force before the year begins". Will the Minister tell me where is the interpretation of "specified body" which he outlined to your Lordships? If the amendment proposed by my noble friend Lord Teviot were carried, the provision would read: A specified body is a metropolitan county passenger transport authority or any body which provides services for local authorities". Will the Minister explain why he rules out the amendment and where the explanation he gave of a "specified body" is mentioned in the Bill?

Lord Brabazon of Tara

My Lords, with the leave of the House, the explanation is in the words: which provides services for local authorities". These bodies provide services for local authorities. Of course the PTAs do not provide any services for local authorities.

Lord Underhill

My Lords, with the leave of the House again, does the Minister agree that with the levying proposal the PTAs will be providing transport services for local authorities? Surely that is one of the arguments.

Lord Brabazon of Tara

My Lords, with the leave of the House again, the point I was making was that they are not services to the local authorities as such; they are services to the people in the local authority areas. That is not the same thing as providing services "for the local authorities" such as the type of services I described.

Lord Teviot

My Lords, without the leave of the House, I am rather unhappy about this subject. I should like an assurance from my noble friend that the districts, which will be the levying authorities, can spend this money on transport and nothing else. If he can tell me that he has every confidence that the districts will spend the money on transport, I shall be happy, or I may have to think again.

Lord Brabazon of Tara

My Lords, with the leave of the House once more and I think for the last time, I cannot give the assurance that my noble friend seeks. As I said in my original remarks, the money goes to the districts. It is up to the districts, whose representatives make up the PTA, to make their decisions on their spending priorities over their entire range of services. However, as I said, I have little doubt that they will continue to attach importance to the provision of socially necessary public transport.

Lord Teviot

My Lords, I feel that we are in rather a cleft stick. The main amendments on this matter failed twice, both in Committee and on Report. This is not an issue on which I wish to divide the House but I have received rather an unsatisfactory answer. The hour is fairly late. However reluctant I am to do so, I shall withdraw the amendment. I feel rather wet about the whole situation, but I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 211B not moved.]

Clause 90 [Information]:

The Earl of Caithness moved Amendment No. 211C: Page 53, line 24, leave out from ("account") to end of line 26 and insert ("any other information available to him, whatever its source and whether or not obtained under a provision contained in or made under this or any other Act.").

The noble Earl said: My Lords, I shall at the same time speak to Amendments Nos. 213 and 233A. All these relate to provisions about information. Amendment No. 211C will enable the Secretary of State to take into account any information from any source, including information from representations made to him, in deciding whether to exercise his powers and how to perform his functions under Part VI of the Bill.

Amendment No. 213 relates to ILEA. It will treat ILEA as if it were to remain a precepting authority and allow the provisions of Clause 90 to apply to it before 1st April 1990. This will allow the Secretary of State to obtain information from ILEA before it is abolished under the provisions of the Education Reform Bill on 1st April 1990.

Amendment No. 233A will enable the Secretary of State to take into account information that is available to him from sources other than under the provisions of the Act, orders or regulations. This carries forward the effect of Section 8 of the Rates Act 1984 into the new system. I beg to move.

On Question, amendment agreed to.

[Amendment No. 212 had been withdrawn from the Marshalled List.]

The Earl of Caithness moved Amendment No. 213:

Page 53, line 26, at end insert— ("(5) This section shall have effect before 1 April 1990 as if after "precepting authority" in subsection (1) there were inserted "or the Inner London Education Authority".").

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

On Question, amendment agreed to.

Clause 91 [Revenue support grant]:

[Amendment No. 214 not moved.]

Lord McIntosh of Haringey moved Amendment No. 214A:

Page 53, line 36, at end insert— ("(bb) the matters to which he has had regard in determining the amount of grant to be paid to receiving authorities").

The noble Lord said: My Lords, this amendment and Amendment No. 215A to which I also wish to speak are pale imitations of the kinds of amendment that I should really like to put down about the grant system. However great the difficulty we had over the years in keeping up with the grant related expenditure assessment and the target system which the Department of the Environment imposed on local authorities, however frequently it changed and however many U-turns there were in the calculation of the grant related expenditure system, at least there was some attempt in the past to explain the basis on which grant was given to local authorities. That occurred even at a time when the percentage of local authority expenditure covered by grant was decreasing quite dramatically.

