Lords Sitting of 14 June 1988

Preamble
The House met at half-past two of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Hereford.

Community Charge Registers, Scotland
Lord Campbell of Croy Lord Campbell of Croy asked Her Majesty's Government:
Why it is necessary for the forms being distributed to the public in Scotland for the purpose of compiling the community charge registers to require the precise dates on which individuals started residing at their present addresses.
The Minister of State, Scottish Office (Lord Sanderson of Bowden): My Lords, the regulations prescribe a standard canvass form for use both initially and once the system is running. It is made clear in the notes to the form that the information in question is only to be supplied when the form is issued after 1st April 1989. It will be necessary for registration officers to have the information in respect of people becoming resident after 1st April 1989 since their liability for the personal community charge will run from the date when their residence starts.
Lord Campbell of Croy: My Lords, I am grateful to my noble friend for that Answer. I appreciate the need for clear identification. However, does my noble friend agree that even in the clan areas of the Highlands there are not so many people with the same name—for example, Mackay, Cameron or Campbell—as to cause ambiguity at individual addresses?
Lord Sanderson of Bowden: My Lords, we are straying into the area of the ability to find out the members of the family in any particular clan, if I may put it that way. We are on to the question of the date of birth and the reason for it which was fully debated when the Bill was before the House.
Lord Campbell of Croy: My Lords, the important issue is not the date of birth but the date of residence. The issue of the date of birth was contained in a Written Question which I tabled.
Lord Sanderson of Bowden: My Lords, I accept that. The whole question of the date as from 1st April 1989, and the reason why it is in the form for the purpose thereafter, is to ensure that when people change their addresses the registration officer is able to determine at what date the residence started.
However, as regards the date of birth, it is well know from our debates that the reason for the date of birth is to determine who, and what, people are in any particular family.
Lord Grimond: My Lords, is not the whole basis of the new legislation that it no longer matters whether or not one inhabits a house; what matters is the use one makes of the public services? Is it not the Government's case that those who sleep under the arches in London or under the hedges in Scotland, or Ministers who come to work in offices, make use of local services and they should pay? However, what possible justification can there be to ask for the very day of the month on which I moved into my house in Scotland, which was over 30 years ago?
Lord Sanderson of Bowden: My Lords, it is important because it is certain that the local authority will want to know what community charge to levy for any part of the year on a person who moves to and resides in a house in a particular area.
Lord Taylor of Gryfe: My Lords, considering how unpopular this legislation is in Scotland, can the Minister give any indication of the rate of return of these forms? Is he satisfied that the forms are being returned to the degree that he expects?
Lord Sanderson of Bowden: My Lords, one always has to be cautious in replying to such a general question. However, all 10 registration officers charged with compiling Scotland's community charge registers are confident that they can provide their lists on time.
Lord Carmichael of Kelvingrove: My Lords, the Minister appeared to be complacent, particularly in the Scottish Office press statement yesterday, in endeavouring to recover from the gaffe over the lottery. Local authorities are entitled to run a lottery but to tie up a lottery with rates is a different matter. The statement said that the registration process is proceeding satisfactorily. Does that also include the serious increase in costs to local authorities?
The Minister will have read that Mr. Mackay, the Highland regional assessor and joint community charge officer, said that his officers have been amazed at the tremendous number of calls, inquiries and correspondence from the public. New telephones have had to be installed to deal with the extra calls made in order to assist people to fill in their forms. There is a great extra cost. Will the Government make any allowance for that when the registers are finally compiled?
Lord Sanderson of Bowden: My Lords, the noble Lord, Lord Carmichael, is right in saying that the cost of implementation of any new initiative is bound to be high. Of course, the Government will take account of the general costs. However, the whole operation is going smoothly and we look forward to hearing from local authorities on their progress as the months go by. I repeat what I said to the noble Lord, Lord Taylor of Gryfe: the authorities are confident that they can provide the lists on time; and that must be in the interests of the whole country.
Lord Campbell of Croy: My Lords, is my noble friend aware that the requirement for detailed information on these forms makes the task of completing them seem daunting and oppressive? I

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know that from neighbours who were former constituents of mine who have sought my help in completing the forms. Should not something simpler be devised for England in a year's time?
Lord Sanderson of Bowden: My Lords, I shall certainly pass on those remarks to my noble friend Lord Caithness when he considers the position for England. All I say to my noble friend is that in any new initiative there are always problems when getting down to composing the forms prescribed. It does present difficulties. However, the registration officers, who are the key men and women, are optimistic that they will be able to deliver on time what they are required to do.
Lord Whaddon: My Lords, if it is important, as the noble Lord says, to know the exact date when a person commences residence in order to calculate what proportion of the community charge he must pay, how do the Government justify charging double the poll tax for people who have two residences since clearly they cannot be in two places simultaneously?
Lord Sanderson of Bowden: My Lords, I do not wish to go into the details of this whole matter, which was very fully debated. I am dealing with the Scottish Act. As regards the Scottish Act there is grace given for the months when one does not have to pay as one moves from a residence. That was debated very fully at the time.
Lord Howie of Troon: My Lords, the Minister says that the Government will take into account the costs of implementing the community charge or poll tax. Does he mean that the poll tax will be increased to cover these costs or does he mean that the Government will cover the costs in some other way?
Lord Sanderson of Bowden: My Lords, I repeat what I said. We shall take into account all the information we receive while we implement this new and very complicated business. I am very confident that, when we come to assess it, the results will be very satisfactory.
Lord Stallard: My Lords, the Minister said that matters are going smoothly. Did the Minister see the report in the Scottish newspapers of last week that 27 canvassers or collectors, whatever they are, had to leave the Strathclyde district for reasons of assault? I believe that was the reason. They were afraid of being assaulted or they had been assaulted. Would the Minister care to comment on that situation, because I understand that it is difficult to replace these persons?
Lord Sanderson of Bowden: My Lords, I am delighted to respond. I do not know which newspapers the noble Lord reads, but I was delighted to read in the Sunday Times of May 29th 1988 that in the Central Region the rate of return was 92 per cent.
Lord Whaddon: My Lords, is the noble Lord aware that my supplementary question did not refer to people who moved during the year, but to people who
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normally have two residences on account of their occupations and who therefore cannot spend double time in one place?
Lord Sanderson of Bowden: My Lords, this depends upon the view of the registration officer as to what is the main residence of the person. If it is a question of a second home, the noble Lord knows very well that certainly in the case of Scotland there are regulations regarding the standard community charge.

Research and Development: Policy
2.45 p.m.
Lord Dormand of Easington Lord Dormand of Easington asked Her Majesty's Government:
What initiatives they are taking to increase the United Kingdom's spending on research and development.
The Secretary of State for Trade and Industry (Lord Young of Graffham): My Lords, the Government consider that advances in science and technology, and the early exploitation of those advances, are essential to national success. We are encouraging cooperation between companies and the academic science base, in particular through LINK, and I am pleased to announce a new LINK programme in personal communications today.
Lord Dormand of Easington: My Lords, is the Secretary of State aware that research and development in the private sector as distinct from the public sector, is well below the national average? As we are constantly told how well our industry is performing, what measures more specific than those given by the Secretary of State a moment ago, are the Government taking to encourage increased spending in the private sector? Matching our international competitors in this field is absolutely crucial, as the Secretary of State implies in his Answer.
Lord Young of Graffham: My Lords, I am aware that compared with most other industrial nations, British industry funds R&D at a lower percentage of GDP than most major countries other than France. From the figures for 1985 there is evidence that the figures have been improving. In particular the Government welcome the decision of the Accounting Standards Committee to recommend the adoption of a standard that would require public limited companies to disclose expenditure on research and development in their annual accounts. If, as I hope, this recommendation is acted upon, then there will be no need for legislation on the subject and in future the company accounts of plcs will be able to show the shareholders how much the company spends on R&D.
Lord Boyd-Carpenter: My Lords, is not one of the best ways of encouraging this useful expenditure to do what the Government are doing and which comes into effect today; that is, to lower the burden of taxation?
Lord Young of Graffham: My Lords, as company taxation has been reduced and personal taxation will be, I believe we are finding increased spending on R&D. I hope that industry will spend on R&D more wisely than perhaps governments have in the past.
Lord Rochester: My Lords, have the Government considered offering tax rebates as regards the expenditure incurred by companies for research and development?
Lord Young of Graffham: My Lords, expenditure on R&D is normally allowable for companies in the course of their business. The Government feel and I believe that it has been shown to be universally popular that the more simple the tax system the lower we can make the rate and the better off we shall all be.
Lord Peston: My Lords, can the Minister comment upon one aspect of a report in today's issue of the Independent as regards the question of disclosure? I shall quote the exact sentence, because it is rather worrying:
"Some companies are also concerned that the short-term outlook in the City would mean that share prices would suffer if they"—
that is, companies—
"revealed spending on long-term research projects."
Does that not indicate the very basis of the problem for R&D and the very basis of our problem as regards long-term development; namely, that there is a lack of harmony of interest between this short-term outlook of the City and the industrial needs of our nation?
Lord Young of Graffham: My Lords, I fear that for once the report in the dependent may not be absolutely accurate. As regards the opinions of the City, that is a matter for those in the City. We have welcomed today the decision of the Accounting Standards Committee, which, provided it is adopted and acted upon, will ensure that companies will be reporting the amount of money they spend on R&D. If they do, we hope that the City will take it as a good sign and a sign of investment for the future, provided it is properly spent.
Lord Barnett: My Lords, will the Minister comment further upon the point he made about fiscal equality and simplicity in tax system? Does it mean that he is personally in favour of improving the personal tax system in terms of fiscal equality in the same way as the Chancellor has done with company taxation?
Lord Young of Graffham: My Lords, the Question before us relates to research and development. The noble Lord, Lord Barnett, knows full well that, if he wishes to put down a Question on that matter, I shall be more than happy to answer it.
Lord Dormand of Easington: My Lords, in his reply to me the Secretary of State mentioned 1985 and said that expenditure in the private sector had increased since that date. Can he give the percentage of GDP at the latest available date?
Lord Young of Graffham: No, my Lords, but I shall find out the latest figures available. I shall write to the noble Lord and place the figures in the Library.

Disabled Patients: Community Rehabilitation
2.50 p.m.
Baroness Masham of Ilton Baroness Masham of Ilton asked Her Majesty's Government:
Whether they are satisfied that the housing and community services provide adequately for the transfer back to the community of patients with permanent disabilities who have completed hospital rehabilitation.
The Parliamentary Under-Secretary of State, Department of Health and Social Security (Lord Skelmersdale): My Lords, it is for health and local authorities to co-operate in the planning and provision of appropriate services for disabled people returning from hospital to the community. While the range of services provided will vary in the light of individual needs and local circumstances and there is always likely to be room for improvement, we are pleased to see the many examples of progress being made in this field.
Baroness Masham of Ilton: My Lords, I thank the Minister for that reply. is he aware that many of the beds that are being blocked are in regional special units or super regional units? Is he further aware that this is most frustrating for the surgeons who are trying to clear their waiting lists? Will he look into this matter very quickly?
Lord Skelmersdale: My Lords, I am well aware that the noble Baroness has a special interest in this field. She has written to me about it and I am following up the cases which she quoted. I can advise her that the department has recently completed consultations on a draft circular on the discharge of patients from hospital in which health authorities were reminded to make suitable plans for the discharge of patients, including arrangements for transfer to other facilities at an early stage of the patient's stay in hospital. It points out the need to involve patients and their relatives or carers in such plans. I said that consultations had recently been completed. The results are now being considered and the circular should be issued quite shortly.
Lord Carter: My Lords, will the Minister give the Government's response to the excellent report recently produced by Shelter entitled Freedom to Lose, which reveals the worrying position regarding the transfer to adapted housing for physically handicapped people? Will he agree that the possibility of transfer of local authority housing into the private sector and to housing associations as a result of the new Housing Bill will mean a considerable reduction in the availability of housing adapted for the physically handicapped?
Lord Skelmersdale: My Lords, I cannot comment on the report because I have not seen it. I can advise

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the noble Lord that in 1986, the latest year for which statistics are available, 17,201 owner-occupied or rented dwellings were adapted for disabled people at a cost of more than £36 million. Therefore I do not think that the arrangements in the new Housing Bill will make any difference to that figure.
Lord Carter: My Lords, in the late 1970s the Department of the Environment revealed that there was a need for 46,000 houses to be adapted for the physically handicapped. Since that time less than 10 per cent. of the total housing stock has been adapted. Are not the Government being complacent about this?
Lord Skelmersdale: No, my Lords, I do not think that we are. If I may go back to the original Question, I was asked about those patients with permanent disabilities who are being discharged from hospital. There are a comparatively small number. We are talking about 1,450 patients a year. In the latest year for which statistics are available a fair number of buildings were adapted. Further, I can say that 2,036 dwellings now provide standard amenities suitable for disabled people where the existing amenities were not accessible by reason of their disability. Quite a lot is going on in that area.
Baroness Elliot of Harwood: My Lords, will my noble friend investigate areas such as Birmingham which are doing a very good job? That area provides accommodation for people leaving hospital while other areas do not do anything. Some of the new techniques are extremely valuable. Will the Minister make inquiries about the areas where this is not being done?
Lord Skelmersdale: Yes, my Lords, most certainly. It may help my noble friend to know that the Department of the Environment recently published a helpful handbook entitled House Adaptation for People with Physical Disabilities which should do a good deal to stimulate good practice in this area. I have arranged for a copy to be placed in the Library.
Lord Mellish: My Lords, the Minister will know that some local authorities—I can name at least two—are bad at providing the kind of facilities referred to in the Question. The housing and community facilities for people with disabilities discharged from hospital are grim. What are the Government doing about those local authorities that are not doing what they are supposed to do?
Lord Skelmersdale: My Lords, as in other areas, I accept that performance is patchy. The Government's objective is to bring the worst up to the level of the best. The Government are encouraging local authorities along those lines.
Lord Winstanley: My Lords, does the noble Lord recall that in the past often acute hospital beds were blocked by patients ready for discharge merely because their relatives were unwilling to receive them? Is it not even worse that acute beds in hospitals like Stoke Mandeville should be occupied by
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permanently disabled people who are ready for discharge and whose relatives are entirely willing to receive them home but are unable to do so because adaptations to their houses to make them fit to accommodate those people have not been carried out? Is it not time that we looked again at the implementation of those sections of the Chronically Sick and Disabled Persons Act which provide for access and home adaptations for chronically disabled people?
Lord Skelmersdale: Yes, my Lords, to both supplementary questions. In answer to the first, that is exactly why we are preparing this circular advising early consultation between the patient, the relative, the clinical team and the local authorities. That is important. The noble Lord referred to the Chronically Sick and Disabled Persons Act. Discussions are going on and I hope to be able to make an announcement on Section 7 in due course.
Lord Ennals: My Lords, does the Minister accept that in the fields of mental illness and physical and mental handicap there is a serious inadequacy both of housing and community services which leads to great hardship? Does he further accept that the failure of the Government to respond to the recommendations of the Griffiths Report is leading to uncertainty in local authorities and great difficulty in planning for services in the future?
Lord Skelmersdale: My Lords, the noble Lord, Lord Ennals, makes an interesting point but I rather believe that it is wide of the subject on the Order Paper.
Lord Stallard: My Lords, the Minister was asked whether he was satisfied that the provisions are adequate. Is he aware that some people have been in hospital for more than 12 months after they could be discharged? That cannot be satisfactory. Is he aware that the supply of houses that should be available to these people has almost dried up because of government policy on rates and the Government's refusal to release money to local authorities from the houses that they have sold? The authorities could adapt or replace houses in order to rehouse these people, who could then leave hospital. He cannot be satisfied, can he?
Lord Skelmersdale: My Lords, the noble Lord will need to read the Official Report in the morning, as will I, because to the best of my knowledge I did not express myself satisfied. Indeed I could never be satisfied in this area. I said that there is always likely to be room for improvement, which is hardly satisfaction.
Lord Ennals: My Lords, can the Minister explain why he said that my question was wide of the mark? Surely it was absolutely directed to the Question on the Order Paper.
Lord Skelmersdale: My Lords, people with mental illness are not regarded as having permanent disabilities. I would accept that people with mental handicaps might well fit—
Lord Ennals: And physical handicaps.
Lord Skelmersdale: Yes, indeed, my Lords, but the noble Lord asked me about mental illness and mentally handicapped patients.
Lord Ennals: My Lords, I said physical handicap, mental illness and mental handicap.
Lord Skelmersdale: My Lords, I apologise because I misheard. Certainly mental illness does fall outside this Question. I have announced what the Government are doing in the area of mentally handicapped and physically handicapped patients. If the noble Lord has a more specific supplementary question I shall do my best to answer it.
Baroness Darcy (de Knayth): My Lords, perhaps my noble friend can enlighten me, because I am slightly confused. Under Section 7 of the 1986 Act, upon which I think he said that he hoped to make an announcement shortly, do physically handicapped people in hospital have the same right to pre-assessment as those with mental and physical handicap? If not, why not?
Lord Skelmersdale: My Lords, I am afraid that the noble Baroness has caught me on the hop. I shall have to write to her on the matter.
Baroness Masham of Ilton: My Lords, does the Minister agree that the problem has been made worse with the closure of many small hospitals, situated near people's homes, which could have acted as a halfway house? Can he perhaps encourage a halfway-house system to be attached to some of the large technical hospitals for this purpose?
Lord Skelmersdale: My Lords, yes. Indeed there are halfway houses which are already in use in connection with some hospitals. However, I agree that a great deal more could be done.

Nuclear Weapons: Destructive Power
3.1 p.m.
Lord Jenkins of Putney Lord Jenkins of Putney asked Her Majesty's Government:
Whether they will compare the destructive power of the atom bomb dropped on Hiroshima with (a) that of the nuclear weapons now carried by Tornado aircraft, (b) that of the new missile for the Tornado, and (c) that of Trident.
The Minister of State for Defence Procurement (Lord Trefgarne): My Lords, as the noble Lord will be aware following my Written Answers of 26th May, it has been the policy of successive governments not to release information concerning the effectiveness of nuclear weapons.
Lord Jenkins of Putney: My Lords, is the Minister aware that the purpose of this oral Question is to enable me to explain to him that there is no need for him to be so economical with the truth? I think he imagines that I am seeking to ask him to estimate the
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destructive power of nuclear weapons in terms of their lethality. Of course I can readily understand that he would be unwilling to do that because lethality depends on many different circumstances.
However, perhaps the noble Lord can tell me and the public—who are entitled to know because it is in their domain—the scientific kilo-tonnage of the various weapons. I think that the noble Lord is capable of doing that. Further, he is entitled to do that because it is in the public domain. If he does not have the figures in front of him at present, will he take an early opportunity to find them and publish them in the form of a letter to me?
Lord Trefgarne: My Lords, the Questions I answered on 7th June—to which I have referred today—were the ones to which I sought to give answers; not the questions that the noble Lord has subsequently posed.
Lord Bramall: My Lords, does the Minister agree that the noble Lord's Question is both irrelevant and unwise? It is irrelevant because surely it is not the comparative yields of certain types of weapons which have any significance in establishing a credible deterrent to war, which we all hope we will never have to use; and unwise because surely it is highly undesirable that such sensitive information should be discussed in open forum.
Lord Trefgarne: My Lords, I am certain that the House will be much impressed by the intervention of the noble and gallant Lord, speaking from the position of experience and importance that he does.
Lord Irving of Dartford: My Lords, does the noble Lord accept that the horrific increases in destructive power of these weapons—which I think we would all admit—underlines the importance of the agreements on nuclear disarmament which have already been achieved? Further, does he understand that we on this side of the House would like to see those agreements carried through so that they apply to all nuclear weapons?
Lord Trefgarne: My Lords, with respect to the noble Lord, I think that that is another question.
Lord Hailsham of Saint Marylebone: My Lords, if we are going into the question of lethality of weapons and seek thereby to isolate the nuclear as distinct from the so-called conventional range, is there not a danger that the public may think that Vimy, Passchendaele and Dresden were all right—sort of tea parties—and that nuclear war is something which in itself is unacceptable?
Lord Trefgarne: My Lords, the policy of making Europe, or the rest of the world, safe for conventional war is not one that I support.
Lord Whaddon: My Lords, can the noble Lord confirm my memory that the most powerful nuclear weapon ever exploded in test was in fact exploded somewhere east of this country during the 1960s and amounted to something like 100 megatonnes? Further, will be pay due attention to the right

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honourable gentleman, the Leader of the Opposition in another place, and not negotiate our weapons away for nothing?
Lord Trefgarne: My Lords, the remarks of the noble Lord greatly tempt me; however, I hope that the House will forgive me if I do not sucumb to that temptation.
Lord Jenkins of Putney: My Lords, is the noble Lord aware that it is necessary for this information to be made public so that the public can estimate for themselves the vast difference between nuclear weapons and other forms of weaponry? Is he further aware that, if he will not give me the figures, I shall find ways and means of giving them to him publicly in this Chamber?
The Lord Privy Seal (Lord Belstead): My Lords, on 7th June my noble friend Lord Trefgarne gave exactly the same Answer as he has given to the noble Lord, today. The Companion to the Standing Orders adjures the House to ask Questions for information only. The noble Lord knew perfectly well what the answer to the Question would be; it would be the same as it was on 7th June. Therefore I beg the noble Lord not to press this point.
Lord Jenkins of Putney: My Lords, as the Leader of the House has chosen to intervene in the matter, may I ask him to accept that there appears to be a misunderstanding between myself and the noble Lord which I shall seek to clarify?
Lord Belstead: My Lords, I think I ought to make crystal clear the danger that we are in. We have no rules in the House about the frequency of Questions. However, if we continue to table the same Questions which will elicit the same Answers, the House will eventually be driven into a position where it will find itself having to ask the Procedure Committee to implement a rule about the frequency of Questions and a mechanism for enforcing that frequency. I am sure that the noble Lord does not wish to drive us down that road.
Lord Jenkins of Putney: My Lords, I must stress that I am not asking the same Question.
Lord Belstead: My Lords, no; I understand that. Nevertheless, the noble Lord tabled a Question which was bound to elicit the same Answer.

Business
3.7 p.m.
Viscount Davidson: My Lords, at a convenient moment after 3.30 this afternoon my noble and learned friend the Lord Chancellor will, with the leave of the House, repeat a Statement that is to be made in another place on Patrick McVeigh: Extradition Proceedings.
It may be for the convenience of the House if I announce that the Committee stage of the Local Government Finance Bill will be adjourned at
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approximately 7.30 p.m. for one hour and that during the adjournment the Order of Commitment for the Scotch Whisky Bill will be discharged and the Companies (Fees) Regulations 1988 will be taken.

Dartmouth-Kingswear Floating Bridge Bill
3.8 p.m.
Read a third time, and passed, and returned to the Commons with amendments.

Business of the House
3.8 p.m.
Lord Belstead: My Lords, I beg to move the Motion standing in my name on the Order Paper.
Standing Order No. 38 provides that on all days except Wednesdays public Bills, measures, affirmative instruments and Select Committee reports have precedence over Motions, whereas on Wednesdays Motions have precedence. Consistent with the Standing Order, it is on Wednesdays that we hold our general debates. As your Lordships will be aware in the later part of the Session it is usual for the Government to table legislative business on Wednesdays so that that business has precedence over Motions where this may be necessary. Therefore it is necessary to suspend the relevant provisions of Standing Order No. 38. That is why I bring the Motion forward. I beg to move.
Moved, That Standing Order No. 38 (Arrangement of the Order Paper) be suspended until the Summer Recess so far as is necessary to give Her Majesty's Government power to arrange the order of business.—(Lord Belstead.)
On Question, Motion agreed to.

Education Reform Bill
3.9 p.m.
The Parliamentary Under-Secretary of State, Department of Education and Science (Baroness Hooper): My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, That the amendments for the Report stage be marshalled and considered in the following order—

Clauses 1 to 9,

Schedule 1,

Clauses 10 to 39,

Schedule 2,

Clauses 40 to 65,

Schedule 3,

Clauses 66 to 112,

Schedule 4,

Clauses 113 to 115,

Schedule 5,

Clauses 116 to 148,

Schedule 7,

Clauses 149 to 177,

Schedule 6,

Clauses 178 to 181,

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Schedule 9,

Clauses 182 to 203,

Schedule 8,

Clauses 204 to 210,

Schedules 10 and 11,

Clause 211.—(Baroness Hooper.)

On Question, Motion agreed to.

Malicious Communications Bill
3.9 p.m.
Considered on Report.

Local Government Finance Bill
3.9 p.m.
The Minister of State, Department of the Environment, (The Earl of Caithness): My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.
Moved, That the House do now again resolve itself into Committee.—(The Earl of Caithness.)
On Question, Motion agreed to.
House in Committee accordingly.
[The LORD ABERDARE in the Chair.]
Clause 104 [Power to designate authorities]:
[Amendment No. 165 had been withdrawn from the Marshalled List]
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 166:
Page 56, line 30, after second ("the") insert ("preceding financial").
The noble Lord said: I shall speak slowly to enable the Committee to empty! With this amendment we move to a new and extremely important issue. Throughout their advocacy and promotion of the Bill, the Government have argued that the principle justification for it is to improve the accountability of local government to its electors; but when we reach this clause and this part of the Bill, we discover that the Government have no faith whatsoever in the ability of the measures proposed to achieve accountability.
What the Government are saying, as they have said in a number of Acts of Parliament in recent years, is that they, the Government, will be the ultimate arbiters of how much local authorities will spend and that the decisions of the local electors and the local community charge payers can, if the Secretary of State so wishes, be set at nought. That is the Government's clear intention in not only continuing but intensifying and making more fierce the provisions which have existed for a number of years for the capping of rates and which are now to be applied to the capping of the community charge.
I say that the provisions in the Bill are worse than the existing situation for two reasons. First, the definition of what community charge is liable for capping is merely that the Secretary of State shall determine that in his opinion either that the
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community charge is excessive or that the increase in the community charge is excessive. That differs from existing legislation because at present those authorities whose expenditure is below the grant related expenditure or needs assessment are exempt from rate capping.
Thus, for example, if the political control of a local authority changes at an election and the defeated party had set a rate below the grant related expenditure or needs assessment determined by the Government, and the incoming party in pursuance of the policies that it had put before the electorate and upon which it was elected determines to increase the community charge, then, regardless of whether the resulting community charge is below the grant related expenditure or needs assessment, the Government can cap that community charge on the basis that the increase is excessive. In that sense, this proposal is significantly more draconian and more restrictive of local authority independence than the existing situation.
The second way in which the new capping procedures are worse is in the matter of timing. At the moment, rate capping is on a previous year assessment, and the rate capping decision is made—I shall not go into the details of how it is arrived at or what consultation there is—in, let us say, July 1987 for the financial year 1988–89. In other words, the local authority is warned of the amount of rate capping which is to be imposed. It is enabled to make adjustments for that in the preparation of its departmental budgets and finally in the setting of a rate in the ordinary way. The rate support grant is announced in the course of that period so that a rate can be fixed to come into effect on 1st April in the example of 1988 that I have given.
In the Government's proposals, which are matters with which we deal in the amendments, the timing is not that the capping of the rate for the succeeding year shall be determined in the previous July, but that the final decision about the capping of the community charge shall be taken in May or June of the year in which the local authority finds itself, which can be anything between two and three months into the financial year. By the time the local authority has gone through all the procedures set out in the Bill for rate capping—I am sure the Minister will set them out much more clearly than I can—we are already into the financial year concerned.
Those community charge payers who have already paid will have to receive refunds; those community charge payers who have decided to pay by standing order will have to have their standing orders varied, and many aspects of local authority expenditure will have to be curtailed, increased or revised in accordance with the Secretary of State's final decision. I am talking about the procedures whereby under the Bill precepting authorities and charging authorities must give to the Secretary of State their calculations on which he can base his determination by 11th March.
I am talking about the fact that he lets them know what will be required within seven days. He then issues a notice to the authority which could be, let us say, by the end of March, and the authority has 28 days in which to appeal against it. After that, the

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Secretary of State considers the appeal and makes a final order setting out the maximum figure. The order is a statutory instrument which must be approved by the other place. That is the procedure which takes place between March amd May of a given year.
The procedure for in-year community charge capping will sow inevitable confusion, not so much for the local authority, although that is of course important, but for the community charge payers (the electors), the people who may well, in the course of that process, on the first Thursday in May be going to elect part or all of the local authority concerned. They may be turning out, or confirming in office, the authority whose calculations have been rejected by the Secretary of State and which is in dispute with him about what the final community charge will be.
That type of confusion, particularly at such a time, is the worst possible way to achieve the accountability which is most important at the time of the election and which the Government, in theory, are seeking to achieve. If we were behaving irresponsibly in this matter, and not seeking to be a revising Chamber, we would wish to wipe the Bill entirely clear of this whole business of the capping of the community charge. We believe that it is profoundly undemocratic and in contradiction to the Government's expressed statement which they have made over and over again. When they are reminded of the administrative complexity and social injustice of the community charge, they always return to the same argument about accountability, and yet in this part of the Bill they deny the ultimate accountability that matters—that of the local authority to its electors—and replace it by the accountability of the local authority to the Secretary of State. That is what we find unacceptable. That is why we find it necessary to bring the amendments before the Committee.
Perhaps I may briefly tell the Committee what the amendments are. I am speaking to my Amendments Nos. 166, 167, 168, 169, 170 and 172. I think it will be for the convenience of the Committee if it is taken that I have spoken also to Amendments Nos. 167A, 170A and 170B in the name of the noble Lord, Lord Ross of Newport. Amendments Nos. 166, 167, 169 and 170 seek to achieve very broadly that the principle of in-year community charge capping should no longer take place, that the timing is changed so that the decision is taken before the financial year starts and so that local authorities are enabled to make sensible calculations and represent a sensible case to their electors for the community charge which they propose to levy.
Amendment No. 168 says that the Secretary of State must first issue a report to show how accountability has been affected by Part I of the Bill. Amendment No. 172 makes a point which I should have thought ought not to be necessary: that different principles for the capping of the community charge should not apply for different classes of boroughs. That is far too open for a Secretary of State to distinguish between local authorities which are politically friendly and those which have been singled out, as too often has been the case in the past, for victimisation by the Government.
These are not wrecking amendments. They are constructive amendments intended to make the capping procedure, which we entirely condemn, as workable as possible. I hope that even if the Government find them objectionable—I hope that they will not—they will find favour with the Committee. I beg to move Amendment No. 166.
Lord Ross of Newport: Perhaps I may speak to Amendments Nos. 167A and 170A. I totally support everything that has been said from the Opposition Front Bench by the noble Lord, Lord McIntosh of Haringey. Quite frankly, these are totally undesirable powers which we are being asked to grant to the Secretary of State in quite substantial quantity. There are 11 clauses which are very complicated. They are a total bureaucratic nightmare and I do not know how local authorities are supposed to survive with such restrictions being placed upon them.
From my own experience in local government I know that when a crisis hits a community it is to the local leaders among the community that the citizens turn. We had a major crisis in my part of the world when our heavy engineering complex was suddenly closed down by the American owners. Nearly 1,000 jobs suddenly went. This happened almost overnight. We have obviously a crisis coming up now in Plymouth. Although I received friendly responses from the Prime Minister and her Ministers, the fact was that there was nothing one could do and no encouragement that one could get someone to take over a heavy engineering complex on an offshore island.
However, it was to the county council that the employees in that firm and most of the people living in Cowes on the Isle of Wight turned, and they expected us to take action. We held a number of meetings. There were people standing up, offering to put up money so that we could set up a development board and encourage new industry to come in. They very much supported me as leader of the council at that time, when I made it known that we as a local authority would go in with two entrepreneurs to acquire that site and try to get it back into production. That is what we did and we still own part of it.
That was a crisis which arose and for which extra money had to be spent, to meet the needs of that purchase. That might not happen or it might be rate capped under this legislation which we are debating today. The only Conservative-controlled council that was rate capped was Portsmouth. I have already paid tribute in the Second Reading speech to what Portsmouth has done to get itself off the ground. Anyone who was in the navy will know that Portsmouth was at a pretty low ebb at the end of the war. It took 20 to 30 years to start getting itself back to being a place to which people wanted to go. Because Portsmouth spent the money, it was able to support the "Mary Rose" museum, and to encourage other ships to come in and also to bring in the cross-Channel services. That was largely through public initiative. Portsmouth was rate capped in the process but most people now think that the town did a damned good job.

