Local Government Finance Bill

HL Deb 04 February 1992 vol 535 cc159-230

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 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, 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 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 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 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 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 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—

1. (a) the Audit Commission and the local authority associations; and
2. (b) such representations of business, industry and other non-domestic ratepayers as appear to him 165 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: 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 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 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.

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 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 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.

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 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 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 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 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 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.

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 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, 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 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 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 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 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 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 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—

1. (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;
2. (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
3. (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 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 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 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 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.

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 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.

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 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 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 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 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 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, 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 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. 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 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 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 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 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 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 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 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 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.

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 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.

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.

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 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 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 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 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.

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 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 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.

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 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"; 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.

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 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 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 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 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 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 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 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.