Lords Sitting of 24 July 1989

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

Air Traffic: Runway Capacity
Lord Boyd-Carpenter Lord Boyd-Carpenter asked Her Majesty's Government:
What action they are taking to secure that runway capacity adequate for the needs of British civil aviation, the tourist industry and the national economy is provided in the South East of England.
The Parliamentary Under-Secretary of State, Department of Transport (Lord Brabazon of Tara): My Lords, we are now considering advice submitted last week by the Civil Aviation Authority on traffic distribution policy for airports serving the London area. The authority is preparing further advice on the adequacy of UK airport capacity in the period to 2005. This work is in response to commissions given to the authority last year by my right honourable friend.
Lord Boyd-Carpenter: My Lords, in thanking my noble friend for that reply, am Ito understand from it that Her Majesty's Government now accept that an additional runway, or additional runways, will be required in the South East by the end of the century? In view of the long time that it takes from a decision to a runway becoming operational, can my noble friend say what the Government are doing about it?
Lord Brabazon of Tara: My Lords, we have to consider the advice which will be given to us next year by the CAA. This is complex and difficult work and we must therefore be sure that the eventual decisions are based on thoroughly researched and considered advice.
Baroness Burton of Coventry: My Lords, can the Minister assist us further? It was my understanding that last July the Secretary of State wrote to the Civil Aviation Authority asking for this information. Am I not correct in saying that the Secretary of State asked for the advice by July 1989? Can the Minister now say why we are faced with another 12-month delay before this advice is tendered? Does he not feel that a period of two years in preparing advice is disgraceful? The Minister should not have accepted such a delay.
Lord Brabazon of Tara: My Lords, as I said, we have received part of the advice which we asked for. The CAA has realised—and it has consulted widely—that this is an extremely complicated and difficult issue. The question is not just whether we need a new runway but where it should be if one is needed. There are complicated air traffic control problems involved. Therefore, the CAA felt that it needed longer to formulate its advice to us.
Baroness Burton of Coventry: My Lords, the Minister does not need to tell me that. I am well aware of it. I am sorry that the Minister looks harassed, but does he not realise that there is no feeling of urgency about this matter? Until the Ministry of Transport, if it is the responsible department, realises that the need is urgent we shall just go on and on waiting. Why did the Minister accept a further delay of 12 months from what was originally stated?
Lord Brabazon of Tara: My Lords, I hope I do not give the appearance of looking harassed. Hot I may be, but harassed I hope I am not.
It is a very complicated subject. If the CAA had felt able to give its advice within the original year then it would have done so. It consulted extremely widely. There was considerable input into that consultation from the regional airports, which made their views very well known. It also referred to the problems of traffic control. As I said, it is important that when we receive the advice it should be the right advice. This is an issue which will be of immense importance in the year 2000 and beyond, and therefore it is important that we get it right.
Lord Underhill: My Lords, is it not a fact that the CAA, in its news release of 18th July, emphasised the uncertainties of forecasting? It also said that the further advice which the Minister mentioned will be given next summer, will include forecasts on air space and airport capacity and will take into account the role to be played by airports outside the South East. Are not those extremely important matters on which we should await the information from the CAA?
Lord Brabazon of Tara: That is right, my Lords. That is why we are firm in our opinion that the advice should be the best advice we can get.
Baroness Macleod of Borve: My Lords, can my noble friend the Minister assist us on the interim period before a runway is operational? Can he tell us what is happening about Stansted? When will it be completely operational? How many more people will it be able to take in the future?
Lord Brabazon of Tara: My Lords, my noble friend makes a very good point. In 1991 Stansted will become operational to a much greater extent than it is now. Therefore, effectively it will be a new runway in the London area. By 1991, when the terminal and the rail link are completed, the first phase will handle 8 million passengers a year. Subject to parliamentary approval, that figure will rise to 15 million passengers a year. Subject to planning approval, there could be the possibility of a second terminal which would take it up to about 20 million passengers.
Lord Stoddart of Swindon: My Lords, is the noble Lord aware that the provision of additional runway capacity in the South East is not universally popular, especially among those living around airports and along airport flight paths? Will the Government take that into consideration? When considering the

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provision of additional air space and runway capacity, will the Government take into account that there should be co-ordination between air transport and surface transport? That is the only way to solve the total problem of transportation in this country.
Lord Brabazon of Tara: My Lords, as regards the first part of the noble Lord's question, I am certainly aware that the provision of new runway capacity may not be universally popular with everyone living in the South East of England. As regards surface transport links, that aspect must be taken into account. For Stansted there will be a new rail link to the airport. There are proposals before your Lordships' House for a new rail link to Heathrow Airport. There are also associated studies of the road networks in those areas.
Baroness Platt of Writtle: My Lords, can my noble friend tell me when a decision will be made on the various east London river crossings? The height of those bridges could have an effect on the short take-off and landing airfield in the City. This could have a tremendous economic effect on people from the City going to foreign capitals. The east London river crossing could prevent the BAe HS146 and future aircraft using the airport. That would be a considerable restriction in the future, whereas those aircraft are quiet and meet the International Civil Aviation Organisation regulations.
Lord Brabazon of Tara: My Lords, I believe that my noble friend will not have to wait much longer for my right honourable friend's decision concerning the east London river crossing bridge.
Lord Marshall of Leeds: My Lords, is the Minister aware that when, in 1974, the Labour Government came to power, they declared that there was no foreseeable need for any future airport facilities or capability in the South East and that there would not be for the next 20 years, and that I, as chairman of the Maplin Development Authority, was then sent for and told that the project was scrapped?
Lord Brabazon of Tara: My Lords, I was not aware that the party opposite had said that when they were in power in 1974. What they could not take into account was the enormous boom in economic activity encouraged by the policies of this Government which has taken place over the past 10 years.
Lord Boyd-Carpenter: My Lords, does my noble friend regard his suggestion that the views of the CAA are not yet known on this matter as consistent with the letter dated 17th July from the chairman of the Civil Aviation Authority to the Secretary of State in which it is clearly stated that the CAA has already indicated its view that there is a need for a new runway in the South East?
Lord Brabazon of Tara: My Lords, yes, but what the CAA has to consider in its advice is whether we need additional capacity at an existing major south-eastern airport; the development of a full
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runway's capacity at another aerodrome; the equivalent of a full runway's capacity through development at more than one location; or the expansion of the capacity of near regional airports. Those are the kinds of matters on which we require the advice of the CAA.
Baroness Burton of Coventry: My Lords, is the Minister aware that I am asking about the question of delay? Someone has to keep on about the matter. I ask the Minister whether he has on file in his office a copy of the letter which the chairman of the CAA wrote to The Times earlier this year stressing the urgency of reaching a decision as regards runway capacity in the South East. When are we to get some action? I am concerned not with what advice is tendered but with when it is. We shall have waited two years already. Does the Minister not agree that it takes between 10 to 12 years from the plans being on the drawing board to a runway being laid? When are we going to get something done about it?
Lord Brabazon of Tara: My Lords, I am not certain that I can add very much to what I have already said at Question Time this afternoon. I am well aware of the letter that the chairman of the CAA wrote to The Times newspaper. It is from the CAA that we are awaiting the advice that we need. If a new runway is required in the South East, estimates for the need seem to vary between the year 2000 and the year 2005 or even later. That still gives us a reasonable amount of time from next year to do something about the problem.
Lord Campbell of Alloway: My Lords, would my noble friend the Minister consider it a possibility to widen the area of this long-running consultation to include perhaps the noble Baroness, Lady Burton of Coventry, and my noble friend Lord Boyd-Carpenter, among others?
Lord Brabazon of Tara: My Lords, the views expressed in your Lordships' House do reach the ears of the department through me and I have no doubt that they reach the CAA as well. The period of consultation is over and it is the advice that we now wait for.
Lord Tordoff: My Lords, does the Minister not accept that there are great environmental questions to be taken into account in this matter and it is not merely a question of commerce, holidays and trade? The environmental impact of extra runway capacity has to be considered not only now but way into the future.
Lord Brabazon of Tara: My Lords, I believe I indicated that fact in my reply to the noble Lord, Lord Stoddart of Swindon.

Palestine: Peace Initiatives
2.47 p.m.
Lord Molloy Lord Molloy asked Her Majesty's Government:
Whether they are planning further initiatives to resolve the problem of Palestine and to bring peace to the Middle East.
The Minister of State, Foreign and Commonwealth Office (Lord Glenarthur): My Lords, the European Council declaration of 27th June sets out our views on the way ahead. We shall continue our efforts to bring the parties together in negotiations leading to a settlement based on "Land for Peace".
Lord Molloy: My Lords, I thank the Minister for that reply. Does he not agree that now the national unity government of Israel is in total disarray, the situation that exists, with the continued occupation of Palestinian homelands, is extremely serious? Does the Minister not also agree that there has to be a declaration for the return to the Palestinians of their lands and that, if this can only be achieved by the installation of a United Nations peace force, then, in the interests of both the Israelis and the Palestinians, the formation of such a force should be the next move?
Lord Glenarthur: My Lords, I believe that the noble Lord is well aware of the Government's views on the issue in general and the benefits to be had from an international conference. That is set out quite clearly in the EC declaration. As regards disarray, I hope that the noble Lord will be aware that it is not necessarily now the case that the restrictive conditions approved by the Likud Central Committee on 5th July will not be translated into Israeli Government policy. I very much welcome reports that the Israeli Cabinet have reaffirmed Mr. Shamir's election proposals.
Lord Weidenfeld: My Lords, does the Minister not agree that since Mr. Shamir's plan is perhaps the only realistic one available now—it was endorsed yesterday by the Israeli Government—it would be counter-productive to continue high level talks between members of Her Majesty's Government and PLO leaders with the credentials of Mr. Bassam Abu Sharif or possibly Chairman Yasser Arafat, in view of the fact that Mr. Sharif has endorsed the recent bus killings on the outskirts of Jerusalem and described them as a natural human response and, not untypically, Chairman Arafat was among the first to congratulate the People's Republic of China upon breaking the students' resistance?
Lord Glenarthur: My Lords, I quite understand the noble Lord's point of view, but the fact is that talking in general does not do damage provided that the talking is designed to try to bring an end to the kind of conflict that we see. As to the meeting on 13th July between Bassam Abu Sharif and my right honourable and learned friend the Foreign Secretary, that was certainly not an upgrading of our relations with the PLO. It was not a full-scale meeting but a short call to reinforce our message that the PLO must stick to the path of moderation.
Lord Cledwyn of Penrhos: My Lords, we welcome the noble Lord's reaction to yesterday's decision of the Israeli Cabinet to hold elections in the West Bank and Gaza. Is it within his knowledge when these elections will be held? Furthermore, will he also welcome the decision taken by the Israeli Government to reopen the primary schools in the
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West Bank, and will he encourage them also to reopen the universities and other educational institutions?
Lord Glenarthur: My Lords, I am afraid that I cannot tell the noble Lord when the elections will be, but I shall try to find out. I welcome, as do other noble Lords, reports that Israeli plans for the progressive opening of schools with effect from 22nd July have begun to be put into operation. We welcome the fact that some, or perhaps even all of them, have reopened. I take note of the noble Lord's point about universities as well.
Lord Paget of Northampton: My Lords, I do not know whether your Lordships are aware that we are talking of the Middle East, which is the most ancient area of human habitation. For perhaps 5,000 years tribes and their descendants have lived and fought there. There has been one common feature to those 5,000 years. There has never been a moment of peace. Peace has not been the way of living in that part of the world. To try to proceed by stepping in and imposing this unwanted state on Israel and her neighbours is an impertinence. They have the same human right as any other people to continue with their warlike ways.
Lord Glenarthur: My Lords, we are all too well aware of the difficulties. What the noble Lord says about the history of that part of the world is all too true. However, where we can try to use our influence to bring an end to the difficulties we must continue to do so. That is precisely what the European Council declaration strives to achieve.
The Lord Privy Seal (Lord Belstead): My Lords, I ought perhaps to say on behalf of your Lordships that we should be a little concerned that we are just coming up to 20 minutes, which is the time the House itself has decided should be allowed for desirably completing Question Time. I would suggest to noble Lords that perhaps the brief, pungent question is more dangerous to government spokesmen than the long, discursive one.
Lord Cledwyn of Penrhos: My Lords, I must agree with the Leader of the House. He is reflecting what the Procedure Committee has recommended many times. Members on all sides of the House are represented on the committee, and this was agreed to.
Lord Bottomley: My Lords, I have given way twice and so I am entitled to ask a question. Is the Minister aware that in the year ended December 1988 there were 1,470 Palestinian terrorist attacks, and that this year there have been 412 attacks on Israelis and 123 on Arabs? There was a bus incident recently—
Noble Lords: Question!
Lord Bottomley: It is a question, my Lords. Israelis were killed in the bus, including innocent children.
Noble Lords: Order!
Lord Bottomley: My Lords, Yasser Arafat said that he is opposed—
Noble Lords: Order, order!
Lord Bottomley: Ought we not to draw his attention to these activities, and will the Government condemn them?
Lord Glenarthur: My Lords, we deplore violence, from whichever quarter it comes.
Lord Molloy: My Lords, will the Government continue with their policy of trying to set up an international conference, and will they try to get it accepted by the United States? That could bring peace to the area.
Lord Glenarthur: My Lords, that is precisely what the declaration by the European Community tries to achieve.
Baroness Phillips: My Lords, is the Minister—
Noble Lords: Next Question!
Baroness Phillips: No other noble Lord is on his feet, my Lords. I protest. If the Government like to take nearly 20 minutes on the first Question, what right do they have to cut down on the time available for the other Questions?

Consumer Credit: Promotion
2.55 p.m.
Lord Rippon of Hexham Lord Rippon of Hexham asked Her Majesty's Government:
What action they propose to take to stop or discourage banks, building societies and other financial institutions from mass canvassing their customers to borrow money at high rates of interest for purchases such as holidays.
The Secretary of State for Trade and Industry (Lord Young of Graffham): My Lords, the Government will continue to urge financial institutions to show responsibility in promoting credit. They will also continue to urge customers to show responsibility in deciding whether to accept or refuse credit offers.
Lord Rippon of Hexham: My Lords, I appreciate the Secretary of State's Answer, but is he aware that both the Governor of the Bank of England and the Prime Minister have expressed concern about the present position? Does he agree that it is not competition but exploitation? Does he remember that when we were discussing the brewers he said that competition is good but that there are times when the customer ought to be protected? Is this not one of those times?
Lord Young of Graffham: My Lords, we have considerable protection against aggressive advertising. First, the law provides that advertisements must not be deceptive or misleading; secondly, consumers must be given sufficient
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information before they enter into binding commitments for credit; thirdly, we support the Citizens' Advice Bureaux so that consumers have access to good advice about credit; and finally, the Governor of the Bank of England has publicly encouraged banks to be more responsible in their advertising of consumer credit. At the end of the day consumer credit is only 16 per cent. of total household borrowings; the other 84 per cent. is for house purchase.
Lord Bruce of Donington: My Lords, is the noble Lord aware that, according to the Bank of England returns published on 12th July, lendings by banks to United Kingdom individuals other than those connected with house purchase increased by £2·1 billion, which in itself is a record and exceeds the record of the same three month period last year of £1£8 billion to August 1988? Is he aware that this runs completely counter to the restraints urged upon borrowers by the Government themselves? What is happening is that borrowers are circumventing mortgage interest rates by increasing their borrowings for personal items, including holidays. Will he suggest to the Prime Minister's office that perhaps a spokesman should convey her fury about such a development?
Lord Young of Graffham: My Lords, I fear that the noble Lord has misread the statistics on this occasion. Lending by the main high street banks moved last month in the opposite direction. It was £331 million in May compared with £360 million in April. It has gone down. The volume of retail sales also fell in June. There is little evidence of any recent worsening of the position. In the case of mortgages, there were fewer repossessions by building societies in the second half of last year than in the first. Fewer building society borrowers had arrears of more than six months. This is very much a matter for the indiviual citizen to decide.
Lord Nugent of Guildford: My Lords, will my noble friend consider the following suggestion? When these seductive advertisements for borrowing appear in the national press, they should state that, where a second charge is required on the property and there is a default, the individual's property is at risk. There should be a warning as is the case with cigarette advertising.
Lord Young of Graffham: My Lords, I shall certainly look into the suggestion made by my noble friend. However, I think it would be slightly unusual if anyone who took a charge or a mortgage on his home, even if it were a second mortgage, did not know at the end of the day that it would threaten the ownership of his property.
Lord Rippon of Hexham: My Lords, can the Secretary of State give an assurance that if the Government's efforts to discourage the banks and others from acting irresponsibly fail, they will take further action, perhaps by introducing legislation, to control usuary because that of course is what it is?
Lord Young of Graffham: My Lords, other countries, including the United States, Japan, Germany and France, have abandoned any controls they had on the amount of consumer lending recognising them to be ineffective, unfair and, indeed, at the end of the day, damaging. Moreover, exactly like us, such countries rely primarily upon interest rates.
Lord Stoddart of Swindon: My Lords, is it not a fact that the continued expansion of domestic credit, which went up by £3 million in June, is a threat to the Government's total economic policy and also a threat to their inflationary policy? Will the noble Lord agree to reconsider the suggestion I made to him the other day that banks and other lending institutions should be compelled to make special deposits with the Bank of England at a very low rate of interest?
Lord Young of Graffham: My Lords, I am grateful that the noble Lord, Lord Stoddart of Swindon, is concerned to ensure that the Government's economic policy succeeds. I share the noble Lord's sentiments in the matter. However, I should point out to him that the amount outstanding on consumer credit is bound to rise as disposable incomes rise and the ability to repay loans increases. That has been the great change in this decade. Personal sector financial assets are three times greater than financial liabilities. Indeed, they are actually growing faster.
Lord Peston: My Lords, perhaps I should preface my short, pungent question by saying how sad I am to hear the rumour that the Secretary of State may not be answering any more questions from the Dispatch Box. I turn now to my question. Is it not intriguing and astonishing that, despite extraordinarily high interests rates—and they are very high for consumers but consumers are not being misled about them; indeed, the rates are perfectly clear—consumers still continue to borrow? Do the Government have any explanation as to why they continue to do so?
Lord Young of Graffham: My Lords, perhaps I may suggest to the noble Lord that he should consider most carefully all articles that he reads in the newspapers. But, having said that, so far as concerns the amount of credit, we live in a world in which the level of personal income is rising sharply. We live in a world where, happily, the citizen is at liberty to decide how he or she wishes to dispose of that income.
We have seen borrowings increase; but I should say that the figure regarding lending for consumption by the main high street banks actually decreased in the month of May as compared with April.

Rose Theatre
3.2 p.m.
Baroness Strange Baroness Strange asked Her Majesty's Government:
What plans they now have for the Rose Theatre, Southwark.
The Parliamentary Under-Secretary of State, Department of the Environment (Lord Hesketh): My Lords, the matter at present rests with the London Borough of Southwark, which is due to decide the developers' planning application for the revised design of their proposed office building.
Baroness Strange: My Lords, I thank my noble friend the Minister for his fairly rosy reply. However, is he aware that by way of their first plan the developers of the Rose Theatre site, Imry Merchant, had 176,000 square feet of office space and that in the current plan they have 201,000 square feet of office space? Is he further aware that in the plan put forward by Ove Arup, the architects for the Theatres Trust, not only would the piles be 6 feet to 11 feet further away from the perimeter of the Rose Theatre, but also the roof space would be 38 feet above and there would be 202,000 square feet of office space?
Is my noble friend also aware—
Noble Lords: Order!
Baroness Strange: My Lords, this is my second point; I am allowed two points.
Lord Denham: My Lords, I wonder whether my noble friend would be kind enough to recall the words of my noble friend the Leader of the House and those of the noble Lord the Leader of the Opposition: Question Time should not be made the occasion for a speech.
Baroness Strange: My Lords, I very much thank my noble friend. I just wish to say—
Noble Lords: Question!
Baroness Strange: My Lords, I just wish to ask whether my noble friend the Minister is aware that the first company registered in 1592, in which Shakespeare was a player, was that of my noble kinsman, Lord Strange, whose name I am supporting by proxy, so to speak.
Lord Hesketh: My Lords, I fear that it will come as no surprise to the noble Baroness when I tell her that I cannot prejudge the outcome of the planning application which is before Southwark Council.
Lord Strabolgi: My Lords, is the noble Lord aware that this site was designated in 1984 as a site of archaeological importance? Further, why did the Government do nothing about this, and why do they always leave such matters to the local authorities? Can they not take some interest when it is a matter of national importance?
Lord Hesketh: My Lords, I am sure that there would be an uproar if we started to interfere with the process, especially with regard to local authorities. Indeed, I am sure that I would be the first one to feel the wrath of your Lordships' House if I so suggested. At present we cannot prejudge the outcome of the inquiry. I should remind the House that the £10 million scheme proposed by Imry Merchant is the largest contribution we have ever seen to a site such as that of the Rose Theatre.
Baroness Birk: My Lords, if the local authorities have the power to ask for information about the archaeology of a proposed building site—
Noble Lords: Order!
Lord Mellish: It should be a Conservative speaker!
Lord Renton: My Lords, as it is perfectly clear that there is a broad consensus and, in effect, an agreement in principle that this site should be preserved, would it not be best for us to leave the details to the planning authorities?
Lord Hesketh: My Lords, I can do no more than heartily agree with my noble friend.
Baroness Birk: My Lords, I think that it is our turn now. Since local authorities have the power to ask for information about the archaeology of a proposed building site, will the Minister therefore agree that where there is any archaeological interest known to be involved, the local authority should be required—not just be responsible—to ensure that a full archaeological search of a site takes place before planning permission is granted, so as to prevent, in the future, an occurrence of the unhappy situation we have seen arise on this occasion?
Lord Hesketh: My Lords, I am sure that the noble Baroness will not expect me to change government policy on my feet. However, perhaps I may point out to your Lordships' House that in fact the site is at present fully protected. A great deal of work has already been done in this respect and an impermeable membrane now covers the whole of the site in order to provide adequate protection.
Lord Marley: My Lords, will my noble friend consider that one way of preserving the Rose Theatre would be to dedicate it as a national permanent memorial to our great actor the late Lord Olivier?
Lord Hesketh: My Lords, that is a most interesting suggestion. However, we are still some distance from being able to prepare the next stage, as it were, of the future of the Rose Theatre.
Lord Mellish: My Lords, the Minister said that Southwark Council now has the planning application. When did the council receive it, and when can we expect to receive an answer?
Lord Hesketh: My Lords, I believe that the application is to be heard at the next planning meeting.
Lord Mellish: My Lords, when will that be?
Lord Hesketh: My Lords, I shall have to write to the noble Lord on that point.
Lord Sudeley: My Lords, can the Minister say whether the present plans for the Rose Theatre site should be called in for a public inquiry as the proposed new plan of the Rose Theatre Trust has already been preferred by two archaeologists, Mr.
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Sheldon of the London Museum, and Professor Biddle as well as Dr. Walter Hodges and Professor Andrew Gurr of Reading University on the grounds that five four-and-a-half feet piles have already damaged the north corner of the site where the stage and tiring house would be?
Lord Hesketh: My Lords, as I have said, I cannot prejudge the decision that will be taken by the Southwark planners.
The Earl of Bessborough: My Lords, am I not right in thinking that the Rose has been saved, and that there is now a possibility that there might be an amalgamation between the Shakespeare Globe Centre and the Rose through the existing Shakespeare Globe Museum, thus unifying—this is important—the fund-raising effort? Does not my noble friend consider that having the backing of the existing Globe Trust is a more rational way of looking to the future? I declare an interest as a trustee, as indeed would my noble kinsman Lord Ponsonby on the other Benches. Would not that be the most sensible solution?
Lord Hesketh: My Lords, as always, my noble friend Lord Bessborough has made a most interesting suggestion, but I have to give him the answer that I gave earlier, which is that it is probably a little too early to be able to act upon his idea; but I shall draw it to the attention of my right honourable friend.
Lord Cledwyn of Penrhos: My Lords, before we leave Question Time, I should like to refer to the element of disorderliness that has crept into our Question Time. We have now taken 35 minutes on questions. If 11 minutes are taken on the first Question, that means that the rest of the questioners will be disadvantaged. I suggest that perhaps the matter should be considered over the Recess. It might go back to the Procedure Committee for consideration. Otherwise, Question Time (which I think is one of the most splendid features of the House) may be damaged.
The Minister of State, Home Office (Earl Ferrers): My Lords, I believe that the noble Lord, Lord Cledwyn, is right to draw the attention of the House to the length of time that is spent on questions. People who spend too much time on one question do so at the expense of others. Perhaps we can put that down to the heat or the end of the summer term. However, no doubt by the time we return, your Lordships will be more accustomed to the disciplines to which we normally accede, and will try to keep to the normal length of questions at Question Time.

Business
3.12 p.m.
Lord Denham: My Lords, at a convenient moment after 3.30 this afternoon, my noble friend Lord Ferrers will, with the leave of the House, repeat a Statement on war crimes that is to be made in another place. This will be followed by my noble friend Lady Hooper who will, again with the leave

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of the House, repeat a Statement on electricity privatisation.
It may be for the convenience of the House if I announce that the Committee stage of the Local Government and Housing Bill will be adjourned at about 7 p.m. for about one hour, and that during this adjournment there will be a consolidated debate on 15 Motions for annulment in the name of the noble Lord, Lord McIntosh of Haringey.

Isle of Wight Bill
3.13 p.m.
Read a third time, and passed, and returned to the Commons with amendments.

London Regional Transport (No. 2) Bill
Read a second time, and committed to an Unopposed Bill Committee.

Standing Orders (Public Business)
The Chairman of Committees (Lord Aberdare): My Lords, I beg to move the Motion standing in my name on the Order Paper. It is a formal amendment which is self-explantory.
Moved, That the Standing Orders relating to public business be amended as follows:
Standing Order 62
After line 6, insert "Broadcasting Committee"
Line 17, leave out "Sound Broadcasting Committee".—(The Chairman of Committees.)
On Question, Motion agreed to.

Local Government and Housing Bill
3.14 p.m.
The Earl of Arran: 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 Arran.)
On Question, Motion agreed to.
House in Committee accordingly.
[The CHAIRMAN OF COMMITTEES in the Chair.]
Clause 18 [Members' interests]:
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 104:
Page 24, line 14, at end insert—
("(1A) Before making any regulations under this section, the Secretary of State shall certify that the requirements contained therein are, in his opinion, not more onerous than those currently applicable to members of either House of Parliament.")
The noble Lord said: We resume at the place where we were most rudely interrupted on Thursday night, still on Part I and dealing with Clause 18 which is concerned with the register of members' pecuniary interests.
There are two different degrees of control of the propriety of the activities of Members of Parliament and local councillors. One is that they should themselves take steps to declare any interest which should be declared when any business is being considered by the council or any committee of which they are a member, or by another place, as the case may be. The second is the provision of a register of members' interests so that everyone may see, in accordance with regulations laid down by the Secretary of State, what interests individual councillors have. They can then be satisfied that they are not abusing any interests that they may have or their position as a councillor in favour of any interest that they have. It is also a check on whether they should be members of particular committees or should withdraw from certain kinds of business when their interests are affected by it.
We have never objected to either of those provisions. We have never felt that there should not be a control: first, of a declaration of interest; and, secondly, that there should not be a register of interests. The question must be asked, however, whether Clause 18, which sets out in some detail the regulations which the Secretary of State may make about members' interests, is properly to be applied by Parliament or, rather, by a Parliament which does not apply the rules to itself.
Another place has had for many years a register of Members' pecuniary interests. For a number of years, because of the reluctance of one Member of the other place to supply a list of interests, it was on a purely voluntary basis; but I believe that it is universal now, and there is no question but that the general public can see the register of interests of Members of another place.
Your Lordships have taken a different approach to our procedures. We have taken the approach in our rules of debate that it is undesirable that Members of the House should promote or oppose legislation in which they may be thought to have an interest or may think themselves to have an interest. It is left to the honour of noble Lords to assess whether that interest falls within the scope of the rules of debate and whether they should declare the interest or refrain from taking part in debate when they have a pecuniary interest.
On the whole, it is widely accepted that we declare interests when the need arises. I am not sure whether we all declare interests with the degree of detail that might be thought to be desirable; but the spirit of self-regulation which pervades the House has always meant that there has been no pressure to have a register of your Lordships' interests, and therefore we have been spared—if that is the right word—the legislation which is now proposed for local authorities.
However admirable our procedures may be in many ways, we should not impose rules on councillors which we would not be prepared to

1133
accept for ourselves. That is not in itself a criticism of the way in which our rules work. I have been describing the differences between them and those of another place and those of local authorities. However, it would be wrong for the House to command the Secretary of State to lay regulations which would put on the statute book (in this Bill) a detailed clause which not only sets out the regulations which govern the giving of notice of pecuniary interests, but sets out in great detail the punishment which is to be imposed for failing to comply with the regulations, or giving a notice, in compliance with requirements, which is false or misleading; or recklessly providing information which is false or misleading in a material particular.
This is a very severe clause, and maybe it is right for it to be severe. But we ought not to say this unless we are prepared to do the same for ourselves. I beg to move.
Lord Renton: The noble Lord, Lord McIntosh, has raised a very interesting point and one which deserves our careful consideration. Although I have not been a member of another place for ten years, my own recollection—no doubt I shall be corrected if I am wrong; but I still think I am right—is that the register of Members' interests in another place was a register compiled by the voluntary action of Members. Indeed, a Member could refuse to submit his interests. I remember that one well-known Member did refuse.
With great respect to the noble Lord, I am not quite sure that the purpose of what is done in the House of Commons is the same or could have the same results as the declaration of pecuniary interests by members of local authorities. Of course we have to bear in mind that the power given to the Secretary of State in Clause 18(1) is limited merely to the making of regulations which affect the direct and indirect pecuniary interests of members of local authorities.
Perhaps my noble friend on the Front Bench can explain what he means by the difference between direct and indirect, because it is rather interesting. But in the nature of things as we know them, what we have to try to ensure in the case of local authority members is that they do not obtain contracts awarded by the local authority to businesses in which they have a pecuniary interest, unless at any rate those interests have been declared. With that background, I find it difficult to understand a distinction between direct and indirect pecuniary interests. Perhaps we should be told.
However, the same sort of situation does not arise with regard to Members of another place, or very rarely. I remember that there was a Member of another place who found, when he was appointed a junior Minister, that the large firm of which he was a member had very considerable contracts, not directly with the Government but with a quango. He did the honourable thing, which was to resign as a junior Minister, before he had to take such a decision. But that is a very unusual situation and I should have thought that, bearing in mind what we know and what, alas, has been experienced with
1134
regard to local authorities, we should not try to restrict the Secretary of State too much. I hope I am not being too long-winded.
Therefore, although I appreciate the purpose of the noble Lord, Lord McIntosh, in raising the matter, I doubt whether it is necessary for us to make an amendment on the lines that he has proposed.
Baroness Carnegy of Lour: I noted that the noble Lord, Lord McIntosh, said that noble Lords on his side of the Committee were not against the declaration of pecuniary interests, direct and indirect, by members of local authorities. I am sure that he is absolutely right. The point he was making—and I think that he made it at Second Reading—was that perhaps we in this Chamber and those in another place should be looking at the matter for ourselves. But that is not part of the Bill and I do not think the noble Lord is really saying that it should be in the Bill until we have examined the proposal.
It is very important to realise why local authorities are quite different from Parliament in this respect. It is quite extraordinary that when one joins a local authority, as many Members of the Committee know very well one discovers the network of interests which interact with the interests of the local authority. Planning decisions—local planning decisions and strategic planning decisions—can affect the value of land and property, and the value of almost anything in the local countryside. One need only have an indirect interest in the value of property in a certain place or the value of land in a certain place to have an interest in the decision that is made.
It is only fair to councillors to have a register of interests. I do not think it is enough for it to be voluntary. As I said at Second Reading, the council on which I sat had a voluntary register, but I do not think that that was enough. One should be protected by a statutory register.
It is not only a case of planning decisions, decisions about housing. Planning decisions as they interact with the construction industry, if one has an interest in the construction industry, are very influential on prices and what happens locally. There is a whole range of decisions that can be taken, as many Members of the Committee know, which can affect one's own interests.
Without doubt I think that this subsection should stand. However, I go along with the noble Lord, Lord McIntosh, in that, as is often the case as we are discussing matters in this Chamber and as I read debates in another place, perhaps we should go further on this point.
Lord Bellwin: I too have some sympathy with the point that the noble Lord, Lord McIntosh, makes. However, my noble friend touched oh the answer to it. One cannot draw an exact analogy. In this Chamber we do not do the same things at all as a local authority has to do. We do not have the job, the function, of placing contracts and making planning decisions and a whole host of activities which are everyday, routine matters in a local authority. We do not have to carry out those duties at all.

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The noble Lord was fair enough to say that within the framework of what we have to do, by and large the system works well enough. I suspect that the same applies to another place, but perhaps that is not for me to say. However, there is such a great difference in what local authorities do that the clause and the legislation set out to try to improve the position as it now is. It really is not the same.
Lord Graham of Edmonton: In my view, noble Lords opposite are downgrading the worth of this Chamber in the decision-making process. There are Members of the Chamber who like myself have served on a local authority, who have served in another place and who now have the great privilege of serving in this Chamber. The amendment seeks to ensure that whatever the Government feel is good for local authorities is good for both Chambers. Whatever the Government feel is right for the Commons should also be standard and the benchmark for local government and for this place.
I know that Members of the Committee may say that there are different criteria and they do a different job. Those who have served on local authorities at a high level, like myself, are aware that there are very important decisions to be made. I can assure the Committee that I have never been lobbied more heavily on this issue than when I appeared in this Chamber—not in the local authority and not in another place. The number of people outside this Chamber who believe—I think rightly—that the decisions taken here can be material in the decision-making process is very great.
My experience of local government is from years past. There may be others with more recent experience. The situation has moved on in the past five or 10 years, and certainly in the past 20 years. This amendment points to the fact that there are measuring rods and standards of propriety and probity in public life that should be the same at all levels.
The noble Baroness, Lady Carnegy of Lour, indicated that this Chamber will need to check its own standards in these matters. However, I hope that Members of the Committee will not say the decisions that are made in this Chamber are less important or are less subject to pressure than the decisions made in either another place or local government. I am not saying that this Chamber awards contracts, but we make decisions which are real, important and far-reaching. The purpose of this amendment is perfectly simple; it is that what is good for the goose of local government should be good for the gander of national government.
3.30 p.m.
Lord Renton: I hope the noble Lord will bear this point in mind. I speak from 44 years' experience of Parliament altogether. Never once, as a Member of Parliament, have I had to take part in a decision as to who should be awarded a government contract except when I was serving as a Minister, and even then it was a very rare thing indeed. Those decisions were nearly always taken by officials, although Ministers were responsible for them. But Private
1136
Members of either Chamber are simply not called upon to take those kinds of decisions.
Lord Graham of Edmonton: I say with great respect that I made the point that we in this Chamber do not award contracts. However, what we do which is equally important or more important than that is to set the framework in which contracts have to be sought. We have just gone through a whole series of decisions which affect the ability of a local authority to contract out. All of those matters have wide repercussions. The Chamber does not need me to go into the detail of that. One reads regularly of the interlocking nature of business interests. That exists and is real.
We are proud of our system of government. Therefore, as my noble friend Lord McIntosh said, we should be able to devise a scheme whereby the public are made aware of Members' interests. I am not talking about simply declaring interests, as I have many times, but about publishing our interests so that there can be no confusion.
Lord Ross of Newport: While I have some sympathy with the amendment, I do not wish the regulations to be held up. I think it is right that there should be declaration of interest and that regulations should be drawn up for that purpose as regards local government. However, I was staggered both in another place and in this Chamber to find that Members are entitled to speak on subjects in which they have very large financial interests. They are never obliged to sit down and keep quiet. In local government, however, that does not and cannot happen.
When I had a small retained interest in a development scheme, I was not allowed to speak on that at all. A statement of my views was read by the clerk of the council. I had no pecuniary interest in that development at all, but I had been retained to advise on it. That certainly does not happen in this Chamber. Directors of companies which are very much involved in takeovers of other companies in which there are constituency interests in another place are perfectly free to make speeches in this Chamber and in another place without any restriction whatsoever.
However, having said that, while I have sympathy with the amendment I cannot support it because I believe it is right that these rules and regulations should be drawn up for local government. They should not be delayed. The problem is to some extent worse in another place. We should put our own house in order, but we do not have to do that before we draw up the regulations for local government as the amendment suggests.
Lord Trafford: Although I agree with the noble Lord's comments, I should point out to him that it is the convention both in another place and in this Chamber for Members to declare interests which reflect in some way on the matter under discussion. I agree with the noble Lord that the observance of this convention may have changed slightly, but I believe that if the noble Lord looks through the rule book he will find that that rule is applicable to this Chamber also.

1137
I recognise that the noble Lord made a perfectly proper distinction between that which we should do by convention and that which we have to do by regulation. I accept that, and I share the view of the noble Lord of the difference in the directness of the spheres of influence which are exercised by Members of this Chamber and those exercised in another place and by members of local authorities. I think the noble Lord, Lord Graham, agreed with that too. In case anyone gets the wrong impression from what has been said here, I should put on the record that it is usually the custom for Members to declare their interest, even though in so doing they are not prevented from making comments on the matter. However, at least when they do make comments in either Chamber it should be known that they have a significant interest in the matter under discussion. That is what matters.
Lord Ross of Newport: As that was an intervention, perhaps I may reply to it. I accept that Members of this Chamber, as far as I know, always declare any interest when speaking on a subject, but they go on to address the Chamber on that subject. I was trying to say that that is not permitted in local government, or at least not in the local authority in which I served.
Lord Hesketh: This amendment would require the Secretary of State to certify that any regulations made under Clause 18 requiring members to provide details of their pecuniary interests are no more onerous than those which are applicable to the Members of either Chamber in the Houses of Parliament. That would indeed pose a major restriction on provisions as regards this Chamber because, as many Members of the Committee have pointed out, Members of this Chamber are under no obligation whatsover to register their interests.
We believe that comparisons between the kinds of interests which Members of another place are required to declare and those which should apply to councillors can also be misleading. It is wrong to draw comparisons. Local authorities are not legislative bodies and the issues and the conflicts of interests that arise are different, as my noble friend Lord Renton and others have pointed out to this Chamber.
If Members of another place are concerned that their rules are not sufficiently stringent, it is open to them to change them. Meanwhile, I do not believe that we should draw up rules for local authority members solely with an eye on those which apply to Parliament. We are currently consulting the local authority associations about the details of the register and the interests to be declared thereon. We do not expect this to be unduly intrusive.
The purpose of the register is to highlight the existence of major interests. It is not proposed that members should be required to provide details of the amount and extent of their interest. We would, for instance, expect members to declare the fact that they have shares in a company, but not how many. Likewise, we would not require members to declare interests that are so insignificant that they
1138
could hardly be expected to influence their conduct as councillors.
At present we envisage that the broad headings to be covered by the register will include land, property and company interests as well as paid employments. The noble Lord, Lord Renton, asked for a distinction between direct and indirect interests. As I understand it, a direct interest involves one's salary, whereas an indirect interest would concern shares in for instance a building firm that could be awarded a contract. However, I am sure that the noble Lord, Lord Renton, and other Members of the Committee will be pleased to hear there is a far better definition laid out in Section 95 of the Local Government Act 1972. With that, I hope that the Committee will be able to resist the blandishments of the noble Lord, Lord McIntosh, and reject this amendment.
Lord McIntosh of Haringey: I did not think I had used blandishments. I thought I was putting a case for Members of this Chamber, with respect to the legislation we pass, to behave as though we were ourselves affected by it. That seems to me to be a totally responsible approach and not a blandishment.
I must first of all reply to the noble Lord, Lord Ross, who feared that the register of interests might be held up. There is no danger of that as the register of interests already exists under Sections 95 and 96 of the Local Government Act 1972. That provision could easily continue in force until the new legislation is ready, and until the Secretary of State is ready to make new regulations.
We are concerned here with a series of issues of practicality and with an issue of principle. On the practicalities, it has been argued that the nature of local government business is so different from the nature of parliamentary business that declarations of interest and registers of pecuniary interest should not be the same. I was chairman of the planning committee of a borough council for four years and chairman of the planning committee of the Greater London Council for four years. I am sorry to say that not once in those eight years was I offered a bribe. Similarly, not once in those eight years did I have any difficulty in declaring an interest on specific issues and in absenting myself from discussion or votes on those matters.
It is argued that the nature of local authority work is significantly different from that of Parliament. I cannot follow that argument. We deal with legislation which has an enormous effect on the finances of very large numbers of bodies, not just public bodies like local authorities but also private companies and, in many cases, private individuals. Evidence of that has already been given by a number of noble Lords. How many of your Lordships and how many Members of another place are approached by those who wish to influence us and do so presumably because they think that it is worth their while financially to seek to influence us and convince us of the rightness of their point of view?
Members of another place in particular, but also a number of Members of this House, are paid as consultants in order, presumably, not only to inform outside organisations about the activities of Parliament but also to influence the activities of

1139
Parliament. Indeed, recently a Member of another place went so far as to advertise his availability as a paid consultant for outside interests. There is plenty of scope for pecuniary interest and for it to be just as important in this House as it is in local authorities.
In our charming, quaint way we have rules of debate which state that:
"It is a long-standing custom of the House that Lords speak always on their personal honour. It follows from this that if a Lord decides that it is proper for him to take part in a debate on a subject in which he has a direct pecuniary interest, he should declare it.
"Subject to this, and to the guidance to Members or Employees of Public Boards (the Addison Rules), there is no reason why a Lord with an interest to declare should not take part in debate."
That is the point to which my noble friend Lord Graham referred.
"It is however, considered undesirable for a Lord to advocate, promote or oppose in the House any Bill or subordinate legislation, in or for which he is or has been acting or concerned for any pecuniary fee or reward".
A very large number of Members of the House declare interests—and then go on to advocate, promote or oppose legislation. Indeed, they go on to vote on, for or against legislation in which they have declared an interest. I believe that there is a good deal of scope for improvement in the rules of this House. The principle has been accepted in local authorities for many years that where there is a direct or indirect pecuniary interest the member of the local authority concerned should absent himself from the debate, not take part in it and not vote on it. Those are good rules which we could adopt in Parliament with considerable benefit to our own proceedings.
Baroness Carnegy of Lour: I thank the noble Lord for giving way. He must remember that the value of this House lies in the fact that its Members have experience in so many different aspects of the life of the country and can contribute to debate on those subjects. If the Members who understand, for example, the land, the environment, farming, and so on, never spoke about it in this House and always absented themselves and never affected the way the House decided on such matters, the nature of the House would change considerably. I believe that the noble Lord has overstated the case. That was not what I meant when I spoke earlier in the debate.
Lord McIntosh of Haringey: I am not convinced by that argument. There are perfectly good rules for distinguishing between general interests and particular pecuniary interests. In local government, for example, it has always been accepted that council house tenants can vote on council house rents. In many councils there would not have been anyone to vote except the council house tenants. Similarly, I do not think that there would be any difficulty in accepting that farmers could vote on matters affecting the regulation of farming. Those are general matters. However, there are specific matters in which noble Lords and Members of the other place have a specific interest. In many cases they are paid fees in order to affect the results of parliamentary proceedings. In those cases I think that the rules that govern us should be no less severe than those governing local authorities.
1140
It is not out of any desire to weaken the controls on local government that I move the amendment. It is out of a desire to see—and this is where we come to the matter of principle—that we do not say to other people that they should do what we are not prepared to do ourselves. That is an issue of principle on which I cannot retract. This is not a probing amendment for negotiation which I could bring back at another stage. This is a matter on which we on this side of the Chamber say what we think—namely, that the rules should be the same for all in public life. I commend the amendment to the Committee.
3.46 p.m.
On Question, Whether the said amendment (No. 104) shall be agreed to?
Their Lordships divided: Contents, 55; Not-Contents, 152.

DIVISION NO. 1

CONTENTS

Birk, B.

Llewelyn-Davies of Hastoe, B.

Bottomley, L.

Briginshaw, L.

Lockwood, B.

Broadbridge, L.

Lovell-Davis, L.

Bruce of Donington, L.

Mclntosh of Haringey, L.

Buckmaster, V.

Mason of Barnsley, L.

Carmichael of Kelvingrove, L.

Milner of Leeds, L.

Molloy, L.

Cledwyn of Penrhos, L.

Mulley, L.

David, B.

Nicol, B.

Davies of Penrhys, L.

O'Neill of the Maine, L.

Dean of Beswick, L.

Peston, L.

Dormand of Easington, L.

Phillips, B.

Elwyn-Jones, L.

Pitt of Hampstead, L.

Ennals, L.

Ponsonby of Shulbrede, L. [Teller.]

Ewart-Biggs, B.

Fisher of Rednal, B.

Prys-Davies, L.

