Local Government Finance Bill

HL Deb 13 June 1988 vol 498 cc89-142

House again in Committee.

Clause 77 [General and special expenses]:

Lord Glenarthur moved Amendment No. 130B: Page 42, line 6, leave out ("and").

The noble Lord said: With the leave of the Committee I shall also speak to Amendments Nos. 130C, 130D and 131A. These technical amendments are needed to Clause 77 to ensure that certain Welsh community charge payers do not have to contribute twice to the cost of the public library service. As Members of the Committee will know, county councils usually provide library services but four districts in Wales are library authorities for their areas, and one more district library authority is proposed. I hope the Committee will agree that these are highly desirable technical amendments. I beg to move.

Lord Graham of Edmonton

This, on the face of it, looks like a technical amendment. Will the Minister tell us what consultations have taken place with the local authority associations and perhaps, in addition, with the library association? As the Minister will be aware, the library movement feels that it has been badly treated from time to time by the impact of certain aspects of the Government's legislation.

Not only the Welsh ratepayer but any ratepayer would jib if he had to pay twice for a single service. As the Minister is aware, amendments have been moved to make sure that the services which are paid for are actually received. That was the burden of the earlier amendments. I hope that the Minister can tell us that the bodies concerned, who have the right to speak on behalf of the ratepayers, are satisfied with the proposal. If he can tell us that, we shall be satisfied with it also.

Lord Glenarthur

I can give my assurance to the noble Lord that the local authorities have been consulted in the role which the noble Lord described, and they are happy. The noble Lord might wonder why it is just Wales that is affected. The Local Government Act 1972 recognised the special factors in Wales which make it desirable for some district councils to be library authorities. These factors consist of such things as sharp transitions in population distribution, industrial concentration and language usage. District councils are able to apply to the Secretary of State at 10-year intervals to be constituted library authorities for their area in place of the county council. I am advised that there is no parallel in England.

Lord Graham of Edmonton

I am grateful to the Minister for those remarks, which were very helpful. I listened carefully to what I call the "excluding criteria". I can see that all of them could apply almost anywhere, except the final factor that the Minister mentioned, which was language. I believe that the Minister said that one of the qualifying bases upon which this provision would apply in Wales was the language factor.

I should be grateful if the Minister could repeat the other criteria, because they seemed to me to apply to rural, small, specially affected parts of almost any other community. We understand, as must the Minister, that there are special circumstances in Scotland in general. I also acknowledge that there are special circumstances in Wales in general, but other than the one that the Minister mentioned about language I do not understand why the other factors were referred to. I should be grateful if the Minister would explain them to me.

Lord Glenarthur

What we are talking about here is the Local Government Act 1972, which provided those particular factors—the population factor, the industrial concentration factor and the language factor. I shall come back later, if I may, to the details of the language factor. But I hope that the noble Lord will realise that there are four districts providing library services in Wales at the moment. They are Rhondda, Merthyr Tydfil, Cynon Valley in Mid-Glamorgan and Llanelli in Dyfed. From 1st April next year it is intended that Newport in Gwent shall also be a library authority.

In order to ensure that the residents of these five districts do not contribute to the expenses of the library service provided by their county council outside their districts—in other words, to prevent them from effectively having to pay twice so to speak—it is necessary to ensure that these expenses are reflected only in those precepts issued by the county council to district councils which are not library authorities. This can only be achieved if the expenses of a county council are, in such circumstances, special expenses under this clause of the Bill. County councils would then adjust their precepts accordingly under the provisions contained in Clause 76. That is what these amendments will achieve.

I think the other amendments are largely self-explanatory. The noble Lord asked me if I could go into further details about how the factors were reached. I cannot give him an answer as to why the point about language usage was reached in 1972. I shall very happily look at that for the noble Lord and come back to him on it.

On Question, amendment agreed to.

Lord Glenarthur moved Amendment No. 130C:

Page 42, line 11, at end insert ("and (c) if it is a Welsh county council whose library area consists of part of its administrative area, its expenses in exercising its functions as library authority in its library area are its special expenses.").

On Question, amendment agreed to.

Lord Glenarthur moved Amendment No. 130D:

Page 42, line 17, at end insert— ("(4A) Expenses which are special by virtue of subsection (2)(c) above relate to the part of the council's administrative area which consists of its library area.").

On Question, amendment agreed to.

[Amendment No. 131 not moved.]

Lord Glenarthur moved Amendment No. 131A:

Page 42, line 34, at end insert— ("(10) "Library area" shall he construed in accordance with the Public Libraries and Museums Act 1964.").

On Question, amendment agreed to.

Clause 77, as amended, agreed to.

Clauses 78 and 79 agreed to.

Clause 80 [Information]:

Lord Glenarthur moved Amendment 131B: Page 43, line 28, after ("2") insert (", 9 or 12").

The noble Lord said: This is a simple drafting amendment. I beg to move.

On Question, amendment agreed to.

[Amendments Nos. 132 and 133 had been withdrawn from the Marshalled List.]

Clause 80, as amended, agreed to.

Clause 81 [Levies]:

Lord Glenarthur moved Amendment No. 133A: Page 43, line 41, leave out (", district council or London borough council") and insert ("or charging authority").

The noble Lord said: With the leave of the Committee, I shall speak also to Amendments Nos. 133B, 164K, 175A, 181B, 181C and 196A. The amendments are technical. They seek to provide that the existing arrangements for combined police authorities and so on will continue as at present without the need for further regulations under the Bill; that the Common Council and the Isles of Scilly will be treated like other charging authorities with respect to levying bodies; and that reference to certain authorities is in the correct part of the Bill. I commend the amendments to the Committee. I beg to move.

Lord Graham of Edmonton

The amendment speaks of leaving out, district council or London borough council". The Minister, in pleading his case, brought in the Scilly Isles. Perhaps he can explain the purport of that inclusion. As I understood it, he said that it appeared in the wrong part of the Bill. Will the Minister take on board our previous discussions concerning London boroughs? I am interested in why a London borough council should he struck out of this part of the Bill.

Lord Glenarthur

There are many bodies which at present obtain some or all of their revenues by making demands, under a variety of statutory provisions, on certain local authorities. Many of these provisions are framed in terms of the rating system and hence can no longer apply in the new system of local government finance. The Bill—the provisions of Clause 121—would repeal all these provisions and in their place set up under Clause 81 a wide regulation-making power which would enable us to replicate existing arrangements for these bodies to obtain their revenue but in a form consistent with the new local government finance system.

For combined police authorities such as the Thames Valley Police Authority, combined fire authorities, magistrates' courts committees and probation committees this whole process of seeking to replicate existing arrangement through regulations is unnecessary as in these cases the existing statutory provisions, unlike many other cases, are not framed in terms of the rating system and hence would be entirely satisfactory after 1st April 1990. Amendments 133B and 181C would provide that combined police authorities, combined fire authorities, magistrates' courts committees and probation committees would not be levying bodies and hence would continue to raise their revenue under existing powers.

Turning to Amendments Nos. 133A, 181B, and 164K, as the Bill stands the Common Council and Isles of Scilly would not be able to take account of any levy issued to them after 1st April 1990 and any levying bodies in their area would no longer be able to issue a precept, make a levy or have their expenses paid by either of these two authorities. This would exclude, for example, bodies such as the London Residuary Body and the Lee Valley regional park from making a levy on the Common Council. This is clearly not right and these amendments seek to redress the situation by bringing all charging authorities within the scope of Clause 81(1)(b).

Before turning to one final point, perhaps I may dwell briefly on Amendments Nos. I 75A and 196A. The noble Lord will have observed that the effect of those amendments is merely to delete from Clause 115 the three subsections that define what is meant in subsection (2) by a waste disposal authority, a combined police authority and a combined fire authority, and reinstate them in their proper place in Clause 142. That clause, together with Clauses 143 and 144. provides for the interpretation of the terms used in the Bill as a whole. It is therefore a small piece of tidying up.

The amendments delete references to specific charging authorities. I believe that that is the point about which the noble Lord expressed concern. The clause refers to charging authorities which include London boroughs, district councils, the Isles of Scilly and the Common Council. I believe that that covers the point made by the noble Lord; I assure him that the amendments are purely technical.

Lord Graham of Edmonton

I appreciate what the Minister has said and I am grateful. However, it puzzles me that clearly nothing has happened in the course of the passage of this Bill which has caused his advisers to come to that conclusion. In other words, the first premises on which the Bill was drafted were clearly incorrect, since nothing has happened since. Either second thoughts, wiser counsel or retrospection has prevailed. I only wish that that would happen more often.

On Question, amendment agreed to.

8.15 p.m.

Lord Glenarthur moved Amendment No. 133B: Page 43, line 43, at end insert (", combined police authority, combined fire authority, magistrates' courts committee or probation committee.").

On Question, amendment agreed to.

Lord Teviot moved Amendment No. 133C:

Page 44, line 6, leave out paragraph (b).

The noble Lord said: I am afraid that we shall move into much lower gear with this amendment. It is a technical amendment. I shall speak also to Amendment No. 174A. They are probing amendments. I have already expressed my concern to the Committee about the Government's proposal to give passenger transport authorities levying rather than precepting powers. The Committee has decided that issue. The present amendments concern the Government's powers to further control a PTA's finances.

As the Bill is drafted, the Government have two powers to control PTA finances. First, there is the power on Clause 81(3)(b) which enables the Secretary of State to impose a maximum limit on levies. Secondly, Clause 104 allows the Secretary of State to community charge cap a district council whose expenditure includes the proportionate amount of the levy from the Passenger Transport Authority.

Effectively those powers mean that the Secretary of State can subject the spending of a PTA to attack on two fronts. That seems to me to be wrong in principle and it does not appear to apply to any other form of local government expenditure. It is particularly serious in respect of the power in Clause 81 to impose a maximum limit on the levy against which the PTA is not given any right of appeal. Surely it has been established that where the Secretary of State exercises a discretion on the level of expenditure of an authority, that authority has a right of appeal. Is it an oversight on the part of the Government that that right is not included in the Bill or is it their intention to cover the matter by regulations?

The amendment to Clause 81 seeks to remove the power of the Secretary of State to impose a limit on the levy and simply rely on the power to charge cap a district. That would surely be adequate as the threat of charge capping a district would be an effective deterrent to PTA overspending.

I now turn to the related amendment, Amendment No. I74A, which seeks to provide that in deciding whether or not to charge cap a district the Secretary of State shall disregard the amount of levy on that district from the PTA. I hope that I have firmly establised that PTAs have very good relationships with their district councils. They have expressed concern that the PTA levy could be the factor that causes them to be community charge capped. One can understand that concern, particularly in the circumstances where the levy involves substantial expenditure which may not directly benefit that district. For example, a light rapid transport system in a regional centre such as Manchester, Birmingham or Leeds may not be felt by adjoining districts to be to their immediate benefit.

As the Bill is currently drafted, the Secretary of State could impose a limit on a PTA levy and then community charge cap a district whose proposed expenditure has gone over the limit because of the size of the PTA levy. Surely that is unreasonable because it does not apply to other elements of local government expenditure.

I should be content if the Government would confirm, first, that a right of appeal would be given to the PTA against the Secretary of State's decision to impose a maximum limit on the levy, and, secondly, that the levy will be disregarded in deciding whether a district is to be community charge capped. I could then accept the Secretary of State's retaining the power to set a maximum limit on the levy.

I realise that this is a very complicated technical amendment, and perhaps I have not done justice to it. I have been through it about six times. I understand it but perhaps I have not made it clear. However, I am sure that the noble Lord, Lord Underhill, who will follow me, will make it as clear as daylight. I beg to move.

Lord Underhill

I am sure that noble Lords have followed what the noble Lord, Lord Teviot, said. I thought that he put his case very cogently. He reminded the Committee that last Tuesday we debated the question of the precepting of passenger transport authorities being changed to levying. I remind the Committee that on that occasion nine noble Lords spoke and not one of them supported the government attitude on this matter. I was the only speaker from the Labour Opposition. That indicates the all-round support. We may still have to determine certain aspects of the matter in the light of the proposition put forward by the noble Lord, Lord Jenkin of Roding, who said that he was considering the possibility of a suitable amendment at Report stage.

I must echo the question as to why the Government are seeking to take power in Clause 81 to impose by regulation a maximum limit on any levy that may be charged. Perhaps I may remind noble Lords what has happened in recent years. I think my dates are correct. In 1983 we had the Act which made it necessary for a passenger transport executive to seek government approval for its financial plans. We had what we commonly term the PEL—the protected expenditure limit. We then had in the 1985 Transport Act control of the precept for the first three years of the new joint transport authorities in the metropolitan areas; namely, the passenger transport authorities. The Committee will recall that the noble Lord. Lord Jenkin of Roding, reminded the Committee that we are still in the third year of that transitional arrangement.

Now the Government seek under Clause 81 to control the maximum amount of levy. Yet the main argument put forward for the change from passenger transport authority precepting to levying was one of accountability. The proposal to set a maximum limit on levies suggests very little faith in accountability. Either the Government have no faith in accountability—although that was their argument for changing precepting of PTAs to levying—or alternatively it is a further step seeking yet further reduction in expenditure on public transport in the metropolitan areas.

In Standing Committee in another place a similar Amendment—to delete paragraph (b) of Clause 81—was put forward. On that occasion, on 8th March (at col. 1326 of Hansard), Mr. Christopher Chope, Under-Secretary of State, said: The clause does not contain a capping power. It has a levy limiting power. The purpose is to set limits on levies where none currently exists". At that time there was no levying power for passenger transport executives. That came afterwards, in the Report stage after all the work of the Standing Committee in another place had been completed. How does that statement by the Under-Secretary of State in the Standing Committee in another place fit in with the decision taken on Report to introduce levying for PTAs in place of precepting? As the noble Lord, Lord Teviot, has said, the amendment must be considered with the provision in Clause 104 for the designation of a charging authority; that is, community charge capping on the same basis as there is presently rate capping.

