Local Government Finance Bill

HL Deb 28 January 1992 vol 534 cc1259-302

8.45 p.m.

House again in Committee on Schedule 4.

Lord McIntosh of Haringey

moved Amendment No. 169: Page 101, line 1, leave out from ("warrant") to end of line 2 and insert ("shall be directed to any constable acting within his police area"). The noble Lord said: In moving Amendment No. 169 I shall speak also to Amendments Nos. 170, 171 and 172. These amendments are concerned with a specific aspect of the proposed enforcement of the council tax which has a curious history. Until the introduction of the Local Government Finance Act 1988 it was normal practice under the General Rate Act 1967, and no doubt under earlier legislation, for warrants for non-payment of what was in those days domestic rates—subsequently the poll tax and soon to be the council tax—to be directed to the police. Domestic rates, despite everything that has been said about them, were relatively easy to collect, so there was no specific difficulty in that regard. The number of arrest warrants was small.

Noble Lords who took part in the debate on the Local Government Finance Bill 1988 will recall that we took strong exception to the provision in Schedule 4 that, a warrant may be directed to the authority concerned and to such other persons (if any) as the court issuing it thinks fit". We anticipated, as will be seen, rightly, that the effect would be that it would turn out to be the responsibility of the local authorities, despite their evident incapacity in terms of expertise and resources to do the job, and that the police would not do it.

In the Community Charges (Administration and Enforcement) Regulations 1989, paragraph 42(6) confirmed the provision in the Bill. It stated: A warrant [issued under paragraph 5] may be executed [anywhere in England and Wales] by any person to whom it is directed, or by any Constable acting within his police area". Section 125(3) of the Magistrates' Courts Act 1980 applies to such a warrant.

Unfortunately, we were proved right. Police in many parts of the country have proved unwilling to involve themselves in the collection of the poll tax. Although the Home Office wrote in 1990 to the Justices' Clerks' Society saying that it was the responsibility of police forces to execute warrants directed to them by magistrates' courts, the evidence available to local authority associations is that in many cases the police are declining—for understandable reasons in the light of restrictions on their own manpower and resources—to become involved.

I received a number of letters from police forces which confirm that position. A letter written to Solihull Metropolitan Borough Council in July of last year from the West Midlands Police stated: I have had further discussions with our two Warrant Officers and with their existing heavy workload would only be able to cope with twelve warrants of this type per month. With the estimated three to four thousand possible cases in the system, twelve per month is not really going to have much of an impact, the situation not helped by the fact that the two Enforcement Officers employed by the Court are not enforcing this type of warrant". There is another letter, from the Thames Valley Police to the Milton Keynes Borough Council. It states: Our Headquarters policy, which we will be implementing, is that:-

1. (i) We will not accept prisoners prior to appearance in Court …
2. (ii) We will not be executing any warrants concerning Poll Tax.
3. (iii) We will not be escorting any prisoners to prison who have been committed by the Courts for poll tax arrears.
4. (iv) If there is a threat of violence to the bailiffs when effecting an arrest, the Police will attend to prevent such a breach of the peace occurring".

There are many examples of the fact that the police are not willing to be involved in this matter unless they are directly instructed to do so. We think that the enforcement of the law, whether it is enforcement of the poll tax or the council tax, is such an important matter that the police should be directly instructed, as they were in the past, to become available for this purpose. I beg to move.

Baroness Blatch

I understand that some authorities are concerned about the resources available for the execution of arrest warrants. However, under domestic rates and the community charge it has been possible for the courts to direct a committal warrant to the local authority concerned, to the police or to any other person. There is no reason to bring in restrictions for the council tax so that warrants can be directed only to the police. This would not make the procedure more effective. Many authorities use their own enforcement officers or outside firms of bailiffs to handle warrants. At the same time it would place an unreasonable burden on the police to expect them to execute all arrest warrants. It would only lead to the slowing down of this part of the enforcement procedure. I am sure that that is not the desirable end that the noble Lord would wish for his amendments. Authorities should be able to come to sensible arrangements on this matter with their local court and local police force.

As to the proposal to extend jurisdiction to Scotland, I am not aware of any problems in this area. It is a much wider question than enforcement for the council tax. Therefore, we do not believe it is appropriate that it should be dealt with in the Bill, although in addressing these amendments the noble Lord did not address that particular amendment.

The noble Lord read out letters from police forces when he was addressing the amendment. Perhaps I may say to him that of course this work would not necessarily feature high on the list of priorities when it had to be weighed against other operational demands of police forces. It would be quite wrong for local authorities to pre-empt the priorities of the police force, and pre-empt not just resources but the way in which they arrange their operational duties when there are other solutions at hand.

What is of importance—and it links back to the previous amendment which we have already said we will take away to think about—is to make sure that the other measures that are resorted to by local authorities work well and effectively in the interests of people who are being pursued for non-payment.

In reading from one of the letters the noble Lord said that the police would be more than willing at least to perform their own duties in relation to a law and order matter. Therefore, I hope that he will not press the amendment.

Lord McIntosh of Haringey

I was not intending to press the amendment. It is not that kind of amendment. But I am very much concerned by the Minister's response to the issue, although I take her point about some of the effects there might be if the amendment is taken literally. I fully accept that the ideal situation would not be to restrict the direction of warrants to the police, as the amendments propose. I quite see that it would be desirable to have enforceable procedures which included both local authorities and the police.

But there is a twofold problem with that solution, if that indeed is the solution which the Government prefer. The first is that there are not sufficient sanctions on the police to play their part. We have many examples of local authorities, particularly in response to a survey being carried out by the Association of Metropolitan Authorities, saying that not only are the police putting this low on their scale of operational priorities—which is to paraphrase what the noble Baroness said—but are saying outright that they are not going to do it.

I quote the following: Police now refusing to accept warrants"; Police have also indicated that they have no intention to physically arrest those people for whom a warrant has been issued without bail"; We have been informed unofficially that warrants stand very little chance of being acted on". I suggest to the Minister that even if the amendments are defective in the sense that they are too restrictive, nevertheless something has to be done to bring this matter of lawbreaking higher up in the priorities of the police force and to put greater sanctions on the police to fulfil their duties as imposed on them by the Act and the regulations.

Baroness Blatch

I am grateful to the noble Lord for giving way. Would he not agree, first of all, that his amendments restrict the number of measures to which a local authority can resort to enlist the help of other people in these matters? If they can only go to the police, without it being an instruction to the police —and not only an instruction to them but one that would involve pre-empting their priorities—it would not work. Would the noble Lord really go down that avenue?

Lord McIntosh of Haringey

The noble Baroness is, in part at least, knocking at an open door. I have already conceded that it was undesirable for only the police to be concerned. I have already said that I will not press the amendments on that basis. There is no dispute between us on that.

What the Minister is not recognising is that there is a major problem out there in the field. There is a major problem that in parts of the country—it may well be in many parts of the country—the police are refusing to do anything at all. I am not suggesting that Ministers can determine in great detail what the priorities of the police shall be. I am suggesting that we could go a great deal further than we have done in stopping the evident collusion of the police in not enforcing the law. That is what I am asking from the Minister. I am asking her to look again at what can be done to strengthen the instructions to the police to carry out their obligations under the 1988 Act and the 1989 regulations.

Baroness Blatch

I am again grateful to the noble Lord for giving way. I hope it is helpful to say that the Home Office has made it clear that the police are under a duty to execute warrants which are directed to them. What the Home Office cannot do is set down the operational priorities for the chief constable.

I do not know whether it is helpful to the noble Lord, but I shall talk to my colleagues in the Home Office about what more can be done to reinforce the message that when they are directed in this way they are under a duty to respond.

Lord McIntosh of Haringey

I am most grateful for that. I would then ask the Minister to write to me about the matter when she has had those discussions with her Home Office colleagues. I have no doubt she will wish to be in contact also with local authority associations.

There is the other side of the coin. The Minister has suggested that there are people working for local authorities qualified to carry out this work, or, indeed, that bailiffs be employed. I do not want to drag her into the very difficult situation which her noble friend Lord Henley found himself in on the discussion of bailiffs earlier this evening, but it is quite clear that the behaviour of bailiffs is such that they are not a reliable body of men and women to carry out this work. They do not behave responsibly; they are not under adequate control; and the criticisms made of them by my noble friend Lady Hollis, by the noble Lord, Lord Henderson, and by the noble Earl, Lord Russell, and others are very powerful criticisms to which the noble Lord Henley acknowledged he had to respond. Is he contesting that?

Baroness Blatch

Having sat through the whole of that debate, it is important to say this. It is as though all bailiffs who operate for local authorities somehow or other fall into the category of being bad apples in the barrel. We should like to think that that is not as widespread as has been said this evening. However, my noble friend from the Department of Social Security and I have agreed that there is an issue to be addressed here. We shall give the matter considerable thought between now and Report stage. So it is the issue of bad practice that needs to be addressed. However, I think there was some hint that it was rather more widespread than it necessarily is.

9 p.m.

Lord McIntosh of Haringey

That is exactly what I said. The noble Lord was expressing dissent. But I said that these were issues to which he will have to respond. I do not think that he will now express dissent with that.

However, I must cast doubt on whether it is appropriate for local authority staff actually to be involved in the arrest and delivery of non-payers of council tax to prison. There is a recent example, which has had a lot of publicity, of Tunbridge Wells local authority staff having to arrest a pensioner for non-payment and to deliver a woman to Holloway prison. Is that the role of local authority officers? I suggest that the opening up of the direction of warrants to local authorities rather than having it a matter for the police, as it was until 1988, has serious difficulties which the Government have not adequately addressed.

It may well be—although I do not think that the Government would have the nerve to plead this in mitigation —that the horrors of the poll tax are so great that the problems that we are seeing now will not be continued under any future tax. Also, it may well be that we are addressing our anxieties to the existing situation under the 1988 Act and things may not be so bad under the council tax. As I say, I do not think that the Ministers will have the nerve to use that argument because they have always defended the principle of the poll tax.

However, something is badly wrong, and any discussion between Ministers in the Department of the Environment and Ministers in the Home Office which is reported to the public, and I hope made available for the purposes of debate at a later stage, will be of great value. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 170 to 172 not moved.]

Baroness Hamwee

moved Amendment No. 173: Page 102, line 1, leave out paragraph 11. The noble Baroness said: This amendment deals with the introduction of charging orders as a means of enforcement. The amendment is supported by the Royal Association for Disability and Rehabilitation because of its anxiety for disabled people who find it difficult to meet the costs of home ownership as well as care costs and the other costs which will arise from this tax.

This, as I say, is a new method of enforcement. For the community charge it was there for collective community charge, but not as a general mechanism. The matter seems deserving of debate so that we may hear from the Government the factors that will be considered. One of the later sub-paragraphs of the particular paragraph in the schedule refers to the prescription of certain factors to be considered by the courts. We may be told of safeguards that will be imposed, such as the circumstances which the court will be recommended to take into account; the personal circumstances of the debtor; whether it will be required to consider if another person living in the house will be taken into account; and whether a charging order is granted.

In the schedule there are other very stringent methods of enforcement available to local authorities. Those include imprisonment and bankruptcy. Knowing as we all do of the problems of repossession, to add a threat of loss of home ownership is a draconian measure, which is certainly worth spending a moment considering.

I move this amendment as a probing amendment so that we may have an opportunity to hear a little of what is behind the recommendation in the Bill. I beg to move.

Earl Howe

As the noble Baroness has explained, Amendment No. 173 seeks to remove charging orders as a means of enforcement for the council tax. I shall explain briefly why we thought it appropriate to include charging orders as an enforcement remedy in the Bill.

Charging orders were available as a means of enforcement for domestic rates, and, as the noble Baroness rightly said, for the collective community charge. Because it had no property element, we did not consider it appropriate to the enforcement of the personal community charge. Now we are bringing in the council tax, which is in part a property tax. It seems right that if other remedies have failed this remedy should be available to local authorities for council taxpayers who default. To be more precise, it will be one of a range of remedies available to a local authority, and in some ways it could be regarded as a gentler option than, say, distress or attachment of earnings. Typically, the registration of a charging order would mean that when the property in question was eventually sold, the creditor would receive part of the proceeds in payment of the debt. I must say that I find nothing unreasonable about that idea.