Gallacher, L.

Sefton of Garston, L.

Galpern, L.

Serota, B.

Graham of Edmonton, L. [Teller.]

Shepherd, L.

Stallard, L.

Greenhill of Harrow, L.

Stoddart of Swindon, L.

Hatch of Lusby, L.

Strabolgi, L.

Hayter, L.

Taylor of Blackburn, L.

Hirshfield, L.

Taylor of Mansfield, L.

Jeger, B.

Turner of Camden, B.

Jenkins of Putney, L.

Underhill, L.

John-Mackie, L.

Wallace of Coslany, L.

Leatherland, L.

Wilson of Rievaulx, L.

Listowel, E.

NOT-CONTENTS

Addington, L.

Boyd-Carpenter, L.

Ailesbury, M.

Brabazon of Tara, L.

Airey of Abingdon, B.

Brougham and Vaux, L.

Amherst, E.

Burton of Coventry, B.

Ampthill, L.

Butterworth, L.

Annaly, L.

Caithness, E.

Arran, E.

Campbell of Alloway, L.

Attlee, E.

Carnegy of Lour, B.

Auckland, L.

Carnock, L.

Aylestone, L.

Cawley, L.

Balfour, E.

Cockfield, L.

Bauer, L.

Coleraine, L.

Belhaven and Stenton, L.

Cox, B.

Bellwin, L.

Craigavon, V.

Beloff, L.

Cross, V.

Belstead, L.

Cullen of Ashbourne, L.

Bessborough, E.

Davidson, V. [Teller.]

Blatch, B.

De Freyne, L.

Blyth, L.

Denham, L, [Teller.]

Bonham-Carter, L.

Dundee, E.

Borthwick, L.

Eccles, V.

1141

Eiffingham, E.

Mowbray and Stourton, L

Elliot of Harwood, B.

Munster, E.

Erroll of Hale, L.

Murton of Lindisfarne, L.

Ezra, L.

Nelson, E.

Falkland, V.

Newall, L.

Ferrers, E.

Nugent of Guildford, L.

Fraser of Kilmorack, L.

Ogmore, L.

Gardner of Parkes, B.

Orkney, E.

Glenarthur, L.

Oxfuird, V.

Goold, L.

Pender, L.

Gray of Contin, L.

Penrhyn, L.

Grey, E.

Platt of Writtle, B.

Gridley, L.

Porritt, L.

Grimond, L.

Rankeillour, L.

Haig, E.

Reigate, L.

Halisham of Saint Marylebone, L.

Renton, L.

Richardson, L.

Halsbury, E.

Rippon of Hexham, L.

Harris of Greenwich, L.

Rochester, L.

Harvey of Prestbury, L.

Romney, E.

Havers, L.

Ross of Newport, L.

Henley, L.

Rugby, L.

Hesketh, L.

Sainsbury, L.

Hives, L.

St. Davids, V.

Hood, V.

Saltoun of Abernethy, Ly.

Hooper, B.

Seear, B.

Hooson, L.

Shannon, E.

Hylton-Foster, B.

Sharpies, B.

Ironside, L.

Shaughnessy, L.

Johnston of Rockport, L.

Sheffield, Bp.

Joseph, L.

Skelmersdale, L.

Kennet, L.

Stedman, B.

Keyes, L.

Stodart of Leaston, L.

Kimball, L.

Strange, B.

Kinloss, Ly.

Strathcarron, L.

Kinnaird, L.

Strathclyde, L.

Knights, L.

Strathspey, L.

Lauderdale, E.

Sudeley, L.

Lloyd of Hampstead, L.

Swinfen, L.

Long, V.

Terrington, L.

Lucas of Chilworth, L.

Thomas of Gwydir, L.

Lurgan, L.

Tordoff, L.

Mackay of Clashfern, L.

Torphichen, L.

Macleod of Borve, B.

Trafford, L.

McNair, L.

Trefgarne, L.

Mancroft, L.

Trumpington, B.

Margadale, L.

Ullswater, V.

Marley, L.

Vaux of Harrowden, L.

Mayhew, L.

Walston, L.

Merrivale, L.

Westbury, L.

Mersey, V.

Whitelaw, V.

Middleton, L.

Wilson of Langside, L.

Monk Bretton, L.

Windlesham, L.

Monteagle of Brandon, L.

Wise, L.

Morris, L.

Wynfoid, L.

Mottistone, L.

Resolved in the negative, and amendment disagreed to accordingly.
Clause 18 agreed to.
The Earl of Arran: I beg to move that the House do now resume.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.

War Crimes Inquiry: Report
3.54 p.m.
Earl Ferrers: My Lords, with the leave of the House, I shall now repeat a Statement about the report of the War Crimes Inquiry which is being
1142
made in another place by my right honourable friend the Home Secretary. The Statement is as follows:
"I set up the inquiry in February 1988 to consider allegations that persons who are now British citizens or resident in the United Kingdom committed war crimes during the Second World War; and to advise whether the law of the United Kingdom should be amended in order to enable prosecutions for war crimes to take place in this country.
"The report as submitted to me was in two parts. The main report contains the inquiry team's analysis and conclusions. The second part contains detailed material on individual cases. The inquiry team intended that the main report should be published. I am today publishing it in full and without amendment. I also accept the expert view of the inquiry team that publishing the material in the second part about individual cases would risk prejudicing any proceedings which might be instituted. The House will see the wisdom of that distinction and understand why I cannot comment on individual cases.
"I believe the House will find the main report a full and impressive document. It lakes a broad view of the historical context affecting the territories and people involved in eastern Europe, of the conduct of successive British Governments during and after the last war, and of the legal and other issues. The team visited the Soviet Union and interviewed a large number of possible witnesses. I am most grateful to Sir Thomas Hetherington, formerly Director of Public Prosecutions, and Mr. William Chalmers, formerly Crown Agent, for their authoritative analysis.
"The inquiry deals with allegations of horrific killings on a very large scale—crimes which would constitute violations of the internationally agreed laws and customs of war. The allegations are not about actions committed in the heat of war. They concern individuals allegedly holding quite senior positions in paramilitary units operating in territories occupied by the German forces, whose task was the systematic murder of civilians.
"The inquiry examined in detail seven cases. They concluded in respect of four that there was sufficient evidence to mount a criminal prosecution (one of the individuals concerned has since died). The inquiry went on to recommend that further investigations should take place in respect of the other three cases; in addition, of the nearly 300 further cases drawn to the attention of the inquiry, they recommend further investigation of 75 and that attempts should be made to trace a further 46.
"The inquiry recommends that there should be a change in the law to permit the prosecution in this country of acts of murder and manslaughter committed as war crimes in Germany or German-occupied territory during the period of the Second World War, by persons who are now British citizens or who are resident in the United Kingdom. Additionally, certain procedural changes (including the taking of evidence by live

1143
television link from persons outside the United Kingdom) are proposed to facilitate the trial of such cases.
"The inquiry was conscious of the danger of creating retrospective legislation and have sought to meet that objection. They are addressing actions which they are satisfied constituted at the time clear breaches of international law, and which would constitute offences triable in British courts now, had the persons concerned been British citizens at that stage.
"The inquiry reached their recommendation on legislation and prosecution in this country after examining and rejecting other courses of action. In particular, they discussed but did not recommend extradition of the individuals concerned to stand trial in the Soviet Union. They set out the arguments for and against extradition. The Government find the arguments against extradition to the Soviet Union convincing.
"The inquiry's recommendations raise important issues of principle and practicality. It can be argued that it is no service to the memory of the victims of these crimes to resurrect, after so many years, the horror of what they endured. One can question what will be achieved by prosecuting very old men so long after the events. The practical difficulties of conducting trials include the age and frailty of witnesses; the problems of assembling evidence which is available, if at all, in the Soviet Union in a form in which it can be convincingly presented to a jury in Britain; and the problem of establishing identity and other key elements beyond reasonable doubt when witnesses' memories are more than 40 years old. The report deals with all these matters.
"On the other hand, it will be argued that, in the words of the report:
"The crimes committed are so monstrous that they cannot be condoned … To take no action would taint the UK with the slur of being a haven for war criminals."
"Other countries which have uncovered similar evidence have acted to enable the alleged offenders to be brought to trial, sometimes making broader changes in the law than recommended in this report. Despite the practical problems of conducting a trial, the experienced inquiry team, a former Director of Public Prosecutions and Crown Agent, reached the view that there would be sufficient evidence in three cases to mount a prosecution if there were jurisdiction.
"If and when the time comes for assessing the evidence, the prosecuting authorities of the day will need to make their own assessment of particular cases.
"We are impressed by the force of argument which led the inquiry to their clear conclusion that legislation was required. But we want to hear the views of Parliament before taking a final view on the principle of legislation.
"This is a matter on which the views of Parliament will be decisive. The Government will provide an opportunity for each House to debate the implications of the report and the action which
1144
should be taken in response to it. This will take place in the autumn once there has been a proper opportunity to study the report and reflect upon it. In the light of the views expressed in that debate, the Government will take a final decision on whether to bring forward a Bill on the lines proposed by the inquiry".
My Lords, that concludes the text of the Statement.
4.2 p.m.
Lord Elwyn-Jones: My Lords, the House will be grateful to the noble Earl for repeating the Home Secretary's Statement and for making available the report of the War Crimes Inquiry conducted by two experts, who are men of great integrity and experience in this field; namely, Sir Thomas Hetherington and Mr. William Chalmers.
The recommendation of that inquiry was in the following terms:
"Some action should be taken in respect of alleged war criminals who are now British citizens or are resident in this country where the evidence is sufficient to justify such action".
It then goes on to say:
"Legislation to allow prosecution in this country is preferable to extradition. Other courses, such as deprivation of citizenship and deportation, and prosecution under the terms of the Royal Warrant of 1945, would not be satisfactory".
Then there is the conclusion:
"Legislation should be introduced to give British courts jurisdiction over acts of murder and manslaughter committed as war crimes (violations of the laws and customs of war) in Germany or German occupied territory during the period of the Second World War by persons who are now British citizens or resident in the United Kingdom".
There follow significant words which I venture to underline:
"Such legislation should be brought into force as quickly as possible".
A great deal of time has elapsed and I am quite sure that in advising the House that there was need for a further and final investigation and for a view to be taken by Parliament, the noble Earl took the view that the lapse of time will not be permitted once more to add to the problem that already exists. We have not yet had an opportunity of examining in any detail the commissioners' report but we are grateful to the Government for having made it immediately available for the House to consider.
As a democratic country, we shall not be unique if it is decided to introduce this legislation. It has already been done by both Australia and Canada, which your Lordships may indeed think are two splendid precedents. Recently, a case was brought to trial before the Canadian Supreme Court which tested the constitutionality of the Canadian legislation in this field. The court decided that there was no infringement of constitutional or other law in what was proposed. So there is a good deal of ground already available for examination of these matters.
The noble Earl indicated that we shall revert to these matters. Can he give an indication to the House at this stage of when it is proposed that that will take place? There will be an overlap period at the end of the present Session, which would seem to be an admirable time for dealing with this matter. I greatly hope that the Government will treat it as a

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matter of urgency. The more delay, the more difficult is the situation, for reasons that have been indicated. I hope therefore that we shall be given some indication at this stage of the Government's intention that Parliament should properly and rightly have an opportunity to deal with this grave chapter in human history and to dispose of it at any rate so far as concerns legislation.
The memories of Nuremberg are still vivid in my memory. There were millions who were deliberately put to death. That cannot be passed over as a mere aberration, forgotten in the mere tide of history.
Lord Hooson: My Lords, from these Benches I, too, should like to thank the noble Earl for repeating the Statement in this House. Perhaps I may say immediately that I entirely agree with the Government's view that there should be a debate in Parliament before legislation is introduced. I also agree with the remarks that fell from the lips of the noble and learned Lord, Lord Elwyn-Jones, at the conclusion of his remarks. Nevertheless, the report highlights the many difficulties that face this country should we decide to change the law.
We should be seeking to change the law 44 years after the end of the War. We are faced in a sense, with the possibility of trial by live television. Some of the witnesses are described in the report as old and infirm and some of them may be witnesses as to identity. In fact, they would have to give their evidence by means of a live television link, which would cause difficulties in obtaining a conviction under our law with a jury.
Therefore there are many difficulties facing the Government. I agree with the course that they suggest. Mature reflection over the Recess should enable us to have a debate in the next Session so as to come to a conclusion.
In the meantime I should like to ask whether in this respect there have been any trials in Australia and Canada. My understanding is that those countries have changed the law but that in fact no trials have taken place. Because I have only been able to scan it, perhaps I may also ask whether any indication has been given in the report of how long it would take from the time that the legislation was passed until a case came to trial.
Earl Ferrers: My Lords, I am grateful to both the noble and learned Lord and the noble Lord, Lord Hooson, for the cautious welcome that they have given to this Statement. I realise, as will your Lordships, that this is a very controversial Statement. I suspect that feelings will run fairly strongly in all directions on the matters considered by the report. I am grateful to both speakers for saying that they are happy that we shall be able to have a debate in this House as well as in another place in order to gauge parliamentary opinion before the Government have to make up their mind on what, I repeat, is not an easy matter.
The noble and learned Lord, Lord Elwyn-Jones, asked when we would be able to have a debate on this matter. All I can tell him at this instance is that
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it is the Government's intention to have a debate in the autumn. He would not wish me to be more precise than that at the moment. However, it is our intention to have the debate as soon as possible for the very obvious reason that when the Government make up their mind, if they do so in the way that the report indicates, the sooner the better.
The noble and learned Lord said that if we were to take action in this direction we would not be unique because Australia and Canada have done so. Of course different countries have reacted in different ways. It is perfectly true that ***Australia and Canada have legislated in a way that is more extensive than the report suggests that we should do. The noble Lord, Lord Hooson, asked whether there have been prosecutions. I understand that Australia and Canada have both established major investigative units and that they have legislated. I would have to seek confirmation; I am not aware that there have been prosecutions. The noble Lord, Lord Hooson, also asked how long it would take before the passing of legislation and the institution of prosecutions. Perhaps I may point out to the noble Lord that if Parliament were to pass such legislation it would then be legislation on the statute book. Whether prosecutions took place, and how many and in what respect they took place would be a matter for the Director of Public Prosecutions. One cannot tell at this stage whether there would be any, or how many there would be.
Lord Hailsham of Saint Marylebone: My Lords, I shall of course read this report with the greatest care. However, I must at this stage express very considerable misgivings about what is now proposed. It is proposed to take jurisdiction retrospectively to try crimes, the horror of which no one can obliterate and no one will attempt to mitigate, which were triable at the time of commission, and at the time of the Nuremberg trial, only under either the Nuremberg statute itself or under the municipal law of the countries where they were committed. That is a very serious step to take. It is not proposed to stop there. It is proposed to alter the laws of evidence which would be inadmissible in any other criminal case tried in this country especially for the purpose of trying these classes of cases, limited to two offences, and limited to the cases to which they would otherwise apply. If it is right to change the law of evidence, it is something that ought to be done for all offences. To do that retrospectively after 45 years is a very serious step to take.
There is another factor that I hope other people will take into account. My noble friend Lord Ferrers referred to the difficulty of establishing a case according to the ordinary rules of prosecution evidence here. That is a formidable difficulty. It will probably take years to mount a prosecution and to bring it to trial under any of these cases.
How about the defence? A man is entitled to a fair trial, and a fair trial includes the right of putting forward a defence. If there are any defendants, how will they be affected by the lapse of 45 years? I venture to say that the answer is that we have not the slightest idea. I venture to doubt the wisdom of this. With the promise that I have given that I shall

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read the report and try to digest its reasoning, I think it right at this stage that I should express my misgivings.
Earl Ferrers: My Lords, I am grateful to my noble and learned friend for what he has said because he expresses a view for which I have no doubt many people have a great deal of sympathy. He said that we would be altering the method by which evidence was taken. I assume that when he said that he was referring to the possibility of using live television. I point out to him that Section 32 of the Criminal Justice Act 1988 allows evidence to be given by people from abroad via live television. There is therefore the ability for such use on the statute book at the moment.
My noble and learned friend referred to the aspect of retrospective legislation. That is very important indeed. The report addresses the argument because it is one of great importance. It states:
"It can be argued that enactment of legislation in this country to allow the prosecution of 'war crimes' in British courts would not be retrospective: it would merely empower British courts to utilise a jurisdiction already available to them under international law since before 1939, over crimes which had been internationally recognised as such since before 1939 by nations including both the United Kingdom and Germany".
I would not wish to argue with my noble and learned friend. He has made a totally valid point. I merely refer him to the way in which the report has addressed the argument. I have no doubt that we shall be able to return to that very important point later.
Lord Mason of Barnsley: My Lords, are Her Majesty's Government taking any steps to stop the three persons most strongly suspected of war crimes from leaving this country until legislation has been determined?
Earl Ferrers: My Lords, anyone has the right and freedom to leave this country if he so wishes. These people, as well as any other people, are not deterred in that way.
The Earl of Lauderdale: My Lords, will my noble friend make one matter clear? He has referred to German occupied territory. Does the report take account of the fact that the Italians occupied territory, first, in Italy, and, secondly, in Dalmatia under German tutelage? Does the report deal with events that may have happened in those areas?
Earl Ferrers: My Lords, those areas were outside the scope of the report.
The Earl of Halsbury: My Lords, perhaps I may add a word in support of what the noble and learned Lord, Lord Hailsham, has said. All the difficulties to which the noble Earl has referred in relation to the report will become worse by effluxion of time. Therefore in the words of Macbeth:
"If it were done when 'tis done, then 'twere well it were done quickly".
There must be a limitation on it.
Earl Ferrers: My Lords, the noble Earl, Lord Halsbury, is perfectly correct. Obviously, bearing in
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mind the age of these people, if action is to be taken it must be taken fairly quickly.
The Earl of Halsbury: My age, my Lords!
Earl Ferrers: The noble Earl says "his age". That is the only similarity between the noble Earl and the matter that we are considering. I accept his point.

Electricity Privatisation and Nuclear Power
4.18 p.m.
The Parliamentary Under-Secretary of State, Department of Energy (Baroness Hooper): My Lords, with the leave of the House, I shall repeat a Statement made in another place by my right honourable friend the Secretary of State for Energy.
"With permission, Mr. Speaker, I should like to make a Statement about electricity privatisation and nuclear power.
"As a result of our preparations for privatisation, it has recently become clear that the cost of reprocessing and waste treatment of spent Magnox nuclear fuel will be a great deal higher than has been charged in electricity prices and provided for in the accounts of the CEGB and SSEB. The Magnox stations are drawing to the end of their lives. One is already closed, and most of the others are due to close within the next few years. Most of these costs therefore relate to the past, to electricity already generated and paid for. Future customers will be bearing the full cost of the electricity they consume. It would not be right to burden them also with costs arising from the past.
"It is important that the energies of the companies should be directed towards ensuring that their existing stations are run efficiently and at lowest cost. National Power will, subject to planning and other consents, also be building new PWRs. In order to enable the nuclear generating companies to focus their attention on the future, the Government have decided that it would be appropriate to relieve the new companies of dealing with these substantial problems of the past.
"The Government have considered carefully how best to implement this decision. It has been decided that both the assets and liabilities relating to the Magnox stations belonging to the CEGB and SSEB should remain under government control.
"The AGR stations will be assigned to National Power and the Scottish Nuclear Company, and will be privatised. These stations have many years of operation ahead. The operating performance of these stations has shown marked improvement and this can be expected to continue in the future. Therefore we have good reason to believe that the AGRs will have a long and successful future in the private sector. National Power will continue to construct Sizewell B and, subject to obtaining the necessary planning approvals and satisfactory contractual arrangements, intends to construct and operate three more PWRs.

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"No changes to the Electricity Bill are needed to bring the Government's decisions into effect. I shall be laying a draft order before Parliament during the autumn to increase the limit on the amounts payable under Schedule 12 to the Bill from the interim level of £1,000 million to £2,500 million. This order will be subject to affirmative resolution and will give the House a full opportunity to debate our detailed proposals. The order will enable grants to be paid to National Power and to the Scottish Nuclear Company for unforeseen costs, as previously explained to the House. These powers will also be used to ensure that the Magnox stations can continue to be operated and their liabilities to be met.
"I am most concerned that nothing is done to jeopardise the future of the employees concerned. Their pension rights, their ability to benefit from the flotations, and their career prospects will be protected. To this end I shall discuss the implementation of the proposal with all the parties concerned, including the unions.
"We shall ensure that the necessary resources are available to maintain the present high standards of safety and environmental protection. We shall not take any steps which are not approved by the Nuclear Installations Inspectorate.
"Preparation for privatisation has brought new information to light. The costs for the Magnox stations, which have now become clearer, would present major financial problems for the two nuclear companies. They can be paid for only by the customer or the taxpayer. The Government do not believe that this legacy of the past should be borne by customers in the future. The Government have therefore moved rapidly to deal with the issue. It is right to separate the problems of the past from the prospects for the future. The nuclear generators will be able to concentrate their efforts on building a new generation of PWR stations and further improving the performance of the AGRs. On the basis of the presently planned life, the last Magnox station will have closed by 2002. Thereafter, commercial nuclear power generation will be wholly in the private sector. This where it should be and where it will fourish".
My Lords, that completes the Statement.
4.24 p.m.
Lord Peston: My Lords, I thank the noble Baroness for her important and interesting Statement. What the Government are proposing appears to be a half-way house between what they originally proposed—which was entirely to privatise all generation, including nuclear generation—and the suggestion that was made when your Lordships were discussing the Electricity MI, when many noble Lords on all sides of the House thought that the whole thing would be infinitely easier if the Government kept the whole of nuclear power in the public sector, at least for the time being.
This seems to be a half-way house and it is very puzzling. Before asking a series of questions, at least I welcome one aspect of the Statement, which is that
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nothing shall be done to jeopardise the future of the employees concerned. I am delighted to hear that and, as this has not been characteristic of the government, I am delighted to hear that they intend to discuss the proposals with all parties concerned, including the unions. That is a welcome return to rational behaviour on the part of the Government.
I have a series of questions to put to the noble Baroness. I am sorry that there are so many, but the Statement is important enough to warrant them and I should prefer to do it now rather than try to find some artificial way of raising the matter tomorrow when we return to our old friend the Electricity Bill.
My first question is fairly obvious. What does the phrase "remain under government control" mean? Will there still be a separate company somewhere (we do not know what it will be called) that will own these stations? Or are we to understand that the noble Baroness's department will own the stations? We should welcome an indication of what "under government control" means.
My second question refers to the reason why this will happen. Am I right in assuring that the Government's argument is that consumers of electricity in the past have not met the full costs of the nuclear generated electricity that they have consumed? Is that the point? They did not meet the costs, the Government have no idea about how to place those costs on them and therefore they have decided that they must place those costs on the taxpayer, because after all that is what this is all about.
If that is so, what about the AGRs, because the Government have decided that they will be sold off? Are the Government assuming—indeed, do the Government know—that the costs to date of the AGRs have been fully met by the consumer? I should be surprised to hear that the Government believe that, but I should like to know what the Government's view is. Why are the AGRs any different from the Magnox stations? I s it not too late for the Government to keep the AGRs in the pubic sector as well, which, I repeat, is the sensible procedure?
In the Statement the noble Baroness referred to the costs of reprocessing and waste treatment of spent Magnox fuel. She believes that will be a great deal higher than has been charged in the past. Is that the only reason? In other words, are there no decommissioning costs involved which are being taken into account? That is what we were debating when we last discussed this matter. Is it just a matter of reprocessing and waste treatment and no more? Has she anything to tell us about that?
Another question I have relates to the fact that the noble Baroness was reading a Statement that was given in another place. It says that the House will have a,
"full opportunity to debate our detailed proposals."
May I assume that "the House" for this purpose means your Lordships' House, even though the Statement is simply a repetition of that read in another place? We regard it as extremely important to debate these matters in some detail.

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I hate to rub salt into any wounds, but the noble Baroness has just announced that under Schedule 12 to the Bill her right honourable friend the Secretary of State already intends to raise the interim levels from £1,000 million to £2,500 million. Is she aware that we are surprised that we have reached this stage as quickly as we have? We assumed that that might be happening in some years' time rather than immediately. Is there any possibility that the £2,500 million could, in the Government's view, be exceeded: I do not expect an answer to that, but I have a more formal question. Am I right in thinking that if we ended up with more than a £2,500 million bill for this, then primary legislation would surely be necessary?
Although this is a short Statement it raises an enormous number of issues. I do not apologise for mentioning them at this time.
My final question is rather a raising of eyebrows. It was clear to many noble Lords on all sides of the House that the problem was central to the Bill. Can we believe that, because the implication of privatisation has suddenly dawned on the Government, this matter has only recently come to light? With no disrespect to the noble Baroness, I find that hard to believe. Is it the case not that new information has suddenly come to light but that it has suddenly dawned on the Government that the sums of money involved are so large that the whole of electricity privatisation is in peril, as we pointed out?
I look forward to the noble Baroness's reply and in particular to that concerning our ability to debate the matters in detail.
4.30 p.m.
Lord Ezra: My Lords, I thank the noble Baroness for that Statement. I should like to carry on where the noble Lord, Lord Peston, finished. I have always believed that the nuclear aspect was the albatross hanging around the neck of the electricity privatisation Bill and that it was the big problem which must be faced. I am not particularly surprised that the Government have now come forward with this Statement.
It raises a number of issues. First, we were told that the Government have decided that both the assets and the liabilities relating to the Magnox stations belonging to the CEGB and SSEB shall remain under government control. That was clearly stated by the noble Baroness when repeating the Statement. However, I cannot understand why later we were advised that no changes to the Electricity Bill were needed in order to bring the Government's decision into effect. I may have misunderstood the whole purpose of the legislation that we have debated at length but I believe that it is a major change and that if it is to be abstracted from the terms of the Bill an amendment is required. I cannot see how today the Government can say that they will abstract it from the Bill but that at the same time no modification is required. I should be glad to hear the noble Baroness's views about that problem.
Secondly, it was made clear in the Statement that the Government did not wish to burden consumers
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with past costs in relation to nuclear. There have been many past costs but one of the most important was that which occurred in the early days of the AGRs. Enormous delays were then encountered in bringing those stations into operation. I agree that the later versions of the AGRs have been more successful. However, if the Government are true to their intention of not burdening consumers with past costs in relation to the Magnox stations why should they be burdened with the past costs in relation to AGR stations? I believe that there should be some logic in the approach.
Thirdly and more generally, would the Government not have been better advised to separate nuclear from conventional stations? Such an amendment was proposed and supported from all sides of the House. Many noble Lords on the Tory side also spoke in its favour. Would it not have been much simpler for the public to be quite clear in what it was being asked to invest? The nuclear stations have special problems such as past costs, decommissioning, the disposal of nuclear waste and other issues which burden the nuclear industry, important though it is in the energy field. Therefore, would it not have been better if right from the start the Government had decided to separate nuclear from conventional stations so that everyone knew where they were? The Government should then have accepted to take on that part of the nuclear burden which they have now decided to do in respect of Magnox and which they should do also in respect of the AGRs. Would that not have been a better and simpler solution and would it not have expedited the Government's intentions?
Baroness Hooper: My Lords, I am grateful to the noble Lords, Lord Peston and Lord Ezra, for their comments and the points that they have raised. As regards the welcome given by the noble Lord, Lord Peston, to the safeguarding of employees' rights and conditions, I point out that it is not unusual for the Government to consult widely and to include the trade unions. Considerable discussions about pension rights were held with the trade unions in respect of the Electricity Bill, as the noble Lord will remember.
I shall try to tackle some of the questions which the noble Lords raised. The type of company that is to be formed is still under consideration and the detail has not yet been finalised. That matter will be the subject of debate in the autumn. It is intended that it will be a separate company owned by the Government.
The noble Lord asked whether in the past insufficient provision was made by the consumers in respect of the charges. The provisions that were made have proved to be insufficient and they relate mainly to the charges in respect of Magnox stations, as we have always made clear. It is as a result of extensive scrutiny of the arrangements and extensive preparation for the privatisation that the full facts about those costs have emerged. In looking at the arrangements which now must be put in place we believe that it is important and right to separate the problems of the past from the prospects for the future, which we believe are good.

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The noble Lord asked whether AGRs are fully covered. That brings me back into the area of unforeseen and unforeseeable costs which we debated during the course of the Bill. The provisions contained in Clause 98 and Schedule 12 are intended to cover any unforeseen costs relating to future operation as well as the past. It will certainly be the intention of the new companies to provide in their charges for all costs that are known. It is the intention of the Government that those costs should be known at flotation. Clause 98 remains in the Bill in order to cover any unforeseen costs. I emphasise, as we have always done, that the difficulties that we now face and their magnitude relate principally to the Magnox stations.
As regards detailed discussion in the autumn, an order of the type provided under Schedule 12, paragraph 4(2), is subject to affirmative resolution by the House of Commons. If necessary, any orders made by the Secretary of State under Clause 34, relating to the non-fossil fuel obligation, and Clause 35, relating to the levy, would by virtue of Clause 107 be in the form of statutory instruments subject to annulment in pursuance of a resolution of either House of Parliament.
Therefore, what all that means is that the order which is subject to the affirmative procedure and which is necessary to increase the £1 billion provision to the £2·5 billion figure would be subject to discussion only in another place; but since orders will be raised on the non-fossil fuel obligation and the levy under Clauses 34 and 35, the procedures there are open to discussion also in this House. In the event of any increase going over the £2·5 billion figure, as I said previously to the House primary legislation would be needed.
I hope that covers most of the points raised by the noble Lord, Lord Peston. I believe he asked why the information has only just come to light. In fact, the figures have emerged only over the past couple of months and it has been necessary to understand and analyse them before reaching a decision which we could put before your Lordships.
The noble Lord, Lord Ezra, asked for confirmation of the statement that there will be no changes necessary to the Electricity Bill. I can give him that confirmation. He also asked whether consumers were going to be further burdened with nuclear costs. I feel I must again make clear that the costs of Magnox stations are a legacy of government decisions taken 30 years ago, so the Government are taking the responsibility for dealing with those costs; not just because we have been urged to do so, as I recognise that we have, but because it is right to do so. Where future costs are concerned it is intended, as I said, that adequate provision for all foreseen costs will be made at the time of flotation of the company.
We remain firmly convinced that nuclear power will have a better future in the private sector. We believe that it is right to separate the problems of the past from the prospects for the future. We believe that Magnox stations will continue to perform realiably in the short term and that the AGR performance, which has been much improved, will
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continue to improve. I should add that in 1988–89 the AGR output in England and Wales was 27 per cent. higher than the previous record. The costs were potentially there, but their full extent has only recently been brought to light. The Government are determined to make clear the full cost of nuclear power. We believe it would be wrong to fudge this and that is why the matter has been brought before your Lordships at the earliest possible point.
Baroness Seear: My Lords, I am not sure that one should raise large questions in response to a Statement, but one is left absolutely flabbergasted that a change of this magnitude and importance is brought forward now. Can the noble Baroness explain what process of investigation was undertaken before the Electricity Bill was drafted and which failed to throw up the facts of the issue? I realise that this is a big question to ask on a Statement but it leaves us speechless. Who advised the Government? Where did the information come from on which the Government based the Bill and which overlooked this trivial little matter of nuclear energy?
Baroness Hooper: My Lords, I said that the full extent of the figures emerged only over the past couple of months. The scrutiny of the accounts of nationalised industries, as the noble Baroness will know, is in the first place a matter for the auditors concerned. From time to time the department meets the industry and its auditors on the accounts. Clearly this happens on an ongoing basis in normal circumstances. However, in the preparation for privatisation all parties have been looking very keenly at the accounts to ensure that they properly reflect all the costs. It is as a result of that examination that the figures have emerged. There has been no attempt to deceive anyone, certainly not this House. We are laying our proposals and the facts before the House at the earliest possible time.
4.45 p.m.
The Earl of Halsbury: My Lords, I thank the noble Baroness for her Statement. Will she confirm that everything towards the end of its life is a legacy inherited from the past? The cost of decommissioning is the cost of not having designed something as you would do 40 years later. In relation to AGRs, will the noble Baroness confirm that we are talking only of two groups of stations: Hunterston B, Hinkley B, Torness and Heysham 2? The others are low-performance prototypes which should be dealt with on the same lines as the Magnox because they will never be economic in terms of their historical cost. Therefore, to that extent I am in agreement with the noble Lord, Lord Ezra.
It seems to me that the noble Baroness is trying to pre-empt the decisions of governments 40 years hence. I have always been taught that no government can commit their successor save through an Act of Parliament which is repealable. I cannot see that it is going to be a business proposition to sell to the City of London something unknown that is to be decommissioned in 40 years' time when we have no experience of decommissioning the first.
Baroness Hooper: My Lords, I am grateful to the noble Earl for his contribution, which is, as always, well founded on his knowledge of the industry. However, on the facts that the Government have been considering in reaching this decision the problem area is very much the Magnox stations which we feel should be kept under sector control. The information coming forward about the progress of the AGRs shows that some of the problems that have emerged in the past have been overcome and that all the AGRs—not only those referred to by the noble Earl—have a long and successful future ahead of them.
Lord Boyd-Carpenter: My Lords, can my noble friend add a little to her answer to the noble Baroness, Lady Seear? As I understood my noble friend, she said that the extent of these costs had only recently come to light. Can she explain how that could be? As I understood her earlier answers, many of these costs go back a great many years. Surely, the government system of accounting took account of them. They must have been available to her department and to Ministers. Can my noble friend explain why only at this very late stage the existence has come to light of these large liabilities which require to be dealt with?
Baroness Hooper: My Lords, provision that had been thought adequate as regards future liabilities on de-commissioning, re-processing and so on, stood both on a historic cost and on a current cost basis at £3.4 billion in the 1987–88 accounts. The provision in the 1988–89 accounts is likely to be at least double that figure. The majority of these costs are for nuclear provision which will be inherited by National Power. It is simply a matter of fact that the full extent of these future costs has only been definitively worked out in the recent past.
Lord Stoddart of Swindon: My Lords, is the noble Baroness aware that her Statement this afternoon will have been received with incredulity by those who have had anything to do with the electricity supply industry and nuclear power over a period of time? The Minister will know that on many occasions figures supplied by the CEGB to the Sizewell inquiry and to the Energy Select Committee in another place gave the impression that the Magnox stations were efficient and that they produced electricity at lower cost than coal-fired stations. Those figures were used for all kinds of purposes—for bolstering up a future nuclear power programme as well as for other reasons.
Is the Minister telling us the that CEGB has only found out the real cost of Magnox stations at this stage? If so, what right had it to give information to Select Committees of this House and other important bodies without perhaps paying proper regard to the truth of those figures? Can the Minister also say whether it is not a fact that as regards the Magnox stations the capital costs of most of them have been virtually written off'? Therefore, are we not talking only of the operating costs and the costs of reprocessing concerning the total cost of energy per unit sent out from those power stations?
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If those are the only costs involved and there are no capital costs to be amortised, then it is incredible and impossible to believe that such costs are below those of the early AGR stations. The Government should look again at this problem and at the figures on which their decision is based. I really do not know quite how to conclude, I am so concerned about this matter. Obviously, other noble Lords are concerned. I wish to emphasise to the noble Baroness the seriousness of the Statement and the considerable doubt which can be thrown on the basis on which it is made.
Baroness Hooper: My Lords, I am well aware of the importance and significance of the Statement. I repeat that the process of privatisation has focused attention on the true cost of nuclear power and of the Government's determination to make the cost transparent. That has resulted in new figures being brought to light. The industry, the Government and their advisers have undertaken a thorough analysis of the make-up of the provision as part of the preparation for privatisation. Some costs had not been previously identified, and others were accounted for differently. There are a variety of reasons.
The 1989 accounts will include for the first time costs which had not been previously provided for and the impact of tax on long-term provision. Most of the costs involved are those of reprocessing and disposing of the spent fuel from past generation. These costs will not go away.
The Earl of Lauderdale: My Lords, I ask my noble friend to clarify one point. I do not think that we want to turn knives in wounds at this stage. With regard to the provision of money that has to be increased, we understand that that is a matter for the other place. But since much wider issues, apart from the provision of money, arise, can the Minister assure us that there will be an opportunity to debate the matter in this House? If she is not herself a usual channel, perhaps she will communicate the view that this House must have a good look at the subject in the autumn?
Baroness Hooper: My Lords, I am grateful to my noble friend. I shall certainly communicate with the usual channels. I am sure that we shall be able to inform your Lordships at the earliest possible opportunity what the procedure will be. I indicated that there are other orders and regulations due to be made under the Bill which would give an opportunity to debate, if not the specific increase of funds, then the wider issues which have been presented in this Statement.
Viscount Hood: My Lords, the figures that the Minister has given are somewhat confusing. We have heard before and during the debate of the very large provision made by the CEGB. The figures that the Minister has now given are shown to be very large indeed. I assume that this must necessarily be provision out of revenue. It follows therefore that the consumer pays. I assume that the provision has been re-invested in the business and does not have a corresponding cash availability to meet the costs when they arise.

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I hope that, in the fullness of time, the Minister will be able to provide figures which will relate the provision already made to the very large additional appropriation included in the Bill.
Baroness Hooper: My Lords, yes. The provision, that I quoted earlier and which exists in the CEGB's accounts, standing at £3·4 billion in the 1987–88 accounts, was the result of charges made to the consumer. In that sense the consumer paid. Apart from the Magnox stations which are to be dealt with separately by the Government, future costs will also be accounted for in the charges to the consumer. I believe that most investors would treat such provision as equivalent to debt in many respects.
Lord Cledwyn of Penrhos: My Lords, is the noble Baroness aware that in my experience in both Houses I have not come across a situation comparable to the present one? She has repeated a Statement of the utmost significance and of national importance. It affects the Electricity Bill. As I understand it, the question of nuclear power is dealt with in Schedule 12 and in related clauses of the Bill.
In the light of what noble Lords, including the noble Earl, Lord Lauderdale, who has just left the Chamber, have said, it seems that there is a strong case for the Government withdrawing from the Bill Schedule 12 and the relevant clauses so that this entire matter can be considered. For some reason or another the Government and their advisers had not given proper thought to this aspect of the electricity industry before the parliamentary draftsman handed them the Bill. Therefore, will she consult her right honourable friend Mr. Parkinson and ask him whether he will now consider withdrawing the parts of the Bill relating to the Statement?
Baroness Hooper: My Lords, we still believe that the Bill is a good one and will achieve our objectives. Our proposals are consistent with the Bill as presently drafted. Indeed the proposals which are the subject of this Statement will contribute to the success of the privatisation. A good deal of extra work will be needed but we are confident that privatisation of the electricity industry can be completed as intended.

Local Government and Housing Bill
5 p.m.
House again in Committee.
Clause 19 [Duty to adopt certain procedural standing orders]:
[Amendments Nos. 105 to 109 not moved.]
Clause 19 agreed to.
Clause 20 [Interpretation of Part I]:
Lord Ross of Newport Lord Ross of Newport moved Amendment No. 110:
Page 27, line 32, at end insert—
(" "local authority" does not include parish councils;").
The noble Lord said: This is a probing amendment. At the end of Part I we are dealing with interpretation. While I assume it is the case that parish councillors are excluded from Part I, there is an anomaly on which I should like some guidance from the Government. My attention has been drawn to this by a county council officer who is a parish councillor. He also happens to sit on a district council and earns more than £13,500 a year. He recognises that in the future he will be barred from sitting on the district council but he will wish to continue his work as a parish councillor.
We know that when the Bill become law the Government intend to introduce regulations which will restrict certain political activities. Those are likely to include writing or speaking publicly on controversial issues, canvassing at elections, holding office in a political party or even having in one's home or one's car a poster supporting a political candidate. Whether we like it or not, the fact is that many parish councillors and town councillors are members of political parties and canvass as such. What restriction will there be on such local government officers who are parish councillors? Will they be able to speak publicly or canvass on controversial issues when they are standing for election to town or parish councils?
Will the effect of the legislation be that local government officers in politically restricted posts will be able to stand for parish councils only as independents and will not be able to have posters or stickers in their cars which might have political connotations? Will these officers be able to sign petitions on controversial issues or write letters to the press, and so on?
The amendment may not be in order but it gives me a chance to raise these points about parish councillors. What is their position to be? Will they be included in these regulations? If so, will that not destroy the ability of those people to serve on parish councils? Many of them serve with great distinction. As a county councillor I sat for hours at local parish meetings which went on interminably. Those meetings were chaired by officers. What is their future to be? Are they to be barred? I beg to move.
The Earl of Arran: I appreciate that the amendment is a probing amendment but it may be helpful to the Committee if I briefly set out the reasons why we consider that parish councils should be excluded from Part I of the Bill. The clauses in Part I which apply to parish councillors are Clause 7—all staff to be appointed on merit; Clause 10—limit on paid leave for local authority duties; Clause 13—voting rights of members of certain committees; and Clause 19—duty to adopt certain procedural standing orders.
Clause 7 is a statutory declaration of the long-standing tradition in the public service in this country that public appointments should be made on merit. We cannot see that the case for an exception for parish councils has been made. Is it realistic to say that parish councils are to be allowed to make appointments of paid staff on grounds other than merit? We consider not.

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Clause 10 provides a statutory upper limit on the paid leave which a local authority may grant to its staff to carry out their duties as councillors on another authority. Some large parish councils employ full-time staff. We believe that the principle of the limit should hold good for parish councils in the same way as for other councils.
Clause 13 confines voting rights on local authority committees and sub-committees to elected members, except in the cases where a special exemption is made. This effectively places responsibility for executive decisions and actions with the democratically elected members. It does not stop other members being appointed in a consultative role. Some parish councils use committees, and we see no reason to make an exception for parish councils in this matter.
In the case of Clause 19—the provision for requiring a compulsory core of standing orders—we have no plans at present for using it in relation to parish councils. From time to time, however, there are complaints about abuses of procedure in relation to parish councils. This power would be an appropriate means to take preventive action if it was ever needed. We therefore think that there is good justification for the application of these four provisions to parish councils. The other clauses do not apply, since they apply only to the relevant authorities listed in Clause 20, which are defined for each group of provisions.
Finally, I should mention that the amendment is defective in that it exempts parish councils, which are found only in England, and does not exempt community councils, which are the equivalent in Wales. We would not regard it as satisfactory to treat these differently. We have had no representations from the National Association of Local Councils, which represents parish councils, about the provisions of the Bill.
The noble Lord asked whether parish council membership would be restrained. There will be no restriction on parish council membership. Parish councillors will be able to canvass for themselves but will not be able to canvass for a political party. We shall be consulting on this proposal. In the light of what I have said, I hope that the noble Lord will feel able to withdraw his amendment.
Lord Ross of Newport: I am grateful to the Minister. He went at a fair pace to start with, so I shall need to read his words rather carefully. He came to the point which I raised. I welcome that. It clarifies the position to some extent. As I said earlier, it was a probing amendment. I felt that it was probably wrongly drafted, and he has confirmed that it should have included community councils. I shall study with interest what he has said. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 20 agreed to.
Clause 21 [Advisory commissioners]:
On Question, Whether Clause 21 shall stand part of the Bill?
The Principal Deputy Chairman of Committees (Baroness Serota): Clause 21 is the first clause in Part II of the Bill, which deals with local government administration. I should like the Minister to explain to the Committee the role and function the Government see for these new advisory members of the Commissions for Local Administration in England and Wales.
As he will know, the present commissions consist of the local commissioners together with the parliamentary commissioner ex officio. That provision was made in Part II of the Local Government Act 1974 and has proved extremely valuable, particularly as the same Act also made provision for composite investigations to be undertaken by the local commissioners together with the parliamentary commissioner, or in his role as health service commissioner when complaints were received which affected both local government services and central government and/or health services.
I should be most interested to know what kind of people these new advisory members will be, who will appoint them and for how long. Of course, the present commissioners hold office during pleasure until they reach the age of 65 and are bound by certain conditions of confidentiality in the legislation.
I presume that they are the external members who first emerged as a proposal when the Government responded to the Widdicombe Report. It would be extremely helpful if the Minister could enlighten us as regards the new membership of both commissions and if he could also give the Committee some idea of what they will do and for how long they will be doing so.
Lord Hesketh: It is always a great pleasure to have the company of the noble Baroness, Lady Serota, in Committee. I stand here feeling a certain amount of awe and trepidation because, as Members of the Committee will be aware, the noble Baroness was the chairman of the Commission for Local Administration in England. As a result, I should have thought that there were 'few people in this country better versed as regards the matters contained in this part of the Bill.
Clause 21 amends the Local Government Act 1974 to allow the appointment of advisory members to the Commissions for Local Administration in England and Wales. The number of such members appointed to each commission may not exceed the number of local commissioners, who continue to retain sole responsibility for carrying out investigations.
The purpose of this provision is to bring a wider range of interest and experience to the commissions. The advisory commissioners will be particularly concerned with the running of the commissions —their general finance and administration—and should be able to advise on wider issues affecting the ombudsman. This should lighten the load on the investigative commissioners which has increased significantly over the last year.

