Lords Sitting of 4 February 1992

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

CAP and Developing Countries
Lord Judd Lord Judd asked Her Majesty's Government:
Whether they will propose a review of the implications of the common agricultural policy for food security in the third world.
The Minister of State, Ministry of Agriculture, Fisheries and Food (Baroness Trumpington): My Lords, in both the CAP reform and the GATT negotiations the Government take full account of the potential implications of change for developing countries. The Government have no plans for a review at present.
Lord Judd: My Lords, I thank the Minister for that reply. However, does she agree that over the past decade highly subsidised agricultural exports from the Community and from the United States have severely undermined agricultural production and food security in the third world, and exports by the third world? How can that situation be in the interests of sound social and economic development in the third world, or indeed in the interests of consumers and taxpayers in the Community? Is it not high time there was a comprehensive review of how development policy and agricultural policy could support each other?
Baroness Trumpington: My Lords, the European Community's export policy for agriculture is primarily directed towards managing Community markets and enabling Community produce to compete in world markets. The Community has other policies which are directed specifically at the interests of developing countries. These include arrangements for preferential imports from these countries as well as the provision of food aid where that is needed. For the future, policy will be influenced by the outcome of CAP reform and the GATT negotiations where the interests of those countries are being fully considered.
Lord Hatch of Lusby: My Lords, is it not the case that there is an anomaly between the attitude of the Community's development policy overseas and its agricultural policy within the Community? Would it not be far better both for the Community and for the people of the third world if instead of giving food aid, the Community were to make provision for a great deal more exports of foodstuffs from the third world, which would necessitate undermining and cutting the subsidies on food production in Europe?
Baroness Trumpington: My Lords, it is a question of the relationship between GATT and the CAP. Significant changes to the CAP would be necessary to implement a GATT agreement. But the CAP reform
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proposals do not address the key issues for the round, which are import access and export subsidies. Agreement in the Community on CAP reform will not be reached quickly. Therefore we want agreement on GATT to he reached first to provide a framework for CAP reform.
Lord Harmar-Nicholls: My Lords, are we not whistling in the dark? A satisfactory settlement regarding GATT is impossible without a fundamental change in the common agricultural policy. Should not that fact be faced up to and dealt with? I recognise the matter is not completely in our hands, but energetic efforts to settle the first problem of the CAP would appear to enable us to start to solve the GATT question.
Baroness Trumpington: My Lords, I am afraid I do not agree with my noble friend. It is vital that the GATT discussions succeed because they will provide boundaries within which CAP reform can take place.
Lord Gallacher: My Lords, in the current discussions on the restructuring of the CAP, is regard being paid to the preferential arrangements whereby member countries in the African, Caribbean and Pacific group are permitted to export to the Community agricultural products on favourable terms? As regards the main part of my noble friend's Question, how is it possible for us to achieve some radical reforms of the CAP to take account of the needs of developing countries so long as the powers on initiatives for change rest in the hands of the Commission?
Baroness Trumpington: My Lords, it is the only body we have to deal with. As regards the ACP countries, I presume the noble Lord refers to bananas. That is a complicated and ongoing subject. The Commission has so far not put forward proposals on that matter.
Lord Boyd-Carpenter: My Lords, has any progress been made in achieving agreement in the Uruguay Round of the GATT?
Baroness Trumpington: My Lords, the current state of play on GATT is that the draft agreement produced by Mr. Dunkel requires some clarification but it provides the basis for a possible agreement. However, several EC member states maintain strong reservations, and further negotiations will be needed before an agreement is possible. The UK will continue to work with our European partners towards achieving an early and successful settlement.
Baroness Seear: My Lords, is the noble Baroness aware that on all sides of the House the successful conclusion of the Uruguay Round is regarded as one of the most important political issues in the world today, and that failure to resolve it will have the direst consequences right across the globe, including in this country?
Baroness Trumpington: My Lords, I can only agree with the noble Baroness.
Lord Cheshire: My Lords, can the noble Baroness give a definition of the terms "third world" and "developing world"? Both have been used. Are they synonymous? Times change; and Poland, for example, is now below the breadline owing to circumstances. Do those terms apply to such countries or is third world a fixed term applying to certain countries only?
Baroness Trumpington: My Lords, it is my understanding—and I stand to be corrected—that the current phraseology refers to developing countries rather than the third world.
Lord John-Mackie: My Lords, is the noble Baroness aware of the figures which my noble friend Lord Judd quoted a few weeks ago; namely, that 1,000 million people in the world are starving; 170 million of them die each year. Of those 170 million, 92 million are children; and of those 92 million, some 30 million are babies? Is it outwith the ability of governments of countries which have food and are capable of growing food to do something about that?
Baroness Trumpington: My Lords, the Government's prime objective is to help countries with food deficits to produce food for themselves; for instance, to provide fishing rods rather than fish. For example, the Commonwealth Development Corporation, which does the most wonderful job, provides assistance for Commonwealth countries, financed largely on the basis of concessional loans from the aid programme.
Lord John-Mackie: My Lords, is the noble Baroness aware that 10 years ago when I entered this House the noble Lord, Lord Renton, whom I do not see in his seat today, made a speech on this subject in which he told the House that both the teaching of such people to grow their own food and providing food for starving people were long term matters. That has proved to be the case. Here we are 10 years later and there is still a problem.
Baroness Trumpington: My Lords, we have to produce suitable food. There is no shortage of suitable food. The problems of delivering food to famine areas are usually due to factors such as lack of resources, poor transport and inadequate distribution. What is the use of sending milk powder to countries where the water is contaminated?
Lord Judd: My Lords, does the Minister agree that whatever may be said about the relationship between the common agricultural policy and the Uruguay Round, many people in the world believe that there cannot be a satisfactory outcome to the Uruguay Round in the interests of the third world before there is a fundamental reform of the CAP because of the CAP's ruthless commitment to social priorities within Europe whatever the cost to the third world?
Baroness Trumpington: My Lords, I have already answered the point about GATT and the CAP.

EC: Role of UK Civil Servants
2.46 p.m.
The Lord Bruce of Donington The Lord Bruce of Donington asked Her Majesty's Government:
How many civil servants in Grades 1–7 inclusive in the Home Civil Service and the Foreign and Commonwealth Office respectively are wholly or mainly engaged on matters concerning the European Community and which Minister and Cabinet committee is responsible for co-ordinating their activities.
The Lord Privy Seal (Lord Waddington): My Lords, it is not possible to give a precise figure because of the difficulty of defining what are matters concerning the European Community and how many of the very large number of people who spend part of their time on European Community business are mainly so engaged. The Foreign and Commonwealth Office and the Cabinet Office have the prime roles in co-ordinating the Government's policy towards the Community but other departments may take the lead on matters within their responsibilities.
Lord Bruce of Donington: My Lords, I thank the noble Lord for that reply, but does he not think it remarkable that apparently, according to his reply, there is no thorough co-ordination of policy in the various departments of state towards the EC? Is the noble Lord aware that in 1992 the United Kingdom share of total EC expenditure after taking abatements into account amounts to £5.5 billion? Does the noble Lord agree that when the preliminary draft budget for 1993 is published some account should be given to the Westminster Parliament as to how that money is to be spent and the attitude which the Government will adopt towards the items of expenditure, covering all ministerial departments, incorporated in the budget? Surely he agrees that the British Parliament is entitled to be suitably informed through a co-ordinated effort by the Government.
Lord Waddington: My Lords, with the greatest respect to the noble Lord, he is in error when he suggests that there is no thorough co-ordination of government policy towards the European Community. Every government department is affected to some degree by our membership of the European Community. It is right that individual departments should take the lead in matters affecting their own areas of responsibility.
That is where the expertise lies. However, interdepartmental discussion on policy takes place under the auspices of the Cabinet Office. As I said, the Foreign and Commonwealth Office, in conjunction with the Cabinet Secretariat, co-ordinates Government policy towards the Community. The noble Lord is rightly concerned about resources. I suggest to the noble Lord that it would be a waste of resources to enlarge the bureaucracy in this country in order to have some new department ostensibly to deal with European matters when they can be dealt with perfectly effectively in the way that I have described.

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Obviously the noble Lord is entirely right to talk about the need for us to watch very carefully our share of the European Community expenditure. However, he will be aware of, and will pay tribute to, the Herculean efforts made by the former Prime Minister to reduce the contribution that Britain has to make.
Lord Cledwyn of Penrhos: My Lords, will the noble Lord tell the House the number of officials employed by the European Commission at the present time? How many of them are employed in the four centres in this country?
Lord Waddington: My Lords, the total staff in the European Parliament, Council, Commission, Court of Justice and Court of Auditors in 1991 was 24,629. That compares with 18,007 in 1981, but, of course, the Community was enlarged in the intervening years.
I am sorry, but I missed the second question put by the noble Lord.
Lord Cledwyn of Penrhos: My Lords, I understand that officials of the European Commission are employed in four centres of this country, including London, Edinburgh and Cardiff—I am not sure of the other. Will the noble Lord indicate how many officials there are?
Lord Waddington: My Lords, I can certainly give the noble Lord the number of British officials working in Brussels. There are 114 UK secondees to the European Community institutions of which 56 are civil servants at grade 7 or above. We are well aware that we could do with more British officials in the Community institutions. That is why we set up a European fast stream recruitment scheme to prepare people for the competitions for European Community posts.
Lord Bruce of Donington: My Lords, I can supply the particulars for which the noble Lord searched. The total number of Commission employees in Brussels is approximately 14,000. Is the noble Lord aware that in the supplementary that I asked I was not implying that there should be further staff engaged in the United Kingdom? I was suggesting that in view of the co-ordination that the noble Lord said existed, the British Parliament should be provided with information prior to the decisions being made behind closed doors in Brussels on the size and content of the European budget.
Lord Waddington: My Lords, as noble Lords know, we have the most sophisticated system for scrutiny of European legislation and European proposals of any country in the Community. However, I do not doubt for one moment that we could improve matters further.
The figures that I gave to the noble Lord, Lord Cledwyn, were correct. I gave the total number for all the institutions. If one were to take the Commission alone, the figure is 16,426 permanent employees and 749 temporary employees.
Baroness Seear: My Lords, those figures seem remarkably small when we hear so much about the extravagant staffing of the Commission. For the
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record, will the noble Lord tell us how they compare with an average government department or an average local authority in this country?
Lord Waddington: My Lords, I need notice of that question. However, I do not believe that many of us consider staffing on the scale of 23,212 permanent officials and 1,417 temporary officials is a negligible matter. The cost is considerable. The total expenditure on staff in the European Community in 1991 was about £850 million.
Lord Bonham-Carter: My Lords, will the noble Lord be good enough to inform the House how many of those people are engaged in translation?
Lord Waddington: My Lords, I shall have to write to the noble Lord on that as I do not have the breakdown between the various functions carried out by the officials. However, I can give the noble Lord the number of people involved in the various parts of the European Community. Three thousand people are employed in the parliament, and another 503 who are temporary, 2,711 are employed in the Council; 16,426 are employed in the Commission and 749 who are temporary; 693 are employed in the Court of Justice and 101 who are temporary; and 320 are employed in the Court of Auditors with 64 who are temporary.

Alzheimer's Disease: Research
2.55 p.m.
Lord Dormand of Easington Lord Dormand of Easington asked Her Majesty's Government:
What action they are taking to encourage research into and help for those with Alzheimer's disease.
The Parliamentary Under-Secretary of State, Department of Health (Baroness Hooper): My Lords, the Government support biomedical research through the Medical Research Council which receives its grant-in-aid from the Department of Education and Science. In 1990–91, the council spent well over £3 million directly on research into Alzheimer's disease generally and a considerable sum on basic research which may be relevant to the disease. In addition, the Department of Health directly funds research about policy and service delivery for mentally ill people including those with Alzheimer's disease; and there are further European Community studies.
Lord Dormand of Easington: My Lords, what are the Government doing to encourage those organisations outside the Medical Research Council and the Universities Funding Council which are doing important work in this field? Is the noble Baroness aware, for example, of what is being done by two bodies with which I am connected? The Teesside Development Corporation has contributed a substantial amount to the new £1.34 million Alzheimer's building in the area? It is a unique project; it will offer residential and day care. The noble Baroness, Lady Blatch, sits next to the Minister on the Front Bench. She visited the building on Friday. I am sure that she was impressed with it.

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Is the noble Baroness, Lady Hooper, aware of the significant and costly research undertaken by the Parke-Davis research laboratories? Are the Government showing an interest in the impressive work carried out by the Royal Society of Chemistry? Such projects ought to be fully supported by the Government.
Baroness Hooper: My Lords, the examples that the noble Lord quotes fully accord with government policy in this matter; namely, that decision making should be at the lowest possible level. Local funding of local projects is therefore very desirable. The noble Lord has pointed to an example.
Through our director of research and development in the Department of Health, we are able to co-ordinate all research that goes on. He directs our efforts towards encouraging further research at a local level to meet local needs.
Lord Carter: My Lords, is the Minister aware that the Alzheimer's research team at St. Mary's Hospital, Paddington, has two sections the clinical research section and a laboratory section? The whole of the laboratory section is moving to the United States in the course of the next year. Are the Government satisfied that the move is in the best interests of Alzheimer's research in this country?
Baroness Hooper: My Lords, I am of course aware of that. I am also aware that my noble friend Lady Denton answered a specific question on the matter less than two weeks ago.
Lord Gisborough: My Lords, is it true that Alzheimer's disease is linked to aluminium and, therefore, aluminium cooking pots? That is an important factor when one considers the number of aluminium pots used in cooking.
Baroness Hooper: My Lords, I understand that the danger from cooking in aluminium utensils represents a very small degree in relation to the normal aluminium content of, for example, water. The risk is therefore very slight.
Lord Carter: My Lords, perhaps I may refer the Minister to the answer that she gave. She stated that the noble Baroness, Lady Denton, answered the question about St. Mary's Hospital. In fact, the noble Baroness, Lady Denton, stated that the question on St. Mary's Hospital was wide of the Question on the Order Paper at the time. Will the Minister now answer my question? Are the Government satisfied that the move of the whole of the laboratory section from St. Mary's Hospital Paddington, to the United States is in the best interest of Alzheimer's research in this country?
Baroness Hooper: My Lords, my noble friend's response pointed out that the whole team was certainly not moving from St. Mary's Hospital to the United States.
Lord Skelmersdale: My Lords, further to the question asked by my noble friend Lord Gisborough, will my noble friend Lady Hooper accept that
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unconfirmed results of research can cause health scares? What are the Government doing to prevent that?
Baroness Hooper: My Lords, we are encouraging the dissemination of responsible information to older people about their needs. For example, a booklet issued recently counters some of the scare stories. It gives sober, sensible, factual information to older people in order to help them with some of the conditions which they face and counteracts the unnecessary scare stories.
Lord Cledwyn of Penrhos: My Lords, can we in this country afford to lose to the United States the director and all the members of the laboratory section? The House will wish to have an answer to that question. Can the Minister say why they are going? Is it the case that they are being tempted to go because in the United States the salaries paid to research workers are very much better?
Baroness Hooper: My Lords, the noble Lord must consult the individuals concerned if he wishes to know exactly why they are choosing to go. I can reassure him only that the research work will continue at St. Mary's Hospital.
Lord Peyton of Yeovil: My Lords, does my noble friend agree that it is time that the rewards offered to scientific workers in this country were surveyed because in many cases they are pitifully low?
Baroness Hooper: My Lords, no. My noble friend will not be surprised to hear that I do not agree with him. As I said in my original Answer, the MRC alone has spent some £3 million directly on research into Alzheimer's disease. The overall figure spent on research into diseases affecting older people is considerably more.
Lord Dormand of Easington: My Lords, does the Minister agree with the widely held view that Alzheimer's disease is now the fourth most common cause of death in the Western world? In those circumstances, does she really accept that the £3 million said to be spent directly on research is sufficient if proper progress is to be made?
Baroness Hooper: My Lords, that sum is spent directly on research into Alzheimer's disease. Considerable additional moneys are spent on basic research which could be relevant to the disease. Departmental research, local research projects, such as that mentioned by the noble Lord, and surveys are also being carried out. In any event, what counts is not merely the amount of money that is spent on this area of research but the quality of the research.

Housing Revenue Account Surpluses
3.3 p.m.
Lord Dean of Beswick Lord Dean of Beswick asked Her Majesty's Government:
Whether they will reconsider their decision to compel certain local authorities to make financial payments into the local authority financial accounts from housing revenue account surpluses.
The Minister of State, Department of the Environment (Baroness Blatch): My Lords, Schedule 4 to the Local Government and Housing Act 1989 requires a local housing authority to make a transfer from its housing revenue account to some other revenue account if its housing revenue account subsidy calculation results in a negative amount. The transfer must be equal to that amount. An authority not entitled to housing revenue account subsidy may also transfer any end-of-year surplus on its housing revenue account to some other revenue account. The Government have no plans to change these principles.
Lord Dean of Beswick: My Lords, is the Minister aware that I find that a very disgusting Answer, bearing in mind—
Noble Lords: Order, order!
Lord Dean of Beswick: My Lords, I withdraw the word "disgusting". Is the Minister aware that I find that a very disappointing Answer? Is she further aware that the Department of the Environment has issued a directive to 18 local authorities stating that the surplus on their housing revenue account must go into the general fund in order to keep the poll tax low? Does the Minister understand, therefore, that the people meeting their full commitment by paying their full rent and poll tax are being forced to subsidise others who are not paying their poll tax? How does that situation accord with the Prime Minister's persistent trumpeting about fairness for people under the Citizen's Charter?
Baroness Blatch: My Lords, the noble Lord used a great deal of energy in responding to my Answer. The same energy might be better deployed in persuading some of his colleagues in local authorities to pursue non-payment of both poll tax and rent. Of the 10 worst local authorities in terms of pursuing rent, Southwark, for example, has failed to collect 38.5 per cent., which is £35 million. In Brent the figure is £15 million; in Hammersmith, £11 million; and in Lambeth, £12 million. I could go on. That is what needs to be changed. The ring-fencing of housing revenue account encourages authorities to manage their housing in a more accountable and businesslike manner. We should be deploying our energies in encouraging that.
Lord McIntosh of Haringey: My Lords, would the Minister care to reconsider that answer? Not content with insulting my noble friend—
Noble Lords: Oh!
Lord McIntosh of Haringey: My Lords, after insulting my noble friend she went on to give an entirely irrelevant answer about uncollected rents. However, is it not the fact that the Question refers to the ring-fencing of housing revenue account? Is it not also a fact that this year, as regards 18 councils, the council tenants, who are on the whole the poorer in our society, will be forced to subsidise the rest? Can the Minister in social justice defend that situation?
Lord Hailsham of Saint Marylebone: My Lords, I beg to move—
Noble Lords: Order, order!
Lord Hailsham of Saint Marylebone: My Lords, I beg to move in reliance on Standing Orders that the Clerk be instructed to read Order No. 30 relating to biting and insulting remarks.
The Lord Chancellor (Lord Mackay of Clashfern): My Lords, the Question is, That this Motion be agreed to?
Lord Williams of Elvel: My Lords, we appear to be in a pre-election period. I hope that the noble and learned Lord will feel able to withdraw his Motion. I believe that no insult was intended either by my noble friend or by the noble Baroness. If things have gone wrong, I hope that the noble Lord the Leader of the House will encourage the House to persuade the noble and learned Lord to withdraw his Motion because I do not believe that it helps our procedures.
Lord Simon of Glaisdale: My Lords, may I ask the noble Lord the Leader of the House whether it is the case that the Motion of the noble and learned Lord is not debatable?
Lord Waddington: My Lords, I am informed that the Motion is debatable. Perhaps my noble and learned friend will take the view that he has made his point. It is necessary for us to use moderation in all things in this Chamber; that is what we are famed for. Perhaps we can proceed after my noble and learned friend has made his point.
Lord Hailsham of Saint Marylebone: My Lords, if what I have done has reduced the temperature—
Noble Lords: Oh!
Lord Hailsham of Saint Marylebone: I shall be perfectly prepared to withdraw my Motion, but I shall not do so another time.
Motion, by leave, withdrawn.

Consolidation Bills: Joint Committee
3.8 p.m.
The Lord Chancellor: My Lords, I beg to move the Motion standing in my name on the Order Paper.
I should also like to take the opportunity to express my heartfelt thanks, and indeed those of the whole House, to the noble Earl, Lord Grey, for the conscientious dedication that he has shown in his membership of the Joint Committee on Consolidation Bills during the past nine years.

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We are all indebted to the effects of the Joint Committee for the vital work that it carries out in scrutinising and examining consolidation legislation put to it. At times membership must seem a somewhat thankless task far from the public eye, but I know that I have the support of the whole House when I say that without the sterling efforts of the committee the clarity of legislation on our statute book would be considerably lessened.
I should also like to welcome the incoming committee member —my noble and learned friend Lord Browne-Wilkinson. I am confident that his proven abilities as Vice-Chancellor will render invaluable his service as a committee member. I beg to move.
Moved, That the Lord Browne-Wilkinson be appointed a member of the Joint Committee in the place of the Earl Grey, resigned.—(The Lord Chancellor.)
On Question, Motion agreed to.

Local Government Finance Bill
3.10 p.m.
Baroness Blatch: My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.
Moved, That the House do now again resolve itself into Committee.—(Baroness Blatch.)
On Question, Motion agreed to.
House in Committee accordingly.
[The DEPUTY CHAIRMAN OF COMMITTEES in the Chair.]
Schedule 10 [Local Government Finance: England and Wales]:
Baroness Hamwee Baroness Hamwee moved Amendment No. 226:
Page 117, line 37, at end insert:
(". In section 43 of the 1988 Act (Occupied hereditaments: liability) in subsection (5) for the words "in accordance with the formula—
AxB/Cx5"
there shall be substituted the words "as nil.".
In section 47 of the 1988 Act (Discretionary relief) in subsection (1) (b) the words "to (6)" shall not apply.").
The noble Baroness said: In moving this amendment, I shall speak also to Amendment No. 227, which deals with the same subject matter.
This amendment is intended to exempt charities from the non-domestic rate. Currently charities are entitled to 80 per cent. mandatory relief on buildings which they occupy and 90 per cent. relief on unoccupied buildings. As to the balance, local authorities have a discretion to award further relief but of that further relief, only 25 per cent. of the cost is borne by the national non-domestic rate pool.
This amendment is supported by the National Council for Voluntary Organisations, which reports difficulties that charities have in obtaining discretionary relief and, indeed, problems in gaining access to mandatory relief. Voluntary organisations are affected when they own or rent offices, community centres,
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advice centres and training workshops—the various facilities on which local communities depend. Rate relief has been an important element of support for the voluntary sector. Indeed, voluntary groups received something in the order of £145 million relief in 1989–90.
Discretionary relief is bound to be further eroded by constraints on local authority spending—in other words, capping. As a result of that, I suggest that voluntary organisations are certain to be affected. As the council budget is constrained, increasingly councils will be spending on statutory responsibilities. Voluntary organisations, as we have already seen, are likely to be affected by that.
The extension of the relief would generate an extra £7 million for the voluntary sector, which, as I say, has been hard hit by funding cuts. Indeed, Members of the Committee may be interested to know that the cuts have been of the order of £29 million in 1990–91. In the forthcoming year they are expected to be £42 million—considerable sums of money.
The cost of extending the relief can perhaps be put in the context of an increasing area of cost to voluntary organisations; that is, the increase in VAT which occurred less than a year ago. The increase to 17.5 per cent. has cost the charities £6 million.
There is a subsidiary reason—or perhaps an argument—for proposing this amendment to the Committee; that is, if there were to be 100 per cent. relief, a small amount of administration would be avoided. However, it is the financial argument—a genuine argument—which may appeal to the Committee. It will not cost a huge amount of money but it will make a great difference to the charities concerned. I beg to move.
3.15 p.m.
Lord McIntosh of Haringey: On these Benches, we support the amendments with one qualification which I am sure the noble Baroness, Lady Hamwee, will understand. If the amendments were to be carried and there were an increase in mandatory relief for charities, there would be a reduction in the distributable amount made available from the national non-domestic rate to local authorities. The distributable amount forms part of the aggregate external financing. It also covers revenue support grant and specific grants. If the Government are minded to accept the amendments—and I hope that they will —it would be part of the deal, so to speak, that any reduction in the distributable amount should be made up by government grants.
Baroness Gardner of Parkes: I am not happy with these amendments. That is not because I do not support charity. Indeed, at present I am chairman of a charity which raises funds to help children in the third world. To my surprise, in these very difficult times, we have had great success. As someone said the other day, many businesses would welcome the increase in turnover which we have achieved.
What disturbs me is that this formula would mean that every charity would receive the relief, whether or not it needed it. The element of voluntary help for a

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charity would be removed by this provision. The local authorities would be obliged to give the relief. I do not believe that central government could or should make up the difference. It is taking away a council's discretion.
At present, as the noble Baroness, Lady Hamwee, said, there is a discretion to grant relief and councils do what they can. Also, they are able to differentiate between the causes which they wish to support and those they do not. I believe that an overall blanket formula is unnecessary. It could be greatly to the disadvantage of the local community or council tax payers.
Lord Ross of Newport: I declare an interest, in that my son manages the Oxfam shops in London and the South East. There are some 160 shops. He tells me that they have difficulty because not only are their rents going up but their income is falling. When people are hard up, they tend not to hand in their second-hand clothes so frequently. I am sure that the charities will need extra assistance.
As the noble Baroness said, it may be that that will be left to the discretion of the local authorities. However, they will not be inclined to grant extra relief because they are so hard pressed. If we want Oxfam and similar charities to continue to bear the burden which they hear on behalf of this nation—they do a wonderful job—the Government should listen to the proposal and consider it carefully. I hope that they will make some concession on this point because the situation is becoming rather desperate, particularly for charities which raise substantial sums from the shops which they run in various parts of the country.
Baroness Gardner of Parkes: If the noble Lord acknowledges that the local authorities are now hard pressed, why is it suggested that there should be a mandatory requirement on them to provide the relief?
Lord Ross of Newport: In this country we rely more and more on charities to bear the burden. Local authorities would like to help but are often not in a position to do so. The matter comes back to national taxation. The Government have taken on the role of running the uniform business rate. Therefore, what we propose must be achieved in this way.
Lord Renfrew of Kaimsthorn: Many of us might have a great deal of sympathy if the benefit—after all, it is a contribution from a local authority to a charity or indeed, from the Government to a charity—were directed specifically towards Oxfam or other charities of which we warmly approve. However, there are other charities of much less widespread interest and which are much less rewarding. It seems extraordinary that all organisations with a charitable status should be exempted in a mandatory way. The whole purpose of charity is that it should be selective. While I am sympathetic to the point which the noble Lord makes as regards Oxfam, it does not support the need for 100 per cent. blanket coverage as proposed in this amendment.
Baroness Phillips: I support the amendment. I ran a charity for 25 years. The staff were badly paid. They
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worked, because they were dedicated. We acquired a building from a church for a very small sum. That same charity now—a women's organisation which has done remarkable work—has to pay the business rate and various other high rents. That will make it extremely difficult for the charity to continue.
The Government depend on charities. If anything is required in the medical or educational world, who do they go to? We now have to make appeals for research into medical matters which should be the responsibility of the National Health Service. We have to make appeals for research into education, and appeals on behalf of animals, children and the homeless.
Charities have always been a remarkable part of British life. It will be a sad day if they go out of existence simply because they cannot afford the running costs imposed upon them. It may be that Westminster will be generous to them, but that is not my experience of Westminster. However, I am assured that the noble Baroness will change that.
In general charities, like most people, are suffering. It is a sad day for all. Perhaps even a few could be supported. I could not follow the differentiation between charities made by my noble friend. People who work for charities are never overpaid. There are no shareholders, there is no expensive chairman. People work through sheer dedication and are supported by volunteers. For heaven's sake, we ask the Government just for once to be generous. I can tell them that they will get some votes.
Lord Skelmersdale: Before my noble friend replies perhaps I may say that I agree with the points of view expressed by my noble friends on these Benches. However, the noble Baroness, Lady Hamwee, brought up one point which causes me some anxiety. Under the 1988 Act charities receive mandatory relief of 80 per cent. if their premises are occupied and 90 per cent. if they are unoccupied. However, the noble Baroness led us to believe that the Act was not being followed and charities were finding difficulty in obtaining their legislative dues. Perhaps my noble friend, when he replies to the amendment, can answer that specific charge.
Earl Howe: As the noble Baroness, Lady Hamwee, said, Amendment No. 226 deals with Sections 43 and 47 of the Local Government Finance Act 1988 which provide for mandatory relief of 80 per cent. on non-domestic rates bills for charities, which can be increased at the discretion of the charging authority to an amount up to 100 per cent. We know from a survey we carried out that almost 19,000 deserving charitable occupiers obtained top-up relief in 1990–91. The amendment would make 100 per cent. relief mandatory. Amendment No. 227 makes similar provision for unoccupied property which would otherwise attract half the occupied rate.
The amendments should be seen in the context of charities generally. The Government have always recognised the special position of charities and the valuable role they play in society. They have already provided a range of tax incentives which are designed to increase the funds available to them. Under general rates, the level of mandatory relief to charities was a

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minimum of 50 per cent., which could be topped up at authorities' discretion to an amount up to 100 per cent. But during the passage of the 1988 Local Government Finance Bill we were persuaded to increase the relief to charities to 80 per cent. because we saw that many charities were likely to face substantially increased bills under the new system. We have, therefore, already done a lot to relieve the burden on them. In addition, the transitional arrangements we introduced to protect ratepayers against large changes in their rates bills will have cushioned a large number of charities from the full effects of the reforms in the first years of the new system.
In our view, that is already a significant list of concessions and I do not think that we should go so far as to remove the burden of rates from charities as an automatic right. All charities benefit from the range of services provided by local authorities, like other non-domestic ratepayers. Many charities have retail outlets which occupy High Street premises which profit from the particular services provided there. It therefore seems right that charities should be asked to contribute something towards the costs of those services, unless the local authority decides, having regard to the interests of its chargepayers or council tax payers, that it is appropriate to remit the bill completely, and that is their right.
Baroness Phillips: Perhaps the Minister will allow me to intervene. If one has a commercial enterprise charity shop, it must be separate from the charity.
Earl Howe: My understanding is that charity shops such as Oxfam shops fall within the ambit of the regulations. They are entitled to the charity relief. I checked that with officials beforehand and therefore I hope I know what I am talking about.
On a final note, mandatory relief for charities is currently borne by the non-domestic rates pool as is 25 per cent. of the cost of any additional top-up relief. The remaining cost of the top-up relief is met by local chargepayers: this is intended to ensure that authorities exercise their discretion responsibly. It is not clear from the amendments, nor from what was said by the noble Baroness, how the proposed increase in the level of mandatory relief for charities would be financed: would it fall on the community charge or council tax payers, on other non-domestic ratepayers, or taxpayers in general? It is easy to make concessions for charities, but someone else has to pay for them.
For all those reasons I hope that the noble Baroness will feel able to withdraw the amendment, in the knowledge that the gulf between us is not all that great. It is a matter of emphasis. We all believe in charities. However, the element of discretion at local level is the deciding factor, at least for the Government.
Baroness Hamwee: I thank the Minister for that response. I too checked on the position with regard to so-called "charity shops" this morning. The advice I obtained was directly contradictory to that just given by the Minister. I understand that charity shops which
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are not charities—they are trading organisations associated with charities—are not subject to the mandatory relief.
Earl Howe: There may be differences of definition. The definition that I obtained is that where premises are being used for the sale of goods donated to a charity and the proceeds of sale, less expenses, go to charity, then that shop falls within the ambit of the regulations. There may be other types of shop that do not.
Baroness Hamwee: I know that this is a difficult area for charities, which need to be careful to remain within their charitable objectives and not infringe into trading activities, in the same way that they may not infringe into campaigning and political activities and so on. I shall look at what the Minister said. It may be something which of itself bears further examination.
For the reasons the Minister gave, having identified that charities require concessions, I ask the Committee, through the amendments, to consider that the concession should go all the way. I take the point made by the noble Lord, Lord McIntosh, regarding the cost to local authorities, and for that reason I shall not press the amendment this afternoon. It is perhaps something I should reconsider, taking on board the need to express the source of the funding.
Perhaps I can turn to the point made by a number of noble Lords with regard to a distinction between charities. I accept that there should be individual decisions taken by people as to which charities they wish to contribute. I do not extend that argument to this subject by saying that a local authority should distinguish between different charities. It seems to me that some comments verged on the idea that some charities are more deserving than others. If so, I do not know why some charities deserve 80 per cent. and not 100 per cent. I do not accept the logic of the argument.
I shall reserve the right to come back to the matter, having looked at what the Minister said in regard to shops and dealing with the source of the finance. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 227 not moved.]
3.30 p.m.
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 227A:
Page 118, line 48, at end insert:
("Non-Domestic Rating: Multipliers
( ) In Schedule 7 to the 1988 Act (Non-Domestic Rating: Multipliers) for paragraph 2 there shall be substituted the following paragraph—
"2.— (1) The Secretary of State shall by order in respect of each financial year from the year beginning on 1 April 1993 by order introduce a scheme of non-domestic rating under which a billing authority shall determine the multiplier for the hereditaments in its area.
(2) Before making such an order the Secretary of State shall consult—

(a) the Audit Commission and the local authority associations; and

(b) such representations of business, industry and other non-domestic ratepayers as appear to him

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to be concerned on the need for accounts payable by small businesses to be abated from the amount that would otherwise be payable.

