HL Deb 08 July 1991 vol 530 cc1245-76

5.5 p.m.

House again in Committee on Clause 1.

Lord McIntosh of Haringey moved Amendment No. 3 Page 1, line 9, after ("Act)") insert ("subject to subsection (2A) below").

The noble Lord said: I do not know whether Members of the Committee are capable of casting their minds back to what was being said before we were so rudely interrupted. I recall because I made notes of some of the Minister's comments about overspending, poll tax capping and the Government's ideas about their own infallibility. It is proper that we should return to that matter in Amendment No. 3. I shall speak also to the substantive amendment, Amendment No. 10.

The Minister responded to comments made by my noble friend Lady Hollis in respect of an earlier amendment. She was rightly being criticised for complacency about the level of local authority spending in 1991–92 as compared with the previous year. She said that in the previous year councils were spending "above the amount we considered appropriate". She referred to a number of councils, notably Conservative-controlled Elmbridge and Labour-controlled Watford, which were spending significantly above the Government's guidelines and adding to the charges. I hold no particular brief for Elmbridge or Watford. I believe that the people of Elmbridge have good reason to be dissatisfied with the property developments indulged in by their Conservative council. Nevertheless, the point is that the Minister said that it is what "we"—that is, the Government —consider to be appropriate which is their dominating concern. On that basis they are proposing to continue capping under any foreseeable system of local government finance.

Capping is not a matter of opposing the virtuous central government against the wicked local government. In theory capping is supposed to be setting a price for a standard level of service, setting the price of that standard level of service against the resources available to the local authority, providing the local authority with a fair proportion of government grant to enable it to provide that standard level of service and then pursuing it if it does not achieve a proper level of service at a reasonable price. That is the only way in which anyone can conceivably justify poll tax capping.

It does not happen in that way at all. In fact there is a predetermined cake of government grant which is divided up among local authorities. It is not provided on the basis of a standard level of service because there is no definition of such a service, nor is there a calculation of the cost. The formulae are set out in an extremely vague and often unfair way. Local authorities are expected to adhere to those formulae even when they are not allowed to understand them.

Perhaps I may give a few examples of the ways in which standard spending assessments are set, and are set wrongly, and the way in which we have the absurd differences between one local authority and another. I am sorry that the noble Baroness, Lady Flather, is not able to be with us this afternoon because on Second Reading she gave a very convincing argument showing how Windsor and Maidenhead are hard done by in terms of the standard spending assessment and government grant compared with neighbouring Slough. There are many more examples of the ways in which standard spending assessments are defective.

The calculations on education are based on student numbers but are adjusted by a factor called AEN. That has three components, two of which come from the 1981 census which is already, as is obvious to Members of the Committee, 10 years old. The effect is that, for example, Wigan is told to spend £1,588 per primary pupil but Surrey—and Surrey is hardly a poorer authority than Wigan—is allowed to spend £1,703 per pupil. At secondary level, Wigan is meant to spend £2,302 per pupil while Berkshire is allowed to spend £2,518 per pupil. Is it seriously suggested that Surrey and Berkshire have more problems of deprivation which need extra funding than Wigan? Even if that were suggested—and the absurdity of that will be obvious to the Committee—why is Manchester supposed to spend £500 per pupil more than neighbouring Bolton?

The data on which the standard spending assessments for education are based are out of date and wrong. Even if the AEN factor, by which the allowance per pupil is calculated, were correct, why suddenly in 1991–92 was that factor reduced from its previous total of 70 per cent. of total funding to 50 per cent? No reason was given for that. There is no reason and there can be no reason because the system is deliberately designed to be a mystery.

Let us look at personal social services—the second most important spending area of local government after education. There is no element in the calculation of the social services standard spending assessment for the number of people receiving the services or the cost of provision. Instead there are 19 indicators of need for personal social services, of which 14 use 1981 census data. There is no reflection in those figures of the increasing need of local authorities to prepare for the Care in the Community and the Children Act changes.

One of the most aggravating matters for local authorities is the way in which so many items of expenditure are covered by what is called "other services". That covers everything from births to cemeteries and allotments to port health. The most absurd example of all of those is the example of visitor nights; that is, the extra grant and standard spending assessment which is given to those local authorities which are deemed to have a greater burden because of the number of visitors which they have. It is no matter that only a few years ago the Government said that that is quite inappropriate and that local authorities should raise money from the visitors to pay for the services which must be provided for them. When it became convenient to support Westminster City Council by giving it an extra allowance under the standard spending assessment, Westminster received the money. That is how Westminster was able to reduce its poll tax and give that factitious semblance of electoral success to the Government last year. Why is the visitor nights calculation worth £37 per adult to Westminster when it is worth only £10 to Blackpool and nothing at all to Stratford on Avon?

One could go on because there are many more examples. Brent has a higher snow allowance than Cumbria and Camden has a higher snow allowance than Lancashire. There are many other examples that I could quote. The point which must be made is that there is no rational basis for the standard spending assessment and for the capping which is the purpose of this part of the Bill and which is the permanent purpose of government in their relations with local government.

At the very least Amendment No. 10 suggests that an order giving effect to this part of the Bill should not be made before the Secretary of State has published a review of the calculations and operation of the standard spending assessment in local authorities. There is no reason on earth why the Government should not agree to that except that they know that they cannot defend standard spending assessments. I beg to move.

5.15 p.m.

Baroness Carnegy of Lour

The noble Lord, who knows a great deal about this subject, has moved his amendment extremely ably. He has exposed the problems of calculating standard spending assessments, the amount on which local government grant is based.

However, the amendment would add insult to injury. Many people who were in local government, at a time when it was very much more effective and gave a lot more local satisfaction than it does now, believe that one of the problems which has beset it is the turning of what should be local government spending issues into matters concerning central government politicians and central, national party politics.

Along with the noble Lord, I am one of those who wish to see a clearer, simpler and less opaque calculation of the basis for grant to local government. However, if local government electors are to be treated year after year to an even greater public wrangle than there is now, based on published criteria and figures in the kind of annual review which the noble Lord suggests the Secretary of State should publish, they will believe even more than they do now that what they vote about is what central government have allocated to their councils and not about the competence of their councillors to make the best of the money which they have.

If that happens—the noble Lord may consider that that is in any case inevitable—it seems to me that there is no justification whatever for the noble Lord's argument for local government raised tax. It would be much better if the system were based on VAT and income tax and the whole palaver of setting and raising tax were thus not necessary. If that were so, the debate would justifiably be a debate only about the amount of money which local authorities are given by central government and what they make of it.

It seems to me that the noble Lord is underlining his own argument for a locally raised tax by moving the amendment. If one feels that local taxation is essential in order to achieve "answerability", then it is a great pity to enhance the argument about central government. It would be much better if local authorities would talk with central government privately to try to achieve a better formula and do the best that they can for their local electors with that money. I am sorry that the noble Lord has tabled this amendment. On the whole I believe it is damaging to his cause.

Baroness Blatch

I am grateful to my noble friend for reinforcing those points. It is interesting to hear the noble Lord, Lord McIntosh, say that a Labour Government would be unconcerned about the aggregate spending of local government and that his party would approve of no limit whatever on spending.

When I worked in local government I remember that the Labour Government had no monopoly on fairness when it came to disputing grant. I remember the painful experience of having to cut £10 million from the budget overnight without notice. At that time we did not believe that the selection of Cambridgeshire for a cut of £10 million was fair compared to many other local authorities.

The noble Lord is selective in his quotations. He refers to AEN—additional educational needs. The greater beneficiaries of AEN are inner London Boroughs and big cities in recognition of their specific problems. With regard to educational SSAs, for Wigan it is £475 per adult; for Surrey it is less, and reasonably so, at £399 per adult; Berkshire is £482 per adult; Lambeth is £725 per adult; Tower Hamlets, whose needs are even greater, is £934 per adult; Manchester £672 per adult, and Westminster, lowest of all, is £368. Those figures should be seen in perspective against what was said by the noble Lord, Lord McIntosh.

The amendment tables a formidable catalogue of requirements but it is unnecessary. The Government are satisfied that the standard spending assessments are fair and reasonable. They are based on extensive analysis and research which has been fully discussed with local authority associations. They are determined according to general principles approved by another place; they take account of an authority's social, democratic and geographic characteristics as well as the functions for which it is responsible.

SSAs are subject to continuous review and refinement. They are calculated each year on the basis of up-to-date information available on a consistent basis for all authorities. We are holding regular meetings with the local authority associations to consider next year's settlement. Individual authorities will have an opportunity to make representations in regard to their SSAs for 1992–93 during the consultation period in the autumn. We have also made clear that we are willing to look at any fresh information which an authority may consider to be relevant.

How do noble Lords opposite suggest that the review would work? How long do they envisage it will take? Are they prepared to countenance delays in the announcement of next year's SSAs? Any delay would be to the disadvantage of all authorities who wish to plan their spending for next year in the light of those assessments. Not only is a wholesale review of the calculations and operation of SSAs completely unnecessary, but the delay that it would cause in the timing of next year's grant settlement would wreak havoc with local authorities' planning timetables.