I want to emphasise, as the noble Lord, Lord Teviot, mentioned in his opening remarks, that we could find a passenger transport authority having its expenditure controlled in two ways: directly by the limit placed on the levy of a PTA under Clause 81, and indirectly by a district council being charge capped under the provision in the Bill for community charge capping. There is the possibility that the district council may consider that the levy from the PTA must be curtailed to help to bring the district council's expenditure to a level which the Secretary of State may consider necessary. The district council may need to decide what curtailment of expenditure is necessary and it could decide to curtail the expenditure of the passenger transport authority.

Such a procedure, under which excessive expenditure could be dealt with twice, seems both unnecessary and unreasonable in the light of the power under Clause 81 to set a maximum limit on a levy. Any such pressure by a district council would lead inevitably to all the dangers which noble Lords stressed in the debate last Tuesday. I remind the Committee that not one noble Lord spoke in support of the government proposal. Noble Lord after noble Lord stressed the importance of a passenger transport authority being responsible for carrying out county-wide services. Should there by any necessity for a district authority to seek to curtail the expenditure of a PTA it would undoubtedly hit the provision of county-wide services. Yet noble Lords from the government side stressed that it was the provision of county-wide services which was the very reason for PTAs being set up in the first place.

Amendment No. 133C seeks to delete paragraph (b) from Clause 81, removing the power of the Secretary of State to set a maximum limit on levies, thereby adhering to the Government's own faith in the accountability of elected members. In addition, Amendment No. 174A, to Clause 104, proposes that where the Secretary of State designates a district council to proceed with charge capping, the amount of any levy from the PTA shall be disregarded in calculating the district council's expenditure. I think I am correct in saying that under the precepting procedure the precept of a PTA would not be taken into consideration for the local council's expenditure because it is the precepting authority's expenditure and not the local authority's expenditure.

Under the present rate capping provisions there is the right of appeal to the Secretary of State and the right of challenge under Clause 108 for the proposed community charge capping. I shall repeat the question which I believe was asked by the noble Lord, Lord Teviot; namely, why is there to be no provision for any right of appeal by a levy-charging body against any maximum levy which might be set by the Secretary of State.

If there is to be a maximum levy set by the Secretary of State, I cannot understand why there should not be a right of appeal against it. At the moment we have an appeal against determination for rate capping and there is also provision for any challenge against the precept level. We ought at least to have a right of appeal on the matter of any maximum levying. I hope that the Minister will see the common sense in these two amendments, bearing in mind what I have said about the statement made by the Under-Secretary of State. I shall not read out to the Committee what Mr. Christopher Chope said as it is reported in Hansard at col. 1326, but I hope that the Minister will read his remarks very carefully. In addition to the point from his speech that I mentioned, he spoke of the types of authority covered which the Government thought to deal with by this levy provision. He referred to the Wimbledon and Putney Commons Act 1971, said that it had not been passed by a Labour Government—and indeed I do not think it was—and went on to speak of other minor authorities. When the clause was discussed and passed in the Standing Committee there was no intention to bring forward the maximum position to deal with public transport authorities. That came forward only at the Report stage in the other place.

For those reasons I hope that the Government will at least take these two matters back and carefully look at these two important amendments.

8.30 p.m.

Lord Brabazon of Tara

As my noble friend explained very clearly, these amendments concern the future control to be exercised over passenger transport authority expenditure. The noble Lord, Lord Underhill, reminded us that the Government have been exercising precept control over PTA expenditure for the past three years. Our aim now is to create an environment in which that is no longer necessary. I trust therefore that I can demonstrate that the concerns expressed by my noble friend Lord Teviot and by the noble Lord, Lord Underhill, are unfounded.

I turn first to the power to set a maximum on the levy. This power applies to all levying bodies and is not designed simply as a means of limiting PTA expenditure. Rather the power is needed to preserve existing statutory limits over those levying bodies which are at present bound by them. These bodies will generally be small boards which have in their legislation a maximum levy expressed in terms of existing rating legislation.

I can give another example to add to the one referred to by the noble Lord, Lord Underhill: the Tunbridge Wells conservators with an existing maximum of one-third of a penny in the pound. Without the power which my noble friend's amendment seeks to remove, it would not be possible to set a new maximum expressed in terms of community charge legislation. The conservators and many other boards like them would thus be left without a statutory limit on their levy. While it may well be doubted whether the Tunbridge Wells conservators will rush to take up this new found freedom, I am sure that the Committee can appreciate the difficulties the loss of this power would present overall.

I do not believe these are difficulties that we need face, because I can assure my noble friend 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, to which my noble friend Lord Teviot and the noble Lord, Lord Underhill, referred, and because the whole thrust of the change to direct billing is that it is the districts who should take a greater responsibility for PTA spending decisions and not central government. There is no intention of running a dual control system of levy and charge limitation as my noble friend suggested.

I turn now to my noble friend's amendment, Amendment No. 174A, on charge limitation. If districts are to take full responsibility for PTA spending decisions, then the PTA bill must be treated as part of their expenditure for all purposes, and that includes charge limitation. If this amendment were carried districts would be able to support excessive PTA expenditure without fear of being charge capped. Concern has been expressed that the charge to billing will lead directly to some districts being charge limited. If that is indeed the case then those districts must already be overspending significantly.

A district's share of PTA expenditure will be just 6 per cent. of its total expenditure and the transfer of PTA expenditure to the districts will he adjusted for in selecting districts for precept limitation. Districts have control over PTA budgets. A district on the edge of charge limitation can instruct its representatives to press for a lower level of expenditure. If that fails, it will have to make cuts in other areas of its budget just as it would to accommodate any other fixed expenditure items. Furthermore, I can assure the Committee that should the district still be precept limited the fixed nature of the PTA bill would be taken into account in determining the appropriate limit. With the increased accountability which will result from the change to the community charge we naturally hope that no districts will give cause for charge limitation.

My noble friend has asked me to give two assurances: that a right of appeal should be given to the PTA against the imposition of a maximum limit on the levy; and that the levy should be disregarded in deciding whether a district is to be charge capped. I cannot give him precisely those assurances, but I can give him two which I believe will meet his concerns. Firstly, I can assure him that in the remote event—and I emphasise that it is remote—of our proposing to use the power to impose a maximum on the levy, we should discuss the matter fully with the PTA concerned before final decisions were taken. Secondly I can assure him that in the process of charge capping the fact that the PTA bill was fixed would have a bearing—not at the point of deciding whether to charge cap a district but at the stage of determining the limit. The fixed nature of the PTA bill would, like other items of relevant information, be taken into account at that stage by the Secretary of State. I hope that my noble friend can accept what I have said on those two points and that on reflection he will feel able to withdraw the amendment.

Lord Underhill

Before the noble Lord, Lord Teviot, tells us his intentions on this amendment, perhaps I may ask the Minister to clarify two statements that he made which I may have misheard. I believe in the first part of his remarks he said that the Government had no intention of fixing a maximum limit on the levy for a a PTA. Later, toward the close of his speech, he said that if any maximum levy were to be set they would have discussions with the PTA concerned. Which is the Government's intention? If it is the former I hope that the Government will introduce an amendment to Clause 81 excluding that maximum from PTAs.

Lord Brabazon of Tara

Let me repeat what I said at the beginning of my remarks. I said that we had no present intention of using this power to set limits on PTA expenditure and that we would not wish to do so except in very exceptional circumstances. However, I cannot give an undertaking that it might never be done.

Lord Teviot

I feel much happier about his matter. One result of being attacked on two fronts has been that my noble friend has absolutely allayed any fears. He was kind about my speech. I had felt that a smelly old schoolmaster in his pipe-smoked tweed coat and grey flannel trousers would give Teviot four out of 10 and Underhill eight out of 10 for their contributions. I do not think he would have had to say anything about my noble friend.

I feel much happier about the matter and I shall read every word of the discussion. I am very pleased that the noble Lord, Lord Underhill, spoke when he did. I think that everything is now fairly clear. However, I have a duty to take advice and I may have to come back at a later stage. At this time I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 81, as amended, agreed to.

Clause 82 [Interpretation]:

[Amendments Nos. 134 and 135 not moved.]

Clause 82 agreed to.

Clause 83 agreed to.

Clause 84 [Revenue support grant]:

Lord McIntosh of Haringey moved Amendment No. 136:

Page 45, line 45, at end insert ("and (cc) what amount of grant he proposes to pay to receiving authorities in reimbursement of the costs incurred by charging authorities in respect of the duties imposed by sections 21 and 23 (4) of this Act".).

The noble Lord said: With this amendment we move to Part VI of the Bill, which concerns grants. Reference has already been made to the grants position in debates earlier this afternoon. Indeed, I was gratified to find the Minister making favourable references to this amendment when he spoke on Amendment No. 119A earlier this afternoon. I believe that I am right in saying that he referred to the text of Amendment No. 136.

With this amendment we are not making dramatic changes to the grants system. However, before moving to Amendment No. 136—and I wish also to speak to Amendment No. 140—I ought to say something about our general attitude towards the grants system. In view of the huge uncertainty about the level and product of the community charge, and indeed of the national business tax, it is clear that the grants system will be the only way in which the Government can reinstate any measure of sense into the system of local authority finance.

It is quite clear that we shall have to have some needs and resources calculation. What is regrettable, indeed indefensible, in the Government's proposals in Part VI of the Bill is that the Government are giving no indication whatsoever of the way in which the revenue support grants will be calculated, on what principle they will be calculated, or on how justice will be done between one individual authority and another or between one class of authority and another. In that sense the noble Lord, Lord Rippon of Hexham, used the word "skeletal" on a number of occasions about the Bill. This is a skeleton of a Bill. It has no flesh on its bones. It does not tell us anything other than the classic formulation which we have in Bills of this kind which provides that the Secretary of State shall do as he thinks fit and that we shall have to trust not only this Secretary of State but no doubt successor Secretaries of State if we doubt that there is going to be any justice in local authority financing. At the moment I am not inclined to trust any Secretary of State—present, past or future—to exercise such wide powers as are conferred upon him by this Bill, and in particular by this part.

In view of the moderation of my remarks I hope that the Government will feel that these amendments are capable of sympathetic treatment. The first aim is to provide that when the Secretary of State determines the amount of revenue support grant he must inform the local authorities and the public how much of the grant is being paid for the administration of the community charge and how much is being paid for the cost, in particular, of the registration of the community charge. At the moment there is no requirement of this kind. It is not clear, either to the public or to the local authorities, how much is being granted for expenditure—this is what the public, the electors, the community charge payers, believe that they are receiving for their money—and how much is being raised in order to pay for the administrative costs.

The noble Earl will agree that if we are to have accountability, and if the community charge payers are to know accurately how much goes towards paying for the services they are receiving from their local authorities, and from where it comes, they should know also how much is being paid by the Government towards those local authorities, not for specific services but for the administration of the community charge. In view of the admittedly high cost—I think we can all be at one on that—it is important to know how much the Secretary of State is allowing.

Amendment No. 140 is a similar amendment. There is the procedure in the Bill for a distribution report. The requirement under this amendment is to disclose in the distribution report how the grant to cover community charge administration and registration will be distributed between authorities. This is a by-product of the procedures to which the Committee has agreed as between different local authorities. It is clearly important to know how the sums involved are being distributed between those authorities. However much the Government may feel strongly in favour of the principle of the grants section of the Bill, I hope that they will feel that these amendments are modest, not at all threatening, and deserve the support of the Committee. I beg to move.

8.45 p.m.

The Earl of Caithness

With the leave of the Committee I should like to spend a little time introducing Part VI, which is Clauses 82 to 94 inclusive, because it is essential that I set it out for the Committee. It is relevant to future amendments. It is also extremely relevant to what my noble friend Lady Gardner of Parkes said earlier this afternoon. It is extremely sad that she is not in her place to hear what I have to say because it would go a long way to soothing her fears about the grants system.

As the noble Lord, Lord McIntosh of Haringey, said, this Part of the Bill deals with the payment of revenue support grant to local authorities. As we turn to consider the amendments to this part we shall no doubt be discussing some of the details of the grant system, but before we do it might be helpful if I briefly sketch out how the revenue support grant system will operate.

In developing the new arrangements for grant support to local government we have aimed to produce a system which is more stable, more intelligible, more accountable and above all simpler than the present one. There will be a single revenue support grant which will compensate in full for variations between areas in the need to provide local services and will also provide additional support for services in proportion to each area's population.

Grant will be distributed so that if every authority spends at the level of its needs assessment all authorities will be able to set the same community charge. The needs assessment will be our assessment of what each authority needs to spend to provide a standard level of service efficiently. The money to pay for this spending will come, as now, from three separate sources: community charges, business rates and grant. Neither grant nor business rates will change according to what the authority actually spends. Authorities will, I hope, welcome this as a major simplification of the present arrangements with their constantly varying grant. That means that any changes in spending will fall on the community charge payer. The authority will therefore be totally accountable to the charge payer for its spending decisions.

Needs assessment will play a key role in the new system. As I have explained, it will be the basis for the distribution of grant. We believe that the needs assessment methodology can and should be much simpler than at present. The complexity of the assessments discredits the grant system by making it incomprehensible to local taxpayers and even to some local authorities. The new system will have fewer indicators of need, which will greatly simplify the system while continuing to reflect needs no less fairly than at present. Our key aim is to strike a balance between simplicity and fairness.

The needs assessment methodology will be set out in the distribution report, the first of which will be in place well in time for the first settlement under the new system. The distribution report can be amended from time to time if necessary, but the Bill does not require, and we do not envisage, an annual report. Each distribution report will apply until it is either amended or replaced by a new one. While we do not intend there to be a new basis of distribution every year— that would re-introduce a great deal of uncertainty—data from authorities will be updated each year. For instance, the number of school children may increase.

The distribution report will describe and define the indicators to be used in assessing need and contain some of the weightings to be given to certain indicator data. The actual needs assessments, and hence the grant entitlements for each authority, can be calculated from this, but only after the total revenue support grant for the year has been fixed.