(3) No order under sub-paragraph (1) above shall be made unless a draft of the order has been laid before and approved by resolution of each House of Parliament".").
The noble Lord said: With this amendment we come to an issue of the very greatest importance to local authority finance and one on which the Government have failed to take the opportunity to set right an evident injustice and error. I refer to the relatively recent provision that the non-domestic business rate should no longer be determined on a local basis but nationally and that the revenues, although collected locally, should be sent straight into central government and allocated and distributed by central government on such a basis as they determine.
Perhaps I may briefly refer to the effect that that has on local authority expenditure and on the proportion of that expenditure which is variable locally. I shall not use the phrase "collected locally", because theoretically the non-domestic rate is collected locally, although, as I have made clear, local authorities are acting only as agents of central government. In 1991–92, the current year, if one takes into account the poll tax transitional benefit, the poll tax benefit subsidiary and the income support allowance, locally raised taxation and locally variable taxation count for only 15 per cent. of the total local authority expenditure.
The effect is that for every pound that a local authority wants to raise for expenditure at its own discretion or in order to fulfil its statutory obligations, it has to raise anything up to £7 or £8 or even more—it would be more in the City of London—in order to finance that expenditure. Naturally enough, the government grant is not extended to meet all the requirements of local authorities. The first problem that we have with the effect of a national non-domestic rate is that the gearing of expenditure of local authorities is wildly exaggerated.
The second problem is that this means that local authority expenditure is extremely vulnerable. Therefore, what the Chartered Institute of Public Finance & Accountancy calls a "robust financing system" cannot be achieved, as the Audit Commission points out, without some other control on it.
Perhaps I may read what the Audit Commission said in its response to the government consultation paper, A New Tax for Local Government. Having begun by saying that restoring local authority control over changes in the non-domestic rate levels would extend the local tax base and give more meaning to consultation and partnership between local government and the business sector, it goes on to say that there should be some protection for the business sector against excessive increases, with which we entirely agree. I say in parenthesis that it may have gone unobserved that we supported, or certainly did not oppose, Clause 65 of the Bill which provided for better consultation between the business community and local authorities.
The Audit Commission goes on to say:
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"the low proportion of expenditure now to be raised by local taxation combined with the very high gearing on tax rises"—
that is the point I was making earlier—
"may make the system unsustainable in the long term without either extensive capping or a reduction in the functions of local government. Neither would be supported by the commission".
I remind the Committee that the Audit Commission is in an entirely neutral sense a creature of the Secretary of State. It has to comply with any of the directives issued to it by the Secretary of State. In its constitution it is not an independent body, yet on this occasion the Audit Commission clearly feels so strongly about the issue that it points out that the alternatives to an improved system of local authority finance which increases the taxable base of local authorities, which in turn is locally based, is so important that it makes this quite remarkable response to the government consultation paper.
It is not only the Audit Commission that feels that way or the experts, although they certainly do. I have mentioned the Chartered Institute of Public Finance & Accountancy. I refer also to the Institute of Revenues, Rating and Valuation, the Society of Local Authority Chief Executives, the Society of County Treasurers and all of the local authority associations. The feeling that something is wrong here and that the business rate should remain local extends to business itself. It is particularly true in the South East, where many businesses, particularly the small ones, feel that they have been very hard done by because of the business rate. The London Chamber of Commerce and many other chambers of commerce in the South East have expressed the view that the national non-domestic rate should be returned to local control.
The most interesting view on this matter is expressed by the Institute of Directors, which carried out an independent survey of its members before expressing its views in its response to the government consultation paper. The institute says:
"Having the national non-domestic rate as a national tax also is contrary to the concept of genuine local government".
It concludes,
"Business rates should return to local government".
When this matter was raised in a probing amendment last week by the noble Baroness, Lady Hamwee, the noble Lord, Lord Henley, having confirmed what I had said, observed that under the present system rises in the non-domestic rate are limited to the rate of inflation. He pointed out that in the 1980s there had been a 37 per cent. increase in real terms in the non-domestic rates. What he failed to point out—we were perhaps a little slow off the mark in responding to what he said—was that that was a period in which central government support for local authorities was reduced from 61 per cent. to 46 per cent. of their total budgets. Therefore, looked at mathematically, that sort of increase in real terms is hardly surprising and is entirely to be expected.
What local business people are saying to the Institute of Directors and to their chambers of commerce, as well as to the councillors whom they know and with whom they have good relations, is that their dialogue with the local authority, which is so much helped by Clause 65 of the Bill, becomes much

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less meaningful if there is no impact on that dialogue in tax-raising terms. My noble friend Lady Hollis points out to me that that is particularly true when a local authority is capped and is therefore unable to respond to the suggestions being made to it by local business people.
The shopkeepers in Norwich want the city council to improve security measures for their shops. Norwich City Council, having been capped, is unable to accede to that very modest request which would cost only £20,000 a year. If the money came to Norwich City Council from the business people, they would have the right to demand the protection which I am sure they need and they would have some assurance that the local authority would be able to negotiate sensibly with them. As it is, much of the consultation in Clause 65, valuable though it may be, is a foot or two off the ground. It is not related to money or what is being paid or received.
In the face of this almost universal desire to return to a locally determined business rate, why have the Government missed the opportunity? I suggest that it would be no discredit, political defeat or loss of face to the Government if, even at this late stage, they were to agree with this amendment. I beg to move.
Lord Renfrew of Kaimsthorn: The noble Lord has made a number of interesting points. Clearly he continues to feel very strongly that business rates should be set by decisions reached locally rather than by decisions reached nationally. However, that is not what the amendment is specifically about; although, as he has explained fully, the amendment requires consultations. Indeed, there are a number of amendments before us this afternoon which require consultations. No doubt there comes a balance, as it were, where too many consultations become cumbersome. I shall leave my noble friend the Minister to answer that point.
I should like to ask a question to which I am quite uncertain of the answer, though I have a suspicion what it may be. I refer to subsection (3) of the amendment which states:
"No order under sub-paragraph (1) above shall be made unless a draft of the order has been laid before and approved by resolution of each House of Parliament".
I take that to be an affirmative resolution. Is it not unusual that there should be a requirement for an affirmative resolution on what will be a routine procedure? There will be an annual order. Subparagraph (1) states:
"The Secretary of State shall by order in respect of each financial year".
The Secretary of State determines a scheme by which the multiplier will be calculated. That is an annual procedure. Is it not unusual to have a requirement for affirmative resolution for an annual procedure in this way?
My understanding is that the affirmative resolution procedure is, in general, to scrutinise, as it were, special actions by the Secretary of State. I may be completely wrong about that—I am not well informed—but I should be grateful for guidance from the noble Lord or from others in the Committee.
Lord Hailsham of Saint Marylebone: The noble Lord is completely wrong.
Baroness Hamwee: As the noble Lord, Lord McIntosh, said, this amendment follows an amendment which I moved in Committee last week. I did not see that amendment as a probing amendment but as an enabling amendment because I was quite content to allow for the details of the return of non-domestic rates to local authorities to be worked out quietly and calmly and to be brought back. However, since that did not meet with acceptance I am happy to support the amendment which is now before the Committee for the reasons which have been given —primarily the risk to democratic local government by the increased gearing which has been identified, the reducing amounts which are raised locally, and the reduced local discretion.
We on these Benches believe that land value rating would be a better way to go about raising local taxes from businesses —a point extracted from me by the noble Lord, Lord Stoddart of Swindon, at an earlier stage. However, as it appears that we are not to have local income tax and neither is land value rating on the agenda, I believe that the amendment which is proposed is a distinct improvement on the present position.
We have heard the list of organisations which have spoken loud and clear with regard to the return to local discretion of non-domestic rates. They are not loony Left-wing organisations. Quite the contrary—they are respected, they are respectable, and we should pay heed to them.
Lord Boyd-Carpenter: The proposal in this amendment is important. One must accept what the noble Lord, Lord McIntosh, said as to that. However, I find his argument unpersuasive. To suggest that it is undemocratic that the business rate should be fixed nationally rather than by local authorities ignores the fact that most of the business premises involved are not operated by people necessarily living in the area and, therefore, by people who have a local vote. They are parts of business organisations, many of them on a national basis. There is no reason to believe that those in the area concerned are going to have a vote or any say whatever in the decision.
It therefore seems sensible that the amount of the business rate should be determined nationally. In addition, of course, there is the fact—and I do not want to raise the temperature of the debate—that in many cases local authorities under Labour control have pushed rates so very high as to discourage the operation of businesses. The businesses concerned have no defence. As I said, they have no vote. Therefore, they will continue to be highly vulnerable to the "depredations"—and I think that is the right word—of high spending local authorities. I hope, therefore, that my noble friend the Minister will reject this amendment.
3.45 p.m.
Lord Stoddart of Swindon: The noble Lord, Lord Boyd-Carpenter, has just tried to perpetuate the myth that has grown that the reason for high business rates is the profligate spending of local authorities. Nothing could be further from the truth.
Noble Lords: Oh!
Lord Stoddart of Swindon: I shall explain that. The reason for very much increased rates was the withdrawal, and the progressive withdrawal year by year, of government central support through the rate support grant. During the whole of the period of this present Government more than £20 billion has been lost to local government by the reduction in central government grant. In my view, and that of many others, it was for that reason business as well as domestic rates increased inordinately. In the main, it was not the fault of high spending local authorities.
The Parliamentary Under-Secretary of State, Department of Social Security (Lord Henley): Yes it was.
Lord Stoddart of Swindon: But it was not. If the noble Lord will just examine the facts he will see that the high rates all the way along have been engendered by reducing the level of government support for local authorities.
Baroness Blatch: Will the noble Lord answer this question? Why was it that rates to businesses were very high in high spending authorities and very low in low spending authorities?
Lord Stoddart of Swindon: There are reasons for that. One reason is that the Government so distributed the grant as to benefit certain local authorities. Perhaps the noble Baroness will consider the position. During the period of Tory Government the proportion of grant, or the proportion of expenditure net from the centre, has gone down from roughly 59 per cent. to roughly 39 per cent. It is that withdrawal of the grant which has caused the problem and which has generally accounted for the rise in domestic and business rates.
Lord Boyd-Carpenter: How does the noble Lord reconcile the argument that it is due to a reduction in central grant that, for example, in Wandsworth rates were kept very low and in Lambeth they were very high?
Lord Stoddart of Swindon: As I have just tried to explain, it was the distribution of the grant and the way in which the Government decided to distribute it that led to some areas being hit hard and to other areas being hit not quite so hard. For example, one of the areas that has been badly hurt by central government is Berkshire, a Tory-controlled council. People living in Berkshire, as the noble Lord will know, have suffered huge increases in their domestic rates, although the amount spent on individual services is less than in many other parts of the country. That is not due to high spending by the local authority. It is due to low grant from central
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government. That is the reason for the disparities and it is something which I am afraid the business community did not understand when it supported the system of the uniform business rate.
When I served on the Select Committee on Overseas Trade I can well remember the CBI coming before us and putting forward a completely mistaken view of what was happening to business rates. From there on it made the mistake of supporting a policy which even the Daily Mail agreed yesterday was a very bad policy indeed. The present system discriminates against small businesses and businesses in the South of England, where the Tory Party hopes to get a great deal of its support at the next general election. It is not just my colleagues and I who make this point. It is the Daily Mail, which is hardly a Labour newspaper. I advise the Government and Members of the Committee opposite to read yesterday's article in the Daily Mail. The article is edited by Margaret Stone. If Members of the Committee opposite read it before Report stage, their attitudes may well be rather different.
There are very good reasons why the business community should be involved in what is happening locally. One of the deleterious consequences of the uniform business rate is that members of the business community take less interest in what is happening locally. I happen to believe that that is a very bad thing indeed. A good thriving business community enables the people in an area to live better, to have a better standard of living, to have more jobs, and so on. Therefore it is important that the business community has an interest in and takes an interest in what is going on around it.
When local authorities collected the rates, members of the business community were interested enough to want to serve on the local authority. They had not only a domestic interest if they lived in the area of the authority but also a business interest. That encouraged them to want to make a contribution to the good government of the area and indeed to look after the financing of the area by ensuring that money was not wasted by the local authority. I had a good deal of experience in local government as a leader of a county borough council for 18 years. I happen to believe that the levying of rates on the business community by the local authority brought a good deal to the good administration of the area. That is now missing.
There is now no accountability. The business community accounts to no one and no one accounts to the business community. The Government do not account to the business community in any sense because they have nothing to do with the governance except in so far as they interfere from the centre with a locality. Therefore it is necessary to involve the business community in the administration of the area. It would be well worth improving and increasing the influence that the business community has on the decisions of local authorities provided that the business rate is payable to the local authority to enable it to administer the area in the way the area needs to be administered.

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For example, what incentive is there for a local authority to keep its rates down in order to attract business? There is no incentive for it to run the area better in order to attract new business or to ensure that business is not repelled and driven away from the area. There is a very good business case—never mind about democracy for the moment—for returning the business rate to local authorities. It is good for local authority administration and it is good for business as well.
I urge the Government to take this matter seriously. If they believe in real local government they should use this opportunity and this method to widen the taxation base for local authorities so that there is at least some modicum of independence and a significant amount of tax to be collected rather than the 15 per cent. which local authorities have available to them at present. The noble Baroness, Lady Blatch, should consider this point seriously. The Government should consider it very seriously if they believe that there is a real role for local government.
Lord Mackay of Ardbrecknish: The amendments relate to Schedule 10, which applies to England and Wales, but I presume that if they were to be accepted by this House and agreed to by another place there would be consequential amendments for Scotland, as the Government have made it clear that the two countries should move on all fours. Therefore I wish to say a few words about this matter as it applies to Scotland.
In the early and mid-1980s there was what can only be described as an enormous outcry from the business and commercial community against the way in which local authorities were using their independent rating powers to clobber local businesses. There was also an outcry from many parts of the country over the fact that there was little equalisation in the rating burden between one area of Scotland and another and indeed between Scotland and the rest of the United Kingdom. Business and commerce with one voice wanted—indeed demanded—a uniform business rate.
While I completely understand the Labour Party's position, because in Scotland as in England and Wales the Labour Party is perfectly open about its intention to remove the uniform business rate and, so to speak, repatriate it to local authorities, I have to say that I have been rather intrigued by the position of the Liberal Democrat Party. Perhaps the noble Baroness, Lady Hamwee, will tell me whether in her campaign against the uniform business rate and in favour of repatriating this aspect of local government funding to local authorities she speaks for Scotland as well as for England and Wales. If she does, I shall be interested to hear that, as will the business and commercial community in Scotland.
I have to tell her that the Federation of Small Businesses and Self-Employed, the Confederation of British Industry in Scotland, the chambers of commerce and every other business and commercial organisation of which I know are not taking part in any campaign to remove the uniform business rate. On the contrary, the campaign they are taking part in is to persuade my right honourable friend the
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Secretary of State to hurry up with the process of equalisation and making level playing fields between Scotland and England and Wales. When my noble friend the Minister replies and points out, as I am sure she will, that we are determined to stick by the uniform business rate, will she also undertake to draw to the attention of her friends in the Scottish Office the remarks made by the parties opposite, in particular by the Liberal Democrats? I am certain that they cannot list any commercial and business groups in Scotland that are in favour of the abolition of the uniform business rate and of a return to the position where business and commerce in Scotland, as in England and Wales, were hammered into the ground by profligate local authorities which put up the rates just as they saw fit and saw their businessmen and commercial people as there to be used to gain more and more money for their spending plans.
4 p.m.
Lord Ross of Newport: The noble Lord's remarks have caused me to rise to my feet. I suppose that I should, first, declare an interest as I actually pay uniform business rate on two lots of commercial property. I am surprised to note that the noble Lord probably did not listen to a programme on Radio 4 this morning. It featured a very good discussion—although it did not include Scotland—involving several commercial operators: one from the North of England, one from the South, one from the Midlands and one from Hereford. Three of them were pleading for the uniform business rate to be given back to local authorities. I agree that there has been a change of view; indeed, I believe that the chambers of commerce about three or four years ago rather wanted it to be put on to central—
Lord Henley: I trust that the noble Lord will give way. I too listened to the programme. I do not think that those people were pleading for the uniform business rate to be returned—or "repatriated" as my noble friend put it—to local authorities. They may have been objecting to some of the levels of rates that they were paying; but they were certainly not asking for the rate to be returned to local authorities.
Lord Ross of Newport: I am sorry, perhaps I misunderstood. That may have been because I was in my car, which was parked in a car park waiting for the arrival of a train which had been held up due to a bomb alert or something of the sort. However, I did not take that view. I believe that I am right in saying that the view was expressed that they would prefer to deal with local authorities and for very good reasons, such as those put forward by the noble Lord, Lord Stoddart of Swindon. I have no hesitation in saying that we do believe in local democracy. Therefore, while it is always very tricky for anyone who is not a Scot to speak on Scottish matters—although I am a Scot by descent—I am quite convinced that my colleagues in Scotland would certainly want the matter left with local authorities.
However, we want people on local authorities who represent the business interest. Written into the Bill is a most extraordinary provision that the non-domestic

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ratepayer must be consulted, yet, in fact, the council has no role in that process. I do not understand it. The noble Lord, Lord Boyd-Carpenter, talked about multiple companies operating most of the shops in the country. They may operate in the main cities and towns, but they certainly do not do so in the market town where I live. Indeed, there is not a single multiple company in the town. Moreover, that goes for many market towns with, say, up to a 10,000 population. Although it may seem surprising to Members on the opposite side of the Committee, people do look to their local authority to help them out when they are in distress. As leader of a county council, I remember how in 1981 people came to the council in droves saying, "You must help us". They looked for local relief. That is why I still believe in local government.
Finally, when the Minister replies, I hope that she will tell us when all the appeals which were put in something like two years ago will be heard. We have been paying enormous rates for the past two years on assessments which many of us believe to be far too high and nothing has, as yet, happened. Indeed, I have not heard a single word from the district valuer in the Isle of Wight as regards a situation in which I am paying something like £12,000 a year in rates. I believe that the assessment is way over the top. It is time it was dealt with. There are something like 16,000 cases which remain outstanding. When shall we receive some response on the matter? I hope that we shall receive a response on this occasion.
Baroness Hamwee: I should like to accept the invitation of the noble Lord, Lord Mackay of Ardbrecknish, to explain the position of those of us on these Benches. It seems to me that by posing the question, he makes it clear he has entirely failed to understand our position. In local government, as in other areas of policy, we aim to do what people who are affected are telling us they would like done. That is the reason for the amendment which is before the Committee this afternoon with regard to non-domestic rates in England.
Of course, the amendment does not refer to Scotland. I was most interested in what the noble Lord said about Scotland. I should have thought that he would have been quite glad that, for once, an experiment might be conducted in England rather than in Scotland. It is precisely because of the calls by those who are affected for the system to be changed that the amendment is before the Committee today.
Baroness Blatch: The amendment is similar in effect to Amendment No. 125A, tabled by the noble Baroness, Lady Hamwee, which we debated on Monday. Like that amendment, it would pave the way for the abolition of the national non-domestic rate by permitting the reintroduction of locally-determined business rates—and, perhaps I may say, without the automatic protection for business by subjecting it to rate increases greater than the rate of inflation. The only real difference behind the previous amendment of the noble Baroness and the one before the Committee today is that the Secretary of State would be required to consult various bodies before introducing a local rating system.
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In his opening remarks, the noble Lord, Lord McIntosh, said that if a local authority wants to spend £1 then it has to raise five, six or seven times that amount. In fact, that was what the noble Lord said; but I am sure that it was not what he meant to say. If local authorities want to spend £1 then they must raise £1 and if they want to spend £1 million then they must raise £1 million. I am repeating what I believe the noble Lord meant to say in respect of gearing. I see that the noble Lord wishes to intervene. I am happy for him to do so.
Lord McIntosh of Haringey: Perhaps I may correct myself on that issue. The Minister is quite right; I did not express correctly what I meant to say. I meant to say that if local authorities want to raise expenditure by 1 per cent., then they have to raise the poll tax by 7 per cent. or by different amounts in different parts of the country. I apologise for the error. The Minister is quite right to draw it to my attention.
Baroness Blatch: The noble Lord's explanation has certainly set the record straight. It takes me on nicely to the point that I want to make. If a local authority wishes to raise its expenditure, then, as the noble Lord rightly said in respect of gearing, it would have to be levied on the domestic ratepayer. Local authorities throughout the country receive the income from either the community charge or, as will be under the new system, the council tax. It also receives its share on a per capita basis of the revenues from the yield from the uniform business rate. The rest is made up to SSA by rate support grant. The only possible reason for arguing that the uniform business rate should go back to local level is that when local authorities wish to increase their expenditure they can increase it on the business community as well as on the domestic community. There cannot be any other reason for it. The noble Lord's point was mainly about gearing. Indeed, the remarks of the noble Lord, Lord Stoddart of Swindon, were also all about gearing.
It seems that the idea behind the proposal is to levy less on the business community. In the circumstances, I should like to return to some figures. I am reminded of the remarks made by the noble Lords, Lord Stoddart of Swindon and Lord McIntosh, in respect of my noble friend on the Front Bench, Lord Henley, when he referred to the rate increases on businesses during a period prior to the introduction of the community charge. Perhaps I may say that, had the business rate been with local government for the past two years, we would now be taking £1.8 billion more from business if it had to be commensurate with local authority spending. Local authorities are spending at a rate which is well above that of the business community; that is, even within the capping regime.
We are talking about a party opposite which is prepared to take all limits off local spending thus allowing local authorities to spend at whatever rate they wish and to levy not just on their domestic community but also on their business community. Then, as an addendum to the amendment, is the requirement to abate the bills for small businesses. In other words, "Go hang" if you are a medium-sized business or a large business which also make up the

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business community. I must tell Members of the Committee on the opposite side that I think they are putting up a very poor case for returning business rates to the local community.
Perhaps I may refer to the Daily Mail article and also link that with the programme on Radio 4 this morning. The business community is rightly saying at present that times are very difficult. The recession has hit businesses very hard. The business community is concerned about revaluation; indeed, it is concerned about all those factors. I do not hear great cries stressing that we should go back to Sheffield, Liverpool, Manchester and—if I dare mention a Scottish authority—Strathclyde. I do not hear that cry. The CBI in England is not saying that now.
However, having said that, I absolutely agree with the noble Lord, Lord Ross of Newport. I take the matter most seriously. I, too, believe that more should be done and that we should continue to keep up the pressure as regards the speed at which appeals are being dealt with. It is absolutely right that we should do what we can to speed up the appeals process. I can tell the noble Lord that my department is applying as much pressure as possible in this respect. As an addendum to that, I can also say that when and if those bills are modified downwards, people will be reimbursed and reimbursed with interest. But that is cold comfort if a business has undergone very difficult times sufficient to cause it to go to the wall in the meantime.
I believe that the noble Lord, Lord Stoddart of Swindon, muddled his arithmetic when he cast his mind back to local authorities. He first referred to Wandsworth and the differentials between one authority and another. The question was posed: what about Lambeth and Wandsworth? Of course the noble Lord had no answer. It is a good comparison because the amount of external support per capita for people in Lambeth is infinitely greater than it is for people in Wandsworth. Therefore the comparison that my noble friend made was a good one.
On business rates, I asked a straight question of the noble Lord, Lord Stoddart of Swindon. I asked him why it was that rates levied on businesses were high in high-spending authorities and low in low-spending authorities. I am not sure what the noble Lord said, but he did not come back with a clear answer. He said that it was something to do with grants.
Perhaps I may remind the noble Lord that in the last year of the old system when the national average rate poundage was 258 pence, in Sheffield it was 400 pence; in Haringey 382 pence; in Manchester 376 pence; on North Tyneside 369 pence; in the Wirral 361 pence; and in Liverpool 356 pence. Those figures speak for themselves. High-spending authorities, high rates; low-spending authorities, low rates, because the rate support grant, as the noble Lord is aware, is an equalising grant. It recognises the needs of different areas. That is why Lambeth receives more external support than Wandsworth.
Lord Stoddart of Swindon: The Minister misquoted me or perhaps she misheard me. I said that Berkshire County Council, which has been for many years under
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Conservative control, is a high rating authority. Its poll tax is very high although its services per capita are below those of many other areas. That is accounted for by the amount of grant which Berkshire receives. If Reading received grant on the same basis and the same amount as Wandsworth, the poll tax that Reading would raise would be nil.
Baroness Blatch: The noble Lord again does the equivalent of mental gymnastics with his comparisons. I am afraid that we cannot compare Reading with Wandsworth. They are different classes of authority. It is important to compare a London borough with a London borough.
Lord Stoddart of Swindon: They are not different classes of people.
Baroness Blatch: If the noble Lord can prove that high-spending authorities did not levy high rates and low-spending authorities did not levy low rates on the business communities, I should be interested to see his evidence.
The purpose of consultation appears to be primarily to soften the blow which such a change would undoubtedly deliver to small businesses. No doubt it will fall to the hard-pressed taxpayer or the medium sized or large business to finance any such reliefs. But coming from the party which claims that a return to local rates would be beneficial to business there can be no greater indictment of the proposal than the fact that the need to protect small businesses arises at all. Medium and larger businesses of course would merely have to grin and bear it.
As my noble friend Lord Henley said in the earlier debate, the re-introduction of locally set poundages would return businesses to all the vagaries and uncertainties of the old rating system. It would mean that once again the burden of rates could differ dramatically from one part of the country to another for reasons which had more to do with the spending policies of local authorities than with local economic activity. Changes in the poundage would no doubt be sprung on businesses with little or no warning, so making it impossible for them to plan ahead; and, despite the lip-service which Members opposite pay to the principle of accountability, businesses would still have no direct electoral influence over local taxation decisions which affect their competitiveness and scope for investment. They would once again merely become milch-cows for extravagant local authorities.
Perhaps I may say to the noble Baroness, Lady Hamwee, that my only experience of Liberal influence on local government was in my authority. The Liberals' first action was to increase the rates by a record 33 1/3 per cent. That took a large sum of money out of the business and commercial sector in Cambridgeshire in one year. It did huge damage. No apologies were made to local businesses. Despite their protestations about the well-established link we had with local businesses, they failed to liaise over such matters.
By contrast, the uniform business rate offers businesses much greater certainty, as well as avoiding the economic distortions I have mentioned. By linking

