Lords Sitting of 23 July 1997

Preamble
The House met at half-past two of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Liverpool.
  Lord Cowdrey of Tonbridge
  Sir Michael Colin Cowdrey, Knight, CBE, having been created Baron Cowdrey of Tonbridge, of Tonbridge in the County of Kent, for life—Was, in his robes, introduced between the Lord Bramall and the Lord Kingsdown.
  Lord Russell-Johnston
  Sir David Russell Russell-Johnston, Knight, having been created Baron Russell-Johnston, of Minginish in Highland, for life—Was, in his robes, introduced between the Lord Mackie of Benshie and the Lord Dahrendorf.

  Carbon Dioxide Emissions
  2.56 p.m.
  Lord Ezraasked Her Majesty's Government:
  What measures they have in mind to achieve the goal of reducing carbon dioxide emissions by 20 per cent. by the year 2010.
  The Parliamentary Under-Secretary of State, Department of the Environment, Transport and the Regions (Baroness Hayman): My Lords, the policies which will enable us to meet our 20 per cent. target include improvements in domestic and industrial energy efficiency, an integrated transport strategy to tackle the growth in emissions from road transport, and a large increase in the amount of electricity generated from renewable sources and combined heat and power schemes. We are developing those policies at present and after the Climate Change Conference in Kyoto at the end of this year we will produce a new UK climate change programme.
  Lord Ezra: My Lords, I thank the noble Baroness for that positive response and wish the Government well with their plans.
  Included within those policies, will there be positive incentives and disincentives in the various markets for people to save on energy and to use energy in a more environmentally acceptable way? For example, are the Government contemplating reducing VAT on energy-saving equipment to the same level as has been reduced on domestic energy? Do they contemplate introducing road pricing to deal with road congestion?
  Baroness Hayman: My Lords, I am grateful for the support of the noble Lord for the general strategy that we are adopting. It is a challenging one if we are to meet the targets we have set out.
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  On the issue of road pricing, in the White Paper on an integrated transport policy it is essential that we consider all the options available to us to reduce congestion and the emissions that come from transport. My right honourable friend the Chancellor of the Exchequer explained in his Budget Statement that what governments choose to tax sends a clear signal about the economic activities they believe should be encouraged and discouraged.
  As regards VAT on energy efficient goods, options for helping people on low incomes to insulate their homes and save energy are being examined. That builds on the existing commitment to report to Parliament on the revenue effects of a reduced rate of VAT for energy efficient materials. The date of that report has been brought forward to the end of October. The scope has been widened.
  Lord Berkeley: My Lords, carbon dioxide is but one of a series of noxious emissions which come from road vehicles. Can the Minister inform the House of the progress being made with the development of low or zero emission road vehicles? They can be particularly useful in towns where there is greater emission from vehicles.
  Baroness Hayman: My Lords, my noble friend is correct that CO2 emissions are important in terms of climate change. But we have to be concerned about the pollutant effects of other emissions. That was certainly behind the negotiating strategy on the auto-oil package, for example, which took place in Luxembourg. However, there has been interest in your Lordships' House about alternative fuel vehicles. Last week I had a useful meeting with the Natural Gas Vehicle Association. We are looking at the role that road fuel gases might play in our air quality strategy, given their potential for reducing pollutants of NOx and particulates. Those are the pollutants of particular concern in urban areas. The most promising application may well be in urban based fleets of vehicles such as buses where refuelling and range are not a major issue.
  Lord Dixon-Smith: My Lords, does the Minister agree that while a great deal can be done in the field of greater fuel efficiency and in developing new hydrocarbon fuels, in the long term our continuing economic prosperity and development has to depend strategically on new technologies which are still in their infancy? Do the Government envisage any change in their research priorities to meet this developing necessity?
  Baroness Hayman: My Lords, we are well aware, particularly from the debate that the noble Lord, Lord Dixon-Smith, introduced on the interests of the Select Committee, about the possibilities of technical innovation providing solutions for the future. Our previous debate on the matter in this House included the possibilities of information technology being used for development in a business context.
  The energy efficiency best practice programme is designed to draw together information on cost-effective ways of reducing energy use. As part of that aim it

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  produces guidance and case studies and runs a series of workshops around the country to raise awareness. The Technology Foresight programme brings together industry, the research community and public sector bodies to examine the UK's long-term needs for technology, including environmental technology.
  Lord Beaumont of Whitley: My Lords, will the Government, in the course of their very desirable efforts to increase the proportion of power that is produced from renewable resources, consider introducing fiscal measures to encourage the extraction of methane from smaller landfill sites?
  Baroness Hayman: My Lords, the issue of how we deal with landfill sites and their future is very important in the area of environmental protection. The Chancellor has put very clearly on the record the importance of environmental considerations in fiscal strategy. I am sure that that is one of the areas that he will consider.
  Lord Dean of Beswick: My Lords, is the Minister aware that inner-city areas such as those in London and other large cities such as Manchester, Leeds and Birmingham are the worst health spots in the nation? Sadly, the increase in deaths from lung cancer and other lung-related illnesses is on the upswing because of the motor car. What hope can the Minister give to people in those areas that there will be a diminution in illnesses in those categories, even if only in gradual terms? The situation is becoming pretty desperate.
  Baroness Hayman: My Lords, my noble friend is correct to point out the health hazards from congestion and pollution in addition to hazards related to long-term climate change. I am well aware from my own background of the health implications in these areas. Transport, and road transport in particular, is the most rapidly growing source of CO2 emissions. We must tackle that problem and be prepared to deal with it. That is why we have set ourselves the task of producing an integrated transport policy. It is important to square the circle of not reducing mobility in return for cutting down congestion. It is very important that we offer people proper alternatives, especially in the field of improved public transport, so that car dependency can be reduced in that way.
  Earl Ferrers: My Lords, will the noble Baroness give an assurance that the Government will continue by fiscal measures to encourage the use of gas as a fuel, and also clean diesel and low-sulphur diesel, which in themselves can enable particulate traps to operate so that the effluents from buses and taxis are less offensive than they are at the moment?
  Baroness Hayman: My Lords, the relationship that the noble Earl points out between fiscal policy and the encouragement of cleaner technology is well understood. I am always extremely nervous of committing my right honourable friend the Chancellor
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  of the Exchequer to anything. However, I assure the House that my department draws his attention to these matters.
  Lord Campbell of Alloway: My Lords, will the Minister tell the House what on earth we intend to do about buses that cruise around belching out diesel fumes?
  Baroness Hayman: My Lords, a little bit of regulation might be in order. Vehicle standards in the bus industry are an area of concern to my department. This is one of the issues that I discussed with the Natural Gas Vehicles Association. We hope to see in the long term much cleaner forms of public transport. The auto oil directive will in itself have a large effect on the particulate and noxious emissions from diesel.
  Lord Swinfen: My Lords, will the Minister confirm that the regulations are already in place on exhaust emissions from motor vehicles? Is she certain that the buses that we see belching black smoke in London and other places pass those tests? Should they not in fact be off the road?
  Baroness Hayman: My Lords, if they do not pass the test, they should certainly be off the road. The levels on some of the basic standards are base levels and we would wish to raise those. The issue of enforcement through the vehicle inspectorate is a very important one in this area and one with which my department is concerned.

  Wimbledon Tennis Tournament: Wider Access
  3.7 p.m.
  Lord Brabazon of Taraasked Her Majesty's Government:
  How they intend to implement their intention to persuade the Wimbledon tennis authorities to introduce more "People's Sundays" for "real people" as reported in the Daily Telegraph of 2nd July 1997.
  Lord McIntosh of Haringey: My Lords, Chris Smith, the Secretary of State, has great powers of persuasion, but even he cannot persuade people out of the hospitality tent into the court. The Government are certainly keen to widen access to major tournaments such as the Wimbledon championships. The point has been made; it is now for the organisers to consider how best to respond. The People's Sunday was, after all, the organisers' own initiative.
  Lord Brabazon of Tara: My Lords, I thank the noble Lord for that reply. According to the Telegraph the Secretary of State, Chris Smith, said that he would put pressure on organisers, "to understand that for the real people access is the important thing". As Wimbledon is a private club and, as I understand it, is not in receipt of public funds, what on earth business is it of the Secretary of State to interfere in the way in

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  which it runs its affairs? Secondly, how do the Government define "real people"? Why is somebody who bought his or her ticket in advance, and not on the day, any less a real person than those who bought them on the day?
  Lord McIntosh of Haringey: My Lords, the noble Lord read the report in the Telegraph. I have the advantage of the transcript of the Secretary of State's interview on "The World at One", in which he neither used the word "pressure" nor the phrase, "real people". So the noble Lord's strictures do not apply in this case.
  I am not sure what I would understand by the term "real people". On the rare occasions when I go to Wimbledon I see a number of noble Lords in the members' enclosure. They look real enough to me.
  Lord Ewing of Kirkford: My Lords, is my noble friend the Minister aware that the only reason that there was a "People's Sunday" for "real people"—and the definition of "real people" certainly excludes hereditary Peers—
  Noble Lords: Oh!
  Lord Ewing of Kirkford: The only reason that there was a People's Sunday for "real people" was the torrential rain during Wimbledon fortnight. Is my noble friend aware that Labour governments can perform all sorts of miracles? During the long, hot summer of 1978, my noble friend Lord Callaghan, who was at that time Prime Minister, appointed my noble friend Lord Howell as Minister for Rain. What we need in this new Labour Government is a Minister for Rain in order to ensure that there is always a People's Sunday for real people. As one of the wettest of wets in this House, may I put forward my own name?
  Lord McIntosh of Haringey: My Lords, I join in congratulating my noble friend Lord Howell on his achievements as Minister for Rain, although from where I am I cannot join in patting him on the head as my noble friend Lord Ewing did. I am interested to learn of the willingness of my noble friend Lord Ewing to be appointed as Minister for Rain because I shall certainly not volunteer myself.
  Lord Aberdare: My Lords, perhaps I may declare an interest as a "real" person and also a member of the All England Club at Wimbledon. Is the Minister aware that the Wimbledon championships are one of the great sporting activities of which this country is very proud? The completion of the present championships within the specified time, despite the rain, was a remarkable achievement.
  Is the Minister further aware that the spectators at Wimbledon have a proud reputation for their impartiality and good sportsmanship? They very often give more encouragement to the under-dog than to the person who is winning the match. It would be a great shame if that were in any way endangered by trying to alter the atmosphere of the championships.
  Lord McIntosh of Haringey: My Lords, I am happy to confirm what the noble Lord said about the
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  importance and distinction of the Wimbledon championships. My understanding is that the reason we do not have the equivalent of "People's Sundays" at every championship is not just that in most years there is not enough rain, but that the organisers of the championships find it desirable to have the Sunday off in the middle of the two weeks in order to prepare for the second week. They have great difficulty in running the championships right through and that is a point which the Government will have to recognise in whatever persuasion they seek to apply to the organisers.
  Lord Taylor of Gryfe: My Lords, has the Minister's attention been drawn to the excellent arrangements that were made for the Open Golf Championship at Troon over the weekend? Is he aware that the championship is run by the Royal and Ancient Golf Club of St. Andrews which does not enjoy protected status for the Open Championship but has agreed to give the contract to the BBC so that everyone can see the Open Championship?
  Is the Minister further aware that on this great occasion the Royal and Ancient Golf Club opened the viewing facilities to children accompanied by an adult, in order to encourage the great game of golf?
  Lord McIntosh of Haringey: My Lords, I am delighted to hear what my noble friend says.
  Baroness Gardner of Parkes: My Lords, in view of the new Secretary of State's wide remit for culture etc., whereby he will encourage young people and give great opportunities for young people to participate, can the Minister say whether the Secretary of State will look into the possibility of ensuring that there is definite provision? That follows the comment by the noble Lord, Lord Taylor, about Troon, where young people were able to see the activities.
  Does the Minister agree that it is important that young people should have opportunities to participate, even as spectators, in the sports?
  Lord McIntosh of Haringey: My Lords, he is not the Minister for culture etc., he is the Minister for Culture, Media and Sport. However, I agree with the noble Baroness that access for young people is particularly important. Of course it is true that the Wimbledon championships do not receive any public funding. They contribute £30 million a year to the Lawn Tennis Association from the activities. But I remind the noble Baroness that the Lottery Sports Fund has already contributed £25 million for 340 projects, many of which are directed towards young people.
  We propose, with the world class project which commences at the beginning of next year, to provide revenue support for training for young players as well as the organisers of the sports. In the years from 1986 to 1996, £5 million was made available from the Sports Council, matched by funding from the All England Lawn Tennis Club and the Lawn Tennis Association for the indoor tennis initiative which provides courts

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  particularly in inner-city areas. That is directed strongly towards young people. So things are being done, although it is never enough.
  Lord Dean of Beswick: My Lords, is my noble friend aware that those of us who come from the inner cities are pleased at the announcement of government funding for projects within inner cities for training the young? It is obvious that the people who sponsor sport only sponsor it at the top end on the basis of a handsome return. Those of us interested in sport are glad to see the Government moving in this direction.
  Lord McIntosh of Haringey: My Lords, I am grateful to my noble friend for his comments. The Lawn Tennis Association is less susceptible to persuasion than most sporting authorities because of its financial independence. But I have indicated the way in which matching funding can be used profitably to widen access.
  Baroness Park of Monmouth: My Lords, reverting to the remark from the noble Lord, Lord Ewing, does the Minister agree with me that perhaps hereditary Peers have a certain standing in that they must have been the first people to play real tennis?
  Lord McIntosh of Haringey: My Lords, I thought that real tennis was a royal game rather than a game of the nobility.
  Lord Renton of Mount Harry: My Lords, over the past two months we have been introduced to "real Sundays", "real People's Sundays", a people's lottery, introduced by the Secretary of State for Culture, Media and Sport and, a few weeks before, "people's diplomacy", introduced by the Foreign Secretary in his mission statement.
  Can the Minister give us a definition of the word "people" in these different contexts? What new popular magic is there that unites Sundays, the lottery and foreign affairs?
  Lord McIntosh of Haringey: My Lords, I repudiated the word "real" as being a quotation from the Secretary of State, but I do not think that I can repudiate the word "people". We are all people, aren't we?
  Baroness Castle of Blackburn: Is it not a fact—
  A noble Lord: Order! Please speak from the Government Bench.
  Baroness Castle of Blackburn: All right, I do not mind being a Bishop if the Bishops do not object, after all, they are some of the real people. Is it not a fact that corporate hospitality takes out of circulation a large number of the best seats at Wimbledon which remain unoccupied because the people on whose behalf they have been reserved prefer to continue in the hospitality tent rather than to watch the game? Meanwhile, the real people are those who care so much for the tennis that
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  they are prepared to queue in the rain, often in the vain hope of getting a seat. Could we therefore have more "People's Days" which gave the viewers such an opportunity? If we cannot have "People's Sundays", can we have a "People's Weekday" now and then so that the people who play at Wimbledon can see that there are people watching them who really care?
  Lord McIntosh of Haringey: My Lords, any of us who saw the Henman match on the Sunday and the Rusedski match on the following Thursday will agree that at the Sunday match the stands seemed to be full, whereas for the Rusedski match they were less than half full. That confirms the valid point which my noble friend Lady Castle made. In fact, 50 per cent. of the seats in the Centre Court go to public ballot whereas 25 per cent. are for debenture holders and corporate hospitality and it is that which is the major cause of empty stands during important matches. That is why we are keen to secure wider access and to have an extension of the days available for those who queue for their seats, as my noble friend said.
  Earl Ferrers: My Lords, will the noble Lord, Lord McIntosh, be kind enough to reprimand his noble friend Lord Ewing, behind him, for saying that hereditary Peers are not real people? Does he agree that hereditary Peers are real people and that it would be quite wrong to consider that it is only the Life Peers who are real people, when in fact they are the ones who are not the real people?
  Lord McIntosh of Haringey: My Lords, I not only agree that hereditary Peers are real people but I am prepared to go further and say that perhaps their ancestors were real people as well.
  Lady Saltoun of Abernethy: My Lords, if a person is not a real person, what is he? Can the noble Lord suggest a definition?
  Lord McIntosh of Haringey: My Lords, we are enjoyably moving away from Wimbledon. I believe that the noble Lady has come to the point about hereditary Peers when she asks: if a hereditary Peer is not a person, what is he? With honourable and distinguished exceptions such as the noble Lady, the problem with the hereditary Peerage is that it is so overwhelmingly male.

  Business
  3.20 p.m.
  Lord Carter: My Lords, at a convenient moment after 3.30 p.m., my noble friend Lady Blackstone will, with the leave of the House, repeat a Statement that is to be made in another place on the Dearing Report on Higher Education. I should like to take this opportunity to remind the House that the Companion indicates that discussion on a Statement after the Minister's initial reply to the Opposition spokesmen should be confined to "brief comments and questions for clarification".

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  There is a mandatory limit of 20 minutes for Back-Benchers from the end of the Minister's initial reply to the Opposition spokesmen.
  The House may be aware that, during proceedings on yesterday's Statement, two Back-Benchers occupied 11 minutes between them. My noble friend the Leader of the House was obliged to intervene. I hope he will not be obliged to do so again today.

  Education (Schools) Bill
  Read a third time.
  The Minister of State, Department for Education and Employment (Baroness Blackstone): My Lords, I beg to move that the Bill do now pass.
  This is an important Bill. It is a Bill that will enable us to fulfil a clear manifesto commitment. We promised that we would reduce class sizes for five, six and seven year-olds. Indeed, that was the first of the Government's key pledges. Through this Bill we are demonstrating that we are committed to raising standards in education without delay.
  The Bill represents a re-ordering of priorities. The money we shall save from phasing out the assisted places scheme—which benefits only 40,000 pupils—will be used to give those 480,000 infant children in overcrowded classrooms a much better foundation of learning in their early years of education. Those early years are crucial to the future of the children in this country. It is only right that they are given the best possible start in their school life. Ensuring that pupils of infant age are not in classes of more than 30 is a significant first step on the road to raising standards.
  We are also honouring our commitment to those pupils on the assisted places scheme. Primary age pupils will keep their places to age 11, when they can transfer to the maintained sector. Secondary age pupils will hold their places until they complete their education at their current school.
  I made clear at Report stage that places in free-standing preparatory schools, offered and accepted in light of the letter from Peter Kilfoyle, will be honoured. Noble Lords were asked to express an opinion as to whether that went far enough. An amendment was passed which places an obligation on the Government to support all assisted pupils at free-standing preparatory schools through to the end of their education at such schools at age 13.
  I can confirm that we remain of the opinion that that goes further than is required to fulfil commitments given and that my right honourable friend the Secretary of State for Education and Employment will be asking members in the other place to overturn the amendment.
  We promised the electorate that we would act quickly—and we are doing so. I make no apology for that. No one can claim there has been a lack of notice. Independent schools and local education authorities have a year to plan for the effects of the phasing out of the assisted places scheme. That in our view, is sufficient time.
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  We have spent a lot of time debating the principles and mechanics of the assisted places scheme—not just the eight or so hours we have spent during the passage of this short Bill, but on the many occasions previously when debating the regulations and during the passage of the initial legislation.
  It would take too much of your Lordships' time for me to thank all those who have taken part individually. So I shall simply place on record my thanks to all of them, without whom we would not have had such interesting debates. But I must single out one or two special contributors. I must express warm gratitude to my noble friend Lord McIntosh of Haringey for his support at the Dispatch Box. I know that the noble Lord, Lord Henley, who is not in his place, appreciates the value of such support and he too has been helped by the noble Lord, Lord Pilkington, and the noble Baroness, Lady Byford. I should like to thank the noble Lord, Lord Henley, and the other members of his team, for performing their duties as official Opposition, sometimes passionately but, despite that, with good grace.
  I should like to make particular mention of the contributions of the noble Lord, Lord Tope, who, unfortunately again, is not in his place. I always look forward to his contributions, even when he probes for commitments and seeks clarification of the Government's position. I can always be confident that he will listen carefully and that, when he receives the assurances that he sought, he recognises them.
  Support from the Benches behind me is always welcome and I thank my noble friends Lord Morris, Lord Ponsonby and Lord Peston and the noble Baronesses, Lady David and Lady Lockwood, for their most useful contributions. I look forward to their continued support during the debates on the major Education Bill in the autumn. In preparation for that I urge my noble friends to have a good summer. I commend the Bill to the House.
  Moved, That the Bill do now pass.—(Baroness Blackstone.)
  Lord Pilkington of Oxenford: My Lords, I accept that the Bill fulfils a manifesto commitment of the Government. Yet, I remain worried about it. Our extensive debates have shown—I quote my noble friend Lord Skidelsky in this matter—that the money saved will not provide the amount of money needed for the worthy aim of reducing class sizes. Therefore, the Bill does not in fact fulfil what it is intended to do.
  Because of that, I am very sad that a great opportunity has been lost for constructive co-operation between the public and private sectors. The schools with assisted places could have added to the policy of the present Government and their predecessor of establishing centres of excellence. They could have paralleled and been part of the centres of excellence that this Government propose to continue. The whole community would have benefited from that co-operation between the private and public sectors, as has been shown in those countries, such as Australia and France, where it occurs.

