§ 3.6 p.m.
§ The Minister of State, Department of the Environment (Baroness Blatch)
My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.
§ Moved, That the House do now resolve itself into Committee.—(Baroness Blatch.)
§ On Question, Motion agreed to.
§ House in Committee accordingly.
§ [The CHAIRMAN OF COMMITTEES in the Chair.]
§ Clause 1 [Repeal of section 101 of Local Government Finance Act 1988.]:
§ Lord McIntosh of Haringey moved Amendment No. 1:
Page 1, line 6, at beginning insert:
("(B1) This section shall have effect for the period between Royal Assent and a date specified by an Order made by the Secretary of State, such date to be not later than the date of implementation of a new scheme of local taxation to be known as Fair Rates which shall be based on the occupation of property.").
The noble Lord said: With the customary pause, I move this amendment and I also speak to Amendments Nos. 6, 9 and 11. I apologise to the Committee for the error in the setting down of Amendment No. 11, which should read:
Page 1, line 17, after ("subsections") insert ("(B1),").
§ This is a very tightly drawn Bill. The Long Title makes it difficult for us, within the rules of procedure, to give expression as we would wish to the consternation which is felt not only on these Benches but also in many parts of the country at the mismanagement of local government finance by the Government. It is a Bill which seeks to turn away from the major errors made in Scotland in 1987, and in England and Wales in 1988, with the introduction of the poll tax.
§ It seeks to do three things, one of which will be the proper concern of my noble friend Lord Carmichael of Kelvingrove, because it concerns Scotland. Two of the matters will be dealt with mainly by my noble friend Lady Hollis and myself. The first of the issues with which the Bill is concerned is to admit, in effect, the total failure of the Government's efforts to achieve accountability in local government finance by not only continuing with capping but extending it so that a very large number of small local authorities will be included under the capping rules. The second matter must also cause very great concern and relates to the preparations which are to be made for what is to be called the "council tax", for which legislation is to be introduced later this year if the Government survive that long.
§ Amendment No. 1 and the three related amendments give the Government an opportunity to get out of the trap which they have dug for themselves. The amendments give the Government the opportunity to take immediate action to deal with the problems of the introduction of the so-called council tax by using the taxation system which is already available to 1215 us in the form of the rating system and going back certainly a year earlier—if the Government are really slow in introducing the council tax, then two years earlier—to a fair system in which tax can and will be collected because the system can and will receive the support of the people of this country.
§ We must not underestimate the significance of the delay which can be caused by this Government's procedures and their incompetence in recognising their errors. We must not underestimate the cost of this delay. In its report earlier this year the Audit Commission estimated that the cost of a year's delay in the implementation of a new tax system is of the order of £800 million. We on these Benches are frequently accused of being spendthrift. We are frequently accused in advertising campaigns—which appear to emanate from government and not from the the Conservative Party that has paid for them—of being spendthrift. The true fact of the matter is that it is the Government, by their insane introduction of the poll tax in the first place and their undignified and ignominious retreat from the poll tax now, who are being spendthrift and who are being extravagant. It is noticeable that the consultation paper published by the Government earlier this year makes no reference to how to achieve a better level of service in local government or a more cost-effective level of service; all that it refers to is restraining local expenditure and taxation.
§ That is not the view which we on these Benches take about local government. We take the view that what the people want from local government is good value for money and that if they feel they are getting good value for money they are entitled to say they are willing to pay more for a good service. It is precisely that which is being taken away from them by the capping procedures.
§ Our view is, and always has been, that if we have a taxation system for local government which is widely respected and widely accepted, then of itself accountability will be achieved—an accountability which cannot be achieved by a tax which is almost universally seen to be unfair, as the Government admit. We shall be moving amendments to achieve that greater degree of accountability, not least by a move to annual election.
§ We have an opportunity now if the Government are willing to take it. It is a very brief opportunity and if we allow the matter to go beyond the end of this month we probably will not be able to make the enormous savings which are now possible. However, it is possible for the Government once again to admit that they have been wrong. It is possible for them now to accept the necessity for a return to a property-based system which takes account of income and takes account more directly of ability to pay—something which can properly be called a fair rate system. I beg to move.
