Sitting of 7 October 1980

Preamble
The House met at half-past two of the clock: The LORD CHAIRMAN OF COMMITTEES on the Woolsack.
Prayers—Read by the Lord Bishop of Newcastle.
The Lord Noel-Buxton—Sat first in Parliament after the death of his father.

ELECTRICITY CHARGES: SCOTTISH ISLES
Lord FERRIER: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether a decision has been reached about the proposal to make a 10 per cent. surcharge on electricity supplies to consumers in the Western Isles; and whether they will make a statement.
The MINISTER of STATE, SCOTTISH OFFICE (The Earl of Mansfield): My Lords, the North of Scotland Hydro-Electric Board announced on 29th August last that it had decided to withdraw the 10 per cent, surcharge on tariffs applying in its diesel areas. This decision was welcomed by the Government.
Lord FERRIER: My Lords, while thanking the noble Earl for his reply, may I ask whether he is aware that the board at the same time declared that the surcharge on those tariffs was properly applied? Is he further aware that in imposing the tariffs they did not refer to the Electricity Consultative Council before applying them?
The Earl of MANSFIELD: My Lords, I am aware that the board had made that claim. Indeed, under the provisions of the Electricity (Scotland) Act 1979 the fixing of the tariffs is the responsibility of the board and the Government can intervene only in very specific circumstances. As regards the last point raised by my noble friend, I understand that it is the intention of the Electricity Con-
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sultative Council for the North of Scotland District to make representations to the Government to this effect, and I can assure my noble friend that they will be given careful consideration.
Lord ELWYN-JONES: My Lords, will the Minister say what the circumstances were which gave rise to the Government's intervention in this particular case?
The Earl of Mansfield: My Lords, I think that that question, not as to character but in the scope of the answer, rather goes outside the generality. There are various circumstances in which my right honourable friend may give a direction to the board, in this case to withdraw, for instance, a surcharge. However, he received certain advice in the particular case which my noble friend raised before your Lordships' House, and my right honourable friend took certain action. At any rate, it had the happy result which I told your Lordships about earlier.
Lord FERRIER: My Lords, does the noble Earl agree that the reply which he gave to me will be received with great acclamation by the public generally? Does he further agree that the proposal to remove this lacuna in the Scottish law would only bring it into line with the law in England whereby boards have to apply to the Electricity Consultative Council?
The Earl of MANSFIELD: My Lords, I am not over-interested in the law in England, but there are certain arrangements in that country which I think we in Scotland could look at and consider whether they could be adapted and, if necessary, applied in Scotland.
Lord BOWDEN: My Lords, despite the Minister's disinterest in the law of England, is he aware of the fact that the surcharge in England on power is about the same as in the Western Islands? In other words, we pay 10 per cent, more per kilowatt here than is paid North of the Border. Is it possible that some other members of the Government might take an interest in that rather remarkable fact?
The Earl of MANSFIELD: My Lords, I am sure that that point will be well noted.
Lord CAMPBELL of CROY: My Lords, will my noble friend confirm that it was, indeed, other groups of islands, as well as the Western Isles, which were threatened with this surcharge, because the generation of electricity had to be by diesel oil and therefore was expensive? However, will my noble friend accept that the large majority of those on the mainland made it clear through the press and in other ways that they were happy to pay the extra which would fall on them in order that these island groups should not in this way be discriminated against?
The Earl of MANSFIELD: Yes, my Lords, I think that there was very considerable disaffection and anxiety in Scotland that persons who experience considerable disadvantage through geographical remoteness should not suffer what might be described as a further penalty.

SHIPBUILDERS: COMPENSATION UNDER 1977 ACT
2.41 p.m.
Lord MONSON: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they believe that acquiescence in the virtual confiscation of the assets of certain naval shipbuilders under the provisions of the Aircraft and Shipbuilding Industries Act 1977 is compatible with traditional Conservative principles.
The MINISTER of STATE, DEPARTMENT of INDUSTRY (Viscount Trenchard): My Lords, as I explained to your Lordships in May, it would be wrong to describe the compensation provisions of the 1977 Act as "virtual confiscation", although we accept that they were unfair in respect of some companies. As has been explained in another place on 7th August, it was only with very great regret that we concluded that there is no satisfactory way to alter the 1977 compensation terms. It is no part of traditional Conservative principles to remedy one unfairness by creating new ones.
Lord MONSON: My Lords, I thank
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the noble Viscount for his reply, although I must say that it does contradict what many of his colleagues said four years ago. Is he aware that shortly before the Recess nearly every Conservative Back-Bench MP, together with the Ulster Unionists and nearly all the Liberal MPs including Mr. David Steel, voted for a Private Member's Bill which would have effectively led to fair compensation being paid to these companies, and that this Bill was only narrowly defeated because of abstention by the Conservative Front Bench? Is he further aware that failure by this Government to remedy the injustice will give a perfect excuse to a future Government of the extreme Left to nationalise every public company in Britain, and every private company too, virtually without compensation?
Viscount TRENCHARD: My Lords, as I have told the noble Lord before, we are fully aware of the pressure and the criticism about the compensation terms, and we share the view that they have been unfair to a number of companies. I really cannot add to what my right honourable friend the Secretary of State said on 7th August, and I must draw the noble Lord's attention to another principle which is equally important. It is that of "retroaction"—a terrible word. But if we are to start altering statutes passed in 1977 and based on values—which is the problem—in 1973 and 1974, based on an announcement in March 1975 after which there have been both many settlements under the Act and many share dealings in company shares and in parent company shares—if we are to go back on all that, we are bound to create much more unfairness and to set a precedent that retroactive tampering with previous Acts is also a permissible affair. That is just as big a problem.
Lord PAGET of NORTHAMPTON: My Lords, at a convenient date and with due notice will the noble Viscount tell us what are traditional Conservative principles? I have never believed that there were any.
Viscount TRENCHARD: Everything good, my Lords!
Lord MONSON: My Lords, can the noble Viscount explain why it is considered perfectly all right for Labour

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Governments to reverse what they consider to be bad Conservative legislation but quite wrong for Conservative Governments to reverse bad Labour legislation?
Viscount TRENCHARD: My Lords, I do not think that I have said it is right for any Government to reverse or tamper with Acts that have been passed. To pass totally new Acts for the future is another question. But here we are talking about a nationalisation Act that was passed through Parliament with certain terms which the outside world—reluctantly in many cases—had to accept and act upon. The noble Lord is not pressing us to bring in new privatisation legislation, which we are trying to do whenever we can, but he is pressing us to go back and alter the terms of an Act passed a long way back. Any Government that does that will receive criticism from these Benches.
Lord DRUMALBYN: My Lords, perhaps my noble friend can answer this question. How long, in fact, did it take to pay the amounts of compensation due, or whatever you like to call it? What were the delays and what was the amount of interest that was paid in the meantime on the outstanding amounts due? That is one form of retroaction that would always be approved, where there is undue delay in payment and interest has not been paid.
Viscount TRENCHARD: My Lords, I can tell my noble friend that interest has been payable since vesting day; that is, between vesting day and the date of settlement for the individual company's case. For interest to go back before vesting day, bearing in mind that the Act became law only on vesting day, would I think be a principle that has not previously been followed. Therefore, interest has been payable between vesting day and the date of settlement.
Lord LLOYD of KILGERRAN: My Lords, I declare an interest, in that I am a small shareholder in the Vosper company. Will not the Minister agree that it is a basic principle of Conservatism that where a gross unfairness is recognised the Government have a discretion to give relief in such a circumstance?
Viscount TRENCHARD: My Lords, I do not think—this may be an unpopular remark to make—that any Government is capable of preventing unfairness as it turns out after the event. Although we criticised very heavily, and would still do so, the party opposite for nationalisation at all in this area and for the terms of that nationalisation, they did not set a new precedent in naming a particular period for trying to assess the value of companies concerned. The problem arose in the length of time between the announcements and the Act finally becoming law. During that period a number of companies did substantially worse and a smaller number of companies did substantially better than they had been doing in the reference period. It is, of course, the latter which in retrospect one can see have been treated extremely unluckily to the point of unfairness.
Lord STRATHCLYDE: My Lords, do I understand that the noble Viscount's remarks apply to companies that have been literally robbed of their assets, such as Yarrow?

BRITISH PRISONERS OF WAR: PAY DEFICITS
2.50 p.m.
The Earl of KIMBERLEY: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government when they propose to rectify the unpaid deficit owing to British prisoners of war in the last World War; and whether they will ensure that interest at a fair rate is added to compensate for inflation over the last 35 years.
The MINISTER of STATE, MINISTRY of DEFENCE (Lord Strathcona and Mount Royal): My Lords, under the terms of the Geneva Convention 1929, officer prisoners of war in Germany and Italy were entitled to receive regular payments from their captors. Deductions were made from the pay accounts of officers held prisoner to take account of such payments. Our records show that, at the end of the war, arrangements were made across the three Services for any such payments which had not been received to

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be refunded. The onus was on individual officers to make claims for such refunds and, so far as we can ascertain, these arrangements were drawn to the attention of returning officer-prisoners. Where adequate records did not exist, payment was, in general, made on the basis of the prisoners' declarations. A detailed investigation into the basis of recent complaints about these arrangements is being carried out by the Ministry of Defence, under the chairmanship of a Minister, and a full statement will be made by the end of the month.
The Earl of KIMBERLEY: My Lords, while I thank my noble friend for that Answer and realise that some prisoners were paid in full, there were still many who were not. Can my noble friend say what action those unfortunate people, or their next of kin, should take, so that this wrong may be redressed? Is he aware that all prisoners from Australia, Canada and the United States were paid in full?
Lord STRATHCONA and MOUNT ROYAL: My Lords, I do not think that I can add to what I said. I think that the noble Earl will have to await the outcome of the thorough investigation which is being made at the present time. May I just point out that making an investigation of this kind is far from easy 35 years after the event when a great many of the relevant records have been destroyed.
Lord GRIDLEY: My Lords, may I ask my noble friend the Minister how it is that these payments have been delayed? Is he aware that, from my experience as a Government trustee of the Far East Prisoners of War and Internee Fund, delay of this type often causes extreme hardship, and that often these men are dead before they can be fully compensated? It is 35 years since the end of the last war. Can my noble friend give some guarantee to noble Lords how long this business is to go on and when it will be expedited?
Lord STRATHCONA and MOUNT ROYAL: My Lords, may I first say that we have to be careful to distinguish between the situation which applies in the Far East and the situation which applies in Europe. The Geneva Convention applied only to Germany and
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Italy, so I think we have to leave out the question of Japanese prisoners of war. The second point is that it would be prejudging the issue to say that payments have been delayed. What I am saying is that a very thorough investigation is being carried out and that we intend to report on that by the end of the month, which is not really a long delay.
Viscount BRIDGEMAN: My Lords, does my noble friend realise how wrong some people would think it if there were any suggestion that there should be a time bar to any of these claims?
Lord STRATHCONA and MOUNT ROYAL: My Lords, of course it is perfectly true that the Statute of Limitations would indeed legally apply, but here again it would be prejudging the issue for me to pass comment on that point.

EEC BUDGET CONTRIBUTIONS: UK REFUND
2.53 p.m.
Lord BRUCE of DONINGTON: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they will state the amount of Britain's net contribution to the EEC they expect to receive by 31st March 1981, and give particulars of the arrangements made to ensure that the agreements made by the nine member states as regards repayment are carried into effect.
The MINISTER of STATE, TREASURY (Lord Cockfield): My Lords, according to the Commission's estimates, the total refunds due to the United Kingdom in respect of the 1980 budget amount to some £710 million. The precise arrangements for payment of these refunds, and the timing, are currently under negotiation with other member states. But my noble friend the Foreign and Commonwealth Secretary is pressing at today's Foreign Affairs Council for the earliest possible agreement on the regulations governing these refunds. The Government expect to receive the bulk of the sums due by 31st March.
Lord BRUCE of DONINGTON: My Lords, is the noble Lord aware that the House will receive that assurance with some satisfaction? Is he also aware that it has been widely reported in the press that the French Prime Minister has stipulated that there must be a settlement of the forthcoming price review before France, for her part, can concur in the refund of the £710 million to which the noble Lord refers? Will the noble Lord give the House the specific assurance that the repayment to the United Kingdom of £710 million will not in any way be made conditional on our advance agreement to any increases that the French may desire in the price review that takes place some time afterwards?
Lord COCKFIELD: My Lords, I am grateful to the noble Lord for the support in the first part of his supplementary question. He and I are of course entirely on the same side in desiring to see a satisfactory settlement of the budgetary problem. The difference between the Government which had the honour to receive his support and the present Administration is that while the previous Administration talked a great deal about these matters the present Government have arrived at a satisfactory solution. I think we can leave these matters safely in the hands of my noble friend the Foreign Secretary who is currently pursuing these negotiations at the meeting today.
Lord PAGET of NORTHAMPTON: My Lords, will the noble Lord agree that this £710 million is money to which Her Majesty's Government are entitled; that apparently until March somebody else is having the use of that money; that the use of money at the present moment is an extremely expensive item; and can he assure us that we will be paid for that use at the appropriate rate of interest?
Lord COCKFIELD: My Lords, there was clear agreement at the meeting on 30th May as to the refunds to be made to the British Government in respect of their contributions to the EEC. We ourselves adhere to that agreement in the terms in which it was negotiated. We expect other people to do the same. The noble Lord is trying now to introduce a new factor into the negotiations which
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I should hardly think appropriate at this stage.
Lord PAGET of NORTHAMPTON: Why not?
Lord BRUCE of DONINGTON: My Lords, may I ask once again that we receive the assurance of the noble Lord that the payment of the sums due to the United Kingdom, or its timing, will not be conditional on any negotiations over the annual price review? Since he has seen fit to introduce the party political atmosphere into this question, will the noble Lord note that, at a time when most of us representing the United Kingdom were creating quite a row in the European Parliament about this deficit to which he has referred, his Conservative colleagues in the European Parliament, in another place and here were pretending that the deficit did not exist at all?
Lord COCKFIELD: My Lords, I am sorry that the noble Lord should take offence at the fact that the present Administration have been so much more successful in conducting their affairs than the previous Administration. So far as his earlier point is concerned, there was a clear and specific agreement at the meeting of Foreign Ministers on 30th May about the refund due to the United Kingdom. At the same time there was also an agreement that member states should make their best endeavours to ensure that the prices for agricultural products were fixed in time for the 1981 marketing season. There is no formal connection between these two matters, and Her Majesty's Government do not accept that there should be any formal connection between them.

BUSINESS
Lord DENHAM: My Lords, it may be for the convenience of your Lordships if I announce that dinner will be available this evening at the usual time. The Committee stage of the Local Government, Planning and Land (No. 2) Bill will be adjourned at about 7 p.m. for approximately one hour and the two Order Confirmation Bills will be taken during this adjournment.

LOCAL GOVERNMENT, PLANNING AND LAND (NO. 2) BILL
3 p.m.
The PARLIAMENTARY UNDERSECRETARY of STATE, DEPARTMENT of the ENVIRONMENT (Lord Bellwin): My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.
Moved, that the House do now resolve itself into Committee.—(Lord Bellwin.)
On Question, Motion agreed to.
House in Committee accordingly.
[The LORD ABERDARE in the Chair.]
Clause 7 [Regulation of functional work]:
[Amendment No. 38 not moved.]
Clause 7, as amended, agreed to.
Clause 8 [Accounts relating to construction or maintenance work]:
Lord SANDFORD Lord SANDFORD moved Amendment No. 38A:
Page 10, line 33, at end insert—
("(7) Notwithstanding the obligation in this clause and associated regulations to maintain separate accounts for each type of work specified in subsection (2), if in any year no more than fifty operatives at any time were engaged on any particular class of work, then the authority may at its discretion choose in the subsequent year to account for work of that description, together with work it may undertake of a different description.").
The noble Lord said: The Committee will see that Clause 8 requires authorities to keep separate accounts for general highway works, minor new works, other major new works over £50,000 and other maintenance works undertaken by their direct labour organisations. I have no argument with that and I see the point in so prescribing. But it will often be the case that the activities in one or other of those categories of work will be so small in the case of a particular authority as not really to justify the maintenance of a separate set of accounts. A typical instance would be where a district council employed, say, 100 workpeople, a sizeable force, for the maintenance of its housing but only 30, 40 or fewer people in respect
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of highway maintenance as part of an agency agreement with the highway authority. In such cases I submit that the district council would be put to unnecessary expense, which we all want to avoid, in maintaining separate sets of accounts for very little purpose. My view is that the de minimis principle should apply and that at some point an authority should have discretion to include a small area of activity within the accounts of the larger one, and something along the lines of the amendment would give a choice to the authority. I am not particularly wedded to the exact form of the amendment and would be happy if the Government on reflection were to introduce one like it. I believe the view I have expressed is shared by the other associations of local authorities.
Lord BELLWIN: We have a great deal of sympathy with the objective behind the amendment, which offers the chance of a useful minor simplification at the cost of no real relaxation of the accounting disciplines. I cannot, however, accept the amendment as its stands, for not only is it defective in its drafting, but it also sets at 50 employees a limit which is far too high to distinguish genuinely de minimis activity which does not need to be accounted for separately. In our own new clause implementing our promise to provide a de minimis exemption, we have settled on 30 employees as the appropriation level. It is obviously essential that no relaxation of the accounting procedures of the sort proposed here should go beyond that. Nevertheless, I do not reject my noble friend's amendment out of hand; it is a worthwhile suggestion which we shall examine further, and I trust that with that explanation he will withdraw it.
Lord SANDFORD: I am grateful to my noble friend, and on that understanding beg to withdraw that amendment.
Amendment, by leave, withdrawn.
Clause 8 agreed to.
Clause 9 [Contents of accounts relating to construction or maintenance work]:
Lord DAVIES of LEEK Lord DAVIES of LEEK moved Amendment No. 38B:
Page 11, line 5, at end insert—

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("( )(a) Expenditure on the employment of indentured apprentices shall be excluded from any account prepared under this section provided that the expenditure so excluded shall not exceed one-fifth of the total expenditure on employees otherwise chargeable to that account.").
The noble Lord said: I apologise to the Committee for this being a manuscript amendment and at the outset I wish to thank the Table for their help; I need only say that sheets of paper went astray. I hope that without my needing to divide the Committee the Minister will consider this amendment in depth and give a satisfactory answer. Clause 9 is succinctly headed:
"Contents of accounts relating to construction or maintenance work".
I am pleading on behalf of apprentices. In recent years the number of apprentices taken on in both the private and the public sector of the construction industry has been falling. The Regional Joint Training Committee for the building trade recommends that the ratio should be one apprentice to five tradesmen, but that level is not being met. Indeed, the private sector average is one apprentice to 18 tradesmen, and the general manager of Bovis has said:
"My board has had to limit the number of new apprentices in the past few years because of financial restraints".
We understand that. Local authority direct labour organisations have been able to maintain a reasonable number of apprentices up to now, but if Clause 9 is enacted in its present form they will be forced to make drastic reductions.
The Committee has a great deal of work before it and I will therefore be brief, and I certainly will not bore noble Lords by quoting many figures. I must however mention a few figures for some inner London boroughs. In Southwark, the latest intake of apprentices has been 25, giving a total of 78, the ratio being one to 10, not the suggested one to five. In Tower Hamlets, 29 apprentices have recently been taken on, giving a total of 68, a ratio of one to five, which is just on the mark. In Lewisham 27 apprentices were taken on, giving a total of 67, a ratio of one to seven. I will not give detailed figures for more boroughs, save to mention that the ratio in Lambeth is one to three and in Greenwich one to 10. All those boroughs have confirmed that
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this legislation will force a cutback in the number of apprentices in the next few years whatever political party is in power or whatever colour the council may be.
The training of apprentices is of vital importance to Britain, not only to combat unemployment but to help provide a properly skilled workforce for the future. The amendment would encourage all direct labour organisations as well as the private sector to maintain apprentice training. In this period of growing unemployment, apprenticeships are essential to create the craftsmen we need. That is not to denigrate the academic side; the greatness of Britain depends not only on the greatness of our academics but on the quality of our engineers and the opportunities given to them. Nothing would do more to eliminate the terrible "cowboys" operating in society today than to give young men the opportunity of a first-class apprenticeship subsidised by the local authority and helped by an intelligent Government. According to the Minister, that is what the present Government are; he said a few minutes ago that everything the Tories stood for was good. If that is the case, he should accept the amendment.
On a BBC phone-in programme this afternoon it was pointed out that, instead of having youngsters walking the streets, it should be realised that every youngster given an apprenticeship was a youngster who would be a credit to Britain as a qualified craftsman, and we shall need qualified craftsmen of all types in the future. What is more, since the party opposite believes in private enterprise, let these skilled young men have in their hands a craft that they may have learned the hard way through going to the technical colleges, the polytechnics or working under craftsmen. They will then have some skill and they may take the great initiative that is worshipped by the party opposite and become independent little businessmen on their own account rather than "cowboys" robbing people for jobs ill done. The point is made. To add any more to it would bore both sides of the Committee. I do hope we can get an answer that will enable me to withdraw my amendment, because there is some promise from the Minister. I beg to move.
Lord EVANS of CLAUGHTON: May I say, in spite of the lateness of the amendment, which is unavoidable as I understand it, that I do support it very much on two separate but overlapping grounds. One is the point that the noble Lord, Lord Davies of Leek, made—the importance of continuing apprenticeships and creating skilled craftsmen. In my part of the world, in the North of England, one of the great problems related to the high unemployment we suffer is the very high incidence of unskilled labour. Many of the private sector organisations, for one reason or another—presumably because of the difficulties they are suffering during the recession—are taking on fewer and fewer apprentices. In local government generally, I suppose—again, this is what we are finding in Merseyside and I am sure it is true of other parts of the country—with the cuts the Government are imposing and which local authorities are having to make, there is a problem about taking on employees. That is one point, and I think every encouragement must continue to be given in the public sector, because of the difficulties the private sector is suffering, to create a skilled workforce.
There is the second point that the Government are exhorting local authorities to give employment to young people and provide employment for young people. If the cost of the provision of that employment is going to be part of the cost of tendering, then, of course, the direct labour organisations will have inflated tendering procedures and will not be competitive because of including the cost of training. Therefore it would seem to me that the fairest course would be to take the cost of training apprentices out of the direct labour organisation side and put it in the training budget of the local authorities so that the direct labour organisations' budget would not be falsely inflated by doing what everyone is exhorting the Government to do. So I should have thought there were two very good grounds there for supporting or at least giving a general indication of approbation to the noble Lord's amendment.
3.12 p.m.
Lord BELLWIN: I am not sure how much importance one really attaches to a manuscript amendment put down literally seconds before one has a chance to
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consider the facts. I should have thought that anything that was really of great moment ought to go down as soon as possible so that we on this side—the Government—have a chance to consider it in depth. But having said that, can I say, so far as this amendment is concerned, that I very much appreciate, as I always do, the eloquence with which the noble Lord, Lord Davies, makes his point, and I sympathise very much with the motivations behind it. But I think I would have to say that if one considers the implications carefully, they are that if one took out any part of the cost of training apprentices from a DLO's costings, that would mean that unless the private sector were in some way able to do the same thing—and I do not see how they would do that—they would be at an immediate disadvantage when being competitive and when tendering.
I think that the way to make a contribution to the problem which concerns the noble Lord in this amendment is surely to look at the general spending on training. Local government makes a contribution to the Training Board of which I think the noble Lord, Lord Greenwood, is still the chairman. He is not here now, but I am sure he will be here soon. While this whole matter of training, as the noble Lord, Lord Davies, rightly said, is one that has to concern us, particularly at this moment in time, I do not think that this is the way to do it.
I do not say that because the amendment comes in the form of a manuscript amendment, although I think that does rather put it out of court. In general, on the point itself, I feel we could not accept it as such. Of course, we will talk about it later. Certainly I could not accept it now and I am sure that in its present form I will not be able to accept it later, but I sympathise with the point made, because who would not be concerned about training generally at the present time?
Lord DAVIES of LEEK: I should like to explain that it was not because of any remissness on my part. Documentation was put in. I do not want to blame anybody. I am grateful for the help the Table gave me in getting it in as a manuscript amendment. So it was not neglect or a misunderstanding.

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We will skip that. I am trying to interpret the mind of the Minister. He said he wants to help in some training. I do not want to delay the Committee at this juncture because in another part of the Bill perhaps we will get an opportunity. But I would point out that even private enterprise gets some subsidy with the apprenticeship system, with grants to technical colleges and polytechnics. Let us get it on the record. I think I will have to divide the Committee. I do not know. There may be an opportunity later on. The Minister did make some suggestions, and perhaps he can give me a note. Consequently, I will withdraw, and we might have a look at it on Report. Would that help the Committee?
Lord SANDFORD: Before the noble Lord withdraws that amendment, and not knowing at all what the circumstances were which led him to feel that he had to table a manuscript amendment, I wonder whether I might read the standing order on manuscript amendments. It says:
"This practice has great disadvantages, in that other Members of the House will not have had an opportunity of considering the terms of such amendments and may be deprived of the opportunity of moving amendments to them".
That is certainly the case:
"Whenever possible, therefore, notice should be given … Occasionally a manuscript amendment is justified, as, for instance, in order to correct an amendment already tabled, or when an amendment under consideration is objected to, and it is clear that with slight alteration of language it would become acceptable to the Committee".
Whatever may or may not have happened, I should have thought that the circumstances which normally justify a manuscript amendment have not been met, and perhaps it would be better, certainly if the noble Lord is thinking of forcing a Division, to return to it at the next stage when everybody has had time to consider it.
Lord DAVIES of LEEK: I have been in this House and in the other place for 35 years and I know what I am doing. That does not have any influence at all on me. But I will give notice in time for the Report stage. Out of courtesy to the Minister, who found himself a little bit at sea because of the speed, I will withdraw it at this juncture. We will see how the debate goes and there will be a chance on Report. I will do it in time.
Lord RHODES: Does the Minister realise what he has said? Does he realise how much money other Government Departments are pouring into job creation schemes and all kinds of schemes for young people? Surely he would back up the virtue of what has been proposed? Does he realise how long it takes one to get a ceiling done at home because of the lack of skilled operatives? I have been waiting for six months for a ceiling that a good plasterer could do.
This situation is making a contribution to inflation because these people can charge what they like. They are paid in cash; and it goes on like that. If more men were to be properly trained in their craft there would be some competition, which would satisfy Conservative principles and would satisfy people who at present are having to pay through the nose for repairs.
Lord BELLWIN: I understand exactly what I am saying and the reason for saying it. I wonder whether the noble Lord opposite in his turn realises the implications of what is being suggested beyond the mere training question. The training issue is one on its own. The impact upon the costs of direct labour organisations, and therefore their ability to compete on equal terms with the private sector, is also a factor to be taken into account. Yes, I understand exactly what I said, and why I said it.
Amendment, by leave, withdrawn.
Clause 9 agreed to.
Clause 10 [Annual balance sheet etc.]:
3.21 p.m.
Lord BRUCE of DONINGTON Lord BRUCE of DONINGTON moved Amendment No. 39:
Page 11, line 35, leave out ("each description of").
The noble Lord said: I beg to move the amendment that stands in my name. Since we are coming to the stages of the Bill that deal with matters of account, it is, I feel, proper that I should declare a personal interest in the subject matter of many of the clauses that follow, in that it is quite possible that my own firm, Halpern and Woolf, who are accountants, may be called into consultation by local authorities on certain aspects of the Bill.

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Therefore I think it wise and only fair that that declaration should be made.
Matters of account are not really conducive to sparkling after-dinner conversation. They are generally regarded as unstimulative and dry, and very often at best obscure, and I must ask the indulgence of the Committee, if, when dealing with this particular clause and some of the amendments that follow, I have to pursue these matters in some detail. In conjunction with, I think, all Members of your Lordships' Committee, I hold that the function of this Chamber is to examine meticulously the proposed legislation that is laid before it with the objective of making it as tidy and as intelligible as possible.
The profession of accountancy is a comparatively young one. My own institute, the Institute of Chartered Accountants, has its centenary this year, but it is relatively young in comparison with the legal profession. However, as a result of experience over many years, which has shown the members of the legal profession that accounting advice should not be taken lightly, I hope that what I have to say this afternoon may find favour with Members of your Lordships' Committee.
The amendment before us deletes from the clause the words "each description of". Under the clause every local authority is mandated to produce
"not later than 30th September in the financial year following that year"
a balance sheet, a revenue account, and a statement of rate of return, as is stated in subsection (2).
Subsection (3) states:
"The balance sheet must show a true and fair view of the state of affairs of the local authority or development body, at the end of the financial year to which it relates, in respect of each description of construction or maintenance work undertaken by them in that year".
The amendment that I have put down deletes the words "each description of", and therefore the local authority would be required to produce a balance sheet only in respect of the DLO as a whole. The reasons for that are as follows. It is quite impossible for a balance sheet to be prepared in respect of each description of work. As Members of your Lordships' Committee will be aware, there are covered here general highways work—
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that is one description; works of new construction over £50,000, which form the second description; work of new construction under £50,000, which is the third description; and maintenance work, which forms another description.
If the clause is left unaltered, a balance sheet must state the assets belonging to each division of work. That would be quite impossible and quite impracticable. As they are at the moment, DLOs have a number of assets, including perhaps a yard, an office, or a warehouse, with plant and machinery, such as cranes, earth-moving equipment, trenchers, hammers, scaffolding, and compressors. Some DLOs may have a joiners' shop incorporating very expensive plant and machinery. They may have moulders, cross-cuts, band saws, routers, sanders, and a whole array of equipment. All these items are under one direct labour organisation. They are the assets of the whole of the direct labour organisation. DLOs also have stocks, such as bricks, cement, timber, sand, steelwork and the like, all of which in the normal way would be under the total control of the DLO as a complete entity.
How can one apportion the asset itself? —shall we say a crane which may be used in works of new construction costing over £50,000, or which in part may be used in work amounting to under £50,000 and in part may be used in highways or, in remote circumstances, perhaps even on maintenance work. Exactly the same applies to the stocks. Is the DLO required to divide the tons of sand in its possession in order to share it out among the four categories of work, in respect of each of which an individual balance sheet is to be prepared? That would be quite impossible and quite impracticable. In this view I am fortunate enough to have the support of my own institute, the Institute of Chartered Accountants, and of CIPFA, the Chartered Institute of Public Finance and Accountancy. It would be quite impossible to do this.
There is no reason at all why a revenue account cannot be produced in respect of each division of work. That is quite practicable. As we shall see when we discuss later clauses, a statement of rate of return may present considerable difficulties, but to have a balance sheet for each particular section simply is not

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feasible. I am well aware that parliamentary counsel may well take the view that the matter is all covered, or that it can be segregated in a code of practice, or that possibly at a future date it can be covered by regulation; or that possibly it is not even the intention of the Government that each department should produce a balance sheet covering each particular description of work. But the only way we can deal with it in this House is simply to accept the amendment that I put forward, because without it the clause simply makes no sense.
I am well aware that there may be among your Lordships a certain impatience with such refined descriptions, but I call in my aid in support in this House, on whatever side of the Committee they may sit, those of your Lordships who have had any experience in commerce, in finance and in industry. Moreover, the question is not of academic importance. As will be noted from the later stages in this Bill, when Clauses 13 and 14 come to be discussed, the real significance of this may be seen. I beg to move.
Lord BELLWIN: The certainty with which the noble Lord, Lord Bruce, presented his case almost convinced me that we should take an opposite course of action to that which we had decided to take, namely, to accept his amendment. He nearly talked me out of it, but I shall resist. We hold to the principle of separate accounting for each of the four distinct areas of direct labour activity set out in Clause 8(2). It is essential that an authority should keep clearly in mind the purposes for which it runs a direct labour organisation and should not think of itself as a general building contractor. If certain sorts of work can be done more cheaply and effectively by private contractors, councils should not attempt to carry them out by direct labour, subsidising losses by transfers from more efficient operations in other sectors. Thus the separation of the accounts according to the four types of activity should ensure that ratepayers and councillors can see where there is danger of this happening, and the provision in Clause 13 that a rate of return has to be earned separately on each activity should check it when it does.
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However, besides these requirements for separate accounting and separate justification, the requirement of this clause for four separate balance sheets is relatively unimportant. We accept that as long as the requirement for separate calculation of the rate of return remains in Clause 13 little will be lost in the way of clarity or informativeness of the annual financial statements if authorities are allowed to prepare a single overall balance sheet covering all their construction or maintenance activity. The single balance sheet would still have to show a true and fair view of the authority's position, and those who wanted to examine it more closely would be enabled to do so by means of the separate statements of rates of return earned on the assets listed in that balance sheet. In fact, the amendment might even save authorities a minimal amount of work; therefore we accept the amendment.
On Question, amendment agreed to.
Clause 10, as amended, agreed to.
Clauses 11 and 12 agreed to.
Clause 13 [General financial duty: treatment of surpluses and deficits]:
3.35 p.m.
Lord BELLWIN Lord BELLWIN moved Amendment No. 40:
Page 12, line 41, at end insert ("work").
The noble Lord said: This amendment requires little explanation. It is necessary to put right a printing error and insert the word "work", so bringing this sentence into line with similar references to construction or maintenance work throughout Part III of the Bill. I beg to move.
Lord BRUCE of DONINGTON: In a mood of reciprocal courtesy, may I draw the noble Lord's attention to the rubric, which is almost opposite his new amendment, which is to insert the word "work", and point out that the rubric at present reads:
"General financial duty: treatment of surpluses and deficits".
May I suggest that he eliminates the words "surpluses and", because this

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was disposed of in another place and is no longer relevant. Surpluses are no longer in this Bill.
Lord BELLWIN: I am grateful to the noble Lord for that observation and we will pass it forward.
On Question, amendment agreed to.
Lord BRUCE of DONINGTON Lord BRUCE of DONINGTON moved Amendment No. 41:
Page 12, leave out from beginning of line 42 to end of line 3 on page 13.
The noble Lord said: Clause No. 13 deals with the financial duty of local authorities to produce a rate of return on capital employed. The amendments that I put down, Nos. 41 and 42, may possibly be taken in conjunction with Amendment No. 44, which embodies the same principle, and it may be convenient to the Committee and save time if I endeavour to discuss all of them together.
The clause as it stands requires a rate of return for each description and also provides that each description of work shall show a positive rate of return on capital employed. I think, and I am supported by the profession in this, that this is going to be most difficult of accomplishment, precisely because it is not possible to divide the assets out over the various descriptions of work, the four descriptions of work I have described. It is a matter of some difficulty to determine the capital which is applicable to each particular section. The Government's point of view, I think, is expressed in its consultation paper, Local Authority Direct Labour, where it says:
"The requirements on a DLO to earn a real rate of return on capital employed will help authorities to identify the true cost of the organisation and to decide whether it should make better use of its resources by disbanding its DLO and applying the capital to other purposes".
This, in view of the provisions of Clause 14, is a little odd, to say the least of it, because it is quite clear within the context of the Bill that it is not going to be for a local authority to decide whether it is going to make better use of its resources. The real purpose of the Bill and of the clause itself is to give that power precisely to the Secretary of State himself, rather than to the local authority.
Then it says:
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"The method of calculating the return will have to be simple and capable of universal application".
Then:
"The Government proposes the following formula, which has been tested and has proved workable".
It then sets out its formula for the various deductions from gross trading income before charging interest on borrowing, and it says that after the various deductions have been made from gross trading income it should be divided by the total capital employed including working capital, with land and other assets valued at current market value after being written down for physical depreciation.
I point once again to the impracticability of determining exactly what the capital employed is in each description of work, and I gave these, as I say, when we were discussing the previous amendment. Moreover, the view that I have expressed is supported by the Institute of Chartered Accountants, which points out in its letter to the Minister dated 20th March the terrific difficulties that in fact arise. My institute said in its letter to the Minister:
"Clause 13 also requires a real rate of return to be earned on each of the DLO's activities. This will require a separate revenue account and a separate balance sheet for each activity".
Then there is this masterly understatement by a professional body, which I have expressed in slightly terser terms:
"This does not appear to be an entirely realistic requirement so far as concerns the balance sheet, i.e., capital employed. In many cases it may be impossible, except on an arbitrary and therefore possibly meaningless basis, to allocate an asset—for example, a yard or an office or a warehouse—proportionately to the activities for which it is used".
There are more reasons, aside from the technical reasons. There is also the complete unreality of trying, on the assumption that a rate of return on capital for each division of work could in fact be determined, to set a standard rate for them all. Surely, to put it in its least offensive terms, it is really nonsense to do something as completely artificial as that, bearing in mind the concession already made by the Government that they are going to permit, outside some of the customary restrictions that they have imposed, work on emergencies. If one particular local authority has a series of emergencies which involves the