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  Therefore, I fear again, as so often in debates on English education, that ideology has prevailed over common sense. At this last stage of the Bill, I only hope that at some time we may see English education escaping the shackles of ideology which have done so much destruction over the past three decades—the last 30 years.
  I am sad about a promise having been changed into a discretion. I do not believe that my wife would have been very pleased when I made my vows at the altar if I had said that I was going to exercise discretion in the case of the promises that I made. It seems to me that a promise was made, and I do not regard it as sufficient to be replaced with a discretion, however generous. I accept the noble Baroness's assurance that the discretion will be used generously.
  Finally, at the end of these long debates I want to express thanks to the noble Baroness for the patience, kindness and care she has shown in the conduct of the passage of this Bill. I also want to express my thanks to my noble friends on this side who have given me so much thought and to noble Lords on the other side who have given me so much to think about.
  Baroness Hamwee: My Lords, I am a poor substitute for my noble friend Lord Tope who is very sad that he cannot be here this afternoon. He will be relieved that these proceedings at any rate are uncontentious. He will read the remarks of the noble Baroness in Hansard. He is one of those noble Lords who I can say with confidence will read what he should read. He would want me on his behalf and on behalf of these Benches to thank the Minister for the work, the co-operation and assurances given during the course of the Bill.
  I repeat that we on these Benches welcome the Bill. But I should also repeat that we welcome it as a small step towards the better funding of education. We are still not clear what the net financial savings will be. We support the Government's objectives, though the Minister will understand the slight note of scepticism that crept into some of our remarks with regard to identifying the means. Therefore, while we welcome the Bill, we hope that the Minister will recognise that we do so continuing the constructive comments and sometimes constructive criticism made by my noble friend.
  Lord Campbell of Croy: My Lords, I thank the noble Baroness, Lady Blackstone—and the noble Lord, Lord Sewel, because half the Bill applied to Scotland—for their courtesy and helpful replies at the various stages through which the Bill passed.
  I can now bring the House up to date about the saga of the phantom Scottish White Paper. I have received, since Report stage, the promised letter from the noble Baroness. It confirms that there is no Scottish White Paper to match the English one. Her letter also confirms my surmise at Committee stage that the Scottish equivalent was only a press conference at the Scottish Office taken by a junior Minister on the same day as the English White Paper was published—7th July. I reiterate
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  my view, respectfully, that that is not a suitable substitute for a public parliamentary paper available to all; namely, a White Paper.
  I remind the House of the significance of the White Paper. At Second Reading on 24th June the noble Baroness referred to the publication of a White Paper early in July as a future event very relevant to the Bill, in particular on plans for reducing class sizes. She mentioned it in both her opening and closing speeches. In the closing speech she described it as a wide-ranging document.
  The Bill covers England, Scotland and Wales. The noble Baroness said nothing to indicate that the White Paper would be on England only. I, and no doubt others, then awaited with eager anticipation the appearance of this document which had so much bearing on the Bill. Sure enough, a White Paper on education was published on 7th July with a Statement in Parliament at the same time. There was nothing in the White Paper or the Statement to say that it dealt only with schools in England. I deduced that it was on England only and asked in the questions after the Statement whether there was a White Paper for Scotland. The noble Baroness was not able to tell me. She clearly did not know and undertook to write to me. She also, generously, said nice things about the Scottish system of education, with her customary charm.
  Of course, the unsatisfactory situation that I am describing is no fault of the noble Baroness or of the noble Lord, Lord Sewel. They have admirably given explanations and replies from their briefs. However, I blame the Government as a whole. A White Paper for Wales dealing with education has been published since 7th July. I also blame the Government as a whole for giving the impression that they have overlooked Scotland; and worse, that Scotland does not matter. That impression provides ammunition for the Scottish National Party, though I am sure that that unfortunate impression was not intentional. It was probably due to carelessness. But it does not help new Labour in its feud with the SNP.
  When we consider that the Scottish constitutional White Paper which will come out tomorrow, the devolution debate which will take place next week and the whole referendum procedure are happening largely in an attempt—misguided, in my view—to outflank the SNP, it is unwise to appear to have forgotten about Scotland in specific fields like education. It would not have happened in the time of the late Lord Ross of Marnock. I am glad to see the noble Lord, Lord Hughes, present; he will remember those days.
  Lord Ross and I twice reversed roles on the Front Benches in another place as Secretary of State and Shadow Secretary of State. Noble Lords from Scotland in all parts of the House will know that I had a great respect for him. Storms and gales would have whistled down the corridors of Whitehall if he had learnt of a proposal to issue an English White Paper without proper arrangements for, or knowledge of, a Scottish equivalent. Incidentally, in those days a White Paper was white and contained the necessary information; it was not a glossy brochure with colour pictures.

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  At one stage in Committee, on 10th July, the noble Lord, Lord Peston, suggested that the debate had been hijacked by the Scots and that even that was legitimate. Half the amendments which were grouped for that debate indeed related to the Scottish part of the Bill. Our legitimate Scottish points were about the destruction of the assisted places scheme North of the Border. It is with sadness that I see this Bill proceeding to its final stage.
  Baroness Blackstone: My Lords, can I perhaps say that absolutely no discourtesy was meant for Members of your Lordships' House from Scotland who have a specific interest and concern for Scotland. I am extremely grateful for what the noble Lord, Lord Campbell of Croy, said in relation to the propriety of proceedings in this House. I shall of course pass on his concerns to my right honourable friend the Secretary of State for Scotland.
  On Question, Bill passed and returned to the Commons with an amendment.

  Higher Education Inquiry: Report
  3.37 p.m.
  Baroness Blackstone: My Lords, with the leave of the House, I shall now repeat a Statement being made in another place by my right honourable friend the Secretary of State for Education and Employment about the publication today of the report of the National Committee of Inquiry into education. The Statement is as follows:
  "The Government are very grateful, as I am personally, to Sir Ron Dearing the chairman of the inquiry and to the 16 members of his committee. Their work has been completed in record time and in a manner for which we are all extremely grateful.
  "Today the Government announce a new deal for higher education: new funding for universities and colleges; free higher education for the less well off; no parent having to pay more than at present; and, a fair system of repayment linked to ability to pay.
  "Our university system is in crisis. Our competitors in North America and the Far East—the Asian Tigers—have many more young people in higher education. In the USA participation is about 40 per cent., in Canada 44 per cent. They recognise the need to invest in their people, mirroring the investment in fixed capital and equipment of the past. Such countries are expanding higher education rapidly. Business in this country also recognises the need for a strong and thriving university sector to prepare for the 21st century.
  "One in three young people now enter higher education compared with one in 20 in the early 1960s. Half the students in higher education are over the age of 21 and a third of them are part time. Public funding per student has fallen by around 25 per cent. over the past decade with consequences for the quality of teaching, seminar work, materials and equipment. Yet
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  the increase in participation among socio-economic groups A to C has been double that of groups D and E. The present system is not working.
  "The same level of funding for students today as existed in the 1970s would cost the taxpayer an extra £4 billion per year. If we combined that level of funding with increased participation—towards 40 per cent.—it would cost an additional £2 billion by 2015. Taken together, such changes would add 3p in the pound to the basic rate of tax.
  "The last Government placed a cap on the expansion of higher education, created the present mix of loans, grants and parental contributions, and failed to address the financial implications of the further development of the sector. However, with cross-party agreement, they established the Dearing Inquiry accepting that the status quo was not an option. Everybody recognised that our higher education system was in dire need of attention. It has both funding problems and huge anomalies. Tuition is free for some, but 500,000 part-time students in higher education and many of the 2 million further education students are expected to pay fees and receive little or no maintenance support.
  "The committee was given the task of ensuring maximum participation in higher education, enhancing standards and quality, ensuring fair and transparent means of student support, while obtaining value for money. The Government endorse the aims and purposes of higher education set out by the committee, building upon the Robins Committee Report of 30 years ago. Higher Education in the Learning Society is a coherent and thoughtful report providing a vision of the future.
  "The committee's recommendations cover the local and regional role of higher education, the qualifications framework, academic standards, the role of information technology, management and governance of institutions and the quality of teaching and research. We shall be considering these recommendations over the summer.
  "We welcome the committee's proposals for widening participation, including its emphasis on those groups which are currently under-represented. Later this year we will set out our comprehensive response in a White Paper on lifelong learning. I give an initial response to set out a clear direction.
  "The committee recognises that we cannot afford further improvement or expansion of higher education on the basis of current funding arrangements. Students should share both the investment and the advantages gained from higher education. Rights and responsibilities go hand in hand. The investment of the nation must be balanced by the commitment of the individual. Each will gain from the investment made. Graduates gain considerably from higher education compared with non-graduates. Graduates, on average, see their earnings rise by as much as £4,000 for every £20,000 of earnings.
  "We have considered funding options within the principles laid out in Opposition. Dearing believes that the present loan system is unfair and not working

  1447
  effectively. He recommends that: loans should be paid back over a longer period of time to help poorer students; that parents should not be asked for higher contributions; that a £1,000 tuition fee for everyone—roughly 25 per cent. of the average cost of a course—should be added to the loan; and that some element of maintenance grant be retained.
  "We accept a great many of the broad principles laid out by Sir Ron. We intend to build on the committee's preferred option, taken together with the proposal in our policy statement Lifelong Learning. We must develop a more efficient system than the present confusion of loans, grants and parental contributions.
  "For lower income families remaining grants will be replaced by loans of the same value. For higher income families an additional maintenance loan will be available equivalent to the tuition fee. We will, however, ensure that the poorest students do not have to pay fees. That is the best way of encouraging access and free education for the least well off. We are equally determined that there should be no increase in parental contributions.
  "Our response to Dearing ensures that fees and maintenance taken together do not place an increased burden on middle-income families. Parents at present are expected to contribute up to £2,000 for maintenance. The committee proposes that repayments should be made on an income contingent basis. We accept this but the committee's funding options also assume that repayments should begin when a graduate's income reaches £5,000. We do not believe that this is acceptable. We will consult on a higher starting point for repayment. We also believe that repayments should be over a longer period and set at a lower level of annual repayments than is proposed by the committee. A supplementary hardship loan, of £250 per year, will also be available.
  "We are also minded to accept the committee's recommendation that students with special needs should receive the specific grant on a non-means-tested basis. We will consider the need for appropriate measures, such as bursaries for students entering teacher training and some health and social care professional courses. Employers in other fields may wish to consider similar measures. We intend that these proposals apply to all new students and we are examining how best such changes might be phased in.
  "In addition, I also wish to assure the House today that top-up fees play no part in the Government's proposals. No university or college should proceed on the basis of introducing such additional fees. The Government will also be considering how the new arrangements will apply to the particular situation of higher education in Scotland.
  "These proposals today will mean more money for universities. The Government will ensure that savings are used to improve quality, standards and opportunity for all in further and higher education. Change is essential if we are to maintain the skills and research base of our country. We cannot defer action to another generation. Our preferred solution secures equity,
  1448
  access, quality and accountability. Our proposals retain the principle that repayments should be made on the basis of future income, not present circumstances.
  "Today's report presents major challenges which every single Member of this House must address together. Building on this report, we will produce a system that will be fair, will be good for students, for parents, for the universities, good for business and good for Britain.
  "The Government are facing the future with confidence. We have the will to take the difficult decisions and to ensure the investment needed for the future of our nation. I recommend to the House that we take on this challenge with clarity and courage. To do otherwise would be to betray the next generation."
  My Lords, that concludes the Statement.
  3.48 p.m.
  Lord Pilkington of Oxenford: My Lords, I thank the noble Baroness for repeating the Statement and, like her, I welcome the care and consideration that the committee and Sir Ron have given to these matters. As she knows, the Dearing Report is a lengthy and complex document—500 and not 1,700 pages—and I thank her for her courtesy in allowing me to see it this morning. However, I have had only a few hours to study it. Obviously, we shall need to debate this more fully. So, at the moment, I should just like to pose a few questions.
  First, on the maintenance grant, the Government propose to move to a full loans system, replacing the present system of 50 per cent. loan and 50 per cent. maintenance for poorer parents. Therefore, I ask the Minister how she feels about the Dearing criticism of that idea. On page 320 of the report it states,
  "Option A"—
  which suggests the full loan for maintenance—
  "increases public subsidies to students from higher income families at the expense of students from lower income families. The former gain access to loan subsidies while the others lose their grant".
  I want to know how the Minister responds to that criticism.
  Secondly, how do the Government feel about a further Dearing comment that the proposal would increase public expenditure in the short term? Associated with that, since the Government suggest that loans should now be available for the payment of £1,000 for tuition fees, can the Minister comment on the effect of that on the PSBR? The next question is this: or are the Government considering accepting the Dearing idea of following the example of the Netherlands and removing student loans from the PSBR? Again, what is the Government's view of charging a realistic rate of interest on student loans? I quote from Dearing:
  "The largest element of subsidy in the current loan scheme is the difference between the retail price index-linked rate of interest charged to students and the cost to the Government of borrowing the funds".
  I now turn to the mention in the Statement of the university system being in crisis. Sir Ron makes some suggestions on how to deal with that. I would like to know how the Government feel about them. For example, Dearing says:

  1449
  "We have identified a range of short-term funding needs—£350 million in 1998–99; £565 million in 1999–2000".
  As the Minister knows, he points to the crisis emerging from that situation. How do the Government propose to meet these proposals?
  I have a further question which relates to finance. Dearing suggests a pay review body in April 1998. Are the Government interested in that? The body would most likely suggest even more charging, since he says that many university teachers are underpaid. What do the Government feel about the balance of funding changing from block grants to grants following the students—in other words, the students direct the money—which is a further proposal in Dearing?
  I now leave money matters and ask a few questions about qualifications. On page 146 of the report Dearing expresses considerable admiration for GNVQs as a qualification for entry to higher education. Are the Government happy about that in view of the recent very potent criticism of NVQs and GNVQs? A further addition to that is that Dearing—and it is one of the main points in the report—makes great play of the close link that must occur between academic and vocational qualifications, in the same place and closely linked. Are the Government happy about that in view of the fact that both they and their predecessors have expressed great admiration of the system that prevails in Europe where academic and vocational qualifications are obtained at separate institutions? Sir Ron ignores the whole European experience. Is he correct in doing that?
  In essence, my worry is that the Government have jumped too early into financial decisions. I have doubts whether the money raised will meet what Sir Ron Dearing suggests. I believe that they have considered the price before the product, but I am hoping that the noble Baroness, with her usual lucidity, will put all my worries at rest.
  Lord McNally: My Lords, I do not know whether my declaration of interest is as a former vice-president of the National Union of Students or as the father of three children who will go through higher education in the 21st century. What I am aware of is that we all share a debt to Sir Ron for a very thorough piece of work and one which, as the noble Lord indicated, demands more than a knee-jerk reaction. Indeed, I suggest to the Minister that she commits herself to a two-day debate in October on the Dearing Report. I say two days because one day will certainly be taken up by all the chancellors, vice-chancellors and ex vice-chancellors who inhabit these Benches.
  I have a few points. As regards the idea of funding centres of excellence—the so-called university premier league—how does that emerge from the report, and what is the Government's attitude to research funding as reflected by Dearing? The issue which will capture the headlines is fees and grants. Perhaps I may remind the Minister that those of us who oppose advertising on the BBC, raiding the lottery for current expenditure or paying for health at the point of need do so because we suspect that, whenever the Exchequer finds a honey-pot, the temptation is to keep on raiding it. The noble Baroness pointed out that the proposals will cover about
  1450
  25 per cent. of the cost of student fees. Is that a capped 25 per cent. or at some future stage will someone suggest 40 per cent., 80 per cent. or 100 per cent.? Is the honey-pot something which can be continually raided?
  Finally, perhaps I may put to the Minister the real concern on this matter. I am the child of a working-class family, and I came through university on a full grant, with full fees paid. I am conscious—not least from the statistics that the noble Baroness quoted—that even after 30 years of university expansion we still fail to bring into our higher education system working-class children. The Minister gave some indication as to how the Government might respond to that. I hope the noble Baroness will consult much more fully on this issue. There is a suspicion that again that situation will be a deterrent to working-class children going into higher education. Will the Minister monitor from now on the impact of these proposals? Will she look both at home and abroad at new ways of trying to attract children from lower income groups into higher education?
  As I said, I benefited from a poorer but perhaps more generous age. We on these Benches still believe that at some stage politicians of all parties will have to face this fact. If we really want the higher education system that the Minister so rightly says the country needs to equip it for the 21st century, we shall have to face the taxpayer with the need, through an equitable tax system, to pay for that investment. A tax system that begins by differentiating between what academic qualifications one has rather than considering one's ability to pay is not an equitable system. I do not believe I can think of anyone better qualified or with a better commitment than the Minister to see through a reform of the higher education system. We on these Benches wish her well in this matter. We are making decisions for the 21st century. She is well equipped to make them. We also welcome her commitment to further consultation during the next few months. We all know what our holiday reading is and we look forward to further discussion on the Dearing Report in the autumn.
  Baroness Blackstone: My Lords, I am sure that we shall all have an interesting summer holiday reading this long and fascinating report. I begin by thanking the noble Lord, Lord Pilkington, for his initial comments and the noble Lord, Lord McNally, for the nice things that he said about me and I hope my competence to deal with some of these very difficult issues.
  Both noble Lords asked a number of questions and I shall do my best to answer them. However, if any of them are unanswered I shall of course write to them. I believe that the noble Lord, Lord Pilkington, began with a question about the shift, as he described it, towards a full loan system, which he took from a quote