I believe that if the percentage of local authority expenditure covered by grant was the same now as it was in 1979, local authority rates would be some 20 per cent. lower than they are at the present time. That should be a sobering reflection to those who talk about the extravagance of local authorities.

But there is no attempt whatsoever in the Bill to explain on what basis the Secretary of State will set the revenue support grant. Whenever Ministers are questioned about this here or in another place, they talk about needs assessment. But even the phrase "needs assessment" cannot be found anywhere in the Bill. It is something in the minds of Ministers. We are supposed to take all of this on trust. We are supposed to believe that it is an adequate way of dealing with local authority finance and with the fact that the needs and resources of different local authorities are clearly greatly different one from another, and that therefore some national system of equalisation at the very least is going to be necessary.

That would not be so bad if it were not for the fact that the government grant and the national business tax combined will now account for some three-quarters of all local authority expenditure, with the effect that the Government will have a greater influence than local authorities on the level of poll tax. How completely arbitrary, unexplained and secretive ways of calculating grant and assessing the level of national non-domestic rate can be considered to be an improvement in accountability is quite beyond me.

Perhaps I may give an up-to-date example. Within the last month the Government have recalculated the indicative level of the poll tax for spending at a needs assessment. In 1987–88 the level was £178. In 1988–89 it is £202. That is an increase of 13 per cent. How do the Government explain that to the charge payers? How does that further accountability? The amount can go up and down without any explanation being given and without any justification being required from the Secretary of State.

The amendments that I should like to move would impose duties on the Secretary of State to set out his reasoning in detail and to be open to challenge on them. The amendments which we have put down are much more modest. In Amendment No. 214A we ask that the Secretary of State report on the matters to which he has had regard in determining the amount of grant to be paid to receiving authorities. In Amendment No. 215A we ask for the estimates that he has used in calculating the distributable amount for the year of the national non-domestic rate.

It seems to me that that is the absolute minimum of information to be required if the Secretary of State is to maintain any sort of level of accountability to local authorities and, through them, to the charge payer. Otherwise, the concept of accountability as it is put forward in the Bill is even more of a farce than I believe it to be. I beg to move.

Lord Carr of Hadley

My Lords, I hope that my noble friend the Minister will be able to give the House more specific information about how needs are to be calculated by his department. Following an earlier debate, I wrote to him about the situation in Westminster. I took Westminster as an example and I raised it in a speech which I made a week or two ago in connection with an amendment moved by my noble friend Lady Gardner of Parkes.

It is clear that the gap between what the department estimates Westminster should spend to provide what the Government call a standard service and that which Westminster is currently spending is almost, if not wholly, accounted for by a difference in educational expenditure. Westminster is currently meeting ILEA costs. I agree with the Government—as I am sure that Westminster City Council would—that when the council takes over educational services it will expect to save a substantial sum compared with what it presently pays to ILEA.

However, the basis on which the Government assess the savings concerns me. I do not believe that it will be as great as they estimate. I do not have the precise figures in mind. However, broadly speaking the Government have suggested that when Westminster City Council takes over education it will be able to reduce the cost of education per head of population by not far short of 50 per cent. That is an enormous reduction in the highest cost area in the country.

In a letter which my noble friend the Minister wrote to me, he put forward a lot of general arguments. He told me that The needs assessment for ILEA is calculated on the same principles as the assessment for other LEAs. These take into account not only pupil numbers, but also the extent of 'additional educational needs' which is a measure of socio-economic deprivation and the additional cost of providing services in London, due to higher wage costs etc. Yes, but no quantity is give to any of those things. Without some quantity being given I do not understand how we can give a precise amount per pupil in our estimates.

I believe that before we can take the figures on board and accept them we need more factual evidence of how the analysis of needs is carried out. If all goes well, then according to the Minister's theory: although there is no directly comparable education authority with which the efficiency of Westminster can be compared, nevertheless: the assessment measures the cost for ILEA as for other LEAs of providing a standard level of service". What is the meaning of that phrase "a standard level of service" in relation to the City of Westminster? I cannot believe that there is a standard level of service as between one area and another.