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expenditure of social labour as distinct from profit-earning labour—the social labour that is held in such disregard by the party opposite—it means that when the local authority acts in its maintenance by reason of community interest, by reason of compassion, by reason of emergency, it is bound to incur a social cost, which cannot be measured in profitable terms.
What point is there, therefore, in trying to standardise a rate of return on capital for each division of work? It may well be that in one year our highways might yield a certain return, but it is by no means certain. It depends upon the phasing of work; and this applies uniformly throughout the private enterprise building sector, of which I have some personal experience. It is not always possible to aspire to an equivalent return on capital regardless of the type of work that is involved, and this is particularly true, for the reasons that I have stated, in relation to maintenance work.
Now it may be considered desirable that a rate of return on capital on the DLO as a whole should be sought. I have my own reservations on that. I still have the old-fashioned notion, which seems to be rapidly dying, that it is the principal job, task and dedication of a local authority to serve its citizens; that not always does there have to be, as Marx once said (though this has now been taken over by the Conservative Party), "the naked cash nexus 'twixt man and man". Within a local authority with compassion, with a sense of urgency and with a sense of public duty it is not always possible for it to conduct every one of its activities, even in a direct labour organisation, on the basis of naked profit alone. But on the assumption that it is possible and on the assumption that it is desirable—and these are large assumptions for the reasons I have already stated—it is quite unrealistic to endeavour to impose such a condition on each division of work.
I observe from the consultative document that it has been generally agreed that, having regard to the performance of private industry contemporaneous with the time when this notional figure was determined, 5 per cent. is the desirable figure. I have to draw the attention of the Committee to the fact that at the time
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the consultations took place and it was agreed, more or less, that 5 per cent. should be the desirable figure, that was indeed so in private industry; but today the figure is l½ per cent. So, in the light of the contemporaneous performance of industry, which is running at 1½ per cent. return on capital employed owing to the introduction of policies upon which at this stage I would desire to pass no further comment, can we have the Government's assurance that the required rate of return will now be amended to 1½ per cent., bearing in mind that in the construction industry recently returns on capital of 0·97 per cent. have been produced?
I am well aware that when I express my views I tend to express them with some force, on the basis that if a belief is held it ought to be held strongly, anyway, and articulated in a similar way; but I sincerely hope that the noble Lord will not allow the incisiveness with which I have sought to present the argument to inhibit him in taking the completely commonsense attitude towards this and accepting the amendments that I venture to lay before the Committee. I beg to move.
Lord HARMAR-NICHOLLS: I think it might help if I could follow on from the last words of the noble Lord opposite. I hope my noble friend will not let the Dr. Jekyll and Mr. Hyde personality of the noble Lord who has moved the amendment interfere with the force of the arguments that he has put on one part of it. When he was talking as an accountant, he was well worth listening to and his words ought to be heeded. When he brought in that little bit of extreme party political flavour of his, then that ought to be disregarded. We are at the Committee stage, where that does not count; it does at Second Reading, if you like, but not Committee stage. However, I should like to say to my noble friend that on reading this clause it looks as though, just as he recognised in the case of the last amendment that he accepted, this can be simplified a great deal and that the procedure could be worked with greater ease than would be the case if the words were left just as they are now.
I understand the problem of the feelings about direct labour organisations. I agree they have been abused in the past, and we have got to see that they are not abused in the future. But, if we are going to deal

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with them, let us deal with them through the front door and not try to strangle them by putting into Bills connected with them such words as ensure that they are virtually asphyxiated. All I am going to ask is that my noble friend will do the same with these amendments as he did with the last, and say that he will look at them again to see whether the accountancy advice which came from both the noble Lord and his institute is well substantiated by the sources available to the Government themselves. It looks as though it can be simplified without interfering with what is wanted. If it can be, it ought to be, and I hope that what was said by the noble Lord will not stop my noble friends looking at it with sympathy, from the accountant's point of view.
3.50 p.m.
Lord AVEBURY: These are amendments which have had support from an unexpected quarter indeed. The noble Lord, Lord Harmar-Nicholls, is not someone I would have expected to see giving support to the Opposition Front Bench. It must be a unique occasion in this House for him to have done so. It is a tribute to the noble Lord, Lord Bruce of Donington, and the forcefulness with which he put the amendments, that the noble Lord, Lord Harmar-Nicholls, has been so convinced by them. The noble Lord, Lord Bruce of Donington, did himself an injustice when he said it was very difficult in dealing with these accounting matters to make one's speeches interesting. Both on the last amendment and on this one I found everything he had to say interesting and of great importance, not only to the local authorities themselves but to the ratepayers who have to study these matters and try to make some sense out of them.
As I understand what has been said, both on the last amendment and on this one—and I confess I am only a humble engineer and not an accountant—if one has knocked out the provision which we dealt with in the last amendment, requiring local authorities to keep separate capital accounts for each of the undertakings mentioned in Clause 8, then it is no longer possible to measure the separate rate of return upon each one of them, as is provided for by Clause 13. One therefore has to look at the rate of return on the capital employed in the direct labour
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organisations as a whole. We would be perfectly justified in doing that, and in calling local authorities to task, if they were negligent in this matter or if the returns which they sought to achieve were not in any way comparable with those achieved in the private sector with which they are competing.
The noble Lord, Lord Bruce of Donington, also had a valid point when he suggested that the return on capital employed in the private construction industry had gone down drastically since the consultative document was produced. Whether it is now any longer 1½ per cent., or, in the light of the most recent report we have had from the construction industry, it may not now even be negative, is a matter we might look at before the Report stage, if the noble Lord the Minister does not accept this amendment.
It would be altogether too inflexible a procedure to mention a figure in advance and then require local authorities to adhere to it. In private industry, which I am used to, we certainly aim at a given rate of return on the capital that we employ, but we are not always successful in achieving it. To tie local authorities down in this way and to say that they must achieve such positive rates of return on the capital employed as the Secretary of State may direct is being totally unrealistic. It is quite fair to ask the local authorities to aim at a given rate of return as we do in private industry, but to force them into this strait-jacket of Clause 14 is not on. It would create enormous headaches for the local authorities. I do not see what is the point of having it there, unless there is some kind of enforcement. If there were some enforcement, with penalties for non-achievement of that rate of return, then a burden is being imposed on local authorities that their private competitors do not have to bear. For these reasons I hope that the Minister will be as accommodating on this amendment as he was on the previous one by the noble Lord, Lord Bruce of Donington, particularly as it attracted support from all three parties in the Committee.
Lord LEATHERLAND: I find myself uttering the same kinds of words as those spoken by my noble friend on the Front Bench. We have to beware of asking councils to take on more and more

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paperwork. I say that with a quarter of a century's experience as a member of a county council, as the leader of my party on it for 15 years, as the vice-chairman of the county council for several years and as the county council's chairman. I also speak from the experience—it was well over 60 years ago, when I came out of the Army—as the person in charge of the costing system of a very important department of the Birmingham corporation.
This proposal in the Bill is an unnecessary requirement. It will mean a great deal of extra work for council departments. They have to specify each description of work—that is a quote from the Bill. They have to deal with every separate activity. This surely means more and more officials, filling up more and more pieces of paper, and it means extra expense for the ratepayers. This is a quite unnecessary suggestion.
Lord BELLWIN: To take first the last point that the noble Lord, Lord Bruce of Donington, made asking me not to be adversely influenced by the way in which he puts the matters, may I say to him that it is not easy, but I will do my best! First, I too gladly speak to the three amendments together (Nos. 41, 42 and 44). This amendment seeks to blur the focus of the scrutiny to which direct labour organisations will be exposed by removing the requirement to calculate a separate rate of return for each of the four broad categories of construction work, as set out in Clause 8. This amendment would allow authorities to conceal inefficiencies and to ignore the true costs of continuing to maintain direct labour establishments in areas of activity where their involvement is uneconomic.
We can imagine, for example, an ineffective house building section and an efficient maintenance organisation within the same authority. We can imagine that the new house building section is faced with keen competition from private contractors. Unless we require that that new building section justifies itself in relation to its own real costs, including the costs of its capital assets, we can imagine the temptation to allow some of the capital burden to be assumed by the authority's maintenance section, which
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might be under less pressure, and then to permit the new billed prices to be lowered to what are fundamentally uneconomic levels. In those circumstances everyone would lose; the contractors, who were unable to match unrealistically low charges and lost the job; the council, whose ratepayers would be paying more than they need, both for their new housing and for repairs to existing stock.
The Bill's requirements for the separate calculation of the rate of return is designed to prevent such covert cross-subsidisation and to provide the means for a critical analysis of the effiectiveness of each category of direct labour activity, together with a rational assessment of the benefit to be derived from it. There would be difficulties in doing it: in apportioning the capital assets; in sharpening up estimating and pricing policies. But effective management is not easy in any circumstances, and the difficulties in many cases will be essentially those of doing for the first time what perhaps should have been done long ago.
The four categories set out in Clause 8 reflect real distinctions in types of activities. It is essential that authorities should be able to justify their involvement in each of them separately and should be able to assess their performance in each of them separately. The rate of return test—the essential yardstick the Bill provides for their measurement—must therefore be applied to them separately.
The Government want to prevent the risk of cross-subsidisation or even the risk of the accusation of cross-subsidisation. We want to have information available in as clear and specific a form as possible, in order to enable councillors and ratepayers to see just where these operations are succeeding and where they are failing. Once the rate of return has been calculated separately for each of the four areas of activity, then there can be no possible argument for not reporting the results of those separate calculations.
There is another argument which might appeal to noble Lord's opposite. It is simply this: whereas a notification of failure to earn a rate of return in one particular branch of activity, which is what the clause presently demands, might invite the Secretary of State to consider

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closing down or curtailing the activity of that branch, a notification of failure expressed in overall terms, which is what Amendment No. 44 would require, casts immediate doubt on the validity of the whole organisation. I would therefore have thought it much better for all concerned if the notification does pinpoint the trouble spots straight away.
It is important to bear in mind exactly what happens when an authority does not achieve that which is set down. This puts the 5 per cent. and 1 per cent. argument into perspective. What actually happens? The first year failure to achieve this leads to notification. The second year it leads to notification; the third year it leads to notification. The Secretary of State, it is true, can call at any time for a special report regarding any of the sections. That is fair enough. We have to bear in mind what happens if they do not achieve. What happens is that the matter is highlighted for the knowledge and information of everyone concerned within the authority, the citizen not least. That is no bad thing. If it were to say that immediately upon notification of failure to achieve a 5 per cent. return or whatever it meant that the Secretary of State steps in and closes it down, that would be different. We are not talking about that. This is about accountability. The local authorities that I know—and know many of them—in the main may be concerned, as the noble Lord, Lord Avebury, said, about the ability to achieve a return at certain times; but no one should object or would object to the principle of having it known that they had failed so to achieve. If the circumstances in which failure to achieve were reasonable—and there can be some where that would be so—so be it. The people should know what is happening. This is the nub of this particular proposal.
I find it not only no bad thing, but it is right; it is better for local government that they should have all their affairs in the open and that everyone knows what it is that they are doing. I think the responsible ones, the vast majority, will not mind. They might argue about the point of the 5 per cent. It is an argument; but I would answer it by saying that these things change. The better times will come but one cannot have a Bill that goes up and down like a yo-yo with 5 per cent. this time and 1 per cent.
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next. The 5 per cent. is there. By itself, it does not impose any special function or penalty on an authority; it is there as a bench mark to be used. I fear that the noble Lord's points about the social labour and the social cost were side issues. I respect the points that he was making and I know the importance that the noble Lord attaches to them by themselves; but in the context of what we are talking about in this clause, I do not think they are relevant. I hope I did not get him wrong when he was talking about naked profit as if it were a dirty expression. I am sure that it could not be that to him, as an accountant.
Lord BRUCE of DONINGTON: The noble Lord will forgive me but I did not say "naked profit". I said "naked cash nexus".
Lord BELLWIN: With respect, I wrote it down as the noble Lord said it and I am sure that Hansard will show that it was said. But that is not the crux of my argument. I think I would stand by saying that the Government cannot accept the amendment on the very important principle of saying why it is that we have this clause and what we are seeking to do. I have explained it, and for that reason—
Lord AVEBURY: Before the noble Lord sits down, he said a few minutes ago that there would be difficulty in apportioning capital assets but that it would not be impossible. The amendment that he accepted just now was one which relieved the local authorities of the obligation to show certain capital assets separately under each of the headings and therefore it becomes impossible, not difficult, for them to measure the rate of return.
Lord BELLWIN: It is one thing compelling or asking or obliging them to show; it is another, expecting, within prudent accountancy, that they would have the apportionments themselves.
Lord MORRIS: I think that my noble friend was a little unfair to the noble Lord, Lord Bruce. As I understood his argument, which has considerable merit, he was in no way condemning the need for the accountability of local government but purely the method of accountability—which is a different issue. I do not think that the views of the consultative committee

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of the accountancy bodies should be given anything other than great weight. They have serious reservations in regard to this part of the Bill and I think that they should be listened to with great care. I should like to ask the Minister whether the accountant body of those people who work in local government (whose name at the moment escapes me) are in line with the Government view on this matter or not.
There is one other point. I must confess that I was surprised to see in the body of the Bill that the Government have considered, I am sure with great care, the use of the current cost convention as opposed to the historic cost convention. As the Government themselves admit, and as is the case, the current cost convention takes account of inflation. I have always been of the opinion that the present Government are determined, if not to eradicate inflation to get it down to so low a level as to be of little importance. For them to presume in the body of this Bill that inflation is here to stay, I find rather strange.
Lord BELLWIN: On the latter point it seems that one cannot win. If one does not put it in then it is said that one is making no allowance for it, and if one does put it in then it is said to be rather strange. Knowing that my noble friend is always helpful in matters like this and that he, too, is a member of the same honourable profession as the noble Lord opposite, one would have to be concerned and to listen carefully to what has been said on their professional side outside their position within this House. The basic point is still the fundamental one; that is, what are we trying to do with this? Because we conceded the previous amendment on the capital side of it should not be held against us in that in trying to be helpful there we recognise what we try to seek at the end of the day, and that is the accountability, the bringing into the open of what is happening. That is the important thing that should concern us. I understand the point on how SIFCA feel about it. To the best of my knowledge—I hope I am putting it right—they suggest that this can work. In discussions we have had with them I would not want to say that they were expressing great enthusiasm; but they
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have said it can work. Beyond that I am not sure how much further I can go.
I should like to be able to say that because of the reservations expressed we ought to consider the points again. Perhaps we might. Noble Lords will recognise that I am thinking aloud; and I apologise for that. It is important that we do not fall into the trap of taking back amendments for Report stage and building a massive list of Report stage situations as we did in a previous Bill with which I was involved—and I do not mean the Transport Bill. If we do that we shall get bogged down at Report and be in difficulties. On the other hand, one must draw a balance, and where a matter ought to be considered, then it must be so. That is the priority. With that in mind, I would say (thinking aloud) that at least we ought to look at it again—even if I am still firmly of the opinion that I expressed previously. I think the importance of those who have spoken on the matter is such that we would look at it again. Beyond that I cannot go.
Lord BRUCE of DONINGTON: I am grateful to the noble Lord for having agreed to reconsider this matter. I cannot help feeling that after mature considerations have taken place with all the interested bodies we shall be able ultimately to arrive at a framing of this part of the Bill which will be reasonably satisfactory to all concerned. Having said that, and on the basis of the noble Lord's undertaking, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 42 not moved.]
4.10 p.m.
Lord BRUCE of DONINGTON Lord BRUCE of DONINGTON moved Amendment No. 43:
Page 13, line 12, leave out ("current") and insert ("historic").
The noble Lord said: This particular question has already been touched upon by the noble Lord, Lord Morris, and it deals with that part of the clause which makes it obligatory when calculating a rate of return on capital employed to have it determined on the basis of current cost accounting. This is the first time that the term "current cost accounting" has appeared in an Act of Parliament. It is

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perhaps a little noteworthy that no definition of it appears in the definition clause. With the leave and the indulgence of the Committee—although there must be many present who are familiar with the term "current cost accounting"— may I explain what this means?
The normal and traditional accounting methods employed in business and commerce over many centuries have produced accounts in terms of a trading profit and loss account and a balance sheet at the end of a particular period based on the money values that record the individual transactions that have taken place during that year. Book-keeping and accounting consist of records of money spent or received in the money units in which these are expressed, the indebtedness that is actually incurred in terms of the money units in which this is expressed, and also the credit extended to others on the basis of the money units which are the record of that particular credit transaction. This is known as the historic cost method of recording and accounting in this country.
It has been found that although accounts produced on a historic cost basis (which is the traditional method of accounting in this country) are a very acceptable measure, indeed the only accurate measure, of the profitability or otherwise of a company, during times when inflation is running at imperceptible levels, or shall we say acceptable levels—and, of course, the value of money has depreciated very considerably over the past 100 years at rates which have varied 2 per cent. to 3 per cent. or 5 per cent.—there has been a general consciousness by the commercial and business community that although this progressive diminution in the value of money is to be regretted, nevertheless it need not influence profoundly the way in which ordinary accounts prepared on a historic cost basis are considered.
This is not so when inflation is running, as it has been, at over 20 per cent. or, as even now, at something like 17 per cent. It means that when one has circumstances of that kind, and before one makes objective and business judgments on the basis of accounts produced on the historic cost basis, one has to take account of the fact that the assets recorded in the balance sheet, when they come to be replaced, will have to be replaced at a far higher cost. It does not take into account the
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fact that when stocks of ordinary trading commodities come to be replaced, or come to be re-bought, they may have to be replaced at a significantly higher cost. It does not take into account the fact that by the time the debts owing to a company or corporation recorded on historic cost terms come to be settled, the money will not be worth the same as when the debts were originally incurred. Of course, the converse takes place in regard to credit incurred.
It is for that reason that the accountancy profession, in collaboration and conjunction very often with Government departments, have developed a code of adjustments to historic cost accounts which reflect the particular trends which I have described. Indeed, this is only as it should be. It would be an imprudent management that did not take account of the developments that had taken place since the balance sheet date, that failed to take account of the very high rate of inflation, the operation of which would tend to distort. For management purposes it is indispensable that some kind of current cost accounting adjustment should be made. It is also, incidentally, convenient for managements who do not like to have excessive dividend claims by shareholders on the basis of the historic cost profits, when they are likely to demand more in dividends than the company's projected cash flow will permit it to pay. It is also additionally convenient for them, of course, when dealing with trade unions. Much of the current cost accounting covention has been directed to all those three probably wholly admirable aims.
Although these developments are desirable from the management standpoint, and as long as they do not detract from the basic historic cost accounting methods of recording individual transactions, it has to be borne in mind that they are not mandatory by law on any part of private enterprise. They are comprised in the current cost accounting convention put out by the Institute of Chartered Accountants and the other bodies in what is called SSAP16, which means the Statement of Standard Accounting Practice.
It is made quite clear in SSAP16 that this applies only to a very limited extent in British industry. I must emphasise that this is not law. This is only recommended

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standard accounting practice, which of course for practical purposes for those it affects means that those in the professions whose function it is to audit and present accounts become bound by the codes of their own institute. Therefore, professional accountants dealing with those companies that come within the convention would be bound to obey that convention.
But let us see where this limited power does not apply. It does not apply to any commercial, financial or industrial concern which does not have share or loan capital listed on the Stock Exchange. So all those companies that are not listed on the Stock Exchange are not bound by this current cost accounting cost convention, provided that they meet at least two of the following three criteria: they have a turnover of less than £5 million a year; their balance sheet total is less than 2½ million; or the average number of their employees is less than 250. Incidentally, also excluded from the current cost accounting convention are the wholly-owned subsidiaries of companies where the parent is registered in the United Kingdom, authorised insurers, property investment and dealing companies and investment trust companies.
Therefore, there is a whole section of British industry and commerce to whom this voluntary convention, which is put into operation only by the exercise of professional discipline, does not apply. Yet, in this Bill it is made mandatory for local authorities to adopt current cost accounting. That seems to be a little odd.
The noble Lord has said that the principal object of the clauses that he was discussing is to throw everything up into the light of day. Mind you, there have been slight undertones from time to time that local authorities might have the option, or, as we shall see, that the Minister may make a direction that direct labour organisations shall not be entitled to carry out certain work.
Then there has always been the inference that there must be no unfair competition with private enterprise. But practically all the private contractors who may consider themselves to be in competition
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with DLOs for building work in local authority areas are, in fact, exempt from current cost accounting provisions. Their auditors are not required to prepare their accounts and state the return on a current cost accounting basis. But inevitably in times of very high inflation the amount of return on capital on a current cost accounting basis will be less than that shown by the historic cost. So there we have what I imagine the noble Lord would call a fair comparison.
Here we have the private builders, some sections of whom, I am reliably informed, are devout supporters of the party opposite, both locally and nationally, whose accounts are produced on a historic cost basis, and there we have a return by local authorities which is required to be on a current cost accounting basis and which, inevitably, in times of high inflation, will show a lower rate. I do not think that that quite accords with the ordinary notion of fairness.
But, taking the noble Lord at his word and now trying to seduce him a little into agreeing with me, on the basis that all he wants to do is to throw everything open to the local electorate, to the local councillors, with a view to seeing the efficiency of a local authority, may I remind him of the existence of a body called the district auditors? The district auditors are responsible to the inspectorate of audit in the noble Lord's own department. There are 12 district auditors and their numbers are supplemented by private accountants in various parts of the country who are engaged by local authorities to do their auditing work for them. Indeed, if I may say so, the present Minister has encouraged this trend. I have in my files here many reports of district auditors.
Why, then, is there this sudden requirement for the open display of information, so that everything may be made freely available to everybody, when—and the noble Lord himself will confirm it—this has been the case all along? District auditors report to the councils. I have their reports and I have seen the depth of their reporting on DLOs. But, moreover, they are responsible to the inspectorate of audit itself, which, as I say, is in the noble Lord's own department and is fully capable. It is on the third floor of St. Lawrence House, 29/31 Broad Street, Bristol, and it is directly responsible to the Minister.
On the basis that all that was required was a more informative and standardised form of accounting, various clauses in this Bill which we have already discussed have much to commend them. But why are the other provisions also required, when the Minister's own audit inspectorate, on the basis of the accounts produced, can already supply him with the information?
Of course, the reason why the Minister wants it in the Bill, and why he has had to draft it accordingly, is that he is concentrating not so much on information being freely available—because the information always has been freely available—as on being able to enforce the powers of closure which he has under Clause 14 of the Bill. Bearing in mind that the Minister can obtain this information, bearing in mind the comparisons that are to be made in regard to current cost accounting with returns produced on the basis of historic cost, and bearing in mind the fact that all this extra work in the estimation of the accountancy bodies involved will put another 4 per cent. on to the book-keeping and accounting staffs of local authorities, I trust that he will do the sensible thing and accept the amendment, especially since current cost accounting has never been in a statute before and is not explained.
There are further considerations. Later on this year or early next year, the House will be called upon to consider the fourth Directive of the EEC on company accounts. Noble Lords may take it from me that there is no mention whatsoever of current cost accounting in that Directive. There is another point which has already been touched upon by the noble Lord who spoke from the Liberal Benches. If inflation is to continue at its current high rates, there may be a case for the Department of Trade to step in and make arrangements for company accounts as a whole to be prepared on a current cost accounting basis. However, as I understand the position—I do not want to reargue the economics here—the Government's position is that the intensity, veracity and ingenuity of their policies is going to bring down inflation, anyway. If that be the case, why is it necessary to enshrine current cost accounting in the Bill? I beg to move.
4.30 p.m.
Lord AVEBURY: Could I add one
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or two words to what the noble Lord, Lord Bruce of Donington, has just said? To take up his final point as to whether the Government should legislate to compel limited companies to adopt current cost accounting, this would be a fundamental departure bearing in mind that these are matters which in the past it has been thought fit to leave to the accounting professions to decide and to make recommendations to their clients about. Ultimately they have to satisfy themselves that what is presented in the company's accounts is a true and fair picture of the company's affairs as at the date of the balance sheet and over the accounting period concerned. If the accounting profession felt that in order to give a true and fair picture the CCA should be universally adopted, then they would have made such a recommendation. They have not done so. They have said that it is a recommended practice in the private sector. No one, however, has ever had their account qualified for their failure to adopt current cost accounting and there is no suggestion that for some time to come we should go any further than we have already gone in this field in the private sector.
I think that what the Government ought to do, if I may respectfully suggest it to them, is to make provision for the introduction of current cost accounting at some future date so that if it does become obligatory in the private sector it can also be required of local authorities. So my suggestion to the Minister is that he should accept the amendment of the noble Lord, Lord Bruce of Donington, but that he should come back at Report stage with another amendment giving to the Secretary of State power at some future date to introduce current cost accounting for this purpose if and when that practice has been universally adopted in the private sector. Then we should be sure that proper comparisons could be made. I take the point entirely that the Minister has made on previous amendments: that we want to ensure that there is a fair comparison between the direct labour organisations and the private sector. Let us do so by ensuring that the accounting practices of both the public and the private sectors follow closely on one another and by giving the Minister the power to introduce this change in the

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future but not to do so while the private sector has not yet reached that point.
Lord BELLWIN: There seems to be some confusion about what we are trying to achieve by asking for these rates of return. The calculation will yield an economic measure of DLO performance. We are not simply trying to make DLOs earn some kind of artificial profit at the expense of other departments of the authority. That would be pointless. We are not even trying in this proposal to even up the competition between public and private building organisations by loading DLO charges with an element to balance the private firms' need to allow for a profit margin.
What we are interested in is more fundamental. We want to look at the allocation of resources, and we want every authority to keep its own DLO under scrutiny to see whether the resources it is consuming might be put to better use elsewhere. This means examining all the assets employed by the DLO (which in most cases will be depot land, plant and stocks of materials) and comparing the return on those assets with the return available generally across the whole range of economic activity in the country. Accordingly, we need to look at the real value of assets and for this purpose taking their historic costs is not good enough.
We believe therefore that the rate of return must be calculated on a basis which takes account of inflation. Only in that way will the calculation show whether the resources are being sensibly allocated. That is the purpose of this particular exercise. The accounting profession has now agreed that of the various forms of inflation accounting, current cost accounting is the most satisfactory and the accounting standard (SSAP 16), which the noble Lord also quoted, has now been published. It is therefore right to require the rate of return calculation to be made on a current cost basis. This can be managed without keeping the whole of the DLO's accounts on that basis, though there would be no objection to that. All that is needed is an end-of-year adjustment for this particular purpose. This is not a particularly arduous exercise, and we are not imposing a major new task on local authority treasurers. In the interests of the sensible allocation of
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resources, we consider that it is well worth the effort.
Turning to some of the points made, because of the extra explanation I have just given as to the extent of the requirement, I imagine that the noble Lord, Lord Bruce of Donington, will not stick to his figure of 4 per cent. additional staff required. I would argue all the way down the road with him against that.
Lord BRUCE of DONINGTON: If I may interrupt the noble Lord in order to correct him, I did not seek to imply—and I must apologise if I did—that the effect of merely ascertaining these particular figures would result in an increase of 4 per cent. I said that the new accounting arrangements taken as a whole—in other words, the entire accounting requirements of this part of the Bill—would necessitate an increase of 4 per cent. in the book-keeping and accounting staff of local authorities.
Lord BELLWIN: I accept that entirely, because it is not the main thrust of the points I am trying to make. I thought that the noble Lord's point about the district auditor was interesting, but the role of the district auditor has been discussed and questioned and has been the cause of some concern for a long time—concern not so much about what they do but about what they do not do, not by way of not examining, because that they certainly do, but by way of not bringing out into the open all that is going on. The noble Lord may know that this is the subject of a great deal of discussion so that we can enhance the role of the district audit service, perhaps working it together with other bodies which are looking at value for money exercises and so on. I do not want to go into that just now. Certainly it is an area which has been looked at very carefully, but in no way would I consider that it would replace that which we are requiring local authorities to do.
So I say again that I fear this is an amendment which I cannot accept. I am trying to be very helpful in this section because I recognise that it is technical and specialised, but at a time when we have to say that all is not as it should be, that we all want to see things not only done better but to be seen to be done better, if they are not up to the mark

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then it is in everybody's interests that they should be up to the mark. I fear I cannot accept this amendment.
Lord WEDDERBURN of CHARLTON: Before the noble Lord resumes his seat, having heard him say that in this respect the only proper way of ascertaining the best allocation of resources, the real value of resources and the rate of return is current cost accounting, no doubt he therefore takes the same view of companies engaged in similar work registered under the Companies Acts. When do the Government intend to make it mandatory upon these companies, in his view there being no other proper way of obtaining a true and fair view of the allocation of resources?
Lord BELLWIN: I have not the slightest intention of being drawn into that area. I am dealing with this matter which is the one upon which I have spoken. If the noble Lord wishes to raise his other point in other ways, I am sure that he has many opportunities to do so.
Lord BRUCE of DONINGTON: I am very disappointed that the noble Lord has not seen fit to accept this amendment. The noble Lord will be aware that it is quite impracticable to take this particular step and that it is unfair to do so. Moreover, he must know that it is completely unnecessary. The provisions that have already been passed in this Bill are uncontested. They provide that each division of work, and there are four, shall provide a revenue account and a statement of return. There is no reason at all why there should be all this contortion to produce a completely artificial figure that cannot be determined precisely because the capital involved in each particular department cannot be ascertained. If the noble Lord had said that the department as a whole should adopt current cost accounting
it would have been more reasonable but it still would not have been necessary, nor would it have been fair.
I cannot help feeling that the noble Lord has rather underestimated the role of the district auditors. The district auditors are quite capable—and indeed I have many of their reports with me—on the basis of the accounts that are produced now and certainly on the basis of the accounts that are going to be produced on a more standardised basis covering separate revenue accounts, of determining the efficiency or otherwise of a particular DLO.
This also begs the question as to who is principally concerned. I would venture to suggest that it is the local authorities themselves, responsible as they are to their own electorates, which are principally concerned. There is no evidence to show—and I do not think the noble Lord can produce any—that there is any dissatisfaction among local authorities in any part of the country with the services that are provided by district auditors or by private firms of auditors that do audit work. There is no evidence of that. This part has been inserted in the Bill as an extra twist by Mr. Heseltine for purposes that are connected more with the enforcement provisions in Clause 14 than for any other reason.
I am very sorry that the noble Lord cannot accept the amendment and, in view of the sheer illogicality of the views that he has put before us, I have no alternative but to insist on the amendment and to ask the Committee to divide upon it.
4.42 p.m.
On Question, Whether the said amendment (No. 43) shall be agreed to?
Their Lordships divided: Contents, 100; Not-Contents, 150.

CONTENTS

Amulree, L.

Briginshaw, L.

Davies of Leek, L.

Ardwick, L.

Brockway, L.

Davies of Penrhys, L.

Avebury, L.

Brooks of Tremorfa, L.

Denington, B.

Aylestone, L.

Bruce of Donington, L.

Donaldson of Kingsbridge, L.

Bacon, B.

Byers, L.

Elwyn-Jones, L.

Balogh, L.

Cledwyn of Penrhos, L.

Evans of Claughton, L.

Banks, L.

Collison, L.

Fisher of Rednal, B.

Beswick, L.

Congleton, L.

Gaitskell, B.

Birk, B.

Cooper of Stockton Heath, L.

Gardiner, L.

Blyton, L.

Cudlipp, L.

Gladwyn, L.

Boston of Faversham, L.

David, B. [Teller]

Gosford, E.

Greenwood of Rossendale, L.

McNair, L.

Sefton of Garston, L.

Grey of Naunton, L.

Maelor, L.

Simon, V.

Hale, L.

Maybray-King, L.

Stedman, B.

Hall, V.

Melchett, L.

Stewart of Alvechurch, B.

Hampton, L.

Melville, V.

Stewart of Fulham, L.

Hatch of Lusby, L.

Meston, L.

Stone, L.

Hayter, L.

Mishcon, L.

Strabolgi, L.

Henderson, L.

Morris of Grasmere, L.

Strauss, L.

Hunt, L.

Noel-Baker, L.

Taylor of Blackburn, L.

Irving of Dartford, L.

Northfield, L.

Taylor of Mansfield, L.

Jacques, L.

Oram, L.

Thurso, V.

James of Rusholme, L.

Paget of Northampton, L.

Underhill, L.

Janner, L.

Parry, L.

Wallace of Coslany, L.

Jeger, B.

Peart, L.

Wedderburn of Charlton, L.

Kaldor, L.

Phillips, B.

Wells-Pestell, L.

Kilbracken, L.

Ponsonby of Shulbrede, L. [Teller]

Whaddon, L.

Kilmarnock, L.

Wigg, L.

Kinloss, Ly.

Reilly, L.

Wigoder, L.

Leatherland, L.

Rhodes, L.

Willis, L.

Listowel, E.

Rochester, L.

Wilson of Radcliffe, L.

Llewelyn-Davies of Hastoe, B.

Ross of Marnock, L.

Winstanley, L.

Loudoun, C.

Rosslyn, E.

Young of Dartington, L.

Lovell-Davis, L.

Sainsbury, L.

NOT-CONTENTS

Ailesbury, M.

Ferrier, L.

Marley, L.

Airey of Abingdon, B.

Forester, L.

Massereene and Ferrard, V.

Alport, L.

Fortescue, E.

Middleton, L.

Ampthill, L.

Fraser of Kilmorack, L.

Minto, E.

Armstrong, L.

Freyberg, L.

Monk Bretton, L.

Auckland, L.

Gage, V.

Monson, L.

Avon, E.

Gainford, L.

Mottistone, L.

Balerno, L.

Gainsborough, E.

Mowbray and Stourton, L.

Bellwin, L.

Gowrie, E.

Murton of Lindisfarne, L.

Belstead, L.

Gray, L.

Netherthorpe, L.

Berkeley, B.

Greenway, L.

Northchurch, B.

Bessborough, E.

Gridley, L.

Nugent of Guildford, L.

Birkenhead, E.

Grimthorpe, L.

O'Hagan, L.

Boardman, L.

Haig, E.

Onslow, E.

Bradford, E.

Hailsham of Saint Marylebone, L. (L. Chancellor.)

Orkney, E.

Braye, L.

Orr-Ewing, L.

Brentford, V.

Halsbury, E.

Porritt, L.

Bridgeman, V.

Hankey, L.

Radnor, E.

Broadbridge, L.

Hanworth, V.

Redmayne, L.

Cairns, E.

Harmar-Nicholls, L.

Renton, L.

Caithness, E.

Harvington, L.

Ridley, V.

Campbell of Croy, L.

Hastings, L.

Rochdale, V.

Cathcart, E.

Hatherton, L.

Rollo, L.

Chelwood, L.

Henley, L.

Romney, E.

Clwyd, L.

Hereford, V.

St. Aldwyn, E.

Cockfield, L.

Hill of Luton, L.

St. Germans, E.

Colville of Culross, V.

Hillingdon, L.

Saint Oswald, L.

Cork and Orrery, E.

Holderness, L.

Sandford, L.

Cottesloe, L.

Home of the Hirsel, L.

Sandys, L. [Teller]

Croft, L.

Howe, E.

Savile, L.

Cromartie, E.

Hylton-Foster, B.

Selkirk, E.

Cullen of Ashbourne, L.

Kemsley, V.

Sharples, B.

Daventry, V.

Keyes, L.

Skelmersdale, L.

de Clifford, L.

Kimberley, E.

Soames, L. (L. President.)

Denham, L. [Teller]

Kintore, E.

Somers, L.

Digby, L.

Knutsford, V.

Spens, L.

Dormer, L.

Liverpool, E.

Stanley of Alderley, L.

Drumalbyn, L.

Lloyd, L.

Strathclyde, L.

Duncan-Sandys, L.

Long, V.

Strathcona and Mount Royal, L.

Dundee, E.

Lothian, M.

Swansea, L.

Ebbisham, L.

Lucas of Chilworth, L.

Swinfen, L.

Elibank, L.

Luke, L.

Trefgarne, L.

Ellenborough, L.

Lyell, L.

Trenchard, V.

Elliot of Harwood, B.

McAlpine of Moffat, L.

Vaux of Harrowden, L.

Elton, L.

McFadzean, L.

Vickers, B.

Emmet of Amberley, B.

Mackay of Clashfern, L.

Vivian, L.

Evans of Hungershall, L.

Macleod of Borve, B.

Waldegrave, E.

Exeter, M.

Mancroft, L.

Watkinson, V.

Faithfull, B.

Mansfield, E.

Westbury, L.

Falkland, V.

Margadale, L.

Willoughby de Broke, L,

Ferrers, E.

Resolved in the negative, and amendment disagreed to accordingly.