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I also suggest that Glasgow, which I think has never been rate capped, is using public money sensibly. It has revived itself in to being a city to which many people want to go. It has put money into the arts. Of course it is always the arts that get clobbered whenever there are restrictions on local government expenditure, and that is happening to me right now.
I wanted to say that because I think that rate capping is yet another measure preventing initiative. If we want people to join local government and to use their initiative we are certainly not going the right way about it through these clauses in the Bill. Amendments Nos. 167A and 170A make provision for local ballots on the Secretary of State's decision to cap an authority. He can only go ahead if he has the blessing of a simple majority of local residents.
The Government have gone ballot-mad lately. Let us take it into the local authority scene. We shall have local ballots in housing. People in council housing will be able to ballot on whether they want to change their landlords, whether they want to go to a local housing association or another private landlord. Under the education Bill people can ballot if they want to come out of the local authority control in education. So why do we not do this on the whole question of the poll tax capping? It seems to me to be a perfectly legitimate way to go about it.
Amendment No. 170B has two parts, First, it mandates the Secretary of State to draw up regulations governing the procedure for such ballots and to bring them back before the House. I think that this is entirely reasonable. It is the Government's job to govern; I accept that. With all the combined resources of the Department of the Environment, it is not beyond its wit to perform such a task. Drafting the detail of legislation is not the job of the Opposition.
Secondly, it declares that the Secretary of State should pay for the ballots. That seems again to be entirely reasonable, given that there will only be a need for the ballot if the Secretary of State decides to take action to cap the community charge. He will effectively trigger the ballot and he should surely pay.
I shall finish by giving a quotation from the Local Government Chronicle in an article written by Mr. Robert Hedley. It says:
"why government even contemplates phasing the charge in alongside the rates, which would so confuse the public as to destroy this argument in the short term"
heaven knows.
"But to cap community charge smacks of dishonesty and selective vengeance".
We are trying to show the Government a way round. If they honestly believe that an authority is behaving in a totally irresponsible way, they could go to the electorate and say, "OK, we'll have a ballot on this issue". They should let the local people respond and say what they think about it. I beg to move.
Lord Boyd-Carpenter: There seem to be two points that arise on this series of amendments: first, as to the actual timing of a capping decision of the Government; and, secondly, as was put with his
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customary force by the noble Lord, Lord McIntosh of Haringey, as to whether under the new system a capping power should survive.
On the first point, I have some sympathy with what has been said. It is obviously in everybody's interests that if a capping decision has to be made it should be made and announced as early as possible. Obviously if it is made late in the day it can cause considerable confusion and difficulty. I imagine that my noble friend the Minister shares the view that if these decisions have to be made, the earlier they can be made the better. They are, however, complex and matters which sometimes involve fairly prolonged inquiry. I think it would be very foolish to introduce any limit in time beyond which a capping decision could not be made. The words, "in the interests of an early decision" are such that one has to be careful not to inhibit the exercise of the power altogether.
I firmly believe that the capping power must remain. I believe that under the new system, with the introduction of what has so often been referred to as accountability, it is likely to be needed less often than it has been in the past. I very much hope that that will be so. It could be said to be one of the objects of the Bill to try to secure that this should be done. The necessity for doing it arises less than it has unhappily done in recent years.
However, I think it would be very irresponsible for any government to abandon the power of capping. After all, it is the central government and the central government alone who are responsible for the management of the national economy. It is the central government who are called to account—and rightly called to account—if the national economy gets into trouble or—and this is particularly relevant to the issue—if excessive expenditure produces a balance of payments crisis or further inflation. Therefore in my view the Government must plainly retain the power to impose capping. I should be very much against any amendment which deprived them of that power. However I agree—and I go along with Members of the Committee opposite to this extent—that if this has to be done, the earlier it is done the better.
3.30 p.m.
Lord Bellwin: I too listened with much interest to the timing point made by the noble Lord, Lord McIntosh of Haringey. I am just not sure the extent to which that would have all the adverse repercussions that he mentioned. I agree with my noble friend Lord Boyd-Carpenter that that is something which must be looked at very closely. I do not at all accept the point about the confusion to the electorate, to which the noble Lord, Lord McIntosh, referred. In actual fact I cannot imagine a better situation than the electorate being called upon to give their verdict on a community charge level which had been fixed by an authority and which could only be reduced if the authority were capped. I can imagine what their reaction to that might be.
However, this whole business of capping certainly brings back very vividly to me previous debates on rate capping. What has happened since has not led to the horror forecasts that were made at the time. In fact I suggest that there are millions of people in the

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country who are very happy that those powers exist. One must bear in mind that it is only those authorities which are spending beyond the levels that are considered to be reasonable—as compared with those who spend within those levels—which are affected. I can think of situations, as I am sure can many other Members of the Committee, in the past year or two when people living in at least one London borough had their rates increased by 67 per cent. We can imagine the feelings of the people who lived in that borough when the rate was capped the following year. It is no secret that that borough was Ealing and that the rate there had to be reduced dramatically. 1 mention that only as an example.
I submit that rate capping has been a very effective measure which has brought only good. It has concentrated the minds of authorities so concerned to the point where many of them are becoming far more efficient in their working terms than they ever were before because they have no alternative. As for the like proposals on the community charge, I suspect that there will be the same effect in the end.
I have already mentioned my slight reservation about the timing. I shall look forward to hearing what the Minister says when he replies. We really get the flavour of the Opposition's feeling about everything pertaining to this particular amendment when we recall that the noble Lord, Lord McIntosh, mentioned the:
"social injustice of the community charge".
There are many of us who feel that it is not in any way a social injustice. We believe that for a majority of the people it is a social justice. It is not as the noble Lord, Lord McIntosh, said, victimisation by government, but it is the unfairness of the present system that has led to this Bill and all the changes contained therein.
Lord McIntosh of Haringey: I hope that the noble Lord, Lord Bellwin, will accept my assurance that my amendments on the timing matter simply bring the situation back to what it was, and is now, under the Rates Act 1984, which he himself piloted with such distinction through this Chamber. If that is a tribute to the noble Lord's skill in advocacy and drafting, then so be it. But we feel that what was good and what was recommended to the Chamber by the noble Lord, Lord Bellwin, in 1984 has some validity. However, it is interesting that both the noble Lord, Lord Bellwin, and the noble Lord, Lord Boyd-Carpenter, have made nothing of the point that it is the Government's claim that the community charge in itself will achieve accountability and should therefore make capping unnecessary. He has given no credit whatever to any difference between the community charge and the rating system in that respect.
Lord Boyd-Carpenter: Before the noble Lord sits down, will he kindly withdraw that last reference to me? If he had been good enough to pay attention to what I said, he would recall—as Hansard will record—that I made it clear that it seemed to me likely that rate capping would be needed much less with the community charge, because of the introduction of accountability, than it has
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unfortunately been in the past, but that it was nonetheless sensible to keep it in reserve. He will appreciate now that what he was trying to say a moment ago about my comments simply twisted them.
Lord McIntosh of Haringey: I should apologise to the noble Lord. He is quite right of course in what he said. I still do not think that it follows from that that the reserve power is necessary, but that is a disagreement between us on a matter of policy and not a conflict on the record.
Lord Rippon of Hexham: As my noble friend Lord Boyd-Carpenter pointed out, this discussion has raised two points. The first was the rather limited one about the matter of the timing. As regards that point, I am sure that my noble friend the Minister will have regard to what has been said. On the second point, 1 should not like the impression to be given that everyone on this side of the Committee is enthusiastic about the concept of rate capping, or wholly convinced of its necessity, particularly as my noble friend has pointed out that one of the arguments in favour of this Bill is that it would make rate capping less necessary in the future than in the past.
Accountability is one of the current weasel words. It can mean different things to different people. I am all in favour of financial accountability. I think that a great deal has been achieved by the Government in recent years and by the Audit Commission in order to achieve financial accountability. But there is also accountability to the electorate. I think that one of the arguments in favour of this Bill is that it is going to create a new financial system under which a greater degree of independence can be returned to local authorities. That is what many of us wished to see.
I think that some of the arguments about the effect of local expenditure on the national economy or on the balance of payments are carried too far. There has always been control over public expenditure and there are many ways in which the Government can exercise control. I have always taken the view that, where a local authority spends money on services which the local electorate want and for which the local electorate are prepared to pay, that should be encouraged.
The Earl of Caithness: Before turning to the detail of the amendments it may assist the Committee if I briefly describe the rationale behind the inclusion of the charge capping provisions in the Bill and the way in which we envisage them operating.
The new system of local finance, in particular the community charge, which the Bill is establishing is a powerful force for local accountability. Community charge capping in no way detracts from it, for in the long term all councils will have pay attention to the wishes and interests of their electors. Nor does the inclusion of the capping provisions cast doubt on the efficacy of the accountability mechanisms we are setting up. But it is clearly the duty of the Government to safeguard charge payers from the most severe effects of excessive community charges where an authority, without regard to the financial or electoral consequences, embarks on irrational spending policies which are detrimental to

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the interests of residents. Should this situation ever arise—and I hope it will in fact never occur—the powers we are seeking will enable my right honourable friend to bring rapid relief to the hard pressed charge payers.
During the Clause 58 stand part debate that we had yesterday, the noble Lord, Lord Graham of Edmonton, stressed to the Committee that there was a new realism in local government. We welcome this and I trust that this continues to be the case. But we must, as we were just reminded by my noble friend Lord Bellwin, always be aware of past examples of reckless behaviour by local authorities. The Committee will recall the massive rate increases which some authorities have imposed—such as Ealing's 72 per cent. in 1987–88. In addition some authorities may be tempted to abuse the transitional period by hiding excessive spending under the cloak of the temporary financial support which the transitional arrangements will give. Against such a background it would clearly be unwise not to provide powers of the charge capping type. The way in which Part VIII will operate is simple. The scheme will operate by reference to an authority's spending financed by its demand on the collection fund. If that demand is greater than £15 million and is excessive in absolute terms or represents an excessive increase over the previous year, as measured against general criteria of excessiveness determined by my right honourable friend, he will designate the authority for charge capping. He will propose a lower figure for the authority's demand on the collection fund and give it 28 days to accept the reduction. If it accepts, my right honourable friend confirms the reduction and the authority has 21 days to put it into effect.
Alternatively, if the authority applies to him for a different figure, my right honourable friend will consider the application and may confirm the figure which he proposed, or fix a higher or lower figure. If a higher figure is fixed, he may impose requirements on the authority concerning its expenditure or financial management. The figure is to be specified in an order requiring affirmative procedure in another place only. Once the order is approved and the authority has been notified, it must within 21 days comply with the limit; otherwise it will not be able to draw further revenue from the collection fund until it does comply.
The Government are satisfied that these provisions allow for the rapid relief of charge payers. The whole process should be completed by the summer. That answers the concerns about a timetable which were raised by my noble friend Lord Boyd-Carpenter, among others. We do not think that these amendments would enhance the provisions in any way; indeed, they would make the process more complicated or would render them ineffectual.
Amendment No. 168 aims to provide that an authority should only be selected for charge limitation after my right honourable friend has made a report on the impact of the introduction of the community charge on its accountability. When we considered a similar set of amendments in another place, my honourable friend explained that they were
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based on a misunderstanding of why we are seeking charge-capping powers. It is not in any way because we fear that the community charge will fail to deliver improved accountability. On the contrary, we are convinced of the efficacy of the accountability mechanisms we are establishing with the Bill. But, as I have explained, charge capping is there to provide rapid relief to those suffering from the excesses of a council which is either simply not susceptible to any reason or logic, or which is taking advantage of the arrangements in the transitional period partly to camouflage irresponsible spending policies.
The amendment would introduce bureaucratic and time-consuming requirements to produce and consider reports about accountability and the community charge which would run counter to the very essence of charge capping. In particular it would make the application of the charge-capping powers difficult in 1990–91. In this first year of the new system there would be no past experience on which to base such reports, yet this transitional period would be the time when charge payers would perhaps be in most need of the back-up protection which this part of the Bill provides.
Amendments Nos. 167A, 170A and 170B in the name of the noble Lord, Lord Ross of Newport, would also be time-consuming and costly in their consequences. They would require not so much a ballot but rather a referendum to be held in any authority where my right honourable friend intends to cap the charge or precept. This requirement would seriously damage one of the main principles underlying Part VIII of the Bill; namely, that there should be a means by which the overburdened charge payer can gain rapid relief. The whole process would be extended by about a month. However, the effect of these amendments would be seen not only in the delay but also in the unnecessary cost which would fall—because the Secretary of State is required to provide sufficient resources—on taxpayers as a whole. It has not been the custom in this country to decide matters by referendum, except for important constitutional issues. The Government do not believe that these costly and time-consuming proposals would be a suitable reason for abandoning that custom.
Amendments Nos. 166 and 169 seek to base selection on spending in the previous rather than the current financial year. In the context of this part as a whole, this is obviously inappropriate and contrary to the whole principle of charge capping. The shape of the scheme set up in Part VIII is an "in-year" system, in which excessive charges are reduced in the same year in which they are levied. It would not make sense to require a reduction of a charge which itself may not be excessive on the grounds that the charge in the previous year was excessive. Perhaps I may expand on that matter, which concerned the noble Lord, Lord McIntosh. The Committee will be aware that a system of rate capping which operates in-year has been tried and shown to work in Scotland. That is adequate proof that it can be done.
It is true that in practical terms it is less easy to achieve savings if one starts early in the financial year than it is if one starts addressing the problem eight months before the beginning of the financial year as

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the present system of rate capping in England allows. However, my right honourable friend has to exercise his powers in a reasonable manner and he would of course take into account the practicability of any reduction he seeks from a charge-capped authority under the new system. We should also bear in mind that any authority selected under the new charge-capping arrangements will, by definition, be an authority spending excessively. It will therefore have much more scope than any normal authority to make significant savings. That also will be a factor to be taken into account in the level of any reductions sought by my right honourable friend.
Amendments Nos. 167 and 170 would mean that an authority could only be capped if its charge or precept was not only at an excessive level but also represented an excessive increase on the year before. However, a charge would clearly not have to fulfil both these criteria before the charge payer would find it burdensome. I can see that the argument behind Amendment No. 172 might make some authorities more careful about their budget-making decisions. But I remind the Committee that if this is enforced we will be dealing with a very few recalcitrant local authorities. Thus the danger in announcing selection criteria in advance is that they might come to be seen as a going rate—a Government norm. This then might influence some authorities' behaviour adversely by encouraging them unnecessarily to spend up to that norm. But, as I have already explained, charge capping is not intended as a general mechanism to influence authorities' behaviour. Authorities should be influenced by the accountability pressures of the community charge system. We do not want to distort this. Charge capping is a reserve power to be brought into use, if at all, where an authority irrationally ignores the pressures of the system.
To sum up, the result of the amendments would be that my right honourable friend could not exercise his powers of charge capping in a flexible manner at the very times when they might be most needed, nor in a way that fulfilled the purpose of charge capping; namely, to give rapid relief to charge payers suffering under the excesses of an irrational and irresponsible council.
3.45 p.m.
Lord Harris of Greenwich: Perhaps the Minister will be good enough to reply to the specific points put to him by his noble friend Lord Rippon.
The Earl of Caithness: I believe that I have covered most of the points which my noble friend put to me. If I have not done so, perhaps he will remind me what points I did not cover.
Lord Harris of Greenwich: With great respect, I do not believe that the Minister dealt very satisfactorily with the significant questions put to him by the noble Lord. However, perhaps I may ask a second question with which I hope the Minister will deal. He mentioned the matter of referenda. Why is it right to have a referendum with regard to housing and wholly wrong to have a referendum with regard to this Bill?
The Earl of Caithness: The noble Lord, Lord Harris, tempts me to discuss another Bill which will shortly be coming before the House. I look forward to discussing that Bill with him in the future.
Lord Harris of Greenwich: With respect, that is no reply. The Bill comes from the noble Earl's department. How does he defend his approach to this amendment when the Government are introducing a referendum as regards housing?
The Earl of Caithness: At the moment, that Bill is being discussed in another place. It is right to wait until the Bill comes before the House to consider that point.
Noble Lords: Hear, hear!
Lord Ross of Newport: Perhaps the Minister can comment on this matter. Two years ago, due to some quirk in the rate support grant formula, Gillingham, Bath and one or two other towns had an absolute bonanza and Gillingham decided that there would be no rate increase for that year. It was cited as a very sensible authority. This year Gillingham presumably because the rate support grant formula has somehow been put right, has had a rate increase of 40 per cent. Does the Minister consider that to be excessive and would it be rate-cappable?
The Earl of Caithness: I think that one would have to look at all the circumstances surrounding the charge that an authority might levy in the future in view of the criteria which I spelt out in answer to the amendment.
Lord Jay: It did not appear to me either that the Minister answered the points put to him by his noble friend Lord Rippon. If I understood him correctly, the noble Lord, Lord Rippon, argued that rate capping in this case would limit the independence of local authorities and therefore would reduce the force of the argument about the accountability which is supposed to be included in this system. As he said, accountability means many things to different people. What it is presumably intended to mean in the argument in support of the Bill is the influence of the elector in electing a local authority and controlling or at least influencing the level of expenditure by that authority.
We all know that that influence is already severely limited by the fact that 75 per cent. of local government expenditure will be financed by revenue which is outside the control of the local authority and therefore of the local elector. As I understand it, 50 per cent. will come from rate support grant and another 25 per cent. from the uniform business rate. Therefore we are talking about influence over only a quarter of local government expenditure. If one realises that, it is surely apparent that the independence left to local authorities and therefore to their electors is pretty small.
There will be strict limits to the extent to which they can reduce the domestic rate, because if they reduce it more than modestly they will be unable to finance even the Government's agreed level of expenditure. If they are also to be prevented from increasing it beyond some unspecified level I should

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have thought that their independence, and therefore the genuine accountability to electors, would be reduced to a more or less negligible level. That seriously impinges upon what is supposed to be one of the main arguments for the whole Bill.
It did not seem to me that the Minister had answered that argument, whether or not it is the argument that the noble Lord, Lord Rippon, had in mind. I think part of it was, but, whether or not it was, I do not believe that the Minister replied to it.
Lord Rippon: Perhaps I may just explain. I made a series of assertions, by which I stand. I gather that they do not at the moment find favour with Her Majesty's Government. That is disappointing but I have no doubt that they will change their minds in due course.
Lord Bellwin: Perhaps I may remind the noble Lord, Lord Jay, that I served in local government at a time when the rate support grant was not 50 per cent. but 66 per cent.—two-thirds. One may therefore wonder what effect that had on both the independence and the accountability of the local authorities under such a regime.
Lord Jay: That may be so, but it does not alter the fact that in future 50 per cent. plus 25 per cent. will amount to 75 per cent.
Baroness Carnegy of Lour: It seems to me that the people of this country have become accustomed to the concept that they elect councillors to decide on their behalf on the level of local services and that, if those councillors prove to be totally wild, central government will come to the rescue. They elect Members of Parliament for that purpose. There are two legs to the whole understanding of local government.
I agree with my noble friend Lord Boyd-Carpenter that it is highly likely that the capping of the community charge will be necessary very much less often than hitherto. Indeed, the system will be working perfectly if it is never necessary. However, one can envisage, particularly at the outset, a council being elected and reckoning at the beginning of its term of office to be really wild and, for whatever reason—and there are many reasons why it might happen—putting the community charge up in a way that will be totally intolerable to its electorate. It may well be that by the time the next election comes the council will have got out of that way of thinking.
We hope that the answerability will enormously improve the way people think, but it may not operate instantly and properly. It would be completely irresponsible, in my view, for central government not to have a fallback position. We have seen that fallback position operate in a very limited way in Scotland, but it has been very important for those people who have been rescued by it.
I think that this is an essential power. I can quite understand why those who want the community charge to fail do not want this provision. However, if one wants it to succeed, I believe that power must be available.
Lord Bellwin: Just to put the record straight, I should like to say to the noble Lord, Lord Jay, that the figure of 66 per cent. to which I referred was without the business rate which was charged to business people. Heaven knows what the percentage was then, but it would have been much larger.
Lord McIntosh of Haringey: When I first spoke on this amendment, I predicted that the Minister would set out the provisions of this part of the Bill with much greater clarity than I could. He did so with great lucidity, and the Committee will be grateful to him. However, his speech was strong on exposition and very low on advocacy. He did not really answer the case that was made, either about the justice of the capping of the community charge and still less about the timing.
What we are recommending goes back to the existing system which the Government introduced only four years ago. First, it has not been claimed by the Government that rate capping is any more necessary now than it was four years ago. Nor is there any suggestion that local authorities are becoming any more irresponsible rather than less irresponsible and therefore that further measures are needed other than those provided by the Rates Act 1984.
Secondly, it is being proposed for a situation in which, according to the whole basis of the Bill, accountability is to be achieved by the very imposition of a community charge rather than by the imposition of rates. I am afraid that the argument does not stand up in either case to the kind of examination which the Committee has given to it this afternoon.
What we have here is nothing more than a "switch sell". We are being sold what is in effect accountability of local authorities to the Secretary of State as if it were accountability of local authorities to their electorate. The country has been sold a false bill of goods and the Committee this afternoon is being sold the same false bill of goods. It would be irresponsible if we did not object to that by seeking to approve the amendments in my name and the name of the noble Lord, Lord Ross of Newport.
3.58 p.m.
On Question, Whether the said amendment (No. 166) shall be agreed to?
Their Lordships divided: Contents, 100; Not-Contents, 135.

DIVISION NO. 1

CONTENTS

Addington, L.

Carmichael of Kelvingrove, L.

Amherst, E.

Carter, L.

Ardwick, L.

Cledwyn of Penrhos, L.

Aylestone, L.

David, B.

Basnett, L.

Davies of Penrhys, L.

Birk, B.

Dean of Beswick, L.

Bonham-Carter, L.

Dormand of Easington, L.

Boston of Faversham, L.

Elwyn-Jones, L.

Bottomley, L.

Ennals, L.

Briginshaw, L.

Ewart-Biggs, B.

Bruce of Donington, L.

Falkland, V.

Callaghan of Cardiff, L.

Feversham, L.

Campbell of Eskan, L.

Fisher of Rednal, B.

169

Gallacher, L.

Northfield, L.

Galpern, L.

Oram, L.

Gladwyn, L.

Peston, L.

Glenamara, L.

Pitt of Hampstead, L.

Graham of Edmonton, L.

Ponsonby of Shulbrede, L. [Teller.]

Grey, E

Grimond, L.

Reilly, L.

Hampton, L. [Teller.]

Ritchie of Dundee, L.

Hanworth, V.

Rochester, L.

Harris of Greenwich, L.

Ross of Newport, L.

Hatch of Lusby, L.

Russell, E.

Hayter, L.

Sainsbury, L.

Houghton of Sowerby, L.

Scanlon, L.

Hughes, L.

Seear, B.

Hunt, L.

Sefton of Garston, L.

Hutchinson of Lullington, L.

Serota, B.

Irving of Dartford, L.

Shepherd, L.

Jacques, L.

Soper, L.

Jay, L.

Stallard, L.

Jenkins of Putney, L.

Stedman, B.

John-Mackie, L.

Stewart of Fulham, L.

Kennet, L.

Stoddart of Swindon, L.

Kilmarnock, L.

Strabolgi, L.

Kings Norton, L.

Taylor of Blackburn, L.

Lawrence, L.

Taylor of Gryfe, L.

Llewelyn-Davies of Hastoe, B.

Taylor of Mansfield, L.

Lloyd of Kilgerran, L.

Tordoff, L.

Lockwood, B.

Turner of Camden, B.

McIntosh of Haringey, L.

Underhill, L.

McNair, L.

Vernon, L.

Mason of Barnsley, L.

Wallace of Coslany, L.

Mayhew, L.

Walston, L.

Mishcon, L.

Wedderburn of Charlton, L.

Molloy, L.

Wells-Pestell, L.

Morton of Shuna, L.

White, B.

Mulley, L.

Winchilsea and Nottingham, E.

Murray of Epping Forest, L.

Nicol, B.

Winstanley, L.

NOT-CONTENTS

Airey of Abingdon, B.

Ellenborough, L.

Aldington, L.

Elliot of Harwood, B.

Alexander of Tunis, E.

Erne, E.

Allerton, L.

Fanshawe of Richmond, L.

Arran, E.

Ferrier, L.

Auckland, L.

Fortescue, E.

Bauer, L.

Fraser of Kilmorack, L.

Beaverbrook, L.

Gainford, L.

Belhaven and Stenton, L.

Gisborough, L.

Bellwin, L.

Glenarthur, L.

Beloff, L.

Gridley, L.

Belstead, L.

Haddington, E.

Bessborough, E.

Hailsham of Saint Marylebone, L.

Biddulph, L.

Blake, L.

Halsbury, E.

Borthwick, L.

Hardinge of Penshurst, L.

Boyd-Carpenter, L.

Harmar-Nicholls, L.

Brabazon of Tara, L.

Harvington, L.

Broxbourne, L.

Henley, L.

Bruce-Gardyne, L.

Hesketh, L.

Burton, L.

Hives, L.

Butterworth, L.

Home of the Hirsel, L.

Caithness, E.

Hood, V.

Cameron of Lochbroom, L.

Hooper, B.

Campbell of Alloway, L.

Hunter of Newington, L.

Campbell of Croy, L.

Hylton-Foster, B.

Carnegy of Lour, B.

Ilchester, E.

Carnock, L.

Jessel, L.

Coleraine, L.

Kaberry of Adel, L.

Cork and Orrery, E.

Killearn, L.

Cornwallis, L.

Kimball, L.

Cottesloe, L.

Lauderdale, E.

Cox, B.

Layton, L.

Cullen of Ashbourne, L.

Lloyd of Hampstead, L.

Davidson, V. [Teller.]

Long, V.

De Freyne, L.

Lothian, M.

Denham, L. [Teller.]

Luke, L.

Dilhorne, V.

Lyell, L.

Dundee, E.

Mackay of Clashfern, L.

Eden of Winton, L.

Malmesbury, E.

Effingham, E.

Marley, L.

170

Masham of Ilton, B.

Saltoun of Abernethy, Ly.

Merrivale, L.

Sanderson of Bowden, L.

Mersey, V.

Seebohm, L.

Montagu of Beaulieu, L.

Selkirk, E

Montgomery of Alamein, V.

Shannon, E.

Morris, L.

Sharples, B.

Mottistone, L.

Skelmersdale, L.

Moyne, L.

Somers, L.

Munster, E.

Stodart of Leaston, L.

Nelson, E.

Strange, B.

Nelson of Stafford, L.

Swansea, L.

Norfolk, D.

Swinton, E.

Northesk, E.

Terrington, L.

Nugent of Guildford, L.

Teviot, L.

O'Brien of Lothbury, L.

Thomas of Gwydir, L.

Onslow, E.

Thurlow, L.

Orkney, E.

Todd, L.

Portland, D.

Trafford, L.

Pym, L.

Tranmire, L.

Radnor, E.

Trefgarne, L.

Rankeillour, L.

Trumpington, B.

Richardson, L.

Vaux of Harrowden, L.

Rochdale, V.

Whitelaw, V.

Rodney, L.

Windlesham, L.

St. Aldwyn, E.

Wise, L.

St. Davids, V.

Wynford, L.

Saint Oswald, L.

Young of Graffham, L.

Resolved in the negative, and amendment disagreed to accordingly.
4.6 p.m.
[Amendments Nos. 167, 167A and 168 not moved.]
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 168A:
Page 56, line 34, at end insert—
("( ) For the purposes of this section, the Secretary of State shall ignore any expenditure undertaken under section 137 of the Local Government Act 1972 as calculated in accordance with section 122 below.").
The noble Lord said: In moving Amendment No. 168A I suggest to the Committee that it should be taken with Amendments Nos. 182, 183 and 184ZA. We now turn to another and I think equally important section of the Bill, which is conspicuous neither by its presence nor its absence, but rather by the vagueness of its provisions. I am speaking of what has been known for many years as the sixpenny rate, covered by Section 137 of the Local Government Act. Over the years that Act ensured that in almost all their expenditure local authorities would be severely constrained to those items expressly authorised by central government. However, it provided a safety valve in the form of a sixpenny rate—which with decimalisation became a 2p rate—and allowed them to spend up to that amount of money on matters which were not expressly forbidden by statute in contradiction to those which were expressly authorised.
Over the years that safety valve proved to be a very valuable provision for local government. The limit has never been exceeded and very often it has never even been reached. It has provided for a very large number of what are important although, in expenditure terms, perhaps secondary services by local authorities which have increased their powers and flexibility to provide services as well as to respond to the wishes of their local electorate.
The most important example is the expenditure by local authorities on the work of voluntary organisations. I am by no means an expert on the

171
work of voluntary organisations; I yield in these matters to the expertise of many other Members of the Committee. I believe and hope that there are others who will be able to say much more about it than I can. However, it will be evident that many voluntary organisations which deal with housing or social needs and have other charitable objects do not fit neatly into the categories of permitted expenditure that central government imposes on local authorities. Therefore if those voluntary organisations are to be given support by local authorities, it frequently has to be done under the provisions of Section 137 as I have described it. That applies in particular to the cause of the arts, which has received a good deal of support in this Chamber over the past few days. Expenditure on the arts may not be appropriate for the local authority under other powers, but could well be appropriate under the Section 137 powers.
The second major use of Section 137 expenditure has been for local economic development and employment generation. In case anybody should think that this is a politically controversial subject, let me remind the Committee that the last bulk of this expenditure was carried out in close collaboration with government. The urban programme, supported by the Department of the Environment, relies very heavily on the ability of the local authorities to raise funds under Section 137 and to co-operate with government initiatives, and for government to cooperate with local authority initiatives in economic development, in job creation, in renewal of rural areas and in getting rid of inner city deprivation and dereliction. This is not a party political matter. This is an issue on which I believe all parties share the same objectives and have agreed over the years to use the Section 137 powers to achieve these objectives.
The third major use of these powers is in two-tier authorities where the local council, which does not have responsibility directly for education or social services, wishes to give expression to the needs of its local area in the social services or the education field. Because education and social services would be the responsibility of the county council it would be ultra vires for that district council to do so under existing legislation. It has to use Section 137 powers in order to do that. It is important that district councils should be able to do so even though they are not education or social services authorities. The district councils have the local knowledge which is so important in deciding whether a particular service is necessary and whether it is properly adapted to the needs of the local community.
In all those respects, I hope that I have said nothing politically controversial. I have stated facts which have been accepted by all parties. This is the way that we have run our local government system throughout the century, and before.
Section 137 powers have already been under very severe attack in recent years. These are not positive attacks, or deliberate attempts to restrict the powers, but more in the nature of neglect of them. First, the value of 2p in 1974 was clearly very different from now. It is worth considerably less in a period in which there has been no general revaluation in England and Wales. To that extent the ability of local authorities
172
to spend in real terms has been severely restricted. Secondly, our metropolitan areas—comprising a very large part of the population of this country—had the advantage of two sets of 2p rates, two sets of Section 137 money. With the abolition of the metropolitan councils and the Greater London Council, this has been abolished. Such a position applies only in the shire counties and the district councils. To that extent the force of the Section 137 provisions has been gravely weakened.
The Government have set up the Widdicombe Inquiry which has given a good deal of attention to this matter. The Widdicombe Inquiry supports what I have said about the value of the Section 137 powers and the provision for local flexibility in expenditure. The Widdicombe Inquiry made the recommendation that as a result of the changes that I have described in the effectiveness of the Section 137 powers, the 2p should be raised to 4p. What are the Government doing in this Bill? They are not responding directly to the Widdicombe recommendations. They are providing the Secretary of State with a wide-ranging power to make alternative arrangements regarding Section 137 of the Local Government Act 1972 and the other relevant legislation.
The intentions of the Government may be entirely honourable. They may have no intention of restricting the powers of local authorities under Section 137. Indeed the Minister may be able to announce this afternoon that the Government agree with Widdicombe that there should be an increase in the amount of flexibility available in order to restore the previous situation. If that is the case, I shall be the first to beg leave to withdraw the amendment with great satisfaction.
I humbly suggest to the noble Earl that this is a classic example where, if the Government's intentions in this matter are honourable, they could do themselves no harm by putting these honourable intentions on the face of the Bill. There is no new precedent here. It has been done in local government Acts throughout this century. There is nothing remarkable or exceptional about it. We are not inviting the Government to do anything for the first time. We are asking that the safeguards that have existed and have been accepted as an essential part of local government finance over the years should be continued in this legislation.
I hope that the Committee and the Government will agree with that case. I beg to move.
4.15 p.m.
Baroness Stedman: I should like to support all that the noble Lord, Lord McIntosh, has said in moving his amendment, and to speak specifically to the amendment in my name, Amendment No. 183.
Late last night the Minister adopted a generous attitude towards the parish and community councils. I think that we probably achieved a minor success. Today I wish to quote the Government's intentions in respect of the parish and community councils and the future of this 2p rate power in Section 137 of the Local Government Act 1972. The expenditure under that power is limited to a maximum for each local authority of twice its 1p rate product. This limit will