Just to take one small example, I understand—I am not sure whether or not I am right about this but I believe that I am—that at the request of the Govern- ment themselves Westminster City Council has agreed to take on responsibility for the teaching of music not just in Westminster but throughout the whole of the London area. That is something which many of us are delighted to hear because some of the changes have given those of us with an interest in music teaching in London considerable concern. It is a comfort to know that. How much of the pence per head which the Government estimate Westminster will properly spend on education has been allowed for that far from standard level of service, that special service which Westminster has agreed to take on at the request of the Government? They have done so not of their own volition—although I understand that they acceded to the request readily—but at the request of the Government.

If we could be given a breakdown of how the Government arrive at a reasonable charge per head for the Westminster City Council area for the future and the proportion of that amount which has been allocated to special services of that kind as opposed to standard services, then I for one would be able to accept what the Government are saying much more easily. I can understand and accept the theory, but I wish that my noble friend the Minister and his colleagues would realise that, unless those general principles and theories can be illustrated by some hard factual analysis, it is very difficult for us to accept that theory and practice will ever come together.

10.15 p.m.

The Earl of Caithness

My Lords, as we have heard, these amendments seek to require the Secretary of State to include additional information in the revenue support grant report for each year. The first concerns the matters to which he has regard in determining the amount to be paid to authorities and the second concerns the estimate to be taken into account when calculating the amount of non-domestic rate available for distribution.

I had assumed that the noble Lord, Lord McIntosh of Haringey, proposed the amendments because he thinks that the Secretary of State will not act reasonably and fairly and that in some way authorities will not benefit as much as they could from national non-domestic rate and grant. I should just like to reiterate that this will not and cannot happen. The Secretary of State must act reasonably and fairly as always when determining the amount of grant and in using his discretion to make the estimates for calculating the amount of NNDR for distribution. Furthermore, he is of course accountable to Parliament. In the past, local authorities have not been slow to challenge any such similar calculations. I think it is most unlikely that this will be any different in the new system.

The amounts of business rates paid in by local authorities and the amounts paid out to them will in any case be evident from the non-domestic rating account and money coming into the pool can only be used for redistribution and will be used for that purpose. It cannot be siphoned off for any other purposes. In addition, and perhaps more pertinent to what the noble Lord, Lord McIntosh, said, this section of the Bill requires the Secretary of State to consult representatives of local government before making the determination of grant. This will be a further opportunity for challenging and questioning our decisions.

Members of another place will have the opportunity in the debate on the revenue support grant report to question the Secretary of State. The revenue support grant will include the determinations of both the amount of grant and the amount of NN DR available for distribution to authorities. Therefore, any of the additional information which the noble Lord is suggesting should be included in the report will be available to that forum and I have no doubt that Members will represent the interests of their constitutents most vigorously.

Perhaps I may take up a point raised by my noble friend Lord Carr, which also refers to something that the noble Lord, Lord McIntosh, said. At present, needs are calculated by looking at a large number of indicators which are designed to reflect the need to provide services to the local population. I give as an example the number of pupils who are to be educated and the miles of road that are to be maintained. Those are the kinds of things used in the assessment figures. Under the new system, simpler indicators but the same principle will apply. Assessment based on the number of clients for each service and the weighting or quantities to be given to each factor will depend on decisions still to be taken and on the government assessment of the amount to be spent on each service as part of the annual decisions on grant.

I can say to my noble friend that at the moment I think there are something like 63 indicators that are taken into account. We and the local authorities have found that to be an unwieldy and complicated system. We intend to have a simpler and more straightforward system and are working on the details at the moment.

My noble friend raised a point about Westminster. Rather than pre-empt tomorrow's discussion, perhaps he will allow me to deal with that point then. I could deal with it now but in fairness to my noble friend Lady Gardner of Parkes, who will move the amendment on which I want to deal with these points specifically on Westminster, perhaps he will agree that I may defer responding to him on Westminster's particular needs until tomorrow.