I hope that what I have said is helpful to the noble Baroness, and that she will feel able to withdraw the amendment.

Lord McIntosh of Haringey

Before the noble Baroness decides what to do, perhaps I may say this. It has to be recognised that a number of local authorities want to use charging orders and from our point of view there is a difficulty with the amendment of the noble Baroness. I am disappointed that in his response the noble Earl did not talk about the dangers that exist with charging orders. After all, the problem with charging orders is that they are likely to be applied for a relatively small debt and to force the sale of a very large asset. That matter has been referred to in our earlier debates this afternoon. If we were to support the Government on this—and I am not saying that we are—we should want to know that there were adequate protections against small debts.

We would also want to be assured that it was not to be a condition precedent to committal. If it were used as a big stick to be waved around virtually regardless, that would seem to us to be extremely dangerous. Charging orders may have their applicability in some areas; but I hope that it is clear that they should be used with enormous care, and that there should be great restrictions on their use. I did not get the impression of that understanding at all from the noble Earl's response.

Earl Howe

Perhaps I can be of a little more help. It is perfectly true that a charging order would enable the local authority to appoint an administrator and force the sale of a property—I take the noble Lord's point—but in most cases that would be a rather draconian sledgehammer to crack a nut.

What typically happens with a charging order is that it is registered and then the local authority waits until such time as the property is sold and receives part or all of the money owing at that time. It is possible to apply for an order for sale but that would be very unusual because the costs involved will usually be disproportionate to the amount of the debt. There must first be a liability order, then an application to the county court for a charging order and then a further application to that court for an order for sale. It is very much a procedure of last resort. One has to give credit to local authorities for choosing the remedy that is most appropriate to a particular case. Attachment of earnings will in most cases be the preferred option.

Baroness Hamwee

I recognise the desirability of giving local authorities a range of methods of enforcement. I am sorry that the noble Earl did not take the opportunity—he may not yet be in a position to do so—to respond to my queries about heading (b) of Schedule 4(11) (4). It refers to the regulations including provision, as to the factors to be considered by the court in deciding whether to make a charging order". I ask the noble Earl to take away the general concerns expressed. Perhaps we can then discuss the matter after the Committee stage.

Earl Howe

This has been a useful debate. Although I do not have specific information to enable me to reply to the noble Baroness, perhaps she will allow me to write to her on that point.

Baroness Hamwee

That would be helpful. I should like to put it on record that there are fears that a charging order is not necessarily a gentler means—that was the term used by the noble Earl. It is a fearful weapon. I dare say that it is the intention that it will be effective. However, I thank the noble Earl for undertaking to provide that further detail. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord McIntosh of Haringey

moved Amendment No. 174: Page 102, line 31, at end insert: ("General Remission 11A. An authority shall have power to reduce or remit the payment of any Council tax on account of the poverty of any person liable to pay it."). The noble Lord said: This is another amendment with a certain history. There used to be a power under the General Rate Act 1967 for a billing authority, or whatever it was called in those days, to remit a payment for reason of the poverty of any person liable to pay it. Those are the words used in the amendment. It seemed to work all right. It did not seem to cause any particular difficulty. It still applies to the non-domestic rate under Section 49 of the Local Government Finance Act 1988. It is a power that magistrates have after commitment to them, although distraint of goods has to be tried first before the magistrates can go to that extent. It is curious that the billing authority itself should not have the power to make the judgment that it will cost more or substantially more to collect a payment than to remit it on grounds of poverty.

I make it clear that I am not proposing, and the amendment does not propose, that there should be any remission on political grounds. On the contrary, we are saying that the power of local authorities effectively to pursue those who are deliberate or willing non-payers will be strengthened by their ability not to have their time distracted by pursuing small claims from people who are genuinely unable to meet them. I should have thought that those who are in favour of observance of the law and of pursuing lawbreakers, as Ministers claim to be, would be sympathetic to the amendment. I beg to move.

Lord Renfrew of Kaimsthorn

I rise with some diffidence as I am certainly not well versed in provisions of social security. I do not speak with a full background on the matter. However, I have read the Bill and it seems curious that this rather vague amendment is inserted at this point. I looked in vain for any inkling as to how a council might receive guidance as to what poverty means in this specific context. I see that later in the Marshalled List a whole series of amendments is to be withdrawn. Perhaps the answer would have been in Amendments Nos. 175 to 181.

I listened with great care to what the noble Lord said and I was astonished that he made no reference to council tax benefit. It seems to me that the Bill makes very clear the fact that persons on very low income will not be liable and that they will receive a remission —if that is the appropriate word; indeed, it is the word used in the amendment—from payment. I should have thought that it would be necessary to reconcile the provision with the provisions clearly laid out in Schedule 9 to the Bill.

I looked through the proposed amendments to Schedule 9. Of course, it would be premature to discuss them now, but I shall certainly have problems with them when we come to that stage. For example, the existence of a retirement pension certainly does not relate to poverty. I should be grateful to receive an explanation from the noble Lord as to how the provision before us relates to the provisions already within the Bill under the general heading of low income.

9.15 p.m.

Lord McIntosh of Haringey

Perhaps I may respond to that specific point before the Minister replies to the amendment. I believe that it would have been helpful if the noble Lord, Lord Renfrew, had been present in the Chamber when my noble friends and others were talking about very specific cases where the rebate system—or, as the noble Lord chooses to call it, council tax benefits—would not have met the case. I do not think that there is any difficulty whatever in defining poverty. Indeed, there are plenty of examples in that respect; for example, there are rebate systems all over the place which take account of it.

Moreover, if there is any difficulty, Ministers will assure the noble Lord that there is no inhibition against them providing guidance to local authorities as to what should be taken into account if the amendment before the Committee was accepted and if this part of the Bill was passed. It is quite clear from the noble Lord's intervention that he thinks this is a party-political matter and that we are trying to introduce a provision which would weaken the enforceability of the council tax legislation.

Lord Renfrew of Kaimsthorn

Perhaps I may intervene briefly. I made no accusations of a party-political nature. I said that the amendment lacked clarity and that it was vague. I should be delighted if both those points could be resolved for me. I repeat, I made no intimations whatever of a party-political nature. Indeed, I think that it is unworthy of the noble Lord to make such a suggestion.

Lord McIntosh of Haringey

I am glad to accept that assurance. I am also glad to acquit the noble Lord of any charge of party-political motivation. Indeed, I am not sure that either the noble Lord or myself should really be seeking to be acquitted of charges of party-political motivation. I am proud of my party-political motivation. I should have thought that the noble Lord would also have been.

Baroness Hollis of Heigham

The noble Lord ought not to be!

Lord McIntosh of Haringey

That is the noble Lord's problem.

I think that I should draw the Committee's attention to something which I did not mention in my introductory remarks. The amendment is supported by the Institute of Revenues, Rating and Valuation. They are the people who are specifically responsible for the task of collecting the council tax and other forms of local government finance. The Institute says: We would urge that the legislation should include a specific power for local authorities to be able to remit payments of council tax in cases of genuine hardship. This could be so framed to include appropriate safeguards to prevent excessive use of such a power. Local authorities should not have to rely only on a general implied power of write-off. This power is available under non-domestic rates (section 49 of the Local Government Finance Act 1988); it would seem reasonable to allow similar powers for council tax payments".

Lord Renfrew of Kaimsthorn

I apologise for intervening once again, but the phrase "a specific power" seems to me to be useful. I can see that it may be appropriate to have such a power. However, it seems to me that the demerit of the amendment before the Committee is that it would virtually be an invitation for each different local authority to write its own bill. That is its weakness. It is not a specific power; it is a power of complete generality. Therefore, one could have complete disparities among all the local authorities in the country.

Lord McIntosh of Haringey

I have no doubt that I could qualify all my amendments by placing at the end of each of them the words: The Secretary of State may lay such regulations and orders as he thinks fit to give effect to this part of the Bill". Obviously one could protect oneself very easily against such an accusation. Of course, we are not doing so. The noble Lord will be well aware that we are making points of political, social and administrative import. If the general argument is accepted, the department, parliamentary counsel or anyone else can insert all the qualifications that are necessary. That has happened to us on many occasions when our arguments have been accepted. I believe that the fundamental distinction must be made—and there is no difficulty about enshrining it in regulations if necessary —that people should not be pursued if it would cost more to collect the tax than would be gained by such pursuance.

In the amendment we say that such a power should apply not to wilful non-payers, but only to those who cannot pay. Given that the Minister accepts the obvious justice of the case put forward in the amendment, I cannot for the life of me think that it is beyond the capacity of Department of the Environment officials or parliamentary counsel to frame specific amendments to give effect to it.

Lord Henderson of Brompton

From the impartiality of the Cross-Benches, I should like to say that the political honours are even, because there is great merit in the principle of the amendment, and there is power in the argument that there is nothing specific about it. It is well worth including such a provision in the Bill if it can be hedged around sufficiently to avoid abuse. That is the nub of the matter.

There cannot be much difference between us. It would be agreeable if both sides of the political spectrum could reach some accord, because there clearly is poverty which cannot be spelled out in Schedule 9. I should have thought that it was for those reasons that the provision has been put forward. If that is so—I see that the noble Lord, Lord McIntosh of Haringey, nods his head—I hope that between now and the next stage the parties could get together and agree upon a solution that would not be open to abuse.

Lord Henley

I am interested to know that the noble Lord, Lord McIntosh, says that this is not a party political amendment. If he says that, no doubt he is correct. I take what he says at face value. My noble friend Lord Renfrew had a point when he said that the amendment lacked clarity and was vague. He went on to make the valid point, which the noble Lord, Lord McIntosh, rejected, that it would then be left to the local authorities to decide what was meant by poverty. It would be up to the local authorities, no doubt represented by friends of Members opposite, to make their party political point by establishing that such and such a level of income was below the poverty line, or whatever, and therefore to undermine the provision of benefit. It is true of course that poverty and hardship have been mentioned in previous statutes, but that was before the creation of the universal welfare state and has little relevance nowadays.

As we know, the council tax proposals provide a number of layers of protection for people on low incomes. The benefit system will ensure that they can claim rebates of up to 100 per cent. of their liability. Clearly, where a 100 per cent. rebate is applicable there is no need for the remission of the charge on the grounds of poverty. The same is true for those on incomes slightly above income support grades.

Having said that, I accept that the noble Lord has a valid point if one removes the word "poverty" from the amendment. In effect, what I suspect he is saying is that the local authority should not have to pursue every sum, however small, at whatever cost. I accept that that is a valid point. We can now get away from party political points that I suspect the noble Lord was trying to make and that the amendment would have allowed for. As I said, it would be wrong for a local authority to have to pursue any individual for outstanding council tax however small the sum.

The Government believe that a local authority would have all the powers needed without a specific provision in the legislation. That view is based upon advice from the Audit Commission. Authorities have provision in their standing orders or financial regulations to enable small amounts to be written off. There is normally a ceiling on the amount, and it is subject to the approval of the chief financial officer or chief executive. For audit purposes, the details of the amount and the reason why the debt is regarded as irrecoverable must be recorded.

For individual sums over the authority's ceiling, the general purposes committee or the equivalent—whatever the local authority wishes to call it—may approve a write-off. The sums would then be written off at the end of the year by the auditor as part of his accounting adjustments, but that would need the approval of the appropriate committee.

Having had our little party political knockabout, I hope that the noble Lord will accept those provisions and that the advice from the Audit Commission will go as far as he feels necessary to deal with the problems he highlighted.

Lord McIntosh of Haringey

I am grateful to the Minister, particularly for the last part of his answer. On the basis of what he said I shall have to think again about the matter and I shall not pursue this amendment.