§ Lord Rippon of Hexham
I do not wish to repeat views that I have expressed in the past about rate capping. When we were debating the community charge I shared the view expressed then by the present Home Secretary that rate capping would be 1216 intellectually dishonest. We really cannot have rate capping and talk about local democracy and accountability. At the same time, we must all recognise the anxieties of the Secretary of State and the Government that the generous transfer of funds from the Exchequer to the local authorities should go to those who are expected to benefit. That I understand is the reason why it is felt that there should be an extension of rate capping.
I must declare an interest in this matter; not a financial interest, but an interest as president of the Association of District Councils. When I speak on these matters I would normally say that my views are not those of the association although I accept them generally. I am speaking for myself. Equally, I try not to get involved when there is a great difference of opinion within the association. However, perhaps I may tell the Committee that at a recent conference of the Association of District Councils the question of extending rate capping to local authorities with budgets of under £15 million was discussed. There was a motion—which I am bound to say I put twice to an audience of about 1,500—as to whether there was a voice who would like to speak in favour of the Government's proposals, or whether there was a hand which anyone would like to raise against the Government's proposals. Nobody spoke.
§ Lord Rippon of Hexham
I beg the Committee's pardon. Nobody wished to speak in favour of the Government's proposals and nobody wished to vote in favour. Faced with that kind of opposition, which goes from Right to Left and includes everybody in the centre, the Government might think again about the wisdom of doing this, particularly as rate capping takes place on the basis of standard spending assessments, the reliability of which are very doubtful, to put it mildly.
Therefore, I hope that the Government will at least say that whatever may be done in the immediate future—perhaps various modifications might be considered—there is no intention in the new legislation of carrying forward the principle of rate capping, which the Committee and the Government must accept is totally irreconcilable with the concept of local democracy and accountability. At the very least, the Government ought to give the assurance which they used to give that capping was only for reckless or irrational local authorities. As president of the Association of District Councils I do not find any such authorities among those with budgets under £15 million.
§ 3.15 p.m.
§ Lord McIntosh of Haringey
I wonder whether the noble Lord, Lord Rippon, would like to add a few words to the very welcome things he said about the ADC conference. I too was present, taking the chair the day after him. The point that ought to be emphasised to the Committee is that the conference at which the noble Lord took the chair was taking place while the ADC was under Conservative control. That 1217 may not last beyond the end of this month, but that conference was a conference of an association under Conservative control.
§ Baroness Hamwee
It is interesting to hear someone with such authority and speaking for so many authorities—local authorities in this case, which are struggling to deal with the current system—speak so forcefully on the need for the views of those local authorities to be taken into account. I am much struck by some of the later amendments—I am not speaking to them now—and the fact that a need has been seen by some Members of this Committee to attempt to write into a Bill an exercise in consultation is very telling. It cannot be usual for primary legislation to require that. The limit on capping, which is to be removed, seems to me to be merely the Government taking to its very extremes the dogma that has so much characterised what has been happening recently with local government finance. And for what? What will be achieved by this exercise? The smaller the authority the less money there is at stake. Very small amour is will be saved and very substantial services will be prejudiced by this exercise.
I should like to speak to Amendment No. 1, which refers to "Fair Rates". Although the noble Lord, Lord McIntosh, knows that I share his views on much of this Bill and on many of his amendments, I have to say for the record that I cannot support that system. It says a good deal that the amendment includes a reference to "Fair Rates" without our being told precisely what that scheme is. However, I shall not get into that little squabble at the moment. My colleagues and I on these Benches have decided that we shall not detain the Committee with our proposals which, as Members of the Committee will know, would be for a local income tax. However, I shall not spend time on that at this stage.
§ Baroness Blatch
These amendments would have the effect of limiting the repeal of Section 101 of the 1988 Act which prevents an authority whose budget is less then £15 million from being capped in the period between Royal Assent of this Bill and the introduction of a scheme of local taxation based on the occupation of property. There is no logic to the proposition behind this amendment. Why is the extension of capping to authorities whose budgets are currently below the statutory minimum to be dependent on the introduction of a local tax based on the occupation of property? Experience has shown that strong capping powers are an essential aspect of any local government finance system.