I could not help but rise to the bait put in front of me by the noble Lord, Lord McIntosh, when he said that the reduction in grant support had resulted in rates being 20 per cent. higher. Perhaps I may reply that if the grant percentage had been maintained, income tax would have been 4p in the pound higher; and perhaps that is something that we ought to consider too.

Lord Carr of Hadley

My Lords, before my noble friend sits down, certainly I am prepared to wait until tomorrow and the debate on Westminster. I just happened to be citing Westminster as an example with which I am a little familiar, but the point is a perfectly general one: the need to give reassurance that these needs assessments are based on measured realities and not on theories.

Without pressing for an answer tonight, perhaps I may just draw to the Minister's attention the fact that the Government's assessment of what Westminster should spend on education is a very precise figure of £318 per head per adult compared with the current £570. When one arrives at a precise figure such as £318, it implies that behind it lies a pretty scientific and presumably describable method of assessment and of weighting for different factors.

I am perfectly happy to wait for tomorrow to know about Westminster, but I should like to say to my noble friend that I think your Lordships' House as a whole deserves some better and more accurate description about the methodology of calculating those needs. This aspect of the Bill depends on the credibility, the validity, the integrity and the stability of the way in which these needs are to be defined. That is what determines the essential grant on which calculation of the community charge is based. My noble friend has not yet convinced me for one that such methodology exists or is capable of description to us.

Lord McIntosh of Haringey

My Lords, the charitable way to describe the Minister's answer is that it is the argument of last resort. When one has no real case to put forward one relies on the fact that under law any Minister or Secretary of State must act reasonably and fairly. One cannot show that the law is obliging him to act in a proper way. One therefore relies on the last remnants of common law responsibilities. It really is not good enough. My noble kinsman, Lord Carr, rightly said, in a very penetrating speech which was not really answered, that there must be calculations there. They must be in the minds of those who are doing the sums in Marsham Street. A first principle of management, I should have thought, would be that one should share these thoughts with the people who are so heavily affected by them.

The point that I was trying to make—a point to which the Minister did not respond in any way in his reply—was that the level of grant and the level of the national non-domestic rate, now accounting for 75 per cent. of local authority expenditure, are so critical that a small change in either or both of those will lead to a very large change in the community charge. That is what the community charge payers will not understand unless the Government behave in a proper and businesslike way, communicating with the people who are affected by their decisions. That is what management is about: communicating with the workforce and with the customers.

Why cannot the Government apply those basic good management principles to the management of our public affairs and our local government finance? I fail to see why the Government should continue to resist what, according to any good capitalist Conservative Party principles, ought to be accepted as being a minimum requirement of accountability. This is not the time of night to divide the House on this issue, but it is certainly a matter to which I shall feel justified in returning at Third Reading. I hope to have some better understanding from the Government about this very important, indeed critical, issue in this Bill. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 215 and 215A not moved.]

Clause 93 [Distribution reports]:

Lord McIntosh of Haringey moved Amendment No. 215B:

Page 54, line 28, at end insert— ("(1A) The report shall also include a statement showing for each receiving authority—

1. (a) the national normative community charge for spending at needs assessed by the Secretary of State; and
2. (b) the effect on the authority's community charge of increases in spending measured in financial and percentage terms.").

The noble Lord said: My Lords, I suppose that we shall have to take this fairly briefly. It is very closely related to the previous amendments.

As I introduced Amendment No. 214A I was talking about the changes that have already been made in the Government's indicated assessment of the normative community charge. It is implicit in any normative statement that the Government have standards to which local authorities should adhere in terms of their spending and of the level of services they provide for local people. This has been expressed by Ministers over and over again in terms of a needs assessment. Where does the needs assessment come in the Bill? What assurance do we have that a needs assessment will be properly conducted? It is not good enough to fall back on the "reasonably" and "fairly" criteria. We demand rather more of our rulers than that. We demand that they set out the principles upon which they propose to spend very large amounts of public money and how they propose to see that that public money is properly spent.