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it to the rate of inflation, businesses have been spared the consequences of real increases in local authority spending since 1989–90. If the uniform business rate had not been introduced, businesses would have had to pay an additional £1 billion last year and a further £850 million this year. As it is, many businesses will share in our success in bringing down inflation with rates rises of only 4.1 per cent. next year.
The only rationale for the amendment is to levy a rate on business that is greater than 4.1 per cent. and to make it more commensurate with that increase in local authority spending. All the evidence that we have shows that businesses are worried at the moment because of the combination of recession, revaluation and redistribution through the revaluation from areas that were less affluent to other areas. I would have hoped that all Members of the Committee would have approved of that shift of the non-domestic rate burden from one part of the country to another.
Given those advantages of the uniform business rate, a return to locally determined rates would not bring the benefits which Members opposite claim. For those reasons, I hope that the Committee will reject the amendment.
4.15 p.m.
Lord McIntosh of Haringey: It is important that we should try to separate the two strands of this interesting debate. I can show that either of the two strands in itself would be enough to justify a vote for the amendment; but they are different arguments and they should be put separately. The first is the issue of local democracy where we pointed out—I made a mess of some of my figures, for which I apologise—that the system of local government finance introduced in the past few years by the Government has resulted in a locally variable element of local authority finance being reduced to 22 per cent., if we take it literally, or 15 per cent. if we take into account all the other elements of central government expenditure which contribute to local government services. The effect of that—perhaps I should repeat it to make it clear—is that, if a local authority wants to expend an additional 1 per cent. of its budget, it has to raise an additional amount, which could be as much as 7 per cent., from the domestic poll tax payers in its area.
It is not just those involved in local authorities, although they are unanimous on the point, but the professionals, and, above all, the Audit Commission, which have pointed out the dangers of the position. The Audit Commission, in an especially trenchant passage in its response to the Government's consultation paper, pointed out that when there is gearing to that extent, then there is long-term instability in local government finance, and unless we have universal capping and/or a restriction on the functions of local government, something will have to give.
The Audit Commission says—we agree with it—that neither universal capping nor restrictions on the functions of local government are satisfactory alternatives to a better system of local government finance. On those matters, the local authorities
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themselves, the professionals in the field, and, above all, the Audit Commission, are unanimous. That is the argument on local democracy.
The second argument is a business argument. That argument too stands on its own two feet and has been amply justified in the views that have been expressed. A number of Members of the Committee, notably the noble Lords, Lord Boyd-Carpenter and Lord Mackay of Ardbrecknish, pointed out that business rates were not popular in the past. That has always been the case. Business people, responding to the admirable campaign of the Local Government Chronicle in favour of a return of the business rates to local control, have always said that they did not like paying the business rate but they recognise, as Members opposite appear not to recognise, that the level of business rates was not entirely at the discretion of local authorities.
The relationship between business rates and domestic rates was established by central government. Local authorities had no discretion to change that relationship. If local authorities wanted to spend more, they could not just raise the business rate at will; they had to raise the rate for domestic ratepayers too. I suspect that much of the argument of Members of the Committee opposite is based on a misunderstanding of that fundamental point, although they also recognise that a good deal of the discontent with the business rate in recent years stems from revaluation rather than the absolute level of the business rate.
We must now address not historical references but the present situation. It is not just small businesses or large businesses but rather businesses of all sizes that are expressing a wish to return to locally controlled business rates. Only today a press release was issued by the federation of small businesses. The policy chairman of that federation, Mr. John Harris, stated:
"Business rates are an unfair tax not related to ability to pay. Businesses are not making much in the way of profits yet their business rate bills continue to go up and up".
He makes those remarks in the context of the argument for wider use of local authorities' discretionary powers to remit business rates for small businesses. I believe the Minister had an adequate reply to some aspects of that argument.
Baroness Blatch: Will the noble Lord produce the evidence to show that businesses wish to return to local authority control?
Lord McIntosh of Haringey: I have already done that.
Baroness Blatch: You did not say that!
Lord McIntosh of Haringey: I did not say that the federation of small businesses said that businesses wanted to return to local authority control. I said that the Institute of Directors had said that businesses want to return to local authority control. A large number of chambers of commerce, particularly in the south and south-east of England, have also expressed that wish. If businesses say that, it does not come well from a Government, who are supposed to be sympathetic to business, to argue the opposite case. On the grounds of local democracy and financial

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accountability for local government and on the grounds of the interests of businesses, I propose to take the opinion of the Committee on the amendment.
4.22 p.m.
On Question, Whether the said amendment (No. 227A) shall be agreed to?
Their Lordships divided: Contents, 92; Not-Contents, 152.

Division No. 1

CONTENTS

Addington, L.

Jeger, B.

Airedale, L.

Jenkins of Hillhead, L.

Annan, L.

Jenkins of Putney, L.

Ardwick, L.

John-Mackie, L.

Aylestone, L.

Judd, L.

Birk, B.

Kennet, L.

Blackstone, B.

Kilbracken, L.

Bonham-Carter, L.

Kinloss, Ly.

Boston of Faversham, L.

Llewelyn-Davies of Hastoe, B

Bottomley, L.

Lockwood, B.

Broadbridge, L.

Longford, E.

Brooks of Tremorfa, L.

Lovell-Davis, L.

Bruce of Donington, L.

McIntosh of Haringey, L.

Callaghan of Cardiff, L.

Masham of Ilton, B.

Carmichael of Kelvingrove, L.

Milner of Leeds, L.

Carter, L.

Molloy, L.

Cledwyn of Penrhos, L.

Morris of Castle Morris, L.

Cocks of Hartcliffe, L.

Nicol, B.

Crook, L.

Parry, L.

Cudlipp, L.

Phillips, B.

David, B.

Pitt of Hampstead, L.

Dean of Beswick, L.

Prys-Davies, L.

Desai, L.

Richard, L.

Donaldson of Kingsbridge, L.

Robson of Kiddington, B.

Donoughue, L.

Rochester, L.

Ewart-Biggs, B.

Ross of Newport, L.

Ezra, L.

Sainsbury, L.

Fitt, L.

Seear, B.

Foot, L.

Serota, B.

Gallacher, L.

Shackleton, L.

Galpern, L.

Shaughnessy, L.

Gladwyn, L.

Shepherd, L.

Glenamara, L.

Stallard, L.

Graham of Edmonton, L. [Teller.]

Stedman, B.

Stoddart of Swindon, L.

Greene of Harrow Weald, L.

Strabolgi, L.

Hampton, L.

Thomson of Monifieth, L.

Hamwee, B. [Teller.]

Tordoff, L.

Harris of Greenwich, L.

Turner of Camden, B.

Hatch of Lusby, L.

Underhill, L.

Hilton of Eggardon, B.

Wallace of Coslany, L.

Hirshfield, L.

Whaddon, L.

Hollis of Heigham, B.

Wigoder, L.

Holme of Cheltenham, L.

Williams of Elvel, L.

Hooson, L.

Wilson of Langside, L.

Howie of Troon, L.

Winchilsea and Nottingham, 1

Hughes, L.

NOT-CONTENTS

Acton, L.

Blatch, B.

Aldington, L.

Blyth, L.

Alexander of Tunis, E.

Borthwick, L.

Allenby of Megiddo, V.

Boyd-Carpenter, L.

Alport, L.

Brabazon of Tara, L.

Ampthill, L.

Bridgeman, V.

Arran, E.

Brigstocke, B.

Astor, V.

Brougham and Vaux, L.

Atholl, D.

Butterworth, L.

Auckland, L.

Caithness, E.

Balfour, E.

Caldecote, V.

Barber, L.

Campbell of Alloway, L.

Belhaven and Stenton, L.

Carnock, L.

Beloff, L.

Cavendish of Furness, L.

Belstead, L.

Charteris of Amisfield, L.

Bessborough, E.

Clanwilliam, E.

180

Clitheroe, L.

Manton, L.

Cochrane of Cults, L.

Marlesford, L.

Cockfield, L.

Marsh, L.

Colnbrook, L.

Melville, V.

Constantine of Stanmore, L.

Merrivale, L.

Cottesloe, L.

Mersey, V.

Cullen of Ashbourne, L.

Milverton, L.

Cumberlege, B.

Montagu of Beaulieu, L.

Denton of Wakefield, B.

Montgomery of Alamein, V.

Derwent, L.

Morris, L.

Digby, L.

Mottistone, L.

Dundee, E.

Mountevans, L.

Elibank, L.

Mountgarret, V.

Ellenborough, L.

Mowbray and Stourton, L.

Elles, B.

Munster, E.

Elliot of Harwood, B.

Nelson, E.

Erroll of Hale, L.

Orkney, E.

Fanshawe of Richmond, L.

Orr-Ewing, L.

Fisher, L.

Oxfuird, V.

Forbes, L.

Pender, L.

Fortescue, E.

Peyton of Yeovil, L.

Fraser of Carmyllie, L.

Quinton, L.

Gainford, L.

Rankeillour, L.

Gainsborough, E.

Rawlinson of Ewell, L.

Gardner of Parkes, B.

Reay, L.

Geddes, L.

Renfrew of Kaimsthorn, L.

Gisborough, L.

Renwick, L.

Glenarthur, L.

Richardson, L.

Gray, L.

Rodney, L.

Gridley, L.

Romney, E.

Grimthorpe, L.

St. Davids, V.

Halsbury, E.

Saltoun of Abernethy, Ly.

Hankey, L.

Sanderson of Bowden, L.

Harding of Petherton, L.

Savile, L.

Harlech, L.

Selborne, E.

Harmar-Nicholls, L.

Selkirk, E.

Harvington, L.

Shannon, E.

Henley, L.

Shrewsbury, E.

Hesketh, L. [Teller.]

Skelmersdale, L.

Hives, L.

Stodart of Leaston, L.

Holderness, L.

Strathclyde, L.

HolmPatrick, L.

Strathmore and Kinghorne, E [Teller.]

Hood, V.

Hooper, B.

Sudeley, L.

Howe, E.

Swansea, L.

Hylton-Foster, B.

Swinfen, L.

Jeffreys, L.

Tenby, V.

Johnston of Rockport, L.

Terrington, L.

Joseph, L.

Teviot, L.

Kintore, E.

Thomas of Gwydir, L.

Kitchener, E.

Trefgarne, L.

Knollys, V.

Trumpington, B.

Lauderdale, E.

Ullswater, V.

Lloyd of Hampstead, L.

Vivian, L.

Long, V.

Waddington, L.

Lyell, L.

Westbury, L.

Mackay of Ardbrecknish, L.

Wharton, B.

Mackay of Clashfern, L.

Whitelaw, V.

MacLehose of Beoch, L.

Wise, L.

Macleod of Borve, B.

Young, B.

Malmesbury, E.

Resolved in the negative, and amendment disagreed to accordingly.
4.31 p.m.
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 227AA:
Page 121, line 17, leave out ("the aggregate of").
The noble Lord said: In moving Amendment No. 227AA I should like to speak also to Amendments Nos. 227AB and 227AC. Schedule 10, which contains a great deal of meat for a schedule tucked away at the very back of the Bill, includes an interesting provision about the local government finance report for the year. Under that provision, in estimating the national non-domestic rate and the distributable amount,

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which is the proceeds of the national non-domestic rate, the Secretary of State is not required to disclose the assumptions on which the estimate is based. Instead he may make,
"such assumptions as he sees fit",
in making his estimate. We believe that there should be a provision on the face of the statute that instead of just the aggregate of the figures the individual figures should be shown. That is the implication of Amendments Nos. 227AA and 227AB. We consider that the assumptions in the local government finance report should also be made explicit.
This is not an amendment on which we propose to divide the Committee. It is principally designed to make sure that the legislation is as explicit as possible and that there is as much freedom of information as possible. I understand that the details of the calculation have been made available by the Department of the Environment on request. We now ask that details which are not secret and which are made available to local authority associations should be included in the local government finance report for each year. I beg to move.
Baroness Blatch: Amendments Nos. 227AA, 227AB and 227AC seek to change the way in which the Secretary of State produces his estimate of the amount distributable to local authorities from the non-domestic rates pool and to require him to publish his assumptions in the local government finance report. Since they would require him to make a separate estimate of each of the thousands of payments into and out of the pool for the coming year I am not sure that that is what the noble Lord intended with the amendment. However, I have to take the amendment literally as it appears on the Marshalled List.
At present the distributable amount is calculated before each financial year on the basis of the national total of rateable values, adjusted for changes such as the effect of rating appeals, and multiplied by the national poundage. Any surplus or deficit carried forward from previous years is also taken into account. While we can be reasonably confident that the estimate of yield produced in that way is as accurate as it can be for the country as a whole, we cannot make reliable forecasts at the level of detail suggested by the amendments, nor can I envisage any way in which we could do so.
We have no objection in principle to disclosing how the calculation of the distributable amount is made. However, the local government finance report does not seem to be an especially appropriate vehicle for such information. That report is concerned principally with the quantum of resources to be given to local authorities and its distribution, not with the methodology for arriving at the sums to be paid. Also the report comes late in the annual cycle. This year it arrived two months after the date on which the distributable amount was announced. We are certainly not averse to revealing the basis of our calculations, but we see no merit in being tied to the specific mode of dissemination to which the amendment refers. Instead, the basis of the calculation could be made available in the autumn when the
182
distributable amount and the poundage are announced, and we are prepared to do that with effect from autumn 1992.
I hope that that meets the request which the noble Lord made in speaking to the amendment.
Lord McIntosh of Haringey: I am most grateful for that reply. I recognise the justice of what the Minister said both about the detail which would he required if our amendment were taken literally and the problems which would arise if the disclosure were delayed until publication of the annual report. Moving the amendment has proved entirely justified by the offer the Minister has made to make the information available in the autumn of 1992, and presumably annually thereafter. On the basis of that very helpful reply I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 227AB and 227AC not moved.]
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 227AD:
Page 121, line 34, at end insert ("and the Secretary of State shall not less than three months before the laying of the report consult such persons representative of local government as appear to him to be concerned as to that basis").
The noble Lord said: This is also a probing amendment. It arises from a certain amount of puzzlement about the wording of the Bill. It also relates to the basis of distribution of the national non-domestic rate and the timing of the consultation. The council tax technical sub-group, which is the point of contact between the local authority associations and the Department of the Environment, has discussed the matter. This is not the place to challenge the Government's decision that the distribution should be made on a population basis, particularly since the way in which the national non-domestic rate is distributed is then reflected in the way in which other forms of external financial support are distributed. We accept that the effect is the same at the end of the day however the national non-domestic rate is distributed.
However, there has been a problem this year in that the proposals for local authority finance were issued by the Secretary of State on 24th November last year and the revenue support grant orders were finally laid only on 24th January. Can the Minister, in response to this advertisement, give an indication that greater efforts will be devoted to making sure that the relevant orders are issued before Christmas? It would be of enormous help to local authorities if the Government could give an indication that that is the case. I beg to move.
Earl Howe: As the noble Lord explained, the amendment deals with consultation with authorities on the basis of distribution of the business rate pool. It seeks to place a duty on the Secretary of State to consult authorities three months before laying the local government finance report for the year.
Under the council tax it is intended that the business rate pool will be distributed to each area on the basis of a fixed amount for each person. We propose to use OPCS population figures for that purpose. Their use is already precedented in the

183
construction of SSAs. The precise rules to apply will be set out in the local government finance report for the year, which will be subject to approval in another place. The Secretary of State will be under a duty to notify representatives of local government of the general nature of the basis of distribution of business rates before making the local government finance report each year. Local government then has a chance to comment and make representations.
That is in line with the present arrangement whereby the rules for distribution are set out in the population report and the Secretary of State is required to notify authorities of the general nature of its contents before it is made. In practice, authorities have at least four weeks before the making of the report in which to make representation to the Secretary of State about the proposed distribution. That period has proved adequate for the purpose. We do not consider that a longer period or a requirement for formal consultation would add anything. I therefore hope that, on reflection, the noble Lord will not feel it necessary to pursue the amendment further.
Lord McIntosh of Haringey: I had always thought that the Government made policy on the hoof. But to have a response in which one Minister is altering another Minister's brief as he speaks is new to me. I do not know now what alteration was made and what effect those last minute thoughts have had on the response that the noble Earl gave. I am not as encouraged by what he said as I was by the previous answer. However, I shall read carefully what he said. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 227AE:
Page 122, line 9, leave out ("one further calculation") and insert ("one or more further calculations").
The noble Lord said: I wish to speak also to Amendments Nos. 227AF, 228ABA and 228ABB, all of which seek to make the same point. There is a curious anomaly in the way in which the final decision is made among authorities about the distribution of revenue support grant and the national non-domestic rate.
The Bill provides that the Secretary of State may make one further calculation. In other words, he may think again once only in making the calculation of the figure. However, elsewhere the Bill provides that the Secretary of State may make one or more amending reports which amend the distribution specified in the original local government finance report. Why in an original report should there be only one opportunity for making a further calculation whereas there is opportunity for making more than one amending report? What are the circumstances under which a recalculation will be made when making the original report? What are the circumstances in which an amending report will be made? I beg to move.
4.45 p.m.
Earl Howe: As the amendments stand, they could undermine the stability which is such an important feature of the grant system as we know it. The amendments deal with the calculation of the amounts of redistributed business rates and revenue support grant to be paid to each individual authority. The calculations involve the sharing out of fixed amounts in accordance with a distribution methodology. That methodology or basis of distribution will be set out in the local government finance report each year and must be approved in another place before the calculation can take place. The distribution of non-domestic rates will be calculated by reference to resident population. The amount of RSG for each receiving authority will be calculated in relation to its SSA and its taxable resources under the council tax.
Once those amounts have been calculated for each authority, it is not our intention that they should be changed. We intend to retain the stability which underpins the present grant arrangements. In particular, we do not intend to return to a system where grant could be adjusted again and again long after the settlement has been made. Certainty has been a cornerstone of the system introduced by the Local Government Finance Act 1988. We do not intend to go back to a situation where authorities could be subject to a series of recalculations after the end of the financial year, with all the uncertainties about increases and decreases in grant that that would entail.
For that reason, we do not intend to take a power that allows the annual settlement to be recalculated any number of times. We propose to continue to be able to make one further calculation to correct technical errors. We have therefore provided, as a fail-safe device, that one further calculation may be made.
I hope that that clarifies the question that the noble Lord posed. The position mirrors the existing arrangements under the community charge. I hope that I have sufficiently explained the position and resolved any uncertainties in the noble Lord's mind. If not, I shall be happy to know.
Lord McIntosh of Haringey: That reply was made in a most conciliatory tone. Nevertheless it was an extraordinary reply. If the Government seriously claim that they have introduced certainty into local government finance, the claim will be met by a hollow laugh from large parts of local government. After all, this is the Government which introduced in-year capping to local authorities. The rare, exceptional-case capping of previous years had always been made in advance so that local authorities knew what their budgets would be. Now we have been given only non-statutory indications of what the principles underlying capping will be. Capping takes place after a local authority has announced its budget, forcing it to announce a new budget.
At the same time, in 1991, after many local authorities had not only determined their budgets but sent out their poll tax bill, the Government announced the special £140 provision and the consequent increase in VAT. That again forced local authorities to send

185
out extra bills, in many cases two or three months late. Therefore, for the noble Earl to tell us that the Government have introduced certainty into local government finance is a little rich.
Similarly he asked me to accept that, in pursuit of certainty, the opportunity to make other further calculations should be restricted to one further calculation. I have no difficulty in accepting that. Can he explain why it is possible under the Bill as drafted to have more than one amending report?
Earl Howe: The position as advised to me is clear. Only one amending report can be made and approved. If there is an anomaly in the Bill, I shall be happy to write to the noble Lord.
Lord McIntosh of Haringey: There is clearly an anomaly because the Bill as drafted makes provision for one or more amending report. I shall be interested to receive the noble Earl's letter. It will enable me to decide whether it is a matter which we should pursue at a later stage of the Bill. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 227AF not moved.]
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 227B:
Page 124, line 23, leave out paragraph 9 and insert:
("9.—(1) Section 78 of the 1988 Act shall be amended as follows.
(2) In subsection (2) after the word "section" there shall be added "having regard to the matters specified in subsection (2A) below.
(2A) In making any determination under this section, the Secretary of State shall have regard to the impact on each receiving authority of the interaction of the following—

(a) the amount of the Standard Spending Assessment of that authority in relation to any comparable authority and the total amount of revenue grant support for the financial year concerned;

(b) the reduction in the authority's council tax base resulting from the operation of the system of discounts established under section 11 of the Local Government Finance Act 1992; and

(c) the proportion and amount of non-domestic rating income which is likely to be allocated to the authority and shall secure so far as practicable that revenue support grant is allocated on an equitable basis between classes of authority and to authorities within each class."

(3) In subsection (3) after the word "year" there shall be inserted—
" "(aa) the reasons for the allocation made in respect of each authority,
(ab) a statement that the distribution proposed is equitable as between classes of authority and to authorities within each class."
(4) Subsections (6) and (7) shall cease to have effect").
The noble Lord said: Again it may seem to be in a curious place, but Schedule 10 contains matters of great importance which ought to be more to the forefront of our discussions about local government finance and the amendments that are being made by the Bill to the system of local government finance.
Part II of Schedule 10 refers to the system of grants. It is only by attacking the issue as it is raised in Schedule 10—in other words, in the distribution of the
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national non-domestic rate—that it is possible to raise the vital issue of the way in which standard spending assessment, the basis of government grant, is calculated, and how that reflects the needs and resources of individual local authorities.
The formal basis of the standard spending assessment is clear. It is claimed to be the basis for the cost of provision of a standard level of service. There are supposed to be measures which take account of different cost elements in different local authorities. That produces a standard spending assessment for each authority. We are anxious about the fact that, even on the face of the matters and before we go into the detail, the variation is so great between one authority and another. However, that is a subject to which we may return.
We also understand the purpose of the standard spending authority. It is to work on the basis that if each local authority were to spend at the standard spending assessment all local authorities would be levying the same poll tax or. as regards this Bill, the same council tax. In order for that to work, we must have an accurate, realistic and fair assessment of the needs of local authorities and of their resources. I suggest here, as in the following two amendments, which enable the Committee to consider the matter in more detail, that the standard spending assessment as at present drafted does not represent either the needs or the resources of local authorities.
Amendment No. 227B requires that the Secretary of State shall have regard to the impact on each receiving authority of the decisions he takes on grant and national non-domestic rate distribution specifically in relation to the standard spending assessment, the calculation of any authority's tax base (the resources element) and the distribution of grant and national non-domestic rate between authorities and within classes of authority. We referred to some of those issues in our discussions on Amendment No. 227A.
Perhaps I may summarise, first, the most important issues of resources and, secondly, the most important issues of need. It will be seen how far the standard spending assessment as a basis for grant departs from the principle which it seeks to claim to espouse. First, the tax base is calculated on the basis of property values. With the laudable aim of simplicity the Government have defined property values only as being capital values. There have been a number of interesting but irrelevant interventions about the greater complexity of the Labour Party's alternative basis for the assessment of property values. However, as we approach the end of the discussion of this Bill in Committee we are in a position where capital values are the basis and the only basis of the assessment of the tax base. That is so despite calls by Members on all sides of the Committee and by Government Back-Benchers in another place that, for the Government to recognise in the light of the huge differences in capital values that occur between one region and another, that is not the best way to assess the tax base.
The second element that local authorities must take into account in assessing their tax base is the level of

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discounts. It is not the level of rebates because they are funded by central government. Local authorities are urged to conduct canvasses and to look at poll tax registers in order to assess the level of discounts. Those paying the council tax will have to cough up for all the discounts that are granted. Unfortunately, despite urging from these Benches, the Government have not recognised the need to give local authorities a statutory authority to demand the information that is required in order to achieve that assessment. Therefore, one must presume that estimates of discount levels, particularly in the first year, will be pretty rough and ready. In other words, here too the resources element will be inadequately described in the legislation and inadequately reflected in the grant.
The final element, which we hope will be less serious in respect of the council tax than it was for the poll tax, is that of non-collection. Again, those who pay will have to pay extra because of those who do not. We believe that the assumptions made on that issue should be spelt out more clearly.
As regards the needs side of the equation, we must say—and we shall repeat the argument in more detail in relation to the subsequent amendment—that the standard spending assessment does not represent the cost of the standard level of service. Instead it represents the share-out of a pre-determined cake made by government rather than a pre-determined level of service. So much for the Citizen's Charter. We shall be suggesting to the Committee that, because of the bad data used in the calculation of the standard spending assessment and because of arbitrary and changing judgments, the standard spending assessment is inadequate for the purpose for which it is intended.
Although there is little explicit reference in the Bill to the calculations which government use in granting this vital element in local authority finance—indeed, there is little explicit reference to the need for those government grants to be justly and fairly distributed among different local authorities—we believe that it is right even at this late stage of the Bill to draw the Committee's attention to the gaping holes in the Government's arguments about local authority finance. I beg to move.
Baroness Blatch: The amount of grant to support local authorities' revenue spending is decided annually in the context of the overall level of spending that the Government consider appropriate for local authorities. We take into account new burdens on authorities, reasonable pay awards and demographic pressures. But we also have to consider what the taxpayer, locally and nationally, can afford to pay in support of this expenditure. The settlement that my right honourable friend has made for the coming financial year allows authorities an increase over last year's settlement of 7.2 per cent. Rate support grant has been increased by 14.7 per cent. to £16.6 billion. This is a fair and realistic settlement and considerably above the forecast level of inflation.
The spending needs and resources of individual authorities will be taken into account in the distribution of RSG to authorities. In the past few
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years we have put considerable effort into improving RSG distribution. We have achieved a system which is fair to individual authorities in its assessment of their different needs and resources and which is not overly complex or cumbersome to administer. We shall continue to operate the tried and tested principles of this system under the council tax. But it may be helpful if I set out what we propose.
It is a fundamental principle that revenue support grant will be distributed so that each authority can provide a standard level of service if it charges a standard rate of council tax. A standard spending assessment will be calculated separately for each local authority representing the amount of revenue expenditure necessary to provide a standard level of service. A great deal of work goes into ensuring that each year SSAs reflect as accurately as possible the different characteristics of each authority's area and the different costs faced by authorities. They are based on a substantial amount of detailed research evidence and are extensively discussed with local authorities. The method of calculating SSAs, which is the basis for the grant allocation to each authority, will be set out in the Local Government Finance Report each year and debated in another place.
Members of the Committee may have been approached by some authorities which claim that they are less favourably treated than some neighbouring area. But when there is a limited sum for distribution some will always feel disadvantaged compared to their neighbour. Perhaps I may pose another direct question. Is there to be no control of grant for local authorities? If there is to be control, on what basis will Members of the Committee opposite make that judgment? Are they to have no judgment about the needs? If they are they will have to resort to many of the factors—they may well put different weightings on those factors—which make up the profile of communities in each of those local authority areas. I can assure Members of the Committee and local authorities that the distribution of grant depends only on formulae dependent on the circumstances of the authorities' area. We do our best to construct those formulae in the fairest possible way.
Grant is paid to bridge the gap between each authority's income and its standard spending assessment. The income taken into account is the amount an authority receives in redistributed non-domestic rates from the national pool, plus the revenue it can raise locally by levying the council tax for standard spending. I can therefore assure Members of the Committee opposite that grant distribution will take full account of an authority's income from non-domestic rates. I can also give an assurance that the income from the council tax for standard spending will take full account of the discounts that each authority estimates it will need to give.
Finally, it is our intention that under the council tax grant will be paid to each tier of authority. I have already outlined the method of grant distribution. Payment to each tier will enable people to see clearly

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on their bills which tier in their local authority area is overspending or underspending against their SSA. It will greatly enhance accountability.
As I say, unless Members of the Committee opposite are to have no view at all as to how each local authority will spend and unless they are prepared to spell out that the profiles of communities will not be taken into account or that there should be different factors, then it is important and incumbent upon them to spell out the system which they would advocate.
The arrangements for determining the total amount of grant to authorities and the principles of distributing that amount between authorities are fair and comprehensible. We do not propose to change them. The noble Baroness will now have an opportunity to address my questions and I hope that the Committee will reject the amendment.
5 p.m.
Baroness Hollis of Heigham: Before the noble Baroness sits down, will she make the same spirited defence of GREA and say that the factors there were appropriate to the local authorities assessment of grant? If she does defend that, how can GREAs and SSAs both be right when between 1989–90 and the current year, in the county of Norfolk, in Norwich SSA over GREA was increased by 25 per cent., in Brecklands it has increased by 80 per cent., and in King's Lynn by 78 per cent? In other words, the growth between GREAs and SSAs in two years varied between 25 per cent. and 80 per cent. Therefore, they cannot both be right. Which was right? Has the Minister any more confidence in SSAs than she had in GREAs?
Baroness Blatch: The noble Baroness did not answer the questions which I posed but chose to go back to a system which is no longer on the table. I revert to a point made by my noble friend Lord Renfrew when he spoke earlier. The factors which went to make up GREA were vast in number. I wish that I could remember them. I used to know them very well. It was a highly sensitive system with a large number of factors taken into account. We know the problems that that caused and we know the difficulties of understanding the relativities and sensitivities of using so many factors.
The present system uses fewer factors. As my noble friend said, with fewer factors and a more sensible and understandable system there is always some rough justice. Perhaps Members of the Committee opposite have a key to a system which either increases or reduces the number of factors, uses different factors or, as I suspect, puts different weightings on them because they would operate the system differently.
Under GREA the system was applied fairly and equitably across all classes of authority. The present system is applied fairly and equitably across all classes of authority. Therefore, I am able to defend it because there is no selectivity in terms of being subjective about the system. It was an objective system. We believe that this is an improvement on the previous system which had too many factors.
Lord McIntosh of Haringey: The Minister has not answered my noble friend's question. Both systems cannot be right. I have many detailed criticisms of the standard spending assessment to make which I was proposing to make in the debate on Amendment No. 227BA. However, if the Minister wishes me to do so, I shall gladly embark on that now. It is clearly impossible for an opposition party, with the resources which we have, to devise out of thin air a new system of grant.
However, we can say—and it is our job to say—that the existing system is not fair, does not work and produces results which are not only inaccurate but also favour specifically Conservative local authorities.
As I have been challenged, I shall give examples. All the examples are a combination of had data in the first place and bad opportunities for arbitrary judgment in the second place. As regards education, the calculations for the education standard spending assessments are based on pupil numbers with a factor which claims to assess areas of special need, which is called the AEN factor. That factor has three components but two of those three components have not been updated since the 1981 census. Therefore, extraordinary results emerge from that. For example, in primary school expenditure Wigan is told that it can spend £1,588 per primary pupil while in Surrey the figure is £1,703. That is hardly in line with what one would think of rationally as being the relative educational needs of Wigan and Surrey. Looking at secondary school expenditure, Wigan is meant to spend only £2,302 per pupil while Berkshire—an area of less social deprivation and need—is allowed to spend £2,518 per secondary pupil. I take another example. Why is Manchester allowed to spend 20 per cent. more per pupil than Bolton next door? What possible justification can there be other than that the basic data are unsound?
I then look at the arbitrary judgments made on the basis of that bad data. In 1991 the Government claim that the analysis proved that 70 per cent. of the standard spending assessment for pupils under five should be distributed according to the AEN factor. However, in 1991–92 they decided to reduce that proportion from 70 per cent. to 50 per cent. No reason was given but that put £13 on poll tax bills in Hackney and Tower Hamlets.
I must take up the time of the Committee on this issue because I was challenged as to whether or not the standard spending assessment is good. Personal social services cover the provision of services for children in care and those who are being fostered, together with the care of old people in homes and the supply of domiciliary services such as meals-on-wheels and home helps. However, when the calculations are made, no account is taken of the actual number of people receiving services or the cost of provision. Instead, complicated formulae are used which attempt to predict the size of the client group population. That is because the Government believe that if local authorities were given the money on the basis of actual provision they would respond by providing more services for more people just to get more money.