173
have to be converted in some way. As I understand it, Clause 122 empowers the Secretary of State to substitute some other limiting factor. However, unless some care is taken on what the new factor with regard to the safety net will be, some of the councils may find that their effective limit is lower after 1990 than before.
This issue is perhaps even more important for the smaller parish councils for which the limit is currently less than £1,000 a year. In many cases it is only a few hundred pounds. But it matters to all those parish and community councils that they should not lose their ability to exercise this power merely because of the need to convert the method of fixing the limit. Whatever factor the Government use to replace the 1p rate product as a measure of the limit of expenditure, the result ought to be no diminution of the power which enables parish and community councils to undertake small-scale expenditures on many matters of great benefit to their smaller areas.
As the noble Lord, Lord McIntosh, has said, the value of that power has substantially diminished since it came into effect in 1974 because no alteration in the limit has ever been made to take account of the alteration in the value of money. That has affected the powers of these smaller local councils even more than the district and county councils which have a much higher 1p rate product.
The Government have not as yet given any clear indication of their intentions, although it is understood that the scope of this power is under review. But the importance of the power to all authorities, and in particular to the parish councils, has always been great because their other powers in parish councils are not very wide. However, many beneficial applications of this power have been made up and down the country to enable these smaller councils to provide facilities for their parish, at the expense of their parish, which would otherwise not have been provided.
I am hoping that today the Minister will be able to give us an assurance that these authorities will be no worse off in future than they are at present.
Lord Somers: When the noble Earl replies, will he say what effect this amendment will have on those local governments which spend a great deal of money on the arts? I do not believe that their position should be prejudiced in any way.
Lord Ross of Newport: Perhaps I can also speak in support of the amendments moved so ably by the noble Lord, Lord McIntosh of Haringey, to one of which I have put my name. As he so rightly said, the amendments give the Committee an opportunity to give effect to the thrust of the Widdicombe proposals and at the same time to give much needed reassurance to many beleaguered voluntary organisations. We wish to see their valued contribution to society and to the community continue. Amendment No. 184ZA is very sensible because it offers a lasting solution to the Section 137 issue by introducing the idea of a multiplier related to the retail prices index. That would negate the need constantly to update the
174
Section 137 powers. I look forward to the Minister's reply on that particular point.
There is widespread concern within the voluntary sector about the current 2p limit on Section 137 spending. As the Widdicombe Report pointed out, some authorities are very close to reaching the limit. As a result, in recent years some voluntary organisations have been told that they cannot be funded by the local authority. In my part of the world that has happened in connection with the Citizens' Advice Bureaux. One local authority has refused to make any contribution to their budget in the current year.
The position has been particularly aggravated by other factors. There was the Leicester ruling that staffing and administrative costs associated with Section 137 work must also be charged to the Section 137 account. There was the abolition of the GLC and metropolitan county councils which reduced the limit that could be spent in those areas from 4p to 2p. There was the tapering of transitional funding grants whereby in 1987–88 and 1988–89 successor authorities in the abolition areas have to cover 50 per cent. of the costs of schemes previously funded by the GLC or the metropolitan county councils instead of 25 per cent. as was the case in 1986–87. Many of those schemes can only be funded under the current Section 137 provisions.
An increasing number of time-expired schemes in the urban programme are not being renewed by the Department of the Environment—and I am sure the Minister will agree with that. That means that local authorities must absorb the whole cost of the scheme, often having to use Section 137 powers. There is increasing emphasis by the DoE on economic projects in the urban programme and most of those have to be funded under Section 137.
The decision neither to revalue rateable property nor to raise the 2p limit since 1974 has meant that the real product of the 2p rate is substantially less than it was in 1974; that is obvious. All these concerns were acknowledged by the Widdicombe Committee which recommended that the Secretary of State should increase the limit to 4p for the London boroughs and metropolitan district councils. Unfortunately that recommendation has not been acted upon. However, this is an opportunity to give effect to the Widdicombe recommendations and also to reassure the voluntary bodies that local authorities will still be able to maintain their discretionary powers and assistance.
Lord Harmar-Nicholls: The soothing and cooing speeches made in support of Amendment No. 168A are in very great contrast to the wording of the amendment itself. If we vote on this amendment, we shall be voting not for the speeches but for the words in the amendment which are very definite. I believe that it is expecting too much to write these words into the statute when one gives the power to the Secretary of State to do his duty. The amendment says:
"For the purposes of this section, the Secretary of State shall ignore any expenditure undertaken".
To say that one will make it as definite as that when one does not know what may be involved, and to

175
expect the Secretary of State to have an overriding guiding hand in the way that local authorities keep within their limits, is asking too much.
The noble Lord, Lord McIntosh, is looking very surprised and rather hurt. However, if he can table an amendment which is as attractive, as soothing and as cooing as his speech in support of the amendment, it may well be that it could be looked at again. However, at this stage— and I believe that nobody knows this better than the noble Lord himself—to pass an amendment which states:
"The Secretary of State shall ignore"—
not "may",
"any expenditure undertaken",
I do not believe is in keeping with the spirit of the speech or the Bill. I do not believe that it is being fair to the common sense of the Secretary of State in the future, whoever he may be, who has to come in as a judge on some of these matters. I do not believe that we should accept the amendment in its present wording.
Lord McIntosh of Haringey: I am grateful for the noble Lord's indication of possible future support if we have to table another amendment on Report. However, that is not what our amendments say. The amendments that we are proposing do not add to the existing law under Section 137 of the Local Government Act 1972. The amendments do not propose any decrease in the powers of the Secretary of State—powers which are already the law and which I have not heard as being the subject of political controversy in the intervening years.
Lord Feversham: In support of those last comments and in opposition to the speech made before it, surely this is an important and, by now, quite traditional freedom of local authorities. It is enshrined in Section 137 of the Local Government Act. It seems a great pity that this new Bill on local government finance should not deal adequately with this important freedom. Although as president of the National Association of Local Councils I very much support the probing amendment of the noble Baroness, Lady Stedman, I am somewhat moved by the discussions which have taken place this afternoon to go further in support of the noble Lord, Lord McIntosh. It would be very good if at some point in this Bill we could have this important freedom noticed and enshrined in some form of words; whether or not they are the words of the noble Lord, Lord McIntosh, I do not believe is so important. However, I feel that this important freedom should again be enshrined in the Bill and I hope that the Government will try to work towards that.
4.30 p.m.
The Earl of Caithness: These four amendments deal with issues relating to a local authority's spending under Section 137 of the Local Government Act 1972; that is their residual power to incur expenditure in the interests of the area or its inhabitants where no statutory powers exist.
Perhaps I may deal first with Amendment No. 168A. It proposes that, for the purposes of
176
calculating the community charge or precept maximum for an authority designated for charge limitation, Section 137 spending should be left out of account. The noble Lord, Lord McIntosh, has, in his customary manner, argued persuasively in favour of this amendment. There seems, at first sight, to be some attraction in leaving out of the calculation of a charge limit, expenditure under a power which is itself subject to a financial limit.
On further consideration, however, it becomes clear that such an omission would have severe disadvantages. It would mean that all expenditure by a local authority incurred in the discharge of the functions, or in the carrying out of the duties, placed on local authorities by Parliament, would be subject to capping; while spending under Section 137, which is, by definition, spending not approved by Parliament, would not.
We are not talking about small sums. Under the present system, some councils are permitted to spend several millions of pounds under Section 137. Although many councils have used the power well and wisely for the benefit of their area, some have made very questionable decisions. In the Government's view, therefore, it is particularly important in the case of discretionary spending that charge payers should be able to be protected from the potential excesses of their local authorities.
Perhaps I may now turn to the amendments on the future basis of Section 137 itself. These amendments raise three issues. Amendments Nos 182 and 184ZA together propose removing Section 137 from the scope of the regulation-making power in Clause 122, and making provision in this Bill for the future basis of calculating the Section 137 limit. In addition, Amendment No. 184ZA proposes that the Section 137 limit should, from 1990–91 onwards, be inflation-proofed, by reference to the retail prices index. In part, the amendments seek to implement the recommendations of the Widdicombe Report for a new Section 137 limit based on population, in place of the present rateable value-based limit.
Amendment No. 183, to which the noble Baroness, Lady Stedman, spoke, proposes safety-netting any losses resulting from a change in the method of calculating Section 137 limits. The Widdicombe Committee's review of Section 137 was wide ranging. The committee not only looked at the matter of the financial limit and the need to identify a new method of calculation that is more equitable, less prone to annual fluctuations and more consistent with the community charge than the present limit, but it made other recommendations about the future scope of the power and its detailed application. These are among the 88 recommendations on all aspects of the conduct of local authority affairs to which the Government will shortly be responding.
It is relevant to our consideration of the precise level of the limit that the committee also recommended a review of local authorities' powers to carry out economic development. If it were decided to grant local authorities specific powers to carry out economic development projects currently funded under Section 137, that would have an important impact on the need to use the power in future.

177
Economic developments, according to the Widdicombe Committee's research, accounts for some two-thirds of spending under Section 137 and its Scottish equivalent, Section 83 of the Local Government (Scotland) Act 1973.
As has been pointed out, in another place my honourable friend indicated that it would not be too long before the Government announced their response to Widdicombe. That remains the position. I have to say to the Committee that I regret that I am not in a position to give any firm indication of when an announcement will be made, nor to undertake that a response will be published before this Bill leaves your Lordships' House.
The Government have, however, made provision for the necessary changes to Section 137 to be made by regulation. What the Committee is being asked to do in Clause 122 is to endorse the means of effecting those changes. However, I should like to take the opportunity to respond to some points, and in particular to a point raised by the noble Lord, Lord McIntosh of Haringey, and the noble Lord, Lord Ross of Newport, both of whom stressed the importance of Section 137 for grants to voluntary bodies and economic development activity.
Although I have, I hope, answered some of the noble Lords' concerns I must make it clear that there is no question at all of the Government calling into question the principle of Section 137. What Section 137 does is to give a general power to undertake expenditure subject to a financial limit which is at present expressed as the product of a 2p rate. The only question in issue here is how that limit should be formulated for the future. The Committee should not think that the amendment is in any way necessary for the continuance of the powers under Section 137.
The noble Lord, Lord Ross of Newport, then went on to say that many authorities are approaching their limit and cannot fund some voluntary bodies. I have to say to the noble Lord that there is no evidence that the present spending limits on Section 137 are a general constraint on spending. The 1986–87 returns to the Department of the Environment have indicated that only 26 local authorities out of a total of 405 spent in excess of 80 per cent. of their limit. To me that does not demonstrate a problem on the scale that the noble Lord has suggested, but if the noble Lord has particular examples where he feels that the shoe is pinching perhaps he will let me know.
The noble Baroness, Lady Stedman, referred to the important position of parish councils. The position of parish councils is also being considered in the context of the Widdicombe proposals. We are aware that for parish councils Section 137 is particularly valuable because they have relatively few specific powers. I have certainly noted the noble Baroness's concerns and they will be taken into account, but I can give no assurances that the quantum of spending will be increased, which I believe was the implication of what she was proposing.
The noble Lord, Lord Somers, raised the important question of the arts. I have to say to the noble Lord that Section 137 is not relevant to support for the arts. This was a matter we discussed in some
178
detail yesterday, as I am sure the noble Lord will recall, and I confirmed that provision for the arts would be taken into account in the needs assessment of local authorities.
The amendments we are debating have been useful in informing the Government of noble Lords' views on particular issues concerning the future of Section 137. I shall want to consider these. However, the substantive changes we are discussing do not need to be finalised in the context of this Bill, and therefore I hope that the amendments will be withdrawn.
Lord McIntosh of Haringey: I listened carefully to the Minister in the hope that he would say enough to enable me to withdraw the amendments. Even up to the last minute, his last few words, I had hoped that that would be the case. I have not found those words. As I understand it, the position is that the Government are going to ensure the continuity of Section 137 powers, and for that we must be grateful. Indeed, we recognised from the outset that this was the intention of the Government. However, they have not recognised the force of the arguments about the way in which Section 137 powers have been diminished over the years since 1972 by inflation, and the way in which they have been diminished by the abolition of two-tier authorities in the metropolitan counties. To that extent there has not been any serious recognition of the problems which face local authorities who wish to make use of what has been universally agreed—and agreed by the Minister in his speech just now—to be a valuable function of local government.
I must say to the noble Earl that I take exception to his introducing into his speech this curious attack on some local authorities. He said that some of their decisions on expenditure under Section 137 were questionable. Most, or some, of our decisions are questionable at one time or another. That is the stuff of politics. We do not expect all to be in agreement, or to be free from question on all the decisions that we make either in our public or our private lives. If the expenditure of local authorities under Section 137 was not at times questionable then it is doubtful whether any of it would be worth while.
The Minister also gave a quite inadequate response to the questions put in another place some months ago about the Government's response to the Widdicombe Report. His honourable friend said then that it would not be too long before the Government responded, and the Minister says now that the position is still the same. The position is not still the same because we are several months on from that time and it is no longer acceptable for the Government to delay the response and to delay the safeguarding of Section 137 powers, which the Widdicombe Committee, appointed by this Government, opposed.
In brief, what these amendments do is to give effect to the Government's own committee's recommendations, the Widdicombe Committee recommendations. I think it is proper that this Committee should have an opportunity to vote on those recommendations and on this amendment.
4.38 p.m.
On Question, Whether the said amendment (No. 168A) shall be agreed to?
Their Lordships divided: Contents, 101; Not-Contents, 136.

DIVISION NO. 2

CONTENTS

Addington, L.

Lawrence, L.

Airedale, L.

Llewelyn-Davies of Hastoe, B.

Amherst, E.

Lockwood, B.

Ardwick, L.

Longford, E.

Attlee, E.

McGregor of Durris, L.

Aylestone, L.

McIntosh of Haringey, L.

Basnett, L.

McNair, L.

Birk, B.

Marsh, L.

Blease, L.

Mason of Barnsley, L.

Bonham-Carter, L.

Mayhew, L.

Boston of Faversham, L.

Molloy, L.

Bottomley, L.

Morton of Shuna, L.

Brooks of Tremorfa, L.

Mulley, L.

Bruce of Donington, L.

Murray of Epping Forest, L.

Campbell of Eskan, L.

Nicol, B. [Teller.]

Carmichael of Kelvingrove, L.

Northfield, L.

Carter, L.

Oram, L.

Chitnis, L.

Peston, L.

Cledwyn of Penrhos, L.

Pitt of Hampstead, L.

David, B.

Ponsonby of Shulbrede, L. [Teller.]

Davies of Penrhys, L.

Dormand of Easington, L.

Rea, L.

Elwyn-Jones, L.

Ritchie of Dundee, L.

Ennals, L.

Rochester, L.

Evans of Claughton, L.

Ross of Newport, L.

Ewart-Biggs, B.

Russell, E.

Falkland, V.

Sainsbury, L.

Feversham, L.

Scanlon, L.

Fisher of Rednal, B.

Seear, B.

Foot, L.

Sefton of Garston, L.

Gallacher, L.

Serota, B.

Galpern, L.

Soper, L.

Glenamara, L.

Stallard, L.

Graham of Edmonton, L.

Stedman, B.

Gregson, L.

Stewart of Fulham, L.

Grey, E.

Stoddart of Swindon, L.

Grimond, L.

Strabolgi, L.

Hampton, L.

Taylor of Blackburn, L.

Hanworth, V.

Taylor of Gryfe, L.

Harris of Greenwich, L.

Taylor of Mansfield, L.

Hatch of Lusby, L.

Tordoff, L.

Hayter, L.

Turner of Camden, B.

Houghton of Sowerby, L.

Underhill, L.

Hughes, L.

Vernon, L.

Hunt, L.

Wallace of Coslany, L.

Irving of Dartford, L.

Walston, L.

Jacques, L.

Wells-Pestell, L.

Jay, L.

White, B.

Jeger, B.

Winchilsea and Nottingham, E.

Jenkins of Putney, L.

John-Mackie, L.

Winstanley, L.

Kennet, L.

NOT-CONTENTS

Airey of Abingdon, B.

Biddulph, L.

Aldington, L.

Blake, L.

Alexander of Tunis, E.

Blyth, L.

Allenby of Megiddo, V.

Borthwick, L.

Allerton, L.

Boyd-Carpenter, L.

Ampthill, L.

Brabazon of Tara, L.

Arran, E.

Brougham and Vaux, L.

Auckland, L.

Broxbourne, L.

Bauer, L.

Bruce-Gardyne, L.

Beaverbrook, L.

Burton, L.

Belhaven and Stenton,

Butterworth, L.

Beloff, L.

Caithness, E.

Belstead, L.

Cameron of Lochbroom, L.

Bessborough, E.

Carnegy of Lour, B.

180

Carnock, L.

Mersey, V.

Clitheroe, L.

Milverton, L.

Coleraine, L.

Montagu of Beaulieu, L.

Colnbrook, L.

Mottistone, L.

Colville of Culross, V.

Moyne, L.

Cork and Orrery, E.

Munster, E.

Cottesloe, L.

Nelson, E.

Cox, B.

Norfolk, D.

Croft, L.

Northesk, E.

Cullen of Ashbourne, L.

Nugent of Guildford, L.

Davidson, V. [Teller.]

Onslow, E.

De Freyne, L.

Orkney, E.

Denham, L. [Teller.]

Oxfuird, V.

Dilhorne, V.

Porritt, L.

Dundee, E.

Portland, D.

Eden of Winton, L.

Portsmouth, E.

Elibank, L.

Pym, L.

Elliot of Harwood, B.

Radnor, E.

Erne, E.

Rankeillour, L.

Fanshawe of Richmond, L.

Richardson, L.

Ferrier, L.

Rochdale, V.

Fortescue, E.

Rodney, L.

Fraser of Kilmorack, L.

St. Aldwyn, E.

Gainford, L.

St. Davids, V.

Gisborough, L.

Saltoun of Abernethy, Ly.

Glenarthur, L.

Sanderson of Bowden, L.

Gray of Contin, L.

Sandford, L.

Gridley, L.

Selborne, E.

Haddington, E.

Selkirk, E

Hailsham of Saint Marylebone, L.

Shannon, E.

Sharples, B.

Hardinge of Penshurst, L.

Skelmersdale, L.

Harmar-Nicholls, L.

Somers, L.

Harvington, L.

Stockton, E.

Henley, L.

Stodart of Leaston, L.

Hesketh, L.

Strange, B.

Hives, L.

Swansea, L.

Home of the Hirsel, L.

Swinfen, L.

Hood, V.

Swinton, E.

Hooper, B.

Terrington, L.

Hunter of Newington, L.

Thomas of Gwydir, L.

Hylton-Foster, B.

Thurlow, L.

Ilchester, E.

Todd, L.

Jessel, L.

Trafford, L.

Kimball, L.

Tranmire, L.

Lauderdale, E.

Trefgarne, L.

Layton, L.

Trumpington, B.

Long, V.

Vaux of Harrowden, L.

Lothian, M.

Whitelaw, V.

Luke, L.

Windlesham, L.

Lyell, L.

Wise, L.

Mackay of Clashfern, L.

Wynford, L.

Malmesbury, E.

Young, B.

Marley, L.

Young of Graftham, L.

Merrivale, L.

Resolved in the negative, and amendment disagreed to accordingly.
4.45 p.m.
[Amendments Nos. 169 to 173 not moved.]
Lord Graham of Edmonton Lord Graham of Edmonton moved Amendment No. 174:
Page 57, line 18, at end insert—
("(6) The power to designate an authority under Section 104 above shall have effect for the chargeable financial years beginning in 1990, 1991, 1992, 1993 and 1994 only.").
The noble Lord said: I beg to move the amendment standing in the name of my noble friend. For the last hour and a half the Minister and those who support him have sought successfully to persuade the Committee that, in the unlikely event of some local authorities continuing to act in the future as they have in the past—that is, irresponsibly, in the eyes of the Minister and those who support him—in regard to incurring expenditure, some power needs to be

181
available, in reserve or up one's sleeve, to ensure that the rate can be capped.
The Minister made very heavy weather of this and failed completely to answer the charge that the raison d'être of the whole of this Bill is accountability. Yet he refuses to allow the elected councillors to be accountable to their electorates from time to time. What my noble friend Lord McIntosh has been able to demonstrate very effectively is that when the Minister talks about accountability he is really talking about the accountability of councillors to him and not about the accountability of councillors to their electorates. So be it.
The amendment says—and I note very carefully and fortuitously what the Minister and his friends have been saying for the last hour and a half—that in the early days of the new financial arrangements there could very well be circumstances in which that handful of local authorities out of many hundreds which in the eyes of the Minister and his friends have acted irresponsibly would be tempted to spend excessively.
The Minister has his own degree of faith in those few councils, but there is also the contempt with which he views not only their ability to hold down the rate but the ability of the rest of the councillors. By having the legislation to cap the rate, he is not merely saying that this is designed to deal with a handful of recalcitrant councillors; he is saying to every single council, "This power is also there to deal with you if you decide in the special circumstances that you want to exceed your spending levels." That is available. It is a stick, a threat, a fear. The noble Baroness, Lady Carnegy of Lour, who regrettably is not present, made a point of saying that in the early years of the new arrangements—and I do not know the source of her evidence—there is likely to be an excess of zeal by some authorities who will be tempted to overspend.
If the Government are serious about trying to redress the deterioration in the relationship between central and local government that the Minister and his colleagues have presided over—indeed, engineered—in the last seven years, this is the opportunity to do it. Although one can have suspicions about one or two local councils we ask the Minister to trust local government. If the Minister insists that he needs the power to cap the charge, how long does he believe that he needs it? The Minister says—and this is if the amendment fails—that he may need it forever. That breeds a climate of suspicion, fear and anger and, in some instances, despair.
We ask the Minister to trust local government to act responsibly, with the Government retaining the powers to make it do so according to the Minister's light for the limit of the transitional period. We have not chosen the number of years. The Government have said, I think not unfairly, that there is likely to be a period in which special arrangements of all kinds will need to be made. We accept that. However, it is a question of giving local councils and councillors the feeling that, if the Government wish to control, tighten and make bodies accountable, there will be a limit. If in that period some councils act irresponsibly, to change the law to suit the Government's whim in the light of local
182
government's behaviour will be nothing new: the Minister has done it time and again in the last eight years. There has been original legislation, primary legislation and secondary legislation when the Government have had to come back largely to deal with isolated instances of what they would claim are recalcitrant councils.
This is an opportunity for the Minister to show that he has faith in his ability to influence local councils in their behaviour. Does the Minister believe that he needs one year, two years, three years or four years? If councils—I do not believe that this will happen—act irresponsibly, has the Minister no faith in his ability to persuade them? He parades before the Committee the dreadful things that have happened in some Labour local authorities, particularly in London. As the Minister knows, he brought forward his nightmarish tales in 1982, 1983, 1984 and 1985. In the local elections held in 1968, there was an increase in the number of Labour councils returned. Some councils that had not been Labour controlled became Labour controlled after the elections. I have faith in local people. They are not easily hoodwinked and they know the worth and measure of those who represent them. If at the end of a four-year period the Government seek to shackle the councils and force them to comply with a dreadful panoply of restrictions, people will know how to react.
The Government have many measures whereby councils can be required to conform. The Minister should know that local government is sick of the way in which he and his colleagues have been hounding it at every turn. The Government now have an opportunity to ease off. I cannot speak for every local council but the local authority associations who speak for them say first that they do not need rate capping and, secondly that they do not need it beyond four years.
The Minister now has an opportunity to respond to my earlier statement, which he quoted. There is a new mood of realism in local government not only in London but throughout the country. The Minister can act in a statesmanlike fashion by accepting the amendment.
Baroness Stedman: I should like to speak to Amendment No. 175, which is grouped with Amendment No. 174. We have been arguing in Committee for more than six days about the question of accountability in one form or another. Many of us have argued that it is under threat from three different specific provisions in the Bill. In earlier amendments to Schedule 7, we tried to deal with the fact that the inflation rate for increases in non-domestic rates does not reflect the actual cost met by local government. We argued a couple of days later that the arrangements for billing and accounting for the community charge do not clearly state the true position for county councils as set out in Clause 96.
We come now to what I see as the third threat to accountability—that community charge capping is not even limited to the transitional period. The Green Paper implied that capping would be used in the transitional period only. On Second Reading, I was among those Members who said that they would accept the powers for the transitional period. I went

183
on to say that I might even accept the powers in the case of a national emergency, but that they should not be permanent.
Capping is now a permanent fixture in the Bill. There is no provision to restrict the length of time of the capping powers. I hope that the Minister will be able to accept the amendment as fair and just to all concerned. It allows capping to continue subject to review every five years, providing that the necessary orders are laid before the Houses of Parliament for approval.
If the Minister is unable to accept the amendment, we may have to return to the matter on Report. If the Minister in unable to accept the amendment so ably moved by the noble Lord, Lord Graham of Edmonton, which I support in preference to my own amendment, perhaps he would consider accepting Amendment No. 175 as a fall-back position. I should be equally happy about that.
The Earl of Caithness: I congratulate the noble Lord, Lord Graham of Edmonton, and the noble Baroness, Lady Stedman, for the skill with which they have deployed their arguments.
We have heard on occasions in consideration of the Bill about the Labour Party's lack of alternative policies to those contained in the Bill. With respect, Amendment No. 174 is perhaps a good example of an amendment moved by the Opposition in another place. That amendment would have delayed the application of charge capping for five years. The party of the noble Lord presumably saw the need to retain capping powers five years hence.
It has been said that powers are needed to cover only those transitional years when the community charge has not been fully introduced. Although the Government agree that those are the years in which it is perhaps most important to give charge payers the back-up protection that they have a right to expect, what I did not say was that they should be left unprotected after 1994–95. As I have explained, an authority might still be irrationally tempted to make excessive demands after 1994. Indeed, the amendment tabled by the noble Lord, Lord Graham of Edmonton, could increase the risk of that happening. When we discussed Amendment No. 165 I dealt with that extensively as, indeed, I dealt with the point of accountability.
The arguments I have just deployed could equally apply to Amendment No. 175, to which the noble Baroness, Lady Stedman, has put her name. Charge capping is included in the Bill as a safeguard against an irrational authority setting excessive charges. Such a possibility, however remote, is with us now, and will be with us in five or 10 years.
The noble Lord, Lord Graham of Edmonton, made a special plea that we should trust local authorities. I have already agreed that there is much more realism than in the recent past concerning local authorities. The inclusion of this power does not mean that we distrust local authorities. It is included in the Bill as a protection to the charge payer who might on occasion be subjected to an excessive charge by a local authority which is behaving irrationally
184
and in such a way that even the noble Lord, Lord Graham of Edmonton, would not approve of it.
I repeat, charge capping is a longstop power which we hope it will not be necessary to use. Therefore, I hope the Committee will agree that we would be acting unreasonably towards charge payers if the powers were not included in the Bill.
5 p.m.
Lord Graham of Edmonton: I am grateful to the Minister not only for his brief, but also because it is clear that he has listened carefully to the arguments deployed by the noble Baroness, Lady Stedman, and myself.
The noble Earl makes noises about recognising greater responsibility, but in my view he treats the electorate with scant appreciation. We are looking at an electorate which, in 1986, say, elected a council which could very well have caused the programme of the Minister and his colleagues. Nevertheless, the council is elected. In spite of all that the Government have said, and all their powers, the people in that community continue to re-elect that Labour authority.
The Minister is saying that there could be the possibility—the rare possibility—that one or two councils out of more than 100 will act, in his view, irresponsibly. The mind boggles at the extent to which the Minister and his colleagues are determined to go in order to make sure that local government conforms completely to the way in which the Government feel it should.
The Minister should not wonder why men and women who are involved in local government despair about the philosophy which the Minister and his colleagues are enunciating; that is, that local government will merely become a group of people who are place men and place women who will have to perform in the light and manner which central government stipulate.
I will work for a change in government. If, as I hope, there is a change in government and that government has the range of powers which this Minister has taken unto him, then all hell will be let loose; not only by the Minister and his friends in opposition, but from all sectors of the media. One of the sick-making aspects is that there are good men and women who want to serve their communities and who are saying that that is not the road down which they are prepared to go. I invite the Committee to express an opinion.
5.4 p.m.
On Question, Whether the said amendment (No. 174) shall be agreed to?
Their Lordships divided: Contents, 98; Not-Contents, 131.

DIVISION NO. 3

CONTENTS

Addington, L.

Attlee, E.

Airedale, L.

Aylestone, L.

Amherst, E.

Basnett, L.

Ardwick, L.

Birk, B.

185

Blackstone, B.

Llewelyn-Davies of Hastoe, B.

Blease, L.

Lockwood, B.

Bonham-Carter, L.

Longford, E.

Boston of Faversham, L.

McGregor of Durris, L.

Brooks of Tremorfa, L.

McIntosh of Haringey, L.

Bruce of Donington, L.

Mackie of Benshie, L.

Campbell of Eskan, L.

McNair, L.

Carmichael of Kelvingrove, L.

Mason of Barnsley, L.

Cledwyn of Penrhos, L.

Mayhew, L.

Cromartie, E.

Molloy, L.

David, B.

Morton of Shuna, L.

Davies of Penrhys, L.

Nicol, B. [Teller.]

Dean of Beswick, L.

Northfield, L.

Dormand of Easington, L.

Oram, L.

Elwyn-Jones, L.

Peston, L.

Ennals, L.

Pitt of Hampstead, L.

Evans of Claughton, L.

Ponsonby of Shulbrede, L.

Ewart-Biggs, B.

Rea, L.

Falkland, V.

Ritchie of Dundee, L.

Feversham, L.

Rochester, L.

Fisher of Rednal, B.

Ross of Newport, L.

Foot, L.

Russell, E.

Gallacher, L.

Scanlon, L.

Glenamara, L.

Seear, B.

Graham of Edmonton, L. [Teller.]

Seebohm, L.

Sefton of Garston, L.

Grey, E.

Serota, B.

Grimond, L.

Somers, L.

Hampton, L.

Stallard, L.

Harris of Greenwich, L.

Stedman, B.

Hart of South Lanark, B.

Stewart of Fulham, L.

Hatch of Lusby, L.

Stoddart of Swindon, L.

Hayter, L.

Strabolgi, L.

Houghton of Sowerby, L.

Taylor of Blackburn, L.

Hughes, L.

Taylor of Gryfe, L.

Hunt, L.

Taylor of Mansfield, L.

Irving of Dartford, L.

Thurlow, L.

Jacques, L.

Tordoff, L.

Jay, L.

Turner of Camden, B.

Jeger, B.

Underhill, L.

Jenkins of Putney, L.

Wallace of Coslany, L.

John-Mackie, L.

Walston, L.

Kennet, L.

Wells-Pestell, L.

Kilbracken, L.

Winchilsea and Nottingham, E.

Kilmarnock, L.

Kings Norton, L.

Winstanley, L.

NOT-CONTENTS

Airey of Abingdon, B.

Croft, L.

Aldington, L.

Cullen of Ashbourne, L.

Allenby of Megiddo, V

Davidson, V. [Teller.]

Allerton, L

De Freyne, L.

Arran, E.

Denham, L.

Auckland, L

Dilhorne, V.

Bauer, L.

Dundee, E.

Beaverbrook, L.

Eden of Winton, L.

Belhaven and Stenton, L.

Elibank, L.

Beloff, L.

Elliot of Harwood, B.

Belstead, L.

Erne, E.

Bessborough, E.

Erroll, E.

Biddulph, L.

Fanshawe of Richmond, L.

Blake, L.

Ferrier, L.

Blyth, L.

Fortescue, E.

Borthwick, L.

Fraser of Kilmorack, L.

Boyd-Carpenter, L.

Gainford, L.

Brabazon of Tara, L.

Gardner of Parkes, B.

Brougham and Vaux, L.

Gisborough, L.

Broxbourne, L.

Glenarthur, L.

Burton, L.

Gray of Contin, L.

Butterworth, L.

Gridley, L.

Caithness, E.

Haddington, E.

Cameron of Lochbroom, L.

Hailsham of Saint Marylebone, L.

Carnegy of Lour, B.

Carnock, L.

Hardinge of Penshurst, L.

Clitheroe, L.

Harmar-Nicholls, L.

Coleraine, L.

Harvington, L.

Colnbrook, L.

Henley, L.

Colville of Culross, V.

Hesketh, L.

Cork and Orrery, E.

Hives, L.

Cottesloe, L.

Home of the Hirsel, L.

Cox, B.

Hooper, B.

186

Hylton-Foster, B.

Rochdale, V.

Kaberry of Adel, L.

St. Aldwyn, E.

Kimball, L.

St. Davids, V.

Lauderdale, E.

Saint Oswald, L.

Layton, L.

Saltoun of Abernethy, Ly.

Lloyd of Hampstead, L.

Sanderson of Bowden, L.

Long, V. [Teller.]

Sandford, L.

Lyell, L.

Selborne, E.

Mackay of Clashfern, L.

Selkirk, E

Macleod of Borve, B.

Shannon, E.

Malmesbury, E.

Sherfield, L.

Marley, L.

Skelmersdale, L.

Marsh, L.

Stockton, E.

Merrivale, L.

Stodart of Leaston, L.

Mersey, V.

Strange, B.

Mottistone, L.

Strathcona and Mount Royal, L.

Moyne, L.

Munster, E.

Swansea, L.

Nelson, E.

Swinton, E.

Nelson of Stafford, L.

Terrington, L.

Norfolk, D.

Thomas of Gwydir, L.

Northesk, E.

Trafford, L.

Nugent of Guildford, L.

Tranmire, L.

Onslow, E.

Trefgarne, L.

Orkney, E.

Trumpington, B.

Oxfuird, V.

Vaux of Harrowden, L.

Peel, E.

Vinson, L.

Perth, E.

Whitelaw, V.

Portland, D.

Windlesham, L.

Portsmouth, E.

Wise, L.

Pym, L.

Wynford, L.

Radnor, E.

Young, B.

Rankeillour, L.

Young of Graffham, L.

Richardson, L.