The total of revenue support grant for a year will be set out in an annual revenue support grant report which will be laid before another place for consideration and approval. The report will determine the amount to be paid to certain specified bodies which provide services to local authorities and the total amount available for distribution to authorities. This amount of grant will be distributed on the basis of the methodology set out in the distribution report applying at the time. This will produce a separate figure for the needs assessment for every authority and a grant entitlement for each charging authority to be paid into its collection fund. There will be a separate and different distribution report and separate and different revenue support grant reports for Wales, where slightly different arrangements will apply.

Once the revenue support grant report for the year has been approved in another place, the Secretary of State will formally calculate the amount of grant to which each authority is entitled and will inform them of that amount. This amount is then fixed for the year. We envisage that, in fact, provisional grant figures will be provided when the report is debated, as is done now.

There will be one opportunity to make another grant calculation, perhaps to put right data errors or to update some information, but any change in grant as a consequence of this calculation will be made after the end of the financial year. Having grant certainty for the year will do away with one of the difficulties of the present system which makes sensible financial planning so hard for local authorities. At present there can be considerable variations in grant entitlements during or after the financial year. This has been due largely to variation in spending by individual authorities, but the new revenue support grant will be independent of expenditure and therefore there will he no change in grant in the year.

The Committee will see that the system is really very straightforward and simple. We set out in one report, the distribution report, how needs are to be assessed and grant distributed, and then in a further report each year we set out how much grant is to be paid. Grant entitlements will then be calculated and payment made accordingly.

Having set out in some detail how the grant system will work, I turn to the amendment moved by the noble Lord, Lord McIntosh of Haringey. This amendment would require the Secretary of State to set out what amount he would pay to receiving authorities in respect of the costs incurred by charging authorities in collecting charges and penalties and in providing a registration officer with staff, accommodation and other resources. These will, of course, be important functions of receiving authorities and we want them to take very seriously their responsibilities in this regard. But I do not think that this requires us to single out these functions for special treatment.

The need to provide for collecting, enforcing and administering the charge will be taken into account by the Secretary of State when he determines the overall level of revenue support grant and sets out the basis for distribution of grant. The needs assessment of charging authorities will take into account their need to spend on these as on other functions, and their grant entitlement will reflect this. This mirrors what happens under the present system. The GRE for rating authorities covers the cost of rate collection, so their grant entitlement supports those costs as it does any other.

The noble Lord may be concerned about whether there will be a separate indicator relating to community charge administration and collection. We have, of course, said that we want to reduce the number of indicators from its present level—there are more than 60, I believe—and there have been all sorts of rumours that there will be only six or fewer. No decisions have yet been taken. We are still looking at the options. But I think it is safe for me to say that there will be more than six indicators overall. The treatment of community charge costs has yet to be decided but we should bear in mind the overall aim of simplification. It may be, for example, that population would be the best basis for distribution, as the number of properties is now for rate collection costs. And there may be other services which could usefully be taken with this and distributed on the same basis. But whether it is dealt with separately or not, it will be fully taken into account.

The requirements introduced in Amendments Nos. 136 and 140 would mean making available a specific amount of revenue support grant for this service and describing how this amount is to be distributed. This would, of course, run directly counter to the unhypothecated, block grant nature of revenue support grant. Such an arrangement would move towards being, in effect, a specific grant. But the Government take the view that when the extent of central government support for local services has been decided, it is for local authorities to decide for themselves how best to supply them. A specific grant would be an inappropriate means of supporting a mainstream statutory function of all authorities.

Those are the general grounds on which I would argue against any separate treatment for a particular service. But there are other practical arguments against it, too. First, grants for specific functions are generally designed to influence local authorities to do something or more of something than they otherwise would. But surely authorities' own best interests will ensure that they need little encouragement to administer their own finances efficiently? If they do not, they will be affecting their own coffers, and in due course the costs of any mismanagement would fall on their charge payers. I am sure they do not want any more of that than we do. So that argument fails as a reason for needing a separate grant element.

But, secondly, I have to tell the Committee that these amendments would not in any way oblige the Government to meet a greater share or a higher level of costs than they thought appropriate. Even with these amendments, we would first set the total of revenue support grant. Then the amount to be paid to specified bodies would be deducted. The amendment as drafted seems somewhat confused on this point, but I think the intention would be that the amount to be payable in respect of these costs would be identified and deducted, to he distributed on a separately specified basis. What remained would be the general block grant to be distributed on the basis set out in the distribution report. In other words, the more grant was set aside to support these costs, the less would be available for the main distribution. This arrangement would not affect the total amount of grant to be paid.

It could affect the overall distribution of grant, if the separate element were distributed on a basis very different from that used for the main distribution. But in any case grant distribution would be related to an assessment of need to spend. So having a separately identified element of grant would not mean that there would be any relationship with actual spending. Some overspending authorities would still doubtless overspend. They would get no more grant. High costs would still fall to be met by the charge payer, who would, on the other hand, benefit from low costs. So I can see no advantages from the arrangements set up by these amendments and, indeed, some disadvantage in giving the impression that we are treating these costs differently.

Lord McIntosh of Haringey

We must be grateful to the Minister for his clear exposition of the Government's thinking in this part of the Bill. It certainly is helpful to have it set out in this way, and it is a good deal clearer when he says it than when we try to read it in the notes on clauses. Certainly it is a good deal clearer than when we read it in the Bill. Nevertheless I still find myself in considerable difficulty about many of the points he is making.

The first claim he makes is that the new system will he "above all, simpler". I have to remind him that in a series of Acts relating to local government over the past nine years, in the lifetime of this Government, what we have had is not a simpler method of administering or financing local government, but increasing complexity on a grand scale. Every Bill that has been brought forward has increased the complexity of the system, and every administrative act by Ministers has increased the complexity of the calculations to which the legislation gives effect.

Indeed, it has got to the stage where, when the rate support grant is announced, it becomes virtually impossible for real consultation to take place with local authorities and it is, I think, notorious that the effectiveness of the Central Consultative Committee, which used genuinely to discuss local authority expenditure and where the resources were going to come from, has declined dramatically under this Government. So, although I do not deny that the principle of the distribution report system and the grant based on the current distribution report is a better way of doing it than we have at the moment, I certainly deny that it is doing anything more than getting rid of some of the complexities introduced by the Government.

I also return to the charge which I made in introducing these amendments, which is that there is no indication whatsoever of the principles of which the Secretary of State will take account in calculating the grant, or of the way in which it will be allocated among different local authorities. It is all very well to say that the framework is the framework of a distribution report. That does not go anywhere to saying what the Secretary of State will put into the distribution report. In other words, we are still being required to sign a blank cheque. We are being asked to accept that the Secretary of State, having accepted the procedures so lucidly explained by the Minister, has a clear idea, about which we are unworthy to be told, of what will be in the grant calculations.

Turning to the specific amendment, I do not believe that the Minister can have understood the proposals fully. We are not saying that we are looking for a greater share or a higher level of grant for the purposes of explaining how much the administration costs will be. We are not looking for an increase in the total amount. In so far as the Minister's reply covered those points, it may be our fault in the drafting of the amendment. However, that was not what we intended.

In the amendments we are trying to ensure that the extent to which the government grant is being swallowed up in the extra administrative costs required by this Bill, these procedures, this way of financing local government—and only by this way of financing local government—should be made explicit to the community charge payers. I cannot imagine any more modest demand for accountability as between costs incurred by local authorities in providing services and costs incurred purely as a result of government action. I cannot imagine on what grounds the Government can, with a straight face, deny that the community charge payers have a right to know what money is going to the services and what money is going to the extra administration required by the complexities of the collection system.

Although we have grave reservations about many other aspects of the grant system, to that extent I am inclined to say that we shall either ask for the decision of the Committee now or that we shall come back with other amendments on the point at the Report stage. I do not know whether the noble Baroness, Lady Seear, wishes to add anything to that.

9 p.m.

Baroness Seear

I speak as an ignoramus on matters of local government finance but I do not suppose that I am alone in that. I wondered whether the Minister would answer one or two questions. It helps to have the statement that he made but it seems to me that all the important decisions will be taken by the Secretary of State. They are important in terms of the amount of money local authorities will receive.

Can the Minister say how clear the way in which decisions are arrived at will be made? We are told that the Secretary of State will decide, but how transparent will the whole performance be and how much consultation will there be with individual local authorities as regards what the expenses will he? It sounded a highly centralised and somewhat dictatorial way of dealing with the provision for local finance. It is very important because, as the Minister said, any failure to meet the costs of running local government must fall directly on the community charge payers. Therefore they have a direct interest in wanting to know how the support grant has been calculated and whether it has been calculated correctly.

I should like to ask the Minister one further question. I am glad that the noble Lord, Lord Belstead, has come into the Committee at this moment. During the debate on the Education Reform Bill the noble Lord told me that I would have my answer to this question when the local government Bill was before the Committee. It has now come before the Committee. Given that the redistribution carried out by ILEA is being moved with the abolition of that body, many Members are concerned about how the level of spending for schools in the poorer boroughs will be sustained. Unless the support grant is able to compensate for the loss of the elements which, through ILEA, redistributed amounts from the wealthier boroughs to the poorer boroughs, the schools in the poorer areas will quickly become sink schools. Can the Minister tell the Committee that that will not happen and that the support grant will be adequate to replace what would have been given through the redistribution carried out by ILEA?

Baroness Fisher of Rednal

The noble Baroness, Lady Seear, has asked the Minister two questions. I was interested to hear the Minister say that there would be fewer indicators of need. That phrase worried me more than any other. I followed what the Minister said but I had thought that the "need" element for local authorities meant just that; need for the needy authorities. I believe all Members will agree that some authorities have more severe problems than others. One does not wish to enumerate them because those Members present know the difficulties faced by some local authorities. Will the fewer indicators of need operate against those local authorities which need the money, particularly the inner city areas throughout the country?

The Earl of Caithness

I should first like to answer the question asked by the noble Baroness, Lady Fisher of Rednal. No, it will not affect those authorities which have special needs. The whole purpose of our system is to simplify it. We believe that some of the duplication can be removed. Other services can usefully be taken on a population basis and distributed on that basis. The core point of the concern expressed by the noble Baroness will continue to be met by the needs assessment. Although we are reducing the number of items taken into account, we do not believe that the local authorities will suffer.

I am glad to say that the noble Lord, Lord McIntosh of Haringey, and the Government are at one in their reflections of the present system of grant calculations and distribution. As the noble Lord has said, it is incomprehensible. We believe that our proposed system will be much simpler because it will be assessed on a needs basis rather than on a spending basis. I believe that that will be much clearer to local authorities. It can be carried out in advance of the financial year rather than the authorities constantly having to return and rather than the grant being affected by the actual spending of the authority.

To answer the noble Baroness, Lady Seear, the distribution basis and the revenue support grant will have to be set out in reports which, as I said, will have to be clear in themselves. I reiterate that they have to be approved in another place; so the concern of the noble Baroness about how clear the process will be is to be debated in another place. Of course, I can reassure the noble Baroness that there will be consultation with the local authority associations about the amount of grant each year.

On the second point raised by the noble Baroness regarding ILEA, the needs assessment of all the inner London boroughs will take account of their new responsibilities for education and the grant collection will ensure that additional needs which cannot be met from local resources will be met from grant. At the moment I am unable to give further details, but I shall see whether I can ascertain more information for the noble Baroness.

Lord McIntosh of Haringey

I suppose we have made some small progress in that the Minister indicated that he will support my Amendment No. 144, which provides for the consultation with, such representatives of local government as appear to him to be appropriate".

Noble Lords

Oh!

Lord McIntosh of Haringey

That is exactly what the Minister said would happen. I cannot see any reason why he should not give effect to it in law if he is volunteering his agreement with our intention in that amendment. However, we are not debating that amendment now, and the Minister can find out ways in which to backtrack on the commitment he has just given.

The answers given are not satisfactory and these are not matters we can let go. It is not appropriate for me to seek the opinion of the Committee at this time of night but I give warning that, if we cannot even reach agreement on such a simple matter as setting out for the benefit of those paying the community charge how much is coming from grant for services and how much is going on the administration of the community charge, then we are making very little progress in the face of what must be deliberate lack of clarity on the Government's part in saying how these grants are to be calculated and how they can be justified to the users of local authority services. In other words, we are a long way from accountability.

We have other amendments on the Marshalled List which attempt to deal with the matter in more detail but we are disappointed with the reception we have received so far. In the circumstances, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord McIntosh of Haringey moved Amendment No. 137:

Page 46, line 4, at end insert ("and (c) shall take into account—

1. (i) the latest information available to him as to the aggregate of all authorities' expenditure.
2. (ii) any probable fluctuation in the demand for services giving rise to additional expenditure, so far as the fluctuation is attributable to circumstances which are not under the control of local authorities;
3. (iii) the need for developing those services and the extent to which, having regard to general economic conditions, it is reasonable to develop them; and
4. (iv) the current level of prices, costs and remuneration and any future variation in that level which in the opinion of the Secretary of State will result from decisions which appear to him to be final and which will have the effect of increasing or decreasing any particular prices, costs or remuneration.").

The noble Lord said: This amendment is the next stage of our attempt to introduce a little glasnost into the Government's procedures. Clearly, the Secretary of State will have before him, when preparing his reports and determining expenditure, information on local authorities' expenditure. No doubt he will have available to him information on fluctuations in demand for the services and in the charges to be made by local authorities for services so that the net cost can be calculated. I am sure that as a responsible Minister of the Crown he will be concerned with the need for developing the services and the extent to which it is reasonable to develop the services, or, indeed, to reduce them if that is the right thing to do. After all, the Secretary of State is taking a very close interest in local authority expenditure. He will not deny that. He must be properly informed about all these matters in order to reach a just decision.

The Secretary of State will have to be concerned with the level of prices, costs and remunerations which apply to local authorities. I do not want to repeat the argument that we had last week about the relevance of the retail prices index, but there was a great deal of recognition that there are considerations and other local authority costs which vary from the retail prices index. It is not possible to operate on too simple a formula.

I am not arguing for complexity for its own sake: I am saying that the Secretary of State, if he is behaving responsibly in preparing these calculations, will have to take matters of that sort into account. There is no obligation on him to do so in the Bill as drafted and it seems reasonable that he should be required to do so if we are to have any confidence that the decision he arrives at is justified.