Nevertheless I believe that I ought for a moment to pursue the issue of poverty and the claim that the Minister made that we have a universal welfare state. I do not think that anyone who travels around our country and sees conditions can be confident of that view. I do not, from this Dispatch Box, put it more strongly than that. Poverty is not all that difficult to define. There are many effective ways of defining it which may not all be consistent with each other but are certainly adequate and necessary for certain areas of the country.

I suggest that any rebate system will only cover the financial situation of an individual or household at the time when the rebate is applied, whereas poverty could result from past conditions which would not be easily reflected in the rebate. For example, a deserted spouse may well be eligible now for 100 per cent. rebates, but she may still have a council tax bill from the time when her husband was with her. She would have no effective means of paying it off. I suggest that that could properly be described as poverty and it would be outside the rebate system but it would be a justifiable case for a local authority to use its powers which the Minister described.

Similarly, as earlier debates have shown, a student receiving grant and loan could be liable for the council tax although his or her resources would be absolutely inadequate for the purpose of paying off a debt accumulated under the council tax. So there is still a political case to be made for poverty to be taken into account, if only to increase the effectiveness of local authorities in pursuing willing non-payers. That is and always has been an important part of our thinking on the subject.

In the light of what the Minister said about the existing powers of local authorities, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 4 agreed to.

[Amendments Nos. 175 to 183 had been withdrawn from the Marshalled List.]

Schedule 6 agreed to.

Schedule 8 [Enforcement: Scotland]:

The Earl of Balfour

moved Amendment No. 184: Page 110, line 7, leave out sub-paragraph (2). The noble Earl said: Before the poll tax came into being I do not believe that I would ever have complained about this provision. However, Lothian regional council has behaved so badly in recent years that I am greatly concerned because this clause allows them to do whatever they like. For example, they sent me a letter demanding that I deduct the community charge from someone who had never been in my employment. As it happens, I know a very decent regional councillor who was extremely helpful. But, had the regional councillor and I not been in agreement on this matter, I could have ended up in court under the provisions of this subparagraph. People have been sent demand notices for water when their water is on a private supply. It has been my experience that unless one sends a registered letter to the regional council, one never seems to receive an intelligent reply.

A person who lives within my parish was sent four different community charge notices in as many months. He was given no real explanation for that. I am greatly concerned about the wording of this subparagraph. It appears to me to allow a local authority to do almost whatever it likes. I beg to move.

9.30 p.m.

Lord Strathclyde

This particular amendment would remove the provisions which basically mean that a mistake in a document or a communication does not invalidate the recovery process. Of course we would hope that local authorities would always get it right and do not therefore need this safeguard. It would, however, be unrealistic to assume that minor typographical and other errors will never occur. Our concern in including this provision in the Bill was to ensure that such minor errors do not provide an excuse for non-payers to delay the recovery process. It would be quite unfair to law-abiding local tax payers if a person could put off paying his council tax simply on account of a minor typing error in one of the documents associated with recovery. The net effect could only be a loss of income and increased costs for the local authority. That, in turn, would mean higher taxes for council tax payers.

However, I fully appreciate my noble friend's concerns that local authorities should not be given carte blanche to commit errors in the recovery process. I am familiar with the case in his own experience which he described so graphically on Second Reading and would certainly never advocate any provision which sanctioned incompetence of the kind he described. We should, however, all note that my noble friend lives under the jurisdiction of a Socialist council.

Given what I have said about the need to allow some minor licence for small errors, I do not think that the deletion of this provision is the right way to ensure that there is no repeat of this kind of problem. That must, I believe, lie in the hands of those charged with overseeing the performance of local authorities; namely, for Scotland, the Commissioner for Local Administration in Scotland (the Ombudsman), or the Accounts Commission. My noble friend can be assured that I am not in any way condoning error in the recovery process, but on the basis of the explanation that I have provided, I hope he will feel able to withdraw his amendment.

The Earl of Balfour

I hope that I shall not end up in court for some misdemeanour as a result of withdrawing this amendment. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 8 agreed to.

Clause 39 [Precepting and precepted authorities]:

Lord Underhill

moved Amendment No. 184A: Page 27, line 25, leave out ("and"). The noble Lord said: Some Members of the Committee appear to be staggered that I am dealing with this matter. I hope that at the end of the day they will be so pleased with my performance, that they will agree with my assertions. In moving Amendment No. 184A, I wish to speak also to Amendment No. 184B.

Amendment No. 184A is a paving amendment to Amendment No. 184B. The amendment seeks to add passenger transport authorities in metropolitan areas to the list of precepting authorities. Such a move would enable PTAs to be treated in the same way as metropolitan county police authorities and fire and civil defence authorities. Those authorities are listed in subsection (1) of this clause.

I recall a debate on the Local Government Finance Act 1988 in which I believe the noble Lord, Lord Teviot, took part. An amendment put down at that time changed the position of the PTAs from being precepting authorities to having to raise finance by sending a bill to each of their constituent counties. At the time it was stressed that the changed procedure would affect the position of a PTA in planning transport matters on a county basis. It was stated that, in view of a district council's resources, such an authority could support only those PTA schemes which directly affected its area rather than schemes planned on a county-wide basis. Districts are obliged to pay the PTA levy but the size of the levy is strongly influenced by district authority pressures.

In a consultative document issued before that amendment was put forward it was stated that the aim was to promote accountability. It was said at that time that PTA members collectively do not have any direct responsibility because they are not directly elected to the PTA. Surely the same point arises in connection with the police authorities and the fire and civil defence authorities.

The consultative document also suggested that districts might in particular regard secession from the PTA as desirable. Since the amendment was carried in 1988 and the Bill became law not a single district has attempted to withdraw from its passenger transport authority.

The amendment which I now move was also moved in the Standing Committee of the other place. I have in front of me the report of the Standing Committee for 3rd December 1991, cols. 776 to 782. In moving the amendment in the Standing Committee in the other place, Mr. David Blunkett said that the amendment would separate out passenger transport authorities for the purposes of the standard spending assessment. At present, public transport is part of a block of other services including libraries and refuse collection. Those are completely different from public transport. We have the position that there is no separate standard spending assessment for public transport. It is left to the district councils, which have other funding priorities, to determine through their SSA the overall proposals of the public transport authority. The attitude of the districts is influenced by the fact that the PTA levy counts towards each district's expenditure for charge-capping procedures. That has a considerable effect on PTA schemes at a time when there is widespread general agreement that investment in public transport must be increased.

The amendment would establish a separate SSA for public transport. As I have said, at present public transport is included in a block of services. In view of the pressure on the finances of many authorities, decisions would have to be taken on whether to cut expenditure on PTA schemes such as those upon grants under Section 20 to assist essential local rail services, or to cut other services in the block. The situation has arisen because of the change from precepting to levying initiated by the Government in the 1988 amendments.

When they abolished the metropolitan counties the Government recognised that there was a need for transport planning on a county basis. They therefore established the PTAs. There is considerable evidence of the effect of that change, some of which is set out in the report of the Standing Committee in the other place.

Mr. Michael Portillo, the local government Minister, rejected the amendment but in no way answered the anxieties of the PTAs about the effect of the present absence of a precepting procedure. In fact on 3rd December, at col. 781, Mr. Portillo stated: The amendment proposes that we return to the system whereby the passenger transport authorities precept on the metropolitan districts. That would cause problems. It was difficult to establish a standard spending assessment for the PTAs". He also said: Local authorities have to make difficult choices: if they choose to spend above their standard spending assessment, they must face the possibility of capping". He concluded with a very important admission: The amendment would return to a precepting status for PTAs. The point is being made vigorously to my hon. Friend the Minister for Public Transport, and he is considering the representations. I remain to be convinced on the issue, and I must therefore urge that the amendment be rejected". That was a statement by Mr. Portillo on 3rd December.

It so happens that, just a month before, another transport Minister, Mr. Patrick McLoughlin, in a letter dated 5th November 1991 to the Tyne and Wear PTA, wrote: We are looking at the possibility of a change in the present arrangements. If the PTAs became precepting bodies the cost of their services would not count as part of the district council budgets for charge-capping decisions. But, in order to maintain the present level of protection for chargepayers, the PTAs would have to be subject to central government controls over their precepts". I have reason to believe that there is a difference of opinion between the Department of Transport and the Department of the Environment on this issue. I hope that, in replying, the Minister will explain exactly the extent of that difference. What has happened to the consideration that Mr. Portillo said was being given by his honourable friend? Has any decision been taken? Is it correct that the Government may be prepared to consider an amendment allowing the Secretary of State by order to designate additional precepting authorities? That could have an advantage. For example, it would allow the SSA implications of the re-establishment of the PTAs as precepting authorities to be the subject of negotiations between central and local government. I hope that we shall receive some comment on that in the light of the important statement by Mr. Portillo and the letter from Mr. McLoughlin.

An amendment similar to those put forward at standing committee in another place was tabled for Report stage but was not selected for debate. Fortunately in this Chamber there is no guillotine or selection of amendments. Therefore we are at perfect liberty to have this debate tonight. I hope that the Minister will be able to give a favourable reply, based first on the Government's consultation document and secondly on the points of Mr. Portillo and Mr. McLoughlin that I raised. I beg to move.

Lord Teviot

I rise warmly to support the noble Lord, Lord Underhill. I was once asked by Lord Elwyn-Jones to move from my seat because I was inaudible. I hope that I can be heard now. It is a pleasure to follow the noble Lord, Lord Underhill. We fought this issue in 1988 and I am afraid that the changes have not been terribly satisfactory. However, I must restrain my words and stick closely to my brief. I shall not take very long.

Arising out of the noble Lord's speech are three key points. There is a vital countrywide service being funded on the basis of lowest common denominator spending controls. Curiously, in those metropolitan areas—I do not have my notebook with me and therefore cannot quote chapter and verse—it is Wigan which is suffering very much more than Oldham. That is just one area. Transferring the precept makes government-supported projects such as light railways difficult to implement. Light rail projects have a great future. With the way that matters work at the moment that is rather difficult. Therefore, we need primary legislation but not a great deal. That is perfectly workable in the spirit of the Bill. If the Government are not prepared to accept change now will they consider introducing an order-making power to make the Secretary of State add to the list of precepting authorities in this Chamber?

Like the noble Lord, Lord Underhill, I shall quote my honourable friend Mr. Portillo, giving chapter and verse. At Committee stage in the other place in respect of an identical amendment, he said: The amendment would return to a precepting status for PTAs. That point is being made vigorously to my hon. Friend the Minister for Public Transport, and he is considering the representations".—[Official Report, Commons, 3/12/91; col. 781.] Therefore, an order-making power would enable the outcome of the deliberations of my honourable friend, Mr. Freeman, to be implemented early. I hope that my noble friend who is to reply will answer that point.

9.45 p.m.

Earl Howe

The amendment would have the effect of establishing metropolitan passenger transport authorities as major precepting authorities. It would re-establish the position prevailing before the PTAs were established as levying bodies in 1990–91 under Section 74 of the Local Government Finance Act 1988. There were sound reasons for making that change. Previously the PTAs precepted upon the metropolitan districts. They received rate support grant in their own right. But as I am sure many Members of the Committee will recall, they were subject to automatic rate capping in all but the final year of their existence as precepting authorities.

We were also concerned that the PTAs in their previous role were insufficiently accountable for their spending decisions both to the metropolitan boroughs and, as importantly, to the electorate. The establishment of PTAs as bodies levying upon the metropolitan districts was intended to strengthen their accountability. PTAs' expenditure now forms part of the districts' budgets, and district councillors are much more directly responsible for these spending decisions as part of their wider responsibilities, and far more accountable to their electorates.

That is a change for the better. We listen to the views expressed to us and we shall continue to do so. Requests for a return to precepting status for the PTAs have been made to my honourable friend the Minister for Public Transport and he is carefully considering these representations. There is no difference of opinion between my honourable friends Mr. McLoughlin and Mr. Portillo. The argument centres on accountability and budgetary control. It must be right that a PTA should be accountable, albeit at one remove, to the local electorate, and that the voters' elected local representatives should have as much control as possible over spending decisions.