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The formula uses 19 indicators of which 14 are based on 1981 census data. At a time when there is rapid change, with the care in the community policy and the Children Act, the spending of authorities is dictated by 10 year-old figures.
In the other services block, let us look at the issue of tourism. I am sorry that the noble Baroness, Lady Gardner of Parkes, is not in her place. There is extra money and the population is adjusted to take account of tourism based on a visitor nights weighting. Again, there are nine factors based on data over 10 years old. The visitor nights factor is meant to direct resources to areas receiving a substantial number of overnight tourists. Nobody has suggested why that should be the case. Indeed, only two years ago at the Consultative Council on Local Government Finance the Government denied that visitor nights was an appropriate basis. They said:
"DoE do not consider the rationale for including an allowance for visitor nights is strong. As local authorities have the capacity to raise extra revenue from visitors through charging policy, it is difficult to identify what, if any, net costs are associated with visitors. Additionally, the data used is from the 1970s and therefore very out of date".
Despite that, not only were visitor nights included in 1991–92, but the Government decided—we can only think to help Westminster—that the weighting should be increased in 1991–92. The benefit—surprise, surprise!—is worth £37 per adult to Westminster; yet somewhere like Greenwich, which has lots of tourists who cost money but who do not stay overnight, receives no benefit. Stratford-on-Avon also receives nothing.
I can continue. In regard to highway maintenance the snow factor is a classic example. Cumbria had to appeal against the decision that it had fewer days with snow lying than either Brent or Camden and that had to be corrected in a last minute adjustment.
Lord Henley: If the noble Lord knows Cumbria, in which I can declare an interest, there is relatively little snow experienced there. I do not know about the figures in Brent. But before he claims that Cumbria is a snowy place, I can assure him that it is wet but that the snows are not that great except in the hills.
Lord McIntosh of Haringey: I am fascinated by that response. The Government acceded to the complaint of Cumbria County Council and they were given two more snow days per year. Perhaps the noble Lord's experiences are not shared by Cumbria County Council.
To show how unstable the system is I give one final example—the way in which public transport in London is taken into account in the "other services" block of services. The changes for 1992–93 have the effect of redistributing standard spending assessment away from inner London to outer London. In outer London standard spending assessment increased by £19 per adult in Bromley and Havering, £18 in Hillingdon, £16 in Richmond and £15 in Bexley and Hounslow. In inner London the biggest losers were Westminster with £39, Islington £18, Hackney £17 and Camden £15. In order to compensate beloved
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Westminster the SSA for Westminster was increased by £39—exactly the amount otherwise lost—by a change in the visitor nights charge.
I am sorry but I have to say that the standard spending assessment will not stand up to a moment's examination. It does not come well from the Minister to seek to defend it on the basis which the Government claim.
These are not trivial matters. They are matters which account for and explain the large differences in standard spending assessments and therefore the large differences in the poll tax, and what will be the council tax, between one authority and another. But it is on the basis of these arbitrary and inaccurate assessments that the Government make all their claims regarding excessive expenditure by local authorities. Unless we introduce a system such as that proposed in the amendment, which provides an accurate estimate of the needs and resource of a local authority and puts them together in an effective and fair way, we will not have a just system of local authority finance. In those circumstances, I seek the opinion of the Committee.
5.13 p.m.
On Question, Whether the said amendment (No. 227B) shall be agreed to?
Their Lordships divided: Contents, 77; Not-Contents, 147.

Division No. 2

CONTENTS

Addington, L.

Hughes, L.

Ardwick, L.

Jeger, B.

Aylestone, L.

Jenkins of Putney, L.

Birk, B.

John-Mackie, L.

Blackstone, B.

Judd, L.

Bonham-Carter, L.

Kennet, L.

Boston of Faversham, L.

Kilbracken, L.

Broadbridge, L.

Llewelyn-Davies of Hastoe, B.

Brooks of Tremorfa, L.

Lockwood, B.

Bruce of Donington, L.

Longford, E.

Callaghan of Cardiff, L.

Lovell-Davis, L.

Carmichael of Kelvingrove, L.

Macaulay of Bragar, L.

Carter, L. [Teller.]

McIntosh of Haringey, L.

Cledwyn of Penrhos, L.

Mallalieu, B.

Cocks of Hartcliffe, L.

Milner of Leeds, L.

David, B.

Molloy, L.

Dean of Beswick, L.

Morris of Castle Morris, L.

Desai, L.

Nicol, B.

Donaldson of Kingsbridge, L.

Perry of Walton, L.

Donoughue, L.

Phillips, B.

Dormand of Easington, L.

Pitt of Hampstead, L.

Ewart-Biggs, B.

Prys-Davies, L.

Ezra, L.

Richard, L.

Gallacher, L.

Robson of Kiddington, B.

Galpern, L.

Seear, B.

Gladwyn, L.

Serota, B.

Glenamara, L.

Shackleton, L.

Graham of Edmonton, L. [Teller.]

Shepherd, L.

Stedman, B.

Greene of Harrow Weald, L.

Stoddart of Swindon, L.

Gregson, L.

Strabolgi, L.

Hampton, L.

Tordoff, L.

Hamwee, B.

Turner of Camden, B.

Hatch of Lusby, L.

Underhill, L.

Hilton of Eggardon, B.

Wallace of Coslany, L.

Hirshfield, L.

Wigoder, L.

Hollis of Heigham, B.

Williams of Elvel, L.

Holme of Cheltenham, L.

Wilson of Langside, L.

Hooson, L.

Winchilsea and Nottingham, E

NOT-CONTENTS

Acton, L.

Alexander of Weedon, L.

Aldington, L.

Allenby of Megiddo, V.

193

Alport, L.

Joseph, L.

Ampthill, L.

Kintore, E.

Arran, E.

Kitchener, E.

Astor, V.

Knollys, V.

Atholl, D.

Lauderdale, E.

Auckland, L.

Lawrence, L.

Balfour, E.

Layton, L.

Barber, L.

Lindsey and Abingdon, E.

Belhaven and Stenton, L.

Long, V.

Beloff, L.

Lyell, L.

Belstead, L.

McColl of Dulwich, L.

Bessborough, E.

Mackay of Ardbrecknish, L.

Blatch, B.

Mackay of Clashfern, L.

Blyth, L.

Mancroft, L.

Borthwick, L.

Manton, L.

Boyd-Carpenter, L.

Marlesford, L.

Brabazon of Tara, L.

Marsh, L.

Brentford, V.

Melville, V.

Bridgeman, V.

Merrivale, L.

Brigstocke, B.

Mersey, V.

Brougham and Vaux, L.

Milverton, L.

Butterworth, L.

Montgomery of Alamein, V.

Byron, L.

Morris, L.

Caithness, E.

Mottistone, L.

Caldecote, V.

Mountevans, L.

Carnock, L.

Mowbray and Stourton, L.

Carrington, L.

Munster, E.

Cavendish of Furness, L.

Nelson, E.

Clanwilliam, E.

Norrie, L.

Clitheroe, L.

Orkney, E.

Cochrane of Cults, L.

Orr-Ewing, L.

Colnbrook, L.

Oxfuird, V.

Colville of Culross, V.

Palmer, L.

Constantine of Stanmore, L.

Pearson of Rannoch, L.

Cullen of Ashbourne, L.

Pender, L.

Cumberlege, B.

Peyton of Yeovil, L.

Denton of Wakefield, B.

Quinton, L.

Derwent, L.

Radnor, E.

Devonshire, D.

Rankeillour, L.

Digby, L.

Reay, L.

Dundee, E.

Renfrew of Kaimsthorn, L.

Elibank, L.

Renwick, L.

Ellenborough, L.

Robertson of Oakridge, L.

Elles, B.

Rodney, L.

Elliot of Harwood, B.

Romney, E.

Elton, L.

St. Davids, V.

Faithfull, B.

Saltoun of Abernethy, Ly.

Fisher, L.

Savile, L.

Forbes, L.

Selborne, E.

Fortescue, E.

Selkirk, E.

Gainsborough, E.

Shrewsbury, E.

Gardner of Parkes, B.

Skelmersdale, L.

Goschen, V.

Stodart of Leaston, L.

Gray, L.

Strathclyde, L.

Gray of Contin, L.

Strathmore and Kinghorne, E [Teller.]

Gridley, L.

Grimston of Westbury, L.

Sudeley, L.

Halsbury, E.

Swansea, L.

Hanson, L.

Swinfen, L.

Harvington, L.

Thomas of Gwydir, L.

Henley, L.

Trefgarne, L.

Hesketh, L. [Teller.]

Trumpington, B.

Hives, L.

Tryon, L.

Holderness, L.

Ullswater, V.

HolmPatrick, L.

Vivian, L.

Hood, V.

Waddington, L.

Hooper, B.

Westbury, L.

Howe, E.

Wharton, B.

Hylton-Foster, B.

White of of Hull, L.

Jeffreys, L.

Whitelaw, V.

Jenkin of Roding, L.

Wise, L.

Johnston of Rockport, L.

Young, B.

Resolved in the negative, and amendment disagreed to accordingly.
5.22 p.m.
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 227BA:
Page 124, line 23, leave out paragraph 9 and insert:
("9.—(1) Section 78 of the 1988 Act (revenue support grant) shall be amended as follows.
(2) In subsection (2) at the end there shall be inserted "based on the needs of the area of each authority".
(3) Subsections (6) and (7) shall cease to have effect.").
The noble Lord said: Amendment No. 227BA concentrates on one particular aspect of the more general amendment to which I have just spoken. Since I was goaded by the Minister into saying in detail what was wrong with the standard spending assessment, she can be assured that I shall not repeat the evidence which I brought to the attention of the Committee on that occasion.
However, there is one more thing I wish to say in substantiating my conviction that the standard spending assessment is inadequate as a basis for estimating local authority expenditure needs. It is that in practice it favours Conservative local authorities. The evidence is clear from the details of the increases in the standard spending assessment being made for 1992–93 over 1991–92. The evidence shows all too clearly that Conservative controlled councils are being given greater increases than any other kind of local authority. In the country as a whole Conservative controlled councils are receiving an increase of 5.67 per cent. in their standard spending assessment. Councils with no overall control are getting an increase of 5.33 per cent.; Liberal Democrat controlled councils are receiving an increase of 4.87 per cent.; and Labour controlled councils have an increase of 3.82 per cent. That is true county by county. I can give many examples.
I shall concentrate on Norfolk for the benefit of my noble friend Lady Hollis. Authorities with no overall control have an average increase of 6 per cent.; Conservative controlled authorities have an average increase of 5.86 per cent. and Labour controlled authorities have an average increase of 4.76 per cent. In Staffordshire, the Conservative controlled authorities have an average increase of 6.11 per cent.; authorities with no overall control have an average increase of 4.47 per cent. and the Labour controlled authorities, 3.46 per cent. The same is true in county after county throughout the country.
It has been my claim, which I believe to be well documented, that the method of estimating the expenditure needs of local authorities is a bad one. It is a bad method because it is based on bad data and involves unwarranted and arbitrary judgments about the meaning of that data. However, to find it proved in practice that the system favours Conservative local authorities is a little hard to bear. I beg to move.
Lord Jenkin of Roding: I wish to respond briefly to the points made by the noble Lord on this amendment and the previous one. I apologise to the Committee that other engagements made it impossible for me to reach the Chamber earlier. I find insufferable the charge that these figures are manipulated in order to favour councils of one political complexion over those

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of another. I can only imagine that the noble Lord, Lord McIntosh, has never had to sit down with teams of experts from the Department of the Environment to see how one can best devise a system that is fair.
The idea is laughable that any Secretary of State would sit with a group of officials around the table in his conference room and say, want you to devise a system which will make sure that in the county of Norfolk the Conservative controlled authorities get a substantially greater increase than those which are controlled by Labour". It is insulting to the officials who put in an enormous amount of work over a prolonged period to create a fair system.
The noble Lord is on fair ground when he says that some of the data is of necessity old. We subject the population of this country to a census only once every 10 years. As soon as the data from the 1991 census has been processed and is available, that information will be substituted for the earlier data. Some data—population data are an example—can be updated quite regularly. It would be as unreasonable for me to say that Conservative authorities get higher percentage increases in their grants; more people want to live in Conservative controlled authorities and therefore, year by year, their share of the grant increases because there are more people in those areas. I would not dream of arguing any such thing. It is far too simplistic.
However, it is rather more realistic than suggesting that my noble friends on the Front Bench actually get their officials to try to manipulate the figures so that they give favourable treatment to one council or another. If the noble Lord is saying that that is what they do, then he should have the courage to stand up and say so and expose his party to the ridicule and obloquy that would come from making such a charge. It is absurd.
Perhaps I may now turn briefly to the calculation of SSAs—
Lord McIntosh of Haringey: It may be helpful if I respond to the noble Lord at this stage since he has made a direct challenge to me and before he returns to the argument concerning the amendment. When I used the word "insulting" earlier today, the noble Lord was not present. The noble and learned Lord, Lord Hailsham, sought to have read the standing order on asperity of speech. He did not pursue the matter. The noble Lord should read that exchange before he continues in that vein and before he seeks to make the accusation that I was saying that it was the deliberate policy of Ministers to seek to alter the standard spending assessment to political advantage. I said no such thing.
I said that the combination of bad data and arbitrary judgments also has the effect that it favours Conservative controlled councils as opposed to other councils. If I were a Minister in those circumstances I do not believe I would dream of, any more than the noble Lord, when he was Secretary of State, would have dreamt of, actually saying, "Fix this to suit my party". Of course not. One makes sure that the weights that are important in Conservative controlled
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areas are greater than they are in Labour controlled areas. It is not done in order to achieve that result, but that is the effect of what one does.
5.30 p.m.
Lord Jenkin of Roding: Even to suggest that is to suggest that officials will connive in what appears to be a deliberate manipulation to suit the interests of a political party. The noble Lord cannot get away with the excuse which he has just given. Of course I shall read the exchange he had with my noble and learned friend Lord Hailsham because I always enjoy seeing what my noble and learned friend has said. It is always worth hearing and reading.
The noble Lord really cannot wriggle out of the charge which he has sought to make across the Floor of the Committee this afternoon concerning Ministers and their officials. It would be laughable to imagine that Ministers could sit down with accrued data and work this all out themselves. They would not have the time; they would not, conceivably, have the expertise or the long experience which one needs of being able to use this data in order to favour councils which happen for the time being to be controlled by the party of their own persuasion. The noble Lord demeans himself and lowers the whole tone of what, on the whole, has been a reasonably sensible debate on this Bill by making charges of that sort.
I now come to the point. When trying to assess the needs of about 400 different local authorities, each with widely different circumstances, widely different populations and with different geographical and sociological conditions, one has to do it in such a way that general rules apply. That is the rule of law. One cannot single out authorities and say, "You are to have this, but we are going to have a different rule for another and a third different rule for another". One has to apply the general rules for the simple reason that, if not, one is immediately open to challenge in the courts under the procedures which many councils have used. Therefore general rules must apply. At the same time, as my noble friend on the Front Bench said in response to the earlier debate, it must be done with a degree of simplicity. Although that may produce some rough justice, at least it is tolerably easy to understand for those councils which have to examine the calculations and determine where they come on the scale.
That is a complicated enough process of itself. But to imagine that one sits down and systematically tries to build in factors that favour one's friends and disadvantage one's political enemies is quite absurd. The noble Lord has not added to the tenor of the debate by making that sort of charge across the Committee.
Baroness Blatch: I am grateful to my noble friend for intervening. I have to say that there have been some bizarre suggestions that SSAs are somehow based on political grounds. That really is a nonsense. There is not a shred of evidence to support those allegations. I hope that noble Lords opposite will listen to this information. The average SSA for Labour-controlled authorities in every class is higher

197
than for Conservative-controlled authorities. For example, in shire districts Labour-controlled authorities have an SSA which, in per adult terms, is 27 per cent. higher than the average for Conservative districts. The higher SSAs in the country are for Labour-controlled London boroughs such as Hackney, at £2,117 per adult and Islington, at £1,722 per adult. That is a reflection of the high costs which they face.
Within the shire districts 20 of the top 30 SSAs in per adult terms go to Labour-controlled authorities. Indeed, the SSA for Barking and Dagenham, with which the noble Lord will be familiar, is higher than the average for all Conservative-controlled outer-London boroughs. I should also like to say that in all the examples given by the noble Lord he conveniently left out spending levels. What he was talking about was one increase on another year. It is interesting that where they were low spending they may well have had a higher increase. But it is not enough to give only one factor and to ignore all of the others.
The SSAs where the noble Lord sought to say there was political manoeuvering speak for themselves. Perhaps I may also say that the system that is currently in place is no different from GREA. Many local authorities complained under both systems. There are many people who shout, "It's not fair, it's not fair". One gain for one authority is a loss for another authority; unless, as I say—and noble Lords opposite are always very reluctant to answer this point —they propose a much larger cake from which the grant will come. If they do, who is to pay it? How much will it be? How will it be funded? If they do not, there are only two points they can argue: first, that they would use different factors and, secondly, that they would use a different method of distribution. But the same overall sum of money would apply. That would then be in conflict with something else that noble Lords opposite are saying. They have criticised almost every heading of spending in local government as being underfunded. Therefore, if they are to address that issue they can only argue for a much larger cake; but again there is a great reluctance on the Front Benches opposite to address that.
A great deal has been said about data. Until the 1991 census is published in all its detail we shall not be able to update the 1981 census. But my noble friend is absolutely right. One can use a number of mechanisms to make the figures more current. We have the registers of births and deaths that are used by all local authorities. Indeed, my department is in receipt of much of the data that comes from local authorities based on that information. There is a head count every single year of all school children of all ages—in every schoolroom and class of every school in the country. There are many ways of updating the information.
The Government accept that the determination of the total of grant should take into account new burdens on local authorities, reasonable pay awards, and demographic pressures. But those are not, and should not, be the only relevant considerations. The Government must also consider the overall level of spending that is appropriate for local authorities. That will depend on the need to maintain an appropriate
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balance between private and public expenditure. It will also depend on what it is reasonable to expect local and national taxpayers to pay.
Are Members of the Committee opposite really suggesting that we should write a blank cheque for local authorities; that we should allow local authorities to say that they need to spend so much on this and that much on something else, and then give them the grant to back that spending? Is that really what is being suggested by Members of the Committee opposite? That really would be a piece of highly irresponsible economic management. The Government will have no part in such irresponsibility. We believe that the aggregate spending of local authorities bears very substantially on the macro level of spending and on the economy generally. We believe that there has to be a view by government of the level of spending in local government.
This year's grant settlement allows a generous increase in RSG and allows spending increases that are above the rate of inflation. It is both a realistic and an equitable settlement. Above all, it is economically prudent. This amendment disregards prudence and I urge the Committee to reject it.
Lord McIntosh of Haringey: Both the noble Lord, Lord Jenkin, and the Minister sought to erect something to attack which bore no relation to what I said. The noble Lord, Lord Jenkin, observed that I had criticised in detail the composition of the standard spending assessment. I notice that neither he nor the Minister sought to defend the accusations I made about it. He also observed that I pointed out that increases in standard spending assessments between 1991–92 and 1992–93 had in fact favoured Conservative authorities as opposed to authorities under other political control.
Lord Jenkin of Roding: Will the noble Lord kindly give way? Is it not an equally tenable explanation that what has happened is that in the case of some of the authorities their SSAs were too low in the previous year? Therefore, adjustments failed to be made in the light of subsequent data. The noble Lord's charge was —and he cannot run away from it—that my noble friends have been favouring Conservative authorities. That is the charge he made. He should withdraw that because of all the implications that has for the officials and all the other people who work with Ministers to seek to produce a scheme which can be operated.
Lord McIntosh of Haringey: I must respond. I made no such charge and I have nothing to withdraw. I certainly made no charge on the integrity of officials and I explicitly said that I had no reason to suppose that Ministers had said, "do this for a political purpose". I had no reason to suppose that and that is not what I said. I pointed out that the standard spending assessment was bad because it was based on bad data and arbitrary judgments and—pause—had the effect of favouring Conservative authorities. The noble Lord can draw what conclusions he likes from that but I made no charge as to the integrity of Ministers or civil servants.
Baroness Blatch: We had very clearly the accusation against those on these Benches of political manoeuvring and political manipulation. As my noble friend has said, all this work is done in conjunction with our officials, and therefore we accept the criticism.
Perhaps I may put two points to the noble Lord. First, he has ignored spending levels. Does he not agree that the spending levels of Conservative authorities across classes of authorities are on average lower than those of Labour authorities? Does the noble Lord argue with the figures that I gave that the SSAs for all local authorities are more favourable for Labour than for Conservative authorities? If the noble Lord puts the spending levels together with the figures that he has given, he will find that they do not prove political manipulation. What they prove is that by and large Labour authorities spend more than Conservative authorities.
Lord McIntosh of Haringey: What they prove is what we have always said—Labour authorities represent areas of greater deprivation; no more, no less. I certainly would not deny that Labour authorities in general have higher standard spending assessments than Conservative authorities. But the economic and social polarisation of this country is such that the Labour Party on the whole represents the "have nots" and the Conservative Party on the whole represents the "haves". That is the truth of the matter and that explains the differences which we have pointed out.
I think that both the Minister and the noble Lord, Lord Jenkin, will confirm when they read Hansard that I made no charge of manipulation. What I have said is that the system is bad and it has the effect, without drawing any cause, of favouring Conservative authorities. I stand by that accusation.
Baroness Nicol: I simply wanted to comment that at the moment both sides are in danger of falling foul of Standing Order No. 30. I beg the Committee to have regard to what is the normal practice of our debates and to cool it a little. Otherwise I too shall move that the Clerk be asked to read Standing Order No. 30. We are going well outside the normal practice of the House.
Baroness Blatch: The noble Baroness is uncharacteristically critical of what is happening at the moment. I am offended by what she has just said. There is an amendment on the Marshalled List which is highly critical of what the Government are doing and asks for a change of the system. The amendment was spoken to quite rightly. The noble Lord opposite had every right to speak to it in the way that he did. We believe that he made an unjustifiable criticism. I have done no more than respond to the criticism and respond to it in detail with as much evidence as I could muster against the evidence that he produced to evidence his amendment. I do not believe that that is breaking the rules and I am rather offended that the noble Baroness thinks that it is.
Baroness Nicol: My remarks were not addressed to the Minister. They were addressed to the noble Lord,
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Lord Jenkin. The point I was making is that unless the debate is cooled a little I feel that we shall have to stop and reflect. If it is not cooled I shall move that the Clerk be asked to read Standing Order No. 30. We can then debate that Motion.
Lord McIntosh of Haringey: I am grateful to my noble friend for her intervention. I shall not return to this matter unless I am provoked. The fundamental case behind the amendment remains the same—the inadequacy of the standard spending assessment and the inadequacy of the way in which it has been devised. Clearly, there will be 100 or even 1,000 alternative ways of calculating a standard spending assessment, but I have to say that a standard spending assessment which results in a local authority finance system that in turn requires universal capping powers is almost by definition a failure as a system of local authority finance. For that I blame the Government's approach to the needs aspect of local authority finance as much as I blame their attitude towards the resources element. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
5.45 p.m.
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 227BB:
Page 124, line 35, at end insert ("and the means by which the resource base of each authority has been determined").
The noble Lord said: In moving this amendment I turn in a little more detail to the issue of the resources of local authorities, to which I referred in speaking to Amendment No. 227B.
The problem with the assessment of the resources of local authorities is that it is fundamentally based on the council tax. The council tax itself is to be based when the Bill becomes law—if the Bill becomes law —on a simple estimate of property values. The difficulty with those property values is not only that they are based on capital values alone but that capital values vary so much from one part of the country to another that the effect on any individual authority or even on any region is a severe flattening of the progressivity of the tax in any one area.
The matter is complicated by the fact that the estimate of property values is over-simplified. At this point perhaps I may revert to the previous amendment. There is a conflict that we ought to recognise between simplicity in calculations and accuracy and justice in calculations. I hope that the simplicity of the council tax basis is not claimed as an advantage. It can in fact be a way of encouraging injustice or allowing injustice to slip through. That is a serious problem.
The second element of the resources side of local authority finance is that it is very heavily dependent on an unknown quantity—the discount which will be paid by other council taxpayers rather than by central government, which is difficult to estimate in advance. There is also the problem of non-collection which has arisen to unprecedented peaks in recent years as a result of the poll tax. Therefore it is extraordinarily difficult to calculate the tax base of a local authority.