Resolved in the negative, and amendment disagreed to accordingly.
5.12 p.m.
Clause 104 agreed to.
[Amendment No. 174A not moved.]
Clause 105 agreed to.
The Deputy Chairman of Committees (Lord Nugent of Guildford): As regards Clauses 106 to 114, if no Member of the Committee has any intervention to make I shall put them en bloc.
Clauses 106 to 114 agreed to.
Baroness Stedman Baroness Stedman moved Amendment No. 175:
After Clause 114, insert the following new clause:
("Expiry and renewal of Part VIII.
. This Part shall continue in force until the end of the period of five years beginning with the passing of this Act and shall then expire, but at any time before the expiry of this Part Her Majesty may by Order in Council direct that it shall continue in force for a further period of five years from the date on which it would otherwise expire:
Provided that Her Majesty shall not be recommended to make an Order under this section unless a draft of it has been laid before and approved by resolution of both Houses of Parliament.").
The noble Baroness said: As regards Amendment No. 174 I was not happy with the reply that the Minister gave when he was dealing with my amendment in conjunction with that of the noble Lord, Lord Graham. He said that we were both trying to take powers out of the Bill. If the Minister reads my amendment carefully he will see that 1 ask for a review within five years and for an order to be laid before both Houses of Parliament. The noble Lord, Lord Graham, said that the Minister does not trust local authorities. It seems that the Government

187
do not trust either the Members of this Committee or of another place to deal competently with orders laid before them. Therefore, I beg to move.
5.13 p.m.
On Question, Whether the said amendment (No. 175) shall be agreed to?
Their Lordships divided: Contents, 82; Not-Contents, 122.

DIVISION NO. 4

CONTENTS

Addington, L.

Jenkins of Putney, L.

Airedale, L.

John-Mackie, L.

Amherst, E.

Kilmarnock, L.

Ardwick, L.

Kings Norton, L.

Attlee, E.

Llewelyn-Davies of Hastoe, B.

Aylestone, L.

Lockwood, B.

Basnett, L.

Longford, E.

Birk, B.

McIntosh of Haringey, L.

Blackstone, B.

Mackie of Benshie, L.

Blease, L.

Mason of Barnsley, L.

Bonham-Carter, L.

Mayhew, L.

Boston of Faversham, L.

Molloy, L.

Brooks of Tremorfa, L.

Morton of Shuna, L.

Bruce of Donington, L.

Nicol, B.

Carmichael of Kelvingrove, L.

Northfield, L.

Cledwyn of Penrhos, L.

Oram, L.

David, B.

Peston, L.

Davies of Penrhys, L.

Pitt of Hampstead, L.

Dormand of Easington, L.

Rea, L.

Elwyn-Jones, L.

Rochester, L.

Ennals, L.

Ross of Newport, L.

Evans of Claughton, L.

Russell, E.

Ewart-Biggs, B.

Scanlon, L.

Feversham, L.

Seear, B.

Fitt, L.

Seebohm, L.

Foot, L.

Sefton of Garston, L.

Gallacher, L.

Stedman, B.

Glenamara, L.

Stewart of Fulham, L.

Graham of Edmonton, L. [Teller.]

Stoddart of Swindon, L.

Strabolgi, L.

Grey, E.

Taylor of Blackburn, L.

Grimond, L.

Taylor of Gryfe, L. [Teller.]

Hanworth, V.

Taylor of Mansfield, L.

Harris of Greenwich, L.

Thurlow, L.

Hatch of Lusby, L.

Turner of Camden, B.

Hayter, L.

Underhill, L.

Hughes, L.

Vernon, L.

Hunt, L.

Wallace of Coslany, L.

Irving of Dartford, L.

Walston, L.

Jacques, L.

Wells-Pestell, L.

Jay, L.

Winchilsea and Nottingham, E.

Jeger, B.

NOT-CONTENTS

Airey of Abingdon, B.

Butterworth, L.

Aldington, L.

Caithness, E.

Allenby of Megiddo, V.

Cameron of Lochbroom, L.

Allerton, L.

Campbell of Croy, L.

Arran, E.

Carnegy of Lour, B.

Auckland, L.

Carnock, L.

Bauer, L.

Clitheroe, L.

Beaverbrook, L.

Coleraine, L.

Belhaven and Stenton, L.

Colnbrook, L.

Beloff, L.

Cork and Orrery, E.

Belstead, L.

Cottesloe, L.

Bessborough, E.

Craigavon, V.

Biddulph, L.

Croft, L.

Blake, L.

Cullen of Ashbourne, L.

Blyth, L.

Davidson, V. [Teller.]

Borthwick, L.

De Freyne, L.

Broadbridge, L.

Dilhorne, V.

Brougham and Vaux, L.

Dundee, E.

Broxbourne, L.

Eden of Winton, L.

Burton, L.

Elibank, L.

188

Elliot of Harwood, B.

Onslow, E.

Erne, E.

Oxfuird, V.

Erroll, E.

Peel, E.

Ferrier, L.

Porritt, L.

Fortescue, E.

Portsmouth, E.

Fraser of Kilmorack, L.

Pym, L.

Gainford, L.

Radnor, E.

Gisborough, L.

Rankeillour, L.

Glenarthur, L.

Richardson, L.

Gray of Contin, L.

Rochdale, V.

Gridley, L.

St. Davids, V.

Haddington, E.

Saint Oswald, L.

Hailsham of Saint Marylebone, L.

Saltoun of Abernethy, Ly.

Sanderson of Bowden, L.

Hardinge of Penshurst, L.

Sandford, L.

Harmar-Nicholls, L.

Selborne, E.

Harvington, L.

Selkirk, E

Henley, L.

Shannon, E.

Hesketh, L.

Sherfield, L.

Hives, L.

Skelmersdale, L.

Home of the Hirsel, L.

Somers, L.

Hooper, B.

Stockton, E.

Kaberry of Adel, L.

Stodart of Leaston, L.

Kimball, L.

Strange, B.

Lauderdale, E.

Strathcona and Mount Royal, L.

Layton, L.

Long, V. [Teller.]

Swansea, L.

Lyell, L.

Swinfen, L.

McAlpine of West Green, L.

Swinton, E.

Mackay of Clashfern, L.

Terrington, L.

Malmesbury, E.

Thomas of Gwydir, L.

Marley, L.

Trafford, L.

Marsh, L.

Tranmire, L.

Merrivale, L.

Trumpington, B.

Mersey, V.

Vaux of Harrowden, L.

Mottistone, L.

Vinson, L.

Moyne, L.

Whitelaw, V.

Munster, E.

Windlesham, L.

Nelson, E.

Wise, L.

Nelson of Stafford, L.

Wynford, L.

Northesk, E.

Young, B.

Nugent of Guildford, L.

Young of Graffham, L.

Resolved in the negative, and amendment disagreed to accordingly.
5.22 p.m.
Clause 115 [Interpretation]:
The Earl of Caithness The Earl of Caithness moved Amendment No. 175A:
Page 63, line 28, leave out subsections (3) to (5)
On Question amendment agreed to.
Clause 115, as amended, agreed to.
Clauses 116 and 117 agreed to.
Lord Hesketh: I beg to move that the House do now resume.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.

Patrick McVeigh: Extradition Proceedings
5.23 p.m.
The Lord Chancellor (Lord Mackay of Clashfern): My Lords, with the leave of the House, I shall now repeat a Statement being made in another place by my right honourable and learned friend the Attorney-General. The Statement is as follows:
"Warrants were issued at Bow Street Magistrates' Court on 13th May 1988 for the arrest

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of Patrick McVeigh on charges of conspiracy to cause an explosion and of possession of explosive substances. I duly sent to the Irish Attorney-General on 16th May, following the procedure recently agreed between us for the purposes of the Irish Extradition (Amendment) Act 1987, a note confirming that the Crown Prosecution Service had the clear intention to bring a prosecution, and that they had satisfied themselves that there was sufficient admissible evidence to found a prosecution. I also sent to him a statement of facts and a statement of the relevant law.
"The Irish Attorney-General, in accordance with the new Irish legislation, satisfied himself on the basis of this material that there was indeed an intention to prosecute, based on a sufficiency of admissible evidence. The warrants, with the authority of the Irish Attorney-General, were accordingly endorsed by a Garda commissioner, and Patrick McVeigh was arrested on foot of those warrants on 18th May, upon the occasion of his release from Portlaoise Prison, where he had been serving a sentence of imprisonment.
"Applications for the return of fugitive offenders to the United Kingdom are made by the Irish state solicitor, on behalf of the Irish state. Following McVeigh's arrest discussions accordingly took place between the Crown Prosecution Service and the Irish state solicitor. At the end of a conference with counsel for the Irish state in Dublin on 7th June, the central question remained as to whether the Irish state intended to call English witnesses to establish that the prisoner before the court was the person whose arrest was sought in the warrants. On 9th June the Crown Prosecution Service wrote to the chief state solicitor stating that it was vital that they should hear from him forthwith as to whether English witnesses (and, if so, which) were required to attend the hearing on 13th June.
"The following day a reply was received in writing from the state solicitor that counsel had advised that the evidence already available was sufficient in law to establish the identity of McVeigh for the purpose of the district court hearing and that it was proposed to act on his advice. Accordingly, the evidence of witnesses from Britain to prove his identity would not be required. It was made clear that the Irish Attorney-General had personally considered and concurred in this advice.
"Yesterday the Portlaoise district court considered the Irish state's application for the return of McVeigh to the United Kingdom. The unchallenged evidence led by the Irish state established that the prisoner before the Irish court was Patrick McVeigh, who had been released from Portlaoise Prison on 18th May, and had formerly lived at 18 Forest Street, Belfast. The English warrants expressly related to Patrick McVeigh of Portlaoise prison, formerly of 18 Forest Street, Belfast. The district judge, however, held against the Irish state on the issue of identification. He concluded that the state had not established that the person before the court was the person to
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whom the English warrants related. He accordingly ordered the release of McVeigh, which duly occurred.
"This result is deeply dismaying. The Crown Prosecution Service have at every stage of these proceedings asked the Irish authorities what evidence the Irish state would require in order to meet the requirements of Irish law. They have meticulously complied with the advice they received. That advice did not occasion surprise, because it was consistent with the requirements previously made by Irish courts, which have never required evidence linking the person named in a warrant to the commission by that person of a specific offence.
"Shortly after yesterday's hearing the Irish Attorney-General telephoned me to express his own disappointment with the result. I expressed to him my own feeling of profound frustration and surprise. We have agreed to consult urgently in the light of yesterday's judgment as to the next steps the Irish state might take in the case of McVeigh, and as to the implications of this decision for the effective machinery for extradition that we both desire."
My Lords, that concludes the Statement.
5.30 p.m.
Lord Elwyn-Jones: My Lords, the House will be grateful to the noble and learned Lord the Lord Chancellor for repeating the Statement made in another place by the Attorney-General. We are all deeply concerned about the deplorable (and I adopt the word "dismaying") outcome of the proceedings in the case of Patrick McVeigh. However, what is reassuring about the Statement which the noble and learned Lord, the Lord Chancellor, has read is that all the evidence required of the relevant British authorities had been provided for the purposes of the proceedings and was indeed available to the Irish court. Therefore, I am in the rare position of having to say that I have no criticism of the actions taken by British Government or British officials in this matter. Nevertheless it is right that it should be said.
The Irish Minister of Justice made a statement today in the Dail. It may well be that the noble and learned Lord has a copy of that. He said:
"The evidence tendered to the Court to identify Patrick McVeigh as the person named in the warrant was in accordance with established norms. It was for this reason that the British prosecuting authorities were informed that further evidence of identification was not required".
Therefore it would seem clear that no fault can be placed at the door of the British authorities in regard to this deplorable matter.
As I understand it, it is the case that since the decision was taken both Attorney-Generals—that is, of this country and of Ireland—have been in touch with one another. Indeed, in his statement the Irish Minister said:
"The British Attorney-General expressed deepest concern at the result of the application. He agreed that the decision not to call evidence of British police officers"—
that fact has been criticised on the grounds that they should have remained there until the bitter end—

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"was, in the circumstances of this case, entirely as he would have expected, in the light of experience in previous extradition cases. Both the Attorney-General and the British Attorney-General have agreed to consult one another on the implications of the decision".
I take it that the noble and learned Lord can confirm that that intention will be carried out. It is most important that fresh thought should be given to the matter, as I understand that there are further extradition proceedings pending which arise from allegations of commissions of grave offences by various persons now in custody in Northern Ireland, who are awaiting the outcome of future extradition proceedings.
The House will be relieved to learn from the statement of the Minister of Justice that:
"The Government"—
that is the Irish Government—
"are very deeply concerned that the issue which has arisen as a result of yesterday's court proceedings should be resolved. I wish to inform the House that the most effective action open to the State is being taken immediately. An appeal by way of case stated will be taken to the High Court against the decision of the District Justice".
If I may say so, that decision is both right and reassuring. The seriousness with which the Irish authorities are dealing with the grave matter bodes well for the future relations between our two countries.
Lord Harris of Greenwich: My Lords, I thank the noble and learned Lord the Lord Chancellor for repeating the Attorney-General's Statement in which he described a situation which I think that all of us will recognise as being deplorable. I should like to ask him two specific questions. First, will he confirm—as I am quite sure he will—that police officers from the United Kingdom were in fact available to give evidence but that—as he indicated—on the advice of the Irish authorities, the Crown Prosecution Service was told that such evidence would not be required?
Secondly, is he aware that we much welcome, as the noble and learned Lord, Lord Elwyn-Jones, said, the decision of the Irish Attorney-General to appeal against the decision of the district court judge? Thirdly, is he further aware that the only people who will be delighted by the outcome of yesterday's decision will be the gunmen of the IRA?
Does the noble and learned Lord know that what happened yesterday will unhappily damage confidence in the Anglo-Irish Agreement—although I hope that will soon be restored—and will also give renewed hope to all those who have been involved in a sustained campaign of terrorist violence both in this country and in Ireland?
The Lord Chancellor: My Lords, I am most grateful to the noble and learned Lord, Lord Elwyn-Jones, and to the noble Lord, Lord Harris of Greenwich, for what they have said about the Statement. The noble and learned Lord has found himself in rather a unique position—but for me a most important one—in that he has no criticism to offer of my right honourable and learned friend the Attorney-General, nor of his officials, in the matter. It is quite clear that they have meticulously followed what they were asked to do.
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I confirm that it was agreed between both Attorney-Generals that they should urgently consult and that the action which has been intimated by the Minister of Justice in the Dail is a consequence of that urgent consultation. Further, the Irish state has agreed to take the most urgent and best action open to it to raise the matter. Of course it must be remembered that in Ireland, as in this country, the judiciary is quite distinct from the Government and the Government have plainly shown their attitude to the matter—as both noble Lords pointed out.
I can also confirm, as indeed does the statement, that there were officers available if it had been thought necessary to give evidence on the lines that the noble Lord, Lord Harris of Greenwich, mentioned. However, as stated in the Attorney-General's Statement, the advice given was that the evidence available, and actually used, was sufficient without the necessity of calling anyone else. Moreover, that evidence was in accordance with the experience of the requirements of the Irish courts in previous applications.
The result of the case stated is one which must await the outcome of the appeal. Therefore it would be quite inappropriate for me to say anything in relation to what is a matter for the Irish judiciary. As regards the Anglo-Irish Agreement—referred to by the noble Lord, Lord Harris of Greenwich—it is fair to say that in this case the attitude displayed by the Irish Government has been shown to be one of the closest co-operation with my right honourable and learned friend the Attorney-General in seeking the extradition. It seems to me that that fact underlines their desire in this matter that alleged terrorists should be brought to justice. It would not be right for me to say anything more at this juncture. The matter will now proceed to the Superior Court in Ireland and we must await the outcome of its consideration of the matter.
Lord Hailsham of Saint Marylebone: My Lords, I should like to applaud, if he will allow me to do so, the reticence which my noble and learned friend has shown at this stage in the matter. It would of course be quite inappropriate for someone who sits in his position to criticise any particular member of the independent judiciary of an independent country. However, perhaps I am not quite so constrained as he appropriately is.
Of course we must await, with interest, the result of the pending appeal. However, speaking for myself, I must say that I heard the decision of the district court judge with something approaching incredulity. If it had been in his mind to give effect to what is a pure pedantic technicality—I do not think it was really open to him to do so—he should at least have given the Irish state authorities the opportunity to call the defective evidence which was available. A total failure of natural justice has taken place.
Neither my noble and learned friend nor my right honourable and learned friend the Attorney-General nor, so far as I can see, the Irish state authorities are to blame; the blame lies where it stands—with the judge who made this deplorable decision.
Lord Blease: My Lords, I rise to share with other noble Lords the serious concerns which they have expressed about this breakdown of agreed law-enforcement procedures between the two sovereign governments; namely, the United Kingdom Government and the Government of the Republic of Ireland. We have heard the Statement of Her Majesty's Government and the position that they have taken about the incident.
Today we have also heard from my noble and learned friend Lord Elwyn-Jones about the debate in the Dail, the Parliament of the Irish Republic. It will be generally recognised throughout the whole of Ireland, as well as the United Kingdom, that it is in the best interests of everyone that those laws be upheld by all peace loving people in all parts of these islands.
I urge everyone not to attempt to level or apportion blame until we know all the facts. This was a district court, and people have to live in certain districts. Perhaps I may say no more at present. We cannot allow such things to happen and so I warmly support the Government's decision. I think that the noble and learned Lord the Lord Chancellor said that urgent discussions were to take place. I hope that they will repair the breakdown and clarify and strengthen the necessary extradition procedural arrangements, and perhaps get at the real problem that lay behind the breakdown on this occasion.
The Lord Chancellor: My Lords, as my noble and learned friend Lord Hailsham of Saint Marylebone recognised, it is not for me to offer any comment on the judical decision. I have of course told the House that the Attorney-General said that the result was deeply dismaying. I am sure that we can all agree with that. I also mentioned, just to confirm the point, that out of the urgent consultations has come the decision taken on behalf of the Irish state to appeal that decision. We look forward with expectation to the disposal of that matter. It is right for me to emphasise once again the appreciation of my right honourable and learned friend of the action taken by the Irish state in the circumstances with which it was faced by that judicial decision.

Local Government Finance Bill
5.42 p.m.
House again in Committee.
Clause 118 [Functions of responsible officer as regards reports]:
Lord Hesketh Lord Hesketh moved Amendment No. 175B:
Page 64, line 41, leave out from ("authority") to end of line 45 and insert ("incurring expenditure which is unlawful,
(b) has taken or is about to take a course of action which, if pursued to its conclusion, would be unlawful and likely to cause a loss or deficiency on the part of the authority, or
(c) is about to enter an item of account the entry of which is unlawful.").
The noble Lord said: For the convenience of the Committee I should like to speak also to Amendment No. 176. Government Amendment No. 175B concerns the circumstances in which the local
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authority's chief finance officer is required to make a report to his authority. Members of the Committee may recall the debate, during the Report stage of the Local Government Bill, on the new powers which we were proposing to give to the local authority's auditor. They may also recall the undertaking my noble friend Lord Caithness then gave to bring forward amendments to the present Bill when it reached this place so as to ensure consistency between the circumstances in which the chief finance officer is required to make a report and those in which the auditor may issue a prohibition order. Amendment No. 175B fulfils that commitment.
I should, first, say a little about the relationship between the proposed new duties of chief finance officers under this part of the Bill, and the new powers given to auditors by Section 30 and Schedule 4 of what is now the Local Government Act 1988. Both measures stem from the Government's concern over the activities of a small minority of local authorities which continue to strive to find ways of evading the financial controls placed on them by Parliament, and which in doing so all too frequently find themselves involved in transactions which are not only highly imprudent but which are also of doubtful legality. The two measures are closely related and have been developed in parallel. They differ, however, in their nature and effect.
The auditor's power to issue a prohibition order, under the new sections inserted into the Local Government Finance Act 1982 by the Local Government Act 1988, can be seen as a strengthening of the legal and regulatory framework within which authorities operate. The auditor has discretion as to whether or not he issues an order, but once he has done so the prohibition is permanent unless the order is revoked by the auditor or the authority appeals successfully to the High Court against it. The chief finance officer's report, however, should be viewed rather as a strengthening of authorities' own financial administration and systems of self-regulation. The effect of such a report is temporarily to prevent the authority from proceeding with the course of action with which the report is concerned, or (if it concerns a potential deficit) from continuing to enter into new commitments; but that moratorium lasts only until the report has been considered by the full council. It is then open to the authority to decide whether, in the light of the advice provided by the chief finance officer, to proceed as it originally intended, or to modify or abandon its proposals.
The two measures are thus of differing severity. I should be more than happy if it were, in the event, never necessary for either to be invoked; but if the question of their use did arise, we envisage that it is most likely that the chief finance officer would first make a formal report on a questionable course of action proposed by the authority, and that would be considered by the authority. If the authority then decided to proceed, the auditor, if he agreed that the proposed actions were unlawful, might issue a prohibition order. It is not, however, to be a requirement in the legislation that he should act only in a case in which the chief finance officer has made a report. It is possible, though perhaps unlikely, that information will come to him in the course of a audit

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which is not known to the chief finance officer, and on which he judges rapid action is necessary. It is also possible that the auditor and the chief finance officer will be of differing opinions on the lawfulness of what is proposed, and thus on whether the issuing of a report or order is called for.
It is evident, therefore, that depending on circumstances the two measures may be brought into play at different times in relation to the same proposed course of an action, or alternatively one or other may be exercised in isolation. We wish, however, to avoid any mischief or confusion that may arise from unnecessary differences in wording that might cast doubt on the power of either the chief finance officer or the auditor to act in any particular case. It is for that reason that we have brought forward the amendment to ensure consistency between the two sets of powers. I should point out to the Committee that government Amendments Nos, 181A and 193B also deal with the harmonisation of those powers. We shall, I trust, have an opportunity to debate the principle behind those amendments shortly, so I will say no more about them for the time being.
Turning now to the detail of Amendment No. 175B, the Committee will have noted that it makes three distinct changes to the grounds for action set out in Clause 118(2). First, in subsection 2(a) it deletes the notion of an authority
"making a payment it has no powers to make"
and substitutes the phrase:
"incurring expenditure which is unlawful".
The distinction between those two phrases is a fine one. Surely, it might be argued, if a payment or an item of expenditure is beyond the powers of an authority, then it is unlawful for the authority to make that payment or to incur that expenditure.
Nevertheless, I have little doubt that, were that inconsistency in wording between this clause and new Section 25A of the 1982 Act to remain, some litigious authority might well in future attempt to exploit the fact, to establish a difference of substance where none is intended, and to demonstrate that in some particular circumstance action by the auditor was appropriate but not action by the chief finance officer, or vice versa. I do not believe that such an argument would impress the courts. But I am sure it would be preferable, if only for the sake of avoiding long hours of fruitless legal wrangling at some future date, if the Committee were to take this opportunity to bring the two measures fully into line with each other.
Secondly, in subsection 2(b) the amendment deletes the phrase:
"an act of wilful misconduct which is or would be likely to cause a loss or deficiency on the part of the authority".
It substitutes the phrase:
"a course of action which, if pursued to its conclusion, would he unlawful and likely to cause a loss or deficiency on the part of the authority".
Again, the new wording which we propose to adopt follows that of Section 25A of the 1982 Act. But it also has the particular advantage that it does away with the term "wilful misconduct".
As my honourable friend the Minister for Local Government said in Committee in another place, the present wording echoes the terminology of Section 20 of the Local Government Finance Act 1982, which requires the local authority auditor to judge whether a loss or deficiency is the result of wilful misconduct. On further consideration, however, we accept that it would not be entirely appropriate to impose on the chief finance officer the burden of determining whether in his view members or other officers of the authority of which he is an employee are guilty of wilful misconduct. Nor is it easy for any person to determine in advance whether the actions of another are likely to constitute wilful misconduct. The amended wording, which I commend to the Committee, requires the chief finance officer only to concern himself with the lawfulness of a course of action and the likelihood that it will cause the authority to incur a loss, and not with the intentions or state of mind of those responsible.
Thirdly, the amendment adds a new criterion in subsection 2(c): the chief finance officer is to be required to make a report if it appears to him that the authority (or a committee or officer of the authority, or joint committee on which it is represented) is about to enter an item of account the entry of which is unlawful. This is an important addition to these provisions. The financial malpractices which some local authorities have indulged in over the past few years have not merely included actions resulting in expenditure or losses of doubtful legality. They have also included the deliberate manipulation of the authority's accounts, often in such a way as to maximise block grant gains.
These manipulations may involve the treatment of receipts in the accounts in ways that may prove to be improper, and thus (under the Local Government Finance Act 1987) unlawful for a local authority to indulge in. Such devices will be caught by the definition, in Section 25A of the 1982 Act, of the matters in relation to which the auditor may issue a prohibition order.
We believe it is important that they should also fall within the conditions set out in Clause 118, so that the chief finance officer will be required to bring them formally to the attention of the full council. Of course, in one sense only the chief finance officer, as the person responsible for the administration of an authority's financial affairs, can be responsible for the entering of an item of account, so this provision may appear to require him to report on his own actions. More to the point, however, is the fact that it will require him to make such a report if the financial strategy being pursued by his authority is likely to cause him to make such an entry.
Finally, it may be helpful if I were to make clear that this amendment does not affect the requirement in Clause 118(3) for the chief finance officer to make a report if it appears to him that the authority's expenditure in a financial year is likely to exceed the resources available to it to meet that expenditure. There is no precise parallel to this in the new Section 25A, which the Local Government Act inserted into the 1982 Act, as this is not a problem which is amenable to being dealt with by means of a

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prohibition order. It would not be clear in these circumstances to what particular item of the authority's proposed expenditure the order should be applied. If, however, the auditor believed that a chief finance officer had not made a report under this subsection in circumstances in which one was required, it would then be open to him to apply, if he thought it appropriate, for judicial review of the authority's failure to take action to rectify its financial position, under the power conferred on him by the new Section 25D.
I hope that my remarks will have been of assistance to Members of the Committee in their consideration of this government amendment, which I commend to noble Lords. I should like also to say a few words about the amendment to subsection (2) of Clause 118 which has been tabled by the noble Baroness, Lady Stedman, and the noble Lord, Lord McIntosh. Amendment 176 is intended, I believe, to do away with the phrase "wilful misconduct". I cannot conceive of any grounds for arguing that, while it is proper for a chief finance officer to report formally to his authority on an unlawful item of expenditure, he should not be required also to report on actions which are likely to lead to a loss on the part of the authority. The mischief is equally great in either case. In the amendment which we have put forward we have, however, dealt with the problem of wilful misconduct while preserving the requirement to report in relation to a likely loss. We have proposed a new condition founded on the notion of unlawful actions likely to cause a loss or deficiency. I beg to move.
The Deputy Chairman of Committees: Before 1 put the amendment, I should explain that if Amendment No. 175B is agreed to Amendment No. 176 cannot be called.
Lord McIntosh of Haringey: I think I can detect in this amendment and in the speech of the noble Lord a nugget of good will. It is a long way down and it has suffered a lot of accretion since it started off, but I take it that the original intention of all this was to take away from the chief financial officer of the local authority responsibilities which, by the nature of his training, abilities and responsibilities, he is unable to assume. If that is the intention, so be it. We are in agreement about what we are trying to do.
However, when we look at the amendment which the noble Lord has proposed, it seems to me that we are out of the frying pan into the raging fiery furnace. The amendment is riddled with inconsistencies and with—I must say this—nonsenses. First of all, it mentions "a course of action". What is a course of action? A course of action is presumably something different from an act, because an act of a local authority and a decision taken by a local authority or one of its officers is the concept which was in before and which is no longer in the subsection. A course of action is presumably something vaguer, less definite. It is very difficult to know what it means. I have never heard of the words "course of action" being used in legislation before.
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Secondly, there is the word "unlawful". There are two objections to that. First, we are talking about the chief financial officer, not the chief legal officer of the council. The chief financial officer is not employed by the council to make decisions about what is lawful or unlawful. He is employed to make decisions about financial matters, which is why the noble Baroness, Lady Stedman, and I have put down an amendment which restricts his responsibility specifically to those points.
However, it is worse than that. Even if the chief financial officer were that remarkable person who is not only a financial expert but a legal expert, who is to say what is unlawful? It could be argued that one cannot say what is unlawful until that has been determined in the courts. One could put in a phrase such as "It appears to him to be unlawful"; one could qualify it in various ways. But the amendment proposed does not do anything of that sort. It says:
"a course of action which, if pursued to its conclusion, would be unlawful",
or
"an item of account the entry of which is unlawful".
I ask the Minister very seriously whether he thinks that is a proper responsibility for a chief financial officer to have, to interpret the law about matters which are not his professional responsibility and about which he cannot be expected to know.
I must confess that the end of this I think we have a very much worse amendment, however good the intentions may be, and a very much worse subsection that that with which we started. I beg the Government to think again about this matter.
Baroness Stedman: I support the noble Lord, Lord McIntosh, and share some of his concern about this point. I am delighted that the "wilful misconduct" part has gone, but, as he says, I think we are in for all sorts of trouble with the rather wide and loose wording of subsections (b) and (c). I ask the Minister whether he will take the matter back and have another look at it. It is very wrong that officers should be given policing duties of any sort. It is the responsibility of the members, the council and ultimately the courts if something goes wrong.
It will do an awful lot of harm to the trust that has been built up between officers and their members if the treasurer or the auditor is now seen as a policeman who can decide what is lawful and what is unlawful as regards what the elected members are doing. I hope that the Minister will look at this amendment again and perhaps come back with it on Report.
6 p.m.
Lord Heskethalways understood that a course of action is exactly what it says it is—a course of action. But more to the kernel of what the noble Lord, Lord McIntosh of Haringey, and the noble Baroness, Lady Stedman, were saying, as regards what is unlawful I am sure that many Members of the Committee do not automatically retire to the High Court when they want to make a decision about whether or not they think something is within the law.