  1451
  in the Dearing Report. Perhaps I may explain to the noble Lord that it is not the Government's intention to shift to a full loans system in the sense that all middle-class students from higher income family backgrounds will get a full loan to cover their maintenance. The expectation is that parents will continue to contribute if they come from higher income groups. The noble Lord, Lord Pilkington, may be slightly confused because Sir Ron Dearing was commenting on a different scheme from that which the Government have put forward.
  The noble Lord asked about the implications of the Government's proposals for public expenditure in the short term. There will be very limited implications since the charging of a fee will soon balance out the increased loans that will be made available. In fact, there will be a net gain after a very short period of time. The noble Lord also asked about whether the remaining student loans would still be counted against the PSBR. That is something that we shall be considering over the next few months. It requires a change in national accounting procedures. Clearly, it is something that we need to consider, just as we need to consider other countries' practices in this respect.
  The noble Lord, Lord Pilkington, went on to ask whether we have any intention of charging a realistic rate of interest on existing loans. I do not know what the noble Lord regards as a realistic rate of interest, but we have no intention of changing the present scheme whereby students take out a loan and repay that loan in real terms—in other words, the only interest that they pay is the RPI; it is the increase in the loan in relation to inflation. There is no interest rate charged on top of that. We think that it would be wrong to charge students at commercial rates.
  The noble Lord then asked about the university system, referring to the fact that the previous government left it in crisis. There is, of course, a serious crisis. The noble Lord also wanted to know what the Government intend to do about short-term funding needs. The noble Lord rightly pointed out that Sir Ron Dearing identified the fact that our universities have substantial needs which must be met if they are to return to the kind of quality that we would all like to see. The Department for Education and Employment is to conduct a comprehensive spending review during the summer and autumn when we shall look closely at those needs to see how far we are able to meet them.
  The noble Lord, Lord Pilkington, went on to raise questions about GNVQs as a qualification for entry into higher education. Sir Ron Dearing advocates the recruitment to universities of students with such vocational qualifications. I am sure that the noble Lord is aware that many universities already recruit students with those qualifications. He suggested that there have recently been criticisms of the GNVQ and NVQ qualifications. I am fully aware that such criticisms have been made and that we need to do all that we can to strengthen those qualifications. The Government are trying to do just that. We shall, of course, be consulting further with the universities about their views on entry requirements and on the extent to which students with
  1452
  vocational qualifications should be admitted. However, I advise the noble Lord that it is the Government's intention that the current system, which was set up by our predecessors, should in this respect continue.
  Lastly, the noble Lord suggested that the Government are jumping too early into financial decisions. We thought very hard about this. Our view was that it would be wrong to leave the universities, parents and students uncertain as to the Government's thinking in this area. We shall, of course, consult and we hope to hear from many Members of your Lordships' House as well as from all the interested parties who have a part to play in the delivery of higher education.
  I turn now to the questions asked by the noble Lord, Lord McNally. The noble Lord asked about the Government's attitude to the Dearing Report's proposals on research funding. Again, this is a matter on which we want to consult and on which we do not wish to take a view until we have had the opportunity to hear the views of the funding councils, the research councils and the universities.
  The noble Lord pointed to the tendency of the Exchequer to go on raiding honey-pots. I am, of course, extremely aware of that tendency. The answer to the noble Lord's question is that the Dearing Committee has made some suggestions on this, including that any change above the proportion of 25 per cent. should be introduced only after an affirmative order in Parliament and following an independent inquiry. Perhaps I may reassure the noble Lord that this Government have absolutely no intention of changing the proportion from a 25 per cent. contribution by students to the average cost of courses, with a 75 per cent. contribution coming from the state.
  The noble Lord, Lord McNally, related his own experience as somebody who came from a working-class background and went to university—in the early 1960s, I think, which is about the same time as I went to university—with the benefit of a full grant. At that time, approximately 6 or 7 per cent. of all 18 year-olds had the opportunity to enter higher education. As I have already mentioned, the figure is now 30 per cent. It would be extremely difficult for us to continue to expand the system, as we wish and intend to do, on the basis of asking the taxpayer to pay for that additional expansion.
  Perhaps I may remind the House that only 30 per cent. of the population get the benefits of higher education and that those benefits are considerable. First, I think that I am a good witness of the fact that it is an enjoyable experience. Secondly, students who benefit from higher education will have lifetime earnings which are considerably higher than those of comparable young people who do not have that benefit. On those grounds, we feel that it is reasonable that they should pay later. No one will be asked to pay up front—no student from the kind of home from which the noble Lord came. I believe that this is the most equitable approach to the question that he raised.
  The noble Lord suggested that the academically qualified would be asked to pay as opposed to people being asked to pay on the basis of ability to pay. Perhaps

  1453
  I may stress once again that our scheme is one of income contingency. No one will be asked to pay if they are unable to afford it.
  4.8 p.m.
  Lord Glenamara: My Lords—
  Lord Renfrew of Kaimsthorn: My Lords, this is a sad day for higher education—
  Noble Lords: Order! This side!
  Lord Glenamara: My Lords, my noble friend Lady Blackstone has a tremendous capacity for saying the most disagreeable things in the sweetest possible way, but even her considerable charms cannot disguise the stark reality of what she has said today. I have been a member of the Labour Party—and have been proud to be a member of the Labour Party—nearly all of my adult life, but I am not proud today. I am ashamed of what the Government are proposing to do. I am ashamed that my Labour Government propose to erect two enormous barriers between young people from working-class homes and higher education. That is precisely what the Government propose to do. I believe that over the lifetime of a Parliament it will deter tens of thousands of young people from poorer homes from entering higher education.
  If the scheme is put into operation, a newly qualified graduate from a poorer home will leave college with a debt of anything between £10,000 and £15,000. If he comes from a well-off home and his parents have financed him he will have no debt at all. Young graduates often marry young graduates. If they do, the debt will be twice as much—it may be £30,000—at a time when they hope to buy houses, have children and so on.
  That this should happen is utterly wrong. It sickens me. I do not know whether I can remain in a party and support a government who are prepared to do this to their own people. The people to be hammered are those who have created the Labour Party and sustained it throughout this century. They will be penalised in a terrible way. I remind the Minister that not all graduates will be the highly paid fat-cat lawyers that the noble and learned Lord the Lord Chancellor spoke about or doctors or merchant bankers. A great many will be school teachers, physiotherapists, nurses and social workers. I know that because I confer degrees on hundreds of such graduates each year. They will not receive high salaries but very modest ones. The intention is to place the burden of this enormous millstone upon them.
  I protest about this. I am shamed by it. I very much regret that a Labour Government have done it without any mandate or consultation. They have introduced the change on the same day as the report comes out. This is absolutely wrong, and I protest about it in the strongest possible terms.
  Baroness Blackstone: My Lords, I deeply regret the fact that my noble friend Lord Glenamara is unable to
  1454
  support the proposals that the Government have announced today. I respect his views but I believe that they are fundamentally flawed and that he is wrong.
  I deal first with my noble friend's last point that this has been carried out without a mandate. The Labour Party agreed with the Conservative Government last year that it was right to set up the Dearing Committee to inquire into the future of higher education. The manifesto clearly set out that agreement and said that we would await the findings of the Dearing Committee. The committee has recommended that tuition fees should be charged to all students. We have modified that proposal in a way that I should have thought my noble friend would have recognised as being highly desirable. We have said that no low income student or student from a low income family should be required to pay fees.
  We clearly set out in our manifesto that we considered that the present system of maintenance grants and loans was not working well. That was there, and I am surprised that my noble friend appears to have missed it. The electorate was consulted on the matter. We decided to pursue the objective which was set out in Lifelong Learning and in the manifesto, on which we consulted the National Union of Students and obtained its support. My noble friend also neglects to point out—the matter was set out in the Statement, and I am surprised that he has chosen to ignore it—that already many thousands of the 2 million students in further education are required to pay a contribution towards their tuition. These are the most disadvantaged students in the further education system. They are the ones for whom we believe it is right to have a more level playing field. I am amazed that my noble friend objects to that.
  I am also amazed that my noble friend has chosen to ignore the fact that there are ½ million part-time students in higher education. I have experience of such students. For many years they have been asked to pay a contribution to their education out of taxed income. Does my noble friend believe that it is equitable to have the kind of system that we had before, in which a minority of students—in other words, those on full-time undergraduate courses—receive their tuition free while virtually all other students, including nearly all post-graduates, are asked to contribute? I end by asking my noble friend whether he accepts that the previous system, under which the taxpayer, who did not benefit from higher education but was asked to subsidise very extensively students who did, was regressive.
  Lord Renfrew of Kaimsthorn: My Lords, this is a sad day for higher education. It may be that there are elements within this that are inevitable, but it should be recognised that in this country for 50 years we have had a system under which well qualified students who achieve university admission have not had to pay tuition fees if they are in full-time higher education. It is a sad day that that system should end. But in view of the increasing number of students in higher education perhaps it should end. I express sympathy for the noble Baroness that it falls to her as a distinguished academic

  1455
  to announce to the House the end of a 50-year era of higher education that in many ways has been an admirable one.
  Perhaps I may refer to two anxieties. The first concerns excellence. Although it was a short Statement, we did not hear very much about research. That word scarcely passed the lips of the noble Baroness. I should like to be assured that the shortfall in research that is currently so acute will be met. We have received no assurance of any kind in that respect.
  My second anxiety is very close to that of the noble Lord, Lord Glenamara. Is it the case that, although for low income families and students with a low income background there will be alleviation of the tuition charge to be imposed through means tests, nonetheless these students will clock up a debt on all of their maintenance? I hope that the noble Baroness can say a little more about that. Perhaps I may give a brief example of what worries me. I put this in the form of a question to the noble Baroness. Imagine a student who enters university, does three years mathematics and goes on to do a Ph.D. in mathematics. He then becomes a school teacher. That person will have a debt of at least £18,000 at current rates of maintenance, to which may be added tuition charges. Will that person be able to get a mortgage when he enters the teaching profession? I very much share some of the anxieties that the noble Lord has expressed.
  Baroness Blackstone: My Lords, I am a little surprised by the comment of the noble Lord, Lord Renfrew, that the word "research" scarcely passed my lips. The Statement said that the Government would be consulting on all aspects of the Dearing Report and did not wish to give any kind of lead today. I made that absolutely clear.
  I replied to the question about research put by the noble Lord, Lord McNally. The Government are extremely concerned that the shortfall left by the Government that the noble Lord, Lord Renfrew, supported, our predecessors, should be looked at sympathetically. He went on to ask about the alleviation of the tuition charge through means tests. We shall be alleviating it. I repeat that no low income students will pay the tuition fee. As at present, students will take out loans to cover the cost of their maintenance. The National Union of Students has accepted that it is reasonable that students should be asked to do that. The noble Lord shakes his head, but I can assure him that those negotiations with the NUS took place before the election. The noble Lord may not be aware of it but those negotiations did take place.
  I do not know from where the noble Lord gets the figure of £18,000 that he quoted. If a student were to go on to do a Ph.D. in mathematics, there are different systems for supporting postgraduate students. It is ill-considered of the noble Lord to throw that in. We are talking about a scheme for the support of undergraduate students. Any graduate on a low income will not—I repeat again—be asked to pay. The scheme run by the previous government, whom he supported, asked students to pay back much sooner, much more and over
  1456
  a much shorter period of time than the income-contingent loan scheme that we intend to introduce.
  Lord Dahrendorf: My Lords, I shall talk about principles, which is all that we can do this afternoon not having read the report. Perhaps I may ask the Minister one simple question. I am strongly in favour of opening the gates of higher education. I have always defended education as a civil right. I appreciate also that as we go beyond 30 per cent., financing becomes a different problem from what it was for 6 per cent., 10 per cent. or 15 per cent. I have learnt also that expansion runs the risk of abolishing the differentiation which is also necessary. A truly successful system of higher education has different levels of higher education. One of the great weaknesses of expansion on the European Continent is that it has levelled the higher education system to the extent that we could fill every place in this country's universities with a continental applicant—a refugee from that system. One of the strengths of the American system is that it is differentiated. What principle will the Government follow when it comes to creating a system which is both open and differentiated, both available to all and able to offer the best in special education and research opportunities?
  Baroness Blackstone: My Lords, I am grateful that for the first time so far in this debate I have been asked a question which was not hostile but one which sought genuinely to find out the Government's position. The noble Lord and I come from a similar background—sociologists from the LSE. I share with him the wish that we should have an open system of higher education. I share his view also that it has to be differentiated. Indeed, it already is differentiated. That system must continue. The Dearing Committee recommends that much of the expansion should be in the form of sub-degree courses which will be provided in further education colleges. That is something about which we shall want to consult over the summer to obtain the views of all those involved.
  Baroness Dean of Thornton-le-Fylde: My Lords—
  Lord Annan: My Lords—
  The Lord Privy Seal (Lord Richard): My Lords, a Cross-Bencher, I think.
  Lord Annan: My Lords, following on from the comments of the noble Lord, Lord Dahrendorf, will the Minister say whether there is to he differentiation among universities; that is to say, between those which will be funded for research and those which it is acknowledged will do valuable work but nevertheless are not research institutes? Following that, will the dual funding of research by the HEFC and the research councils continue? It is regarded as important by the universities that it should.
  Baroness Blackstone: My Lords, yes, it is no part of the Government's intention to change the differentiation

  1457
  that already exists so far as concerns research funding. The Dearing Committee makes a number of proposals about dual funding. It is our intention to think about them. We have made no decisions as yet. We shall want to hear the views of the universities, the research councils and the users of research in business and industry about the best, most effective and value-for-money way of funding research.
  Baroness Dean of Thornton-le-Fylde: My Lords, perhaps I may first declare an interest as a member of the Dearing. Committee. I have listened to the contributions with a great deal of interest. My noble friend the Minister will be pleased to know that my question is not a hostile one. I strongly support her Statement today. There are 93 recommendations in the report, and of course funding has understandably attracted the attention.
  As a member of the Dearing Committee I learnt quickly that the golden age of so-called free tuition in higher education is a misnomer. It has not been around for a long time. Less than 50 per cent. of students have free tuition. That golden age did little for the members of our community in the needy social groups.
  I welcomed the Statement and I welcome the leaflet that my noble friend's department has issued and which I have just seen. I welcome the debates that we are to have in the future. Funding is important for the whole compact, because this is a compact. The 93 recommendations are a compact covering excellence, diversity, collaboration, standards and a world-class learning regime in the UK.
  Lord Richard: My Lords, my noble friend should ask a question.
  Baroness Dean of Thornton-le-Fylde: My Lords, I finish by asking my noble friend a direct question. One of the key principles of the report is that if a student is to make a contribution to his or her tuition, the principle must be that an added contribution to the tuition should remain within the HE sector, recognising that a great deal of HE work is delivered in further education colleges. Will my noble friend refer to that, please?
  Baroness Blackstone: My Lords, as I said in the Statement, the universities will benefit from the changes. It is our intention that the savings made will be provided to increase opportunity, quality and access for students to the further and higher education system.
  Lord Beloff: My Lords, the Minister will be aware that I was a constant critic of the previous government's attitude towards higher education, including the appointment of Sir Ron Dearing. I shall have to wait until the two-day debate of the noble Lord, Lord McNally, to see whether I was justified. Perhaps I may ask one precise, technical question. Will the £1,000 which is to be charged to most students be paid by them directly to their university—will they come with a cheque on the first day
  1458
  of the academic year—or is it a notional contribution which the department will pay to the universities and ultimately recover from the student?
  Baroness Blackstone: My Lords, yes. The £1,000 will be paid direct to the university by the parent. Clearly students from low income backgrounds will not be paying any contribution for tuition. Therefore a mechanism must be found to make up the loss of that for those universities which have large numbers of low income students compared with those universities which have large numbers of high income students.
  Baroness Lockwood: My Lords, I welcome this Statement and my noble friend's response to some of the questions. Might I have a little further clarification on the participation rate? Is there a target, or will universities be free to make their own programmes and recruit according to those programmes? May we be assured that there will be continuity of funding policy for the universities, because the most difficult problems with which universities have been faced over the past few years have been the changes and the stop/go policies in relation to recruitment? Can they be assured that they can plan and go ahead with their policies without interruption?
  Baroness Blackstone: My Lords, one of the most unfortunate aspects of the previous government's treatment of higher education was to indulge in rapid expansion, decide that they did not have sufficient money to fund it and then to stop the expansion. As a former head of an academic institution, I can speak with some feeling about that. It certainly makes planning very difficult.
  We do not have a target rate as regards participation. The Dearing Committee does not have one either, but it mentions an overall and general goal of reaching 40 to 45 per cent. We wish to consult on that during the summer and to obtain people's views. Certainly we will hope eventually to raise the ceiling which has been placed on universities as regards the recruitment of students, but I can give no date for that.
  Lord Richard: My Lords, lest it be left unanswered, and so that it does not become set into the fabric of discussions on the Dearing Report, at this stage we do not propose a two-day debate on it.