We wish to know the thinking behind it. I am not suggesting that the money should be hypothecated to individual services. We are not going away here from the block grant principle, but we are saying that if the poll tax is to work as an improvement in accountability— which I beg leave to doubt for all the other reasons that have been advanced—then surely the poll tax payers must see how the poll tax fits into the rest of local authority expenditure. At the moment it is impossible for them to see how that will happen, because the people who are responsible for three-quarters of the expenditure are simply not coming clean about the thinking that they are imposing. Let us not hear again about reasonably and fairly and let us not hear again about consultation. Let us have a proper answer this time. I beg to move.

10.30 p.m.

The Earl of Caithness

My Lords, the noble Lord, Lord McIntosh of Haringey, seeks to have extra information included in the distribution report. As the name implies, the distribution report is intended to set out the basis on which grant is to be distributed. We do not intend to make a new distribution report each year because one of our aims is stability, which is something I am sure the noble Lord will agree is lacking in the present system. Having decided on the way in which needs are to be assessed, and having established all the relevant weights between the particular factors, we intend to keep those arrangements for some while and not to make annual changes in the methodology, although the data used in calculating the needs assessment will be updated annually.

The extra information which the noble Lord would have included can only be calculated each year once the details of the RSG settlement for that year are known. It would therefore not be possible to achieve what the noble Lord wishes other than by reprinting the report annually after the RSG settlement, merely to include this data. I do not think that that would be appropriate. However, there will be no secret about the community charge for spending need. Indeed, I anticipate that it will feature largely in the annual debate in another place on the RSG settlement. Similarly, anybody can calculate quite easily what the effect on the community charge will be of any change in the local authority's expenditure. The key principle is simple: every £1 that an authority spends above or below its assessed need will add or subtract £1 from the national community charge figure for spending need.

I take issue with the noble Lord, Lord McIntosh of Haringey, on clarity. The proposed system that we shall introduce is a great deal clearer than the system we have at the moment. It identifies, through the needs system and through the spending of the local authority, exactly in which area overspending or savings are being made, and that for once will be clear to the charge payer. I believe that it is a clearer system for the Government too, because any charge payer for the first time will be able to look back at his previous charge, notice where the difference is and then be able to attribute that either to the Government changing their mind or to the local authority increasing or reducing expenditure. There are considerable benefits in the system we propose.

Lord McIntosh of Haringey

My Lords, as Dr. Johnson would have said, that is not even assertion; that is mere asseveration. There is no justification anywhere on the face of the Bill—we have only the words of the noble Earl—that it is the Government's intention to carry out what he says. There is nothing which talks about a needs assessment; there is nothing which says how the needs assessment is to be explained or calculated. None of these things appears on the face of the Bill. There has been no firm indication of how the regulations are to be framed. I am not doubting the good faith of the noble Earl—far from it— but I am saying that the Government have a duty which is wider than ministerial statements at Report stage in your Lordships' House.

I am sorry to say that this answer again is totally unsatisfactory. I am sorry that the noble Earl should fall back on the administrative argument that we cannot do the final figures until the revenue support grant has been calculated. Of course that is the case. We always knew that and we do not disagree with the Government's intention to maintain some relatively stable calculation and not to change matters from year to year. That does not mean it would not be valuable in communicating the Government's intention and having a serious and proper debate about the calculations and about the level of financial support at whatever time the figures become available. I hope that the noble Earl, irrespective of what else he says about this amendment, will think again about whether at such time as they become available he would recommend to his right honourable friend that the calculation should be made and that there should be a greater degree of glasnost about this matter.

Without in any way feeling that I have received a satisfactory answer, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 216, 217 and 218 not moved.]

Clause 102 [Transitional Grants]:

The Earl of Caithness moved Amendments Nos. 218A and 218B:

Leave out Clause In Clause 104, page 60, line 15, leave out ("or residual").

On Question, amendments agreed to.

[Amendments Nos. 219 and 220 not moved.]

The Earl of Caithness moved Amendments No. 220A: Page 60, line 39, leave out ("residual").

On Question, amendment agreed to.

The Earl of Caithness moved Amendment No. 221:

Page 60, line 40, leave out ("and") and insert— ("(ee) payments to be made by the authority to another person in respect of interest on repayments of excess receipts by way of non-domestic rates, and").