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The difficulty should not be underestimated. The purpose of the amendment is to put more rationality into the process. I beg to move.
Baroness Blatch: The amendment would require the Secretary of State to set out in the local government finance report the means by which the resource base of each authority is determined. It is our intention to do just that. The annual local government finance report will set out the basis of distribution of revenue support grant. We have made it clear that grant distribution will take into account the revenue that can be raised locally by each authority charging a standard rate of council tax. The tax base is therefore an integral part of the grant distribution system and we intend that the rules for determining the tax base of each authority will be set out in the report.
The Committee will want to know how we intend to calculate the tax base for grant distribution. I can assure all Members of the Committee that the tax base will take full account of estimates of exempt properties, empty properties and personal discounts in an area. We propose that it will include the estimated numbers of chargeable dwellings in an area, expressed as the equivalent number of band D dwellings, after allowing for personal discounts and reductions for physically disabled people.
I trust that the noble Lord will agree that there is no need for the separate duty on the Secretary of State proposed by the amendment.
Lord McIntosh of Haringey: I am grateful to the Minister for that answer which on the face of it I find entirely satisfactory. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Hamwee Baroness Hamwee moved Amendment No. 228:
Page 124, line 35, at end insert:
("The basis of the distribution shall take full account of the higher costs faced by receiving authorities in London and the South East of England.").
The noble Baroness said: In moving this amendment I shall speak also to Amendment No. 228ZA. We return now to the question of differentials across the country. The second amendment in the grouping relates to property prices and incomes and is not confined to the South East. It is perhaps a different way of addressing the point featured in Amendment No. 228A; namely, the costs faced by receiving authorities which the amendment before the Committee specifies as being those in London and in the South East.
During earlier Committee stages we looked at the issue of regional banding. I appreciate that the Government are not prepared to accept that system. However, the amendment proposes another solution for the Government to use to deal with the concerns which have been so vociferously expressed with regard to the discrimination, which is perhaps unintentional, but, nevertheless, there will undoubtedly be such effects in areas where property prices are higher, especially in London and the South East.
London is likely to lose something in the order of £300 million in external finance on the new basis which is proposed. There are huge variations among the
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boroughs. However, if I give the Committee the figures of £140 per adult in inner-London and £31 per adult in outer-London, I do not believe that they could be regarded by anyone as being wide of the mark. If no alteration is made to the arrangements to compensate Londoners for the grant losses which will result from higher relative property prices, it is even more important that the standard spending assessments should accurately reflect authorities' need to spend.
I believe that reference was made during earlier stages of the Bill—or it may have been on a previous local government Bill—about the difficulties which arise because there are two associations of borough authorities in London. I must tell the Committee that there is common ground on the following issue between the two local authority associations. I refer to the inadequacy of the present area cost adjustment. That adjustment is intended to compensate authorities for higher non-discretionary costs. But it is essentially a labour cost adjustment; in other words, it applies only to the share which is assumed to be the base of labour costs for individual services.
The total costs covered by the area cost adjustment vary quite considerably among different types of service. For example, in education 80 per cent. is covered by the ACA, for the police it is 85 per cent. and the figure for highway maintenance is as low as 50 per cent. The area cost adjustment takes account of higher labour costs but not of other costs such as rents and—dare I say it—non-domestic rates which are included in the adjustment.
I understand that the Department of the Environment accepts that there are cost differences. The local authority associations believe that they are being required to meet a very high level of proof with regard to that—indeed, a much higher level than the department requires with regard to other aspects of the grant-making process. If the ACA for each service was to be set at 100 per cent. of the SSA rather than at the assumed labour cost share, I believe that the increase will be just under £200 million, which I accept would result in a corresponding increase in grant. That is the point. If the problem were to be addressed, some of the unfairness of which I believe Londoners will become very conscious in the council tax provisions would be reduced.
In conclusion, perhaps I may deal briefly with Amendment No. 228ZA which would require the Secretary of State to,
"take into account relative property prices and household incomes".
We have spent a good deal of time in Committee discussing the differences in property prices and how they do not accurately reflect differences in household incomes. But I suggest that the evidence put forward is irrefutable. I do not think that that part of the debate needs to be repeated in detail. However, I should stress that I shall support the other amendment if the amendment before the Committee is not accepted. I beg to move.
Baroness Blatch: Perhaps the noble Baroness will be able to answer a question which will enable us better to consider the amendment. Is she arguing that

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there should be greater recognition of the South and the South East over and above the area cost adjustment factors—which cover inner-London boroughs, outer-London boroughs, inner-fringe districts and outer-fringe districts and other South-Eastern districts—which would mean money over and above recognising the costs of the South and the South East? Is the noble Baroness asking for even greater recognition?
Baroness Hamwee: Yes, I am, for the very reasons that I have already given. Not only are London and the South East discriminated against because of the way that the council tax will work; they are also discriminated against because of other factors such as rents and rates which I mentioned.
Baroness Blatch: But what is proposed would be discrimination in favour of them in respect of a very large sum of money. Is the noble Baroness ignoring that fact, or is she asking for more? If it is to be more, that would be at the expense of other parts of the country. Is the noble Baroness saying that even more money should come away at the expense of other parts of the country?
Baroness Hamwee: The answer to the Minister's question is yes. I have already given the figure of loss of grant of £300 million. I am told by the London local authority associations that the cost of the amendment which I propose and which they support—to that extent, therefore, I am speaking on behalf of all the London boroughs—would be under £200 million.
Baroness Hollis of Heigham: Perhaps I may speak to Amendment No. 228ZA which is grouped with the amendment which is presently before the Committee. I shall not requote the figures cited by the noble Baroness, Lady Hamwee, about the loss of London's external finance and the implication per head to inner-Londoners, and so on. I shall not do so because my amendment has a slightly wider implication. One of the concepts that we have been exploring in a whole series of amendments is that one of the many problems associated with the council tax and its banding is the mismatch between property values and income; in other words, the ability to pay. London in particular suffers from problems at both ends of the scale, some of which were rightly identified by the noble Baroness, Lady Hamwee.
Ministers on the Benches opposite and Members of the Committee sitting behind them have not supported opposition amendments which would have rectified that anomaly by going for individual valuations. They have rejected, or not supported, amendments which might have rectified that anomaly by going for regional banding and they have not accepted amendments moved by my noble friend Lord Desai for sensible coefficients which might also have rectified it. As a result, most property in the North is in the bottom two bands and most property in London is in the top three or so bands. That is why London is doubly affected. It means that the London boroughs not only do not receive proper proportionate contribution from the better off because their
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contribution, to use the Minister's phrase in an earlier Committee stage, is "artificially dampened" or constricted; it also means that those on the lowest incomes pay too much because their property has a high value.
For example, a bus driver who is a tenant of a housing association may have an income, which includes a London allowance, which is 15 per cent. or perhaps 20 per cent. higher—and it is no more than that—than his Northern counterpart. However, he will be living in a housing association property of which he is a tenant (in respect of which he has no asset) which is assessed at, say, three times the value of a similar property in the North. It is that problem that the amendment is seeking to mitigate to some degree. That bus driver who is occupying rented housing association property will be paying too much twice over in comparison not only with the better off in London, because they are paying too little or because of the cut-off of the top band, but also with people on similar incomes and with similar jobs, occupying similar but lower valued property elsewhere in the country.
The problem arises because the revenue support grant takes into account the value of the authority's property resource compared with its needs when determining grant. By virtue of the fact that London has higher property values, by definition the revenue support grant related to its resource element will be lower. The higher property values in London assume a higher resource and a higher capacity to pay, but, in the example I have offered, that means no such thing. For that point to be evident I have only to remind your Lordships that 1 per cent. of London's houses are in the bottom band but 16 per cent. of its households are in the bottom decile of income. London's property prices are about one-third higher than the national average and in the North they are almost one-third lower, whereas incomes are only about 20 per cent. higher in London and in the North only 6 per cent. lower. As it stands, the distribution is not fair to either the London authorities or their taxpayers.
While this amendment will particularly help London it will also pick up anomalies elsewhere. We ask the Secretary of State to take into account the relativities between property prices and household incomes—because we have that information from social and regional trends and the like—when distributing revenue support grant. That seems to be only fair, just and reasonable, and I hope to have your Lordships' support.
6 p.m.
Lord Jenkin of Roding: I too have been sent a copy of the brief provided by the London Boroughs Association. At first sight they make a case which, apart from what the impact will be, looks a persuasive one. They argue that, if the council tax is being introduced a year earlier, there will be something of the order of £300 million more grant. It is said that London is being deprived of £300 million of grant because of the phenomenon to which the noble Baroness, Lady Hamwee, has drawn attention. What

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both she and the noble Baroness, Lady Hollis, might have pointed out was that, of the London boroughs, on the whole those with the largest number of houses in the lowest hand—and Newham and Tower Hamlets are quoted in the report—will gain from the way the system works, whereas the boroughs which will tend to lose will be the ones with much higher property values equivalent to an average loss of "£288 for each household in Kensington and Chelsea".
Perhaps the noble Lord, Lord McIntosh, may care to note that the effect of the amendment to which his noble friend has put her name will presumably be to reverse that benefit which favours the poorer Labour-controlled or Liberal Democrat-controlled boroughs and give it to Conservative boroughs. I am quite sure that that is not what they intend but that is what will happen.
The case which has been advanced against this amendment in another place turns on the same argument as one heard about regional banding—namely, the appalling problem involved in drawing a line and the differences between people on either side of that line. I would not press my noble friends at this stage to go for a scheme which might give rise to precisely that problem—a problem to which at the moment one can see no solution.
I simply ask my noble friend to take on board the report from officials to members of the LBA, which ends with a paragraph that states:
"LBA officers will carry out a major research project on the area cost adjustment in the Spring of this year, and put forward the findings to the SSA sub-group for discussion and consideration for inclusion in SSAs for 1993/94".
All I ask is that, when that evidence arrives, my noble friends will look closely at it. There is a feeling that because of the higher costs in London, which the noble Baroness, Lady Hamwee, said were not all covered by the labour cost adjustment, it is losing out. It so happens that the boroughs with the highest property values lose out more than those with the lowest property values. No doubt that is something to which the noble Baroness, Lady Hollis, can address herself at a later stage. There is a sense of grievance here. I have no doubt that, if my noble friends could look not at the first year but at 1993–94 when they have the results of the "major research project", they would consider it very carefully and sympathetically.
Baroness Gardner of Parkes: I have no real support for the amendment moved by the noble Baroness, Lady Hollis. I think it looks extremely complicated. It is quite impossible to assess household incomes except on a personal basis with the rebate system which comes into the council tax. I do not support that.
I have quite a degree of support for the amendment of the noble Baroness, Lady Hamwee. As I think my noble friend Lord Jenkin said, there is a sense of grievance. Whether or not it is justified I should like the Minister to establish. Not only the LBA but the AMA feel they are being unfairly treated. One point I was asked to raise was about the former discounts scheme which used to exist under the old domestic rating scheme. Under it, rateable values in London were discounted by about 17.5 per cent. partly to compensate for the much higher rateable values in
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London. I know my noble friend the Minister has said that all the other allowances which are being made more than compensate for that, but I should like to be assured that that is so.
The figure of £300 million as the loss to London has been bandied about. Unless something is done to help London in particular and the South East in general, that sense of grievance will remain. Either something can be done or at least it can be clearly proved that we are getting support through SSA topping up or some other mechanism. It may be that the Minister was right when she said at the beginning that the assessments were there and the money was already being given, but I should like to see that clearly established and on the record in Hansard so we can all study it afterwards.
I do not support the amendment at this stage but I should like to see something on this from my noble friend the Minister that we can consider so as to assess whether we are getting fair treatment.
Lord Mackay of Ardbrecknish: I have listened with some interest to the special pleading of London and the South East in the debate. Perhaps when my noble friend sums up she can help me on two things that both me. First, the size of the local government funding cake is constant. It can be increased in total but it is looked at in the round. Therefore, any increase in the amount of money coming to London and the South East from that cake will be to the detriment of other parts of England. If she confirms that I wonder whether, like me, she is wondering whether the two parties opposite are telling people in, say, the north of England or the south west of England that they are campaigning to redistribute local government funding in favour of London and the South East and away from what are largely agreed to be the peripheral areas of England, let alone the United Kingdom, where I am quite sure that the tune they sing is that London and the South East get a disproportionate amount of this country's resources.
I should be grateful if my noble friend, in her summing up, can help me in that regard so I am quite sure that the case advanced by the opposition parties is a false one.
Lord McIntosh of Haringey: Before the Minister replies perhaps I can respond to the noble Lord, Lord Jenkin, who put it to me that our amendment would favour Conservative areas at the expense of Labour areas. If he reads Amendment No. 228ZA more closely he will see that it states:
"the Secretary of State shall take into account relative property prices and household incomes within each receiving authority".
If we were to be accused of being vague in the amendment, on the basis that it could be 90 per cent. property prices and 10 per cent. household income or 90 per cent. household income and 10 per cent. property prices, we would accept that charge because in the amendment we seek to draw attention again to the need to have a system which reflects ability to pay. Nothing in the amendment justifies the charge that we are seeking to benefit Conservative areas.
Baroness Blatch: I wonder whether the noble Baroness, Lady Hollis, would help me by answering a question before I deal with the amendment. How will she assess the household income part of the amendment?
Baroness Hollis of Heigham: I said in my opening remarks—perhaps I talk too fast—that there is plenty of evidence of regional trends in Social Trends published just a week ago. I consulted the figures. They give the regional banding of incomes.
Baroness Blatch: Can I take it from that helpful answer that the assessment of the income of households will be done on a crude regional basis and there will be no assessment of income of individual households?
Baroness Hollis of Heigham: If the Minister were minded to think that there was substance in the amendment such that she would like to take it away and consider it, I would say that the matter is obviously best worked out in consultation with the local authority associations. I was trying to say that there was reliable evidence of the banding and patterning of household incomes by regions, for example, in Social Trends. That information can obviously be desegregated.
6.15 p.m.
Baroness Blatch: Then I shall address not just the iniquity of applying that system but the inequalities within a region. If someone on a very low income lives in a high income area—if I am to take the noble Baroness at her word that the basis would be regional —the disadvantages would be considerable for people on low incomes because they would be banded generally for living in a high income area.
Amendment No. 228 requires that revenue support grant distribution takes full account of higher costs faced by receiving authorities in London and the South East. We indeed recognise that local authorities in different parts of the country face different employment and other costs because of local market conditions over which they have little or no control. The existing grant system addresses that by taking the higher costs faced by authorities in London and the South East into account in the calculation of standard spending assessments. These area cost adjustment factors involve significant amounts; under the proposed settlement for next year they will increase the amount of grant by 26 per cent. for certain services. I can assure the noble Baroness that we do not propose any change to that principle under the council tax.
I say to my noble friend Lord Mackay that a serious question is being posed here. Either the size of the cake is enlarged substantially or, in addition to the positive discrimination in favour of the South and the South East which is paid for by the rest of the country, a serious increase in the amount to be raised in local tax can be expected in all areas other than the South and South East. It is fair to point out that in those parts of the country there is an active campaign, through amendment to the Bill, to ensure that there is
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a switch of resources from the North and the Midlands to the South and the South East over and above the discrimination the Government apply which is based on sound information.
I say to my noble friend Lord Jenkin of Roding and the noble Baroness, Lady Hamwee, that SSAs incorporate substantial allowances for higher costs in London and the South East. Those allowances take account of higher staff costs which are by far the most important element in local authority cost. In comparison, other costs show smaller variations across the country and are much less important in overall local authority costs. For example, rent and rates represent 2 to 3 per cent. only of local authority spending. I can give my noble friend the assurance that if there is new information, based on research done by local boroughs, it will be considered seriously in the preparation of the budget following the submission of that information. We are up-dating information all the time and any new information that comes along will be considered seriously.
Amendment No. 228ZA would require the Secretary of State to take into account relative property prices and household incomes when determining the basis of distribution of RSG. I shall deal with the question of household incomes first. Why should the amount of grant paid to a local authority depend upon the income of its residents? There might be two reasons. The first would be to reflect the amount which the local authority would have spent to provide a standard level of service. It might be entirely reasonable in such cases to take account of household incomes, although there will be other appropriate measures too.
The other reason for reflecting household income in RSG would be if the amount raised in local taxation were to be related to personal incomes; but, we do not have a local income tax and shall not have one for the very good reasons that have often been explained from these Benches. So household income cannot be a legitimate input into the calculation of a local authority's notional revenue for grants purposes, although I have said that staffing and general living costs are taken into account in the area cost adjustments.
The amendment refers also to relative property prices. The Government already propose to take into account property values in each area when distributing RSG. Each authority will get RSG sufficient to finance a standard level of spending on the assumption that it levies a common level of council tax. Clearly the amount it will raise from such a levy will depend upon the number of dwellings in each valuation band within the authority's area. The calculation will take account also of the number of exemptions and personal discounts. Variation in property prices is therefore a central element in the distribution of RSG.
We have returned again to regional banding. The Committee should be clear what regional banding would mean. It is important to note it. It will result in higher bills in regions where house prices are low. A typical property in the North would pay the same as

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a typical property in the South East regardless of the fact that earnings and average property prices are lower in the North. That would not be fair.
Although regional banding has been debated widely, it may help the Committee if I explain the basis of our proposals. The Government recognise that there are areas with high property prices. Under the council tax, in any street the most valuable homes will attract the largest bills. Similarly, in any town the most valuable homes will attract the largest bills. The same rationale applies not just to larger homes but to homes in more expensive parts of a town or even a village.
A three-bedroom house overlooking the park will be more expensive than an otherwise identical property in a less attractive part of the same area. It is fair that council tax bills should reflect this. The same logic applies across a county, a region or the whole country.
The Government believe that regional banding would be not just unfair, but it would give rise to unacceptable regional distortions. Distortions arise because at the boundaries of regions there would be a sudden change in the band, and therefore in the council tax bill, of otherwise identical properties.
To take a specific example, taxpayers in Enfield would, not surprisingly, be delighted to find that their homes had been allocated to a lower band than similar properties of the same value just over the border in Hertfordshire. The house in Enfield would be in a lower band because, on average, house prices are higher in London than in the rest of the South East. That is despite the fact that house prices just outside London are often higher than in the capital itself. Such anomalies should be avoided.
We are looking for some honesty in this matter. Either the whole sum of money made available to local authorities is increased substantially or we discriminate, over and above the positive discrimination that is already part of the system, in favour of the South and the South East at the expense of the Midlands, the North East and the North West. If that is the case, Members on all Benches opposite should tell the people of the Midlands, the North East and the North West that that is what they mean.
Baroness Hamwee: Without repeating the debate on regional banding, I hope I may just refer to the matter of anomalies on either side of boundaries. In a previous debate in an attempt at alliteration I compared Carlisle with Kelso. Those towns are situated on either side of the English-Scottish boundary. I also in a previous debate referred to Ludlow and Llangollen which are situated one on either side of the English-Welsh boundary. There are clear anomalies between those parts of Great Britain as regards the proposals in the Bill. I cannot see any logic in referring to anomalies between different regions of England if we are to accept anomalies between England and Scotland and England and Wales. I wish to use the terminology used in debates earlier in this Committee stage by the noble Lord, Lord Mackay. We have endeavoured to assist peripheral parts of Britain in the way we have approached the question.
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As regards the gainers in London, the noble Lord, Lord Jenkin of Roding, understandably drew attention to the fact that some London boroughs will gain. I do not dispute that. I am using the figures of the Association of London Authorities rather than the London Boroughs Association figures because the former figures were nearer to hand and there is no substantial difference between the two sets of figures. There are five gainers. Those in the gaining areas will gain, per property, £31 in Newham. That is the highest amount. I am rounding that figure up in order to be fair. People in the other four gaining areas gain between £3 and £11.
I have not tried to pick out the highest figures. I have simply tried to give a few figures to illustrate this point. Of the losers, Greenwich will lose £383. That compares with the highest gain of £30. The noble Baroness, Lady Parkes, will be aware of the figure—or a figure very like it—I am about to mention. Westminster will lose £233. If I have identified five gainers, there are, by definition, 28 losers. Almost all of those stand to lose three figure sums and many of them stand to lose more than £200.
I am obviously grateful for the assurance that has been given that the further work of the London Boroughs Association will be considered. I appreciate the assurances that have been given. I hope a dialogue will be established with officials at the department with regard to that matter. I shall study what the Minister has said. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 228ZA not moved.]
Baroness Hamwee Baroness Hamwee moved Amendment No. 228A:
Page 124, line 37, leave out from beginning to ("the") in line 38 and insert ("consult and take full account of the views of the representatives of local government with regard to").
The noble Baroness said: This amendment is grouped with Amendment No. 228AA. The terminology used in this amendment is similar to that used in Amendment No. 228AA. The Bill contains a requirement for the Secretary of State to notify representatives of local government of the general nature of the basis of grant distribution. The difference between the two amendments depends on whether one construes the word "consult" as meaning to take account of or whether one construes it as meaning to have a conversation with someone and then ignore the content of that conversation. To that extent the amendment I have tabled goes a little further than Amendment No. 228AA.
In any case the word "consult" must mean considerably more than merely to notify. Is there any particular advantage in notifying other than that local authorities and local authority representatives will need the information in question? But does it take the process of a dialogue to persuade local authorities that the procedure is fair and, most importantly, to persuade indirectly the taxpayers that the procedure is fair? On the Local Government Bill we talked a great deal about consultation. I hope that that is a word we can write into this Bill. I beg to move.
Baroness Hollis of Heigham: I wish to support Amendment No. 228A. Amendment No. 228AA which stands in my name and that of the noble Lord, Lord McIntosh, is grouped with this amendment. The difference between the two amendments—the noble Baroness, Lady Hamwee, has mentioned this—is that Amendment No. 228AA does not go as far as Amendment No. 228A because we on these Benches pay the Minister the courtesy of assuming that if the local authority associations are consulted by the Minister or the Secretary of State, the Government would, as a result, take on board their opinions and perhaps moderate or change their views. However, in substance the two amendments make the same point.
We believe that something as important as the general nature of the basis of grant distribution should be the result of consultation and not merely of notification. I would have hoped that that principle is by now well established in a whole range of legislation under this Government. I believe I am right in saying that the Local Government Finance Act 1982 required the Government to consult local authorities and trade unions on appointments to the Audit Commission, for example. I believe that during discussions on the Local Government Bill which is now in another place we decided that the Audit Commission was required to consult councils on performance indicators. The Minister will correct me if I am wrong, but I believe that under social security legislation following judicial review, where it affects housing benefits administered by local authorities, the Secretary of State is required to consult and not merely to notify.
I am reasonably confident that in the Planning and Compensation Act that passed through this Chamber —the noble Baroness, Lady Hamwee, the noble Baroness, Lady Blatch, and Members on this side of the Chamber were heavily involved in that legislation the Government willingly and gracefully accepted a number of amendments and themselves introduced a number of amendments to strengthen consultation. We hope that within that spirit and within the spirit of the Citizen's Charter the Minister will tell us that this amendment is not necessary because, by regulation perhaps, the Secretary of State will ensure that he will consult local authority representatives to enable him to take on board the broadest cross-section of views in ensuring the most equitable, fair, sensitive, simple and just means of distribution of grant.
Lord Jenkin of Roding: I hope I may make some brief remarks. During my period at the Department of the Environment I probably spent as much time consulting, listening to and taking full account of the views of local authorities as I did on almost any other single activity in which I was engaged in what was a fairly turbulent two-and-a-quarter years. Much of this matter depends upon the general climate of opinion prevailing. No one would pretend that while one is introducing legislation to provide for a fall-back general rate capping power—I introduced such a measure—or when one is seeking to abolish a powerful authority such as the Greater London Council or the unwanted metropolitan regional councils one will have an easy ride with local government.
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Nevertheless I have a distinct recollection of meeting after meeting with representatives of local authorities where we sat round the table on the podium on the third floor of the Department of the Environment and spent many hours discussing and listening to the representations which local authority representatives made. That occurred at the end of a process in which the DoE officials, with the officials of the local authority associations, had chewed over everything. I am sure the local authority representatives were as carefully briefed as I and my colleagues were as regards what each side was likely to say in response to representations that might be made.
I like to feel that during that period, despite the difficulties over controversial legislation, we were able to establish a rational dialogue on this crucial annual issue of the distribution of the rate support grant. I have no doubt that many local authorities thought that the consultation should have gone further and lasted longer. I may be completely out of date since I am talking of the period 1983 to 1985, but it is my recollection that even despite the turmoil and the antagonisms which existed at the time and despite the difficult leaders of certain councils, many of whom are no longer in local government because they were subsequently disqualified, we were able to conduct a rational dialogue on that issue.
I do not know whether the Bill needs to be amended but the Committee may wish to know that, even in a difficult period, each year there was serious consultation—with serious talking and serious listening—on the issue of the distribution of the rate support grant. Ministers and local government leaders took part in those talks in total good faith.
Baroness Blatch: Once again I am grateful to my noble friend for drawing the attention of the Committee to the record of the department in consulting local authorities, not only at ministerial level but also at official level—Ministers to local authority members and officials to officials. The record is a good one. Consultation with authorities is an integral part of the annual revenue support grant round and will continue to be so under the council tax.
The Secretary of State will continue to consult authorities on the total amount of RSG, as now. He will continue to be required to notify authorities of the general nature of the basis of the proposed distribution of RSG, as now. Authorities will therefore have full opportunity to comment before the Secretary of State makes the report. In practice the present arrangements have given authorities at least four weeks before the Secretary of State makes the RSG report in which to make representations to him about it.
The new system does not weaken the consultation process. As I said, the Secretary of State will continue to consult authorities on the total amount of RSG, as now. Before the local government finance report is made authorities will be notified of the proposed distribution of RSG, as now. Additionally, they will be notified of the proposed distribution of NDR because under the new arrangements that also will be set out in the local government finance report.

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The principles of grant distribution under the council tax and the related arrangements for notification and representations are to be based on existing practice, which has worked well. We have no reason to depart from that. Given that there will continue to be a period in which representations can be made, I do not see that a requirement for formal consultation would add anything to those arrangements. I hope that the noble Baroness will feel able to withdraw the amendment.
Baroness Hamwee: I am puzzled, not by what has been said but by the words in the Bill. I accept that there was consultation under the previous arrangements. The Local Government Planning and Land Act 1980 provided a duty to consult. The word used on page 124 of the Bill is "notify". If the arrangement is to be consultation rather than notification, why does the word "consult" not appear in the Bill?
Baroness Blatch: The noble Baroness obviously missed what I said. As has always happened within my department, the Secretary of State will of course consult. However, the Secretary of State has a duty to notify. He will consult and then notify the local authorities and then await the comments of local authorities. That has been the practice. It is well tried and tested and will, I believe, continue.
Baroness Hamwee: That is my point. There was a duty to consult. I do not suggest that the individuals who are at present involved in the process would fail in what would now be a moral duty but not a legal duty. However, the horrible apparition of a Secretary of State who may not be of the same leanings as Members on the Government Benches might cause them to give some thought as to whether a duty to consult ought to be written into the Bill. I am not getting anywhere now, but I do not think that I shall leave the matter alone for ever.
Baroness Blatch: The record of both the Labour Party opposite and our party is tried and tested. I cannot envisage another party not continuing the good practice.
Baroness Hamwee: If it is tried and tested perhaps the noble Lords would like to put their names to it and sign it. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 228AA not moved.]
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 228AB:
Page 125, line 11, at end insert:
("( ) The calculation made under subsection (1) above shall not cause the aggregate of the amounts payable in respect of revenue support grant and redistributed non-domestic rates to exceed the authority's budget requirement.").
The noble Baroness said: We have heard much about people receiving services they do not pay for, which was the rationale for the 20 per cent. contribution to the poll tax. Under the council tax we are now faced with a structure under which local authorities may offer services and taxpayers receive services which they do not pay for.
Under the council tax, it is clear that a number of authorities may receive more government money in the form of grant and business rate than is needed to cover their budgets. Not only will they not need to raise a council tax —in other words, their services will be free to their council tax payers at the point of use—they will have a surplus, which the Government propose should be attributed to shire districts to offset the county council bill. That means that in certain shire districts local authorities would provide, but people would not pay for, street cleaning, refuse collection, environmental health, planning, amenities and the like.
That is a bizarre situation. One might ask oneself whether it is because those shire district authorities are particularly poor. Are we at last to have some rough and ready measure of social justice? Hardly. It will usually be the more prosperous southern shire districts, plus, I have no doubt, Wandsworth, which have a relatively high number of affluent commuters and professional people, which will benefit. For example, if one projected the council tax into 1991-92, some 30 shire districts would have a negative tax. They would receive more from this Government in revenue support grant and business rates than they would spend. Of those 30 authorities only three are north of the home counties belt. The authorities are located in Oxfordshire, Dorset, Bedfordshire, Cambridgeshire, Hampshire, Kent, Wiltshire, Surrey, Buckinghamshire and so on. Therefore, the grounds are not those of poverty.
Secondly, will they pay nothing because of their prudence and because they have kept their spending below their standard spending assessment? As my noble friend Lord McIntosh argued so well earlier today, standard spending assessments are a crude, volatile and inaccurate index of need. Standard spending assessments privilege southern coastal towns which are prosperous and attractive enough to benefit from additional tourist nights and are therefore able to adjust their population base, but they take no account whatever of the deprivation reflected by unemployment and hopelessness in northern cities. To return to an earlier debate on SSAs, how can anyone justify privileging tourist nights as a definition of greater need while ignoring unemployment, homelessness and deprivation altogether in the standard spending assessment?
Standard spending assessments, on which 85 per cent. of local authorities' income will now hinge, are based on some 22 controls. Of those controls only eight refer to district councils and four to debt charges and interest rates—and those which I have checked are inevitably inaccurate, and I can give examples. Two controls refer to flood or seawall defences and one to transport. Only one control, determining the whole of the local authority grant, relates to an authority's range of services from amenities to cemeteries, environmental health, planning and the like.
Under GREA there were some 60 variables, 29 to 35 of which affected district councils. I accept that that was more complex, but it was more sensitive and to that extent it was fairer. In moving to SSAs sensitivity

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has been traded for simplicity at the cost of fairness. In relation to an item which will fund 85 per cent. of local authority income fairness is central. As a result, shire districts, which are not poor and not necessarily prudent, will nevertheless find, through the variables that determine standard spending assessment, that their needs, although fewer, attract a disproportionate advantage.
In addition, such districts gain a third privilege by the patterning of the flow—who gains, who pays—in terms of business rates. Perhaps I may cite figures from Norfolk because I know them best. Norwich business pays £42 million into the national pool. On the basis of the population, the local authority receives back £33 million. That is a shortfall of £9 million. That, to some extent, explains why so much has to be compensated for by its council tax. It is the democratic choice of the two adjacent local authorities to choose low services, low rates and low spending patterns. However, the businesses in those two rural areas contribute about £9 million to the national pool and receive back respectively from the pool £27 million and £28 million. They do nothing for business. But the business rate is distributed on the basis of population. It allows them, in conjunction with a favourable SSA, to receive from central government resources which are higher than their assumed spend were council tax now to be in operation. As a result, some local authorities—I do not refer specifically to the two adjacent local authorities—need not levy any district council tax. Because the needs of low spending authorities are less pressing, they are aided by an over-generous standard spending assessment and a quirky effect of business rate which help them at the expense of more deprived areas.
Those authorities which spend below their SSAs will receive more than they need because their SSAs are artificially high since they are inaccurately judged. That offers a positive bonus to local authorities to spend below the the level of SSAs which Government have set in order to provide certain levels of service. Because grant will increase the more those local authorities spend below SSA, there will be a positive incentive to them not to provide the services that Government consider necessary. Indeed, we shall see a local government version of set-aside. Additional grant will go to local authorities to provide no services or fewer services. The fewer services authorities provide the more grant they will receive. The less services one provides the more grant one receives. The less one does the more one receives.
That must be perverse. It is certainly absurd. It means that external finance—it comprises 85 per cent. of local authority's income from revenue support grant and business rate—will be thrown at districts that do not need it but denied to councils that do. Those who most need such finance will not receive it; and those who least need it will do so. As a result, the residents of the more prosperous shire districts will pay nothing for their services while those in the least prosperous will pay very much more.
That was a structural problem even under the poll tax. However, it was relatively concealed because
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there was a shared collection fund. Under the council tax there is no such shared collection fund. The grant will go to the individual shire districts. It will be made transparent that at least 30 districts, and perhaps more, will receive more grant than the assumed level that they have determined they need to spend. As a result Government propose that that surplus should offset the county council precept.
I understand why Government might be embarrassed. Perhaps Members opposite will also be embarrassed by a situation in which a swathe of the more prosperous districts with lower need will receive more money in grant than they judge they need to spend to provide services.
Earlier, the Minister pressed us, asking, "Where will the money come from?". I answer, "From there". I beg to move.
Baroness Gardner of Parkes: The noble Baroness drew attention to the overnight bed allowance and implied that it was unjust. I wish to place on record that that was highly relevant to Westminster City Council. It was a matter that had never been taken into account before because there were no figures. It gives Westminster a benefit of £44. However, it has now been charged more and has lost benefit because it was considered that it should pay a greater contribution to London Transport than out-of-London boroughs. Therefore it has gained £44 and lost £49. It is important to place on record that it was not the bonanza that it may have seemed.
6.45 p.m.
Lord Henley: I thank my noble friend. The noble Baroness, Lady Hollis, made an interesting case. However, she will not be surprised to hear that I do not accept a word of it.
The effect of this amendment would be to remove a billing authority's ability to use surplus amounts of revenue support grant and non-domestic rates to offset the county precept in its area.
At present revenue support grant and redistributed non-domestic rates are paid into the collection fund administered by charging authorities in respect of local authority services in an area. The charging authority sets the community charge to meet the balance of its own and precepting authorities' demands on the collection fund.
As my honourable friend the Parliamentary Under-Secretary, Mr. Key, explained when a similar amendment was considered in another place, some shire districts have been able to make very small demands because of prudent housekeeping and the generation of interest receipts arising from asset sales or from other sources of income. In such cases the community charge has been made up basically of only the cost of meeting the county precept, offset by the full amount of revenue support grant and non-domestic rate paid into the collection fund in support of all local authority services in an area, including those services provided by district councils. Under the council tax, RSG and NDR—if the noble Baroness does not object to my using initials—will be paid directly to both main tiers. Those districts which are