  Local Government Finance (Supplementary Credit Approvals) Bill
  4.30 p.m.
  The Parliamentary Under-Secretary of State, Department of the Environment, Transport and the Regions (Baroness Hayman): My Lords, I beg to move that the Bill be now read a second time.
  In opening the debate, perhaps I may say, first, how much I look forward to the maiden speeches of my noble friends Lord Dixon and Lord Lofthouse of Pontefract. Both noble Lords have extensive experience

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  in another place, but pre-dating that experience they have distinguished records in local government. I am sure that they will have a great deal to say on tonight's measure that will be of value to the House.
  The Government were elected, having made an unequivocal pledge to release resources long denied to local authorities to help them meet housing need by building new houses and rehabilitating old ones. With this Bill, the Government are laying the legislative framework that will allow them to honour that commitment.
  I begin by making it quite clear why the Government have put the release of additional resources for housing right at the top of their agenda. Since 1979, over £22 billion has been raised through the sale of council housing. The sale of subsidised housing helped many people realise long cherished dreams of home ownership. But the proceeds of those sales did very little to help those in need who remained behind within the public or private rented sectors. Very little of the money raised went back into housing to provide new homes for the homeless or to take care of the homes of the tenants who were never in a position to buy their own homes.
  Far from helping those people, the previous Administration exacerbated their plight by imposing year-on-year cuts on housing capital programmes. Exchequer support for capital spending, which stood at £4.3 billion as recently as 1992–93, had fallen to planned spending of just £1.7 billion this year. The impact of cuts on this scale can be seen in damp homes and in leaking roofs, rotting windows and doors, inadequate kitchens and bathrooms, and in patch and mend repairs.
  The impact can also be seen in the substantial fall in the Housing Corporation's approved development programme, the main means by which new social housing has been provided in recent years. The approved development programme stood at well over £2 billion in 1992–93. By the end of the century, however, planned spending had been reduced to just £560 million.
  It is not within the power of this Government to reverse years of cuts and neglect overnight. But we are determined to take immediate action to begin to tackle the problems that we have inherited.
  The Local Government Finance (Supplementary Credit Approvals) Bill will provide the legislative foundation for a capital receipts initiative that can begin to reverse the decline. In itself, the Bill is a straightforward, short, three clause enabling measure. Clause 1 concerns Section 55(3) of the Local Government and Housing Act 1989. This clause specifically states that set aside receipts cannot be taken into account when determining the amount of a credit approval issued to a local authority. Clause 1 of this Bill will remove that prohibition in respect of the issue of supplementary credit approvals. Its simple objective is to allow us to issue supplementary credit approvals in a way that takes account of set aside receipts, as well as of assessed housing need.
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  Clause 2 replaces a current duty on Ministers with a power. In this instance, it is power to specify the period during which an authority must set aside sums from revenue to meet certain types of capital expenditure. Clause 3 simply provides the short title for the Bill and limits its effects to England and Wales.
  The Government are determined to tackle some of the major problems of social decay and deprivation; to govern for the many and not for the few. This is the agenda that underpins our initiatives in education and in health. As our manifesto commitment made clear, we are equally determined to tackle the problems we have inherited in housing.
  However, our manifesto recognised the importance of taking action within a sound, prudently managed economy. That does not blunt our ambition; it focuses it. Increasing local authority spending, however it is done, increases public expenditure. With that in mind, we are determined to ensure that the additional public expenditure we are releasing is targeted as effectively as possible to secure the greatest benefit possible.
  Noble Lords will know that within the tight public expenditure controls adopted by the Government, we have nevertheless provided for over £800 million of additional resources to be distributed in England and Wales under the capital receipts initiative. An additional £174 million will be released to local authorities in England in 1997–98, followed by a further £610 million in 1998–99. In Wales, almost £10 million will be released this year, with a further £33 million released in 1998–99. This is an excellent start, and it underlines the Government's commitment to tackling the very real housing problems which this nation faces.
  I should perhaps take this opportunity to assure your Lordships that the resources provided by the Chancellor will support local authority capital spending and any revenue costs which flow from that. This was, I know, an issue of particular interest to the noble Lord, Lord Bowness. I would like to make it quite clear today that we do not envisage this initiative exerting any upward pressure on council taxes or local authority rent levels.
  I have stressed the importance the Government attach to the tight control of public expenditure. That places a premium on securing the very best value for the additional public expenditure we have provided. Simply releasing local authorities' set-aside capital receipts where they lie will not achieve that end.
  As I am sure noble Lords participating in the debate will be aware, since 1990, local authorities with outstanding debt have been required to set aside 75 per cent. of the receipt from the sale of housing assets and 50 per cent. of the receipt from sales of land and other assets. But the receipts generated over this period have not always been generated in the areas of highest need.
  There is a further complication. Over time, some authorities have chosen to repay outstanding debt with the capital receipts they were required to set aside. Such authorities now retain little, if any, of the set-aside generated over the years. Birmingham, for example, has

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  put aside capital receipts of over £100 million since 1990, but it has used this to repay debt and now has no set-aside receipts.
  But the capital finance rules have not obliged authorities to repay debt in this way. Indeed, they provide authorities with the scope to adopt very different debt management and receipts strategies. It has been left to the individual authority to take a view on where the balance of advantage lies for them in the light of their specific circumstances. As a result, there is a great deal of variation in the way local authorities have applied their set-aside receipts.
  These considerations led us to conclude that simply releasing the receipts where they lie would not meet our objective of directing resources where they were needed most. Clearly, authorities which set aside significant receipts over time will reasonably expect to have those receipts recognised when resources are released. But that cannot be and should not be the sole criterion.
  What is needed is a mechanism that allows us to distribute the additional public expenditure being provided, striking a balance between the receipts set aside by individual local authorities and the relative housing need of those authorities. We have concluded that the best way to do this is to distribute the additional resources in the form of supplementary credit approvals. The first clause of this Bill will allow that.
  Perhaps I may now say a little about how we intend to apply the additional flexibility provided by Clause 1. Our proposals for the implementation of a capital receipts initiative in England were set out in a consultation paper, which was issued to all English local authorities, to the Local Government Association, and to other interested parties on 19th June. A parallel consultation paper for Wales in broadly the same terms, but taking into account different local government finance rules and local authority government reorganisation, was issued on 2nd July.
  In those consultation papers we set out proposals for distributing one-third of the additional supplementary credit approvals in accordance with the proportion of eligible receipts set aside by each local authority since April 1990, when the present capital finance regime came into operation. That recognises the expectations of authorities which have generated significant receipts over a period of time.
  We propose to distribute the balance of the supplementary credit approvals in accordance with assessed housing need. That will ensure that those authorities facing the most pressing problems are given additional resources to begin to tackle them. That seems to us to be fair and equitable. I should make it quite clear, however, that this is a proposition on which we are particularly keen to hear the views of local authorities. We look forward to receiving their comments, and those of all other interested parties, in the course of the consultation exercise.
  However, we have made it very clear that our priority is to help local authorities most effectively tackle housing and housing-related regeneration priorities. We recognise that that might be achieved through a range of methods which will differ from area to area and
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  which might include: renovations and improvements to local authority housing; private sector renovation; the provision of new social housing in partnership with registered social landlords; improving the energy efficiency of local authority and private sector housing and reducing CO2 emissions—an issue that was discussed earlier; and tackling the problems of the neighbourhood, for example, by encouraging or promoting mixed tenure development.
  Programmes related solely to physical improvements and development, however, will not always result in long-term sustainable change; indeed, I believe we have all experienced and seen evidence of that. Very often, associated non-housing projects will also be necessary. These may include works which help reduce crime and vandalism on estates and which improve residents' ability to acquire jobs. We have therefore proposed that a proportion of the resources being provided should be available to support housing-related regeneration projects where they will directly benefit the inhabitants of the housing scheme.
  When local authorities draw up schemes, we are also eager that they ensure, whenever possible, that those schemes contribute to the Government's welfare to work initiative and help to combat social exclusion.
  We do not wish to deflect local authorities from meeting priority local needs, but we do want them to put their strategies into the wider context. That means providing opportunities for young unemployed people, perhaps through environmental task force placements, and helping them acquire skills and qualifications. As our policies to support our welfare to work agenda develop, we shall look to local authorities to take every opportunity to play an integral role.
  We wish to generate an atmosphere of trust and partnership between central and local government—a theme to which some of us will return during the debate later this evening. In the first instance, it will be for individual authorities, within the framework that I have outlined, to determine local priorities. We do not intend to be prescriptive, each scheme should be tailored, rightly, to meet local circumstances. But we are determined to ensure that authorities apply resources wisely and well.
  We expect authorities to be able to demonstrate that the works they have undertaken represent good value for money. They will need to show government and local people how the wider local and national policy objectives, to which they are committed, have been met.
  We want to see resources directed where they are meeting need most effectively. We have therefore emphasised that we will be taking account of how authorities have used resources when resources are next distributed in future years. Local and national taxpayers have a right to expect no less.
  Perhaps I may now turn to Clause 2 of the Bill. The clause amends Section 54(4) of the Local Government and Housing Act 1979, concerned with the issue of a supplementary credit approval in respect of capitalised revenue expenditure. The clause replaces the obligation

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  on the Secretary of State to impose an amortisation period not exceeding seven years with a power to specify an amortisation period.
  Opposition spokesmen in another place sought to impute all sorts of nefarious motives to the Government in introducing this clause. I hope to reassure your Lordships that, although somewhat technical in nature, it has, I believe, a simple, credible and very reasonable purpose.
  This is a measure to deal with exceptional circumstances, where an authority is facing severe revenue difficulties but has an urgent need to undertake significant revenue expenditure. It is right that the Secretary of State should have the power to help such an authority by allowing the revenue cost to be spread over several years through borrowing.
  However, the present rules allow the cost to be spread over no more than seven years. In each of those years, one seventh of the sum borrowed has to be found from revenue and set aside to repay the debt. That can be both harsh and mechanistic for an authority with the greatest need for help. Harsh—because it continues to impose a significant revenue burden on an authority that is, by definition, already facing severe difficulties; and mechanistic—because only limited account can be taken of the authority's individual circumstances.
  We believe it is right that the Secretary of State should be able to use his discretion to decide the length of the repayment period and so tailor the arrangement to suit the circumstances of the authority concerned and its particular problems. Clause 2 achieves that end.
  Perhaps I may turn briefly to Clause 3 which reflects an amendment made in another place to bring about commencement of the legislation immediately on Royal Assent. I am aware that such swiftness departs from convention; but, in this instance, we believe that it is fully merited. If the additional resources provided by the Government are to be spent this year and used effectively to tackle urgent needs, we must give local authorities as much time as we can to prepare and implement their plans. The Government's capital receipts initiative, underpinned by this Bill, will help local councils utilise the skills of our people to build and refurbish homes to meet grave housing need. The resources will begin to redress years of chronic under-investment in housing.
  The Government have found the additional public expenditure needed to support the initiative. With this Bill, we have brought forward the legislation which will ensure that expenditure can be distributed fairly.
  Moved, That the Bill be now read a second time.—(Baroness Hayman.)
  4.48 p.m.
  Lord Bowness: My Lords, first, I believe I should declare an interest as a member of a local authority. Like the Minister, I should like to say how much we look forward to the maiden speeches of the noble Lords, Lord Dixon and Lord Lofthouse of Pontefract. With their long and distinguished careers in another place, I believe that they may be actually more at ease than I am
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  at this particular moment. As this is the first time that I have faced the noble Baroness across the Dispatch Box, other than briefly at Question Time, perhaps I may belatedly congratulate her on her appointment. I promise this afternoon to try to know my 1990s from my 1960s.
  I thank the Minister for her explanation of the Bill, which is far from simple. However, despite her explanations, I have to tell the noble Baroness that the Bill is still not, to my mind, as clear in its objectives as it should be. Indeed, a number of the questions raised as it went through its passage in another place remain unanswered. Further, I submit that it travels under false colours. If we did not know the strength of feeling of the right honourable Secretary of State for the Environment, Transport and the Regions, one might describe it as a flag of convenience.
  I shall refer to the Labour Party manifesto. I believe that noble Lords opposite will be prepared to hear it quoted against them if they are prepared to pray it in aid on other occasions. The manifesto referred to the phased release of capital receipts from council house sales. However, I submit that the Bill does not release a single penny from the accumulated receipts; rather it will give local government the chance to borrow more and increase their indebtedness.
  That manifesto phrase is worthy of being referred to the trading standards department as I doubt whether there is anyone in local government who did not think that not only accumulated receipts but also the proceeds of future sales were to be included. However, it seems from the debate in the other place that it is only the accumulated receipts that are affected. The requirement of setting aside 75 per cent. of housing receipts and 50 per cent. of non-housing receipts still stands unless an authority is not in debt. Therefore, despite the much heralded new approach nothing is to change as regards future receipts, and none—I repeat none—of the accumulated receipts will be released.
  What we have instead is a system which will encourage fresh and additional borrowing. That additional borrowing in the first year is, I understand, to be £200 million, rising to £700 million in the following year for the whole of the United Kingdom. That small amount is no doubt good news for public borrowing but it will not go far to meet the high aspirations of the Government as outlined by Ministers in another place when they spoke of building new houses, getting people back to work and providing extra leverage to address the needs of individuals and communities. How is this extra power of borrowing to be determined as between authorities? It appears that it is to be determined by the Government according to an as yet undecided method of assessment of need and the amount of set aside receipts.
  It is clear—as the Minister has indicated this afternoon—that in many cases the greatest need is to be found where there are the least receipts. Are the authorities which have the greatest receipts to be prejudiced in the granting of supplementary approvals? The Bill does not restrict itself to housing receipts although again in debates in the other place it was said that the powers would be used only in respect of housing receipts. If that is so, why does the Bill not restrict itself

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  to housing receipts and why did the Government resist an amendment which would have made that clear? Could it be that the intention is to authorise still more borrowing by local authorities at a later date? It has been admitted that the £200 million represents new money but in view of the Government's commitment to the current spending plans it would be fair to local government and indeed to the House to tell us exactly where other savings will be made to finance this measure. How will the necessary revenue support to local government be found to support that borrowing?
  I turn now to another aspect of the matter which I believe will be, or should be, of considerable concern to local government. There will already be disappointment that the receipts are not to be released, that future receipts are not to be released and that the amount is so small. The manifesto referred to local decision making being,
  "less constrained by central government and also more accountable to local people".
  Indeed this afternoon the Minister spoke about not being prescriptive. Yet the money to be allocated to the United Kingdom will be distributed on the sort of conditions described by the Minister in the other place in the following terms:
  "We propose not simply to hand over the resources and leave people to get on with it, but to distribute supplementary credit approvals on the basis of one third according to historic receipts and the remaining two thirds in accordance with assessed needs … We shall expect local authorities to monitor their expenditure carefully, so that they can confirm that the money is being well spent—they will receive help from Government officers, including the Audit Commission. If they cannot do so, their future allocations will be reduced".—[Official Report, Commons, 17/6/97; col. 126.]
  Of course I welcome a commitment to value for money, but we on this side of the House have always done so. These words seem to me to say to local government that if the Government do not approve of the locally determined policy the tap will be turned off.
  As a former member of the Audit Commission, the reference to that commission gives me cause for concern. The powers over local authorities in so far as they exist have been exercised by individual auditors independent of government and of the Audit Commission. However, this reference, and indeed similar references in the Government's paper on compulsory competitive tendering, brings the prospect of an Audit Commission view on policies—rather than on financial prudence, efficiency, effectiveness, or economy—closer. That is something which I believe that the Audit Commission, local government and ultimately the Government may come to regret.
  I hope therefore that when the Minister replies she will be able to give us answers to some of the following questions. Why is borrowing to take the place of the release of receipts? Why does the Bill not apply to future receipts? Is it true that as it does not, local authorities will have more accumulated receipts after this legislation than before? What criteria will be used to judge need? Will the allocation not be to the detriment of those who have accumulated substantial receipts? How will the additional cost be paid for? I accept what the Minister has said; namely, that it will not be paid for through an upward pressure on council
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  tax. However, everything has to be paid for somewhere, and presumably this assurance means that the overall level of government grant fully to fund this extra borrowing will have to be increased. How does the Minister expect her officials and/or the Audit Commission to approve or disapprove individual local authority schemes?
  I heard the Minister's concerns as regards harsh and mechanistic procedures, but how does she justify the extension of local authority borrowing powers for revenue spending when I believe, from my experience in local government, that to be as debt free as possible is an aim that most responsible local government have been working towards for a long time? I am well aware of and can understand the ambitions of local authorities to benefit from the good management of their resources and the consequential use of the proceeds. However, I also understand the difficulty in permitting total freedom so to do. I have never believed, as some seem to do, that the money from the sale of council housing and from other assets has been standing idle and has not been put to good use. That income has been used in aid of the council tax and debt has been repaid. As the Minister has indicated, it has been used in other ways all to the benefit of the local and national economy.
  We believe that it would be fairer and more sensible to use capital receipts for debt repayment. When we were in government we sought to encourage new providers of social housing and encourage the private sector to invest in council house estates through large-scale voluntary transfer. Some £4 billion was invested. I submit that that amount would not have been found by local or national government. I again thank the Minister for her explanation of this Bill, but it masquerades as an answer to these problems. However, increasing local authority borrowing and powers to borrow makes it a poor Bill, and therefore it does not have the support of this side of the House.
  4.58 p.m.
  Lord Dixon: My Lords, I start on a personal note and thank all my colleagues for the get well messages I received when I was in hospital recently. They were greatly appreciated.
  I chose to make my maiden speech on this small three-clause but important Bill because I have a great interest in housing as a former chairman of a local authority housing committee. House building is probably one of the most labour intensive industries in this country. I know that from experience because in the late 1960s I built my own home. I worked in the shipyards as a carpenter during the day and worked every night, every holiday and every weekend for 16 months to build my house. Therefore I know how much work goes into building a house.
  We have thousands of building workers out of work. We have thousands of people who require houses and who need to have their houses renovated. We have councils throughout the country sitting on billions of pounds. It does not take a Philadelphia lawyer or a genius to work out that if councils were allowed to spend some of that money, building trade workers

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  would be taken off the unemployment register and people who desperately need houses would be able to obtain them and those who need to have their houses modernised would be able to do so. This is not new or old Labour policy; it is common sense Labour policy. Since 1979 more than £22 billion has been raised from the sale of council houses and very little has been reinvested in housing. The Bill will ensure that some of the money raised will go back into housing so that tenants and homeless people will know that they will benefit from the opportunities of decent homes.
  The measure is to be phased to match the capacity of the building industry and to meet the requirements of sound economic management, as the Minister said. I can well understand that, because I recall the early 1970s through the Heath administration. People were allowed grants for the installation of bathrooms and indoor toilets and to put hot and cold water in their houses. However, a finishing date was placed on the claiming of the grants. What happened, my Lords? The industry became overheated. Housing material prices spiralled out of control. Anyone who could get their hands on a ladder or barrow became a builder overnight, and some shoddy work was done.
  I wish to concentrate some of my remarks on the area where I was born and bred and which I have served as a councillor and a Member of Parliament for the past 35 years. I refer to South Tyneside metropolitan district which comprises the towns of South Shields, Jarrow and the Boldons.
  Lord Evans of Parkside: Hear, hear!
  Lord Dixon: My noble friend Lord Evans of Parkside gives me support by shouting, "Hear, hear!" when I refer to South Tyneside. He and I were brought up in Jarrow. We served apprenticeships in Tyne shipyards. He became a fitter; I became a ship's carpenter. We served our National Service in the Royal Engineers. He became chairman of the Confederation of Shop Stewards Committee; I became secretary. We were both elected to the local authority. He became leader of Hebburn Council; I became leader of Jarrow Council. On local government reorganisation, we were both elected to South Tyneside Council. He became chairman of the Planning Committee; I became chairman of the Housing Committee. We both went to the House of Commons; and we both entered this honourable House together. When we were getting our beans on toast in Hawthorn Leslies canteen, little did we know that our careers would finish up here.
  Unemployment in South Tyneside in May of this year was 13.5 per cent., as opposed to the national average of 5.7 per cent. That represents the highest unemployment rate in Great Britain. Among those unemployed are joiners, bricklayers, plasterers, and electricians—all people who build houses. In 1996, South Tyneside Council had a housing application list of 8,725. That means that 8,725 households were waiting for houses, not 8,725 individuals. A further 4,066 tenants were on its transfer list.
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  Since 1990 the council has set aside housing receipts on the sale of council houses totalling £23,709,000, and in addition in April 1990 had a further £7,557,000 in set-aside assets. The Minister mentioned only those receipts from 1990. Will the Bill take into consideration the receipts under the 1980 Act when giving supplementary credit approvals? Perhaps the Minister will explain when she winds up.
  South Tyneside Council has been starved of resources for 18 years. In 1978–79, when I was chairman of the Housing Committee, the HIP allocation at 1997 prices was £41,362,000. We were building and modernising hundreds of houses. The HIP allocation for this year is £3,899,000, with an additional SRB allocation of £764,000, making a total of £4.5 million, or one-ninth of what the council received from the previous Labour Government for maintaining, building and modernising houses.
  Perhaps I may give a recent illustration of how the cut-back in housing finance over the past 18 years has affected the council house stock. A fortnight ago I was invited to the 21st anniversary party at Martin Hall pensioners sheltered accommodation in Jarrow. I was invited because 21 years ago as chairman of the South Tyneside Housing Committee I opened the complex. Although the accommodation was clean and weatherproof, the building was virtually the same as it had been when I opened it 21 years ago. No modern adaptations or alterations had been carried out; and the lifts promised many years ago were still awaited. That was not because the council did not wish to carry out the work but because it did not have the resources to do so.
  The building and refurbishment programme which South Tyneside is putting together will provide much needed jobs and training in an area which has the highest unemployment in Great Britain. It will allow sensible authorities like South Tyneside to get on with the job they were elected to do. The Bill will assist in the Government's two main objectives: jobs and social justice. I welcome the Bill, and congratulate the Government on the speed with which they have brought it about.
  Finally, perhaps I may digress slightly. About seven years ago, while serving in another place I was asked to join the House of Commons tug-of-war team for the annual contest between the Commons and the Lords. Along with other Members of various parties, I willingly agreed. The only thing we had in common was that we were all about the 17-stone mark. I immediately started training in Strangers' Bar on Federation Special. A captain from the Royal Marines showed us techniques of how to use the rope in a tug-of-war. I looked forward to the night when we were to have the contest between the Commons and the Lords, thinking that it was a one-horse race. When I arrived at College Green I had my first glimpse of the House of Lords team. They were massive, like house ends. I said to one of my colleagues, Jimmy Hood, "The Barbarians mustn't have a match on this week". Needless to say, we were well and truly beaten; and it took a week before my arms finally got