Sharpened accountability has not in itself provided sufficient incentive for local authorities to budget wisely, particularly during times of transition. We intend to ensure that there are strong and effective capping powers appropriate to the new council tax. I know that my noble friend Lord Rippon will find that a rather disappointing comment. That is why we have confidence in our illustrative exemplifications of the council tax and that is why we should have no confidence at all in the figures put forward by the 1218 Opposition to illustrate their fair rates scheme. They say that they will not have capping of any kind. In a system without restraint I am afraid that spending would go through the roof.
The Opposition claim that their policy is to abolish the community charge and then to replace it in the short-term by returning to domestic rates based on the 1973 valuation lists. That would be followed by the introduction of a new rating system under which properties would be valued by reference to a complicated mixture of four different factors. There can be no worse prospect for either local authorities or their residents. First, there would be the immediate reintroduction of the old rates system which was universally regarded as unfair, as Mr. Kinnock himself has acknowledged, and then a second upheaval to bring in a system under which it would be almost impossible for householders to understand the basis on which they were being taxed. In contrast, under the Government's proposals, property will be banded according to its value, a concept which is clear and comprehensible. We do not need to label our proposals fair in order to try to sell them. The council tax is self-evidently much fairer than either the old style rates or the revamped version which is favoured by Members of the Committee opposite.
In short, the measures we are now seeking will strengthen capping powers in the run up to the new system of the council tax. Under the new system we intend to have strong and effective capping powers. The Opposition's proposals mean that spending would rise out of control. Our proposals are responsible and very clear. I call upon the Committee to reject the amendment.
§ Lord McIntosh of Haringey
I confess myself satisfied with that answer. The Minister has made clear the battle ground on which we are joined. She has made it clear that she has no confidence in the ability of the Government to produce a local government finance system which will avoid the continued use of capping. She has made it clear that the arguments and hopes expressed by the noble Lord, Lord Rippon of Hexham, are not to be treated sympathetically or even with any serious degree of understanding by the Government. She has made it clear that this Government will continue, whatever system of local government finance they choose to adopt, to determine from Marsham Street what local authorities shall spend rather than allow local people to do that. She has made it clear that the Government turn their back, as we always said they would, on the principle of accountability in local government. This is a centralist government. They treat local government with spite and treat it so because they have no confidence in the ability of people in their local areas to make proper judgments about the services they want and how much money they should spend on them.
These are very modest amendments. They simply state that the extension of the capping procedures proposed in the Bill will go ahead but only until such a time, or indeed not later than such a time, when the Government produce a fairer system of local government finance. By opposing the amendment the 1219 Government are making it quite clear that they have no intention of producing a fairer system of local government finance. I shall test the opinion of the Committee.