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now able to offset county precepts because of low budgets will receive more RSG and NDR than they need to finance their own expenditure.
On 6th November my honourable friend the Minister for Local Government, Mr. Portillo, announced that the Government did not intend to claw back RSG and NDR in such circumstances. Instead the Bill seeks to preserve the present situation in which local residents benefit from low budgets by allowing authorities in this position to use surplus RSG and NDR to offset the county precept for their areas. One or two districts such as Rochester upon Medway and Wellingborough are already in the happy position of being able to do so entirely, and a score or more others—as the noble Baroness suggested—are able to do it to a lesser but worthwhile extent.
This amendment would remove the ability of such authorities to use surplus RSG and NDR to offset the county precept for their areas. As I explained, the Bill does no more than preserve the present position by continuing to allow RSG and NDR to be used to reduce local taxes. It would not permit authorities to pay a dividend to their council tax payers. In the rare event that anything was left after offsetting the entire county precept, then these funds would remain in the billing authority's collection fund to offset council tax in future years.
In my view, this amendment is an example of the politics of envy. It seeks to penalise authorities for past prudence by removing funds which they would have received if the present arrangements had continued. There would be no benefit to other authorities. The amounts saved would remain with the Exchequer because authorities' entitlements to RSG and NDR are set before their budgets are known. The only practical effect would be to worsen the position of council tax payers in numerous prudent authorities' areas. That might not trouble the noble Baroness opposite, but it is not an outcome that I could countenance. I hope therefore that the noble Baroness will withdraw the amendment or that the Committee will reject it.
Baroness Hollis of Heigham: The Minister made the comments that I expected. I hoped that to some extent I had anticipated them when I suggested that we are not referring to prudent housekeeping. That is the phrase I used; indeed the Minister used it. I thought that I had responded to it. We have sought to argue from this side of the House that the reason that the charge is negative, with people in some 30 authorities, for the most part prosperous shire districts in southern England, paying nothing, is not because of prudent housekeeping but because of absurd standard spending assessments and the generous patterning of—
Lord Henley: We cannot go back over the whole argument of standing spending assessments. The matter was argued long and hard by my noble friend Lady Blatch and the noble Lord, Lord McIntosh. In my view, that point was resolved and I believe that the Committee accepted that it was resolved.
Baroness Hollis of Heigham: I can understand why the Minister is embarrassed if I refer to standing spending assessments. I can also understand why he might wish that I should not do so. The point remains that—and this is central to my argument—the reason why many of those prosperous shire districts in the south of England can have a negative council tax is because of the absurdly generous standing spending assessments. That builds on the arguments advanced in previous amendments, to which we shall certainly return.
It is also the consequence of the patterning—as I tried to argue but the Minister did not respond—of the way in which UBR works. Again, for the most part it favours prosperous, more rural, suburban or commuter shire districts in the south at the expense of cities and northern areas. When one puts the two together one has a situation that is undeniable and one that even the Minister has not sought to deny; that had the council tax been in place this year some 30 shire districts would not have to charge their residents for council tax services—
Lord Henley: I made the point clearly. If the residents are lucky enough to have had a previously prudent authority which has spent responsibly, has saved money and has perhaps had income from other sources—as was the case in Rochester, an example that I cited—why should the council tax payers of that authority be penalised merely because the noble Baroness cries, "It's not fair"?
Baroness Hollis of Heigham: The Minister repeats the phrase "prudent housekeeping" and believes that he has said something new. I repeat that the problem lies not with prudent housekeeping; that is not a problem, because obviously we all welcome prudent housekeeping and value for money. The consequence is the result of the distribution of standing spending assessments.
I had not intended to make this point but the Minister has made it irresistible for me to do so. We had GREAs only two years ago. Perhaps Members will do me the courtesy of letting me finish my point. They were based on some 60 variables. I was chair of a finance committee and leader of a council at a time when the Government were saying that GREAs were the best thing ever in terms of allocating the grant to local government. They were simplified to standing spending assessments. I take the point that sometimes there is a trade-off between fairness and simplicity. During the course of three years we have seen in the change from GREA to standard spending assessment—again I take the case of Norfolk—in the city of Norwich an increase of 24 per cent. But Breckland—a Conservative authority, although I am sure that that is an accident—has been increased by 80 per cent.; King's Lynn has been increased by 78.9 per cent.; South Norfolk by 80 per cent.; Broadland by 64 per cent.; and North Norfolk by 67 per cent. The point that I am making is that GREAs cannot have been right then and SSAs right now unless the percentage increase in the allocation in all those authorities is equal.

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The gap between 24 per cent. for one authority and 80 per cent. for another on two sets of criteria for allocating grant both of which were vigorously defended by Members opposite as being the right and proper way to allocate grant surely proves my case that SSAs are crude, inaccurate and volatile. As a result of SSAs and the patterning of business rates many of the shire districts are receiving from central government a bonanza which they neither need nor merit allowing their taxpayers to pay nothing at all for local services. That is the problem, but I give way to the Minister.
Lord Henley: The noble Baroness follows in the footsteps of her noble friend. Once again they are trying to imply that Ministers on this side of the Committee were up to funny business in fixing the SSAs. The noble Baroness shakes her head. She cited an example of an authority which gained as a result of SSA as opposed to GREA. She then said in a rather snide voice, "Oh, I am sure that is an accident". In exactly the same way, the noble Lord, Lord McIntosh, said—and it will read perfectly all right in Hansard tomorrow—"Surprise, surprise", when giving the same example. In other words, on both occasions they have tried to make the accusation that my noble friend Lord Jenkin has repudiated; that we were up to funny business in fixing the SSAs so that Tory authorities would benefit. There is no truth in that whatever.
Baroness Hollis of Heigham: The point we have made but which Ministers opposite have refused to hear—we can tell them but we cannot make them listen—is that they have established a system of SSAs which, in so far as it simplifies and departs from GREA, has done so to weight those factors which most benefit rural, shire and district councils which happen—and I say "happen"—largely to be Conservative. That is irrefutable. Any system which benefits, for example, additional tourist nights but ignores homelessness and unemployment will inevitably redirect grant into those more prosperous and attractive areas to which tourists go. Any system which takes from cities which have businesses and redistributes on a population basis will inevitably privilege rural areas over urban areas. That is the consequence of the formula adopted and that is the point that we have consistently made—
Baroness Blatch: Does the noble Baroness disagree with the figures that I gave earlier? They showed that SSAs for classes of authority are more favourable to Labour authorities than they are to Conservative authorities across the country.
Baroness Hollis of Heigham: My noble friend Lord McIntosh and I entirely accepted that those authorities which have higher needs and lower resources have a proportionately higher SSA. We have not challenged that position. However, how can Members opposite justify the distribution of SSAs and UBR, the business rate, which constructs 85 per cent. of the funding that local authorities receive? How can they justify that out of some 30 authorities all but three, so far as I can tell, are below the Home Counties
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belt? Only three are in the North and the rest are in the south of England. Those tax payers in the South will contribute nothing towards the services which they enjoy.
I would have hoped that that would generate in the minds of Members opposite some faint worry that perhaps SSAs are not quite accurate and not quite meeting need. The system allows prosperous shire districts to charge their taxpayers nothing for services while other authorities, ranging from inner London boroughs to urban authorities in the North—for instance, Wigan, Manchester and Barnsley—are severely penalised. They have higher needs and less resources with which to meet their bill.
The Minister repeatedly spoke of the politics of envy. It is a phrase that trips off his lips and he uses it often. Whenever Members on this side of Committee challenge the structural—I do not say "political"—unfairness of the council tax we are told that we are prompted by the politics of envy, as though it is right to defend structural unfairness within a public tax, spending public money raised through VAT as well as income tax, which falls on us all. I hope that Ministers will consider before using phrases such as this because we are tying to rectify the structural flaws of unfairness which privilege with public money some districts which need it least while denying it to others which do. I am sure that we shall return to the matter again and I beg leave to withdraw the amendment.
On Question, amendment negatived.
[Amendments Nos. 228ABA and 228ABB not moved.]
7 p.m.
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 228AC:
Page 127, line 45, leave out ("may, with the consent of the Treasury") and insert ("shall").
The noble Lord said: I should like to speak also to Amendments Nos. 228AD and 228AE. It is my fault that they were not linked together in the groupings. I hope that it will not inconvenience the Government if I deal with them together.
Lord Henley: Perhaps I may just make sure that I understand the noble Lord. I believe that he wishes to speak to Amendments Nos. 228AC, 228AD and 228AE together. They were originally grouped together and then ungrouped.
Lord McIntosh of Haringey: I apologise for any inconvenience but, in the end, it may save the time of the Committee.
These amendments are concerned with what in Clause 13 are called "reduced amounts" and in the schedule are called "other grants". I understand them to be about transitional relief. I still do not understand why they are not only called by euphemistic terms but by different euphemistic terms at different places in the Bill.
These are relatively minor amendments. They are concerned with the detail of implementation of Clause 13, which we debated at some length and to which I do not propose to return in substance.

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Amendment No. 228AC replaces "may" by "shall" because we need to be certain that local authorities will receive reimbursement for council tax forgone by transitional arrangements. Amendment No. 228AD, in paragraph (2) (a) puts back in a part of the Bill which would be taken out by Amendment No. 228AE but adds, in paragraph (2) (b), a provision that there should be reimbursement for reasonable administrative expenses caused by the transitional arrangements. I beg to move.
Lord Boyd-Carpenter: I object to the removal of the provision requiring the consent of the Treasury. It is obvious that this involves substantial matters of national finance. National finances will get into a terrible mess if the co-ordinating control of the Treasury is removed. Therefore, on that specific point I hope that that amendment will be rejected.
Lord Henley: I shall certainly advise the Committee to reject the amendment, or perhaps the noble Lord may wish to withdraw it.
The amendment seeks to do two things, neither of which we believe is in the best interests of sound government. Amendment No. 228AC would impose an obligation on the Secretary of State to pay grant under an amended Section 88A of the 1988 Act every time that regulations are made under Clause 13. However, this ignores the perfectly sensible proposition that there may be cases where it is more appropriate and more efficient for grant to be paid under some other power.
We have said that regulations under Clause 13 may provide for a scheme of transitional reductions. We have also said in our consultation paper that the cost of that relief will be found within the overall total which is available for central grants to local authorities but it is likely that in this case a separate grant would be more appropriate since it would be of a transitional nature and probably subject to retrospective adjustments.
We have also amended Clause 13 to allow for regulations providing relief for people with disabilities. Under this scheme the bill for a disabled person's property will be reduced to that of a property in a lower band. Because it should be possible for local authorities to show the amount of relief they award in the tax-based returns which they send to the Department of the Environment or the Welsh Office, it would be possible to compensate them through revenue support grant rather than through an administratively burdensome grant scheme. I am sure that the Committee would welcome any attempt to minimise rather than maximise bureaucracy.
Amendments Nos. 228AD and 228AE would require the Secretary of State to pay grant under the amended Section 88A in respect of administrative expenses incurred by the authorities. I am afraid that that would ignore the possibility that such expenses may be covered elsewhere and, in particular, by the council tax preparation costs grant which we are proposing to pay under Section 146 of the Local Government and Housing Act 1989. I hope that that brief explanation will be sufficient to persuade the noble Lord to withdraw the amendment.
Lord McIntosh of Haringey: I am extremely interested in that answer because the Minister is suggesting not that grant will not be paid in some form or another but that it may be paid under some other power. Perhaps the Minister will take a layman through that proposition. I need to be told that there is somewhere in the Bill an assurance that grant will be paid even though it is not to be paid under this part of the schedule.
Lord Henley: I take it that the noble Lord is asking about the administration costs. I have mentioned that certain administration costs would be covered by the grant which we are proposing to pay under Section 146.
Lord McIntosh of Haringey: That is not quite right. The Minister made the point twice. He referred to the grant being made under another power when responding to Amendment No. 228AC. Therefore, it is both the grant as a whole and the administration element of it in which I am interested.
Lord Henley: My understanding is that we would have other powers that we could use which may be more appropriate and more efficient to use for the grant. That is what we would intend to use.
As regards administration costs relating to the two later amendments to which the noble Lord spoke, there the expenses could be covered elsewhere. What I said in particular was that they may be covered by the council tax preparation costs grant which we are proposing to pay under Section 146 of the Local Government and Housing Act 1989.
Lord McIntosh of Haringey: We shall come to the council tax preparation costs grant when we deal with special grants in the next pair of amendments. My problem as regards what the Minister said—although I am glad that he said that the Government intend to pay grant, which is very helpful—is that I understand that compensation through RSG would work only for spending forgone up to the standard spending assessment whereas there could be expenditure above the standard spending assessment.
Lord Henley: Rather than responding immediately at the Dispatch Box on that point, I should prefer to write to the noble Lord.
Lord McIntosh of Haringey: I am grateful. I understand that it is perhaps better to do so. In the light of what the Minister said and his undertaking to write to me, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 228AD and 228AE not moved.]
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 228AF:
Page 128, line 17, leave out ("may, with the consent of the Treasury") and insert ("shall").
The noble Lord said: In speaking to this amendment I shall speak also to Amendment No. 228AG. I readily acknowledge that Amendment No. 228AF will bring forward the same objection from the noble Lord, Lord Boyd-Carpenter, as he raised on the previous amendment.
We now turn to the issue of compensation grant for the setting up costs of the council tax. We tabled these amendments not because we expect the Government to move on this issue but because it should be on the record in Hansard that CSL—the consultants employed by the Department of the Environment to estimate the start-up costs of the council tax—estimated a figure of no less than £156 million. That is a very large sum of money. I do not wish to become involved in issues of privilege but I suggest that the public should know the kind of figures which we are talking about and the costs of the about-turn in which this Government in this Parliament have indulged on local government finance.
I understand from the consultation paper issued at the end of November that in compensation for that expenditure it is proposed there shall be a 75 per cent. payment of the estimated revenue element of the £156 million and that the capital element—some £40 million—will be subject to supplementary credit approval. That means that local council tax payers will be paying 25 per cent. of the enormous costs of setting up a new council tax scheme. Eventually, over the lifetime of the capital borrowing, they will be paying all the costs of the additional capital expenditure required.
Clearly those are heavy burdens on local authorities, especially when one bears in mind the gearing about which we spoke in relation to earlier amendments and the fact that a considerable number of the authorities concerned are to be capped. What it means is that the expenditure will not be additional expenditure; it will be expenditure on administration of a new council tax taken out of the budgets of expending departments like education, social services, highways and so on.
That is a matter which ought to be drawn to the attention of the public. I know that the Government are adamant about percentages but they should not be other than ashamed of the financial implications of their behaviour in regard to local government finance. I beg to move.
Lord Boyd-Carpenter: I hate to disappoint the noble Lord, Lord McIntosh, and I shall therefore once again object to his proposal to remove the provision in regard to the consent of the Treasury.
More seriously, Treasury control is an essential part of our system. To erode it, even in a fairly limited area, would be a mistake. I do not know why the noble Lord—on this as on the previous amendment—feels it necessary to do so. It is not an essential part of his general proposition. I shall leave that to my noble friend the Minister to deal with but remain immutably opposed to the removal of the provision for the consent of the Treasury.
Lord Jenkin of Roding: I suspect I may be able to help my noble friend. If we were to take the sentence and merely transpose "may" for "shall", it would read very rummily indeed as,
"The Secretary of State shall, with the consent of the Treasury, pay a grant";
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that is, that the Secretary of State is entitled to compel the Treasury to consent to his paying a grant. Of course the noble Lord, Lord McIntosh, has to take out the words,
"with the consent of the Treasury".
I endorse everything my noble friend said. However, I question whether the amendment is necessary and perhaps my noble friend will be able to help. If a Secretary of State actually refused to operate this paragraph, refused to make a determination as required by (2) or, having made a determination, refused to pay the grant, I suspect that in either case he could be taken to court under judicial review and the court could declare that he was obliged to pay it. In other words, I do not believe that the use of the word "may" in the first line of the substituted paragraph 88B(1) merely gives the Secretary of State a discretion as to whether he pays it, but the word is necessary, if we intend to insert the words,
"with the consent of the Treasury"—
my noble friend made the point clearly why that is necessary —simply in order to make sense of it. It adds nothing to substitute the word "shall".
Lord Boyd-Carpenter: I differ a little from my noble friend. If we were to provide the words,
"shall, with the consent of the Treasury",
we would not be compelling the Treasury. We would be indicating that the Minister concerned is bound to pay the grant if he received the consent of the Treasury, and therefore it would maintain Treasury control. I differ from my noble friend, with respect, on the interpretation. Fortunately, this is academic because nobody is proposing to do it.
Lord McIntosh of Haringey: I do not wish to intrude on private grief. I do not mind which of the noble Lords opposite is right on the matter. If we look at the substantive amendment—Amendment No. 228AG—it will be seen that all we are adding is that there should be a statement of whether or not the amount which the Secretary of State proposes to pay reflects that authority's expenditure on the purposes for which the grant is to be paid; in other words, the start-up costs of the council tax.
We do not doubt that the Secretary of State is going to pay grant. He has already said so in the announcement about local authority finance which he made to Parliament on 26th November last. We do not like the intention that the grant shall cover 75 per cent. only of revenue expenditure and provide only supplementary credit approval rather than finance for the capital expenditure. However, the issue of whether he is going to pay grant is not an issue between us.
Baroness Hamwee: I support the amendment. I agree with the noble Lord, Lord Boyd-Carpenter, that to say "shall subject to the consent of the Treasury", would probably meet the case. However, that is not the substantive point. I hope that the Government will feel that they can accept the amendment. The dispute as to the costs of introducing the council tax will run and run and the more certainty we can have as to what those costs have been, the more likelihood there is of disposing of at least one area of dispute.

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I support the amendment for another reason, which is the underlying reason of pointing to the costs that will be incurred. No one should be in doubt as to the difficulties that that will cause, and not merely to local authorities as abstract organisations but to those bodies as providers of services. They should be in no doubt either about the inevitable knock-on effect on those services.
7.15 p.m.
Baroness Blatch: Amendment No. 228AF seeks to place a duty on the Secretary of State to make a special grant. Special grant powers are exactly that. They give the Secretary of State the power to make a grant to one or more receiving authorities following the approval in another place of a report setting out the purpose of the grant. We intend to use those powers to pay grant in support of council tax start-up costs. We have already said that grant of some £86 million will be paid to meet 75 per cent. of local authorities' council tax implementation revenue costs before 1st April 1993.
Perhaps I may say to the noble Lord, Lord McIntosh, in regard to his reference to start-up costs, that the CSL estimate of start-up costs was £115 million of revenue expenditure, funded by £86 million, which represents 75 per cent. of new money by way of special grant, the remaining 25 per cent. coming from other sources but taken into account in fixing the aggregate funds for 1992–93.
Lord McIntosh of Haringey: I do not believe the figures are in dispute. I said £156 million, which is the total figure of £115 million revenue expenditure and £41 million capital expenditure. I do not believe that we are in disagreement on the figures.
Baroness Blatch: That is right but they are different sums of money used in different ways. I was going to go on to say that the noble Lord was right that £41 million is capital expenditure and the Government will be providing supplementary credit approvals up to the full amount.
The powers are not limited solely to that purpose; they may be used to give grants in special cases where there is no specific statutory power. It is important to say that they are genuinely discretionary granting powers for special cases which may arise. This amendment is therefore a complete nonsense. It simply does not make sense to place a duty on the Secretary of State to make a grant the purpose of which is not known and will not be known until the need to use these powers arises.
I now turn to Amendment No. 228AG. This amendment is unnecessary. As the Bill is presently drafted, a special grant determination may state the total amount of grant and the method of its distribution to authorities. Amendment No. 228AG would require such a determination to state, in addition, whether or not the amount to be paid to each authority reflected that authority's expenditure on the purpose for which the grant was to be paid. As the Bill stands, the amount to be paid to each authority will depend on the basis of distribution specified in the determination. If that basis of distribution is related to
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the expenditure of individual authorities, as may well be the case, then the determination will say so. There is no need for a separate requirement on the Secretary of State.
The new Section 88B allows more flexibility over the contents of special grant reports than is possible under the existing provisions in the Local Government and Housing Act 1989. Our aim is to ensure that expenditure related grants under these powers can be given at an earlier point—I hope the Committee approves of that—than under the existing powers. This is a sensible modification which will I am sure be welcomed by local authorities and Members of the Committee. I hope that the amendment will be withdrawn.
Lord McIntosh of Haringey: At the end of what started to be an eminently reasonable reply I felt that the Minister was over-reacting to some extent. To describe the amendments as nonsense does not do justice to their content. We already know that the special grants for start-up purposes are going to be paid. They were announced to Parliament by the Secretary of State on 26th November. I have no reason to doubt what the Secretary of State does even if his Minister of State appears to believe that the issue is in doubt. It is not whether he is going to pay grant but the level of grant he intends to pay.
Even then our Amendment No. 228AG does not specify the level of grant that he is going to pay. It simply requires him to include a statement as to whether the grant he proposes to pay reflects the authority's expenditure on that purpose. All we are asking for is a little open government. We are not restricting the Secretary of State in any way at all. I believe that this is a case where a reasonable and moderate amendment was responded to in an immoderate way and I regret that. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 228AG not moved.]
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 228AH:
Page 132, line 23, leave out from ("rules") to end of line 26.
The noble Lord said: This amendment arises out of a genuine sense of puzzlement as regards the provisions for the 1993–94 council tax, which is its first year. It is well understood, and it has been the case in all local government financial legislation, that the actual collection fund may be in surplus or deficit in any one year or from year to year. That is to say, no one will be able to forecast accurately exactly what will be collected and whether to some extent it will be above or below the budget. The provision for the future is that any surplus or deficit will be shared between the billing authority, which is the district council, and the precepting authority, which on the whole is the shire county. That seems fair enough. Why then for 1993–94, and for that year only, should any deficit or surplus be borne solely by the billing authority? I ask out of genuine curiosity. I beg to move.
Baroness Blatch: I suspect also that the noble Lord is concerned mainly about the treatment of deficits rather than surpluses, although he will accept that some authorities will have surpluses to carry forward. Let me first assure the Committee that there is no question of including deficits in the budget requirement. They will therefore not affect liability for capping, though of course they will have to be met by the council tax payer. There can be no question of either an amnesty for people who have not paid their community charge, nor of government provision to local authorities to write off losses from non-collection. Let there be absolutely no illusions on this point: due community charges are to be collected.
That said—and I regret that it needed such emphasis—we can see two possible approaches to the treatment of deficits carried forward into the first year of the council tax. First, we could adopt the approach which is most consistent with the treatment of deficits under the community charge, in which they are taken into account in the community charge calculated by the charging authority and shown on the bill. There are sound arguments for adopting that approach. After all, the deficits will have arisen under the community charge and will be largely the result of action (or lack of it in some cases) by the billing authority in its previous capacity as a charging authority.
The alternative would be to adopt the approach which we are proposing for subsequent years under the council tax and to apportion any deficit or surplus between the billing authority and major precepting authorities. This approach would be consistent with overall arrangements in which each main tier will calculate its own amounts of council tax. But to adopt this approach in the first year of the council tax would mean that any deficit accumulated under the community charge would be reflected in the amounts of council tax calculated by both the billing authority, which would have been largely responsible for that deficit in its previous incarnation, and by major precepting authorities.
It is not difficult to imagine what the major precepting authorities would think of that approach, especially in areas where they would be responsible for the greater part of the council tax and hence the greater part of any community charge arrears. Nor is it an option which is likely to encourage every charging authority to do its best to collect the community charge next year.
We have not yet made any firm proposals for the treatment of community charge surpluses and deficits in the first year of the council tax. Whatever we decide, the regulations prescribing the treatment of the surpluses and deficits will be subject to the negative resolution procedure and Parliament will have the opportunity, if it so chooses, to debate them.
For the moment our concern is to avoid restricting the options available. I hope that this amendment can be withdrawn.
Lord McIntosh of Haringey: In responding to the amendment I find it very curious that the Minister should refer with some emphasis, as she says, to something which is not said either in the amendment
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or in my speech. There is no suggestion in the amendment or in my speech that there should be any amnesty for those who do not pay their poll tax. The law is the law and the taxes will have to be collected. The Minister's statement is a complete red herring.
I find the rest of the Minister's speech curious for perhaps less political reasons. It is an interesting reflection on the Government's thinking. Is the noble Baroness suggesting that, if there is a deficit which could be quite serious on occasions and require an authority which inherits the deficit in the collection fund either to charge more or to make cuts in services, those cuts should apply only to the services of the district council and billing authority and the much more expensive services of the precepting authorities such as education and social services would not be affected?
That strengthens the argument for single-tier authorities, but I do not believe in quite the way the Government intended. I find it curious for the Minister to say that the blame for deficits in non-collection should be the responsibility of the billing authority. I thought that the Prime Minister said, when he was first retreating from the poll tax, that it was uncollectable. I thought that a great many of the problems with the non-collection of the poll tax were caused by the Government dithering over the abolition of that tax. The impression given by the Prime Minister when he wrote in the House Magazine on 7th October was that they had already abolished the community charge. It is not surprising that some people believe that it has been abolished and therefore that they do not have to pay it.
Under the circumstances, what began as an innocent amendment has turned out, through the Minister's insistence, to have political resonance over and above that which was intended. I shall be grateful for a comment on this specific point: I still do not understand why a shortfall should come only from the billing authority in one year whereas in future years it will come from both the billing authority and the precepting authority.
Baroness Blatch: The noble Lord asked a straight question about the choice of cutting services and whether that was a consequence of having to find the moneys. I said when I first spoke to this amendment, and I say again now, that these moneys are not part of the budget—in other words, the actual services are not affected by this measure. The moneys owed will have to be collected through the council tax.
Lord McIntosh of Haringey: I understand that and I am grateful it is on the record that they are not part of the budget and therefore that they will not be taken into account for the purposes of capping. But I still do not understand why there should be a difference in 1993–94. But I do not suppose there is any point in asking for the third time. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
7.30 p.m.
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 228AJ:
Page 132, leave out lines 48 to 51.
The noble Lord said: Again, this is an amendment arising out of puzzlement. I do not understand the purposes of the regulatory powers which are introduced in lines 48 to 51 on page 132:
"The Secretary of State may make regulations providing that sums standing to the credit of a billing authority's collection fund at any time in a financial year must not exceed a total to be calculated in such manner as may be prescribed".
I do not understand what those powers are and I do not understand why they should be necessary or under what circumstances they may be used. I beg to move.
Earl Howe: I hope that I can help the noble Lord on this amendment. The amendment would remove the Secretary of State's power to make regulations prescribing a maximum for amounts held in a billing authority's collection fund at any one time. This is a reserve power that my right honourable friend possesses already under subsection (4) of Section 99 of the Local Government Finance Act 1988, which this paragraph seeks to amend.
The collection fund, which will be retained under the council tax, is akin to a trust in which the billing authority will hold income from the council tax and non-domestic rates pending payment of sums due to major precepting authorities, to the Secretary of State and to its own general fund. The billing authority will be entitled to interest earned by the collection fund, but it would be wrong for it to abuse this incentive to efficient tax collection. The proposed power is needed in case authorities should be tempted to try to manipulate the collection fund at the expense of tax payers and major precepting authorities.
My right honourable friend has not had to use this power under the present system, and I hope that he will not have to do so under the council tax. Charging authorities have not abused their trust in the past and we do not expect billing authorities to do so in future. But it would be imprudent to dispense with a power just because one hoped and expected never to have to use it.
I hope that I have reassured the noble Lord and the Committee that there is nothing sinister in this reserve power. I trust that the noble Lord will not consider it necessary to pursue the amendment further.
Lord McIntosh of Haringey: Talk about the nanny state! The noble Earl has given the feeblest excuse that I have ever heard for the continuation of powers which were introduced and have never been used. I do not blame him, but I must say that had I been faced with a brief of that kind I would have been sorely tempted to tear it up and throw it away.
What on earth do the Government think is going to happen that has not happened in these recent years: wicked local authorities conspiring to defeat the Government on all occasions; conspiring to stop the collection of the poll tax; conspiring to charge their local poll tax payers higher sums than they need in order, presumably, not to get re-elected? Here is a power which is not necessary, has never been
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necessary and ought to be abolished. I am sorely tempted to divide the Committee on it, but I shall not. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Schedule 10 agreed to.
Schedule 11 [Water and Sewerage Charges: Scotland]:
Lord Strathclyde Lord Strathclyde moved Amendment No. 228B:
Page 139, line 20, leave out ("domestic") and insert ("non-domestic").
The noble Lord said: This is a small technical amendment. I beg to move.
Lord McIntosh of Haringey: I do not think that the Minister should get away with that. It is a mistake in the Bill which is now being corrected. It is not a technical amendment at all.
On Question, amendment agreed to.
Schedule 11, as amended, agreed to.
Schedule 12 agreed to.
Schedule 13 [Minor and Consequential Amendments]:
Baroness Blatch Baroness Blatch moved Amendment No. 228C:
Page 163, line 36, at end insert:
("Caldey Island Act 1990 (c. 44)
90A. In section 2 of the Caldey Island Act 1990, after the words "to the community charge" there shall be inserted the words "to council tax".").
On Question, amendment agreed to.
Schedule 13, as amended, agreed to.
Schedule 14 agreed to.
In the Title:
[Amendment No. 229 not moved.]
House resumed: Bill reported with amendments.