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  back into their sockets. Since that night I have always had the greatest respect for the strength of this honourable House.
  5.8 p.m.
  Lord Dean of Beswick: My Lords, the very pleasant duty falls to me of congratulating my noble friend and colleague Lord Dixon on his down to earth speech, full of facts. It seemed strange when he mentioned former chairmen of large housing authorities. Including myself, there are four or five of us—so we have not done too badly. The next speaker, my noble friend Lord Lofthouse of Pontefract, a former Deputy Speaker, is another chairman of housing in Wakefield, Yorkshire. I first met him some years ago. The only difference between us is an age gap. I was four or five years in front of my noble friends. Nevertheless, I am sure that we shall all want to listen to my noble friend Lord Dixon as often as he wishes to speak because he will have some useful contributions to make. I have no doubt that my noble friend and colleague Lord Lofthouse of Pontefract will do the same.
  I was somewhat puzzled by the speech of the Opposition spokesman, the noble Lord, Lord Bowness. For some years I had the privilege of leading on housing in your Lordships' House for my party in Opposition. I became completely fed up with asking Ministers in the former government when we would have a housing policy which would produce houses to let. I never received an answer. Here we have a shadow Minister, in almost his maiden speech, castigating the new Government who are putting forward a policy which has been requested for years as though it is not the thing to do.
  I wish to wind the clock back a little to indicate what was going on under the previous government's jurisdiction. A number of independent reports over a period of years were commissioned and produced by politically independent people. The first was Faith in the City, produced under the auspices of the noble Lord, Lord Runcie. It drew the conclusion that the main problem in the country was a lack of low-rent housing so that people could get some sort of home to live in. Almost concurrently, another committee was studying the same problem under the aegis of His Royal Highness the Duke of Edinburgh. That committee was also non-political, and it put forward the same views; namely, that somebody had to produce some housing. Who was it to be? It would certainly not be the private sector. But the government at the time, deliberately and as an act of policy, stopped local government building houses. I became sick and tired of asking why. I was informed by a succession of Ministers, "Oh, we've got something in its place. It will now be the Housing Corporation and the voluntary sector". Their eventual target was supposed to be some 60,000 houses a year. The two reports I mentioned, and organisations such as Shelter, were asking for 100,000 houses a year up to the turn of the century just in order to stand still. The then government did nothing at all. Had they continued with the building policies that they inherited in 1979 and not
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  sabotaged matters as they did, there would have been between ½ million and a million more houses to rent in the public sector.
  What was the then government's claim to success? It was the sale of council houses. That policy has run its course. Of course it was a success. They almost literally gave some houses away. For recipients the discounts were so large that they were treated marvellously. But does anyone really believe that it is possible to take over 1 million houses out of the housing pool in the rented sector and not exacerbate the problem of homelessness? That is absolute rubbish. Those houses are no longer there for rent. People may say that they would not have been there anyway, that people would still have been living in them. But a percentage of those would have been available. The building programme could have been continued and could have provided the housing that was being asked for. We should have been in a much healthier position than is the case today.
  I wonder whether the Opposition are really serious about their proposals for housing. If they have a policy, what is it? It is obvious that they did not have a policy over the past few years and have not produced one. Yet they carp at the policy before us today.
  The noble Lord, Lord Dixon, was quite right. There is a building force available—tens of thousands of builders are still on the dole—and money is available. I shall not go into detail, but I believe that in this Bill the Government are starting to unlock those funds at a rate at which they can be absorbed and used objectively. As the former chairman of a housing committee, I know that the noble Lord was right when he spoke about over-heating and cowboys in the industry. That is the last thing we want.
  I hope that this measure is only a very small start in dealing with a very big problem. If we do not treat it in a massive way as it starts to accelerate, we shall be in trouble by the millennium. We shall hardly have made any indent on the problem as it stands today. The Government have started out correctly in introducing this Bill in order to move matters forward. I compliment the Minister on her detailed explanation of the Bill. It is rather sad to hear a carping criticism from a noble Lord representing the Opposition—who have done nothing since 1979 except sabotage everybody else's ideas and efforts to deal with a problem that was looming larger, and is larger than ever today. This Government have inherited the problem and have begun to tackle it. They should be commended, not criticised, for this measure.
  5.14 p.m.
  Lord Lofthouse of Pontefract: My Lords, it is a pleasure to have the opportunity of making my maiden speech in this House after many years in the other place and in local government. When I first came to this place I wondered how I should settle down. It tended to worry me a little—until, about a fortnight before I had the privilege of being sworn in, I visited the other place and sat in the Gallery. I received something of a shock. Looking down into the Chamber I did not know anybody. When I arrived in this place it was a great

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  comfort to see many familiar, kind and welcoming faces. It took me back many years to my time in the other place.
  I should like, first, to say a big thank you to both the Clerk of the Parliaments and Black Rod, and to all their staff, for the kindness and guidance that they have shown to me and to other noble Lords since we entered this place, and would specially thank the noble Lords, Lord Mason and Lord Gregson, who supported me in my introduction to this Chamber.
  I shall plead for a little tolerance since it is five and a half years since I was able to stand in the Houses of Parliament and make a speech. So there is, I am sure, a small amount of ringrust there. If it shows through too keenly, I crave your Lordships' tolerance.
  I welcome the Bill. In doing so, I recognise that Clause 1 will allow capital receipts to be taken into account in determining future supplementary credit approvals. As your Lordships will be aware, the local government Act of 1989 effectively prevented government from re-issuing the set-aside capital receipts. The new clause makes it legally possible for the Government now to release those set-aside receipts.
  It is interesting to note that the legislation does not specify specifically housing receipts; conversely, it does not preclude general fund receipts. The noble Lord, Lord Bowness, on the Opposition Benches referred to that. No doubt noble Lords will be interested to hear what my noble friend the Minister has to say about whether in future years the receipts can be extended and used for general fund purposes such as leisure, education and social services.
  Clause 2, the requirement on Ministers to stipulate the period of time over which loans are to be repaid (SCA), effectively gives local authorities permission to take out loans up to the amount of the SCA. Previously, Ministers stipulated that such loans were to be repaid over, say, 10, 20 or 30 years, depending on the type of expenditure funded from such loans. I welcome the fact that that extra constraint has now been removed from the proposed legislation. It therefore provides more freedom for local government. That helps local councils to become more accountable for their actions and also allows them to maximise the financial consequences of their borrowing. This is another step in the right direction. It will allow local government to become more self-sufficient.
  The noble Lord on the Opposition Benches kindly referred to myself and my noble friend Lord Dixon, and suggested that we probably have more knowledge on this subject through our work in the other place. I thought that something of a nicety and it was much appreciated. But, listening to the noble Lord's speech, he tended to prove that his knowledge was limited on the Bill that is before us.
  The release of £200 million in the current year and a further £700 million next year, as announced in the Chancellor's Budget on 2nd July, demonstrates that the Government are sincere in keeping their manifesto promises. The available funding is part of the Government's intention to release the capital receipts
  1472
  that currently sit in local authority bank accounts. I hope that your Lordships will agree that it is sensible to make such available resources work for the community by ensuring more investment in the housing stock within such communities.
  I believe that it is equally sensible that the Government have not restricted local authorities unduly into prescribing where such funds are to be used. It will be left to local authorities' discretion to use resources to meet the highest priority need.
  The Government's proposal to use the supplementary credit approval arrangements—that is, to give borrowing permission to local authorities rather than merely allowing authorities to spend the actual cash—is sensible. It overcomes the problem where some authorities have high need and only relatively low cash available. The recognition of housing need in the weighting of distribution is also to be welcomed. The proposed proportion of two-thirds housing need to one-third actual receipts appears very reasonable.
  The fact that the Government have undertaken to underwrite the revenue consequences on either the housing revenue account or the general fund, depending on where individual authorities actually spend the resources, will ensure that effectively such additional spending is "free spend". If actual receipts had been used, there would be no long-term call on revenue accounts to repay the loan charges. Ensuring that the revenue consequences are reimbursed from central government should give a neutral impact on the finances of local councils. There may be a problem if loans are over, say, 20 years, with ensuring that such revenue support continues for 20 years. One of the advantages of capital grants/receipts is that there are no ongoing revenue consequences.
  I welcome the Government's commitment to release all set-aside receipts during the life of the Government. By that commitment, the Government have avoided the danger of over-inflating the economy by allowing the release of funds accumulated during the previous government's administration to be carried out on a manageable basis. That should ensure that authorities have the ability to maintain value for money. If too much had been released too soon, the construction industry would have been in a most generous supply and demand situation and the consequence would be that tender prices would inevitably increase due to the over-supply of resources. By phasing in such a release in a manageable and realistic manner, authorities should still be able to ensure that the construction industry will compete for the available work. Hopefully, the additional work will aid unemployment and the return to work initiatives. Indeed, the consultation proposal outlines such initiatives as being an integral central policy plank of the initiative.
  I welcome the fact that in order to sustain communities and ensure pride for the local population, the Government are also allowing up to 15 per cent. of resources to be used for regeneration-linked housing purposes. Again, such an initiative will aid the return to work scenario and could also be used to aid security and crime prevention.

  1473
  I believe that if there is any aspect which could be enhanced in the current proposals, it is that an indication—say a minimum of 90 per cent.—of future years' allocations should be notified to local authorities as soon as possible, ideally at least two years in advance.
  The biggest single problem facing local authorities under the current capital control regime is that they only receive the following year's allocation each December. Most capital schemes are by nature large-scale and expensive and the contract period can often exceed 18 to 24 months. Such large schemes require a lead-in time of about 40 to 45 weeks. The most effective way of managing such large-scale projects is to have security and knowledge of the funding arrangements for the period when actual work and therefore expenditure is incurred. The wealth is very welcome to local authorities with the vast run-down and shortage of housing throughout the country, not least in my own area which is a metropolitan district council, and with the disrepair and lack of new build. To people who criticise and say that the Bill does not go far enough, I say that it is a start, a responsible start, and I wish it a speedy passage through the House and into legislation.
  5.25 p.m.
  Baroness Hamwee: My Lords, I have the happy task of following the noble Lord, Lord Lofthouse of Pontefract, and thanking him on behalf of the whole House. He has had a distinguished career and that distinction will, I know, be to the benefit of this House on many occasions. I also congratulate him on having given to Dod a photograph which is clearly up-to-date and recognisable.
  I welcome too the fact that we have in this House another northerner with so much local government experience. However, I say that through slightly gritted teeth as a Lancastrian. We are enjoined not to thank all maiden speakers, but I cannot forbear at least saying that if the speech of the noble Lord, Lord Dixon, was typical, I look forward to more to come. Like the noble Lord, Lord Bowness, I have to declare an interest as a serving councillor.
  As has been said, housing was the Conservatives' biggest privatization: 1.6 million homes and the figure I have is £28 billion though a slightly different figure has already been mentioned this afternoon. The privatisation, though not of itself objectionable, had no parallel programme for the replacement of stock and that was objectionable. Therefore, I and these Benches welcome the Bill. But it is not a Bill about the release of capital receipts; it is a Bill about the mechanism for some spending or, as I would prefer to say, investment.
  I am bound to make some of the same points as the noble Lord, Lord Bowness, but I hope that the Minister will hear a different tone in what I have to say. I have often wondered whether restrictions on local authorities' use of capital receipts were because central government were concerned about the effect on the public sector borrowing requirement and on council tax levels, both of which to a great extent are artificial matters. Alternatively, was it because of a concern about a power base at local
  1474
  government level, capital assets being power? Therefore, the previous government were quite happy to see that power base reduced and not replaced.
  The Chartered Institute of Housing analogy is that if an individual sells a house, he will only pay off his mortgage if he does not need a new house. Similarly, local authorities should be in a position where they can put housing need before debt repayment. In any event, I support investment in housing. As an aside, I hope soon to see that local authorities will be free to borrow from private capital markets to support that programme. I make that comment in the context of being one of those who is not at all concerned about who provides the housing. I do not subscribe to the dogma that local authority housing is good and all other is bad. But I should like to see local authorities being able to play a full part.
  I said that the Bill is not about the release of capital receipts, nor, unhappily, is it about local decisions. It encapsulates a centralised approach. As the Minister said, local authorities and other interested parties have been consulted. I believe that the response date for that consultation is the end of this month. I therefore wish to ask the Minister how the responses will feed into the final stages of the Bill. She may say that it is an enabling Bill and that therefore it is not necessary for us to know too much detail about the responses. But we shall have the opportunity to conclude the Bill after those responses have been made. I should be interested to know how those of us outside government can ascertain whether the responses include matters which ought usefully to he reflected in the legislation.
  I understand that the balancing act which the Government have carried out is necessary because of the availability of funds and assessment of need not falling neatly into the same geographical areas. But local housing authorities will not be assessing need. The consultation document refers to a one-third to two-thirds approach, one-third reflecting the proportion of set aside receipts and two-thirds being need. I have heard or read somewhere that that is to become 50/50. I do not know whether that was a matter of rumour—the Minister shakes her head. The consultation papers say that the one-third to two-thirds approach is for the current financial year. But there is not much left of the current financial year or will not be by the time the approvals become available.
  The general needs index, which I understand will be the basis for assessing need, is not regarded as a perfect measure. For instance—indeed, perhaps most particularly—it does not include homelessness figures. To put it another way, it omits one very important indicator of need. I believe that the Government are looking at that matter but until the index is changed, many local housing authorities, including outer London boroughs, of which my authority is one, will lose out.
  I understand that future allocation will be made on the basis of reports from the government officers. Over the years there have been many criticisms about government officers being portrayed as representing some kind of devolution of power. Of course, that is not so. They are a geographical placement of the department's civil servants. I am concerned about matters of transparency and accountability—judging their judgment of the need.

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  As has been said, the spending which will be allowed is not just to go toward housing. I welcome that and the recognition that successful housing is about more than roofs. I do not underestimate the importance of the contribution to the whole community, though I wonder what the limitation of spending on regeneration to "the housing scheme"—I emphasise "the" housing scheme—will mean. I look forward to the widest interpretation of "housing purposes"-for instance, energy efficiency.
  That is all perhaps a little over-idealistic when one considers the need for repairs and new homes. The Minister said, and I understand, that one cannot reverse overnight the effects of the previous government's programme or lack of programme. The repairs backlog in England and Wales on remaining council stock is of the order of £9 billion. Many housing authorities have already acknowledged that they have no hope of undertaking new build, because unless their existing stock is repaired, they will lose that stock as well.
  As to numbers, the then Department of the Environment told us a couple of years ago that the number of households in England would grow by 4.4 million in the years between 1991 and 2016, and that that growth would require 176,000 new homes. The last government set the social lettings target at 60,000 units a year, often failing to meet that target, whereas most experts said that the true need was for at least 100,000 units a year. The so-called "release" of capital receipts would, I believe, allow a maximum of 40,000 units a year; in other words, barely enough to compensate for budget cuts that we have seen recently, including the 1996 Budget cut. Noble Lords will be well aware that the Government effectively have accepted cuts to the Housing Corporation's programme as part of their commitment to the previous government's spending targets. I look forward to any words that can give us hope for an increase of significance in the future.
  I should like to think that the view ahead could be made a little rosier. I urge the Government to reconsider what is to be done with future receipts from sales of council houses. That matter has already been raised this afternoon. Sales have fallen from their peak but are still generating something of the order of £1 billion a year. I urge them to be used—invested is the term I prefer—on repairs or new build of social housing and not set aside.
  I also urge the Government to reconsider what is to be done with non-housing receipts. We are told that education is the Government's number one priority. So why, for instance, is there not a phased release of non-housing receipts for education purposes? I dare say the Minister will respond by referring to the resources for education announced in the Budget. But many education authorities will receive very little once the bidding process is complete although those authorities want to spend on education.
  Finally, authorities can invest most effectively if they can plan ahead. That point was made by the noble Lord, Lord Lofthouse of Pontefract. It is important to know as soon as possible how much is to be released not just this year and next year but in subsequent years. To use figures from the Chartered Institute of Housing, £1 billion
  1476
  released for five years would renovate 280,000 council homes or build 140,000 new homes through housing associations, which could use private funding as well, or build 70,000 new council homes. At the same time it would create something like 20,000 jobs over that five-year period, as noble Lords have already pointed out, with consequent savings in benefits and increased income from tax.
  The Government have a great chance to do some very real good. The Bill is a first step. But it seems to me that it is a little like the step of a toddler who seems about to take a great stride but hesitates and then, at the last moment, while everyone is watching and holding their breadth, just manages the first few inches. The Bill is not about capital receipts; nor is it about local authorities using their own money. It is about giving permission to borrow to a limited extent. The supplementary credit approvals announced in the Budget are a tottering first step. We on these Benches look forward to confident strides forward.
  5.37 p.m.
  Lord Lucas: My Lords, in the midst of such expertise, I feel extremely humble. I shall speak of the maiden speeches later. For the moment, let me say that I find it hard to think of anything to add to the speech of my noble friend Lord Bowness, with his great depth of experience. I enormously look forward to the replies that the Minister will give to him. The noble Baroness, Lady Hamwee, is one of the few Members on her Benches who still understands what it means to be in opposition, to test and question the Government. Many of her colleagues seem to believe that they are now in juxtaposition or perhaps even post-position. The noble Baroness has long commanded my admiration and certainly will continue to do so so long as she tests the Government in the way that she has done this afternoon.
  I too wonder what is happening to the Government with this Bill. How quickly they have abandoned the golden rule that borrowing should be for capital expenditure. Indeed, they provide a clause in the Bill whereby borrowing will be for revenue. I find that surprising. I hope too, with my colleagues, that the definition of need will be settled, at least before we return to the Bill in October, and that we shall all understand how need is to be defined and who is to measure it. I hope that the noble Baroness, if not now, will then be in a position to expound on how the systems under the Bill will apply to Wales in the future, presuming that at that stage Wales is on the way to having a devolved assembly. It seems to me that the Bill falls slap bang in the middle of the division of controls between central and local or devolved government. It will be fascinating to know how the Government envisage it working in the future.
  We were treated to two excellent maiden speeches. I greatly enjoyed the speech of the noble Lord, Lord Lofthouse of Pontefract, though I believe he is reading and believing some of the Government's propaganda more than he ought. He will come to realise as he spends more time here that nobody can sack him and nobody is likely to promote him either. He can speak his own mind and be critical of the Government, unlike his colleagues in the other place who tremble at