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Although the clause would enable the appointment of a maximum of three advisory commissioners in England, we are at the present time only proposing to appoint two. My right honourable friend is considering whether there is a need for such an appointment in Wales, given the small size of the commission.
I trust that Members of the Committee will recognise the value of bringing additional experience to the commissions, and that the advisory commissioners will usefully complement the existing membership, and serve to strengthen the efficiency of those bodies.
As regards the question as to who the advisory members will be, we expect them to be drawn from business and from the academic world and appointed for a fixed term by the Monarch, on the advice of the Secretary of State. It is to help the investigative members of the commissison to achieve better performance that the advisory members have been added to the Civil Service Commission.
Baroness Serota: I am extremely grateful to the Minister for his explanation. The present commissions are under pressure, especially the English commission, because of the great increase in the number of complaints in recent years. I must, however, confess that I am still a little puzzled as to what these advisers will do if they are not going to investigate complaints. I say that because the commissions are relatively small organisations and, in my experience, are already extremely efficiently run. Nevertheless, it is helpful to have on the record just what the Government have in mind for these particular appointments. I shall watch with interest to see how the proposal works out when these people are actually appointed.
Clause 21 agreed to.
5.15 p.m.
Clause 22 [Advice and guidance by Commissions for Local Administration and Scottish Commissioner]:
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 111:
Page 28, line 24, after ("appropriate") insert ("in relation to its other functions").
The noble Lord said: I, too, rise with trepidation to speak on Part II of the Bill, conscious of the experience and wisdom of my noble friend Lady Serota. I can only say that as the son-in-law of the late Tom Sargant who was the founding secretary of Justice, and as one who took a leading part in the movement to establish the post of ombudsman, I have a longstanding interest—if, perhaps, no qualifications—enabling me to speak on the matter.
The object of Amendment No. 111 is again to question the Government about the intention of the wider powers which are given to the commissions for local administration under Clause 22. The commissions will now be able to give advice to local authorities about good administrative practice, or
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such advice and guidance about good administrative practice as appears to the commission to be appropriate.
Our amendment would insert the words,
"in relation to its other functions",
so that the advice and guidance is not simply an open-ended opportunity for the commissions to become involved in all aspects of the administration of local government. This not in any way intended as a criticism of the work of the commissions; but it is intended to find a mechanism—although we may not yet have the wording right—whereby the investigation of complaints of maladministration shall remain at the centre of the commissions' activities.
We already have an Audit Commission which looks into the administration of local authorities. However much the commissions for local administration may be able to contribute to that work, it seems to us that the Audit Commission should stick to its own job and that the commissions should stick to their job which is to protect the ordinary members of the public from maladministration by local authorities.
We hope that it is not the Government's intention to lose sight of the primary reason for the establishment of the commissioners for local administration and the Scottish commissioner and that we shall receive satisfactory assurances on that point from the Minister in his reply.
The Earl of Arran: I must assure Members of the Committee that, whatever the circumstances, I always rise to speak with trepidation. However, surprisingly, this amendment does not seek to confine the advice which may be issued by the Scottish commissioner.
We welcome the opportunity which this amendment provides to clarify the role which the commissions in England and Wales and the Scottish commissioner will play in issuing advice and guidance. We do not see this as a major extension of the commissions' role. The local ombudsman's prime function will continue to be the investigation of complaints by individuals. The provisions are more by way of enabling powers to allow local government to benefit from the wealth of experience that the commissioners gain in carrying out those investigations, which it would be foolish to continue to allow to go to waste.
The advice and guidance which the commissions will issue will tend to be in the area of administrative practices and procedures with the aim of pointing to common faults and highlighting examples of good practice where they occur.
The advice will be what it says—purely advisory—and there will be no obligation on local authorities to follow it. Clause 22 also requires the commission to consult representatives of those concerned before issuing advice, so the local authority associations will have ample opportunity to comment.
The advice and guidance will thus be related in general to the investigative functions of the

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commissioners. However, we think that it would not be desirable to impose an absolute restriction on the matters which the advice can cover, as the amendment proposes. That might prevent the commission from drawing wider conclusions from the knowledge and experience it has gained through investigations. In view of those comments, I hope that the noble Lord, Lord McIntosh of Haringey, will feel able to withdraw the amendment.
Lord McIntosh of Haringey: What the noble Earl has said sounds reassuring. If the commissions are to confine their advice and guidance primarily to good administrative practice in relation to the pattern of complaints of maladministration that they have received, the Government's intention is close to that which we intended in moving the amendment.
The amendment is in any case as the noble Earl has indicated, defective in that it does not include an amendment under Clause 22(2) in relation to Scotland. However, that is a problem which could easily be remedied at a later stage or even by a manuscript amendment now. However, I am, as I say, relatively reassured by what the noble Earl has said, which I shall read carefully before deciding whether I need to refer to the matter at a later stage. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 22 agreed to.
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 112:
After Clause 22, insert the following new clause—
("Investigation by Commissioner.
.—(1) In section 23 of the local Government Act 1974 (appointment and functions of Commissions for Local Administration) there shall be inserted after subsection (12) the following subsection—
"( ) Each of the Commissions may investigate a matter in relation to which no person has made a complaint in circumstances where it considers that an injustice may have occurred, or is likely to occur, or where it considers that a complaint is unlikely to be made, and where in the opinion of the Commission an investigation would be appropriate for the purpose of preventing or remedying maladministration.".
The noble Lord said: Although the new clause is not in the same form, it is related to the matters which we have just been discussing. Widdicombe, at paragraph 9.75, referred to the present restrictions on ombudsmen to pursue an investigation where a complaint from the individual concerned is not referred to them in writing. That has been a matter of debate by the commission and Justice for a number of years. Justice carried out research as long ago as 1976 and 1977 which showed that there was a strong middle class bias among complainants. Over 70 per cent. of complaints were made by non-manual households. Those findings were published in 1980 in Justice's review of the first five years of the institution of the local ombudsman.
There is a risk that those who are less well educated and less sure of their rights may find it more difficult to make complaints in writing, even with the help of their local councillors. We propose in the new clause that under certain circumstances—clearly the commissioners will wish to use the circumstances
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carefully—where no person has made a complaint, but where the commissioners consider:
"that an injustice may have occurred, or is likely to occur, or where it considers that a complaint is unlikely to be made, and where in the opinion of the Commission an investigation would be appropriate for the purpose of preventing or remedying maladministration".
they may be able to make an investigation. As I have said, that is a power which would have to be used cautiously or the commissioners' work would become intolerable. It is a power which is strictly complementary to the commission's work. It follows research which has been well established over a period of years. It coincides with Widdicombe's recommendation. I beg to move.
Baroness Serota: I support the amendment moved by my noble friend Lord McIntosh of Haringey, which would enable the commissioners to investigate on their own initiative. As he has said, it is a well-founded proposal. It was recommended in the earlier and later Justice reports. It is a power that exists in other jurisdictions in other parts of the world: in common law countries, Commonwealth countries and countries on the Continent of Europe.
I entirely agree with my noble friend that it is a power that should be used cautiously and sparingly. It is fair to say that the record of the local commissioners is such that there is every reason to believe that that would be so. Of their 7,000 complaints, I see from last year's annual report, which was published only last week, that they took only 5 per cent. to full investigation and public report. That is hardly an indication of fools rushing in where angels fear to tread.
There is a need in matters of public importance —that has been evidenced in recent years, especially in relation to the deaths of children and the care of vulnerable elderly people in residential institutions—for complaints to be investigated where the individuals concerned cannot themselves bring a complaint. Such cases are currently the subject of ad hoc inquiries, conducted under commissions of inquiry set up by Ministers under other statutory powers; but there are still other cases which, in my experience, would have been the subject of complaint if the individuals had been able to make such complaints.
Without appearing to be biased, I believe that I stand sufficiently distanced from the commission now to take an impartial view of its operations. It is fair to say that the commissioners are singularly well-placed to undertake such investigations. They are extremely familiar with the working of the local authorities through their day-to-day work. They have an able and experienced staff, well used to conducting investigations, some of which require a considerable degree of confidentiality as they deal with many personal matters.
Clearly the commissioners would not wish to pursue such an investigation except when there was good ground for concern and prima facie evidence to suggest that injustice had occurred.
The amendment may commend itself to the Government because the ombudsman's investigations are far less costly than those

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undertaken by high-powered and legally chaired independent inquiries set up under statutory powers. Indeed, their costs are modest. The commissioners' continuous investigative experience would be of great value in those few, but nevertheless important, cases where individuals are unlikely to be able to bring a complaint themselves.
Lord Hesketh: The amendment would enable the local commissioners in England and Wales to carry out investigations on their own initiative where they had reason to believe that a member of the public may have suffered injustice as a result of maladministration by an authority.
The amendment would constitute a radical change to the local ombudsman's role. Instead of carrying out investigations into individual complaints of injustice, he would become a general purpose watchdog over local government. We do not consider that those two roles are compatible or that such a watchdog is necessary at present. The Widdicombe Committee made a recommendation along the lines of the proposed amendment. It suggested that it would shine the local ombudsman's torch into dark corners and would offset the inclination of certain groups not to complain.
There are such dark corners in local government and they need illuminating; but we have set up other search lights to seek them out. The new range of measures in Part I will get rid of many of the abuses and ensure that councils operate fairly and democratically. The Bill, together with last year's Local Government Finance Act, also provides for councils to appoint separate finance and monitoring officers who will be under a duty to blow the whistle if they consider that the council is about to act illegally or improperly, including taking action likely to result in injustice due to maladministration.
It is also clear that the local ombudsman is becoming more widely known and accepted as a way of seeking redress from local authorities. That is evidenced by the substantial increase in the number of cases that the local ombudsman is now receiving. Much of that is attributable to the introduction of direct access in last year's local government legislation which made it possible for complaints to be made directly to the local ombudsman instead of through a councillor. The commissioners themselves have also taken steps to publicise their activities, and information about the service and how to complain is available through the citizens advice bureaux and other consumer groups.
Those measures have made the local ombudsman much more accessible to the general public so that maladministration is more likely to be brought to the attention of the local ombudsman by those who have suffered injustice. He will need to go out and look for it.
Clause 22 also supplements the local ombudsman's powers by enabling him to issue advice and guidance based on the wealth of experience which he gains through the investigation of individual cases of maladministration. This will
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enable him to focus on common problems and mistakes that occur within local government and indicate ways in which they can be remedied.
Finally, the ombudsman already has the power to investigate a complaint brought by a person who represents someone who he feels has suffered an injustice. So already there is a source of restoration available through a third party. I hope that in these circumstances the noble Lord, Lord McIntosh, will see fit to withdraw his amendment.
5.30 p.m.
Lord McIntosh of Haringey: That was very much the reply that I feared. It shows that the Government's thinking has not only not advanced since we last talked about these matters last year, but in some ways has actually retreated. The whole point of the local ombudsman system, as my noble friend Lady Serota has made clear, is that it is a system which is applied selectively when it is really necessary. It is an economical and efficient system for remedying maladministration.
What the Government are doing all the way through the Bill is imposing more obligations on local authorities, providing more administrative remedies rather than quasi-judicial remedies and giving the Secretary of State more and more power to control local authorities in every detail. That is exactly what we wish to avoid and why we think that the analogy of the local ombudsman is a much better approach to maladministration than the heavy-handed attitude of the Government which is expressed in over 200 pages of the Bill.
I have not in any way been convinced that the very modest extension of the powers of the local ombudsman which was supported by Justice as long ago as 1980 and by Widdicombe in 1986, is not a valuable addition to the work of the ombudsman. It could replace page upon page, tens of pages upon tens of pages of regulations. I am deeply sorry that the Government should take this attitude to the work of the ombudsman and that their alternative should be so heavy-handed, overpowering, untrusting and so lacking in understanding in its approach to local government. I do not think that this is a matter on which I wish to divide the Committee now, but it is something to which we shall have to return at a later stage. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 23 [Expenses of Commissions for Local Administration]:
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 113:
Clause 23, leave out clause 23 and insert the following new clause:
("Funding of the Local Commissioners.
.—(1) In Schedule 4 to the Local Government Act 1974, the following paragraphs shall be substituted for paragraphs 6 to 11—
"(6) Expenditure incurred in any year by each of the Commissions shall be defrayed from the Consolidated Fund, subject to the consent of the Secretary of State.
(7) Before granting consent under paragraph 6 above, the Secretary of State shall consult such associations of local authorities as appear to him to be concerned."
(2) Each of the commissions shall prepare a general report on the discharge of their functions in each financial year and shall arrange for its publication.
(3) Before arranging for the publication of a report under subsection (2) above, each of the commissions shall give a reasonable opportunity for such local authority associations to comment on it, and if any comments are made, shall (when arranging for the report to be published) arrange for it to be published with an annex containing such of the comments as the local authority associations concerned consider appropriate.").
The noble Lord said: Once more this is an amendment which has a respectable lineage. Again, in 1980 Justice recommended that the representative bodies should be wound up. This was confirmed by Widdicombe in 1986. The representative bodies, consisting of representatives from the local authority associations, were undoubtedly the right way to start off the local ombudsman system. They were able to take an active part in helping the local ombudsmen to set up their procedures, in helping them to develop methods of investigation which were effective and they provided a valuable contribution to the budget-making and the annual reporting of the local ombudsmen.
However, within a very short time, certainly within five years of the establishment of the local ombudsmen, the representative bodies no longer fulfilled the original role. The basic anomaly of the representative bodies that the local authorities themselves should be paying for the policing of their activities, so to speak, came to the fore.
The Government have taken account of that and now propose in Clause 23 that the funding of the commissions should be an expense of central government and be part of the revenue support grant under the Local Government Finance Act. However, although this moves away from a solution to the funding of the local commissioners which is no longer relevant, it moves away in the wrong direction. It is now putting the funding of the local ombudsmen under the control of the Secretary of State. As we have seen throughout this Bill and throughout nearly all the 50 Bills which have been before Parliament since 1979 on the subject of local government, to use the Secretary of State is a very heavy-handed and overpowering approach. In our view the Secretary of State ought not to have the responsibility for the expenses of the commissions.
So in effect we propose an analogy with the quasi-judicial functions of other similar organisations. We suggest that the funding of the local commissioners should come under the Consolidated Fund, subject to the consent of the Secretary of State who after all is the nearest Government Minister. He should have the duty to propose the amount of expenditure which is considered necessary in respect of the Consolidated Fund.
We agree that the commissions should prepare annual reports and that is provided for in subsection (2) of the new clause. We also take the view in subsection (3) that the commission should give the local authority associations a reasonable opportunity
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to comment on their annual report and that these comments should, if necessary, be published in an annex. In effect, this replaces the vestigial role of the representative bodies which is now no longer appropriate in its original form.
In the amendment we agree with the Government that the funding of the local commissions should be taken away from the local authorities who are being investigated. However, we think that the role of the Secretary of State should be limited to making a proposal for the Consolidated Fund and that this would maintain and enhance the independence of the local commissions and help them to make their work truly independent both of central government (the Secretary of State) and of the local authorities themselves. I beg to move.
Baroness Serota: In moving the amendment, the noble Lord, Lord McIntosh of Haringey, mentioned the role of the representative bodies, particularly in the early days of the establishment of the commissions in the local ombudsman system in 1974. It would be a pity, when these representative bodies are being abolished not to take the opportunity to pay tribute to their work. I do so with all my heart.
I must confess at the same time that there were occasions when I found the representative bodies extremely negative, if not infuriating, when they met as a group, together with the local commissioners, at a time when we were trying to develop the work of the local ombudsman system. Of course they were trying to keep the costs down. Nevertheless, that was part of their role and in saying farewell to them I think that the Committee would want to thank the individual members of the local authority associations who played a key part in that early work.
With regard to the amendment itself, I am inclined to agree with the noble Lord, Lord McIntosh of Haringey, that if local government or its representatives—through the three local authority associations in their membership of the representative bodies—are no longer to have a working interface with the commissions for funding purposes, it would be right and proper for the commissions to be funded in the ways suggested in the amendment rather than in the way that is suggested in the Bill.
It follows the procedures which were adopted in the late 1960s for the funding of the parliamentary commissioner for administration. In my view the commission must be seen by the public, particularly by complainants, as standing independent both of local government and of central government. The proposal that it should be funded through the Consolidated Fund rather than by the department through the rate support financing arrangements suggested in the Bill, seems to me to be an admirable suggestion. I support it fully.
Lord Hesketh: This amendment deals with two separate issues. With the leave of the Committee, I propose to deal with them separately. Subsection (1) would provide for the commissions for local administration in England and Wales to be funded directly by central government, subject to consultation with the local authority associations.

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This would replace the provisions in Clause 23 for funding the commissions by top-slicing from revenue support grant under Section 78 of the Local Government Finance Act 1988.
We considered very carefully the whole question of how the local ombudsman should be funded, in the light of the Widdicombe Committee's recommendations. We were concerned that the existing system was excessively bureaucratic, requiring the commissions to levy individual authorities. We also considered the view expressed by the Widdicombe Committee that it was anomalous in principle for the representatives of those subject to investigation to play a major part in dictating the budget of the investigators. Above all, we were conscious of the need to preserve the independence of the local ombudsman in carrying out investigations.
One solution to these problems—perhaps the simplest—would have been for the Government to fund the local ombudsman directly. However, this was an option which was rejected in 1974 when the local ombudsman was first set up, because it would have made it appear that the local ombudsman was a central government service investigating local government. It is important that the local ombudsman is seen as an independent service for local government. These arguments still apply today, and we have concluded that the cost of the local ombudsman should continue to be met by local government. Likewise, we think that local government should continue to have some say over those costs, although not the final say.
The provisions we have included in Clause 23 do, we believe, meet these objectives. They eliminate the bureaucratic collection arrangements by enabling the funds to be paid centrally, whilst at the same time ensuring that the cost is met by local government by way of a reduction in revenue support grant. The clause will require the commissions to consult local government representatives before submitting their estimates. The Secretary of State will have the final say in determining the amount of RSG to be paid to the commissions, and will have a role in scrutinising the commissions' proposals, and ensuring the regularity and propriety of expenditure. I hope the Committee will agree that these are satisfactory arrangements for funding the local commissions, and that central funding would be undesirable.
The second feature of the noble Lord's amendment is to change the arrangements for consulting representatives of authorities within the local ombudsman's jurisdiction, which are provided in Clause 24. I have to say that there is a technical flaw in the amendment as drafted as it does not replace the provisions already provided in Clause 24, so that we would have two alternative arrangements on the statute book. However, I shall address the substance of the amendment of the noble Lord, Lord McIntosh.
The current arrangements provide for the commissions to consult the representative body on its annual report. This is a statutory body set up by order under the Local Government Act 1974 to
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represent authorities within the local ombudsman's jurisdiction. We have concluded—and the local authority associations and the representative body itself have agreed—that it is no longer appropriate or necessary for the commissions to consult a specially constituted statutory body. There is no reason why the commission cannot consult the local authority associations and representatives of other bodies within jurisdiction, directly. This is the way that central government traditionally consult local government.
Clause 24 therefore replaces the representative body with direct consultation arrangements. The commissions will be required to submit copies of their annual reports to representatives of authorities within their jurisdiction, and allow sufficient time for them to comment before publishing their report. However, it no longer seems appropriate in these circumstances to require the commission to include all the comments received in the report itself. This right, currently enjoyed by the representative body, is quite an unusual privilege, and from a practical point of view, it would be difficult to continue these arrangements when divergent comments may be received from the proposed broader consultation base. I am sure that the local authority associations will, with their usual efficiency, find other ways of making their views known—vocally, if they need to—to a wider audience if they wish to do so. It is for those reasons that we resist the amendment.
5.45 p.m.
Baroness Serota: I am grateful to the Minister for his detailed reply. I entirely agree with him about the changed arrangements for the publication of the annual reports. That is agreed all round. However, I did not hear him reply in any way to the arguments put forward by my noble friend Lord McIntosh and myself about the use of the Consolidated Fund for the purpose of defraying the expenditure incurred each year by the commission. That argument was not mentioned at all.
Lord Hesketh: We believe the amendment of the noble Lord, Lord McIntosh, gives t he Secretary of State as big a role to play as the Government's own current clause does. We believe it is well established that the funding arrangements proposed by the Government will ensure that both central and local government, as well as the commission itself, will have a say. It is this tripartite arrangement which we believe will go so far as is possible to ensure the independence of the commission. That is why it is our preferred choice.
Baroness Carnegy of Lour: I think I understand what the Minister has just said. However, I wish to check that I have understood by asking whether, when the Minister refers to top-slicing the revenue support grant, he is saying that when the Secretary of State fixes the total amount for the revenue support grant, he adds the cost that we are discussing and then takes it away again and pays it to the commissioners? I believe that is what the Minister is saying; and from the way the noble Lord, Lord McIntosh, is smiling, I believe he agrees with me.
Lord Hesketh: The noble Baroness is entirely correct.
Lord McIntosh of Haringey: I accept, as the Minister said, that the amendment is technically defective. Therefore, I should say at once that I shall not seek to divide the Committee on it. However, I am very dissatisfied by the tone and content of the reply which has been given. It seems to me that what is being proposed is the worst of all possible worlds in that local authorities shall pay for the local ombudsman's services, just as they do now, but they shall have no effective say in determining what the expenditure will be. Further, they will have no very effective way of commenting on the work of the local ombudsman.
I was not defending the representative body. Not only was I not defending that body, but I was also assenting to the abolition of the representative body with the agreement of the local authority associations which have all agreed that the representative body is no longer the way to proceed. However, if we are to move away from the theory of local authority control which was established in 1974, we have to move to something which really establishes the independence of the local ombudsman. I though that our suggestion of using the Consolidated Fund on the analogy of other tribunals and other quasi-judicial bodies was the right suggestion. What we have now is a curious solution in which local authorities pay all the money and have nothing to show for it. This is rather like the late foreign Minister of Canada, Mike Pearson, who described diplomacy as persuading other people to do what one wants.
However, here local authorities are being given no opportunity to do anything other than have their rate support grant cut in order to pay for the local ombudsman. Let me make it clear that local authorities support the principle of the ombudsman. They do not agree with the other amendments that I have tabled, but they agree with this particular one. I should have thought it deserves more serious consideration than it has had up until now. I shall withdraw it, with the leave of the Committee, because it is defective, but I should like to have an opportunity to discuss the matter with Ministers between now and a later stage. I hope that they will agree that that could be helpful. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 23 agreed to.
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 114:
After Clause 23, insert the following new Clause:
("Contractual matters and commercial transactions
.—(1) The Secretary of State shall, within three months of the date of passing of this Act, by Order repeal so much of Schedule 5 of the Local Government Act 1974 as relates to the exclusion from the jurisdiction of the Commissioner of actions taken by an authority relating to contractual matters or commercial transactions.
(2) The Secretary of State may by Order make such consequential amendments to Schedule 5 of the 1974 Act as are necessary for the purpose of this section.").
The noble Lord said: With this amendment we move forward in the Bill and slightly back in
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Widdicombe to paragraph 9.73 on page 221. It is not a very clear paragraph; I had to read it several times before I understood what it meant. I now think that Widdicombe was pointing out that there are some prohibitions on the jurisdiction of the local ombudsman which are not particularly desirable. The example taken up in the proposed new clause concerns cases involving commercial and contractual transactions.
Widdicombe was not convinced that cases involving commercial and contractual transactions with members of the public are different in kind from cases involving other local authority dealings with the public. I think that the Widdicombe Committee was not convinced that as a matter of general principle such dealings should be excluded from the ombudsman's remit. We agree. This new clause would reinstate contractual matters and commercial transactions into the jurisdiction of the commissioner and empower the Secretary of State to make such necessary provision by way of a repeal of the appropriate parts of Schedule 5 to the Local Government Act of 1974.
That is not a very dramatic change. Nevertheless, the view has been expressed by the commissioners that they have felt the lack of such jurisdiction. They have felt that it has restricted them, and presumably it has inhibited them from investigating cases of maladministration which they would otherwise have wished to investigate. It is with the support of Widdicombe and of the commissioners that I beg to move the amendment.
Lord Hesketh: The amendment would extend the ombudsman's jurisdiction to the investigation of commercial and contractual matters by requiring the Secretary of State to repeal paragraph 3 of Schedule 5 to the Local Government Act 1974 which at present specifically excludes such matters from the ombudsman's purview. The repeal would be made by order within three months of the date of the passing of this Act.
The primary concern of both the local and parliamentary commissioners is with the relationship between the executive arm of government and the general public. The local ombudsman is there to ensure that individuals who have suffered a grievance, or have a complaint against a local authority, are able to secure some redress without the need to go through the courts. Such provision is needed because local authorities exercise statutory functions.
Where, on the other hand, a local authority or other public body is involved in commercial transactions, such as the buying or selling of goods or services, it does so on the same basis and under the same conditions as other employers or contractors. We believe that there is no reason why special arrangements should be available to enable other parties to such transactions to seek redress. The law already provides stringent protection for individuals involved in commercial transactions and there is no argument for extending those provisions just because one of the parties concerned happens to

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be a local authority. Indeed, successive governments have rejected such an extension, and that is why we continue to do so today.
However, in the White Paper responding to the Widdicombe Report we undertook to keep under review specific areas where the commercial aspect might be regarded as secondary and where a council's tendering procedures involve non-commercial considerations. We are currently considering, for instance, whether the allocation of market stalls by local authorities should be brought within the local ombudsman's jurisdiction. Such changes can be made by my right honourable friend the Secretary of State under his existing order-making powers under Section 26(9) of the Local Government Act 1974, so that primary legislation would not in any case be needed to make such adjustments to the local ombudsman's jurisdiction.
It is for those reasons that we resist the amendment.
Lord McIntosh of Haringey: I suppose that I shall have to be satisfied with that response. The problem is that the Government are forcing local authorities to undertake more and more of their business in the form of commercial and contractual transactions. Therefore, if the Government have an opportunity to pursue that policy, more and more of the local authority's business would fall outside the jurisdiction of the local ombudsman. That cannot be desirable.
The case of market stalls is interesting. I was not aware of that point. I suppose that it is mildly reassuring to know that the Secretary of State has the power to vary subsection (3) of Schedule 5 by order if he thinks it necessary. Rather than prolong the debate on what must be to most Members of the Committee an intensely boring matter, I think it better that I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 115:
After Clause 23,
("Matters affecting educational establishments
.—(1) The Secretary of State shall, within three months of the date of passing of this Act, by Order repeal so much of Schedule 5 of the Local Government Act 1974 as relates to the exclusion from the jurisdiction of the Local Commissioner of complaints concerning administration in schools and colleges.
(2) The Secretary of State may by Order make such consequential amendments to Schedule 5 of the 1974 Act as are necessary for the purposes of this Section.").
The noble Lord said: With Amendment No. 115 we come to a matter which arouses a little more passion; that is, the question of the exclusion from the remit of the local ombudsman of all matters educational. The changes that are taking place in the management of our public sector education as a result of legislation are quite extreme. I shall not venture into the subject of the recent education Acts. The spread of responsibility from local authorities to governing bodies and the role of parents and outside members in governing bodies in my view means that the jurisdiction of the local ombudsman
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should not be extended to educational issues as a whole. They would be quite unqualified to deal with such matters. They are not educationists and would be second-guessing not only local authorities but also those who are involved in the professional aspects of education outside the local authorities. It is much better if we keep ourselves and the local ombudsman clear of that area.
However, there are areas in the educational sphere, in schools and colleges, which are administrative. They concern the way in which the rules of the local authorities with regard to administration are carried out and whether those rules themselves are fair and protect the interests of the ordinary citizen. They are matters which are strictly analogous to the administration of other local authority services which are within the remit of the local ombudsman. It seems to us—although not necessarily to the local authority associations—that that is an anomaly which could be remedied without intruding on more strictly educational matters. I hope that the amendment will commend itself to the Government and the Committee. I beg to move.
Baroness Carnegy of Lour: Perhaps I may ask the noble Lord whether he has in mind that administration, in terms of the amendment, includes the running of the school by the head teacher. If, in the view of a complainant, the head teacher is not administering the school properly, would he be caught by the amendment?
Lord McIntosh of Haringey: In so far as the administration of the school by the head teacher is within the scope of the education Act it would be excluded, because the education Act proposes ways of remedying maladministration by head teachers. The way that head teachers themselves are chosen could be an administrative matter. Decisions taken by local authorities on administrative matters, rather than by the head teacher, are matters which we consider to be analogous with administration of other local authority services. Where they are education matters and dealt with by the education Acts, we do not think that they should be included.
6 p.m.
Lord Hylton: I am inclined to think that the amendment is relevant to the recent education Act which provided for the devolution of quite considerable administrative matters from the education authority to the individual school. When that legislation comes into force, it will be a totally untested and untried area. It could go seriously wrong if schools are not given sufficient administrative personnel to do everything properly and those personnel are not properly funded. It would be in the national interest that the local government ombudsman should be able to look into those matters of administration. I am not talking about the quality of teaching or the subjects taught; I am talking about administration.
I recall that we debated the question of school records, affecting individual pupils in connection with an education Act of several years ago, although I am not quite certain which one it was. If those

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records get into the wrong hands and are not properly looked after or are destroyed when the child leaves school, they may affect that person's future career. That is an example of the kind of administrative matter with which we are concerned and which should probably be better protected than it is now.
Baroness Blatch: Perhaps I may inject into the debate a note of confusion in my own mind; namely, the distinction between what may well be a purely administrative matter and what may well be partly an education matter. It strikes me that, if one puts oneself in the shoes of the customer, an injustice is an injustice. If we put into effect legislation that at least allows for a grievance to be heard and an injustice to be righted, we should not be in the business of making distinctions. As more autonomy goes down to school level, it is important that the customer—the parents and/or the young person—has somewhere to go other than, occasionally, the local education authority which is in the business of defending its schools and its own responsibilities. There is therefore a case for there being recourse to the ombudsman. I see no reason for the exclusion or for the distinction.
Lord McIntosh of Haringey: Perhaps I may be allowed to speak again before the Minister replies. The noble Baroness has made an interesting point, but I am not convinced by it for the following reason. Parliament spent a great deal of time in 1986 and 1988 debating education legislation which, as the noble Baroness, Lady Blatch, rightly said, devolved a considerable amount of power from the local education authorities to head teachers and governing bodies. The basis of the existence of the local ombudsmen is that they deal with the responsibilities of local authorities and maladministration by local authorities. The Government's education Acts have sought to draw a distinction between what is the local authorities' responsibility and what is the responsibility within the schools. Whether or not they have drawn it correctly remains to be seen, but they have sought to provide remedies for injustice in our education establishments—our schools and colleges—where the local authority is no longer responsible for the detail of them.
I did not propose in this amendment—and I did not think it wise to propose in this amendment—to go against the 1986 and 1988 education Acts. If they are right, they are right. If they are wrong, then they are wrong. We shall see. They have not yet been fully tested, but it would be foolish to seek to extend the role of the local ombudsmen beyond the responsibilities of the local authorities, limited as they are now in education establishments.
Lord Hesketh: Like the previous amendment, Amendment No. 115 seeks to extend the local ombudsman's jurisdiction in this case to the administration of schools and colleges within the ombudsman's purview.
The ombudsman can already investigate some education matters such as allocations, grants, catchment areas and school buses. However, the
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local ombudsman is prohibited under Schedule 5 to the Local Government Act 1974 from investigating complaints about internal affairs of schools and colleges including curriculum, discipline, conduct and internal organisation. That is so because of the intrinsic difficulties in defining where the boundary lies between professional judgment and administrative action. The education function in the control and instruction of children is essentially professional and the administrative element cannot be easily hived-off to pin-point matters that might fall within the ombudsman's scope. As the noble Lord, Lord McIntosh, pointed out, it is also the case that there already exist various mechanisms for the handling of complaints about education concerns. For example, under Section 23 of the Education Reform Act 1988 local education authorities must establish local arrangements, approved by the Secretary of State, to deal with complaints about the school curriculum and related matters.
The amendment would therefore enable the ombudsman to encroach upon matters for which there is already an established complaints machinery, and where it would be inappropriate for him to intervene. That is why we resist the amendment.
Lord McIntosh of Haringey: I do not think that the amendment has effectively achieved its objective. As I read it again, I now realise that the word "administration" is difficult to define just as it is difficult to define in education Bills. I do not claim any greater wisdom than parliamentary draftsmen in this matter, but I do not think that I made it clear in drafting the amendment that it was the responsibilities which remain in the hands of local authorities that we intended to attack. I shall have to take the amendment away and think about it rather than ask the Government to take it away and think about it. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 24 agreed to.
Clause 25 [Implementation of recommendations of Commissioners for Local Administration in England and Wales]:
Baroness Stedman Baroness Stedman moved Amendment No. 115A:
Page 31, line 42, leave out from ("he") to end of line 30 on page 32 and insert ("shall inform the person aggrieved in writing and that person shall have the right to seek an Order in the County Court requiring that the authority take appropriate action to remedy the injustice reported by the Local Commissioner and to prevent similar injustice being caused in the future.").
The noble Baroness said: We now come to the question of what happens when the ombudsman has considered a case of maladministration and has reported back to the authority which has declined to take any action on the ombudsman's report.
At the moment, where a case of maladministration is referred to the local ombudsman in England, Scotland and Wales, the local authority concerned is not obliged to take any action to remedy the situation. Its response is purely voluntary and it is under no obligation to redress any

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maladministration of which it may be guilty. While those rights are denied to complainants in England, Scotland and Wales, those suffering as a result of maladministration in Northern Ireland have recourse to the county court if the local authority refuses to act on the ombudsman's report.
In the House of Commons, during the Committee stage of the Bill, the Parliamentary Under-Secretary of State said that judicial or statutory enforcement would be "formalised, legalistic" and would involve "costly and lengthy investigations". That is nonsense. The system of county court redress works very well in Northern Ireland. It is instructive and interesting to compare the annual reports for 1987 of the Northern Ireland commissioner for complaints and of the Commissions for Local Administration in England and Wales. The English commission was concerned at what it described as the
"continuing increase in time taken to deal with complaints".
The Northern Ireland commissioner states that the average time taken between receiving a complaint, investigating it and issuing a report is roughly 10 months, whereas the equivalent time in England is some 52 weeks or 12 months.
The ability of the complainant to seek redress in the county court does not seem to have produced any excessive litigation in Northern Ireland. Cases of maladministration over which the local authorities have refused to act are relatively few. In the period from the beginning of the service until March 1985, which is the last set of figures I have been able to obtain, only 6 per cent. of cases in which maladministration was found had not been settled. Few in number though they may be, in my view there are still too many such cases. A number of bodies throughout the country have taken an interest in the ombudsman system and have commented on the reasons why we do not opt for enforcement. In its 1984 review of the 1974 Local Government Act, the Commission for Local Administration in England called on the relevant Secretaries of State to urge all authorities always to provide prompt and positive remedies where injustice is found by a local ombudsman.
It went on to say that legislation should be introduced for the enforcement of remedies if a marked improvement were not made voluntarily in a reasonable time. It recommended the Northern Ireland system as a model that might perhaps be followed.
In his annual report for the same year the ombudsman for Scotland concluded that statutory provision for enforcement had become necessary. He said:
"My predecessors and I have been very reluctant to come to this conclusion, feeling that it was much better to retain the voluntary system as long as failure to comply was a rarity, but the time has now come to say that the voluntary system is not working adequately".
The Welsh local ombudsman in evidence to the Widdicombe Committee wrote:
"It is intolerable that any injustice caused by maladministration identified in the course of an objective and impartial investigation should be allowed to go unremedied".
The Widdicombe Report itself suggested that where a complainant was dissatisfied with the remedy offered by the local authority one should look at the system in being in Northern Ireland. Indeed, the Select Committee on the Parliamentary Commissioner for Administration in another place took evidence from public bodies, local authority representatives and government Ministers. It concluded in its report:
"We consider that the best method of providing support for the local ombudsmen's reports would be for our remit to be extended to allow the possibility of our calling recalcitrant local authorities to account. If experience showed that our involvement did not, however, have an improving effect on the treatment of the reports of local ombudsmen, we would recommend serious consideration of the involvement of the courts".
All those people looked at the Northern Ireland situation and at the few cases in which there had not been agreement and where local authorities had not acted.
In July 1988 in the White Paper on the Widdicombe Report, the Government concluded that non-compliance with the local ombudsman's report, which the Government then put at a rate of 5 per cent. served,
"to produce a particularly marked sense of grievance on the part of the complainants, as well as undermining the credibility of the local ombudsman system as a whole".
The National Consumer Council has taken that view from as long ago as 1982. It says that,
"the Northern Ireland policy has not released a flood of applications to the courts, for the existence of the powers of enforceability seems to result in compliance"
It acts as a deterrent to those authorities who do not want to take any notice. Yet the local ombudsman in the latest annual report for 1988–89 makes clear that some authorities are still, as he puts it, "stubbornly refusing" to remedy injustices found by the local ombudsman. As the report says:
"Councils which hold out against putting right the wrongs they have done are failing in their duty to the people they are supposed to serve".
I contend that they are also giving local government a bad name. It is time that the ombudsman was given some teeth: this amendment is one way of doing so. I beg to move.
6.15 p.m.
Lord Hayter: By purest coincidence, I read in the newspapers over the weekend of exactly the situation the noble Baroness has just described. The ombudsman said in his report that although he complained last year about the action of a local authority no remedial action had been taken; therefore, he could only again draw attention to the incident and hope for the best. I support the amendment.
Lord McIntosh of Haringey: This is probably the most difficult and contentious issue to face the Committee in dealing with Part II of the Bill. It is certainly true, as the noble Baroness said, that enforceability of the ombudsman's findings through the county court is established in Northern Ireland; it does not involve an increase in court cases nor extend the length of the inquiries. And it is supported by both the commissioners themselves and Widdicombe.

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However, I want to sound a note of caution. It is not related to any of the remarks of the noble Baroness. If the ombudsman's conclusions were to be enforceable in that way, it would have an effect not on the length of the investigation but on the way in which the investigation is conducted. The work of the local ombudsman would become in effect the tribunal: it would have to be subject to the rules of the Council on Tribunals. In the view of a number of people who have advised me (for example, from the ranks of Justice, which was always in favour of enforceability in the past) that could well damage the ability of the local ombudsman to conduct a wide-ranging investigation without too much concern for the quite rightly restrictive rules of the Council on Tribunals.
That is an issue to which the noble Baroness did not refer when she moved the amendment. It makes me not just doubtful about the wisdom of what she proposes but in the end, after very careful consideration, reluctant to agree with it. I am sorry about that. I do not like to go against the noble Baroness. I respect her judgment on these matters. I respect too the view held by the commissioners and Widdicombe. But, on balance, I think that we should lose more than we should gain if we went over to enforceability.
Baroness Blatch: I sympathise with the principle of the amendment. I do not know whether or not it is technically correct. However, the one argument used over the years (with which I agree) against any kind of sanction beyond that of printing in the local press that the local authority has refused to comply with the recommendations of the local ombudsman has been that the number of recalcitrant local authorities is so small that it is better to leave these matters to the voluntary system.
Let us take the figures given by the National Consumer Council and used by the noble Baroness. I believe they are the same as those that I have. Of 145 cases between 1974 and 1989, 97 continued not to comply, which represented 21 per cent. of those who were found at fault. That is a considerable number.
I am concerned about anybody who is aggrieved, who has gone through the pain of speaking informally to the local authority to try to resolve an issue and who, having taken the matter to the ombudsman, has obtained a first hearing in which the authority has been found wanting but has then had to wait many more months while a second application is made to the ombudsman and again found that the authority is declared wanting.
I told the Chamber at Second Reading of an instance when I first came into local government. I took my local authority to the ombudsman and twice it was found wanting. At the end of the day my local authority said that it was going to run the local authority its way and that it would not be told how to do so by the ombudsman. I felt that the aggrieved parties in that situation had absolutely nowhere to go. There was no sanction whatever against the local authority. However small the number of people who are aggrieved, one needs to have the long stop of being able to go to a court to
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say that there has been a judgment on the local authority, not once but twice, that it has been printed in the local press and that still the local authority is not prepared to comply with recommendations. There ought to be some sanction against the local authority.
The point made by the noble Lord, Lord McIntosh, is correct. If one moves into that sphere a right of appeal for the local authority is appropriate. I am not sure that the amendment is correct in every sense. However, I very strongly support the principle that where a local authority has been judged wanting by the local ombudsman, not once but twice, there ought to be somewhere for the aggrieved person to go. I believe that it has to be the courts.
Lord Ross of Newport: Does the noble Baroness wish to speak first? She has great knowledge.
Baroness Serota: No.
Lord Ross of Newport: I have great sympathy with the amendment. I shall listen to the Government's response with some interest. My experience agrees very much with that of the noble Baroness, Lady Blatch. With regard to a health matter, the ombudsman was so disgusted that the area health authority would not pay compensation of about £40 that he took the matter to a committee in another place presided over by Sir Anthony Buck, the Member for Colchester, North. It is a committee which has some strength. I vividly remember the chairman of the health authority and the chief executive sitting in the corridor outside one of the committee rooms worried that they were going before the committee. In the end the authority paid up. It was absolutely ridiculous that the matter had to be taken to such length. If it had not been for the ombudsman's initiative it would not have gone that far.
That is one resort. I believe I am right in saying that the committee in another place can put some pressure on local health authorities and others in the worst cases to do something. If at the end of the day they still refuse to act, I gather that they cannot be made to pay. I wish that the noble Baroness, Lady Serota, had spoken first. I have sympathy for the amendment. It is absolute nonsense that in many cases local authorities have not paid what they should rightly have paid to put matters right.
Baroness Serota: Like all other noble Lords who have spoken on this amendment, I have great sympathy for the case that the noble Baroness, Lady Stedman, has put to the Committee about the enforceability of the ombudsman's findings. The account that she gave of the different recommendations that are made from time to time on this subject were absolutely accurate.
However, like the noble Lord, Lord McIntosh of Haringey, I accept that if the proposals in this amendment were carried into the Bill they would undoubtedly affect the way in which ombudsman investigations were carried out. Above all, I believe that they would affect the way in which local

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authorities responded to the investigations. In the interests of natural justice, if one has an authority able to impose a solution on any individual, surely in all conscience he must have a right of appeal. Therefore as the noble Lord, Lord McIntosh, said, we are in an area similar to that of tribunals, with all that that means.
I have always believed that ombudsmen—be they local or parliamentary—should act wherever possible informally and through the conciliation process in order to bring justice where maladministration has been found. I know that I differ from my successor commissioners who have recommended the Northern Ireland procedure. But I believe that at this stage we should accept the proposals of the Government to strengthen the public impact of the local ombudsman's findings and not introduce into the Bill a provision where an appointed individual—the ombudsman is an appointed individual—however distinguished and impartial, would be given the right to impose his view and findings on an elected authority. One can see the difficulties in that situation.
In my knowledge, with the exception of Northern Ireland, no classical legislative ombudsman system in any other country in the world has that authority. The ombudsmen must work by consent. They must work with the co-operation both of the body that is under investigation and of the complainant who feels that he has suffered an injustice. If I had my way the Bill would include powers of conciliation for the local ombudsman. I accept that that may be going a bit far. But ideally we should work by consent and co-operation in this field if injustice is really to be remedied. That is why I welcome the commission's current annual report which points out that 13 per cent. of the complaints that it has considered are settled locally. That is the direction in which we should go rather than in the direction of the courts, with all that is involved in court procedures.
I look forward with interest to hearing what the Minister says about the amendment. If the new provisions in the Bill do not work, and if the rate of non-compliance rises, we shall have to produce an enforceable system. I would deeply regret it, but such time must surely come if local government does not see the red light on this occasion.
Baroness Carnegy of Lour: With my very much more limited experience, I should like to support what the noble Baroness has said. The atmosphere and style of the ombudsman system has enormous value. The trouble is—and it is very much felt at the receiving end by the person who has a complaint —that the adverse publicity for the local authority is often not enough. As I understand it, the Bill is strengthening that position. Much more will be printed in the press about maladministration. There ought therefore to be an incentive to councillors who are in a position to do so to criticise their authority for what it has done. There will be a chance for other people to take the matter up in the public domain. Much more will therefore happen.
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However, if the provisions in the Bill do not work and it continues to be impossible for people to have redress from the local authority, Parliament should go further.
Lord McIntosh of Haringey: I have a compromise to suggest to the Minister. Why not have enforceability only in the City of Westminister?
Lord Hesketh: It would be some form of pilot scheme. With my hand on my heart, this is the first time this summer that I have been able to say what a great pleasure it is to have had the case supported by such an eminent figure as the noble Baroness, Lady Serota. It is a very difficult area.
The amendment which the noble Baroness, Lady Stedman, has put before the Committee would remove the provisions in Clause 25 requiring local authorities who decide not to comply with a local ombudsman's further report to publish a summary of his findings in local newspapers and replace them with a power for the aggrieved person to seek an order in the county court requiring the authority to remedy the injustice and prevent similar injustice being caused in the future.
This raises fundamental issues about the role of the local ombudsman which have recently been considered by the Widdicombe Committee, and by the Select Committee on the Parliamentary Commissioner for Administration. Both committees concluded that more needed to be done to improve the rate of compliance with local ombudsman recommendations, which is currently running at about 5 per cent. of cases where injustice due to maladministration is found. That may not sound very many for a voluntary system, but these failures produce a particularly marked sense of grievance and they tend to undermine the credibility of the ombudsman system as a whole.
I therefore have a great deal of sympathy with what the noble Baroness is trying to achieve with her amendment. However, I do not think that it is quite the right approach. I agree wholeheartedly that all local authorities should comply with local ombudsman recommendations, whether or not they agree with them. Although the local ombudsman is not a judge sitting in a court, he acts as an independent arbiter between the complainants and the council. He will have carried out a full and thorough investigation of the facts.
It is presumptious of any council in these circumstances to say that it knows better: one must accept the umpire's decision. To do otherwise undermines the whole credibility of the ombudsman system and compounds the sense of grievance of those who complain.
Judicial enforcement of remedies is not the answer, simply because they bring the court and the judge into the process and the benefits, of an informal system are immediately lost. I know that the noble Baroness will be disappointed when she hears once again the words concerning investigations that, we believe, if the amendment were accepted, would immediately become more formal, legalistic, lengthy and expensive. Moreover, we believe that local authorities would challenge the facts at every