It is not just a matter of the nature of the Secretary of State's considerations: it is a question of whether the judgment which another place takes when these orders are placed before it is based on information which is reliable. Unless these calculations are made available to Members in another place they cannot make a sensible judgment whether the Secretary of State himself is sensibly determining the level of support grant or whether his distribution reports are realistic. In that sense, though it is not proposed that these regulations should come before this Committee, it is not inappropriate for us at this time to suggest the kind of background information and the basis of calculation which the Secretary of State will have to use and which he should be taking into account, and which, I suggest, he should be making available to another place in order that they may approve the order with the due concern and responsibility which they must have for these matters. On this basis I beg to move.

9.15 p.m.

The Earl of Caithness

As we have heard, the purpose of Amendment No. 137 is to re-introduce into the Bill those factors which the Secretary of State is required to take into account before determining rate support grant in the present system under the Local Government, Planning and Land Act 1980. Therefore, it seeks to retain a link between the amount of grant and the level of expenditure. I say to the noble Lord, Lord McIntosh of Haringey, therein lies my difficulty.

The new system that we are proposing is designed to encourage local accountability by establishing a clear link between the need of an authority to spend and its community charge. The revenue support grant system will continue to compensate local authorities for variations in their needs, but the grant of an authority will no longer be dependent upon its expenditure, only its need to spend. Our purpose is to break the present link between grant and local authority spending.

If a Secretary of State were required to take into account the actual spending of a local authority when he determined the amount of grant, this would run directly counter to our intention that the grant should he fixed in relation to the need to spend rather than on the level of expenditure which local authorities choose to incur. Under the new system, if a local authority chooses to spend above the level it needs to spend this will readily be apparent in the community charge and the community charge payer will doubtless take account of that at the next opportunity he has to cast a vote. On the new basis, it is not something that the Secretary of State should he required to take into account when determining the amount of grant.

Lord McIntosh of Haringey

I find that answer almost entirely misconceived. In these amendments it is not proposed that the Secretary of State should base the revenue support grant on the expenditure of local authorities, but merely that information on the expenditure of local authorities should and must be available to him in making his calculations.

I suggest that the whole distinction between having revenue support grants based upon needs and resources rather than expenditure is misconceived. It is not the case that revenue support grants are based on expenditure: they are based upon what are supposed to be objective calculations of needs and resources. That is the basis upon which successive Secretaries of State have justified their rate support grant awards and their rate support grant figures over the years. It was Mr. Michael Heseltine, the Secretary of State, who added complexity to an already complex calculation by the introduction of multiple regression techniques into the calculations of the grant from the estimates of needs and resources. It was not at all on the basis of expenditure.

That is not to say that the Government do not concern themselves with the expenditure of local authorities now or in the future because both under existing legislation and under Part VIII of this Bill the Government are taking a keen interest in the expenditure of local authorities and propose to use it in order to limit the level of community charge which is raised. The idea that we are moving from an unjustifiable grants system based upon expenditure to an justifiable grants system based on needs and resources is almost entirely phoney. First, that was not the case before and, secondly, we are not moving away from it.

In both cases I reject the charges that the Government make and the analysis which the Government make about these amendments. To say that information on changes in demand, the need for service development, the need for information to be available on local authority expenditure as a whole and the need for information on costs, should be taken into account by the Secretary of State, is quite a different matter from saying, as the Minister appears to be saying, that what we are advocating is a change to a calculation of grant on the basis of expenditure.

I hope that I have not done any injustice to the Minister in what he said, but I hope that if I now withdraw the amendment, as I propose to do, he will look at the arguments that have been put forward this evening. I hope that he will recognise that his allegations about our amendment and the implications of it are almost entirely misconceived. However, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord McIntosh of Haringey moved Amendment No. 138:

Page 46, line 7, at end insert— ("(6A) The report shall also include—

1. (a) details of the factors taken into account in the estimate of the distributable amount for the year referred to in paragraph 8 of Schedule 8;
2. (b) an estimate of the total amount for the year of community charges to be raised by charging authorities and a reconciliation of the factors taken into account in this estimate within the related factors in (a) above and elsewhere under this section.").

The noble Lord said: We try again, without much hope of success and without much hope of the arguments penetrating. With this amendment we ask that when the revenue support grant report is laid before another place, as it will be once a year, the Secretary of State should do the other place the courtesy of explaining what he estimates the income of authorities to be, and indeed each authority to be, from the national business tax, and give an estimate of the total amount of the community charges raised by local authorities and how he has arrived at that estimate.

There will be disputes about these matters. There will be difficulties in arriving at the best estimates. The complexity of the system is such that it is not obvious what resources will be available to local authorities. On the other hand, it is essential that in reaching a decision the House of Commons should know not only what are the other resources against which the revenue support grant will be calculated but also how that estimate has been arrived at. There is nothing more frustrating than the position we had earlier when discussing the residual rate, when totally different sets of figures appeared to be circulating in different parts of the Committee on the effect of the residual rate on the individual community charge payer and ratepayer in certain inner London boroughs. That difference of evidence cannot be resolved on the floor of the Committee tonight, but when the House of Commons comes to consider a revenue support grant order it must have some confidence that it has the correct figures. In order to do so it must have the basis of calculation used by the Secretary of State in preparing the order.

I suggest that this is not a threatening amendment. It does not force the Secretary of State to make a judgment any different from that which he would otherwise make of the recommendations he will put to another place, but requires that he should do so with the utmost openness and make his calculations available so that they can he sensibly discussed there. I beg to move.

The Earl of Caithness

There are some technical flaws in this amendment, the chief of which is that there is no "estimate" of the distributable amount, but rather a calculation, albeit one based on estimates of certain amounts, and for that reason the amendment as it stands does not achieve its purpose.

However, I would not of course argue against it on that ground, since there are more important reasons for disagreeing with the noble Lord. I imagine that the concern underlying it is that somehow in making his estimates and doing his calculation the Secretary of State will not act reasonably, and that authorities will not benefit as much as they could from the proceeds of business rates. I understand the concern authorities have that the changes we are making to the rating system should not inadvertently disadvantage local people. Indeed, we share that concern, but I believe, for good reason, that this will not, and cannot, happen.

First, the Secretary of State must, as always, in using his discretion to make the estimates which then form the basis of his calculation, act reasonably. An authority which believes he has not may he able to challenge his action. Furthermore, Members of another place will have the opportunity in the debate on the revenue support grant report to question the Secretary of State, and I have no doubt that they will represent the interests of their constituents most vigorously. But, secondly and more specifically, the non-domestic rating account for each year will show the amounts of business rates paid in by local authorities and the amounts paid out to them. It will be quite apparent on the face of the account whether it is in balance, in surplus or in deficit. If it is in deficit, that will reduce the amount which can be distributed the following year. If it is in surplus, that will increase the amount which can be distributed the following year. What this means is that any 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 purpose. Conversely, only the sum coming into the pool can be paid out; there is no source of additional money.

The Secretary of State's calculation will be based on estimates which may prove not to be entirely accurate predictions of future trends. However, if this is so, and the distributable amount calculated turns out to be greater or smaller than the amount actually available, the necessary adjustments will be made the following year. In short, I believe that the non-domestic rating pool is being set up in such a way that authorities need have no fear that the proceeds of non-domestic rates will go astray.

I had thought that the noble Lord, Lord McIntosh of Haringey, was on the point of giving up, but I am delighted that he moved the amendment. As he knows, the Government are always open to argument and I recognise the strength of his concern. I shall certainly undertake to consider whether we can amend the clause to provide that the estimates upon which the calculation is based should be set out in the report as well as the distributable amount itself. Indeed, perhaps the noble Lord and I might have a word about that between now and the next stage of the Bill's proceedings.

I now turn to the second item. The report is to include an estimate of the total amount for the year of community charges to be raised by charging authorities and a reconciliation of the factors taken into account in this estimate with the related factors in the calculation of the distributable amount and elsewhere. The first is clear and straightforward. However, I cannot accept it because it would prejudge local authorities' budgeting decisions.

The report will, on present plans, be made about the same time as the rate support grant is made, in November. It will set out the amount of revenue support grant to be paid to authorities. It will set out the distributable amount of non-domestic rates. We will provide figures showing individual authorities' needs assessments and the grant entitlement of each receiving authority. We will be able to say what the national norm is for the community charge for spending at need. However, since the actual community charges will depend on authorities' spending decisions, which will not yet have been taken, we will not be able to make an estimate of the amount to be raised by charging authorities.

Since the report will give the grant total and the NNDR, we will know the total of authorities' needs assessments. It is a simple matter of arithmetic to calculate the amount which will have to be raised from the community charge if authorities spend at need. By definition this will be consistent with the grant and NNDR totals, but is is unlikely to be the same as the actual amount raised, which will of course depend on local authorities.

For the same reasons there would be difficulties with the final part of the amendment, the reconciliation of the community charge total, RSG total and the NNDR distributable amount. As I have just explained, a reconciliation of these figures, on the assumption that all authorities spend at need, is simple arithmetic. However, a reconciliation taking into account actual spending and actual charges cannot be done in the revenue support grant report.

I am afraid that this has been a rather long and technical explanation of the problems arising from the amendment. I hope, however, that the Committee will accept that in certain respects it fails to achieve its objective and in others is based on ill-founded worries. Given this, and my undertaking to consider, whether we could include more information about the basis on which the distributable amount is calculated, I hope that the noble Lord will feel able to withdraw the amendment.

Lord McIntosh of Haringey

As the Minister rightly says, the amendment is in two parts. The first refers to national business tax and the second refers to the receipts from community charges. I must say straight away that I am most grateful for the undertaking given by the Minister about the national business tax and I look forward to hearing his conclusions once he has taken it away and thought about it. Further, I shall certainly be pleased to talk to him about the matter at any time before the next stage of the Bill's proceedings.

As regards the second stage, it may well he that the Minister has a point. When drafting the amendment it was not our intention to prejudge the local authorities' community charge calculations. Further, if the timing of the report is such that it would have this effect, then clearly that situation would be undesirable.

I still believe that the purpose behind the amendment is sound. It is important that when the settlement is made the public should know what the Government think will be the result of the settlement in terms of the community charge, because after all that is what hits the headlines when the grant settlement is made. If well-informed calculations are not made of how much the community charge will cost the individual in each local authority, then ill-informed calculations will be made. We should prefer to see well-informed calculations rather than ill-informed calculations.

I hope that we shall he able to explore the possibility of our coming together on this matter and achieving our objective of knowing what the Government expect to come out of the grant settlement in terms of the community charge. without prejudging local authority decisions. Perhaps when we meet we can talk about that matter also. On this occasion, not giving up has perhaps yielded some minor movement. for which we must be grateful. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 84, agreed to.

Clause 85 agreed to.

9.30 p.m.

Clause 86 [Distribution reports]:

Lord McIntosh of Haringey moved Amendment No. 139:

Page 46, line 32, leave out subsections (1) to (3) and insert— ("(1) The Secretary of State shall—

1. (a) determine in relation to each charging and precepting authority notional expenditure assessments having regard to their functions and needs in accordance with principles to be applied to all authorities, and
2. (b) make a report containing the basis on which he proposes to distribute among receiving authorities those amounts of revenue support grant which fall to be paid to such authorities under this Part, being a basis which has regard to the notional expenditure assessment determined under subsection (1) (a) above.

(2) Before determining the notional expenditure assessment or making the report under subsection (1) above, the Secretary of State shall consult such representatives of local government as appear to him to be appropriate.

(3) This report shall be laid before the House of Commons and shall specify the principles on which the notional expenditure assessments and basis of distribution are determined.").

The noble Lord said: In moving Amendment No. 139 I should like to speak also to Amendments Nos. 141 and 144. I misjudged the Minister when he agreed to the principle behind Amendment No. 144, because I think that he was also agreeing to the principle behind No. 141. I take it that he will be able to accept those amendments and that I can concentrate upon Amendment No. 139. It is of more importance than may appear from the wording of the amendment. The point behind it, which must never be lost sight of, is what I think economists call the gearing.

If there is any error in the Government's assessments of the needs of a local authority and those needs have to be met by raising expenditure, the very fact that so much of local authority expenditure is financed from central sources—that is, the grants element and the national business tax element—the effect of any miscalculation of needs on the final community charge levied will be much greater than one for one. One cannot put a figure on it. But if, for example. there were a 10 per cent. error in the assessment of needs, or there were to be a 10 per cent. change in needs through no error on the Government's part—one of the points made in the earlier amendment we debated—the effect on the community charge, because of the gearing, could be 20 per cent., 30 per cent. or 40 per cent. That is the nature of the beast which has been recommended to the country by the Government. It is a dangerous and inflexible beast. The dragon flicks its tail and all sorts of unintended effects, about which the dragon with its small brain does not know, can result.

The Secretary of State must do everything he can to establish what the needs of local authorities are, in accordance with the acceptable, understood and agreed principles, and make that information available to the public. The object of the exercise—accountability—cannot be achieved unless the Secretary of State acts with the utmost openness and consistency in making his calculations and explaining how they are arrived at.

Those matters are too important to be raised and withdrawn in a few minutes after a bland government reply. I hope that I can expect the kind of sympathetic treatment from the Minister that we had on the last amendment. I hope that he will confirm his commitment to consultation with local authorities which is being debated in this group of amendments also. I hope that I shall be able to withdraw these amendments or have them accepted with a light heart. But if that is not the case, if we are not making progress towards openness on the part of the Secretary of State in arriving at his grant settlement, then I am bound to say that we are moving even further from the principle of accountability which is the Government's main justification for all these amazing administrative procedures and the amazing social injustice which is involved with the community charge.

Unless we have an indication of understanding and assent from the Government, then this matter will have to be taken further, either now or at a later stage. I beg to move.

The Earl of Caithness

The noble Lord has given us a full explanation of the purpose of these amendments. He sees Amendment No. 139 no doubt as a safeguard for local authorities, setting constraints on the Secretary of State's powers and ensuring that certain steps are taken. I understand his argument but I hope to show the Committee that the noble Lord's concerns are misplaced.