I say again that we are willing to look at any new evidence which an authority wishes to bring to our attention. We are keeping SSAs under constant review and the proposed amendments are unnecessary and unhelpful. I call upon the Committee to reject them.

Baroness Hamwee

I wish to speak in support of the amendment, oddly enough for many of the reasons mentioned by the noble Baroness, Lady Carnegy. She said that she thought voters would take their decisions on the basis of what central government were allocating to local government. Since that is now the largest component of any local authority budget I do not believe that she is far wrong in suggesting that that should be the basis for their assessment.

The noble Baroness said also that local authorities and local authority associations should be talking to the Government. As the Minister indicated, that happens. For those on the receiving end of it—I do not know whether that applies to the Minister—I suspect that it happens with depressing and repetitive regularity, with members of local authorities of all political persuasions joining together in delegations both on behalf of their authorities and as members of the local authority associations to visit Marsham Street, often with a list of questions not asking that different decisions be made but to establish precisely why the assessment for their authority has been put forward.

It is an indictment of the Government that such an amendment needs to be tabled. The SSAs are so complex—perhaps not as complex as the grant related assessments—that they are part of the reason that local government finance is held in such disrepute both by the man in the street and, perhaps even more than councillors, by local authority officers who are trying to operate the regulations.

The noble Lord, Lord McIntosh, said that the formulae are vague. I disagree a little. They are so complex that, to use the term of the noble Baroness, Lady Carnegy, they are almost completely opaque to those trying to apply them. There is a widely held view among councillors that the computers at Marsham Street are run until the right answer comes out at the other end. That may not be the case, but it is indicative of the state that the system is in. We should all be talking from all sides that are concerned with the matter. It is a great shame that a request for consultation has to be put forward in a Bill such as this. It should not need to be requested in that way.

Baroness Blatch

Perhaps I may respond to the noble Baroness. The record of my department concerning discussions both with the local authority associations and, indeed, individual authorities, and very often with individual councillors, is a very good one and long may it remain so. We operate an open door policy and I hope that that, too, will continue.

I pose a question to the noble Baroness. If the Government are not to recognise the special needs of an authority—whether deprivation, one-parent families, ethnic minorities or any specific factor that makes their needs special as one authority compared with another—how does the noble Baroness suggest grant should be distributed between authorities? The alternative is a very rough justice indeed.

Baroness Hamwee

It is not for a moment suggested that the needs for different areas are not taken fully into account. I have not discussed the amendment with the noble Lord, Lord McIntosh, but I read the large gaps between the lines. The amendment was tabled because local authorities are not satisfied with the way that the system works. It is not a question of not recognising need. Need and the provision of services is what the local authorities are all about.

Baroness Blatch

The reason I posed the question is that the noble Baroness criticised the system and said that there were too many exemplifications. I am saying that if the exemplifications are reduced then the justice becomes rougher. I ask how the noble Baroness, by simplifying the system, can ensure that all authorities are being dealt with fairly.

Lord McIntosh of Haringey

I do not believe that the Minister is doing justice to the argument. She must know that that is the case. Nobody is complaining about the number of exemplifications. The noble Baroness, Lady Hamwee, is not making that complaint. She is saying that the system is too complex. She is not saying that the examples given to explain it are too common.

That is not the issue before the Committee. The issue before the Committee is that it has been demonstrably shown that the standard spending assessment does not live up to its own standards. That is the real point. If there were a real standard spending assessment it would be based on an assessment of the standard cost of running an acceptable service. The needs element would be taken into account and there would be an allowance for specific difficulties to affect the standard spending assessment in certain parts of the country. That is not what happens. An arbitrary amount of money is allocated. Various calculations, many of them based on out-of-date information and partial or inadequate information, are used to make the final calculations.

I thought that the noble Baroness, Lady Carnegy, started very well. She contrasted the days when, as she described it, local government was more effective. That was confirmed by the Minister when she spoke about the difficulty in Cambridgeshire when the local authority had to cut £10 million from its budget. Both noble Baronesses and I were active in local government at a time when one was allowed to know what one could spend and what one's grant was to be before the year started. As a final twist in the tale of central government control of local authorities the Government introduced a system whereby one is not told until after the year has started, after the poll tax level has been set, that one cannot spend that kind of money. That has been an additional burden on local authorities and has increased the difficulties of local authorities both in setting realistic budgets and in collecting the money due to them. The evidence for that is only too plain in the collection levels for the poll tax.

After a very good start the noble Baroness, Lady Carnegy, came to a rather perverse conclusion. She believes that we should be taking away from local authorities altogether the power to decide what their budgets should be. I did not notice the Minister agreeing to that. However, progressively over the years the Government have gone as far as they dare in that direction. They have gone progressively in the direction of reducing local authority accountability and increasing central government control.

This is a modest amendment which says that the Government' should look at their own calculations and make them public before extending capping. That does not seem to be an unreasonable or damaging suggestion to make in the limited context of the Bill. I believe that the Committee should take a decision.

5.31 p.m.

On Question, Whether the said amendment (No. 3) shall be agreed to?

Their Lordships divided: Contents, 65; Not-Contents, 124.

Division No. 2
Addington, L. Dean of Beswick, L.
Ardwick, L. Desai, L.
Aylestone, L. Donaldson of Kingsbridge, L.
Beaumont of Whitley, L. [Teller.] Dormand of Easington, L.
Ennals, L.
Blackstone, B. Ewart-Biggs, B.
Blease, L. Falkland, V.
Boston of Faversham, L. Gallacher, L.
Bruce of Donington, L. Galpern, L.
Carmichael of Kelvingrove, L. Graham of Edmonton, L. [Teller.]
Cledwyn of Penrhos, L.
Clinton-Davis, L. Grey, E.
Cocks of Hartcliffe, L. Hampton, L.
David, B. Hamwee, B.
Hanworth, V. Northfield, L.
Harris of Greenwich, L. Peston, L.
Hilton of Eggardon, B. Phillips, B.
Hollis of Heigham, B. Pitt of Hampstead, L.
Houghton of Sowerby, L. Prys-Davies, L.
Howie of Troon, L. Redesdale, L.
Jay, L. Richard, L.
Jeger, B. Ritchie of Dundee, L.
Jenkins of Putney, L. Rochester, L.
John-Mackie, L. Seear, B.
Kilbracken, L. Sefton of Garston, L.
Kilmarnock, L. Stedman, B.
Listowel, E. Stoddart of Swindon, L.
Lockwood, B. Tonypandy, V.
Longford, E. Tordoff, L.
McIntosh of Haringey, L. Underhill, L.
Mason of Barnsley, L. White, B.
Milner of Leeds, L. Williams of Elvel, L.
Morris of Castle Morris, L. Winchilsea and Nottingham, E.
Nicol, B.
Ailesbury, M. Huntly, M.
Aldington, L. Hylton-Foster, B.
Ampthill, L. Ingrow, L.
Arran, E. Johnston of Rockport, L.
Astor, V. Joseph, L.
Auckland, L. Kimball, L.
Belhaven and Stenton, L. Kinnoull, E.
Blatch, B. Knollys, V.
Blyth, L. Lauderdale, E.
Boardman, L. Long, V.
Borthwick, L. Lyell, L.
Boyd-Carpenter, L. McAlpine of West Green, L.
Brabazon of Tara, L. Macleod of Borve, B.
Brougham and Vaux, L. Mancroft, L.
Butterworth, L. Margadale, L.
Byron, L. Marlesford, L.
Caithness, E. Masham of Ilton, B.
Campbell of Croy, L. Merrivale, L.
Carnegy of Lour, B. Milverton, L.
Carnock, L. Monk Bretton, L.
Cavendish of Furness, L. Mottistone, L.
Cawley, L. Mountevans, L.
Cochrane of Cults, L. Munster, E.
Coleraine, L. Murton of Lindisfarne, L.
Colnbrook, L. Nelson, E.
Constantine of Stanmore, L. Norfolk, D.
Cox, B. Norrie, L.
Craigavon, V. Nugent of Guildford, L.
Craigmyle, L. Onslow, E.
Cumberlege, B. Orkney, E.
Daventry, V. Orr-Ewing, L.
Davidson, V. [Teller.] Park of Monmouth, B.
Denton of Wakefield, B. Pender, L.
Dundonald, E. Pennock, L.
Eccles, V. Platt of Writtle, B.
Elles, B. Plummer of St. Marylebone, L.
Elliot of Harwood, B. Pym, L.
Elton, L. Quinton, L.
Erne, E. Rankeillour, L.
Faithfull, B. Reay, L.
Ferrers, E. Rodney, L.
Flather, B. Romney, E.
Fraser of Carmyllie, L. Roxburghe, D.
Gardner of Parkes, B. St. Albans, Bp.
Gisborough, L. Saltoun of Abernethy, Ly.
Grantchester, L. Seccombe, B.
Greenway, L. Selkirk, E.
Gridley, L. Shannon, E.
Halsbury, E. Skelmersdale, L.
Harmsworth, L. Strathcona and Mount Royal, L.
Hastings, L.
Havers, L. Strathmore and Kinghorne, E.
Henley, L. Sudeley, L.
Hesketh, L. [Teller.] Swansea, L.
Hives, L. Swinton, E.
Holderness, L. Teviot, L.
Hooper, B. Thomas of Gwydir, L.
Howe, E. Trefgarne, L.
Trenchard, V. Whitelaw, V.
Ullswater, V. Wise, L.
Vaux of Harrowden, L. Wynford, L.
Waddington, L. Young, B.
Wade of Chorlton, L.