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Local government in this country has very professional people who should be able to make decisions of that nature. I will say that I am pleased at last to have found a golden nugget, be it a very small one and be it very deep down, which the noble Lord, Lord McIntosh, and the noble Baroness, Lady Stedman, can to an extent be moderately happy about. The chief finance officer's normal duties require him to take judgments about the legality of an authority's conduct. We are talking about professionals. I think that one cannot have both sides of the pudding. One either accepts that chief finance officers are professionals and capable of making professional judgments or one does not.
Baroness Stedman: Whether the authority accepts the judgment on a particular issue is a matter for the authority. The elected members, and ultimately the council, must decide whether or not they accept the advice of their treasurer.
Lord McIntosh of Haringey: Perhaps I may also say that I fail to see the cogency of the noble Lord's reply as regards professional responsibilities. If we were talking about the chief legal officer whose job is to advise the council about the legality or otherwise of the actions that it proposes, I could understand the position that is being put forward. The chief legal officer has responsibilities relating not only to his own activities but to the activities of all other functions and chief officers of the council, including the chief finance officer.
However, we are here talking about the chief finance officer who is not responsible to the council in that way. I appreciate what is being proposed here, and I am not going to argue the political point that an officer of the council shall have the responsibility to report to the district auditor, whether or not the council likes it. I know that that is the intention of this provision and I am not raising that major political point, on which we have many reservations, but I am saying that the wording of this amendment is ill-conceived.
It is ill-conceived to require a chief finance officer to make judgments about what is lawful. I am totally dissatisfied with the distinction which the noble Lord seeks to draw between a course of action and an act, which is what we would understand in plain English to be what a local authority is doing. I still plead with him that it would be wiser to take this away and think about it. If he can come back with something better, or a better series of arguments defending it, we shall remain silent about it on Report.
Baroness Carnegy of Lour: I may be misunderstanding the noble Lord, Lord McIntosh, but as regards the use of the word "unlawful" the following is stated in the Bill under Clause 118(2):
"The chief finance officer of a relevant authority shall make a report under this section if it appears to him that the authority"
and so on. With the amendment this subsection would state:
"if it appears to him that the authority…has taken or is about to take a course of action which, if pursued to its conclusion, would be unlawful".
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The crucial words are,
"if it appears to him"
that a certain action was unlawful. That does not seem to me to justify the noble Lord's criticisms. That reads perfectly sensibly to me in the context of the Bill.
Lord McIntosh of Haringey: But he is the wrong person to whom it should so appear. He is the chief finance officer, not the chief legal officer. That is the reason we object to it.
Lord Hesketh: I am very grateful to my noble friend Lady Carnegy of Lour. She was absolutely correct to state what she did. I point out to the noble Lord, Lord McIntosh, that the chief finance officer will have access to whatever legal advice he requires to fulfil his duty.
On Question, amendment agreed to.
Lord Underhill Lord Underhill moved Amendment No. 177:
Page 65, line 25, leave out ("his") and insert ("its").
The noble Lord said: I am certain that the Committee will appreciate it if in moving Amendment No. 177 I speak also to Amendment No. 178, standing in the name of the noble Baroness, Lady Stedman. When she comes to speak on her amendment, as undoubtedly she will, I feel sure that she will agree that both amendments have the same intentions.
We have in the previous amendment been dealing with the position of the chief finance officer. The amendment which I am now moving, Amendment No. 177, raises the question of who will decide what are the sufficient resources to enable the chief finance officer to perform the statutory duties laid down under Clause 118. What the amendment seeks to do is to replace the chief finance officer's judgment as regards the sufficiency of resources with that of the authority.
This goes beyond the judgment of the chief finance officer. It really goes to the chief finance officer's decisions. Subsection (7) of Clause 118 states:
"A relevant authority shall provide its chief finance officer with such staff, accommodation and other resources as are in his opinion sufficient to allow his duties under this section to be performed".
I am not in any way criticising the responsibility or the qualifications of chief finance officers. The qualifications are laid down quite clearly under Clause 117. But it is the local authorities—the charging authorities—which have to make the decisions as to the priorities in carrying out statutory and non-statutory functions. I am sure that all Members of the Committee will agree that these, at the end of the day, are political decisions to be arrived at by a local authority. Yet the provisions of this clause, and the subsection to which I have referred, give the chief finance officer first call on an authority's scarce resources. In many cases their resources are scarce.
The noble Lord, Lord Hesketh, in dealing with the previous government amendment, referred to the chief finance officer as being a person who is an employee of the authority. Yet here we are faced with a situation where a chief finance officer can demand

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whatever he may consider necessary to carry out the responsibilities placed upon him under Clause 118. For instance, he could decide that he required quite expensive computer systems in order to carry through a lot of checking and rechecking. We have just been referring to the question of legal interpretation. It may well be that the chief finance officer is not a legal expert. Many of them are not.
I have a son who is a company financial director. He would not be expected to take legal decisions. He would employ somebody to advise him. It may well be that a local council may want a second opinion. The advice that the chief finance officer may demand—he has the right to demand it—may be costly to a local authority. He may also require further highly paid accountants in addition to those in his own department in order to make decisions. He will be able to decide all these things and make these demands with the knowledge that the law states that whatever resouces are necessary to carry out his obligations must be provided by the local authority concerned. That is what Clause 118(7) rules. In the amendment we are not seeking in any way to decry the ability and the integrity of the chief finance officer, but at the end of the day the decision on the allocation of resources must surely be that of the local authority. That is the purpose of this amendment.
Baroness Stedman: The noble Lord is quite right to say that our amendments run in parallel. The same results would be obtained by accepting either amendment. We wish to see the responsibility for the level of resources and costs made a matter for the elected members of a council as a whole. It should be their job to decide such matters as part of their overall duties. I shall be happy to support the amendment moved by the noble Lord, Lord Underhill, and to withdraw my amendment in due course.
Lord Hughes: I hesitate to enter a discussion on this English item. However, there appears to be a repercussion for Scotland. I have looked at the Scottish Act and I cannot see any equivalent section. That is probably so because we have had chief finance officers in Scotland from the time that local government started there.
In 25 years in local government in Scotland, I cannot think of any authority which delegated to its chief finance officer—or, as we used to call him in the cities, the city chamberlain—the decision-making power on staff up to deputes, offices and equipment. One of the most important committees in Scottish local government is the establishment committee. The establishment of each department has to be approved by that committee. Obviously, heads of departments make submissions. In many cases, they get exactly what they want because they temper their demands to what the authority is likely to agree.
The nearest approach to that provision in the Scottish Act is the section relating to the community charges registration officer. That is at the nub of the Scottish Act, as in the present Bill. The relevant subsection says:
"A regional or islands council may appoint such additional number of depute registration officers as they consider necesary to enable the
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registration officer to perform his functions under this Act, and any depute registration officer so appointed shall have all the functions of a registration officer".
Subsection (5) of Section 12 says:
"A regional or islands council shall secure the provision of sufficient staff, accommodation and other resources to enable the registration officer to perform his functions under this Act".
That seems to be the proper way of going about it. I think that subsection (5) of Section 12 of the Scottish Act probably gives the Secretary of State for Scotland the means to call a council to account for its actions if he does not believe that it is doing what subsection (5) requires in securing the provision of sufficent staff, accommodation and other resources to enable the officer to do his job.
As regards the chief finance officer, to make a decision about what staff, accommodation and equipment are necessary must be the responsibility of a local authority. It would not be unreasonable if that were accompanied by a similar provision to place an obligation on the authority to provide resources on a sufficient scale to enable the chief finance officer to do his job. If that were done, the Secretary of State would have the means to call an authority to account if it was deliberately frustrating the finance officer by not providing him with the necessary means for doing his job.
Having said that, and noticing that the noble Earl, Lord Caithness, has returned to the Chamber, I should like to receive an assurance that there is no similar provision in the Scottish Act which would compel a local authority to do exactly as one of its officials demanded.
6.15 p.m.
Lord Hesketh: I hope that I may peruade the Committee that Amendments Nos. 177 and 178 are not well founded. Subsection (8) of this clause is required in the form in which it appears in order to make it absolutely clear that the authority cannot deny the chief finance officer access to secretarial or clerical support, legal advice, photo-copying facilities or anything else he needs to send out a report. I recognise that this provision takes away control of one small aspect of an authority's resources from elected members and gives it instead to an appointed officer. The need for this move is to be regretted; but let there be no doubt that it is necessary.
It is likely that, if circumstance arise in which a chief finance officer considers that he has a duty to make a report under this clause, certain elements among the members will already have set their hearts on pursuing some illegal or imprudent course of action. We know only to well the lengths to which, in such cases, some members will go to avoid facing up to the consequences of their own irresponsibility. It is therefore vital that the chief finance officer should at all times retain the ability to draw these consequences to the attention of the authority as a whole. Obstruction of the chief finance officer would no doubt be unreasonable conduct on the part of the authority. But it would defeat the purpose of these provisions if action by the chief finance officer were delayed while this point was disputed.
The important point to remember is that we all hope that chief finance officers will very rarely even

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consider that they have to produce a report. Much has been made of the expense involved. However, I should like to feel that there will be very little expenditure involved because that will not be the norm. The noble Lord, Lord Underhill, drew the employee relationship to our attention. That already exists in the private sector with the recent Financial Services Act and the situation of the compliance officer.
The noble Lord, Lord Underhill, also made a point concerning his son who is a financial director. As I pointed out in relation to an earlier amendment, the chief finance officer will have as much access as he requires to legal advice. The noble Baroness, Lady Stedman, said she believed that the local authority should decide whether or not the chief finance officer required further legal advice. However, that is a decision which he will make on his own. I therefore hope that the Committee will find it possible to reject the amendments.
Before we depart from the point, perhaps I may digress to Scotland for a brief moment. We were taken there by the noble Lord, Lord Hughes, who referred to the community charges registration officer. In Scotland, the duties are of a different kind than the duties of a chief finance officer in this Bill. Therefore the powers are different. There is no comparable provision in the Scottish Act.
Lord Hughes: Before the Minister sits down, may I have an assurance that there is no power given to any officer of a local authority in Scotland to compel his authority to make such appointments as he demands? That is an important point. I had not noticed this extraordinary power which is proposed in an English form. I should have felt that we had made an awful mess in dealing with the earlier Act if we had allowed something like that to creep into it.
Lord Hesketh Lord Hesketh: In this Bill, certainly not.
Lord Hughes: With the best will in the world, that is not an answer. I am asking about the position in the Scottish Act.
Lord Morton of Shuna: I believe that the position in Scotland is that if the relevant officer feels that he is not receiving adequate staff to enable him to carry out his duties, he makes a report to the Secretary of State under Section—
Lord Hughes Lord Hughes: Section something!
Lord Morton of Shuna: Section something of the Local Government (Scotland) Act 1973. No doubt the Minister will be able to confirm that.
Lord Ross of Newport: What position does that put the chief executive of the local authority in? He is the chief officer. He is the man who reports to the chairman, the leader of the council and all the councillors. Here the Government are giving this extra power to the chief financial officer. Any council worth its salt has a representative from the treasurer's department—if not the county treasurer or the
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borough treasurer himself-who would tell it what any decision is likely to cost and what extra rate if any may be required.
It seems to me that in these clauses the Government are giving county and borough treasurers superior standing to the chief executive. If I were a chief executive I would not think very highly of that.
Lord Hesketh: The reason the powers are given to the chief financial officer are very straightforward. The problems, if they arise—and it is an "if"—will arise out of his normal functions and his area of competence. Therefore he is the man best qualified to do the job.
Lord Ross of Newport: The chief officer's team is supposed to be the executive of the officers who report to the council. That is the team which was set up by the Baines Report. Those are the people who meet together, make their own recommendations and bring forward new ideas to the council. What on earth is the use of the chief officer's team if one does this kind of thing in local government?
Lord Hesketh: The Government believe that this is the most suitable and satisfactory answer to the problem.
Lord Underhill: The interchange of views indicates the foolishness of the provision in the Bill. As has been mentioned by the noble Lord, Lord Ross of Newport, if the chief executive officer did not report to his council that something was wrong—which the chief financial officer now has to do—somebody would ask what the hell the chief executive officer was doing. Surely it is his duty to see that the council functions correctly.
Once again, listening very carefully to what was said from the Government Front Bench one senses a fear of putting any reliance on local government in general. That comes out time and time again. The noble Lord, Lord Hesketh, said that this was only a little function, indicating that it involved only small funds. Let me repeat what subsection (7) says:
"A relevant authority shall provide its chief finance officer with such staff, accommodation and other resources as are in his opinion sufficient to allow his duties under this section to be performed".
The chief finance officer will wish to carry out his responsibilities under the terms of Clause 118 faithfully and properly. Therefore he may consider it desirable to obtain the maximum possible advice. Many of us have been faced with circumstances where one is expected to cast opinions on people who are one's senior officers. It may well be that, whatever the status of the legal officer in the local authority, he may prefer not to support or to advise the chief finance officer on a particular legal point and may say that he ought to obtain counsels' opinion outside the authority because he is not prepared to do it. Therefore I believe that it is not as simple as the noble Lord suggests. I believe that a satisfactory solution to the problem would be that proposed by my noble friend Lord Hughes. The Government should have a look at it.
We are not saying that if a local authority refuses to give the kind of information that is required there

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should not be some way that that information could be obtained. However, that does not require the kind of draconian provision in this clause. I think that the Government could well, without any commitment, agree to take a look at the wording and see whether they could do something on the lines suggested by the noble Lord, Lord Hughes.
Lord Sandford: I hope that my noble friends on the Front Bench will do no such thing. The noble Lord, Lord Ross, a moment ago spoke as though what we were discussing was the normal administration of a local authority. Everything that he said was perfectly correct in that context. But we are not talking about that; we are talking about a situation where it appears to the chief finance officer that his authority is about to embark on an unlawful course of action.
One reason why we do not have such a provision in the Scottish legislation, I suggest, is that the Scottish local authorities have not gone off the rails to the extent that they have been led off the rails elsewhere by Militant Tendency.
Lord Hughes: As far as I can see, the noble Lord is now talking to the previous amendment. This has nothing to do with unlawful action. He has missed the boat.
Lord Sandford: I do not think that I have. It is quite true that Clause 118 dealt more specifically with that point than this amendment, but we are still in the same area. This whole part of the Bill deals with the situation which has been created by a minority of authorities which have in a variety of ways distorted and abused the financial administration and powers that were in their hands. It is entirely necessary to give the finance officer those extra powers.
Lord Hughes: I do not disagree with the Government's idea that if a local authority frustrates the intentions of Parliament by understaffing or under-equipping its departments, there should be a method of dealing with it. In recent legislation there has been more than one case in which English law has been adapted to follow the pattern in Scotland. This is a case where the Government can achieve their objectives in England in exactly the same way as they can achieve them in Scotland. The local authority is given the responsibility of appointing the necessary staff. If the finance officer—who is the official concerned in this case—feels that he cannot carry out his functions for the reasons which I quoted from the Scottish Act, he can report to the Secretary of State that the authority is depriving him of the necessary powers. The Secretary of State can then require the authority to provide the necessary staff, and the Secretary of State himself may determine what is required.
That conforms to ordinary democratic procedure in local government. It also makes certain that, where an authority acts unreasonably seeking to frustrate the operation of the finance department in the proper execution of its functions, there is a remedy. I suggest that the Government would be well advised to take this matter back and produce the alternative type of action which has been found so effective in Scotland.
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It has proved so effective that the Government have never sought to alter it from the time referred to by my noble friend Lord Morton of Shuna. I think that it was an Act of 1972 or 1973. That would do exactly what the Government want without impinging on the normal rights of local government.
Lord Stewart of Fulham: I am by no means as well-versed in the complexities of this Bill as most noble Lords, but I have been listening to this debate with increasing disquiet and amazement. If I have got it right, it seems to me that the chief finance officer will be able to say to the local authority which employs him, "I consider that in order to do my job properly I require an office of a certain size, a certain number of staff with such and such qualifications and a certain amount of equipment". When he has said that the local authority is legally obliged to provide it.
Is there any parallel to that anywhere at all? What would happen if the chief officers of government departments could say that to their political chiefs and to Parliament? What indeed would happen if Ministers could say to Parliament what they thought they required and Parliament had to give it? There is no parallel at all to that.
I quite understand that what the Government are worried about is a local authority trying to starve out a chief finance officer by not providing him with things that any reasonable person would consider necessary for his job. As has been pointed out, if that is what is wanted the remedy ought to lie in the hands of the Government through the Secretary of State. To place the whole matter in the hands of the finance officer himself and make him the sole judge of his needs is very imprudent financially. Local authorities might find themselves let in for more expenditure than anyone could have imagined if that were to become the general rule. So far as I know it is something quite unparalleled in any other sphere of administration. Surely the Government must think again about this matter.
6.30 p.m.
Lord Hesketh: The opening remarks of the noble Lord, Lord Stewart, are seductive, but of course the chief finance officer will not go around demanding offices, resources, photocopies, secretaries, or whatever. He is being put in the position not being denied his office, his resources, his photocopier or the use of it, and his secretary. Therein lies a subtle but most important difference. We are speaking of a highly qualified professional person who is carrying out an objective and making a decision on a professional basis.
Lord Morton of Shuna: Surely that is absolutely untrue. If the relevant authority believes that the chief finance officer has gone off his head and is asking for more than one hundred times the staff that he needs, what remedy is available to the authority? Under this section the duty is to provide what in his opinion the chief finance officer wants, and whether it is reasonable or unreasonable does not matter. There is no remedy there.
Lord Hesketh: I do not think that is entirely true. There is a 21-day period—and it can be much shorter

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if the council wish—to call a meeting concerning the report that has been produced by the chief finance officer. The proof of the pudding will be in the eating and resides in the fact that the audit officer will immediately throw out the report if the finance officer has gone completely off his head, as the noble Lord, Lord Morton, insinuated that he might.
Lord Underhill: Should this debate on these two amendments go much further, it will not be long before the Government recognise that there must be a change. A sufficiency of arguments has been put forward. The noble Lord, Lord Hesketh, used the argument that the chief finance officer must not be denied his resources. Where is that stated in subsection (7)? The noble Lord is using his powers of invention. Subsection (7) states that the local authority must provide resources if the chief finance officer thinks he needs them, and that is something totally different.
The Government are being totally unreasonable about this matter. I see that the Minister is reading a further note. I hope that it is a note to say that they will have another look at this point. If he is prepared to promise that, I shall sit down immediately, but I do not think that that is the case. This is an important matter and the question of principle has been raised. We shall look carefully at what the noble Lord has said. I believe that his words belie the authority of the Bill. We shall have to consider coming forward with another amendment at Report stage on the lines suggested by the noble Lord, Lord Hughes. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Hughes: Before the noble Baroness, Lady Stedman, says that she does not intend to move her amendment, perhaps I may ask the Minister, the noble Earl, Lord Caithness, to look at the Scottish position and give me information about it in writing.
Lord Hesketh Lord Hesketh: Yes, my Lords.
[Amendment No. 178 not moved.]
On Question, Clause 118, as amended, agreed to.
Clause 119 [Authority's duties as regards reports]:
Baroness Stedman Baroness Stedman moved Amendment No. 179:
Page 65. line 42, after ("118(2)") insert ("or (3").
The noble Baroness said: This amendment and Amendments Nos. 180 and 181 are dependent upon the two amendments that we have just been discussing. Since the Committee has not accepted that it is the council which should decide the level of resources and cost as part of its overall duty, it is no good proceeding with these amendments and therefore I shall not press them. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 180 and 181 not moved.]
Lord Hesketh Lord Hesketh moved Amendment No. 181A:
Page 66, line 12, leave out paragraph (b) and insert—
("(b) ending with the first business day to fall after the day (if any) on which the authority's consideration of the report under subsection (2) above is concluded.
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(10) If subsection (3) above is not complied with, it is immaterial for the purposes of subsection (9)(b) above.
(11) The nature of the decisions made at the meeting is immaterial for the purposes of subsection (9)(b) above.
(12) In subsection (9)(b) above "business day" means any day other than a Saturday, a Sunday, Christmas Day, Good Friday or a day which is a bank holiday in England and Wales.").
The noble Lord said: In moving Amendment No. 181A, for the convenience of the Committee I propose to speak also to Amendments Nos. 193A, 193B and 193C. Government Amendment No. 181A is concerned with the definition of the prohibition period during which the local authority may not proceed with the course of conduct which has led to a report being made by the chief finance officer or, in the case of a report made under Clause 118(3), enter into any new financial commitment. It has two effects. First, the definition of the prohibition period as it appears at present in Clause 119(9) may give rise to some ambiguity. It refers to the day on which the report is considered but it does not acknowledge that major debates at council meetings may well last beyond midnight. There may also be an adjournment. In those circumstances, on which day would the prohibition period end?
Obviously that point needs to be made clear and the new subsection (9)(b) inserted by this amendment does that. It takes as its reference point the day on which the consideration of the report is concluded. However, the amendment goes a little further than that. We wish to take this opportunity also to extend the prohibition period by a further working day beyond the day on which the discussion of the report is concluded. Thus, if a debate were to finish at 11 p.m. on a Tuesday evening, the prohibition period would continue until midnight on Wednesday. However, if the meeting lasted until, say, I a.m. on Wednesday morning, the prohibition period would extend until midnight on Thursday.
The purpose of this aspect of the amendment like the amendments to Clause 118 that we have already considered, is to ensure that the new duties for the chief finance officer work harmoniously with the new powers of the local authority's auditor provided in Section 25A of the Local Government Finance Act 1982.
To explain that more fully, at this point I must turn to the Government's Amendment No. 193B, which is an amendment to Schedule 15. In part, it will have the effect of amending further the 1982 Act so as to restrict the auditor's power to issue a prohibition order under Section 25A of the Act. The Committee may recall that the new Sections 25A to 25D were inserted in the 1982 Act by Schedule 4 to the Local Government Act 1988.
We do not think it desirable that the auditor should be able to issue a prohibition order concerning a matter on which the chief finance officer has reported while that report awaits consideration by the authority. It would not only be superfluous for those powers to be able to be exercised concurrently; it would also lead to confusion and uncertainty. The auditor would have to determine whether in his view the authority was likely to breach the prohibition under Clause 119 and thus whether he was justified in issuing an order. That would be invidious. If he did

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not issue an order when he was free to do so, that might be taken to cast doubt on the validity of the opinion expressed in the chief finance officer's report.
For the sake of clarity and simplicity, we believe it best if the auditor's power to issue a prohibition order were in abeyance pending the authority's consideration of the chief finance officer's report. In any case, the authority would be prohibited by Clause 119 from proceeding with the matter reported on during that period. The Government's Amendment No. 193B would therefore add a new sub-paragraph 6(1B) to Schedule 15, the effect of which is to insert a new Section 25AA into the Local Government Finance Act 1982. This new section provides that the auditor may not issue a prohibition order in respect of a matter on which the chief finance officer has made a report under Clause 118 of this Bill during the period between the issuing of that report and the authority's consideration of it. More precisely, the restriction on the auditor runs from the day on which copies of the report are sent by the chief finance officer to the end of the day on which the authority's consideration of the report begins.
As the Committee will perceive, that formulation, taken together with the extension of the prohibition period provided in Amendment No., 181A, means that there will be an overlap of at least one and possibly two working days on which the auditor is free to issue an order, but the authority is still bound by the prohibition arising from the chief finance officer's report. If, for example, a debate began at 8 p.m. on Tuesday and finished at 1 a.m. on Wednesday, the period of restriction on the auditor would end at midnight on Tuesday. However, the prohibition period imposed on the authority would not end until midnight on Thursday.
The reason for this overlap is simple. Having restricted the auditor's exercise of his powers in this way, it would not be sensible to create a situation in which the authority, properly advised by its chief finance officer that a proposed course of action—for example, a financing agreement—was unlawful, could commit itself to the arrangement immediately after its meeting and before the auditor could issue an order. It does not follow either that a responsible authority would decide to ignore the professional advice of its chief finance officer, after due consideration by the full council, nor, if it does, that the auditor would take the same view of the situation as the chief finance officer and wish to issue an order. But, should those circumstances arise, it is sensible to ensure that there is no loophole through which an authority bent on unlawful conduct can slip.
Government Amendment No. 193B also inserts a new sub-paragraph (1C) into paragraph 6 of Schedule 15. This is straightforward and consequential upon Amendments Nos. 117G, 117H and 117J, which we discussed last Thursday, providing for the Audit Commission to make arrangements for the certifying of authorities' contributions to the national non-domestic rate pool
Government Amendments Nos. 193A and 193C are mere restructuring of the numbering of paragraph 6 of Schedule 15 in consequence of the insertion of new sub-paragraphs (1B) and (1C). I beg to move.
Lord McIntosh of Haringey: If the Government had issued this prospectus in their election manifesto I wonder whether it would have been greeted with the wild enthusiasm which the community charge originally received, according to Government sources. This is reductio ad absurdum the policy towards which the Government's introduction of the community charge and their controls on local authorities has been leading them. We now have reached the stage where one has to lay down to the nearest midnight the time period for the last bit of central government interference in the legitimate activities of local authorities. I despair. I do not know why the Government mess around on the margin in this way. Why not abolish local government? Have done with it! Alternatively, as a moderate compromise proposal, why do they not ensure that local authority councillors are locked up for 24 hours after the end of their council meeting, preferably in handcuffs? That might achieve the objective.
On Question, amendment agreed to.
Clause 119, as amended, agreed to.
Clause 120 agreed to.
Clause 121 [Rates and precepts: abolition]:
The Earl of Caithness The Earl of Caithness moved Amendments Nos. 181B and 181C:
Page 67, line 3, leave out (", district council or London borough council") and insert ("or charging authority").
Page 67, line 5, at end insert (", combined police authority, combined fire authority, magistrates' courts committee or probation committee.").
The noble Earl said: I beg to move Amendments Nos. 181B and 181C en bloc.
On Question, amendments agreed to.
On Question, Whether Clause 121, as amended, shall stand part of the Bill?
Lord Ross of Newport: I am very grateful that the noble Earl has returned to the Bench. I do not wish to throw a fast ball at him. I received a letter only today. I have not had a chance to give him notice of the point I wish to raise.
Clause 121 of the Local Government Finance Bill provides that,
"The General Rate Act 1967 shall not have effect…after 31 March 1990".
After that date no dwellinghouse will have any annual rateable value, let alone a rateable value of £35 and upwards. The £35 and upwards, I can now reveal, relates to the commoners of Wimbledon and Putney. I wish to place on record that the Government have to consider the problems of people such as the commoners of Wimbledon and Putney. The estate goes back to 1860 and the Earl Spencer. If it is not possible to answer now, I understand. Perhaps the noble Earl can write to me. Perhaps we can have some indication whether this is taxing the Government's mind. We hope to have a definite indication before the Bill is on the statute book.
The Earl of Caithness: The noble Lord, Lord Ross of Newport, raises an important point about the commoners at Wimbledon. I can assure the Committee that it was fresh in my mind yesterday

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because I thought that was when the noble Lord would raise the matter. Since then I have been concentrating on today's amendments. The matter is not quite so fresh. Perhaps I can write to the noble Lord.
Clause 121, as amended, agreed to.
Clause 122 [Statutory references to rating]:
[Amendments Nos. 182 and 183 not moved.]
[Amendment No. 184 had been withdrawn from the Marshalled List.]
[Amendment No. 184ZA not moved.]
Clause 122 agreed to.
6.45 p.m.
The Earl of Caithness The Earl of Caithness moved Amendment No. 184A:
After Clause 122 insert the following new clause:
("Rating of statutory wafer undertakings.
.—(1) The following section shall be substituted for section 31 of the 1967 Act—
"Statutory water undertakings.
31.—(1) The rateable values of the hereditaments in any rating district which are occupied, otherwise than as dwellings, for the water purposes of a statutory water undertaking (hereafter in this section and in Schedule 4 to this Act referred to as "water hereditaments" of the undertaking) shall be ascertained in accordance with the provisions of the said Schedule 4.
(2) For the purposes of subsection (1) of this section, a hereditament is occupied for the water purposes of a statutory water undertaking if it is occupied for the purposes of any of the undertakers' functions with respect to the supply of water.
(3) In this section and the said Schedule 4, references to statutory water undertakers shall be construed in accordance with section 11(6) of the Water Act 1973 (and references to statutory water undertakings shall be construed accordingly)".
(2) This section shall have effect in relation to any proposal made on or after 10th March 1988 which is outstanding on the passing of this Act but shall not have effect in relation to any proposal made before 10th March 1988.").
The noble Earl said: In moving Amendment No. 184A, I shall touch upon Amendment No. 184AA, which is an amendment to Amendment No. 184A, Amendment No. 184B, and again touch upon Amendment No. 184BA, which is an amendment to Amendment No. 184B, and my third amendment, which is Amendment No. 184C. I am afraid that I shall detain the Committee a little time on this. These are technical and highly complicated matters and it is right that I should spell them out in some detail and explain them to the Committee.
These three new clauses with which Amendments Nos. 184A, 184B and 184C deal are all concerned with maintaining long-held understandings about the way in which the rating system operates under the General Rate Act 1967.
Perhaps I may deal with Amendment No. 184A first. This deals with the rating of some of the hereditaments occupied by water authorities. As things stood, some of these were rated by statutory formula whereas others were separately entered in the valuation list. On 4th December 1987 the Court of Appeal ruled in the case of the Severn Trent Water Authority v. Cakebread that the Water Act 1973 had changed the definition of a statutory water undertaking's functions so as to treat all
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hereditaments occupied by a water authority as being rated under the statutory formula for the water industry.
This has had the effect of requiring a substantial number of hereditaments, chiefly sewage treatment works, to be deleted as separate entries in the valuation list. Thus these properties, which we had always thought should be separately rated, were effectively by the court decision excluded from rating. However, there has been no corresponding increase in the cumulo value under the formula, although the court held that in principle this was now meant to include the value of sewage works, so that a substantial amount of rateable value—about £18 million—has been lost to local authorities.
A loss of this magnitude is not something that we could contemplate continuing indefinitely. The provisions for the rating of water authority hereditaments from 1990 contained in Part III of the Bill will enable us to apply the formula rateable value only to the hereditaments it was meant to cover and provide for continued separate assessment of sewage treatment works. Amendment No. 184A thus makes provision for the intervening period up to 1990 by putting the law back to what we and almost everyone else thought it was.
Amendment No 184B deals with another recent decision, that of Clement v. Addis. Your Lordships' House considered the different but important question of what changes are to be taken into account when a property is revalued between general revaluations. Previously it had long been accepted that any valuations made between general revaluations should take account of the physical condition and state of locality at the time of valuation, but the general market conditions were to be assumed to be those ruling at the time of the last general revaluation.
It was generally accepted that the expression "state of the locality" in Section 20 of the General Rate Act related to physical state and amenities of a property and that in order to make a case for a change in rateable value, appellants had to show that there had been some physical changes to the property or to its locality. This view was recently tested in the Addis case which turned on whether a factory on the borders of the lower Swansea valley enterprise zone could rely on the introduction of the enterprize zone to seek a reduction in rateable values on the grounds that the "rate holiday" in the enterprise zone reduced demand for premises just outside it. The Court of Appeal upheld the traditional view by holding that the establishment of an enterprise zone was not a change affecting the state of the locality. Your Lordships' House took the opposite view.
Following that judgment, it appears that ratepayers generally, and not just those near enterprise zones, may obtain changes in rateable value to reflect changes in market conditions since 1973. Although the losses in rate income from cases directly linked to Addis have so far been limited, that could in time lead to many thousands of cases being determined in this way and could lead to a continuing—and I might say almost "rolling"—revaluation as economic circumstances change.
In the Government's view that is not appropriate. Changes in economic circumstances are properly dealt with at the time of revaluation. Under the Bill, there will be a general revaluation in 1990 and every five years thereafter; therefore, there will be no risk of ratepayers having to wait as long as they have in the past for new assessments which take account of changed market circumstances and their effect on rentals.
Amendment No. 184B, which applies to the valuations made under Section 20 of the General Rate Act 1967, sets the law back to what it was previously held to be for the remaining life of that Act. On Report, we shall be tabling a further amendment to Schedule 6 of the Bill to ensure that this principle of valuation is carried through into the new legislation.
As the Committee will be aware, once the courts have made a decision in a particular case, all other cases turning on the same point of law fall to be judged in the same way. Cakebread and Addis decisions therefore left the way open for a continuing erosion in rateable values across the country. On 9th March 1988 my right honourable friend the Secretary of State therefore announced in another place that he would be making these amendments with effect from midnight on that day. That means that all proposals for deleting water authority hereditaments from the valuation list or the values of industrial premises that had been subject to changes in economic circumstances which were made before that date would fall to be determined in accordance with the court's judgments. However, any proposals made after that date would be subject to the revised principles contained in these new clauses. The final subsection in each of the two clauses provides for that. I am sure that the Committee will agree that it is only right and proper that, although urgent changes in the law were needed in these cases, a proposal should be judged on the basis of the law as it stood at the time the proposals were made.
That leaves us with the question of how proposals to restore hereditaments to the list or to restore their old values should be dealt with. The new clause contained in Amendment No. 184C addresses this. We felt that it was only right that if proposals aimed at taking advantage of those decisions were barred as from 10th March, then proposals which had already succeeded in doing so should be capable of reversal from that date by way of a new proposal from the valuation officer.
That is what Amendment No. 184C does. Moreover, because a valid proposal to reverse the position cannot be made until after this Bill is on the statute book, it provides that notwithstanding the usual procedures in the General Rate Act, proposals to alter a valuation in these cases can go back to 10th March, before the start of the rate year.
In tabling this amendment we seek to limit the effect of these decisions on local authority revenue. I agree that these effects are not trivial, although I should point out that in general local authorities benefit far more than they lose by year on year changes in the aggregate level of rateable value; in
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general the rateable value base increases by between 1 and 2 per cent. per year.
However, there are swings and roundabouts. As a result of the two court decisions we are discussing, the authorities will experience some loss. In aggregate, the amounts due to be refunded in respect of proposals made before 10th March this year are only of the order of one half of 1 per cent. of local authority rates revenue for 1988/89.
These effects are not of course evenly spread between local authorities. Some may lose more than others. As my right honourable friend pointed out in his announcement on 9th March, there are provisions in Section 67 of the Local Government Planning and Land Act 1980 for authorities to be compensated if they suffer a reduction of more than a prescribed proportion—currently 22½ per cent.—in their rateable value in any year. This proportion indicates the level of losses that Parliament has taken the view would be excessive; if losses above this amount are incurred, the additional amount will be the subject of compensation payments. My right honourable friend will of course consider any representations from the local authority associations about these issues.
I am aware that some water authorities have lodged applications for further repayments by local authorities under the provisions of Section 9 of the General Rate Act 1967. In lodging these applications, they may have had in mind the implications of your Lordships' decision in the case of Tower Hamlets v. Chetnik Developments, the implication of which is to limit the discretion of authorities as to whether or not to make repayments. In our view, it is unlikely that this decision would have the effect of requiring local authorities to use their powers under Section 9 to make any further repayments; the cases are different in character. Nevertheless, recognising that the sums involved could be very substantial, and that the uncertainty is likely to create problems for local authorities' budgets, we propose to table a further amendment at Report stage to clarify the position on Section 9 by confirming that it will not apply in those cases.
I recognise the concern that has been expressed over the effects of these decisions on local authority revenues. That is a point on which doubtless the noble Lord, Lord McIntosh of Haringey, will dwell when moving his amendment. I think that they are much exaggerated. The losses are not unsustainable, and as I have said, there is provision for compensation in the worst cases. I repeat that when my right honourable friend made his Statement on 9th March he confirmed that he would listen to representations from local authorities.
The alternative, which Amendments Nos. 184AA and 184BA propose, is simply not acceptable. The noble Lord, Lord McIntosh, is seeking to make Amendments Nos. 184A and 184B fully retrospective, such that the rateable values affected by the Cakebread and Addis cases were deemed never to have changed. Retrospective powers are not to be used lightly, particularly where they seek to extinguish the rights that an individual has fought for and gained in the courts. In this case, it would remove from individuals substantial sums of money which,