§ 3.23 p.m.
§ On Question, Whether the said amendment (No. 1) shall be agreed to?
§ Their Lordships divided: Contents, 52; Not-Contents, 128.1220
|Division No. 1|
|Ardwick, L.||Jay, L.|
|Birk, B.||Jenkins of Putney, L.|
|Blackstone, B.||John-Mackie, L.|
|Blease, L.||Leatherland, L.|
|Briginshaw, L.||Lockwood, B.|
|Brooks of Tremorfa, L.||Longford, E.|
|Bruce of Donington, L.||McIntosh of Haringey, L.|
|Callaghan of Cardiff, L.||Mason of Barnsley, L.|
|Carmichael of Kelvingrove, L.||Milner of Leeds, L.|
|Cledwyn of Penrhos, L.||Mishcon, L.|
|Clinton-Davis, L.||Morris of Castle Morris, L.|
|Cocks of Hartcliffe, L,||Murray of Epping Forest, L.|
|David, B.||Nicol, B.|
|Dean of Beswick, L.||Northfield, L.|
|Desai, L.||Peston, L.|
|Dormand of Easington, L.||Phillips, B.|
|Ennals, L.||Pitt of Hampstead, L.|
|Fisher of Rednal, B.||Portsmouth, Bp.|
|Fitt, L.||Serota, B.|
|Gallacher, L. [Teller.]||Stallard, L.|
|Galpern, L.||Stoddart of Swindon, L.|
|Graham of Edmonton, L. [Teller.]||Strabolgi, L.|
|Hilton of Eggardon, B.||Wallace of Coslany, L.|
|Hollis of Heigham, B.||White, B.|
|Houghton of Sowerby, L.||Williams of Elvel, L.|
|Irvine of Lairg, L.|
|Alexander of Tunis, E.||Denton of Wakefield, B.|
|Ampthill, L.||Dudley, B.|
|Astor, V.||Effingham, E.|
|Belhaven and Stenton, L.||Elles, B.|
|Beloff, L.||Elliot of Harwood, B.|
|Belstead, L.||Erne, E.|
|Bessborough, E.||Erroll of Hale, L.|
|Birdwood, L.||Ferrers, E.|
|Blatch, B.||Flather, B.|
|Blyth, L.||Fraser of Carmyllie, L.|
|Borthwick, L.||Fraser of Kilmorack, L.|
|Boyd-Carpenter, L.||Gainford, L.|
|Brabazon of Tara, L.||Gisborough, L.|
|Brougham and Vaux, L.||Glenarthur, L.|
|Butterworth, L.||Grantchester, L.|
|Caithness, E.||Gridley, L.|
|Campbell of Alloway, L.||Hailsham of Saint Marylebone, L.|
|Campbell of Croy, L.|
|Carnegy of Lour, B.||Harmsworth, L.|
|Carnock, L.||Hastings, L.|
|Cavendish of Furness, L.||Havers, L.|
|Cawley, L.||Hayter, L.|
|Cayzer, L.||Henley, L.|
|Clanwilliam, E.||Hesketh, L. [Teller.]|
|Cockfield, L.||Hives, L.|
|Constantine of Stanmore, L.||Hood, V.|
|Cottesloe, L.||Hooper, B.|
|Cox, B.||Howe, E.|
|Cullen of Ashbourne, L.||Hylton-Foster, B.|
|Cumberlege, B.||Ironside, L.|
|Dacre of Glanton, L.||Johnston of Rockport, L.|
|Daventry, V.||Joseph, L.|
|Davidson, V. [Teller.]||Killearn, L.|
|De Freyne, L.||Kinloss, Ly.|
|Denman, L.||Kinnaird, L.|
|Knollys, V.||Rankeillour, L.|
|Lauderdale, E.||Reay, L.|
|Long, V.||Renwick, L.|
|Lucas of Chilworth, L.||Rodney, L.|
|Lyell, L.||Romney, E.|
|McColl of Dulwich, L.||Russell of Liverpool, L.|
|Macleod of Borve, B.||St. John of Fawsley, L.|
|Mancroft, L.||Saltoun of Abernethy, Ly.|
|Margadale, L.||Selkirk, E.|
|Merrivale, L.||Shrewsbury, E.|
|Milverton, L.||Skelmersdale, L.|
|Monk Bretton, L.||Strange, B.|
|Monson, L.||Strathcarron, L.|
|Monteagle of Brandon, L.||Strathmore and Kinghorne, E.|
|Mountevans, L.||Strathspey, L.|
|Mountgarret, V.||Sudeley, L.|
|Mowbray and Stourton, L.||Terrington, L.|
|Munster, E.||Teviot, L.|
|Murton of Lindisfarne, L.||Thomas of Gwydir, L.|
|Norrie, L.||Ullswater, V.|
|Nugent of Guildford, L.||Vaux of Harrowden, L.|
|Onslow, E.||Waddington, L.|
|Oppenheim-Barnes, B.||Wade of Chorlton, L.|
|Oxfuird, V.||Wedgwood, L.|
|Park of Monmouth, B.||Wharton, B.|
|Pender, L.||Whitelaw, V.|
|Peyton of Yeovil, L.||Wise, L.|
|Platt of Writtle, B.||Wynford, L.|
|Porritt, L.||Young, B.|
§ Resolved in the negative, and amendment disagreed to accordingly.
§ 3.32 p.m.