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opportunity. Moreover, it would no doubt engender a negative, defensive and unco-operative attitude in local authorities, especially among those who are presently prepared to abide by the ombudsman's decisions despite not being in agreement.
We have in Part H introduced measures to require timely and thorough consideration of the ombudsman's reports, together with a requirement that local authorities who decide not to comply with the recommendations contained in a further report should publish a summary of the local ombudsman's conclusions. The combined effect of these measures should encourage more local authorities to comply with the recommendations of the local ombudsman. As the noble Baroness, Lady Serota, has pointed out, we very much hope that they will work and thus remove the problems that are now perceived. It is for those reasons that we resist the amendment of the noble Baroness, Lady Stedman.
6.30 p.m.
Baroness Stedman: I feel some disappointment and draw some encouragement from the Minister's reply. I accept the point that the noble Lord, Lord McIntosh, made; it is good and valid and one which I had not considered too deeply. I shall certainly consider it again. I am worried that some who have spoken in the debate say that if this does not work we shall have to go for enforcement. That would go on and on and we should have to find another Bill or another means of including that enforcement. However, I accept that it is a difficult problem.
I accept also that only a few councils do not abide by decisions of the ombudsman. My understanding from someone who has been involved in the work is that, contrary to what one might have expected, it is not the big militant authorities who do not comply. They do; they take their jobs and the criticism seriously. It is more likely to be the smaller authorities where there is a much closer officer/member relationship than in the bigger authorities. But even so I deplore the fact that there is this small minority of authorities who do not accept the judgment when it is placed upon them.
However, I should like to read what has been said and in the meantime I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 25 agreed to.
Clauses 26 to 28 agreed to.
On Question, Whether Clause 29 shall stand part of the Bill?
The Earl of Balfour: This is the first time that I have had an opportunity to join in the debates on the Bill because I have been completely tied up with a few things at home. In Clause 29 the exact terms of the declaration of acceptance of offices by councils should be included in the Bill and not left in the rather vague terms under the new Section 33A of the Local Government (Scotland) Act 1973.
I should like to raise one other point which I feel might be of concern to all sides of the Committee. Unfortunately our electorate can sometimes elect
1184
people, for whatever reason, from the extreme Left, let us say, communism, or from the extreme Right, such as the National Front. Clause 29(3)(a) reads:
"two members of the local authority to which the declarant is elected".
Could two members of the National Front slip through the net and support one of their own if a third person was elected? Otherwise I approve of the clause. That is the only point that I wanted to make.
Lord Hesketh: Under the new Section 33A to be inserted in the 1973 Act, the form of declaration is to be described by order rather than by the election rules. We have taken the point that the form of the declaration to be made within a period of two months after an election cannot appropriately be prescribed in the rules for the conduct of elections. But as regards the terms of declaration that should be in the Bill, those terms have always been prescribed in subordinate legislation and we see no reason to change that.
The Earl of Balfour: I am most grateful. I believe the other points can be met.
Clause 29 agreed to.
Clauses 30 and 31 agreed to.
Clause 32 [Promotion of economic development]:
Lord Graham of Edmonton Lord Graham of Edmonton moved Amendment No. 115B.
Page 38, line 41, leave out ("Subject to sections 33 and 34 below").
The noble Lord said: I also speak to Amendments Nos. 115C and 115J and, as the Marshalled List indicates, I also speak to the intention to move that the clause do not stand part of the Bill.
To set the scene, because these amendments are part of a piece, I should like to remind the Committee that Clause 32(1)—this is the area of the Bill that deals with economic development and discretionary expenditure by local authorities—reads:
"Subject to sections 33 and 34 below, the functions of every relevant authority shall include the taking of such steps as they may from time to time consider appropriate for promoting the economic development of their area".
The important words there are:
"Subject to sections 33 and 34 below".
In reading that one might say "Well done" to the Government. They are keen to expand the promotion of economic development in the local authorities, subject to Sections 33 and 34. Section 33 is sidelined:
"Restrictions on promotion of economic development".
So on the one hand the Government hold out the prospect to local authorities that they will be given powers to engage in promoting economic development within their areas. But Clause 33 says "Just a minute", on the other hand there are restrictions. Clause 33(1) reads:
"The powers of a relevant authority by virtue of section 32 above, and their powers by virtue of other enactments, shall not include power, for the promotion of the economic development of their area, to take any such steps as may be specified or described for the purposes of this section in regulations made by the Secretary of State.
Subsection (2) contains a similar provision.
Either the Government are in the business of encouraging local authorities to engage in activities designed to expand the economic development of their area, or they are not. Over at least the past five years we have seen a range of initiatives by local authorities of all political persuasions. They have recognised that the Government have a number of commendable initiatives of which they are proud and in the macro-economic situation they seek to make them available in a nationally planned and organised state.
However, there are also other considerations. Both small and large local councils have been engaged primarily in economic expansion in order to create work. Many jobs have been created by local initiatives. The estimate of the cost of the jobs created by the Government's regional policy and enterprise zone initiatives has been estimated at £30,000 per job. The cost of jobs created by local authorities ranges between £3,000 and £5,000.
If the Government are serious about wishing to create a climate in which jobs are encouraged and produced, it is cheaper to do so by providing the local authorities with the powers. I am not talking about the money and so forth, but about the powers. On the one hand the Bill concentrates on giving the semblance of providing the powers, but on the other hand it takes them away.
I live in Edmonton which is in the London Borough of Enfield. Other nearby local authorities are either Conservative or Labour. They are all engaged in trying to fill the gap left by central government planning. They know more about the local situation than the central or regional planners. I am puzzled about why the Government believe that it is right and proper to constrict the ability of local authorities to do what I consider to be a good job.
The local authorities have the responsibility to maintain a buoyant economy by attracting new firms and assisting local firms. I suspect that Enfield is no different from boroughs of different political persuasions; they are all desperately keen to retain the viability of existing local firms. The authorities have a number of ways in which they can do so. They can provide first-class liaison between the schools, the civic centre, the Chamber of Commerce and so forth. Enfield has a most satisfactory record in that regard.
The authorities must also recognise the need to build factories and other workplaces which will act as an inducement to people outside the area. They are competing one against the other. I fail to understand why the Government are acting in this way.
My part of the world may not have suffered as badly as others regarding the number of closures. The industrial town that I know from my boyhood is Jarrow, concerned with shipbuilding. In the past 10 years we have seen the closure of the steel plant in Consett. There have been other places where the catastrophic closure of one industry has affected the whole community. It is the job of local councils to be sensitive to closures. They just make sure that
1186
other initiatives are considered and taken before a factory closes as a result of being rationalised out of existence.
Can the Minister say what will be left to the local authorities? He may well say, "It's all very well, but we believe that the council is limited in its ability to be the best judge of spending capital and investing money. There are other people who can do it better". W are not engaged in an argument about who can do things better. The Government, regional government, enterprise zones, development agencies and the urban development corporations can do things better in their way. There is a place in which the local council can do things better. I make no political point and hope that noble friends will not do so. I believe that most local councils which wish to spend money in such a way are properly motivated by their desire to ensure that local people are provided with opportunities for work.
It is disappointing that at a time when the Government are attempting to tackle the problems of the inner cities and advocating closer working between the private and public sectors, and when the UK looks likely to lose out in terms of the availability of EC structural fund assistance, they appear not to be acting in the best interests of maintaining a buoyant local economy. That is particularly so when one looks at the provisions contained in Clauses 32, 33 and 34.
We plead with the Government not to damage the partnership between central and local government which all too sadly has been damaged in other ways. We ask them to encourage councils by giving them powers to assist the local economy when they can see an opportunity but which is not provided for in the Bill. I beg to move.
6.45 p.m.
Baroness Carnegy of Lour: It is excellent that the Bill encourages local authorities to have more scope to contribute towards the economy of their areas. The noble Lord, Lord Graham, described what he believed to be wrong with the Bill and wishes to leave out two clauses which limit the powers of local government. I believe that the two clauses are essential in enlarging the scope. His speech sounded like one made in the late 1970s or early 1980s when local government had to be the entrepreneur and go into competition with the private sect or in the local area. We now know that does not work because competition between local government and the private sector damages the private sector. It is made more difficult for the local market to work because the authority is in a special position.
However, there is now an important role for local authorities in the local economy. It is to operate in the same way as the Scottish Development Agency now operates: as an enabler of the private sector, The local authorities must be enablers and make it possible for private industry to operate freely in the area and create jobs. There is a great deal that the local authorities can do in that respect.
If they are not prevented from expanding into the private sector they will not assist the economy in the modern setting. Local government can only do what

1187
legislation says it can do and cannot go beyond that. It is difficult to set out in legislation all the details of what local government can and cannot do. These clauses are an attempt to make it possible to control that. The clauses are important in the modern setting. It would not have been important 10 years ago, but now it is important to word clauses as in this instance. I hope that they stay in the Bill.
Lord Renton: We are in a rather unusual position. We are discussing the possible omission of two clauses—Clauses 33 and 34—and doing so on a necessary paving amendment to Clause 32. We cannot complain about that; however, we should be clear about what we are up to.
It is interesting and helpful that the noble Lord has put down on the Marshalled List at the end of the amendments to Clause 33 notice of his intention to oppose the Question that Clause 33 stand part of the Bill. Although it is clear from his speech and from his paving amendments that he also wants Clause 34 left out, the noble Lord has not indicated on the Marshalled List any notice of his intention to oppose Clause 34. Perhaps after all, in spite of his paving amendment, he does not intend that that clause should be left out.
I endorse what has been said by my noble friend Lady Carnegy of Lour. I should have thought that the noble Lord would be reassured by, and would rejoice over, Clause 32(3) which makes it perfectly clear that the relevant authority will be able to make a grant, a loan, a guarantee or an indemnity to anyone who is going to be economically active in its area, or invest in that person's undertaking. That is very forthcoming on the part of a Conservative Government who believe in private enterprise but who nevertheless are willing for local authorities to have a stake in private enterprise and various other things.
I should have thought that there must be some limit to the exercise of the powers in Clause 32. There must be some kind of financial limit. Are we to accept the possibility that local authorities will be majority shareholders in the undertakings in which they may invest? I would not be surprised if the Secretary of State, using his powers under Clause 33, said, "Yes, useful investment, but we do not want them running local industry to the extent of becoming majority shareholders". These powers could be used on a wide scale. The Government must have the power in the national economic interest, especially if there is a threat of inflation, to limit the total amount of funds spent by local authorities on these matters.
To say that the splendid Clause 32, about which we can all rejoice, stands on its own without any limitation on the powers to be used in pursuit of it seems unrealistic. Realistically, there must be some kind of ministerial responsibility regarding the financial extent to which the powers are used. That is why we must have Clause 33. Bearing in mind that the noble Lord has not expressed his intention to oppose Clause 34, I consider that the guidance and consultation about promotion and economic development referred to in the side heading—amounting to a description of some of the
1188
clause—could be helpful to local authorities. Speaking for myself, I would not wish to see the terms of the clause omitted.
Lord Ross of Newport: On first seeing these clauses I welcomed them very much. In many parts of the country it is to local government that people turn at times of difficulty. It could be the closure of a major business or sudden high unemployment.
I was serving on an authority in 1971 when such an incident occurred. Our third largest employer closed down and the unemployment rate rose to 18 per cent. I did my best to persuade the Government that we should become an assisted area. That was, and always has been, refused. The only help forthcoming was from the development commission, but that is now drying up. Therefore, the local authority dealt with the situation. All parties were involved in combating the situation. What we did was very much in line with these clauses although I have to say that it was in the teeth of opposition from the then county treasurer who did not believe that local government should be involved.
We set up an enterprise agency which I chaired. All the other members were from private enterprise businesses which had put money into the project. I should like to put on record all the help we received from BP and Lloyds Bank in that respect. More recently a development board has been set up, originally chaired by a Lord Lieutenant and now by an industrialist. It is doing extremely well. That would not have come about if the local authority had not taken the initiative. Not a large amount of money was involved—between £300,000 and £400,000, I imagine. Looking at these clauses that would be about the limit we would be allowed if the same thing were to happen today.
I should like to put on record that our second largest employer in the Isle of Wight is Plessey. If Plessey is to be the subject of a takeover bid it would be disastrous for the economy of my former constituency. Under any such merger we do not believe that the company will be maintained in the way it is now. The chairman and managing director of Plessey in the Isle of Wight have played a major role in stimulating the economy, helping the schools, in training and in very other way. It is due to pressure from the development board, and from the Plessey Company in particular, that we have our own technical training area, for which we have fought very hard and which has just been granted to us. It is important and fully backed by industry.
I see local government as encouraging enterprise—not overbearing but putting money where necessary on behalf of the ratepayers and promoting initiatives. We have been able to do that because to a large extent the people on the island accept that what has happened has been through local government initiatives.
I should have indicated earlier my intention to speak on Clause 34 stand part. There is one part I wish to raise on the clause that I hope the Minister can deal with. I disagree totally with subsection (2) that local authorities should determine at the beginning of each financial year whether they will take any steps in the year for the promotion of

1189
economic development in the area. How on earth can they do that? These events suddenly occur. A closure happens overnight. An American multinational can suddenly decide to close a factory. It has happened on a couple of occasions in Scotland recently. Suddendly there is disaster. It may be that the local authority has made no preparation. I will raise this later in the Bill. But are we actually saying that local authorities cannot do anything until the beginning of the next financial year? That would be totally mad.
Apart from that, and subject to other later amendments, I welcome the clauses. I hope however, that we shall amend those that are too restrictive. However, they set a pattern which I accept is an innovation for this Administration. There are restrictions but, on the whole, the clauses are to be welcomed. There are some areas that I certainly want to see changed. I specify one in particular because the amendment refers to taking out Clause 34. A part of Clause 34 is a total nonsense, and I give notice that I shall refer to that again.
7 p.m.
Lord Elton: Very briefly, I advise my noble friend the Minister that if he is for a moment entertaining the idea of withdrawing the power to restrict the economic involvement of the local authorities in this way, he should consider the history of the metropolitan authorities when approaching their conclusion. They demonstrated dexterity and vigour in applying local authority funds to all kinds of sectors that went far beyond what could have been the intention of the legislation under which they did so. Therefore, while it is a regrettable fact it is a necessary one that the Secretary of State should have power to restrain this employment of money if it appears to be inappropriate.
Baroness Blatch: I wish to add one point to what was said by my noble friend Lady Carnegy, who spoke in favour of the limitations, as indeed did my noble friend who has just spoken. I think that is right. The other point I wish to make is that I do not believe that local authorities should be frustrated by the limitations set out in Clauses 33 and 34. The one provision that local authorities can make to promote the economy in the area is to provide good services. The provision of good schools, the building and maintenance of roads and the provision of other services does as much to promote the economy of an area as the provision of direct promotional activities. Therefore I do not believe that there should be a frustration. The limitations are important.
To cover the point raised by the noble Lord, Lord Ross of Newport, and the case of a large company going out of business and causing the kind of repercussions he has outlined, as regards Plessey, I believe the Government's record of bringing assistance into play—one only has to think of Corby, Consett and other instances—with a co-operative approach to a crisis is preferable to building something that is the norm on the face of the Bill
1190
for the everyday management of local authorities. I do not believe that there needs to be frustration about the limitations set out in Clauses 33 and 34.
Lord Hesketh: These amendments are intended to provide that the power for local authorities to incur expenditure in the promotion of economic development is placed on the statute book without any limitation. The amendments effectively delete references to Clause 33 of the Bill, which would enable the Secretary of State to make regulations to limit the scope of the very broad power given to local authorities under Clause 32(1) and Clause 34, which sets out the consultation procedures with the local business community.
These amendments attempt to attack the heart of the new power. The basic principle behind our proposal was to give local authorities a specific power to promote economic development in their areas. If I may explain a little of the background to our decision it will be easier to see why we did not merely give local authorities an unqualified enabling power, and how flexible the new power will be in practice.
As the Committee will be aware, the decision to introduce such a power stemmed from the review of the proper role of local authorities in economic development which we carried out on the recommendation of the Widdicombe Committee. Our review concluded that local authorities were using a wide range of specific functional powers and their discretionary spending power to carry out an equally wide range of activities in the economic development field. Their activities included grants for enterprise boards and for individual firms; funding of training schemes; capital investment in starter and other individual industrial units and general and specialist advice to potential businesses.
I could go on, but I am sure that ':he Committee can see very clearly from those activities which I have already mentioned that the Government's conclusion was that local authorities had a very important role to play in promoting economic development. Indeed, in many cases local authority economic initiatives have been an important element in the success of central government policies. My own department's urban programme schemes, for example, require an input by local authorities.
Hence the decision to introduce a specific power for local authorities which it is hoped will give them a clearer footing on which to undertake their activities. However, while our investigations confirmed our view that local government had a vital role to play here, they did at the same time demonstrate that there was some lack of direction in some areas of activity and that there was a need for a economic activities by local and central government and the private and voluntary sectors to be complementary rather than competitive with each other. It was clear that where faults did exist these were exacerbated, if not caused, by the fact that local authorities had no clear powers to promote economic development and hence no parameters within which they could carry out their programmes.

1191
The intention of Clauses 33 and 34 and the regulations which we will be making is to set the new power in as clear a context as possible in order to focus the activities of the authorities to best effect. While we have said many times that we have no intention of hindering local authorities in the useful work that they do in this field, there are undoubtedly areas in which we do not think it appropriate for them to be involved. There are examples of best practice in terms of organising a programme of activity which we think it important for local authorities to follow. Thus, as I think the Committee will agree, it would be very odd to hear that a local authority had set itself up as a manufacturer. There are others far better placed to do so. I cannot see how such activities could or would be appropriate to encouraging economic development in a particular area.
We have made no secret of our intentions as regards the probable restrictions on the power. From the beginning when details of the power were announced in another place we set our cards on the table. Furthermore, the usual consultations that precede the making of such regulations began as far back as January. Three meetings have already taken place between officials and the local authority associations and I am pleased to say that we will very shortly be issuing a consultation paper on these matters.
As regards the procedural items in Clause 34, which the amendments seek to make ineffectual, there is nothing here that any sensible authority would not be doing already. It is only common sense to draw up a clear strategy before embarking on expenditure at the ratepayers' expense and to ensure that any programme of work is complementary to the policies both of central and local government. We shall talk in more detail about this on later amendments, but I cannot see how such requirements will restrict any authority in exercising its powers under Clause 32.
We shall also discuss in other amendments the more detailed aspects of the restrictions that will apply to the new power. It is not our intention to restrict authorities' use of the new power unduly. We have discussed all these matters quite openly and extensively with those concerned and discussions will go on. I can assure the Committee about our intentions as regards the new power. As my noble friend Lord Renton pointed out, it would be quite impossible for the Government to provide a Bill which has enormous flexibility but is without any form of control in order to provide opportunity for local authorities. For that reason, we resist these amendments.
Lord Graham of Edmonton: I am conscious that I stand between the Committee and pleasure. Therefore I shall not take as long as I might otherwise have taken. This is a big issue. The Minister was quite right and fair to say that these amendments go to the heart of this part of the Bill. I make no apology for that. What puzzles us is that by the whole range of measures and changes in the controls that the Government exercised over local government before
1192
this Bill and these clauses came to be, it was very difficult for local authorities to do very much that did not have the approval of central government.
This Bill and these clauses are studded with phrases such as, "subject to regulations", "subject to matters that may be specified", and "regulations made by the Secretary of State". There are also references to,
"transitional provisions in connection with other provisions as the Secretary of State considers appropriate".
It is a fact that before very long nothing will move on the face of local government that has not been expressly authorised, never mind generally authorised, by the man or woman in Whitehall. That is why we are protesting in this manner.
The noble Baroness, Lady Carnegy, was quite fair in saying that what she objected to in the success of local government enterprise was that it competed with private enterprise. As such she does not like the idea that if there was to be a loser it might be private enterprise even though the winner was municipal enterprise. She is saying that local enterprise from the council is all very well provided it is not too strong or too successful as a competitor with local private enterprise. The noble Baroness, Lady Blatch, nods her head in support as vigorously as she can with decorum from a sitting position.
Lord Jenkin of Roding: Surely the point here is that a local authority cannot go bust. It is very unfair competition if a local authority which cannot go bankrupt competes with traders which can. That is something which traders up and down the country have found when they have had to compete with local authorities in areas such as funeral services and so on. It is damned unfair competition. If the regulations deal with that, they will be performing a notable service.
Noble Lords: Hear, hear!
Lord Graham of Edmonton: I gather from the chorus of "Hear, hear" from the other side of the Committee that what private enterprise does not want is competition; and certainly not from municipal authorities. Most small local businesses want to become big local businesses and ultimately gobble up everyone else. We do not want to provide unfair competition. We want to provide what the Minister himself wants, which is flexibility for local government where it finds that there is a need to act quickly in order to protect the local environment.
The noble Baroness, Lady Blatch, said that she wanted the co-operative approach in these matters. She will be well aware, because she follows these matters closely, that the Labour Government set up the Co-operative Development Agency in 1978. The Government have just announced that it is to close. The Co-operative Development Agency stimulated the co-operative approach in many ways and created work which needed the stimulation of a local council. I have before me its last annual report which contains very good work. The Government have rewarded the CDA by closing it down. That is what the Government mean when they talk about these matters. The Minister says that a consultation

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process is going on and that a paper is likely to be published. I should like to believe that those who are being consulted are of a like mind with the Government on the ways in which they will be further hog-tied in respect of their flexibility.
Nothing in what the Minister said has encouraged me one iota to believe that the Government are serious in wanting to stimulate initiative and enterprise in local councils where it is required. The noble Lord, Lord Jenkin, referred to funeral services. That hare was run a few years ago. That hare is not running at this time. The noble Lord is fighting the battles of 1982, 1983, 1984 and 1986 which he lost when he was tackling a great many areas of local government. The Bill sets out to ensure that anything which moves at a local government level can move only with the approval of the Secretary of State. That is why I intend to seek the opinion of the Committee on Amendment No. 115B. I commend the amendment to the Committee.
7.12 p.m.
On Question, Whether the said amendment (No. 115B) shall be agreed to?
Their Lordships divided: Contents, 38; Not-Contents, 83.

DIVISION NO. 2

CONTENTS

Ardwick, L.

Lovell-Davis, L.

Broadbridge, L.

McGregor of Durris, L.

Carmichael of Kelvingrove, L.

Mclntosh of Haringey, L..

Mason of Barnsley, L.

Carter, L. [Teller.]

Nathan, L.

Cledwyn of Penrhos, L.

Nicol, B.

Dean of Beswick, L.

Phillips, B.

Dormand of Easington, L.

Pitt of Hampstead, L.

Elwyn-Jones, L.

Ponsonby of Shulbrede, L [Teller.]

Ennals, L.

Falkender, B.

Prys-Davies, L.

Fisher of Rednal, B.

Stedman, B.

Gallacher, L.

Strabolgi, L.

Galpern, L.

Taylor of Mansfield, L.

Graham of Edmonton, L.

Turner of Camden, B.

Houghton of Sowerby, L.

Underhill, L.

Jeger, B.

Walston, L.

Kagan, L.

Whaddon, L.

Kirkhill, L.

White, B.

Lockwood, B.

Williams of Elvel, L.

NOT-CONTENTS

Arran, E.

Elliott of Morpeth, L.

Auckland, L.

Elton, L.

Balfour, E.

Fraser of Carmyllie, L.

Bauer, L.

Gray of Contin, L.

Belstead, L.

Gridley, L.

Blatch, B.

Haig, E.

Blyth, L.

Hailsham of Saint Marylebone, L.

Borthwick, L.

Boyd-Carpenter, L.

Halsbury, E.

Brougham and Vaux, L.

Harmar-Nicholls, L.

Caithness, E.

Hayter, L.

Carnegy of Lour, B.

Henley, L.

Carnock, L.

Hesketh, L.

Carr of Hadley, L.

Hives, L.

Coleraine, L.

Holderness, L.

Colville of Culross, L.

Hooper, B.

Craigavon, V.

Hylton-Foster, B.

Crickhowell, L.

Ingrow, L.

Davidson, V. [Teller.]

Jenkin of Roding, L.

Dundee, E.

Johnston of Rockport, L.

Elliot of Harwood, B.

Joseph, L.

1194

Kaberry of Adel, L.

Penrhyn, L.

Kenilworth, L.

Rankeillour, L.

Kinloss, Ly.

Reay, L.

Lauderdale, E.

Renton, L.

Lawrence, L.

Romney, E

Lindsey and Abingdon,

St. John of Bletso, L.

Long, V. [Teller.]

Sanderson of Bowden, L

Mackay of Clashfern, L

Sharples, B.

Margadale, L.

Shaughnessy, L.

Marley, L.

Stodart of Leaston, L.

Maude of Stratford-upon-Avon, L.

Strange, B.

Strathclyde, L.

Merrivale, L.

Sudeley, L.

Mersey, V.

Thomas of Gwydir, L.

Monk Bretton, L.

Torphichen, L.

Monson, L.

Trafford, L.

Monteagle of Brandon, L.

Ullswater, V.

Mottistone, L.

Vaux of Harrowden, L.

Mountevens, L.

Windlesham, L.

Murton of Lindisfarne, L.

Wise, L.

Orkney, E.

Wynford, L.

Orr-Ewing, L.

Resolved in the negative, and amendment disagreed to accordingly.
7.20 p.m.
The Earl of Arran: I hope that Members of the Committee will agree that this is a suitable moment at which to break for dinner. I suggest that we return to the Committee stage of the Bill at 8.20 p.m. I beg to move that the House do now resume.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.
Water Supply (Water Quality) Regulations 1989
Surface Waters (Classification) Regulations 1989
Controlled Waters (Lakes and Ponds) Order 1989
Water and Sewerage (Conservation, Access and Recreation) (Code of Practice) Order 1989
Director General of Water Services' Register (Inspection and Charges) Order 1989
Water Reorganisation (Pensions etc.) (Designated Persons) Order 1989
Trade Effluents (Prescribed Processes and Substances) Regulations 1989
Control of Pollution (Discharges by the National Rivers Authority) Regulations 1989
Control of Pollution (Radioactive Waste) Regulations 1989
Water Supply and Sewerage Services (Customer Service Standards) Regulations 1989
Control of Pollution (Registers) Regulations 1989
Water Reorganisation (Pensions etc.) Regulations 1989
Control of Pollution (Consents for Discharges etc.) (Secretary of State Functions) Regulations 1989
Water Appointment (Monopolies and Mergers Commission) Regulations 1989
Control of Pollution (Revocations) Regulations 1989
7.21 p.m.
Lord McIntosh of Haringey Lord McIntosh of Haringey rose to move, That an Humble Address be presented to Her Majesty praying that the regulations and orders be annulled.
The noble Lord said: My Lords, I do not propose to make a long speech about the contents of these regulations, although I can assure your Lordships that if I did so we could readily fill up not only the dinner hour but also the rest of this evening's business.
I prayed against these orders because they so accurately and immediately bore out the fears which I had, and the fears which I expressed in my reasoned amendment on Third Reading of the Water Bill on 27th June. Perhaps noble Lords will recall that in a relatively unusual procedural Motion I moved an amendment to the Motion that the Bill be now read a third time. The amendment proposed the insertion of the following words:
"but this House regrets that completion of consideration of the Bill in this House is sought in the absence of adequate information in respect of the terms of water and sewerage undertakers; the likely terms of the flotation and the sale of securities; the basis on which prices to consumers will be set; the final terms of the code of practice on environmental and recreational matters; the detailed requirements in respect of the quality of drinking water and river water, and the relevant timetables for compliance".—[Official Report, 27.6.89; col. 586.]
We were assured by the Minister that everything which was normally done in privatisation Bills had been done; that the House had been kept as fully informed as possible about the progress of the supplementary documentation which, as I think he agreed with me, is desirable when the House is considering such important legislation; and that everything would be published as soon as possible. That certainly was true.
However, the moment that the Bill received Royal Assent, 15 orders were placed by the Secretary of State covering the very matters to which I referred in my reasoned amendment: the final terms of the code of practice on environmental and recreational matters; the detailed requirements in respect of the quality of drinking water and river water; and the relevant timetables for compliance.
When we were concerned with the terms of appointment of water and sewerage undertakers, the Minister was kind enough to let me have—although it was too late for me to do anything about it; but, I accept, that he let me have them as soon as he could—the final terms of appointment; that is, the model terms of appointment. But, these 15 regulations were all there. They had all been
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prepared. As soon as Royal Assent was given, they were available for publication and within 24 hours they were on the news-stands on every street in the capital.
Our complaint, and the reason why we are praying that these regulations should be annulled, is that they could have and ought to have been available to us in final draft form as the Bill went through this House. That is the burden of our complaint. There are many matters which are wrong about them, and I know that other noble Lords have comments to make upon them. But our fundamental complaint and the fundamental criticism that we make of the Government is that we ought to have known the contents of these regulations; we could have known their contents; and the proper respect would have been paid to your Lordships' House if these regulations in their final draft form had been available for debate as the Bill passed through its many stages. Otherwise, as I complained then, and as I complain again now, the Bill is in very material aspects a hollow Bill; it provides for regulations but does not tell the House what they will be.
At the time I said that we had achieved certain improvements in the codes of practice. The Minister had been good enough to write to me about the ways in which the codes of practice were to be improved and I believed him when he said that these improvements would be found in the final form. I was right to believe him. He behaved totally honourably, because the improvements which he undertook to make in the codes of practice were made.
I said that I knew, because I had a letter about it, that of the matters in the codes of practice would be better; but, I also said that I did not know whether some matters would be worse. That was also right because some aspects of the codes of practice are substantially worse than we expected, substantially worse than that which the Government ought to be proposing and substantially worse than those outside the House, who have been concerned with such matters and who have been reading the regulations in great detail, feared. Indeed, this has caused them a great deal of worry.
Let me give just a few examples of the ways in which such matters are wrong. The Water Supply (Water Quality) Regulations 1989 provide for a time-scale. The House will note that the time-scale provided for in these regulations is already out-of-date. The European Commission has already demanded that a time-scale be agreed within a period of two months. If that is not done, there will be legal action in the European Courts. That is the demand that has been made by Senor Ripa Di Meana, the European Commissioner for the Environment.
What has happened, not only since the Bill reached the statute book but also since the regulations were laid, is that our amendment on the time-scale for the improvement of drinking water quality is to be enforced—enforced despite the fact that the Government overturned that decision in another place. Therefore our amendment will in fact win through. The time-scale will have to be agreed, otherwise we shall be taken to court by the European Commission.
I turn now to the Water and Sewerage (Conservation, Access and Recreation) (Code of Practice) Order, 1989. I should remind your Lordships that these regulations are only here because the Government accepted an amendment in this House on Report that they should be subject to the negative resolution procedure. But this order has been widely attacked by those who are concerned with these matters on the grounds, fundamentally, that it is not enforceable, and also on the grounds that nature conservation has not been given the necessary precedence to achieve what was desired by noble Lords on all sides of the House as the Bill proceeded on its course. I know that my noble friend Lady Nicol has points to make on this particular order.
As regards the Water Supply and Sewerage Services (Customer Service Standards) Regulations 1989, these are unacceptable because they do not provide any guarantee of compensation for the supply of unwholesome water.
There should be a no-quibble guarantee similar to the kind given, for example, by Marks and Spencer. We have no such thing. If the House had been told that the regulations on customer service standards would not cover tha case of Camelford (which was referred to by noble Lords on a number of occasions during the Bill's passage) it would have been outraged. Amendments would have been moved—I have no doubt they would have been agreed to—in order to secure that the regulations covered the necessary points.
The Control of Pollution (Registers) Regulations: I do not know what the Government's attitude is towards freedom of information, but the control of pollution registers are to be made available in the NRA's regional headquarters and not where people need them, for example, at local council offices, or, as we argued throughout the Bill's passage, on customers' bills. Here again, the regulations are grossly inadequate.
The Surface Waters (Classification) Regulations are interesting because they provide a standard of a maximum concentration of nitrate of 50 mg per litre for surface water which is abstracted for drinking water purposes. That is a tighter condition than the one imposed by EC directive 75/440 and yet the Government have throughout been arguing—the Secretary of State was arguing in another place only within the past few weeks—that the European Commission had it wrong about nitrate, that the maximum acceptable concentration of nitrates were wrong, and that it was scientifically undesirable as well as practically impossible to achieve those standards. Why has that standard now been entered into the classification of surface water regulations when water is abstracted for drinking water quality purposes?
I could have given many more examples of the way in which the regulations are defective. I need do no more than refer to the fact that the Joint Committee on Statutory Instruments has examined three of the regulations in detail and has found the drafting of them all to be unsatisfactory. The joint committee was asked to deal with all 15 regulations
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in a period of five days. It was unable to do so. It would be humanly impossible to do so; but it found serious drafting problems with all the regulations. They were not merely produced too late for the House to consider them properly when the legislation was going through, they were badly produced. Heaven knows what defects there are in the other regulations!
In the manner and timing of the presentation of the regulations to Parliament and in the way in which the House has been treated in relation to considering them as part of the proper consideration of the legislation, the Government have failed on all counts.
The regulations should be annulled so that the Government have an opportunity to think again and to correct not just the drafting errors but, much more importantly, the substantive faults in 1he regulations. I hope that the Government will take the opportunity to do so. I beg to move the Motions en bloc.
Moved, That an humble Address be presented to Her Majesty praying that the Water Supply (Water Quality) Regulations 1989 [S.I. 1989 No. 1147] be annulled; an humble Address be presented to Her Majesty praying that the Surface Waters (Classification) Regulations 1989 [S.I. 1989 No. 1148] be annulled; an humble Address be presented to Her Majesty praying that the Controlled Waters (Lakes and Ponds) Order 1989 [S.I. 1989 No. 1149] be annulled; an humble Address be presented to Her Majesty praying that the Water and Sewerage (Conservation, Access and Recreation) (Cope of Practice) Order 1989 [S.I. 1989 No. 1152] be annulled; an humble Address be presented to Her Majesty praying that the Director General of Water Services' Register (Inspection and Charges) Order 1989 [S.I. 1989 No. 1154] be annulled; an humble Address be presented to Her Majesty praying that the Water Reorganisation (Pensions etc.) (Designated Persons) Order 1989 [S.I. 1989 No. 1155] be annulled; an humble Address be presented to Her Majesty praying that the Trade Effluents (Prescribed Processes and Substances) Regulations 1989 [S.I. 1989 No. 1156] be annulled; an humble Address be presented to Her Majesty praying that the Control of Pollution (Discharges by the National Rivers Authority) Regulations 1989 [S.I. 1989 No. 1157] be annulled; an humble Address be presented to Her Majesty praying that the Control of Pollution (Radioactive Waste) Regulations 1989 [S.I. 1989 No. 1158] be annulled; an humble Address be presented to Her Majesty praying that the Water Supply and Sewerage Services (Customer Service Standards) Regulations 1989 [S.I. 1989 No. 1159] be annulled; an humble Address be presented to Her Majesty praying that the Control of Pollution (Registers) Regulations 1989 [S.I. 1989 No. 1160] be annulled; an humble Address be presented to Her Majesty praying that the Water Reorganisation (Pensions etc.) Regulations 1989 [S.I. 1989 No. 1161] be annulled; an humble Address be presented to Her Majesty praying that the Control of Pollution (Consents for Discharges etc.) (Secretary of State Functions) Regulations 1989 [S.I. 1989 No. 1151] be annulled; an humble Address be presented to Her Majesty praying that the Water Appointment

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(Monopolies and Mergers Commission) Regulations 1989 [S.I. 1989 No. 1162] be annulled; and that an humble Address be presented to Her Majesty praying that the Control of Pollution (Revocations) Regulations 1989 [S.I. 1989 No. 1150] be annulled.—(Lord McIntosh of Haringey.)
Lord Shaughnessy: My Lords, as a Member of the Joint Committee on Statutory Instruments, I should like to endorse the remarks of the noble Lord, Lord McIntosh of Haringey, both in the substance and in the particulars. It is extraordinary that with legislation of this magnitude and importance, the regulations have been found by our committee to be defective in at least three instances. I should like to hear the Minister's comments on why they have had this rather slipshod treatment from the point of view of drafting and other points of view. Why were they not more carefully addressed in relation to a Bill which has attracted as much attention and controversy as the Water Bill has? Perhaps the Minister will address that point when he comes to reply.
Lord Addington: My Lords, I can only endorse what has been said by the noble Lords, Lord McIntosh of Haringey and Lord Shaughnessy, about the regulations and the report which I have looked through and which stated that they were not very good. I found the fact that they came out a little too late extremely irritating to say the least.
Certain issues crop up in respect of the regulations and the code of practice. When it comes to conservation we have more of the old argument on "may" or "shall" cropping up. For instance, page 17 of the code states:
"In particular, where an SSSI is sustaining damage as a consequence of nutrient enrichment, to which sewage disposal is making a significant contribution, the relevant body should consider suitable remedial action".
Surely "should take" or "will take" would be more appropriate. If damage is being done, something should be done about it.
When it comes to matters such as access, there are two categories of access—either by right of way or by a local government Act—as opposed to rights which are granted by the new water companies. There should surely be some way of ironing out that problem.
On recreation, there is the possibility of conflict between angling and boating interests. Once again, something should be done to ensure that if such conflicts arise something is done about them. We can go on to deal with things such as water quality. There is a structure whereby the control of pollution, for instance, will be relaxed if the ground quality is causing any deterioration in water quality.
We should look at what is causing the deterioration in ground quality. If man-made pollution of the ground is affecting the water, something should be done about it. The regulations should cover that point.
I agree that the Government have made a notable step forward in recognising the problem caused by pesticides. I wish that more such steps had been taken. On registration, we have a solution that is
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good as far as it goes. We shall be told what is put into water. We are told the state of the water before the additives are used or its state afterwards. We should be given more than merely half the information.
We then have the classification regulations. The regulations are an improvement in that somewhat tighter standards are being imposed by the Minister than the directive requires, and I thank him for them. However, when it comes to the three classifications—DW1, 2 and 3—will the Minister tell me whether, where water is being taken for drinking water, there are any water undertakers which do not have plant necessary to bring the water up to the desired quality. Also, it is rather a pity that only drinking water is covered by the directives. Surely, there should be some classification for quality when it comes to fisheries, bathing waters and shellfish. There should be a directive covering those. When we start to deal with the problems we shall not have to consider the water quality for the simple reason that the water will already be of a sufficiently high standard to make bringing it up to standard far easier.
Just as a start, the regulations on water source protection zones require the implementation of protection zones. These regulations are quite a good step towards the desirable state of affairs of better water quality. However, they are only a start. Much more is needed and, as has already been stated, unfortunately they are not very well drafted. I hope that these regulations are a start on something that will come and that where there are flaws—as there will be—the Minister, in his usual gracious manner, will be prepared to make changes to them.
Baroness White: My Lords, I have no intention at all of speaking on any of the details of the regulations. I simply wish to indicate my very strong support for my noble friend Lord McIntosh of Haringey and the representative of the Liberal parties, I suppose I should say, since there is only one representative on the Benches. I also wish to say how glad I am that the noble Lord, Lord Shaughnessy, has taken the trouble to come here and tell the House what your Lordships' Joint Committee on Statutory Instruments feels about the way in which these regulations have been dealt with.
It appears to me that this is not an occasion on which we can satisfactorily discuss any of the details. However, it is possibly the most gross example that we have ever had of the way in which the present Administration has been treating the House in its handling of legislation. It is disrespectful to the House as a legislative Chamber for a group of proposed regulations to be presented to us in this way, without an adequate examination by our own statutory committee which is set up to undertake precisely that task. It is only right that one should make it quite clear that this is not the way in which responsible legislation should be carried out in the House.
I hope that the feelings of those of us who are present can at any rate be conveyed by the Government Front Bench. In our view, this is not the way in which responsible legislation should be

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dealt with. It is an insult to us and we cannot possibly be expected to deal with the details. They have not been adequately examined by the statutory committee.
Perhaps I may raise one other little matter which interests me from the constitutional point of view. I do not expect the noble Earl to respond because it is not really his function to do so. Perhaps he will ask his noble friend the Leader of the House to inform us what is the shortest period which is accepted as satisfactory between the acceptance by the House of the Motion that the Bill do now pass and the Royal Assent. In this case it was something like one hour 10 minutes. I may be wrong, but it was something of that order.
One may say that this is a constitutional charade, but it seems to me to be rather disrespectful to Her Majesty. One does not imagine her sitting at her desk with her biro at the ready in order to indicate her assent to something passed by this House. I would find it of interest if perhaps the noble Lord, Lord Boyd-Carpenter, who regards himself, I know, as a great authority on these matters could help us. Perhaps he will be able to enlighten us. What is the shortest period that should elapse before the Royal Assent is pronounced on a Bill which has been pushed through the House as this one has?
7.45 p.m.
Baroness Nicol: My Lords, I share the disquiet which has already been expressed by a number of noble Lords. I wish to return particularly to the regulation which covers the conservation, access and recreation code of practice. Perhaps I may remind your Lordships that we were given a draft code of practice in January this year. Many of us based our contributions to the Water Bill on the provisions of that draft code of practice. We had every expectation that the majority of the promises at any rate would be fulfilled.
Now we have the actual code. Perhaps I may remind your Lordships of one paragraph in it which will be found on page 7, under the heading:
"Integrated Land Use and Management Plans".
This very important paragraph says:
"The objective should be to resolve most conflicts between different land uses by zoning for those uses by area and over time. In cases where conflicts between recreation and the conservation of landscape, flora and fauna cannot be resolved by zoning, preference should normally be given to conservation, especially where this involves securing the protection of vulnerable and endangered species of flora and fauna."
That is clear enough. That kind of general expectation ran through the entire draft code of practice. So I was rather disappointed to go through the actual code and find not a mention of zoning and no mention at all of the general approach to conservation and the general feeling that conservation should not dictate any sort of precedence in any circumstances other than sites of special scientific interest and other specially designated areas. What the new code does is to echo the removal of the general approach to conservation which we tried so hard to save.
I have not gone through all 15 of the regulations but I think that as concerns those which I have
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examined my noble friend on the Front Bench is absolutely right to feel unease at the way they have been handled. I hope that it is not too late for the Government to think again. If they are not prepared to think again, I hope that my noble friend will feel that he can press the rejection of all these regulations.
7.47 p.m.
The Minister of State, Department of the Environment (The Earl of Caithness): My Lords, I am grateful to all your Lordships who have taken part in this short debate on the instruments before us. The debate is concerned with 15 statutory instruments covering a number of matters relevant to the implementation of the regulatory framework for the privatised water industry which the noble Lord, Lord McIntosh of Haringey, has asked the House to pray against this evening.
I have to say that I thought this was an extraordinary proposal by the noble Lord, Lord McIntosh. I know that he has ritually, throughout the passage of the Water Act, expressed his discontent with the degree of information that we have made available to the House on various matters. That in itself was surprising, as I explained at some length, but it is perhaps even more surprising that his response to the Government's prompt publication of many of the detailed proposals he has been pressing us for is a Motion for their rejection.
Yes, the Government have moved swiftly. The noble Lord, Lord McIntosh of Haringey, and the noble Baroness, Lady White, said that the regulations were laid immediately after Royal Assent. This should come as no surprise to the House. If your Lordships will refer to the points which I made on 27th June on the reasoned amendment moved by the noble Lord, Lord McIntosh of Haringey, in col. 592 of Hansard your Lordships will see what I said at the bottom:
"The regulations themselves will be laid immediately after the Water Bill receives the Royal Assent and will be based on the consultation documents".
So the Government have moved swiftly to produce these measures, a number of which are key elements of our plans to provide a new protection for the water environment. I understand why the noble Lord might not wish to draw attention to the lamentable record of his own party when it was in government in implementing water pollution control legislation. I know he would prefer to forget that it was the government of his party who, having passed the Control of Pollution Act in 1974, failed ever to implement its main water provisions. Nevertheless, it is disappointing to hear only a reprise of the unconvincing arguments we heard during our earlier debates on the Water Act itself.
I put it to your Lordships that the noble Lord has made no case for praying against these instruments. In making these instruments, the Government have fulfilled their undertakings to bring forward key subordinate legislation under the Water Act promptly. The drinking water quality regulations are perhaps the most significant of all the measures we are debating this evening. They incorporate the EC drinking water directive into domestic legislation for

