Community Charges (Substitute Setting) Bill

HL Deb 18 March 1991 vol 527 cc396-400

3.5 p.m.

Lord Denham

My Lords, I have it in command from Her Majesty the Queen to acquaint the House that Her Majesty having been informed of the purport of the Community Charges (Substitute Setting) Bill has consented to place her prerogative and interests, so far as they are affected by the Bill, at the disposal of Parliament for the purposes of the Bill.

Bill read a third time.

Clause 1 [Personal community charges: substituted amounts]:

Lord McIntosh of Haringey moved Amendment No. 1:

Page line 19, leave out from ("above") to ("the") in line 20 and insert ("shall not exceed the amount which results from the application of").

The noble Lord said: My Lords, in moving the amendment I speak also to Amendment No. 2.

When the Bill was considered in Committee, a number of noble Lords, notably and most eloquently the noble Lord, Lord Rippon of Hexham, pointed out how impenetrable the wording of the Bill is. It is impenetrable not only because the subject matter itself is intrinsically difficult hut also because the Bill is framed as a series of amendments to the Local Government Finance Act 1988. Rather than reading the intention of legislation on the face of the Bill, reference has to be made continually to the text of the Local Government Finance Act 1988.

In the course of a number of debates on the Bill, and notably in her opening speech on Second Reading, the Minister described the Bill as a measure to protect charge payers from the possibility that local authorities might not pass on, as she put it, the benefits of the poll tax capping procedures. When I challenged her, I stated that of the authorities which had been poll tax capped last year, six had sought to reduce their poll tax by less than the amount required by Government, but eight had sought to reduce their poll tax by more than the amount required.

I have been reconsidering the question. I owe the Minister an apology. I believe that she stated to me on a number of occasions that it was possible for a local authority to reduce its poll tax by more than the amount set despite the rigidity of the formula set out in the Bill. Having apologised to her, perhaps I may say that she did not explain why. It is only by going back in detail since that time to the Local Government Finance Act that I have been able to read in Section 95(4) of that Act that there is indeed provision that the budget can be set lower and therefore that the poll tax can be set lower. I do not retract my apology in any sense in saying that the Minister could have made that clearer when she explained the matter to the House. I could have decided not to move the amendment. I believe however that the Minister should he given the opportunity to say why it is correct that the tax can be reduced by a greater amount when the budget is reduced by a greater amount.

When legislation is as complex and indirect as this measure, it is only right that in explanatory material the implications should be spelt out as clearly as possible. I am not the only person to have been confused by the wording of the Bill. It is clear from the debates in another place that the same mistake was made there. It could be that I am wrong and that my original arguments were correct. In that case I shall have to regurgitate the words that I have spoken and eat them again. It will be helpful if the Minister now sets out as simply and clearly as possible the position as she believes it to be.

The Parliamentary Under-Secretary of State, Department of the Environment (Baroness Blatch)

My Lords, I am grateful to the noble Lord. I find it very unusual that the noble Lord is not one up on me in the matter of information relating to the Bill. However, I am more than pleased to have the opportunity to elaborate on my answer to him in Committee when there were lively exchanges about whether the Bill would prevent an authority setting lower substitute charges than those implied by the budget reduction required by the cap.

This Bill would not prevent an authority resetting its charges, after capping, at a lower level than that implied by the budget reduction required by capping. There are two points here. First, there is, as I indicated in Committee, nothing to stop a capped authority reducing its budget by more than the cap requires. This is just what Hillingdon did last year. So too did Brent. The formula in the Bill ensures that the whole of that larger reduction is passed on to charge payers. Thus, as I said on 5th March, under the Bill, reductions in budget, whether the minimum to meet the cap or where the authority decides to go further, are fed through to charge payers.

Secondly, it remains entirely open to an authority—any authority —to set a substitute charge under Section 34 of the 1988 Act at a lower level if, for example, it found that its original estimate of non-collection was unduly pessimistic and it wanted to pass on the benefit mid-year to its charge payers. That is the position now and the Bill does not change it.