Resolved in the negative, and amendment disagreed to accordingly.

[Amendment No. 4 not moved].

5.39 p.m.

Baroness Hollis of Heigham moved Amendment No. 5:

Page 1, line 9, leave out from ("shall") to end of line and insert: ("have no effect in respect of any authority to which it would otherwise be applicable where the amount calculated by it in relation to the year concerned under section 95(4) of that Act or the aggregate amount of precepts issued by it for the year (as the case may be) is greater than the total amount in respect of that authority calculable from its Standard Spending Assessment.").

The noble Baroness said: This amendment continues and develops issues raised by Amendment No. 1 as regards capping and Amendment No. 3 in relation to standard spending assessments, which my noble friend Lord McIntosh dealt with. Amendment No. 5 will ensure that local authorities which spend up to or at their SSAs, and which are also below the figure of £15 million, will not be capped. The issue arises because in another place the Minister, Mr. Portillo, said that they would not be, but subsequently another junior Minister said only that such capping was "unlikely". Therefore this amendment seeks clarification from the Minister on that point.

The amendment raises the issue of capping. It may be helpful if I quote the chairman of the Association of District Councils which, as my noble friend Lord McIntosh and the noble Lord, Lord Rippon, reminded us, is currently Conservative controlled. At the local government conference in Brighton just a few days ago, Mr. Thomason said: The ADC is particularly concerned about capping proposals as a principle but also as to their proposed extension to smaller authorities. It is not that we want to justify high spending, but because capping based on faulty standard spending assessments does not adequately reflect spending needs and presents particular distortions for small councils". One recalls the string of commitments we have heard. In the early 1980s we were told by the Government that capping would not be introduced. In 1985 we were told that it would only be a power of last resort. In 1988 we were told that it would be only a reserve power. The then Minister, Mr. Howard, said: The people of an area will be able to vote for a relatively high speeding authority if they so choose". However, by 1990 that right to be able to vote for a relatively high spending authority has become a matter of selective action capping, but not as a matter of course. What is now being proposed is universal capping: every authority, any circumstance, every budget, all to be scrutinised by Whitehall. That is what it means. No longer are government seeking to restrain only the high spenders, only the large authorities, or—spare the thought—only the Labour authorities. As was said in another place, what this means is a comprehensive vote of no confidence—no, not a vote, the Government did not win that at the local elections—a comprehensive statement of no confidence by central government in local government.

In this amendment we are not talking about saving vast sums of money for the nation, the economy and the taxpayer. If all 87 district councils with budgets under £15 million which were eligible for capping were to be capped, that would save us £102 million; or less than one-quarter of the budget of an average county council such as Norfolk. If the de minimis rule applies, whereby the first £26 per head is exempt, then the total saved represents barely 10 per cent. of Norfolk County Council's budget. All this, for that.

The Minister made a sturdy defence earlier of standard spending assessments when she told my noble friend that they were fair and reasonable. I recall that not so very long ago a previous Minister, occupying the present Minister's position, defended grant related expenditure assessments in much the same way—that they too were "fair and reasonable". Not, as my noble friend Lord McIntosh said, that we have any great faith in SSAs, but the switch from the 63 variables of GREA to the 13 variables of SSA has produced wild swings of losers and gainers. Some district councils have gained 25 per cent. in the standard spending assessment; my own district council has lost 6 per cent. Both assessments were thought to indicate what an average local authority needed to spend to produce an average level of services. However, GREAs and SSAs could not both have been right. Both were defended in exactly the same terms that the Minister has employed this evening.

Standard spending assessments are notoriously crude—a point made by the noble Baroness, Lady Hamwee, and my noble friend Lord McIntosh. Of its 13 variables—applicable, for example, to education and social services—only one, the "other services" variable, applies to district councils. On that one variable—in turn, distributed basically on a population base—grant and its fulcrum point of capping applies. Moreover, those population figures are, for the most part, 10 years out of date. The figures ignore factors like the regional role of an authority, its historic buildings and the like. Yet, however crude, arbitrary and opaque those standard spending assessments are, as Members of the Committee have previously said, they represent at the moment the only benchmark we have of what the Government say is appropriate for a local authority to spend. Therefore, the amendment seeks to ensure that what government say local authorities should spend to provide an average level of services is what they can spend to provide such services. If local authorities do spend to the limit of their SSAs then whatever the previous level of percentage growth on their previous budget, those local authorities should not be vulnerable to capping while under the £15 million figure. That is important precisely because small district councils, with budgets of perhaps £4 million, £5 million or £6 million, are especially vulnerable to the financial impact of quite modest one-off items of expenditure: car parking, street paving, several extra staff for implementing the Environmental Protection Act imposed on us, with our approval, by government.

We had similar problems a few years ago when the Government ran simultaneously both GREAs and targets. As the Minister will no doubt recall, this produced chaos and confusion all round. This amendment seeks to ensure that we do not march backwards into the same morass. What the amendment seeks from the Minister is clarification and commitment: clarification of the somewhat different statements made in another place and commitment that local authorities spending up to and at their SSAs—not over, but under £15 million —will not be capped. I hope the Minister will be able, unambiguously, to give us that commitment. I beg to move.

5.45 p.m.

Baroness Blatch

The noble Baroness ranged far and wide from the amendment in her presentation of it. This amendment seeks to maintain, as the noble Baroness said, exemption from capping of authorities in England and Wales, setting budgets below £15 million, for those authorities which set their budgets below standard spending assessment. The proposition is unnecessary. We have made clear the position of an authority which sets a budget at or below its standard spending assessment. During the passage of this Bill in another place my honourable friend the Minister for Local Government and Inner Cities stated: I have no intention of capping authorities below the SSA". —[Official Report, Commons, 11/6/91; col. 801.] One cannot be clearer than that. Authorities which budget sensibly have nothing to fear from the extension of our capping powers. Authorities which budget at or below SSA are acting in a prudent and sensible manner. They are giving their charge payers a fair deal. We have no need to take action against such authorities. It is against the other kind of authority —those which spend above SSA—from which the hapless charge payer requires protection. We are determined, through the provisions of this Bill, to provide that protection in all cases. I call upon the Committee to reject the amendment.

Baroness Hollis of Heigham

I am happy to accept that statement by the Minister, which gives us the assurance we seek. Mr. Portillo's statement, which the Minister quoted, was subsequently qualified by Mr. Key, another junior Minister in the DoE, and therefore it is not unreasonable for us to assume that he was modifying Mr. Portillo's statement that, it is unlikely that a sensible and prudent local authority which is not spending above its SSA will be caught by the Bill".—[Official Report, Commons, 11/6/91; col. 820.] Can we therefore assume that that should now read that a sensible and prudent authority not spending above its SSA will never be caught by the Bill and that Mr. Key's statement has been modified, in turn, by what the Minister said tonight?

Baroness Blatch

I stand entirely by what I said in my reply to the noble Baroness.

Baroness Hollis of Heigham

Then I am happy to withdraw my amendment.

Amendment, by leave, withdrawn.

[Amendment No. 6 not moved.]

Lord McIntosh of Haringey moved Amendment No. 7: Page 1, line 9, at end insert ("after the making of an order under subsection (3A) below.").

The noble Lord said: In moving this amendment I shall speak also to Amendments Nos. 8 and 12, Amendment No. 12 being the substantive amendment. This, again, is a request for clarification because in another place Mr. Portillo responded to the Opposition by giving what he claimed to be helpful assurances about the inclusion or otherwise of European Community money in acceptable expenditure. That is what these three amendments are about. What we are trying to do in this amendment is to make sure that when expenditure for capping purposes is determined expenditure associated with a European Commission funded project will not be taken into account. Mr. Portillo said: Where a local authority spends some money and subsequently gets a grant from the EC, in the year that it spends the money it must find it from the collection fund. In the year after it will get the money from the EC. However, if, in year one, when the local authority spends that money, it already knows that it is going to get a grant from the EC, it can take that into account in the year that it spends the money because the budget is assessed on an accrual basis".—[Official Report, Commons, 11/6/91; cols. 840–1.