§ Baroness Hollis of Heigham moved Amendment No. 2:
Page 1, line 6, at beginning insert:
("(A1) Subsection (1) below shall have effect for the purpose of removing restrictions on the powers of the Secretary of State to designate English or Welsh authorities in respect of which no order providing for retirement by thirds has been made under section 7 or 26 of the Local Government Act 1972, as appropriate.").
The noble Baroness said: In moving this amendment I shall, with the leave of the Committee, speak also to Amendment No. 4. Both amendments call for annual elections. On Second Reading—and I apologise to the Committee for the fact that I was unable to attend on that occasion—the Minister said at col. 268 of Hansard that she wanted,
unfettered local accountability".
excessive spending … damaged the overall management of the economy and the control of inflation",
and that it allowed authorities,
to impose unnecessary burdens on their charge payers". [Official Report, 20/6/91; col. 269]
She also said that she had hoped that the "increased transparency" of the community charge—I believe that the Minister must be one of the remaining three people in the country who still call it a community charge—would work to that effect, but that it had failed to do so.
§ I hope and believe—and I hope that Members of the Committee agree with me—that the amendment before us would, if it were adopted, give the Minister what she wants; namely, the "unfettered local accountability" to which she referred.
§ However, I should like first to comment on the remarks made by the Minister on Second Reading about excessive spending and the implications that that might have for annual elections. In her speech, 1221 she made much of the 25 per cent. rise in local authority spending during the two years in question, which I take to be 1989–90 and 1990–91. However, I ask Members of the Committee to consider whether that spending of 25 per cent. was excessive. Inflation for the first of those years—that is 1989–90—was around 8 per cent. The following year it was 9.6 per cent. That was 17.5 per cent. in all and less than the 25 per cent. mentioned by the Minister; that is, if she is right. But is she right?
§ However, perhaps one should also consider the additional responsibilities incurring expenditure imposed by central government on local government during those two years. Some of them were welcome—for example, the Environmental Protection Act; but some were decidedly unwelcome, such as the cost of collecting the poll tax or the transfer from central government of additional housing benefit costs. In my local authority of Norwich that additional expenditure amounted to about £2 million on a budget of £17 million, or 12 per cent. If one adds to that the cost of inflation for those two years at 17.5 per cent. and the additional government-imposed responsibilities at 12 per cent., one sees that a standstill budget for local government over those two years would have produced an increase of about 30 per cent. in real terms. In fact, as the Minister said, local expenditure was held at 25 per cent. Members of the Committee may think that that was not excessive under the circumstances.
§ As regards the burden on the charge payers, I should remind the Committee that, had government grant remained at the same level in real terms as in 1979, the local authority levies would have increased by less than the rate of inflation. I am talking in average figures. However, it is quite clear not only that local authority spending over the past two years has not been excessive but also that, had the Government not withdrawn their grant, the burden for charge payers would have been less than the rate of inflation. Indeed, the average poll tax would have been just £100 per head. Moreover we should have been spared all those shenanigans—which made the poll tax opaque, rather than transparent as the Minister suggested—such as the safety nets, transitional arrangements, area relief, household relief and flat rate subsidy on flat rate levy.
§ Secondly, even if the expenditure of some individual authorities was "excessive" in the judgment of the Government, that judgment is a political one and indeed a party political one; it is not an economic one. As my noble friend Lord McIntosh of Haringey said on Second Reading, that assumes only one answer. The difference between local government and local administration, as I am sure Members of the Committee are aware, is precisely that local administration assumes uniform problems, uniform expenditure, uniform solutions; in other words, it assumes that all places are the same. But local government does not. Not only does it assume that different communities have different needs; it also has different perceptions as to how best to meet them. The approach is essentially pluralist—a concept which we hope Members of the Committee will endorse today.1222
§ Local spending is a decision for local people to make. Of course, government have the right to determine their grant formula, but local people have the right to decide through the ballot box how the locally raised revenue shall be spent. Hence the amendment. It proposes that, where there are annual elections, authorities spending below the £15 million suggested shall be exempt from rate capping. At present, less than half district councils have annual elections. The same applies to London boroughs and the county councils.
§ What then would the timetable look like? How effective would such a discipline be? The average local authority budget is passed in March, the bills are sent out in April and, following the terms of this amendment, the elections would take place in May; that is, should the local authorities decide to adopt the procedure. That would serve as an entirely proper discipline on local government. It clearly works.