Clause 13 agreed to.
Clause 14 [Rates of return: powers of Secretary of State]:
[Amendment No. 44 not moved.]
4.52 p.m.
Lord SEFTON of GARSTON Lord SEFTON of GARSTON moved Amendment No. 45:
Page 14, line 16, leave out ("if he thinks fit") and insert ("where a local authority has failed to conform with the appropriate statutory provisions").
The noble Lord said: ft may be for the convenience of the Committee if I speak to Amendments Nos. 45 and 46 together. They are related and they both strike at the problems that face local government in regard to this Bill. This may seem to merit the description used earlier by the noble Lord, Lord Bellwin, that this is of small consequence, but in fact the consequences of this part of the Bill for relationships between local government and national Government could be very severe indeed.
The amendment merely seeks to make clear that no local authority is to be called to task for committing an offence that they did not even know existed. It may be that the noble Lord, Lord Bellwin, will say that that is not the situation. Never-the less a responsible body of which he and I were once members believe that it could be; they believe that the words in the Bill "if he thinks fit" give a wrong power to the Secretary of State, and they think it should be altered. This amendment seeks to alter it in such a way that their fears will be removed.
It may be that the wording of the amendment is not the wording the noble Lord would pick if he wished to make it clear that it was not treating the local authorities unfairly. He said earlier that discussions had taken place with all the associations, that the door was still open and would be until this became law, and I suppose even after that on points of clarification. I am very worried. In fact my opinion right at the beginning was that it would have been much better to have a Bill of this sort sent to a committee; then the to and fro could have taken place without any restriction, the intervals between committee meetings could have been used to have discussions with
226
interested parties, and at the end of the day there could have been an agreement or a compromise struck between the various associations and the Government.
It is not my wish or intention to divide the Committee on an issue that I think could have been settled in another way. Before I formally move Amendment No. 45, may I ask if there is any indication in the Minister's mind that he would have talks with the AMA to see if this matter could be resolved amicably and would report back at Report stage on some new wording which might well meet the problem? I think it is vitally important that nobody should seek to make political capital out of a division between local government and central Government, when the important issue will not be the powers of the Secretary of State but restore the faith of local government in central Government which has been badly eroded recently, I admit by both parties. If the Minister could give some indication whether he would prefer to do that it might save time today.
Lord RENTON: First, as to Amendment No. 45, it does seem to me that the words "if he thinks fit" are quite unnecessary and from a purely drafting point of view should come out. This subsection (4) gives power to the Secretary of State to direct a local authority or a development body to submit to him a special report. Well, he is not going to use that power unless he thinks fit. Therefore to write into the Statute "if he thinks fit" is quite absurd.
Lord SEFTON of GARSTON: If the noble Lord would give way, it was not my intention to conclude the debate there from my point of view. Perhaps it may be my ignorance of the procedure. It was my intention to sit down while the Minister responded to my question.
Lord BELLWIN: Perhaps I could cover that point and then the noble Lord could continue. Of course consultations have taken place. I myself was not a party to them, so I cannot say what they were about. But it is always open in any case at any time for there to be discussions with the AMA, indeed separately with the AMA; I see no reason why there should not be discussion with any local authority association. It does not always have to be

227
together; their interests are not always the same. I should think that, for the purpose of the business of the Committee, we shall have to discuss this now as it is, but that would not prevent any further points being made at any time. I can assure the noble Lord that despite what we decide now, if after this the AMA or any other association would like to come and talk, of course we will always listen.
Lord SEFTON of GARSTON: I accept that, of course. Let me then try to express some of the fears of those peope who have spent the greater proportion of their lives working in local government, attempting to ignore party divisions in governments of all sorts and attempting to get the best out of central and local government for the good of the community.
During the earlier part of the debate on this Bill several Members opposite posed the question, were direct labour organisations frightened of fair competition? They asked what was wrong in expecting direct labour organisations to reveal their figures, to show how they were working, and let judgment be taken on the basis of those figures. I repeat again something that was said on this side of the Committee: no direct labour organisation is, in fact, frightened of fair competition. But, that poses the question: what is fair competition? Already there has been mention today of the different things in which the private sector can become involved but in which a local authority is prevented from becoming involved. During the Second Reading debate, which unfortunately I was unable to attend, the noble Lord, Lord Bellwin, said:
"At the end of the day the people who will decide will be those who are on the receiving end—the user, the customer. They are the best ones to decide". —[Official Report, 5/8/80; col. 1461.]
I could well imagine that the noble Lord, Lord Boyd-Carpenter, would have accepted that, but I do not think on reflection that the noble Lord, Lord Bellwin, would accept it when he thinks of the consequences of applying a purely monetary factor to determine where we spend our money in regard to the building trade.
I am sure that there is no need for me to remind the noble Lord, Lord Bellwin, that perhaps one of the most disgraceful
228
practices that existed in the building trade was the way in which the private sector used lump labour. There will be no requirement at all, there will be no prosion in the Bill, that if, in fact, the private sector acts unfairly and therefore poses problems for local government which it cannot get over, the private company should be barred from submitting further tenders. Or is it the Government's intention to insert a provision at a later stage?—because if fairness were the key note, certainly no private sector company should be allowed to continue tendering if in fact it has practised that iniquitous process. As an aside, it is amazing that on the question of tax evasion the Sunday Times should make such a fuss about tax evasion in regard to the Vestey family, when one remembers the Mickey Mouses and the presidents of various states that were paid money out of the Sunday Time coffers in order to avoid taxation there—
Lord NUGENT of GUILDFORD: Will the noble Lord give way? This is the Committee stage of the Bill and there is an obligation to keep to the business of the amendment and not to go wider, as the noble Lord might in a Second Reading speech.
Lord SEFTON of GARSTON: I can well understand noble Lords on the other side being concerned about points like that being made, but it is very pertinent to this clause. Indeed, it is pertinent to this clause for the simple reason that this is the clause that really lays down the powers for the Minister to penalise a direct labour organisation if, in fact, it is failing in what the Government say is fair competition. So, it is perfectly pertinent to raise the question of whether the fairness contained in this clause really is fair. It is on that basis that I deal with it and I make no apology at all for dealing with it. I attempted to see whether, in fact, we could get meaningful discussion between the Government and the AMA with a view to resolving the problem in a form of words that would meet the problem, but the Minister did not want me to do that.
There is another aspect. If, in fact, the statements to be made by local authorities under this clause of the Bill are to deal only with the direct labour organisations, is that fair when one

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considers that a subsidiary in a private building trade can continue being unprofitable for years and years and submit tenders on that basis, competing with local authorities and all the while be subsidised by the activities of a parent company which, in fact, is making vast profits? Would a local authority he put on the same basis as the private sector and be allowed to compete with the private sector and use the profits from a land sale in order to sustain the direct labour organisation?—of course, not! The Government would be horrified to think that anybody should suggest that they would do so. May I say that local authorities would also be horrified to suggest it and would not do it. Nevertheless, the fact is that the private sector does just that, and many times runs the building section of its activities on a loss-making basis and again competes unfairly with the local authority.
So, for all those reasons—and there are many, many more—if the Government are serious and want to establish fair competition they should bring in a provision that allows these people, if found to be carrying out certain unfair practices, to be banned from further tendering. If they do not, it is quite evident that the Government are attempting to penalise direct labour organisations to such an extent that they will no longer exist.
Amendment No. 46 to which I should like to speak, deals with the number of years—the testing period. As regards that, the same point that I made in relation to the ability of the private sector to sustain a building section arises. What number of years is the right number of years? I do not think that that matter has been sufficiently discussed. Certainly the AMA does not consider that it has been sufficiently discussed in order to arrive at the right number of years. There would be no harm at all if the Minister did that.
The clause with which I am concerned deals with the requirement for a special report. No details are given, and perhaps I may refer to the Notes on Clauses which are very significant. The notes say that there may be special circumstances which explain an unsatisfactory performance or there may be a need to retain a small direct labour force to deal with certain sorts of work; for example, winter highway maintenance in remote areas for which
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no contractors can be found. That is what the notes say. It is not "for which no contractors can be found"; it is "with which no contractors would be bothered!", because it is a service to the community and it is not a profit-making exercise. That is the real reason. If, in fact, these kinds of statements occur, then do not be upset and do not be amazed that local government, generally speaking, should mistrust the Bill. Therefore, that is another reason why these discussions should take place—meaningful discussions—with a view to hearing both sides, not discussions that merely shove this debate to another part of our discussions on the Bill during Report stage. There should be a deliberate, meaningful attempt by the Government to meet the local authority associations to deal with all these points.
The Notes on Clauses make great play of establishing—and this is important—parity between the private sector and the local authority sector. How on earth can we establish parity between the private sector and the local authority sector? It is an impossibility and I suggest that the noble Lord, Lord Bellwin, knows that full well. I have heard him express the point of view that the difference between local authorities and the private sector is that local authorities have something to do with service as a first priority. Everybody agrees on this side of the Committee that when providing that service there should be great respect for accountability and there should be great regard given to efficiency.
Private firms allow various sections to be subsidised by the activities of the parent company. The Government will not allow a very essential service of a direct labour organisation to be subsidised by the other activities of the local authority—oh no! When they call for a special report, would it be possible for that special report to call for a report on the establishment and maintenance of a timber workshop where windows and doors are manufactured for the use of the direct labour organisations? Would it be possible for the Minister to call for a special report on that particular facet of the direct labour organisations' work and then judge that particular section on the viability or otherwise of that? Because if they did, it would strike at the roots of efficiency

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of a building organisation; it would hive-off one particular part of it. And if we were to suggest that that should happen in the private sector, then the private sector would laugh us out of court. Yet that is the suggestion that is being made in the Bill.
I do not believe that it is possible to institute fair comparison between the private and public sector and I have good experience that tells me that I am right. Let me tell noble Lords what happened in Liverpool. When the property boom came into existence after the war, we in Liverpool also had suffered bomb damage; and we in Liverpool also had a tremendous price to pay for the bombing, just like London and Coventry. Did we find the private sector willing to come to Liverpool and to put the same amounts of capital investment and building activity into Merseyside? Oh no! Where did they go? They flooded the South-East, Coventry and the Midlands, because that is where the profit was. In Merseyside we were compelled to enlarge and strengthen our direct labour organisation because of the failure of the private sector to step in and give us the service.
Perhaps I can bring the point home with a more recent example. It is not long ago that, as the leader of Liverpool City Council, I sat down with the National Federation of Building Trades Employers on Merseyside and listened to a heartrending plea from them that their problems stemmed from the fact that cuts were being made, albeit under a Labour Government. We were being compelled to make cuts in the building field. They really could not manage; they could not sustain themselves unless public investment was stepped up and they were allowed to work on behalf of the local authority.
Having had a reputation at one time for being a rabid Left-winger, one would not have suggested that I should have agreed with them, but I did. I said that I thought there must be co-operation between the private and the public sectors. I made this offer to them: that we would even approach the Home Office to make sure that we could build our police headquarters a little in advance of time because of the unemployment problem that we were suffering; that the buildings would go out to private tender, because
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that was the right thing to do. The private trade would then get £x million worth of work on Merseyside. Could I ask for a quid pro quo? Could I ask that the private sector accepts some responsibility as a duty to the community? I said that as we had responded to their invitation—and we did, for they got the law courts and the police building—could they find some way, among the countless amounts of money they had within the building industry as a whole, through a federation, perhaps to invest in the public sector 25 per cent. of the money that they were receiving from the buildings that we were giving them, and so provide Merseyside with some speculative office development, for we had just lost 300 jobs because we did not have a spec office in the centre of Liverpool ready to pick up an organisation being set up. Their reply was that they would certainly do that provided that we guaranteed them the letting. That is what they call speculative office development. They do it in London and they do it in Manchester because they know that the return is guaranteed.
This strikes at the very root of the Bill. In fact, the Bill is another extension of the political philosophy of the Tory Party. Quite frankly, as was said earlier on this side of the Committee, it is the philosophy that everything in the public sector is wrong and everything in the private sector is right, with which I am sure the noble Lord, Lord Boyd-Carpenter, would agree. That is just not good enough either for this Committee or for the rest of the country. I return to my theme at the beginning of my remarks. It is certainly not good enough for the AMA. I am dying to give some more examples of the private sector that flowed away from Merseyside because the return was not sufficient. This efficient private sector flowed to the Barbican, and the Barbican became an example of the most inefficient kind of organisation that has ever been seen anywhere in the world. That organisation was the private sector building industry of this country. I can give a few more examples of that up and down the country.
The real truth is that this Bill has provided a chasm so great between central and local government that I am frightened that it will not be bridged. I am also frightened on one other point, and

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conclude on this note. I am frightened that some of the points I have made may have made that chasm a little wider. I cannot help it. I was compelled to make them because the Minister would not give me an assurance beforehand that he would have discussions with the AMA. I should now like to express the hope that we shall get back on to an even keel, that we really will try to restore the relationships that used to exist between local government and central Government, have meaningful discussions with them and resolve this problem once and for all. I beg to move.
Lord SANDFORD: I wonder whether we could return to Amendments Nos. 45, 46 and 49 in Clause 14. I should like to take up the last point on which the noble Lord, Lord Sefton of Garston, left us after that excursion. It is undoubtedly true that extreme views are held in this Committee about the merits and virtues of direct labour organisations. We have just heard one and yesterday, if I may say so, we heard another from my noble friend Lord Boyd-Carpenter. But this is not what we are dealing with at this point in the Bill. I think there is much more consensus—it is not a view held only by the AMA; it is also held by the Association of District Councils and the Association of County Councils, and I would think by Parliament—that at this point in the Bi11 my right honourable friend the Secretary of State is asking for powers too sweeping to achieve what he wants to achieve and more sweeping than it would be proper for Parliament to accord him. Therefore, would hope that my noble friend would respond to the suggestion made by the noble Lord, Lord Sefton, not for discussions only with the AMA, but for discussions with all the associations to see whether we cannot arrive at a formula which achieves what the Secretary of State needs in order to do what is required in this Bill, but which does it in a way more appropriate to what Parliament ought to allow a Secretary of State to do.
Lord MISHCON: I wonder whether I might follow—possibly in the hope of shortening this debate—in the same spirit as the noble Lord, Lord Sandford. Yesterday we had some excursion, if again I may borrow that phrase from the noble Lord, in regard to the relative
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merits of direct labour and private building contractors. I hope that the Committee will agree that it is not a useful excursion this afternoon.
In this clause we are dealing with—and I re-echo the words of the noble Lord, Lord Sandford—not an excursion into direct labour but an excursion into ministerial powers that are far beyond those that Parliament ought ever to accord. On Clause 13, the noble Lord the Minister said in a very piquant phrase that he was talking to himself in front of the Committee. I want it recorded for posterity that I, personally, found his discussion with himself extremely courteous; I also found it extremely helpful and reasonable, and I want to ask him, if he would, to have a discussion again with himself when he rises to his feet and to adopt precisely the same sort of temperamental reaction as he did on the previous occasion. I say it for this reason.
Let us take it for granted for one moment that it is perfectly right—I think the Committee feels this—that all the information that can reasonably be required of a local authority in connection with its direct labour organisation should be given. Let us take it for granted that the electorate (this is a democracy, and we are talking about democratic government) ought to be allowed to react to information which is so given and which shows the local authority to be acting without due diligence, because it is keeping on a direct labour organisation which is inefficient and uneconomic for good reason—and I am not saying for good social reasons; that would not be my point. It ought to be allowed to say what it thinks at the next election about the type of authority that allows this to be carried on.
I am asking the Minister—and I think this too is in the spirit of the remarks of the noble Lord, Lord Sandford—to look in this spirit at these amendments and the powers given by this clause. I can paraphrase them, but if the Committee feel that they want me to delay them further (and I do not think they will) by using the exact wording of the Bill, I will do so. The noble Lord, Lord Renton, in a short intervention, said it was unnecesssry to say that the Minister, if he thinks fit, can call for a special report. This clause—and

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it is unique in my humble experience in regard to ministerial powers—says that the Minister can call for a special report. He can lay down the time within which it is to be given and then, without anything further by way of default shown by the local authority or its direct building organisation, under subsection (4) can direct that the direct labour organisation shall, for a period which he shall direct, on conditions that he shall lay down in regard to piecemeal cutting off of the direct labour organisation, be made to cease to exist.
It is almost the powers that Providence takes upon itself but in its mercy does not exercise. At least the Government ought to have some limit to the dictatorial powers that they want to exercise in regard to a limb of the democratic life of this country if they expect any sort of decent officers or citizens to serve as members of local authorities. No Secretary of State, no Minister, should have the power, willy-nilly, to say, "I demand a report. I will look at the report. Whatever that report says, I am going to decide that this department should shut down."
The noble Lord, Lord Renton, saw that with his usual wisdom and with his usual sense of equity and justice, and put down an amendment, as your Lordships will see, which at least tries to limit the Minister's power, and says this: "At least you can do it if the direct labour authority did not reach the percentage that was supposed to be reached if it was to be deemed to be economically run". That was going some part of the way, but the noble Lord, Lord Renton, will I am sure, concede that not even in his amendment does it say in respect of which period: whether it is to be for one year that it did not, two years that it did not, whether it was the last year it did not, or whether it was three years ago it did not. The amendment does not say that.
What I am pleading for—and I believe it is a plea echoed throughout the Committee; from the Liberal Benches we have already heard it from a distinguished member of local government—is that if we are not to have a Division which will rid this Bill of the whole of the clause, then I ask the Government to be sensible and reasonable in looking at the amendments that have been put down in order
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to try to make this clause less dictatorial and less unique in its offensiveness to local government and to the constitutional life of this country.
5.24 p.m.
Lord EVANS of CLAUGHTON: Having been given an invitation to express a Liberal view—unless the noble Lord, Lord Mishcon, thought I had already expressed it-I shall now come to my feet and thank the noble Lord, Lord Renton, for giving way because he has been trying to finish a speech which I think he is half-way through. It is a genuine pleasure to speak in a debate initiated not by my noble friend but by my old friend Lord Sefton of Garston. If you had been sitting opposite him for many years in local government, as I was, you would know that he can be much more fierce than he has been in your Lordships' Committee today.
What concerns me is the words "if he thinks fit". I gather that in another place the Minister's right honourable friend suggested that if an aggrieved local authority that had been called upon to make these reports felt that the Minister was behaving unreasonably, the Minister would need to show good cause for calling in the direct labour organisation. I should like—and this is important—an assurance of some kind that he would in fact have to show good cause to an aggrieved local authority.
Frankly, I believe the words "if he thinks fit" are much more narrowly defined than the noble Lord's right honourable friend suggests. I think that a local authority would be left with no way of challenging the Minister unless they could show that the Minister had been unreasonable, had behaved in had faith or fraudulently. Although I do not have all that much affection for Her Majesty's Government, I cannot see that they will be likely to behave fraudulently or in had faith. Therefore, I think "unreasonableness" would be the only way of following that.
It seems to me that that gives an aggrieved local authority an extremely narrow basis for challenging a Minister in court. The trouble then is that once the Minister has obtained the report he can then, having seen this report, bring

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subsections (4) and (5) into operation which could effectively close down a direct labour organisation, which would be extremely serious and have far-reaching effects on that local authority and would put them in extreme difficulty.
According to what the AMA said, once he has received a report he is entitled to direct that the DLO ceases to operate on the basis of the same broad discretion as set out at the beginning of this clause. That is the view of the Association of Metropolitan Authorities. If, then, in some minor way the DLO had transgressed, he could bring them to a close. That is the way I read it. It seems to me important that we should have some statement from the Minister that he would need to show good cause if the wording is retained as set out in this clause, otherwise he has an unfettered right to close down direct labour organisations virtually at will.
May I deal briefly with Amendment No. 46, which we are asked to discuss at the same time. I think it is reasonable that "five" should be inserted instead of "three" knowing, as I do through my occupation and my activities as a councillor, that there is a considerable series of ups and downs and enormous variations in the building trade. You could not in a 3-year period decide whether the organisation was carried on successfully and correctly. A 5-year period is a much more effective one.
As the noble Lord, Lord Sandford, has said, it is not just the Association of Metropolitan Authorities which feel unhappy about this clause as it stands at present. You might say because it is Labour-controlled that it is behaving politically. But it is not. In fact the Association of County Councils feel this way. They say quite clearly, in a slightly different context, that as at present drafted the Bill gives the Secretary of State unfettered power to close a DLO. They say:
"While the Association have no doubt that the present Secretary of State"—
well, they had to say that, did they not?—
"will use his powers in a manner acceptable to local government, a future encumbent of the post might not be so minded";
and I think I know what they are talking about. Whatever party one represents here, we must be very concerned about
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the way in which the clause is drafted and beg the Government to reconsider the matter along the lines which universally they have been requested to do.
Lord RENTON: I hope I shall not be thought stuffy if I refer briefly to Amendments Nos. 45 and 46, both of which are amendments to subsection (4), which merely gives the Secretary of State power to direct a local authority to make a special report on the matters specified in sub-paragraphs (a) and (b). It seemed to me until I heard the noble Lord, Lord Evans of Claughton, that the words "if he thinks fit" were quite unnecessary, because one cannot conceive of a Secretary of State using a power to make an order or give a direction unless he thought fit to do so.
Speaking with such knowledge of the law as I have, which is long, it does not seem to me that the addition of the words "if he thinks fit" necessarily require the Secretary of State to show cause. I therefore go back to my original proposition that those words are, from a drafting point of view, in any event unnecessary, and to that extent, and to that extent only, I have sympathy with the noble Lord, Lord Sefton, and those who have supported him. When we come to the further words in Amendment No. 45, however, where he wants to add:
"where a local authority has failed to conform with the appropriate statutory provisions"
it seems that those words could only cause confusion, first because the appropriate statutory provisions have not been specified, and if he is referring to the whole of the provisions in Part 3, then he is placing a burden on the Secretary of State which he should not be asked to assume.
However, there is a much greater objection to those words; namely, that if the Secretary of State has to decide whether the local authority has failed to conform at that stage, or if a court has to decide it if the matter is brought before the court at that stage, there will be a need to prejudge the decision which the Secretary of State will eventually have to make under subsection (5), to which the noble Lord, Lord Mishcon, referred and to which we shall have to come in due course. I would therefore not expect the Minister to accept that part of

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Amendment No. 45 because, as I say, it would cause confusion and mean prejudging.
As for Amendment No. 46, having listened carefully to the noble Lord, Lord Sefton, I am surprised in view of what he said that he should want to place on a local authority the burden of providing information going back five years instead of the more modest period of only three years which the Government suggest, and therefore I do not expect Amendment No. 46 to be recommended for acceptance.
5.35 p.m.
Baroness DENINGTON: It might be helpful to the Committee if I made my contribution on Amendment No. 49 now because it is all on the same theme. The particular note I have made about this provision is that it is the tone of the whole clause that is so disturbing and thus, surely, unacceptable. It is the tone of the proposal that we are trying to amend. The AMA assure me that the powers being taken in the clause are without precedent. My experience is not wide enough to know whether that is so, but the AMA, with their wide knowledge, must know, and I therefore accept that the powers being taken here by the Minister are without precedent, powers to close down—after calling for a report which he may or may not have had or on which he has or has not made any comment—a direct labour organisation. I cannot really believe that is what the Government want to do, but that is what they are saying in the clause.
It has been pointed out that the local authority is democratically elected and is responsible to its electorate. We have already agreed earlier in the Bill that the local electorate will have made available to it all the information on this and other subjects that could possibly be required. That being so, surely in the end it is up to the local authority to be persuaded that it should or should not close down its direct labour department. Surely this is all after the Minister has had the report and after his representative has gone there to examine the situation with the local authority to see what is wrong, and it should be their task to help sort the matter out.
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As I have said before, central and local government must work in partnership. That is part of the set-up in this country and, on that theme, perhaps the Committee will permit me to extend the discussion because it might help to explain why I and others are so deeply disturbed by the tone of the clause. I find in it a strong tendency to undervalue—to deny the proper status, might be a better way of putting it—local government; not to trust those who are working in local government and giving of their time, people who have an effection for their constituents and who want to do the best they can for them. There is a tendency on the part of the present Government, and particularly the Secretary of State, to promulgate too many instructions to limit the activities of local government, and that is not a healthy tendency.
Local government has a basic and important part to play in our democracy, and that is the theme I wish to develop. If we are not vigilant, democracy in this country may be in danger of being eroded both from the extreme Left and Right. We must heed the signs, particularly those of us who have the privilege of sitting in your Lordships' House able to discuss these issues. It must not be condoned or permitted in however slight a form. This might be described as a slight form, but we must not let it creep in.
In my time in local government it has suffered as a result of reorganisation. It is not as clearly rooted in its particular locality as it was, and I think that is a loss. It is beginning to be too remote from the village society—I mean town and country villages, because big cities are villages—and we really must watch it. The present tendency of the Secretary of State to control local government through regulations, which we saw in the Housing Act and now see in this Bill, surely must give cause for concern to us all, particularly those of us who watched the weakening of local government in Germany in the 'thirties. It started or was seen in Germany, and we know where that led us. It is for these basic reasons that we on this side, and, I am sure, many if not all in this Committee, object to the arbitrary and unprecedentedly wide powers that the Secretary of State wishes to take on to himself and which are so obvious in this

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clause which we are seeking to amend. Therefore, we must totally oppose it.
Lord BRUCE of DONINGTON: Before the noble Lord the Minister indicates that he is quite willing to reconsider all the matters raised in these two amendments, I would venture to put one or two considerations in his mind. The amendment that has been moved so ably by my noble friend Lord Sefton, supported by my noble friend Lady Denington, seeks to question the right of the Secretary of State to have unfettered discretion to require the local authority to deliver a report. If the purpose of demanding a report is merely to ground the action to which my noble friend Lord Mishcon referred in subsection (5), then at least we understand where we are. We know that this request for more information, for a detailed report, is not really required for the information it contains; it is required, in effect, as an excuse to take action under subsection (5). Taken on its own merits, the noble Lord's department has no need to ask any local authority for a report of this kind.
I have already referred to the activities of the district auditors, who, as I have said, are responsible to his own inspectorate of audits. There are already in being proposals for the setting up of a commission to deal with the whole question of district audit. The Minister is to be invited to set up a new organisation employing 700 people to take over the work of the district auditor service and audit inspectorate. One does not know whether the noble Lord's department is going to adopt this report, but the indications are that Marsham Street does tend to place an increasing reliance on the various audit services that exist. The Minister can get any reports that he needs from the district auditors if they are of sufficient import within the financial context within which this Part of the Bill has been framed. They are the people who know; he already has them under his own control. Therefore, why does he have to require the local authority to submit a separate report?
I believe that with the silent consent of the Committee we are also dealing with Amendment No. 49, to which my noble friend Lady Denington spoke with the assent of the Committee. If I may, I
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should like to address myself to that one also. I am quite sure that I am not alone in believing that this is really the crunch clause of the whole of Part of the Bill, and indeed is a crunch clause in principle, comparable with the decisions that we shall have to make at a later stage in this Bill as to who knows best and as to the extent to which central Government shall be permitted to tell local authorities exactly what they shall do. It is one thing for the central Government to insist in certain circumstances that local authorities shall operate within certain financial constraints, and indeed the Government themselves have made a lot of pretence of granting individual local authorities far greater freedom to operate within the financial constraints that they seek to place on them. I repeat that the Government are entitled to expect reasonable conformity with their own macroeconomic policies if for any reason they should go seriously out of line, although I am bound to say that on the basis of experience local authorities have kept far better financial discipline than the Government themselves.
But the question we have to consider here, and the question that has been raised so ably by my noble friend Lady Denington and was also raised yesterday by my noble friend Lady Fisher, is the extent to which, on specific matters involving specific areas of local government decision, the Minister should be allowed to have a diktat in specific instances. Possibly I am not speaking in sufficiently dulcet tones to command the support of the noble Lord opposite, Lord Sandford—
Lord SANDFORD: No, you are not.
Lord BRUCE of DONINGTON: — but I feel that the noble Lord himself will be fully sensible of the issues involved here. It is really the issue of a specific local activity on which local councillors are fully informed, on which they have been advised by district auditors. The councillors are subject to the will of the local electorates, who are fully informed on these issues and will be more informed if certain sections of this Bill are passed. The issue is whether the central Government are entitled to take over the power to say to a local authority, in regard to a specific area of its activity, "You shall

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stop" This is the issue, and I sincerely hope that when the chips are down the real friends of local government, those who really believe in local democracy as distinct from shedding crocodile tears over it or paying lip service to it, will know where their real allegiance lies.
5.50 p.m.
Lord BELLWIN: I said earlier that it was not easy, did I not? Let us get a few things straight about this matter. First, these amendments, Nos. 45, 46 and 49, seek to limit the power of the Secretary of State to call for a special report to those circumstances explicitly set down under the Bill or its orders or directions. This is too narrow. There could be other circumstances where the spirit, if not the letter, of the legislation is being broken. For example, there could be a persistent failure to choose the lowest tenderer under Clause 7(4), or, taking another example entirely, there could be such a margin of failure by a DLO that a special report became imperative before matters got out of hand.
We are living in a world where waste cannot any longer be allowed to go unchecked, and the Secretary of State must be given discretion to step in and ask for an explanation; and that is what this is about. But this is not an unfettered power. There is protection at all times in the courts. If it is found that the Secretary of State has exercised his power for an improper purpose, or even on legally irrelevant grounds, the court can order such action to be quashed; and in the end, providing that a report is not a punishment, except in a peculiarly narrow sense, it gives an authority an opportunity to explain itself. But it is also a warning—
Lord MISHCON: I wonder whether the noble Lord the Minister, with his usual courtesy, will give way. He has just said, very correctly, that a power can be challenged in the courts. I am sure that he would be the last person, together with all Members of this Committee, who would wish to leave a clause, relating purely and simply to local government and national government, based on fighting in the courts. In the remainder of his very interesting and useful speech will the noble Lord kindly indicate, if he can, whether there is any limitation that he
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would himself be prepared to impose upon the Minister before this power—which I have called "dictatorial"—is exercised? If the noble Lord can do that, and if he promises to bring forward at the Report stage an amendment with a sensible limitation and safeguard, he would I think find a sympathetic Committee.
Lord BELLWIN: If I may continue—and as I go along I shall try to come to the point that the noble Lord has mentioned. I have listened for I think an hour and a half to the debate on this matter, and I feel that the Committee would expect me to reply in the manner in which I wish to do so. The fact is that the Government cannot permit any chipping away of the three-year period—and for the moment I am sticking to the amendments, even though the debate has ranged much beyond them—over which a DLO's performance should be judged. We are here speaking of ratepayers' money tied up in a DLO—risk capital, you might say, involuntarily collected and applied. The period must be as short as reasonably practicable. Shareholders in a company would be asking their directors to report if things went wrong in a shorter time span than that. Of course it would be open to a local authority to include such mitigating circumstances as it thought fit, and that is why the reports are being asked for before the Secretary of State would consider any stiffer action. But surely three years is long enough.
I listened with some fascination to the opening remarks of the noble Lord, Lord Sefton of Garston. He and I are old colleagues, old not in the sense of years, but rather in the sense of being longstanding colleagues on the AMA. I have always had, and still have, a great regard for him personally and for his great attachment to local government. The fact that I disagree with most of what he says is beside the point. What the noble Lord said was, I thought, expressed with his usual great sincerity and considerable eloquence, which in no way has diminished in all the time that I have known him.
The noble Lord spoke most of all about unfair practices. He knows it well enough, goodness knows!, but I ought to remind him that when local authorities appoint sub-contractors—the private sector—to do work that the direct labour departments do, all the authorities that I

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know draw up an approved list of suppliers and contractors. If people fail to come up to the required standards, they simply do not get on the list. While it is absolutely true—my goodness! I have experienced this as well; the noble Baroness, Lady Denington, made the point yesterday—that there are times when contractors let one down, there are also times when one's own direct labour organisation lets one down. That is not a reason for saying that all contractors are bad, or that they all go out of business, or that they all fail to come up to the standards—not so. They need fail only once or twice before the chances are that they are off the list. So there is very much the discipline of the approved list, which I believe is an important aspect of the criticism against private contractors. I think that that ought to be said.
The noble Lord spoke about parity between the public and the private sectors. Well, of course, this is the debate that goes on all the time, and it may well be that there is an imbalance one way as against the other. However not only is there no harm in trying to get the balance right, but it is I believe essential that we get it right. What we are talking about here is competition. The noble Lord was anxious that fair competition should mean what it says, it should be fair. All right, of course I accept that it should be fair, and if there are aspects of it which he thinks would be unfair one way, then fine, let us by all means talk about that. There would be no harm in that at all.
But basically we are setting out here in certain aspects of the Bill to redress an imbalance, because it has not always been fair. I shall not bore the Committee by going into all of the many ways—and I know many ways—in which the accounts are made up, in which a direct labour organisation tenders for work, often in competition, gets the order, and then invoices out what it costs to the customer department. The customer department then simply gets that back from the ratepayer, and on the accounts it looks as if the direct labour department has not lost anything at all on that particular order. That is but one of a whole series of examples that I could give and that I suspect the noble Lord, Lord Sefton of Garston, from his considerable experience also could give.
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There is no point in trying to go back from there. We are talking about parity. Let us try to get a better basis, and that is what this part of the Bill about direct labour organisations is wanting to do. It is not setting out to try to strangle DLOs, as was suggested yesterday—not at all. All it requires is that they should be efficient, good and effective in their use of public money. And there is a difference between the use of public money and the use of private money. If a contractor fails to make a profit, that is his affair, and he will suffer the consequences. But this is public money that we are talking about. Direct labour organisations receive their money to operate from ratepayers and from Government, and that is why it is important that there must be accountability, competition and fairness all round.
Many comments have been made and I want to try to cover them all. I wonder whether I might touch on the point made by my noble friend Lord Renton. The noble Lord, Lord Evans of Claughton, to whose remarks I want to return in a moment, also spoke about the words, "if he thinks fit". Yes, this point was debated in another place, on I think 2nd July, when my right honourable friend the Minister for local government and environmental services was at some pains to explain that the exercise of the power was restricted by the context of the Bill. He made again the point that it could be challenged in the courts—and I shall come in a moment to what the noble Lord, Lord Mishcon, said. It so happens that the Opposition in another place felt that what my right honourable friend said was a sufficiently reasonable explanation and in fact they withdrew their amendment.
The noble Baroness, Lady Denington, touched upon some other matters. Incidentally, may I say to the noble Lord, Lord Mishcon, that, yes, of course I am always very courteous when talking to myself. I sometimes try to be especially so in those circumstances. It is not usual that I do it aloud, but I did say that I hoped that it was with the indulgence of the Committee and your Lordships. Frankly, I do not think that it adds much to the debate on these amendments if we start to drift off into discussions about democracies in danger of being eroded.