That is helpful for revenue projects, but we should like the Government to go a little further and make clear the position on capital.

As I understand it, when we are talking about capital budgets, there cannot be any supplementary credit approvals until the year after the budget has been expended. We have to ask whether it is possible for a local authority which has capital funding from the European Community to use the basic credit approvals as a basis for borrowing. I suspect that the Minister's answer will be, as Mr. Portillo intended to be, helpful, but it would be desirable to have the position set out entirely clearly. I beg to move.

Baroness Blatch

These amendments are designed to delay the operation of the provisions of Clause 1 of the Bill. Their effect would be to delay abolition of the exemption of authorities setting budgets of less than £15 million from the capping regime—and hence the protection that this provision would offer charge payers—until an order bringing the provisions into effect has been made by the Secretary of State. In turn this order itself could not be made until the Secretary of State had laid before Parliament a statement that the calculation made under Section 95(4) of the Local Government Finance Act 1988 for authorities setting budgets of less than £15 million did not include any expenditure which had been undertaken in the expectation that that sum would in future be covered by a grant from the European Community.

This is an unnecessary series of amendments. They seek to top slice the budgets of some authorities so that additional expenditure over and above the limits implied by our capping criteria would be permissible. This goes quite against the general policy that capping bites on the aggregate demand made by an authority on the collection fund. No distinction is drawn between the component parts of that budget. However, apart from that fundamental point, there are other reasons why the amendments are misguided.

Where expenditure is funded by EC grants, this expenditure, as is the case with any expenditure financed by specific grants, does not lead to an increase in an authority's budget on which the capping criteria bite. The noble Lord made that point himself. The amendment refers specifically to the situation where expenditure is incurred in the expectation that there will be EC funding. The arrangements to apply in such a case were described by my honourable friend the Minister for Local Government and Inner Cities during consideration of the Bill in another place. He made clear that where a local authority spends money in one financial year in the knowledge that it will be reimbursed for that expenditure in the subsequent year—in this case through an EC grant—it can take this expected income into account in the year in which it incurs the expenditure. That is standard accruals accounting practice. The authority therefore has no need to increase its budget on which capping bites to take account of such expenditure. Accordingly there is no reason why authorities in receipt of EC funding have any need for the kind of concession which the noble Lord opposite is seeking to give them, even if such a concession were right in principle, which I believe not to be the case.

These amendments seek to delay the operation of the provision of Clause I of the Bill for wholly spurious reasons. The noble Lord, Lord McIntosh, was concerned that basic credit approvals could be used to cover any capital borrowing. My understanding is that capital has no direct implications for capping, which bites on revenue. We are talking about revenue servicing borrowing, including where the authority chooses revenue contribution to capital. In other words, it is the revenue contribution to capital spending that would be caught, if necessary, by capping; but where it can be covered by expected income from the EC the effects on the local authority's budget would be neutral.

Lord McIntosh of Haringey

I am grateful for that reply. These are arcane matters. The Minister said that there will be no direct effect in terms of capping. I wonder why she used the word "direct". We need to know without ambiguity what powers local authorities have to borrow to finance expenditure which is going to be funded as a capital project by a European Community grant. Do authorities have the power to borrow for that purpose even when it is a capital grant rather than a revenue grant?

Baroness Blatch

We are talking about capping biting on the revenue costs of a local authority. Where that revenue is met by EC grant, clearly the effect on a local authority's budget is neutral. Where a local authority contribution matches an EC grant—in other words, where the local authority itself is providing money as well as the European Community—the extent to which the local authority is providing revenue would form part of its normal budget and would be subject to capping if over the limit.

Lord McIntosh of Haringey

I am sorry but I must press the Minister. Can we have a firm assurance that a local authority in that position will have approval for the borrowing that will be necessary? It is well understood that the European Community announces grants well in advance of making the payment. We want to know whether the local authority will need to get borrowing approval in advance of the grant. The capping procedure is very rigid indeed. There are no disregards from the capping procedure. For example, Sheffield is faced with enormous extra expenditure arising from the Hillsborough football stadium disaster, but no allowance is made as to whether the necessary expenditure for emergencies will be taken into account in deciding whether the council should be capped.

Baroness Blatch

European Community funding for projects in the United Kingdom is matched by government through extra credit approvals. Those are allocated to local authorities. What I cannot do is give a guarantee that in every single case the precise credit approval will match the local authority spending. I say that for two reasons. One concerns the way in which it will impact on each local authority. I cannot be precise about whether the actual project is fully funded by the EC, is partially funded by the EC or whether the local authority is matching EC funds. With regard to where the revenue costs of borrowing are met by extra credit approvals and by EC funding, the effect on the local authority budget will be neutral. But where a local authority is spending more than what is covered by the EC it will form part of its normal budgeting process and therefore will be aggregated and would be subject to capping.

Lord McIntosh of Haringey

I feared that that would be the answer. That means that local authorities which succeed in gaining European Community funding on a basis which involves their contributing to it themselves may find themselves penalised for doing something which is approved of by the European Commission and is approved of to the extent of getting funding from Europe. However, because of the capping provisions, they may be unable to take it up because they may be unable to get authority from Marsham Street in order to expend their part of it. That seems paradoxical. It seems to me that central government in Britain are putting themselves quite unnecessarily above the judgment of the European Commission and indeed are running a severe risk that local authorities may lose the opportunity to bid for European Community grants.

This is an extremely complex matter. We shall have to read the reply given by the Minister and then consider whether we need to return to it at Report stage. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 8 to 12 not moved.]

Clause 1 agreed to.

6 p.m.

Clause 2 [Amendment of grounds for charge capping in Scotland.]

Lord Carmichael of Kelvingrove moved Amendment No. 13: Page 2, line 4, at end insert ("and the Secretary of State shall not treat the total estimated expenses of an authority as excessive when the budget set by the authority results in an increase in expenditure lower than the rate of inflation prevailing at the date on which the budget is set".).

The noble Lord said: This amendment and the three which follow it on the Marshalled List, although they have not been grouped together, are really concerned with the results of what is believed by many, in particular the Law Society of Scotland, to be a change in the attitude of the Government to Scottish rates and poll tax. The main concern is the dropping of the test of "excessive and unreasonable" expenditure. The test is to be replaced by a situation where the Secretary of State will consider whether an authority's planned expenditure is "excessive" or whether there is an excessive increase in planned expenditure compared with the previous year.

If the Secretary of State for Scotland is following the English rule and other assessments, as he apparently is in this part of the Bill—and I am glad that the noble and learned Lord the Lord Advocate is here to explain the situation to me—then, in addition to measuring proposed increases in budget percentages from year to year, he will also look at the Government's expenditure target, which for Scotland is called "the grant-aided expenditure assessment". In England, the near equivalent is the standard spending assessment.

The grant-aided expenditure assessments in Scotland were primarily developed for the purpose of distributing grant on a more fair and equitable basis. It has never been recognised by authorities in Scotland, nor by organisations like CoSLA, as being a suitable mechanism for identifying the absolute need for an authority to spend. Further, that point has repeatedly been acknowledged in circulars from the Scottish Office. By just applying the English rules to the budgets set by local authorities this year and using grant-aided expenditure assessment as part of the Government's control mechanism, 31 local authorities in Scotland would have been capped.

Perhaps I may give the Committee an example to show just how ludicrous that arrangement would have been. Stirling District Council would have been capped, although it had no increase in the poll tax it charged this year compared to last year. Moreover, Shetland Islands Council would have been capped despite the fact that it presently has a poll tax of only 93 pence per annum. I am sure that the Minister is aware of how ludicrous is the argument. I hope that he will be able to reassure us by way of the Government's response. I beg to move.

The Lord Advocate (Lord Fraser of Carmyllie)

In moving the amendment, the noble Lord, Lord Carmichael, has briefly traversed the ground in relation to those authorities in Scotland which have had budgets in excess of their grant-aided expenditure. With respect, I should tell the noble Lord that I am not sure that there is a great deal to be gained by going over decisions which the Secretary of State took in Scotland on the basis of a test which relates not only to excessive but also to unreasonable expenditure. The noble Lord is obviously aware of the change which is proposed for Scotland.

Perhaps I may address my remarks specifically to the effect of the amendment before the Committee. Its effect would be to require the Secretary of State to use the rate of inflation at the time the local authority's budget was set as the yardstick by which to measure "excessive" expenditure. Quite apart from the fact that this would take no account of any authority which was already budgeting well in excess of its grant-aided expenditure figure, this amendment does not provide for the fact that—as in the current year—inflation could fall sharply between the time budgets were set and the start of the year in question. I believe that the noble Lord will appreciate that it is not unknown in Scotland for the local authority to fix its budget for the coming year before one calendar year has expired; indeed, sometimes it is done in December or certainly before the end of January.