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the first time, and in a number of respects go beyond its requirements. They provide for all water supplies to comply with EC standards, and set 14 additional national standards. For example, the lead standard is tighter than the one set in the EC directive. Why is that? It is of course in recognition of the need to continue to reduce exposure to lead from whatever source.
The regulations provide for frequent monitoring and analysis, and lay down minimum sampling frequencies much higher than the EC directive requires. They require sampling normally to be done at the consumer's tap and set down procedures for the collection and analysis of samples. There will be independent quality control checks of laboratories, and, in addition, the new drinking water inspectorate will monitor the work done by the water undertakers.
There will be new provisions on water treatment. Supplies will have to meet certain minimum treatment requirements. For example, the use of new chemicals or products in treatment or mains relining will not be permitted without the Secretary of State's approval. Thus, denitrification processes currently being investigated by my department will be able to be used in the programme of reducing nitrate levels only if we are satisfied that they are safe. That was a point to which the noble Lord, Lord McIntosh, alluded when he was talking about what had happened on the reasoned opinion, and the points made by the Environmental Commissioner in Brussels. Of course we seek to mitigate the potential damage from nitrates in order to agree the limits as set out in the directive. We shall be able to do that in most cases except for two—one area in Norfolk and one in Stafford. The reason for that is that we have to introduce new complicated denitrification plants, and we need those to be tested.
I hope that I shall be allowed to ask the noble Lord, Lord McIntosh, a question. The question arises from the debate on these instruments in another place. It was a question that my honourable friend the Minister responsible for water asked the honourable friend of the noble Lord, the honourable Member for Dewsbury. The question was this. If we cannot meet the timetable for the nitrates by 1993, was the party of the noble Lord challenging the basis on which we have yet to test the technology? Surely the noble Lord would not wish us to introduce a denitrification plant in order to meet the directive when it had not been properly tested? Perhaps the noble Lord will comment on that when he replies.
For the first time the drinking water regulations place a duty on water undertakers to provide the public with comprehensive information about the quality of their water supplies. From next January information on compliance, any relaxations, and about undertakings given under Section 20(5)(b) of the Act will be kept in a publicly available record. Water undertakers will also be required to send additional information to local authorities at regular intervals. Both the local authority and the local health authority would have to be told immediately of any significant health risk due to water quality. In summary, these regulations provide for the
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maintenance and improvement of our already high standards of water quality. In the Government's view they should be generally welcomed.
The regulations on surface water classification and the associated order relating to ponds and reservoirs provide a critical link between the quality of water in the environment and in supply. They make a preliminary use of the powers to introduce systems for water quality classifications, to put in place immediately a system for the classifications in respect of abstraction for human consumption, so that the level of treatment required for different qualities of water entering the supply system may be determined. These instruments allow us to give effect to the EC Surface Water Abstraction Directive, to charge the NRA with the responsibility for monitoring for compliance, and enable us to ensure that all abstractive waters are properly classified and regulated. They are a necessary supplement to the water quality regulations, and should be applauded as a major step towards better water standards.
The noble Lord, Lord Addington, asked whether water would be abstracted from water supply in the DW1, DW2 and DW3 qualities without the relevant treatment capability. The short answer to that is "No". The purpose of the classification regulations, taken with the water quality regulations, is to prevent that happening.
I would have expected the noble Lord, Lord McIntosh, to support the control of pollution measures. These instruments will put in place from the transfer date the requirements for regulating effluent discharges which are fundamental to the pollution control system. They ensure more openness and better accountability, for example by requiring additional information to be published and by removing anomalies in the present provisions. They provide for the separation of the regulator and the regulated so that a water or sewerage undertaker can no longer be accused of being both poacher and gamekeeper in matters relating to pollution control.
The noble Lord asked that the pollution registers' information should be available locally. I have to say that in our opinion that would be quite impracticable. On any reasonable grounds it is surely sufficient that they should be available, as they are now, at 10 regional centres. That provides reasonable access at reasonable cost.
When the noble Lord, Lord Addington, was talking about fisheries, he asked about the matter of river quality and what matters are to be regulated. I repeat the Government's view that it would be unreasonable and inappropriate to establish the relevant classifications and river quality objectives before the NRA is able to give advice and consult on them. The regulations we are debating this evening put in place the framework necessary for the maintenance and development of existing systems.
I shall now turn briefly to some of the other measures which the noble Lord wishes the House to pray against. The customer standards regulations, otherwise known as the guaranteed standards scheme, will enable the domestic customer to claim a £5 cash payment or credit for each occasion or day

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that certain standards are not met. I am sure that the early implementation of this scheme will be generally well received.
The two measures relating to pensions will ensure that pensions payable at the transfer date in respect of former employees of seven predecessor organisations will be treated in the same way as pensions payable in respect of former employees of the water authorities; and that certain unfunded liabilities of the water authorities will transfer to the National Rivers Authority.
The order relating to the inspection of the director general's register, which includes particulars relating to the appointments of water and sewerage undertakers, specifies the times at which the register is to be open for inspection and the fee payable for certified copies of extracts from it or documents referred to in it. It follows the precedents of previous privatisations.
I now turn to the regulations concerning the procedures of the Monopolies and Mergers Commission for references for determination of questions relating to the appointment of water and sewerage undertakers. These apply standard provisions, and would come into play only if determinations by the director general concerning the level of charges were disputed by appointed companies.
Before I come to the code of practice on conservation, access and recreation, which is of great interest to many of your Lordships, as has been made abundantly clear tonight, I should respond to the noble Lord's comments on the report of the Joint Committee on Statutory Instruments which was published on 19th July. I can assure the House that the Government consider the committee's comments to be valuable and constructive.
I can assure the noble Lord, Lord Shaughnessy, that we shall reflect on what the joint committee has said; in most cases we have already indicated that we will bring forward amending regulations to just three of the 15 instruments. I can only apologise to the noble Lord and to his committee that mistakes were made. They were not intentional, and we tried extremely hard not to make mistakes. However, I apologise for the extra work that I caused the noble Lord.
I now come to the code. This is an important part of the environmental package in the Water Act. I hope that noble Lords on all sides of the House will agree that as a result of the changes made in the light of consultation, and as a result of comments made by a number of noble Lords this document is now even better than the draft we published earlier in the year.
I take the point of the noble Baroness, Lady Nicol, who by and large does not agree with that. I shall read very carefully what she has said and draw her comments in particular to the attention of my right honourable friend.
The code provides the best available guidance on matters relating to conservation, public access and recreation. The negative resolution procedure for its approval, which was included in response to
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amendments proposed by this House, means that we now have a full and robust statement of the matters to which the NRA and the new water and sewerage companies will have to have regard in performing their general environmental duties.
In conclusion, the laying of these statutory instruments emphasises the Government's determination to act as quickly as possible to maintain and improve the quality of our water environment. They are a first and important step in implementing the new regulatory regime for the privatised water industry from which we shall all benefit. While I am pleased to have the opportunity to debate them, I do not think that there can be any real doubt about the contribution they will make to improving standards in the water industry. On that basis I ask the House to reject the Prayers of the noble Lord, Lord McIntosh, for their annulment.
8 p.m.
Lord Shaughnessy: My Lords, before the noble Earl sits down, perhaps I may say that I am grateful to him for his remarks about any inconvenience that may have been caused to the Joint Committee on Statutory Instruments. No great inconvenience or extra work has been caused to me. The point I tried to make was that speeding through regulations of this order with these consequences resulted in anomalies which, as has been mentioned, are reported in the 26th Report of the Joint Committee on Statutory Instruments in respect of Statutory Instruments Nos. 1147, 1159 and 1161.
Our job is to deal with such anomalies, instances of defective drafting, possible doubt as to vires and the necessity for elucidation. I wanted to impress upon the noble Earl the importance of getting right before they are brought back to your Lordships' House for discussion at whatever time might be indicated on the Order Paper matters of such importance that have such far-reaching consequences.
The Earl of Caithness: My Lords, I listened with great care to what the noble Lord said. I can only apologise again; I shall certainly draw his remarks to the attention of my right honourable friend.
Lord McIntosh of Haringey: My Lords, the Minister has been in his job for 18 months now. I have faced him across the Dispatch Boxes for all of that time. He is by no means as naive as he would like the House to think him, either in terms of the procedures of the House or in terms of political debate.
On the procedures of the House he seeks to persuade your Lordships that my Prayer to annul the instruments reflects a general dissatisfaction with all of the conditions of the statutory instruments. That, of course, is not the case. Under the negative resolution procedure, as he knows very well, the only way in which these statutory instruments can be debated is by a Prayer to annul them. That is the basis on which I proceeded.
The noble Earl knows equally well that it is an established procedure of this House, whether laid down in Standing Orders or not, that we do not seek

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to divide on a Motion to annul orders that have already been approved by another place. We should not dream of doing so. If another place has already considered the statutory instruments as it has, and has decided to approve them, we should consider it a gross excess of the powers of this House if it were to seek to go against another place.
The Minister knows also that the negative resolution procedure, like the affirmative resolution procedure, makes it impossible to do anything but accept or reject in toto. There is no possibility for us to produce amendments. The fact that we have made criticisms—virtually none of which has been answered—does not imply that we disagree with very large parts of the regulations. The idea that the noble Earl should seek to persuade the House that we object to many of the good things in the statutory instruments is a travesty of the truth. I am sorry that the Minister should have felt impelled to speak as he did.
I am also sorry that his political argument was so weak that he felt it necessary to refer again—I think for the seventh time during the passage of this Bill—to the record of the Labour Government in 1974 to 1979 on investment in sewerage. As before, he sought to use the fact that investment went down between 1974 and 1979 under a Labour Government to convey the totally false impression that the record of investment by a Labour Government was worse than the record of a Conservative Government. If one takes the average investment by a Conservative Government as compared with a Labour Government the average was higher under a Labour Government. That is despite the fact that the Labour Government came into office in 1974 after the oil crisis and a period of severe economic unrest throughout the developed world.
The Minister has sought—let us hope for the last time—to allow the House to draw false implications from a statement he has tried to make on the record of the Labour Government on water and sewerage investment.
The Earl of Caithness: My Lords, I am grateful to the noble Lord for giving way and for reminding me of the Labour Government's record. I did not mention investment. I said that the Labour Party did not implement many parts of the Control of Pollution Act which related to water.
Lord McIntosh of Haringey: My Lords, it was equally inexcusable, whatever he referred to. It was inexcusable to drag up history of more than 10 years ago to bolster a very weak case. If the case had not been weak he would not have thought to intervene in the way that he did.
What is significant about the debate is not so much procedure. It is the fact that the Minister has not been able to defend the very specific criticisms that have been made on the form of the instruments by the noble Lord, Lord Shaughnessy, and on their content by my noble friends Lady White and Lady Nicol. He has not given adequate answers to those questions.
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The Minister sought to revive a particularly fruitless debate in another place in which his colleague, the Minister for Water, challenged my honourable friend Mrs. Ann Taylor on nitrates. I can only say that he cannot have read Hansard very thoroughly. Mrs. Taylor gave a very clear response to the Minister. Her response applied specifically to the complaint that had been made by Mr. William Cash that in his part of the country geological faults made it impossible to achieve the full nitrate standards required by the European Commission. Mrs. Taylor said in reply that undoubtedly, where there are geological reasons, as there are in Staffordshire derogations can be negotiated with the European Commission. That was a full and complete reply to the questions raised by Mr. Michael Howard.
It is pity that the Minister thought fit to reply to the serious criticisms that have been made of the form and content of the regulations in the way that he did. It is not worthy of him or of the House. If it were not for my profound respect for the relationship of this House with another place I should be sorely tempted to divide the House on the humble Address that the regulations be annulled. I do not think that we have been given an adequate reply. I do not think that we have been treated with the seriousness which the House deserves, either during the passage of the Bill or during this final stage of the laying of regulations. However, in accordance with precedent, I beg leave to withdraw my Motions.
Motions, by leave, withdrawn.
Viscount Long: My Lords, I beg to move that the House do now adjourn during pleasure until 8.20 p.m.
Moved accordingly, and, on Question Motion agreed to.
[The Sitting was suspended from 8.10 to 8.20 p.m.]

Local Government and Housing Bill
House again in Committee on Clause 32.
[Amendment No. 115C not moved.]
Lord Graham of Edmonton Lord Graham of Edmonton moved Amendment No. 115D:
Page 39, line 10, at end insert—
("(aa) the creation or protection of opportunities for training with any such undertaking or with any commercial, industrial or public undertaking opportunities for employment with which have been or appear likely to be made available to persons living in that area;").
The noble Lord said: This amendment also has a strong local employment enterprise initiative aspect. The skills of an area's population are seen as increasingly important for promoting local government development. They secure the expansion and success of existing firms and act as a bait for securing new mobile investment. Many local authorities are closely involved with the local business community in training or retraining the employees of local firms. They run training courses at local colleges or ITECs in skills such as electronics and computing which are in short supply. Local

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authorities also train in advance of demand in key skills which are nationally in short supply; for example, clerical work and typing. Some local authorities and metropolitan areas in the early 1980s realised the importance of skills to the regeneration of their local economies and undertook to finance the off-the-job training of apprentices in local colleges after their sponsoring firms had gone into liquidation. The wisdom of such an initiative is seen today when there is a famine in key industrial skills.
Training is an important activity carried out by local authorities and direct reference to that point should be included in the Bill. Some direct reference should be made to training as not all local authorities undertaking training are education authorities which are able to justify their training activities by virtue of education Acts.
I simply ask this question of the Minister: will those district councils which wish to improve the skills available to local employers be able to continue to do so if no specific reference to training is made in the Bill? We believe that local authorities play a vital role in identifying gaps in current provisions and funding innovative schemes to plug those gaps. In the context of sectoral restructuring in local economies and the substantial barriers to labour mobility, training and retraining is critical to local economic development.
Local authorities have sought to develop and enhance the quality of training provided under the government national schemes while others have organised their own training and retraining courses to meet the specific needs of the local labour market. Small employers are not always in a position to invest in training and a number of local authorities have sponsored apprenticeship training. Great Yarmouth Borough Council encourages smaller engineering firms which are outside the Engineering Industry Training Board levy by giving grants to pay the wages of apprentices for time spent in off-the-job training. It has now been extended to encourage other types of training in small firms.
Many authorities are involved with business training schemes for occupants in small units or starter units. Bournemouth Borough Council has recently been successful in obtaining much in funding from the European Social Fund for its project. That has enabled it to give free training to all unit occupiers in two enterprise centres and it is hoped that around 60 people will take advantage of that training. The conversion costs relating to the Bournemouth enterprise centre were £40,000. Revenue costs amounted to around £23,000 per annum.
Many local authorities have addressed the training needs of the disadvantaged. Sheffield City Council has a technical training workshop which provides vocational training in micro-electronics and computing for women over 25 years of age who wish to return to work. Brighton Borough Council has, in conjunction with the Brighton Friend Centre, targeted a £10,500 training programme at the specific needs of ethnic minority workers and the skills requirement of the financial services sector.
Given the central role of training in local authorities' economic development strategies, it would be wrong for local authorities to have to rely on financially restricted discretionary powers. The aim of the amendment is perfectly simple. It seeks the creation or protection of opportunities for training with any such undertakings or, with any commercial, industrial or public undertaking and opportunities for employment which have been or appear likely to be made available to persons living in that area. It is not an isue that the Government have overlooked, but it is, I am sad to say, something for which they have not made provision. I beg to move.
Lord Hesketh: In the last set of amendments we discussed whether there should be any restrictions on the use of the economic development power. This amendment, and those that follow, attempt to ensure that certain activities are included in the Bill as pertinent to economic development by local authorities.
Clause 32 gives the power for local authorities to take steps they think fit to promote economic development. Subsection (2) specifies what those steps can include. The power is deliberately drafted in very wide terms to cover everything that might be relevant. Subsection (2) puts beyond doubt what the power can cover, but it is not exhaustive. A local authority can do anything that it reasonably thinks will promote economic development, even if it is not in the list in subsection (2), provided that it is not prohibited by the regulations. To that extent, it is unnecessary to add further specific activities to the list.
Amendment No. 115D proposes that the creation of opportunities for training should be added to the list. Amendment No. 115E proposes a similar addition; namely,
"the provision of training, including training to enable persons to take up employment".
Let me make it quite clear from the outset that it is our firm intention that training should be regarded as one of the activities that all local authorities can support under the terms of the new power. That is without question. Assurances on this have been given in another place and in meetings between officials and the local authority associations. I can do no better than to repeat those commitments and to confirm that any guidance issued by the department will state that training is an appropriate activity for the new power. I can see no reason why the categories of training listed in these two amendments should not be included among local authorities' economic development plans.
Understandably, we do not wish local authorities which are not education authorities to set up in competition with those which are, but we think that any potential conflicts there can be overcome by the authority seeking the agreement of the education authority before going ahead.
Given those assurances, I do not believe that it is necessary to place training on the face of the Bill. There is a great variety of activities that will fall under the umbrella terms of subsection (2) and we

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could not hope to put all those on the face of the Bill and at the same time ensure that no worthwhile activity was omitted from the list. For those reasons, we urge rejection of the amendment.
Lord Graham of Edmonton: I am satisfied that it is the Minister's intention that those activities will be covered by the Bill, but I shall need to look carefully at what he has said. There is only a slight doubt in my mind as to whether all areas will be covered by local authorities which study the local situation to ensure that training facilities are available for the undertakings that we have in mind.
I am grateful to the Minister. He seems to have indicated not only that the amendment is unnecessary but that he wants training to be encouraged as part of the activities undertaken by a local council in pursuit of its local economic imperatives. That certainly satisfies me at this stage. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 115E and 115F not moved.]
8.30 p.m.
Lord Graham of Edmonton Lord Graham of Edmonton moved Amendment No. 115G:
Page 39, line 34, at end insert—
("(gg) provide a subsidy in respect of the remuneration of any employee of that person;").
The noble Lord said: I move this amendment which stands in the name of my noble friend Lord McIntosh of Haringey. As is proper when dealing with this part of the Bill, the amendment deals with the local economy.
Many local authorities provide wage subsidies or give recruitment grants to firms taking on school leavers or the long-term unemployed. That activity should be specifically referred to in the Bill. The subsidies last for a limited period, generally six to 12 months, and are conditional upon the job being a new one (so that there is no displacement of existing employees) and permanent. These temporary subsidies are important in influencing firms to take on employees in areas of high unemployment, effectively reducing the cost to firms of new recruits for an initial period when they are at their least productive.
The effect of these subsidies on competition is very limited. The grants average only about £1,000 to £1,500 per new employee and do no more than cover the extra cost of taking on "green" or brand new employees. Many of these wage subsidy recruitment grants are directly supported on a matching basis by the European Social Fund.
I understand that in discussions between the DoE and local authority associations the department's officials have indicated that they would support the provision of wage subsidies by local authorities provided that they are for a limited period. The recognition of the important role that local authorities play in making available temporary wage subsidies should be reflected on the face of the Bill. I commend the amendment to the Committee.
Lord Hesketh: Amendment 115G is similar in intention to the previous one in that it would insert an extra category into the list of activities which can be regarded as financial assistance. In this case it suggests providing subsidy in respect of remuneration of any employee. In other words it proposes that wage subsidies be regarded as an element of fostering economic development.
Again, unless the regulations that we propose making specify that an activity is inappropriate, the assumption must be that a local authority can reasonably do what it thinks will promote economic development. As regards wage subsidies the Government's opinion is that it would be inappropriate in general to pay grants which were to meet part of the costs of a commercial or industrial undertaking being conducted with a view to profit, and we propose to say so in regulations.
There are, however, a number of very important exceptions to that which I suggest will meet the concerns that are reflected in this amendment. The exceptions are, first, grants towards the cost of employing persons who have been unemployed immediately before becoming employed by the recipient of the grant, provided that the grant does not continue for more than one year; secondly, grants towards the cost of employing trainees during their training period; thirdly, grants towards employing not more than three people with particular skills to act as trainers; and lastly, grants which form some part of a scheme supported financially by a government department or the European Community.
We believe that this covers most of the areas where local authorities are active in filling the short-term gaps that can sometimes arise, particularly where some other body is unable to cover the full cost of some initiative. Finally, it is worth emphasising that grants to non-profit-making bodies for wages or salary cost will not be prohibited, nor grants to meet the costs of consultancies.
These matters will all be set out quite clearly in the consultation document that we hope to issue shortly on the detailed use of the new power. Given that undertaking, I ask the Committee to resist the noble Lord's amendment.
Lord Graham of Edmonton: I am heartened by what I believe is the Minister's desire to assist an authority that genuinely wants to encourage employers to provide work for people. He said that the general ability to do that would not be given but that there would be exceptions. One of those exceptions was people who were unemployed immediately before becoming employed by an employer who is to receive the grant.
I am sure that the Minister has taken on board that such expenditure is not given lightly. A local authority which, at budget time, is faced with many calls upon its money has to say for example, "We shall put £10,000 or £100,000 aside to encourage local employers to take currently unemployed people off the local unemployed register and provide them with work". According to my information, if the average grant lies between £1,000 and £1,500 it is really a question of an employee who would be in

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receipt of a wage of about £120 a week being offered employment because the employer will receive a local grant of £25 or £30. I believe that the Minister also said that he had in mind to propose that this would be time-barred after 12 months.
I have been satisfied that the generality of the provisions of this additional paragraph is not acceptable because it is too wide, too sweeping and too capable of being applied to anybody.
The intention behind the amendment is not simply to make employment cheap from the employer's point of view. The purpose was for employers to be encouraged to provide work for those who sadly have not been offered a job over a period of time. However, I am grateful to the Minister. I shall read very carefully what he has said. In the meantime I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 115H and 115J not moved.]
Clause 32 agreed to.
Clause 33 [Restrictions on promotion of economic development]:
Lord Graham of Edmonton Lord Graham of Edmonton moved Amendment No. 115K:
Page 40, line 2, leave out ("and their powers by virtue of other enactments,").
The noble Lord said: In moving this amendment which is tabled in the name of my noble friend, Lord McIntosh of Haringey, I shall also speak to Amendment No. 115L.
The purpose of these amendments is to remove the Secretary of State's right to impose limitations on local authorities by way of regulations, hindering them from making full use of the economic development powers and opportunities which are conferred by other Acts of Parliament. Examples of the powers that would be constrained include the Local Authorities (Land) Act 1963, which enables local authorities to develop land and promote development by building advanced factory units; or the Local Government (Miscellaneous Provisions) Act 1982 which enables local authorities to finance employment training activities.
This provision places an acceptable limitation on the lawful exercise by local authorities of their existing economic development powers. If the Secretary of State intends to continue the use of this provision, he should be asked to clarify specifically when such a power will be used. I commend the amendment to your Lordships.
Lord Hesketh: These amendments seek to remove the words "and their powers by virtue of other enactments" whenever they appear in this clause, which establishes the restrictions to apply to economic development activity. The effect would be that restrictions under this Bill, or regulations ensuing, would apply only to economic development under the new power. They would not apply to economic development activities funded through other powers.
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These amendments were also tabled in the other place and were, I think, the result of the same misunderstanding. The new power, as we have discussed, is not, in essence, new: it is a rationalisation of the existing position whereby local authorities rely upon a large number of different powers for the pursuit of economic development activities. There is therefore a need to establish a single, clearly defined power which is general in scope and which will help local authorities to direct their activities for the maximum benefit.
The new power will give individual local authorities a good deal of discretion in the way in which they chose to promote economic development in their areas. This however cannot be granted without restrictions covering inappropriate activities. These restrictions will not frustrate important local initiatives but will instead ensure that resources are directed to those areas where they can be of most benefit to the economy.
As I have said, there are at present a number of powers which permit certain forms of economic development. If the new arrangements are to be successful they must apply to enconomic development in toto, irrespective of the power used to authorise expenditure. The new power does not repeal existing powers; but it will exist alongside them. To prevent confusion therefore, and to ensure that there is a single system to cover all activity undertaken for the purposes of economic development, the same restrictions will apply to uses of existing powers for economic development as to the new power.
Let me make it quite clear that we are not placing any restrictions on other functional powers, where these are used for any purpose other than economic development. For example, a power to provide employment opportunities for the disabled in sheltered workshops, if used for the benefit of the disabled and not to promote economic development will be unaffected by these proposals. The restrictions apply only to economic development.
If the new power is to provide the framework for local economic development which we seek, it is essential that the provisions apply to all economic development activity irrespective of the power used. Without such a provision, the situation will in effect remain unchanged and this power, which has been widely welcomed from all quarters, will be weakened. That is why we urge the Committee to resist the amendment.
Lord Graham of Edmonton: Will the Minister give us the long list of bodies which are included in the phrase "all quarters"? He says that the power has been welcomed in all quarters. The night is young. I believe that we can with profit listen to the list of bodies—which I hope are very representative and authoritative—that agree with what the Minister has said.
I well understand the desire of the Minister and his colleagues to use the phrase that the restrictions apply only to economic development. He then stated that it was essential that the provisions apply to all economic development. What do the Government

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have against a local authority engaging in local economic development initiatives that are designed to provide work, stimulate the economy, and improve the infrastructure at a local level?
The Minister is making very heavy weather of denying the charge that the Government are continuing the vendetta against local government down to the last dot and comma in the Bill. I was a local government man before I had the opportunity and privilege of working at a national level. I can tell the Minister that it is this niggardly, nit-picking attention to the minutiae of the task of local government—looking after its local people—that is resented very much by members of his own party, a resentment shared from time to time by members of my party. Can the Minister tell me the bodies represented by "all quarters" which approve of his action of centralising in the hands of the Secretary of State the ability to take economic initiatives?
Lord Hesketh: The noble Lord, Lord Graham, tends slightly to confuse the issue. When I say that economic development has been welcomed, it certainly has. The noble Lord does not like Clauses 33 and 34. He combines them with Clause 32 and says that nobody likes such provision. Just before retiring for dinner earlier this evening, we discussed the fact that in order to provide the most flexibility the Government have to have some form of control. The noble Lord does not like it but it has to be there. All governments would have had to put in some form of control. We believe that it is a sensible move in order to provide opportunity for local authorities. The noble Lord, Lord Graham, tries to persuade the Committee that the intention is something different. I am perfectly sound in my belief that that is what we are trying to do.
Lord Dormand of Easington: Answer the question.
Lord Graham of Edmonton: My noble friend Lord Dormand of Easington asks the noble Lord in very persuasive tone to answer the question. The Minister did not answer the question. I share the Minister's support for initiatives that are designed to improve the local economy. However, when he spoke of the amendment—which refers not only to the present Bill but also widens the net to take into account all other economic initiatives covered in other Bills—the Minister said that in that respect the clause was widely welcomed. I have asked him which bodies widely welcome the neutering of their existing economic powers, putting them into a straitjacket. Obviously the Minister—I say this with great respect, and no disrespect—speaks from a brief which indicates to him that what he has told the Committee is widely welcomed. There are people not a million miles away from here who have an obligation to support the Minister, and to tell the Committee who those people are who are in favour of this straitjacketing of their current economic powers.
Lord Hesketh: Local authorities of all kinds have welcomed the proposals of the Government. I do not have with me at this moment a list of the individual local authorities. However, I shall be
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more than happy to furnish in a letter to the noble Lord, Lord Graham of Edmonton, further details on the point that he has raised.
8.45 p.m.
Lord Graham of Edmonton: I have in mind the difficulties of the Minister. He is the one who has confused the issues. I have never said that local authorities do not widely welcome measures by central government which enable them to stimulate the local economy. There is no dispute there. But the Minister runs that into my criticism that we are not disputing the support of local economic initiatives but the Minister's intention in the Bill to neuter currently held powers and put them into the straitjacket of this clause.
I am grateful for the Minister's promise that he will write to me further on the issues. When he and his advisers read the record, I believe that they will see that we have been at cross-purposes. Perhaps I may have stated inadequately what I wanted. I look forward to hearing from the Minister. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 115L not moved.]
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No 115M:
Page 40, line 12, at end insert ("save that no such regulations shall prevent, restrict or impose conditions on the exercise of such powers by any relevant authority on the grounds that the area of the authority, or part of it, falls outside an area recognised by the Secretary of State as having special economic needs, such as an assisted area, rural development area, derelict land clearance area, urban priority area or other similar designation.").
The noble Lord said: In many ways this is the most important way in which the Government are seeking to appear to recognise—as they have in Clause 32—the importance of economic development activities by local authorities and then to take the powers away in subsequent clauses.
In the subsequent clauses we discover bit by bit the extent to which these provisions restrict the power of local authorities to carry out very important economic development work. The most important single restriction is of the power to do economic development work on a geographical basis according to the diktat of the Secretary of State. The way in which it is achieved—I suppose that it is quite neat—is that the economic development powers are to be exercised only in assisted areas and travel to work areas which have above average unemployment. In all other areas, the permission will not be given.
It is not the Labour-controlled local authority associations which are objecting to that. It is the Conservative-controlled associations, and in particular the Association of District Councils, which has calculated, on the basis of a survey by the Institute of Local Government Studies in Birmingham, that no fewer than 40 per cent.—that is, 139 local authorities mainly shire county district councils—will be excluded from the power which they now have under Section 137 to undertake economic development activity. Those district councils are far more likely to be Conservative-

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controlled than Labour-controlled, it is the Conservative-controlled associations, through the Association of District Councils, which are leading the objection to these provisions.
I can give the Committee examples of the way in which this restriction to assisted areas and travel-to-work areas will work in practice. I start with the travel-to-work areas. I wonder how many people realise, because of the nature of the London labour market, that London consists of only two travel-to-work areas: London and Heathrow. In both unemployment is on average, over the whole travel-to-work area, either average, or in the case of Heathrow below average. It is well known that within the London travel-to-work area substantial parts of inner London—I cite Haringey because it is nearest—have vastly higher unemployment than the average, but because they are in the same travel-to-work area as the richer parts of London, they will be excluded from the powers to carry out economic development activities.
Let me take an example further away from London: on Humberside. The whole travel-to-work area of Bridlington and Driffield has unemployment at about the average and therefore would be excluded by the Secretary of State; but Bridlington has an unemployment rate of 19 per cent. The local council can do nothing about it because it has been excluded on geographical grounds.
As if that were not enough, the way the Government have planned economic development powers ignores the fact that the powers are not necessarily exercised directly in the local authority area for which the statistics apply. Very often to deal with unemployment levels that are unacceptably high, the powers are exercised by stimulating an adjacent area. That too will no longer be possible.
There are considerable concerns about the ability to carry out relatively minor economic development activities in rural areas. Again these are Conservative-controlled rather than Labour-controlled. In North Bedfordshire there has been considerable activity in the form of employment grants for small companies. That would all have to go if the Government's intentions go through. In South Norfolk the local council has had quite an imaginative scheme for converting barns into workshops and other places of employment. That will all have to go.
Another consideration that has been totally ignored by the Government and does not have any effect on their plans is the need for, let us say, workshops in areas of high land value. In large parts of central London and in most of the central parts of our cities there is a very local need (sometimes a neighbourhood need) for employment in the form of small workshops. My own borough of Haringey has been very good about providing some of these. They are necessary, not because there are no premises available, but because the land values and the rental values available are too high to make it economical for it to be done on a commercial basis. Therefore a very proper use of local authority pump-priming power has been to provide workshop
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premises to pay for the conversion and to provide premises at an affordable rent.
I have given only a few examples of the kinds of things that can be done, but I remind the Committee—I believe our new procedure committee does not allow us to display items and to show maps, but I hurriedly pass them to the Minister—that very large parts of London and South-East England are excluded from the powers which now exist under Section 137 of the Local Government Act. Although the Government appear to be giving recognition to ecnomic development powers, in practice they are doing no such thing. For considerable parts of the country those powers are now being taken away. We do not believe that that is the right way to approach something that has been a success in pump priming, in collaboration between the public sector and the private sector and has been a success in terms that this Government have constantly encouraged. We hope that the Government will see the good sense behind the amendment and they will feel able to give it the support that we wish it to have and the Committee feel the same. I beg to move.
Lord Hesketh: This amendment seeks to put in the Bill a stipulation that nothing in tie regulations issued under this clause will restrict the economic development activities of a local authority if part of that authority's area falls outside of those areas recognised as having some form of central government priority.
The new economic development power encompasses a wide range of activities. It is very important to realise that there is only one aspect of the new power which the Government feel ought to be restricted. This is the proposal, announced in December last year with the introduction of the new power, that economic development in the form of cash grants, cash loans and guarantees of borrowing to profit-oriented businesses should be restricted to those areas most in need of such assistance. We have said that those areas will include at least those areas currently recognised by some for of central government priority. These include all development areas, intermediate areas, rural development areas, urban programme areas and derelict land clearance areas. It has, however, always been the intention that other areas would also qualify. An additional category of areas therefore will be those with unemployment above the national average.
The department will be issuing a consultation document in the next couple of days which will give further details of this. We have already had a series of meetings with the local authority associations and have repeatedly invited their suggestions for other areas which might suitably be included. There is no question therefore of the Government trying unduly to restrict the availability of this power.
There is however a very real need to give special consideration to disadvantaged areas, and this is what we are trying to achieve here. Instead of working on the principle which the proposers of the amendment seem to have in mind—to those that hath, give more—we are aiming to focus this type of support on areas of greater need. To permit financial assistance of this nature across the board would

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be to risk significantly increasing existing regional disparities.
Of course we recognise that the application of this strict rule would not be appropriate for all levels of grants given under the new power. We propose therefore to have a de minimis limit for such financial assistance outside of the recognised areas. Current thinking favours a figure about £10,000 per annum per recipient; but this will of course be the subject of further consultation. I am sure that this will be welcomed by the local authorities as a useful addition to their powers.
It cannot be stressed enough that the proposed geographical restriction would apply only to the giving of grants, loans and guarantees to profit-oriented business. It would not affect other forms of economic development, such as assistance for training, the development of sites, concessionary rents or indeed the provision of such financial assistance to the voluntary or charitable sector where the recipients are non-profit-making.
In the light of these comments, I am sure that the Committee will agree that this is a sensible and necessary directing of valuable aid to areas of the country most in need of it. There is flexibility built in; and for that reason, and for the reasons I have already outlined, we hope that Members of the Committee will resist the amendment.
9 p.m.
Lord Ross of Newport: I do not know how the noble Lord, Lord McIntosh, will respond to the Minister's reply. However, it is important that such aid as the noble Lord outlined should be allowed to continue and that there should be flexibility. Having fought successive governments over the designation of assisted area of rural development area status where part of one's constituency was inside but another was not, I know that the local authority knows where the stimulus and help are needed. Some of the schemes outlined by the noble Lord, Lord McIntosh, are worth while and it would be tragic if they were put at risk. Parts of the Minister's reponse gave me hope, and I hope that the noble Lord, Lord McIntosh, will pursue the matter.
Lord McIntosh of Haringey: It was interesting to learn from the Minister that a consultation document will be produced within the next couple of days. In the light of our debate on statutory instruments relating to the Water Act, it is an extraordinary piece of bad timing that the Government have chosen to issue a consultation document two days after the matter has been considered in this Committee. It must raise the question of whether the Government want the Bill and the whole issue to be debated properly in this Committee. How are we to take on trust something that will be issued in two days' time when we have not seen it and do not know of its intentions? It is simply an invitation to us to withdraw the amendment but to bring it back at the Report stage. We certainly cannot be satisfied with the vague assurance that there will be a consultation document
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and that local authority associations are being consulted; we know that. It is because they are not satisfied with what is being said to them that they are encouraging us to table these amendments.
I should like to ask the Minister some specific questions which he may now be able to answer. Presumably he has a draft of the consultation document which we are not privileged to see. First, can he assure us that the rate of unemployment which is used as a basis of restriction will not be the whole travel-to-work area, as in my example of London and Heathrow, but will be substantially smaller? At the maximum it should be the borough or district, but rather it should be the small areas in which there are serious pockets of unemployment.
Secondly, what will be the threshold unemployment rate at which authorities will not be permitted to make loans, grants and guarantees? I suggest to the Minister that the threshold should be substantially lower than the national average unemployment rate so that there is no sudden reduction in the number of local authorities which are able to give grants. Certainly it should not be the case that the list of local authorities unable to make grants varies from month to month and year to year according to the unemployment rate.
Thirdly, let us look at the list of restricted areas. In his reply the Minister gave examples but it was not a complete list. Can we be assured that the list of eligible areas will include enterprise zones, urban development corporations and free ports? Can we be sure that it will include not only all of the DTI's assisted areas, including the development and intermediate areas? Will it cover derelict land clearance areas and rural development areas? Will it cover the European Commission's objective 2 and 5B areas or areas in receipt of special European Commission assistance counteracting employment run-down in basic industries such as coal, steel, shipbuilding and textiles?
All those are specific points which have been the subject of negotiation between the local authority associations and the Government. If a consultation paper is to be issued in two days' time the Minister should have specific answers to those points. Can the Minister confirm that if part of an authority's area is included in a designation the economic development powers will be available throughout the district or borough? They ought to be because, as I previously argued, one must often provide employment and help anti-unemployment schemes in adjacent areas or areas with suitable sites rather than in small area where there is a particular problem? Will there be a specific provision enabling more non-qualifying local authorities which use the grant loan or guarantee powers to continue to do so? In other words, will there be any transitional provision?
The Minister ought to be able to answer those questions because they should be answered in the consultation document. Can he confirm that all authorities in all parts of the country will have the option to provide financial assistance to defined

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limits? In other words, will there be some kind of de minimis power which will apply in the areas where other powers are no longer to be available?
I have not been able to give the Minister notice of those specific questions. However, he has told the Committee that the thinking of the department is well advanced so I am sure that he will be able to answer them. I am also sure that he will encourage us to think that the Government are treating the matter with the seriousness it deserves and that we shall be able to withdraw the amendment as he suggests.
Lord Hesketh: I suspect that I am in error for having used the phrase "a couple of days". It was too specific and has led the noble Lord, Lord McIntosh, to believe that I have a copy of the consultation document with me. Perhaps I was rather too hopeful but the fact is that I do not have a copy of the document. I should have said "a few days".
The noble Lord, Lord McIntosh, asked about the rate of unemployment and the travel-to-work area. The difficulty that we face is that there are no statistics for less than the whole travel-to-work area which leads to certain problems—
Lord McIntosh of Haringey: The Minister has been badly briefed about employment statistics. Of course, they are brought together in travel-to-work areas, but I hope that he is not seriously telling us that in the whole of London only one employment rate is available for London and a second for Heathrow. That is not the case. Traditionally unemployment statistics were collected by what was called "employment exchange areas" which are now much smaller. There is no shortage of statistics about employment in areas much smaller than travel-to-work areas.
Lord Hesketh: I believe I am correct in saying that there are estimates for the smaller areas but there are not statistics. I believe that to be the case. If I am wrong I will certainly let the noble Lord, Lord McIntosh, know and will apologise to him.
The noble Lord asked whether the areas would be confined to travel-to-work areas chosen on the level of unemployment. Of course, there will be inner-urban priority areas such as Haringey which will be included. There will be other tests. The district covering Bridlington, for example, will also be covered. We feel that the noble Lord should not jump to conclusions. He should see the full proposals before condemning them. We might benefit from waiting for the arrival of the consultation document rather than discussing it in absentia.
Lord McIntosh of Haringey: The only answer to that is that we should now adjourn because it is clear that the proceedings in Committee are incomplete. Are we seriously being told by Ministers on the Government Front Bench in this Committee that we must sit tight and wait and have faith in something that is known already but we cannot be told about?
1222
The consideration of this Bill in Committee is supposed to be the most detailed examination of the legislation, but it is simply incomplete because the Government do not have their act together and cannot produce the consultation document. We are told, first, that it is to be available in a couple of days. Now we are told that it will be available in a few days. I suppose we will find that it is produced immediately the House rises for the Summer Recess. If so, we shall not have a chance to raise the matter in any other parliamentary way.
This is not the way to treat such legislation. It is simply not good enough for us to be brushed aside in this way. I am accused of refusing to believe what the Government say. I am told that must accept assurances based on something I have not seen. That is not the way we should be proceeding. I did not intend to divide the Committee on this amendment but I must now do so.
9.10 p.m.
On Question, Whether the said amendment (No. 115M) shall be agreed to?
Their Lordships divided: Contents, 32; Not-Contents, 53.

DIVISION NO. 3

CONTENTS

Addington, L.

Mason of Barnsley, L.

Airedale, L.

Nicol, B.

Cledwyn of Penrhos, L.

Ponsonby of Shulbrede, L. [Teller]

Cocks of Hartcliffe, L.

Darcy (de Knayth), L.

Ross of Newport, L.

David, B.

Russell, E.

Dean of Beswick, L.

Seear, B.

Dormand of Easington, L.

Stedman, B.

Elwyn-Jones, L.

Strabolgi, L.

Graham of Edmonton, L. [Teller.]

Taylor of Blackburn, L.

Thomson of Monifieth, L.

Hayter, L.

Tordoff, L.

Hylton, L.

Underhill, L.

Lockwood, B.

Walston, L.

McIntosh of Haringey, L.

Whaddon, L.

Mackie of Benshie, L.

Williams of Elvel, L.

McNair, L.

Winterbottom, L.

NOT-CONTENTS

Arran, E.

Hesketh, L.

Balfour, E.

Hives, L.

Bauer, L.

Hooper, B.

Beloff, L.

Jenkin of Roding, L.

Belstead, L.

Johnston of Rockport, L.

Blatch, B.

Joseph, L.

Borthwick, L.

Kaberry of Adel, L.

Boyd-Carpenter, L.

Kinnoull, E.

Caithness, E.

Lawrence, L.

Carnegy of Lour, B.

Long, V. [Teller.]

Carnock, L.

Mackay of Clashfern, L.

Craigavon, V.

Margadale, L.

Davidson, V. [Teller.]

Mersey, V.

Dundee, E.

Monk Bretton, L.

Elliot of Harwood, B.

Monteagle of Brandon, L

Ferrers, E.

Mottistone, L.

Fraser of Carmyllie, L.

Mountevans, L.

Greenway, L.

Napier and Ettrick, L.

Gridley, L.

Norfolk, D.

Hailsham of Saint

Romney, E.

Marylebone, L.

Sanderson of Bowden, L.

Henley, L.

Skelmersdale, L.

1223

Strange, B.

Trumpington, B.

Strathclyde, L.

Ullswater, V.

Sudeley, L.

Windlesham, L.

Thomas of Gwydir, L.

Wynford, L.

Trafford, L.