On Question, amendment agreed to.

Lord Hesketh moved Amendment No. 222:

Page 61, line 11, after ("repaying") insert (", under regulations under this Act,").

The noble Lord said: My Lords, this amendment is very simple and straightforward. It involves and clarifies the drafting of Clause 104(4)(b) by making reference to regulations. I beg to move.

On Question, amendment agreed to.

Clause 109 [Calculations to be made by authorities]:

The Earl of Caithness moved Amendment No. 222A:

Page 64, line 2, leave out from ("levy") to end of line 4 and insert ("or special levy issued to it for the year but (except as provided by regulations under section 88 or (Special levies) above) shall not anticipate a levy or special levy not issued.").

On Question, amendment agreed to.

Lord Hesketh moved Amendment No. 222B:

Page 64, line 7, at end insert— ("(7A) The Secretary of State may by regulations do one or both of the following—

1. (a) alter the constituents of any calculation to be made under subsection (2) or (3) above (whether by adding, deleting or amending items);
135
2. (b) alter the rules governing the making of any calculation under subsection (2) or (3) above (whether by deleting or amending subsections (5) to (7) above, or any of them, or by adding other provisions, or by a combination of those methods).").

The noble Lord said: My Lords, this amendment seeks to improve and clarify the purpose of Clause 109, which is to determine the amount that a charging authority is to transfer from its collection fund to its general fund in order to meet its estimated expenditure for the year. This is a technical and non-controversial amendment and I commend it to the House. I beg to move.

On Question, amendment agreed to.

Clause 114 [Power to designate authorities]:

The Earl of Caithness moved Amendment No. 223: Page 66, line 34, leave 'ut paragraph (b).

On Question, amendment agreed to.

[Amendments No. 224, 225, 226 and 227 not moved.]

The Earl of Caithness moved Amendments Nos. 228 and 229:

Page 67, line 9, at end insert— ("(6) In construing subsection (1) above any calculation for which another has been substituted at the time designation is proposed shall be ignored. (7) In construing subsection (2) above any precept for which another has been substituted at the time designation is proposed shall be ignored."). In Clause 115, page 67, line 38, at end insert— ("(5) In construing subsections (1) and (3)(a) above any calculation for which another has been substituted at the time designation is proposed shall be ignored. (6) In construing subsections (1) and (3)(a) above any precept for which another has been substituted at the time designation is proposed shall be ignored.").

Clause 116 [Designation of authorities]:

Lord McIntosh of Haringey moved Amendment No. 229A: Page 67, line 40, after ("shall") insert ("before the end of the previous financial year").

The noble Lord said: My Lords, in moving Amendment No. 229A, I shall speak also to Amendment No. 229B. They are in a sense probing amendments, although it may seem curious at this stage in the passage of the Bill. As may be recalled, we had quite a lengthy debate in Committee about the fact that the poll tax capping procedure is what is technically called an in-year procedure. It is only when the community charge has been declared that information goes to the Secretary of State, who then makes a judgment, and there is a 28-day period for a reply, after which he makes a final decision. We pointed out that the effect will be that the final capping procedure, if it is to be implemented, will probably be in early June of each year whereas the community charge will have been in operation from the beginning of April. In-year procedure therefore means that the community charge will be levied and people will have to start paying it on a basis that could be upturned by the Secretary of State through the capping or limitation procedure.

We argued—we still feel this strongly—that it is an unsatisfactory way to run local authority finance. It would force local authorities to go back to the community charge payer two months after the demands had gone out and to say, "The Government have said that we must charge a different amount. Please send some money or amend your standing order". That is not an efficient way to proceed with public business. It is also damaging to public accountability. It is difficulty to explain why two different assessments should be made of the same needs except in so far as it becomes clear that a difference between central and local government in these circumstances will be a political disagreement. People will take political sides about it and will not accept that there is any rational judgment as between the two.