The PTA levy is of course taken account of in the SSA which would be reduced if the PTA became a precepting authority and had an SSA of its own. In turn that SSA would be liable to capping. Similar amendments to these were proposed and the issues debated at Committee stage in another place. As I have explained, and as my right honourable friend the Minister for Local Government has previously explained in another place, there were sound reasons for turning PTAs into levying bodies. We still remain to be convinced of a need for a return to precepting status. Therefore, I ask the noble Lord to withdraw the amendment.

Lord Teviot

Before the noble Lord, Lord Underhill, replies I must return to the matter. I appreciate that my noble friend Lord Howe listened to all the arguments but nevertheless the procedure has not been a success. I realise that perhaps one may not wish to return to the original situation but this case is an exception. One could well return to the original situation without losing face. I am sure that the noble Lord, Lord Underhill, will reply soon but I believe that all options should be kept open. My noble friend Lord Jenkin of Roding, who has not been in his seat, vigorously supported me. He is a man of great experience and he hated the situation that existed in 1988.

Earl Howe

I should have said that I was grateful to my noble friend for his suggestions. The Government do not have a closed mind on the return to the precepting status. We are alive to the views expressed. However, at this stage and for the purposes of this Bill we are not convinced that it is the road we wish to go down.

Lord Underhill

I am grateful to the noble Earl for giving the reasons why the amendment cannot be accepted. But naturally I do not agree with him. Indeed, having listened to the noble Earl I can recall the 1988 debate. He used some of the same phrases and sentences that were used then. I do not criticise him for doing so; he would otherwise have accepted my amendment. The same argument was put forward in justifying the provision in the 1988 Act.

The noble Earl said that the Government do not have a closed mind and that they are still looking at the matter. I hope that means that the Minister is seriously considering the proposals that have been put to him and that we may hear that there is to be a change. The noble Lord, Lord Teviot, suggested wisely that the Minister should be given the power to add to the number of precepting authorities. Otherwise we might have to wait a long time before any decision by the Government is put into effect.

From the beginning the Government were doubtful about the abolition of the precepting authorities. They are now considering representations made to them. I have quoted the letter from Mr. McLoughlin and the noble Earl has agreed that the matter is being considered. I hope that we shall hear of a decision soon, and on that basis I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 184B not moved.]

Clause 39 agreed to.

Clauses 40 to 52 agreed to.

Clause 53 [Authorities subject to designation]:

Lord McIntosh of Haringey

moved Amendment No. 185: Page 37, line 12, at end insert: ("( ) In this Chapter any powers given to the Secretary of State to designate an authority shall not apply if that authority has complied with section 32 above or in the case of a major precepting authority section 43 above."). The noble Lord said: With Clause 53 and Amendment No. 185 we come to the major issue of capping. We referred to the matter on Second Reading and at various times during our debates. I wish to make absolutely clear at the outset our view of capping and of the Government's proposals. It is that, except in wholly exceptional circumstances of misappropriation or virtual law-breaking, local authorities should have control over their budgets. We believe that the proper role of central government with regard to local authority budgets is to use the element of government grant not only to recognise the needs and resources of local authorities, and therefore to supplement them appropriately, but, if necessary and desirable, to use that grant in order to encourage levels of expenditure which central government believe to be appropriate. However, we are not prepared to accept either in its present form or in its recent form the use of capping in this way—originally the occasional habit and now the regular habit of this Government.

In fact, we agree with The Times in its leader of 14th June last year which described capping as: an offence against local democracy far more outrageous than anything M Delors is proposing for monetary and political union". Indeed, we agree with the present Secretary of State when he said on first assuming office in July 1979: We will sweep away tiresome and excessive control over local government. Local councils are directly elected. They are answerable to their electorate. They do not need, they do not want, the fussy supervision of detail that now exists". If only that were the position of the Government and his department today. That is as far from current practice as were the statements of Mrs. Thatcher in quoting St. Francis of Assisi when she first took office in 1979 from the other policies and practices of the Government today.

Capping is an offence against local democracy. It has grown up as a practice for dealing with exceptional circumstances, dealing with what Ministers called, as recently as 1990, exceptional needs. The present Secretary of State, before he resumed his office, wrote on 10th May 1990 describing universal capping as: an act of centralised power outside our experience. On those grounds alone, it should be resisted". What are the Government's arguments in favour of capping and what is the strength of those arguments? First, they claim that local authorities would take advantage of changes in local government taxation in order deliberately to increase their charges. That shows very little understanding of the pressures on local authorities from their electorate. It also shows little understanding of the fact that in practice, despite the enormous increases in costs caused by the poll tax when it was first introduced and despite the concurrent increase in local authority responsibility —for example, under social security legislation, local management of schools and so on—the real increase in local authority expenditure in 1990 was only 2.4 per cent. which compares extremely favourably with central government expenditure.

Secondly, the Government argue that by capping they are protecting the poll tax payer. That was described recently by Ministers as being the appalling behaviour of a dozen or so local authorities. Even more recently it was described as a reserve power to be used against extreme cases. It is not being used in that way but it is being used as a political weapon. If one looks at the top three poll tax charges for the current year, the top three are Hackney—a Labour council —but also Elmbridge, and Windsor and Maidenhead which are not Labour councils. None of those three councils have been capped although their poll tax is between £450 and £500 per head.

At the same time local authorities are being capped even though their poll tax is very much lower at £250 to £300 per head. That is an irrational reaction to something which Ministers see as a political threat but which they cannot plausibly argue is a national threat.

The third argument which Ministers use has always been that central government should have control over the national economy and over the part played by local government in the total public expenditure. In the absence of my noble friend Lord Desai I shall refrain from entering into a theoretical argument on that subject although I am deeply sceptical about some of the definitions of public expenditure used by the Treasury. However, the lie is given to that argument simply by the fact that the Government are now abolishing even the de minimis rules which provide that councils with budgets below £15 million should be exempt from council tax capping.

The capping procedure has no economic or social justification; it has the purely political objective of humiliating local government, and particularly those parts, whether Conservative or Labour controlled, which show signs of independence from the wishes of Ministers.

Let me not hear talk from Ministers of excess expenditure. Excess expenditure, as defined by them, is excess over their own arbitrary judgments and the judgments of their departments about what an individual local authority should spend. It should by now be obvious that the views of the Department of the Environment and the Treasury of what local government as a whole should spend should be treated with respect and concern, although not always with total belief. What cannot be treated with respect and concern is the view of central government about what each individual local authority should be spending. That is based on false reasoning, false arguments and in many cases—following the intervention of Ministers—political prejudice.

The amendment provides that any of the powers given to the Secretary of State to designate authority from the point of view of capping shall not apply if the authority has complied with Clause 32, in the case of a billing authority, or Clause 43, in the case of a major precepting authority. In other words, if an authority has set its budget properly and according to the law then it should be proper for the authority to levy that council tax. I beg to move.

10 p.m.

Lord Renfrew of Kaimsthorn

The noble Lord quoted St. Francis of Assisi, albeit at second hand. I should have thought he would do better to quote Voltaire's Dr. Pangloss, who said: Everything is for the best in this best of possible worlds". Certainly the world the noble Lord seems to inhabit is not the world which can sometimes be observed.

I waited for a long time through the noble Lord's speech to see whether he would at last, as indeed he did, use the words "excess" or "excessive" which are the nub of the clause. Chapter V, the provision which he seeks to amend, goes on to refer to designation: As regards a financial year the Secretary of State may designate an authority if in his opinion— (a) the amount calculated by it as its budget requirement for the year is excessive". The amendment incorporates the innocuous phrase, shall not apply if that authority has complied with section 32 above". However, Clause 32 simply requires the authority to make a calculation. It does not give any indication as to the merits of the calculation. It simply has to go through the formulation of calculating R minus P over T, which was discussed at some length yesterday. "R" of course is any budget which the authority chooses for itself.

Perhaps I was wrong in my initial fear that it was a wrecking amendment. I do not now regard it as such. The noble Lord made clear that it is his intention that local authorities should have unbridled licence to charge whatever they may wish to charge in their budgets and that will no doubt be reflected in the council tax.

It is well documented that some local authorities have expended large sums and imposed on the ratepayers, poll tax payers or the council tax payers —whichever regime is in operation—considerable burdens. I should have thought it appropriate for the noble Lord to recognise that not only is that possible but it has happened. It is therefore necessary to consider whether some means should be found for restricting unbridled expenditure.

What makes me uneasy in the speech of the noble Lord is that he gives no recognition to the possibility of profligacy and simply seeks to remove from the Secretary of State any power whatever of acting or reacting when the expenditure is clearly excessive. It therefore seems to me to be an inappropriate amendment.

Baroness Blatch

This amendment is quite transparently intended to destroy capping completely by exempting every authority that carried out its budget calculation properly in accordance with either Clause 32 or Clause 43.

I should like to thank my noble friend for his excellent intervention. Of course he is quite deliberately refusing to make the distinction, but Clauses 32 and 43 are about methodology, and this ignores any view that the Secretary of State may have about what a local authority needs to spend to provide its services.

I should like to pose a straight question to the noble Lord. Perhaps when he replies to the amendment he would care to answer it. Two weeks ago the Sheffield Star of 15th January 1992 said it was understood that the local Labour council hoped that the general election, which must be before June, would overtake events and that the Tories would be turfed out of power. It said that they admitted that they intended to prepare and set an illegal budget, and the hope was that so much time would pass that the Tories would not have time to go through all the necessary procedures if an illegal budget was set following confidential talks with Mr. Kinnock, whom they expected to allow the illegal budget to be legal should he come to power following the election.

I just wonder whether the noble Lord, Lord McIntosh, would approve. If he does not want to accept that article perhaps I can pose the hypothesis that if one of the councils subject to a cap decides to set a budget well above the cap and totally ignores the Secretary of State, and decides to proceed to the barricades on that issue, would the noble Lord, if he ever had the power to do so, remit that power and allow the local authority to spend at any level that it chose?

Chapter V is intended to carry forward into the new council tax system the existing provisions that have worked very effectively under the community charge. Our aims are to protect council tax payers from excessive spending or excessive increases in spending by any authority and to ensure that all authorities budget sensibly and play their part in meeting the Government's economic objectives. No authority can be exempt from the need for expenditure restraint and value for money in delivering public services.

In particular, we need to make sure that the very substantial level of extra funds that we are providing are not used in future years merely to boost spending and hence lead to increases in the level of taxation both during the transition to the council tax and thereafter once it is established.

In short, capping is not about acting when authorities in some way fail in their statutory budgeting duties. I recognise that the Opposition have sometimes seen capping in this light, as when the honourable Member for Dagenham explained recently, during the Second Reading debate on what is now the Local Government Finance and Valuation Act, that he envisaged a reserve power would always be available in extreme cases of illegality or fraud. That is incorrect. We now know what the honourable Member for Dagenham thinks, as he said recently that he opposed the principle of capping and did not propose in any circumstances to cap local authorities. Those are wholly inconsistent statements.

Unlike the Opposition, we recognise our responsibilities both to local and national taxpayers, and hence in the council tax regime we are determined to provide effective capping powers.

Members of the Committee opposite mentioned accountability. Local accountability is indeed a very important principle. It is fundamental to any system of local government finance. Local authorities are, and will be, accountable through the ballot box for their spending decisions. This Bill in fact contains provisions to assist electors in identifying responsibility for expenditure decisions by distinguishing the separate taxes set by authorities in each main tier. The tax that a household pays will thus, for example, be seen clearly to be the sum of the county council's tax and the district council's tax.

However, experience with the community charge has shown that regrettably we cannot rely on sharpened accountability alone to restrain local authority spending. The noble Lord's amendment would leave council tax payers defenceless against extravagant authorities. It would allow authorities to undermine the Government's broad or economic objectives in controlling public expenditure, inflation and the level of local taxation.

I do not know how the noble Lord can sit there and say that local authorities can be trusted with absolutely no constraint whatever on their spending by Parliament. He said that he hoped that I would not cite any examples. One only has to look across the country; the examples are legion. I have pages and pages of evidence of why it is that these measures are required. It is late at night and I do not intend to use them all, but I can draw on them if needed.