First. we have already produced—as long ago as last September—one of our series of yellow-covered booklets about the new grant system. It contains a lot of information about how we intend the new system to work. At this stage I am delighted to see my noble friend Lady Gardner of Parkes in her place. I hope that she will read Hansard and what I said when I spoke to Amendment No. 136, which was related to grant. Of course it is very relevant to what my noble friend said earlier, but doubtless she too has read the yellow-covered booklet and knows that in the booklet we proposed a system of "needs assessments"—that is, assessments of need to spend. These, it says, will continue to reflect the real disparities in the circumstances of different areas which affect authorities' need to spend in order to provide a standard level of service efficiently". It goes on to say, There will be a separate assessment of needs made for each authority and it is likely that these will be built up from assessments for each of the major services, with a single assessment for all other services". So we are going to produce a "notional expenditure assessment" for each authority; it will have regard to authorities' functions and it will measure their need to spend. The assessments will be based on principles applicable to all authorities, or all authorities in a class.

What more will the distribution report contain? It will describe how grant is to be distributed on the basis of these needs assessments. As the yellow booklet says, grant will compensate in full for differences in needs assessment. If Authority A has a needs assessment£5 million higher than Authority B, it will get £5 million more grant than Authority B. There will also be an additional slice of grant distributed as an equal amount per adult and that will make up each authority's full grant entitlement. The effect of this is that, if every authority spends at the level of its needs assessments, all authorities will need to raise the same level of community charge.

The system is simple and it is not a secret. Local authorities need no safeguard against it. This brings us to the second reason why I do not think authorities need be concerned at the present form of Clause 86. It is not open ended and we do not make the mistake of thinking that it is. The Secretary of State must always exercise his discretion reasonably. He cannot settle on an arbitrary basis for the distribution of grant and it is difficult to see why he should want to. The expenditure of all local authorities is our concern and in considering what level of support to provide, again, we take account of the position of all authorities. We are only too well aware that if we were to act capriciously or unreasonably, some authority would no doubt seek judicial review of our action.

But there is a further safeguard, before things reach that stage. It is that each distribution report, the initial one, any replacement and any amendment report, will have to be approved in another place before it can have effect. I have to say that it is up to those in another place to determine how effective that scrutiny is. The Secretary of State can be held to account for anything in such reports if concerns about authorities are raised in another place.

In saying that our intentions are reasonable and do not need to be constrained, I am not of course implying that all authorities will agree with every aspect of what we propose. Indeed, as some of them hold diametrically opposed views this would be quite impossible. But this points up another flaw in the assumptions which appear to underlie this amendment. Procedural constraints, such as those this amendment would establish, act as legal hurdles but cannot bring about any particular outcome (in this case, any particular grant distribution) as they do not, and cannot, remove the Secretary of State's discretion. This is why I do not believe it would be an improvement to make this amendment to the Bill. It would add to its procedural complexity and to the possibility that we might make a technical slip—and I remind the Committee that it is authorities which suffer in the end if we cannot operate the system simply and flexibly—without materially affecting the system we propose to set up.

Turning now to Amendments Nos. 141 and 144, which introduce a formal consultation requirement in Clauses 88 and 90, which concern respectively distribution reports and the transitional safety net, the Committee will know that the present grant distribution arrangements, and in particular the GRE needs assessments, are extremely complicated. We intend that the future arrangements will be much simpler, and much more comprehensible. It is, however, inevitable that there will be a degree of complexity and a certain amount of mathematics involved if we are to achieve a fair reflection of local authorities' needs.

We shall certainly want to talk to local authority associations as we prepare each distribution report. But formal consultation would not be appropriate because that would impose a more formal straitjacket on the way in which the exercise is carried out. We have proposed instead that the Secretary of State should notify local government interests of what he has in mind. He will of course receive any representations they may make, and will consider them before final decisions are made. There is nothing new or unusual in this. We are constantly receiving suggestions and representations which are all taken into consideration.

The noble Lord, Lord McIntosh of Haringey, was also concerned that there was no consultation provision in the clause dealing with the transitional safety net, Clause 90. The report setting out the transitional arrangements will be a one-off report. Again, I do not think it is necessary for there to be formal consultation to ensure that the authorities' views are heard. I am sure that they will make them known and we shall listen.

I should say to the noble Lord, Lord McIntosh of Haringey, that I am not backtracking on the commitment I made on Amendment No. 136. I told the Committee that there would be consultation with local government representatives about the amount of RSG each year. The Bill requires that in Clauses 84 and 85. But in view of the noble Lord's remarks, perhaps I should read what he said in the Official Report. I must admit that I did not take in all of the noble Lord's points fully. However, if I could read them between now and another stage of the Bill, I believe that would he beneficial.

Lord Bonham-Carter

Before the noble Earl sits down, may I ask him whether I am right in saying that I heard him say, as a categorical statement, that the Secretary of State will always act reasonably? Is that a law which the noble Earl proposes that the Chamber should accept as the truth?

The Earl of Caithness

I fear that the noble Lord may not have been in his usual place when I spoke about reasonableness earlier on. Of course the Secretary of State is duty bound to act reasonably, for if he does not he might be taken to a judicial review.

Baroness Seear

The noble Earl really must understand that there are a great many of us who find this an extremely unsatisfactory reply. There is plenty of evidence in this Bill, which presumably was drafted with the approval of the Secretary of State, that he does not always act reasonably. It is apparent on the written page. There is the fact, for example, that we were told that the Secretary of State was proposing to collect poll tax from old men in cardboard boxes under the arches. That is not much of a measure of the reasonableness of the author of this document.

Who makes the estimates of the needs? It is the civil servants, presumably, who advise the Minister. Having been involved in the past in some studies of this kind, I should like to know how they arrive at their knowledge of what the needs are. It is an extremely intricate and difficult matter. What is the process by which needs are determined? The bland description given by the Minister of how it is to be done and his ultimate trust in reasonableness leave me totally unconvinced.

9.45 p.m.

The Earl of Caithness

The experience gained by the department over many years of dealing with local authorities stands it in good stead in terms of knowing what local authorities need. Local authorities have never been slow in coming to the department with their concerns or to point out matters on which they believe that the department has not taken their representations on board. That knowledge, accumulated over many years, has enabled the present system—incomprehensible as it is!—to continue. The proposed system will be much simpler. As I have said on more than one occasion, we shall continue to be in touch and to consult with local authority associations over a number of issues in the Bill. I am sure that local authorities will not be slow in coming forward with their views if they have not been reflected in what the department has said.

Lord McIntosh of Haringey

As evidenced by the Minister's reply, there are two basic misconceptions about the amendments. First, he stated that we are looking for safeguards for local authorities. We are looking for safeguards for voters and community charge payers. They are the ones who will ultimately suffer if there are errors or injustices in the way in which the revenue support grant is calculated and, a fortiori, because of the gearing to which I referred in moving the amendment, in the community charge that they have to pay. I reject the claim that the purpose of the amendments is to safeguard local authorities.

The second misconception is that the amendments are intended to affect the discretion exercised by the Secretary of State in any way. After all, this is a revising Chamber. We are not seeking to move controversial or wrecking amendments. This series of amendments concerns the information which the Secretary of State has in arriving at his decision and the way in which he communicates that information to the public at large and to the House of Commons when it is considering the order. There is nothing which in any way restricts the discretion of the Secretary of State. It contributes a procedure which is more realistic than the simple fall-hack position of saying that the Secretary of State must always act reasonably or that he is subject to judicial review.

If neither the House of Commons nor the public at large has the information on which to determine whether or not the Secretary of State is acting reasonably, the criterion of reasonableness cannot be said to be effective. That is a fundamental point. It should not be left to questioning. It should be a matter of established procedure that the Secretary of State is open in the way in which he arrives at his calculations, the explanation he gives of the calculations and the results of them.

The matter is one of great seriousness, not merely for local authorities but also for those who are using services and paying for them. If mistakes are made they will result either in a breakdown of services, an excessive community charge or a combination of the two. I cannot see why the Government find it necessary to go on stonewalling on important matters of public accountability. I find that to be in total contrast to the claims which were made by the Government at Second Reading and when we started our consideration of the Bill in Committee that the rest of the procedures are justified because of an increase in accountability. When we ask for more accountability and for accountability from the Secretary of State as well as from local authorities, we meet a blank wall of resistance.

When it comes to the matter of consultation, I am not convinced by the answer which the Minister gave. He said that the Secretary of State is obliged to notify local authorities of the contents of the distribution report. However, I remind him that he is only required to notify them of the general nature of the contents of the distribution report. That is even further away from proper consultation than the Minister claimed.

This is not a matter which has been adequately dealt with by the Government. We shall have to return to the subject at a later stage and we shall have to find some way of bringing to the Government some sense—which they appear not to have at the moment—of their responsibilities to the public and users of local authority services. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 140 not moved.]

Lord Carr of Hadley moved Amendment No. 140A:

Page 46, line 35, at end insert— ("( ) In making a report under subsection (1) above the Secretary of State shall have regard to the extent to which each receiving authority gives financial support to bodies representative of the arts.").

The noble Lord said: I should like to say a word on behalf of my co-sponsors of this amendment, my noble friend Lady Young, the noble Lord, Lord Donaldson of Kingsbridge, and the noble Baroness, Lady Birk. Unfortunately, all three find it impossible to be present tonight. When we were trying to plan ahead we all hoped—as perhaps the Government also hoped—that this amendment would have been taken at the end of last week rather than at the beginning of this. All three asked me to apologise to the Committee for their unavoidable absence and to stress their strong support for the amendment to which they have put their names.

The Government confirmed strongly in our first debate today—that on their Amendment No. 119A—that the rate support grant was the proper instrument for meeting the special needs of particular local authorities. I do not dissent from that view provided the Government will make absolutely clear both their ability and their determination to use the rate support grant fully and fairly for that purpose. As a number of noble Lords made clear in that earlier debate this afternoon, including particularly Members on this side of the Chamber who are noted for their strong support for the Bill as a whole, it is necessary now for the Government to make clear their interest and intent in more definite and specific terms and less general terms than has been the case hitherto.

The amendment deals in specific terms with the special needs of local authorities which have important arts bodies in their areas and asks that they should be specifically taken into account by the Secretary of State. It has become an accepted and important part of our system of public support for the arts in this country that local authorities should give support to important arts organisations in their respective areas and that that responsibility should not be left solely to the Arts Council. I submit that it is of great importance that that practice should continue. It is therefore of great importance that the Government should recognise the strong fear that exists that the new system of local government finance which this Bill proposes to introduce may make the continuance of that established practice impossible or at the very least extremely difficult.

The Government may say that that fear is unfounded but I think that they must recognise that the fear exists very strongly. Nothing they have said so far has been sufficient to remove that fear. That is why we come back to the need which was mentioned earlier this afternoon for more specific and concrete assurances from the Government as to how they intend to use what they say is flexibility that they possess and to fulfil the responsibility which they say that they accept.

Hence, the amendment seeks from the Government an assurance that, in determining authorities' revenue support grant, the Secretary of State will have regard to the extent to which each receiving authority gives financial support to bodies representative of the arts in each of their areas. That principle is of general, nationwide application. I want, however, to argue the case above all in connection with one particular national arts organization—namely, English National Opera. It is not because this is the only case that matters. Far from it. It is because I believe that factual arguments about a specific case make clear the problems of the needs far better than do general arguments over a much wider field.

First I must declare my interest as one of the vice-chairman of' English National Opera, which ensures that I know what I am talking about when I go into a little detail. English National Opera currently derives its income from two main sources. The first source is public grants. To a major extent they come from the Arts Council and to a lesser but vital extent, they come from Westminster City Council. In round figures, in the current financial year£7 million is coming from the Arts Council and£1.25 million from Westminster City Council. This year the Arts Council grant is 5.2 per cent. greater than it was two years ago, which the Committee may note is an increase significantly below the rate of increase of inflation. This year the Westminster City Council grant is 11.2 per cent. greater than it was two years ago, which is a higher rate of increase than the rate of inflation. Taken together the two public grants in total have increased by 6.1 per cent. over those two years.

The second source of ENO's income is that generated by the company itself. Self-generated income falls under three headings. First of all there is the box office, which this year is budgeted to produce £4.5 million. That is an increase of no less than 30.6 per cent. over what it was two years ago. Another source of self-generated income lies in retailing, catering and other trading activities. This year that source is budgeted to produce £1.6 million, which is an increase of no less than 23.5 per cent. compared with two years ago. The third source of self-generated income consists of private sponsorship and donations, and that is budgeted to produce this year a figure closely approaching £l million, which is an increase of no less than 29.4 per cent. compared with two years ago.

Taken together the total of privately generated income has increased over the past two years by 27.9 per cent. Thus, during the period when total public grants to ENO have been increasing by 6.1 per cent., the company's self-generated income has increased in total by 27.9 per cent. Putting those figures another way, as a percentage, the income from public grants is now 54 per cent. of the company's total income compared with 56 per cent. of the company's total income in 1986–87 and 65 per cent. in 1983–84.

I have gone into those figures in some detail in order to show to the Committee and to the Government in particular that English National Opera, far from begging indolently for public charity, has been vigorously and successfully pursuing a policy of decreasing its degree of dependence upon public grants. I assure the Committee that that policy will be continued with great intensity, and I believe that further progress will continue to be made in that direction. Yet while I am sure that it will succeed in making further progress, I think the Committee may accept it as reasonable that ENO cannot expect to maintain the quite exceptional annual percentage rate of increase that has been achieved over the past few years. The more one does in this field, the more difficult it becomes to take the next step forward. But we shall certainly pursue it most vigorously.

However, I hope that I have also shown how vital is the grant from the Westminster City Council as a component of our financial resources. This is even more true in view of the fact that as a deliberate act of policy Arts Council grants annually are being increased at significantly less than the annual rate of inflation. We therefore have to go on increasing our private sources of income as a percentage of the whole to make up for the less-than-inflation-rate increases of the Arts Council grant. If we were to lose the Westminster City grant as well the position would become impossible. I do not think that the board of directors could fulfil the responsibilities placed upon them. I must stress to the Committee, and to the Government—who presumably know it well—that our responsibilities were not of our own definition. They were placed upon the board of ENO when it was set up.