Licensing (Amendment) (Scotland) Bill
7.37 p.m.
Brought from the Commons; read a first time, and to be printed.

Tourism (Overseas Promotion) (Wales) Bill
Brought from the Commons; read a first time, and to be printed.

Carriage of Goods by Sea Bill [H.L.]
7.39 p.m.
Lord Goff of Chieveley: My Lords, I beg to move that the Bill be now read a second time. The Carriage of Goods by Sea Bill provides a long awaited opportunity to reform and update the law of this country in respect of rights to suit relating to contracts for the carriage of goods by sea. It gives me great personal satisfaction to propose this legislation as from my experience at the Bar and on the Bench of that most international of domestic courts, the Commercial Court in London, I am only too well aware of the need for reform.
A very large number of contracts for the carriage of goods by sea are expressly governed by English law

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even though the ships, the cargoes and the ports involved have no connection with this country. London's role in the making of these contracts and the settlement of disputes which may arise under them results in a significant contribution to our invisible earnings and helps to secure the status of London as the world's leading maritime centre and centre for the resolution of maritime disputes.
The basic problem is that, since the contract of carriage is made between the shipper and the carrier, at common law only those parties could sue and be sued under that contract; for example, for damage suffered by the cargo on the voyage, or for short delivery of the cargo at destination. Thus, although the goods subject to the contract may have been sold and even resold while afloat—and there can be long chains of contracts—at common law the buyer of the goods afloat was unable to sue on the contract of carriage. The Bills of Lading Act 1855 was passed to remedy this defect. However, as I will shortly explain, for some considerable time lawyers and commercial interests have considered that the statutory provisions in the 1855 Act relating to the right to sue the carrier have themselves become out of date, because the statute no longer reflects commercial practice and is unduly restrictive in the rights it grants. Recent decisions of the courts have reinforced these views, as has the development in other jurisdictions of statutory provisions which are considered to be better fitted to meet modern commercial expectations and requirements.
Although there has long been agreement on the need for reform, until the Law Commission and the Scottish Law Commission took the matter in hand, lawyers and commercial interests had found it difficult to agree upon the scope and form of change which was needed. We owe a particular debt of gratitude to Mr. Brian Davenport QC, then a distinguished Law Commissioner, whose initiative led to the Law Commissions' reports. These were published in March of last year, and the very widespread support which the proposals received reflects the quality of the work undertaken by the commissions and the appropriateness of the balance which they struck. The text of the Bill now before the House is the culmination of the commissions' work, and support for its early enactment has come not only from United Kingdom interests but also from other European interests which adopt, and wish to continue to adopt, English law as the basis for their contracts for the carriage of goods by sea.
Based on their consultations and their examination of the law in other jurisdictions, the Law Commissions concluded that the Bills of Lading Act 1855 no longer meets commercial requirements or accommodates commercial practice, for the following reasons. The Act enable, the receiver of goods shipped under a bill of lading to sue the carrier for non-delivery or defective delivery if the property in the goods has passed to him "upon or by reason of" the consignment or endorsement of the bill of lading. This requirement causes difficulty whenever property either has not
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passed at the relevant time or has passed independently of the transfer of the bill of lading with the result that the transfer of the bill of lading is in no way causative of the passing of property.
For example, a common problem under the 1855 Act concerns sales involving bulk cargoes. The Act does not enable a purchaser of part of a cargo shipped in bulk under a bill of lading to sue the carrier because the Sale of Goods Act prevents property passing in part of a bulk cargo before the goods constituting that part have been ascertained. This means that, for example, any of the purchasers of part of an oil tanker's cargo who purchase it during the course of the tanker's voyage cannot sue the carrier under the terms of the bill of lading. Again the 1855 Act does not reflect current commercial practice whereby goods are often carried under a document other than a bill of lading, notably a sea waybill. Finally, the 1855 Act does not allow for future developments in commercial practice in this field, and in particular the increasing use of electronic data interchange.
In summary, the Bill now before the House solves these problems, first, by simply providing that any lawful holder of a bill of lading has the right to sue the carrier and further by conferring the same right on a person who is identified in a ship's delivery order covering part of a cargo originally shipped in bulk. In addition, the Bill provides that a person entitled to take delivery of goods under a sea waybill which contains or evidences a contract for the carriage of goods by sea is likewise enabled to sue the carrier. In turn, any person thus entitled to make a claim is placed under the same liabilities towards the carrier as if he had been party to the original contract of carriage. The Secretary of State for Transport will be given authority under the Bill to make regulations governing electronic data interchange, though it is recognised that the timing of any such regulations will depend on the development and acceptance of electronic data interchange by the industry. Finally, the Bill does not seek to restrict other rights to sue, for example, under a charterparty or in tort, nor does it affect in any way the application or operation of the international Hague Visby Rules on liability and limitation in respect of cargoes carried under a bill of lading.
Perhaps I may turn briefly to the individual clauses of the Bill. Clause 1 lists the shipping documents to which the Bill applies and allows the Secretary of State for Transport to make regulations, subject to negative resolution, to apply the provisions of the Bill to electronic data interchange. Clause 2 is the heart of the Bill and allows the lawful holder of a bill of lading, the consignee identified in a sea waybill, or the person entitled to take delivery under a ship's delivery order, to sue the carrier under the original contract of carriage even though he may not have been party to the original contract. The lawful holder of a bill of lading can sue a carrier even though the bill of lading is no longer a transferable document of title so long as he became holder of the bill of lading before it ceased to be such a document.
A person entitled to sue under a ship's delivery order will be able to do so on the terms of the

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undertaking contained in the order, such right being confined to the goods covered by the order. For example, if the order covered 1,000 tonnes of a 10,000 tonne cargo of grain shipped in bulk, his rights are confined to the 1,000 tonnes and do not extend to the whole 10,000 tonne cargo. Where a person who is given a right of suit has not himself suffered any or all of the loss in question, he is allowed to exercise the right of suit for the benefit of such persons who have suffered the loss.
Finally, the clause makes provision for the rights of suit of the original shipper and of intermediate parties entitled to sue by virtue of the provisions of the Bill.
One of the points of balance in the Bill to which I have referred is that those who gain contractual rights against the carrier will also be placed under contractual liabilities towards the carrier. Clause 3 therefore provides that a person who is entitled to sue under Clause 2 or who takes or demands delivery or otherwise makes a claim against the carrier becomes subject to the same contractual liabilities as if he had been an original party to the contract of carriage. Similarly, a person who takes or demands delivery before he has acquired any contractual rights will become liable when he subsequently has the rights conferred on him.
Clause 4 relates to bills of lading only and provides that a bill of lading representing goods to have been shipped or received for shipment is conclusive evidence against the carrier of such shipment or receipt so long as the bill of lading is in the hands of the bill of lading's lawful holder. This disposes of a widely criticised court ruling dating back to 1851 to the effect that a ship's master who signs the bills of lading could only bind his principal, the shipowner, in this way if the goods had actually been placed on board the ship.
Clause 5 covers interpretation and other matters. Clause 6 contains the short title and commencement and extends the Bill to Northern Ireland.
Since publication of the Law Commissions' reports and the Bill which I have just outlined, the matter has been studied and discussed in detail by the different commercial interests involved. I am pleased to say that the Bill has gained the support of all the commercial interests affected. Though cargo interests might have been expected to support it, I am glad to say that the Bill also has the support of shipowners and their insurers. The Law Commissions have struck their balance well and should be commended on their achievement.
It is some considerable time since the enactment of the Bills of Lading Act 1855. Much has been written on the 1855 Act, not all of it complimentary. However, there is now considerable evidence that commercial practice has moved on and that our law in this area needs to be amended and updated. Indeed, the common thread running through the discussions and correspondence which took place following publication of the Law Commissions' reports was that the proposed updating was badly needed and long overdue. Further delay could erode London's international position. With the enactment of the Bill now before your Lordships' House, Parliament will
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move our law in this area from the middle of the 19th century to well into the 21st. I commend the Bill to your Lordships.
Moved, That the Bill be now read a second time.—(Lord Goff of Chieveley.)
7.50 p.m.
Lord Byron: My Lords, I take the opportunity to thank the noble and learned Lord, Lord Goff of Chieveley, for introducing this important measure which will change significantly the basis upon which a shipowner can sue and be sued in respect of the carriage of goods from the position which has been maintained over the past 137 years. Perhaps I may say, first, what a pleasure it is to be able to welcome a new piece of legislation dealing with international trade which has its origin not in a convention named after a hitherto obscure European city but in the much more domestic confines of the Law Commission. However, that is not to say that the commission has been at all domestic or parochial in its outlook. It has consulted widely at home and has studied corresponding law in a large number of other countries before producing a Bill which, while in many ways radical, nevertheless builds upon existing statutory and common law principles.
The inadequacies of the present Bills of Lading Act have been widely debated for many years. Cargo underwriters and those who advise have understandably been pressing for change. On the other hand, shipowners and P&I Clubs have perhaps been a little nervous at what form the new Bill might take. I believe it fair to say, as regards the Bill's present form, that such fears are largely, if wholly, groundless.
It would be presumptuous of me—indeed, it is unnecessary —to attempt a detailed analysis of the Bill. However, I should like to mention one or two points. By divorcing the rights of suit from the passing of property, there must be at least some risk of double jeopardy for the shipowner. The Law Commission addressed that point and concluded that the position was not materially worse for the shipowner than at present when a duplicity of claims is always possible, especially in the case of claims from both a charterer and a holder of a bill of lading.
I am not wholly convinced by that argument, especially as it is not always the ultimate payment of damages which may concern the carrier. It is often the requirement to secure potential claims. For understandable reasons, those involved—that is, cargo underwriters and others—are more anxious than ever to obtain security for their claims. The possibility of shipowners having to secure a number of different claimants, perhaps in different jurisdictions, is not, I think, wholly fanciful. Clearly, we shall have to see how that works in practice.
As was explained by the noble and learned Lord, a key concept in the Bill is that of the "lawful holder". I, for one, would be grateful if the noble and learned Lord could help a little further with that phrase. One can think of obvious examples where the holder might not be lawful, as in the case of theft or fraud by the holder himself. On the other hand, the commentary to the Bill and the Law Commission's report talks about

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being in possession of a bill in good faith. I am not certain that the concept of "lawful" is wholly synonymous with good faith. For example, it would be possible to hold in good faith a bill which was in origin an entirely fraudulent bill. I cannot say that I have researched the use of the word "lawful" in other statutes, but I should be most grateful if the noble and learned Lord could further assist us on the point.
Broadly speaking, I believe that the Bill achieves a fair balance between respected interests. Cargo underwriters will no longer find that their claim collapses because of the difficulty over title to sue. On the other hand, shipowners are probably less likely to find themselves facing claims in tort where they will be denied the benefit of their bill of lading contract. They have also acquired better rights to sue the receiver for claims such as those concerning the shipment of dangerous cargo, and so on.
There has been some criticism of a policy, which has its origins in the original 1855 Act, depriving the shipper of his right to sue after the endorsement and transfer of the bill of lading to a third party. I do not associate myself with that criticism; I think that it is misplaced.
As to the drafting of the Bill, I must confess that there are one or two areas where it seems to me that the language possibly lacks some clarity. Under Clause 2(2) (b), there is reference to,
"rejection to that person by another person of goods or documents delivered to the other person in pursuance of any such arrangements".
I believe that the intention is entirely clear as to when documents or goods may be rejected up the line to the original seller. However, I am not entirely happy with the concept of rejection "to" a person. It does not seem a very happy use of the word "to" in that context.
In conclusion, I should like to make a very small point in relation to the naming of the Bill which, I believe it is fair to say, has not met with universal acclamation. I can understand why it was thought not possible to have the Bills of Lading Act 1992. It is because the measure does not deal solely with bills of lading; indeed, it has other important ramifications in relation to waybills, and so on. However, it is perhaps a pity that we already have a number of Carriage of Goods by Sea Acts.
I do not wish to appear to be carping. The Bill is very much to be welcomed. It will undoubtedly help to keep the Commercial Court in London as a major centre for the resolution of international trade and shipping disputes—something which recent European Community legislation has not always helped. Again, I should like to express my thanks to the noble and learned Lord, Lord Goff of Chieveley, for introducing the Bill. I wish it well.
7.56 p.m.
Lord Donaldson of Lymington: My Lords, it was in 1946 that I was called to the Bar and became a pupil of my noble and learned friend Lord Roskill, who I am happy to see is now in his place. Very shortly afterwards he started the long road of introducing me to the arcane mysteries of the Bills of Lading Act 1855.
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Throughout my time as a practitioner at the Bar—and, indeed, as a judge of the Commercial Court in the Queen's Bench Division—I liked to regard myself as a shipping law specialist; and, possibly towards the end of the time, I actually was. When I went to the Court of Appeal I regret to say, in some ways, that I had to become a general practitioner. Therefore, I suppose that my proper description tonight is a "lapsed specialist". But in so far as a lapsed specialist has any right to address your Lordships' House, I should like to commend the Bill as meeting very long felt wants in shipping law.
However, more to the point is the fact that for some years now I have been president of an organisation, known as the British Maritime Law Association which is the British chapter of a much wider and worldwide organisation called the Comité Maritime Internationale. The BMLA is not an organisation of academic lawyers; indeed, very far from it. It is highly representative of all the various commercial interests which are concerned with the shipping industry. My reason for saying that it is rather more to the point tonight is that I have been specifically asked by the executive committee of the association to assure your Lordships, in confirmation of what my noble and learned friend Lord Goff of Chieveley said, that the proposals in the Bill have universal support throughout the industry.
It used to be said in years gone by that trade followed the flag. However, I believe that it would be much truer to say today that trade follows the law and that the law, in its turn, follows trade. If we do not modernise British commercial law as and when the need arises, commercial interests—which in this field operate on a worldwide scale—will undoubtedly start adopting other laws. Noble Lords would be making a great mistake if they thought that that would be a loss solely for the lawyers. Indeed, in that respect our hearts need not bleed for the lawyers. But once English law is abandoned as virtually the international basis of shipping contracts (which includes the associated insurance, brokering and chartering contracts) those who are concerned will start consulting other nationalities and other commercial centres because it will be natural to do so —if your contract is governed by Dutch law then for goodness sake go to Amsterdam where they understand Dutch law and use the Rotterdam shipping market, and so on.
There is a real economic interest in the Bill being passed. I trust that the need for Members of another place to get themselves re-elected (of which I read in the papers) will not interfere in any way with the passage of the Bill and that in due course I may see it as a 1992 Act, perhaps with a different Short Title.
8 p.m.
Lord Roskill: My Lords, perhaps I may begin by echoing every word that my noble and learned friend Lord Goff of Chieveley and my noble and learned friend (and former pupil) the Master of the Rolls has said. Since the war everybody who has practised in the Commercial Court or been a judge in that court has been alive to the point I raise.

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I ought to declare a particular interest. In 1968 I was sitting as a judge in that court and it fell to me to decide the question whether the buyer of a part cargo or parcel of wheat or grain of some sort could sue the ship in tort when he had not been the owner of the goods at the time they were damaged. Unless he could, the shipowner could escape a claim for negligence. Most reluctantly, I was constrained by a long line of authorities going back over a century to hold that there was no cause of action in those circumstances. I earnestly hoped that the Court of Appeal would find a way out, but nobody tried to do so.
About six or seven years ago that point came up again. It went to the Court of Appeal of which my noble and learned friend Lord Goff (then a Lord Justice) was a member. In a dissenting judgment he vigorously disagreed with me and thought he had found a way out. The case came to your Lordships' House. I am happy to say—but only moderately so—that in the end I was said to be right and, almost incredibly, my noble and learned friend was said to be wrong. It takes this Bill to establish that I was wrong and he was right. I think that is a means of achieving immortality.
Everyone hopes that this Bill will go onto the statute book quickly. Perhaps I may echo what my noble and learned friend Lord Goff said by way of tribute to Mr. Davenport and Mr. Beatson of the Law Commission whose energy and ingenuity has found a way around the problem with which we have lived.
My noble and learned friend Lord Goff also referred to Clause 4. That has got rid of the most monstrous rule called the rule in Grant v. Norway on which all of us were brought up. It is an enormous relief to see that that has gone and shipowners cannot escape liability when goods have been lost by saying that they are not bound by the acknowledgement in the bill of lading.
I should like to say one word about the Short Title and make a particular plea to the draftsman. My noble and learned friend said, absolutely rightly, that the Bill did not affect the Hague-Visby Rules. Those rules are now enshrined in the Carriage of Goods by Sea Act 1971. That in turn repealed the famous Carriage of Goods by Sea Act 1924 which first introduced the Hague Rules into this country. To have another Act called the Carriage of Goods by Sea Act 1992 is, with great respect to the draftsman, a complete misnomer. This Bill is about documents of title and documents which are not of title but which by statute are given very much the same effect. I appreciate that a purist may see a possible difficulty in calling it the Bills of Lading Act 1992 because it does not deal only with bills of lading. But why should it not be called the Carriage of Goods by Sea (Documents) Act or given a name which limits its effect to documents of the class with which it deals? The reform is necessary, but to give it the same title as the 1971 Act, when quite rightly it does not even suggest that it has to be construed together with the 1971 Act, is a route to confusion hereafter. I hope that that suggestion, which others have also made, will not he met by the rather obdurate approach, "This is the way we like to do it". I strongly support the Bill.
8.5 p.m.
Lord Underhill: My Lords, when the Bill first appeared on the Order Paper in my innocence I thought it was a straightforward transport Bill. For that reason my name was added to the list of speakers. I am grateful to the noble and learned Lord, Lord Goff, for explaining the Bill. At least I know a little more about it. The noble and learned Lord must he gratified by the powerful support of other noble and learned Lords. I pondered whether or not I should leave my name on the list. I decided to leave it for one reason only. When I realised that the Bill was to replace the 1855 Act, of which I knew nothing, I decided the best thing to do was not to seek a brief about which I would know nothing and would simply have to read out, but to listen carefully to the debate to be satisfied that the 1855 Act needed to be replaced and that it was being replaced with legislation that was wanted and deserved. From what I have heard tonight, I am satisfied that that is the case. Any minor points can be dealt with at the next stage of the Bill. Therefore, in my innocence of the law I wish the Bill success at its next stage.
8.6 p.m.
The Minister of State, Department of Transport (Lord Brabazon of Tara): My Lords, like other noble Lords, I should like to thank the noble and learned Lord, Lord Goff of Chieveley, for his very able introduction of the Bill. The Government wholeheartedly welcome and support it and hope for its early enactment.
This Bill, as the noble and learned Lord indicated, represents the fruits of several years' work by the English and Scottish Law Commissions. One of the most impressive features of that work was the consultation exercise undertaken by the two Law Commissions. They canvassed and obtained the views of all interested parties, including commodity and other traders, shipowners, underwriters, arbitrators and bankers. They also received invaluable advice from many distinguished commercial lawyers with expertise in marine cargo disputes, including practitioners, academics and members of the judiciary. Indeed, the commitment of the commercial Bench and Bar has continued today as the noble and learned Lord, Lord Goff, is himself no stranger to the workings and concerns of the Commercial Court.
The result of the two law commissions' extensive consultations has been the production of a commendable piece of law reform which seeks to preserve the position of London as a major financial and commercial centre, with all that that implies for our invisible earnings.
I single out four features which I think call for particular comment. First, the Bill would overcome the restrictions on the right to sue currently faced by holders of bills of lading. Secondly, the Bill looks to the future by anticipating certain problems which are increasingly likely to cause difficulties unless legislative action is taken soon. I am thinking in particular of the provisions made for sea waybills and electronic data interchange. Thirdly, the Bill would bring our

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law on right to sue in marine cargo cases much more into line with the law of our European partners and that of other leading maritime jurisdictions. Fourthly, the Bill is non-controversial. The policy and balance contained in it has obtained the support of all the commercial parties. Indeed, the Law commission has succeeded admirably in achieving a result which offers something for everybody, or at least everybody engaged in the world of carriage of goods by sea.
Clause 1 empowers my right honourable friend the Secretary of State for Transport to make regulations regarding the application of the provisions of the Bill to electronic data interchange. Though considerable work is being done in this field it may be some time before it will be appropriate to make those regulations. As electronic transmissions could transfer rights and liabilities under contract law appropriate safeguards will have to be in place and there will have to be international agreement between commercial interests on what those safeguards should be.
I commend the work of the two Law Commissions which has resulted in the Bill now before us. I also thank the noble and learned Lord, Lord Goff, for taking it forward. The noble and learned Lord referred to the need for early enactment. I trust that with your Lordships' agreement we will be able to speed this Bill on its way onto the statute book.
8.10 p.m.
Lord Goff of Chieveley: My Lords, I am most grateful to your Lordships for what you have said about the Bill. I am especially grateful to the Minister for expressing the Government's support for the Bill. In view of the general support which I understand the Bill has received, I do not believe that there is much to which I need refer. On the two short points that have been taken, the first by the noble Lord, Lord Byron, about the meaning of the words "lawful holder of a Bill of lading" I should merely like to say that I imagine that that was included to exclude the unlawful bill of lading—one who had come by the bill unlawfully. I shall gladly communicate with the noble Lord elsewhere if it would be of assistance to him.
With regard to the Bill's Short Title, I take the criticism. The Long Title makes it plain what the Bill is all about. I do not believe that I need add anything more. I commend the Bill to your Lordships' House.
On Question, Bill read a second time, and committed to a Committee of the Whole House.

Severn Bridges Bill
8.11 p.m.
Read a third time, and passed.

Social Security Administration Bill [H.L.]
Report received.
Social Security Contributions and Benefits Bill [H.L.]
Report received.
Social Security Administration (Northern Ireland) Bill [H.L.]
Report received.
Social Security Contributions and Benefits (Northern Ireland) Bill [H.L.]
Report received.

Kurds and Kuwaitis in Iraq
8.12 p.m.
Lord Molloy Lord Molloy rose to ask Her Majesty's Government whether they are taking any action to alleviate the plight of Kurds and Kuwaitis still in Iraq.
The noble Lord said: My Lords, I should like to put on record that I have been to Kuwait and have seen the terrible things that have happened there. One of the most moving experiences was to see in street after street in Kuwait City, and way out to the oil fields, little green flags which said, "Thank you very much to the British people". I have seen some of the conditions in which our troops and our American allies had to fight. We were fortunate to have two brilliant commanders, Sir Peter de la Billiére and—I understand that I am allowed to say this—Sir Norman Schwarzkopf. Everything was wonderfully organised.
I should also like to pay tribute to those men and women who supported our Air Force and Navy and the various regiments and corps. Remarkable work was done by the allied forces. There was wonderful co-operation and superb planning. The only thing that I found irritating when I spoke to the British people there, the Kuwaitis themselves, and the Americans, was that they could not understand—I cannot give the words they used—why the dickens we did not continue the process of occupation as we occupied Germany. There was a similarity in the behaviour of both dictators. It is still something about which people ask and do not understand. I pay tribute also to the BBC and ITV personnel, both of television and sound radio, for the remarkable way in which they were able to keep us informed of what was going on.
There is a matter that is causing great anxiety to the people of Kurdistan, the Kurds in northern Iraq. They desperately want to return to rebuild their country. What happened to the people of Kuwait is probably one of the most sorrowful stories I have ever heard,

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even set alongside the many ghastly stories that emerged when we first entered Germany during the Second World War. People have given gruesome details of what occupation by the Iraqi army meant—how they had to stand by and see their mothers and sisters raped, and how men too were raped. Sometimes the Iraqi soldiers were most gleeful if they were able to have an audience that included the family. What has hurt the Kuwaitis most is the fact that the Iraqi soldiers took back to Iraq about 1,000 women and that hardly any of the soldiers taken prisoner by the Iraqis have been returned to Kuwait.
The refugees and prisoners of war are still in Iraq. People were abducted in their thousands and taken to Iraq. Yet the agreement upon which we insisted was that Saddam Hussein should pay £50-odd million for the oil fields; that everyone who was not Iraqi and belonged in Kuwait should be returned; and that the Kurds should be protected. We say those things but do nothing to enforce the United Nations resolution and the agreement made by senior officers at the time. Many people are unable to understand why we did not continue. One has to go there to understand what happened. There is anger and grief. When they are mixed, a dangerous situation is created.
There is one other aspect I should like to mention. Iraqis who were hidden by the Kuwaitis because of the enormous help they had given them have said, "First and foremost you will not get Saddam Hussein out easily". In saying "you", I believe that they meant the Americans. They have said, "You are more concerned with Saddam Hussein holding down the other awkward people in the north of his country. That will suit the policy of the United States of America". I believe there is some truth in that, disgraceful though it is. People also said that they must start forming an Iraqi government in exile. They hate Saddam Hussein and his evil Ba'ath people as much as anyone else. They feel that they must have an Iraqi opposition in exile.
I understand that in the other place Mr. Campbell-Savours has had discussions with the Prime Minister and has asked whether he will support any move by the Iraqi opposition to set up a parliament in exile. They would be an official Iraqi government, able to consider the United Nations sanctions and war reparations. In view of the terrible things that happened to the Kuwaiti people and the Kurdish people we should not have to negotiate with Saddam Hussein. We should respond to the pleas of those Iraqis who are admired in Kuwait—that is saying something—because of their hatred of their fellow countrymen, the Iraqi soldiers, for what they did.
Many crimes were committed. People can recognise the junior and middle grade Iraqi officers who enjoyed raping, killing and beating. They know who they are. Today those Iraqis are laughing at the United States and Great Britain. I cannot imagine what Sir Peter de la Billiére and General Norman Schwarzkopf are thinking, because I do not understand why we stopped. The fact that it was a short, quick war was due to the fantastic precision bombing of the Royal Air Force. It made a supreme contribution to the swift victory.
While in Kuwait I saw the oil wells that had been set on fire. As your Lordships are aware, one has to be a specialist in oil matters to be able to set an oil well on fire. There they were still blazing away by the hundreds. I was moved when the Kuwaiti people showed me stacks of anti-personnel and anti-tank bombs. I had some experience of such bombs in the invasion of Europe when I was a sapper. I had to deal with some of them. The British soldiers—the sappers—cleared the mines. They cleared away both the heavy anti-tank mines and also the hundreds of anti-personnel mines. There were, of course, a few deaths during that process but had it not been for the efforts of the Royal Engineers—the sappers—hundreds and perhaps even thousands of Kuwaiti children could have been killed or maimed.
I hope that the Government will consider carefully what can be done to improve the situation. We must think of a way in which we can ensure that the civilian hostages kidnapped by Saddam Hussein can be returned to Kuwait. We must obtain a watertight guarantee that prisoners of war who were captured by Saddam Hussein's army and taken back to Iraq will be returned. The Crown Prince of Kuwait has told me that the number of people who have been taken to Iraq, including prisoners of war, runs into thousands. Heaven knows how many people have survived that ordeal.
The Crown Prince remarked on the terrible grief of those who are left in Kuwait. He said the Kuwaitis feel grateful to the United States of America, to Great Britain and to all those who gave them their country back. He said he did not want to criticise those who had aided Kuwait but he said everyone must face up to what is happening now. The Crown Prince also referred to the position of the Kurds. He said he had heard accounts of what was happening to the Kurds. Those accounts were just as horrifying as the accounts of what was happening to the Kuwaiti prisoners in Iraq.
A number of years ago I visited Baghdad. I went there to investigate what was happening to the Kurdish people. Saddam Hussein, as well as being evil, is a cunning man. He told me I could visit the Kurds and speak to the Kurdish leaders. As soon as I met the Kurdish leaders I realised something phoney was going on as they were so exceedingly well dressed. They were wearing military uniforms. I realised they were Kurds as they spoke Kurdish. One or two Christians were present, but the others were Islamic.
The Kurdish leaders told me they were treated exceedingly well by the great Saddam Hussein. They said there were no problems and all the bad reports had been whipped up by the ridiculous, democratic Western press. I realised that some Kurdish leaders were prepared to sell their own people to a person who would destroy them by the hundred thousand as has occurred. It was awful to have to swallow what they told me.
There was a great deal of TV coverage of the misfortunes of the Kurds during the terrible winter of last year. However, they are now looking ahead. They must have seed to enable them to plant crops so they can grow next year's food. The Kuwaitis for their part

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want to see their missing relatives again. Many Kuwaitis pleaded with me to help them get their sons, daughters, fathers and mothers back to Kuwait.
I am sure that had this kind of situation occurred in this island anyone who had perpetrated such evil acts would know full well that every Briton in Scotland, Wales, England and parts of Ireland would be his sworn enemy. Such a person would be afraid of not seeing the sun rise the next day. We, however, have never had the need to act in such a way. I can quite understand the bitterness, anguish and terrible emotional pain felt by the Kurds and the Kuwaitis. All I am asking is that my country, through its Government, should endeavour to ensure that Saddam Hussein is removed, that people can return to their homelands and that that part of the world can enjoy the peace it so richly deserves.
8.24 p.m.
Lord Judd: My Lords, I greatly appreciate this opportunity to speak briefly in the debate this evening. I am sure we are all grateful to my noble friend Lord Molloy for giving us the opportunity to consider this subject together. I wish to speak in this debate because I visited Iraq towards the end of last year. I was able to go up to the north to visit the Kurds and also go down to the south and visit the Shi'as. I visited Sulimaniya, Said Saidiq, Basra and Asmara. I was able to talk with the heads of the UN operation there and their staff operating in the field in the various UN agencies, with personnel of the humanitarian voluntary agencies, and with various Iraqi officials and Iraqi leaders, particularly in the Ministry of Foreign Affairs.
Since my visit I have tried to keep in touch and up to date with the latest news. The situation at the moment with the Kurds appears to be that the Iraqi Government are continuing their strict embargo on the north and indeed seem to be tightening it. The UN is experiencing increasing difficulties in getting things through from the south. Access from the north is, of course, difficult because of the mountains. That has led to food prices rising sharply. There is food to be had but only at a price. There is, however, an absolute shortage of kerosene and other heating fuels and the winter is severe.
Shelters provided by the United Nations High Commission for Refugees are now more or less complete and most people are housed in what are called "hard" shelters. However, we have to face the fact that those shelters were self-built—the United Nations supplied the materials—so families which could not provide labour (for example, families with female heads of households) are still badly housed in tents, prefabs or rehabilitated public buildings which had to be abandoned. Engineers from humanitarian agencies such as Oxfam have been helping to provide water and sanitation. Most of the efforts of the United Nations are taken up with emergency aid. This means that nothing is being done about agricultural regeneration for the longer term. Pressure is mounting for longer-term aid so that the Kurds can once again become self sufficient.
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One urgent problem with which help is needed is the clearing of the mines which were heavily sown in agricultural land by both Iraqis and Kurds. Maps showing where the mines are situated are not available. As the mines are plastic, they are particularly difficult to detect. That acute problem must be dealt with before agricultural regeneration can go ahead.
I wish to say a few words about the Shi'as in the south because I believe the media have rightly highlighted the problems of the Kurds in the north, which are acute, but I am disturbed by the degree to which the plight of the Shi'as has not received the same amount of attention. There does not appear to have been any new news in the past few days and weeks apart from information that the situation remains unstable. There are continuing reports of resistance activities and evidently the marshes still harbour guerrillas. However, as I have said, hard news is still difficult to come by.
Oxfam and other humanitarian agencies that are operating with the Shi'as are beginning to think about training programmes, for example to enable engineers to maintain machinery—to make do and mend—as the difficulties of importing new parts for machines mean that self-reliance will be necessary.
As regards the Kuwaitis in Iraq, my latest information is that human rights groups here in the United Kingdom report some 1,200 people still missing. As my noble friend Lord Molloy has said, that is a grave situation and a challenge to us all.
We should note that the next round of oil sale talks between the United Nations and Iraq is due to start in about a week or 10 days' time. In the previous round—if one is trying to look for any encouragement in a grim situation—it seems that Iraq gave some indications that it was beginning to look for compromises. Indeed, there are indications that it admitted the invasion of Kuwait to have been a mistake. That is easy to say, but it is at least something that it has been said. Saddam Hussein has recently admitted that Iraq suffered a military defeat, although he continues to claim a moral and spiritual victory.
I should like to make one further observation in our debate this evening. We are faced with a special situation in Iraq. It is not a situation which can be compared with that of Germany in 1945. There has not been a total defeat of the enemy resulting in the challenge of rebuilding a country from scratch. It was specifically declared that the war aim was not to remove the government in Baghdad and that that was a matter specifically for the Iraqi people.
We have seen what happened. The Kurds made their stand, and look how they have been treated. The Shi'as made their stand. In Basra and Asmara I was appalled by the damage caused not by the allied war but as a result of the Shi'as trying to do something about their own situation in response to encouragement from outside the country.
The present regime remains in place. We continue to say that it is an internal task for Iraq and the Iraqi people to change the political situation. In view of the nature of that regime I would take second place to nobody in standing by firm and strong sanctions.