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particularly following my right honourable friend's Statement on 9th March, they were legitimately entitled to expect. The amendments proposed also highlight the difficulties that would be faced with any sort of truly retrospective legislation. They fail to acknowledge that people have been acting on the basis of the new construction of the law given by the courts. Dealing with this would be problematic, as I am sure the Committee will understand.
The courts did establish what the law actually is, and there is no getting away from that fact, even though this differed from what we and others had previously understood it to be. The Government have moved expeditiously to limit the effects of that change in law, and to make available compensation in the most serious cases. This surely should deal with the problem. I beg to move.
Lord McIntosh of Haringey Lord McIntosh of Haringey moved, as an amendment to Amendment No. 184A, Amendment No. 184AA:
Subsection (2), line 2, leave out from ("after") to end of line 4 and insert ("1 April 1974").
The noble Lord said: I believe that the procedure is that I am speaking to Amendment No. 184AA in responding to the noble Earl on Amendment No. 184A.
The Committee is grateful to the noble Earl for his patient exposition of what is a most complicated piece of law and legislation. We were aware of its implications from at least 9th March of this year when the Secretary of State made his Statement in another place. The Minister will be aware that my honourable friends in another place did not oppose the announcement of the Secretary of State that as from midnight he would impose retrospective legislation to deal with the matters which arose from the Cakebread and Addis cases.
On a matter of timing, I must say that it is now more than three months since 9th March. When the Secretary of State was challenged by my honourable friends in another place as to when he would be producing the amendments, he said that he could not produce them in time for the Committee stage in another place because the Standing Committee was still sitting but he hoped he would be able to produce them on Report.
In the event we land up with amendments which not only come to us at our Committee stage rather than going to the Commons Report stage, but do not even come at the beginning of our proceedings. I do not deny that we have had adequate time to consider them. I am not making that point. However, it has taken almost three months for the Government to produce amendments.
The third consequential amendment to deal with the Chetnik case has still not been produced and will not be available until our Report stage. That is not good enough. A period of three months to consider this matter is more than adequate. It ought to have gone before the Commons at its Report stage if the Secretary of State's hopes had been achieved, and they ought to have been achieved.
The issue with which we are concerned, and which the Minister rightly identified, is the cost to local
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authorities of the refunds that they will have to make on those issues which were decided by the courts before the prohibition imposed by the Secretary of State at midnight on 9th March. The noble Earl said airily that the refunds amounted to less than one-half of 1 per cent. of the rate revenue. if he would be good enough, I should like him to turn that into millions of pounds because I suspect that it is a large figure. My understanding is that the Department of the Environment and the Valuation Office of the Inland Revenue estimate that the refunds could amount to £90 million in respect of the Cakebread n case alone, and the local authority associations regard that estimate as being conservative. If the Section 9 refunds are not dealt with, then the amount could come to something like £250 million.
These are not small figures. They are certainly not small figures in relation to the allegations of abuse of expenditure by local authorities which are constantly made from the Government Benches. It is incumbent on the Minister to say more than just cheerfully "less than one-half of 1 per cent.," even if those figures were to be agreed as being correct.
It is worse than the gross amount because the amounts that local authorities will suffer are not spread evenly over all local authorities. They occur specifically in the case where local authorities have sewage and water treatment plants which have now been taken out of the rolls, and there are a number of local authorities which will suffer losses of well over million, and in some cases over £2 million. They occur in those local authorities—admittedly I think it is only19—which have enterprise zones, but those too will suffer quite severely. The Minister must give a better reason for resisting our amendments on the refunds which are designed to protect local authorities from this serious loss of revenue.
I am not saying that I am in favour of retrospective legislation, and I certainly do not treat these amendments as being other than probing amendments to bring before the Committee the seriousness of the financial loss that will be faced by a selected number—perhaps not a large number—of local authorities. I hope that the Minister will not accept these amendments; to do so would be a quite unjustified extension of retrospective legislation. I hope he will recognise that the case has been made for more generous treatment of the refunds that local authorities will undoubtedly have to make, and the revenue that they will have lost, for the period between when the law was established and the law was found to be other than what the department and we thought it was. I hope that the Minister will be able to say enough about that to enable me to withdraw the amendments that I have put down to his amendment.
Lord Ross of Newport: I feel that I would be letting down my profession if I did not make some comment on Amendment No. 184B. The Government are not being very generous to industrialists and others who have found, through economic changes, a diminution in their rentals and capital values and in their resource income. I happen to think that the Law Lords probably had it right in that decision, and to say that to have to wait five years for a revaluation is

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not very long does not seem to me to be playing the game.
Of course when the Government set up enterprise zones there was bound to be a deleterious effect on the rental values of properties on the fringes of those zones. That is presumably what happened in the Addis case in Swansea. Certainly the retail consortium and professional colleagues think that it is not playing the game on the part of the Government to say that any future changes in market conditions will have to wait until revaluation in five years.
A planning decision can have a disastrous effect quite quickly on a town's shopping areas, and things of that sort. I have not put down any amendment; but I put down a marker that we might have to consider this aspect again at Report stage. I do not think that the Government are being just in what they are putting forward in this amendment. That does not mean that I do not totally support what has been said, that local authorities should be properly rated. I water authorities should be properly rated. I congratulate the Government on doing that when they are going to privatise the water companies, because it might have been an asset that they could have used. I fully support the fact that they are going to bring them back into rating.
The Earl of Caithness: The noble Lord, Lord McIntosh, said that 1 had, in a somewhat airy fashion, indicated that the amount to be refunded in respect of these proposals would be half of 1 per cent. of local authority rate revenue. I agree that that is a substantial sum. If the noble Lord will recall, I was of course comparing it to the fact that the rateable base value increases between 1 per cent. and 2 per cent. a year. In that context it is not such a frightening figure as may at first appear. Of course the figures that the noble Lord mentioned are substantial ones. What I would say to him is that we are still considering the implications, and considering some of the representations that have been made to us by the local authority associations.
I have quite a lot to say to the noble Lord about the full retrospection that the noble Lord suggests by his amendment is appropriate. Perhaps I could condense this down to one point, which I am sure his noble friend Lord Morton of Shuna would confirm. If a private individual rather than a public authority is to be deprived of vested financial rights, this would be a breach of Article 1 of the First Protocol to the European Convention on Human Rights. Therefore, I fear that we might have been in a little difficulty if the noble Lord's amendments were accepted.
The noble Lord, Lord Ross of Newport, considered our decision on Addis to be unfair. By implication, from that he must consider that the compulsory five-year revaluation that we are now bringing in is not satisfactory and does not provide the necessary safeguards; and he would doubtless prefer a shorter period of time. I would think that the noble Lord might even prefer a rolling revaluation, which I can advise the Committee would lead to enormous complications and be extremely time-consuming for the valuation officers.
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Of course the problem has been highlighted by the fact that we have not had revaluations in England since 1973. I think since 1948 we are supposed to have had eight revaluations and we have had only three, which is grossly unfair—as the noble Lord said, and speaking with my own surveyor's hat on—to some areas where there has been a material change in the surrounding areas. Of course the noble Lord, Lord Morton of Shuna, benefits from the fact that in Scotland there has been a regular revaluation on a five-year basis.
Lord Morton of Shuna: I wonder whether the noble Earl would give way? If he would wait while his noble friend Lord Sanderson of Bowden deals with the next amendments he will hear that the Scots do not feel that their revaluations, which have gone on every five years, in fact benefit them. Perhaps I may suggest that he reads the documents provided by the Scottish CBI and the Scottish Council for Development and Industry, which would give him a great deal of news about revaluation.
The Earl of Caithness: I am most grateful for that intervention and I am sure my noble friend Lord Sanderson of Bowden will have a ready reply to the noble Lord. I think that, on reflection, the Scots may consider that they are overall better off having a five-yearly revaluation rather than being the possessors of properties and hereditaments in England where we have not had a revaluation for 18 years. However, although I take the point which has been raised by the noble Lord, Lord Ross, it is one that I cannot recommend to the Committee. I do not think that a revaluation is the right answer, particularly at the present time when we have not had one for so long.
Lord McIntosh of Haringey: As I said at the beginning, my amendments were probing amendments, to see whether I could draw the Government out a little more as to the amounts of money concerned. The noble Earl has not been drawn out; he still has not confirmed or denied the figures I gave: nor has he said whether the Government are considering compensation for those local authorities which are particularly badly affected. Before begging leave to withdraw the amendment, I wonder if I might try once more to see whether we can make any further progress.
The Earl of Caithness: if 1 recall rightly, I believe I said that the figures quoted by the noble Lord were indeed large sums of money. That means I did not contradict the noble Lord. As I understand it—and I shall need to check these figures—the loss to the authorities for Cakebread is something like £90 million in total, which is precisely the figure quoted by the noble Lord; and for the Addis decision, it is between £30 million and £40 million in total.
Lord McIntosh of Haringey: I am grateful to the noble Earl. Can he help the Committee about the compensation aspect and what help is to be given, bearing in mind that it is a limited number of local authorities which suffer heavily and that the comparison which the noble Earl made with the overall general increase in rate revenue is really not appropriate for those authorities?
The Earl of Caithness: I thought I had covered that point more fully than the earlier one. I admitted that it was unevenly distributed throughout the country.I said that compensation would be paid in the worst circumstances and that of course we were listening to local authority representations at the moment.
Lord McIntosh of Haringey: I am most grateful. I acknowledge, as I ought to have done right from the beginning, that the department has been in continuous consulation with the local authority associations. That must be the right way to do it and that was recognised from the outset by my honourable friends in another place. I am particularly grateful to the Minister for condensing his speech on retrospection since it became clear that I was not going to pursue the issue of retrospection back to 1974. I am sure the Committee will be as grateful as I am for that. In view of the statements made by the Minister, I beg leave to withdraw Amendment No. 184AA.
Amendment, to Amendment No. 184A, by leave, withdrawn.
On Question, Amendment No. 184A agreed to.
The Earl of Caithness The Earl of Caithness moved Amendment No. 184B:
After Clause 122 insert the following new clause:
("Valuation according to tone of list.
.—(1) Where for the purposes of section 20 of the 1967 Act a hereditament is valued on the basis of the assumptions specified in subsection (1) of that section (basis of valuation for the purposes of proposal to alter a valuation list to be consistent with the tone of the list), no account shall be taken of a change to which this subsection applies unless it is one which—

(a) affects the physical state of the hereditament or otherwise affects it physical enjoyment; or

(b) affects the physical state of the locality in which the hereditament is situated or is otherwise physically manifest in that locality.

(2) Subsection (1) above applies to any change in the state of the hereditament or the state of the locality in which the hereditament is situated which has occured since the time by reference to which the value of the hereditament is to be ascertained, other than one relating to a factor which is a relevant factor within the meaning of that section.
(3) This section shall have effect in relation to any proposal made on or after 10 March 1988 which is outstanding on the passing of this Act but shall not have effect in relation to any proposal made before 10 March 1988.").
[Amendment No. 184BA not moved.]
On Question, Amendment No. 184B agreed to.
7.15 p.m.
The Earl of Caithness The Earl of Caithness moved Amendment No. 184C:
Insert the following new clause:
("Rating amendments: supplementary.
.—(1) This subsection applies to a proposal for an alteration of a valuation list which, if made, would have the effect of rating as a non-water hereditament of a statutory water undertaking a hereditament whichm—

(a) was previously so rated but ceased to be so rated by virtue of an alteration made on or after 4 December 1987;

(b) was occupied for the purposes of the undertaking at the time of the proposal in pursuance of which the earlier alteration was made; and

(c) was not at that time occupied for the purposes of the undertakers' functions with respect to the supply of water.

(2) This subsection applies to a proposal for an alteration of a valuation list which—
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(a) would, if made, have the effect of reversing an alteration of the list made on or after II February 1988; and

(b) would not fall to be made but for section [Valuation according to tone of list] above.

(3) Where in the case of a proposal to which subsection (1) or (2) above applies there has been, since the making of the proposal in pursuance of which the earlier alteration was made, such a change of circumstances in relation to the hereditament to which the proposal relates as is mentioned in any of paragraphs (a) to (h) of section 68(4) of the 1967 Act, the change of circumstances shall be disregarded for the purposes of dealing with the proposal.
(4) This subsection applies to an alteration of a valuation list which—

(a) is made in pursuance of a proposal to which subsection (1) above applies; or

(b) has the effect of reversing an alteration of the list made on or after 11 February 1988 and would not have fallen to be made but for section [Valuation according to tone of list] above.

(5) An alteration to which subsection (4) above applies shall be deemed to have had effect—

(a) if the earlier alteration was made in pursuance of a proposal made before 10 March 1988, from that date; and

(b) if the earlier alteration was made in pursuance of a proposal made on or after 10 March 1988, from the date that the earlier alteration had effect;

notwithstanding in either case that the date from which the alteration is deemed to have had effect differs from the date provided by section 79(1) of the 1967 Act.
(6) For the purposes of subection (1) above, a hereditament is rated as a non-water hereditament of a statutory water undertaking if its value is ascertained otherwise than in accordance with the provisions of Schedule 4 to the 1967 Act.
(7) In this section, the reference in subsection (1)(c) to statutory water undertakers is a reference to a water authority or statutory water company within the meaning of the Water Act 1973 and "statutory water undertaking" shall be construed accordingly.
(8) In this section and sections [Rating of statutory water undertakings] and [Valuation according to tone of list] above—

(a) "the 1967 Act" means the General Rate Act 1967;

(b) "valuation list" has the meaning assigned by section 115(1) of that Act; and

(c) references to the date on which a proposal is made are references to the date on which the proposal is served on the valuation officer or, where the proposal is made by the valuation officer, is served on the occupier of the hereditament to which the proposal relates.").

On Question, amendment agreed to. Clauses 123 to 126 agreed to.
Clause 127 [Rates levied for certain years]:
Lord Carmichael of Kelvingrove Lord Carmichael of Kelvingrove moved Amendment No. 184CA:
Page 69, line II, leave out subsections (2) to (4) and insert—
("(2) Where a revaluation of rateable values of non-domestic properties produces a substantial change in the total rate payment, the Secretary of State may, following consultation with relevant local authority associations and other interested parties, introduce a Rating Revaluation Rebate Scheme.").
The noble Lord said: Perhaps it would be for the convenience of the Committee if we also dealt with Amendment No. 184CD. These amendments are very important. They deal with the rates payable on commercial and non-domestic properties. I should suggest to the noble Earl, Lord Caithness, who is not now in his place, that if he thinks that everything in Scotland is easy he should have a word with his noble friend Lord Sanderson and invite him to visit the Perth conference in 1991—the Conservative Party Conference of course—to see what the reactions are there.
The purpose of Amendment No. 184CA is to provide an opportunity to compare what happened as a result of the last revaluation in Scotland with what is proposed for 1990. It is also to draw attention to the fact that the Scottish arrangements differ from those for England and Wales. Although transitional protection for revaluation is allowed for in terms of Clause 49 for England and Wales, authorities there will have, with the approval of the Secretary of State, an ability to set a rate poundage slightly in excess of the retail prices index increase in order to compensate for any loss of income arising from the phasing-in of increases in rate bills. That is dealt with in paragraph 7 of Schedule 7. Also, unless local authorities in Scotland are allowed to charge this loss to other non-domestic ratepayers or compensation is provided by the Government, the shortfall can only be made good by poll tax, by domestic ratepayers or by quite considerable reductions in expenditure.
Rating valuation is based on property values and consequently the 1990 revaluation will give effect to property value levels at the appropriate date. Shifts of value (both up and down) since the previous revaluation will therefore be taken into account in the values that are arrived at. Artificial phasing-in factors such as those proposed in this clause undermine this process of revaluation. It is difficult to see how they can be applied even-handedly in Scotland and also in England and Wales.
Anomalies can also occur, for instance, where property is modernised or extended at the same time as it is revalued or where subjects such as licensed premises or mines and quarries have greatly improved their drawings or output from one revaluation to another. A mere comparison of the before and after revaluation position is not enough. I could give examples of cases. Indeed, over a five-year period there could be quite a large number of cases. It is not automatically easy to get any sense out of a before and after revaluation. The Minister may remember that following the 1985 revaluation, the Secretary of State, alarmed at what had happened, at the conference, allowed a£50 million package for one year to provide 100 per cent. rebates for all properties, domestic and non-domestic, where the pre-revaluation levels had increased by a factor greater than three. A limit of£10,000 was set for any individual property. Subject to that constraint, any excess rateable value above the factor of three was fully rebated.
The percentage rebate and individual claim limit has been progressively reduced from 100 per cent. to 75 per cent., 50 per cent. and 25 per cent. Over the four-year period the rebate claims that have been met outwith the RSG system have cost about£57 million. The main advantage of such a rebate scheme approach is that the reduction in income and compensation arrangements can be clearly identified and rests with central government whereas a phasing-in arrangement will tend to fudge the real costs. The main thrust of the amendment is to expose the different financing treatments proposed for Scotland and England and Wales and to have on record how the Government see the transitional protection for non-domestic ratepayers in Scotland being paid for.
I deal now with Amendment No. 184CA. The Minister will surely accept that there is growing concern and unrest that Scotland may well lose out under the Government's plans for non-domestic rating. While the uniform business rate will operate in England and Wales from the beginning of April 1990, present indications—unless the Minister can clear this up—are that Scotland will not feature in that arrangement until well into the 1990s. I know that the Minister is well in touch with Scottish business interests and very concerned at the costs of rating to Scottish business. This arrangement could mean a further financial burden or barrier for business and commercial interests in Scotland, as I shall explain. The amendment offers a short-term solution provided that the Government are prepared to finance a change until arrangements are in place for the operation of the uniform business rate throughout Scotland, England and Wales.
The Scottish Council for Development and Industry is very concerned about this. It has had a number of meetings and has done some basic work on the subject. It is concerned that while a 1990 revaluation appears feasible on the existing systems, implementation of a harmonised system will have to follow at a later date. Our estimate and that of the Scottish Council for Development and Industry is that this will probably not be before 1995. Legislation will be required thereafter to extend the uniform business rate to Scotland. For a substantial interim period therefore it is likely that the uniform business rate will be in operation for England and Wales but not for Scotland. This could be very damaging to industrial development prospects in Scotland and to the successful operation of existing businesses.
I mentioned earlier the question of a barrier. The revaluation in England and Wales and the introduction of a uniform business rate there would have the effect of reducing rates paid in the North of England. We shall work on that assumption. There will be a positive stimulus to location of industry and commerce in the North rather than in the South of England. This could be a barrier to development in Scotland unless some kind of compensation is made to allow Scotland to compete on equal terms.
The committee of the Scottish Council for Development and Industry proposed an extension of the de-rating system to non-manufacturing subjects as the preferred solution. Manufacturing subjects already have a 40 per cent. allowance on rates. If something similar could operate for non-manufacturing subjects until Scotland and England are working on the same basis, the Scottish Council for Development and Industry believes that this would go a long way to giving some parity until a uniform business rate is in operation nationally. I beg to move.
Lord Taylor of Gryfe: The amendments provide the opportunity for the Minister to say a word on how the glaring anomalies drawn to his attention by representative organisations and Members of the Committee might be dealt with. I know from conversations with the Minister that he shares the concerns expressed about the anomalies.

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I have drawn attention to one particular case on a number of occasions. I do this not because I am concerned about the company in question but because it is a symbol of the anomalies. I referred earlier to the Exxon Corporation in Mossmoran, Fife, which was induced and encouraged by the Scottish Office, Locate and other agencies to come to Scotland and invest in a large chemical plant. It is connected with the American company of Standard Oil, New Jersey. It came to Scotland and invested£400 million. For its pains, because of the contractor principle of rating, it is charged£9 million per annum in rates by Fife County Council, the local authority. Had it gone south of the Border to Carlisle or Newcastle, the rates bill would have been less than£1-5 million. It is charged an annual burden of£7 million to£8 million by locating in Scotland. This cannot be good for the Scottish economy. If ever there was a disincentive to investing in Scotland, that is it.
The Bill, in particular the Scottish aspect of it now under discussion, provides an opportunity for the Government to make some encouraging comments about alleviating the many anomalies. I could quote from the Hoffman La Roche factory in Ayrshire, which is suffering similar discrimination. I know that the Minister shares our concern. The noble Lord, Lord Carmichael of Kelvingrove, has referred to the concern of the Scottish Council for Development and Industry, of which I have the honour to be vice-chairman. If these anomalies are to be removed, it must not involve any reducton in local authority revenue. How should this be met if the companies concerned and the non-domestic ratepayers are to pay less in rates and the burden on the local authority is greater? This can be done in two ways. It can be done by putting the burden onto the non-domestic ratepayer or it can be done by cutting back local authority services—neither of which is desirable or acceptable.
As the noble Lord, Lord Carmichael of Kelvingrove, said, there is the precedent of a rebate scheme. Members of the Committee may recall the panic stations that emerged at the Perth conference of the Conservative Party following the last revaluation in which they saw these values and rate commitments increased. In a gesture of benevolence, but also in a moment of panic, the Government allocated£50 million to Scottish business and domestic ratepayers in order to alleviate that burden. Therefore, what is suggested here is either a similar rebate scheme or that the Scottish council proposal of industrial derating should be applied to non-industrial subjects.
As I said, I do not expect the Government to tell us tonight exactly what they propose to do; but there is a transition period and it is now extended by the fact that the uniform business rate in England is now being postponed or phased for another five years, so the anomalous condition of comparison between Scottish and English values will be continued right into the 1990s. I suggest to the Government that they should grasp the nettle because the Minister knows very well that there is a strong depth of feeling in Scotland that Scotland is being neglected. This has caused an unfortunate and undesirable increase in
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the voting and political power of the Scottish Nationalists, which I deplore. So long as there is to be an anomaly, a disadvantage, continued over a long period that will be the inevitable reaction.
We have in Scotland the community charge for individuals before you have it in England and all this feeling builds up. Perhaps the Government will say something reassuring on how they see the prospects for avoiding the continuation of the anomalous situation that I have mentioned. Perhaps the Government can indicate the time-scale and phasing that will be involved so that at one stage, at least, we can look forward to uniform business rates covering the whole of the country without disadvantage to Scotland.
Lord Sanderson of Bowden: Both Amendments Nos. 184CA and 184CD address the impact of business rates in Scotland. I make it clear at the outset that the Government's commitment to the reform of business rates remains firm. We accept that business rates in Scotland are too high and that particular sectors of Scottish business can face quite disproportionate burdens compared with their competitors south of the Border.
From the time of the Green Paper Paying for Local Government in 1986 we have made clear that in Scotland reform would take place in a series of stages. I shall refer to these in the course of my remarks on these amendments, but in the meantime I assure the Committee that there are no grounds for suggesting that the Government are dragging their feet or that the timetable is slipping. The first stage of the reform, freezing and indexing of business rates, is already in place in statute and, as I shall explain, work on harmonisation is well under way. These are important steps forward and must not be ignored.
Amendment No. 184CA, in the names of the noble Lords, Lord Carmichael and Lord Morton, is concerned with cushioning non-domestic ratepayers from increases in their rates bills brought about by the revaluation to be held in 1990. I fully accept the need to protect businesses from sudden increases in their rates bills; and, indeed, this is the purpose of Clause 127 as it stands. This amendment is therefore unnecessary.
Clause 127 allows the Secretary of State to place a ceiling on the year-on-year increase in rates bills which any business will be asked to face in each of the five years following revaluation. My right honourable friend the Secretary of State for Scotland has recently announced that he intends to extend these arrangements beyond 1995 and that he will take powers to introduce lower ceilings in the case of small businesses faced with increases. We are, therefore, firmly committed not only to protecting all business ratepayers from any sudden increases in their rates bills following revaluation, but we recognise the special difficulties such increases can pose for small businesses and will take steps to cushion them further where necessary.
The noble Lord, Lord Carmichael, refered to the phasing-in arrangements which could impose some burden on community charge payers. This will not happen. The formula in Section 3 of the 1987 Act for adjusting rate poundages at revaluation is made

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subject to phasing arrangements by virtue of Clause 127(3). This is intended to ensure that poundages after 1990 recover the full amount due from the business sector without adding to the amount to be met from community charges.
The Committee will recall that Section 3 of the Abolition of Domestic Rates Etc. (Scotland) Act 1987 includes provisions to index annual increases in rate poundages to the retail prices index. This means that, as from April next year, the aggregate non-domestic rate burden in Scotland will increase no faster than inflation. The revaluation in 1990 will have no effect on that, other than to redistribute the rate burden with some ratepayers paying more and others less. The transitional arrangements we propose will moderate these redistributive effects. As I said, it is right that we should protect those who are particularly badly hit by the revaluation from the full and immediate impact of the increases in their rates bills. This is best done by phasing-in the redistribution effects of the revaluation in the way we have proposed, rather than by asking the taxpayer to bear an even greater share of local authority expenditure.
I do not resist this amendment because of any hostility to the sentiment behind it, but because it is not necessary. With the assurance that I shall table an amendment with the effects 1 have outlined of extending the existing provision of Clause 127, I ask the Committee to reject this amendment.
Amendment No. 184CD, proposed by the noble Lord, Lord Carmichael, would provide a non-domestic rating relief scheme for Scotland from April next year; and I recall the events of 1985 to which the noble Lord referred. I take it that the purpose of such a scheme would be to extend the present industrial derating scheme to other classes of property; or to increase the level of derating; or possibly some combination of these measures.
I remind the Committee that at present manufacturing industry in Scotland enjoys 40 per cent. derating. This level was set to ensure that Scottish manufacturers are not put at a disadvantage compared to their lower-rated competitors south of the Border. Industrial derating, therefore, is recognition of the fact that business rates damage business efficiency and distort competition. We are in no doubt that the business rating system needs radical reform and our commitment to such reform remains firm. Derating would not be a satisfactory way to tackle the fundamental problems.
The starting point to removing the differences in valuation practice between Scotland and England and Wales has been technical harmonisation discussions between the Scottish Assessors Association and the Inland Revenue Valuation Office. Their discussions have made significant progress. The major areas of cross-Border differences have been identified and the underlying causes analysed. It is not surprising that there should be such differences given the two distinct bodies of statute law, expanded by case law. The differences, however, have been magnified by the more recent revaluations in Scotland and the simultaneous revaluations north and south of the Border in 1990 will be a major step in clarifying the position.
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The emphasis in the harmonisation discussions has been on identifying areas where progress can be made quickly with a view to the 1990 revaluation. As the Committee will be aware, most properties are valued by reference to comparative rental evidence. A major benefit of the discussions so far has been agreement to ensure, so far as possible, that the handling and interpretation of the evidence of rents north and south of the Border is consistent.
I now turn to what the noble Lord, Lord Taylor of Gryfe, is most concerned about. I accept that in these classes of property for which there is little or no rental market, the differences in valuation practice north and south of the Border are more fundamental. These properties, which include refineries and chemical works, to which he referred, are valued under the contractor's principle in Scotland and the contractor's test in England and Wales. Since 1973 the decapitalisation rates applied in determining the rateable value have diverged significantly north and south of the Border. We are, however, taking power in this Bill to prescribe the decapitalisation rate on a GB basis, and the Government have indicated their willingness to consider using these powers for the 1990 revaluation. This would have the effect of bringing valuations made on the contractor's basis north and south of the Border more into line. We will be able to discuss this particular point in more detail when we come to amendments to paragraph 9 of Schedule 15.
In summary, we expect to see considerable progress towards harmonisation in 1990. It has always been clear, however, that the 1990 revaluation is only one step on the road and not the end of the process. Further work will be necessary, of course, particularly in such complex areas as the rating of plant machinery.
The Committee will also be aware of other steps we are taking to protect businesses in Scotland from high rates bills. The freezing and index-linking of non-domestic rates has been given legislative effect in Section 3 of the Abolition of Domestic Rates Etc. (Scotland) Act 1987, and comes into operation on 1st April next year. The real practical benefits of that reform should not be underestimated. Between 1983-84 and 1988-89, the average non-domestic rate poundage in Scotland will have increased by 52 per cent. but in that time the total increase in RPI has been only 25-1 per cent. In practical terms that would mean a present average rate poundage of 66p and not 80p. This equates to a reduction in the total business rates' burden in Scotland of£200 million a year. Our policy is to work towards a fairer basis of valuation, with control on rate poundages. Such an approach is infinitely preferable to arbitrary cuts in bills for particular sectors by widening the scope of derating. Our measures benefit all non-domestic ratepayers in Scotland and not just particular sections of them. Increasing the scope or level of derating would not be acceptable and I ask the Committee not to accept this amendment.
7.45 p.m.
Lord Carmichael of Kelvingrove: The Minister has made some very important points in relation to Amendment No. 184CA. He has promised that there will be a government amendment, for which we are

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very grateful. I hope that what has been said from this side of the Committee will influence what the Government decide to put in that amendment. The Minister said that there would be no slippage of the timetable and we hope that that will be the case.
Dealing with the question of harmonisation between England, Scotland and Wales, I wonder whether it is going as well as the Minister believes. I have heard that there are quite serious professional and technical difficulties which, even with goodwill, will take some time to straighten out.
As regards the matter of industrial derating, I do not know whether the Minister really appreciated that I was not suggesting that industrial derating should be a permanent fixture. It was suggested as a transitional arrangement to try to overcome what we believe to be a very serious hump. However, taking into account the fact that the Minister said that the Government will put down an amendment and because of the sheer meat of his speech which will need to be looked at with considerable care, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn
Clause 127 agreed to.
The Earl of Dundee: I think that we have reached a suitable moment at which to adjourn this Committee stage. I suggest that we do not return to further consideration of this Bill until 8.45 p.m. I beg to move that the House do now resume.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.

Scotch Whisky Bill
Baroness Carnegy of Lour: My Lords, I understand that no amendments have been set down to this Bill and that no noble Lord has indicated a wish to move a manuscript amendment or to speak in Committee. Therefore, unless any noble Lord objects, I beg to move that the Order of Commitment be discharged.
Moved, That the Order of Commitment be discharged.—(Baroness Carnegy of Lour.)
On Question, Motion agreed to.

Companies (Fees) Regulations 1988
7.47 p.m.
Lord Beaverbrook Lord Beaverbrook rose to move, That the regulations laid before the House on 16th May be approved. [27th Report from the Joint Committee].
The noble Lord said: My Lords, these regulations set out the fees for the main statutory activities of the companies registration offices, which cover the incorporation of companies, the examination and registration of annual returns and other documents by the registrars of companies and the provision of inspection facilities for all documents kept by the registrars.
CROs received some£27 million in fee income in 1987-88 and there will be no change in the majority of existing fees, including fees for incorporation, change of name and annual returns. These latter fees have remained unchanged since the mid-1970s, even
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though the demand for these services has increased substantially. This has been made possible by raising productivity at the CROs. Staff levels in recent years have been contained in the face of this rising demand. At the same time the quality of CRO services has been improved.
The fees that are subject to change are those for inspection of documents kept by the registrars. The£1 inspection fee was introduced in 1981, but for some time now the income from this service has fallen short of the costs of providing it. However, the overall income received by the CROs has been sufficient to cover this shortfall but the latest review of costs against income has forecast an overall deficit.
The CRO has a duty to recover, taking one year with another, all costs arising out of the regulation of companies as such, and the development of the law relating to them. Increasing the inspection fee to£2.50 would avoid this system of company regulation becoming a burden on the taxpayer and remove the element of subsidy which those using the search services have been enjoying. A number of related fees and charges have also been increased, all on the basis that the income received should fully cover the costs of the services involved, which is a Treasury requirement.
At£2·50 the fee still represents value for money. There are about 1 million companies on the register of companies and the fee buys the microfiche record of any one of these. On average, a company record comprises some five microfiche totalling 300 pages of information. This information includes incorporation documents, annual returns giving details of registered office, directors, shareholders, share structure, annual accounts—except for companies with unlimited liability—and other documents providing information, for example, about mortgage charges, changes in directors, company secretaries and registered office addresses.
In 1984, the Public Accounts Committee was critical of the state of the register because at that time, only about 40 per cent. of companies were up to date with the filing of their annual returns and accounts. The compliance figure is now just double that, at 80 per cent. This and other improvements in CRO services may have encouraged more inspection of company records which is reflected in a steadily increasing demand for this service. This provision of more complete and more up-to-date information emphasises the value-for-money aspect of the CRO search services. It has also improved the contribution CRO company information can make to stimulating business activity.
Your Lordships should note that the registrar of companies in England and Wales informed his user group last February that fees were being reviewed and that there was a possibility of an increase in the inspection fee. This information received wide circulation. The department also issued a press notice giving details of the proposed fee structure following the laying of the order before Parliament. I beg to move that the Companies (Fees) Regulations 1988, be approved.
Moved, That the regulations laid before the House on 16th May be approved. [27th Report from the Joint Committee].—(Lord Beaverbrook.)
Lord Ponsonby of Shulbrede: My Lords, in the absence of my noble friend Lord Bruce of Donington, I should like to thank the noble Lord for so ably explaining the purpose of this order. At face value it seems that the percentage increase in the amount of fees is very high, but because the fees have not been increased since 1980, one realises that in real terms they are not as high as they might seem. I believe the noble Lord would have been pleased to know that the compliance figures are higher than they were in the past and that more companies are filling their returns more quickly. I am sure that this is a good thing and that noble Lords will look forward to hearing in perhaps seven years' time that the compliance figures are even better.
On Question, Motion agreed to.
[The Sitting was suspended from 7.50 to 8.45 p.m.]