This is an essential power for the Secretary of State. I believe it would have to be a power for the Secretary of State even under the party of the noble Lord opposite. It would only be a matter of time before we were back to the stage where we would hear a re-run of the phrase, "The party's over". The party is over, and I hope that the Committee will reject this amendment.

Baroness Hamwee

The bridle described by the noble Lord, Lord Renfrew, is regarded by many of us not as a bridle but as a stranglehold —an unbridled licence to charge. The other way of looking at that is a constraint on the licence to provide a service. That is the problem for local authorities.

We have heard the Minister's comments about accountability. I do not know whether her examples included details of how local authorities, subjected to these unconstrained spending regimes, may have voted when they had the opportunity to test their policies on their own electors. That, after all, is what it is all about. It is not just about trusting local authorities; it is about trusting local electors.

I have a grave fear about what this is doing to local democracy, and not just in the realms of accountability. The centralisation that we see now is such a deterrent to good candidates to stand that democracy is seriously threatened as a result of that. Every party knows the difficulty there is in persuading people to do a job which is not the job that they would like to do. They have so little flexibility and so little local discretion. The number of statutory obligations that there are now means that there is very little room for local discretion. The job will not much longer be felt to be one which is considered at all worthwhile and worth the enormous effort that has to be made by local councillors. That in itself is a huge threat to local democracy. It will be of no surprise to anyone that we support the amendment.

Baroness Blatch

Before the noble Baroness sits down, perhaps I may I pose a straight question to her. Is the noble Baroness also saying that she would advocate no limits whatever on local authority spending?

Lord Strathclyde

And local income tax.

Baroness Hamwee

We would not start from here, would we?

Noble Lords

Answer!

Baroness Hamwee

I think I have made my position entirely clear. We would leave local authorities to take their own decisions but local authorities would not be in a regime that is set by the Government that we have now.

Baroness Blatch

With respect, that was not an answer to the question. I asked the noble Baroness whether she would support no limits whatever on local authority spending. In other words, would it be for local authorities entirely, within their gift, to determine their own level of spending without any limit whatever set by Parliament?

Baroness Hamwee

I thought I was giving a helpful answer by going along in the direction that the Minister feels she is tempting us but where we are actually ahead of her.

10.15 p.m.

Earl Russell

Listening to the noble Lord, Lord Renfrew, on the idea of a local authority having control over its own budget, I was reminded of one of my senior colleagues who once referred to a proposal for reform of the syllabus, saying: This proposal originates with the teachers of the subject, which I regard as a most improper manner". The noble Baroness asked the noble Lord, Lord McIntosh of Haringey, a question. She asked whether he could really sit there and say that local authorities could be trusted to set their own budgets. I shall ask the noble Baroness another question. Can she really sit there and say that the Secretary of State can be trusted to set someone else's budget? Secretaries of State ought not to be unduly trusted. They find it leads them into temptation.

When the noble Lord, Lord Renfrew, used the word "excessive", he quoted obviously from the statute: in his opinion … is excessive". But the Secretary of State's opinion is not the ultimate and last word on everything outside his department. I have had from the very beginning of capping a sense that this is a major constitutional impropriety. Those who listened to our debates on the Monday before last may appreciate that I feel that this tendency of a Secretary of State's power to spread into areas where it does not belong is a constitutional impropriety which goes on in a great many contexts. The gentleman in Whitehall does not necessarily know best. He does not know what is going on in every local authority.

I will accept what the noble Baroness said when last we discussed this subject—and she may say it again —that the Secretary of State has a right to limit the amount of his own money that goes into a local authority. What I cannot see in a democratically elected local authority is why the Secretary of State has the right to restrain the amount that is raised from local authority taxpayers. The noble Baroness talked about protecting council taxpayers. We are grown up. We live in a democracy. We do not really need the nanny state to protect us.

I suspect that some of the trouble here arises from the fact that since the other two parties most mistakenly have chosen to be class-based, there are certain areas where they accept that they will never have any chance of winning an election. That does not apply to us. We are capable of winning one in any area, from Wear Valley to Richmond. That is the proper aim. One gets the local authority voted out of office. I have always suspected that all the spite and spleen that go into the process of capping are simply frustration that they can never get the authority voted out. I can understand that kind of frustration but one should not give way to it in waving around big stick legislation.

I also think that the noble Baroness should be very wary of developing the argument about the need to control spending. It proves too much. It is not only public spending that is inflationary. Spending is inflationary, whether public or private. If from the need to control the economy the Government are claiming the right to control local authority spending, precisely the same constitutional argument would allow them to constrain the spending of a private individual. I have no intention of accepting a situation where the Secretary of State comes along when I have been buying my wife a Christmas present and says, "Your spending is excessive. It must be capped". The constitutional argument for the one is just the same as for the other. It is improper in both cases.

Baroness Blatch

The noble Earl asked whether I could sit here and approve of my right honourable friend the Secretary of State setting budgets for local authorities. My right honourable friend does not set budgets for local authorities; nor does he have the power to set budgets for local authorities. My right honourable friend is concerned with overall limits within which local authorities must set their budgets.

Perhaps I may pose a question to the noble Earl. If the aggregate spending of all local authorities were to be unlimited and the sky was the limit—I have to deduce that from what both the noble Baroness and the noble Lord, Lord McIntosh, have said—is the noble Earl saying that that would have no impact whatever on the national economy?

Earl Russell

It has exactly the same kind of impact on the national economy as private spending. I trust that the noble Baroness is not claiming power to control that. I simply do not see why she has so much difficulty with the concept of a local authority controlling its own budget. I accept that what the Secretary of State is controlling is spending limits, but I cannot understand why the noble Baroness trusts him to do that. He is not competent. He does not know the facts. What is more, I cannot think of any spending limit that the Secretary of State has ever got right. His record does not encourage me to trust him. I did not say that the sky was the limit; I said that what is acceptable to the voters is the limit. Local authorities are accountable to voters. They are the people who ought to have the final say on the matter.

Lord Mackay of Ardbrecknish

I have been listening with some degree of amusement to the debate. Perhaps I may suggest to my noble friend that she ought not to propose hypothetical questions to the parties opposite about what they would do if they were in Government, which I suppose is mildly unlikely in one case and totally unlikely in the other. She should perhaps look back a little to the time when they were in Government; that is, both individually and collectively in the days of the Lib-Lab pact.

I cannot speak from memory for the Department of the Environment, but I certainly recall that when Conservative Ministers came into possession of the Scottish Office, if I may put it that way, they did not need to enact new legislation in order to control local authority spending. In fact, they used the legislation which had been put through by the party or parties opposite—indeed, I cannot quite recall whether the legislation was there before the Lib-Lab pact started or whether it was put forward afterwards—and no less a person than Bruce Millan (who is now a European Commissioner and busy attempting to cap this country as regards its donation, if one can call it that, or its contribution from the European Community) used the legislation on a number of occasions in order to control the spending of Scottish local authorities.

I am pretty sure that the legislation was not just in position for Scotland and that it also applied in England. But I stand to be advised on the matter. However, I simply make the point that this interesting debate is a little less credible by virtue of the fact that one can recall the legislation which was in place when we took power in 1979, and which was put into that position by the party or parties opposite who were well aware of the need for central government to control excessive local government expenditure.

Baroness O'Cathain

Is it not true that the great majority of local authority money actually comes from central government? There is an old saying that he who pays the piper calls the tune. I know that that is an old cliché; but, quite seriously, if there was no capping it would be ridiculous. One would just go to central government and demand more and more money from income tax.

Baroness Hamwee

Does the noble Baroness agree that it is the taxpayer who is paying the piper?

Baroness O'Cathain

Yes. I should prefer to see central government controlling where taxpayers' money goes, rather than leaving it to local authority control.

Lord McIntosh of Haringey

The debate is becoming more and more unreal as noble Lords opposite and the noble Baroness take part in it. I very much enjoyed the knock-about act of the noble Lord, Lord Renfrew. In fact, it gave me a totally different view of the University of Cambridge. It now strikes me as being a good deal more interesting than I had thought. The noble Lord accused me of being Panglossian in Voltaire's terms. I put it to him that his use of the word "excessive" falls within the definition of Lewis Carroll's Humpty Dumpty who said: "When I use a word it means what I want it to mean, nothing more and nothing less."

As the noble Lord said, the question is: who is to be master? That is the crux of the matter. The Secretary of State chooses to use the word "excessive" to mean anything that he wishes. He will corrupt the English language in order to give credence to that definition or, what is worse, that lack of definition.

Lord Renfrew of Kaimsthorn

Is the noble Lord so complacent that he feels that by his own definition he can thereby demolish excess?

Lord McIntosh of Haringey

I do not think that I need take any view about the expenditure of individual authorities, unlike the noble Lord, Lord Renfrew, or the Secretary of State about whom we are talking. The point is that local people have the right to decide about the proper use of their money. In answer to the noble Baroness, Lady O'Cathain, I should say that I made it clear in my opening remarks that I always thought it was proper for the Secretary of State to use central government grant to local authorities in such a way as to encourage the kind of expenditure he wants and to discourage the kind of expenditure that he does not want.

It has always seemed proper that the Secretary of State should use grant to lean on local authorities. However, that is a very different matter from saying that the total expenditure of local authorities, including the money that they raise directly from taxpayers in their areas, should be subject to the whim —and it is no more than that—of the Secretary of State. That is the fundamental difference between us.

Our position has been entirely consistent throughout. I can say that without any fear of contradiction. I made it clear in my opening remarks that the only exceptions we would accept to our determination to resist capping were the cases of fraud and illegality to which my honourable friend Mr. Bryan Gould referred last summer. That is still our position. That does not necessarily mean that the powers would have to be exercised through capping legislation. There are other ways of dealing with fraud and illegality in local authority budgets, not least the concept of the fiduciary duty.

The noble Baroness, Lady Blatch, asked what seemed to me to be an unreal question about Sheffield, based upon an hysterical article which she chose to quote. I shall do my best to answer the question, but it is difficult to answer allegations which have no basis in law or reality. Sheffield has not set an illegal budget. If Sheffield were to set a budget which the Secretary of State, judging by rules which he has not yet set, declared to be excessive, he would be legally entitled to cap it, and there is nothing we could do about it.

Baroness Blatch

The noble Lord is right. I was referring to the article which talked about a possible illegal budget. The noble Lord is right, it is open to Sheffield to set a budget at whatever level it wishes. It will be interesting to see the noble Lord's reaction if it does so. The story goes that Sheffield is likely to set a budget some £30 million to £40 million above SSA. If it does that, the budget will not be illegal, but it will clearly be an attempt to take on the Government in the vain belief that there may be a Labour government. Whatever the amount of SSA is, the sum mentioned is considerably above the SSA. I am reading from the newspaper article. I am sorry, I should have said that it will be considerably above the cap that has so far been set. If Sheffield does that, merely to take on the Government in the vain belief that should the Labour Party come to power it will be a permitted level of spending, I wonder what the noble Lord's reaction will be.

Lord McIntosh of Haringey

We have come quite a long way from the Minister's original charge. She has now agreed that Sheffield has not set a budget, let alone an illegal budget. She is now suggesting that Sheffield might set a budget which is above SSA. Hundreds of local authorities—

Baroness Blatch

Perhaps—

Lord McIntosh of Haringey

No, perhaps the Minister will let me finish my sentence. I am saying that many local authorities will set budgets above SSA and many local authorities will set budgets above the level which the Secretary of State considers reasonable. They will include Conservative- and Labour-controlled councils. Many councils will find themselves setting budgets which will lay them open to the charge of capping. They will not be illegal budgets. They will merely be budgets which fall within the power of designation of the Secretary of State.

The Minister should not quote newspaper articles in the naive way that she did, with the intention—as I see it—of accusing the Labour Party or a Labour-controlled council of illegal motivations or actions, because she has now been forced to agree that that is not the case.