  1477
  the thought of Mr. Mandelson. Here he is a free agent and we look forward to hearing a great deal more from him.
  I can say exactly the same to the noble Lord, Lord Dixon. I was on the edge of my seat for every moment of his speech. I listened to it with rapt attention and should his name appear on the Order Paper again to speak, I shall do my best to make sure that I listen to him. I can reassure him that it is possible to obtain beans on toast—I am sure that many of his colleagues can show him where to obtain an excellent plate of it; it is something on which most of us were brought up and most of us insist on. However, I retain one burning question in my mind from his speech: is his house still standing?
  Lord Dixon: Yes, my Lords, and it will stand for many years to come.
  5.42 p.m.
  Baroness Hayman: My Lords, it has been an interesting debate, even though a brief one. As the noble Lord, Lord Lucas, said, it was enlivened by two excellent maiden speeches. I rather guessed the contributions that would be made by my noble friends Lord Dixon and Lord Lofthouse of Pontefract. I did not quite anticipate the trenchancy of those contributions, nor the wonderful vision of the tug-of-war contest that was evoked. My noble friend needs no lectures from the noble Lord, Lord Lucas, about exercising his judgment in regard to speaking his mind on government policies. I felt that the support he gave to this initiative was wholehearted, and greatly welcomed from the Front Bench. They were two outstanding speeches, showing clearly to those of us in this House the value of being rooted in experience of local and national politics and of the building trade, if I can put it in that way. The contributions that will be made by both my noble friends in the future will be looked forward to from all sides of the House.
  It has been an interesting debate and one in which we were accused of over-caution, on the one side, and of flying under a flag of convenience, not speaking our mind or explaining what we were doing, on the other. I should like to try to deal with both of those criticisms.
  The noble Baroness, Lady Hamwee, talked about first tottering steps. I would rather take tottering steps and stay on my feet than take large strides and fall flat on my face. We have always recognised that this is a limited beginning after many years of frustration, which I well understand, among local authorities.
  My noble friend Lord Dixon asked whether we would be taking into account the pre-1990 receipts that were generated. I have to tell him in all frankness that that will not be possible. We have a large challenge in dealing with the receipts generated post-1990 under the present financial regime for capital receipts. We simply cannot put the clock back for £23 billion of expenditure. But we do intend to start now in putting the clock forward and reinvigorating the contribution that government can make to the housing needs that were so clearly explained by my noble friend Lord Dean, the two maiden speakers and the noble Baroness, Lady Hamwee. It is a start; it is a limited start, but one that we believe is nonetheless valuable.
  1478
  The main criticism focused once again on the mechanism that is being used and why we have not simply released capital receipts. I reiterate what I said in my opening remarks and what the noble Lord, Lord Bowness, acknowledged in his speech. Were we simply to release receipts where they lie, that would not ensure that the badly needed resources were available where they were most needed. That is for two reasons. One is that receipts were not always generated in areas of highest need; the other is that different regimes for dealing with the set-aside receipts are employed by different local authorities. It would be quite wrong and arbitrary not to take into account housing need and what has been generated rather than what is now in the coffers in terms of this initiative.
  I was asked by the noble Lord, Lord Bowness, and by the noble Baroness, Lady Hamwee, about non-housing receipts and their treatment. They came at the question from slightly different viewpoints. From the noble Baroness there was a plea for greater release for a wider range of projects, as I understand it. From the noble Lord, Lord Bowness, there was the suspicion that we were not being completely frank and were somehow hiding a non-housing need, a non-housing plan under a housing Bill. Perhaps I may make the position quite clear.
  It is our specific objective in the first instance and in this measure to facilitate a capital receipts initiative for housing and housing associated regeneration projects. In that context it is right that we should take into account housing receipts in terms of the money generated. However, the Bill would also be available to facilitate the release of additional resources related to set-aside of non-housing receipts. We believe that that is right and proper. We should not in this Bill limit the Government's capacity to launch further non-housing initiatives in future years.
  Perhaps at this point I may reassure the noble Baroness, Lady Hamwee, that we are anxious that issues such as energy efficiency which come completely within the broad ambit of government policies should be facilitated by this measure. We would certainly encourage local authorities to do that.
  The other main issue raised in the debate was the relationship between local and central government: whether we were being too didactic and too prescriptive. I say to the noble Lord, Lord Bowness, that the concept of partnership between government at local and national level is something that we have lost over past years. The view has grown up through the experience of the past 18 years that there must either be prescription and central control or total local autonomy; there is no way of bringing those two together. We reject that attitude. It is imperative if we are to achieve what are demanding targets and ambitions under difficult and restrained circumstances that we have a concerted effort. We are trying to set out clearly what are the overall national priorities for this receipt which is national public expenditure that is being generated.
  Lord Dean of Beswick: My Lords, I am glad that the Minister has raised that point because it was ever thus before when the huge housebuilding programmes were under way. It was a partnership between national

  1479
  government and local government. The housing investment programme was carried out on that basis. Local authorities did not get everything they wanted but things were done on an acceptable basis. There was always the fallback position that, through the operation of the housing investment programme, the government could stop a local authority doing something silly.
  Baroness Hayman: My Lords, I am grateful to my noble friend for that helpful contribution. It is important to recognise that there is a national framework for this programme but that we are being open and are consulting local authorities both about issues like phasing and also about allowing them to set their own priorities in relation to their local need, whether it is a regeneration programme or a new-build programme or whether it is renovation of properties or energy efficiency measures. We are interested in allowing them scope to do that. However, it is important—and it is a responsibility of government—to monitor the effectiveness of that programme, to see how public money is spent and to disseminate good practice. There is a good deal of scope for that as well.
  I was slightly surprised that the noble Lord, Lord Bowness, was so concerned about the role of the Audit Commission. I believe that the Audit Commission has a valuable function to fulfil here. Certainly, my experience in the NHS is that the Audit Commission has not in the past confined itself only to accounting matters. It has carried out value-for-money studies that are comparative and those have proved extremely important both in making all of us within that service question what we were doing and also in terms of being able to disseminate good practice.
  We recognise that this is a limited measure. We recognise and have always been clear that it has effects on the public sector borrowing requirement. Those effects were made clear in the Chancellor of the Exchequer's Budget. I understand the point that was made by noble Lords about planning ahead and certainty. We tried to cover that at least in terms of giving both the 1997–98 and 1998–99 figures in the Budget.
  Noble Lords participating in the debate asked about new receipts. I understand their interest, because we are creating a new stream of capital receipts even now. Straightforward release would give us exactly the same problems as have led to us using this mechanism of supplementary credit approvals, because they are not necessarily being generated in the areas of most housing need. However, we will be continuing to monitor the level of receipts and the extent to which these offset new expenditure by authorities. We shall be looking closely at the function and the future of existing set-aside rules during the comprehensive spending review.
  Perhaps I may respond to one further point. If I have missed out other points I shall certainly write to those noble Lords who have contributed. I was asked how housing need is to be assessed. The consultation paper makes it clear that need will be
  1480
  measured by the generalised needs index. I understand the reservations that were expressed about that, but it is the measure already employed to distribute housing capital resources to authorities. In order to get the proposal up and running for this year we have had to take some fairly clear, already definable criteria and implement them. But we are willing and we are publishing the consultation document in order to be able to listen to what people have to say. Nothing is ever perfect. I would not suggest that this year's programme will be the best. I hope it will be better next year and better the year after that. However, we can improve it by listening to constructive contributions from local authorities and from others who comment on the paper.
  I do not believe we have been dodging our manifesto commitments in introducing the Bill. I believe we have been fulfilling them in responsible and sensible ways. In the manifesto we stated that we would be reinvesting in building new homes and rehabilitating old ones. On 13th May the Municipal Journal described the Bill as,
  "an important, practical and symbolic measure which signals the new administration's commitment to economic development and job creation and recognises the strategic local authority role in developing partnerships with the private sector and housing associations for the provision of social housing".
  For too long social housing was a Cinderella service under the previous administration. My noble friend Lord Dean referred to targets. I betray my age if I say that I remember when a Tory Prime Minister was aiming for 500,000 homes a year in terms of fulfilling responsibilities. We take our responsibilities about housing very seriously. This country used to take a pride in its council housing. Good quality homes were there for those who needed them, giving them a base from which to work and support their families. Those homes have been allowed to decline—in some cases so badly that no one can now live in them—so vulnerable families have to live in small flats while perfectly adequate houses go to rack and ruin. It is wasteful in terms of people's lives and wasteful financially and it is the cause of great social concern.
  The capital receipts initiative will not, as I have said before—we are clear about this and do not pretend otherwise—at one stroke reverse all the years of decline. It will not solve all the housing problems that are out there. But it is a start. I am pleased that this is the first piece of legislation over which the noble Lord, Lord Bowness, and I have crossed swords. I congratulate him on his responsibilities, as he was kind enough to congratulate me. It is the commitment to housing and to the social problems that are engendered by bad housing that will underline much of the policy that I shall be putting forward on behalf of my department. Our priority for making use of the new power provided in the Bill is to issue resources under this initiative, taking account both of the receipts that were set aside from the sale of council houses and the housing need of various areas. I commend the Bill to the House.
  On Question, Bill read a second time, and committed to a Committee of the Whole House.

  Local Government Act 1988 (Competition) (Defined Activities) (Scotland) Amendment Order 1997
  5.58 p.m.
  The Parliamentary Under-Secretary of State, Scottish Office (Lord Sewel)rose to move, That the draft order laid before the House on 7th July be approved [7th Report from the Joint Committee].
  The noble Lord said: My Lords, today's debate, provisionally timed as a five-minute wonder, concerns the Local Government Act 1988 (Competition)(Defined Activities)(Scotland) Amendment Order 1997 which amends a small part of the timetable by which authorities must have complied with the compulsory competitive tendering legislation.
  Compulsory competitive tendering regulations are renowned for their complexity. This order is no exception and is about an unusually technical part of one of the most complex areas of secondary legislation around. It would be fair to say that "arcane" would not do it justice.
  CCT introduced a split between functional work—work carried out by authorities in pursuit of their own functions—and so-called works contracts—work authorities carry out for other public bodies such as other councils. This order concerns only works contracts for the new services. These are white collar support services, housing management, vehicle management and security services.
  Under CCT, an authority can only enter into a works contract with another public body if it has won the work following a complicated and tightly prescribed tendering process involving at least three other parties. I would not dispute that competition here may bring benefits, but the current timetable of October 1997 is not sensible.
  There are two main reasons why this change to the timetable needs to be made. The first reason is a legacy of reorganisation. We all know that Scottish local authorities are still bedding down from a disruptive piece of local government reorganisation. Some account must be taken of the adverse impact reorganisation has had on the internal workings of local authorities.
  The other reason is of course linked. It just does not make sense to require authorities to compete for these contracts while we are developing an alternative system of best value covering all local authority services, which is a much more comprehensive and thorough approach. This order tidies up the CCT timetable and means that authorities will not have to comply with the CCT legislation surrounding works contracts until April 2000. I beg to move.
  Moved, That the draft order laid before the House on 7th July be approved. [7th Report from the Joint Committee].—(Lord Sewel.)
  Lord Fraser of Carmyllie: My Lords, perhaps I may intervene briefly in this matter. As the noble Lord pointed out, the regulations in this field are very complex. I noticed with interest that the Joint Committee of both Houses appointed to scrutinise such
  1482
  statutory instruments indicated that there was nothing to which it was thought necessary to draw the special attention of the House.
  But there is one matter upon which I shall be grateful for the Minister's clarification. I understand his reasoning that, because of reorganisation, a greater period might be allowed for the local authorities to bed down before this measure is required of them. I also understand the arrangements that the Secretary of State for Scotland has put in place following the announcement by him on, I believe, 27th May, that he was suspending compulsory competitive tendering for a further year in Scotland while this best value approach was being examined.
  However, what slightly baffles me is that I understand that the timetable for reporting back by CoSLA and others and consideration by the Secretary of State himself of the new arrangements is to be completed before the end of this year. If the existing date is October 1997, I can see why the Secretary of State wishes to defer it. However, if that is the sort of timetable to which the Scottish Office is working, I am less convinced as to why the date needs to be put back, as this order will provide, from October 1997 to the year 2000. That seems to me to allow for an excessive period. I shall be grateful if the noble Lord can give me some explanation for this almost three-year delay in some cases. Otherwise, I say to the noble Lord that we are bound to harbour the suspicion that the real purpose of this statutory instrument is not to give local government or the Scottish Office a little more time to get new arrangements in place, but to lose the ball in the long grass by indicating now that nothing needs to be done by the year 2000. I hope that the Minister can satisfy me that my suspicions are wholly ill-founded, but I have just a glimmer of suspicion that I may be rather closer to the truth than he would like to acknowledge.
  Lord Mackie of Benshie: My Lords, as I understand it, the Minister said that there were two objectives. He said that one was to give local authorities further time to settle down. I also understood him to say that a comprehensive review of the situation was taking place and that that would give more time to produce results. By that does the Minister mean that he is reviewing the whole question of competitive tendering or that he simply wants to revise the procedures and that competitive tendering will continue in order to keep costs down?
  The noble Baroness, when speaking about the previous legislation on the Order Paper, spoke of efficiency audits. It appears to me that they are necessary in all circumstances of local government. Perhaps the Minister can comment on whether that is part of the comprehensive look at this very serious problem of local government. It will be nice of him to say so, not that I am suspicious of this Motion, like the noble Lord, Lord Fraser of Carmyllie, but I would simply like to hear the Government's views on this very

  1483
  important point of efficiency in contracting and whether the system of competition is properly worked out, fair and competent.
  Baroness Carnegy of Lour: My Lords, perhaps I may follow my noble neighbour who lives in the same area as me. He will know, as I do, that competitive tendering has proved enormously successful in the Tayside area, not just in helping local authorities to become more efficient, but in restoring the private sector in many areas which has been reduced almost to nothing in the City of Dundee because of the preponderance of services being carried out in the public sector.
  I heard the Minister say that competitive tendering can bring great benefits. He knows that very well with his experience of the matter. I understand that it might be quite difficult to put white collar services out to tender in the early years of a local authority, but in the case of vehicle maintenance I do not understand why that should be so. There are garages for the maintenance of vehicles all over Scotland which are longing for work of that kind. They will not get any work until the year 2000. That seems to me to be quite wrong. I wonder why that is included in the order. Perhaps the Minister can tell us why.
  Lord Sewel: My Lords, those who offer me help and advice on occasions like this are enormously prescient because they suggest that I should start by saying, "We have had a very interesting debate" and, in a way, we have.
  As regards the year 2000, it is absolutely true that the report on which the best value approach is based identifies a three-stage implementation plan. The first stage is autumn 1997 when councils will provide details of how they have conducted the current CCT bidding round and assessment of the extent to which they comply with the essential elements of best value. A plan showing how and when they will be able to achieve compliance will be very important in order to move forward.
  But there are further periods of self-assessment at stages in 1998 and 1999. So it is really being done to get authorities into the process, to make sure that they are familiar with it and doing the job properly and taking a little time to make sure that things are done correctly. It is better to have them done correctly by taking a little time rather than to rush things and to find that they do not work smoothly. The year 2000 aligns these particular services with the white collar functional work as well, so that the works contracts and the functional works are now running on the same timetable. I hope that the noble Lord will see the reasoning behind our explanation.
  The noble Lord, Lord Mackie of Benshie, drew particular attention to the need for efficiency. Local authorities in Scotland have a statutory requirement to ensure that they have procedures and processes in place to deliver economy, efficiency and effectiveness. In Scotland, this is subject to audit by the Accounts Commission. Therefore, robust procedures are already in place to ensure that councils deliver on that score.
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  The noble Baroness, Lady Carnegy, mentioned vehicles. Perhaps I should point out that this is a new service. It is a vehicle management service; not a vehicle maintenance service, so it is a much more professional, white-collar task which fits in with this group.
  On the basis of the explanations that I have given, I hope that the House will be able to approve the order.
  On Question, Motion agreed to.

  Central and Local Government
  6.10 p.m.
  Lord Hunt of Tanworthrose to ask Her Majesty's Government what action they are taking following the report from the Select Committee on Relations between Central and Local Government: Rebuilding Trust (H.L. Paper 97, Session 1995–96).
  The noble Lord said: My Lords, I have the honour to be the chairman of the Select Committee on Relations between Central and Local Government, which reported to the House last July. The report was debated on 18th November. However, since the general election there have been a number of developments in this field and I thought that it might be helpful if we could take stock of them and be informed of the further action which the Government propose.
  I must begin by declaring an interest because since we produced our report I have been elected an honorary (unpaid) president of the Local Government Association. However, I should like today to concentrate on the Select Committee and to say only a few words at the end of my speech about the LGA.
  I shall not go through all the Select Committee's recommendations; suffice it to say that we agreed unanimously among ourselves that relations between central and local government were unsatisfactory and that the piecemeal way in which over a long period powers have been taken away from the local authorities has not only weakened local democracy, but has blurred accountability so that a resident with a problem often does not know, and cannot find out, who is responsible.
  Accordingly, our recommendations were made with three objectives in mind. The first was to mark the status and respect owed to a system with a democratic mandate. We suggested a formal concordat on the place and role of local government; signature of the European Charter on Local Self-Government; and the establishment of a standing parliamentary committee to maintain an overview of central/local relations.
  Secondly, in order to give local authorities more freedom to play their role as community leaders, we recommended a new but still restricted power of local competence; the right to experiment with different internal management and electoral arrangements and better arrangements in Whitehall to co-ordinate policy on local issues which cut across departmental boundaries.
  Thirdly, on the crucial issue of finance, we felt that capping should go as a standard procedure although there should be a reserve power to cap, subject to

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  parliamentary resolution; Treasury control of local authorities' self-financed expenditure should be relaxed and non-domestic rates should be returned to local authority control; the standard spending assessments should be simplified and used only for their original purpose of grant allocation; and consideration should be given to a change in the arrangements for compulsory competitive tendering.
  The previous government agreed with much of our diagnosis of the problem and in particular with the need for the relationship between the two tiers to be one of partnership rather than of adversaries. The response in Command Paper 3464 also agreed in principle on the need for a new power of local competence and on legislation to allow experimentation. However, on other matters, and in particular on finance, the response was a disappointment to the committee.
  The current Administration has not so far made any formal response to the report, which is the reason for this debate. Many in local government, of all political parties, welcomed the present government's manifesto commitment to reducing the extent of central controls over local authorities while increasing local accountability. Action has been taken (which I can welcome) on a number of issues along the lines suggested in our report. I welcome particularly signature of the Council of Europe's Charter on Local Self-Government, the origin of which, incidentally, I believe owes something to the work of the noble Baroness, Lady Farrington, and the noble Lord, Lord Bowness, in the Council of Europe. In many ways, signature is a symbolic act since it imposes nothing that is not already our practice, but it is surely right to give formal recognition to the importance of local government and to the right of democratic and accountable local authorities to a share in the running of local public affairs in the interests of the local community.
  On some other issues, the Government's action so far has, I am afraid, been less encouraging. I refer in particular to the apparent decision that capping in its present form will continue for 1998–99. That seems disappointing. As I said in our report, we recommended that capping should go as a standard procedure. We never recommended that all powers to cap should disappear. However, it would appear—I do not know whether the Minister will be able to confirm this—that the Government intend (at any rate until 1998–99) to continue with capping as a standard procedure.
  On a number of other issues, the Government's view is not yet clear and I hope very much that the Minister will be able to draw the threads together this evening and to give us an overall perspective and response from the Government.
  I shall not take time by repeating the arguments for our recommendations, but I should like to emphasise one point: if local government is to engage the interests of local people and if local democracy is to be a meaningful concept, local authorities must have the powers to do things differently, to experiment and to respond to local wishes where there is no overriding
  1486
  national interest or need for national standards; otherwise local government risks becoming simply a branch office of central government.
  In our deliberations a number of suggestions for experimentation were put to us which might be of value in showing different methods of organisation and in terms of increasing local interest in, and the local turnout at, local elections. I refer, for example, to giving individual councillors decision-making powers; sharpening the role of executive councils; promoting the scrutiny role of back-bench councillors; having directly elected executive mayors; establishing cabinet-style committee systems, and so on. We talked about a number of those suggestions, but we very deliberately did not try to make a recommendation on any of them. However, we felt that local authorities should be able to experiment. If such practices proved of value, they might then be adopted more widely.
  Therefore, in our recommendations we propose that there should be greater use of enabling legislation to allow local authorities to experiment with internal working. We urged the Government to find legislative time as a matter of urgency. I understand, following some recent consultations, that pressure of time on the Government's legislative programme makes it extremely unlikely or impossible that time can be found in this Session for such a Bill, but that that is something towards which the Government look kindly and on which they would not oppose a Private Member's Bill if one were introduced. Perhaps the Minister will be able to confirm whether that is the case. The committee felt strongly that this was worth doing.
  Finally, in my capacity as honorary president of the Local Government Association I should like to say how much that body welcomes the arrangements that have been established recently for working in partnership on issues that concern both central and local government. As a new voice speaking on behalf of the whole of local government in England and Wales, the LGA aims to enhance the impact of local government but to do so in a positive and constructive way, working in partnership both with central government and other local organisations in tackling some of the pressing problems that we all face.
  6.20 p.m.
  Lord Prys-Davies: My Lords, councillors, council officials and all those closely concerned with the cause of local government are hugely indebted to the noble Lord, Lord Hunt of Tanworth, for drawing the attention of the Government to the report of the Select Committee on Relations between Central and Local Government which was published a year ago. The Local Government Association has a notable champion in the noble Lord. No reasonable person expects the Government to produce at a stroke a new local government policy that instantly addresses all of the complex issues raised in the report. Nevertheless, I believe it is agreed that the report of the Select Committee identified areas of legitimate critical concern and came up with constructive recommendations to improve the central/local government relationship and serve the