The Secretary of State and all taxpayers have the right to expect authorities to take into account when they set their budgets forecasts of a fall in inflation for the year ahead. On that basis, I must tell the noble Lord that his amendment seems to be unacceptable. With that brief explanation of what the amendment before us entails, I invite the Committee to reject it.

Lord Carmichael of Kelvingrove

Before the Minister sits down, can he say whether he would reconsider the matter if the amendment were to be reworded in order to provide that "attention" would be paid to the rate of inflation, or that "allowance" would be made for it, so that if it was negative inflation the Secretary of State would legitimately, as per the present wording, be entitled to take a lower figure but if it was above such a figure he would also be entitled to make allowances for that fact?

Lord Fraser of Carmyllie

I know that the noble Lord will appreciate that one of the changes which is allowed for and set out in this clause for Scotland, which I understand applies this side of the Border as matters stand, is that the Secretary of State will have regard to principles as he may determine in respect of that year. It may be that he will set out his capping criterion in advance. The noble Lord puts forward the example of 31 councils which would have been caught by the English criteria. But if, in the future, criteria are to he established for Scotland, the authorities concerned would know in advance what was the situation. Therefore, in those circumstances, they would be in a position to budget sensibly.

Lord Carmichael of Kelvingrove

I am grateful to the Minister for his explanation. It is one that will need to be studied closely and one upon which we shall take advice. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Carmichael of Kelvingrove moved Amendment No. 14:

Page 2, line 27, at end insert: ("(d) in Schedule 3 to the 1987 Act in paragraph 2 for the words "without having afforded the local authority to which the report relates an opportunity of making representations" there shall be substituted the words "without a meeting between himself and representatives of the local authority to which the report relates being held to discuss"; (e) in Schedule 2 to the 1987 Act at the end of paragraph 2 there shall be inserted the words "Such a report shall not be laid before Parliament until the Secretary of State and the local authority to whom the report relates have been questioned in public by the Select Committee for Scottish Affairs on the contents of the report." ").

The noble Lord said: This amendment also refers to the 31 local authorities. I am sure the Minister knows the ones to which I am referring, as they have been well publicised. It deals with the unlimited powers being given to the Secretary of State by means of the Bill. It really points to a situation where local government in its entirety is being subjected to capping, and not just those authorities whose expenditure was considered in the past to be both unreasonable and excessive.

That point really leads on to the other amendments. It would have been better had all these amendments been grouped together, but I only realised today that this had not been done. At present, it seems that the Secretary of State has almost total power. In addition to the scrutiny of Scottish capping and the proposal for representations to be made, we are suggesting that there should also be a meeting between representatives and the Secretary of State. In other words, in addition to representations being made, we believe that there should be a sort of statutory meeting. Further—I accept the fact that this is perhaps too openly democratic for the Secretary of State—prior to a report being laid before Parliament, we suggest that there should be a second requirement that the report itself should be questioned in public by the Select Committee for Scottish Affairs.

Both this amendment and Amendment No. 13 were tabled in an attempt to heighten awareness of the very wide-ranging powers which the Secretary of State will have if the Bill is passed in its present form. The Bill would give him quite unprecedented powers. I beg to move.

Lord Fraser of Carmyllie

As the noble Lord clearly spelt out, the amendment would have the effect of altering and prolonging the procedures followed where the Secretary of State undertakes capping action. It would, first, place a requirement upon him to hold a meeting with representatives of any local authority against which capping action had been taken before he could make and lay a report before this place proposing a reduction in the personal community charge.

Such a requirement is superfluous. The present legislation, through paragraph 2 of Schedule 3 to the Abolition of Domestic Rates (Scotland) Etc. Act 1987, ensures that authorities have the right to make representations, as the noble Lord is aware. In practice, they are invited to make written representations, and if they request a meeting further to discuss those representations, the Secretary of State would almost certainly agree to that. Indeed on every occasion where a local authority in Scotland has requested a meeting, that request has been agreed to.

The terms of the amendment are also impractical. No provision is made for a local authority to send in written representations, merely that a meeting should be held. That would deprive an authority of the opportunity to set out its arguments in greater detail than is possible at a meeting. Furthermore, the amendment would require a local authority to have a meeting with the Secretary of State even if it did not think that that was essential.

The second part of the amendment would require the Secretary of State, and any authority against which capping action was being taken, to appear before the Select Committee on Scottish Affairs. I suspect a note of mischief in the amendment. The noble Lord is very much aware that there has been no Select Committee on Scottish Affairs since 1987, for reasons which are also well known. I hope that there will be a change which will allow for the re-establishment of the Select Committee at some time in the future, but one cannot envisage that happening immediately.

The effect of the amendment would therefore be to wreck the clause, since under its terms no report proposing a reduction in an authority's community charge could ever be laid. I am sure that that was not the noble Lord's intention, but I have to advise him that that is the practical effect of the proposal contained in the second part of the amendment. Existing procedures allow local authorities adequate opportunity to make representations, and with that explanation of the two parts of the amendment, I urge the Committee to reject it.

Lord Carmichael of Kelvingrove

I again thank the Minister for his reply. When we consider a Bill in this place, everyone tells us that we are planning for the future. I believe that we are only 21 points ahead in Scotland at the moment. We shall probably have a Select Committee after the next election, because something will need to be done about it.

However accommodating the Secretary of State is, and there have been some accommodating ones, there is always the feeling that the local authority and the public, in a wider sense, are never brought into the discussion. That is one of the reasons why we felt a Select Committee should examine the matter. I said that the proposal was perhaps over-democratic, but we should be able to find a mechanism that does not delay the procedure too much. I hope that we shall see the day when such matters are discussed and the more interesting parts televised so that the population of Scotland will realise what local authority expenditure is all about. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

6.15 p.m.

Lord Carmichael of Kelvingrove moved Amendment No. 15:

Page 2, line 32, at end insert: ("(4) The Secretary of State shall within twelve months of the coming into effect of this section make an order giving effect to the provisions of section (Application of Scottish criteria) below.").

The noble Lord said: The feeling is that the Scottish criteria are being undermined by the Bill. The Minister may already have been given some information by the Law Society of Scotland which, among others, is worried about the proposal. We are anxious that within 12 months of the section coming into effect the Secretary of State should make an order giving effect to the provisions of a section dealing with the application of the Scottish criteria.

We are worried that none of the powers in the Bill is effected by affirmative resolution. All are subject to negative resolution which affords little opportunity for discussion in either place. The basis of the objection is that the word "unreasonable" has been omitted. That affects the way we have been working in Scotland. In dealing with the other amendments, there was a feeling that where expenditure was obviously necessary the local authority could take the Government to court. To include only "unnecessary" and not to allow reasonableness to be discussed falls short of what we consider obvious justice in the Scottish sense. I beg to move.

Baroness Blatch

It is interesting to note that the amendment would apply solely to charging authorities. Does the noble Lord have a particular reason for exempting precepting authorities from the concession? Will not preceptors feel hard done by if they do not receive a similar relaxation in the rigour of the capping regime which will be enjoyed by their charging authority counterparts?

The amendment runs totally counter to the measures to extend our capping powers which we are convinced are necessary if we are to be able to protect all charge payers from the consequences of excessive expenditure. The success of the capping regime in 1991–92 in limiting local authority budgeted spending to only about 0.5 per cent. above the amount provided for in the settlement is a well-established fact. The power for my right honourable friend the Secretary of State to cap authorities indulging in excessive increases in expenditure was an integral part of that regime and will remain so. Indeed, it is precisely because the powers previously available to my right honourable friend the Secretary of State for Scotland are too limited that we seek the powers contained in Clause 2.

The Opposition are happy to see a much weaker form of capping introduced in England and Wales, the effect of which would be to prevent my right honourable friend taking the kind of robust action which has saved many charge payers from facing excessive bills this year. The amendment would remove one limb of the capping criteria under which we currently operate—the power to cap excessive year-on-year increases in budget—and would seriously damage the effectiveness of the second, the power to cap budgets which are, in my right honourable friend's view, excessive in absolute terms. The combined effect would be significantly to reduce the protection that we are able to offer to charge payers. I call upon the Committee to reject the amendment.

Lord Carmichael of Kelvingrove

I accept the flaw in the amendment that the precepting authority would be the only authority that could appeal to the Secretary of State. The authorities precepted upon would be unable to do so. If I include them in an amendment on Report, perhaps the Minister will consider the proposal.

The word "unreasonable" has been used in Scottish legislation. It is well-established. The courts are well able to decide what is reasonable and what is unreasonable. The spirit of the amendment is not as bad as the Minister made out. It is one with which we have worked for some time. However, I realise that the amendment is flawed, and I beg leave to withdraw it.

Amendment, by leave, withdrawn.

Clause 2 agreed to.

[Amendment No. 16 not moved.]

Clause 3 [Valuation of domestic properties]:

Baroness Hollis of Heigham moved Amendment No. 17: Page 2, line 35, after ("required") insert ("(a)".