Young of Graffham, L

Resolved in the negative, and amendment disagreed to accordingly.
9.17 p.m.
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 115N:
Page 40, line 13, leave out subsection (3).
The noble Lord said: This amendment refers to Clause 33(3) which is quite an extraordinary subsection. Let us look for a moment at the existing powers that local authorities have to promote economic development. Under Section 111 of the Local Government Act 1972, local authorities have a subsidiary power including expenditure, borrowing or lending and the acquisition or disposal of property or rights calculated to facilitate, or to be conducive to or incidental to, the discharge of local authority functions.
Under Section 120 of the same Act local authorities have power to acquire land pursuant to their functions or for the benefit, improvement or development of their area. Under Section 142 they have power to provide information and to publicise services in a local authority area. Section 144 provides powers to encourage visitors and to provide conference and other facilities. Section 145 gives powers to provide entertainment including the promotion of arts and crafts. Section 65 of the Health Services and Public Health Act 1968 gives local authorities power to grant aid and to make available furniture, equipment or other practical assistance for voluntary organisations providing services for the needy.
Under the Local Authorities (Goods and Services) Act 1970 local authorities have the power to make available bulk purchase materials and technical or professional assistance. Under the Local Authorities (Land) Act 1963 they have power to develop land and promote development by making advances for the erection of buildings. Under Section 45 of the Local Government (Miscellaneous Provisions) Act 1982 they have power to enter into arrangements under the Employment and Training Act 1973. All of these are powers which local authorities have effectively brought together and used for something which has not only been an important part of their functions over a considerable period of time but is now in theory recognised by the Government in Clause 32 of the Bill as being an appropriate activity for local authority areas.
Not only do the Government seek to restrict, as they did in the previous amendment, the geographical scope of these activities and to do so in a peculiarly restrictive and overbearing way, but now, under subsection (3) of Clause 33, they propose that:
"The Secretary of State may by order made by statutory instrument impose such a financial limit as may be specified in or determined under the order on the following expenditure, that is to say, such expenditure as",
1224
is intended under Clause 32. I shall not read the rest of the subsection. It is available for Members of the Committee.
Local authorities have responsibly and successfully used these varied powers before, and now the Secretary of State has the power to impose a cash limit on all of this expenditure which in effect can be whatever he likes. On 21st December 1988, the Minister said:
"The Government have considered the question of a financial limit on the use of the new power, to which they referred in the White Paper. They do not consider that the new power should lead to any significant change in the level of local authority activity in this field, since it is intended merely to simplify the framework within which this activity takes place. In these circumstances, they have concluded that it would be inappropriate to set any general financial limits on the use of the power: the general financial disciplines to which local authorities are subject will be sufficient".
What has happened since then? Bureaucracy in Marsham Sreet has taken over more and the idea that local authorities can act responsibly in control of their own expenditure has been cast on one side in this as in so many cases. We now find that, under regulation and by statutory instrument, the Bill gives the Secretary of State the ability to exercise any power he likes, with reference to Parliament but not in a way that Parliament can change, to cut down on what is universally recognised to be a valuable and responsible part of the activities of local government. It is another example—it may not be the worst—of the hatred which some people in the Executive have for local government and for local democracy. It may not be the worst, but it is bad and should not be allowed. Subsection (3) should not be part of the Bill. I beg to move.
Lord Jenkin of Roding: The noble Lord seeks to persuade us as he has done through this and earlier amendments that the mischief which prompted the establishment of the Widdicombe Committee and prompted a great many of its recommendations is a thing of the past. To the Government, the noble Lord says, "You are shutting the stable door after the horse has bolted". I have no doubt that the noble Lord, who had long and distinguished service in local government until it was abruptly terminated, and his respected leader in another place, Mr. Kinnock, both passionately wish that that were true, that the kind of excesses that were going on in some authorities in the late 1970s and earlier 1980s were a thing of the past, that somehow all that had now been exorcised and that we should never again see the kind of problems which I faced as Secretary of State for the Environment between 1983 and 1985. The Committee would be very unwise to base its decisions on this legislation on the belief that that kind of thinking is founded in reality.
The noble Lord, Lord McIntosh of Haringey, knows as well as anyone that there were—and, for all I know, there still are—in local government a number of people who regarded local authorities as political instruments with which to challenge central government. They never accepted that the powers of local authorities themselves derive from Parliament and that therefore the proper relationship is one where Parliament lays down the broad framework

1225
and local authorities agree by convention to live within that framework. That used to be the pattern and it was never challenged. However, it has now been challenged and has been challenged, if I may put it this way, to destruction by a number of local authorities. The noble Lord repeatedly referred to Haringey. I can tell him that that was one of the thorns in my flesh.
It may be that under the influence of the Widdicombe Committee, under the influence of the knowledge that this Bill was forthcoming and, perhaps even more, under the influence of the Labour Party which really believes that it can be elected if only the loony Left would keep its head down and keep quiet, people believe we do not need this legislation. We do. It is absolutely right that we should change the framework and regularise the framework within which all these powers have been exercised.
When I come to move the amendment tabled in my name, I shall want to make it clear that there are many such powers which are entirely acceptable. It is right that they should be put into a proper framework, that they should not rest on old legislation which may have been passed with an entirely different intention and that they should be subject to proper control.
I have some sympathy with the noble Lord when he says that too much is being left to regulations. The problem is that if we tried to spell it all out in the Bill, we would end up with a Bill which would be a thousand clauses long. I am sure that the noble Lord would be the first to complain about that. It is not of the volition of the Conservative Party, or of this Government, that they have been forced to legislate in far greater particularity than any previous government; it is because they were confronted up and down the country with local authorities which seemed to be determined to use every possible way to challenge the accepted conventions by which—and I say this with complete sincerity—the majority of local authorities have always been perfectly happy to abide.
But, unfortunately, it was a case of the bad driving out the good in a sense in that the excesses of the extremists have required the regulation of the vast majority of moderate, sensible authorities. I regret this as much as anyone else. Subsection (3) is a good example of the kind of control which has now become necessary. The Committee would be deluding itself if it believed with the noble Lord, Lord McIntosh, that this is all a thing of the past and that we do not need any of these powers. Regretfully, I have to say that we do. I hope that my noble friend on the Front Bench will stand firm on the matter.
Lord Hylton: Of course there have been abuses in local government, and no doubt some of them go back a very long time. Nevertheless, it is not possible to deceive every electorate indefinitely; eventually they see when local authorities are exceeding their brief or are using local questions to conduct national campaigns.
1226
If this Government persist, as they seem to do, in pruning, clipping and restraining the powers, the discretion and the responsibility of local authorities, very soon they will find themselves in a position where no valid candidates, no excellent citizens, are prepared to put themselves forward for election to local authorities, and where the quality of local government officers will deteriorate from year to year. When that process has—alas and unfortunately—gone far enough forward, it will then be necessary to recast the whole system. We shall need some form of regional government, perhaps on the West German model.
9.30 p.m.
Lord Hesketh: The amendment seeks to delete the power in Clause 33(3) for the Secretary of State to impose a financial limit on expenditure by an individual authority under the new economic development power.
Let me assure the noble Lord that that is very much a reserve power. Its sole effect is to enable the Secretary of State to deal with any problems arising from excessive expenditure by a particular local authority, or authorities, if such a situation should occur. When the new power was announced, the Minister said that we knew of no situation at present which would justify the use of the power; that remains the case.
The new economic development power is very general in its scope and is free from the financial limits which some would like to have seen imposed. We feel that the introduction of a reserve power strikes the right balance between, on the one hand, the Government's desire not to frustrate local economic development initiatives and, on the other, the very sensible desire to guard against possible abuse. It would, for example, be extremely foolhardy if we were to find ourselves unable to intervene in a situation where one local authority was spending an inordinate amount of money on employment creation within its own area with a disproportionate effect of undermining the situation in neighbouring areas.
We are not introducing the new power with a view to increasing local government's expenditure on economic development. I repeat that this is a rationalisation exercise. We do not want to be saying to local government, "We are replacing your old, financially restricted powers with a new power with no financial limit", as that would clearly send the wrong message with regard to the level of overall expenditure. What we are in fact saying to local government is, "Steady as she goes". If local authorities recognise that message, then there will be no occasion to resort to the reserve power.
It is essential therefore that the reserve power is included in the Bill. I strongly urge the Committee to reject the amendment.
Lord McIntosh of Haringey: I am always grateful to the noble Lord, Lord Jenkin of Roding, for his reference to my career in local government. He seems to be stuck on one point. He seems to know nothing else; but, nevertheless, it is nice to hear that he has

1227
absorbed that fact. His contribution was extraordinary. He seems to believe that it is in the Labour Party's interests to pretend that abuses in local government have disappeared and that there is no problem over abuses of power by local authorities. He has forgotten that the classic example of the abuse of power by a local authority is the current example, which is that of the City of Westminster.
When we considered Clause 4 last week, I wondered why the Government were being so restrictive. The only answer which occurred to me when we were considering the role of the head of the paid service was that the Government had already anticipated that Lady Porter and the Westminster City Council would come under the deserved, justified and well-documented fire of television and of investigations into the propriety of their sale of the cemeteries for £1 which they are now seeking to buy back at £5·5 million. Oh yes! There are abuses by local authorities, and especially in the local authority in which we are now situated.
Rather than seek to drag up history and make political capital, it would be better if those on the Government Benches here and in another place were to look at what is happening around them.
I shall return to the more substantive issue, which is the reply. He quoted what the Minister said on 21st December 1988; that the power was intended as a reserve power since the Government were not aware of any current circumstances which would justify the use of such a power. Will the Minister tell us under what circumstances he sees the use of such a power? Eight months have passed since that statement was made. Surely they have been collecting a dossier of abuses of power, particularly by Labour local authorities. There must be Labour local authorities which are abusing the powers to create a better economic life for the citizens in their area. I do not want many examples—just a few—of abuses of the power to promote economic development. I shall gladly give way to the Minister. It is clearly his responsibility to show us what abuses there are.
Lord Hesketh: We have to take Clause 33 with Clause 32. It is perfectly clear that it will be rather hard to have a dossier concerning an abuse of power under the new situation that will pertain after the Bill becomes an Act. It is rather difficult to create a dossier before the Bill becomes an Act, and we live in the new world of enlightenment.
Lord McIntosh of Haringey: That is very nice to know. How are we to be assured that this subsection provides only a reserve power? It does not say anything about a reserve power. It says:
"The Secretary of State may by order made by statutory instrument impose such a financial limit as may be specified … on"—
not only such expenditure as—
"is of a description so specified or determined".
In other words, the statutory instrument will say, "This is the kind of expenditure we don't like. This is the amount of expenditure we're going to permit and no more". But then it goes on to say, not only,
"by virtue of section 32 above"—
1228
which is what the Minister referred to—but,
"or any other enactment".
Retrospective legislation? Any examples of other legislation to which I referred which has been legitimately, properly and responsibly used by local authorities for a period of 20 years can be taken out by a regulation made by the Minister by statutory instrument. He can amend not only this Bill but all other Acts as he thinks fit. Is that a precedent which we should like to see pursued—to have a regulation-making power given to a Minister to amend not only this Act but any other enactment? I am glad to hear a defence of this new constitutional principle.
Earl Lytton: When the Minister comes to reply, perhaps he would like to say what is the meaning of "any financial year". How far back can it extend or how far forward?
Lord Hesketh: We seem to have strayed some way from reality, I fear. We have now forgotten about parliamentary control itself. As I pointed out in my original reply to the amendment, it is a fact that it would be very foolhardy of the Government if they got themselves into a position where they could not intervene in a situation where one local authority was spending unlimited sums of money. That has always been the case. When we discussed this before dinner my noble friends Lord Jenkin and Lord Renton pointed out that we could not possibly introduce the flexiblity that we have endeavoured to achieve without control.
Lord McIntosh of Haringey: There are two overwhelming answers to that. The first is that of the noble Lord, Lord Hylton, who said that in the end there is no free ticket to over-expenditure. Those who spend too much money will have to face the ballot box in the end; they will have to face re-election. If they have behaved wrongly in their electors' view, they will be kicked out. That is the first answer.
The second answer is that there are very extensive capital controls in Part IV of the Bill—those are enormously complicated powers based again on regulation-making. In Part IV there are 15 new regulatory powers for the Secretary of State which control local authority expenditure. In the view of the Minister, those are not enough to make it possible for him not have what he calls reserve powers. They are not reserve powers, they are dictatorial powers given to the Secretary of State to override not only the Bill before the Committee but also any other enactment. That cannot be acceptable. I commend the amendment to the Committee.
9.40 p.m.
On Question, Whether the said amendment (No. 115N) shall be agreed to?
Their Lordships divided: Contents, 23; Not-Contents, 45.

DIVISION NO. 4

CONTENTS

Airedale, L.

David, B.

Cocks of Hartcliffe, L.

Dean of Beswick, L. [Teller.]

Darcy (de Knayth), B.

Graham of Edmonton, L.

1229

Hayter, L.

Ross of Newport, L.

Hylton, L.

Russell, E.

Irving of Dartford, L.

Seear, B.

Lawrence, L.

Stedman, B.

Lockwood, B.

Thomson of Monifieth, L

McIntosh of Haringey, L.

Underhill, L.

McNair, L.

Walston, L.

Mason of Barnsley, L.

Whaddon, L.

Ponsonby of Shulbrede, L. [Teller.]

NOT-CONTENTS

Arran, E.

Carnegy of Lour, B.

Balfour, E.

Carnock, L.

Bauer, L.

Davidson, V. [Teller.]

Beloff, L.

Denham, L. [Teller]

Blatch, B.

Dundee, E.

Borthwick, L.

Elliot of Harwood, B.

Boyd-Carpenter, L.

Fraser of Carmyllie, L

1230

Glenarthur, L.

Mottistone, L

Gray of Contin, L.

Napier and Ettrick, L.

Harmar-Nicholls, L.

Norfolk, D.

Henley, L.

Romney, E.

Hesketh, L.

Sanderson of Bowden, L

Hives, L.

Skelmersdale, L.

Hooper, B.

Strange, B.

Jenkin of Roding, L.

Strathclyde, L.

Johnston of Rockport, L.

Sudeley, L.

Joseph, L.

Thomas of Gwydir, L.

Kinnoull, E.

Trafford, L.

Long, V.

Trumpington, B.

Mackay of Clashfern, L.

Ullswater, V.

Mersey, V.

Wynford, L.

Monk Bretton, L.

Young of Graffham, L.

Monteagle of Brandon, L.

Resolved in the negative, and amendment disagreed to accordingly.
9.48 p.m.
[Amendments Nos. 115NA to 115Q not moved.]
Clause 33 agreed to.
Clause 34 [Guidance and consultation about promotion of economic development]:
Lord Jenkin of Roding Lord Jenkin of Roding moved Amendment No. 115R:
Page 40, line 46, leave out from second ("to") to end of line 49 and insert ("persons and bodies appearing to it to be representative of persons subject to non-domestic rates under sections 43 and 45 of the Local Government Finance Act 1988 as regards hereditaments situated in the authority's area and to such other persons carrying on commercial, industrial or public undertakings in their area as they consider appropriate;").
The noble Lord said: We come now to the clause sidelined and accurately described as:
"Guidance and consultation about promotion of economic development".
It may be for the convenience of the Committee if at the same time we discuss Amendment No. 115S.
The arrangements for consultation of, if I may use a compendious phrase, the representatives of industry and commerce on the economic development plans of a local authority are, for some reason which I have to confess I do not understand, markedly different from those spelt out in a Bill we considered in the last Session which became the Local Government Finance Act in relation to consultation on the levels of expenditure and the national non-domestic rate.
The Government would acknowledge, I believe, that commerce very much welcomes the clarification of the powers of economic development which are contained in this group of clauses. This has been an area of great uncertainty and, as I indicated in a brief intervention a moment ago, a good deal of controversy and acrimony.
So far as concerns Clause 34, representatives of industry and commerce very much welcome the fact that local authorities will now have to draw up an economic development programme in a specific document. The noble Lord, Lord Graham of Edmonton, complained a few moments ago that it would be difficult and that they had to react quickly. He asked how they could do that. All that is wanted here is a framework. As any businesman would argue, if a local authority starts spending significant sums of money, it must have objectives and a clear framework within which to make plans.
Secondly, the representatives welcome the fact that, as the clause provides, the expenditure is to be attributed to specific proposals in the programme. Perhaps most important of all, they have to set out what the expenditure is intended to achieve. One of the lessons that I learnt in government is the setting of objectives. It is widely practised in industry. One cannot decide whether one has achieved one's purpose unless one has spelt it out at the beginning and can therefore test the results against the objectives. In all those respects, therefore, Clause 34 seems a great advance on what has gone before.
However, when we come to the provisions dealing with consultation I must say that I share the view that the clause is flawed. Everything that has been said on both sides of the Committee in discussing Clause 32 and the following clauses is that economic development in a local authority area must be carried out in partnership between the public and private sectors. Part of the objection to the way in which some authorities use their powers is that they seem to do so, as it were, in the teeth of the private sector, ignoring and in some cases virtually thrusting it aside. As I understood it, the noble Lord, Lord McIntosh of Haringey, argued that that was not the right way to do it and that local authorities must have their powers in order that they may collaborate effectively with the private sector. One of the more encouraging features of developments in the last two or three years is that that has become very much the pattern in most local authority areas.
If that is the case, the plans when drawn up must clearly be the subject of effective consultation with the local business community. The sums of money involved may be quite substantial. Perhaps more than in some other aspects of local government spending, they have a direct and immediate impact on the conduct of business by firms in their area. The case for consultation is particularly strong in relation to economic development. If we are talking about the development of the local economy, businesses may have a great deal of advice and wisdom to offer to local government in deciding the best way forward.
Given that fact, it is perhaps not unreasonable that one might have expected to see the consultation clause drawn up closely in parallel with what is now Section 134 of the Local Government Finance Act which provides for consultation on expenditure generally and on the national non-domestic rate. Those provisions were drawn up in the light of experience with the statutory rates consultation. That was part of the Rates Act of 1984 which I introduced and took through the other House.
However, Clause 34 does not follow the Section 134 provisions in three respects. First, under Clause 34, there is no duty to consult; it is discretionary. That seems to me to be quite inexplicable because economic development involves the business community perhaps more than other areas of local government spending. Secondly, unlike Section 134, it does not spell out that the consultation should be with bodies representative of industrial and commercial undertakings in their area. That seems to be the normal way. Chambers of commerce and chambers of trade may be involved and, in a large city, there may be branches of the CBI or other employer organisations that have a great deal to offer. This clause simply suggests that the local authority should consult with those who appear appropriate for such consultation.
Thirdly, the clause does not provide, as does Section 134, that the practice of consultation should be underpinned by guidance from the Secretary of State. In short, these clauses are far too permissive.

1233
They enable authorities to make their economic development programmes simply:
"available to commercial [and] industrial … undertakings in their area as they consider appropriate and to such other persons as they think it desirable to consult".
That is simply not acceptable to the business world, which is very anxious to collaborate with local authorities, who recognise that this partnership for economic development has very great value. There are some marvellous examples to be found around the country. However, this clause does not give the necessary and appropriate degree of protection.
There is a reference in the clause to guidance but it relates to the purposes of the expenditure and not to the method, timing or manner of consultation. Section 134 of the Local Government Finance Act sought to spell that out with greater particularity.
Somebody might ask: "What is wrong with using the Section 134 power to consult?" The fact of the matter is that a local authority would not be bound to bring an economic development programme as such within the ambit of the consultations or to distinguish spending under this head from the generality of an authority's spending when it is setting its budget.
I think that business might reasonably have expected that there would be a parallel power or duty to consult with the same kind of people. If the local authority wishes to consult more widely then by all means let it do so; no one will quarrel with that. But there should be a duty to consult with those who are representative of the business interests in their area and that might well be additional to the generalised power contained in Section 134 of the 1980 Act.
The present proposals in fact do neither of those things. The two amendments with which we are now dealing are intended to amend the Bill so that the duty to consult in relation to economic development is, if I am allowed to use the phrase, mutatis mutandis, the same as the power to consult on rates and expenditure. For the life of me I cannot see why it should be different.
Local authorities have now become very accustomed to the statutory consultation procedure on expenditure and on rates. I cannot see why they would object to the idea of having the same kind of procedures operating in relation to their economic development plans. I therefore hope that my noble friend on the Front Bench will perhaps undertake to look at this matter again and come back on Report with something that reflects more clearly the wishes of bodies such as the Association of British Chambers of Commerce and others which have been pressing the Government to make this change. I beg to move.
Lord McIntosh of Haringey: I rise only to welcome what the noble Lord has said about the co-operation between local authorities and the private sector. I
1234
hope that he will be in his place for the rest of this evening and on Wednesday afternoon when we discuss Part V of the Bill. It is our view that Part V of the Bill creates very major obstacles to the kind of collaboration with the private sector, and indeed with the voluntary sector, which I believe that he and we all wish. I hope that he will support the amendments that we shall put forward to improve collaboration between local authorities and the private sector.
10 p.m.
Lord Ross of Newport: I have no objection to these amendments. However, I have to say to the noble Lord, Lord Jenkin, that to oblige authorities in some areas to discuss with chambers of commerce that are totally moribund is a bit much. I set up an enterprise agency. I was advised by the industries involved in the enterprise agency—I wanted it to be taken over by a chamber of commerce—that no such thing should happen. The chamber of commerce was so decrepit that it was not worth consulting. I am a non-domestic ratepayer. To say that we have to consult people whom we know have very little to contribute is not very clever. They may be stronger in some areas but that is not my experience.
What is wrong with the trade unions and work councils? Can they not be consulted too?
Lord Jenkin of Roding: Perhaps I may respond to the noble Lord. The trade unions are a different case. This clause is concerned with the consultation with the representatives of industry and commerce, and of employers. Section 134 of the Local Government Finances Act 1988 states:
"A relevant authority shall consult under this section persons or bodies appearing to it to be representative of persons subject to non-domestic rates".
One has obviously to have different words because people will be affected by the economic development plans of the authority. But that provision seems perfectly adequate to relieve a local authority from any obligation to consult a completely moribund chamber of commerce or chamber of trade. It would have to find out who was representative of the people who were interested and consult them.
This provision imposes on the authorities a reasonable duty. It is a good deal clearer and more specific than the very vague words which are in the clause at the moment.
Lord Hesketh: These two amendments bring us to Clause 34 of the Bill, which provides for local authorities to decide before the beginning of each financial year whether or not they are going to undertake any expenditure under the economic development power. If they decide to do so then they are required to draw up a programme of their proposed activities and consult those carrying on commercial, industrial and public undertakings in their area and anyone else they wish to about their proposals. We feel that the opportunity to consider a programme of activities and to discuss it with those whom it will affect will be a useful exercise for local authorities and should lead to a properly planned and well-focused use of the new power. In

1235
fact, we suspect that in many cases local authorities already undertake such preparatory work, and by putting this on the face of the Bill we are merely asking them to build on current good practice.
The amendments address a particular aspect of the consultation programme—who should be consulted? As it stands, Clause 34(3) says that local authorities should make their programme available for consultation to,
"such of the persons carrying on commercial, industrial and public undertakings in their area as they think appropriate and to such other persons as they think it desirable".
The onus is on the local authority as being best placed to decide who should be consulted as representative of the area's interests in economic development.
The amendments align the consultation process more closely to that of the consultation procedures that are to take place on the non-domestic rates under Section 134 of the Local Government Finance Act 1988 to which my noble friend Lord Jenkin drew our attention. Thus it widens considerably the categories of those who are to be consulted. The amendments would require authorities to consult all those considered to be representative of the non-domestic ratepayer. This would include not only members of the local business community, who must surely have the main interest in economic development, but also other important non-domestic ratepayers such as health and education authorities, which are not involved in commerce and industry.
During the Committee proceedings in another place the question of who should be consulted was raised on behalf of the chambers of commerce. I understand that this amendment has been tabled with the same point in mind. I would be the first to recognise that a good, well-organised chamber of commerce would be the ideal forum to use to discuss proposals for promoting economic development in an area. It would have the local knowledge plus the business expertise to see exactly what would be in the best interests of the area.
The clause as drafted leaves it to local authorities to decide who they should consult as representative of the business community. I am sure that in those cases where it is appropriate they will consult their local chamber of commerce. Nevertheless, the noble Lord has a good point, though I am not quite sure that these amendments as drafted would achieve what he is aiming for. I should like to take away his suggestions to see what solution might be arrived at to ensure that chambers of commerce will be consulted as a matter of course on local authorities' proposals.
It would also be opportune for me to say a few words about the relationship between this consultative process and that required under the Local Government Finance Act 1988. There is obviously scope for overlap here, although there will in fact be more detailed guidance in regulations on the non-domestic rate procedures. If local authorities did want to combine the two exercises, I can see no reason why they should not as inevitably some of the same expenditure plans will be under consideration with the same people. Again, it is for local authorities
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to decide what is most appropriate for their circumstances. I assure the Committee that any circular we may issue on the proposals will remind local authorities that it would be sensible housekeeping to combine the two exercises at the same time, so far as they are able. I hope that with those reassurances my noble friend will feel able to withdraw the amendment.
Lord Jenkin of Roding: I am indebted to my noble friend for his forthcoming reply. The idea that the consultation might proceed in parallel is very good. I should like to take advice on that. I am grateful for his undertaking to consider whether there is some way in which the point can be met, and no doubt we shall be able to return to this matter on Report. With that, I am happy to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 115S to 115U not moved.]
On Question, Whether Clause 34 shall stand part of the Bill?
Lord Ross of Newport: I regret that I did not give notice that I wished to speak on Clause 34 stand part. I apologise for doing so at this late hour. I draw attention to what I believe is a total nonsense in Clause 34(2) where it reads as follows:
"It shall be the duty of a relevant authority, before the beginning of each financial year, to determine whether they will take any steps in that year for the promotion of the economic development of their area".
As I said earlier, closures happen very suddenly and a local authority may have decided that it did not intend to play any part in economic development. I believe that subsection (2) is wrong. I do not propose to pursue that now, but I give notice that I wish to raise this matter on Report and perhaps the Government will consider it in the interim.
Lord Hesketh: I believe that I can put the mind of the noble Lord, Lord Ross, at rest, which would prevent him having to think about it as we approach Report. What he has in mind is the unforeseen event such as the closure of a major employer in a locality. In such a case local authorities may quite properly wish to help in a number of ways. They might wish to support retraining for redundant personnel or fund redevelopment of a vacant site for other industrial purposes. They may wish to encourage other business interests in the area, and that too could be done in a number of ways. I cite in particular one example which was mentioned in another place where the council as a rating authority remitted payment due from an undertaking in respect of non-domestic rates. I believe that Clause 34 as drafted does not prevent that.
The duty imposed by Clause 34(3) is a duty to draw up a programme of proposals which it would like to undertake and consult on with those whom it feels to be representative of the local business community. This does not imply that some activity which is required during the course of the year cannot take place as the authority would still have satisfied the requirement to consult on the proposals that it had in mind at the beginning of the year.
Lord Ross of Newport: I am grateful for that assurance. I shall not be raising this matter on Report.
Clause 34 agreed to.
Clause 35 [Amendments of existing power to incur discretionary expenditure]:
Lord Hayter Lord Hayter moved Amendment No. 115V:
Page 42, line 19, after ("(4AA)") insert ("Subject to subsection (4AB) below,").
The noble Lord said: This amendment is associated with the other amendment with the rather frivolous number of 115ZZ. That amendment explains what we are trying to achieve. We want to persuade the Minister that transitional protection should be available for the local authorities who are losers in the amount of the Section 137 money that they can spend after the new system is in operation. Under my proposal, they would be able to spend up to the old limit for three years thus enabling them to control their funding programmes more sensibly.
Those Members who are involved with voluntary organisations—which I represent today—will know that Section 137 of the Local Government Act 1972 was of great importance to them. The discretionary funding power enables local authorities to incur expenditure which in their opinion is in the interests of their area. However, expenditure under that power is limited to the product of a 2p rate.
Section 137 is so important because it enables local authorities to fund new projects outside their statutory powers. One of the great virtues of voluntary organisations is that they are able to identify gaps in the current provisions and to highlight those needs. They can also devise new ways of delivering services. In other words, they are often ahead of the legislative framework within which local authorities function.
I shall not elaborate; but, for example, the information technology centres provide training in new technology. They were started 10 years ago by a voluntary organisation with the help of the London Borough of Hammersmith and Fulham. The organisation has been taken up by the Government and today there are more than 100 such centres.
The economic development about which we have been talking for a long time this evening was not at first a statutory function of local government but it is now. Therefore, the Government have accepted it. Both those examples show how important Section 137 is to the voluntary sector. It would be most unfortunate if in any way the Bill undermined the ability of local authorities to exercise their discretionary power.
My concern is shared by many voluntary organisations. It is that perhaps inadvertently Clause 35 could have that effect, particularly in the short term. For that reason, I propose the transitional period of three years. I believe that it would be a prudent step to take and one which would bring a great relief to a number of voluntary organisations.
Clauses 32 and 35 introduce many changes, as we have already heard. It will take a great deal of time before those changes improve the situation; some
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may well make it worse. Not surprisingly, the changes are causing great uncertainty and confusion in voluntary organisations and in local authorities which are concerned that they may have to cut funding to the organisations because of the overall reductions in their spending limits.
Therefore, what is needed by the local authorities is more time. They need time to examine all the different powers which are available to them and to make absolutely certain that they are not using Section 137 when they should be using another power. They need time to clarify the precise nature of the work which the voluntary organisations are carrying out so that they can apportion their grants between all the relevant powers available to them. They need time to compile their community charge registers so that they can calculate the number of adults in their area and work out the Section 137 spending limit—and that is a sensible suggestion! They need time to build all those processes into their budget-making cycle. And they need time to give the voluntary organisations ample warning to make alternative arrangements or to give staff notice if it turns out that the new limits mean that the local authority cannot continue to fund them.
Without sufficient time local authorities must make rushed decisions on inadequate information and with no consultation. The victims of that process will be the voluntary organisations. Therefore we are asking for more time.
I remember that when we discussed the community charge Bill I saved the Government a lot of money by abandoning the transitional arrangements for the City of London and several London boroughs. Now in return, and in a more minor sphere, I ask the Government to give to the voluntary organisations that transitional arrangement under this Bill. I have been advised by, among others, the National Council for Voluntary Organisations. I can assure the Committee that it is anxious about the position. I hope that the Minister will be able to relieve that anxiety. I beg to move.
10.15 p.m.
Baroness Stedman: I support these amendments so ably moved by the noble Lord, Lord Hayter. In many parts of the country the new proposals to replace Section 137 money will not create problems for voluntary organisations but some authorities, particularly the inner-London boroughs and some of the shire district authorities, who fund a large number of voluntary bodies will have problems. There will be problems especially when one tier of local government decides to fund projects which are the responsibility of another tier of local government. I am thinking, for example, of some cases of sheltered housing, some aspects of transport and, indeed, crime prevention.
Discretionary funding power is extremely important. It gives to authorities the power to be flexible, to innovate and to be able to respond quickly to the changed circumstances in their areas. A clear case was made by the noble Lord, Lord Hayter, for this transitional protection to enable the voluntary organisations to know where they stand and to be able to adjust their plans accordingly.

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The impact of the changes on the parish councils will vary considerably. Nationally, the spending limit will be broadly as it is with the 2p rate limit, but the local councils—the parishes—who will suffer most will be those with high business rates. Under the Section 137 powers they will lose out in terms of actual income. That in turn will have an impact on those voluntary organisations which are funded by the lower tier authorities. The London boroughs and the shire district councils with high rateable values now but low populations will suffer the most. For places like Brighton, Harlow or even Leicester, the change from a high rateable value-based calculation to a population-based calculation will hit them hard.
The Government have said that they do not want the changes to Section 137 to result in cuts. If the Government want to guarantee that that does not happen they should support these amendments and accept them for the transitional protection that they give to the voluntary organisations.
Lord Hylton: I support these amendments so well moved and explained by the noble Lord, Lord Hayter. I speak as chairman of a local charitable foundation in a rural area. Some years ago now we invented a new type of person to meet a particular need. That person is called the village contact person—a kind of miniaturised CAB, scaled down to what is needed in a village. This is particularly useful when one lives on the borders of three district councils, three counties, one health authority and one police area with overlapping and conflicting boundaries and catchment areas.
This new invention has been able to point perplexed citizens in the right direction to obtain assistance where needed. The concept has been accepted by the local authorities in question and it is even beginning to be studied and imitated in other areas. Transitional protection is needed and I urge the Government to accept the amendment.
Lord McIntosh of Haringey: It is sometimes said that in times of economic hardship the rich are uncomfortable, the middle class suffer and the poor starve. At times of fiscal uncertainty and uncertainty in public expenditure, central government are uncomfortable, local authorities suffer and the voluntary organisations starve. I hope that the Government will look sympathetically at these important amendments, which are not enormously costly and which were so well moved by the noble Lord, Lord Hayter.
The Earl of Balfour: I wish to raise a matter that concerns me very much. Clause 35(9) applies to Scotland and that is why I looked at it rather carefully. What intrigues me here is that a purely English Act is amending a purely Scottish Act. At the top of page 42 the Scottish Act is amending the English Act. From what I can gather the idea of this clause is to try to bring the legislation north and south of the Border into line, and the idea arose from the problems of the Lockerbie air disaster.
As I understand the situation, as legislation exists in a different way north and south of the Border, English local authorities could not contribute to the
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fund unless they were sponsored by someone in England. Under Section 137 of the English Local Government Act 1972, the people who can begin a voluntary fund are,
"the Lord Mayor of London or the chairman of a principal council or by a committee of which the Lord Mayor of London or the chairman of a principal council is a member".
As I say, I am not familiar with English legislation. I am not quite certain whether a parish or community council would be regarded as a principal council. Under Section 83(3)(c) of the Local Government (Scotland) Act 1973, the people concerned are the,
"chairman of a regional, islands or district council, a chairman of a community council".
In England and Scotland community councils are rather different. In Scotland they have no statutory functions, and, so far as I know, in England they have functions.
So far as I know, there are Lord Lieutenants in England and Scotland. I do not know whether they have different functions. If this is the case then it is rather nice to know that they are being brought in equally on both sides of the Border. Another qualified body is that of which,
"any of these persons is a member".
I believe that in law there is a difference between a person being a member of a body and a committee member of a body. I think there may be a difference in legislation.
I realise the principles that an attempt is being made to achieve in this clause. It is very good because provision on both sides of the Border should be the same, and so far as I am concerned that should also apply to England, Wales, Scotland and Ireland. The clause has been drafted in such a peculiar way. When I have been in Scotland, on many occasions I have had tremendous help from the officials of my own East Lothian District Council.
However, we cannot make head or tail of the clause. Today I have managed to get some information; but I wonder whether the drafting of the clause is such that it will lead to confusion. What will happen with a disaster or charitable fund or a development fund of some kind which is set up, for argument's sake, south of the Border and to which the Scots would like to contribute, or north of the Border to which English people would like to contribute? When one reads the clause as it stands in regard to the position of the two countries, one becomes lost.
Lord Hesketh: The purpose of these amendments is to insert a new subsection (4AB) which would provide that where the financial limit on the new per capita basis for calculating the annual limit of local authority expenditure under Section 137—set out in subsection (4AA)—is less than that obtaining in the financial year commencing 1st April 1988, the former limit shall continue to be the limit for a period of three years from the commencement of these provisions. I think it may assist the Committee in considering the merits or otherwise of the amendment if I first explain how the new financial limits were arrived at. The change to a per capita limit is of course intended to bring the Section 137

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power in line with the way in which the community charge is calculated. It will bring to the expenditure under this power the same benefits as the community charge will bring to local authority expenditure generally. It will relate more closely to the needs of the area than a system based on rateable values which may give a distorted spending limit in relation to the needs of an area's population.
The precise sums that we have proposed for the limits take into account a number of important factors. First and foremost the limits reflect the parallel proposals in Part III of the Bill to introduce a new general power for local authority economic development activity, which we have already discussed. That new power will, as the Committee knows, not be subject to any general financial limits. It is worth noting that economic development activity has in recent years accounted for a significant proportion of expenditure nationally under Section 137. In fact, the Widdicombe Committee's research revealed that in 1984–85 economic development accounted for about two-thirds of Section 137 spending. We have no reason to suspect that the proportions have changed significantly since then. The removal of this large amount of activity from Section 137 to a new general power not subject to annual financial limits makes a real difference to the figure appropriate for the Section 137 limit.
Secondly, we have been concerned for some time about the extent to which Section 137 powers have been used by some local authorities for certain peripheral activities that appear unconnected with their functions. We recognise the importance of Section 137 powers for local authorities to be able to respond to local circumstances for which they have no specific powers. By nature the power gives local authorities a degree of competence over and above that provided specifically by Parliament. That is why annual expenditure is restricted by a financial limit.
Most local authorities do of course use the power, not as a means of extending their powers but to respond in a limited way to particular local needs. This is supported by information collected centrally by the Department of the Environment which shows that in 1984–85 average expenditure under Section 137 was only some 32 per cent. of the total national headroom available. Moreover, in that year only 21 out of 511 local authorities spent more than 80 per cent. of their limit. In 1986–87 a similar picture emerges, with only 26 authorities of the responding authorities spending more than 80 per cent. of their available headroom. Again, I stress that much of this was on economic development which will in future be outside Section 137.
In the light of these considerations we have proposed that the national aggregate headroom for Section 137 should be regarded as some £200 million for principal authorities. This provides for a limit of £5 per head of adult population in all areas of the country. Bearing in mind what I have already said about economic development activity being removed from the scope of Section 137, and the fact that fewer than five per cent. of authorities have
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spent anywhere near their limits, I can only suggest that we have the proposed limits about right.
There will of course be some local authorities who will lose some Section 137 headroom under the new arrangements, and this is the thrust of this amendment. This reveals however the disparity between the two arrangements. Under the existing arrangements an area with a high rateable value would have a high Section 137 limit irrespective of the level of population making demands on the power. The areas which may lose headroom under the new arrangements will almost certainly be those which previously benefited from an artificially high limit because of a high rateable value. Our proposals will remove the anomaly.
Nevertheless, we are prepared to look closely at any local authorities who think that the new limits will cause them particular difficulties. I can assure Members of the Committee that, although the proposals have been public for over a year, no local authority has asked for any transitional arrangements. No such representations have been made to date. We believe that the Bill as drafted already provides sufficient flexibility to provide transitional arrangements if any should be needed.
I also suggest that the transitional arrangements proposed in the amendment are not suitable. They allow spending to continue at the 1988 level for three years and then impose a sudden change. Any transitional arrangements should surely allow for a smooth change rather than simply postpone a sudden change. I therefore suggest that the amendment is not appropriate. The proposals in the Bill relate headroom for spending more precisely to need. Local authorities have to date not asked for any transitional arrangements. If they do, their case will be considered and provision can be made under the Bill as it stands.
10.30 p.m.
Lord Hayter: I am much obliged to the Minister for his thoughtful and very full explanation of the Government's attitude towards this proposal. However, I think I made it clear that I was thinking more of the voluntary organisations than the local authorities. I think therefore that I should consult with the voluntary organisations to ascertain what they feel as a result of the Government's statement. In the circumstances, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 115W:
Page 42, line 20, leave out ("different") and insert ("higher").
The noble Lord said: This is the First of two sets of amendments which are concerned with the actual limits for expenditure proposed as a replacement of the old Section 137 powers. I remind Members of the Committee that this is the amount of money which can be spent and which has been spent—I would almost say from time immemorial—for many years by local authorities, not in accordance with any particular powers but in accordance with their rights to spend money in the interests of their neighbourhood.
When I say "many years", the original figure used to be the old sixpenny rate but with decimalisation it became a 2p rate. It is certainly true that the original Section 137 power included provision for the Secretary of State to vary the figure by order either upwards or downwards. But to the best of my knowledge it has never been varied downwards. When the Widdicombe Committee came to look at the figure, it undertook an inquiry, especially in the light of the abolition of the GLC and the metropolitan counties. The committee came to the conclusion that the figure set in the 1976 Act was about right.
A considerable number of local authorities spend very much less than their Section 137 powers will allow. I am sure that noble Lords from Scotland will forgive me if, for the sake of simplicity, I use the English example rather than the Scottish one contained in the 1973 Scottish Act. About 20 per cent. of local authorities spend 80 per cent. or more of the amount allowed by their powers. That fact, and the research carried out, led the Widdicombe Committee to conclude that the level set out was about right.
The committee then suggested that the level should be varied for the new single-tier authorities which were to be set up after the abolition of the GLC and the metropolitan counties. But the committee wanted to ensure that the total amount available, especially regarding voluntary organisations about which we have been talking, did not decrease.
As I said, the Government have never actually reduced the figure, despite having the power to do so. We should now like an assurance, preferably on the face of the Bill although we should be happy to hear it from the Minister, that the Government do not plan to use the powers they will be given to reduce the amounts of money involved, either in real or money terms, unless there were wholly unforeseen circumstances. I hope that the Minister will be able to give such an assurance and so enable me to withdraw the amendment. I beg to move.
Lord Hesketh: Amendment No. 115W concerns the financial limits for expenditure under Section 137 of the Local Government Act 1972. That is the discretionary spending power available to all local authorities, including parish councils, to incur expenditure on anything which they consider to be in the interests of their area or to all or some of their inhabitants but for which they have no specific powers. Annual expenditure is subject to a financial limit currently based on the product of a 2p rate. That is to be replaced by a financial limit calculated on a per capita basis to be consistent with the community charge.
Amendment No. 115W concerns specifically the power of the Secretary of State to vary the financial limits under Section 137 of the Local Government Act 1972. Subsection (7) of Clause 35 inserts a new subsection (4AA) to Section 137 so that the Secretary of State can make an order to specify a different sum for a particular description of authority. Amendment No. 115W proposes that the Secretary of State should be empowered only to specify a higher sum.
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The amendment limits the flexibility of the Secretary of State to vary the financial limits. Let me reassure the Committee straight away by saying that I can see no reason under present circumstances for the power to be used for a general reduction in the financial limits under Section 137. The Secretary of State has had the power to vary Section 137 limits up or down since 1972 and has never used it. I think that that is proof enough of our good intentions.
The Committee will, however, be aware of a particular case which arises from the passage of the Bill through another place which will require the Section 137 limits to be altered. That is the decision to change the limits in the London boroughs and metropolitan districts only to reflect spending under Section 48 of the Local Government Act 1985 which in any other parts of the country would be authorised under Section 137.
We shall be discussing that aspect in more detail when we discuss a later amendment. Very briefly, however, we propose to make an adjustment to Section 137 limits of those authorities who are within Section 48 scheme areas broadly equivalent to their expenditure under Section 48 which otherwise would have had to score against their Section 137 limit. That is administratively simpler than our original proposals and reflects our wish not to place unnecessary administrative burdens on Section 48 support of voluntary organisations.
If Amendment No. 115W were accepted, that approach would not be possible. Local authorities who administer Section 48 schemes have welcomed the Government's new approach and it would be a pity if we needed to look for an alternative solution which would certainly have additional administrative consequences for the land districts of those sectors. That is just one example of the need for flexibility in such matters and I would not wish it to be jeopardised by an amendment such as this. For those reasons, we resist the amendment.
Lord McIntosh of Haringey: I am reasonably satisfied by that reply. I am glad to learn that there are no foreseeable circumstances under which the Secretary of State would exercise his power to make a general reduction in the limits. I am also interested by what the Minister said about the Section 48 position. That may enable us to cut short the debate on Amendment No. 116A. Without further ado, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 115X:
Page 42, line 23, leave out ("£2·50") and insert ("£4·00").
The noble Lord said: I should like to speak also to Amendments Nos. 115Y and 115Z. The amendments again, refer back to Widdicombe's research on the scale of Section 137, or Section 83 of the Scottish Act, spending. As I hinted earlier, it was indicated that the average expenditure under those powers was only 32 per cent. of the ceiling. So we do not in general have local authorities pushing against that ceiling. Twenty-one authorities were spending more than 80 per cent. of the permissible limit. If we do our sums correctly, and work back to

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the position when Widdicombe did his research, we would come to a rather higher figure than that which has been provided by the Government in Clause 35. The calculation which was the basis of Widdicombe's recommendation was that there should be permitted expenditure in 1984–85 of about £3·70 per head of population, which was equivalent to £4 at current prices—in other words, current prices when the Widdicombe Report was produced. Consequently, if we consider it in the light of inflation from that time, we should have a figure on page 42, line 23 of £4, in line 25 of £8 and line 28 of £4, rather than the figures which are at present on the face of the Bill.
I hope that the Government will feel that they ought now, in the middle of 1989, to give a full uprating of Widdicombe's figures. It was very detailed research, rationally thought out, and I have indicated the results if he were reporting now. I beg to move.
Lord Hesketh: Perhaps I may make a break from precedent and apologise to my noble friend Lord Balfour who raised a lengthy and complex technical matter not entirely to do with the amendment which we were previously discussing. I suggest that perhaps I may write a letter to him covering his fine point. I apologise for not having answered him on the last amendment.
These amendments concern the financial limits for expenditure under Section 137 of the Local Government Act 1972. The amendments seek to replace the financial limits proposed for each description of authority set out in Clause 35 with higher limits. These higher limits are those recommended by the Widdicombe Committee. Those limits were based on existing spending power without any adjustment for the introduction of the new economic development power. Our lower figures allow for the fact that most of what is now spent under Section 137 will in future not count against the limit. As this represents over two-thirds of the Section 137 limit a reduction of just three-eighths of the Widdicombe Committee's proposed limits seems very reasonable.
The limits proposed by the Government would provide £5 per adult for principal authorities. This will be shared equally between district and county councils in areas where there are two tiers of administrative authority. This will of course remove the existing disparity between single and two tier authority areas. At present, London and the metropolitan areas are at a theoretical disadvantage compared to other areas in the country because they have not had the benefit of two tiers of Section 137 expenditure since 1986, although the provisions of Section 48 of the Local Government Act 1985 have largely compensated for this.
The new per capita arrangements with £5 per adult available across the country will ensure that all principal authorities are put on an equal footing. There will be a further sum of £3·50 per adult for parish and community councils. However, as we have explained in another place, we think that an
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adjustment to take account of the continuing powers under Section 48 is appropriate.
We remain firmly of the view that the figures we have proposed are correct. While I do not wish unnecessarily to go over the same ground again, I think some points are worth re-emphasising. First, it should be noted that when the original 2p rate limit was introduced, it represented a significant increase over previous limits. To date, the total available nationally under the limits has never been approached. I feel that the rates proposed in the Bill continue to represent a similar level of generosity, particularly when one considers that economic development expenditure—which in recent years has accounted for some 67 per cent. of Section 137 spending—is being removed totally from Section 137 limits to a new power that will not be subject to any general financial limits. I can see no need or justification for increasing the limits when less than 5 per cent. of authorities spend anywhere near their limits, even including the present substantial economic development spending.
We recognise of course that Section 137 is an important power and that many local authorities use it very sensibly, often to support the voluntary sector. I think this Committee is at one in seeking to ensure that the invaluable work carried out by voluntary organisations is not jeopardised. I can reassure the Committee therefore that there is absolutely no reason to suspect that local authority support for the voluntary sector will be jeopardised by the Government's proposals.
There are many functional powers which can be used to support voluntary organisations. Section 137 powers should in fact only be needed in very few instances. Our experience has revealed that if authorities considered the full scope of their available functional powers they would probably relieve considerable pressure on their own Section 137 limits.
I think therefore that there is no case at present for increasing the limits proposed in the Bill which, as I have explained, are in excess of the usage made by nearly all local authorities. If the position should change, however, the Bill provides for the Secretary of State to vary the limits by order. The position will of course be kept under review, and I am sure that if problems arise they will quickly be notified to us. I think the Bill as drafted provides an adequate degree of flexibility to suit such changing circumstances. I hope that the Committee will be able to resist the amendment of the noble Lord, Lord McIntosh.
10.45 p.m.
Lord McIntosh of Haringey: It is certainly true that the removal of the economic development expenditure from the Section 137 expenditure makes a substantial difference in the short term to the amounts of money which local authorities are going to require. It is also true, as I made clear in my own introduction of the amendments, that most local authorities do not come anywhere near the ceiling and that the average take-up is only 32 per cent. of the ceiling.
However, I think the Minister is ignoring the fact that in the longer term there will be considerable

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pressure for local authorities to do more and more of their work in conjunction with voluntary organisations. This is not a pressure which we are in any way resisting. That means that much of the expenditure which would in the past have come under other powers will now probably come under the Section 137 expenditure, or Section 35 as it will be now.
I think that in the longer term there may well be more pressure against the upper limit than has been anticipated either in the calculation of these figures or in the Minister's reply to this amendment. However, I concede that there is power to raise the limit afterwards, and I think it is probably better if we leave the matter there. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 115Y to 115ZZ not moved.]
Lord Dean of Beswick Lord Dean of Beswick moved Amendment No. 116:
Page 42, line 42, at end insert—
("(10) After subsection (4B) there shall be inserted the following subsection—
("( ) It is hereby declared that the power of a local authority to incur expenditure under subsection (1) above includes power to do so for the purpose of undertaking or promoting twinning or linking arrangements with a local authority outside the United Kingdom, including activities for—

(a) the promotion of educational, social and cultural links;

(b) the promotion of economic or trading links;

(c) the promotion of humanitarian aid and technical assistance; and

(d) the encouragement of understanding and goodwill between the peoples of different localities.").