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My goodness me! when I see and hear about me the things I have seen and heard in the last week or two, then I fear desperately for the future of democracy. I do not fear for it because of what is in these amendments.
Yes, I am worried about democracy—we ought all to be worried about democracy—but not just because of what is in these amendments, believe me. Yes, the future of local government, the relationship between central and local government is a matter of considerable concern, and I have no doubt that we shall be talking very vigorously on all sides about that aspect when we come to the other parts of the Bill. But I would ask noble Lords opposite to accept that the passion and the fervour and the belief, on these aspects, are no less firmly held on this side of the Committee than on the other side.
The noble Lord, Lord Bruce, may I say, not disrespectfully, has been as provocative as ever. He talked about diktats. That, I felt, was not going to get us very much further. I have to answer him by saying that the need to submit a report is a discipline, and that it is what happens beyond that that one has to be concerned about. He said that it was not for central Government to say to local government, about a specific service, "You shall stop. You cannot go any further". Well, I will give an instance of when they did. The 1947 Civic Restaurants Act did exactly that. If an authority for three successive years lost money then it had to show reason to the Secretary of State why it should not be closed down. I well remember this, because one of the first things in my time on the Leeds City Council was seeing that the Civic Catering Department which had lost money for many more years than that, did close down; so that really did come home to me.
My noble friend Lord Sandford talked about further discussion, and as I come to the end of my remarks I will touch on that again; but perhaps the most interesting, most constructive, of all, if I may say so, was the point that the noble Lord, Lord Evans, made when he referred to subsections (5) and (6), which my noble friend Lord Renton also mentioned.
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I cannot accept these amendments, for the reasons I have given, and others as well; but I feel that the points made by the noble Lord, Lord Evans, and my noble friend are valid We ought to have a look at the actual wording of those two subsections. Yes, I think we ought to do that, and that we will certainly do. The amendments and much of what has been said about them are something which I cannot accept because the fact is that at the end of the day the Secretary of State—and it is any Secretary of State—must have power to act to end a waste of ratepayers' money and the nation's resources if failure persists. We expect public opinion to play its part. Local democracy is important in this respect, and Clause 15 provides that information has to be publicly available; but without an ultimate sanction and when all else has failed an awkward DLO might still cock a snook and carry on in its unreformed way. We are therefore talking about a weapon of last resort.
So, before I sit down, I say to the noble Lord, Lord Mishcon, on the point about the courts, that of course it is the last thing one wants to have to do, or to expect to do; but I was being challenged on the point as to where this would take us, and that is why the courts were mentioned, not as a major point.
Lord MISHCON: Before the noble Lord the Minister sits down, I think the Committee will be grateful to him—I personally am; I have no right to speak for the Committee—for what I thought was the conciliatory attitude in regard to the subsections that worried my noble friends and myself, namely, (4) and (5), more than anything else in this clause. Nobody is endeavouring to claim a victory, because I think many of us have said the same thing, but if, in answer to the speeches made on all sides of the Committee, he is saying that in regard to the Secretary of State's powers to close down a direct labour organisation he is thinking again of the wording in the section which gives that power, in order to see whether there should be some limitation put upon it, then I believe the Committee knows what he has said and will be grateful for it. But I should like him to be so kind as to say whether that is what he was saying, because that is what I invited him some little time ago to do.
Lord BELLWIN: Yes, that is exactly what I am saying. I am not going to go over it all again. I think your Lordships know that my own views are not in accord with many of those expressed. I believe that what we are seeking to do in this part of the Bill is absolutely essential and must be done; but if we are talking about that aspect of it, then, yes, of course, I say that, and that I will do.
Baroness DENINGTON: Regarding the amendment I moved—my noble friend will speak for himself—on the undertaking given, we can look at it at Report stage. It is the tone—I use that word again—and the intention, perhaps quite wrongly, conveyed by the tone, which is very offensive to local government. If we can get the tone right and the Minister is able to come back satisfactorily, then we can all be happy together.
Lord SEFTON of GARSTON: In relation to Amendment No. 45, certainly the offer made by the Minister is exactly what I sought at the beginning. I make no apology for the fact that I dealt in my speech purely with the question of whether or not, in relation to the carrying out of Amendment 45, there would be deferment. I still say that was a viewpoint that must be held and must be considered. Previous assurances have been given by the Minister that his door is open to the associations, and naturally I assume now that they will now be taken into consultation in regard to this clause. I would have been prepared to save the Minister an hour and half long ago, if he had said "Yes". In relation to what was said by the noble Lord, Lord Renton, I mentioned five years instead of three merely because I thought that was a better period in which to assess the viability of a direct works department. Three years is too short. I beg leave to withdraw.
Amendment, by leave, withdrawn.
[Amendment No. 46 not moved.]
6.8 p.m.
Lord RENTON Lord RENTON moved Amendment No. 47:
Page 14, leave out lines 30 to 33.
The noble Lord said: If your Lordships will look at these lines it will be seen that
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they contain two phrases which are, I suggest, quite unnecessary, because they cancel each other out. Therefore they are a meaningless nullity and it is far better that we should not have them in the Bill. I beg to move.
Lord BELLWIN: I feel we cannot accept this amendment. It is essential that the Secretary of State should exercise his powers to restrict a DLO's activities only after he has given them a fair chance to explain themselves and to justify their operations as far as they can. This amendment would remove the requirement that the Secretary of State should give an authority that chance and would allow him to close down a DLO on the sole grounds that the target rate of return had not been met. Failure to earn the proper return will always be serious, but it will not always be the only criterion.
Lord RENTON: I accept what my noble friend says, but it does not seem to me that the words in lines 30 to 33 really meet his point, and as he says he is going to have a look at these two subsections again I trust that he will look at those phrases. They do cancel each other out. On that understanding I would be glad to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord RENTON Lord RENTON moved Amendment No. 48:
Page 14, line 33, at end insert ("the rate of return on the capital employed is less than the required rate").
The noble Lord said: I should point out that this should be prefaced by a small "c" in brackets if paragraph (b) is to remain or by a small "b" in brackets if it is to go out ultimately. But that is no matter, because this is the sort of point which is corrected by the Clerk of Public Bills before the Bill is reprinted for the Report stage.
The reason why I am moving this amendment is that it is surely necessary to make it clear—because this is the fundamental subsection of this clause and, indeed, of this part of the Bill—that it is only where the rate of return on capital is less than the required rate that the Secretary of State can direct that the local authority or other body shall cease to have power to carry out direct labour work.

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From the earlier discussion one might have thought that direct labour is going to be brought to an end in a great many circumstances almost automatically, but that is not so. It is only where the rate of return is not adequate in accordance with what has been described earlier in the Bill as "required" that the Secretary of State will be able to make an order in those terms.
The Explanatory Memorandum, on the front page of the Bill, makes it clear in paragraph 4, where it says in relation to Part III that it
"enables the Secretary of State to deprive authorities of the power to maintain direct labour organisations"—
and these are the operative words—
"where a prescribed rate of return on capital has not been achieved".
We really should make it clear in subsection (5)—which, as I say, is the important subsection—that it is only where that prevails that the direction can be given. Accordingly, I beg to move.
Lord BELLWIN: If my noble friend would feel able to withdraw his amendment, I think we ought to look at this wording generally to see whether in fact we can cover what I must say sounded to me to be the very fair points that were being made. I am not sure, because we are now speaking concerning the legal niceties, as to whether or not I can in fact come back with something different, but I think the points made have, as they seem to me, sufficient validity for me to be able to say this, and that I do. If my noble friend is able to withdraw his amendment, I in turn will undertake to have a look at this wording to make sure that we are covering these aspects.
Lord RENTON: I am much obliged to my noble friend. I would simply add that it is rather strange when the Bill itself does not carry out what is said in the Explanatory Memorandum.
Lord MISHCON: The Minister, by his generous remarks, has saved himself and the Committee a further speech from me.
Amendment, by leave, withdrawn.
[Amendment No. 49 not moved.]
On Question, Whether Clause 14, as amended, shall stand part of the Bill?
Lord BRUCE of DONINGTON: There is an amendment down in my name to leave out Clause 14, which I beg to move. I do not know whether that is in order. I am very sensible of the constructive attitude which has been displayed by the noble Lord in dealing with the vital amendments which are incorporated, or ought to have been incorporated, within Clause 14. I accept in good faith that he intends to look at the whole thing again, and also to look at the form of words in relation to the two very strategic amendments which were so ably moved by my noble friend Lord Sefton and by my noble friend Lady Denington.
Lord BELLWIN: If the noble Lord would be so kind as to give way, I do not want to mislead the Committee at all. I said I could not accept the amendments in question. I said, in relation to the specific subsections which referred to the powers of the Secretary of State, that I felt we should look at that wording, but I did not say that I accepted the amendments at all, and I should not like the noble Lord to be under a misapprehension.
Lord BRUCE of DONINGTON: I am sorry; I did not intend to imply that the noble Lord had agreed to the amendments, but that in both cases he was going to look at the powers again. That leaves us with Clause 14 unamended, and I am bound to say that this still leaves a situation in which, in the first part of it, we are faced with an almost impossible technical position, arising from the loss of Amendment No. 44, in which local authorities are required to report,
"those circumstances in respect of any description of work where the rate of return now expressed on a current cost accounting basis falls below the specified amount".
As I have already explained to your Lordships, this presents an impossibility. It would be quite impracticable for the technical reasons which have been explained both by me to the Committee, with your Lordships' indulgence, and also by the professional bodies concerned.
But I myself cannot conceive of any kind of powers, however expressed in this clause when it is reconsidered on Report,

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that are going in any way to eliminate the Government's determination that the Minister shall retain the power to direct, in one form or another, what the local authorities shall do in this regard and in certain circumstances. It is this power that we on this side of the Committee must challenge. The noble Lord expressed himself on Second Reading as not in any way trying to undermine the DLOs. In his reply on Second Reading, at column 1459, he repudiated the accusation by those who contend that the Government are launching an attack on direct labour, and he said at column 1460:
"I know some splendid direct labour organisations in different parts of the country, and I hope that I left one behind me".
Then he said somewhat modestly:
"Perhaps I should not have said that".
There will be many on this side of your Lordships' Committee who are convinced of the noble Lord's complete sincerity in this matter. The noble Lord had a distinguished record in local government, and I believe that if he had been the sole arbiter of the matter this question could have been dealt with very much more reasonably in Westminster as a whole than it has been so far.
There is also another requirement in Clause 14 which has not been the subject of amendment but which makes it still objectionable and shows which way the bias lies, because the statement of return has got to be made within six months of the end of the financial year. Indeed, in another part of the Bill certain accounts and documents are required within six months of the end of the local authority year. Once again you get the unfairness, because under the Companies Act 1976 we find that private companies have 10 months in which to deliver their accounts to the Registrar of Joint Stock
Companies, and others have seven months. The Government are even shortening that period in so far as the statutory requirements are concerned.
Lord MORRIS: I do not believe that that is a fair analogy at all. The difference is that a company is funded by shareholders; a local authority is funded by the ratepayer. That is a very different thing.
Lord BRUCE of DONINGTON: I do not feel very strongly about it. So far as the noble Lord's remarks are concerned, the difference is not great but, in my view, it is a straw in the wind as to which way the Government's mind is going. If there remained any doubt as to the real purpose of Mr. Michael Heseltine in this matter, let us take the words of his colleague, Mr. Norman Fowler, speaking on 3rd October last when he said:
"It is central to this Government's policy that the public sector should handle only those functions which it alone can and must".
That is the real essence of the Government's policy and of the whole content of Clause 14. That is why we on this side of the Committee ought to stand up and be counted, with or without the support of those of your Lordships who believe in the future of local government, who believe in the local democratic process—who will have to stand up and be counted too. We think that your Lordships should be afforded an opportunity of nailing your colours to the mast in this matter, and consequently we shall divide.
6.23 p.m.
On Question, Whether Clause 14, as amended, shall stand part of the Bill?
Their Lordships divided: Contents, 145; Not-Contents, 71.

CONTENTS

Airey of Abingdon, B.

Birkenhead, E.

Congleton, L.

Aldington, L.

Boardman, L.

Cork and Orrery, E.

Alport, L.

Boyd-Carpenter, L.

Cottesloe, L.

Amory, V.

Brabazon of Tara, L.

Croft, L.

Armstrong, L.

Bradford, E.

Cromartie, E.

Auckland, L.

Bridgeman, V.

Cullen of Ashbourne, L.

Audley, L.

Brownlow, L.

Daventry, V.

Avon, E.

Cairns, E.

de Clifford, L.

Balerno, L.

Caithness, E.

Denham, L. [Teller.]

Bellwin, L.

Cathcart, E.

Denman, L.

Belstead, L.

Chelwood, L.

Digby, L,

Berkeley, B.

Cockfield, L.

Dormer, L.

Bessborough, E,

Colville of Culross, V,

Drumalbyn, L.

Dundee, E.

Kinloss, Ly.

Redmayne, L.

Elibank, L.

Kintore, E.

Renton, L.

Ellenborough, L.

Knutsford, V.

Ridley, V.

Elliot of Harwood, B.

Lindsey and Abingdon, E.

Rochdale, V.

Elton, L.

Liverpool, E.

Rodney, L.

Evans of Hungershall, L.

Long, V.

Rollo, L.

Exeter, M.

Loudoun, C.

Romney, E.

Faithfull, B.

Lucas of Chilworth, L.

Rosslyn, E.

Ferrers, E.

Lyell, L.

St. Aldwyn, E.

Ferrier, L.

McAlpine of Moffat, L.

St. Germans, E.

Forester, L.

McFadzean, L.

Saint Oswald, L.

Fortescue, E.

Mackay of Clashfern, L.

Sandford, L.

Gainford, L.

Macleod of Borve, B.

Sandys, L. [Teller.]

Gainsborough, E.

Mancroft, L.

Savile, L.

Geddes, L.

Mansfield, E.

Sharples, B.

Gisborough, L.

Margadale, L.

Skelmersdale, L.

Gowrie, E.

Marley, L.

Soames, L. (L. President.)

Gray, L.

Massereene and Ferrard, V.

Spens, L.

Gridley, L.

Melville, V.

Stamp, L.

Haig, E.

Middleton, L.

Stanley of Alderley, L.

Hailsham of Saint Marylebone, L. (L. Chancellor.)

Minto, E.

Strathclyde, L.

Monk Bretton, L.

Strathcona and Mount Royal, L.

Hanworth, V.

Monson, L.

Swansea, L.

Harmar-Nicholls, L.

Morris, L.

Swinfen, L.

Harvington, L.

Mottistone, L.

Teviot, L.

Hastings, L.

Mowbray and Stourton, L.

Tranmire, L.

Hatherton, L.

Murton of Lindisfarne, L.

Trefgarne, L.

Henley, L.

Netherthorpe, L.

Trenchard, V.

Hereford, V.

Northchurch, B.

Trumpington, B.

Hill of Luton, L.

Nugent of Guildford, L.

Vaux of Harrowden, L.

Holderness, L.

O'Hagan, L.

Vickers, B.

Home of the Hirsel, L.

Onslow, E.

Vivian, L.

Hylton-Foster, B.

Orkney, E.

Waldegrave, E.

James of Rusholme, L.

Orr-Ewing, L.

Watkinson, V.

Kemsley, V.

Radnor, E.

Yarborough, E.

Keyes, L.

Rawlinson of Ewell, L.

NOT-CONTENTS

Ardwick, L.

Gladwyn, L.

Parry, L.

Avebury, L.

Glenamara, L.

Peart, L.

Bacon, B.

Gosford, E.

Phillips, B.

Balogh, L.

Hale, L.

Pitt of Hampstead, L.

Banks, L.

Hall, V.

Rhodes, L.

Beswick, L.

Hampton, L.

Rochester, L.

Blyton, L.

Hatch of Lusby, L.

Ross of Marnock, L.

Boston of Faversham, L.

Hooson, L.

Segal, L.

Bowden, L.

Houghton of Sowerby, L.

Simon, V.

Briginshaw, L.

Hughes, L.

Stedman, B.

Brockway, L.

Irving of Dartford, L.

Stewart of Alvechurch, B.

Brooks of Tremorfa, L.

Jacques, L.

Stewart of Fulham, L.

Bruce of Donington, L.

Janner, L.

Stone, L.

Cledwyn, of Penrhos, L.

Jeger, B.

Strabolgi, L.

Collison, L.

Kaldor, L.

Taylor of Blackburn, L.

Cooper of Stockton Heath, L.

Kilbracken, L.

Taylor of Mansfield, L.

David, B.

Llewelyn-Davies of Hastoe, B. [Teller.]

Underhill, L.

Davies of Leek, L.

Wallace of Coslany, L. [Teller.]

Davies of Penrhys, L.

Lloyd of Hampstead, L.

Wells-Pestell, L.

Donaldson of Kingsbridge, L.

Lovell-Davis, L.

Whaddon, L.

Elwyn-Jones, L.

Maelor, L.

Wigoder, L.

Evans of Claughton, L.

Melchett, L.

Wilson of Radcliffe, L.

Fisher of Rednal, B.

Ogmore, L.

Winstanley, L.

Gaitskell, B.

Oram, L.

Young of Dartington, L.

Moved accordingly, and, on Question, Motion agreed to.

Resolved in the affirmative, and Clause 14, as amended agreed to accordingly.
6.30 p.m.
Clauses 15 and 16 agreed to.
Clause 17 [Interpretation of Part III]:
Viscount SIMON Viscount SIMON moved Amendment No. 50:
Page 17, line 5, leave out ("subsection (2)") and insert ("subsections (2) and (3)").
The noble Viscount said: This is a paving amendment for Amendment No. 51. I hope it will be convenient to the Committee if I speak to the two of them together,

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and particularly to Amendment No. 51 which is the substantive amendment. After the discussions we have had on matters of very great importance, we come to a very small matter. It has been brought to my notice by the Port of Bristol Authority.
Bristol is a municipal port owned and operated by the local authority. The people at Bristol were afraid that the labour employed at the port, which is directly employed by the port authority, could bring the port operations within the scope of Part III of the Bill. I did not think it likely and they did not think it likely; but they felt, as I do, that although we all think we know what we mean by direct labour organisations, they are not very clearly defined in the Bill and it might be held that they included direct labour employed by a local authority for running a port. Since I put down this amendment, I have been given to understand that the Government agree that it is not intended to cover port labour. In those circumstances, I think the simplest thing to do to save time is to move this amendment formally and give the Minister an opportunity to tell us what the Government are going to do about it. I beg to move.
Lord BELLWIN: This amendment would exempt from Part Ill of the Bill those labour forces employed by local authority port undertakings. The argument is that these workforces are integral parts of the ports' operational staff, and that the undertakings as a whole are already subject to competitive stimulus and to the requirement to act as commercial businesses, and that the requirements of this part of the Bill are thus in substance already met as far as they are concerned. We accept that argument, and we therefore accept this amendment.
Viscount SIMON Viscount SIMON moved Amendment No. 51:
Page 18, line 13, at end insert—
(" (3) Notwithstanding anything in subsection (1) above, in this Act "construction or maintenance work" does not include work undertaken by a local authority authorised by any enactment to carry on a dock or harbour undertaking if that work is undertaken for the purposes of or in connection with that undertaking.").
On Question, Whether Clause 17, as amended, shall stand part of the Bill?
Lord ROSS of MARNOCK: We have had quite a lot of talk about direct labour organisations and, I think without exception, in reference to local authorities. But that is not what Clause 17 says. Indeed, from Clause 6 through to Clause 14, which I was very happy to vote against, the reference is not just to local authorities but to a development body. Here, in Clause 17, we have the definition of a development body. In relation to England and Wales, I leave that to those who know something about England and Wales; I know nothing at all. But the clause reads:
"… in relation to Scotland … any body established under sections 3 or 5 of the Water (Scotland) Act".
I hope someone will tell us what kind of organisations are concerned there. Then we come to:
"a development corporation established under the New Towns (Scotland) Act 1968"
—and as far as I know about these new towns it will be their works department who will be the bodies which will be construed as direct labour organisations. All they do is maintain their own houses.
But we must get in the element of competition. I do not know whether the noble Lord, Lord Boyd-Carpenter, knows very much about new towns in Scotland but by the nature of new towns in Scotland there are very few building contractors in them. There are very few, if any; so that the element of competition is just not there. To suggest under Clause 7(3) that there could be regulations telling them before carrying on with the maintenance on their property that they must get tenders from three separate people who are nonexistent, is, I think, rather silly. I leave the new towns corporation to the many noble Lords who may have experience of them. I know of at least one noble Lord who was beside me for quite a time today who is the chairman of one such new town and others have been members. They will agree with me that whatever else has been said about the clauses covered by this definition, it should not apply to the new towns in Scotland.
The case which especially concerns me is that of the Scottish Special Housing

259
Association. I do not know how many noble Lords know anything about the Scottish Special Housing Association. It was established by Act of Parliament over 40 years ago. We are interested here in competition. It was established to build houses when nobody else would build them. I suggest to the noble Lord, Lord Boyd-Carpenter, that he tries to look for a building contractor somewhere in the North of Scotland, in Argyll, in the Western Isles, to build what would have been a local authority housing scheme. He will find they are not there.
Lord BOYD-CARPENTER: I am deeply touched and flattered by the noble Lord's concern with my particular views on the intricacies of Scottish housing but might it not be more economical of the time of the Committee if he were to address his inquiries to Her Majesty's Government's Ministers who are responsible?
Lord ROSS of MARNOCK: I am hoping that they are alive and listening—although there is not a Scottish Minister there. He cannot blame me when there is not anyone there concerned with Scotland. I am glad that the noble and learned Lord the Lord Advocate is not here. He is not a Scottish Office Minister. This is one case in point. Why is there included in the clause the Scottish Special Housing Association?—which was set up to build where even the local authorities had not the resources to do it. When we established an aluminium smelter in the north of Scotland one could not expect the local authority, with its resources, to build houses so we gave the task to the local authority aided by the Scottish Special Housing Association. The same thing applied to different parts of Scotland—they were all in the North—which have been affected by North Sea oil.
The other point about the Scottish Special Housing Association is this. I listened very carefully to every word that the noble Lord, Lord Bellwin, said. He was determined that there was going to be open scrutiny; that people would know what was happening; the Ministers would know what was happening. It is the Minister who sets it up and appoints all the people to the Scottish Special
260
Housing Association. He gives them the money year by year. He discusses with them exactly what they are going to do. I do not know where competition comes in here but they are invited to use experimental materials for building and use experimental designs. I can well imagine that that was essential in certain parts of Scotland. I remember Tom Johnson was concerned that they should use highland materials for highland houses. All this kind of thing was laid upon the Scottish Special Housing Association.
It is not the same as the great controversy which has ranged between one side and the other about the direct labour organisations. I doubt very much if there has been in your Lordships' House in the past 10 years a question about the efficiency or inefficiency of the Scottish Special Housing Association. I am perfectly sure there has not been one. Certainly there has not been one in the other House. It gives its report yearly to the Secretary of State. The Secretary of State can ask it to do anything. He has the power already so we do not need this legislation. Naturally, people are very worried because when considering Clause 14 its sole job is to build and maintain houses. It can ask private contractors to build houses in certain areas; but then the private contractors own them. So they help out local authorities.
Under Clause 14 I am perfectly sure that the noble Lord, Lord Bellwin, is going to retain the powers even if he changes the words. I think that is the implication of what he said; he is going to retain the powers but change the words and probably make them more relevant to the Bill itself. Clause 14 stands on its own as presently worded. I think that is the weakness of it. Under Clause 14 the Secretary of State can virtually disband the Scottish Special Housing Association. The very function for which it is there is to build houses and they can be told by the Secretary of State to stop it under a regulation. This is quite appalling!
What I am going to suggest is that between now and the Report stage the noble and learned Lord the Lord Advocate should tell the Secretary of State—if he is on speaking terms with him—or the Minister of State for Scotland, who is in

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this House but is not here at the moment, that he should consider removing first of all the Scottish new towns. I can understand if he desires to keep them there. He really ought to remove the Scottish Special Housing Association from this part of the Bill.
Lord BELLWIN: I am not going to say too much on this. We have had such a lot of debate on this whole area that I am not going to go over it all again. I understand there are five new towns in Scotland and I confirm that the proposals apply to them. There is no reason why it should not be so. I do not know whether the noble Lord, Lord Ross of Marnock, has had the Notes on Clauses which we made available. That explains the definition of the development body.
Therefore there is not much I want to say having gone over this whole matter again and again. The Scottish Special Housing Association to which he refers is a Quango, and while much of Lord Ross's argument is correct, it is unjust that all public bodies should be excluded from competition. There is no need to respond to particular Scottish points. One would take this within the generality of everything else. The people concerned in Scotland would no more want to be excluded than anyone else. If they are as proud as I hope they are of their direct labour organisations—and those who have good ones are proud of them—they would say: "All right, fine; so be it."
The EARL of DUNDEE: I apologise to the noble Lord that I was not in my place when he began his very interesting speech. I am sure that he is aware that the Scottish Housing Association, which was begun by the late Walter Elliot when he was Secretary of State for Scotland about 40 years ago—some two or three years ago completed its 100,000th house. I cannot tell of course how many houses would have been built by other people if they had not done the job, but they are a very useful asset. They have played a great part so far in at least mitigating the difficulty of the Scottish housing problem.
Lord ROSS of MARNOCK: I am sure that the noble Earl will confirm what I have said that there has been no complaint at all about their inefficiency or slackness
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in respect of accounting. They have to account to the Secretary of State all the time and every year. Fancy the Secretary of State proclaiming his own ignorance by asking them to give a report of their accounting over three years when he himself gets a report every year!
From the point of view of the emergency work that they do, I remember when we were building houses around Fort William. The private firm, Logans, that was building them went "bust". It was not any other private firm that went in to complete those houses. We were very glad to have the Scottish Special Housing Association to go in and do it. The same thing has applied time and time again in relation to special jobs that had to be done where houses were needed for industry. To suggest that this is on the same level as the direct labour organisations of the local authority is just not true. I can excuse the fact that this is not Lord Bellwin's field. It is somebody else's responsibility and somebody else knows a little more about it. He says that we have talked long enough about the general field. I am not talking about the general field, I am asking: Why is the Scottish Special Housing Association in this? It is a particular field.
I am not going to pursue this at the present time. I can assure the noble Lord that from the inadequacy of the replies and from the support that I have had in regard to the worthwhileness of this organisation, and the fact that there has been no complaint at all about them in respect of their work, that I will put down amendments on Report stage.
Clause 17, as amended, agreed to.
Lord BELLWIN Lord BELLWIN moved Amendment No. 52:
Insert the following new clause:
("Exemption of small direct labour organizations from requirements of Part III.
.—(1) This Part of this Act does not apply to a local authority or development body in any year if they did not in the previous year at any one time employ more than thirty persons, other than persons excluded by subsection (2) below, who were engaged (whether wholly or partly) in carrying out construction or maintenance work.
(2) The persons excluded by this subsection are persons engaged wholly or mainly upon the design, development or control of construction or maintenance work.
(3) The Secretary of State may by order specify for the purposes of subsection (1) above a number of persons less than thirty.
(4) The power to make an order conferred by subsection (3) above shall be exercisable by statutory instrument.
(5) A statutory instrument containing any such order shall be subject to annulment in pursuance of a resolution of either House of Parliament.
(6) The Secretary of State may direct that this Part of this Act shall not apply to a local authority or development body in any year if he is satisfied that the only reason why it would apply to that authority or body is that at some time in the previous year the number of their employees engaged in construction or maintenance work exceeded the relevant number because it was necessary to exceed that number in order to carry out urgent construction or maintenance work whose necessity could not reasonably have been foreseen by the authority or body.
(7) In subsection (6) above "the relevant number" means thirty or such lesser number as may for the time being be specified for the purposes of subsection (1) above.").
The noble Lord said: This is a new clause which we are introducing to cover the undertaking that we gave in another place about the de minimis exemptions. It will be generally welcomed. It is a fair and sensible relaxation and will save the smallest authorities some work and ensure that safeguards are maintained on all the more significant direct labour organisations. I beg to move.
6.50 p.m.
Lord SANDFORD Lord SANDFORD moved as an amendment to Amendment No. 52, Amendment No. 52A:
In subsection (1), line 3, leave out ("thirty") and insert ("fifty").
The noble Lord said: I beg to move Amendment No. 52A and, at the same time, will speak to Nos. 52B and 52C. Like Oliver, I should very much like to welcome the amendment that my noble friend has just moved. It is something which the Association of District Councils, together with many others, was asking for. Also like Oliver, but conscious of the ill-treatment that his remarks provoked from his benefactors, I shall have the temerity to ask for a little more.
This threshold or limit of 30 employees will do good in sparing some—but only 16—district councils from the requirements of the clauses which we have been discussing in this part of the Bill. But by raising the limit to 50, as I have
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suggested, about 44 smaller district councils, with small direct labour organisations with an average of 35 employees, would also be released. I put it to the Committee that with small organisations such as these, held solely to undertake housing maintenance and to meet reserves for emergencies, the complex accounting provisions in the Bill will be largely irrelevant and certainly irksome, while the cost of introducing and maintaining accounting systems of this kind will be of the order of £20,000 per annum for each authority.
If my noble friend thinks that this is going too far, then I would fall back on Amendments Nos. 52B and 52C and ask him to consider that, at the very least, he might amend the new clause as I am suggesting, so that his right honourable friend would be able to raise the threshold—rather than being unable to do so, as he is at the moment—if, in the light of experience, it proved desirable to do what I am asking should be done now, but which may not meet with the Government's approval at this stage. I beg to move.
Lord BELLWIN: If I may, I will also speak to Amendments Nos. 52B and 52D. I have to say that the amendments are not acceptable because, first, No. 52B would permit an increase only in the number of operatives at which exemption was granted and would permit no tightening up. We can see no merit in this, as it is our view that 30 is the appropriate level at which exemption should begin. Although, once authorities have become used to operating the system, there may be some case for extending it to embrace more authorities, we foresee no circumstances in which we shall want to retreat. There should be no loosening of controls over DLO expenditure.
Amendment No. 52D, too, is not acceptable. It would enable local authorities to set up as general building contractors for other public sector bodies in an area stretching far beyond their own boundaries. There can be no justification for councils using their ratepayers' money—unwillingly subscribed money—as risk capital in speculative ventures, in competition with the private sector. The only reason for the existence of a direct labour capacity within any authority

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must be the discharge of its own functions. Authorities must first prove that direct labour is, indeed, the best way of doing that. They can do that by competing in their own area on their own building programmes. They must keep their accounts clearly on a trading basis, earn a return on capital and prove all this before they can think of expanding. I fear that I cannot accept these amendments.
Lord SANDFORD: I am grateful to my noble friend. I must not allow my disappointment over Amendments Nos. 52A, 52B and 52C to stand in the way of my welcome for what we have gained with Amendment No. 52. I beg leave to withdraw my amendment.
Amendment to the amendment, by leave, withdrawn.
[Amendments Nos. 52B and 52C not moved.]
Lord BRUCE of DONINGTON Lord BRUCE of DONINGTON moved Amendment No. 52D:
After Clause 17, insert the following new clause:
(" —(1) Notwithstanding anything in section 101(10) of the Local Government Act 1972, the Local Authorities (Goods and Services) Act 1970 or any other enactment, a local authority may enter into arrangements for the construction of buildings, or the carrying out of other works by them on behalf of an authority to which this section applies.
(2) This section applies to

(a) another local authority within the county or adjoining county

(b) the water authority

(c) the police authority

(d) the Passenger Transport Executive

(e) the Health Authority (within the meaning of section 128(1) of the National Health Service Act 1977) in the county.").

The noble Lord said: This amendment arises from deliberations that took place in the working party on direct labour organisations, with memberships that were drawn from all local authority associations, the district audit service and officials from the Department of the Environment itself, whose report was published in August 1978. That report recommended that DLOs should be permitted to work outside their parent local authority boundaries for other local and public authorities, as well as inside them.
There seems to be no reason why there should not be more flexibility in the scope of DLOs to work for other than their parent authority, should that be desired by both parties, particularly under the constrictions that are already imposed by Part III of the Bill that we have considered so far. The division of responsibility between various levels of local authority should not be allowed to prevent the responsible authority from getting any work carried out by the agency which it considers best able to do it.
Perhaps the best illustration here is highways work. As your Lordships are probably aware, the winding roads within the United Kingdom—at any rate, in certain parts of it—very often cross and recross local authority boundaries. It is for consideration—and, indeed, I should have thought it was a matter of common sense—that where there was a strip of road four or five miles long, or even longer, which crossed and recrossed local authority boundaries, those authorities should be empowered to agree among themselves which direct labour organisation should be entitled to do the work. There are other similar instances of that kind.
In view of the lateness of the hour, and the proximity of the time when, presumably, we shall be asking for the House to resume and then to adjourn during pleasure, I shall not press the matter further than that, because I believe that the noble Lord may already have given sympathetic consideration to this amendment. I have not had any prior consultation with him, unlike the noble Viscount, Lord Ridley, or the noble Lord, Lord Sandford, but I have every reason to suppose that the amendment will commend itself to the Minister's undoubted common sense. I beg to move.
Lord BELLWIN: When I spoke to the amendment of my noble friend Lord Sandford, I touched on this amendment. I fear that the noble Lord will be disappointed, because we cannot accept his amendment.
On Question, amendment negatived.
Clause 18 [Consequential repeal or amendment of local statutory provisions]:
6.58 p.m.
Lord UNDERHILL Lord UNDERHILL moved Amendment No. 53:

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Page 18, line 35, leave out from ("to") to end of line 36 and insert ("an affirmative resolution by both Houses of Parliament").
The noble Lord said: This clause empowers the Secretary of State by order to repeal a provision of any local Act, or to amend any such provision, which appears to him to be inconsistent or to have become unnecessary in consequence of Part III of this Bill. This, again, is a very sweeping and arbitrary power which is being given to the Secretary of State. In effect, it means the repeal or amendment of an Act which is on the statute book. I must draw your Lordships' attention to the fact—I do not know what will be in the Government's mind—that it could well be that this provision would cover the clause in the Greater Manchester Bill which was the subject of discussion in this House. Many of your Lordships will recall that occasion. If the Secretary of State so decided he could repeal that clause. A provision which has been approved by Parliament could be repealed by the Secretary of State.
During Question Time earlier today the noble Viscount, Lord Trenchard, said he was certain that the House would agree that we should not tamper with any Act passed by Parliament, yet this clause will permit the Secretary of State to tamper with an Act passed by Parliament. What is the effect? The alteration of existing legislation should not be left to the Negative Resolution procedure. Therefore we are asking in the amendment that this important provision to repeal an Act, or part of an Act, or to amend an Act, or part of an Act, must be by Affirmative Resolution so that, because one is changing legislation, the matter can have proper discussion.
7.1 p.m.
Lord BELLWIN: I invite the Committee to consider the purposes for which the order-making power under this clause are designed, and the conditions under which it may be used. It is very much a reserve power. It will allow the Secretary of State to repeal any part of a local Act of Parliament whose provisions are inconsistent with this one. This provision is a standard one. There is nothing unusual about this. It is in fact a perfectly proper way of ensuring that new requirements determined on by Parliament prevail over
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inconsistent provisions which may exist in local Acts.
In this case the orders will be used to amend or repeal local Act powers which are inconsistent with the provisions of Part III of this Bill. They will not remove any power to carry out work which may exist in local Acts but simply ensure that when carrying out such works, the financial requirements of this Bill bite just as they do on "works contracts" and "functional work". Even so, before the Secretary of State could make an order under this clause, subsection (3) would require him to consult the local authority concerned.
With this safeguard, and Parliament having signalled its approval of the requirements for competitive tendering and proper accounting set out in this part of the Bill, we believe that it is unnecessary to require specific parliamentary approval of every application of these principles to individual authorities. To do so would be an inappropriate use of Parliament's time, and we cannot accept the amendment.
Lord MISHCON: I wonder whether I may say just a few words in support of my noble friend Lord Underhill and elucidate something which happened yesterday. I regret that the elucidation takes place in the absence, I believe, of the noble Lord, Lord Renton, who pointed out yesterday the difference between an Affirmative and a Negative Resolution of the House. It was then said that it is a much more simple matter for the House to deal with any variation of a regulation, or making of a regulation, and so on by a prayer for annulment. And indeed it is by the Affirmative Resolution procedure.
I did not answer the noble Lord from my own experience of these matters because I wanted to check it before doing so. I once had the privilege of moving a prayer for the annulment of a certain regulation of this House and was answered, as always, effectively, by the noble and learned Lord the Lord Chancellor. I was advised then that although it is the tradition of this House—one can look back into history and find that this is borne out by the various examples that have occurred—to pray for annulment it is not the tradition of this House to divide on any ministerial regulation. Bearing in mind

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that tradition and having had, in any event, a courteous undertaking from the noble and learned Lord the Lord Chancellor, I did not pursue the matter to a Division.
As I understand it, that is not the situation with an Affirmative Resolution. I may be wrong, but my understanding of the advice that I was then given is that there is a difference between the two. If, therefore, I am correct I would not wish the House to be misled into thinking that it is a much easier matter to deal with delegated powers, or whatever, under the Negative Resolution procedure as against the Affirmative Resolution procedure.
The noble Lord the Minister has had no notice of what I have just said, and I would always wish to be as fair as he is. Whether the noble Lord or any other noble Lord is able to guide the Committee on the matter at this time I do not know. I shall well understand it if the Minister wishes to take guidance upon what I have said so that at least we may know what the proper procedure and tradition of the House is and therefore can make up our mind. If the Minister feels that he needs time to obtain guidance and if he is prepared to look at the matter at the Report stage so that the House may know what is the position, I should be willing to leave it at that.
Lord BOYD-CARPENTER: I do not always feel subject to an irresistible urge to support the noble Lord, Lord Mishcon, but on this occasion it seems to me that he is on to a reasonable point. I recall, as he does, the occasion when he moved a prayer to annul a Negative Resolution and was, I think very properly, advised that though it would be legally open to this House so to proceed it was contrary to long-established practice.
As regards the affirmative procedure, the noble Lord may recall that within quite recent memory the House has refused to approve an Affirmative Resolution. I refer to a fairly recent Rhodesia order in the unhappy days when sanctions were being applied to that singularly unhappy country, so I think that the noble Lord is on to a quite significant point.
I want to address one word to my noble friend. It is, it seems to me, quite
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a serious matter for a Minister to repeal part of a statute, be it a public or a local statute. As part of a legislative factory perhaps we owe a certain respect to our product, and statutes are very much a product. Although my noble friend in his normal, persuasive way said that it would only be when it was inconsistent with this Act that this power would be exercised, I am not sure that he is absolutely right. As I understand it, and he will correct me if I am wrong, it is when it appears to the Secretary of State to be inconsistent. I have complete devotion to all Secretaries of State but sometimes they err and it is not, with respect, for a Secretary of State in a matter of this sort to have a decisive position.
As the noble Lord, Lord Mishcon, says, this matter has been sprung on my noble friend and one does not want to press him, particulary at this hour. I wonder, however, whether my noble friend would look at it again. When one is repealing a statute there is an argument for the Affirmative Resolution procedure. When my noble friend says that it would be a waste of parliamentary time, I think that must depend, must it not, on the substance of the order. If the order is a purely technical and formal one, it is the experience of all of us that it goes, as it is called, on the nod. Unless this House is to indulge in the kind of practice sometimes carried on down the corridor, I think my noble friend is unduly apprehensive if he thinks other than that an amiable nod by himself would be required in the great majority of cases. I hope therefore that he will look at the matter again.
Lord BELLWIN: Talk about persuasiveness! My goodness me! In the light of what the noble Lord, Lord Mishcon, and my noble friend have said of course I will have a look at it. I cannot accept this as it is now, but we will have a look at it, read what has been said, think very carefully about it and see what we might or might not do.
Lord UNDERHILL: I am grateful for the intervention of the two noble Lords and for the promise of the noble Lord the Minister to have a look at the matter. May I make just two points which I hope he will consider. He made the point that the local authority concerned would be consulted. That is all it says. It does

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not say what will happen if a local authority still says, "No, we want our Bill to stand". The Minister will go straight ahead. That is why I believe that the authority of Parliament must be preserved. However, the Minister has said he will take a careful look at it, and on that basis I withdraw the amendment.
Amendment, by leave, withdrawn.
Lord SANDYS: I think it may be for the convenience of the Committee if the Committee stage were suspended until eight o'clock. In the meanwhile, the House will be prepared to accept further business. We have two Confirmation Bills on the Order Paper. Therefore I beg to move that the House do now resume.
House resumed.