The Minister referred to the assumption, which she claims is made by Sheffield City Council, that a Labour government will let them off the hook. She has said nothing to show that Sheffield City Council thinks that. She has done nothing more than quote from a totally unreliable and inaccurate newspaper article. All I will say to her on that point is that, when we come to correct the errors in local government finance, we shall remove capping. Until, by law, we have changed the rules, the rules, as imposed by law, will stand and will not be changed. I believe that is the assurance that the Minister wants. I have no difficulty in giving her that assurance.

As I said, our position has been entirely consistent throughout. We believe that it is right and proper for central government to be concerned about the proper use of their own grant to local authorities. It is proper for them to express that by variations in the amount of grant given to local authorities. It is even proper for central government to lean on local authorities in order to encourage them to do things they wish them to do and discourage them from doing things they would not wish them to do. What is quite improper is for them to take control, on an individual council-by-council basis, of the expenditure of local authorities. For every example the Minister can quote, I can quote many more. She quoted Sheffield; Elmbridge, a Conservative council, has ruined its local inhabitants by a grossly excessive new civic centre. Its expenditure is way above the standard spending assessment: it is the second highest in the country, but the council has not been capped. Let us see whether the Government pursue this matter.

Our view is one view, the Government's view is now Mark 3. Ten years ago they were saying that it should be left to local authorities; two years, or even less, ago they were saying that capping was required only in exceptional circumstances. They are now saying that capping is a way of life. That is a measure not only of the intellectual inconsistency of the Government's approach, it is a measure of the complete bankruptcy of their political approach to the difficult and complex issue of local authority finance.

It is only the hour of the night that persuades me that it would not be desirable to take the opinion of the Committee on the amendment. I beg leave to withdraw it.

On Question, amendment negatived.

10.30 p.m.

Baroness Hamwee

moved Amendment No. 186: Page 37, line 18, at end insert: ("(2A) For the purposes of this Chapter the budget requirement of an authority does not include any expenditure which an authority estimates that it will incur in the making of grants to voluntary organisations under sections 137 and 142 of the Local Government Act 1972, sections 33 and 38 of the Local Government and Housing Act 1989, sections 45 and 65 of the Health Services and Public Health Act 1968, and section 73 of the Housing Act 1985. (2B) In this section "voluntary organisation" means any body the activities of which are carried out other than for profit but does not include any public or local authority."). The noble Baroness said: We have had, as the noble Lord, Lord McIntosh, said, something of a knockabout on the previous amendment, although I accept that the sentiments that underlay the knockabout were firmly held on all sides.

The amendment seeks to take voluntary organisations out of the capping provisions. I ask the Committee to think about the serious problems of voluntary organisations and perhaps we can shed the inevitable political prejudices that surround the issue. I am talking now about the voluntary and charitable organisations and not a matter of unbridled local authority spending or however one wishes to refer to it.

It is undoubtedly the case that voluntary organisations have been major victims of rate capping. Almost £30 million of local authority funding was lost in 1991–92, primarily in London and the other metropolitan areas, where capping was most severely felt. The NCVO forecasts that £42.4 million will be cut in the forthcoming financial year. These are enormous sums and very important to the voluntary organisations, which require them in order to survive and provide their services. Those services supplement and complement local authority services. We on these Benches do not for one minute suggest that local authorities should run the world, any more than that central government should run the world. I am sure we all agree that the work done by the voluntary organisations is extremely valuable.

Those organisations rely very much on local authorities; they are the channel for much of their funding. The continued use of capping will inevitably lead to a further squeeze on local authority discretion. As I said in the last debate—if we can call it that—it is the discretionary element which is proving the most difficult in local authority decisions. Many local authorities face pressure in meeting their statutory obligations and, sadly, they are realising that it would be possible to cut out spending on voluntary organisations even though they do not wish to do so. Many Members of this Committee would wish to speak in support of voluntary organisations but because of the lateness of the hour they cannot be present. I accept that those Members might not take precisely the line I have taken. I hope the Government will give careful consideration to the effect of the Bill's provisions on voluntary bodies. I beg to move.

Lord Judd

I wish to speak briefly in support of this amendment. It is difficult to overestimate the number of voluntary agencies which feel affected by the present situation. However, the Government have placed tremendous emphasis on the role of voluntary organisations in society and have frequently said they believe voluntary organisations should take on more responsibility for social provision. Furthermore, it is often the case that the kind of activity voluntary bodies are engaged in is, I should have thought, dear to the Government's philosophy, as those organisations encourage the principle of self-help and encourage people to provide for their own needs. The Government have stressed the importance of that approach. Therefore it comes hard to discover that essential support for voluntary organisations is being cut back as a knock-on effect of rate capping.

Many Members of this Committee who feel strongly about this issue are not present due to the lateness of the hour. The late hour also means that I shall not elaborate on the remarks I have already made. However, I hope the Government appreciate that this matter is of importance to a great many people who are working frantically hard to try to meet acute social need.

Lord Henley

I am sorry that some Members of the Committee who wished to support the amendment of the noble Baroness were not able to be present. I accept that this amendment is well intentioned but I believe it is totally and utterly misconceived. It would, at one fell swoop, demolish the principle that capping bites on the whole of an authority's budget and does not seek to discriminate between its various components. It would be quite wrong for the Government to single out any particular category of expenditure on the grounds that it was in some way more worthy of support than any other service. Such judgments are for each individual authority to make.

In capping we are concerned solely with whether the overall budget set by the authority is excessive or represents an excessive increase over that set for the previous year. Our objections to specific disregards of the kind suggested by the amendment, however, go wider than this. Practical difficulties would arise almost at once. I am sure no one would consider it unduly cynical of me to anticipate that some authorities would seek to exploit any loophole in the capping regime to allow themselves greater expenditure. To put it mildly, there would be considerable debate over the precise definition of a voluntary organisation for these purposes. There would be an opportunity for some local authorities to extend support in to some questionable areas. I suspect that certain local authorities would be only too pleased to have an opportunity to do that.

There is a further serious difficulty with the approach envisaged in the amendments. The services of voluntary organisations are of largely local importance. Authorities are best placed to know how these services mesh in with their own services and how value for money can best be pursued in each case. In some areas local authorities work closely with the voluntary sector to provide services; in others the services are provided direct by the authority. In either case it is for the local authority to decide on the appropriate level of support for the services concerned, regardless of whether the service is provided by a voluntary body or by the authority itself. But to distinguish those cases in which a voluntary body acts as the provider in the manner suggested by the amendment would, I fear, disadvantage those authorities which have chosen to make their arrangements in a different way, as they would have to find support for those services from within the budget constrained by the capping regime. I am sure that that is not the intention of the noble Baroness, but that would be the effect of the amendment.

I should not wish to give the impression that my opposition —which is fairly fundamental opposition —to the amendment means that I do not value the work of voluntary organisations. Far from it. Their contribution to local areas and communities is very important. However, that contribution is not uniform across the country. As I said, local authorities are best placed to judge their spending priorities in the light of local circumstances. I therefore hope that the noble Baroness will feel able to withdraw her amendment.

Earl Russell

I was a little surprised that my noble kinsman said that local authorities were best able to judge their spending priorities. Why did he not say that in connection with the previous amendment?

Lord Henley

I said nothing which differed from what my noble friend Lady Blatch said. That judgment would be within the overall limits set by the Secretary of State, who is responsible to Parliament.

Baroness Hamwee

Perhaps I may clear up one minor matter. I did not intend to suggest that I thought that I had lined up a bevy of speakers in support of the amendment who had failed to turn up. I simply meant that I know that it is a subject which is dear to the hearts of many noble Lords, but look at the clock. The Minister is tempting me to say, and it is sensible to say, that we shall have to consider returning to the matter at a later stage in order to enable other noble Lords to take part in a debate on the subject at an earlier hour.

I accept that there are problems in defining a voluntary organisation. I am sad that that might be a reason for denying the thrust of the amendment. The point made by the noble Lord, Lord Judd, about empowerment and allowing people to live their own lives and taking the issue outside the constraints imposed by the capping regime is a very important and fundamental one which clearly divides us. I did not expect a different response. In view of the hour I shall ask leave to withdraw the amendment, but it is a matter to which we shall return. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 53 agreed to.

Clause 54 [Power to designate authorities]:

[Amendments Nos. 186A and 186B not moved.]

Lord McIntosh of Haringey

moved Amendment No. 187: Page 37, line 38, at end insert ("and the Common Council;"). The noble Lord said: I hope that nobody will think that in moving an amendment to include the City of London in the capping regulations we are being discriminatory. We are seeking to remove discrimination, which is becoming increasingly untenable as the Government have extended their view of capping and the coverage of capping. The last justification for excluding the Common Council of the City of London from the capping provisions disappears when the £15 million limit on budgets is removed.

The City of London is already peculiarly affected by government legislation. It is the only council in the whole of the country which is allowed to keep a specific amount of its non-domestic rate for its own purposes rather than having it allocated on the normal basis. In 1990–91 the City of London spent 62 per cent. above the standard spending assessment. That came to a total of over £10,000 a head above the standard spending assessment, but the council was not designated for capping.

This is not an attack on the City of London. Supporters of the City of London have argued that its circumstances are peculiar in that a significant number of people travel in to work in the City of London every day. That fact is specifically taken into account in the standard spending assessment, as the Minister will confirm. Such a consideration makes a great deal of difference, as she knows, to the poll tax charged in Westminster. Whatever excuse there might have been for excluding from these procedures the Common Council of the City of London, it disappeared when the minimal level of budget was abolished and when the Government are taking powers under this Bill even to cap the council tax of the larger parishes.

We are not in favour of capping and have not been in favour of the extension of capping that is proposed in the Bill, but at least we should try to be logical about it. I beg to move.

10.45 p.m.

Baroness Blatch

I am extremely puzzled by this amendment. This question was posed in another place and the answer was given that all billing authorities —including the Common Council of the City of London—are already within the capping regime by virtue of Clause 53(1), which defines references to an authority in Chapter V as a billing authority and major precepting authority. There is no question of exempting the Common Council from the regime of capping. I hope that the amendment will not be pressed.

Lord McIntosh of Haringey

Clearly the Minister has caught me by surprise. I apologise for any inadequacy in my research. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord McIntosh of Haringey

moved Amendment No. 188: Page 38, leave out lines 11 to 13. The noble Lord said: This amendment is more in the form of a technical amendment. It concerns the to-ing and fro-ing which may take place between an authority and the Secretary of State in making the final decisions about capping.

As I understand it—and I am now nervous about my understanding of these matters—as the 1988 Act stands an authority must notify the Secretary of State of decisions that it makes about the demand on its collection fund within seven days. That applies to substitute decisions as well. Having made its calculations, the law provides that an authority can reset its Section 95 calculations, though any substitute calculations cannot be at a higher level. I have some knowledge of that matter because I took part in the debates on the 1988 Bill.

There may be circumstances in which an authority sets its original Section 95 calculation but before the level of council tax is set it reconsiders the matter and reduces its budget. The provisions of the Bill require the Secretary of State to ignore that decision for the purpose of designation and treat the authority as though it had not reset its budget. For example, an authority might reset its budget at a level which turns out to be a level that the Government would regard as excessive but would not attract designation due to de minimis provisions.

We believe that the Secretary of State should be empowered to take account of the most up-to-date information from the local authority about its budget before making a decision about capping. I beg to move.

Baroness Blatch

I believe that there is a misunderstanding about this amendment also. As my honourable friend the Parliamentary Under-Secretary of State for Wales explained when this amendment was considered in another place, it seems a particularly odd amendment. I have no doubt that it is intended to undermine the capping provisions. But let us examine its potential effects, since I suspect that they are not altogether those intended by the noble Lord opposite.

In the vast majority of cases an authority will set one budget for the year and in those cases the amendment would have no effect whatever. In the cases where an authority does set a substitute budget for the year, it will have done so for one of two reasons: either it will have decided, quite voluntarily, that it wishes to reduce the demand made upon its council tax payers—I am sure that we shall all welcome that—or its original budget may have been quashed as a result of a failure to comply with the provisions governing budget setting.