The amendments attempt to regularise the procedures and make them as short as possible. I do not know whether they may lead to a rational process resulting in a capping or limitation procedure that could be implemented before the demands go out. Personally, I doubt it. It is clear that the procedures proposed by the Government for in-year capping of the community charge are inefficient, unjust and derogatory to the principle of accountability that the Government claim to put forward. I hope that the Government will see the impossibility of what is being claimed and at least acknowledge that there are difficulties that they should consider further.

The Earl of Caithness

My Lords, it is the Government's intention that Part VIII should be a means by which relief can be rapidly extended to hard-pressed charge payers if a local authority chooses irresponsibly to ignore the accountability that the community charge will introduce, and levies a demand that is excessive and contrary to the interests of its electors.

However, although I would agree with the sentiment behind the amendment—that the Government should complete their part of the charge capping process as quickly as practicable—I must say that the amendments significantly weaken the effectiveness of the capping provisions. The effect is that my right honourable friend would have at most one week after an authority set its charge in which to designate it for charge capping. My right honourable friend could be left with no time in which to make a designation if the authority set its charges on 1st April. Obviously that would not be satisfactory.

Amendment No. 299A would also mean that it would be feasible for an authority to put itself outside the scope of capping if it failed in its duty to set a charge by lst April. Notwithstanding the illegality of such an action and the consequences which the authority would face, I am sure that noble Lords will agree that it would also be totally wrong for charge payers to be left as a result of such legal action without the means of respite which Part VIII provides.

I hope that, given the great practical difficulties which the amendments would introduce and the fact that they run counter to the intentions behind Part VIII, the noble Lord will withdraw them, notwithstanding the fact that I agree with the sentiment behind them.

The noble Lord talks about the reductions in in-year spending. I should like to point out that this system of rate capping operates in Scotland and has been tried and shown to work there, as I said in Committee. We believe that it is a better system than that which we have at the moment. It is for that reason that we propose it in the Bill.

Lord McIntosh of Haringey

My Lords, local authority finance officers are very able and dedicated people and almost any system can be made to work somewhere. It does not mean that it makes sense managerially to do this. It does not mean that it is right to have a capping system which applies after the charge has already been levied and involves the possibility of a charge changing. I am totally unconvinced by those arguments but I thought that they would be put forward. If I needed convincing, the Minister has convinced me that in-year capping is a deeply flawed system and that, if they had to have any capping at all—with which I do not agree—the Government approached the issue better in the Rates Act 1984, the previous-year capping system. That is an issue to which we must return having elucidated the possibility of a rational and effective in-year capping system. I beg leave to withdrawn the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 229B not moved.]

Clause 118 [Challenge of maximum amount]:

The Earl of Caithness moved Amendment No. 230: Page 70, line 8, at end insert— ("(12) In construing subsection (4) above any calculation for which another has been substituted at the time of designation shall be ignored. (13) In construing subsection (7) above any precept for which another has been substituted at the time of designation shall be ignored.").

On Question, amendment agreed to.

Clause 121 [Substituted calculations and precepts]:

The Earl of Caithness moved Amendment No. 231: Page 71, line 18, after ("year") insert ("under this section").

On Question, amendment agreed to.

The Earl of Caithness moved Amendment No. 231A: Page 71, line 20, leave out from ("above") to end of line 22 and insert ("the following provisions apply accordingly—

1. (a) Part II,
2. (b) sections 88, (Special levies), 111, 113 and 114(1)(b) and (6) above, and
3. (c) sections 124(1), 150(2)(f) and 151(2)(c) below,").

On Question, amendment agreed to.

[Amendment No. 232 had been withdrawn from the Marshalled List.]

The Earl of Caithness moved Amendment No. 233: Page 71, line 23, leave out from ("above") to end of line 25 and insert ("the following provisions apply accordingly—

1. (a) sections 30(4) and (5), 31(3) and (11), 33(1) to (3), (5) and (8), 85(5) and (6), 86, 88, 113 and 114(2)(6) and (7) above, and
2. (b) sections 124(2), 150(2)(d) and 151(2)(6) below.").

On Question, amendment agreed to.

Lord Hesketh

My Lords, I beg to move that further consideration on Report be now adjourned.

Moved accordingly, and, on Question, Motion agreed to.