The noble Baroness said: I wish to move Amendment No. 17 and speak to Amendments Nos. 21 and 39. These amendments seek a clear statement by the Government that local authorities are competent to start preparations for the new tax so that it may be introduced as smoothly as possible. We fear that without such an acceptance on the face of the Bill, spending for these purposes could be ultra vires. It seems clear that providing information for valuation seems to be covered by law but more general preparation for the bill may not be. The reason for this is that, if Members of the Committee will cast their minds back to the preparations for the poll tax, local authorities had two years in which to gear up. However, when the tax was introduced we found that canvass forms were inaccurate; computers broke down or refused to talk to each other; software did not arrive in time or did not work; laser printers could not read the forms; packaging machinery did not operate. Some lucky residents ended up receiving six poll tax demands, not all with an identical sum on them, and others received none at all. As everyone queried everything, the phone system and advice surgeries broke down as well. That is before we get on to rebates, benefits and the need for high security windows to protect the staff.

In the name of sanity, we want time to avoid all that. I appreciate that the DoE is involved in consultation, but if there is to be any hope of local government meeting the April 1993 deadline—which I have to say I somewhat doubt —we must start preparations now. We must not delay them until after the passing of the major Act, perhaps in the autumn. I beg to move.

Baroness Blatch

As far as valuation is concerned Clause 4 of the Bill places a duty on authorities to supply any information requested in a notice served on them by the Commissioners of Inland Revenue. If the Bill now before this Committee is enacted, authorities will be placed under a duty to provide that information. There will, therefore, be no doubt about their powers in that respect.

I now turn to the more general preparations for the introduction of the council tax. As prudent managers, local authorities will of course look ahead. There is nothing unusual in the process of looking at statutory functions and assessing possible developments in the future. If I were still in local government today I too should be looking at how my authority should prepare for the introduction of the council tax. I add that it is clear from the many detailed responses we have received on our council tax proposals that many authorities are doing just that.

We have announced our intention to legislate next Session to introduce the council tax in April 1993. It is that legislation which will give local authorities the necessary powers generally to prepare for and to implement the council tax. If it is enacted according to our plans local authorities will have all the necessary powers early in the 1992–93 financial year. It is our view I hat in such circumstances it is open to authorities to make a contingency allowance when prepaying their 1992–93 budgets to cover the expenditure they estimate they will incur in 1992–93 in exercising those powers.

We have asked local authorities to let us know of any specific difficulties they foresee with such arrangements. We have not yet received anything from them, but if we do we shall of course consider carefully what they have to say. But whatever the authorities might tell us about preparing generally for the council tax, these are not matters for this Bill. This Bill is about the valuation of domestic property. General preparations for a new form of local taxation is an entirely different matter. It is a matter for future legislation. I believe it would be wrong in principle for us to do more than to deal with valuation. I call on the Committee to reject the amendments. Finally, I must advise the Committee that if these amendments are accepted, they would be a matter of privilege in another place.

Baroness Hollis of Heigham

I thank the Minister for her reply, which we shall study carefully. I am happy to have her reassurance that the issue of valuation seems to be well covered by law.

I turn to the point about general preparation. As I understand it, subsections (2) and (5) of Section 114 of the Local Government Finance Act 1988 both seem to suggest that a local authority may be vulnerable under the provisions on maladministration ultra vires on any expenditure in advance of the major Act being passed.

The Minister made it clear that the local authority would have powers to include appropriate expenditure in its budget for the coming year once the Bill had passed (should it do so, given other contingencies). In practice that means that staff cannot be appointed and expenditure cannot be incurred for software, except for ordering and the like, until the financial year of April 1992, to take effect for the next year, 1993.

I understand that the noble Baroness is involved in consultations, and I hope that there is good will on the issue. Nevertheless, I repeat to her that, as concerns the ability to incur expenditure in April 1992, 12 months will not be adequate if the Minister seeks to meet the timetable that the Government themselves have laid down for the introduction of the provisions of the Bill in 1993. All our experience on the poll tax suggests that it took us two years and after that a further 18 months for the legislation to begin to run even faintly smoothly.

If the Minister seeks to tell us of the preparation time, she will find that the council tax may, I fear, have an even bumpier initial ride, should it come to pass, than the poll tax. I believe that between now and Report stage the Minister will have received the responses to the consultation document. I very much hope that we may then pursue the matter further with good will. I am sure that there is no real dispute between us, but as the provisions stand I fear that the Minister may be acting in a rather shortsighted way and that would be regrettable. However, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord McIntosh of Haringey moved Amendment No. 18: Page 2, line 35, leave out ("a") and insert ("an individual").

The noble Lord said: In moving this amendment, I wish also to speak to Amendment No. 28. I hope that the Minister will not say about all amendments to Clause 3(1) that they will be subject to privilege if they are accepted. It seems to us that there is a conflict between subsections (1) and (3) of Clause 3 about the basis of the valuation which is prepared for in the Bill and which is planned for the new council tax.

Clause 3(1) states: There shall be paid out of money provided by Parliament such sums … to enable a valuation to be carried out, in accordance with the following provisions of this Act, of all domestic properties in Great Britain". Then we turn to subjection (3), which states: The valuation shall be carried out … differentiated according to prescribed bands of values". Those words seem to us to be deliberately opaque. They have been explained by Ministers in another place on a number of different occasions but the explanations do not entirely add up. It is still not clear whether the intention is, as in Clause 3(1), that the valuation should be of all domestic properties or whether, as in Clause 3(3), there should only be valuation, differentiated according to prescribed bands of values".

Our position must be made clear. We do not believe that justice will either be done or be seen to be done if the valuation is only to be on a grouped basis for bands of value. It will not be just if there is to be no individual valuation of individual properties and if the owners or occupiers of those properties are not to know what the valuation is but will simply have to be content with knowing into what band they fall.

Ministers made great play in another place of the valuer standing at the end of a street looking down it and saying, "Ah, these houses are all the same. We shall put them all in the same band". I do not believe that people in any given street ever feel that all their properties are of the same value; nor do purchasers believe that they are the same.

All kinds of different considerations apply—for example, the convenience that the position of the house in the street offers. Considerations such as the availability of car parking come into play, or physical factors such as extensions which have been added to a house. The values of houses differ according to what people have done with their houses. Therefore people are right to want individual valuations. They are right to expect that a valuation for the purpose of taxation which will remain in force for a long time will be based on a proper valuation of an individual property. They are right to be worried at the thought of a valuer standing at the end of a road and valuing properties in that road by casting an eye down it. If that is the case, I do not think people will consider they have been dealt with fairly.

Similarly if people do not know what the valuation of their property will be, how will they know whether or not to appeal against the assessment? That is the real problem. Some Ministers in another place seem to think that if people only know which band they are in, there will be fewer appeals. I suggest that the opposite will be the case. I suggest that because there are so few bands and because the difference between bands is so significant, people who do not know what their individual valuation is and how far away they are from the edge of a band will appeal to gain a significant advantage from being put into a lower band. I suspect that if this scheme goes forward, there will be many more appeals and litigation, and much more trouble for the valuation profession than would be the case if we had a system that was from the outset self-evidently fair and just.

We appeal to the Government to save themselves from what seem to us to be the inevitable consequences of a badly thought out attempt which seeks in effect to protect the interests of Tory voters who live in more expensive properties. That is why the system has been set up in this form but it will rebound on the Government in a similar way to the poll tax although perhaps not with the same ferocity. I beg to move.

6.30 p.m.

Baroness Blatch

These amendments seek to reintroduce an individual valuation of each domestic property. The result would, I believe, be a step backwards. It would be expensive and unfair and would delay the introduction of the council tax. It would be expensive because it would require the precise valuation of each house, each flat and each dwelling in Great Britain. On the basis of the proposals suggested by the Opposition, that valuation would be based on four factors: market values, rental values, building costs and repair and maintenance costs. The cost of a professional assessment of each of these factors would be astronomical, and there would be a need for frequent revaluations if individual values were to be kept accurate. This would mean yet more astronomical costs.

We must contrast that with our proposals, which avoid the need for precise valuation. These proposals have been widely welcomed. We provisionally estimate that the costs of allocating properties to bands will be about £250 million or about £11 for each property. This is not a small sum of money, but it is only a small fraction of the sum that would be required if there were to be an individual valuation carried out in the manner underlying these amendments.

The noble Lord's amendments concern the complex system preferred by the Opposition. In speaking to this amendment it was clear that the noble Lord had overlooked the fact that the bands are sufficiently wide to allow for general banding and that the tax rate between bands is not that great. I believe the noble Lord said the opposite. We believe these amendments seek a reintroduction of an expensive and unfair system. I call on the Committee to reject them.

Lord McIntosh of Haringey

This is not the only amendment that we have tabled to this clause. Later amendments, which have to be discussed separately for the sake of clarity, make it clear that we believe it is possible to return to the 1973 rates in the short term for all existing properties. The valuation which is required on an individual basis will only be required for new properties. Our Amendment No. 20 concerns that point. Therefore the argument that our provision is not feasible on financial grounds does not stand up.