The noble Lord, Lord McIntosh, again referred to the fact that last year a number of authorities cut their charges by more than the amount which he described as that "required". I assume that the noble Lord does indeed have in mind the exemplifications which we published. There seemed to be some doubt about that during Committee. As I then said to the noble Lord, it is wrong to suggest that these exemplifications represented the precise charge which capped authorities should have reset. Some authorities set higher charges than those exemplified, some set them lower and some set them at exactly the same level. The charges actually set could be lower if they reduced their budgets by more than the amount required to comply with the cap. That is the Hillingdon-Brent situation to which I have referred. They could also be lower than those exemplifications, depending on the precise population figures used by the authorities.

But the amendments proposed are not merely unnecessary: they are undesirable. The noble Lord has indicated that they are to be withdrawn. The formula would mean that there would be nothing to ensure that the authority does not put its collection fund in deficit. By prescribing exactly how much charges should be reduced after capping, the Bill not only provides certainty to charge payers; it also guards against the situation whereby an authority could by cutting charges unduly fail to get insufficient income to the collection fund and incur a deficit.

The Government could not countenance a situation in which all ground rules were abandoned. The formula provides both a ceiling and a floor on charges after capping. These amendments would put a hole in the floor while leaving the ceiling intact. We need to retain the safeguard so that an authority's basic duty of sufficiency is not put at risk. As I have indicated, the Bill as drafted does not prevent an authority from using Section 34 if it so wishes and where it is proper to do so to reduce its charges further. But that section expressly provides that an authority using it is subject to the duty to raise sufficient income.

Section 34 gives a local authority the power to reduce the charge by more if necessary. Section 35 puts the duty on local authorities to reduce the charge if the budget is reduced; in other words, if there is a reduction in the budget there must be a resultant reduction in the community charge. Under Section 95(4) of the Local Government Finance Act 1988 local authorities are free to lower the budget. The cap refers to the budget level and not to the community charge level. Therefore, factor C which will be fed into the equation will be the degree to which a local authority has lowered its budget.

In conclusion, this Bill provides charge payers with certainty. The formula approach means that reductions in charges after capping can be predicted with pinpoint accuracy. This in turn means that charge payers in capped authorities will know exactly where they stand. It also means that there is a safeguard against tipping the collection fund into deficit by overzealous charge cuts. But all this in no way cuts across authorities' existing powers to reduce their charges where, for example, they consider that they have been unduly pessimistic about their estimates of non-collection. These amendments are both unnecessary and undesirable. I am grateful to the noble Lord for giving me this opportunity to explain to the House why they should not be pressed. If they were pressed I should ask the House to reject them.

Lord McIntosh of Haringey

My Lords, I am grateful to the Minister for her explanation. It is a relief that I do not have to regurgitate my words. Having acknowledged that the Minister is right and that I was wrong about the wording of the Bill. I am bound to say that the political argument against it is as strong as ever.

The Minister is now making clear the fact that at any time a local authority can reconsider its budget if it finds, for example, that its collection rate is more favourable than it had thought or for any other reason under Section 34; it can adjust its poll tax accordingly. However, it cannot take into account factors which would force it to reconsider in the opposite direction. In other words, all the arguments that we put forward which sought to convince the Committee that it was had business practice for a business plan to be produced on out-of-date, inadequate or inaccurate information as is provided for in the Bill are not weakened by the Minister's further explanation of the Bill.

It is now said that if new information is forthcoming from one direction account can be taken of it, but if new information is forthcoming from another direction no account can be taken of it. I cannot believe that the control of local authority expenditure should be engineered by the Government in that way. Nor can I believe that the Government can seriously expect this to be a long-term solution. It denies all the principles of accountability on which the poll tax was originally posited. Indeed, I have no doubt that within the next few days we shall hear that the so-called principles of accountability are to be withdrawn. Let us hope that we are to have a more sensible solution to the problems of local government finance. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 2 not moved.]

Baroness Blatch

My Lords, I beg to move that the Bill do now pass. A number of noble Lords have contributed to the debate on this Bill and to the proposals made for its amendment. I thank them for that. I recall in particular the contribution of my noble and learned friend Lord Hailsham of Saint Marylebone who suggested, with customary humility and good humour, that we all do the Lambeth Walk.

The Bill came to us from another place unamended and we have made no amendments to it here. It is an important measure to protect local people by guaranteeing that they derive the full benefit of the Government's intervention on their behalf to curb authorities' excessive budgets. I commend it to your Lordships.

Moved, That the Bill do now pass. —(Baroness Blatch.)

On Question, Bill passed, and returned to the Commons.