INVERCLYDE DISTRICT COUNCIL ORDER CONFIRMATION BILL
7.10 p.m.
Considered on Report.

CITY OF DUNDEE DISTRICT COUNCIL ORDER CONFIRMATION BILL
The Earl of MANSFIELD: My Lords, I beg to move that this Bill he now considered on Report.
Moved, That the Bill be now considered on Report—[The Earl of Mansfield.]
Lord de CLIFFORD: My Lords, I am sorry to have to detain the House for a few moments and I must particularly apologise to the noble Earl, Lord Mansfield, that I have to raise these points at this moment. Somehow or other this Bill escaped me when it went through this House earlier, and it is only since a number of alarmed citizens have drawn my attention to certain parts of the Bill that I have wished to ask him to elucidate them. I am referring of course, as is my usual wont, to the control of dogs.
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As to paragraph 3 of the schedule to this Bill, there is some doubt in the minds of some people, including my own, whether this is drawn correctly. My reading of this is that if a person has a dog which goes astray and it is seized, if it has a collar with a name on it then the owner or keeper must be notified and if the dog is not claimed within seven days it can be either sold or destroyed. Paragraph 3(1) does not, however, say that. It merely says that the dog may be seized and may be detained until its owner has claimed it and paid all expenses incurred by reason of its detention. Does that in fact mean that if somebody puts out his dog when he goes to work in the morning, and it is seized because it has not got a collar with its name and address on it, that dog has to be kept by the authority in perpetuity? If so, it is very surprising.
The second point I wish to raise is on paragraph 4 of the schedule. I must confess total ignorance of Scottish law so I may be asking questions to which there are very simple answers. The principle of paragraph 4(b) and (c) is virtually to ban dogs from the foreshore in a designated area. The principle that dogs should be banned from beaches was not permitted by your Lordships' House in the County of Merseyside Bill and it is slightly alarming to find that the City of Dundee is applying for the same powers.
The words "in a designated area" are used, and I have been given to understand from certain people who have inquired about this that these by-laws have to be confirmed by the Secretary of State and they have also been assured that a "designated area" not only on a beach but in a park, or anywhere else, is an area which is fenced off. It would be nice to know, if the noble Earl can let me know at some time convenient to himself, whether in fact this is a true interpretation. Can the Secretary of State object to these by-laws and does a "designated area" mean that it must be fenced off? The principle of fencing off cultivated areas, children's playgrounds, orchards, et cetera is completely acceptable and highly desirable and it would be a great help to a number of people if the noble Earl could give me an answer.
The Earl of MANSFIELD: My Lords, when my noble friend rose I divined that

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he would not be interested in paragraph 5 of the schedule to this Private Bill, which deals with the provision of alcoholic refreshments in baths. But having said that, and forewarned as I was, the balls that he has bowled have been reasonably fast and I think in some degree I shall have to consider the matter and write to him.
The position is that this is one of a great number of provisional orders which have gone through your Lordships' House (if that is the term) in the last year or so and the purpose of this, as of all the others, is to give district councils in Scotland powers to do various things. In paragraph 3 of the schedule the power is given to the district council to appoint dog wardens to assist the police to control stray dogs. I suppose the noble Lord might have said that the general duty of rounding up stray dogs belongs to the police, so why is this necessary? If he had asked me that question I should have said to him that the police have a number of calls on their time, energy and resources and it is felt appropriate that this kind of activity had best be undertaken by the local authority as, for instance, has occurred in Edinburgh, at not very much expense to the public. I think they have taken on two dog wardens for their service. At any rate we say that local authorities are free to determine their own priorities. The establishment of a dog warden service does not involve any noticeable additional aggregate of Exchequer support although it might have a marginal effect on grant distribution.
Paragraph 4 of the schedule makes it an offence for owners or keepers of dogs to allow their dogs to foul any part of designated protected areas, and I think my noble friend really asked me whether an area can be protected if it is not enclosed. I think that is what it comes to. I am hesitant about pronouncing on this, but I would just remind him that paragraph 4(2) of the schedule says that,
"'beach' means any bank, dune, fiat or other land adjacent to the foreshore".
By implication, I would imagine that that, at any rate, could not be enclosed.
Nevertheless, I will study what the noble Lord has said when I see the Official Report tomorrow and on the two points
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which he has raised—that is to say, on the dogs and their collars and the effect of their being rounded up, and also the enclosure of beaches and other designated places—I will write to the noble Lord.
On Question, Bill considered on Report.
Lord TREFGARNE: My Lords, I beg to move that the House do now adjourn during pleasure until eight o'clock.
[The Sitting was suspended front 7.20 to 8 p.m.]

LOCAL GOVERNMENT, PLANNING AND LAND (No. 2) BILL
Committee stage resumed.
Clause 18 agreed to.
Clause 19 [Part III—Supplementary]:
Baroness Denington Baroness Denington moved Amendment No, 54:
Page 19, line 9, at end insert ("provided that no such order shall specify a date prior to 1st April 1982")
The noble Baroness said: This is an amendment which is supported by all the local authority organisations. As we understand it, the Secretary of State is saying that this part of the Bill when it becomes an Act should come into operation on 1st April next year, and seeing that the Bill will not become an Act—
Lord ELWYN-JONES: It is not easy to hear the noble Baroness. I hear that the machine is now on, so I have not intervened to the detriment of my noble friend.
Baroness DENINGTON: I must say that is very strange because I am usually one of those people who whisper to my neighbour in a gentle voice and everybody outside in the corridor hears me. I am rather comforted. I understand all is well now. I was going on to say that, since there will barely be 4½ months when this Bill becomes an Act before the Secretary of State is wanting it to come into operation,

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it really is the contention of the local authority associations—and I am sure they must be right—that there is so much detailed work arising out of the Bill, and the Secretary of State still has to issue a number of directions and regulations, that they just cannot with the best will in the world be in a position to bring it into operation by 1st April next year. What we are asking for is an extension to 1982, on the assumption that one should let it run for a full financial year; otherwise one might perhaps have suggested October 1982.
In regard to the changes proposed in tendering a number of authorities say they will have to recruit extra staff. The change in the way the local authorities account for their maintenance work is going to involve changes, and the revamping of their costing systems with consequential changes, and this is going to cause changes in computer systems. One typical authority, I am told, alleges that it will take 18 months, when all the details are known, to get them on to the computer. This seems to me a very long time indeed. But it surely becomes perfectly plain that it could not possibly be achieved within the barely 4½ months available. I am also informed that the Chartered Institute of Public Finance and Accountancy are producing a code of guidance for use by authorities, setting out the appropriate accountancy practices that authorities should follow to implement the legislation. Obviously that will be very valuable and very necessary. This will also be used by the district auditor services in examination of the local authorities' accounts, again showing how important it is to have this code of guidance and to be able to work from it.
I understand that on the Committee stage in another place the Minister stated:
"We shall continue to listen to any further arguments the local authorities want to put to us on timing".
As far as I understand—I am open to correction—the local authorities were told they would be consulted, but the consultations on timing have not taken place. I would ask the Minister to ask his Secretary of State to be reasonable and to give the local authorities a chance to take this Bill in, to absorb it and to do all the enormous amount of work which
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is going to be required to get their house in order and then be able to give him, in proper form, all the information that he is going to be asking for. I beg to move.
Lord SANDFORD: I do not often find myself agreeing with the Opposition, but I am afraid I have to tell my noble friend that I think it would be quite improper for Parliament to accept this Part of the Bill and this clause in particular, unless it were first amended as the noble Baroness has just proposed, because all the reasons she has just given are indeed so. My noble friends will have to decide for themselves what to make of it all. All I can do is to reiterate what the facts are as far as the association is concerned. There has not been the consultation on this particular issue; there have been lots of consultations but not as to the date for introducing this part of the Bill. It is, of course, a fact that after the Bill is enacted regulations and directions pertaining to this part will then have to be issued, and only then will it be possible to get on with the detailed arrangements for accounting and tendering as prescribed in the Bill, and prescribed in some detail.
Then there is the further point that the noble Baroness has mentioned, that the detailed codes of guidance which there has been a lot of discussion about are not yet available. It would be quite improper for Parliament to give its authority to the introduction of this part of the Bill until it not only knew that their codes of guidance were available but had an opportunity to study them and hear professional opinion upon them. So with great regret I have to say that I for one—and I reflect here the views of the entire Association of District Councils—will have to support this amendment. My noble friends will have to make up their own minds.
Lord MORRIS: I feel I must oppose this amendment quite strongly, because this clause does nothing really other than allow the Government flexibility. This is what the Government must have in order to plan the implementation of the Bill itself. I am also concerned about the consultation side. It is really a question of who is consulting whom. I am quite certain that Her Majesty's Government would in no way put a bar upon interested

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parties arranging for meetings, should they deem that necessary. If, on the other hand, they are being deliberately prohibitive, I, for one, would like to hear evidence as to that fact. But I do not believe that that is so; I believe that the key to this is that the Government must have flexibility.
Viscount RIDLEY: I too would like to support the amendment on behalf of the County Councils Association. I feel that in so doing it is not in any way aiming at this part of the Bill about which your Lordships may have noticed I have kept remarkably silent during the past several hours, which I think indicates the general support for the objectives behind this part of the Bill. The county councils, although they do employ direct labour in the highways departments and so forth, are not affected and are not, as I have said, opposing the spirit of this part of the Bill. All the same, they will be very deeply involved in the accounting side of it and it will put a great strain on the financial administration of all authorities, particularly coming at a time when we are dealing with a rate support grant; possibly the transitional arrangements which we have not yet discussed; and possibly the block grant which we have not even reached—and will not reach until Christmas, at this rate anyway—and so on. So, I think that it would be very sad if the Government put this fearful strain and public expense on authorities just to try to get the thing into operation. I believe that it would be to the advantage of the system and the whole idea of direct labour which we have been discussing at such length, if it could be postponed until 1st April, 1982. Should there be a Division I would be bound to vote with the Opposition on this amendment, but I hope that the Government will accept it.
Lord BELLWIN: I must say that I remain unconvinced that authorities really need another two years to get ready to implement proposals based on principles expounded and accepted as long ago as 1975. They had fair warning of our intention last August, when we said in our consultation document that we were aiming to bring the new system into operation for the financial year 1981–82. The broad outlines have thus been clear for a long time.
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The details, too, have been under consistent close scrutiny for a year now. Authorities know already what will be contained in the regulations to control tendering which will be made under Clauses 5 and 7. They have had before them since July a draft code of practice prepared by the Chartered Institute of Public Finance and Accountancy which will enable them to consider now what changes they will need to make to their accounting systems. CIPFA is also developing with my department's active encouragement a standard computer system to enable authorities to meet and, indeed, go beyond the requirements of the Bill. As soon as possible drafts of the necessary subordinate legislation will be issued so that the remaining small gaps in the picture can be filled. It will take an effort, but authorities can certainly do it if the will is there. They can be ready for the next financial year. This legislation has been overdue for long enough already.
The noble Baroness, Lady Denington, spoke of the extra staff, as did my noble friend Lord Ridley. I always hear those stories whenever anything new comes out. Yes, I am sure that in the case of some authorities it will involve extra staff, but in the case of other authorities it will not do so. It is a question of how these things are done. As for it taking 18 months to get all the details on to the computer, I must say that I would not know quite what was involved in that and nor, indeed, did the noble Baroness, Lady Denington, say. I should want some convincing.
I think that the most important point made by my noble friends and the noble Baroness, Lady Denington, was the one about consultation. As I stand here I am not aware of the amount of consultation that has taken place, but it would surprise me immensely, knowing all the consultation that has taken place on so many aspects of the Bill for so long now, if there had not been consultation. It need hardly be said that if more time was needed to discuss the nuts and bolts, the nitty-gritty, the department—as I seem to be saying so often today—is open and everyone involved is welcome to come along. But I do not think that that should be a reason for our not proceeding.
I am grateful to my noble friend Lord Morris who talked about flexibility. Of course we want it. As to there being any

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bar or prohibition on consultation, I hope that what I have just said assures him about that—I hope it hardly needed saying. I should really be regretful if my noble friends, when "the chips are down" as they say, still felt that they had to vote against the Government. We consider that this is long overdue. There is no point in further vacillation. We know where we are going. We can tidy things up as we go, if we have to do so, but to delay another year would be unthinkable. I wonder whether the noble Baroness feels that she could withdraw
the amendment, but, if not, then, of course, we must vote on it.
Baroness DENINGTON: The noble Baroness does not think that she can withdraw the amendment because if she does she will let the local authorities down, and she is not prepared to do that.
8.15 p.m.
On Question, Whether the said amendment (No. 54) shall be agreed to?
Their Lordships divided: Contents, 61; Not-Contents, 119.

CONTENTS

Auckland, L.

Hampton, L.

Ridley, V.

Avebury, L.

Hatch of Lusby, L.

Rochester, L.

Bacon, B.

Houghton of Sowerby, L.

Ross of Marnock, L.

Balogh, L.

Irving of Dartford, L.

Sandford, L.

Beswick, L.

Jacques, L.

Segal, L.

Bowden, L.

Jeger, B.

Simon, V.

Bruce of Donington, L.

Kaldor, L.

Stedman, B.

Byers, L.

Llewelyn-Davies of Hastoe, B.

Stewart of Alvechurch, B.

Chitnis, L.

Lloyd of Kilgerran, L.

Stewart of Fulham, L.

Cledwyn of Penrhos, L.

Lovell-Davis, L.

Stone, L.

Collison, L.

Maelor, L.

Strabolgi, L.

Crowther-Hunt, L.

Melchett, L.

Taylor of Mansfield, L.

David, B. [Teller.]

Minto, E.

Thomson of Monifieth, L.

Davies of Leek, L.

Mishcon, L.

Thurso, V.

Davies of Penrhys, L.

Oram, L.

Underhill, L.

Denington, B.

Parry, L.

Wallace of Coslany, L.

Elwyn-Jones, L.

Peart, L.

Wells-Pestell, L.

Evans of Claughton, L.

Perth, E.

Whaddon, L.

Gainsborough, E.

Ponsonby of Shulbrede, L. [Teller.]

Wilson of Radcliffe, L.

Gregson, L.

Winstanley, L.

Hale, L.

Rhodes, L.

NOT-CONTENTS

Airey of Abingdon, B.

Denman, L.

Henley, L.

Alexander of Tunis, E.

Dormer, L.

Hereford, V.

Alport, L.

Drumalbyn, L.

Hill of Luton, L.

Audley, L.

Dundee, E.

Holderness, L.

Avon, E.

Elibank, L.

Home of the Hirsel, L.

Balerno, L.

Ellenborough, L.

Hunt of Fawley, L.

Bellwin, L.

Elliot of Harwood, B.

Kemsley, V.

Belstead, L.

Elton, L.

Keyes, L.

Berkeley, B.

Evans of Hungershall, L.

Kimberley, E.

Boardman, L.

Faithfull, B.

Kintore, E.

Boyd of Merton, V.

Ferrers, E.

Knutsford, V.

Boyd-Carpenter, L.

Ferrier, L.

Lindsey and Abingdon, E.

Bridgeman, V.

Forester, L.

Liverpool, E.

Brougham and Vaux, L.

Fortescue, E.

London, Bp.

Caithness, E.

Gainford, L.

Long, V.

Carr of Hadley, L.

Geddes, L.

Lyell, L.

Cathcart, E.

Gisborough, L.

McFadzean, L.

Chelwood, L.

Gowrie, E.

Mackay of Clashfern, L.

Cockfield, L.

Gray, L.

Macleod of Borve, B.

Colville of Culross, V.

Gridley, L.

Mancroft, L.

Cork and Orrery, E.

Grimthorpe, L.

Mansfield, E.

Craigavon, V.

Haig, E.

Margadale, L.

Crathorne, L.

Hailsham of Saint Marylebone, L. (L. Chancellor.)

Marley, L.

Croft, L.

Massereene and Ferrard, V.

Cromartie, E.

Hanworth, V.

Melville, V.

Cullen of Ashbourne, L.

Harvington, L.

Monk Bretton, L.

de Clifford, L.

Hastings, L.

Morris, L.

Denham, L. [Teller.]

Hatherton, L.

Mottistone, L.

Murton of Lindisfarne, L.

Romney, E.

Trefgarne, L.

Netherthorpe, L.

Sandys, L. [Teller.]

Trenchard, V.

Newall, L.

Savile, L.

Trumpington, B.

Nugent of Guildford, L.

Selkirk, E.

Tweedsmuir, L.

O'Hagan, L.

Soames, L. (L. President.)

Vaizey, L.

Orkney, E.

Stamp, L.

Vaux of Harrowden, L.

Radnor, E.

Stanley of Alderley, L.

Vickers, B.

Rawlinson of Ewell, L.

Strathcona and Mount Royal, L.

Vivian, L.

Redesdale, L.

Swansea, L.

Waldegrave, E.

Renton, L.

Swinfen, L.

Watkinson, V.

Rochdale, V.

Teviot, L.

Windlesham, L.

Rollo, L.

Tranmire, L.

Yarborough, E.

On Question, amendment agreed to.

8.24 p.m.
Clause 19 agreed to.
Clause 20 [Right of councillor to opt for financial loss allowance]:
Lord RENTON Lord RENTON moved Amendment No. 55:
Page 19. line 28, at end insert ("notice").
The noble Lord said: The word "notice" was, no doubt, omitted through inadvertence. If it is not put in, the sentence does not read very sensibly or grammatically. I beg to move.
Lord BELLWIN: I am most grateful to my noble friend for spotting this typographical error and for bringing forward an amendment to correct it. The Government, of course, accept it, and I repeat that I am most grateful to my noble friend.
On Question, Whether Clause 20, as amended, shall stand part of the Bill?
Lord ROSS of MARNOCK: I draw attention to page 20, subsection (7):
"This section does not extend to Scotland".
I do not know how it could because it is an amendment of an English Act. There is nothing in Section 173 of the Local Government Act 1972—and this gives us Section 173A—that applies to Scotland. So if any words here are otiose they are the words:
"This section does not extend to Scotland".
But I gather that the provision is probably there just in case any local councillor in Scotland thought that he would get the same option as that which was available in England and Wales and, no doubt, for
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the avoidance of doubt the noble and learned Lord the Lord Advocate agreed that the insertion of these words would be all right. Strictly speaking they are quite unnecessary.
However, if that is their purpose, perhaps someone from the Scottish Office will explain to me why local councillors in Scotland are not being given this option. I know that the Minister will say, "Oh well, there was a communication" and that they suggested that they would prefer not to have this. But that was before the actual amendment was tabled, which I think was during the Report stage or the Committee stage of another place. I wonder whether they communicated with or gave the opportunity to the Scottish local authorities to opt for this one in view of the fact that it was actually going into the Bill. So far as I can gather there was no further meeting of the Convention of Scottish Local Authorities to consider this. I think that it is as well to give an opportunity to the Scottish Office to explain why this option is not available in this clause to Scottish councillors.
The Earl of MANSFIELD: As I understand it, the noble Lord really has two complaints. First, he says that subsection (7) has no business in the Bill, or this part of it. Secondly, I think that the noble Lord asks why, in effect, the choice between attendance allowance and financial loss allowance does not extend to Scotland. On his first point—I am almost reluctant to say this—at first blush the point would appear to have some merit and it will be looked at.
Lord ROSS of MARNOCK: Of course it has.
The Earl of MANSFIELD: But it needs very careful consideration. Nevertheless, I pass on to the part of his remarks which I think deserves a considered

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answer. The answer to why the choice was not made available to councillors in Scotland is that, speaking historically, the particular clause under discussion was inserted in the Bill in response to an amendment tabled in Standing Committee with the support of the English and Welsh Local Authority Associations. The Confederation of Scottish Local Authorities was naturally consulted about the provision, but it decided that it did not wish the option to extend to councillors in Scotland. Without revealing secrets I can say that the Government were mildly surprised, but there was no question of foisting the new arrangement on Scottish local authorities who had given a clear indication that they did not want it. In the circumstances, therefore, the section does not extend to Scotland, and I hope that the noble Lord will be satisfied with this explanation.
8.31 p.m.
Lord RENTON: The matter is not quite as simple as has appeared even from the last two speeches. If we turn to Clause 164 we find there set out the parts which apply to Scotland and those which do not.
Lord ROSS of MARNOCK: That is all wrong.
Lord RENTON: On the other hand, if we turn to paragraph 20 of the Explanatory Memorandum we find that certain parts are said to apply in their entirety to Scotland. One of the parts there mentioned is Part IV in which Clause 20, which we are now discussing, falls, and yet in fact because of subsection (7) of Clause 20 Part IV does not in its entirety apply to Scotland. Of course, one must not hold it against the Government that in the course of changes in the Bill the Explanatory Memorandum may not hold good for the rest of time, but at the same time, having tried myself to find out the territorial extent of the Bill to Scotland, I must confess to a slight puzzlement over Part IV. Also, although I hope it is not out of order to mention it in passing, Part VII gives rise to some difficulty as well. I think that the matter could well be clarified in due course by an amplification of Clause 164.
Lord ROSS of MARNOCK: The noble Lord has been anticipating a lengthy speech that I am going to make when we come to Clause 164. I can assure him that it is wrong in more than that considerable part. He will appreciate my difficulties in trying to relate the various references in various parts of the Bill to what clauses apply to Scotland. In many cases they are quite wrong too. I think that the Lord Advocate's department must bear some responsibility for this in not keeping the changes that were made elsewhere up to date in respect of this particular Bill. Of course we have made further changes that will necessitate further amendment of, for instance, Clause 2 with reference to Clause 164.
I was aware of the attitude of the Scottish local authorities to which the Minister of State referred, but the point I was making was that they were consulted before an amendment was eventually set down. They replied with reference to allowances that they would prefer a salary, and secondly that they thought it would be invidious for people probably attending the same meeting to be in receipt of very different sums of money, one in respect of allowances and others in respect of loss of earnings, because the sums are different.
They also drew attention to the fact that account should be taken at the present time of the losses or the disadvantages to certain councillors in respect of occupational pension schemes as a result of being paid only allowances, and what they were really losing in the long term. It is a serious matter from the point of view of getting the right councillors and getting young councillors. It is not something just to be glossed over. I hope that the Government are giving some attention to it.
They also referred to the fact that they considered that the allowances presently payable are quite inadequate, and that they should be upped. It was not a simple reply, but the point is this: Did the Government inform the Scottish local authorities that, despite their original attitude, they were going ahead and going to place an amendment on the Marshalled List? It may well be that if they had known that, they would have opted in. It would have been wise for the Secretary of State for Scotland to take powers to

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introduce it probably at a later stage—rather than seek new legislation—by order if and when Scottish local authorities felt it would be to their advantage to have this particular optional payment.
Baroness DAVID: If there is no response to that, I have one or two comments to make on the clause. In fact, I have a tiny bit of praise for the Government. We are glad that they have paid attention to the representations made by the Opposition during the Committee stage in another place and that this clause has been included in the Bill. I think it will make a difference to a certain number of people. It may encourage some people, who would not embark on standing for local authorities, to do so. Even so it still would probably be at a certain financial cost to themselves, but it is an improvement on the Bill as it originally stood. I hope that people will be encouraged to go into local government because I am an enthusiast for local government having served in it for 15 years or so. Of course this slightly depends on what happens later on in this Bill, because if the independence and powers of local authorities are going to be eaten away, as they may be if certain changes are not made, people may be less willing to come forward. Anyway, I can give a welcome to this clause.
Lord EVANS of CLAUGHTON: I also should like to give a general welcome to this clause. Whatever it does to encourage people to become councillors by financial inducement, if you like, will of course never—but I suppose legislation can never—make up for the difficulty that many people find in standing for local authorities. However much lip service may be paid by employers in whatever sector to the fact that it makes no difference to the promotion opportunities of their employees, it is a fact that many people are put off not by the lack of financial inducement—and in the 24 years I have been a councillor 17 were unpaid, and really the payment did not make much difference to me, and to a lot of other people—the difference is made by the knowledge that if you are a councillor and the boss wants you in his office and they say, "I am sorry, he is at the allotments and smallholdings committee" a mental note is made by the employer, "That chap should not be promoted".
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I cannot see how even the Government of Mr. Heseltine—who has had his usual standing ovation today—and the Secretary of State could legislate for that. We all, in whatever party, owe a duty to people who might be considering going into local government and to the employers to state as often as we can that if we put an impediment, and unstated impediment, in the way of a potential councillor, that will damage his promotion prospects. I think that might be doing more of a service to ensuring the high quality of local government than increasing allowances or introducing the financial loss allowance. Having said that, one can only welcome this, but I do not think it is going to cure any problems it is only going to make the suffering a little less painful.
The Earl of PERTH: I hope that the Government will consider seriously the point made by the noble Lord, Lord Ross of Marnock. It seems to me that we do not want to be at a disadvantage in Scotland. It may well be that the local authorities who to date have said that they do not want it may change their minds. If the power was within the powers of the Secretary of State for Scotland, I should have thought that that would be a good thing. While it is not something which we should divide upon today, it is something which I hope the Government will think of for Report stage.
Clause 20, as amended, agreed to.
Clause 21 [Amendments relating to allowances to members of local authorities and other bodies]:
8.39 p.m.
Lord SANDFORD Lord SANDFORD moved Amendment No. 55A:
Page 21, line 16, at end insert—
(" (6) In section 174(1) of the Local Government Act 1972 (which provides for the payment to members of bodies travelling allowance and subsistence allowance) there shall be inserted after the word "duty" where it first appears, the words "whether or not approved also for the payment of such allowances in the nature of those payable under section 173 above".").
The noble Lord said: I should like to congratulate my noble friend on having weathered the storms of Part III and direct labour organisations and sailed into the

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calmer waters of Part IV and allowances. This amendment is a simple one, and its purpose is this: It is to give local authorities the flexibility of being able to pay travelling and subsistence allowances on their own to members in performance of approved duty without at the same time becoming liable automatically to pay attendance allowances or financial loss allowances, if claimed, in addition.
An example of the circumstances where this would be useful would be where it is desirable but not essential for a member to attend a meeting, conference or seminar where his presence would be useful but not vital for the working of his council. In present circumstances, it is not possible to pay the one allowance without paying the others, and I believe this flexibility would be useful. I beg to move.
Viscount RIDLEY: I rise briefly to support what my noble friend said because I have had many instances of the sort of example he gave where it would be useful to ask members to go to a meeting but it would be expensive if they were to charge the various allowances, although they might not want to do so, but help with travelling expenses would be valuable, and I therefore hope the Government will accept the spirit of the amendment.
Lord EVANS of CLAUGHTON: I too support the amendment. I am sure the noble Lord, Lord Sandford, would assure us that he is not thinking of the kind of occasion, which occurs in local government from time to time, where people claim an attendance allowance and a subsistence allowance, and any other allowances that may be going, for attending the mayor's ball. So long as it is in respect of a serious event I am sure the amendment would be a useful acquisition.
Lord BELLWIN: I am glad the noble Lord, Lord Evans, made that last point, because although it was meant in jest, nevertheless there has been much concern about what some authorities classify as approved duties, and I am sure there are many of which probably no one in this Committee would approve. Obviously I have sympathy for the aims of the amendment and my noble friend Lord Sandford put the point fairly and well for extending the discretion of local authorities to
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decide what allowances to pay in respect of approved council duties. But other issues than this need to be taken into consideration and the Government believe that these other issues weigh heavily against accepting the amendment. I might add that the wording of the amendment appears to be defective; I am advised it would not achieve the precise effect desired, but that is not our main concern.
At present, once a council duty is approved for allowance purposes, it carries with it entitlement to the full range of councillors' allowances; that is, attendance allowance (or financial loss allowance) plus travelling and subsistence allowances. It is an all or nothing situation; either the full range of allowances is payable, or none at all. To make the change proposed in the amendment would involve distinguishing between different types of council duty. In effect, two classes of approved duty would be created; the one attracting all the allowances, the other only travelling and subsistence allowances. Some duties would cease to qualify for attendance allowance and would inevitably cone to be regarded as second-class jobs. Councils would have to consider each of the duties they approved for allowance purposes and would be faced with invidious decisions as to which duties were more important than others; and particular decisions could well provoke resentments among councillors. Nor do I accept the argument that this change would necessarily reduce expenditure on allowances, but as the argument was not pressed on that point I will not pursue it; but it has been said elsewhere that that would be the effect.
The great advantage of the attendance allowance system is that in this respect it is straightforward. It provides a simple means of acknowledging council service. If a particular activity is accepted as an approved duty on the part of members, they may receive appropriate allowances not only for travel and subsistence but in respect of the time they have given up to performing that duty. The amendment would introduce a substantial complication into the system. It would cause confusion in the minds of the public and might arouse more suspicion than already exists among ratepayers of the allowances system as a whole. I have no wish to encourage authorities to incur

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unnecessary expenditure, but for the reasons I have explained I find that argument inconclusive. Your Lordships will wish to know that it is already open to an individual councillor to decide not to claim all or part of any allowance to which he may be entitled. Something like one-fifth of councillors prefer not to claim their allowances. There need be no concern that we would encourage imprudence and irresponsibility by failing to accept the amendment.
I was very involved with this issue in my previous capacity, both within my own authority and when I was vice-chairman of the AMA, and I discussed the subject with all my colleagues in local government. It is a difficult issue because, as has been said, it is not just the money but the whole effect on a career and all that goes with it. Yet, when the discretion was as wide as it was before, one had situations which were very unfair as between one authority and another, often adjacent authorities, where one classified a whole range of duties as approved and another refused to do so. The more we can do away with that the better it is for the image of local government because there are always those who are only too pleased to say, "There is another example of it", should there be the slightest suggestion of stepping outside the bounds of propriety. With what joy, I fear, certain people point to such matters as a reflection on all councillors, when we know very well that that is not the case. I suggest, therefore, it is best to keep the provision fairly tight and not leave too much room for individual discretion. I think most authorities would prefer it that way. For those reasons we cannot accept the amendment, but I hope noble Lords appreciate that it is with great sympathy that we have considered this whole area.
Baroness STEDMAN: Forgive me if I am wrong, but is the amendment necessary? Like the noble Lord, Lord Evans of Claughton, I spent many years in local government, most of them before we had any allowances. Indeed, I remember in my earlier days, in the mid-1940s, the officers, having a good trade union, negotiated first-class train fares and daily attendance allowances and if the chairman of their committee went with them, the chairman went second class and had to claim his or her expenses. I am glad
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we have moved on from that to some sort of parity.
When my county was first formed after reorganisation—I cannot speak for it at the moment although my ex-chief executive is below the Bar listenin to the debate—we had an arrangement by which, when there were council representatives on an outside body, and most of them were attending that organisation voluntarily—like the Eastern Arts Council or the council representative on the Institute for the Blind—the councillors, being representatives, were able to claim travel allowances but did not receive attendance allowances. Presumably it is open to any council to make those sort of decisions when appointing representatives to such bodies. If so, that would make the amendment completely unnecessary, would it not?
Lord SANDFORD: So that there should be no doubt that that kind of flexibility is possible I moved my amendment. I was not entirely convinced by the Minister's reply. If there are authorities which are daunted by the prospect of having to make invidious distinctions between one situation and another and one class of member and another, they can stick to the rigidities of the system as it is at present. The flexibilities of my amendment were designed for those authorities which recognise the facts of the situation—namely, that some approved duties are essential to the working of the council or to attract the full range of allowances, others are useful but not essential—and it should be possible to pay out-of-pocket expenses but not incur the liability to pay the full allowances. I think I have the better of the argument, but I am glad to withdraw the amendment.
Amendment, by leave, withdrawn.
On Question, Whether Clause 21 shall stand part of the Bill?
8.49 p.m.
Baroness DAVID: We are pleased to welcome in this clause the abolition of the three-mile limit for the payment of subsistence to councillors. I speak with particular passion about this because I lived within one and a half miles of the Shire Hall in Cambridge when I was a member of Cambridgeshire County Council

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and it was rather irritating to have to pay for my lunch in the middle of a meeting when most of the other people could claim for it. I was surprised to note that the cost of this will be £820,000 in a full year and I am wondering whether the Secretary of State will make allowance for this expenditure when he is considering the general expenditure of councils.
Lord BELLWIN: All I can say to the noble Baroness is that I hear what she says. I can make no comment on it at this point.
Clause 21 agreed to.
Clause 22 [Introduction of special responsibility allowances for members of local authorities]:
On Question, Whether Clause 22 shall stand part of the Bill?
8.50 p.m.
Lord EVANS of CLAUGHTON: I generally welcome the introduction of special responsibility allowances for members, although I have some reservations. I am aware that it was recommended by the Robinson Committee but not immediately approved by the local authority associations generally. It does have the problem, which I do not think we can afford to neglect, of having two levels of councillor. I should be very much concerned if any encouragement were given to the development, which I find dreary and reprehensible, of the party in control taking all the places on the policy and resources committee and having just their chairmen, with no opposition members being able to take part in the discussions of the policy and resources committee. I find that very dreary and undemocratic, and generally the kind of dispensation that makes local authorities unpopular with the public at large. I should be very unhappy indeed if it were to encourage the development of two levels of councillor—the salaried, special responsibility councillor and the ordinary poor old Back-Bencher. So I have certain reservations about that.
In a sense I suppose I must declare an interest and ask the Minister whether, in defining special responsibilities, he seeks
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to limit it only to chairmen. I can see a very strong case for the chairman of an education committee or a large-spending committee, who has enormous responsibilities and is very often, on a big authority, virtually a full-time councillor, having a special responsibility allowance. I have been a councillor for 24 years and in that time I have been a leader for 24 years of a group extending from one to 19. The Minister says he talks to himself aloud. I used to have problems, when I was a group of one, only when I was in two minds. My group rose from one to 19. I say with great sincerity—I am sure that many others who have been in opposition, perhaps not as long as I have, will agree—that opposition leaders do have special responsibilities. They are expected to give almost as much time as, and very often more time than, some chairmen—almost as much time as the leader of the council. I would hope to have an assurance from the Minister that special responsibilities as defined in subsection (2) does not rule out members of opposition parties.
Baroness DAVID: I should very much like to support what the noble Lord, Lord Evans, has said. I was going to give general support to the clause but was going to ask about the position of opposition leaders and spokesmen. I am not quite clear, and I do not think the clause is quite clear, whether they are going to be able to get the special responsibility allowance. We support the giving of this, as the Robinson Committee suggested, but we think that the slight changes from what Robinson suggested are on the right lines. We are anxious to hear about the position of the opposition spokesmen.
Viscount RIDLEY: Before the Minister replies can I raise another point on this question? I understand that discussions on the details involved are likely to follow when the Bill becomes an Act. One thing that will be considered is that the population of an authority is going to be taken into account. That means that the chairman of the education committee of a large borough in a county with an enormous population might be paid more than the chairman of an education committee concerned with a small population. I hope there is not too much weighting. I come from the most sparsely