In the first case the amendment would require the Secretary of State, in exercising his capping powers, to consider the original, higher budget. Yet the demand upon council tax payers—and it is the demand upon such taxpayers with which we are concerned—would be a different, lower amount. It makes no sense to ignore the revised budget. To do so could in certain circumstances lead the Secretary of State to designate an authority when it has already reduced its budget. Does the noble Lord opposite think that the delay and expense involved would be welcomed by council tax payers? I think not.

In the second case, where an authority had set a revised budget as a result of quashing, that budget could be greater than the original. The amendment would, however, not allow the Secretary of State to have regard to the revised budget, whether or not it was higher than the original. In fact, it is difficult to see what budget the Secretary of State could have regard to in such circumstances. Surely not a quashed budget? In any event, council tax payers would be forced to bear the bills associated with the revised budget without any protection through capping. That is, as I am sure the Committee will agree, a nonsensical situation.

I should add, just in case it is what the noble Lord had in mind, that authorities cannot increase their budgets voluntarily. So they could not, even under the scenario suggested in the amendment, set a budget upon which the capping regime would bite and then set a higher revised budget which would allow a greater imposition to be made on their council tax payers and of course higher bills.

There is one further situation which would be affected by this amendment. Where an authority in the previous year had set a substitute lower budget, quite possibly as a result of capping, the amendment would mean that any judgment about whether the budget increase was excessive would not take account of that lower budget. As we are focusing on the effects of the increase on local taxpayers, this would be as nonsensical as the cases I have just described. I am fairly certain that is not what the noble Lord intended. I hope that he will not press the amendment.

Lord McIntosh of Haringey

I am much less apologetic about this amendment than I was about the previous one. The Minister has no doubt considered the implications of the amendment more carefully than I have been able to do. She has greater facilities to do so. If there are defects in the drafting I understand that. It will certainly form the basis for me to beg leave to withdraw the amendment. The Minister seems to ignore the fact that I recognised in my opening remarks that there was not any provision for a substitute budget to be set which was higher under the 1988 Act. I was not advocating that that should be the case.

All that goes to show that negotiation between a local authority and the Secretary of State on capping is inevitably an enormously complex process. In the years in which it has been enforced it has led to very great difficulty for many authorities in setting their budgets and sending out their poll tax demands on time. The result has been a considerable loss in revenue and therefore considerable unwanted, unnecessary and wasted increases in public expenditure. That confirms my view that we should get rid of the whole process. I shall read carefully the explanation which the Minister has given of the more abstruse implications of the amendment. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord McIntosh of Haringey

moved Amendment No. 189: Page 38, leave out lines 14 to 19. The noble Lord said: There seems to be a flaw in the thinking of the Government. In responding to an earlier amendment, the noble Lord, Lord Henley, was most vehement that it was a principle of the capping procedures that they should apply to the whole budget and that there should not be any exceptions. Given the unacceptable position from which he starts, I understand the logic of that case. Therefore, why should a parish precept which is not within the control of a district council now be included with the district council's budget and count towards the judgment of the Secretary of State as to whether the budget is excessive?

Subsection (6) gives the Secretary of State wide-ranging powers to amend the provisions in Clause 54(4) by regulation. I am sorry that I did not take the opportunity to alert the noble and learned Lord, Lord Simon of Glaisdale, to that. It appears to me that the effect is to introduce another Henry VIII clause—in other words, to allow the text of the Bill to be varied without restriction by secondary legislation. That cannot be right. I question whether it is what the Government intended. I beg to move.

Baroness Blatch

Amendment No. 198 would remove the power of the Secretary of State in Clause 54(6) to include local precepts in the budget requirement of billing authorities for capping purposes. Members of the Committee will be aware that unless an order is made under Clause 54(6) the Bill's provisions continue the current practice whereby parish precepts are ignored in considering whether the budget set by an authority is excessive or represents an excessive increase over the previous year. We therefore have no direct controls over revenue spending by parishes.

We hope that we shall be able to rely on the general pressure of accountability to control parish spending. However, were there, for example, to be a substantial increase in the level of a significant number of parish precepts pointing to a widespread transfer of functions and spending from district to parishes—and that is going on a pace at the moment with functions being moved from countries to districts and from districts to parishes—without any accompanying reduction in district spending we might consider that it would no longer be appropriate for parish expenditure to continue to be considered outside any control.

We have therefore included a provision—Clause 54(6)—to allow us to bring a district council's expenditure on meeting parish precepts within its budget for the purposes of capping. We are not of course proposing the capping of parish councils as such. We hope never to have to use this power; but, as my honourable friend the Parliamentary Under-Secretary of State for Wales made clear in another place, we have no intention of relinquishing it as suggested in the amendment. To do so would prevent us from taking action on parish spending should the need ever arise. I hope that the amendment will not be pressed.

Lord McIntosh of Haringey

I was interested in the Minister's reply because I did not hear her confirm my comment about the reserve power which exists in the Bill to cap parish council expenditure. It is not enough for the Minister to say that the Government have no intention of doing so when the measure not only appears on the face of the Bill but was debated at an earlier stage. We are seeing the carrying out to excess of central government's obsession with any ability which a local authority has to control its own expenditure, whether by itself or by the way in which functions are carried on by parish councils. The Government are prepared to pursue local authorities down to the last dot and comma in order to secure that the Secretary of State has the unfettered ability to impose his own will on the budget of even the smallest local authority and on even the smallest amount of expenditure.

I still consider that the provision in the Bill which the amendment would remove enables the Secretary of State—it does not force him—at his own will and in his own judgment to include or exclude parish council expenditure from a district council's own budget. That cannot be a proper exercise of power. I must think again about the Henry VIII implications of the amendment before deciding whether I wish to return to the matter at a later stage. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 54 agreed to.

Clause 55 agreed to.

Clause 56 [Designation of authorities]:

Lord McIntosh of Haringey

moved Amendment No. 190: Page 38, line 46, at end insert ("and a statement of his reasons"). The noble Lord said: In moving the amendment, I shall speak also to Amendments Nos. 191 and 192 standing in the name of the noble Baroness, Lady Hamwee, and Amendment No. 193 standing in my name. We are responding to what appears to be a wholly one-way process on the disclosure of information under Clause 56. At present the Secretary of State has virtually unlimited power to require local authorities to disclose information to him. In the circumstances we do not think it appropriate to object to that. However, there is virtually no power to require the Secretary of State to give any information to the local authority about the way in which he is carrying out the capping process, the reasons for it or its effects.

Under the 1988 Act, if an authority is designated for capping, it is given 28 days in which to inform the Secretary of State of the reasons why it believes that the cap should be at a different level from the one suggested. Therefore, the Act requires the authority to provide reasons but it does not make any provision for the Secretary of State to give his reasons.

After all, let us not eliminate the possibility—and I know it is blasphemy to say so—that the Secretary of State may be misinformed. There may be matters on which he has based his decision about which he is in error. It may be that if the authority is not given the Secretary of State's reasons for capping, it would be deprived of the opportunity to respond rationally to the capping decision by the Secretary of State and perhaps to do something about it.

In the Hammersmith and Fulham case, the High Court was told that the Secretary of State believed that his proposed reductions would be achievable without disrupting service delivery or causing financial difficulties. The affidavit on behalf of the Secretary of State stated that he had decided to approach the setting of the proposed maximum amounts on the basis of judging, from all the information available to him, whether the full reduction would be achievable in the year in question without disrupting service delivery or causing financial difficulties. That seems to us to be a totally inadequate exercise of the Secretary of State's responsibilities to deal fairly with local authorities. It seems to us entirely proper that those obligations should be laid impartially both on the authority and on the Secretary of State if there is to be a meaningful dialogue between them. I beg to move.

11 p.m.

Baroness Hamwee

I support the amendment and speak also to the amendments grouped with it. Their purpose is to provide information to the electorate and to concentrate the Secretary of State's mind on the effect of what he is doing.

It needs to be made clear—and if necessary it will have to be made clear in words of one syllable—just what is the impact in each area of the policies which are being imposed. That means listing the services. If we are to have capping and centralisation, the power should be allied with responsibility for that act. It would also give the electorate a clear understanding about who is responsible for the reduction of services as a result of capping. I support the amendment.

Earl Russell

I support Amendments Nos. 191 and 192 in the name of my noble friend Lady Hamwee. It always seems to be a Conservative principle that you cannot have something for nothing. There is sense in that. It is accepted that increasing services involves taxation and the Conservative Party is always ready to make that point. However, by exactly the same logic, it seems to be equally clear that withdrawing funds must have the effect of reducing services unless the Government are suggesting that funds have literally been poured down the drain. Were that the case, I am sure that one newspaper or another would have reported it, photographed it and told us all about it.

If one takes away money, that must have consequences. Since there is no genuinely cost-free action, we should legitimately ask to be told what are those consequences.

Baroness Blatch

These amendments demonstrate a failure to understand how the capping regime works. For the past two years we have announced provisional capping criteria in advance for the information of authorities. They can then take account of the provisional criteria along with all other relevant matters when they take their budgeting decisions. It should then be clear to each authority why it has been designated for capping. Quite simply, such an authority would be one which has set a budget for the year in question which the Secretary of State considers, in accordance with principles adopted by him, to be excessive or to represent an excessive increase over that set for the previous year.

In the notice of designation we shall notify any designated authority of those principles in accordance with Clause 56(1) (b). If noble Lords opposite are worried, as I suspect they are, about the reasons which led the Secretary of State to propose a certain amount as the cap for that authority, the answer is equally straightforward. The Secretary of State takes into account all the circumstances of the authority in deciding on the level of cap.

It is also nonsense to suggest, as the amendment does, that the Secretary of State should provide a summary of the service reductions which he considers are likely to result from a lower budget in line with his proposed or final cap. It is not for the Secretary of State to decide on the spending priorities of a designated authority. That is a matter for the authority itself. That has been said not only by myself but also by my noble friend Lord Henley on an earlier amendment.

It is for the authority itself to decide whether it wishes to challenge the proposed cap on the basis of its own information and to form its own judgment. Similarly, it is for the authority to decide how to live within its revised lower budget, whether it has accepted the proposed cap or not. It is certainly not for Ministers to become involved in the question of local authority budget priorities. They are matters for local decision.

With that explanation, I hope that the matter will not be pressed.

Earl Russell

I am puzzled by the Minister's explanation. The Minister is arguing that individual priorities are no concern of the Government but that the overall total is. Is that not like a Division List in which we know the total number of people who voted but have no idea who those people are? Is it not difficult to obtain the whole without knowing about the sum of the parts?

Baroness Blatch

There is absolutely no correlation between the example given by the noble Earl and what we are saying. The Secretary of State is concerned with budget limits. That is the beginning and end of his power in the matter. It is for local authorities to set their budgets within those limits. That is what it is about. It is not for the Secretary of State to become involved in the minutiae or the priority setting for a local authority.

Lord McIntosh of Haringey

The situation is even worse than what is suggested by the noble Earl, Lord Russell. He suggests there may be a Division List in which we know the numbers but not the people. I suspect we have here a Division List in which we know the people on one side but not on the other. In other words, there are full requirements for disclosure by the local authority of its budget but no requirements for the Secretary of State.

If indeed, as the Minister suggests, the responsibility of the Secretary of State begins and ends with the determination of principles for designation or capping, why is it that affidavits on behalf of the Secretary of State in the Hammersmith and Fulham case which I quoted expressed views about the ability of the authority to contain that amount of expenditure within one year. It seems to me that counsel on behalf of the Secretary of State was going well beyond the principles which the Minister herself indicated.

It is not possible to treat this as a purely theoretical matter. It has been a matter of dispute between the Secretary of State and local authorities since the poll tax was introduced and increasingly as capping has been introduced. It will get worse as time goes on.