I have gone in some depth into the position of ENO because I know about this aspect. I believe that factual detail about a particular case can be more illuminating, and. I hope convincing, than greater generalities over the whole field. What I have said about ENO I imagine could also be said if I knew as much about London Festival Ballet. I know the general principles are the same and I hope that other Members of the Committee will be able to go into that in more detail.

However, I must remind the Minister that the giving of these grants by Westminster City Council to both the English National Opera and the London Festival Ballet was the direct result of an arrangement made by the Government with Westminster City Council following the abolition of the Greater London Council which had previously been grant-aiding both these bodies. The present position of these grants is a direct result of that arrangement. I submit to the Government that they cannot simply walk away from that position which they created and arranged.

Perhaps I may end as I began by stressing that the amendment that I am moving is a general one and of nationwide application. Once again, I have been stressing what has happened to two particular bodies within the area of the Westminster City Council. However, in other cities throughout the country—Birmingham, Liverpool, Newcastle, Manchester and others one could mention—similar situations, although of a more limited scale, are occurring. I therefore wish to stress that it is not just special pleading on behalf of one or two particular companies in one particular local council area. It is pleading for the continuance of what has become—and with direct government encouragement—an essential and integral part of our method of public support for arts bodies throughout this country.

I beg the Government to take this matter extremely seriously, to see whether they cannot give assurances that we need within this Bill. If for any reason they cannot, they must find answers outside this Bill, as they did in the Education Reform Bill in relation to similar bodies such as the Horniman Museum. Where there is a will there is a way. The Government willed the present position of these grants and they must find the way for them to be continued. I beg to move.

Lord Bonham-Carter

I hesitate to intervene at this point, because I would not like to spoil the very strong case which the noble Lord, Lord Carr of Hadley, has made for the amendment he has moved; nor do I want to enter into a philosophical debate about the way in which we support the arts in this country. I would only say that what he said made it abundantly clear that sponsorship, which has a role to play, has only a marginal role—and I am glad that it is only a marginal role—in supporting the arts in this country, because sponsorship carries with it very grave policy implications for the administration of the arts, about which I have reservations which I have already expressed on another occasion.

The main point which I want to make is simply this. I cannot comprehend why the Government do not take more seriously the economic benefits which the arts bring to this country. The fact of the matter is that London is the greatest tourist centre of any capital city in the world. One of the two reasons it is the greatest centre for tourism in the world is the English language. The other is the vitality of the theatre, the opera, the ballet and the musical world in general. That is why people find it agreeable and interesting to come to London, not merely on their way elsewhere but for conferences of all kinds.

I have urged the Arts Council—I must declare an interest here as I was on the board of the Royal Opera House for many years and am still connected with the Royal Ballet—to try to make an estimate of how much we earned in straight foreign currency through the existence of the incredibly vital theatre, musical and operatic and balletic world in this country. I cannot believe that if the Government, whom we now know always act reasonably, were to look at this they would not recognise that this is a huge economic asset which should be supported and which has transformed the role of London in the world of the arts.

Before the war people would not have dreamed of coming to London to listen to music. Today London is the capital city in the world in which more music of every kind is played than in any other capital city that there is. That is not merely important and agreeable for those of us who live in London. It is important and agreeable for all of those who come to London and it makes it an extremely attractive place to visit.

As the noble Lord, Lord Carr of Hadley, said, this has to be supported by other centres outside London to which, in one degree or another, the same applies. The Edinburgh Festival is a huge earner of foreign currency. The Edinburgh Festival reflects what is going on not merely in this country but throughout the rest of the world. It has made for itself a special position. This special position cannot possibly be financed without long-term assurances of government finance, public finance; and the same applies to Birmingham, to Manchester, to Liverpool, to Welsh opera and to Scottish opera. This is a public interest in which we have a public concern, and I very much hope that the noble Earl in dealing with this very important amendment will show sympathy and understanding for the public concerns which are expressed in it.

Lord Jenkin of Roding

I wish to add only a word or two to the speeches which have already been made, and perhaps rather more specifically than the noble Lord, Lord Bonham-Carter, who has ventured into the whole realm of arts financing. Perhaps I may just remind him and the Committee of the substantial provision that was made by the Government at the time of the Local Government Act when the GLC and the six metropolitan county councils were abolished. There was a substantial increase in the Arts Council funding, in order to make sure that some of the arts ventures and companies that those councils were supporting would continue with public support.

The particular point that I should like to make is limited to the ENO and the London Festival Ballet. It is within my recollection, which is just as fallacious as anyone else's but I believe it is right, that, when we asked Westminster City Council whether it would take over from the GLC the grant aiding from local government sources of those two companies, it was on terms that the rate equalisation arrangements that existed within London would be modified so as to reflect the burden which Westminster was taking on. I am glad to see that my noble friend on the Front Bench is nodding assent, so perhaps my recollection has not played me false on this occasion.

It follows from that—does it not?—that if the basis of funding Westminster City Council, which was established at that time on the footing that it took over these liabilities, is now to be changed—and the debate initiated earlier this evening by my noble friend Lady Gardner of Parkes underlines that—it is incumbent upon the Government to make some alternative arrangement that does not leave the community charge payers of Westminster having to face the substantial burden as a part of their normal contribution or, as was feared by my noble friend Lord Carr, allow the grant to fall by the wayside. I suspect that either outcome would be unnacceptable to the Committee.

I believe that my noble friend Lord Carr was right when he ended his speech by saying that the Government—it was I who in 1985 made the decision in the name of the Government—having decided that this should be done for those two world-famous arts companies, it is now for them to follow on from that by making a provision which does not lead either to the ending of the grant or its substantial reduction, or to an unacceptable burden falling on the community charge payers of Westminster.

As regards the areas outside London, the only one with which I am the least familiar is Liverpool and the arrangements which were made there. The Merseyside Museums and Galleries Trust was established and Sir Lesley Young is now the distinguished chairman of that trust. I understand that the trust is faring well. I do not expect the arrangements in the Bill materially to affect what will happen to that trust. However, as regards the two companies in London a specific arrangement was made. The basis of that arrangement is now to be changed in the Bill. I believe that, within the Bill or outside it, there is an obligation on the Government to try to put matters right.

Lord Feversham

I do not wish to prolong the issue, but I must rise to support the noble Lord, Lord Carr. I do so if only as a voice from the Cross-Benches and to reinforce his distinguished supporters from other parts of the Committee. I believe that all Members wish to make sure that the Government understand that they are almost completely surrounded in respect of this issue.

Lord Howie of Troon

I should like to add briefly to the comments made by the noble Lord, Lord Bonham-Carter, from the Liberal Front Bench. He spoke reverently of the attraction of London as an international centre of culture and so forth. I should like to add one example to the generalised examples which he gave. This week at the Institute of Civil Engineers just across Parliament Square a meeting of the World Federation of Engineering Organisations is taking place. Why is the federation meeting here in London? There are two reasons. First, London is a great centre of engineering. Secondly, London is a great cultural centre to which delegates from all over the world are attracted. It is a feature of that particular conference this week that delegates from no less than 50 countries throughout the entire world are here. The paramount reason is, of course, for engineering, but in addition it is because they can set up a conference devoted to engineering matters in a centre which gives a wide range of cultural activities which can be ancillary to the conference. The attitude of the noble Lord, Lord Carr, is right, as he so often is and has been in his long career in Parliament. I hope he is supported.

10.15 p.m.

Baroness Carnegy of Lour

Although my noble friend says that this is a general amendment covering the whole of the country, it is tailor-made to affect that which Westminster council does for the English National Opera.

The amendment is not really the right way round for other local authorities—at least, for those with which I am familiar—in that, if specific additional support for local authorities is not to be based on their current spending but on needs, the Government should be looking at the arts enterprises within the local authority areas for which the authorities have responsibility but which they will not necessarily fund to the same extent year by year. For example, there are museums. The Edinburgh Festival is an ongoing event which Edinburgh District Council and Lothian Regional Council must support. They do not do so very strongly but they must and should support it, and it is always there.

Local authorities vary the support they give to the local museums, theatres and operas for which they have a responsibility to contribute. They are matters for annual consideration. It would be wrong to say that the Secretary of State should have regard to the extent to which each receiving authority gives financial support to bodies representing the arts. It should not be based on that but on the responsibility that they have and they should then decide how much to contribute.

At the same time, the London bodies need separate consideration. I am not sure why the community charge payers in Westminster should have this enormous responsibility for the English National Opera when community charge payers from all over the country enjoy it and many other parts of London receive the economic benefit from its existence. To confuse the two issues is a pity. The Government should be looking at how to ensure that the English National Opera and other similar national bodies are to be assured of support, with the change that is now taking place, and at how to ensure that across the country support for the arts is considered in terms of the arts enterprises which exist in the area and which the local authorities might fund rather than in terms of what authorities did in the previous year. That is more in tune with the theme of the Bill.

Lord Beloff

I believe that my noble friend Lady Carnegy of Lour made a very important point. I do not believe it removes the argument for this particular amendment to the limited extent to which it has been proposed in favour of two major national companies, for the very cogent reason advanced by the noble Lord, Lord Jenkin of Roding, that this was an undertaking given. All that is being suggested is that it is carried into a new situation in regard to the way in which local finance is raised.

I believe there can be no argument, and I make no apology because everyone here is declaring an interest. I declare a much more humble interest than other Members of the Committee. I am not on the board of anything but I actually go to ENO, and I should worry a little at the thought of someone paying a community charge in Westminster and subsidising to some extent the tickets that I buy. This is a matter that should be taken into account.

As the noble Lord, Lord Bonham-Carter, said, there is a major case for the nation as a whole to regard the support of the arts among the major objectives of government. I am not sure that it is true of activities as regards local government which do not directly and to a major extent affect the lives of their own constituents. Therefore, while I hope very much that the Minister will be able to accept this amendment, I believe that this little debate—I am sorry it has been so late at night but, as in the case of other Gangs of Four, only one is left—is an important debate and I hope that at some future date we shall be able to return to this very important subject.

The Earl of Caithness

As we have heard, the purpose of Amendment No. 140A is to introduce a requirement for the Secretary of State to, have regard to the extent to which each receiving authority gives financial support to bodies representative of the arts when he makes the distribution report. As we have already discussed the distribution report will describe and define the indicators to be used in assessing need for each authority and will contain some of the weightings to be given to certain indicator data. Once the revenue support grant for the year has been fixed, the actual needs assessments, and hence the grant entitlements for each authority, can be calculated from the information in the distribution report.

The needs assessment will play a key role in the new system. It will be our assessment of what each authority needs to spend in order to provide a standard level of service efficiently. The needs assessment will be built up from a number of separate indicators of need to produce an objectively determined basis for the distribution of grant. In constructing needs assessments I confirm to the Committee that we shall take into account the general responsibilities of local authorities for funding arts as part of the services to local people just as we do at the moment. This will not change. I cannot go so far as to say that we shall take into account the actual contributions now made by authorities to arts bodies or, in particular, by Westminster City Council, on London's behalf, to the English National Opera and the London Festival Ballet. In the first place one of the major changes we are making is to pay grant only in relation to need to spend, not in relation to actual spending. I can see no reason to make an exception for the arts, however much we as individual patrons of the arts might wish to ensure the future of particular bodies which have given us enjoyment.

I also say to the Committee that even if we were to take account of past spending on the arts in our grant distribution we could not ensure that any extra grant went to increased arts spending, nor could we direct spending to particular institutions or bodies. It is true that any arts support by an authority in excess of its needs assessment, like any other spending above its needs assessment, which will already have taken account of arts funding, falls wholly on the community charge payer.

The Committee will recall that this lies at the heart of our policies for local accountability. If an authority wishes to provide additional services the charge payers in that area must be willing to pay for them. If there is as much support outside this Committee for bodies such as ENO and LFB—and I very much hope there is—then there should be continued support for subsidy to them from charge payers through local authorities.

As regards the support of Westminster to the English National Opera and the London Festival Ballet, we need to remember that although Westminster make the payments, the cost is not borne by their ratepayers alone. It is not solely a Westminster problem. It is in fact shared by all London boroughs, because Westminster pay less into the London rate equalisation scheme for distribution to other boroughs than they otherwise would. Therefore, all London ratepayers contribute to the support of the ENO and LFB. Of course, like so many other matters, this is concealed from the ratepayer under the present system. It follows therefore that it is for the London boroughs as a whole to consider whether they want to continue the present level of support under the new system. Again, if the feelings of the Committee reflect the feelings of those outside, there will be considerable support for such funding and there are methods by which local authorities can continue their support.

I must emphasise that one of the main purposes of these reforms is to give back to the charge payer the right and the power to decide how his or her money should be spent. It must be for them and not for the Government to decide at the end of the day what priority they wish to give to arts funding. That said, perhaps I may make this point clear to my noble friend. The Government recognise the standing of bodies such as those currently supported by the London boroughs through Westminster and we shall he keeping an eye on them. We shall be prepared to consider whether there is some help or encouragement we can give to secure their future which does not conflict with the essential principles of our new local government finance regime.

The amendment proposed here would give rise to such a conflict and that is why I cannot support it, albeit that the Committee, like the Government, wish to see these bodies continue to flourish. However, I take note of the strength of the Committee's feeling on the matter. I can confirm to my noble friend that I shall be discussing this debate with my right honourable friend the Secretary of State.

Lord Carr of Hadley

I draw some encouragement from my noble friend's last remarks and I shall certainly do all I can to co-operate with him, as I am sure will others, in the future consideration of this matter. Frankly, following on from what the noble Lord, Lord Jenkin, said, I am not so much concerned about from where the help comes but that it should come from somewhere and that the Government should not run away from the responsibility which they undertook in the setting up of the present grant system. I indicated to my noble friend ahead of this amendment that it was at this stage a probing one.