§ I am sure that Members of the Committee are familiar with the figures. However, the year that the London boroughs had all-out elections—namely, May 1990—their budgets increased by barely 6 per cent. That was the effect of submitting those budgets to the electorate. The budget increase of the Metropolitan districts (one third out)—in other words, those with, effectively, annual elections—was only 8 per cent. But the county councils, which did not face an electorate, raised their budget by 13 per cent. The shire districts, over 60 per cent. of which do not currently hold annual elections but have "all outs" every four years, increased their budget by 14 per cent.
§ Annual elections clearly establish the link that we all want to see between taxation and representation and thus strengthen both accountability and transparency. If during the year following an annual election that budget is seen not to represent value for money in the eyes of the voters, they can, do and should throw out a portion of their elected members. Broadland District Council in Norfolk may chose to offer its electors a low rate, low service budget. On the other hand, Norwich City Council, which is adjacent to it, might propose higher taxes for higher levels of service. What matters is not cheapness: what matters is, on the one hand, value for money as audited by the Audit Commission; and, on the other hand, the informed and active consent which local people have given to the authority. I suggest that that is offered by the amendment before us which proposes annual elections.
§ I hope it is clear from what I have said that we agree with capping. But the question is: who does the capping? The amendment proposes annual elections to ensure that local people cap their authority through the ballot box, and not central government who, having lost the democratic vote and been rejected at the ballot box in 900 seats at last May's local elections, seek to enter by the back door and make themselves the majority voter in every town hall. Local people may want a service; they may vote for that service; and they may be willing to finance that service out of their own money—we are not talking about central government matching grants here—and the Government say, "No". They relegate citizens to the 1223 status of children who cannot be trusted to make up their own minds, make their own decisions or take responsibility for their judgments.
§ The amendment requires local authorities to be accountable —transparent, as the Minister would wish—through the ballot box, as I am sure she would also wish. In that way, as Widdicombe says, local government becomes government by local communities rather than of local communities. I hope that the Committee will support the amendment. I beg to move.
§ Baroness Blatch
The amendments seek to establish a link between the electoral arrangements pertaining in an authority with the requirement for the Government to have the power to cap that authority. As I shall demonstrate, there is no logic in such a link. Reference was made to Second Reading. The noble Baroness considered the point about unfettered spending by local authorities. She approves of local authorities having unfettered freedom to spend at whatever level they choose. She also advocates that the Government should have no interest in local authorities' aggregate spending. I shall remind her of what else I said on Second Reading. I also said that the contrast between our experience this year, when the Government announced their intention of capping in advance, and the previous year was marked. In 1991, local authority expenditure rose by 13.5 per cent. and was almost £3 billion above the amount we considered appropriate. In 1991–92, local authority budgeted expenditure is only 0.5 per cent. above the amount provided for in the settlement. The results speak for themselves.
I admit that at first sight the logic of the proposition might be regarded by some as seductive. Even allowing for the apparent attraction of annual elections, I do not believe that the proposition stands closer examination. First, the facts do not support the view that where councils are elected in thirds there is sharpened accountability which would lead to spending restraint. Harlow, for example, has election by thirds and yet the council is overspending to the tune of £83 per charge payer; Elmbridge, likewise elected by thirds, this year is adding £73 to the charge; and Watford, elected by thirds, is adding £56 to the charge. I could continue. The noble Baroness also ignores the amount of local government finance that comes from the national taxpayer, and therefore it is appropriate that the Government should be interested in aggregate spending.
There is no basis for the suggestion that councils, having elections in thirds, should in some way be privileged and not be subject to the capping regime if they choose to budget below £15 million.
Secondly, the proposition underlying the amendments is flawed in principle. Councils which elect their members in thirds have one year without an election. Under the scheme suggested in the amendments, what would happen? What is more important, so far as the principle of elections to approve overspending is concerned, is that single issue elections are alien to the British tradition. To view an election as the means of validating overspending is not part of our tradition. 1224 We have made clear our commitment to enhanced accountability. That is why we propose to retain increased transparency of spending decisions of local authorities which have to foot the bill under the council tax.