I shall confine myself to the one example. In the first year Calderdale had a poll tax which was below the national average and after capping would have been in the bottom 5 per cent. in the country. Not surprisingly, Calderdale wrote to ask what principles were used by the Secretary of State in arriving at the maximum amount for the budget he proposed. Two days later the Department of the Environment replied: The Secretary of State has proposed that maximum, after taking into account both the first principle in your authority's notice of designation, whereby he considered Calderdale's SECTION 95(4) calculation to be excessive and all the relevant financial information available to him about your authority's financial affairs". In other words—I have to repeat it in the absence of the noble Lord, Lord Renfrew—he is saying that his designation means what he wants it to mean; nothing more and nothing less.

Calderdale replied: Thank you for your letter of 6th April. It tells me nothing. Am I to infer from your letter that the Secretary of State is not prepared to disclose the 'relevant information' available to him?". The department wrote: As the Secretary of State made clear in his statement on the matter in the House of Commons on 3 April 1990, when he took his decisions … he considered all the relevant information available to him. This information included all the material which your council had submitted to him". Calderdale replied: I note that the information … included the material submitted by the Council … What else did it include?". I could go on but I will not. If I may, I shall draw my conclusion from this before I give way to the Minister.

The point about this is that it is a dialogue of death. Councils who genuinely and with good reason do not understand what is being done to them and do not understand why they are being discriminated against are asking for information and they are being met with complete stonewall tactics from the Department of the Environment on behalf of the Secretary of State.

Baroness Blatch

The noble Lord has been rather helpful in using the Calderdale example because there was nothing at all inconsistent about what the Department of the Environment said in the letter to Calderdale. The important point is that the Secretary of State is primarily concerned with spending limits, but in the course of the procedures that the authority and the Secretary of State have to go through there is a dialogue between the local authority and the Secretary of State, as there was with Calderdale and the department.

It is for the local authority to present its case, and in presenting its case it will refer to the impact of the spending limit on its programme and its priorities and whether it can live within those limits. There is considerable evidence that the Secretary of State does listen and has in the light of that evidence modified capping limits.

Lord McIntosh of Haringey

What happens is that the Secretary of State behaves like a judge who hears all the evidence and is not required to analyse it in public or give reasons for his judgment. That is not a proper process, and it is not a process which we should encourage. After all, these decisions affect many millions of people and many hundreds of millions of pounds. It is not enough to say that the local authority can put forward all the arguments it likes. There is no requirement on the Secretary of State to respond to those arguments.

Baroness Blatch

I am not sure whether it is deliberate, but the noble Lord appears to be ignoring the fact that when the cap is finally set it has to come before Parliament for affirmative resolution; so the Secretary of State does have to present his case in public to Parliament.

Lord McIntosh of Haringey

He is not presenting his case before Parliament. He is presenting the results of his deliberations before Parliament.

Nothing that happened in the Calderdale case detracts from the argument I am making. What is happening is that councils are throwing information at the Secretary of State about the way in which they have prepared their budgets, about the content of their budgets and about the effect on their budgets if there were to be caps as proposed by the Secretary of State. All the Secretary of State does is draw all this information into himself and does nothing else except give an ex cathedra judgment at the end of the day and report that judgment to Parliament. I certainly do not call that consultation. I do not even call it a proper way to proceed as between people who should have some degree of self-respect.

In view of the lateness of the hour I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 191 and 192 not moved.]

Clause 56 agreed to.

Clauses 57 and 58 agreed to.

Clause 59 [No challenge or acceptance]:

[Amendment No. 193 not moved.]

Clause 59 agreed to.

Clause 60 [Duty of designated billing authority]:

Lord McIntosh of Haringey

moved Amendment No. 194 Page 40, line 42, leave out from ("year") to end of line 47 and insert ("is appropriate to the needs of its area"). The noble Lord said: In moving Amendment No. 194 I should like to speak also to Amendment No. 197. Here we are seeking in a slightly different way something of the same sort of concession as we were seeking on earlier amendments —that is, that there should be greater consultation and autonomy for local authorities in deciding on the appropriate budget—so we are seeking to include the provision that the budget should be appropriate to the needs of the area both in Clause 60 and in Clause 69. So, we are trying to make the designation procedure and the rest of the capping procedure a consultation exercise between the Secretary of State and the local authority. Amendment No. 194, to Clause 60, is about billing authorities and Amendment No. 197, to Clause 61, is about authorities which levy precepts.

We are proposing in the amendment that the Secretary of State would intervene to force the authority to examine its budget, set out its case and also that the Secretary of State would be required to provide a view. At the end of the process, the authority would be left to determine a budget, or a precept, which is appropriate to the needs of the area. That is a two-way process. It is a process which would be recognised by local people as effectively securing something which is appropriate to their needs. It is not at all like the one-way process, which is the basis of this legislation. I beg to move.

Baroness Blatch

As I explained when we discussed Amendments No. 190 to 193, the cap set for an authority takes account of all of the individual circumstances of an authority. Any cap would be, in the Secretary of State's view, reasonable, achievable and appropriate in the light of all of those circumstances. If an authority challenges its proposed cap, it is required to provide reasons in support of its alternative. The Secretary of State will consider the points made and reach his conclusion on the basis of all the information available to him which he considers to be relevant.

It is not then for the authority to second guess the Secretary of State and to decide whether or not, in its view, the cap is "appropriate". It is of course depressingly clear that the purpose of thse amendments is to provide capped authorities with the opportunity to ignore the Secretary of State's considered view and to carry on imposing an unnecessary burden on their council taxpayers.

These amendments would offer authorities the opportunity to vitiate the whole effect of capping by substituting their view of an appropriate level of expenditure for that of the Secretary of State. What is the point of having a capping regime in that case? We know the Opposition's views on capping—if they were the Government they would have no capping. Their lack of concern for local taxpayers is clear. There is a fundamental disagreement between us on that point. I hope that the amendment will not be pressed.

Lord McIntosh of Haringey

The thrust of that reply is indicated in the phrase "second guessing the Secretary of State". Indeed, there is bound to be an element of guessing what the Secretary of State intends because there is no obligation on the Secretary of State to say what he intends. It is late at night. These amendments are, as the Minister rightly says, intended to change fundamentally the capping process. It is clear that at this time and under these circumstances we are likely to be repeating ourselves if we continue with amendments along these lines. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 195 and 196 not moved.]

Clause 60 agreed to.

Clause 61 [Duty of designated precepting authority]:

[Amendment No. 197 not moved.]

Clause 61 agreed to.

Clauses 62 to 64 agreed to.

Clause 65 [Duty to consult ratepayers]:

Baroness Hamwee

moved Amendment No. 198: Page 43, line 37, at end insert: ("(7) Each relevant authority—

1. (a) shall prepare and publish a plan for expenditure, relief from non-domestic rates, and support in kind that the authority intends to incur, or provide to, voluntary organisations over the next three financial years;
2. (b) shall prepare and publish modifications to the current plan, or if the case requires, a new plan on an annual basis; and
3. (c) shall designate an officer or officers to be responsible for enquiries relating to the plan prepared under paragraph (a) above.

(8) For the purposes of subsection (7) above "voluntary organisation" and "officer" have the same meanings as in the Local Government Act 1972."). The noble Baroness said: With this amendment we return to the problems that voluntary organisations have suffered increasingly over recent years of not knowing because of continually constrained local authority spending how they are to plan for the next few months in many cases—but certainly not over any long period.

I recognise that to give voluntary organisations the security that they would like for three or five years, or whatever, without the possibility of change, would be to give them a luxury that, it is to be regretted, nobody else in the world has. That is not what is proposed by the amendment. What is proposed is that authorities shall publish their plans in order to assist voluntary organisations to include relief from non-domestic rates over a three-year period. They shall publish modifications to that plan or a replacement plan on an annual basis. In addition, the amendment requires that an officer in a local authority be designated as responsible for inquiries relating to that plan. That is already a matter of best practice among many authorities. We have already heard today about the problems of voluntary organisations. This amendment may be a small means of assisting their position. I beg to move.

Lord Judd

I should like to add a brief word of support for the amendment. I realise that at this late hour there is little likelihood of it being accepted but I hope that the principle behind it will receive detailed consideration from the Government. For many of those working in the voluntary sphere there is an element of arbitrariness, uncertainty and even mystery about the way in which decisions are made. At a time when voluntary agency activity is being encouraged and voluntary organisations are being encouraged to take more responsibility, it would be sensible to facilitate longer term planning in partnership. I believe that the amendment would help in that respect and I hope that we can have some assurance from the Government that they will look at the principles behind it.

Earl Howe

This amendment would place a new duty on local authorities to plan their support for voluntary organisations and to designate an officer or officers to be responsible for inquiries about the plan. The plans, which would be published, would cover three financial years and be subject to annual review. They would contain details of expenditure, of relief from non-domestic rates and of support in kind which authorities would incur or provide over the next three years.

Voluntary groups make a vital contribution to our society. They are innovative and they can respond quickly and flexibly to changing demands. They are by their nature close to peoples' needs. Those needs might be, for example, for particular personal services which can best be provided by a voluntary group, for more general leisure activity or for the improvement or protection of the local environment.

The relationship between local authorities and voluntary organisations is therefore already very close. Local authorities provide valuable support for local voluntary groups through grants, rate relief and help in kind. This support covers the whole range of the activities of local authorities. Indeed, in parts of the country it involves both county and district. I cannot therefore accept that a duty to plan for expenditure on voluntary organisations alone across such a diverse set of relationships would be practical. It would cut right across individual service plans, some of which are statutory, some of which are not. In some areas it would even cut across local authorities. It would place an additional burden on authorities which they would have to meet from within their existing resources.

The amendment mentions relief from non-domestic rates. Mandatory relief for charities from non-domestic rates is 80 per cent. That is entirely borne by the national non-domestic rates pool so there is no need for local authorities to plan for that relief. Local authorities have discretion to increase mandatory relief to 100 per cent. and to relieve non-profit-making bodies which are not charities of up to 100 per cent. of their non-domestic rate. Those decisions have to be taken in the context of the annual cycle of national and local government finance and of annual decisions by individual authorities of the calls they will make on their charge payers or council tax payers. It would therefore be inappropriate to commit authorities to three-year plans which would have to be reviewed each year and which could not be finalised until after those decisions had been taken.

The amendment has the look of a proposal that favours and promotes the voluntary sector. In reality, it achieves little or nothing at considerable cost and would certainly entail a great deal of unproductive work on the part of local authority staff. What surely matters is that the needs of the community are recognised and met. As I said, the voluntary sector makes a vital contribution in that context.

It seems to me that there is absolutely no need to have a statutory duty to prepare plans which cut right across individual service plans and which, incidentally, make no distinction between grants to voluntary bodies and contracting with those bodies for the delivery of services such as community care. To answer the noble Lord, Lord Judd, it is those contracts that enable voluntary bodies to plan for the long term.

For the reasons that I have given, I hope that the noble Baroness will feel able to withdraw the amendment.

Baroness Hamwee

With regard to the cost of implementing the proposed arrangement, the Association of Metropolitan Authorities believes that any additional costs would be negligible. The noble Earl, Lord Howe, raised an important point as regards the relationship between the work of voluntary organisations and the service plans of local authorities. It is precisely to assist that relationship that the proposal has been put forward.

The noble Earl also talked about the ability of voluntary organisations to respond quickly and flexibly. I do not believe that I am the only Member of this Chamber who has direct experience of a voluntary organisation being entirely unable to respond quickly and flexibly because it does not know where its money will come from over the next few months or indeed weeks.

The amendment is supported by the National Council for Voluntary Organisations and it was suggested by the voluntary sector. I am sorry that it did not meet with more favour from the Government Benches. It is perhaps a matter to which we shall need to return at a later stage, although in a slightly different form. However, in the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 65 agreed to.

[Amendments Nos. 199 to 203 not moved.]

Clauses 66, 67 and 68 agreed to.

[Amendment No. 204 not moved.]

Clause 69 agreed to.

Clauses 94 to 96 agreed to.

Clauses 98 and 99 agreed to.

[Amendments Nos. 205 and 206 not moved.]

Earl Howe

I beg to move that the House do now resume.

Moved accordingly, and on Question, Motion agreed to.

House resumed.

House adjourned at twenty-nine minutes past eleven o'clock.