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populated county in Britain. There is just as much work for the chairman of the education committee in Cumbria or Northumberland as there is in Kent or Sussex, and I hope the population will not be too overriding a consideration when these details are discussed.
Lord BELLWIN: The recommendation of Robinson was on that very point—that the amounts of money should vary in accordance with the population. It was the main criterion the committee set down—as to exactly how much. I take the point. One can have as much work to do in a sparsely populated and yet very widespread authority as in the opposite, and so I am sure that ought to be thought about. On the point about the opposition leaders, that is entirely up to the discretion of the local authority itself. I would entirely agree with the noble Lord, Lord Evans, that it is awful in those authorities which insist on one-policy committees; and there are plenty of them round the country. Personally I think it is dreadful. In any authority I was ever involved with we never had anything of that kind. To me the simplest thing was to involve the opposition. Then one had drawn the teeth in any case, all the time. I always thought it was a matter of good tactics, apart from good sense, that it be seen that there was not an attempt to keep out opposition.
It would be up to each authority as to what it does regarding its allowances, and it will have to decide who it is going to designate to receive them; it is a matter for the authorities' discretion. One can only hope that they will use it responsibly and fairly. But I can readily see where we will get some injustice in it. Nevertheless, this is the next step forward. I do not think we have the whole answer in this Bill as to how one recompenses people who go into local government. But still it is a step forward, and I think everyone recognises it as such.
Lord MORRIS: I should like to ask my noble friend the Minister whether Her Majesty's Government are thinking of extending that principle to hardworking Opposition Whips in your Lordships' House?
Lord BELLWIN: I would hope that they would extend it to hard-working Ministers in your Lordships' House!
Lord MISHCON: The Committee will have listened with rapt attention to what the noble Lord, Lord Evans, said. If I may say so, he represents with great efficiency and great experience a minority party. Many of us who have served in local government—some of us have been fortunate enough to serve all our lives as members of a majority party—have always, when we have considered the question of contribution to local government affairs, welcomed the fact that there were many members of an opposition who had such a useful contribution to make, especially on committees.
I recognise, since I have been trying, with my noble friend, so often in debates on this Bill to talk in terms of the independence of local authorities, what the Minister says when he makes the point that this must be at the discretion of local authorities. However, there is one thing which would not be mandatory and which would not be in a Bill but which I hope he could say to the Committee. It is this. When guidance is issued by his department to local authorities in regard to this specific clause that we are dealing with—that is, the clause dealing with the special allowances that could be made for responsibility—the Minister as a matter of guidance should say to those local authorities that it is meet and fit, as the department sees it, that special consideration should be given, when meting out these special allowances, to those who belong to a minority on the local councils. I think that with that guidance some local authorities may be shamed into compliance with it; and certainly it could be quoted in debates in council chambers. Therefore I think it might be very useful.
The EARL of CROMARTIE: Before the Minister answers this point may I say that I feel that I have some right to speak. Since 1935, leaving out the war years, when I was doing something else, I have been in local government; in fact I was convener of my county. We have all been talking about opposition and parties. Now we in the Highlands do not let party politics enter our local government at all, and we are very much the better for it.
Lord PITT of HAMPSTEAD: The noble Earl is probably right. On the other hand, in most parts of the country there are majority and minority parties. What my

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noble friend Lord Mishcon said is most pertinent, because in effect this would be the way for central Government to help, just by the guidelines; the guidelines would be useful. Not only would they influence the majority party in the decisions that it makes, but they would be weapons that the minority party could use.
Lord BELLWIN: I am very sympathetic to the point that the noble Lord, Lord Mishcon, makes. In my experience I have found that authorities—not of course all, but most—take notice of guidance of that kind. I acknowledge, for example, that usually the leader of the opposition has an absolutely enormous task. I have served in that capacity, I have served in most of them, and I know what is involved. So I thank the noble Lord for his suggestion. We shall give it some thought and see whether we are able to do something of that kind. We shall take that one away.
Clause 22 agreed to.
9.2 p.m.
The EARL of MINTO The EARL of MINTO moved Amendment No. 56:
After Clause 22, insert the following new clause:
("Allowances for vice-chairmen of councils (Scotland)
The following section shall be inserted after section 3 of the Local Government (Scotland) Act 1973:—
3A. A council may appoint a member of the council to be vice-chairman of the council and may pay to him, for the purpose of enabling him to meet the expenses of his office, such allowance as the council think reasonable." ").
The noble Earl said: I beg to move Amendment No. 56. The objective of this amendment is to give to the Scottish councils the same facilities as exist at present in the English and Welsh councils. It might help if I were to remind the Committee of the statutory background as it stands at the present moment. Section 3 of the Local Government Act 1972, which applies to England and Wales, contains an enabling provision for the appointment of a chairman and to pay him an allowance for the purpose of enabling him to meet the expenses of his office. In Section 5 of the same Act there is a similar provision for councils in England and Wales to appoint a vicechairman
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and pay him an expenses allowance.
Under Section 3 of the Local Government (Scotland) Act, 1973, we are enabled in the councils in Scotland to appoint a chairman, and subsection (7) allows us to act in the following way:
"A council may pay the chairman, for the purpose of enabling him to meet the expenses of his office, such allowance as the council thinks reasonable".
However, the 1973 Act does not make provision for councils in Scotland to appoint a vice-chairman, and accordingly there is no power to pay an expenses allowance to anyone who may be acting ex officio in that role.
This matter was considered by the Robinson Committee, and perhaps this amendment, which has the support of the Convention of Scottish Local Authorities, is best supported by a short paragraph from the Robinson Committee's Report. Under the heading "Existing statutory allowances" on page 51 the Robinson Committee reported at paragraph 215:
"We have also had regard to the position of the mayor, chairman and others who currently enjoy by statute an allowance to cover the expenses of their office. We have learned that these allowances, voted by individual councils, are in general no more than necessary to defray the costs of office and that they are often applied to the benefit of the council as a whole rather than just to one individual".
Then in firm, black letters the committee added:
"We recommend that this arrangement should continue, with the addition, as previously recommended by the Oakes Committee, of vice-chairmen in Scotland".
So this amendment to all intents and purposes has the blessing of a recommendation from two previous reports, from separate committees, and the backing, too, of the Convention of Scottish Local Authorities.
I should like to say that during the past six years I have had the privilege of watching from the inside the council chairmen in Scotland attempting to carry their very heavy workloads, and I should have thought that in a Bill which now involves Scotland it was reasonable that we should endeavour to place all the councils of Great Britain in the same terms of reference within this sphere. I beg to move.
Lord DIGBY: I should like to support my noble kinsman in this amendment. As vice-chairman of an English county council I am horrified to learn that my equivalents North of the Border apparently are illegitimate. I believe that they exist, even though they do not seem to be allowed. Vice-chairman is an important office from the point of view of the working of the council and in regard to other aspects of succession. I should like to ask whether this allowance is of the type that we have just discussed in relation to Clause 22, or whether it is the equivalent of what we call the chairman's fund, which is an allowance to enable official hospitality expenses to be incurred. In other words, is it for the actual expenses of the individual, or is it for expenses of his office when entertaining other people?
The Earl of MINTO: In answer to that point I should make clear that the reason why this amendment did not appear in relation to Clause 22 is that in that clause we were referring essentially to special responsibility allowances. This is what we in Scotland would call in the terms of a pure expenses allowance for his duties as vice-convenor, as we would say, vice-chairman, as I have said, in Scotland.
Lord ROSS of MARNOCK: I should like to support the amendment moved by the noble Earl, Lord Minto. The issue is separate from the special responsibility payment and all it would do would be to bring the position of Scotland up to that of England and Wales. You can imagine a local authority like Strathclyde, which embraces half the population of Scotland. Of course, the work has to be shared out, there has got to be a vice-convenor, and in that case I do not think there is any justification for Scotland's not being in the same position as the local authorities South of the Border.
Viscount THURSO: We on these Benches, and I in particular, would like to support the noble Earl, Lord Minto, on this amendment. I served for many years on the Caithness County Council and on Thurso Town Council and I am currently Lord Lieutenant in Caithness. I therefore know how much social responsibility is now falling on the convenor of the county, who in our particular instance has lost two town councils,
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complete each with a provost and bailes, to share the workload of meeting the social obligations to the community of the local authorities. This workload is now falling on the lieutenancy, I may say, in no small measure. It is not that I am trying to get rid of the workload, but I do realise, in the position in which I find myself, exactly how much work is now falling upon a diminished number of office-bearers within the local authorities and I realise exactly how much expense falls upon them and how much effort they have to put into keeping community life going in a multitude of different ways. I think it is vitally important that we help vice-convenors in this instance to support those convenors and to support the work of the councils and the life of the community.
Baroness ELLIOT of HARWOOD: I am glad to support this amendment. I speak as one who has been, like the noble Earl, Lord Cromartie—29 years, even longer still—on the county council. It was the noble Earl, Lord Minto, who succeeded me when I retired. I can vouch for the fact that the work on the regional councils now, as opposed to the counties which existed when I was on the county council, is tremendously increased. The area has increased; the amount of work has increased. The number of people who do it is smaller, and it is most important that we should recognise this and help these county councillors or regional councillors; and I am sure it is only right and fair that in Scotland we should have the same treatment as they have in England and Wales. I hope very much that the Government will recognise this and see that this amendment is included in the Bill.
The Earl of MANSFIELD: The historical position was accurately set out by the noble Earl, Lord Minto. I think I should just say that the statutory creation of a vice-chairman or vice-convenor, call him what you will, and the payment of an allowance to him were not included in the Local Government (Scotland) Act of 1973 simply and solely because the Scottish local authorities had not previously expressed any need or desire for the post of vice-chairman. The whole aim, or at least a major part of the aim, of the 1973 Act was to leave the new

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local authorities the maximum freedom to organise themselves as they wished and it was therefore considered inappropriate to have such a statutory provision. But since the Act came into force, of course, the local authorities have organised themselves in the way that seems best according to each individual circumstance.
There is no doubt that in Scotland there has been a growing concern, of which the Government are aware, about the position of senior councillors in general, and of course there are a number of vice-chairmen. Concern has also been expressed as to the need to provide additional remuneration in recognition of the very onerous burdens which fall upon those particular councillors. Clause 22 and the powers contained in it are designed to alleviate the position and burden of these councillors with extra responsibilities, and I have no doubt that they will include vice-chairmen. Therefore, vice-chairmen who are members of Scottish local authorities will be able to qualify under the special responsibilities scheme. The question therefore arises, bearing in mind Clause 22: Is it either necessary or desirable that vice-chairmen should have what I might call the extra-special statutory enshrinement which would be the result of this amendment?
When I first considered the matter I came to the conclusion that there was no special need and that they could be (as it were) remunerated, if that is the correct word, quite adequately under Clause 22. But in view of the expressions of support for the amendment which have come from all parts of the Committee I think it is only right that I should say that I will take this away and have a look at it. I cannot give any commitment at this stage, but it may be that something will come of it. In the meantime, perhaps the noble Earl would at this stage be good enough to withdraw his amendment.
The Earl of MINTO: I should like to thank the noble Earl the Minister of State for his comments, and also other noble Lords for their support of my amendment. There is one point that I might make at this moment, and that is the fact that, of course, the heart of the object of the amendment is the actual appointment and the power of appointment of a vice-chairman, which does not come within the 1973 Act. I
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think that that is very important, because Clause 22 applies throughout. This is a specific within the additional clause that I am suggesting. But having made those comments I would again thank the noble Earl and, bearing in mind his remarks with regard to having a second thought, I have pleasure in asking the Committee for leave to withdraw this amendment.
Amendment, by leave, withdrawn.
9.17 p.m.
Baroness FAITHFULL Baroness FAITHFULL moved Amendment No. 57:
After Clause 22, insert the following new clause:
("Disclosure of information
.—(1) In subsection (3) of section 32 of the 1974 Act (which empowers a Minister of the Crown or an authority subject to investigation to give notice to a Local Commissioner that in the opinion of the Minister or authority disclosure of certain documents or information would be contrary to the public interest and which prevents any person from communicating any such document or information to any other person, or for any purpose) for the words "any person" there shall be substituted the words "the Local Commissioner or any member of the staff of a Commission who is allocated to assist him".
(2) In subsection (3) of section 30 of the 1975 Act (which makes similar provision for Scotland) for the words "any person" there shall be substituted the words "the Commissioner or any member of his staff".").
The noble Baroness said: The introduction of this clause is straightforward, simple, non-political and non-controversial. The intention of the clause is to amend Section 32(3) of the Local Government Act 1974 to allow the Commission for Local Administration—that is, the ombudsman in connection with the work of local authorities—the unrestricted right of access to documents and information kept by and in the possession of a local authority, such information being relevant to a complaint of maladministration in respect of a local authority. This new clause would bring the procedure and practice of the Commission for Local Administration into line with that of the Parliamentary Commission—that is, the Civil Service Ombudsman—who, under the Parliamentary Commissioner Act 1967, has access to documents and information concerning a complaint.
In order to make a fair and just assessment concerning a complaint, in respect of both the local authority and the

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complainant, the local authority commissioners need to have access to all facts relevant to a case. This clause is supported by the Association of County Councils, the Association of Metropolitan Authorities and the water authorities, and I personally have consulted with the Association of Directors of Social Services, the Association of British Fostering and Adoption Agencies and the Adoption Resource Exchange, and all agree with the clause.
As the law now stands, under Section 32(3) of the Local Government Act 1974 a notice may be served by the local authority on the Local Authority Commission withholding documents concerning a complaint of maladministration. This has been tested in the courts in a case relating to foster parents and children. The local authority's case was upheld in law. Only the Secretary of State can discharge the notice but it is deemed wiser to change the law than in every case for the Commission to have to apply to the Secretary of State.
In May 1977 the then Secretary of State in another place stated that it was his Government's intention to amend Section 32(3), as this clause is seeking to do today. Parliamentary time was not found to make the change. Following the 1979 general election, the present Government introduced in another place the Local Government Planning Land Bill (No. 1). In this Bill the previous Government's change of law in respect of Section 32(3) was included. The Government, however, did not proceed with the No. 1 Bill and regretted that parliamentary considerations made it necessary to defer the changes, but emphasised to the Commission that they did not imply any change of heart.
Accepting the problems of successive Governments over their legislative plans, the Commission especially regret the failure to amend Section 32(3). More than three years has passed since it was agreed that a change would be necessary allowing the local commission right of access to information and documents relevant to their investigations. I beg to move.
Lord BELLWIN: I thank my noble friend for, as always, the lucid and helpful way in which she has explained this
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amendment to the Committee. The Government recognise the need for the change in the effect of the 1974 Act that this amendment would make, and I am happy to accept the amendment.
On Question, Whether Clause 23 shall stand part of the Bill?
Lord IRVING of DARTFORD: This clause provides for the substitution of the requirement for quinquennial revaluations of the discretionary power to the Secretary of State to decide when new valuations shall take place and when they shall come into effect. Rateable values provide the tax base for local government. Even with the statutory requirement for five-yearly revaluations, only three revaluations have taken place since the war. With the existing law, however, Parliament has to agree every year if a revaluation is to be postponed. If Clause 23 were enacted, Parliament would only hear of rating revaluations as and when the Secretary of State saw fit to order a revaluation.
If revaluations are not carried out regularly, the tax base is held at an artificially low level and anomalies in valuation arise as between different classes of property within local authorities and the level of valuations between local authorities. As a result, the tax base becomes unfair as well as out-of-date, and this also distorts the distribution of Government grants to local authorities.
Regular revaluations are essential if the rate base is to be kept up-to-date, and if it is not to involve substantial injustices arising between individual ratepayers as to the relative rate burdens which they bear. Without regular revaluations, the whole rating system is liable to be undermined.
A necessary feature of a source of local taxation is that its basis should be objective and independent, but it will be impossible to preserve both the independence and the objectivity if the Government deals with the local tax base in an arbitrary way. The clause is somewhat ambiguous. It will be interpreted as meaning an end of revaluations in their present form. The Government may intend this as paving the way for the abolition of rating at least of domestic properties. I am certainly not in favour of an end of the rating system,

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nor are the local authority associations, nor was the Layfield Committee, nor indeed were the Conservative Government of 1970 to 1974. It is, in my view, essential to the independence of local government. However, if the Government feel themselves committed to the abolition of the rating system they ought not to dismantle the present system without proposing a viable alternative in its place and recognising that such abolition would mean a 5 pence increase on income tax or a 5 per cent. increase in VAT.
The clause would permit the Secretary of State to specify new revaluation procedures. The local authority associations want to stress that any change in the method of assessment should be the subject of consultation with the local authorities and with interested organisations before such orders are passed. I hope that we can have this assurance from the Minister. I would also hope that he will be able to accept a proposal for a fair and sound tax base resting on regular five-yearly revaluations of property.
9.26 p.m.
Lord EVANS of CLAUGHTON: I support all that the noble Lord has said and, if I may say so, he said it extremely well and succinctly and has left little to say. All of us have reservations about the rating system which is regressive and which discourages improvement to housing and so on; but because of amendments made in various pieces of legislation, it is much less regressive and unfair now than it was some years ago. But the great point about the rating system, however imperfect it is, is that it is a means of raising locally money which the local authorities can use as they wish and which is not dependent on central Government. We know that the Conservative Party have given an undertaking to abolish the rating system. I say that because I am a keen Conservative Party Conference watcher; although they are not of the same fascination as Labour Conferences. But there are 82 motions. I understand, submitted for this year's Conservative Party Conference at Brighton calling for the abolition of rates as was promised in the 1974 Conservative Party Manifesto. I understand that one motion to be debated at this Conference calls upon the Government to introduce
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measures as soon as practicable to abolish the present inequitable rating system.
I think it is an imperfect and inequitable system but it is less so than it used to be. The whole problem is this. It is all very well to say, "Let us find another means of raising money locally "—but every alternative system put forward has considerable imperfections. A great attraction must be local income tax, but there are problems there. There is the very old Liberal chestnut which I am bound to bring up: the taxation of site values—which I have never myself succeeded in fathoming but I understand it has much to commend it according to the valuation officers. I am sure that this will not cure the problem of money raised locally by rates. We shall probably cure the problem of financing local government locally only when and if we introduce a system of regional government. In spite of the best efforts of my party, I suspect that will not happen in the near future.
I think that the Conservative Government are caught in the kind of "Catch 22" situation in which the previous Labour Government were caught. Noble Lords on the Opposition side want to preserve the rating system and the quinquennial review, but there was not a single quinquennial review during the last Labour Government. We all recognise that there is a serious problem. We do not want to lose local independence of money raising and I suspect that most of us are unable to devise a system—or the civil servants have not been able to do so—which will be an acceptable alternative. What I worry about is that I suspect that this clause, as the noble Lord has said, is leading to the abolition of rates and towards the total abolition of any system of money collected locally and towards total dependence on the block grant system. This would emasculate local government to a point where it will cease to be local government and will become a local agency. Although I regard the rates system as imperfect, until we have devised something else we would be much mistaken if we were to agree to any system to abolish the quinquennial review which would then exacerbate the inequalities of the existing system and lead towards the abolition of any system of money raised locally. I very much support the proposal to leave out Clause 23.
9.30 p.m.
Lord DAVIES of LEEK: I have listened with care—and I will speak for only about two minutes if the Committee is worried. Looking at this Bill, we are afraid that the authority of local government will be disappearing. Many of us consider that basic good local government is the fundamental heart of democracy. In the raising of money, and in the rating system, local authorities want freedom. Although this may not be relevant, the point of raising local money ought now, when looking at systems in local authorities in great football areas and others, to be to devise a system by means of which younger people could come into the local rating system or whatever one could think of. When they tear out telephone boxes, when street windows are broken at football grounds and there are groups of 16 to 18 years of age, it is not good saying that responsibility could not be put upon those young shoulders to realise what this vandalism does throughout the cities of England, Wales and Scotland. At some time in the future I hope that this age group will be looked at. If I followed that much further, if there were rules of order in this House and a Mr. Speaker, I would be ruled out of order. But I think in passing that should be noted.
Baroness STEDMAN: I rise to support my noble friend in his opposition to this clause. The major objection to it—and indeed to the whole of Part V of this Bill—is that Clause 23 absolves the Government either from having a regular five year revaluation or from presenting reasons to Parliament why there should not be such a regular revaluation. If this were so then the Government could seek to justify their contention, and if they could carry the resolution in Parliament.
Surely members of the Committee opposite realised the advantages to the local authorities if their rateable values are regularly updated. The rates, as has been said by previous speakers, are the local authorities' tax basis. Their revenue estimates are based on their rates. The rates are what local authorities have to live on and on which they have to survive. If the valuation is outdated then the local authorities are labouring under a major burden because they are not receiving the revenue which is theirs
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by right, and they are not receiving the money they need to finance the services that they have to provide. This is even more serious when this Bill seeks to introduce a system obliging local authorities to hold their rates down to certain levels. It makes it even more intolerable—after requirements, coercions, inducements and even possible penalties—that local authorities still cannot have a proper rate base from which they can collect the revenue that rightly and properly should be available to them.
I am sure that the noble Lord is going to tell me when he replies that there have only been three five-year revaluations since the war. I accept that my party, when in Government, were no better than the party opposite. The present valuation list is seven years old because my Government, when in office, deferred the quinquennial revaluation until after the Layfield Report. They at least had to go to Parliament to get the approval for that deferment. We are against giving the Secretary of State the discretionary power so that he can have a valuation either in whole or in part whenever he wants it or does not want it without any parliamentary check and without any consultation with the local authorities or their associations.
One could ask: Why is this clause in the Bill? As the noble Lord, Lord Evans, said, the Prime Minister has already stated that her party is dedicated to abolishing rates. Is this clause in the Bill because the Government intend to abolish the rating system? If so, when is that likely to happen, what consultations will there be with local authorities before such a decision is taken, how soon shall we know of that decision and what is to replace the rates?
Local authorities regard this clause as another attack on their autonomy. The local authority associations tend to see it as the thin end of the wedge, which is intended to reduce the effectiveness and the vitality of local democracy. We have a right to know, before we proceed on to the other parts of this Bill, what is in the Government's mind, because in due course when we come to Part VI we shall be talking about a reformed type of grant that depends very much on rateable value. The proposed block grant cannot properly be determined unless we have an updated valuation.

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As other noble Lords have said, the local authority associations are opposed to any moves at this stage which tend to lead towards the abolition of the domestic rate, and the County Councils Association have said that they see it as an essential feature of local autonomy and local accountability to the local electorates, in the absence of any better independent source of local taxation. If that independent source of taxation will not readily be available, then this clause should not stand part of the Bill.
Viscount RIDLEY: I should like to express my unease in regard to this matter. I was a member of the Layfield Committee, which has been mentioned twice, and one of the things we felt strongly about was that the quinquennial valuation should continue. Otherwise, the rate base gets so out of date that it becomes a nonsense. So, undoubtedly, there is disquiet in the ACC. I think that the Minister who is to reply knows a lot more about Scotland than I do. He may tell us why the Scottish local authorities have the power to do their own revaluations. They are very much more realistic, and move upwards and downwards with the value of the property that they are concerned with.
The objective of doing away with the rates appears to have been denied by the Secretary of State at Brighton, who I saw on the television not long ago. I did not see more than a bit of the programme, but it is a pledge which the Conservative Party will live to regret. Unless they can find an alternative which is acceptable to local authorities, I hope that they will move very cautiously in this field.
Lord DIGBY: I have some experience of this problem being a ratepayer in the Republic of Ireland, where a revaluation has not been done since the 19th century and I am paying something like £11 in the pound. Luckily my ancestors were clever, but some inflated their rateable values at that time, because that enabled them to get bigger mortgages and they have been paying ever since. However, having seen all those, and realising the disadvantages, I must support this clause because I am a supporter of the rating system. But I believe that it needs to be reformed, and this gives the Govern-
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ment a chance of seeing how they can reform the rating system, while not having the very considerable expense of revaluations in the short term.
Lord ROSS of MARNOCK: That would be quite feasible, quite relevant and a good argument, but, unfortunately, as far as I can see, this will apply only to England and Wales and I presume that any reform to get rid of the rating system would apply to the whole country. I am surprised that the noble and learned Lord the Lord Advocate is to reply to this debate. Of course, he will be able to tell us that it will not apply to Scotland, and that Scotland has had the quinquennial revaluations. Mind you, they are not very popular. The last one cost me very considerably, indeed, when they upped my valuation by a multiple of, I think, 4½. But the argument was that it was time to sort out the variations between one area and another.
There is no doubt that there are very few people who can wholeheartedly support the present rating system. The trouble is that nobody can agree as to what we are going to put in its place. The point is that with the narrow base of the present rating system under which you pay rates according to the house you live in, irrespective of your income, property, or anything else, the more you load on to that the worse it becomes from the point of view of equity. It means that you have got to keep your rating system realistically up to date by valuations.
This is a monstrous clause. I do not know why it is being included in the Bill. Somebody asked why it is that we in Scotland do our valuations ourselves. The reason is simple. In the 1956 valuation Act changes were made in respect of the qualifications of the valuation officers—the assessors as we called them at that time. Scottish local authorities were given the option to go over to the English system and get the thing done for nothing by the Inland Revenue. They all opted to do it themselves except for, I think, one small area of the Borders. We felt that if we did it ourselves we could do it far, far better, and this has proved to be the case. So we have carried out our quinquennial valuations. Despite the moans, we have retained a sense of fairness.

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The longer you go on putting off the revaluation the more difficult it becomes and the worse it becomes. When eventually it comes, people are faced with the realistic results of what has happened in seven, eight, nine or 10 years. But to leave it to the Secretary of State to do it by order specified from time to time, and not to justify it is, I think, quite wrong. It is a retrograde step that England and Wales are taking and I am very glad that Scotland is not included. Do not let anybody propose an amendment at Report stage to include Scotland!
Lord MISHCON: I promise the Committee to be brief and, I hope, not to repeat any point that has been made. May I just extend one point; namely, that I could well understand a clause such as this being in a Local Government Bill if the Government had thought their way through the alternative to rating and had wanted to present it to the Committee in order that the Committee might know that it was a waste of time and money to have a quinquennial. The views of noble friends on my side of the Committee would obviously be very critical of any such alternative. Nevertheless, it would be intelligible that one had this clause in the Bill if the Government had made up their mind to tell the Committee that within so many years or months a new system would be put before Parliament and therefore it was a waste of time and money, as I have said, to have a quinquennial valuation now. So I join with those who ask the Government to be frank with the Committee and to say whether or not any such alternative plans have reached an advanced stage. If it were possible, it would be very nice to know their nature; but if that is not possible at least we are entitled to know, if this clause is to stand, when it will be that the House will have an opportunity to consider such an alternative.
My second question is this. If the answer to the first question is that it is impossible to give any such information to the Committee, bearing in mind the obvious obsolescence that there will be about the present valuation list, could the Minister please say when it is proposed by the Government to make the order for which it is envisaged this clause will provide? Again the Committee will not want to agree to this clause in vacuo
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without knowing when such an order is likely to be made.
The third and last question I address to the Committee, almost with a break in my voice, is this. Since this is an administrative matter for the Minister to decide, why, all of a sudden, in view of the arguments which we have heard, is this to be confirmed by an Affirmative Motion of the House and not by the Negative Resolution procedure?
9.45 p.m.
The LORD ADVOCATE (Lord Mackay of Clashfern): The present statutory position is that a new valuation list for England and Wales—and let me say that now and not have to repeat it, at least for some little time—is required on 1st April 1981. This is determined by Section 68 of the General Rate Act as subsequently amended and by the Valuation Lists (Postponement) Order 1978. I understand that it was the intention of the previous Government to effect a further postponement at least until 1982. Clause 23 of this Bill would give effect to the present Government's proposal to cancel the revaluation which was announced by the Secretary of State on 22nd June 1979.
The amendment which has been proposed to leave out this clause would restore the statutory requirement for regular revaluations and unless a further postponement order was made a revaluation would then be required in April 1981. We have heard a lot of argument about how difficult it would be to bring the Direct Labour Organisation clauses of this Bill into operation quickly. I think it is reasonably obvious that a general revaluation in April 1981 would hardly be a feasible proposition at this stage.
The noble Baroness, Lady Stedman, anticipated me to some extent when she said that Governments of her party were about as bad as those of this Administration in this respect, but I think that she has hardly been fair in this matter. So far as I understand it in England and Wales there have been three general revaluations since the war—in 1956, 1963 and 1973—and I am sure noble Lords opposite will recognise all of those dates as being years in which there was a Conservative

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Administration, whereas during all the time that the party opposite formed the Administration there was no revaluation at all in England and Wales.
In this situation the proposal to defer revaluation is, we would suggest, widely understood and accepted, and the background to that decision is that this Government came into office committed to looking for fundamental reforms of rating. I think they were not committed to dismantling the rating system or anything of that sort, and in my submission this clause certainly does not do anything of that kind. But the Government are committed to looking for fundamental reforms and this we are doing; but as noble Lords have said this is a very difficult matter. It is easy enough to criticise the present system, but constructive criticism suggesting an effective new system is not so easy, although of course we are open to ideas on that subject.
In view of the difficulty of the question, it is natural that we should not force the pace, but we are conducting the review in a careful and deliberate way. It was made clear in the manifesto which preceded the last general election that, with economic preoccupations, rating reform would have to take a second priority. While the future of the rating system against that background is so uncertain, it seems to me that my right honourable friend the Secretary of State, against the background of the history of general revaluations in England and Wales, could not justify continuing with a general revaluation. The public would see that as inexplicable and wasteful. On the other hand, cancellation has brought expenditure savings already of around £5 million and made manpower economies in the valuation office of the Inland Revenue; and, more important still, it gives time for a serious review of the rating system.
With regard to the method used in the Bill, it seems to us to be right to use that method, because at this stage we cannot tell exactly when these considerations will be completed. It would obviously, in our view, be silly to have a general revaluation until these proposals are brought forward. Accordingly, we see the system of having a revaluation on a date fixed by the Secretary of State as a sensible way to proceed against that
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background. And, of course, this is a matter on which wide consultation would take place, as indeed it has taken place on the reform of the rating system itself, and I perhaps should repeat my invitation to anyone who has constructive ideas to participate fully in that consultation. In the meantime, I would invite the Committee to agree to the inclusion of this clause in the Bill.
Lord MISHCON: Before the noble and learned Lord the Lord Advocate sits down would he be good enough to deal with the questions I ventured to pose to him? He has said that it is not now possible to say when an alternative scheme will be put before the House as an alternative to the rating system. This I understand; and I almost anticipated, if I may say so, with respect, that that would be his reply. If this clause is seriously put before the Committee for endorsement, can he tell the Committee when is the latest date he would expect before the Secretary of State decided that he would have to make an order in regard to valuation? Thirdly, and lastly, I did ask him—and I said it was with a break in my voice, and the lamentation becomes even more considerable when I get no reply—why is it that we have been told repeatedly today and yesterday that whenever there is a pure administrative order to make (I am looking at this moment at the noble Minister who has made that declaration to the Committee on so many occasions) the appropriate procedure is to do it by the Negative Resolution procedure and the prayer to negate as it were; whereas now when we come to a clause where it looks as though the Secretary of State is not very keen on making an order of an administrative nature he suddenly asks for an Affirmative Resolution of the House? I do ask, if I may, for a frank answer to both those questions.
Lord MACKAY of CLASHFERN: I must say I thought, perhaps by implication, I had tried to answer those questions in my previous remarks. So far as a particular date is concerned by which an order for revaluation would be required, I think that is very difficult to anticipate. It depends on how successful the progress is towards fundamental reform, and also of course depends on the extent to which the passage of time affects the validity of the existing list. I accept that any passage

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of time affects it to some extent, but it is really a matter for judgment, looking back to see just exactly what effect it has had.
So far as the form of this clause is concerned, I said that I thought this was the appropriate form for the purpose that the Secretary of State had here in mind. It seems to us that to bring in a new revaluation is a very significant general step, and therefore one which Parliament should have the opportunity of affirming; that is, that it should be a procedure where the affirmation of Parliament is required because of the significance of what is involved. I hope on this occasion at least I have answered the noble Lord's questions, so as to avoid any further break in his voice.
Lord IRVING of DARTFORD: I am sorry the noble Lord is unable to accept the amendment. He mentioned that the three valuations since the war had been under Conservative Governments and I
think he and his Government deserve that credit. But it hardly seems logical, in view of that virtue, now to proceed to cancel the obligation altogether. To have an effective local democracy, people having to face things like rates should be assured that they are fair, objective and independently assessed, so that they can have confidence in the system. The longer revaluations are postponed, the greater the distortion between authorities and people. I do not believe that we ought to put up with a decaying system because we are not going to have regular revaluations. I hope that your Lordships will join in the Lobby in support of this amendment.
9.55 p.m.
On Question, Whether Clause 23 shall stand part of the Bill?
Their Lordships divided: Contents, 130; Not-Contents, 42.

CONTENTS

Airey of Abingdon, B.

Elliot of Harwood, B.

Morris, L.

Aldington, L.

Elton, L.

Mottistone, L.

Alexander of Tunis, E.

Exeter, M.

Murton of Lindisfarne, L.

Alport, L.

Faithfull, B.

Netherthorpe, L.

Ampthill, L.

Ferrers, E.

Northchurch, B.

Audley, L.

Ferrier, L.

O'Hagan, L.

Avon, E.

Forester, L.

Orkney, E.

Balerno, L.

Fortescue, E.

Orr-Ewing, L.

Bellwin, L.

Gainford, L.

Pender, L.

Belstead, L.

Geddes, L.

Perth, E.

Berkeley, B.

Gisborough, L.

Radnor, E.

Bessborough, E.

Gowrie, E.

Rawlinson of Ewell, L.

Boardman, L.

Gray, L.

Redesdale, L.

Boyd of Merton, V.

Greenway, L.

Renton, L.

Boyd-Carpenter, L.

Grimthorpe, L.

Rochdale, V.

Brabazon of Tara, L.

Haig, E.

Rollo, L.

Bridgeman, V.

Hanworth, V.

Romney, E.

Brougham and Vaux, L.

Harvey of Tasburgh, L.

St. Aldwyn, E.

Brownlow, L.

Harvington, L.

Saint Oswald, L.

Cairns, E.

Hastings, L.

Salisbury, M.

Caithness, E.

Hatherton, L.

Sandford, L.

Carr of Hadley, L.

Hereford, V.

Sandys, L. [Teller.]

Cathcart, E.

Hill of Luton, L.

Savile, L.

Chelwood, L.

Holderness, L.

Selkirk, E.

Cockfield, L.

Home of the Hirsel, L.

Sharples, B.

Colville of Culross, V.

Hunt of Fawley, L.

Soames, L. (L. President.)

Colwyn, L.

Keith of Castleacre, L.

Spens, L.

Congleton, L.

Kemsley, V.

Stanley of Alderley, L.

Cork and Orrery, E.

Keyes, L.

Strathcona and Mount Royal, L.

Craigavon, V.

Kimberley, E.

Swansea, L.

Crathorne, L.

Kintore, E.

Teviot, L.

Croft, L.

Lindsey and Abingdon, E.

Tranmire, L.

Cromartie, E.

Liverpool, E.

Trefgarne, L.

Cullen of Ashbourne, L.

Long, V.

Trenchard, V.

de Clifford, L.

Lyell, L.

Trumpington, B.

Denham, L. [Teller.]

McFadzean, L.

Tweedsmuir, L.

Denman, L.

Mackay of Clashfern, L.

Vaizey, L.

Digby, L.

Mansfield, E.

Vaux of Harrowden, L.

Dormer, L.

Margadale, L.

Vickers, B.

Drumalbyn, L.

Marley, L.

Vivian, L.

Dundee, E.

Middleton, L.

Waldegrave, E.

Elibank, L.

Minto, E.

Watkinson, V.

Ellenborough, L.

Monk Bretton, L.

Windlesham, L.

Elles, B.

NOT-CONTENTS

Avebury, L.

Kaldor, L.

Ross of Marnock, L.

Balogh, L.

Kilmarnock, L.

Segal, L.

Birk, B.

Kirkhill, L.

Simon, V.

Chitnis, L.

Llewelyn-Davies of Hastoe, B. [Teller,]

Stedman, B.

Cledwyn of Penrhos, L.

Stewart of Alvechurch, B.

Collison, L.

Lovell-Davis, L.

Stewart of Fulham, L.

David, B.

Mishcon, L.

Stone, L.

Davies of Leek, L.

Mountevans, L.

Strabolgi, L.

Elwyn-Jones, L.

Parry, L.

Thurso, V.

Evans of Claughton, L.

Peart, L.

Underhill, L.

Hale, L.

Pitt of Hampstead, L.

Wells-Pestell, L.

Harris of Greenwich, L.

Ponsonby of Shulbrede, L. [Teller.]

Whaddon, L.

Houghton of Sowerby, L.

White, B.

Irving of Dartford, L.

Ridley, V.

Winstanley, L.

Jeger, B.

Rochester, L.

Moved accordingly, and, on Question, motion agreed to.