Local Government Finance Bill
House again in Committee.
Lord Morton of Shuna Lord Morton of Shuna moved Amendment No. 184CB:
After Clause 127, insert the following new clause:
("Commencement date.
. In the Abolition of Domestic Rates Etc. (Scotland) Act 1987, section 1 (abolition of domestic rates) shall be amended by deleting "1989" and substituting "1990 or such other date as applied in England and Wales".")
The noble Lord said: This is a simple amendment which no doubt the Government will accept with an easy heart. It seeks to delay the application of the Abolition of Domestic Rates Etc. (Scotland) Act 1987, which is a curious title for any Act, until 1990 or such other date as is applied in England and Wales. The purpose is to bring the Scottish provision into line with the English one, which is after all the stated purpose of the Government.
The Scottish Act was rushed through prior to last year's general election, in respect of which, whatever the results in England, the results in Scotland were not precisely in favour of the Government. One of the main architects behind the promotion of the legislation, the Member of Parliament for Edinburgh, South, was one of the Scottish Conservatives who fortunately departed the scene.
Public opinion in Scotland is quite clearly opposed to the poll tax. That is shown decisively in the election result. It is shown in opinion polls on the poll tax. The latest one appears to say that 73 per cent. of the population of Scotland consider that the tax is either a bad idea or a very bad idea. It even reached the stage that 14 per cent. of Conservative supporters considered that they should not pay the poll tax, which will be an interesting result when it eventually takes place. The campaigns against the poll tax—for payment, non-payment and otherwise—continue to grow.
If I may move from the political to the nonpolitical angle, the cost of implementation continues to rise. Current indications are that regional authorities, which have to implement the poll tax in Scotland, will have to make reductions in spending on education and social work to meet the capital needs of implementing the poll tax in Scotland because the Government have wholly failed to meet
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the requirements. Even that may not be enough to move the hearts of the reasonable men sitting on the Benches opposite. I am sorry that the noble Earl, Lord Caithness, is not to reply to the amendment. He has such a deep knowledge of valuation matters and the Scottish scene and would be very keen, I know, to become involved with the Scottish position. However, it is pleasant to see him here.
The Scottish Office set an aim to get all the regulations out of the way and clear of the consultation process by the end of 1987. However, they have not managed to do so. We are now in a position whereby the Scottish registration authorities must have a register published and in place by 1st October. They await action on the regulations about the severely mentally handicapped; they await action on the regulations about student registration and they await action on the form of community charge demand notices. How exactly it is expected—while the regulations are still to be made—to have a register in place by 1st October is beyond the comprehension of any reasonable person but, apparently, not of those in St. Andrew's House.
It will be most difficult to provide a registration process that exempts severely handicapped people when we do not yet know how we are to measure who is severely mentally handicapped and what standards and medical certificates will be required. Further, how are we to register students when there is no regulation yet in place to show how the registration officer is to set about the procedure? As I have said, all that must be completed by 1st October. As today is the 14th June, that gives us three-and-a-half months during which time many people hope to take a holiday.
Therefore the basic principle, which we suggest is the only logical answer, is to say that the Act should be brought in a year later when it comes into force in England and Wales. That would have certain advantages and (to forecast an amendment concerning nurses that I shall speak to later this evening, or tomorrow morning, or whenever) it will mean that various people do not automatically leave Scotland to come to England where they will not have to meet the poll tax for a further year.
Leaving aside the issues that I have so far raised—which I suggest are serious enough—the Minister who will reply to the amendment will no doubt have among his papers a letter from ICL (UK) Ltd., addressed to St. Andrew's House, dated 27th May 1988. The company, which is one of the foremost companies in computers, is collaborating with four of the Scottish regions in the production of computer-application software to enable it to handle the complicated issue of the community charge register and its functions. The letter states quite firmly that they are working to a very tight deadline so as to bring the Act into operation effectively by 1st April 1989. The company points out that the absence of many major, detailed points is holding up the completion of the specification with consequent delays to the definition of the dependent processes.
It must be said that much of the delay results from the lack of provision of detailed regulations concerning the charges. The examples include regulations relating to rebates.
I wonder whether I have the attention of the Minister at the moment. I am sure that the Minister will agree that the subject is relatively complex. It requires specification and programming with meticulous care. Rebates will be treated as a separate process; the definition of the facilities must be available well before the initial demand run and the interface with the community charge application is fully established. However, details of the rebates are not yet known.
The finalisation of demand regulations requires many decisions to be taken; but it is not possible to proceed because such decisions have not yet been taken. Further, we do not know what the amendments are in regard to the various classes of exemption. Until the present Act is through, we will not know what the full classes of exemption will be or how they will be defined. Therefore, that will not be known, possibly, until the end of next month. The aforementioned company, who are fairly experienced in computer technology, say that if the regulations are not prescribed in detail by mid-July 1988 they will not be able to meet the timescale for delivery of the software. Thus, it will be quite impossible for them to deliver software that meets the requirements of the regions in time to achieve the required result.
Of course, such matters only apply to the four regions that ICL are in fact contracted to. However, it is a serious problem which the Government appear to be ignoring totally. I suggest that the amendment has a geat deal of merit to it and I trust the Government will treat it in that sense, because it would be quite impossible if the whole computer setup for this most complicated legislation just does not work. In short, we would be left with total chaos if the regulations and material are not available in time in order to obtain the correct size of computer that is required for the difficult operation which has to be carried out. On that basis, I beg to move.
Lord Taylor of Gryfe: I should like to express my support for the remarks made by the noble Lord, Lord Morton of Shuna. I should also like to assure the Minister that the amendment is designed to be helpful. It is accepted that the community charge legislation, as regards Scotland, is through. However, the implementation of that legislation is the matter which is before us at present. 1 suggest that politically it might be wise for the application of this legislation to be delayed, as suggested, to bring it into line with the dates of the application in England. There is a deep-rooted feeling in Scotland that we are getting it first; in other words, we are the guinea pigs. It must be said that it is something we do not like, as has been shown by the references made by the noble Lord, Lord Morton of Shuna, to the election results and the various opinion polls. Therefore, it might be wise just to bring it into line with the dates of the English legislation and thereby refute the criticism that Scotland is being used as a guinea pig in this case.
I am most impressed by arguments put forward by the noble Lord, Lord Morton of Shuna, about the detailed implementation of the legislation. I do not think it is wise to hurry it against this specific date. I think we shall be in very serious trouble in getting the
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returns in the forms which have been completed, in processing them and then allocating the liability to the various categories in the community. It will be most difficult. Indeed, the noble Lord, Lord Campbell of Croy, made reference today to the complications involved in merely filling out the form.
How many of those forms will be completed correctly? How many people are there knocking on doors explaining to people how to fill out their form? The danger of completing that process by October is that there will be further difficulties. People will have completed forms that are unsatisfactory or unacceptable. There is then the whole appeals procedure to be gone through, and so on, to enable people to know what their liability for the community charge is. That is a big undertaking. I cannot understand the Government's confidence that that procedure will be carried out within the timescale that has been set.
There is also the disadvantage that certain groups will suffer. Students at universities in Scotland will pay the poll tax a year before students at English universities. That kind of difficulty should be faced. It would cost the Government nothing. I was impressed by the circular that I received from the Scottish Office explaining the poll tax. It was well done. It was a good exercise in public relations, but the purpose of the poll tax is still misunderstood. The amendment would give the Government a further year to explain to people the full implications of the tax. For those reasons, it might be wise to accept the amendment. The Government should not regard it as a defeat or a further endeavour to frustrate them; it is merely a suggestion that is intended to be helpful.
9 p.m.
Lord Mackie of Benshie: I do not wish to add much to what has already been said. The noble Lord, Lord Morton of Shuna, really should not have been so nasty to the Minister. The Minister is doing his best to grapple with the problems that he has inherited and which have been pushed on to him for political reasons. He is making a good job of it. It is not nice to rub salt in the wound. I think that the noble Lord, Lord Morton, who is normally a nice man, has stepped outside his remit on this occasion. Nevertheless, the Minister has revealed some of his difficulties. There is the matter of collusion and discussion between experts on industrial rating in Scotland and England. He said that they were trying hard to manage it by 1990 and that the matter is more or less a technical one between experts. He was doubtful about that point, but he is obviously grappling with the problem.
There are then the human difficulties caused by assessing and exempting people and finding those who will pay the poll tax. The Minister should use the common sense that he possesses in abundance, go to his masters and say, "It cannot be done in this time". If he could go to them and say "Scrap it altogether", that would be better. I realise however that that is politically impossible given the Government's commitment to this appalling tax. But they should at least take another year to see whether they can get something right.
Lord Sanderson of Bowden: I thank noble Lords who have spoken to this amendment. I feel as if I am back before the last election when the point was fully debated in this place, as the Committee knows. I have heard nothing tonight that I did not hear then, except that we have moved on a bit. It has been our consistent intention since the Green Paper Paying for Local Government was published in January 1986 to introduce the community charge on a faster timescale in Scotland than south of the Border. There is nothing sinister in that. The reasons why it has been possible to set a faster timetable for Scotland are of a technical and operational nature. I shall come to the points raised by the noble Lord, Lord Morton of Shuna, in a moment.
The changeover to the new system is more straightforward in Scotland because, for example, there are fewer local authorities in Scotland. Moreover, our calculations suggest that there will be a narrower range of community charges than south of the Border, which will again ease the process of introducing the new system. Against that background, it seems entirely reasonable that the timetable in Scotland should be different.
Lord Morton of Shuna: Are the Government sure that their calculations in regard to costs in Scotland are as accurate as were their calculations in regard to expenditure by Lothian, where they were only£6 million out in a total of£23 million, which is a fairly substantial error?
Lord Sanderson of Bowden: I was going to refer to the points made by the noble Lord when he proposed the amendment. Perhaps I may now deal with the cost of implementation, which he raised. The criticism that the Government have wholly failed, as he said, to meet the requirement is unfair. Local authority bids in November totalled£20 million for 1987-88 and 1988-89, and the Government have allocated an extra£21 million. Some bids may have exceeded original estimates, but the Government cannot be expected to increase provision in respect of every bid. Local authorities have been given a fair allocation covering their requirement for equipment plus a contribution to accommodation costs.
We have of course never made any secret of the fact that the timetable set out in the 1987 Act is a tight one. We are however satisfied that sufficient time has been allocated for the necessary preparatory work to be done to enable the community charge to be introduced on 1st April 1989. Indeed, despite the alarms and excursions caused by the quite unnecessary scare stories put about by opponents of the new system, it is proceeding steadily towards implementation on our planned timetable. In answer to a question earlier today I gave as an example a 92 per cent. registration for the central region, not a region that happens to be controlled by the Conservative Party.
Registration officers have the rules for the registration system, and the canvass process itself started in April with initial inquiries now virtually complete in many areas. The register will come into force on 1st October and there will then be a further six months before community charges start to be paid during which the procedures for continuously
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updating the register will operate. There will therefore be plenty of time for registration officers to deal with inquiries and sort out any difficulties which may emerge during the canvass period. As we have always intended, therefore, Scotland will enjoy the benefits of this important reform as from 1st April 1989, whatever Members opposite may like to say about it.
I want to deal with the point raised by the noble Lord, Lord Morton of Shuna, regarding the ICL concerns about the implementation of the timetable. The ICL letter mentions three areas of concern where detailed regulations are needed to complete the specification of the new system. The position on each of them is as follows. As regards rebate regulations, as with the introduction of the new housing benefit scheme which came into operation in April, our timetable has always envisaged the formal making of the regulations in the autumn. At the same time, we recognise that it is essential for local authorities to be able to plan the changes to their systems. We have therefore been in consultation with them since December 1987 about the contents of the regulations. A near final draft has been issued to them and provides a sound basis for the preparations they need to make.
As regards the demand notice regulations, draft regulations have been issued for comment and have been discussed with CoSLA officials. They are well aware of the basic requirements which will be imposed. As far as exemptions are concerned, as the noble Lord will readily appreciate, details cannot be absolutely finalised until consideration of the Bill has been completed in this House. But I trust that the new exemption schedule is helpful in setting out in primary legislation a number of matters which would otherwise have had to await regulations. I refer of course to hospital patients etc. To sum up on this point, in our view the letter from ICL overstates the uncertainties which remain and contains nothing which calls in question the achievement of implementation by April 1989.
As regards the question of failure to meet the timetable requirements for regulations, the noble Lord, Lord Morton of Shuna, referred to an outline of the timetable for consultations given to CoSLA last year. I agree that not all the dates mentioned have been met, but nothing has happened to put the target of implementation by 1st April 1989 in jeopardy. Many of these matters were debated in this House at great length when the Scottish Bill was before your Lordships. I feel that we are having a re-run and I am afraid I have to resist the amendment.
Lord Morton of Shuna: I am very much obliged to the Minister for his helpful reply. Apparently St. Andrew's House considers that if the information is supplied to the computer suppliers by the autumn, that will be early enough for them to fit everything in. I presume therefore that St. Andrew's House is far more experienced in the supply and measurement of computer software than ICL (UK) Limited who say quite categorically that the software for establishing the registration has to be delivered by, at the latest, 5th August to allow the full system to come into operation. Is 5th August regarded by St. Andrew's House as the autumn? I personally hope not, but that

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perhaps is connected with my holiday arrangements. I should not have thought it was generally regarded as autumn.
We are told that we have to enjoy this Act. I am sure that in Scotland we showed just how much we enjoyed this Act on 11th June 1987. No doubt we shall have other opportunities to show our enjoyment clearly. However this hour of the night is not the time to test the opinion of the Committee. I may well return to the matter at a later stage.
I suggest however that the quickest way to get chaos in any computer-organised system is to have a computer arrangement which is too small for the load it is asked to bear. If the quantity of software in connection with the quantity of work the computer is asked to bear is too small, chaos is what will inevitably result. I think that is what the Government are wandering into, but if they insist on doing so, on their heads be it. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
9.30 p.m.
Lord Carmichael of Kelvingrove Lord Carmichael of Kelvingrove moved Amendment No. 184CC:
After Clause 127, insert the following new clause:
("Liability for personal community charge.
. In the Abolition of Domestic Rates Etc. (Scotland) Act 1987, section 8 (liability for personal community charge) shall he amended by adding at the end—
"(10) A transitional protection scheme, funded outwith the Revenue Support Grant system, will be introduced to restrict the liability to the personal community charge of certain categories of persons to he prescribed."").
The noble Lord said: This is an amendment of considerable importance to those members of the community who will be particularly badly hit by the tax. Amendment No. 184CC is a new clause allowing those paying the community charge for the first time either to be considered separately or to be considered with great sympathy. For example, it is only now becoming clear to many people that this will be an additional personal financial burden on them with, in many cases, little or no prospect of a rebate being granted. But even if a rebate were granted, a 20 per cent. contribution of the personal charge and a 100 per cent. contribution to the domestic water charge will still be required.
The Minister may recall that the uproar created by the revaluation in 1985, which has been mentioned several times tonight, was based on rating increases of between 20 to 30 per cent. But it still caused so much trouble that the Government had to respond to the concerns and the pressure by introducing a special rating revaluation rebate scheme. Many individuals such as crofters, nurses, people in tied houses, caretakers in trust houses and married women in employment or otherwise, will find their own personal liabilities increasing to a far greater extent than the incidence of increases experienced at revaluation. There is little point in trying to cushion the level of the community charge at local authority level by safety-netting grant losses when the major impact of the charge—as we argued all through the Scottish Bill and now through this Bill—will fall upon the individual. Therefore, in addition to the
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rebate scheme which may only assist in a marginal way, we believe a transitional protection scheme is needed which caters for those paying for the first time.
Had the three-year phasing-in period for the community charge been retained, this would, by its very nature, have allowed individuals to re-order their finances over that period of three years to meet an increasing personal liability. The introduction of a transitional protection scheme is, I believe, the logical replacement of this three-year phasing. I accept that it was my own colleagues in another place who wanted to do away with the three-year phasing. That was largely because we saw the great administrative difficulties that would arise if the two schemes had been working side by side. But that scheme—part rates, part community charge, to use its polite name—would have been running at the same time over the entire country for three years. We are asking for a special scheme for those special groups of people hit for the first time with a sudden personal responsibility which may amount to quite a large sum for the individuals concerned.
The Government—as all governments tend to do when they are discussing such a matter—talk in terms of losers and gainers and roughly balancing the position. But the Minister knows very well that that does not cover the individual who is the loser although, as has been said so often, very few Members of this Chamber will be losers. All of us, including myself, will be gainers. This amendment would permit individual liabilities to be reduced in a sensible and compassionate manner.
As regards the recent introduction of a transitional protection scheme for housing benefit, the warnings from all of the local authority associations about the financial impact of the changes that it would imply were ignored by the Government until the political pressure became so great that they had to introduce a scheme for protection of housing benefit. Therefore, acceptance of this amendment allows the Government—although it does not force them—to have the necessary legislative powers in place to deal with the political pressure, which I imagine will be fairly strong, arising as a result of this serious problem.
It would be too much perhaps to expect the Minister to give us some assurance on this matter. However, I hope that he can give us an assurance that he will take it away and look at it. That would save us all a great deal of trouble because, believe me, if we do not receive some assurance come this time next year when the rates bills and the community charge hills begin to arrive, I think there will be disillusionment, perhaps even reaching the point of real anger as there was during that famous period in 1985. I beg to move.
Lady Saltoun of Abernethy: I wish to say a few words about people in tied houses. I think that most employers who have employees who live in tied houses accept the fact that they will have to make a very considerable contribution to the community charge payable by their employees in tied houses because they will no longer be paying rates on those houses. That must be kept in mind.
Lord Mackie of Benshie: The Government would be wise to accept the amendment. They have already brought forward many exceptions in the realisation that those must be dealt with. The amendment will allow them to deal with the many more exceptions that will surely come up. It is a commentary on the Bill that major amendments have been brought forward at this time. In this case, although normally I would object strongly, it seems sensible for the Government to be able to prescribe certain categories which they will undoubtedly have missed.
Lord Sanderson of Bowden: I thank the noble Lord, Lord Carmichael, for introducing the amendment. I have listened carefully to the arguments which he has put forward in support of the new clause. However, I cannot accept the thinking behind the proposal. Perhaps that will come as no surprise to the noble Lord.
The impact of the community charge system on particular individuals will depend on a number of factors: the rates paid at the present time, the size of the household and the spending policy of the local authority. The last matter is an extremely important point. In our view, it would therefore be quite wrong to set up a complex scheme of transitional protection as envisaged by the amendment to change the impact of the introduction of the community charge system on particular groups of people.
I am grateful to the noble Lord for reminding us that in another place, at the insistence of many Members, including members of his own party who were very keen on a phasing-in period, the provision which was originally envisaged was dropped. Such arguments suggest that special consideration should he given to particular groups of people who are subject to particular sorts of treatment under the rating system. He instanced crofters. I well remember a debate in which the noble Lord, Lord Mackie of Benshie, was eloquent in his support of crofters. I also remember taking part from the Back-Benches in that debate. I had to say to him then, as I say to him now, that it would not be fair to those with low incomes in my part of the world to see 50 per cent. reductions for crofters.
That argument implies that the distributional effects of the rating system are correct and fair and should be preserved. That is nonsense. One of the main reasons for abolishing domestic rates is their manifest unfairness. I think the noble Lord, Lord Mackie of Benshie, and his party recognise that. In addition, even if a scheme of the type envisaged by noble Lords opposite could be demonstrated to be fair, it would inevitably be badly targeted and would represent bad use of public money.
I am confident that the correct approach to helping people who might otherwise find it difficult to meet their full personal community charge liability is the rebate system.
Lord Morton of Shuna: Perhaps I may intervene briefly. Will the noble Lord explain why, for certain
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London boroughs, the system of bringing the provisions in by stages is to be applied and why the Government consider that to be fair when they do not consider it to be fair for Scotland? The Government have their own judgment of fairness.
Lord Sanderson of Bowden: The noble Lord has raised an interesting point. If he was a ratepayer in Camden, perhaps he would understand the difficulties under which the Government have to implement the new system. One of the good reasons why we were able to bring forward the provisions from 1st April 1989 in Scotland was that the differentials are not nearly as great as those which are faced in the city of London and elsewhere in England.
I am confident that the rebate system and its effective implementaiton is the answer. It will be a comprehensive system which is based on the ability to pay rather than the membership of any group. It will provide rebates of up to 80 per cent. of a person's personal community charge liability. I am sure that that is the correct approach, rather than the one suggested by the amendment. Whatever its attractions, the amendment represents a logically unsound and financially wasteful approach. I hope that the noble Lord will feel able to withdraw the amendment.
Lord Hughes: I am interested to hear the Minister say that the differentials in Scotland are not nearly so great as they are in certain London boroughs. Some people in Scotland will be very glad to hear that. We have been accumstomed over the past year or two to hear the Scottish Office, the Secretary of State and other Ministers talk of certain local authorities in Scotland as though their rating patterns were every bit as bad as the worst to be found in England. I do not know whether in this reference to the better position of rating in Scotland the Minister has been on the road to Damascus and seen a light.
Lord Carmichael of Kelvingrove: I was interested that the Minister thought that the suggestion in the amendment was logically unsound. The argument against the poll tax is that it is a crazy system and that it will raise all kinds of problems. What we proposed would not, at the very worst, make it all that much more crazy. In fact we believe that it would be a great improvement. However, I am sure that at this stage the Minister is not prepared to move on the issue.
One of the points that we had particularly in mind concerned tied cottages. Since the idea of a poll tax was first mentioned in this Chamber and in the anterooms around the Chamber I have heard about the problems concerning gamekeepers, bailiffs, farm foremen and all kinds of other people. I was trying to help those people and some of the Members of the Committee. The Minister does not accept that and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 184CD not moved.]
9.30 p.m.
Lord Morton of Shuna Lord Morton of Shuna moved, as a manuscript amendment, Amendment No. 184CE:
Page 69, line 32, at end insert—
("(1A) In subsection (6) the following words shall be added at the end—
"For the avoidance of doubt a student nurse shall be regarded as undertaking a full time course of education." ").
The noble Lord said: The amendment concerns a particular class of persons who, in the words of the Minister, are to "enjoy" the application of this Act a year before the English Act comes into force— nurses. The effect of the amendment is to make sure that nurses are treated as students undertaking a full-time education.
As the Committee will recollect, in a sense we discussed the nursing position as regards England on 6th June at an earlier stage in the Committee. The Scots position is different because the Scottish trainee nurse will be required to pay the full community charge from 1st April 1989 whereas no trainee nurse in England or Wales will be required to pay that until 1990. That enjoyment can be measured by the level of the community charge, estimated at between£400 and £500 a year for Edinburgh and Glasgow and no doubt a similar figure for Dundee and Aberdeen.
While I appreciate that there are many people in Scotland who have to support families on earnings equivalent to those of a student nurse's net£7250 or so a week, nurses are perhaps in a special position. Hospitals very much depend on student nurses, particularly training hospitals such as the Royal Infirmary and Western Infirmary in Edinburgh, the Royal Infirmary, Western Infirmary and Gartnavel General Hospital in Glasgow, the Ninewells Hospital in Dundee and the Aberdeen Royal Infirmary.
It would be very unfortunate if people who wanted to train as nurses next year decided that they would forgo the Government's "enjoyment" of the poll tax in Scotland and have£500 extra in their pockets in England. That is the effect, because the pay is the same. If one works in Newcastle or Carlisle or at Peel Hospital—or whatever has replaced Peel Hospital—one receives the same pay. If one works in a hospital in the Borders one will be paying hundreds of pounds in poll tax, whereas in a nurses' home in Newcastle a nurse will be paying a few pennies a week as the rating equivalent for her room there.
Enjoyment is perhaps an odd word to use for the privilege that the Scots nurse trainee is asked to endure in order to receive her very good training in Scotland. We understand that the Secretary of State for Social Services announced to the Royal College of Nursing that non-means tested bursaries are to be brought in. If that is to happen, perhaps the Minister will explain why Scottish nurses and any Scottish trainees in the medical services are to be penalised.
I realise that there are many others who have an equivalent rate of pay in Scotland and that they also will have to endure the great privilege of paying an extra£400 or£500 a year for a year when the English will not. Of course, the privilege may help the Scots to find out all the advantages of the poll tax. The Minister said when we were debating the Abolition of
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Domestic Rates Etc. (Scotland) Bill that he had found one local authority official in Scotland who was in favour of the poll tax, and I congratulated him on his discovery. I do not know, but perhaps when this privilege has applied for a year that one official will have changed his mind.
In moving this amendment, I must say how very much I regret the recent death of my noble friend Lord Ross of Marnock. He had a command of language and expressed himself with a vigour that I wholly lack when I explain, or attempt to explain, my total rejection of the whole philosophy behind this Bill which, so far as I can see, is based on what the Archdeacon of Glasgow described as "the Gospel according to Margaret", which gives absolution to the rich and tells the poor to work harder. To use the words of the right reverend Prelate the Bishop of Durham, that seems to me just wicked. I wish I had the words to express just how strongly we on this side of the Chamber regard this provision as wholly wrong.
However, if one is to do anything at all to achieve some kind of equality, it is absolutely essential that people who are offered employment in different parts of the United Kingdom should be treated equally. I ask the Minister very seriously—if he is paying any attention to what I am saying—at a time of general shortage of trainee nurses and when people are not applying for such jobs, how does he expect the Scottish hospitals to be staffed? How will they attract trainee nurses to staff the wards when they can obtain£400 or£500 net a year more in their pockets by going south. I beg to move.
Baroness Carnegy of Lour: The noble Lord has based his argument on the fact that the community charge in Edinburgh, Glasgow and Tayside is likely to be between£400 and£500 a year. Many people are bandying figures about. It is very strange that in Scotland—if I remember rightly from our discussions on the Scottish Act—the community charge covers 14 per cent. of the total local government expenditure whereas in England and Wales it covers 25 per cent. The Government's figure for the average community charge at the moment in England and Wales is£224. Although I realise that there are some aspects of Scottish life which cause more to be spent on local government, how can a figure be suggested that is twice the average for England and Wales when the proportion of local government expenditure is only 14 per cent. as opposed to 25 per cent.? I do not understand.
Lord Morton of Shuna: As I understand it, the figure of£400 is the present calculation of St. Andrew's House. The figure of£500 is the calculation of Edinburgh District Council. No doubt the correct figure is somewhere in between.
Baroness Carnegy of Loure noble Lord explain this point to me? He is very knowledgeable on these matters. It seems to me that an explanation is needed.
Lord Morton of Shuna: The answer is quite short and straight: No.
Lord Taylor of Gryfe: The noble Baroness, Lady Carnegy of Lour, is missing the point. It is not whether the sum is£400 or£200, but whether it is just and right that nurses in Scotland should have the obligation to pay the poll tax a year before nurses in England. I am sure that the Minister, with his knowledge of the nursing profession, should react to this situation. That is the issue. It is not whether the amount is£400 or£500. It depends on the extent of the local authority spending.
However, the main thrust of this amendment is not on the calculation of'£400 or£500. The main thrust is whether it is right and just that the nursing profession in Scotland should enjoy—to quote the phrase used—this privilege of paying the poll tax before it is applicable in England and Wales. Is this not a disincentive for recruitment of necessary nurses in our part of the world?
Baroness Carnegy of Lour: In reply to the noble Lord, I do not think that I am missing the point. If I were a nurse I should think that there was a considerable difference between being expected to pay in one year£200 or£400. I would calculate the difference between what I paid of the rate element in my rent and the£200 or the£400. The difference would he an extra£200. I should consider that very important. That is part of the argument.
Lord Mackie of Benshie: Perhaps I may put a different point. 1 do not think the thrust of the amendment is concentrating on the year. The previous amendment did that. The thrust of the amendment is: why are trainee nurses not regarded as being in full-time education when other students are so regarded? That is the essential matter. We are very short of nurses and they are being treated as though they were well paid people receiving part-time training; whereas the thrust of the government thinking, according to the latest announcement of the Minister of Health. is that more nurses are going to do more technical work and be more highly trained. That does not appear to me to be logical. I hope that the Minister will address himself to the long-term effect.
Lord Hughes: If I understand correctly what lay behind the intervention of the noble Baroness, she was taking exception to my noble friend Lord Morton of Shuna coming down heavily on the£400 or£500 community charges which may be payable in certain parts of Scotland. She is perfectly correct when she says that that is not what is going to happen all over Scotland. For example, a student nurse at Stracathro Hospital would probably be paying less and there are other hospitals in the more rural areas of Scotland where the community charge inevitably will be less than it is in Glasgow and Edinburgh. If her remarks have any logic about them at all, it would seem that she is accepting that if a nurse is paying a
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low community charge, whether it be£200,£150 or£100, that should be the position that emerges.
As I see it, the argument is not necessarily a total comparison between training nurses and university students. We are arguing that there should be equity between Scottish and English training nurses. On the last amendment I was astonished when the Minister again said that Scotland was going to enjoy a year earlier the benefits of the poll tax legislation. Without wishing to labour these words too much, I am quite certain that a student nurse in Scotland, whether she is paying a poll tax of£100 or£500, will not regard that as a benefit to be enjoyed a year earlier than a student nurse in an English area where the poll tax might he of a similar figure.
It may well he that the Minister does not find the form of the manuscript amendment acceptable but I shall be astonished if he can find words to justify discriminating in favour of English nurses or discriminating against Scottish nurses. 1 must repeat that nurses in Scotland will be discriminated against and, as my noble friend Lord Morton of Shuna has said, during that year there may well be considerable movement of student nurses from Scotland into England.
Lord Stodart of Leaston: Having listened to what Members of the Committee have said. there seem to be two strands of argument emerging. First, there must be no discrimination as between Scotland and England. I have had experience of the Scottish Office, which the noble Lord has enjoyed, and of an English one. On many occasions, rather to my gratification, benefits have gone to Scotland although I am bound to say not in the nursing field. and I have received very little objection from the Scots when those receiving them have found themselves better off. Therefore, I do not find this particular argument very convincing. A matter of concern is that in each country where nurses are in short supply there is discrimination between nurses and other students.
Lord Hughes: I am sometimes in favour of discrimination when it is for the benefit of Scotland as a whole but we are talking about discrimination against a particular group of people who are not highly paid. If the noble Lord is going to say that he is in favour of a student nurse in Scotland being paid at the end of the day between£150 to£500 less than an equivalent nurse in England for a period of one year—because after the year this will disappear—I shall have to disagree with him.
9.45 p.m.
Lord Stodart of Leaston:The noble Lord must have totally forgotten the legacy to which he succeeded with relish in 1964 when, if my memory is correct, he succeeded me in the Scottish Office. He found a situation there in which, in the agricultural field, the rather poorly paid upland farmers were receiving more than their equivalent in England, and I do not recall him going into the great apoplexy of objection.
Lord Hughes: Of course not. 1 may not be arguing as well as I might do on the subject of the nurses, but I must plead that I am not stupid.
Lord Borthwick: May I ask another question? Scotland has been revalued more often than England and at a much higher rate. For many years the English rates have been much lower than in Scotland. I think it is still going on. I have not checked on it lately but my recollection is that we pay much higher rates in Scotland than in England because of the revaluations. The English have not had a revaluation for a long time. That makes a big difference to industry, the nurses, and everybody else.
Lord Hughes: I hope that this is my last intervention. This may be very nice but I do not see what it has to do with the different situations of English and Scottish nurses. They could not care less about what farmers and others are getting. What they will be worried about is what is happening to them.
Baroness Carnegy of Lour: We must not treat this just as raw figures, and talk about£400. I become more and more concerned about this because the poorest student nurses are worried stiff by what noble Lords and other politicians are saying. If those student nurses are on low incomes—and presumably they are—they will be rebated. There is a chart about the rebates which my noble friend sitting beside me has and which I do not fully understand. However, the rebate will be considerable for student nurses.
The amount that we are talking about is of great importance to student nurses. If the difference between what they pay now and what they will pay on the community charge is a reasonable amount—and they may even gain; I do not know—they will not be worrying. If it is£400 of course they will be worried stiff; but it will not be£400.
Lord Morton of Shuna: The noble Baroness cannot get away with that. Is she suggesting that student nurses are on income support? If student nurses are on income support I would agree that they would get a rebate. If they are not on income support they would not get a rebate. It is as simple as that. If they do not receive income support, they will not receive a rebate.
At the moment they get£7248 a week after deductions. Whatever the community charge may be, whether it is£200 or£500, the Scottish trainee nurse will have to pay that for a year whereas the English equivalent will not have to pay it. The trainee nurse is usually accommodated in a nurses' home. Therefore it does not very much matter to her where she trains. She, or he, will be accommodated by the hospital, especially by the hospitals which are keen to get trainee nurses, and they will go to England.
It worries others as well as me that it would be difficult to staff hospitals like the Glasgow and Edinburgh Royal Infirmaries if all the trainee nurses were in Newcastle, Carlisle or Leeds because they were£5,£6,£8 or£10 a week better off by being there. That is the point behind the amendment.
Lady Saltoun of Abernethy: I entirely support the noble Lord, Lord Morton of Shuna, in this amendment. It is short-sighted to make a difference between student nurses in England, Wales and Scotland for even one year. I hope for all the reasons that have been given that the Government will seriously consider the amendment.
Lord Sanderson of Bowden: We have had an extensive debate which has covered the important issue of student nurses. In addition, the debate has ranged very much wider in so far as we have had figures bandied about. I have to agree with my noble friend Lady Carnegy of Lour about the whole question of the figures that are bandied about. I do not want to trade figures with the noble Lord. Lord Morton. The figures he has quoted appear to come into a category of "scare stories" put about by opponents of the system. The Government's calculations indicate that the average community charge which will be required to replace domestic rate income in the current year will he£226, with figures of up to£340 for the highest city.
The actual levels will be determined by local authorities of course, and I would draw the noble Lord's attention to what my honourable friend the Minister of State said in another place when he provided provisional figures reflecting the latest available information on rate poundages for 1988-89. They in no way represent the forecast level of the community charge when it is introduced in April next year and they take no account of proposals for grant and safety nets, which we are currently discussing with CoSLA. but they do give an indication of the likely figures. In Edinburgh city it appears that the figure which I had before, and which I freely quote, is£334. That is somewhat different from the figure that is being discussed.
It may be for the convenience of the Committee if I describe generally the effects of the community charge system in regard to student nurses in Scotland, which is the basis of this amendment. First, I should like to set the issue in context. We have always made clear that under the present arrangements there is no justification for any special arrangements to be made in respect of the community charge liability of student nurses. We made that clear at the time. I remember the eloquent words used by Lord Ross of Marnock at the time—and here I should like to join in the tributes to the noble Lord, who was such a very valuable and erudite Member of this Chamber. I remember the discussions that took place at that time and they went on at great length.
In particular there will he no justification for bringing student nurses within the definition of "students" for community charge purposes and hence making them liable for only 20 per cent. of the personal community charge. Student nurses, despite the title "student" which they carry. are employees, albeit in employment which includes a significant training element. As such they are paid salaries ranging from£4,825 in the first year of employment to£5,575 in their third year. In passing, I should say that student nurses of course have benefited from the very generous pay settlement which the Government