The Opposition say that they rest their entire case for expenditure restraint upon accountability. An exposition of that view was provided in another place by the honourable Member for Dagenham when he said that they opposed wholeheartedly and thoroughly the principle of capping and that as they advocated the independence and value of local government, they believed that the right controls on local government spending were those exercised through the ballot box. That is easy to say in the absence of responsibility.
It gives us no satisfaction to say that we have found that enhanced accountability, while an integral part of the system of local government finance, has not been able to deliver the high hopes which we had previously expressed. The experience of the past few years has shown conclusively that increased accountability has not in all cases led to sensible and prudent budgeting.
We shall not allow charge payers to be left unprotected from the vagaries of their authority's spending plans, not even until the next local election. We shall take action, if it is required, to ensure that they do not have to pay the bills for excessive budgets in the first place. We have a duty to protect charge payers. The necessity for that has been borne out by events. The amendments seek to restrict the exercise of that duty and hence the protection that we are able to offer; I call upon the Committee to reject them.
§ 3.45 p.m.
§ Lord Cockfield
There is an important fallacy in the arguments put forward by the noble Baroness, Lady Hollis. She was trying to equate a high level of expenditure with a high level of services. It is nothing of the sort. A high level of expenditure often represents no more than inefficiency, bad management, incompetence, padded payrolls and poor services. What on earth does she think has been going on in Liverpool these past three years?
§ Baroness Hollis of Heigham
I was disappointed, although not entirely surprised, by the Minister's reply. She made a number of points and I shall try to respond to some of them. First, she said that results speak for themselves. Knowing the stringency of capping, local authorities reduce their expenditure to avoid it. That is obviously right; but turkeys too are not especially keen on offering themselves up for Christmas. That says nothing, however, about the appropriate and preferred method of disciplining local authority expenditure. The Opposition's argument is that that discipline should be exercised by local electors who foot the local additional bill. That should be met by annual elections, as we propose, rather than by Ministers.
I agree that by definition capping reduces local authority expenditure; so would annual elections. The question is: who reduces it and for what reason? Under the amendment, it would be the decision of local people, through their councils, for containing, 1225 disciplining and controlling their expenditure. It would not be central government. In other words, it is town hall and not Whitehall.
The noble Lord, Lord Cockfield, said that a high level of expenditure did not necessarily represent value for money. He is correct. It may represent inefficiency and incompetence. The Opposition do not seek to justify high expenditure as such, but justify it in so far as it represents value for money. Time and time again the Audit Commission has said of those very budgets that central government have sought to rate cap—including that of my authority—that we offer value for money at just the point at which central government have chosen to exercise their rate capping powers.
The Minister made much of the point about central government's aggregate expenditure. That is due to the fact that at the moment poll tax raises only 14 per cent. of total spend after the flat rate subsidy. But that reflects the fact that the business rate is now regarded as a central government tax. The unified business rate currently raises some 32.5 per cent. of local authority expenditure. That is a local tax, centrally hijacked. If that tax were now to be brigaded, as it should be for accountancy purposes, with the poll tax, the Committee would see that local people raise some 46 per cent. of their local spend. That is a far from insignificant sum and the area from which discretionary spending would be financed.
The Minister said that it was not a British tradition to have single issue elections. I am sure that as a member of a county council she will agree with me that the budget is not a single issue election; it represents the financial translation of the policies, principles, services and political judgments that motivate that local authority and for which that authority seeks endorsement from the local electorate. In other words, to use annual elections as a vote of confidence in the budget is saying that those local elections review the capacity and functioning of local government. That is why we are against capping.
Finally—this, as my noble friend Lord McIntosh said, marks the divide between us—the Minister repeated again this afternoon that she sees the job of government as protecting people—local voters—from their local councils. I repeat that that is to relegate local voters to the status of children who cannot be trusted to vote properly and do not know what they are doing when they vote. So far as local people are concerned, when they exercise their vote they exercise their judgment. I suggest that the Government would do well to take that judgment as seriously at local elections as they will shortly have to at the general election. I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ Moved accordingly, and, on Question, Motion agreed to.
§ House resumed.