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They are essential. However, in a situation in which we say that change must occur internally, I wonder whether we should introduce a carrot as well as a stick. When one visits the country and sees at first hand the scale of the damage to the infrastructure—water systems destroyed, sewerage systems destroyed, health programmes in tatters—and sees the reality for the ordinary people, it becomes very clear that that cannot be put right by voluntary humanitarian agencies operating from outside, nor even by the UN agencies. It is a major task, and the social infrastructure should be restored by the government of the country.
I should like to suggest that, without in any way relaxing sanctions, we should be prepared to make the following proposal to the Iraqi administration. If they will come to us with the first instalment of a humanitarian programme which they will run with our co-operation to tackle the humanitarian challenges of the destroyed social infrastructure of the country, we will be prepared to allow Iraq to sell sufficient oil to undertake the first instalment of that programme. We will monitor progress extremely carefully and, depending on what happens in that first instalment, we will be prepared to consider a second instalment.
The problem with the present situation is that, while we are prepared to allow Iraq to sell some oil to generate funds for a humanitarian relief programme, that programme would in effect be administered by the United Nations and outsiders. Therefore, while we say that political change must come about internally we bypass all the political realities of the country. We do not thrust any responsibility on to the administration—however appalling and however much we condemn that administration—to force it to face its responsibilities before the people. I am fearful that Saddam Hussein may try to turn the situation into a propaganda victory by saying that outsiders are insisting on doing everything and he is not allowed to do anything.
I believe that, if we really care for the Iraqis, who have had no opportunity to influence events under tyranny, and for the Kurds, the Shi'as and the Kuwaitis caught in that country, we face a tremendous challenge to our ingenuity in our diplomacy. Without in any way relaxing our firmness on sanctions, thereby guaranteeing that only goods of which we approve enter that country we must at least try to begin to open up the situation and find crevices and nooks in which some internal chemistry of change might begin to take place in that country.
8.34 p.m.
Lord Cocks of Hartcliffe: My Lords, I am grateful to my noble friend Lord Molloy for giving us an opportunity to raise the issue of the Kurdish people. I feel that we have an obligation to debate the subject because, while there are no easy solutions, at least awareness of the problem should be demonstrated by those who appreciate how dreadful the conditions are.
My noble friend Lord Molloy described graphically the terrible conditions to which the Kurds have been subjected. The honourable Member for Cynon Valley in another place, who is responsible for the Official
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Opposition's overseas aid programme, has written a very moving article in this week's edition of Tribune in which she describes a visit to the Kurds and the appalling conditions which they are suffering.
I have spoken previously in your Lordships' House about the plight of the Kurdish people. I have referred to the appalling events at Halabja where there was a chemical attack resulting in enormous loss of life. The problem must not be forgotten. It is one to which there has to be a political solution. There are over 20 million Kurds. I believe that it is the largest nation group which does not have a state of its own. While the present situation continues we must keep searching for a political settlement.
Links with the Kurdish leaders should he developed as far as possible. Some of the Kurdish leaders were invited to be present at the Labour Party Conference last year. I hope that that will happen again. I know that the Government will do what they can to establish and maintain links.
The suffering is appalling. The winter is particularly bitter. I am told that in places supplies of electricity and gas have been cut off. I hope that the ideas put forward by my noble friend Lord Judd from his wide practical experience of these matters will be considered seriously.
A form of genocide has been committed against the Kurdish people. We must remember that it is not only in Iraq that they are persecuted. They have also suffered in Syria, Iran and to some extent in Turkey. They are basically a peaceful people. If they are given the opportunity I am sure that they will live in peace with their neighbours because they have not had control of their own land for some 400 years yet they have always done their best to get on with the people who have been in charge.
There is now a great deal of talk about a new world order and tomorrow your Lordships will hold a substantial debate on the aftermath of the break-up of what we knew as the Soviet Union. I mentioned last week that it is surprising that those of us who have lived under the shadow of the cold war for all our adult lives and thought how wonderful it would be when that shadow was lifted find that, now that that great monolithic bloc has disintegrated, the world faces all sorts of problems. One could say that in many ways the world is a more dangerous place now than when the cold war was at its harshest.
I do not expect the Minister to give us any easy answers. I know that he is very concerned about these matters. During the Gulf War a great deal of publicity, particularly television publicity, was given to the plight of the Kurds. There was great awareness of their plight. To some extent that has diminished and we have to make sure that the issue is kept in the minds of people who are in a position to influence events.
There are some 12,000 Kurds living peacefully in this country. They do not demonstrate, take hostages or explode bombs to draw attention to their case. We should not only think of the people who are suffering but also of the Kurds in this country and do what we can to foster links. I hope that working through the

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United Nations and the relief organisations we can bring some amelioration to this appalling human tragedy.
8.40 p.m.
Lord Tordoff: My Lords, we are indeed grateful for the opportunity to put Iraq on the agenda, in particular in relation to the Kurds, the Kuwaitis and, as the noble Lord, Lord Judd, properly said, the Shi'as in the south. I have not been into Iraq; noble Lords will know that I was on the Iranian side of the border last year looking at the refugee camps in both the Kurdish areas and the Shi'ite areas in the south. That brings home to one what life is like at the tough end of society.
Perhaps we have dwelt on the results of last year's conflict. We should not forget that the problems go back 10 years. In 1980, before the Iran-Iraq war broke out—before Saddam Hussein invaded Iran—he called together a group of 1,250 businessmen to go to a seminar. After they had had a brief discussion in the morning they were invited to dinner in the evening. They were put on buses and at the point of machine guns were forced over the Iranian border and told that they were Iranian spies. That was bad enough for them, but the government of Iraq then started to take hostages among their families. The whereabouts of many of those hostages are still not known today. One of the matters that we must determine if we possibly can is what has happened to those poor people. I am sure that many are now dead. But for the sake of their families and relatives, many of whom now live in Western Europe, we ought to do our best to give them the peace of mind of knowing where their relatives are.
Rightly, the noble Lord, Lord Molloy, has brought the Kuwaitis into the discussion. The situation is slightly different with regard to the Kuwaitis. They were deported from their country by Saddam Hussein's regime in the course of the Gulf War. Again, no one knows where a number of those people are today.
I listened with considerable interest to what the noble Lord, Lord Judd, said. I find it interesting that he suggests there are carrots which can be offered. I hope that he is right. It is very easy to take a totally negative view of the Iraqi regime. On balance, I believe that one is right to do so. However, if there is any hope that by offering some carrots we can begin to unravel this wretched situation, what the noble Lord said from his considerable experience ought to be taken into account.
Over a period of 10 to 12 years the number of people about whom we speak runs into hundreds of thousands. Some of them have been released and have been able to return to their homes. But many have disappeared, I fear for ever.
Can the Government bring us up to date on the situation of the United Nations? I understand that there is an inquiry team which is either in Iraq or about to go there. If so, I should be interested to know what questions it is empowered to ask. For instance, is it able to visit prisons to try to establish where some of those people are? I understand that the
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International Committee of the Red Cross has been trying to get into some of the prisons and has been refused access. Is that true?
If the inquiry team is able to make contact with the parts of the Iraqi government which are capable of rational discussion, the questions that need to be asked are these. Why are those people being imprisoned? Have they committed crimes? Have they ever been tried? What are their specific sentences? What are the conditions of their detention? What humanitarian contact can be made with people who are in prison? Can their families send them letters? That at least would be some relief to the people who have been deprived of contact for many years and doubtless for those who are incarcerated. We know that the hostages in Lebanon were greatly perked up by the ability to receive messages, whether through the World Service of the BBC or by letters which eventually managed to reach them. Those questions ought to be asked of the Iraqi regime, either directly by the Government or through the various agencies.
We should bear in mind that a number of those people are not prisoners of war; they are not prisoners of conscience; they are not political prisoners. They are hostages. The Iraqi government took those people hostage in order to put pressure on their families in Kurdistan and in Western Europe. That is one of the most abominable ways of dealing with people.
It is very easy to become over-emotional over the situation. However, we need cool heads. We need to work out precisely, step by step, what we can do, not to assuage our own feelings but to improve the lot of the people who are being kept hostage in prison and in particular to help their families in this country and in other parts of the world.
It is a terrible situation. I do not go along with those who say that the troops should have continued to fight. The political situation in the Middle East would have been made much worse if we had not had a clear mandate from the United Nations. The Gulf War was fought on a very clear agenda. To have stepped outside it, to have gone beyond it, would have totally undermined our credibility in the whole of the Arab world. The war was successful in so far as it was capable of being successful. Nevertheless, we are all conscious of a sense of failure that we were not able to topple the regime of Saddam Hussein and that we left so many of those people in his hands.
I hope that the Government are using every means in their power to ensure that international agencies are doing their best to secure the release of those poor people.
8.47 p.m.
Baroness Ewart-Biggs: My Lords, I too am grateful to my noble friend Lord Molloy for tabling the Motion and for introducing the debate in his vivid and emotive fashion. His loyalty in upholding the cause of the Kurdish people has been constant and much admired by the House.
We have heard from the speakers in the debate about the political impasse which is the background to the situation affecting the Kurdish people while at the same time a serious humanitarian situation affects

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them. Iraq's abuse of human rights has been well documented by human rights organisations such as Amnesty International and Middle East Watch. I fear that it is only too evident that Saddam Hussein's dictatorship has been characterised by repression and horrific cruelty. No words can be found to describe one's feelings about the system which Saddam Hussein has used against the Kurds. Torture, extra-judicial killings and massacres have been quite routine within his country.
The price of opposition is often death. Saddam Hussein's forces have killed thousands of men, women and children and depopulated whole areas of the country. As is known, much of that was achieved with weapons and military equipment which were sold by Western governments and armaments companies. It is our hope that such exporters will now be more discriminatory in their sales of arms in the future.
As my noble friend Lord Cocks said, Saddam Hussein's barbarity towards the Kurds amounted to genocide. For example, the operation A1-Anfal, launched in 1987, claimed thousands of lives as whole villages were razed and their Kurdish inhabitants massacred. The exact death toll will probably never be known. However, it is safe to say nearly every family in Iraqi Kurdistan lost at least one relative in that slaughter. Those people were targeted because they were Kurds.
In 1988 more than 5,000 Kurds were killed at Halabja, as mentioned by my noble friend Lord Cocks, when Saddam Hussein's forces used chemical weapons against them. There is mounting evidence to suggest that that was just one tragic episode in what was and will be again a systematic campaign of genocide, unless the UN prevents it.
Will the Minister indicate whether any advances have been made by the UN team investigating the evidence on Iraqi genocide in its steps to consider and punish those responsible for perpetrating such outrages? Will he give the House an assessment of the human rights situation in Iraq and indicate any progress made by the UN in securing the release of those Kuwaitis and other nationals abducted by the Iraqi army at the end of the Gulf War?
Saddam Hussein's conduct in the aftermath of the Kuwait conflict suggests that he plans to continue as he started against the Kurds—by using the maximum force and cruelty against them. Such fears are borne out by the fact that Iraqi forces have continued their attacks on the Kurds in the north and the Shi'as in the south. It is indeed tragic that these attacks have taken place despite the allies safe haven strategy and the passing of various UN Security Council resolutions to protect the Kurds.
Another aspect of Iraqi aggression has been the imposition of an economic blockade against the Kurds. Will the Minister indicate the advances that are being made by the UN in putting pressure on Iraq to lift the blockade that it has imposed on the Kurds in the north? Surely that must be a matter of the greatest urgency.
In a most powerful speech my noble friend gave an account of his visit to Iraq a few months ago. He suggested an approach which included a carrot as well
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as a stick. Given the impasse that now exists, I believe that the suggestion warrants consideration. He maintained his belief in sanctions remaining in force while at the same time encouraging Saddam Hussein and his regime to comply with Security Council resolutions.
I fear that Saddam Hussein's intentions towards the Kurdish people are very clear. The Kurds are most anxious that the allied forces and their cover and the presence of the United Nations organisations will disappear. Again, will the Minister indicate how long the forces will remain in the region; and does he believe that that will give the Kurds the reassurance that they need?
My noble friend Lord Judd gave an idea of the relief programme that is being carried out. I have had reports from UNICEF, which is an active force in the north of Iraq. It reports the most serious conditions pertaining to women and children, given the extreme weather conditions, the extreme poverty and the lack of valuable resources. I had a report from UNICEF Baghdad only this morning describing the hospital in Sulaymaniyah. Clearly the death rate among children even in the hospital is high. However, people are worried even more by the fact that few children are brought to the hospital because of the high cost of getting in there and the severe weather conditions. Therefore, the mortality rate among children is very high.
My noble friend Lord Judd also illustrated that relief work is not the answer when so much work needs to be done in reconstruction. He gave examples of the way in which we should be moving away from the patchwork relief work, which of course is alleviating the problems but is not striking at their roots towards reconstruction.
Will the Minister comment upon the elections that are scheduled to take place in Kurdistan on 3rd April? After all, they will be the first democratic elections to take place on Iraqi soil. Will UN or EC observers be sent to the elections? How will the elections affect dealings with the present Baghdad regime?
It is clear that the Kurds remain in a desperate plight, despite the safe haven operation, the passing of different UN resolutions to protect them and a UN relief operation to protect their basic humanitarian needs. Continuing Iraqi aggression and Saddam Hussein's imposition of an economic blockade have placed the Kurds in the gravest of dangers. Given the UN's role in the much heralded new world order we can hope only that it will be empowered to bring immediate pressure to bear on the Iraqis to lift the blockade and to stop the attacks on the Kurds. A great deal depends on that.
Everything that I have read indicates that Kurdish leaders have a great fear that the world will forget about their plight and that international opinion will again move to some other crisis. If that happens they know that any hope of their problems being solved will pass away yet again.
8.57 p.m.
Lord Canvendish of Furness: My Lords, I too am grateful to the noble Lord, Lord Molloy, for giving us the opportunity to draw attention once again to the Iraqi Government's blatant disregard for internationally accepted norms of behaviour. He spoke with passion and from first-hand experience. The comments made by your Lordships tonight illustrate only too well the way in which Saddam Hussein's regime continues to inflict suffering and hardship both on his own people and on his neighbours.
The appalling human rights record of the Iraqi Government is also well documented. The abuses inflicted by the Iraqi dictatorship include the use of chemical weapons against its own unarmed civilian population in 1988; appalling atrocities committed during the occupation of Kuwait; the mistreatment of Western hostages and prisoners; and the brutal suppression of uprisings by the civilian population in the north and the south of Iraq after the Gulf conflict.
Perhaps I may turn first to the situation in northern Iraq. We are very concerned about reports that an economic blockade imposed by the Iraqi authorities on northern Iraq has become more severe in recent weeks. We are monitoring developments carefully in consultation with our allies. We are also discussing with the UN relief agencies how to ensure that adequate humanitarian supplies continue to reach the population of northern Iraq in spite of the blockade. Security Council Resolution 688 demanded that Iraq end its repression against the civilian population and co-operate with the humanitarian effort. We have told the Iraqis that we expect them to respect this resolution. We are determined that they shall do so.
When the current phase of the Kurdish crisis began in March 1991 we were at the forefront of the international response. Thanks to the initiative of the Prime Minister, safe havens were established in northern Iraq. An enormous international relief effort was mounted to sustain the civilian population there. Many lives were saved.
The international relief effort continues. We have contributed more than £45 million to it since April 1991. We shall continue to be ready to respond to humanitarian needs in Iraq. The UN and other international agencies have done an excellent job in protecting the Iraqi people from the worst of the privations visited on them by their government. They have provided shelter, food and medicine. The UNHCR winterisation programme in the north has provided shelter for more than 500,000 displaced Kurds and enabled them to face the onset of winter in safety. In addition to the provision of shelter they are repairing and upgrading hospitals and water supplies. Thousands of kerosene stoves, blankets and tents are being distributed.
However, as the noble Lord, Lord Molloy, has explained so graphically, there is no room for complacency. The Kurds will not feel secure while Saddam Hussein continues to oppress them through the economic blockade and while the threat of military action remains. Fortunately, international assistance continues to reach the area. The international community must sustain its efforts. We shall not idly
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stand by. The Minister for Overseas Development has proposed an international donor conference with the United Nations later this month. The aim of the conference would be to ensure the continued effective co-ordination of the international response to the latest UN inter-agency appeal for relief operations in Iraq. In reply to the noble Lord, Lord Judd, and the noble Baroness, Lady Ewart-Biggs, perhaps I may say that that will be an opportunity to consider long-term structural development needs. In that, we should include agriculture.
We have kept in close touch with Kurdish political leaders and assured them that we will not lose interest in their plight. We continue to maintain a coalition deterrent force in southern Turkey to deter any renewed systematic repression in northern Iraq. We are grateful to the Turkish Government for hosting that force and for agreeing to a further extension of its presence until June 1992. The noble Baroness, Lady Ewart-Biggs, asked for how long that would last. As I understand it, the agreement with the Turkish Government is renewed on a six-monthly basis.
This force has been successful in deterring further large-scale military attacks on the civilian population. It has been a significant factor for stability in the area. We have assured Kurdish leaders that we shall keep up the pressure on Saddam Hussein to respect his obligations. We shall not be prepared to lift sanctions until he has implemented UN Security Council resolutions in full. We are determined to bring home to him that he has no alternative but to comply.
However, that pressure is directed at the Iraqi Government not the Iraqi people. The solution to the humanitarian problem in Iraq lies in Saddam Hussein's hands. The UN Security Council has established a mechanism under Resolution 706 and 712 for Iraq to finance humanitarian supplies out of oil revenues and for strict monitoring of the distribution of supplies throughout the country. Iraq is now discussing implementation with the UN. The scheme must be implemented promptly in order to ensure that supplies reach all those Iraqis in need. We will keep up the pressure on Iraq to do so.
The noble Lord, Lord Judd, asked me about that mechanism. I was grateful to the noble Lord for his contribution and his first-hand experience. I know that he is closely in touch with these matters. He asked whether we should adopt a carrot and stick approach. Perhaps I should expand on the mechanism established by the UN which contains strict controls to prevent abuse by the Iraqis.
All revenues collected from Iraqi oil sales will be paid into a UN-controlled escrow account. Only when the UN has approved the humanitarian use to which the proceeds will be put will the funds be released. The UN would then monitor the distribution of humanitarian supplies purchased. Unfortunately, the Iraqi regime has not yet agreed to co-operate in the implementation of the scheme and they should do so now. I hope that that conveys that there is an element of carrot and stick. However, I was extremely interested to hear the noble Lord's views.
The noble Lord, Lord Molloy, asked why we left Saddam Hussein in power. I believe that the noble

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Lord, Lord Tordoff, accepted that there was perhaps not much room for manoeuvre. The coalition stated its war aims very clearly. The noble Lord will remember the sensitivity required to get a coalition in place. Those aims included the removal of the Iraqi forces from Kuwait and the restoration of the legitimate government there. With hindsight it is easy to say that we should have gone further, but the noble Lord will know that there would have been much hostility from many quarters had we done so.
The noble Lord mentioned the contact of Mr. Campbell-Savours with the Prime Minister about the Iraqi government in exile. We have met Iraqi opposition leaders and shall continue to keep in touch with them. We shall encourage their efforts. I hope that the noble Lord accepts —and I know it is easy to say—that it is not for us to decide who should govern Iraq. Ultimately it will be for the Iraqi people to choose the government when the time comes.
Lord Molloy: My Lords, that proposition came mainly from American Iraqis. I spoke to them. They wanted to see whether they could represent the Iraqi people pro tem to restore some of the honour of their countrymen after the disgrace which Saddam Hussein has imposed upon them. Once Saddam Hussein has gone, their role as a pro tem exile government would cease so that proper democratic elections could take place.
Lord Cavendish of Furness: My Lords, as I have said, we quarrel with the regime, not with the people. I hope that it is understood that we do not blame innocent people for the atrocities. For the time being we shall continue to stay in touch with the leaders.
The noble Lord, Lord Judd, spoke of the effect of sanctions. It is Saddam Hussein's misguided policies which brought Iraq to its present position. He continued to inflict suffering on his people by his stubborn refusal to implement Security Council resolutions in full. We want all Iraqi people to be able to receive food, medicine and humanitarian supplies and that is why we have made the contribution of £45 million since April 1991.
Lord Judd: My Lords, I am grateful that the Minister is replying so fully. Perhaps I can explain that there is a difference between the arrangements that might be entered into with the Iraqi government for humanitarian relief aid following the sales of a certain agreed amount of oil, and the income generated by that, and the task of reconstructing the social infrastructure of the country. Without that social infrastructure being reconstructed the needs of the people cannot be met.
Lord Cavendish of Furness: My Lords, the noble Lord, Lord Judd, makes a powerful point. To confirm that, I shall consider the matter and consult with colleagues. I shall write to him and copy the letter to all who have taken part in the debate. I do recognise the noble Lord's experience.
The noble Lord, Lord Judd, spoke also of the problems in the South. Although it is not strictly speaking the subject of the Question I should like to take this opportunity to say that we do not ignore the
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plight of the people there. The United Nations has a humanitarian centre in Basra and has been pressing the Iraqis to permit the establishment of a further humanitarian centre at Nasariya close to the marshes. Again, the Iraqis have so far refused. We strongly support an expansion of the United Nations presence there.
We raised our anxieties about the South direct with the Iraqis, the UN and with Mr. Van der Stoel, the UN rapporteur on human rights in Iraq. We have also met representatives of the Shi'a community to hear from them about the situation first hand. Since September 1991 we have given £1.5 million to UNICEF for medicines, water and sanitation in the South; £268,000 to Save the Children for water and sanitation in the South and almost £700,000 to the organisations working to help refugees from southern Iraq in south west Iran. We recently approved a contribution of £300,000 for further relief work in southern Iraq and my understanding is that that has been paid and is administered through the organisation CARE.
The noble Lord, Lord Tordoff, asked about a visit by the United Nations human rights team to Iraq. He asked whether the International Red Cross gained access to Kuwaiti detainees and about the conditions under which they are held. Again, the United Nations rapporteur on human rights visited Iraq in January. We look forward to hearing the report of his visit which he will present to the United Nations Commission on Human Rights this month. I regret that Iraq has not yet provided details of the whereabouts of missing Kuwaitis or given access to the ICRC. The ICRC continues to press for information and in that it has our full support.
The noble Baroness, Lady Ewart-Biggs, asked about elections in Kurdish regions. We shall examine with interest proposals by Kurdish leaders to hold elections in northern Iraq. We have often told them that it is in their interests to work together and speak with one voice. We hope that any elections will promote that aim. We want to see a democratic and pluralistic system in Iraq in which all sectors of the population enjoy respect for human and political rights.
With regard to the question of whether there shall be visits I am afraid that I do not know what the normal code is for these things. I will need to write to the noble Baroness in that regard. The noble Baroness also asked about progress made by the United Nations investigating genocide by the Iraqi regime. The rapporteur on human rights to whom I referred presented an interim report on Iraq's human rights performance in November. Criticisms contained in it were damning. He will present his full report to the United Nations Commission this month for its consideration and we look forward to hearing his conclusions.
The noble Lord, Lord Molloy, also raised the question of Kuwaitis missing in Iraq. The Kuwaiti people have had to bear many cruel hardships over the past 18 months, as described in detail by the noble Lord, Lord Molloy. But few can have suffered more than the families of those Kuwaiti and other nationals

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who are still missing or unaccounted for in Iraq. We feel deeply for their plight. This is yet another example of the callous and inhuman attitude of the Iraqi Government.
Iraq's obligation to assist the International Committee of the Red Cross in tracing and repatriating Kuwaiti and other nations held in Iraq since the Gulf conflict was spelt out clearly by the UN Security Council in Resolution 687 of April 1991. It was reaffirmed in subsequent resolutions. The ICRC has tried patiently and persistently to pursue this mandate. We have given it our full support. The Kuwaiti Government have also provided details of some 2,000 Kuwaiti citizens whom they believe to be in Iraq. In spite of numerous approaches, the Iraqi authorities have failed to provide any adequate or convincing response to ICRC enquiries. They continue to delay or obstruct efforts to secure information about and access to these detainees. The UN Secretary General prepared a report on Iraqi compliance with the requirements of Security Council Resolution 687 for the Security Council's latest review of sanctions in January. That report sets out only too clearly the painstaking efforts by the ICRC to make progress and the inadequacy of Iraq's response. I am afraid that that is the very disappointing news that I have to give your Lordships' House tonight. The noble Lord, Lord Tordoff, is absolutely right in that in effect these prisoners are hostages.
The British Permanent Representative in New York has raised during the periodic reviews of
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sanctions by the Security Council the question of missing Kuwaiti nationals. The Security Council has concluded on each occasion that there is no case for relaxing the sanctions regime—in that I have had support from all sides of the House—while Iraq continues to flout the will of the Security Council. We shall continue to take every opportunity to remind the Iraqis of their obligations. We shall continue to impress on them that there will be no relaxation of sanctions until they meet those obligations.
In spite of all the efforts of the international community, many Iraqis continue to live in fear of the regime's intentions towards them. The people of Kuwait still wait for news of missing loved ones, for the return of looted property and for compensation for their losses. Saddam Hussein must know that the international community will not lose interest in any of these issues. I can assure noble Lords that we shall maintain sanctions until Iraq has implemented the UN Security Council resolutions in full. Only when Iraq has met its UN obligations in full can it possibly be accepted back into the community of nations. Continued international pressure will be necessary to prevent further excesses occurring and to ensure that the people of Iraq can live without fear of repression and their neighbours without fear of intimidation or attack. I can assure noble Lords that Britain will continue to play its full part in maintaining that pressure.
House adjourned at sixteen minutes past nine o'clock.