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announced earlier this year for nurses and which is of the order of 16 per cent.
There is therefore no reason why student nurses, who use local authority services and who participate in the local democratic process, should not be liable to pay the personal community charge in the same way as other people in employment with similar incomes. Depending on their particular family circumstances, student nurses would at present he eligible to apply for rebates. I understand the point made by the noble Lord, Lord Morton, which indeed he made earlier in the debates when my noble friend Lord Hesketh was replying in respect of the English situation.
A further argument which has been made is that student nurses have at present no liability for rates payments and therefore that their personal community charge liability will be a completely new item of expenditure which they will have to meet. That is not always the case. Indeed I have personal experience in respect of my own daughter. who was a trainee doctor, and she paid rates on the flat in which she lived while she worked for the Royal Infirmary in Edinburgh.
Lord Morton of Shuna: Will the noble Lord allow me to intervene? There is a difference, which I should have thought most people would recognise, between university students who, for instance, come into the category which the noble Lord has just mentioned of trainee doctors. They are either university students or they are getting paid once they have acquired their qualification. They are in a different situation from trainee nurses.
While I am on my feet, does the noble Lord disagree with the Secretary of State for Social Services, who said on the 23rd May:
"Nurse learners should have student status with non-means-tested bursaries instead of salaries"?
If that is the position, what are the Government going to do about it until that is brought into force?
Lord Mackie of Benshie: Will the Minister address himself to the point of which the Government make much; that is, their belief in market forces? There is a shortage of student nurses. It is surely logical to exempt them from an extra charge.
Lord Sanderson of Bowden: If Members of the Committee will allow me to complete what I have to say, they may learn a little more and be enlightened on some points that I have not yet been able to make.
A further argument which has been made is that student nurses at present have no liability for rates payments and that therefore their personal community charge liability will be a completely new item of expenditure which they will have to meet. This is not the case. Student nurses who own or rent their own accommodation will of course pay rates, either directly or as part of their rent; and student nurses living in nurses' homes will pay an element in their accommodation charges towards the rating liability on the property. The fact that this contribution may not be very perceptible and that it
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does not reflect the variations in rate hills over the country as a whole is a criticism of the general lack of perceptibility and accountability in the present rating system rather than a point about the liability of student nurses as such.
Against this background I should like to say a few words about the implementation of Project 2000 referred to by the noble Lord. Lord Morton of Shuna. As the Committee knows, my right honourable friend the Secretary of State for Social Services announced on 23rd May that the Government had accepted in principle the recommendations of the UK Central Council for Nursing and Midwifery and other related bodies that nurse training should move to a pattern in which the proportion of academic study would increase considerably. I am sure that we would all agree that that is an entirely desirable development.
Where courses undertaken by student nurses meet the criteria set out in the regulations defining students for community charge purposes, student nurses will of course qualify for the student reduction. Following the implementation of Project 2000 proposals, this is likely to be the case for basic courses leading to registration. However, that does not mean that student nurses under the present arrangements should immediately he brought into the definition of students for these purposes as is proposed by Amendment No. 184CE.
I should also say that in earlier discussion of these arrangements the impression may have been given that the Project 2000 proposals are to be implemented at a stroke in 1990. We have always made clear that the phasing of the implementation will depend on further discussion between the Government and the nursing profession and that we expect that the proposals will be implemented progressively during the 1990s. We expect that during the process of implementation student nurses undertaking particular courses will come within the prescribed definitions.
I hope therefore that on consideration Members of the Committee will agree that the proposals we have in mind for the treatment of student nurses in the community charge system are perfectly equitable. I well understand the point that has been made. I should point out that we have a long way to go before agreement is reached between the profession and the Government as far as bursarial awards arc concerned.
Lord Morton of Shuna: I have a vague recollection of a passage in Shakespeare's King Lear in which there is a certain amount of vituperation. I cannot remember the words exactly and therefore I shall not attempt to quote them. I refer to them because they express more or less my feelings on the Government's attitude.
I am not sure whether the noble Lord, Lord Stodart of Leaston, was suggesting that upland farmers, naturally earning very much less than the£72 a week that trainee nurses receive, will take over the places of the trainee nurses in the Royal infirmaries of Edinburgh or Glasgow while the nurses are away in Newcastle and Carlisle. In that situation,

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speaking personally, I would go to Newcastle if I were feeling ill.
Surely the point is that the student nurse at the moment, if she pays any rates at all, pays an amount that is, in the words of the Minister, not perceptible. An amount in the region of£5 a week to a girl or young man who is earning£72 a week is fairly perceptible. I do not want to get too involved in the figures, but the amounts of£400 and£500 have been well spoken to by non-political officials of both Edinburgh and Glasgow.
10 p.m.
Lord Sanderson of Bowden: If the noble Lord will allow me, I can give him the figures which have appeared for Edinburgh, Glasgow, Dundee, Aberdeen and Newcastle. They are£334,£291,£275,£220 and£259 and are taken from the paper which I quoted earlier.
Lord Morton of Shuna: The Committee will appreciate that there has been an ongoing difference of view between local authorities and St. Andrew's House as to which figures are more real. At this late hour I do not think we will resolve that difficulty.
Even if we are referring to£300, that is£6 a week which the nurse does not otherwise pay, or does not perceive that she pays. She is certainly not paying£6 a week in rates for a room in a nurses' home. That would certainly not be the case. What she pays is not very perceptible and is a matter of pennies a week rather than pounds.
The whole point of this amendment is to allow the Scottish nurses to be treated equally to the English and Welsh nurses. It is possible that the amendment is not the way to do that. It may be that the Government should think of paying some form of bonus to the Scottish trainee nurses for the year that the two Acts do not run side by side in order to meet this difficulty. Some way has to he found to meet it; otherwise hospitals in Scotland will not be properly staffed with nurses. It is a serious proposition.
Certainly what the Minister has to say about not implementing the changeover in Project 2000 for years and years will add to the enjoyment of the Royal College of Nursing; but that is another point. No doubt that will be taken up elsewhere. The basic question is: why should anybody train as a nurse in Scotland next year if they are going to be£5,£6 or£10 a week worse off by doing so when they can do the same job in England and not suffer?
I shall not press the amendment but I assure the Minister that I will return to it at a later stage. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
The Deputy Chairman of Committees (Lord Ampthill): Before calling Amendment No. 184D I should advise the Committee that if it is agreed to, I cannot call Amendments Nos. 184E, 184F and 184G.
Clause 128 [Exemption from personal charge]:
Lord Sanderson of Bowden Lord Sanderson of Bowden moved Amendment No. 184D:
Page 69, leave out from beginning of line 33 to end of line 16 on page 70 and insert—
("(2) For subsections (8) and (9) there shall be substituted the following subsection—
"(8) A person is exempt from liability to pay the personal community charge in respect of any time in a financial year if he is, at that time, a person such as is described in Schedule IA to this Act".").
The noble Lord said: In moving this amendment I speak also to Amendments Nos. 194ZL, 194ZM, 194ZS, 194ZU, 194ZX, 194ZZG and 206D. I must first say to the Committee that this looks to be a formidable group of amendments. However, I hope I may be able to pursuade the Committee that the group is less forbidding than it looks. The main amendment in the group is Amendment No. 194ZX, which inserts into the Abolition of Domestic Rates Etc. (Scotland) Act 1987 a new schedule listing all those who are exempt from personal community charge liability. At present, the exemptions are set out partly in Section 8(8) of the 1987 Act and partly through regulations made under it. In addition, Section 30(2) of the 1987 Act provides power to exempt prescribed classes of persons resident in Crown land. As the Committee is aware, Ministers both in this Committee and in another place have given undertakings, during the passage of the Bill, to bring forward amendments extending the exemptions from personal community charge liability which are provided for in the Bill.
As we have always made clear, the community charge system is to be basically the same throughout Great Britain. These undertakings have therefore been made with the full agreement of my right honourable friend the Secretary of State for Scotland, and it is our intention that the resultant exemptions should apply throughout Great Britain. On considering how best to draft the necessary provisions for Scotland, we came to the view that it would be preferable, as is provided for England and Wales in Schedule 1 to the Bill, to set out clearly on the face of the legislation all the exemptions which are provided. That is the purpose of the new schedule, and I hope that the approach we have adopted will commend itself to the Committee as a clearer and more direct way of expressing the policy than the previous rather convoluted and indirect approach.
In introducing the schedule, therefore, I hope I may be forgiven if I do not describe in detail all its provisions, since many of these are already embodied in the 1987 Act or in regulations which Parliament has had a full opportunity to consider. Also, I hope that the Notes on Clauses which I was able to distribute to Members of the Committee opposite and to my noble friends behind me were also helpful. I propose therefore to note particularly those parts of the schedule which represent some change, either of presentation or of substance, from the current Scottish system.
First, paragraph 1 of the schedule provides an exemption from personal community charge liability for convicted prisoners. This is in line with paragraph 1 of Schedule 1 to the Bill in relation to

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England and Wales. As the Committee is aware, we have agreed that this exemption should be extended to prisoners held on remand, and the necessary amendments, both for Scotland and for England and Wales, will he tabled at Report stage. The exemption for convicted prisoners has always been our stated policy, but I hope that the Committee will agree that it is preferable for it to appear on the face of the Act rather than being contained in regulations exempting prisoners as resident in Crown land, which was our original intention.
Paragraphs 2 and 3 of the schedule provide for the exemption of visiting forces and members of international headquarters and defence organisations. These exemptions are already provided for in subsections (2) and (3) of Clause 128 of the Bill and are merely transferred to the schedule. The exemptions are necessary in fulfilment of the United Kingdom's international treaty obligations.
Paragraph 4 of the schedule provides for the exemption of the severely mentally handicapped, and simply repeats the substance of the exemption now included in subsections (8)(B) and (9) of Section 8 of the 1987 Act. As the Committee is aware, we have undertaken to extend the exemption to include people who become severely mentally impaired as a result of accidental injury or similar causes in adulthood, and appropriate amendments to achieve that for both England and Wales and Scotland will he brought forward at Report stage.
Paragraph 5 of the schedule provides an exemption for children in respect of whom child benefit is payable, and simply repeats the substance of Section 8(8)(A) of the 1987 Act.
Paragraph 6 of the schedule provides an exemption for students who are resident in England, Wales or Northern Ireland in order to undertake their courses. This is in line with the parallel exemption provided in respect of English students studying in Scotland or Northern Ireland by Paragraph 6 of Schedule 1 to the Bill. The exemptions are necessary in order to put beyond doubt that students whose homes are in Scotland but who study outside Scotland should not be liable to pay the personal community charge in Scotland during the period of their course, but will instead pay the appropriate personal community charge at their term-time address.
Paragraph 7 of the schedule provides for the exemption of members of religious communities. This is in line with the undertaking given by Ministers that monks and nuns who have no income of their own should not be required to pay the personal community charge. It parallels the provisions made for England and Wales in Paragraph 6A of Schedule 1 to the Bill, which was inserted by the Committee at an earlier stage.
Paragraphs 8 and 9 of the schedule provide for exemptions from the personal community charge for patients whose sole or main residence is a hospital, a nursing home, a residential care home or a hostel providing an equivalent degree of care to such a home. There is no change in policy here, but only in the way in which policy is given effect. The original intention was that hospital patients should be prescribed as an exempt class of residents in Crown
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land under Section 30(2) of the 1987 Act, but Paragraph 8 of the schedule places that exemption on the face of the Bill. People being cared for in residential care homes and certain hostels are already exempt from the personal community charge by virtue of these premises remaining in rating: under Section 8(8)(d) of the 1987 Act, persons whose sole or main residence is subject to non-domestic rates are exempt from the personal community charge, and the necessary definitions of residential care homes and hostels for these purposes form part of the Abolition of Domestic Rates (Domestic and Part Residential Subjects) (Scotland) Regulations 1987. 1 think the Committee will agree, however, that this is a somewhat indirect method of establishing the exemption, and that it is preferable to have it spelt out on the face of the Bill. Paragraphs 8 and 9 of the schedule provide substantially identical provisions to the provisions for England and Wales set out in Paragraphs 7 and 8 of Schedule 1 to the Bill, with necessary variations to reflect the different Scottish legislative background and the definitions already contained in the Abolition of Domestic Rates (Domestic and Part Residential Subjects) (Scotland) Regulations.
Paragraph 10 of the schedule provides for an exemption for residents of Crown land which is designated by the Secretary of State. The intention is that this power should be capable of dealing with the position of United Kingdom service personnel for whom individual registration for the personal community charge would be inappropriate for one of two reasons: either because their pattern of residence (for instance in barracks) is so transient as to make registration impracticable, or because they should not appear on the register for reasons of national security. It has always been our intention that such an exemption should he available, and it is parallel to that provided for England and Wales by Paragraph 9 of Schedule 1 to the Bill. My right honourable friend the Secretary of State for Scotland is in discussion with my right honourable friends the Secretary of State for Defence and the Secretary of State for the Environment as to how the power of designation should be used. It replaces the power already contained in Section 30(2) of the 1987 Act to exempt classes of persons resident in Crown land.
Finally, Paragraph 11 of the new schedule restates the exemptions contained in Section 8(8)(c) and (d) of the 1987 Act for residents in collective community charge premises or in premises subject to non-domestic rates.
I hope that in thus describing the contents of the schedule I have not unduly tried the Committee's patience, and that I have demonstrated that there is nothing in the new arrangements for exemptions from personal community charge liability which is not either already provided for in the Abolition of Domestic Rates Etc. (Scotland) Act 1987 or is the subject of ministerial policy which has already been clearly stated. I therefore commend the amendments to the Committee.
10.15 p.m.
Lord Morton of Shuna: This grouping is rather long. Included in it are Amendments Nos. 184E,

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184F and 184G. in the names of my noble friend Lord Carmichael of Kelvingrove and myself, and manuscript Amendments Nos. I94ZXA and 194ZXB, again in the names of my noble friend and myself. At this hour of the night I am glad to be able to say to the Minister that in general we agree with his approach. The change to having a schedule detailing those who are exempt is an advantage over what we had before. My main regret is that the Bill did not follow the clearer language—I am talking only about language—of the Scottish Act. In parts of the Bill clarity of language is noticeably missing. In the Scottish Act, with the help of the late Lord Ross, we achieved clarity of language if nothing else.
Amendments Nos. 184E, 184F and 184G are intended to raise the issue of who is responsible for reimbursement of the losses that will occur in respect of the visiting forces and others who arc to be exempt for the moment. Argyll District Council receives a substantial sum in rates in respect of visiting forces, basically in Dunoon and Machrihanish. Of course there are other areas, such as Edzell, where there is a similar situation. Moreover, much the same point occurs with what could be described as home forces on Crown lands and how they will be dealt with.
Perhaps the Minister can explain in some detail exactly how this reimbursement will work. Will it be pretended that such people do not exist and some compensation arrangement on the revenue support grant made, or will they he counted in the total number of people resident in Scotland and then, so to speak, added back on? However one does this, there are differences and it would be convenient—at least for the various local authorities—to know exactly what is proposed to be done about such people. Otherwise, the system does not seem to be too difficult.
I have two amendments to Schedule I. One of them concerns the first passage about prisoners. Subparagraph (4) of Schedule IA refers to:
"A person detained for default in complying with his sentence shall not he treated as detained in pursuance of the sentence".
As the Minister will know—or if he does not. he will soon be advised—it is often the case that a fine is imposed in the confident expectation of all concerned, including the accused, that there is no question of the fine being paid. However, for technical reasons, that is exactly what is done and the gentleman or lady concerned is perhaps fined£200. with no time to pay, and an alternative of' imprisonment is imposed. In such a situation. which happens fairly regularly, is it the Government's contention that that person should pay the poll tax while he or she is in prison, in default of paying the fine? I do not think that that is what was intended. I hope that the Government will look again at the matter.
I turn now to my other amendment. I do not wish to take the matter much further as we have already had one or two words in this connection tonight. It concerns the position of nurses. Amendment No. I 94ZXB, tabled in my name, suggests that trainee nurses should be exempt. That is one way of getting out of the whole problem. I have of course suggested other ways, apart from the amendment we discussed
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some time ago, but in general this approach seems to be correct. However, typically of this Government, the whole approach has come forward with no consultation with any of the local authorities concerned. It has just appeared out of the blue during the past few days. It is most interesting and no doubt the Government are to be congratulated. Nevertheless, some consultation might have ironed out a few of the wrinkles which still exist.
Lord Sanderson of Bowden: The noble Lord made four points. First, I shall look most closely at what he said on the issue of prisoners. It is not intended that the exemption should cover fine defaulters whose stay in prison is normally a matter of a few days only and who may choose at any time to end their sentences by paying their fine. However, I shall consider carefully what the noble Lord has said in that connection.
Secondly, as regards the question of visiting forces, international headquarters and defence organisations. the cost of the exemption will be taken into account in the distribution of revenue support grant. Therefore it will not be the case that, for instance, community charge payers in Argyll—where there is a significant number of visiting forces—will have to pay a higher charge than they would otherwise have done because of the presence of the visiting forces. My right honourable and learned friend the Secretary of State for Foreign and Commonwealth Affairs also proposes to negotiate an agreement with the relevant foreign governments, in line with the current arrangements, whereby a proportion of the rate bills of visiting forces is paid by the foreign governments to Her Majesty's Government. That, however, is a separate issue from the basic principle that the costs of exemption will he taken into account through revenue support grant. It is different from the situation relating to residents of certain Crown lands, which I tried to explain in my previous speech. It is envisaged that people resident in designated land should pay the equivalent of their personal community charge liability to my right honourable friend the Secretary of State for Defence who will, in his turn, pass it on to the relevant local authority. There is therefore no need for special arrangements through revenue support grant, or otherwise, to take account of the exemption. But that point is already under discussion at the moment and should not be confused with the liabilities which have to he faced up to regarding visiting forces.
Lord Morton of Shuna: Perhaps it is just my simple mind, but if the right honourable and learned gentleman the Foreign Secretary is negotiating to be paid by the visiting forces at Machrinhanish and Dunoon, why is it necessary to go through the business of equalising out the revenue support grant? Why not just pay it to the relevant local authorities?
Lord Sanderson of Bowden: That is a subject which we could debate at great length. The most important point so far as I am concerned and, I am sure, so far as the noble Lord is concerned, is that revenue support grant arrangements will take the figures into account. I shall look carefully at what has been said

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during the debate about student nurses. I think that we have already spoken enough tonight on that issue. I believe that those are the four matters that the noble Lord raised with me. I was grateful for his support for the way in which the amendments had been put together.
Lord Hughes: Like my noble friend, I welcome the way in which the Government are now dealing with this matter. If the Minister would like to look hack at the Hansard reports on the Scottish Bill last year he will find that the late Lord Ross of Marnock frequently argued for some of these matters to appear in the Bill instead of being by regulation, and, without exception, the Government refused to accept that suggestion. It is perhaps sad, because had Lord Ross of Marnock lived a week longer he would have discovered that he had had a belated victory on so many of these items.
I have only one question to ask in addition to what has been said. Subsections (8) and (9) deal with residential hostels and patients in homes. I wonder what the position is in relation to the type of person we all know about—an elderly parent who, but for the devoted attention of a daughter who looks after him or her at home, would either be in a hospital or a home. In those circumstances, does that elderly person have to pay the community charge?
Lord Sanderson of Bowden: I should like to look at what the noble Lord has asked me. I should have thought that the answer is yes, but I should like to check on that point and write to him.
Lord Hughes: If the answer is yes, will the Minister be good enough to explain how he justifies that answer?
Lord Sanderson of Bowden: Any answer I give is always a justifiable answer.
Lord Hughes: Justifiable to me or to the Minister?
On Question, amendment agreed to.
Clause 128, as amended, agreed to.
Clause 129 agreed to.
Clause 130 [Prescribed expenditure]:
The Earl of Caithness The Earl of Caithness moved Amendment No. 185:
Page 72, line 15, at end insert ("but, subject to subsection (9) below, the reference in section 80A(5)(c) of the 1980 Act (as amended by subsection (6) above) to consideration which is not in money does not include consideration given in pursuance of a contract entered into before that date.
(9) In any case where the consideration which is not in money and which is given pursuant to a contract entered into before 10th March 1988 is affected by—

(a) a variation of the contract on or after that date, or

(b) the exercise on or after that date of an option or other right conferred by the contract,

so much (if any) of that consideration as exceeds what it would have been if the contract had not been so varied or, as the case may be, if the option or other right had not been so exercised shall he regarded for the purposes of subsection (8) above as given in pursuance of a contract entered into after 10th March 1988.").
The noble Earl said: I beg to move Amendment No. 185. This is a technical amendment which is intended to ensure that the measures which my right honourable friend the Secretary of State for the Environment announced on 9th March are retrospective only to the 10th March.
The purpose of those measures was to secure that the acquisition or improvement by local authorities of capital assets should be counted for the purposes of capital controls in a standard manner, regardless of how the acquisition was financed. Clause 130 applies this principle to barter deals. Members of the Committee will note that Clause 130 is expressed to take effect from 10th March, the day after the Secretary of State's Statement. I am advised, however, that as it stands the clause might be held to apply to work carried out on or after 10th March under a barter transaction, even where both parties were fully committed to the transaction before that date. That was not our intention and this amendment corrects the position. Contracts entered into before 10th March will not be affected by Clause 130, except in so far as the value of work is increased by a variation of the contract or the exercise of an option on or after that date. That deals with the amendment.
Perhaps this is an opportune moment for me to convey my apologies to the Committee. Unfortunately I shall not be here on Thursday as I have to attend a meeting of the Council of Environmental Ministers in Luxembourg. However, where I should have failed, doubtless my noble friends the Lord Privy Seal and Lord Hesketh will be able to convince noble Lords opposite of the reasonableness of the Government's case.
Lord Dean of Beswick: Before the noble Earl sits down, perhaps he will take it from me that some people on this side of the Committee would not be too disappointed at not having to be here on Thursday. Having toiled through this Bill for a long time, unfortunately not too successfully, we wish the noble Earl all the best in his endeavours. I have no doubt that his colleagues on the Front Bench will he adequate replacements or loca while he is away. We wish him a safe return.
The Earl of Caithness: I have every confidence that my noble friends on the Front Bench will he far more adequate than I am in dealing with the subject and will convince Members of the Committee in no time. I beg to move.
Lord Carmichael of Kelvingrove: This amendment embraces the three clauses, Nos. 129, 130 and 131. which were the result of a great deal of agitation in the other place when the Government suggested that artificial devices were being used by local authorities in order to increase their capital spend. That was by exchanging what is called in Scotland the excambing of land and other actions involving private capital, although the Government agreed that all the devices used by local authorities were legal up until that point, until the amendment and until the Minister made the Statement on 9th March and another Statement some time in April.

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Perhaps I may ask the Minister one or two questions. First, as regards costs, if the costs had been incurred, promised or entered into before 10th March, he said that they would be met in full or would at least be perfectly legal. As he well knows, with any building work there is always an outrun that is marginally higher, sometimes considerably more than marginally higher, than the original estimate. Is the figure he is giving a rigid figure on which the government have decided? However, if£X thousand or£X hundreds of thousands were going to be the outrun costs and if it turned out to be£Xhundreds of thousands of pounds plus a little more, would the entire scheme be considered illegal or would it only be in the margin of what was outwith the costs?
There are one or two other questions which I apologise for asking the Minister at this late hour on behalf of my noble friend Lord McIntosh of Haringey who unfortunately was not able to stay. A number of local authorities submitted schemes. Newcastle, for example, submitted a scheme for the provision of multi-storey car parking involving private sector finance. The Minister may not be able to respond to all these points tonight, but it is only fair that I put these specific points so that the Minister can examine them and find answers for them.
Westminster has multi-million pound schemes to repair depot facilities for large housing scheme repairs. Greenwich housing association in cooperation with the local authority has a scheme to build 300 new homes. Kingston has a scheme for a new technology block for the Kingston Polytechnic. Lewisham has a scheme for town hall extensions to accommodate additional poll tax staff and education staff. Doncaster has a scheme for the provision of offices to accommodate the additional 100 staff necessary to administer the poll tax. Can the Minister tell us the effect of the 9th March Statement on all these kinds of building schemes? That is what led to the pressure on the Secretary of State.
As authorities looked at what appeared to be the relaxation that the Minister granted in his Statement, it became clear to many of them that there really was not as much on offer as they had been led to believe. I understand that no additional allocations have been granted. The forms were sent to authorities only on 1st June. That is only 10 days ago. Responses were asked for by the end of July. Does the Minister have any idea which of the AMA schemes that I have mentioned are likely to go ahead as a result of the effects of the March Statement, and which of the 150 projects totalling about£350 million submitted by the Association of District Councils will go ahead?
Finally, the result of these clauses, the changes in the rules of 9th March and 25th April and a bidding process in which the Secretary of State decides which projects will go ahead are really most confusing to local authorities and also to private financial institutions. Now the Government have said that a new system of capital controls is necessary to complement the other local government finance changes in this Bill from 1st April 1990. I understand that that will require legislation some time next year. If that is required, can the Government give us any indication
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of what the system is likely to be? Up until now we have heard nothing. I have made several points for this time of night, but I hope that the Minister can reply to some of them tonight and give me answers to the others at a later stage.
10.30 p.m.
Lord Dean of Beswick: The point that my noble friend made regarding other major cities is relevant. Although it is late in the evening, I think some of us would like to know what is happening in that regard. There are a variety of schemes and methods of carrying out schemes which are being altered and pot-pourried all the time by the Government. A few months ago, perhaps before the general election, the main thrust was on inner city development schemes. A large number were being programmed by the Phoenix Development Corporation which had government blessing.
Obviously those were being carried out to attract private capital into inner city areas on the basis of government encouragement with limited government funding. It has been mentioned several times in this Chamber that in some of these cases government money that had been pumped in could attract between£6 and£8 and, in some better areas, a return of£9 to every £1. I am sure that when that was happening—I did not like to see it happening—no one could see what effect that type of reassessment or reapplication of funding from local government would create; in other words, that the future funding of such schemes by local government would be blurred because nobody could make any predictions.
We now have a situation in which other provisions will be superimposed which could well blur the issue even further. We have seen references on recent Order Papers to four or five new urban development corporations. I see the noble Lord the Leader of the House smiling. However, I want to put down a marker and to say that I shall watch with deep interest to see when orders referring to those corporations—including that in central Manchester—will appear on future Order Papers. A fundamental change is being made in those areas. We may find that local authorities may decide in certain areas to go into partnership or to operate through a Phoenix initiative. They will have no choice if that is to be done by urban development corporations.
In all those schemes, the minority input will come from Her Majesty's Government. When the urban development corporation orders come before the House, they should not be tucked away and debated during the break for dinner. The issues are very wide. There may be spin-offs of which we shall not be aware at the time of the orders. I have a Question which will appear on a future Order Paper regarding residuary bodies.Carte blanche was given for residuary bodies to supplement the GLC in the six metropolitan counties when the Government decided that it had finished its useful life. Some of the chairmen of residuary bodies are also the chairmen of urban development corporations and are on various bodies in those metropolitan areas. We are reaching a situation which I find beyond belief in terms of accountability.

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I have provided the Minister who is answering from the Dispatch Box this evening with correspondence relating to a particular project in Manchester which I find difficult to understand. Two or three years ago I met in complete confidence Mr. Kenneth Baker, the noble Lord. Lord Elton, and another Member of the House who was then a junior Minister to express my disquiet at what might happen with a particular development in the Manchester area. There has been no publicity about that matter because it would have been damaging in terms of public accountability. The Government had a stake in the project and so did the local authority. However, the Government had a say in what money was put in. The local authority had no say in what money was to be put in and what kind of debt it would pick up. That is why I am putting the point while the Leader of the House is present. When the orders relating to the urban development corporations come before your Lordships' House the Minister cannot expect them to go through on the nod. There are a lot of questions to be asked and to be answered.
Superimposed on the city centre schemes whether undertaken in isolation, through a partnership between a city council and a developer. or through the Phoenix Initiative (which is government sponsored but rather looser than urban development corporations in which the local authority has a direct input)—will be urban development corporations which, if the Secretary of State so decides, can completely eliminate local authority responsibility and input. I think that that would he totally disastrous.
How does a local authority proceed—even though it may he of a different political colour from the Government? How do the people the authorities are hoping to attract to put in money, proceed? They want to redevelop their city and they start on the basis of what they think is a projected financial future. However, this Bill could blow a hole in all their predictions which could disintegrate as a result. If I were leader of my own city of Manchester, I should have been absolutely outraged and appalled at some of the debts being run up in Greater Manchester. The districts will have to pay for those debts although they have had no say in the decisions which have resulted in those deficits being accrued. I am not talking in terms of£l million,£2 million or£3 million; I am talking in multiples of£10 million. That issue will come before your Lordships' House in the not too distant future. I shall make sure that it does. I warned the Minister concerned in confidence what would happen. It has now had the fullest publicity in the Sunday Times and the relevant people in government have been notified of what I am talking about.
If the Government want to proceed on the basis that they can push local government about all the time and get away with it, they should think again. There is accountability. On the basis of what is being proposed in the Bill, where do local authorities which set out on plans 12 months ago go from here? What advice can the Minister give those authorities which have proceeded on the Phoenix Initiative or in
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partnership with other people? Albeit they do not like the Government but nevertheless they want their inner cities developed. Is it too late tonight to ask the Minister to answer that particular point? I can assure him that—whether it is raised at Report stage or in some other form—it will not be allowed to go away. I shall bring it hack because there arc some very serious questions that need to be answered.
Noble Lords may think that I am filibustering but I am not. I shall come hack to these issues for some answers. That will be on behalf of people who will be asked to pay a lot of money to hail out deficits accrued as a result of decisions in which they have had no say whatever. The decisions were made on their behalf by people who were put in post by this Government and who were supposed to protect their interests.
The Earl of Caithness: I was a little disappointed to hear the noble Lord, Lord Carmichael of Kelvingrove, say that building work always gets more expensive throughout the contract. I recall that not so long ago we discussed the very question of contracts in the context of the Local Government Bill. My noble friend Lady Blatch and I argued strongly that many of the noble Lord's concerns could be taken into account by getting the right specification at day one.
I was interested in some of the points raised by the noble Lords, Lord Carmichael and Lord Dean of Beswick, about individual schemes. I can tell the noble Lords that we have asked authorities to submit details and when we have their response to our questionnaire we shall he able to make decisions. However, I can assure them and the Committee that schemes that meet the criteria that I mentioned when I moved the amendment will he permitted. Let me reiterate that those schemes that will count are those committed before 9th March. The costs will be permitted in full even if' there have been increases subsequent to that date.
The noble Lord, Lord Carmichael of Kelvingrove, raised the point about the new capital control system. I hope that my right honourable friend the Secretary of State will make an announcement in the near future on that matter.
On Question, amendment agreed to.
Clause 130, as amended, agreed to.
Clauses 131 and 132 agreed to.
Lord Hesketh: I beg to move that the House do now resume.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.

Dartford-Thurrock Crossing Bill
Returned from the Commons with the amendments agreed to.

Road Traffic (Consequential Provisions) Bill [H.L.]
A Message was brought from the Commons that they concur in the resolution relative to the Bill communicated in the Lords Message of yesterday.
House adjourned at fourteen minutes before eleven o'clock.