Perhaps I may say to the noble Baroness, Lady Carnegy, that I accept any criticism of lack of perfection and of multi-directionism in the drafting of the amendment. Its purpose was to air the problem and to seek the Government's reactions. I shall not go back on my undertaking to ask leave to withdraw the amendment. However, I must say to my noble friend that, with respect, the answer he gave in the first part of his remarks does not begin to address the problem. The English National Opera was not set up by the government of the day to serve the local needs of citizens even of the whole of London. They are of course included, but it is the English National Opera Company. Its main role—accomplished, I believe it is agreed, with considerable excellence and distinction—is to serve the needs of all the people of this country and the many visitors from home and overseas who come to London.

Surely the Government—whatever government it may be—cannot expect the ratepayers or the community charge payers of the City of Westminster to bear a substantial part of that burden on their shoulders. It does not add up. If the Minister is saying that this is beyond the scope of local government finance as it is now to be organised and that it will be organised in some other way, that is all well and good. With that assurance, and with the hope that we may have the opportunity to discuss this again in private at least prior to the next stage of the Bill, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 141 not moved.]

Clause 86 agreed to.

Clause 87 agreed to.

10.30 p.m.

Clause 88 [Calculation of sums payable]:

[Amendment No. 142 not moved.]

The Earl of Caithness moved Amendment No. 142A: Page 48, line 5, leave out ("(i)") and insert ("(h)").

The noble Earl said: This is a minor technical amendment. I beg to move.

On Question, amendment agreed to.

[Amendment No. 143 not moved.]

Clause 88, as amended, agreed to.

Clause 89 agreed to.

Clause 90 [Special provision for transitional years]:

[Amendment No. 144 not moved.]

The Earl of Caithness moved Amendment No. 144A: Page 49, line 18, leave out ("financial matters") and insert ("matters (financial or otherwise)").

The noble Earl said: This is also a technical amendment. I beg to move.

On Question, amendment agreed to.

Clause 90, as amended, agreed to.

Clauses 91 to 94 agreed to.

Lord Glenarthur moved Amendment No. 144B: After Clause 94, insert the following new clause:

("Transitional grants.

.—(1) The Secretary of State may, if the Treasury consents, pay a grant in respect of a transitional year to an English charging authority to which Part IV applies.

(2) The amount of the grant shall he such as the Secretary of State determines with the Treasury's approval.

(3) In deciding whether to pay a grant to an authority in respect of a year and in determining the amount of any such grant, the Secretary of State shall have regard to his estimate of the expenditure the authority might reasonably he expected to incur in the year in carrying out its functions under Part IV.

(4) A grant under this section shall he paid at such time, or in instalments of such amounts and at such times, as the Secretary of State determines with the Treasury's consent; and any such time may fall within or after the financial year concerned.").

The noble Lord said: I spoke to this amendment when I moved Amendment No. 123G. I beg to move.

On Question, amendment agreed to.

Clause 95 [Collection funds]:

The Earl of Caithness moved Amendment No. 144C: Page 51, line 33, leave out ("before") and insert ("on").

The noble Earl said: I beg to move Amendment No. 144C, and with the leave of the Committee I shall speak also to Amendments Nos. 164A, 164B, 164C, 164D, 164E, 164F, 164G, 164H and 164J.

District councils and London boroughs are currently required to keep a general rate fund. All the receipts of these councils are carried to this fund and all their liabilities are discharged from it. It is intended that this arrangement would be replicated under the new local government finance system, but modified to reflect that in addition to the keeping of the general fund there would also be a free-standing collection fund. My noble friend Lord Glenarthur outlined the principles of the collection fund when we debated the amendments on Part 11 and today we have considered at some length the arrangements for operating collection funds in England and Wales. We also intend, through the provisions of Clause 98, to set up a similar arrangement for the City. However, while in the case of other charging authorities their general fund will be used to cover receipts and expenditure relating to all their functions, the City fund will only be used to cover those matters which currently fall within the ambit of the City's general rate, poor rate and St. Botolph tithe rate.

Within the general rate fund there can be a number of funds, such as the authority's loans fund which it uses to manage its borrowings for capital purposes, or special funds which are in effect its financial reserves. The funds are not free-standing but are merely sub-divisions of the general rate fund. We wish to continue those arrangements so that on 1st April 1990 the funds will become sub-divisions of the charging authority's general fund or, in the case of the City of London, its city fund. The powers we are seeking will enable my right honourable friend to make regulations which will secure this.

In short, the amendments will enable us to maintain the existing arrangements for an authority to manage its moneys. but in a form consistent with the new financial system. I therefore commend them to the Committee and beg to move.

On Question, amendment agreed to.

The Earl of Caithness moved Amendment No. 144D: Page 51, line 42, leave out from ("held") to end of line 43 and insert (", invested or otherwise used in such manner as may be prescribed by regulations made by the Secretary of State.").

The noble Earl said: I beg to move Amendment No. 144D and at the same time to speak to Amendment No. 164L. These amendments will ensure that the traditional and effective cash management practices of local authorities continue. I can commend them to the Committee. I beg to move.

Lord Jenkin of Roding

I welcome the amendment. The London Borough of Redbridge had expressed some dismay that on the drafting of the Bill it was apparent that its investment powers were to be much more heavily circumscribed. It is now clear that that is not to be so. In the past it had been in the habit of lending to bodies such as water authorities and it could not understand why it should not be free to continue to lend the balances standing to the credit of the collection fund in the same direction, so I welcome the amendment and thank the Government for having moved it.

On Question, amendment agreed to.

Clause 95, as amended, agreed to.

Clause 96 [Payments to and from collection funds]:

[Amendment No. 145 had been withdrawn from the Marshalled List.]

[Amendments Nos. 145A and 146 not moved.]

[Amendment No. 147 had been withdrawn from the Marshalled List.]

Baroness Stedman moved Amendment No. 148: Page 52, line 12, leave out paragraph (f).

The noble Baroness said: I understand that it will be for the convenience of the Committee if we talk also to Amendments Nos. 153, 154 and 156 in this group of amendments. I should like to speak specifically to Amendment No. 148, which is in my name.

If the paragraph were removed it would give to district councils the benefit of the interest on the money collected. Surely it is better to allow the collecting authorities to retain all the interest in the collection funds. It is the charge payers in a charging area who will receive the benefit if they pay early. I believe that if within a county area payers from one district pay promptly, they, as distinct from the other payers in the other areas of the county, should be the chief beneficiaries of their prompt returns and payments. There are sticks for local authorities in the Bill. I hope that the Government will accept the amendment as a possible carrot for a rather better than average performance.

The collection fund is defined in Clause 88. The items to be charged to the fund are listed there. They are borne by the authorities precepting on the fund so the cost is spread over the whole county area. The items not charged to the fund are borne by the community charge payers in each district separately.

The districts will bear all the costs of collection—the billing, the reminders, the cash collection and the recovery. The districts will not be able to keep all the benefit of interest receipts from a favourable cash flow due to an efficient method of collection. Districts now keep 100 per cent. of the interest generated by the cash flow from the rate collection. That is a real incentive to operate fast and efficiently in issuing demand notes, collecting cash and tracing defaulters. The proposed community charge will be much more difficult to collect than the rates, which is another reason why the interest should he retained by the collecting authority. I beg to move.

Lord McIntosh of Haringey

The noble Baroness in moving Amendment No. 148 referred also to Amendments Nos. 153, 154 and 156, all of which are in my name and are on a closely related point. I am fairly open minded about the best way to achieve the purpose. Certainly the amendment of the noble Baroness has the advantage of simplicity. The point, as she has so clearly said, is that the cost of interest payments should be charged to the collection fund. At the moment, the charging authority has to pay interest to a precepting authority if the charging authority fails to pay the precept in accordance with the prearranged timetable. This could happen if there were considerable difficulty in charge payers withholding or being slow in making payments.

We have not yet considered whether we are going to adopt in England the proposal which will be debated tomorrow for Scotland, of having a lottery to reward people for paying early. I do not know whether the lottery will achieve the consent of the Committee. I can imagine that there could be different views about that. But it is certainly right, as the noble Baroness. Lady Stedman, said, that there should be rewards for efficient collection of the community charge. That is the intention of Amendment No. 153.

I do not think I need weary the Committee with the detail of Amendment No. 156, which makes a similar point in relation to the costs of collecting the community charge and the national business tax. The costs of collection and the interest receipts are treated together because otherwise charging authorities will have little incentive to speed the flow of payment from the charge payers into the collection fund if it will cost them any money to do so. In that way, the benefits of the additional interest receipts are shared among all the authorities precepting on the fund and the additional costs would fall upon the charging authority alone.

Also together the costs of collection and any losses on collection are aggregated. If there are difficulties—and there are bound to be difficulties in collecting the community charge—there will be a shortfall fund. The authority which takes extra effort to collect the charge will have to bear the costs of that extra effort. Instead, the costs of collection, according to this amendment, would be set against the income collected, because the costs as well as the income would be set against the collection fund.

I think these are realistic amendments which make a very similar point to that made by the noble Baroness. I hope that they will receive the sympathetic consideration of the Government and the Committee.

The Earl of Caithness

I have listened carefully to the points made by the noble Baroness, Lady Stedman and the noble Lord, Lord McIntosh of Haringey. To decide what is the appropriate treatment of interest earned by the temporary investment cash surpluses in the collection fund, and of the costs of administering the fund it is necessary to look at the nature of the collection fund.

The Bill provides that interest on the temporary investment of sums in a collection fund is credited to the fund. As my honourable friend explained in another place, this is consistent with the philosophy of the collection fund, which regards money in the fund as being held temporarily by the charging authority on behalf of its charge payers. Such money is not the charging authority's "own" money, and hence interest earned on it should go to the fund and should not be for the authority's own direct use. Furthermore, the amounts passing through the collection fund can be very significant in relation to the charging authority's own expenditure, especially in shire areas. Thus, interest on these sums, if credited to the charging authority itself, would significantly distort the charging authority's own demand for revenues on the collection fund and hence weaken accountablility. Such an approach of crediting the charging authority with interest could also be a disincentive to charging authorities to pass more money quickly through the collection fund.

There is however the important issue of giving charging authorities an appropriate level of incentives to collect charges promptly, and my honourable friend, the Parliamentary Under Secretary of State gave an assurance in another place that we were aware of the need for incentives and would try to keep them as they operate now, and that we would be talking to the local authority associations about this. We are doing just that. We have proposed to the associations that the arrangements we shall be setting up for distributing money in the collection fund will mean that any interest received by a fund will benefit solely the charge payers in the fund's areas. Thus, for example, in a shire county, if one district is particularly efficient in collecting charges, the interest it earns for its collection fund will benefit only its charge payers—by way of lower community charges—rather than being shared between all charge payers across the whole county.

The noble Baroness and the noble Lord will be pleased that we have now also decided that it would be right for the efficient district council itself to enjoy some benefit from the fruits of its efficiency. Accordingly, we intend to make directions under Clause 102(3) which will have the effect that each charging authority will receive an allowance from its collection fund which represents the interest earned on the temporary investment of community charge moneys in the fund. We believe that this arrangement would provide incentives for efficiency while remaining consistent with the principles of the collection fund.

The amendments run counter to the principles underlying the collection fund. Interest on collection fund moneys belongs to the fund, as I have explained. On the other hand, costs of administering the fund, together with other costs of collecting the community charges, are simply costs of one of the charging authority's functions, and along with the costs of all its other functions are properly part of its expenditure to be met from its general fund. I would add that costs of administering the fund will not include any interest payable by the authority, as the arrangements we intend to set up—by regulation under Clause 103—for distributing money from the fund will ensure a collection fund is never overdrawn.

The Government accept that charging authorities need an appropriate level of incentives, and I believe the arrangements we are now proposing will achieve this. I hope the Committee can agree them.

10.45 p.m.

Baroness Stedman

I am grateful to the noble Earl. It is rather late at night to take in all that complicated reply. I have a feeling I am supposed to be saying "Thank you" because the noble Earl has gone some way towards meeting us, as promised by his colleague in another place. I should like to read the reply again, and I shall convey my thanks personally, if I have the right idea. In the meantime I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 149 not moved.]

[Amendment No. 150 had been withdrawn from the Marshalled List.]

[Amendments Nos. 150A and 151 not moved.]

Baroness Stedman moved Amendment No. 152: Page 52, line 19, after ("precept") insert ("other than that part of a precept in respect of which subsections (6), (7) and (8) below apply").

The noble Baroness said: I seem to remember way back in 1981, when we were discussing the Local Government and Planning (Amendment) Act, being in the Royal Gallery at about this time of night and trying to fight the corner for parish councils. It looks as if we have gone right round the course and I am back again trying to fight for parish councils. The attempt here is to deal with both the English parishes in Amendments Nos. 152 and 163 and the Welsh parishes in Amendments Nos. 162 and 164, so that in future the non-domestic rating position which the parishes currently enjoy in relation to guaranteed access to part of the money that is raised from the rates levied on non-domestic property, continues. The changes proposed to the position which could result from the Bill, will not affect the amount of rates paid by occupiers of non-domestic property anywhere in the country, nor will there be any increase in the grants paid by government to assist local councils. None is paid now nor will be paid to the parish councils.

The purpose and effect of the amendments is to ensure that the expenditure of parish and town councils will be met in the future, as at present, in part by rates levied on non-domestic property, and in part by payments from the personal finances of individuals—currently by the domestic rates and in future by the community charge. There will be quite serious dislocation of the finances of many parish and town councils, especially those with an above average amount of non-domestic property in their parish, if their finances have to depend wholly upon the community charges paid by the inhabitants; and we try to prevent the financial pressures on the most local and most economic level of provision in the areas and transfer the responsibilities to the more distant and, because of their need to maintain administration, perhaps the less economical district councils. We want to protect the councils who have undertaken borrowing commitments on the basis of a low level of rate income and who will have to continue repayments when a third, a half or more of the rate income base ceases to be available.

The mechanism for the amendment is that the district council, which is the charging, collecting and paying authority, will be required to calculate the expenditure of the district council, that part of the expenditure of the county council to he met by precept on the district council and the expenditure of all the parish councils of the same proportion of the non-domestic rate proceeds held by the district council in its collection fund. The district council will then distribute that amount to the parish councils in proportion to their expenditures and meet the balance of their requirements from the collection fund which is made up for this purpose of the community charges paid by the parish inhabitants.