It is true that the gap between different bands is not as great as it should be. It is also true that the tax is a flatter tax than a property tax should be. It does not reflect real differences in property values, just as property values themselves do not reflect ability to pay. That is why—as we shall indicate in later amendments—it is necessary to temper a purely property tax with ability to pay as indicated by income. For all those reasons the proposed council tax, which we shall debate in full in the autumn, is far less just than the system of local government finance which we wish to put in its place.

Lord Renton

Has the noble Lord calculated what it would cost to go back to the 1973 valuation? I am sure he would find it was a very considerable amount to start afresh on that. Bearing in mind that in all such matters of public expenditure we have to compare cost with benefit, does the noble Lord really consider that the large cost of his proposal would produce a benefit that is worthwhile?

Lord McIntosh of Haringey

To go back to the 1973 valuation for those properties which have not been altered would not cost anything at all because the valuations already exist. However, I believe the point the noble Lord, Lord Renton, wishes to make is that our proposals require a new and, I accept, complex valuation, over a longer term. The Minister mentioned the figure of £250 million as the cost of even this curtailed government valuation system. I ask Members of the Committee opposite to consider that figure in the light of the figure of £800 million given by the Audit Commission as the cost of a single year's delay in the introduction of a new and effective system of local government finance.

Lord Renton

I have listened carefully to the noble Lord a s he is always so well informed on these matters. But is he really saying that we could base this new valuation—I believe we have had five quotations—on 1973 values without any regard to the change in the value money or to the work that may have been done on a particular street of council houses? There are bound to be changes that should be taken into consideration and the cost of the detailed estimation of those changes would be very considerable.

Lord McIntosh of Haringey

The noble Lord made two points. One concerned the change in the value of money. I am sure that with his knowledge of local government affairs the noble Lord will agree that that matter will be dealt with automatically by the difference between rateable value and rate poundage. In other words, where values are out-of-date and have not reflected changes in the value of money, the change in the value of money is reflected in the rate poundage which is levied. That has been a feature of the rating system for many years under all governments.

The noble Lord made a second point about those properties which have undergone significant alterations s. nee 1973. That is a valid point. We accept that there will have to be some interim valuations for new properties or for properties which have undergone significant alterations in order to establish as fair a system as possible even in the short term. But all those factors pale into insignificance beside the £800 million a year which has been identified by the Audit Commission as the cost that would result from delaying the introduction of an acceptable and accepted system of local government finance. Members of the Committee opposite who were responsible for the introduction of the poll tax and the chaos that it has caused, and for the huge losses to the public purse that have resulted from that tax—quite apart from the social unrest that it has stirred up—should be more aware than they appear to be of the figures that I have mentioned.

We say that it is possible to make an immediate move away from the poll tax and that it is not necessary to keep the poll tax for two years, as the Government propose. It is possible to undo the most damaging effects of the poll tax fairly rapidly and at the same time give adequate attention to producing a scheme of local government finance which will work and which will be acceptable.

Baroness Carnegy of Lour

The noble Lord has spoken about the cost of delay. Is he really saying that it would be just to resurrect valuations which were so different from one another and from the previous valuations? The most important point which my noble friend mentioned was the enormous rise in the value of some houses in comparison with others whose value has stayed still or hardly risen at all. That is where the injustice lies and that was the injustice which was revealed in Scotland. The noble Lord must not mislead us into thinking that a return to the old valuations, even for a very short time, could conceivably be just or acceptable. Is he saying that the Labour Party in government would do that?

Lord McIntosh of Haringey

I am sorry that the noble Baroness should wish to return to the panic which struck the Conservative Party in Scotland when it saw the effect of the revaluation there. Conservatives failed to see the point that changes in rateable values which took place over large areas of Scotland would be corrected by changes in the rate poundage demanded. They were in a complete panic because they did not understand and would not explain to the Scottish people the difference between a change in rateable value and a change in rate poundage. They did not explain that an increase in the rateable value of an area does not demand a single penny extra in local authority expenditure in that area.

Baroness Carnegy of Lour

The noble Lord cannot get away with that. He knows perfectly well that within a given area of local government there was an enormous increase in the rateable value of some houses while others had stood still or reduced in value. That was the problem and it would be enormously magnified in England now.

Of course I understand how rate poundage worked. I operated it for years, just as the noble Lord did. He has heard me say before that in the area where I live the value of some houses multiplied three times while others within the same area did not. That is what he is suggesting might happen in this country. It would be extraordinarily unfair, whatever he says.

Lord McIntosh of Haringey

In so far— and it is not very far—as the noble Baroness has a point, it is in her claim that the valuation is not being done well enough and does not reflect property values as it should. Later this evening we shall consider amendments which seek to deal with the laxity of the procedures being proposed in this Bill. The Government intend to privatise the valuation system. I wonder whether that is well understood. There is no provision anywhere for those who will do the valuation to he properly qualified. There is no provision that it should be done on a consistent basis as it would have to be if it were undertaken by the proper public authorities. If the noble Baroness is claiming that the inadequacy of valuation is the damaging factor, then that factor applies with extra force to the proposals which are made by this Government. However, the issue is much more profound.

I blame all Conservatives for the poll tax but I blame Scottish Conservatives particularly. Conservatives in the rest of the country will also blame Scottish Conservatives for the poll tax. Scottish Conservatives, faced with a revaluation of the rates, panicked. Their panic has driven us all to the desperate plight in which we now find ourselves. I shall gladly give way to the noble Baroness.

6.45 p.m.

Baroness Blatch

I am not intervening. I am replying to the amendment.

My noble friends Lord Renton and Lady Carnegy of Lour raised an important point. Defence being better than attack, the noble Lord, Lord McIntosh, chose simply to answer every question with an attack on yesterday. My noble friend Lord Renton posed a very simple question: are noble Lords opposite really saying that a return to the rating system would cost nothing? In reply the noble Lord, Lord McIntosh, said that it would cost nothing. I suggest that it would cost the ratepayers dearly, and not only Scottish ratepayers, who will not enjoy the prospect of returning to the rating system. The rating system has been declared by all, including the leader of the noble Lord's party, as unfair, out of date and discredited. Returning to a rating system is not a happy prospect. I believe that it would be costly. The people for whom it would be costly would be those who have to meet those very high bills.

The noble Lord criticised the present Government for the time it will take to bring in the new council tax. He said that we shall be lucky to bring it in by 1993. We intend to do so. The noble Lord said that it would take until 1994 at least. I suggest that the system which the noble Lord proposes is far more complex. The valuation will take much longer and will be much more expensive, and people will be faced with returning to the discredited rating system not for one year or two years but possibly for much longer than that.

The nature of the grant system for the council tax is a matter for the main council tax Bill and not for this Bill. Until we come forward with that Bill, which this Chamber will be able to consider in good time, it would be wrong to preclude using any information for purposes connected with grant distribution.

However, we have made clear that the present grant system should be amended as little as possible in order to accommodate the new system of local taxation. At present grant is distributed so that local authorities can finance spending at the standard level by levying a common community charge. For the council tax which we propose authorities in each area can finance spending at the standard level by levying standard taxable amounts fixed by the Secretary of State. There would be one amount across the country for a band A property, one for a band B property and one for a band C property, and so on. In that way authorities will be compensated for differences in their expenditure needs and for any variations in their taxable capacity.

In simple terms, couples living in properties in the same band anywhere in each country—England, Scotland or Wales —will face the same council tax bill before any rebate or discount which may apply if their authorities spend at the same standard level. Information about the banding of properties would be a vital tool to achieve that. To preclude its use would deprive us of the main basis for determining the level of taxable resources in each area.

The proposal that relative aggregate personal income in each area should be used in the formula would make no sense in our proposals. It would mean that properties in the same band but in different local authorities would pay different amounts of council tax even if those authorities spent at the same standard level. There can be no sensible justification for that and I therefore call on the Committee to reject the amendment.

Lord McIntosh of Haringey

It is a pity that in her response the Minister did not choose to give a reply which bears any relation to the amendments. That is not what the amendments say. The Minister, and her supporters on the Government Benches, seek to make much of the injustice of the earlier rating system even though it is absolutely clear that our intention is to return to the rating system only as a short-term measure in order to avoid the very much greater injustice of continuing with the poll tax for a year longer than is absolutely necessary.

We have to consider what is to be put in place of the poll tax in the longer term. I put it to the Committee that what the Government propose is more unjust than anything which could ever have arisen from the rates. They propose a property tax based on capital values. The Minister has made it quite clear that the same amount will be raised from a property in Hackney worth £165,000 as from a property in Virginia Water worth £1 million. That does not represent ability to pay, which is what we argued about when we first debated the poll tax when Lord Chelwood moved his amendment relating to ability to pay. I am sure that he would not have been satisfied to be told that a millionaire in Virginia Water is to pay no more than a council tenant in Hackney whose property is rated highly because of its location but who cannot afford to buy it under the right-to-buy procedures. The value of property in different parts of the country depends on factors very different from the ability of the tenant or owner to pay taxation.