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  cause of local government and democratic government. I also believe that the problems identified by the Select Committee should not be ignored.
  I have re-read the debate held last November on the report. I do not wish to change any of the basic points that I then sought to make, except that I welcome some significant steps that the new Government have taken.
  I was pleased to hear my noble friend on the Front Bench, Lady Hayman, refer in her winding-up speech on Second Reading of the Local Government Finance (Supplementary Credit Approvals) Bill to the concept of partnership between central and local government. That is a noble concept. The cornerstone of the partnership edifice is mutual trust. The new Government have already provided evidence that reform is on the agenda. I am delighted that they have already signed the European Charter of Local Self-Government, and that that charter will be ratified in the autumn.
  It may well be—the noble Lord, Lord Hunt, hinted at it—that "charter" is an excessive term for such a document. However, the Select Committee heard in evidence that that charter was increasingly appealed to on the Continent. The committee recommended unanimously that the signing of that charter would be "an obvious first step". I believe that by signing the charter the Government have sent a clear signal to local authorities that they want a new start in their relationship with them.
  Perhaps the House will permit me to refer to the White Paper A Voice for Wales (Cm. 3718) which was published yesterday. In paragraph 3.6 on page 15 of that White Paper it is provided that the Government,
  "expect the Assembly to promote and foster local government in Wales in line with the European charter on local self-government which the Government has signed".
  In a sentence immediately following that passage it is stated that it will be:
  "necessary to ensure that the Assembly regularly reviews with local government how effectively this commitment is being observed".
  I believe that that commitment refers back to the signing of the European Charter of Local Self-Government. This leads me to ask whether the Government intend to ensure continuous monitoring of their commitment to the charter.
  I welcome the setting up of the new central/local government partnership forum. A week ago there was a meeting chaired by Mr. John Prescott. I have received reports that the Local Government Association speaks of constructive discussions at that meeting.
  The Select Committee advised that capping should be discontinued as a standard practice. It also recommended a return to local control of the non-domestic rate. The noble Lord, Lord Hunt, has already referred to that recommendation. We considered these to be important measures in improving the relationship. The Labour Party manifesto said that crude and universal capping should be removed but that the Government would retain a reserve power.
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  I return to the White Paper A Voice for Wales. In paragraph 3.3 on page 15 reference is made to,
  "the Government's reviews"—
  in the plural—
  "of council tax capping and non-domestic rates".
  Can my noble friend on the Front Bench inform the House which department is to take the lead in conducting these two reviews? Is the Welsh Office involved? To what extent is it dominated by the Treasury? Have there been, or will there be, consultations with the Local Government Association? Can my noble friend indicate when the two reviews are likely to be completed?
  The committee attached the greatest importance to re-establishing the accountability of local authorities to the local electorate and raising the interest of people at local elections. To that end, the committee recommended that local authorities should be granted a power of local competence subject to certain restrictions. One knows the response of the previous government. Can the Minister indicate the present Government's response to that particular recommendation?
  An impression formed by many on the Select Committee was that today local government did not have a good record in attracting men and women of vision and practical capacity to stand as councillors. There are exceptions. The Government's White Paper on the Welsh assembly published yesterday states that it will require people of high calibre to man its committees. I suggest that the same message can be addressed to many local authorities.
  I end with the initiative which is within the gift of your Lordships' House. The recommendation that there should be a committee of this House or of Parliament to review central and local relations has been widely supported. The previous government suggested that the case could be met by another ad hoc Select Committee in five years' time. I see no grounds for a five-year delay. Neither do I see that such a committee would in any way empower Parliament to regulate government. I mention that point because it has been made by one critic of the proposal; but in my view that criticism is wide of the mark.
  The LGA views such a committee as a powerful guardian of central and local relationships. That is a noble concept. The setting up of a committee is a matter for Parliament. It is one to which I venture to think we shall have to return. I look forward to hearing my noble friend the Minister when she replies to the question asked by the noble Lord, Lord Hunt.
  6.31 p.m.
  The Earl of Kintore: My Lords, I thank my noble friend Lord Hunt of Tanworth for initiating this important debate. I congratulate him on his new honorary post and on ensuring that his report Rebuilding Trust does not gather dust in some government department. Few Select Committee reports can have been debated by two different governments in less time than it took to compile the report.

  1489
  Local government finance figured highly in the evidence to the committee. At present, about 25 per cent. of the money required to finance local government is raised locally through the council tax. The remainder comes from central government. There is a distinct danger that central government may have strong views on how their money is to be spent. That is not good for local democracy. A way of raising more money locally could be to return the local business rate to local authorities. I welcome the remarks in the Government's election manifesto that they will consider returning the business rate to local authorities once they have consulted business.
  What I hope will not happen is what I read in the Daily Telegraph of today. On page 14 under "Local Government Finances", it states
  "Wealthy face big rises in revision of council tax".
  When giving evidence to the committee, the Department of the Environment stated that it thought that the maximum amount that the council tax could raise was 25 per cent. of local finance. I declare an interest as an owner of a small big house. I feel that we must be rapidly approaching the 25 per cent. threshold. In the article in the Daily Telegraph, Sir Jeremy Beecham, who gave evidence to the committee and who is now chairman of the LGA in England and Wales states:
  "In my view, we have got to get to a situation where we are 50 per cent. local authority funded and 50 per cent. centrally. And to do this you have to let the council tax take the strain. We could make the banding system fairer and more progressive. It will mean people in higher value houses paying more but I have no problem with that".
  Well, Sir Jeremy, if you read this, I do have a problem. You may have fallen into the trap of assuming that everyone who lives in a big house is wealthy. That is not so, and indeed by the choices that they make in educating their children, having their own library and their own water and sewerage system, they may well be a much smaller burden on the rates than people living in more modest homes.
  I imagine that local authorities realise that money is tight and will remain so for at least two years. So, if no new money is forthcoming, perhaps I may suggest that local authorities ensure that they are making the best use of what they have. I am not talking here of more compulsory competitive tendering but of a war on waste. I do not mean the problems which excite the Audit Commission, but the small wasteful practices which are in every authority. Individually they probably do not amount to much but collectively they amount to enormous sums. Even a 1 per cent. saving of waste in local government spending, forecast to be £74.5 billion for 1996–97, is a considerable sum. I leave your Lordships with a Scottish proverb:
  "Look after the pennies and the pounds will look after themselves".
  6.36 p.m.
  Lord Plant of Highfield: My Lords, I was pleased to be able to serve on the Select Committee, so ably chaired by the noble Lord, Lord Hunt of Tanworth. I am only sorry that when the report came to be debated in
  1490
  the House the first time my university duties prevented me from taking part. So I am especially pleased to have an opportunity to contribute something today.
  It was widely accepted, I think, right across the political spectrum that the appointment of the Select Committee was timely. Indeed, many of the committee's recommendations were welcomed. The report itself raises some fundamental questions about the future role of local government in relation to central government.
  One of the first things that the committee recognised was the constitutional importance of local government and the fragility of its place within the UK's constitutional arrangements. It is important constitutionally in at least two respects: first, local government has revenue raising or taxing powers, if one likes, and it is important in terms of the diffusion of power within what is, at least until the Government's devolution proposals go through, still a unified state.
  Nevertheless, given those constitutional issues, the committee recognised that in the absence of a comprehensive or systematic written constitution, local government's role was vulnerable to the policies of the governing party in Westminster. Because local government is important in our traditional constitutional arrangements, we need to ensure that the impact of what central government do is properly understood and assessed.
  The previous government—I make no comment on the virtues or vices of their policy in this respect—through a whole range of individual (what the noble Lord, Lord Hunt, called piecemeal) policies, and which I might perhaps call incremental policies, produced a profound change at the end point of those incremental changes in the relationship between central and local government. I do not know—I am not in a position to know—whether those incremental changes were part of a grand strategy to change the relationship; but, nevertheless, they did change the relationship. In those circumstances, it is important that we do not lose sight of what I still believe to be one of the most fundamental of the Select Committee's proposals; that is, the establishment of a Standing Committee of this House or of Parliament generally to keep an eye on the relationships between central and local government, because those incremental changes can have a large-scale consequential effect. However, it is an important recommendation. Although I do not expect my noble friend necessarily to address the matter tonight, I hope that the Government keep the proposal firmly in mind.
  The proposal is apposite in the light of the Government's devolution proposals. The constitutional arrangements for the United Kingdom will change fundamentally, and devolution for Scotland and Wales is bound to have an impact on local government, as my noble friend Lord Prys-Davies said. Not only would such a Standing Committee reasonably look at the relationships between central and local government, but it might also look at the relationships as they develop between central government, local government and devolved bodies in Scotland and Wales. That is an important issue of which we should not lose sight.

  1491
  The second important aspect of the report is the emphasis on the fact that the degree of freedom and autonomy of local government depends crucially on its capacity to raise its own revenue. That point was well made by Sir Frank Layfield in his 1976 report. Indeed, the issue goes further than that, as Layfield said. It is not only that freedom and autonomy imply a degree of self-financing but also that responsibility goes with raising one's own revenue. As Layfield stated—and we quote this important point—people feel more responsible for policies for which they have had to raise the resources. That is true of individual life and of corporate and collective bodies, too. If we wish to increase the autonomy and freedom of local authorities, naturally the cry will go up, "Well, they must behave responsibly". So they should, but they are more likely to behave responsibly if they are accountable to their local electorate for money that they must raise rather than relying on grants from central government. That is an important point.
  In relation to that, the Committee took the view that capping should be relaxed and that it is far too blunt an instrument in such a context. We made some suggestions about that. It would be fair to say that the committee was not overly impressed with the Treasury argument (which can be found in Chapter 5 at paragraphs 17 and 18) in favour of arguing for retaining capping and government control of local authority financing. It would be tedious for noble Lords to obtain the paper for themselves if they do not already have it, but we tried to rebut the Treasury arguments in our conclusions at paragraph 5.37. Of course, there is also evidence in the volume of evidence.
  Perhaps in reply the Minister can comment on the Government's thinking not only about the short-term issue of capping, because we know what is to happen during the next year or so, but about their attitude to the general control of public expenditure in relation to what are undoubtedly their legitimate interests in macro-economic policy and how far local government expenditure affects macro-economic policy. We were rather sceptical about Treasury reviews in that respect.
  If we are to increase the responsibility and freedom of local authorities we need to take three steps. First, the power of central government to control local government expenditure should be relaxed over a period. Secondly, more resources for local government should be raised locally. I know that there are different views about how that ultimately might be done, but the first step would be the relocalisation of the non-domestic rate. Thirdly, those two proposals taken together would raise issues of accountability for revenue raising and expenditure.
  They could be enhanced in several ways. Obviously, we do not want to give local authorities such a freedom without suggesting what might be put in place to ensure that responsible behaviour ensues. First, we could ensure that more information was available in local authority areas about the aims, purposes and effectiveness of local authority expenditure on services. There could be published performance indicators, targets keeping to Citizen's Charter standards and, of
  1492
  course, public reports from the Audit Commission. All kinds of pressures could be put on local authorities which perhaps did not exist when capping was first introduced. It is not a case of returning to the pre-capping days, because other mechanisms are available to try to ensure the virtuous cycle of local authority revenue raising and spending.
  Another aspect which has changed since the introduction of capping is that local councils are now more a part of the mixed economy of service delivery; that is to say, while they may be funders of services, regulators of services and so forth they are not the only providers of services. Such diversity and mixed economy of local authorities will also ensure greater accountability. It is important to note that our proposal does not return to a pre-capping situation because there are all kinds of other mechanisms which the previous government, to their credit, introduced and which could be used to ensure virtuous behaviour. I hope that that does not sound too condescending.
  Finally, I wish to stress the importance of local authorities as leading partners in local economic development. The report dealt with partnership generally, and that is likely to emerge as an important role for local government in the foreseeable future. Relations with training and enterprise councils have not been too good and I hope that that situation will change. Indeed, there are signs that it is changing. As I entered the Chamber during the debate on the previous Bill, unfortunately the noble Baroness was concluding her speech. She was talking about the potential role of local authorities in relation to the welfare to work programme, the environmental task force and so forth. Those are excellent examples of how local authorities can enter into partnerships with other bodies and play a central role in local economic development. I look forward to reading her speech in that debate in Hansard.
  Overall, the report was most important, but two major issues remain to be resolved. The first is a Standing Committee or some other mechanism for monitoring this important set of relationships and the second is the issue of local authority finance, which is intimately bound up not only with the freedom of local authorities but with their capacity to act responsibly.
  6.48 p.m.
  Baroness Hamwee: My Lords, I must declare an interest as a serving member of a local authority. I, too, thank the noble Lord, Lord Hunt of Tanworth, not only for introducing the debate but also for his sterling work in pulling together that disparate group of people on the Select Committee. The unanimity was not the lowest common denominator, but it was greatly helped by the noble Lord's chairmanship. He has since become something of a hero in the local government world, which may not have been an outcome that he expected when he became chairman. His election as president of the Local Government Association is not only a token of the personal respect for him but a symbol of the goal of better relations, which he embodies.
  The report of the Select Committee was entitled Rebuilding Trust. As other noble Lords have said, trust is the most important ingredient in the relationship. The

  1493
  committee in its report considered that relationships could have been worse, but they still left a lot to be desired. We also left quite a few gaps between the lines. I believe that we expected the informed reader to read something into those gaps.
  I approach the debate with a spirit of optimism, tinged with a little concern as a result of events over the past few weeks. However, I feel considerable optimism because of the language being used by the Government. I do not regard it simply as a matter of cosmetics. I say optimism because of the very obvious willingness of Ministers to meet people from local government as well as from other walks of life. The leader of my own council seems to be spending much of his time in meetings at Eland House at present. If it is a device by central government to divert local government from getting on with local tasks, then they might be succeeding better than they expected. However, I do not accuse them of that Machiavellianism. I say optimism also because I do believe that they have real ambitions to show that the old way was not the best way and to change it.
  My concern is about some of the events in the past few weeks. I am not suggesting that if I asked the question, "What do you think of it so far?" we would receive the classic answer. My own answer is that I remain to be convinced on all matters, though I welcome a number of steps. I welcome especially the Government's signature to the Council of Europe's Charter of Local Self-Government, which was long overdue and was one of the recommendations from the Select Committee which the previous government rejected.
  However, I must wonder aloud whether this country is already straying from that charter. I refer in particular to the article which deals with financial resources of local authorities. Article 9.1 provides that,
  "local authorities shall be entitled within national economic policy to adequate financial resources of their own of which they may dispose freely within the framework of their powers".
  That is guarded language and has all the hallmarks of negotiation and compromise in the drafting. However, I believe that even the most sceptical would read into it a requirement for quite considerable financial autonomy at local level.
  As has already been said this evening, our committee recommended that capping should no longer be general practice. Yet one of the first acts of this Government has been to cap two counties and to give indications, at any rate in the medium term, of their attitude to capping. Capping is not just a desk exercise. Those counties have been quite clear about the possible effects in particular on the education service, as regards the likely sacking of teachers, as well as the less dramatic but very real erosions of good education which can result from restricting expenditure.
  Having read on through the charter, I wonder which articles would be selected by the Government when they come to ratify it. It was only on re-reading the document that I realised that Article 12 provides that,
  "each contracting state may select paragraphs",
  1494
  although it is required to select a good number. Is the Minister in a position to share with us this evening the articles which will be selected? I hope that such points on financial autonomy will be ones which the Government will happily ratify.
  On the question of finance, I have to say that the harder the last government tried to convince us on the subject of capping, the less convinced we were. I am not sure whether it was Treasury officials of whom the noble Lord, Lord Beloff, was thinking when, in a previous debate, he talked about feeling like an anthropologist in the rain forests of New Guinea because local government was, to him, a whole new world. He referred to local government officers as being "strange creatures" and said:
  "My conclusions were somewhat surprising. In the whole series of oral evidence … those who came out best were the officers of local government. Their evidence was in general clear, to the point and well expressed. Those who came out worst were, without exception, civil servants".—[Official Report, 18/11/96; col. 1119.]
  As I said, I do not know whether the noble Lord had officials from the Treasury in mind. In the Select Committee we were certainly pretty hard on them and trenchant in our rejection of their arguments in the report. Since then, I have taken great pleasure in quoting on a number of occasions the footnote which we used to describe their arguments; namely, "humpty dumpty arguments"; in other words,
  "When I use a word, 'Humpty Dumpty said in a rather scornful tone', it means just what I choose it to mean—neither more nor less".
  The committee recommended the use of capping only in extreme cases and stressed that that capping should be subject to parliamentary approval, by which we meant that a parliamentary committee should be established to maintain an overview of central/local relations. Like other noble Lords, I believe that it would be a real indicator of the Government meaning what they say about local democracy and independent local government if they had the confidence to propose to Parliament that such a committee should be established; that is to say, if they were prepared to allow such a committee to maintain and report on that overview.
  The remit that we proposed was really quite limited; namely, the health of the relationship. I, for one, would not be prepared to allow for parliamentary supervision of local government in the way that has been understood or misunderstood by some commentators. The point made by the noble Lord, Lord Plant of Highfield, about incremental changes is most important. Guarding against such changes—as regards, for example, the greater effect than any such change might by itself imply—would be just the sort of work that such a committee could do.
  While I am dealing with the question of finance, I cannot resist a short response to the noble Earl, Lord Kintore, who I do not believe was prepared to acknowledge this evening the relationship between council tax and other taxes. That relationship was made very clear by the previous government whose last two Budgets led to the inevitable increase in council tax because of the way they dealt with income tax. Coming from a borough which raises something like