The noble Lord said: This amendment has been moved to facilitate local authorities in their desire to twin or have a relationship with overseas authorities, mainly in the promotion of educational, social and cultural links, economic or trading links, humanitarian aid and technical assistance and the encouragement of understanding and goodwill between the peoples of different localities. Quite a number of these twinning arrangements, partnerships, or whatever one wishes to call them, exist at present and have existed for some time to the mutal benefit of the peoples of both the areas involved.
Local authorities have invariably established twinning links at the social and cultural level. This provides an excellent platform on which to build prospects for economic twinning. Local authorities will of course have a certain knowledge of the key personalities and the organisations involved and will have a knowledge of how things get done in their twinned locality. Training arrangements have proved to be a good means of establishing transitional working relationships between companies. Local education authorities fulfil a strategic training function and are well placed to co-ordinate such activity. Executives with experience and an awareness of European business practice will play a vital role in the 1990s.
It is now accepted that mergers and takeovers will not be as dominant a consequence of 1992 as was
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originally thought. Alliances between companies will be commonplace. Local authorities, through their civic twinning, language resource and training responsibilities, are well placed to provide the most favourable climate for such alliances to occur.
There is a fear that in the early years of the operation of the single European market there may be a significant increase in unemployment. There is also a fear that small companies will be particularly affected. Local authorities are well placed to provide a framework of support for local economies dominated by small firms as they struggle to come to terms with the new order.
The amendment is tabled to suggest a proper power to twin towns under Section 137 expenditure. The notes on clauses, explaining the new direct benefit testing introduced by this Bill, referred to town twinning as an activity that would cease. The Government should explain the provision further and think again in the light of the good work undertaken to the benefit of local government here and links abroad, particularly in the developing countries.
The benefits gained are educational, social and cultural links and programmes of activities, which are usually of mutual benefit, though some activities may benefit one partner and some the other. Most links are within Europe but an increasing number are worldwide. Economic and trading links are usually beneficial to both parties but individual initiatives may bring benefits to one or other of the parties. Local authorities spend money on exhibitions, seminars, missions abroad, reception of visitors, pump-priming of new arrangements. Examples are links between Cardiff and Xiamen, and Cheltenham and Weihai. Salford has an arrangement with Khartoum to provide technical assistance to trade and material help, Birmingham with the Gambia on a similar basis, East Sussex with Addis Ababa and Strathclyde with Kampala.
I recall that before I became leader of the council in Manchester the city was twinned, after the war, with Leningrad. That arrangement is still in being and has been of great benefit. Mutual visits were made—business, educational and cultural. Twenty-five years ago 16 year-old schoolchildren from Leningrad visited Manchester. Such visits were unheard of in those days. It was unfortunate that the youngsters were harangued by a group of people who were anti-Soviet which cancelled out the goodwill of the visit. However, as a result of the twinning, Manchester arranged for dancers of the Kirov Ballet to perform. The botanical gardens of Manchester and Kirov exchanged plants. There were also business contacts.
I do not want to go into the subject in greater detail tonight. We have had a long day. I believe however that the amendment is worthy of serious consideration. I should like to think that the Minister might be sympathetic towards it. I beg to move.
Lord Hesketh: As noble Lords will be aware, Section 137 is a discretionary spending power. In using it, local authorities must be content that expenditure is in the interests of their area or any part of it, or all or some of its inhabitants.

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Furthermore, the power encompasses expenditure on contributions to the funds of charities and other non-profit making public service bodies for their work in the United Kingdom, for public appeals by civic heads in connection with a particular event affecting UK residents, and, as it presently stands, for the purpose of promoting economic development.
The use of Section 137 was looked at by the Widdicombe Committee of Inquiry into local government, which found that misunderstandings about the precise scope of Section 137 were not uncommon. The Government considered that some changes in the formulation of the section would go a long way to resolve those misunderstandings. In particular, we were anxious in drafting the clause to make it quite clear that one of the tests that must be satisfied before a local authority could embark on expenditure under Section 137 was that the benefits arising therefrom should clearly be in the interests of the area or its inhabitants, or part of it or some of them. Additionally, it needed to be made clear that the power could be used only where authorities were certain that no other relevant powers existed. We think that Clause 35 achieves that clarification.
So, in considering any amendments to Section 137, we would need to look carefully at any suggestions to bring other types of activity within its scope. Would they be strictly only in the interests of the area or its inhabitants and would no other powers be available to the local authority to carry out those things? I think in the case of the activities listed in this amendment the answer is most definitely no. The amendment is clearly designed to widen not only the type of activities carried out under Section 137 but also the geographical coverage of the power so that money could be spent not only for the benefit of those outside the area of the authority in the UK but also for those overseas. That was certainly not the original intention of Section 137 and was not the intention of the Widdicombe Committee, which reaffirmed the principle that,
"local authorities should continue to have a financially limited discretionary power to spend in the interests of their area".
The purpose of Section 137 aside, such an amendment is still not necessary. The Government fully recognise that town twinning and its associated activities are valuable tools in widening horizons and promoting international friendship, primarily at a local level for the benefit of local people. In recognition of that, every local authority already has adequate powers to spend any money that is necessary to launch, encourage or support twinning arrangements.
As regards the encouragement of understanding and good will between people of different nationalities and localities, local authorities may, under Section 176 of the Local Government Act 1972, meet the costs of making and receiving official visits to and from overseas and incurring necessary incidental expenditure. Again, local authorities have powers under Section 144 of the 1972 Act to use advertisements to encourage people to assist their area for recreation or conferences and they can
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provide or contribute to facilities for conferences or exhibitions.
Moreover, the new economic development power in Clause 32 of the Bill can also be used to some extent in the international context where the power is being used for providing economic development. As noble Lords will be aware, local authorities support the work of the regional development bureaux that are scattered around the country and which promote the interests of their areas abroad. The work of the boards has often proved useful in attracting foreign investment to a particular locality and there is nothing in the new power to prevent that type of support continuing.
The list of powers available is extensive, but I think those that I have quoted to the Committee give a flavour of the flexibility that already exists for local authorities. That is why the Government resist the amendment.
Lord Dean of Beswick: I am grateful to the Minister for that detailed reply. His answer appears to go a long way towards allaying some local authorities' fears about the Bill. There is one small point that I should like to raise with him, although, given the lateness of the hour, he may not wish to answer it tonight. He referred to the boundaries or periphery to which certain parts of the permission to spend may be restricted. Perhaps he will take this point on board and give us the Government's view at a later stage.
The Widdicombe Report has been mentioned. Did that committee cast its mind forward towards 1992, which is a much wider area than was originally envisaged in local government? I do not expect an answer now. That is just one point. Having heard what the Minister said, I should like to look at it, as no doubt will the people involved. In view of the further point that I have made, beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 35 agreed to.
11 p.m.
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 116A:
After Clause 35, insert the following new clause:
("Review of section 48 spending.
.—(1) The Secretary of State shall, within two years of the coming into force of this section, consult the local authority associations, organisations representative of voluntary organisations and such other bodies as he considers to be concerned, with respect to the impact of the provisions of section 35 above on any funding scheme established under section 48 of the Local Government Act 1985.
(2) The results of any investigation under this section, together with any recommendations which the Secretary of State may consider appropriate in relation to any Order under section 137 (4AA) of the Local Government Act 1972 as amended shall be laid before Parliament.").
The noble Lord said: I think I can be fairly brief in speaking to this amendment because the Minister referred to it when responding to my Amendment No. 115W. I realise that there must be further thinking by the Government on this matter. They accepted an amendment from Sir George Young at

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Report stage which seemed to imply that Section 48 spending by metropolitan boroughs would have a secure future. The purpose of this amendment is to build on the agreement reached in another place, in the hope that the Government will be able to undertake a review after a short period, as the amendment proposes, in order to ensure that local authorities have an opportunity to fund voluntary organisations in London and in the most deprived parts of London where working with voluntary organisations is of the utmost importance.
I sensed from the Minister's remarks earlier that he would not be unsympathetic to such a proposal. I beg to move.
Lord Hesketh: The purpose of this amendment is to place a requirement on the Secretary of State to consult, within a period of two years of the coming into force of the section, the local authority associations, voluntary organisations and others considered appropriate, about the impact of the provisions in Clause 35 as regards the funding of schemes under Section 48 of the Local Government Act 1985.
The amendment further proposes that the results of any such investigation and any recommendations considered appropriate in relation to any other orders under Section 137 (4AA) of the Local Government Act 1972 should be laid before Parliament.
I can sympathise with the noble Lord's desire to ensure that the impact of the Government's proposals is kept under review. There is no need, however, to do so in the form of this amendment.
I think there is little doubt that we are at one in seeking to ensure that the Government's proposals do not have an adverse effect on voluntary organisations who receive funding under Section 48. We recognise the importance of this power and are fully committed to ensure that voluntary organisations are not unfairly hindered in their activities.
We shall be discussing with the relevant authorities the reductions that we shall be making to Section 137 limits to reflect Section 48 spending which would otherwise be authorised under Section 137. Once we have agreed the appropriate sum we will of course be keeping the position under close scrutiny. I am sure that if any difficulties are encountered, local authorities and individual voluntary organisations will be very quick to make representations to the Secretary of State. The Secretary of State has the power to vary the limits by order for any particular description of authority. This power is there to be used and will be used if it is necessary. These powers provide an important level of discretion and flexibility for local authorities. We do not wish to see that jeopardised, and the Government will be prepared to respond to changing circumstances if the need arises.
I do not think, however, that it is necessary or desirable to place a requirement on the Secretary of State to conduct a review within two years of the introduction of the provisions. The two-year period
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is arbitrary. We believe that it is far better for the position to be reviewed if and when the need arises.
If the purpose of these amendments is to ensure that changes can be made to the provisions and if the introduction of the Bill has an adverse effect on the voluntary sector, then they are not necessary. As I explained when speaking to the earlier amendment, any changes necessary can and will be made under the provisions of the Bill as it is presently drafted. On that basis we resist the noble Lord's amendment.
Lord McIntosh of Haringey: That sounds quite hopeful. The Minister said that the Government are negotiating now with the local authorities. Can he tell us whether the negotiations are likely to be concluded before we come back to this matter at Report stage?
Lord Hesketh: The answer to that question is yes.
Lord McIntosh of Haringey: I am delighted to hear that reply. If there is anything further that we need to say when the negotiations are concluded, we shall do so. In the meantime I think we accept that scrutiny is as good as review, although I am not quite sure that I completely understand the difference. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Schedule 2 agreed to.
Baroness Strange Baroness Strange moved Amendment No. 116B:
Before Clause 36, insert the following new clause:
("Discretionary spending on advice services.
.—(1) Section 142 of the Local Government Act 1972 (provision of information etc. relating to matters affecting local government) shall be amended in accordance with this section.
(2) In subsection (1), after the word "otherwise" in the third line, there shall be inserted "(a)", and after "authority" in the seventh line, there shall be inserted "; and (b) information, advice or other assistance about their rights and responsibilities.".")
The noble Baroness said: The purpose of the amendment is to make specific provisions for funding of advice services such as the citizens' advice bureaux by local authorities, should they so wish. At the moment local authorities have no specific powers to fund such services and have to rely on more general powers, such as Section 137 of the Local Government Act 1972. They also have to depend on Section 142 of the 1972 Act, which is a general power to fund information but limited in its application.
Money advice about increasing debt problems often involves the advice worker in time-consuming negotiations with creditors.The Disabled Persons (Services, Consultation and Representation) Act 1986 recognises the need for disabled people to be accompanied at meetings and permits the use of representatives to ensure that they have access to the full range of services.
The amendment seeks to amend Section 142 so that it is appropriate to the needs of the present day. Other local authority powers allow them to fund advice in specific areas. For example, Section 69(5) of the Weights and Measures Act 1985 allows counties—but not districts—to fund consumer advice. Other provisions cover housing advice and

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advice to prevent children from being taken into care, but this does not cover all the subject areas that a citizens' advice bureau will cover.
The amendment is likely to be welcomed by local authorities in view of other provisions contained in Part III of the Bill, in particular as they will need to be more rigorous in future about identifying the powers that they are using when they fund voluntary organisations. Advice services have always created something of a dilemma for local authorities seeking to fund them simply because there has been no specific power available. Local authorities have had to divide their funding advice services between different powers. The amendment aims merely to clarify the position and to spell out that Section 142 is available to local authorities wishing to fund local advice agencies.
For many people caught up in some difficulty, and unable to decide or indeed to know what they ought to do, local advice services are like the Pickwick, the Owl and the Waverley pen—they come as a boon and a blessing to men.
The amendment is simply an enabling amendment. It does not commit local authorities to any increased expenditure. It merely gives them the powers so to do should they so wish. I beg to move.
Lord Dean of Beswick: I wish briefly to support the amendment of the noble Baroness. She has covered all the points required. It is a very worthy amendment because of the breadth of help that such advice centres give to different sections of the community. We should like to think that the Minister is sympathetic to the amendment so ably moved by the noble Baroness.
Baroness Seear: We on these Benches would like to support the amendment.
Baroness Blatch: I am in some difficulty with the amendment. I agree with the principle that the local authorities should have the freedom to make judgments about their local advice-giving services, and to fund them. I have seen no difficulty in the past. I should like to plead for the right for a local authority to make judgments about the quality of that advice-giving service, and to make up its own mind about whether or not it wishes to fund and to what level.
I can see nothing in the Bill as drafted that prevents a local authority from making that judgment about advice-giving centres, and to make grants as appropriate. Therefore I am not absolutely certain what is being provided by this amendment. From a superficial reading of it, it seems that one is asking for powers specifically to grant aid to advice-giving centres. But there are many organisations which come to local authorities for grants. It seems to me that it should be left to the local authority to make a determination about whether it wishes to grant aid based on its judgment about the quality of that service. Therefore, I am in some difficulty because I cannot see in the Bill as drafted what precludes a local authority from fund-aiding its CAB, its law centre or whatever. Therefore I need to be convinced by the Minister that the amendment is necessary.
Lord Hesketh: The amendment seeks to insert a new clause into the Bill. Section 142 of the Local Government Act 1972 would be amended so that, in addition to the provision of information on request from members of the public, local authorities would be able to make arrangements for providing information, advice or other assistance about their rights and responsibilities.
Let me straight away assure the noble Baroness that I have great sympathy for the views that she has expressed. The provision in the 1972 Act that she seeks to amend dates back to the Local Government Act 1948 when it was thought to be an adequate power to fund such things as the citizens' advice bureaux. Our views have developed since then, and we believe that this is a convenient point at which to review them. I shall be glad to take away this amendment to see if we can develop a suitable response to the problems raised by the supporters of the amendment.
I hope with that assurance that my noble friend will feel able to withdraw the amendment.
Baroness Strange: I thank my noble friend very much indeed for his kind and thoughtful words with which I am delighted. I shall look forward very much to seeing what he brings forward at Report stage. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 36 agreed to.
The Earl of Balfour: In Clause 47 I should like to make quite certain that the "n" in the formula is intended to be a power and not a multiple. Let me give a simple example. Let us suppose that the value of "r" was 10. Then the figure within the brackets would be 1·1. If "n" is a power, and let us say it is 3, then the answer to what is below the line is 1·331. If it is a multiple it is 3·3, which is quite a difference.
I go one stage further and again assume a simple figure. Let us suppose that "x" is 100 and "n" is a power from the figures I have just given. The answer then is 75·1. But if it is a multiple then it is 30·3. I should like to make quite certain that "n" is intended to be a power and not a multiple. It is a purely mathematical point.
Lord Hesketh: It is certainly true that my noble friend Lord Balfour has one over on me here! The noble Earl may not be aware that there is a slight confusion which is that Part IV of the Bill is being dealt with on Wednesday, which appears somewhat illogical. The reason for doing this is for the benefit of the Opposition as well. Because of that, I can understand why the noble Earl feels quite logically that we should be dealing with Part IV, but we have rushed off to Clause 64, which is Part V, because it was felt for the ease of the progress of the Bill in terms of certain other matters of logic to return on Wednesday to Part IV. I hope, in the light of that explanation, that the noble Earl will understand why I am unable to answer his question now.
The Earl of Balfour: I am sorry to confuse the Committee.
11.15 p.m.
Lord Dean of Beswick Lord Dean of Beswick moved Amendment No. 116C:
Before Clause 64, insert the following new clause:
("Commencement of Part V.
.—(1) The Secretary of State shall, within three months of the date of Royal Assent, by order made by statutory instrument specify the days on which this Part is to be brought into force, in accordance with the requirements of this section.
(2) No day shall be appointed for the coming into force of sections 65 or 66 below before a day six months after the date of the order.
(3) No day shall be appointed for the coming into force of sections 67 or 68 below a day one year after the date of the order.
(4) The provisions of section 164(2) below shall have effect subject to the provisions of this section.").
The noble Lord said: The purpose of the amendment is to provide adequate transitional arrangements. It is accepted that whatever amendments are negotiated, either within the Bill or through undertakings relating to regulations to be issued under the Bill, the Government's intention is to ensure that some companies currently owned by local authorities, or in which local authorities are substantially or marginally involved, will fall within specific categories. Parts III, IV and V of the Bill are inextricably interlinked. It is the Government's intention that many companies will be caught by the new financial control regime. The purpose of the amendment is to ensure that time and effort are not wasted by categorising companies which are in the process of being restructured in the light of the legislation.
The amendment anticipates that it will be the intention of the Government to introduce a statutory instrument specifying the dates on which various parts of the legislation will be brought into force. It is suggested that controlled companies should not be brought within the scope of the legislation for at least six months after the relevant date and that influenced companies should have a minimum period of grace of one year.
Taking these in reverse order, it will be appreciated that many of the influenced companies will probably be caught only by means of a technical accident. Local authorities will be anxious to disentangle both these and other influenced companies to ensure that there is absolutely no question of the companies being affected by the provision in Part IV of the Bill before the company has been restructured, reduced in size or subjected to such other action as may be appropriate to ensure that it is outside the limits of borrowing controls.
The situation in relation to controlled companies may be somewhat different by virtue of the numbers involved and the scope for adjustment. But, again, there is no doubt that local authorities will wish to consider the need or desirability of restructuring these companies. The minimum six-month period is proposed from the date of the order introducing the statutory instrument to enable the appropriate action to be taken. It may be that, in both categories where government are satisfied that changes are being made to the constitution of a company which will affect the impact of any part of the Bill, the Secretary of State should be enabled to extend the period of grace
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proposed in the amendment. Those are the points which I wish to make in relation to the amendment. I hope that the Minister will be sympathetic.
Baroness Lockwood: I should like to support my noble friend's amendment and at the same time attempt to elicit more information from the Minister. The restrictions which the Bill would impose on some controlled companies are causing a number of them to look at their structure and decide whether they need to remain a controlled company and whether they should become an influenced company. They will need plenty of time to change their constitution and structure if they are to become an influenced company.
Can the Minister give more information about the difference between a controlled company and an influenced company? The exact difference is not made clear in the Bill. I particularly have in mind the Yorkshire mining museum which at present is a controlled company but has already been advised by the Minister in another place that it might be advisable to consider restructuring. But would restructuring mean for such a company that the restrictions and controls imposed upon it would relate only to the borrowing controls? Would all other financial controls be removed from such an influenced company?
Would an influenced company still be eligible for a share of local authority provisions through the European Community? Would such a company be able to continue to take advantage of the services of a local authority such as specialised legal, financial, administrative and personnel services? More information on these matters would facilitate the decisions of present local authority controlled companies on what their future position should be.
Lord Hesketh: As this is the first amendment to Part V it might be of assistance if I begin by explaining the thinking that underlies the proposals of this part. I hope that the Committee will understand if this takes a moment or two.
Local authorities can use companies in various ways. A local authority may own a company and control it in the same way as a holding company owns and controls its subsidiaries. A local authority may have a half share in a company as a joint venture with the private sector. A local authority may have a minority interest in a company. Finally, a local authority may have a more complex relationship with a company which gives it substantial influence over it without actually controlling it.
At present there are no rules on the way in which a local authority should behave in relation to companies in which it has an interest, other than the basic fiduciary duty to which any local authority is subject. I should explain that company law does not provide these rules because company law is concerned to make companies responsible to shareholders and to protect those who deal with companies. It is not concerned with questions of responsibility of shareholders to others over what they do with their rights in a company.
That is the area we need to address. A local authority that is a shareholder or has other rights

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over a company has more or less unrestricted discretion as regards how it uses those rights. For example, I cite the appointment of the auditor of a company controlled by a local authority. Like any other company, the auditor of a company controlled by a local authority is appointed by the shareholders; that is, by the local authority. Since it is the local authority that is controlling the company, it is in a sense appointing its own auditor.
Contrast that with the position of the local authority's own auditor who is appointed by the independent Audit Commission. We think that on this point the public are entitled to expect guarantees that the auditor of the company controlled by the local authority is genuinely independent. That is one example of the kind of question on which we felt it necessary to set out a framework within which the rights of local authorities over companies are to be exercised.
The proposals in Part V, therefore, make no change to company law. They provide rules on how local authorities shall use their rights and influence over companies that are so closely connected with them that it is right to treat the companies as part of the local authority sector.
The first step is therefore to define what companies are so closely connected with local authorities that they should be treated as part of the local authority sector. This task falls into two parts. First, there are those companies where the local authority has formal rights which enable it to control the company. Here the task is to define what those formal rights are. That is done by Clause 65.
Secondly, there are those companies over which a local authority does not have formal rights of control but has the means to exercise a dominant influence. Here the task is to define what should be regarded as giving such influence. That is done by Clause 66.
Having defined what companies are to be regarded as part of the local authority sector, it is necessary to provide powers to establish the rules to apply to local authorities in exercising their powers over these companies. That is done by Clause 67.
Clause 67 also deals with the way in which companies in the local authority sector fit into the new system of capital finance for local authorities. There will be in addition companies over which local authorities do not have control or a dominant influence. Two aspects of such participation call, in the Government's view, for regulation. The first is the question of companies in which local authorities may participate. The second is how to deal with some questions such as the making available of information about that participation. Both these questions are addressed by Clause 68.
I hope that this explanation of the basic scheme of Part V will help the Committee to see how the various clauses fit into our overall scheme of proposals. The new clause which is the subject of Amendment No. 116C is concerned with the programme for bringing Part V into effect. The new clause would require the programme to be specified in an order within three months of Royal Assent and make it impossible to bring the rules on controlled
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and influenced companies into effect for six months after that order, or the other controls for a year after that order. Since Royal Assent will not be before 1st October, and since there would be problems in bringing some aspects into effect part way through a financial year, the new clause would effectively postpone Clauses 65 and 66 to 1991 and the rest to 1992.
In so far as this amendment is probing the question of our proposed timetable for implementing Part V, it may help if I explain what we intend. We hope to send to the local authority associations in the course of next month a draft explaining our intentions as precisely as possible. Like the document which we have already sent about Clauses 15 to 17, we envisage this as a draft of a circular explaining the whole proposed scheme including the way in which the order will complete it.
We shall then hold consultations with the local authority associations on the basis of that document to resolve any points that they wish to raise. We hope that these consultations will at least have started before the next stage of this Bill in your Lordships' House. Thereafter we will proceed to draft the order and shall again consult on the text of the draft order. Assuming Royal Assent later this Session, our aim would be that the order should be made by about the end of the year and would come into force on 1st April 1990.
In so far as the new clause is trying to postpone the introduction of the proposals, we do not think that that is acceptable. We see these proposals as, in part, complementary to the proposals in Part IV, and we think that they should desirably come into effect together. I hope that the indications on our proposed timetable that I have given will be helpful.
The differences between a controlled company and an influenced company were set out in our initial consultation document last year. They will be spelt out in our forthcoming consultation document which should be produced within the next month. On the basis of what I have previously said, these are the reasons why we wish to resist holding up the timetable as proposed in Amendment No. 116C.
Lord Dean of Beswick: The Minister has given a long and detailed reply. I intend to withdraw the amendment is tabled at a later stage, which is what I believe he was saying, will he give an undertaking —
Lord Hesketh: I was referring to the consultation document.
Lord Dean of Beswick: I believe that there is some misunderstanding on my part as to what the Minister said. When he refers to a controlled company and an influenced company, am I over-simplifying it by thinking that the controlled company is one where the local authority has the controlling shares and an influenced company is where it is the minority shareholder?
Lord Hesketh: A controlled company can be where the local authority has the majority of the shares. It may also be where it has a majority of the business.
Baroness Lockwood: Before my noble friend decides what to do about the amendment, can the Minister assure me that the specific questions that I posed will be included in the consultation document? Can the Minister say whether the process of consultation will be completed before we come to the Report stage of the Bill?
Lord Hesketh: The order that will be the eventual outcome of the consultations will not be ready until December.
Baroness Lockwood: But the noble Lord said that a consultation document would be issued within the next month. Will the consultation document cover the specific points I put to him in my earlier remarks?
Lord Hesketh: Indeed, it will.
Lord Dean of Beswick: My noble friend and colleague Lady Lockwood expressed far better than I could our worry about the consultation document. We shall look at what the noble Lord said. If action needs to be taken we shall take it. On that basis, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
11.30 p.m.
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 116D:
Before Clause 64, insert the following new clause:
("Promotion of economic development by companies.
.—(1) The following provisions of this Part shall have effect subject to the provisions of this section.
(2) A company shall be an exempt company for the purpose of sections 65 or 66 below in relation to the area of a particular local authority where—

(a) the authority has exercised its powers under sections 32(2) or 32(3) above (or under any other enactment for the purposes of economic development) in relation to that company; or

(b) the principal aims of the company include the protection or promotion of employment or training in the area concerned; or

(c) the company is a company established for the purpose fulfilling one or more of the functions of the authority; or

(d) the company is a company which is in receipt on behalf of the authority of funding from the European Regional Development Fund, or any other source, for the purposes of the protection of employment or training in the area.

(3) The Secretary of State shall, in exercising his powers under sections 65(1), 66(1) or 67(1) below, have regard to the likely effect of such exercise on the protection or development of employment or training in the area.").
The noble Lord said: With Amendment No. 116D, I should like to speak also to Amendments Nos. 116E, 116F, 119A and 119B. These amendments are tabled in the hope of eliciting further information about the provisions of Part V of the Bill. We are grateful for the extensive exposition of the structure of Part V which the Minister gave in response to the previous amendment. However, it is still not clear that there are not conflicts between Part III and Part V of the Bill. Indeed, that is one of the reasons why we asked the Government to take the two parts in succession.
I shall give one example. When we were considering Part III earlier this evening the noble Lord said that none of the restrictions applies to training. The Minister in another place said that there was nothing
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in the Bill to restrict spending money on training. That may well be so, but it is not clear from the Bill that that is the case. It sounds as though the promotion of training through the formation of both controlled and influenced companies, which is after all a common and effective way of encouraging training, is brought under the scope of Part V and will be subject to all the restrictions which we have been told are involved in Part V.
The impetus behind Part V still seems to be that the use of controlled and influenced companies is somehow wicked and is an attempt by local authorities to get round other expenditure controls, in particular capital expenditure controls. Where we see in Part V the restrictions on controlled and influenced companies and the restrictions on the links that they may have with the council, we cannot help but think that these restrictions apply to companies where training is the principal or just one of the objects of the association with a company.
I turn now to Amendments Nos. 116E and 119A. One of our difficulties with the Bill is that so much of it is left to regulation that we really cannot tell on what basis there will be criteria to exempt individual companies or categories of company. We could deal with this problem by listing a whole series of types of company or individual companies and then ask whether they are exempt. I do not think that that is a sensible way to tackle the provisions of the Bill.
We would prefer it if the Government could give us some basis on which we can understand what kinds of companies will be exempted. Does the noble Lord have any exemptions in mind, and do they relate to individual companies or to categories of company? Have any of the exceptions been discussed with outside interests? We have heard about the consultation paper which the noble Lord will issue within the next month. Will it cover this point? Will the consultation on categories of companies to be exempted be discussed with the local authority associations before directions are made? What will be the form of parliamentary scrutiny? Will they be reported for affirmative or negative resolution?
There are exemption powers under Clauses 57 and 58, as well as those contained in Part V. But why do they appear in two different parts of the Bill? Is there any significance in the fact that they are in different places? Moreover, are the Government clear in their own mind that they are working in the same direction in the two parts of the Bill?
There are a number of other questions which one could ask. For example, will the Minister agree to an automatic exemption when both the local authority and the company certify that the control which has been identified is either accidental or unimportant to either side? Further, will the directions given for exemption be on the basis of common criteria, will they be in categories of companies or will there be some kind of consultation on the classification of types to be exempted?
All of those points may be covered in the consultation paper to which the noble Lord referred. I do not know whether they will be. But, if they have not been covered, or if they are not to be covered in

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the consultation paper, we would very much like to hear his assurance that they will be.
I appreciate that I have asked a considerable number of questions at, possibly, a high speed. I did so because it is late at night. Of course I appreciate that the Minister may not be able to respond to every single point. Nevertheless, I hope that he will be able to give us some help so that we may be able to understand the thinking behind the exemption policy and therefore have a better judgment than we have at present as to whether this policy is reasonable and acceptable. I commend the amendments to the Committee.
Lord Hesketh: These amendments would introduce a new category of "exempt company" which could never become subject to the controls over controlled or influenced companies proposed in Part V. Such companies would be those where the local authority had given assistance to it as part of its economic development programme; the company's main aim was promoting employment and training in the area; the company was established for the purpose of discharging a function of the authority; or the company was in receipt of grants from any source to promote employment of training in the area.
The amendments would also require the Secretary of State in using his powers under Part V to have regard to the employment or training in the area. Finally, the amendments would remove the Secretary of State's power to exempt categories of companies or specific companies.
This is an interesting set of proposals. In order to explain why the Government must advise the Committee not to accept them, I propose to take each element separately. I shall deal first with the proposal that a company could never be subject to the rules on controlled or influenced companies if it came into the categories listed in the new clause. There are two distinct points here: the first is what the new clause actually does; the second is what it might have been intended to do.
What the new clause actually says is that a company which has, for example, been assisted under the economic development power can never be subject to the rules on controlled or influenced companies. In other words, no matter how great the degree of control or influence exercised by the local authority, the rules shall never apply. A company which was 100 per cent. owned by the local authority could never be subject to the controls, provided a grant of £1 had been made to it under the economic development power.
We do not think that such a position can be sustained. The proposals of Part V are intended to make sure that the rules for local authorities apply to companies which are properly regarded as part of the local authority sector. We do not think that it is reasonable to say that the rules shall not apply to a company which is clearly under the control or influence of a local authority just because it has received assistance under a specific power.
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Therefore, the amendment means that local authorities would be free to set up a company as a wholly-owned subsidiary to compete in any industry or trade, and that company would be outside all the controls which apply to local authorities, including those on capital finance. We believe that the new clause is therefore a charter for municipal socialism on a grand scale. We find that that is unacceptable.
It may be that the clause had a limited or more limited aim, and I should therefore address it on that basis, rather than simply confining myself to what it actually would do. First, it may be that the clause is intended to ensure that local authorities can participate in companies to which they have given assistance for purposes of economic development.
There is here a fairly basic difference between the Government and the Opposition. Like them, we can see no reason why local authorities should not give assistance to private sector companies in the form of equity finance; but, unlike them, we do not think that when they do so they should also take part in running the company. We do not think that local authorities are well placed to do so. So we think that there should be restrictions on their taking voting shares and on appointing directors of normal private sector companies. The objections do not, however, extend to non-voting equity or appointing someone to attend and observe what the directors are doing, without the right to vote. The provisions that will be made under the Bill will therefore enable this to happen.
Secondly, it may be that the clause is intended to ensure that local authorities can play a proper part in local enterprise agencies. Again, we are clear that local authorities should be able to do so. However, where the local authority controls, or has the power to dominate, a local enterprise agency, we think that some at least of the controls appropriate to the local authority sector should apply.
Thirdly, it may be that the clause is intended to ensure that a local authority can use a company to facilitate the discharge of its functions. There can be no objection to that, and we are clear that the provisions to be made under this part will do so. What the clause would also do, however, and what is unacceptable, is to say that where a company is used for that purpose the controls of the local authority sector should never apply, even if the local authority has 100 per cent. control. That cannot be right.
There is also one effect of the clause 'which I doubt the noble Lord intends. Because it would take those exempt companies out of Clause 65, it would have the effect of bringing them into the controls under Clause 68. I am not sure whether he intended that.
Finally, the new clause has a separate provision requiring the Secretary of State to have regard to the effects on employment and training. We have had those questions very much in mind throughout our development of these proposals. The Department of Employment has been consulted at all stages. We believe that our proposals are entirely consistent with the Government's other policies in these fields, and thus the provision is unnecessary.

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I turn now to Amendments Nos. 116E and 119A, which would remove the power of the Secretary of State to exempt companies. On the question of whether it is reasonable to give the Secretary of State a discretionary power, I must point out that any such power must, according to the general principles of administrative law, be used rationally and in accordance with the general purpose of the legislation. This is no arbitrary power for the Secretary of State to do as he likes. He must have good reason for granting an exemption, and he must have good reason for refusing an exemption if a local authority or a company asks him to grant one; and that reason must be one that is relevant to the general purposes of the legislation to establish a framework of regulation for local authority interests in companies.
On the question of whether the mere fact that we are seeking a power to adjust the definitions at the margin shows that our definition is inadequate, I must say that to oppose such a power shows a misunderstanding of how wide a variety of cases involve local authority participation in companies. There is bound to be a number of cases where, despite the greatest possible subtlety in the definition, the circumstances which point to the fact that a company ought to be regarded as controlled or influenced by a local authority are outweighed by other circumstances, special to that one case, which point decisively to the other conclusion.
Let me give some instances. We have already made it clear that we would intend to use these powers to exempt the various local groundwork trusts from being regarded as within those definitions. The reason for this is that the trusts have been set up in a variety of ways. Some are probably within the definition of a controlled company, some are probably within the definition of an influenced company, and some are probably within neither category. All, however, are substantially dependent on department grants, and while they are there is little likelihood of their being used to circumvent the rules appropriate to the public sector. We think that it therefore makes sense to put them all on the same footing—outside these definitions. The power to exempt will ensure that we are able to do so.
Again, there is the National Housing and Town Planning Council. That is a body where membership is open to both local authorities and private persons. By chance, at present the number of local authorities is greater than the number of private persons who are members. In theory, the local authorities could combine to control the company. In practice, in the circumstances of that company, we accept that this is so unlikely that we can disregard the possibility. On the other hand, it is not impossible that a similar number of local authorities, which shared a common purpose, could get together to set up a company to avoid some of the controls to which, as local authorities, they are subject—say, those that we shall later discuss on capital finance.
A third example is the Sheffield Combined Heat and Power Company. This is a praiseworthy attempt to promote energy efficiency. Because of the geography of Sheffield and the location of the site
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owned by the city council, it seems that it will be inevitable that, to begin with, the majority of the company's business will be with the city council. We think it likely, however, that this will be a transitional situation, and we are likely to agree to the company being exempted during that transitional period. We must, however, be able to distinguish between that sort of case and the sort of case to which I have already alluded where a company is set up as a device to provide, outside the rules that would otherwise apply, some capital asset for the local authority, and for the local authority alone.
We therefore think that we need a power to distinguish between those where all the circumstances of the case point to the fact that a theoretical power of control or influence will never be used, and those where it might. We want to be able to exempt bodies such as I have described, but we do not think that it will always be possible to lay down in general legislation every detail that will be relevant to the judgment whether a company is properly treated as part of the local authority sector or not. For these reasons, therefore, we think that we need the flexibility given by the exemption powers that these amendments would delete.
I apologise to the Committee for taking a considerable period of time, but I wanted to cover the amendments in some detail. I urge the noble Lord, Lord McIntosh, to withdraw his amendment.
Lord McIntosh of Haringey: I am grateful to the noble Lord for that detailed explanation, which was necessary even at this late hour of the night. I was particularly flattered that he should describe my amendments as "municipal socialism on a grand scale". I shall not let him have my copy of that great book by Bernard Shaw, The Common Sense of Municipal Trading. However, if I can find another copy in the bookshops I shall certainly be glad to inscribe one to the noble Lord personally so that he can understand the benefits of municipal socialism on a grand scale.
The Minister has been good enough in discussing this group of amendments to give some practical examples of exemptions that there might be. We are grateful for those because they help us to understand the way in which the Secretary of State's mind is working. Perhaps I may draw the Minister's attention to one outstanding example of collaboration between a city council and the private sector and see whether I can take him along with me a little way on that issue.
There is the example of the National Exhibition Centre in Birmingham. I do not know whether the Minister has been briefed on that, but he will know that the National Exhibition Centre in Birmingham is an extremely successful enterprise in which Birmingham City Council has played a major role since the start in 1973. There are now 125,000 square metres of exhibition space, either funded directly by Birmingham City Council or funded by loan stock underwritten by the city council.
The situation is that it is absolutely essential that the National Exhibition Centre should be extended and there should be at least another 20,000 square