Resolved in the affirmative, and Clause 23 agreed to accordingly.
10.4 p.m.
Baroness DAVID Baroness DAVID moved Amendment No. 58:
After Clause 23, insert the following new clause:
"Repeal of s. 21 of Local Government Act 1974
(. Section 21 of the Local Government Act 1974 (valuation lists not to be altered on account of minor structural alterations to dwellings) shall cease to have effect.").
The noble Baroness said: Now that revaluation is to be postponed until we do not know when, until the Secretary of State decides that the moment has come, this, in a way, minor amendment perhaps becomes rather more important. The change in treatment for rating purposes of minor structural alterations to properties and central heating installations, which was introduced by Section 21 of the Local Government Act 1974, has resulted in anomalies and discrepancies in rate bills of otherwise comparable properties. Not unnaturally, this has caused a good deal of ill-feeling and irritation.
As the law now stands no rates are payable on the increased rateable value attributable to minor structural changes or central heating installations until a new valuation list is introduced. This means that a ratepayer who made such changes to his property before the introduction of the 1973 valuation list pays rates on the value of the improvements, while a ratepayer who made the changes in, say, 1974, possibly just a year later, pays no rates on the improvements. This anomaly leads to confusion and to friction between ratepayers, perhaps people living in next-door houses. We consider that Section 21 of the 1974 Act should be repealed. I beg to move.
Lord MACKAY of CLASHFERN: I recognise that Section 21 of the Local Government Act 1974 gives rise to some anomalies and unfairnesses between one ratepayer and another. The object of the provision was to simplify the rating valuation system by removing the necessity for making changes to the rateable values of properties every time small improvements are made. It helps to keep down the costs of maintaining the valuation lists and reduces the inconvenience to householders of forms and inspections.
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An important consideration also was that householders would not be discouraged from making minor improvements by the prospect of having to pay higher rates and water charges immediately.
I recognise the effect on that of any postponement of a general revaluation, but in our view the arguments in favour of the provision still hold good, and while the future of domestic rating is under review and the system considered for radical reform, the balance of argument in our view seems to be with permitting this concession to continue. While I understand the arguments that are put against it, I would respectfully suggest to the Committee that the section should be allowed to remain.
Baroness DAVID: It may keep down the cost of making some sort of new valuation but, on the other hand, the council is not getting the benefit of the rates which would come from the increased value. It seems to me that it is, in a way, a two-edged argument. I feel that if there is not going to be a revaluation for some time this should be looked at again. If the Minister would be willing to consider this, then I would withdraw the amendment for the moment and think about bringing it forward again on Report.
Lord MACKAY of CLASHFERN: All I can say is that I think this has been fairly fully considered and I do not think it would be very open of me to suggest that I could reconsider it.
On Question, amendment negatived.
Clause 24 [Ascertainment of rateable value of non-industrial buildings]:
On Question, Whether Clause 24 shall stand part of the Bill?
10.10 p.m.
Viscount RIDLEY: I wish briefly to express a little unease about the clause. There is involved in it a power to order the revaluation of only certain classes of hereditaments, and this seems quite a power to enable Governments to use a political influence between, say, domestic and non-domestic ratepayers. There is

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already a considerable discrepancy, which has widened over quite a long period with domestic rate relief, and I am not happy that this should be perpetuated. I hope the Government will take on board my point about the dangers of the clause.
Lord MISHCON: May I ask the Lord Advocate, when dealing with the matter raised by his noble friend, to say that this might be considered so that some of us who do not wish to table needless amendments on Report may have our time saved here and now and know that the Government are being generous in this respect?
Lord MACKAY of CLASHFERN: So far as Clause 24 is concerned, the position is to make an improvement in the definition. The point my noble friend was referring to perhaps arises more aptly under Clause 25.
Viscount RIDLEY: I apologise to my noble and learned friend; he is quite right and I should raise the matter under Clause 25. The hour is late, so perhaps I may be forgiven.
Lord AVEBURY: Perhaps the noble and learned Lord will explain one feature of the clause. I hesitate to burden the Committee with technical questions at this late hour but I notice that in subsection (4) there is a provision for transitional relief about which the Secretary of State may make regulations in respect of hereditaments the net annual values of which are to be ascertained in accordance with Section 19 (3) of the 1967 Act instead of in accordance with Section 19 (2). The implication, as I understand it, is that certain rateable values will be increased by the new method of ascertainment.
We should not let the clause go without an explanation as to what hereditaments are likely to have their values raised and whether the amounts will be of considerable size, as one would expect they might be if there have to be transitional provisions. The ratepayers who may be affected by this change in the method of ascertaining their rateable values should be aware of what is likely to hit them and of what their rights may be to seek the
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transitional relief provided for under subsection (4). An explanation from the Minister would be of value therefore not only to the Committee but to ratepayers who might be affected and who find their rates going up as a result of the clause.
Lord MACKAY of CLASHFERN: As noble Lords will appreciate, the basis of the valuation of certain of the properties to which the clause relates will be on the basis of net rents and there may be changes in rateable values accordingly. It is difficult to say by how much until one knows what the net rents in question are. It is to provide for that possibility that the transitional provisions are in the clause.
Lord AVEBURY: The Minister has not said what kind of properties are likely to find their rateable values increased as a result of the clause. Can he not give some indication of the types of premises the rateable values of which are likely to be increased, even if he cannot say by how much?
Lord MACKAY of CLASHFERN: The clause as a whole is dealing with the situation of premises which are valued to gross at the moment and will be valued to net when the clause comes into effect. These are premises which are non-industrial but are not domestic dwelling-houses, speaking very generally. It is premises of that sort which would be affected in this way and be valued by reference to net rents, which might give a higher figure than the present one.
Clause 24 agreed to.
Clause 25 [Valuation and adjusted valuation]:
[Amendment No. 59 not moved.]
Lord MISHCON: I wonder if I might have your Lordships' indulgence, as we have reached Clause 25, to make a point purely and simply for the convenience of Members of the House and certainly Members of the Committee.
Several noble Lords: Order, order!
10.16 p.m.
Baroness STEDMAN Baroness STEDMAN moved Amendment No. 60:

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Page 26, line 27, at end insert—
("(4) Before exercising his powers under this section the Secretary of State shall consult with such associations of local authorities as appear to him to be concerned and with any local authority with whom consultation appears to him to be desirable.").
The noble Baroness said: I want to make it plain to noble Lords opposite that in this amendment we are not seeking to oppose Clause 25, but we do wish to see it further amended so that adequate consultation will take place between central Government and local government. As I see it, Clause 25 has two purposes, and I share the unease of the noble Viscount, Lord Ridley, who jumped the gun a few moments ago. The first of the purposes is the technical one which will provide a proper basis for rating revaluations and enable the Secretary of State to prescribe a time by reference to which the valuation shall be made.
The second purpose is, I think, the more important of the two. It is to enable the Secretary of State by order to arrange for partial revaluation. Although the local authority associations have all said that they would prefer to see a complete rating revaluation, if that is not possible then I think they would accept a partial revaluation, covering perhaps non-domestic property, provided that that was linked to some sensible and fair method of adjusting, say, the domestic rateable values.
Clause 25 does make this possible; but as I see it, and as the local authority associations feel, there is a defect in this clause in that it makes no mention at all of consultation between central Government and local government on an issue which is absolutely fundamental to local government tax base. All the local authority associations have said that they believe this clause could be amended in the way that I am suggesting tonight. and that it would be an improvement.
Again, we get back to the need for consultation with the local authorities. I understand that at Committee stage in another place the noble Lord's honourable friend, Mr. Fox, agreed to look again at the possibility of making statutory provision for consultation. There was no statutory duty on the Government to consult last summer and they went ahead without any proper consultation with the
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local authorities in withdrawing the revaluation. We want to see consultation with local authorities, and we hope that the noble Lord can advise us how his honourable friend now proposes to do that in the light of his comments at Committee stage in another place.
All we are asking, in effect, is that before he exercises his powers under this very important clause and Section 22 of the 1967 Act the Secretary of State shall consult with the local authority associations and such local authorities as he considers it desirable to consult. When this Government first took office they made a decision about revaluation without really adequate consultation with the local authorities. The local authorities did not expect such an announcement, and they should at least be brought into discussions before that sort of decision is taken. The councils, the councillors and the ratepayers have all got to be taken along with the Government when these matters are considered.
Revaluation, in whole or in part, affects the level of the rates and what they ought to be spent on. Therefore it is a subject of considerable interest to all those who are involved in local government; and local authority associations feel that, while they do not want to be a party to the actual decision that is finally made by Government, they want it written into the Bill that they shall be consulted before such vital decisions are made. I beg to move.
Lord MACKAY of CLASHFERN: This amendment would require the Secretary of State to consult local government interests before exercising any of the powers conferred on him by Clause 25. This is the clause that provides for the possibility of a partial revaluation, and the clause provides that in such an event the Secretary of State shall prescribe an arithmetic multiplier that will be applied either to the revalued or to the non-revalued sector so as to preserve the overall balance of rateable value between the sectors. The clause as drafted already places a duty on the Secretary of State to consult local government and others about that adjustment. It seems to us quite right that there should be consultation in this important professional matter, and that is provided for.

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The amendment before us goes further, however. First, it would require consultation about the prescription of a time, earlier than the general revaluation is to have effect, by reference to which any valuations for the new list are to be assessed. Now it seems to me that the local authority associations have no special interest in this reference time. It is a technical point on which professional advice would be received from the valuation office of Inland Revenue. It is really on the practicalities that that would be important. If any consultation is needed, it would be with professional associations in the valuation world, and this kind of consultation is very likely. Indeed, once the date of a revaluation has been announced, the professional bodies are certain to come forward voluntarily with their advice on a reference date for the valuers to use.
The second requirement of this amendment is more significant. It would require consultation about the question of whether there should be a full revaluation or a partial one, and, if partial, for what classes of property. Here I recognise that the local authority associations will feel themselves to be specially interested. The Government know their preference for a full revaluation, if a revaluation is to take place. However, even in this event a statutory duty to consult seems undesirable and unnecessary. Partly this is because the amendment would provide for consultation with local government interests but says nothing about other interested parties. It is difficult to have consultation with ratepayers, but there are some bodies in the field that attempt to represent ratepayers as a group. Partly also a duty to consult local government seems unnecessary, because the local authority associations have formal access to the Secretary of State through their participation with him in the Consultative Council on Local Government Finance.
I should have thought that that is a fairly telling point. The Consultative Council meets several times a year and has a joint secretariat. The local government side can therefore keep a regular review of the Secretary of State's intention towards a revaluation, and this subject has already been discussed this last year in that particular forum. While local authorities share with the Secretary of
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State in the Consultative Council, then I think one can say that they already have established a forum for consultation on any financial issue in which they are interested. The logical outcome of the amendment before us would be that a duty to consult should be inserted by statute in every provision that mentions any aspect of local government finance. I suggest that that would be unnecessarily to burden the statute book without a corresponding advantage. I think that the general arrangements for consultation that I have described are adequate and should be thought satisfactory.
With regard to the point made about the decision not to hold the revaluation, that was a decision which in the peculiar circumstances required to be taken rather quickly; work was going on. I should think it is true that my right honourable friend the Secretary of State has done his best to consult as far as possible, but I accept that in that particular case there may have been special reasons for urgency which did not enable him to consult as fully as otherwise he might have done. I hope that in the light of that explanation the noble Baroness will feel able to withdraw the amendment.
10.24 p.m.
Lord MISHCON: I apologise for having intervened earlier, but I just did not know how to get over the difficulty regarding our procedural rules. The point that I was trying to make, which I now make in order, relates to the way in which Clause 25 had been printed in the Bill now before the Committee. That was a plea only for clarity, and especially for clarity for those who, outside this Chamber, are not quite so accustomed to Bills and to reading them, and who, because of their interests, possibly, which are peculiar and do not arise generally in regard to legislation, have to read this Bill and come to some sort of conclusion as to whether or not they should make representations upon the Bill to any appropriate association.
Your Lordships will see, if your Lordships would be good enough to look at page 24 of the Bill, and at Clause 25, that this is one of those fairly rare occasions when parts of another Act are incorporated and there are changes in regard to the sections which are quoted

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from that Act. Your Lordships will also see if you look at Clause 25 that you deal with exactly the same print in regard to the subsections of the clause itself as you do with the parts of the other Act which are going to be altered. Looking down the columns on pages 24 and 25, the following mystery appears. Your Lordships will see "(1)" and then "19A.—(1)" in precisely the same type, followed by "(2)" and "(3)". Then, if you go over the page to page 25, you see "(4)", "(5)", "(6)" and "(7)". Then, all in the same clause, "19B.—(1)" in exactly the same type as before, and "(2)", "(3)", "(4)" and "(5)". Then, if you turn over to page 26 you will see, all of a sudden, "(2)" coming after "(5)" in precisely the same type and with precisely the same indentation, in fact, as occurs in the case of the other clauses. My plea was going to be that in future, in a clause where, as I have said, sections of another Act are quoted and amended, it would be very helpful if printing arrangements could be made either to have a variation in the numbers and the way they are printed or at least a variation in the indentation in the Bill itself.
Having made that general point—and your Lordships have been most indulgent in allowing me to make it now, and I repeat my apology; I did not know when to raise it, quite frankly, since it did not have anything to do with an amendment—may I ask the noble and learned Lord the Lord Advocate this question? I appreciated the logic, if I did not agree with the reasoning, of his reply to my noble friend Lady Stedman when he said that local authority associations were brought into consultation in regard to financial matters in any event, and therefore there was no need to incorporate that in a Bill. As I said, I understood the logic of that, and I understood the reasoning. Why should that consultation not have taken place within that very ambit when one is dealing with a method in regard to adjusting the rateable values, as is set out in this Bill? Indeed, I thought that was going to be the reasoning behind the amendment moved by the noble Lord, Lord Renton, that it was all unnecessary because there were financial matters which were considered in the appropriate way all through the year, and therefore it was quite unnecessary to put this in
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the Bill. But to my consternation the noble Lord withdrew his amendment, or said it was not going to be moved.
We are now left with a situation which I do not quite follow, and it is this. Either these matters are discussed with local authority associations and therefore there is no need to have any provision in this clause, or in any clause indeed, relating to financial matters, because it happens automatically; or that is not so, in which case there is the necessity. If the answer to the question be, no, these financial matters are definitely discussed on all appropriate occasions within the local authority associations, why has the method of dealing with this specially to be provided for by way of consultation? If indeed the noble and learned Lord the Lord Advocate has given an explanation of this and I did not hear him because of my concern in making the other point and concentrating all my thoughts on that weighty matter, I ask his forgiveness, but I did not, frankly, hear his explanation, and I ask for it now.
Lord MACKAY of CLASHFERN: May I take the second point first. The explanation which I gave was that the method required in the clause for adjusting as between the revalued and non-revalued sections is a rather special matter and it is a matter on which it was thought right that there should be special enactment of consultation, because it is a matter that may affect not just the generality of local authorities, but the particular formula may be required to take account of local circumstances. On the other hand, where the amendment goes much wider than that into general consultation in regard to the exercise of any power under this clause, I was suggesting that the situation is a little different and that the general consultative machinery which is already in existence, and which seems to work reasonably satisfactorily, should be relied upon, otherwise all the statutes referring to local government finance would be liberally sown with a somewhat similar provision to that in the amendment.
I can see that one might question the need for even the special provision, but in our view it is a question of trying to strike the right balance, and where there is a rather special matter of this kind to prescribe a particular method which might

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have particular local difficulties about it as a special duty of consultation is properly laid upon the Secretary of State.
So far as the printing is concerned, my understanding of the layout is that where subsection (1) of Clause 25 seeks to enact new provisions to go into another Act the new provisions are set in with a larger margin, and that continues down page 24. I agree, certainly, if my sight is not being affected by the lateness of the hour, that the margin does not seem quite so wide on page 25; but that is the intention. Then when you come to page 26 you see that subsection (2), which is back to the main numbering of the clause, is set out nearer the side of the page, and then you get the greater indentation again in subsection (3), when you come to put new provisions into the 1967 Act in subsection (3). I agree that page 25 looks as though it does not conform as closely to the pattern as I would have liked, and no doubt on the next reprint that particular difficulty may be overcome.
10.33 p.m.
Lord AVEBURY: If I might endorse the sense of the remarks of the noble Lord, Lord Mishcon, I thought these pages were not at all clear. The answer is probably that when you have words or sections inserted in another statute, the right method of highlighting it, so that one cannot, in glancing at the page, be confused between what is properly in this Bill and what is being inserted in some other statute, would be to use another type face, preferably a bold type face, so that the words hit your eyes as you look at the page. I believe this is done on occasion in our Bills, although not for the purpose that the noble Lord, Lord Mishcon, has in mind.
May I, while I am on my feet, suggest to the noble Lord the Minister, who I know is trying to be very helpful in explaining why we have this element of consultation dealt with on page 25 which he thinks is necessary, while not wishing to go as far as the amendment currently under discussion, would it not be logical to say that if the Secretary of State does have an obligation to consult local authorities on all these financial matters when he meets them several times every year in the Consultative Council on Local Govern-
328
ment Finance, then the only requirement you ever need in consultation is with particular local authorities?
Rather than leaving out that subsection (3) altogether, what the noble Lord the Minister might like to consider is leaving in simply paragraph (b). The particular local authorities which, as he said, might be affected by these proposals, or the other bodies of persons with whom consultation may appear to be desirable, would not necessarily be represented at the Consultative Council on Local Government Finance, but the associations of local authorities are, as I understand it, invariably represented and would automatically be consulted about any of these matters. To be logical, the noble Lord the Minister should at Report stage come forward with an amendment which would delete paragraph (a) of that clause, while leaving in paragraph (b).
Viscount COLVILLE of CULROSS: As the fourth noble Lord to talk about the format of this clause, other than on clause stand part, I cannot be out of order! May I suggest to the noble Lord, Lord Mishcon, that the first priority is to make sure that nothing is done in this Bill that will prevent rapid consolidation. That is the primary thing that we must hope for. There have already been substantial changes to the General Rate Act 1967, which was itself a consolidation Act. After this Bill goes through, I think we cannot wait for another version of that. The second thing I would suggest to him is that, whereas it is comparatively common to write in new sections or subsections into existing statutes, the use of different type faces has been reserved so far for what I consider to be the most valuable of all purposes; that is, the construction of a Keeling schedule, whereby the new text with the amendments, highlighted in the usually heavy print, is set out in a schedule to the Bill, so that one can see the complete new text as it has been amended in the legislation there and then. That is not a device very often used by draftsmen—not as often as I would like to see. If we introduce too many different forms of type face, however, the value of that particular exercise—which is great when it is done—may well fall away. I would hope therefore that he would be satisfied with the expectation of early consolidation.
Lord RENTON: I am grateful to my noble friend Lord Colville of Culross for his reference to the need for consolidation and to his reference to the desirability of Keeling schedules on some occasions. I do not think, however, that he would suggest that this particular clause would be suitable for a Keeling schedule, because it merely adds to the existing law rather than making amendments to it. I was quite satisfied with the very candid explanation given by my noble and learned friend the Lord Advocate about the rather strange arrangement of the subsections and the new clauses here, and his free confession that it is on page 5 that the mistake is made of there not having been sufficient in-setting into the margin.
Lord MISHCON: I also very much appreciated the comments of the noble and learned Lord the Lord Advocate on what was a minor point, but it could occur again. I hope the Committee will forgive me for having raised it in the course of a very busy evening. May I thank the noble Viscount, Lord Colville of Culross, for the lesson he has given me? I assure him that I have learnt much from it. His own contribution, had it taken place before mine, would have been much more worthy of the Committee and of much more use to the Committee.
Baroness STEDMAN: We have strayed somewhat wide of the original amendment. I had not anticipated that we would be discussing Keeling schedules and so on on what had seemed to be a simple and reasonable amendment. But it has been an interesting five or 10 minutes. I am grateful to the noble and learned Lord the Lord Advocate for his reply. I should like to look at it tomorrow in Hansard for it seemed to me that there was a glimmer of hope that if we come back at the next stage with something that did not ask for quite such a wide field of consultations, we might get better treatment. On that basis, I will look at it again and come back to it, if necessary, at the next stage. I am happy to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 25 agreed to.
Clause 26 [Domestic rate relief]:
Viscount COLVILLE of CULROSS Viscount COLVILLE of CULROSS moved Amendment No. 60A:
Page 26, line 34, leave out ("dwelling-house") and insert ("domestic").
The noble Viscount said: I had to make the speech that I made just now because I now propose that we should amend the 1967 Act by putting in some new subsections. I hope that the Committee will agree with me that it will be expedient to discuss these four amendments together because they are all a single point. Whether it is the rate poundage or the rateable value, when the rate bill arrives through the letter box it is very often rather large; and anybody who is entitled to a form of relief is, as a rule, thankful for that relief. The domestic relief which is at present available is, of course, fairly wide, but, despite the further extensions given in this Bill, there is still one anomaly. If any noble Lord lives in a house with an integral garage and a loft in which can be put unwanted furniture for storage, the whole building is treated as being domestic and attracts the full domestic relief. However, not everybody has an integral garage, but they still have a car. Not everybody lives in a house; some people live in flats where they have neither an integral garage nor an integral place to put their unwanted goods and chattels; so they have a separate garage or a separate shed or building which, in itself, forms a rateable hereditament. That separate building attracts no domestic rating relief, even if it would have done so had it been part of an integral building. This is an anomaly which may not represent a huge sum of money for the individual—but every little counts. I hope that it would not be a very large sum in aggregate for those who have to pay out this relief, which is central Government.
I do not think Her Majesty's Government had wholly overlooked this matter. It was raised by my honourable friends the Members for Hornchurch and for Melton on 6th March in Standing Committee in another place. My honourable friend the other Parliamentary Under-Secretary of State said that he would consider it again. I am sure he did so; but there have not so far appeared on the Marshalled List any amendments to give effect to it. I believe that these amendments would do so. They have the advantage that, although Amendment No. 60C looks extremely

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complicated, the new definition of a domestic hereditament in the newly-to-be-inserted Section 48 (3) (b) will cut down the number of garages to those which really essentially must be the ones to be used for domestic purposes as opposed to any trade purposes. I would not wish to extend it further than to purely the equivalent of the integral domestic garage. Then of course paragraph (c) provides for private storage.
This is a small extension of a much-used, much-welcomed relief for householders who find the rates hard to pay. I hope that the Government, upon the further reflection that they have had time to give since March—which is quite a long time—may be able to provide some encouraging noises and reaction to what I suggest now. I beg to move.
10.45 p.m.
Lord MACKAY of CLASHFERN: This matter has indeed been further considered by the Government since March. I am very happy to be able to advise the Committee to accept this and the other amendments that my noble friend Lord Colville will move, as he has indicated. This is an anomaly which over the years has generated a slow but steady stream of letters to the Department of the Environment and it is certainly a position which is very hard to defend. Nearly 2 million people stand to benefit from this extension of domestic rate relief, and it gives me particular pleasure therefore to be able to commend it to the Committee.
Lord COLVILLE of CULROSS: I am very grateful to my noble and learned friend.
Viscount SIMON: May I ask the noble Viscount, Lord Colville of Culross, this: Amendment No. 60C, in head (ii), reads:
"is provided by the keeper of a hotel inn guesthouse or boarding-house and used wholly or mainly for the motor vehicles or his guests, or".
Surely, it means "of his guests"?
Viscount COLVILLE of CULROSS: The noble Viscount is perfectly right. It is probably the result of my hand writing. If I may consider the matter rapidly on my feet, may I suggest a manuscript amendment to insert the word "of" instead of "or" when I come to that?
Viscount COLVILLE of CULROSS Viscount COLVILLE of CULROSS moved Amendment No. 60B:
Page 26, line 37, leave out ("dwelling-house") and insert ("domestic hereditament").
Viscount COLVILLE of CULROSS Viscount COLVILLE of CULROSS moved Amendment No. 60C:
Page 27, line 21, at end insert—
("( ) After subsection (4) there shall be inserted:—
"(4A) In subsection (3) for the word "dwelling-house" there shall be substituted the words "domestic hereditament".
(4B) In this section "domestic hereditament" means a hereditament which is—

(a) a dwelling-house; or

(b) a hereditament of an area not exceeding 25 square metres which is used wholly or mainly for the accommodation of a motor vehicle, other than a hereditament which—

(i) forms part of premises in which a business of providing services for motor vehicles is carried on, or

(ii) is provided by the keeper of a hotel inn guest-house or boarding-house and used wholly or mainly for the motor vehicles or his guests, or

(iii) is used for the accommodation of a motor vehicle for the time being chargeable with duty under Schedule 2, 3 or 4 to the Vehicles (Excise) Act 1971 (Hackney Carriages, Tractors and Goods Vehicles) whether it is also used for any other vehicle or not; or

(c) private storage premises within the meaning of section 19 of this Act." ")

The noble Viscount said: I beg to move, with the substitution on page seven of the Marshalled List in head (ii), line 3, of the word "of" for the second word "or".
Viscount COLVILLE of CULROSS Viscount COLVILLE of CULROSS moved Amendment No. 60D:
Page 27, line 22, after ("(5)") insert—
("(a) For the word "dwelling-house" there shall be substituted the words "domestic hereditament"; and
(b)")
Clause 26, as amended, agreed to.
10.48 p.m.
Lord MOTTISTONE Lord MOTTISTONE moved Amendment No. 61:

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After Clause 26, insert the following new clause:
"Limitation on business rates
(". There shall be added after section 2 of the 1967 Act the following new section—
"2A.—(1) In determining a rate payable in respect of hereditaments to which this section applies, the amount per pound on the rateable value shall not exceed the standard rate poundage defined in Part VI of the Local Government, Planning and Land Act 1980 and for the purposes of this Act the standard rate poundage shall be calculated as if the actual expenditure of the authority levying the rate did not exceed the standard expenditure as defined in Part VI of the Local Government, Planning and Land Act 1980.
(2) This section applies to hereditaments used exclusively for business purposes.".").
The noble Lord said: The purpose of this amendment is to put a limit on business rates. It may be remembered that on Second Reading I had occasion to remind the House that businesses pay very nearly half the £9 billion of the total rate, and that this is equivalent to 85 per cent. of the anticipated yield of corporation tax. Businesses in fact pay a vast tax in rates and they are not represented as indeed are domestic ratepayers; and so in a sense this is taxation without direct representation. With that background, it must also be remembered that at a time of recession high taxes, including high rates, are a very important determining factor in investment, development of business and in employment. Against that background, I should like the Committee and my noble friends on the Government Front Bench to consider this amendment.
The new system of rate support grant, with the possibility of restricting the amount of grant that is given to excessively high-spending local authorities, could lead to a greater rate take-up on the part of all ratepayers. One also needs to remember that local authorities that are high spenders tend to be the kind of local authorities that see businesses as impersonal monsters, rather than as employers of the people who live in the ratepaying area.
So it is quite important that there should be consideration given to limiting the amount of rate which is paid by businesses to what could be a reasonable figure. It is suggested, within the terms of the amendment, that the burden of rate on business ratepayers should be
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limited to that required to finance local authority services up to the so-called common standard, plus threshold. Anything in excess of that would fall upon the domestic ratepayers who, unlike the business ratepayers, as described, have democratic representation. This, it is suggested, will further the commendable objective of the Government of making local councils more accountable to their electorates. I beg to move.
Lord MISHCON: I rise to oppose the amendment and am somewhat surprised that the noble Lord should word this amendment in a way which, he says, makes local authorities more answerable to the electorate. Has this Bill not gone far enough not only in clipping the wings of local authorities, but in absolutely slaughtering them in regard to their dignity and their powers?
We listened on Second Reading—and we shall be coming to these points again very soon—to ways in which local authorities are to be limited by central Government in regard to their borrowing powers and capital spending, to how they are to be forced to give reports, to how they are to be told, without any reason, that their direct labour organisations can be closed down at the arbitrary wish of the Minister. I readily concede that that is a matter that will be looked at again by the Minister, but that is how the Bill stands. They are to be directed, they are to be pushed and they are to be told that, in some way or other—I think we shall be commenting on this later—their powers are being extended under this Bill. If some of us, as human beings, had our powers extended in this way, we would regard ourselves as prisoners who were allowed to walk a little further in the area prescribed for walking in the prison yard.
I hope that I am not exaggerating, but the noble Lord, Lord Mottistone, now comes to the Committee and wishes to have an amendment which, in any event, I believe to be unworkable—and I am so advised by those who are skilled in matters of local authority finance—and which tells local authorities that they cannot levy a rate poundage in respect of non-domestic hereditaments beyond what is laid down in the Bill by central Government.

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Is there to be any further invasion of local authority rights? If there is to be, I suggest—and I hope not unreasonably—that the word "authority" should be left out of these assemblies, and they had better be called local agencies of central Government, with nominated deputies of central Government. If these matters are to be rectified, they must be rectified by parties who go before the electorate and point to something unjust about the way in which the rate poundage is levied, assessed and so on, and that must be done in a proper democratic way.
Let us cease this pantomime of saying such wonderful things about local authorities and how much they form part of the great democratic life that we in this country have, when we sit here at Second Reading, at Committee stage, at Report stage and hereafter taking every conceivable power away from them and, as I have said, rendering them completely impotent as a result. It is in that spirit that we on this side oppose the amendment.
Lord MONSON: I should like briefly to support this amendment for which the noble Lord, Lord Mottistone, has made an extremely good case. I wonder whether the noble Lord, Lord Mishcon, has read the most interesting article by Sir Horace Cutler in yesterday's Financial Times, in which Sir Horace points out that 65 per cent. of the rates in London are contributed by business. Business, of course, has absolutely no representation on the Greater London Council. If further burdens are heaped upon industry, this will lead to greater recession and more unemployment. Surely nobody on either side of the Committee could possibly wish to see this.
10.56 p.m.
Lord BELLWIN: As the noble Lord, Lord Mishcon, will, I am sure, expect, I do not propose to anticipate what will be said in the debate, presumably not today, on the financial proposals in the Bill. The noble Lord, though, included some of what I presume he will say then and which I shall oppose very vigorously indeed. I disagree with him entirely as to the effect which the proposals will have on local government, but I do not think that this is the moment to embark upon that argument. I would prefer to stick
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to the amendment itself and to comment upon its merits.
As has been said, this new clause would impose a ceiling on business rates. The ceiling would be derived from the calculations of an annual settlement for block grant, and it incorporates an essentially simple idea. In distributing block grant, an assessment has to be made as objectively as possible of the expenditure needs of each local authority. This assessment will be known as "grant related expenditure", a term which was adopted instead of the term "standard expenditure" in another place. Local authorities will remain free to determine expenditure below the level of their grant related expenditure or in excess of it, but grant entitlement would be reduced at high levels of expenditure. If business rates were required to be fixed on the assumption that expenditure did not exceed that of the grant related expenditure, then the appropriate grant related poundage would be derived from the grant settlement and could be read off from a schedule of poundages. I apologise immediately for the technicality of the terminology. I give due warning that it is something which we will have to become used to when we debate block grant. This is part of the complexity that it has for lay people.
The case for imposing a ceiling of this kind on business rates has been put to us by my noble friend Lord Mottistone. In recent months it has been put to the Government by the CBI. However, in practice the proposition would not work as simply as might be supposed. First, such a ceiling would place very great reliance upon getting grant related expenditure assessments exactly right. With the new block grant, this Government are making strenuous efforts to improve on assessment methods and to do them more objectively. But it must be recognised that such assessments can never be more than an approximate statement of the need to spend. It is for that reason that in operating block grant we will incorporate a threshold above the grant related expenditure, and the tapering of grant will not begin unless that threshold is exceeded. No such safeguard is built into this amendment.
Secondly, a ceiling on business rates alone raises questions of equity. Why

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not also on domestic rates? It has been agreed that the business ratepayer is disfranchised. A ceiling on business rates would have the effect of throwing any marginal increases in expenditure wholly on to the domestic ratepayer. Taken on its own, that proposition can be defended, but such a scheme would be in addition to block grant. In other words, the extra burden on domestic rates would be in addition to the marginal increase in the proportion of expenditure that the ratepayer must find as a consequence of a lower rate of grant support on higher levels of expenditure which is a feature of block grant.
Finally, this additional burden on the domestic ratepayer would in some areas be slight; in other areas massive. This is because block grant achieves an equalisation of resources between authorities by ironing out discrepancies in their total rateable value. Within this total rateable value there can be a wide range of ratios of domestic to non-domestic rateable value. It would be wholly unfair and unacceptable to provide a ceiling that could have widely different effects between areas. There could be, for example, a higher domestic rate in district A than in district B, yet expenditure could be at a higher level in district A. This would make nonsense not only of the provisions in block grant for equalising the resources of different areas but also of our new efforts to improve the information given to the ratepayer about the rate bill and how it is spent.
One has to conclude therefore that a ceiling of the kind proposed would protect business ratepayers but would result in very uneven effects between areas, a consequent undermining of local accountability and considerable complication of the grant system. This, however, is to criticise the amendment on rather narrow grounds. It may be that a ceiling on business rates only could be devised. There would have to be a substantial re-designing of block grant but, given time, it might be possible to work something out. My advice to your Lordships would be not to accept this amendment and to decide against re-designing block grant at this stage. Let us first see how the new grant provisions, coupled with our provisions under Clause 2 of the Bill, work out in practice. It is my belief
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that local authorities will come to terms with the greater discipline of accountability that these various measures will impose and that there will be less cause in future for concern about the level of rates on businesses.
As I sit down may I just say that I am conscious of the fact that some of the extremely high increases that we have seen recently in rates generally do have the impact upon businesses which is causing much concern everywhere and I shall return to that when we debate block grant. Therefore I can well understand the reason why my noble friend brings forth the amendment, but I hope I have illustrated adequately that there are many technical problems involved in doing what is suggested at this time; but there are in fact good reasons why we should not embark upon it at this time but that, like all the proposals about rating generally, it must be part of the pool of debate. With that explanation I hope perhaps my noble friend may feel able to withdraw this amendment.
Lord MOTTISTONE: I fully understand the technical difficulties that my noble friend the Minister has pointed out and I am reassured by the fact that he does not altogether discount the principle of my amendment for reconsideration in the future. It seems to me that the prosperity of the country is indirectly affected by the present situation, but with that semi-assurance on the part of my noble friend, for which I am most grateful, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
11.4 p.m.
Lord MOTTISTONE Lord MOTTISTONE moved Amendment No. 62:
After Clause 26, insert the following new clause:
"Rating relief for hereditaments which are partly used
(.There shall he added after section 25 of the 1967 Act the following new section—
"25A.—(1) This section applies where—

(a) the whole or part of any hereditament, which has been and remains constructed or adapted for use as a factory, mill or other premises of a similar character for use wholly or mainly for industrial purposes, is not so used (the unused part); or

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(b) the whole or part of a hereditament comprising a commercial building is not used for the purpose for which it has been used remains constructed or adapted for use (the unused part)

provided that in either case no other use is made of the unused hereditament, but notwithstanding that the building or plant or machinery therein, or appurtenant land is or continues to be maintained in a workable condition.
(2) In this section, references to a hereditament comprising a commercial building are references to a hereditament (not being a dwelling-house or a hereditament having a floor space not exceeding 240 square feet and used as a lock-up garage) whose net annual value falls to be ascertained under section 19 (2) of this Act.
(3) If it appears to the rating authority that either paragraph (a) or (b) of subsection (1) applies and that the unused part is likely to remain unused for a period of 18 months or more, the authority shall request the valuation officer to apportion the rateable value of the hereditament between the unused part and remaining part of the hereditament; and if the apportionment made by the valuation officer is agreed by the authority and the occupier, then as from—

(a) the date upon which the unused part became unused; or

(b) the commencement of the rate period in which the request was made

whichever is the later, until the event in subsection (4) below occurs the value apportioned to the remaining part shall be treated for rating purposes as if it were the value ascribed to the hereditament in the valuation list.
(4) The event referred to in subsection (3) above is whichever is the first to occur of the following:

(a) any of the unused part becomes used;

(b) a further apportionment of the value of the hereditament is made;

(c) the person in occupation of the hereditament at the time that the apportionment under this section is made ceases to be in occupation.".").