Baroness Blatch

Does the noble Lord agree that the rating bill for the majority of people in this country would be higher than the present community charge if we were to return to the old rating system?

Lord McIntosh of Haringey

I certainly do not agree that under a proper system of local government finance, which includes local determination of the unified business rate—a matter we are not allowed to discuss in the context of this Bill—the rates raised from and determined by local people would be higher than they would be under the poll tax. Under the poll tax, because we try to take money from people who do not have the ability to pay, we spend hundreds of millions of pounds on extra collection costs. The Government admit that. It costs hundreds of millions of pounds extra for those who have to make up the deficit caused by those who cannot pay. Clearly, it is not because they will not pay; it is because they cannot pay. Any system which gets away from the shambles in which we have found ourselves since 1987–88 will be better and fairer than the present system.

Baroness Blatch

The noble Lord suggests returning to the rates immediately, pending changes. Does he agree that the majority of people returning to the rates, pending changes, would be worse off than they are at present when paying the community charge?

Lord McIntosh of Haringey

One cannot estimate what kind of rebate scheme one will have. The Government have insisted on a rebate scheme under which millions of people are required to pay 20 per cent., which they cannot afford, of 100 per cent., which it is recognised that they could never afford. It costs more to collect that 20 per cent. than it represents in revenue. We should like to table amendments to put the matter right. We should like an opportunity to put the matter right because the Government know that it must be put right. But the Bill is so drafted that we cannot put it right now. Neither the present system, which is patently not working, as the Government recognise, nor the proposed alternative, will be fairer than our proposals or the proposals of the Liberal Democrats. A local income tax would be much fairer than the Government's proposal. This is a panic compromise. It is designed to get away from the collapse of local government finance, brought about by the Government, without offending rich Tory voters. It will not work.

Perhaps I may now return to the amendment to which the Minister was studiously determined not to refer. The only just way of achieving a valuation—the only means of achieving what will be seen as a just valuation—is to have an individual valuation of each property. We have suggested how that can be done and how delay and injustice can be avoided. It is a matter of deep regret that the Government do not understand the significance of the proposal.

Lord Swinfen

Is not the noble Lord mixing up the capital value of property—in other words, what it would fetch on the open market—with the rateable value which is a theoretical letting value? The two values do not mix. In addition, am I not right in saying that, since the last rating revaluation, there are a number of appeals still outstanding, not only in Scotland but in England and Wales, which complicate the whole business? There will be appeals on new properties that have been built since the rating system was abolished, coupled with the appeals still left over from the old rating system which have not been settled because the process takes a long time.

Lord McIntosh of Haringey

The noble Lord, Lord Swinfen, should address his comments to the Government Front Bench because it is precisely the system proposed by the Government that will cause the difficulties he describes. It is precisely because the Government's system is based purely on capital sale values and not on notional rental values that the injustice that has been described will come about. If it is to work, a rating system must take more into account and must be tempered by consideration of people's ability to pay. If the noble Lord reads carefully what I have said and, perhaps more importantly, what the Government have said in reply, he will see that all his criticisms fairly and squarely come home to roost on the Government's proposals. They do not apply to our proposals. We shall certainly return to the matter on Report. I shall not be seeking the Committee's opinion. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord McIntosh of Haringey moved Amendment No. 19: Page 2, line 35, after ("valuation") insert ("with the purpose specified in subsection (4A) below").

The noble Lord said: In moving Amendment No. 19, I should like to speak also to Amendment No. 35 which is the substantive amendment. The proposal is designed to get away from the difficulty of the government scheme. I suspect that this is partly what the noble Lord, Lord Swinfen, was talking about. The danger is that property values will be used not just to set individual taxes but to distribute revenue support between authorities.

Baroness Blatch

I hope the noble Lord will forgive me for intervening. As I understand it, we have just dealt with Amendments Nos. 19 and 35.

Lord McIntosh of Haringey

I feared that that was the case. I was speaking to Amendments Nos. 18 and 28. That was why I did not understand the Minister's reply.

Baroness Blatch

I spoke to Amendments Nos. 18 and 28 which introduce individual valuation of domestic properties.

Lord McIntosh of Haringey

When the Minister rose to reply, I thought that she had jumped ahead of herself, and that is the case. I was still speaking to Amendments Nos. 18 and 28. I had not moved on to speak to Amendments Nos. 19 and 35. That may be the cause of the misunderstanding. There is no misunderstanding between myself and the noble Baroness, Lady Carnegy. We understand one another very well, although we disagree. However, I had spoken only to Amendment No. 18, as the Chair will confirm, and I did not seek leave to withdraw it until a moment ago.

Baroness Blatch

I understood that the noble Lord spoke to the amendment which is concerned with individual valuation of each property. I therefore responded to Amendments Nos. 18 and 28. He then spoke to another amendment which was concerned with valuation. That is the amendment which starts: A valuation carried out under this section shall be for the purposes". I responded to that amendment, which was Amendment No. 35, in conjunction with Amendment No. 19.

Lord McIntosh of Haringey

The record will show that I did not move on from Amendment No. 18 to Amendment No. 28. If that had been the case, I would have had to seek leave to withdraw Amendment No. 18, and I did not do so until a moment ago. I fear that the Minister has got ahead of herself on her brief.

I should now like to speak to Amendment No. 19 which I have not moved previously. It is concerned with a different matter; namely, the use of property values as the resource base for local authorities. Under the Government's proposals, the only resource base which will be acceptable is that of property values. The trouble is that the Government now propose to return to the worst features of the rating system. I was drawn into the argument because of the way in which the Minister responded to my earlier amendments, not because of anything that I said when introducing the amendments. It brings back the issues of high capital values which are not related to the ability to pay and which were raised, quite properly, by the noble Lord, Lord Swinfen, and by the noble Baroness, Lady Carnegy, when they took part in the earlier debate.

The fundamental fallacy behind the Government's proposals lies in the fact that it is people, not houses, who pay taxes. For that reason it is necessary to have Amendment No. 35, which would provide: A valuation carried out under this section shall be for the purposes (and only for the purposes) of compiling lists differentiated according to prescribed bands of values … No use shall be made … in assessing the amount or distribution of revenue support grant between local authorities, except as part of a formula also reflecting the relative aggregate personal income of each local authority area". This is precisely the argument that we anticipated in the previous debate. It is because the Government's methods are so crude, and because they incorporate a fundamental unfairness in capital values without any mitigation reflecting ability to pay, that we believe that these amendments are necessary, and indeed will protect the Government from itself. I beg to move.

7 p.m.

Baroness Blatch

Perhaps I may start by apologising to the noble Lord. I now understand what has happened. I in fact responded to Amendments 18 and 28. The debate then rambled on—if my noble friends will forgive me—and I came back. One query was about valuation and the other was about the use of valuation information, and I came back with my response to this amendment speaking to Amendments Nos. 18 and 21. Therefore, I would ask the noble Lord to accept my response on the use of information, and I repeat only the last part of that answer. To achieve this information about the banding of properties would, we believe, be a vital tool, and therefore the amendment should be rejected.

Lord McIntosh of Haringey

I accept and understand the difficulties that the Minister has had. These are related groups of amendments and I suppose that it would have been possible to have had a single cover—all debate for all of them. That was not suggested either by us or by the department because we wanted to try to keep the separate issues as clear as possible and to deal with one matter at a time.

The fundamental point that needs to be made about all the amendments in this series whenever it is suggested to us that it is going to be more expensive to have an interim rescue operation—which is what the return to the rating system in the short term would be—followed by the fairer system compared with the proposals of the Government, is that nothing, but nothing, can be as expensive to the public purse as the poll tax or its proposed successors. Nothing that results in a cost of collection more than twice as high as the previous system can be called just nor can justify calling the previous system unjust. Nothing which results in such a high level of non-payment not because of unwillingness to pay but because of inability to pay can be called preferable to going back, even on a short-term basis, to the rating system.

The system that we have now, which was introduced by this Government after hours of debate in this House, is patently, and is now admitted to be, the most unjust system of local government finance that has ever been entered into. These amendments may not go as far as we would wish because they are amendments to a narrowly-drawn Bill. However, they represent an attempt to go back in a considered way, without unnecessary delay, to a fairer system than the existing system, and to move as rapidly as possible to a system that is fairer than any of the existing systems or the system that is proposed.

It is a matter of deep regret that the Government do not understand the significance of what we are trying to do. This may be a matter that we shall wish to return to at Report stage, but in the meantime I beg leave to withdraw Amendment No. 19.

Amendment, by leave, withdrawn.

Viscount Astor

I beg to move that the House be resumed. In moving this Motion, perhaps I may suggest that the Committee stage begins again at five minutes past eight.

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

House resumed.