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metres of exhibition space. In the longer term, to maintain the comparison with the other major European exhibition centres, say in Hanover, Frankfurt, Milan or Paris, the space probably ought to be of the order of 200,000 square metres. But it will take a long time and will involve investment of such a long gestation period that the private sector finance will probably not find it attractive unless there is either a contribution from Birmingham City Council, as there has been in the past, or loan stock underwritten by Birmingham City Council.
There may well be start-up losses which will undoubtedly, if the initial investment is anything to go by, be recouped. But the problem at the moment is that any investment by Birmingham City Council in the National Exhibition Centre could be counted against its capital allowances. Therefore it could cause the city council to lose the ability to do other things which it considers necessary in the form of capital investment.
I know that Birmingham City Council is in negotiation with the department about this matter and I appreciate that the Minister may not be able to give me an immediate reply. I should like to propose to him something quite modest. I understand that he is now the only Minister in the House in the Department of the Environment. Would he be prepared to meet me and Sir Dick Knowles, the leader of Birmingham City Council, before the Bill comes to a later stage, so that we can discuss the future of the National Exhibition Centre?
Baroness Blatch: Does not the noble Lord agree that if the Birmingham exhibition centre is to work in either the short, the medium or the long term, there is no reason why it should not attract private finance? If it is not going to work in either the short the medium or the long-term, should the Birmingham City ratepayers or community charge payers be left to pick up the bill?
Lord McIntosh of Haringey: The answer is that, historically, it has worked by dint of public investment in the first place when private investment was not available. The public investment has proved to be justified. The first 125,000 square metres of the Birmingham international exhibition centre is profitable. It is a successful example of municipal trading. What we are now looking for is an assurance that it can carry on to the next stage to enable it to continue to compete successfully in the international exhibition centre market. So the answer to the noble Baroness is that there is every reason to suppose, first, that it needs public investment and, secondly, that public investment works. That has proved to be the case from historical fact.
Lord Hesketh: I am pleased to say that I think I can go a little further than the noble Lord, Lord McIntosh, who very kindly suggested that we should have a meeting. The Secretary of State has agreed to meet Birmingham City Council to discuss this matter. I suspect that the noble Lord, Lord McIntosh, kind as he is to me, will consider that an even better proposition than a meeting with just me. That was the case as of this morning. I have no doubt it will be the case as of tomorrow morning, although the date may have to slip by a week or so.
Lord McIntosh of Haringey: I am not entirely surprised to hear that, but the Minister will know that Mr Ridley, the former Secretary of State, agreed to meet Sir Dick Knowles last Wednesday. However, he was not able to do so. When the meeting was cancelled no further date was set. If Mr Patten is able to meet Sir Dick Knowles, that will of course satisfy us entirely. We are very pleased to hear that news. However, I hope the general point is well-established that this is one example of a joint venture—I could produce many more, and the Minister has produced examples himself—despite the misgivings of the noble Baroness, Lady Blatch, has proved successful, but which continues to need a public sector involvement. Like the National Exhibition Centre, these joint ventures may be involved in the economic development of an area, they may be concerned with training or many other aspects of the economic and social life of our cities and districts.
However, in order to survive they must not only not be discouraged by legislation but they must be encouraged, and local authorities must be encouraged to work through them. That is in conflict with the provision that local authorities will lose their capital allocation if they put money into these companies. That is the fundamental point which we have to bear in mind. Nevertheless, I think we have made some progress in understanding the Government's position, and particular progress as regards the assurance that there will be a meeting between the new Secretary of State and the leader of Birmingham City Council. I hope I shall not have to ask for further meetings with others who have expressed great concern about these matters. We shall await the results of these meetings and of the negotiations that are taking place before we decide what we have to do at a later stage. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 64 agreed to.
Clause 65 [Companies controlled by local authorities and arm's length companies]:
[Amendments Nos. 116E to 116G not moved.]
Lord Hesketh Lord Hesketh moved Amendment No. 117:
Page 71, line 21, after ("above") insert—
("(a) may be limited in time and may be made conditional upon such matters as appear to the Secretary of State to be appropriate; and
(b)").
The noble Lord said: In moving Amendment No. 117, I should like also to speak to Amendment No. 120.
Clause 65(1) gives the Secretary of State a power to direct that a company under the control of a local authority may be exempted from the controls imposed by Part V. Amendment No. 117 is intended to clarify the scope of the exemption power. Amendment No. 120 does exactly the same in relation to the power to exempt companies that would otherwise be classified as subject to local authority influence.
This power has been generally welcomed as providing a useful element of flexibility. We have already shown our good intentions in this direction, but we feel that as it stands the clause may not allow us to address the full range of possible exemptions that the Secretary of State may wish to make. As drafted, it clearly permits a once-and-for-all exemption for a company or type of company. There may however be cases where a once-and-for-all exemption might not be appropriate, but an exemption qualified in some way might be.
One example might be where a local authority had set up a company to take over an activity previously carried on by the authority with the intention that in due course the company would be sold to the private sector. It may therefore only be controlled by the authority for a limited period while it was building up the private sector involvement and divesting itself of the local authority interest. Where such a clear programme existed, it might well be appropriate to say that that company could be exempted from Part V for the period planned for that transition. If the only possibility was a once-and-for-all exemption that would not allow the matter to be reconsidered if, for any reason, the transition to the private sector did not proceed. That might make it difficult to give such a once-and-for-all exemption.
Similarly, there might be a situation in which the status of a company was such that, although it was technically a controlled company, its independence from the local authority could be virtually guaranteed. While those conditions prevailed, an exemption might be guaranteed on condition that the company's status did not change.
It can be argued that the clause as presently drafted conveys such a power, but it can be argued with equal or greater force that it does not. These amendments will clarify the situation and will allow the Secretary of State to cater for both these and other types of situation when he considers that it would be helpful to grant an exemption subject to a time limit or certain conditions being met.
I commend this amendment to the Committee as a useful addition to the flexibility of the exemption power. I beg to move.
Lord Graham of Edmonton: The sense of what the Minister has said is understood and accepted. However, will he take on board some of the anxieties of the National Federation of Housing Associations? I understand that assurances have been given by the Secretary of State in respect of the powers of direction which would be used to exempt registered housing associations from the provisions of these clauses and that discussions are taking place. Nevertheless, the federation is concerned.
Can the Minister say whether Amendments Nos. 117 and 120 have any implications for the promised exemptions for registered housing associations? In particular, I should be concerned if the exemptions were subject to a time limit or conditions, as that is not part of the undertakings given by the government spokesman to the national federation.
The provisions of the amendment could be used in a positive fashion to exempt organisations which,
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although not registered housing associations, are vital to their work. For example, care and repair organisations are established by housing associations, often in partnership with local authorities, to assist elderly owner-occupiers to remain in their own homes and to carry out necessary renovation work. For such organisations registration with the Housing Corporation has been unnecessary and it would seem cumbersome for them to have to register in future simply to avoid the provisions of Part V of the Bill. Similar considerations apply to some of the consultancy schemes which have been established to assist in the management of special needs projects.
There is another area where the National Federation of Housing Associations would welcome the positive use of the provisions in the amendment. That is where registered housing associations and voluntary organisations enter into partnership for the management of special needs and other housing schemes if, inadvertently, for some reason the voluntary partner was held to be a local authority-influenced company.
The Minister will have sensed from the tenor of my remarks that we are seeking clarification, not commitments. The Minister could help both the National Federation of Housing Associations and me in this respect. I shall be grateful for the Minister's comments.
Lord Hesketh: I shall certainly cover the point about registered housing associations. They will be exempted while they are registered. We do not propose any other conditions. I do not have to hand an answer to the point raised by the noble Lord about care and repair.
Lord Graham of Edmonton: Here comes the answer now!
Lord Hesketh: Care and repair organisations would be covered by Part V of the Bill only if they are controlled or influenced companies. So, if they are not controlled or influenced companies, they will not be covered by Part V.
Lord Graham of Edmonton: I am grateful to the Minister. Those outside the Committee will read what he has said.
On Question, amendment agreed to.
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Baroness David Baroness David moved Amendment No. 117A:
Page 71, line 23, at end insert ("and may provide that the company or companies covered by the direction are to be exempted from some or all of the provisions of this Act which would, but for the direction, apply to them."
The noble Baroness said: The amendment seeks to deal with the serious and uncertain effects of the Bill on the public library service. This part of the Bill applies new controls on companies which are either controlled or influenced by local authorities. Clause 65 allows the Minister to exempt any company or class of companies from the provisions. I ask that serious consideration be given to exempting those public library regional systems which happen to have the status of companies.
Although each local authority charged with public library responsibilities acts separately, all the local authorities in England and Wales band together into regional library systems. They do so principally to provide inter-library lending services, thus saving local authority expenditure and maximising the use of books and other materials for the benefit of the total population.
That is an essential feature of the British library scene. The need for access to materials outside the stock of any single public library authority was recognised in the present legislation governing public libraries in England and Wales (the Public Libraries and Museums Act 1964). Section 3 of that Act laid on the Government an obligation to designate those regions. That was not simply a power to do so, but a statutory duty.
Unbelievably, successive governments over the last 25 years have simply ignored that statutory duty. Some of those regions still have no legal status at all. That presents problems because it means that the officers running the systems are personally liable for their financial affairs. It was to overcome those difficulties that, in the absence of action by government, two of the systems made themselves into companies. Those are London and South Eastern Library Region, known as LASER, and the North Western Regional Library System, NWRLS—not such a convenient acronym.
The Government argue that, since those companies are performing functions that would otherwise have to be discharged by each local authority separately, they should be governed by the provisions of Part V of the Bill. That presents problems and provokes questions to which the Government have so far provided no answer. In LASER, for example, there are 42 participating local authorities, and getting the agreement of each to every act of borrowing would present major organisational problems and cause long delays. It would need the full council to give permission for every sum of borrowing and those amounts could sometimes be as small as £147.
The principal control introduced by the Bill on companies controlled by local authorities is control over borrowing for capital expenditure. The interlending system these days is highly dependent on computerised facilities and the regional systems will therefore require from time to time to acquire expensive new computer systems. The library regions have no capital reserves for those purposes. The borrowing required for that purpose would have to be allocated between participating authorities and it might well, at any point in time, dwarf any borrowing for library purposes which each local authority then had to undertake. Borrowing is normally only required for library purposes for the construction of new library buildings.
Increasingly, interlending systems have international connections. The European Commission is actively promoting the development of such systems as part of its programme for the encouragement of information technology usage in the Community. The European Commission is likely
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to make grants to at least some of the regional systems to meet part of the cost of the acquisition of new facilities. How is any contribution from the Commission to be dealt with under the provisions of the Bill?
The best course would therefore appear to be to exempt from the provisions of the Bill those regional library systems which are companies. Since, however, the Government so far show no signs of accepting the need for exemption, I suggest that it would be useful to amend the Bill in order to allow the Minister to exempt for some purposes but not for others. At present he has to exempt for all purposes or for none.
That would allow the Minister to free regional library systems from the complex procedural requirements on authorisation of borrowing, but still ensure that such borrowing had to occur within total local authority limits. Amendment No. 117A would do that.
I do not know whether the amendment that the Minister recently moved would have any effect on what I have been speaking about, but I hope that he will look favourably on this amendment. I think that the present provision will raise a very serious difficulty for local authorities which have these regional library systems which are companies and will have a very bad effect on the possibilities of the general public borrowing from them through the inter-library lending service. I beg to move.
Lord Hesketh: This amendment would increase the flexibility of the power of exemption given to the Secretary of State. Instead of making the question simply whether or not the company is exempted, it would allow exemptions from some controls but not from others. The flexibility which the amendment would give would have its advantages. However, we think that there is already sufficient flexibility built into Part V, and that to add a power to vary the extent to which controls apply case by case would be wrong.
Clause 64(4) gives power to prescribe, in the order which will lay down the details, different rules for different cases. Where it is appropriate for the rules to apply differently to some companies, provision can be made in the order. The order will be a statutory instrument subject to debate in both Houses of Parliament. That seems to us to be a better way of making any such variations for different classes of company than using a direction by the Secretary of State.
Directions will simply exclude companies entirely from the scheme of controls. If there is no direction, and they meet the definitions, the authorities concerned will be bound by the appropriate set of rules set out in the order.
Regarding public library regional organisations, if these organisations are part of the public sector by being controlled by the local authorities, then these companies should be controlled as part of the public sector. The organisations proposed by the 1964 Libraries Act would have been treated as part of the public sector. If the company is borrowing on behalf of the local authorities who are all members, then

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the borrowing itself should be treated as part of the borrowing for the local authorities concerned.
It is for those reasons that we resist the noble Baroness's amendment.
Lord Graham of Edmonton: Before my noble friend replies, is the Minister saying that although he resists the amendments, what they seek to achieve is capable of being achieved by other means? In other words, in the order-making process if the orders that are made are made in such a way that they will meet the points that have been raised by my noble friend, I imagine that she will be satisfied. But what if what was a very reasonable case based upon real fears will not be achieved? Frankly, it is nonsense for the Minister to talk about the Secretary of State having flexibility, if a desire for that flexibility to be exercised sensibly and moderately is pointed out to him by a genuine case and he has to make out a case against it.
Lord Hesketh: The noble Lord, Lord Graham, is correct in his assumption.
Baroness David: I shall have to read what the Minister said and consult my friends in the Library Association. They are extremely worried about what may happen and they feel that there may be a total collapse of this service if flexibility is not there. They have one other proposal which the Minister might consider. It is that the Minister could use his powers to exempt all companies with a turnover below a certain threshold—a de minimis provision—so that companies under the multiple control of local authorities would be exempted provided their borrowing requirements fall below a certain figure. Perhaps the Minister can consider that possible alternative when he is thinking about these proposals and write to me.
There is great anxiety about what could happen. I shall certainly read very carefully what the Minister has said and consult with the people who have advised me. I shall probably come back with some proposal at the next stage of the Bill. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Hesketh Lord Hesketh moved Amendment No. 118:
Page 71, line 40, leave out ("736") and insert ("736A").
The noble Lord said: In moving the amendment, I speak also to Amendment No. 119. Both amendments are purely drafting. Their purpose is simply to make changes to Clause 65 so that references to sections in the Companies Act reflect accurately the revisions to the Act being made by the Companies Bill which has recently completed its Committee stage in another place. I beg to move.
On Question, amendment agreed to.
Lord Hesketh Lord Hesketh moved Amendment No. 119:
Page 71, line 42, leave out ("subsections (4) and (5)") and insert ("the following provisions").
On Question, amendment agreed to.
Clause 65, as amended, agreed to.
Clause 66 [Companies subject to local authority influence]:
[Amendments Nos. 119A to 119F not moved.]
Lord Hesketh Lord Hesketh moved Amendment No. 120:
Page 73, line 10, after ("above") insert—
("(a) may be limited in time and may be made conditional upon such matters as appear to the Secretary of State to be appropriate; and
(b)").
On Question, amendment agreed to.
12.15 a.m.
Lord Hesketh Lord Hesketh moved Amendment No. 121:
Page 73, line 14, at end insert ("the condition in any one or more of the following paragraphs is fulfilled").
The noble Lord said: With these amendments we come to the question of whether there is such a close business relationship between a company and a local authority that, taken with the personnel links that we have already partly discussed and to which we shall return, we should say that the company is subject to the influence of a local authority. I believe that it will also be convenient to consider Amendment No. 123A.
Amendment No. 121 is a very straightforward drafting amendment. It might be argued that the present wording permits the inference that all the tests have to be satisfied before a close business relationship is held to exist. This is certainly not the intention. The possibilities are manifold and subsection (3) covers them: any of the possibilities listed would constitute a close business relationship. This amendment makes that clear.
Amendments Nos. 123 to 128 deal with one of the tests of whether there is a close business relationship between a local authority and a company. The situation in question is where the local authority has provided half or more of the capital employed by the company. Normally, of course, where more than half the capital is provided in the form of voting equity, the local authority will control the company and Clause 65 will apply. However, there may be circumstances in which the local authority will have provided half or more of the capital without taking the corresponding votes. If that is coupled with a significant personnel link, we think that the company should be treated as under the influence of the authority.
The problem is to define precisely what constitutes providing half or more of the capital. There was a flaw in the original definition in the Bill as introduced and an amendment was made at Committee stage in another place. However, a problem has become apparent after further consideration of that amendment. We had noticed it and a number of local authorities have also drawn it to our attention. We are grateful especially to Kirklees and Tameside for their help in this respect, even though the proposals in our amendments are not exactly what they would wish to see.
The problem with the Bill as it stands is that it requires a comparison to be made between the capital provided by the authority and whichever is the less of two sums. One of those two sums is

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basically the company's borrowing. If no borrowing is outstanding, then that sum is nil, and the test would be satisfied in the local authority had provided even £1 by way of capital. This is clearly unsatisfactory.
We have therefore decided that the right way to proceed is to divide the test that is in Clause 66(3)(c) of the Bill into two. The first of the new tests will be introduced by amending the existing paragraph (c). This will make it deal with the case where the local authority has provided share capital or capital grants which amount to half or more of the net assets of the company. Where a local authority has provided half or more of the risk capital of the company, we think it reasonable to say that there is a close business link.
Amendment No. 125 then introduces paragraph (cc) which sets out a test to cover cases where the local authority has guaranteed borrowings of the company from third parties. Here one compares the capital for which the local authority is responsible, either directly or (through the guarantee) indirectly, with the total assets of the company.
We think that these amended tests now give a clear and workable definition of the type of relationship where the local authority is providing the bulk of the company's capital.
I should tell the Committee that the local authorities who have been in touch with us have raised some further points. First, they have suggested that we should concentrate on finance provided rather than assets, because this would take better account of any losses incurred by the company.
We have considered this carefully, but have concluded that we should not adopt this approach, because the tradition of local authority finance is against allowing the capitalisation of revenue expenditure. This is to prevent one generation of ratepayers or chargepayers running up deficits to be paid for by future generations. Given this tradition, we think that we should stick by our approach based on the actual assets.
Secondly, they have suggested that the tests in Clause 66 should refer to "more than a half" rather than "half or more". We have not yet reached a conclusion on this point. We can see the case for allowing partnerships that are precisely 50–50, but we are not sure whether the tests as at presently drafted will stand in the way of such partnerships. We shall consider the case further, and if necessary return to the question later.
Thirdly, I should mention Amendment No. 123A which reflects the concern by these authorities that paragraph (c) as amended will be restrictive. We do not think that it will be restrictive. My officials will be glad to discuss this further with those concerned. For these reasons I commend the amendments, except Amendment No. 123A, to the Committee.
On Question, amendment agreed to.
The Earl of Arran The Earl of Arran moved Amendment No. 122:
Page 73, line 21, at end insert ("or, if there is no such account, as estimated by the authority for the period of twelve months
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preceding the date of the estimate or for such part of that period as follows the formation of the company")
The noble Earl said: On behalf of my noble friend, I beg to move Amendment No. 122 and at the same time I speak to Amendment No. 129. Clause 66 defines the two tests for determining the personnel and business links that must be established for a company in which a local authority has an interest to be classed as a local authority influenced company for the purposes of these provisions. Amendments Nos. 122 and 129 deal with the latter of these: the business association test. That test is satisfied when a company has over half of its business with local authorities under various definitions which are set out in Clause 66.
Subsection (3)(a) deals with the case where such a business link is represented by the aggregate of payments made to a company from local authorities within a period of 12 months. A business link test is satisfied when these payments represent not less than half of the company's turnover as shown in its most recent audited profit and loss account.
Similarly, under subsection (3)(c), as drafted, one of the factors that the business link test is required to take into account is the net assets of the company. Subsection (4) provides that the net assets should be determined on the basis of the most recent balance sheet of the company on which the company's auditors have made a report.
Amendments Nos. 122 and 129 provide for cases where a profit and loss account or balance sheet is not available for the previous year simply by requiring that where audited accounts do not exist the local authority should estimate for the preceding 12 month period or for that part of the period that follows the formation of the company. Where balance sheets do not exist the relevant comparison should be made on the basis of an estimate made by the local authorities concerned for the period in question.
These are important technical amendments. I therefore commend the amendments to the Committee.
Lord Graham of Edmonton: Can the Minister say what kind of consultation took place at a later date on these matters? I know that wide consultation took place earlier when the Bill was conceived. However, the Government have introduced these amendments at a late stage in your Lordships' Committee.
The Minister has made out the case that the basis for the amendments is sound. Can he say what consultation has taken place with those involved in local government on the appropriateness of these technical amendments?
The Earl of Arran: We have not consulted further because we believe that the amendments are entirely logical as they stand.
Lord Graham of Edmonton: So people outside the Committee will be seeing the amendments for the first time. There has been no consultation and no explanation whereby everyone can understand that the Government are doing them a favour. After such people have read what the Minister has said it is

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possible that we shall come back at a later stage with amendments to his amendments.
On Question, amendment agreed to.
Lord Hesketh Lord Hesketh moved Amendment No. 123:
Page 73, leave out lines 32 and 33.
On Question, amendment agreed to.
The Chairman of Committees: If Amendment No. 123A is agreed to I cannot call Amendment No. 124.
Lord Graham of Edmonton Lord Graham of Edmonton moved Amendment No. 123A:
Page 73, leave out lines 38 to 41 and insert ("exceeds one-half of the aggregate of the company's nominal share capital, the company's liabilities on capital account, exclusive of shareholders' funds, and capital grants received by the company.").
The noble Lord said: If the amendment is agreed to I shall be speechless and so will the rest of the Committee. The Minister has already said that he cannot accept the amendment. However, will he confirm that he has either told us that he will be happy to have consultations or that these are already on course? There is no point in making out a technical case merely for the Minister to read out what his advisors have told him. Neither of us will be any the wiser. I believe that in referring to Amendment No. 123A earlier this evening he said that he would be willing to have consultations with the appropriate people. Will the Minister confirm that?
Lord Hesketh: The noble Lord, Lord Graham, is correct. I said then and I repeat now that my officials will be glad to discuss the matter further.
Lord Graham of Edmonton: On the basis of that offer which I understand to be genuine and sincere, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Hesketh Lord Hesketh moved Amendments Nos. 124 to 126:
Page 73, line 38, leave out ("whichever is the less of").
Page 73, line 39, leave out from ("company") to end of line 41 and insert—
("(cc) the aggregate of—

(i) grants falling within paragraph (c)(1) above,

(ii) loans or other advances made or guaranteed by the authority or by a company under the control of the authority, and

(iii) the nominal value referred to in paragraph (c)(iii) above,

equals or exceeds one-half of the fixed and current assets of the company").
Page 73, line 45, leave out ("or") and insert ("and").
On Question, amendments agreed to.
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 126A:
Page 73, line 46, leave out paragraph (e).
The noble Lord said: The amendment refers to the whole concept of a business relationship. It would remove from the category of business relationship the proposal in Clause 66(3) that such a relationship
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would exist where the company intends to enter into a transaction which, if completed, would give rise to such a relationship. The whole concept of the intention of entering into a transaction which would give rise to a relationship is a complex almost metaphysical idea.
Clause 66(3) is a long subsection extending for more than half a page. It sets out all the circumstances in which a business relationship is thought to exist between the company and the local authority. They then form the criteria for determining whether the company is an influenced company. They are supplementary criteria to the 20 per cent. of voting rights which are the subject of subsection (1) of the clause.
All of these conditions in subsection (3)—whether the aggregate of payments to the company exceed half its turnover in a 12-month period; the grants and loans made by the company; whether the nominal value of the shares held by a company equals or exceeds one-half of the net assets of the company and its liabilities on capital account—are clear enough, even if sometimes companies do not actually work that way and they exist to provide services or to assist local employment.
However, paragraph (e) is altogether more metaphysical. It states:
"the company intends at that time to enter into (or complete) a transaction and, when that is done, there will then be a business relationship between the company and the authority by virtue of any of the paragraphs (a) to (d) above".
I presume that what the Government mean is to stop people making transactions which would then lead to paragraphs (a) to (d) of subsection (3).
That is a bit tough. For example, let us suppose a cleaning company is bidding for contracts under the compulsory competitive tendering procedure of the Local Government Act 1988. If the company is set up in order to go in for contract cleaning one of the major sources of revenue is likely to be local government because these are contracts which will be let systematically over a period of time and it is a matter of chance whether a significant part of the company's turnover is with local authorities or health authorities or with the private sector.
What is the intention? Does the intention only come in when the local authority wishes to award the tender? It is unclear how we are to interpret the idea of intention. In a large company the contracts which could give rise to this condition could be made by middle ranking management. The directors of the company may know nothing about it and suddenly find themselves, because of the activities of their staff, an influenced company. It seems to me to be extremely complicated from the point of view of companies, quite apart from the local authorities.
Under Clause 70(1) a company which does business with more than one local authority will become an influenced company where, if the various segments of business were added together, they would fall within the rules in subsection (3) in relation to any of the authorities concerned. Therefore, to return to our example, a cleaning company which tenders for work in different parts of the country could easily become influenced without even noticing that it was happening.
What does the Minister think the effect will be on the 1988 Act? Was it the Government's intention when the 1988 Act was introduced that those tendering for this kind of work should be subject to the restrictions of influenced companies? In effect, we are suggesting in this amendment that this subsection is unworkable. Contract law depends on the completion of the process of offer and acceptance, not on intention. It is up to the Government to explain how the concept of intention fits into the Bill. Unless they can do so they ought to take out this paragraph and think about it again. On the face of it, it seems to be contrary to the original intentions in the 1988 Act. Much as we dislike some parts of the 1988 Act, it is wrong that those who try to abide by it should be drawn into the morass of metaphysical legislation which is implied by paragraph (e). I beg to move.
12.30 a.m.
Lord Hesketh: The amendment would delete the last of the tests of whether there is a close business relationship between a local authority and a company. I should like to take the Committee through the arguments which have convinced us that this provision is necessary. I start by drawing the Committee's attention to the proposals in Clause 67 about the ways in which the rules proposed for companies, subject to a local authority's influence, would be brought to bear. By definition we are dealing with a situation in which the local authority lacks any power of control over the company: otherwise, the company would be a controlled company. We therefore must approach the question by concentrating on the transactions between the company and the local authority.
As the Committee will see, Clause 67(3) proposes that local authorities will be under a duty to impose certain conditions in any transaction that they may have with a company which meets the definition of a company subject to local authority influence. In a situation like this it is necessary not only to look at the position as it is, but also as it will be when any transaction being considered is complete. If one does not consider transactions which are not yet complete, then the point in time at which a condition can be applied may have gone, and may not recur for many years.
Consider the case of a company which meets the test for a personnel link, and with which a local authority is going to sign a long-term contract, which will constitute practically all the company's business. When this is signed, the company will clearly meet the test in paragraph (a), and will therefore be a company subject to local authority influence. But unless the conditions are attached to that contract when it is signed, there will be no opportunity to attach the conditions for the duration of the contract. We therefore think that it is essential that one should take into account not only situations already in existence, but also those where, when a transaction under negotiation is completed, the test will be met.
There is one further point which I should make. We have been asked how the proposed application of
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the capital finance controls to influenced companies will be applied to those which meet the business relationship test only through this forward-looking test.
The answer is that it would not be a good idea to treat as part of the local authority sector for the purposes of the capital finance controls, a company which is within the definition only because of this forward-looking test. The order under Clause 37(5) will therefore make it clear that only those companies where a condition has actually been attached to a transaction under this requirement will be treated as part of the local authority sector for these purposes. Companies therefore that meet the test for influenced status only by reason of the test in paragraph (e) will be treated differently for capital finance purposes until the transaction in question is completed. For these reasons we oppose this amendment.
Lord McIntosh of Haringey: If the Minister were to read his own reply in the cold light of day he would realise that the Government have become so clever that they have caught themselves coming back. It is all very well to say that there are only fleeting occasions when you can catch companies of this kind. If that is the case then what we are doing is revealing a profound over-complexity in the Government's thoughts. If they are reduced to the concept of intention in order to catch influenced companies and to place restrictions on them, then they have allowed their overpowering desire to control every aspect of local government activity to get the better of them. I am sorry to hear that reply. It is not appropriate to divide the Committee. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Hesketh Lord Hesketh moved Amendments Nos. 127 to 129:
Page 74, line 1, leave out from ("subsection") to ("to") and insert ("(3) above—
(a) the reference in paragraph (c)").
Page 74, line 3, after ("and") insert—
("(b) the reference in paragraph (cc) to the fixed and current assets of the company shall be construed in accordance with paragraph 77 of Schedule 4 to that Act,
and, in either case, the reference").
Page 74, line 5, at end insert ("or, if there n no such balance sheet, as estimated by the local authority for the time in question").
The noble Lord said: I beg to move these amendments en bloc.
On Question, amendments agreed to.
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 129A:
Page 74, line 8, after ("of") insert ("and was appointed by").
The noble Lord said: In moving this amendment, I also wish to speak to Amendment No. 129C. It is a very simple point. Subsection (5) says that a person is associated with a local authority if he is a member or an officer of the local authority. The amendments say that if the membership or the status as an officer is not relevant to his position in the company—in other words, he was not appointed by the

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company—the restriction should not apply. Widdicombe made a link between restrictions and responsibility; but the Government appear to be saying that even if the councillor or officer is acting in a purely private capacity, he will influence whether the company is in turn influenced and whether it is subject to all the local authority capital controls. That is not what Widdicombe intended and it is not what common sense intends. I hope the Government will feel that they have gone too far on this occasion. I beg to move.
Lord Hesketh: These amendments would restrict the categories of those who are regarded as associated with a local authority for the purposes of the tests whether a company is under the influence of a local authority. Amendment No. 129A would limit the category of those who are members of the authority and involved in the company to those appointed by the authority. Amendment No. 129C would do the same for officers of the authority.
These amendments have a very understandable purpose. They aim to exclude from the reckoning of those associated with a local authority members and officers of the authority who play a role on the governing bodies of a company, but who were not appointed to their position by the authority. At first sight, this proposal sounds very reasonable, but it does not take sufficient account of the way in which companies are set up, nor of the facts of company law.
Let us consider first those who are officers of a company which may be subject to local authority influence. The directors of such a company will normally be appointed by the company itself in a general meeting. It is, I agree, possible that the appointment may be given to some outside body—such as the local authority—but there is no need for that to be done; and usually it is not.
The effect of the noble Lord's amendment therefore would be that no member or officer of a local authority would be regarded as associated with the local authority if he was appointed director by the company general meeting, even if the meeting's intention clearly was that he would speak for the interests of the local authority.
Turning to the question of those who are members of the company and have a vote at the company's general meeting, the position is similar. It is very common, particularly in companies set up by local authorities, to make the membership of the company technically quite separate from the local authority. A typical example would be that the directors of the company and the members of the company are the same group of people, and recruit themselves by co-option. A new person is brought in by the directors voting to admit him or her as a member, and then for the enlarged membership to elect him or her as a director. The local authority as such plays no part in the process. But if the existing members and directors are largely members or officers of the local authority, and the new member and director is one or the other, I have no doubt that he or she will be linked with the local authority.
The noble Lord's amendment proceeds on the false assumption that the qualification that he seeks
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to introduce is one which it is not possible in practice to introduce. We think that if a member or an officer of a local authority is involved in a company which is at the same time financially dependent on the local authority, the conditions necessary for the local authority to have influence are fulfilled and the company should, in the absence of other indications, be treated as subject to that influence. That is why we resist the amendment.
Lord McIntosh of Haringey: It would not be so bad if the position of being an influenced company did not then start to lead this company to be subject to the capital controls on local authorities. Despite the tortuous argument advanced by the noble Lord, it is difficult to see why so many members and officers of local authorities should be excluded. After all, they have other interests. They are human beings. They take a part in their local communities and get involved in undertakings which may be purely voluntary and charitable and concerned with enterprise. To exclude them simply on the basis that they happen to be members or officers of local authorities seems to be starving to an unacceptable extent the voluntary sector and starving the sector of companies co-operating with local authorities. We may wish to return to this matter at Report stage. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 129B:
Page 74, line 8, at end insert ("who is a member of a political group within the meaning of section 15 of this Act, another member of which is Chairman of a decision making committee or sub-committee, or Leader or Deputy Leader of the authority.").
The noble Lord said: In moving this amendment, I should like to speak also to Amendments Nos. 192D and 130A. These amendments seek to restrict the definition of persons associated with an authority—that is, in respect of members, their spouses, business partners and political nominators—to those who are members of the majority party (that is the significance of Clause 15 of the legislation) or, in a hung council, the current coalition or administration.
It seems to us to be quite inconceivable that members of minority parties who are members of the board could be acting for the council or pursuing its ends. It is only a peculiarly conspiratorial view of local government which leads central government to think that this is the way such arrangements may work.
In my area, in Haringey, where the Conservative Party has been in opposition now since 1971, there have been Conservative councillors who played an active part in local activities—and a very valuable part—for many years. They have inevitably been involved in dealing with the council in order to promote those activities. Such activities could be dealing with housing, local enterprise or voluntary activities. Why not? Why should the council be restricted by its dealings with those companies when the Conservative councillors involved in a Labour area are clearly not associated, and would be

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horrified if it were so suggested, with the policies of the council as a whole.
Therefore we suggest that to make such restrictions apply to all members of the council, whether they are in opposition to the majority who are in control of the council, is going too far. I beg to move.
Lord Hesketh: These amendments are directed to the test of whether there is a link between the personnel associated with the local authority and the personnel in the controlling organs of a company. Amendment No. 129B would limit those regarded as linked to the local authority by virtue of membership of the local authority to those on the controlling political group of the authority. Amendment No. 130B would limit those regarded as linked to the local authority through holding office in a political party represented on the council likewise to those linked to the controlling political group on the council.
Amendment No. 129D would say that members should only be regarded as linked to the council for the period since the last ordinary election of councillors. It would also have the effect that officers would cease to be regarded as being associated with the local authority as soon as they cease to be in office.
Amendments Nos. 129B and 130A assume that members of local authorities are always divided into two camps so hotly opposed that the one not in control will never share any aim with those who are in control. This appears to be wide of the situation of many local authorities. It is not at all common for local authorities to have, at least on some subjects, policies which are supported by the overwhelming majority of members of the council, including those in political groups which do not hold any committee chairs.
The effect of this amendment would therefore be that where there was such general agreement, the local authority could arrrange matters so that a company that would otherwise be regarded as subject to its influence would be excluded from the category. They would do this by arranging it so that sufficient of the members of political groups, who did not hold committee chairmanships, represented the authority in the company that the thresholds for the test were never met.
It seems to us unjustified to build such a loophole into the definition. We do not think that whether or not a company is in the local authority sector should be determined by whether there is all-party support for what it is doing, with it being outside the local authority sector if there is, and inside if there is not. For this reason the Government must recommend that the amendment be rejected.
I turn now to Amendment No. 129D. This would shorten the period during which a councillor remains regarded as associated with the local authority to the period since the last ordinary election of councillors. It would also mean that officers were not regarded as linked with the authority once they have left the authority's service.
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I must address first the question of why there should be any period at all after someone has ceased to be a member or an officer of an authority that they should be regarded as associated with the authority. We think that it is common sense to regard such an association as continuing for some period. We must remember that we are here considering only those companies which have close business relationships with the authority. That means that the business of a company is very closely bound up with the authority. In those circumstances, it is realistic to think that a former member or officer will not be in touch with his former colleagues. We think not.
We also have to remember that in some cases there may be a temptation to use a company as a means of avoiding some control to which the local authority is subject—particularly in the field of capital finance. Regrettably, the experience of the past decade shows that we cannot ignore such cases if we wish to have an effective form of control over the proportion of the available capital in the economy taken up by local authorities.
A local authority seeking such a form of avoidance might well regard a company in which recent past members of the authority played a significant role as a convenient solution. Even more so, it might be able to invite officers to resign from the service of the authority and take up an equivalent position with the company. We therefore think that some control of this kind is essential for both members and officers. We cannot therefore accept Amendment No. 129B, and we resist the other amendments.
Lord McIntosh of Haringey: In the light of the Minister's last comments I invite him to look at the position in the Conservative-controlled London Borough of Bexley which is doing what Ministers in his department have urged it to do; namely selling all its housing stock to a new company formed for that purpose. As I understand it, the director of housing, the principal projects officer of housing, a senior officer in the finance department, and one other whose position I do not know, propose to be the managers and even the directors of that new company. I invite the Minister to look at the famous City of Westminister where the senior officers of the cleansing department tendered successfully for the cleansing contract. Ministers continue to refer to allegations of abuses by Labour-controlled authorities. They forget that it is above all Conservative-controlled councils which involve themselves in such deals.
Our amendments would not go as far as any of the things which the Minister has alleged. It is only because of his conspiratorial view of local government that he allows himself to say the things that he does. What is so terrible about a council having the overwhelming support for its policies as he says, of members of other parties? Why is that such a wicked thing? Why should they not then agree, if that is the wish of all their electors and not just the majority party, to do things which they consider to be to the benefit of the ratepayers?

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It is only the view that "Marsham Street knows best" under all circumstances, even if there is overwhelming support locally for a policy, which leads the Government to resist an amendment of this kind. I am sorry to find that kind of resistance. When the Minister reads what he has said, he will not like it much. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 129C to 129E not moved.]
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 129F:
Page 74, line 31, leave out paragraph (f).
The noble Lord said: This is a relatively simple point and one which can be readily understood. Do we have to have spouses (husbands and wives) in the category of association? In Clause 66 we already have two kinds of criteria for a company to be influenced. One of those criteria is if 20 per cent. of the voting rights are held by persons who are associated with a local authority and the other is if there is a business relationship relating to over 50 per cent. of the company's turnover. Subsection (5)(f) proposes that the spouse or business partner of a person who is a member of a local authority should also be considered to be associated.
The Minister has resisted the idea that there might be members of minority parties who do not agree with the council's policies. Will he also resist the idea that there might be spouses who do not agree with the opinions of their partners who may be directors of the company or have voting rights at a general meeting through holding shares? Why should we assume that the spouses of local authority members have the same views and are prepared to act on behalf of their local authority as though they were the members themselves? Spouses do have different political views, and even if they do not, they may well have an independent attitude towards the public work that they undertake.
We are talking about public work, not about a vast conspiracy to defraud the Government of their rights. It is deeply insulting to the spouses of members of local authorities to assume that they are simply puppets of their spouses. I hope that the Government will realise that this is a very offensive—
Baroness Seear: Sexist.
Lord McIntosh of Haringey: The noble Baroness says "sexist". I am not sure that I could say that. Clearly "spouses" works in both directions. I think it is offensive to both men and women; I agree with the noble Baroness. It is offensive to both men and women to assume that their actions and opinions will be the same as those of the women and men to whom they are married. I hope that the Government will look favourably upon this amendment.
Lord Hesketh: This amendment again addresses the question of who should be regarded as associated with the local authority for the purposes of establishing a personnel link between a company and an authority. The amendment would delete any link through the spouse of a member of the authority.
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Ever since legislation has addressed the question of councillors' pecuniary interests, the law has regarded a pecuniary interest held by a councillor's spouse as being as significant as an interest held by the councillor himself or herself. In this we think that the law is merely taking a commonsense view of things. We therefore think that it is appropriate to reflect this long-standing provision when we come to consider who should be regarded as closely associated with the authority.
We must remember that the pesonnel link is only one of the two tests to be considered. Both must simultaneously be considered. We are therefore only dealing with companies where the company's business is predominantly associated with the local authority. In such cases we think that it is necessary to consider whether, if a councillor's spouse is concerned in the running of the company, there is likely to be an influence on the company from the authority. We think that there is, which is why we are resisting the amendment.
Lord McIntosh of Haringey: Even if that were true, which it is not, what does the Minister think about the possibility of enforcing a provision of this kind? Who are the thought police who will spy into the marital relationships of councillors and officers of authorities? Is this not an open invitation to live in sin in order to avoid the conditions of Clause 66 of the Bill? Who in their right minds will enter into the holy estate of matrimony if they are to be accused of not just loving and honouring but of agreeing with every single thing that their spouse says? The situation is absurd. However, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
The Chairman of Committees: If Amendment No. 129G is agreed to, I cannot call Amendments Nos. 130 or 130A.
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 129G:
Page 74, line 34, leave out paragraph (g).
The noble Lord said: Again, we are back with the thought police. I ask how anyone could have written down this provision seriously without cracking up. The proposal is that office holders in a political association specified on the nomination papers of a local authority—councillors—are considered associates of that authority. So if some member of a ratepayers' association is an office holder of the ratepayers' association and perhaps the only ratepayer councillor on the council—this could be the assistant minutes secretary of the ratepayers' association—because there is one ratepayer councillor, the association is considered to be associated and the whole of the company is brought into all the restrictions of the influenced category. It is farcical. We are getting to a stage where I ought not to be laughing; it is extremely serious.
Why is the paragraph not more restrictive? It could easily be more restrictive. It could relate only to the political party of the majority in control of the council, for example. That would be very easy to achieve. But it is farcical to apply the provision to

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every single office holder of every single political party or organisation which succeeds in getting one councillor elected on a local authority—it could well be the Monster Raving Loony Party—so that the person then becomes an associated person which makes a company an influenced company. I beg to move.
Lord Hesketh: In addressing Amendment No. 129G, it will be difficult not to comment at the same time on Government Amendments Nos. 130 and 131; but I quite understand the noble Lord's wish to debate these separately.
This amendment would leave out another one of the possible ways in which an association would be established between those connected with a local authority and those involved in running a company. This one is where the people concerned hold office in a political party represented on the council.
I remind the Committee that we are considering only cases where a company meets the business relationship test; that is to say, where the business of the company is predominantly bound up with the authority. In those circumstances, it seems common sense to say that if an office-holder in a party represented on the council holds votes on the board of the company, or at a general meeting of the company, there is a probability that an influence over the company's activities can be exercised.
I also remind the Committee that we have to consider the likelihood, given the experience of the past 10 years, that some local authorities will seek ways of avoiding controls—particularly controls over capital finance. We think that it is important to ensure that there is a proper system of control over local authority capital finance, as part of the general system of controlling the demands which the public sector makes on the economy. We should not therefore be quick to allow arrangements with clear possibilities for avoidance.
We therefore think that we need to consider the case where a company whose business is predominantly bound up with the local authority has as a director or member the chairman or other office-holder in a party linked to the council.
We therefore advise against accepting Amendment No. 129G. However, we think that the definitions in paragraph (g) can be improved. These improvements are contained in Amendments Nos. 130 and 131. They stem directly from amendments put down, but not moved, by the Opposition in another place. We think that they will be an improvement, and in due course, I shall commend them to the Chamber. I cannot however commend this amendment.
Lord McIntosh of Haringey: I think it would have been better if the Minister had cut the Gordian knot and removed the subsection as a whole, rather than seeking to amend it. However, I shall listen carefully to the Minister's arguments on Amendments Nos. 130 and 131. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Hesketh Lord Hesketh moved Amndment No. 130:
Page 74, line 34, after ("holds") insert ("a relevant").
The noble Lord said: Thse amendments deal with the test of whether there is a personnel link between a local authority and an influenced company where the link is established because a person holds office in a political association or other body to which any elected member of the authority affiliated himself in his nomination papers.
On Report in another place, Opposition Members moved an amendment to Clause 66(5)(g) so that such links should be limited to local political organisations. The Government can see some merit in this, and there is certainly force in the argument that the holding of an associaton office in one political party in, say, Hertfordshire should not count as a link with a London borough simply because both local authorities have members who stand for the same political party.
Amendments Nos. 130 and 131 therefore make it clear that the personnel link under Clause 66(5)(g) will only be established in the following circumstances. In the case of a political association or body which is active only in the area of the authority, the holding of any office will be deemed to be relevant in establishing the link. In every other case, including where the political association is based outside the area of the authority or is also active in another area, the office held is only relevant for the purpose of establishing a link with the authority if it is a branch or other part of the association or body which is active in the authority's area.
Amendments Nos. 130 and 131 will therefore limit the criteria for establishing a personnel link by virtue of holding office in an apolitical association to those cases where the association is active in the authority's area. We believe that that fully meets the concerns of the Opposition in another place. I therefore commend the amendment to the Committee. I beg to move.
Lord McIntosh of Haringey: It is better than nothing.
On Question, amendment agreed to.
[Amendment No. 130A not moved.]
1 a.m.
Lord Hesketh Lord Hesketh moved Amendment No. 131:
Page 74, line 36, at end insert—
("(5A) For the purposes of subsection (5)(g) above, an office in a political association or body is relevant to a local authority in the following circumstances—

(a) if the association or body is active only in the area of the local authority, any office in it is relevant; and

(b) in any other case, an office is relevant only if it is in a branch or other part of the association or body which is active in the area of the local authority.").

On Question, amendment agreed to.
Clause 66, as amended, agreed to.
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 131A:
After Clause 66, insert the following new clause:
("Registered and Unregistered Housing Associations.
Nothing in this Part shall apply in relation to a registered or unregistered housing association.").
The noble Lord said: We have already had reference to the subject of registered and unregistered housing associations in relation to an earlier amendment. There appears to be a distinction between the Government's proposals relating to registered housing associations as compared to unregistered housing associations. I should like to move the amendment simply to give the Government an opportunity to say what their position is in relation to unregistered housing associations and to confirm what was said earlier about registered housing associations. I beg to move.
Lord Hesketh: New subsection (1A) would exempt "independent voluntary association companies". New subsection (1B) defines a voluntary association company by reference to Section 137 of the 1972 Local Government Act. New subsection (1C) defines independence by two tests, one of which would require that the company receives no financial assistance from the local authority and the other that any financial assistance is not given for the purpose of avoiding restrictions.
I believe there is very little between the movers of the amendment and the Government as to the substance of what we want to achieve. Such differences as there are concern the most effective way of achieving what we want. Perhaps I may remind the Committee that the definitions that we propose for what is to be regarded as a company subject to local authority influence requires that the company meets two tests simultaneously. The first is that there is a close business relationship and the second that there is a substantial overlap between the people associated with the authority and the members of the company's governing organs.
The two main forms of the business relationship test would be that the company derives half or more of its turnover or half or more of its capital from a local authority. The Committee will therefore see that that test addresses the same points as paragraph (a) of the proposed new subsection (1C). Paragraph (a) of the amendment would exempt a company that receives no financial assistance from the local authority. Before the tests set out in the Bill could be satisfied a company would have to receive not merely some financial assistance but more than half of its turnover or capital from the local authority. Paragraph (a) therefore seems to be aimed at exempting companies which could never come within the definition.
Lord McIntosh of Haringey: I think that the Minister is responding to Amendment No. 131B rather than to Amendment No. 131A, which is a new clause after Clause 66. It is very interesting to have the Minister's speech, which will appear in Hansard and will help the noble Lord, Lord Hayter, in moving Amendment No. 131B on Wednesday afternoon, but it is not strictly relevant.
Lord Hesketh: I apologise. I can only blame the late hour. I have some very much more relevant information.
This new clause would exempt both registered and unregistered housing associations. The considera-
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tions which apply to the two cases are different, and I must address each separately. On registered housing associations, I do not think that there is very much between the noble Lord and the Government on the substance. The differences are purely about the most convenient way of achieving our objective.
We have made it clear that we do not intend it to be possible for a registered housing association to be treated as a company subject to local authority influence. We shall use the power of exemption given by Clause 66(1) to exempt all registered housing associations from its scope. Since we do not think that there are any registered housing associations that are formally controlled by a local authority, this should ensure that no registered housing association is affected by the controls over controlled or influenced companies.
We have also made it clear that we shall use the powers to be given by Clause 68 to ensure that a local authority can participate in any registered housing association active in its area. We do not, however, think that it is appropriate to exclude registered housing associations entirely from Part V. We think that it is appropriate to retain, for example, the requirement in Clause 68(5) which will give a right to councillors to ask those appointed by the authority to the housing association about the activities of the association. Thus, for registered housing associations we shall ensure that Part V operates in such a way as to cause no problems to registered housing associations.
For unregistered housing associations, however, the position is different. I assume that the reference to an unregistered housing association is as defined in the 1985 Act. If noble Lords look at that definition, they will see that the only requirements that an unregistered association must meet are that it does not divide profits among its members and that it must include among its objects the provision of rented housing. I stress the word "include" because that is crucial to the reason why we do not want to exempt unregistered housing associations in the same way as registered ones.
Because the definition merely says "include", the requirement is satisfied if the appropriate object appears in the memorandum of association. The association does not have to do anything towards that object. It could devote all its activities to some completely different purpose—say, running a chain of greengrocers' shops. In such activities unrelated to housing, there would be no controls whatever such as apply to registered housing associations.
To exclude unregistered housing associations would therefore be to create a large loophole in the system of control. If a local authority wanted to use a company outside the controls of Part V, it would simply have to set it up as an unregistered housing association.
We think that the clause is unnecessary as it applies to registered housing associations since we have given undertakings that we shall use the powers in the Bill to ensure that there is no adverse effect on them. We believe that it is dangerous as it applies to unregistered housing associations since it would create a major loophole in the controls. That is why we resist the amendment.
Lord McIntosh of Haringey: I am delighted to welcome the noble Lord into the group of the Ministers who read out the answer to the wrong amendment. The noble Baroness, Lady Trumpington, has the prize for that because not only has she been known to read the wrong answer, but no one noticed until afterwards.
On this occasion, we are grateful for both the half reply that the Minister gave to a subsequent amendment and for the full reply that he gave to this amendment. I am grateful for what he said about registered housing associations. I am not convinced that he has given an adequate answer on unregistered housing associations. That may be a matter to which we shall have to return. In the meantime I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
The Earl of Arran: I beg to move that the House do now resume.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.

Electricity Bill
Returned from the Commons with certain amendments disagreed to with reasons for such disagreement; with an amendment disagreed to but with an amendment proposed in lieu thereof and with consequential amendments to the Bill; with an amendment agreed to with an amendment; and with the remaining amendments agreed to; it was ordered that the Commons reasons and amendments be printed.
House adjourned at seven minutes past one o'clock.