The parishes still need money with which to carry out their duties. They need to be assured that that money will come to them. We hope that the amendments meet the case in respect both of English parishes and of Welsh community councils. I beg to move.

Lord Feversham

Perhaps I may put in a brief word of support for the amendments, which are concerned specifically with the loss of business rate or non-domestic rate to parish councils under the proposals in the Bill. I believe that the noble Baroness has dealt sufficiently with the technicalities. I shall not reiterate them or detain the Committee. However, I should like to add some general observations in support of the amendments and with regard to local councils.

I have the honour to serve as president of the National Association of Local Councils as well as being a local councillor myself. Therefore, I have a particular interest in their problems. I believe that the local or parish council tier of government is of immense value to our national life, operating, as it does, close to the ground in the community and enabling local people to make decisions for themselves on largely non-political lines and without the need for bureaucratic complexity.

It ought to be the aim of all central governments to work to maximise the advantages of this kind of local government. Unfortunately, large-scale legislation designed to alter radically the way in which local authorities operate—we seem to be getting a lot of that sort of legislation at the moment—tends to erode bit by bit the position of parish councils. This Bill is no exception. It is the loss of a specific share of the non-domestic rate to the parish council which presents the greatest threat of erosion in the Bill.

The purpose of the amendment is to attempt to find a way in which the difficulty can be solved to the advantage of the parishes without seeking to undermine what the Government are seeking to achieve over a wider field.

Lord McIntosh of Haringey

I rise to support the amendments, although my name is not on them. I do so as a former chairman of the Association for Neighbourhood Councils and as the present joint president of that association, which has always been very closely associated with the National Association of Local Councils and has always been concerned to extend the principle of parish councils into the urban areas of England which are at present denied the right to have them. That does not mean that we are not also concerned with Wales and with the suburban and rural areas of England, which are able to have parish councils.

We have talked of the gearing on some of the charges in which a very small difference in needs assessment or in the money available from the national non-domestic rate makes a huge difference to the community charge paid. If there were any meaning in the previous discussion about gearings, then the argument for the case of parish councils is very much stronger.

At the moment the principle of the national non-domestic rate must be that it should subsidise the charge payers rather than the councils. That clearly is the right principle and one that I know the Government adopt in dealing with these matters. The problem is that as the Bill is drafted at the moment the subsidy goes only to the district councils and not at all to the parish councils. I do not think I can put it more simply than that. That means that parish councils' expenditure appears to be entirely without any subsidy from the national non-domestic rate or from the grant system. Therefore, any increased expenditure by parish councils is very heavily geared and makes a huge change to the parish council rate. It is not that they are deprived of the ability to raise money, but they do not have any of the support they have had in the past from other sources of local government finance. I cannot believe that that was the Government's original intention because I know that the Government have always given a degree of support to local councils and would not wish voluntarily to see them suffer from changes in legislation.

It could well be that the drafting of these amendments leaves something to be desired and that they could be improved. I am not qualified to judge them. Clearly, putting in whole new subsections of this kind is a complicated and highly skilled matter. However, I hope that at the very least the Government will recognise the need for parish councils to be treated on an equal footing with district councils as far as concerns grant and subsidy. I hope also that they will be able to give an indication either that the amendments are acceptable or that something comparable can be put into the Bill.

Lord Tordoff

I should like to offer support in principle from these Benches for the amendments. There is no more democratic form of local government than parish councils, in our view. Therefore, the question of accountability is peripheral to the argument. Both the noble Baroness, Lady Stedman, and the noble Lord, Lord Feversham, have made the point very cogently. However, looking at the Official Report for another place I understand that Mr. Michael Howard complained that it was unsatisfactory that parish councils should be able to offload their spending to businesses which happened to be in their parish area. That approach, he said, does not contribute to accountability. In my view that is a fairly monstrous statement.

As the noble Lord, Lord McIntosh of Haringey, has said, there is a problem of gearing. To take that finance away from parish councils which have been used to being able to call upon business rates is monstrous. There is no question that if the rate is being transferred to the national level there should be some proportional distribution of that rate between the district and the parish council. It is in that spirit that the amendments are moved. They have our full support.

11 p.m.

The Earl of Caithness

These amendments seek to change the arrangements for handling the contributions received from the national non-domestic rates pool. As I understand them they are designed to give parish and community councils direct access to a share—in proportion to their precepts—of the national non-domestic rate, now commonly abbreviated to "NNDR". I have listened carefully to the points made by those who have spoken on this matter and I understand the concerns raised, but these amendments do not remove a disadvantage which the NNDR arrangements impose on the parish charge payer but rather seek through the NNDR to give such charge payers an advantage.

It may be argued that such an advantage is needed to compensate charge payers for the higher charges that they may face if they are in a parished area, but I do not believe that this is the right use of NNDR, which is to provide a flat rate support to charge payers, and in any event parish charge payers need not necessarily face higher standards.

It is of course open to a district council in either England or Wales to reduce its own charges in those areas where a parish or community council provides services which elsewhere the district itself provides. Thus, if both the parish and the district provide the service in question to the same level and with equal efficiency and the district makes a reduction, the charge payer in the parish and the charge payers in the other parts of the district's area would have the same charge. However, I accept the argument of the noble Baroness that should a district decide not to reduce its charges in this way, then those in parished areas may pay higher charges than those in non-parished areas. Thus, in order to protect those in parished areas from being unfairly treated I can inform the Committee that the Government are taking this matter up with the Association of District Councils with a view to seeking to agree with the association guidelines for councils to give some specific recognition to parish services when setting the community charges.

Returning to these amendments, I believe that they manipulate the NNDR in a way that would run counter to the underlying principles of the new financial system, but in view of the Government's acknowledgment of the difficulties that may be faced by parish councils and the action that we are taking to counteract them I hope that the noble Baroness will feel able to withdraw her amendment.

Lord Tordoff

Before the noble Baroness speaks, perhaps I may ask the Minister whether, in the negotiations which take place, consideration of the existence of large businesses in a parish area—large factories, for instance—will be one of the things that will be taken into account. We must recognise that some of the costs that will be borne by the parish may be directly attributable to the presence of industries within their areas, and therefore the situation cannot be the same in each area. There may be certain pollution costs, for instance, that ought to be taken into account.

The Earl of Caithness

Indeed there are a number of things that of course are being taken into account. One has to take into account the fact that some district councils do not have parishes at all. As the noble Lord will be aware, there is nothing that the parish council is doing at the moment that the district could not be doing. However, I can assure him that full consultations are taking place.

Baroness Stedman

It seems to be my night for saying "Thank you" to the Minister. I have done it twice in succession on amendments. I am delighted that he is taking the amendment back and having discussions. I hope that they are successful and look forward to hearing from him in the future about the kind of arrangements that he has made and how the parishes will benefit from them. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment no. 152A had been withdrawn from the Marshalled List.]

The Earl of Caithness moved Amendment No. 152B: Page 52, line 24, leave out ("(7)") and insert ("(5)").

The noble Earl said: In moving Amendment No. 152B I shall also speak to Amendments Nos. 152C and 152D. These are technical and drafting amendments. I beg to move.

On Question, amendment agreed to.

The Earl of Caithness moved Amendments Nos. 152C and 152D: Page 52, line 28, after ("repaying") insert (", under regulations under this Act,"). Page 52, line 29, leave out ("under this Act").

On Question, amendments agreed to.

[Amendments Nos. 153 to 157 not moved.]

[Amendment No. 158 had been withdrawn from the Marshalled List.]

[Amendment No. 158A not moved.]

[Amendment No. 159 had been withdrawn from the Marshalled List.]

[Amendment No. 159A not moved.]

[Amendment No. 160 had been withdrawn from the Marshalled List.]

[Amendment No. 160A not moved.]

[Amendment No. 161 had been withdralt7zfrom the Marshalled List.]

[Amendments Nos. 161A to I62ZA not moved.]

The Earl of Caithness moved Amendment No. 162A: Page 53, line 4, leave out from ("this") to end of line 5 and insert ("section—

1. (a) includes power to revoke or amend a specification made under the power;
2. (b) may be exercised differently in relation to different authorities.").

The noble Earl said: Clause 96 would provide for my right honourable friend to specify what payments can be made from and what sums can be paid into English and Welsh charging authorities' collection funds. This is a minor technical amendment to enable different specifications to be made for different groups of charging authority. I beg to move.

On Question, amendment agreed to.

[Amendments Nos. 163 and 164 not moved.]

Clause 96, as amended, agreed to.

Clause 97 [General funds]:

The Earl of Caithness moved Amendments Nos. 164A to 164D:

Page 53, line 13, leave out ("before") and insert ("on").

Page 53, line 22, leave out from ("assets") to end of line 23 and insert ("held in the general rate fund of such an authority").

Page 53, line 24, after ("1990") insert ("(other than assets forming part of a trust fund)").

Page 53, line 25, at end insert— ("(7) After 31 March 1990 the Council of the Isles of Scilly shall not be required to keep any fund known as its general fund and required (apart from this subsection) to be kept under any order made under section 265 of the Local Government Act 1972; and the assets held in that fund immediately before 1 April 1990 (other than assets forming part of a trust fund) shall be transferred on that date to the Council's general fund established under this section.").

On Question, amendments agreed to.

Clause 97, as amended, agreed to.

The Earl of Caithness moved Amendment No. 164E: After Clause 97 insert the following new clause:

("General funds: supplementary.

.—(1) In this section "relevant authority" has the same meaning as in section 97 above.

(2) The Secretary of State may make regulations—

1. (a) about the relationship of a relevant authority's general fund to its other funds;
2. (b) providing for assets falling within a relevant authority's general fund to be held in separate funds within the general fund").

(3) The regulations may provide that any fund established by a relevant authority on or after I April 1990, other than its collection fund or a trust fund, is to be maintained as a separate fund falling within its general fund".

On Question, amendment agreed to.

Clause 98 [The City fund]:

The Earl of Caithness moved Amendments Nos. 164F to 164H:

Page 53, line 28, leave out ("before") and insert ("on").

Page 53, line 42, at end insert— ("(4A) No sum shall be paid into, and no payment shall be met from, the City fund except in accordance with subsections (3) and (4) above.").

Page 53, line 43, leave out subsection (5) and insert— ("(5) The assets of the Common Council subsisting immediately before I April 1990 shall be transferred to the City fund on that date if they are assets—

1. (a ) subsisting in respect of the general rate, the poor rate or the St. Botolph tithe rate, or
2. (b) representing sums credited in aid of any of those rates.").

On Question, amendments agreed to.

Clause 98, as amended, agreed to.

The Earl of Caithness moved Amendment No.164J: After Clause 98, insert the following new clause:

("The City: further provisions.

—(1) The Secretary of State may make regulations—

1. (a) about the relationship of the City fund to other funds of the Common Council;
2. (b) providing for assets falling within the City fund to be held in separate funds within the City fund;
3. (c) prohibiting the Common Council from establishing funds.

(2) The regulations may provide that any fund established by the Common Council on or after 1 April 1990, and falling within a prescribed description, is to be maintained as a separate fund falling within the City fund.

(3) The regulations may provide that such assets as are transferred to the City fund under section 98(5) above and fall within a prescribed description shall he held in separate funds falling within the City fund; and the number and composition of the separate funds shall be such as are prescribed.

(4) The regulations may provide that the Common Council shall not establish or maintain on or after I April 1990 a fund into which both the following must or may be paid—

1. (a) sums which must be paid into the City fund under section 98(3) above, and
2. (b) other sums.

(5) The regulations may provide that the Common Council shall not establish or maintain on or after 1 April 1990 a fund from which both the following must or may be met—

1. (a) payments which must be met from the City fund under section 98(4) above, and
2. (b) other payments.").

On Question, amendment agreed to.

Clause 99 [Calculations to be made by authorities]:

Lord Glenarthur moved Amendment No. 164K: Page 54, line 27, leave out from ("above") to ("shall") in line 28 and insert ("the authority").

The noble Lord said: I spoke to this amendment with Amendment No. 133A. I beg to move.

On Question, amendment agreed to.

Clause 99, as amended, agreed to.

Clauses 100 and 101 agreed to.

Clause 102 [Other transfers between funds]:

The Earl of Caithness moved Amendment No.164L:

Page 55, line 14, at end insert— ("(2A) Regulations under section 95(5) above may include provision that—

1. (a) any sum to which they relate shall be transferred from an authority's collection fund to its general fund or to the City fund (as the case may be);
2. (b) the sum so transferred shall be held, invested or otherwise used in such manner as may be prescribed;
3. (c) a sum equal to the sum transferred shall be transferred to the authority's collection fund from its general fund or from the City fund (as the case may be);
4. (d) together with the sum so transferred an additional sum representing interest and calculated in a prescribed manner shall be transferred.").

On Question, amendment agreed to.

The Earl of Caithness moved Amendment No.164M:

Page 55, line 19, at end insert— ("(3A) If the Secretary of State directs it to do so, a charging authority shall transfer to its collection fund from its general fund or from the City fund (as the case may be) such an amount as is specified in, or calculated in a manner specified in, the direction; and the transfer shall be made at such time as is specified in the direction.").

The noble Earl said: I beg to move Amendment No. 164M and to speak to Amendment No. 164N at the same time. These amendments will enable my right honourable friends to make directions requiring English and Welsh charging authorities to transfer the sums specified in the directions from their general fund to their collection fund. This power which we are seeking is the converse of the power in Clause 102(3), which enables my right honourable friends to direct the transfer of funds from the collection fund to the general fund. I beg to move.

On Question, amendment agreed to.

The Earl of Caithness moved Amendment No.164N: Page 55, line 21, leave out ("or (3)") and insert (", (3) or (3A)").

On Question, amendment agreed to.

Clause 102, as amended, agreed to.

Clause 103 agreed to.

Lord Hesketh

I beg to move that the House do now resume.

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

House resumed.

House adjourned at thirteen minutes past eleven o'clock.