  1495
  45 per cent. of its budget from the council tax, I have to say that the problem is not that percentage; the problem is that that borough is so out of kilter with other boroughs that our residents simply do not understand why the level of tax is such as it is. They rightly feel very unhappy that they are expected to pay at a higher level than in neighbouring boroughs, simply because the boroughs are so differently treated through the grants system.
  I have already referred to what I regard as an unhappy centralising tendency in central government, which is not just evident in capping. Indeed, we debated this afternoon the treatment of capital receipts. We have also seen, and will debate in the autumn, plans for regional development agencies. I accept that they will have large numbers of councillors as members, but I wonder why central government see the need to impose yet another structure—instead of allowing the blooming of, though not a thousand, perhaps rather a lot of flowers—on the partnerships between local government, central government, business and the voluntary sectors; and, indeed, applying the odd bit of fertiliser to help those partnerships as those flowers come along.
  We are about to see plans for London government. The presidential style mayor which has been so widely trailed seems to me to show that the Government are more comfortable with a centralised, rather top-heavy, top-down approach. One of the issues dealt with by the Select Committee was that of community leadership which plays a most important role. As your Lordships will appreciate, it is hard to act as a leader if one's powers are circumscribed.
  I look forward to proposals which may allow local authorities to have greater powers. I speak as one bruised by the provision that local government may do only what it is allowed to do by central government. My authority put forward an apparently perfectly sensible plan to charge developers for planning advice just to recover costs. This House, acting in its judicial capacity, rejected that plan as being ultra vires. I confess that I was the chair of the planning committee which proposed the plan. I proposed the plan in conjunction with my vice-chairman, who is an astute and successful businessman. We felt that we had been harshly treated by the system.
  I know that the Government do not want to be seen as a nanny. I hope that they move fast and far from that role model, not least because I believe that the Government's own commitments will, to a large extent, rely on local government for implementation. As the noble Lord, Lord Hunt, said, the report of the Select Committee was unanimous. Central government's friendship towards local government—which local government is keen to reciprocate—must embrace power sharing and power shifting.
  I appreciated the comments that the Minister made at the end of the earlier debate which revealed that partnership and flexibility are very much in the mind of the Government. That is the first time I have heard that concept expressed in that way and it was welcome. I look forward to more assurances which I hope the Minister will be able to give us tonight, including some
  1496
  rumoured announcement. I do not know what that may be. However, it is a pity that if the announcement is so important, no other noble Lord may speak after the Minister and therefore none of us will have an opportunity to respond this evening to the news, whatever it may be. The Minister looks puzzled; perhaps we are not to be given the news that is the subject of the rumour. Perhaps the Minister has not even heard the rumour.
  7.2 p.m.
  Lord Bowness: My Lords, like other noble Lords, I am grateful to the noble Lord, Lord Hunt of Tanworth, for initiating this debate this evening. I am grateful to him not only for discussing the report but for the fact that initiating this debate has enabled me to speak on the report, for unfortunately I was unable to be present when it was debated on a previous occasion. There is no doubt that local government have a powerful advocate in the person of the noble Lord, Lord Hunt of Tanworth, who is president of the new Local Government Association. Local government is particularly fortunate in that regard.
  Like the noble Baroness, Lady Hamwee, I have an interest to declare as a member of a local authority. I declare that interest as I am required to do so by standing orders. However, I also hope to convince the House that as a member of local government for nearly 30 years, and as leader of a local authority for some 18 years, I am unashamedly a supporter of local government. I believe that good local authorities have an important role to play as leaders of their communities. Across the country we have seen exciting schemes of regeneration and partnership with the private sector and other bodies. That has been achieved by local authorities of different political persuasions. Therefore I am a supporter of local government.
  The problem with being a supporter of local government is that whenever one discusses that subject, everyone agrees that there should be strong local government in the United Kingdom; that it should be accountable; and that it should play a full part in the democratic process. However, the difficulty always seems to concern how one achieves that within the United Kingdom. I welcome unreservedly attempts made by the present Government to improve relations with local government; but I do not think we should forget that the previous administration also made attempts to improve relations with local government. In the previous debate on this report in November, the noble Earl, Lord Ferrers, (who was then the Minister) mentioned a genuine attempt by local government and central government to rediscover the traditional relationship between central and local government which the then government and the great majority of those in local government believe is the right way of proceeding.
  The Labour Party when in opposition accused my party of deliberately seeking to destroy local government and their freedoms. I hope that noble Lords opposite will accept my credentials as a local government person when I say that I believe the notion that that was deliberate was more a perception of being

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  in opposition than a reflection of the truth. This evening I do not think it is useful to look backwards. However, I remind noble Lords of the speech of my noble friend Lord Ferrers on the previous occasion we debated this matter when he explained how circumstances had changed and how some in local government had sought to change the traditional balances between local and central government. Certain measures had been taken.
  The problem with asserting the rhetoric that one side is trying to destroy local government is that now noble Lords opposite are the Government they will find that the realities of government will inevitably lead them to have to disappoint some friends and colleagues in local government because of the essential tensions which exist between central and local government. I hope that the noble Baroness will not mind if I refer to examples of that from the earlier debate this afternoon. I refer to borrowing powers rather than the release of cash and to the retention of capping. If London government is reorganised how will the powers be devolved as regards the London boroughs? Which powers from central or local government will be devolved to regional development agencies? What are the reserve powers that auditors, or the Audit Commission or the Secretary of State will keep regarding best value? I pose those comments as questions and not particularly as criticisms.
  We also need to remember that we often draw invidious comparisons with other countries regarding freedom of action, powers and the financing of local government and local administrations. Yet, often, upon closer examination, United Kingdom local government are found still to enjoy considerable discretion, influence and freedom which compare favourably with what happens elsewhere. It is difficult to read across from one jurisdiction to another if only because of different political traditions and history.
  My local authority has had a long association with a local authority in the Netherlands. The Netherlands has always seemed to me to have some splendid aspects to its system of local government. However, I doubt whether a system which enables the appointment of the Burgomaster or of the Queens Commissioners by the Crown would be acceptable if adopted in the United Kingdom with regard to similar appointments. We in this country draw on totally different political traditions.
  The difficulty with achieving the increased status that we should all like to see for local government is the perception of the public. If noble Lords wish to consider my following remark as being indicative of a failure on my part with regard to my local authority, I may have to bow to the criticism. The public care about services. They are relatively content with those services, if all the surveys are to be believed. However, I do not believe they mind too much who provides those services. They care even less about the geographical boundaries of the authority that provides the services. They give their loyalty to different communities for different things. For some purposes those communities comprise small units; for others they may be larger than the area of the relevant local authority. In rare cases such as Rutland there is a particular geographical loyalty which corresponded in the past—and now again in the present—to administrative boundaries.
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  I regret to say that I do not think it is likely that the vast majority of the public would take to the streets to save the administrative unit of their town, county or city. One of the difficulties under which local government has to labour is the perception by the public, perhaps encouraged by ourselves, that Westminster is the all-important forum. Indeed, local election campaigns for the main political parties are fronted by the parties' parliamentary spokesmen; and then we complain that local elections are fought on national grounds and that there is a poor turnout.
  This is not so much a criticism as a realisation, I hope, of how much has to be done to achieve a balance between national and local government if it is to have the status that has been spoken about, and indeed the status that many local governments and other forms of local administration have in other countries.
  I do not believe that reorganisations change attitudes or give status. The suggestion in the Government's manifesto that there could be regional assemblies only where there is predominantly single tier local government is worrying if that envisages another bruising round of local government reorganisation.
  Dare I suggest in this House that we should learn from the French how existing local authorities work together in statutory frameworks which enable them to do so without reorganising themselves? No one contemplates abolishing one of the 36,000 mayors in France. They have legislative frameworks which enable small communities to work together more effectively. In larger communities, the conurbations, the urban communities, the district arrangements bring those communes together with structures which are of, and belong to, the communes, all without the problem of reorganisation.
  The issue is a fascinating subject for me, and I am sure for other noble Lords who participated. I am grateful to the noble Lord, Lord Hunt of Tanworth, for bringing the matter forward. I hope that when the Minister replies, the noble Baroness will share with us how she envisages some of the fundamental issues being confronted. I am sure she will not suggest that because there has been a change of government suddenly all will be well.
  7.12 p.m.
  Baroness Hayman: My Lords, no, I shall not suggest that just because there has been a change of government suddenly all will be well. But I suggest that we shall start assembling the building blocks to make things better than they have been; and that is our responsibility.
  I am extremely grateful to the noble Lord, Lord Hunt of Tanworth, for initiating tonight's debate, for his skilful work in chairing the Select Committee and for so lucidly and persuasively introducing the report's theme and conclusions in his opening speech. We are having a speedy second debate on the Select Committee's report, as the noble Earl, Lord Kintore, pointed out. Far from gathering dust on the shelves, the danger of this report is that it will be so well thumbed that it will fall to pieces before we can study it properly. However, I hope that I am in a position tonight to convince the sceptics

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  among your Lordships—perhaps the noble Baroness, Lady Hamwee, will take comfort from this; she expressed her concerns earlier—that we can give a reply from the Government Benches to the report which does not immediately implement all the recommendations; which does not put right overnight some of the things that have gone wrong over the long term; but a reply that is positive not only in tone but also in substance. It is the substance that is often the more challenging task. Perhaps we shall be able not only to agree with the Select Committee on the diagnosis but to start initiating some of the treatment.
  Perhaps I may say to the noble Lord, Lord Bowness, that I accept, as I think everyone in the House accepts, his credentials in terms of commitment to local government and his distinguished service within local government. However, although if we are charitable we may accept that the previous administration did not deliberately destroy the relationships and powers of local government, I fear that they carelessly destroyed those relationships and some of those functions. We have to look at the incremental effects over nearly two decades. They have been referred to by my noble friend Lord Plant and others.
  The overarching theme of the Select Committee's report was summarised in its title Rebuilding Trust. I believe that the reconstruction of public confidence in public administration is an essential responsibility for this Government in a whole range of areas and on a whole range of issues. Tonight, however, we are focusing on the specific challenge of rebuilding trust between central and local government and of creating that partnership referred to by my noble friend Lord Prys-Davies and other noble Lords.
  I stress at the outset that we agree completely with the Select Committee's thesis that the rebuilding of trust is essential. I believe that for too many years local government has been seen as part of the problem, not as an essential factor in the solution. If we are to meet the enormous challenges out there, and to reconcile some of the tensions that the noble Lord, Lord Bowness, rightly pointed out—the tensions are inevitably inherent in the power sharing between different levels of government—the climate of the relationship in which we do that is absolutely central.
  The creation of a new climate and the reinvigoration of local democracy were the focus of many of the specific recommendations of the Select Committee and are central equally to the Government's thinking about local government. Encouraging increased democracy, autonomy, accountability and partnership was the key element of the proposals for local government reform set out in our manifesto. Those proposals parallel in striking fashion the recommendations of the Select Committee report. I accept that the challenge for the Government will be in turning the words into reality. However, I believe that in the limited time available we have made significant progress. But in essence we shall have to be judged not on the words or even the deeds of less than 100 days. What we have achieved in this
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  field will have to be judged on the outcome and outputs at the end of, I believe, not one but at least two Parliaments.
  On some of the specific recommendations of the Select Committee, perhaps I may deal first with the recommendation of a Bill to enable local authorities to experiment with their internal management arrangements, allowing authorities to pilot the way decisions are taken and accounted for. We in government want to encourage greater public participation in local government and local democracy and democratic innovations in local government. However, as the noble Lord, Lord Hunt, pointed out, finding time for legislation is always a challenge, and time has not been able to be found in the Government's legislative programme for this Session.
  I believe that I can see an opportunity for partnership. If the noble Lord, Lord Hunt, could be prevailed upon to introduce such a Bill as a Private Member's measure, I can assure him—it is perhaps the announcement that the noble Baroness, Lady Hamwee, sought—that the Government will provide all the support that we could and wish such a Bill Godspeed. It would mean that councils would be able to try out different management arrangements such as a small executive or an executive mayor accountable to back-bench councillors. What would be appropriate for one authority might not work for another. But it is important that councils should be able to try out those schemes in reality rather than simply float them as ideas. Piloting and experimentation with new ideas is a concept that has our support.
  Another aspect of the report dealt with encouraging the leadership role of local authorities by giving them restricted powers of local competence. The Government want to see local authorities develop their roles as leaders and champions of their communities. In our manifesto we said that we would place on councils the duty to promote the economic, social and environmental well-being of their area. We are working closely with the Local Government Association to determine just how such a duty should be framed, to ensure that it achieves what we all intend and addresses the problems of the gaps in the powers that local authorities already have in a sensible and coherent way.
  The Select Committee also called for better arrangements across Whitehall to handle local government issues, a point raised in the debate. We have made a start. We held the first meeting of the central/local partnership just a week ago. It was chaired by my right honourable friend the Deputy Prime Minister. At that meeting seven members of the Cabinet, together with seven other Ministers, sat down round the table with leading members of the Local Government Association. I assure the House that the discussions were no mere formality on that occasion. Today, the Deputy Prime Minister and the Chancellor of the Exchequer have both been at the Local Government Association conference. If there is a wicked plot to take the leader of the noble Baroness's council away from duties at local government level, perhaps the same plot is operating to take Ministers in my department away

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  from their duties at departmental level—a lot of people are spending a lot of time on trying to get this matter right.
  The remit of the forum initiated by the Deputy Prime Minister is to consider the major issues involving local government, particularly those that cross departmental boundaries and require a government-wide approach. The partnership will provide a new, overarching forum for exchange.
  At future meetings we and local government at the highest level can discuss those key issues with which we are both concerned that relate to delivering a better quality of life to all our people. We can also debate seriously those challenges and tensions which we have a responsibility to make creative rather than destructive.
  The Select Committee also called for the expansion of existing guidelines for central/local relations into a more formal concordat. We shall be working closely with the Local Government Association on developing a concordat for central/local relations.
  Both the noble Lord, Lord Plant, and the noble Baroness, Lady Hamwee, referred to the recommendation that a parliamentary committee should be established to take an overview of central/local relations. As noble Lords will recognise, that is ultimately a matter for Parliament itself. But the central/local partnership meeting that we have put in place creates a forum, albeit a limited one, for Ministers and local councillors to oversee those relations and discuss what other measures are necessary.
  I am grateful for the welcome that was given to the signing by this Government on 3rd June of the Council of Europe charter on local self-government. Perhaps I may add my acknowledgement of the role played by both the noble Lord, Lord Bowness, and my noble friend Lady Farrington in piloting, supporting and championing that convention. We have demonstrated central government's recognition of the value and worth of local government and shown our commitment to and belief in democratically elected local government.
  We intend to ratify the charter. As the noble Baroness, Lady Hamwee, indicated, there is a question relating to the selection of articles. However, as did the previous Government, we believe that our domestic legislation on local government conforms with the charter as a whole.
  The noble Lord, Lord Prys-Davies, asked whether the Government would review their own compliance with the charter as they would expect the Welsh Assembly to do. We take all our international commitments very seriously. Signing the charter is no exception. I can say with confidence that our programme for local government will ensure that local authorities and our relationships with them will have the status and role envisaged within the charter.
  A number of the Select Committee's recommendations, and a great deal of the debate this evening, concerned matters that are essentially financial. That is perhaps in some ways the most difficult area in which we shall have to reconcile the aspirations of local government and the responsibilities of national government in terms of economic priorities.
  1502
  Resources remain tight, and I understand the frustrations within the local government sector. We have done as much as we can within existing public expenditure plans. The Chancellor of the Exchequer announced in his Budget an extra £200 million in this financial year and £700 million next year for housing and housing-related capital investment. At the same time he announced more resources for education—£1.3 billion over the course of this Parliament for upgrading and modernising schools. Earlier this afternoon we discussed the Government's supplementary credit approvals Bill in terms of the added investment that we are giving to local authorities.
  The issue of capping has inevitably been raised in the debate tonight. The Select Committee recommended that it should be used only as a reserve power where an authority has set a clearly unreasonable budget. We have said that we intend to abolish crude and universal council tax capping. We have to work out with the local government associations how we can make the change from the situation that exists at the moment, and to which we made clear we were committed for the current year, for the future. My right honourable friend the Deputy Prime Minister has been talking about exactly these issues in Manchester today.
  The committee recommended that non-domestic rates should be returned to local control. We said in our manifesto that we would consult business fully about effecting that return.
  There are no instant answers on this matter, nor on resolving the dilemmas that were exposed by the noble Baroness, Lady Hamwee. We will be saying more about the comprehensive spending review that has been initiated and the part that local government finance will play in that review. It is absolutely essential that we consider the changes that need to be made in local government finance within the context of the comprehensive spending review so that, together, between local and central government, we can deliver on our manifesto commitments and on the very challenging tasks that we have set ourselves as a government.
  I was tempted to follow the noble Earl, Lord Kintore, on the issue of banding and raising local taxation. I am always slightly nervous in this House when someone starts talking about "a small big house". My husband has not recovered from the conversation he overheard one night between two noble Lords, when one asked the other, who had been speaking on countryside measures, whether he had many acres. He replied, "No, no, only a few hundred. In fact, I've got more bedrooms than I've got acres". So the definitions of "a big house" are slightly outside the normal parameters of such. We have to look carefully—this will be one of the issues addressed in the comprehensive spending review—at the balance between locally generated income and income that is generated at national level.
  The issue as to how we replace compulsory competitive tendering is part of the whole range of financial issues being dealt with. We are committed through our manifesto to a regime of best value. We will be consulting local government widely about that duty of best value.

  1503
  I make no apologies for not having come to the House with fully worked out proposals on these issues. It is central to what we are trying to do to create an ownership of the solutions that will eventually be reached between national and local government. I am not trying to hide the fact that difficult issues will arise and there will be difficult judgments to make during that process. What we can do is bring a new spirit and a new climate to the discussions. We can work together towards solutions that will not please all the participants all of the time but will at least, I hope, be accepted as having taken into account the views of those who participated.
  The proposals for best value fit very much into our vision of local authorities which have a more complex role today, as my noble friend Lord Plant pointed out, and which are both commissioners and deliverers of services. We also want to see local authorities develop their role as leaders and champions of their communities. We want to encourage democratic innovation in the broadest sense. There is a great deal going on at the moment in the local government world and our approach will not be to be over-prescriptive or to try to enforce a single model. Rather, it will be to enable individual local authorities to tailor and to pilot those arrangements which are best suited to their local circumstances.
  Equally, in the regions we have made it clear that we shall not be imposing the single national blueprint. The legislation on regional development agencies will allow for each region to have an agency which best suits its own circumstances.
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  All that will take time, but we are committed to taking forward our programme of change and are doing so in consultation with local government and after detailed discussions with local government. We want to ensure that its expertise and views are known from the earliest stages of policy development, so that when we take decisions they are soundly thought out and based on local government experience.
  The democratic deficit in our society is deep and is perhaps most harshly felt at local government level. It will take both sides, local and central government, working together some time, imagination and commitment to rectify that deficit. But it is one of our essential tasks and a task in which we believe local government is willing and able to play an important part.
  I believe that at the end of that process we shall have achieved the aims both of this Government and of the Select Committee in terms of re-invigorating local government, of increasing democracy, autonomy and accountability. We shall not do so simply by making speeches. We shall do so by going away and putting in the hard work on a basis of mutual respect that will be essential to turn those words into reality.

  Alliance & Leicester plc (Group Reorganisation) Bill [H.L.] (formerly Girobank plc (Transfer) Bill)
  Reported from the Unopposed Bill Committee with amendments.
  House adjourned at twenty-nine minutes before eight o'clock.