The noble Lord said: This amendment relates to what we call "mothballing relief ". It is believed that it would be helpful to introduce a new provision which would exclude for valuation purposes those parts of properties which have been taken out of use but are being maintained in order that they may eventually come back into use at some later date when, for example, the present recession is over and the economy is growing again. This provision would be of particular value and help to manufacturing companies facing fierce competition from overseas.
In the major recession between the wars industrial de-rating was introduced. There is a strong case for that being re-introduced now and it is under consideration within the CBI. Meanwhile, the provision of "mothballing relief"—that is, the process that is incorporated in the amendment—is a positive step that the Government can take to help preserve the industrial base. The administrative problems associated with mothballing relief could easily be overcome if there was a will to see some such measure successfully introduced. I beg to move.
Lord MACKAY of CLASHFERN: My noble friend Lord Mottistone has made a powerful case for rate relief for what is sometimes described as premises or plant in mothballs. Listening to the arguments, I think two strands can be distinguished. First, there is the case that if firms close down or cease to use certain production facilities in a factory, clearly definable parts of a factory or pieces of plant and machinery are left unused. The continuing rate liability in respect of those parts is then seen as a burden. The possibility of rate relief is seen as a valuable source of respite for firms with diminished profits, but with hope of restoration in time.
Second, there is an argument about equity. It is said that it is unfair that rates should be levied when a property is not being fully used. And a particular unfairness is seen between the case in which there are two separate small factories, one of which is closed (and, therefore, liable for empty property rating which would often be at a reduced poundage) and the case in which one half of a large plant is closed (where no rating relief at all is presently available).
At first sight those seem very persuasive arguments. There are, however, arguments against. The first is one of rating principle. Mothballing relief would breach the fundamental principle that the use of part of a hereditament constitutes occupation of the whole. This may not sound serious, but I believe that with any tax there has to be a desire to preserve the basic principles or the tax becomes inconsistent in its application with concessions made arbitrarily to some groups and withheld from others. Mothballing relief, for example, would pave the way for

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arguments about what constitutes occupation for other classes of ratepayers, notably the domestic. Should we withhold such relief for unused rooms in domestic property? If my son goes off to university should I get a rates reduction?
A more difficult question perhaps is whether this sort of relief is workable in practice. There are two points. The first is the problem of definition and interpretation, to define a separate part sufficiently for this purpose. The other is the problem of enforcement. Once relief had been granted the rating authority would want to be satisfied that the area of property or the item of plant remained genuinely out of use. This is a matter of guarding against tax evasion, and in practice might be very difficult to enforce. Imagine trying to keep a check on some kinds of factory or plant, or office space, or facilities in shops and warehouses that might be made use of one day but not the next. it might also be costly to maintain adequate inspection. Thirdly, there are the effects on industry or commerce. Such a concession may, for many kinds of firm, introduce a new tax factor in calculations about whether to cut back production, whether to resume higher production, whether to use all parts of the plant efficiently. Rate relief for mothballing could thus have an unhappy distorting effect on decision taking, as any breach of taxation principle might do.
Finally, there is the important question: Who would pay for the relief? If relief were given for under-use of premises or plant there would be a loss of rate revenue for authorities. We cannot estimate how much because no one can guess how much under-use would be claimed to exist. Perhaps it would be a great deal. The cost would have to be borne either by other ratepayers or by the Exchequer, which means higher taxation centrally.
To sum up, it may be that a strong case for mothballing relief can be argued for particular firms. However, the relief proposed would cover all industry and all commerce. We cannot tell what the cost would be or where it would be borne. We must have some doubts about whether there would be a distorting effect on firms' decisions. More importantly, it would conflict with fundamental principles of rating and make for inconsistency and muddle. But above all, the practical
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difficulties of knowing what constitutes "out of use" and of inspection and enforcement seem to be most formidable. I must reluctantly advise your Lordships to reject the amendment.
In doing so I should like to stress that the Government are far from unsympathetic to the problems of rates on firms that no longer require their premises fully. In this Bill, in Clauses 34 and 35, to which we shall come, we seek to take powers to suspend the surcharge on unused office property and to ameliorate the mainstream provisions of empty property rating. This follows a review of empty rating that has been conducted since the Government came into office. These clauses are, of course, the subject of other amendments on the Marshalled List so I shall not say more about them now, except just to indicate that the Government consider this to be an important matter, but I regret to say that we cannot see our way to supporting this amendment.
11.10 p.m.
Lord HARMAR-NICHOLLS: That argument was the argument of the bureaucrat without any sort of reserve. The principle can be altered if circumstances which justify the alteration of the principle justify it. I should have thought that the fact that so many people who have factories and property have it left empty through no fault of their own is a justification for the alteration of a principle.
The only part that could hold water, if one did not examine it with a little care, is that it would be difficult to administer, but I do not accept that. We have found that the administration of this sort of thing is already in existence. For example, if one walks through customs, there are now two alleys: one where you go if you have nothing to declare, and the other where you go if you have something to declare. But, if you go through the one used for when you have nothing to declare, that does not prevent the customs and excise people examining what you have with you, if they feel that it is worth doing.
I should have thought that if you get an affidavit from any company that is claiming this relief, supported by their accountant, at the end of the day for

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the most part the Inland Revenue accept the accounts submitted by the accountants of a company, and levy their taxes upon that. It is only if they have any doubt that the accountant himself has been misled and the accounts ought to be questioned, that they set about an inquiry and look into the matter. But the number of occasions on which that happens is rare, because if there is a statement of an accountant—someone whose profession is dependent upon their integrity—then I would have thought that that would be sufficient.
So it is within the power of Parliament always to alter the principle if it thinks that the circumstances justify it, and I feel that the circumstances do justify this mothballing suggestion, included in this new clause. As regards the administration part of it, yes, that can be overcome, on the undertaking in an affidavit from the people who are claiming the relief, supported by their accountants or by their lawyer, on both of which spot checks could be done.
The whole of our industrial administration depends upon spot checks. One could always use the bureaucratic argument that safety in the works means that every works must be inspected every day, because somebody may be infringing it. All of these things could not work if one did not have that amount of trust and in discovering by spot checks those who are taking advantage of the trust that is put into it. I believe that this ought to be looked at again. Despite the answer which my noble and learned friend has just given, I think that the circumstances certainly warrant another look at it so that we can see whether or not there are words that could bring about what is fair, despite the slight difficulty that bureaucracy might find arising from it. Perhaps we could do that on Report.
Lord MORRIS: I feel that I must support my noble friend Lord Mottistone and my noble friend Lord HarmarNicholls. I must confess that I was astonished to hear Her Majesty's Government suggest that it would be difficult and expensive to monitor a mothballing arrangement. Just to give one very simple example: any part of a factory or plant that had to be shut down for a short
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period would have need of no lighting, heating or power. It would be the simplest thing in the world for the industrial ratepayer to give evidence when he applied for the electricity in the plant to be turned off and for whom, say, the electricity was to be turned on again. There we have very good evidence indeed which I think even the civil servants might be able to understand and accept as evidence of the fact that the factory is not in use.
Lord MOTTISTONE: I do not know whether my noble and learned friend the Lord Advocate would care to respond to the suggestion of my noble friends Lord Harmar-Nicholls and Lord Morris, and say whether he would be prepared to consider the matter again. He spoke about two threads in my argument; he produced two splendid threads in his argument. In fact, at the beginning of his speech he supported the principle, as indeed he did in his closing remarks. Then he put in this nasty paragraph about bureaucracy which we all know can be argued the other way round if people have the will. Indeed, in my speech I anticipated that there would be a difficulty and said that if there is a will there is a way. Before I go any further, I just wonder whether my noble and learned friend has anything further to say.
Lord MACKAY of CLASHFERN: I was seeking to assert that we indeed have the will, but unfortunately have not been able to find the way. I think that it is fair to remind your Lordships that a similar amendment was proposed during the Committee stage on this Bill in another place, and my right honourable friend the Minister for Local Government and Environmental Services advised against the amendment. That was some time ago and I think that the matter has been fairly fully considered. Therefore, I do not think that I could encourage my noble friend to feel that there is much likely to come out of any further consideration of the matter.
Lord MOTTISTONE: Notwithstanding my noble and learned friend's remarks now, I did detect a chink in his armour in his earlier statement, and I think that further study of the Official Report will help me towards an amendment at a later stage. With that thought, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 27 [Payment by instalments]:
11.18 p.m.
Lord MOTTISTONE Lord MOTTISTONE moved Amendment No. 63:
Page 27, leave out lines 37 to 40 and insert—(" (5) This section shall extend to all hereditament).").
The noble Lord said: I apologise for having all my amendments on the run; it is pure chance. The purpose of this amendment is to extend the right of domestic ratepayers to pay rates by instalments—indeed, we understand the Government propose to extend it to very small firms—to all businesses. We understand that the Government's intention is to limit the right to business properties with a rateable value of £2,000 or less. This will only help very small firms and shops. Indeed, it is not very different from helping domestic ratepayers.
It has been argued that if this principle, within the terms of the amendment, is adopted abruptly, it would disrupt in a very large way the cash flow situation of the local authorities. Having observed from an earlier amendment what a large proportion of their income is paid for by unrepresented business interests, I believe that is probably the case. However—and here I suspect that I may be up against the bureaucracy again—it is surely possible to introduce such a principle by stages and for the local authorities to adjust control of their cash flow to meet the new situation as and when it is introduced. I should have thought that any competent administrators—perhaps the Government do not consider that their immediate servants in local or central Government are competent administrators—should be able to surmount this particular problem. I beg to move.
Lord MACKAY of CLASHFERN: As my noble friend has said, we propose to extend this to business ratepayers subject to a minimum and maximum sum to be specified by order. The next amendment, which I shall move, seeks to give power to prescribe different sums for Greater London than for other places, for reasons which will perhaps be obvious. The intention is that a suitable general maximum sum would be £2,000 of rateable value, as my noble friend has said. That
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would be for a hereditainent outside London. The proposal in relation to London, if the amendment which I shall next speak to is acceptable to your Lordships, would be £5,000. So far as minima are concerned, a minimum of £100 appears appropriate both for London and for the generality of the country.
If one takes these figures of £2,000 elsewhere and £5,000 in London, I understand that our proposals would cover about 85 per cent. of non-domestic properties and thus give widespread benefit. At the same time they would cover only about 30 per cent. of non-domestic rateable value and thus be restrained in their impact on local authority income. We estimate that the cost to local authorities would be around £15 million in additional interest costs whereas, for instance, a limit of, say, £5,000 outside London would substantially increase interest costs arising from cash flow difficulties by introducing a further 15 per cent. of total rateable value at a gain of only 9 per cent. more property. So that as you go up you get a smaller return by way of proportion of properties but a much higher cost.
We believe that having minima and maxima of the kind that I have suggested gets a reasonable balance and extends this relief fairly generally in business. In our view it is necessary to balance much needed help to the business sector against the very real risk of damage to local authorities' cash flow. I perhaps ought to say that we consider that there is available both to central and to local government very competent administration, and that these figures are based upon what a competent administration would do in the way of handling this matter. Nevertheless, I believe that the limits which we have in mind which enable some 85 per cent. of non-domestic properties to qualify are sufficiently high to be of genuine assistance to the large majority of small businesses. Accordingly, in the light of these explanations, I hope that my noble friend will feel that the Government have gone as far as it is reasonably practicable to go in this direction, and that he will feel able to withdraw his amendment.
Lord MOTTISTONE: It is, again, am afraid, a rather disappointing answer. It would seem to me, as my noble and

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learned friend said, that the small businesses are well looked after, and for that of course we must be grateful in every possible way. But the cash flow problems that might accrue to local authorities who, on the whole, are there to provide a service for the rest of us, should be subordinated to the wealth-creating companies, which are the large companies, who also have cash flow problems of their own. The fact that the local authorities' interests are taken first seems to me to be the opposite way round to what it should be, and that the concentration should be on doing everything possible to help the wealth-creating interests or industries and to subordinate all the administration, including ourselves, to that main purpose. I find this disappointing. I do not think that I have the support of the Committee. With that in mind, I shall have to study carefully what has been said to see whether we can find another way of tackling the problem. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
11.25 p.m.
Lord MACKAY of CLASHFERN Lord MACKAY of CLASHFERN moved Amendment No. 64:
Page 28, line 4, at end insert—
(" (7) The power to prescribe sums conferred by this section includes power to prescribe larger sums in relation to hereditaments in Greater London than in relation to hereditaments elsewhere.").
The noble and learned Lord said: As I explained earlier, the purpose of Clause 27 is to extend to the occupiers of certain non-domestic property the right to elect to pay rates by instalments, which is currently enjoyed only by the occupiers of dwelling-houses. This right would be limited to property with a rateable value between minimum and maximum limits specified by order. The amendment seeks to make the necessary provision for any order to be able to prescribe higher limits for property in Greater London than elsewhere. This is desirable because evidence shows that the average non-domestic rateable value in Greater London in 1979 is more than double that outside. Accordingly, in order to get reasonable parity as between Greater London and elsewhere, this provision is necessary. I beg to move.
Clause 27, as amended, agreed to.
Clauses 28 to 33 agreed to.
Baroness STEDMAN Baroness STEDMAN moved Amendment No. 65:
After Clause 33, insert the following new clause:
"Abolition of rating surcharge on unused office etc. property
(.—(1) Subject to subsection (2) below, sections 17A and 17B of the 1967 Act (rating surcharge on unused office etc. property) shall cease to have effect on 1st April 1981, and accordingly no person shall be liable to pay any surcharge under the said section 17A in respect of any period after 31st March 1981.
(2) Subsection (1) above shall not affect—

(a) any liability for a surcharge in respect of any period before 1st April 1981; or

(b) any offence under section 82, as applied by section 17B(1), of the 1967 Act committed before that date.").

The noble Baroness said: I will not detain the Committee for long, and this is a probing amendment at this stage. We are concerned that the rating surcharge provisions of the Local Government Act 1974 are not operating as envisaged when the legislation was introduced, and despite subsequent modification, we still do not think they work as well as they might do. The main argument is that the local authorities have to carry out considerable work in identifying the properties where surcharge may be due, but in most cases the occupier can then show that the surcharge should not be levied either on the grounds of hardship because he is trying to sell or let the property or that he is adapting the property to make it suitable for some other use than that for which it was originally intended. The result is that the administrative costs of collecting the surcharge are proving to be very high. The Association of Metropolitan Associations carried out a survey recently which showed that the administrative costs were nearly the same as the amount they eventually collected.
The provisions to levy rates on the empty properties under Section 17 of the General Rate Act 1967 are capable of being used in a way that takes better account of the needs and problems of the local authority area. I recognise that in Clause 34 of the Bill as drafted the Government have introduced a power for the Secretary of State to suspend the

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rating surcharge provisions by order. That is certainly better than nothing and we welcome it, but I hope the Minister will consider the points I have raised and perhaps take this back, and if any useful purpose will be served in tabling it at the next stage, I shall be happy to oblige him. I beg to move.
The MINISTER of STATE, MINISTRY of AGRICULTURE, FISHERIES and FOOD (Earl Ferrers): I am grateful to the noble Baroness for having explained the purpose of the amendment. She was correct in saying that the Government have taken powers in Clause 34 to do virtually what she wishes, and of course the purpose of Clause 34 is to enable the Secretary of State to suspend the progressive surcharge provisions by order. The Government intend using this power straight away and it is proposed that it will take effect from 1st April 1981. Provision for the liability to surcharge to be reintroduced by a further order is included in the clause simply because there may be justification for it to be reintroduced by changed property market conditions in the future, and of course that would not be the case if the amendment were accepted. It seems to the Government that there could be times when conditions in the commercial property market might encourage a degree of undesirable speculation, especially in office building. For that reason it is preferable to keep the surcharge powers on the statute book, so they could be reintroduced by order if necessary. I accept the conditions attached to the proposed abolition in the amendment which seek to ensure continued liability in respect of any surcharge levied before the suspension order comes into force. I can tell the noble Baroness that the Government intend to include in the order the necessary provisions to achieve this effect. I hope that will satisfy the noble Baroness.
Baroness STEDMAN: I am most grateful to the noble Earl, and in the circumstances I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 34 [Suspension of provision for liability to progressive surcharge in respect of unused office etc. property]:
[Amendments Nos. 66 and 67 not nioved.]
Clause 34 agreed to.
Clause 35 [Rating of unoccupied property]:
The DEPUTY CHAIRMAN of COMMITTEES (Lord Alport): There is a manuscript amendment, No. 67A.
Lord IRVING of DARTFORD: There are two related amendments, Nos. 68 and 69. I think you have had submitted to you a manuscript amendment on the same clause. If you would be kind enough to call it I should be happy to discuss the three together.
The DEPUTY CHAIRMAN of COMMITTEES: I have called No. 67A, which is the manuscript amendment.
Lord IRVING of DARTFORD: Would it be appropriate and convenient if I discussed the three Amendments together? Thank you very much. I beg to move Amendment No. 67A:
Page 32, line 35, leave out subsections (2) and (3).
This is a new clause introduced by the Government. If enacted it would increase the Secretary of State's power to prescribe how empty property rate provisions of the General Rate Act 1967 may be used. The 1967 Act provides that a local authority may not levy empty property rate until a property has been empty for three months. After that period has elapsed the authority may levy an empty property rate as it considers appropriate. Subsections (2) and (3) would enable the Secretary of State to vary the time for which a property may remain empty before a local authority may levy property rate and would enable the Secretary of State to set different time limits for different classes of property. Subsections (4), (2F) and (2H), would further increase the Secretary of State's power to prescribe what proportion of a general rate might he levied as an empty property rate and to vary the proportions which might be levied on different classes of authority.
Some of the local authority associations have argued that individual local authorities are in a better position than central Government to determine the needs and problems of their areas. This is as true

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of the use or non-use of empty property rate as it is in respect of the services they undertake. The Secretary of State has indicated in his press hand-out of 15th May that he intends to use these powers. We consider this to be yet another unwarranted erosion of local government autonomy which ought to be resisted. I beg to move.
Earl FERRERS: This amendment seeks to achieve the purpose of the noble Baroness's earlier proposed new clause, which is to abolish completely the surcharge on unoccupied commercial property. As I said during the discussion on that amendment, we believe that it is better to leave the Secretary of State with a power to revive the surcharge if, in the light of changing economic circumstances, this seems desirable. For example, if there were a recurrence of the property boom, with a lot of speculation in empty office property, the surcharge might have a part to play. With regard to the other amendments to which the noble Lord spoke at the same time, I am bound to tell him that it is the Government's intention to use the order-making power in the sub-paragraph which his amendment seeks to delete to reduce at the earliest opportunity the maximum level of empty property rate which may be levied to 50 per cent. of ordinary rates on business premises.
The power to vary this level is also essential if the Government are to maintain the necessary flexibility in their approach to changing circumstances ill both the domestic and the non-domestic sectors. It is not the Government's intention to use the order-making power to reduce the maximum level of empty property rate in the domestic sector at the present time. But clearly the use of this power to reduce the maximum level at which rating authorities may levy empty property rates has got implications for local government finance.
I should like to make it clear to your Lordships—and I think that it will satisfy the noble Lord—that the Government intend to compensate local authorities for the loss of income which will result from a reduction of the maximum level of empty property rate to 50 per cent. of ordinary rates. This will be achieved by an adjustment to the rateable value base used in calculating rate support grant
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entitlements. It will involve compensating all local authorities that receive block grant—and only a handful will not—whether or not they currently levy empty property rate by prescribing that the rateable value of empty non-domestic hereditaments shall be treated for grant purposes as having 50 per cent. of its value in the local valuation lists. This will take effect from 1st April 1981. I hope that for those reasons the noble Lord will not seek to press his particular amendments.
Lord IRVING of DARTFORD: I am grateful to the noble Earl for his answer. I think he will appreciate that these points are very complicated matters and we should like time to consider them between now and Report stage. In the meantime, I am happy to beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 68 and 69 not moved.]
11.37 p.m.
Earl FERRERS Earl FERRERS moved Amendment No. 70:
Page 34, line 37, leave out paragraph (1)) and insert—
(" (b) such notice as is mentioned in subparagraph (2) below is given by the charity or, as the case may be, the trustees ").
The noble Earl said: I should like to speak to Amendments Nos. 70, 7l, 72 and 73 together. These are four technical amendments that are necessary to correct flaws in the present drafting of Clause 35. Clause 35 is concerned with the rating of empty property, and, in general, it provides powers for the Secretary of State to vary certain provisions of empty property rating. My right honourable friend the Minister for Local Government and Environmental Services explained, when he introduced the clause in another place, that the Secretary of State proposed to use the new powers to reduce the maximum rate poundage that local authorities could levy on empty commercial and industrial property to 50 per cent. of the general rate poundage.
Properties that are occupied by charities or by trustees for charities and that are used for charitable purposes are given rate relief of at least 50 per cent of the rates due. An unoccupied property that is newly acquired by a charity does not, however,

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attract rate relief. Conversely, a property that is acquired by a commercial firm will continue to attract charitable relief on empty property rates until it becomes occupied. The clause seeks to remove these anomalies.
The flaw in the drafting is that the clause makes references sometimes to charities, sometimes to trustees, and sometimes to both. This discrepancy makes the clause inoperable in some parts and anomalous in others. These four amendments seek to correct that omission. I beg to move Amendment No. 70.
Earl FERRERS Earl FERRERS moved Amendment No. 71:
Page 34, line 41, leave out (" charitable purposes (whether of the charity which owns it or of that and ") and insert (" the purposes of the charity or for the purposes of the charity and of ").
Earl FERRERS Earl FERRERS moved Amendment No. 72:
Page 35, line 4, leave out (" trustees became the owners of the hereditament") and insert ("hereditament was acquired by the charity or by trustees for it").
Earl FERRERS Earl FERRERS moved Amendment No. 73:
Page 35, line 10, leave out from (" paragraph ") to end of line 12 and insert—

("(a) if the hereditament ceases to be owned by the charity or by trustees for it; or

(b) if it continues to be owned by the charity or by trustees for it, but it ceases to be the intention of the charity or, as the case may be, the trustees, that it shall be used as mentioned in sub-paragraph (2) above.").

On Question, Whether Clause 35, as amended, shall stand part of the Bill?
Lord MONSON: Before we leave Clause 35, may I ask the noble Earl, Lord Ferrers, precisely why the Government do not intend to use the powers conferred upon them by Clause 35 to vary by order the maximum level of the empty property rate and the length of the initial free period of three months in so far as domestic property is concerned. It seems extremely unfair on householders
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that they should not be getting this relief, or that the Government do not propose to give them this relief, whereas they intend to do so as far as business properties are concerned. Three months is an awfully short period. If a landlord intends to improve his property, it is normally quite impossible to prepare plans, specifications and estimates, and to obtain approval for the grant, within a period of three months, let alone get the work done and have the property occupied again. Could the noble Earl possibly give some explanation of the Government's motives in not intending to extend this relief to domestic property owners?
Earl FERRERS: I absolutely understand the reasons which concern the noble Lord, Lord Monson, and I think that anyone would have a great deal of sympathy with what he has said. But he will appreciate that the Government recently published a report on the vacant property survey which provides certain information on the amount and the condition of vacant property in England. This report found that a considerable number of properties were empty because private owners had been deterred, at least in part, from reletting by the effects of the Rent Acts; and in our Housing Act, this Session, we have introduced a number of initiatives, most notably the provision for shorthold tenancies, in order to encourage such people to bring their vacant accommodation back into use. The survey also found that 62 per cent. of empty properties were built before 1919, and our proposals for promoting home-ownership at low cost, such as the support lending scheme and statutory backing for schemes such as the GLC homesteading one, will, we think, make it easier for owners of older property to find purchasers. Prospective buyers of properties in poor condition will also be helped by our proposals in the Housing Act to make the house renovation grant scheme more attractive and flexible.
So, with all these new measures to give positive help to owners to bring problem categories of empty housing into use—in other words, what one might describe as the carrot—it would be inconsistent and, I would suggest, contrary to remove the stimulus of empty property rating, which really might be described as the stick. Under this clause in the Bill we retain

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the right to alter the domestic rating and to lower it if that is required, but for the reasons which I have given we feel that at the moment it would be inappropriate.
Lord MONSON: I am grateful to the noble Earl for that explanation. I am not entirely happy with it, but I should like to think about it again between now and the next stage.
Clause 35, as amended, agreed to.
11.43 p.m.
Lord MOTTISTONE Lord MOTTISTONE moved Amendment No. 74:
After Clause 35, insert the following new clause:
"Abolition of the ratiny, of empty business properties.
(".—(1) In subsection (1) of section 17 of the 1967 Act there shall be inserted at the beginning the words "Subject to subsection (1A) below".
(2) In section 17 of the 1967 Act there shall be inserted the following subsection after subsection (1)—
"(1A) This section shall not apply in respect of either

(a) hereditaments which have been and remain constructed or adapted for use as factories, mills or other premises of a similar character for use wholly or mainly for industrial purposes; or

(b) hereditaments (not comprising one or more dwelling-houses or having a floor space not exceeding 240 square feet and used as a lock-up garage) whose net value falls to be determined under section 19(2) of this Act.".")

The noble Lord said: At the present time of recession and very depressed profitability, as I referred to earlier in relation to other amendments, the practice of many local authorities charging rates on empty industrial and commercial properties is causing particularly severe problems. In extreme cases buildings have been deliberately vandalised to reduce the rate burden, which is pretty disgraceful. The present provisions relating to the empty property rate are complex and take up a great deal of administrative time for both ratepayers and rating authorities. In this respect, the smaller firms are at a particular disadvantage. Whether or not a local authority levies an empty property rate is one of the factors taken into account by potential developers. A number of cases have been publicised, and are known to the Government,
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where companies have been forced to pay rates on empty properties which they have tried but have been unable to sell. An example of this is the British Leyland comnlex at Speke, in Liverpool.
My right honourable friend the Minister for Local Government and Environmental Services has announced that the Government will restrict the empty rate on business properties that rating authorities can charge to a maximum of 50 per cent. of the full rate. This is helpful, but it really does not go far enough because the sums of money involved can be quite considerable. If you imagine the British Leyland complex at Speke, even 50 per cent. of its rateable value is an extremely high sum indeed. It is because of these considerations that we should like to see the right of rating authorities to levy empty property rate on industrial and commercial buildings abolished altogether. I beg to move.
Lord IRVING of DARTFORD: The new clause seeks to remove the right of individual local authorities to levy empty property rate on business premises. Section 17 of the 1967 Act is capable of being used very sensitively—and I know that this is not the view which the noble Lord takes; but it is true—having, regard to the economic and other conditions in their areas. For example, it means that empty property rate may be levied on properties within one or more geographical areas of a rating authority and applied only to properties of a type or size specified by the authority. The Act as it stands is better able to cope with varying conditions than this blanket amendment to remove all rights to levy empty property rates on business property. In a buoyant economy, the amendment would enable property owners to leave property empty while awaiting an increase in the rental value without any liability to pay rates. In a depressed economy, local authorities are as aware of the problems as anyone else.
Earl FERRERS: I can understand my noble friend's desire to see empty property totally derated. It is almost the same argument as the noble Lord, Lord Monson, had earlier about derating domestic property. There are three strong arguments against this. First, to remove the requirement for owners of

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empty property to make a contribution would cause a loss of income to local authorities of around £55 million a year. This is some £35 million more than the loss from our own proposals to reduce empty property rates to a maximum of 50 per cent. on business properties. This would be a substantial inroad into local authorities' funds. Secondly, total abolition of rates on empty property would mean that owners would pay nothing towards local authority services, from which they benefit along with those who have premises which are occupied. I am thinking here of police and fire services, for example. There are few owners of empty property who would sleep happily if they felt that they could not call on these services in an emergency. Thirdly, empty property rating is a lever, although perhaps not a very agreeable one, to discourage owners from holding property empty and unsold in the hope of future speculative gain, which is the point Lord Irving made. The significance of this lever obviously varies from year to year with changes in the market. It would not be consistent with the need to have flexible powers in this area, therefore, to abandon completely the provision for the rating of empty property.
I suggest that our approach in the Bill seems far preferable. Clause 35 provides for flexibility in the light of changing circumstances and orders can be made from time to time to vary the provisions as appropriate. We have promised, for example, that the problems of empty property rating in both the domestic and the non-domestic sector will be kept under review. I hope my noble friend will not feel moved to press his amendment.
Lord MOTTISTONE: I find my noble friend's arguments rather more persuasive than those of his colleagues earlier in the evening. The point about my amendment is that it would be effective for all time. Clearly, the country will prosper one day as long as this Government remain in power. We can look forward to an occasion when the last remarks of my noble friend will be relevant to the situation. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
11.48 p.m.
Lord MONSON Lord MONSON moved Amendment No. 75:
After Clause 35, insert the following new clause:
"Rates not to be increased above 1979 levels in real terms, except with Parliamentary approval
(. After section 3 of the 1967 Act insert the following new section:—
3A.—(1) Save as hereinafter provided, no rating authority shall, after 31st December 1980, have power to make or levy a rate higher than that sufficient to ensure that the total rates receivable by that authority in that year exceed the total rates received by the same authority in the year 1979 by a percentage identical to the percentage rise in the Retail Price index during the intervening period.
(2) The Secretary of State may by order permit a greater increase in the rate which can be made and levied than that provided for under subsection (1) above.
(3) An order under this section shall he laid before the Commons House of Parliament and shall not have effect until approved by a resolution of that House." ").
The noble Lord said: I beg to move Amendment No. 75. The purpose of this amendment is to prevent rating authorities raising rates above 1979 levels in real terms (as opposed to raising them in monetary terms) without the consent of Parliament or, to be more specific, the consent of the House of Commons. Since, effectively, potential increases in taxation might be involved if this amendment were to be accepted, it seems proper that the Commons alone should decide the matter rather than both Houses of Parliament. To forestall the criticism which I expect will be forthcoming, I should say that this amendment was drafted entirely by me, apart from subsection (3). I do not doubt that there are many technical defects in the amendment as drafted but, provided the general principle is accepted, these defects can be remedied between now and the next stage of the Bill.
At Second Reading I tried to extol the merits of a possible amendment along these lines. The noble Lord, Lord Bellwin, replying for the Government, implied that such a suggestion was not only extremely radical but almost unthinkable. In the absence of support from any other quarter of the House, I wondered whether it was worth proceeding any further. However, it then became evident that the tide of

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public indignation against rate increases so large as to greatly outstrip people's net earnings (or the earnings of those who were actually liable to pay rates in full) was running extremely strongly. This popular indignation was manifested in leading articles in the press. For instance, that in the Daily Express of 19th September which asserted that there is a strong case for Government taking direct power to limit rate increases: What is the point of us losing as ratepayers what we stand to gain as taxpayers? On the same day the Evening News called upon Mr. Heseltine to ask Parliament speedily for the final weapon to impose economic sense on the determined spendthrifts.
This theme was taken up by several other newspapers. The Daily Telegraph went so far as to suggest that if profligate local authorities did not mend their ways, their function should be taken over entirely by central Government. The Economist of 4th October wrote:
"The other big defect of Mr. Heseltine's new Bill is while it limits Exchequer grants, it does not limit local taxation or expenditure".
So it became evident that some sort of new clause on these lines would be, after all, generally welcomed by the country at large.
Now to explain the amendment rather more fully: at Second Reading I suggested that rate rises might be allowed to exceed inflation by 20 per cent. or thereabouts. For example, a rise in the cost of living index of 17½per cent. in a previous year would permit a maximum rate increase of 21 per cent. On reflection, this seemed over-permissive: indeed, a senior Conservative with whom I consulted certainly thought so. The amendment in the Marshalled List tonight permits an increase in line with the rise in the cost of living index, but no higher, in the normal course of events. To counter-balance this, a degree of flexibility has been introduced by subsections (2) and (3) which would permit the Secretary of State to override this limitation if the circumstances seemed appropriate, subject to the approval of the House of Commons.
I can anticipate three main objections to this amendment. At Second Reading, the noble Lord, Lord Bellwin, suggested that any such proposal would impose unprecedented shackles upon local government. I suggest this is not the case.
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Local authorities would enjoy almost exactly the same freedom in decision-making as they do now, the only restriction being a limitation on the ability of local authorities to extract a greater sum in real terms from the ratepayers in order to implement their policies than they do at present. This is hardly very onerous.
The second objection—which will come mainly from Conservatives—is that the block grant proposals will do the trick and that my amendment is superfluous. In the words of the press: the Government will punish over-spending councils. I certainly concede that the block grant system is an improvement on the present system, but not much of an improvement. The people the Government will be punishing will not be the over-spending councils but their unfortunate ratepayers unless the constituency is a very marginal one. In cases where only a small minority actually pay rates in full and where the party that holds power has an unassailable majority, Mr. Heseltine's punishment will fall entirely upon the backs of the ratepayers.
The same answer can be given to those who object on the third ground, who will be mainly opposition supporters who oppose the block grant and who claim that the existing system is quite adequate to prevent local authority extravagance. Mr. Roy Hattersley said the other day that if local government electors felt really strongly about their councils high level of spending, they could always kick these councillors out at the next election.
I tried to point out on Second Reading the fallacy of this argument, and why local government elections could not be compared to general elections in this way. I was glad to have my views reinforced only yesterday by two gentlemen who speak with great authority. I quote:
"More and more people, especially in the more extravagent authorities, are shielded from the full horror of rates. Industry and commerce pay through the nose whenever they can be trapped, as do houseowners who are above the rebate standard".
So wrote the right honourable Member for Orkney and Shetland, Mr. Jo Grimond in the Spectator. Sir Horace Cutler, leader of the Greater London Council, wrote in the Financial Times yesterday of the growing feeling of resentment on the part of that proportion of the population which pays domestic rates against that

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proportion which does not. He went on to point out that in the Greater London area electors who do not pay rates exceed those who do, and that is why so many wildcat schemes, such as the idea of free travel on London Transport, can gain acceptance. Most of the electors have nothing to lose and that is why such proposals are suggested.
I should not want it to be thought that I am concerned only with the direct burdens being imposed on ratepayers, whether business or domestic, important and proper though it is to mitigate these burdens. The indirect consequences of failing to act would be almost as worrying. Whatever our individual political sentiments, we are surely united in wanting this Government to succeed in bringing down both inflation and unemployment. Yet if the few extravagant local authorities are simply allowed to push the entire burden on to the ratepayers, both inflation and recession will be stimulated—inflation because those who pay rates will press for higher wages and salaries to meet their rate bills; recession because shops, offices, warehouses and factories, all part of productive industry in the areas concerned, will close down and be obliged to dismiss their workers if rates become too burdensome.
I am sure that the overall purpose of this amendment will meet with broad public approval. I hope that the Committee will give it serious consideration and I should welcome any suggestions for improving it. I beg to move.
11.57 p.m.
Lord ELLENBOROUGH: I support my noble friend Lord Monson—
Lord DENHAM: The noble Lord.
Lord ELLENBOROUGH: He and I agree on so many things that I think "noble friend" is hardly out of order. But I support the noble Lord, Lord Monson, because this clause has very considerable merit. It is in no way an answer to the rating problem, but it is, at least, an interim measure, an additional safeguard, for hard-pressed ratepayers on whose behalf I feel strongly, because I happen to be president of the National Union of Ratepayers' Associations which
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has some 200 associations up and down the country.
I feel that this clause is simple and fair. It is easily understood. It is not a substitute for the complicated block grant proposals, which may be fine in principle but which, I fear, may be unfair in practice, and about which I know many ratepayers' associations will remain very worried, unless and until the Minister can give satisfactory reassurances and can clarify the position, which of course it is hoped in due course he can do.
One reason in favour of this clause is that the worst aspect of the proposed arrangements regarding the block grant is that, in the final analysis, there still will be no protection for the ratepayers. This is because, whatever financial penalties are imposed on the most monstrous, reckless and extravagant councils, they will still be able to raise additional monies by supplementary rate demands. In such cases, local ratepayers, particularly domestic ratepayers, will suffer an even greater and inequitable burden. Of course, the really spendthrift councils who abuse the system will receive a lot of bad publicity, but I doubt whether irresponsible people like Mr. Ted Knight, the Labour leader of Lambeth Council, is really going to give a damn that rates fall unequally on the population and that income earners who are not householders pay no rates. Such is the way of local elections, with turn-outs of 30 per cent., and sometimes much less than that, a large proportion of those voting not even being ratepayers—and it is always national and not local issues which determine the result when the time comes—that I very much suspect that the Mr. Ted Knights of this world will still be running Lambeth Council.
Even without any additional burdens, many ratepayers are having this year to carry impossibly heavy burdens because, under the existing rate system, the amounts that they pay bear no relation to their incomes. It is increasingly detrimental to those who are wholly dependent on hard-earned life savings, the purchasing power of which has been eroded by escalating inflation in recent years. Despite promises by successive Governments, so far no practical steps have been taken to ease the unfair burden of rates on retired people living largely on fixed

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incomes who are just outside the limits of the rate rebate scheme.
Finally, I find it depressing that the Bill makes no mention of rating reform. It does not recognise the fundamantal flaw in the present rating system, in that too little revenue is drawn from too few electors, and that sooner rather than later means must be found to spread some or all of the rates burden from householders and commercial and industrial property holders to everybody who is able to pay. For those reasons, I feel that the noble Lord's clause has considerable merit and I should like to support it.
Lord BELLWIN: I readily acknowledge the strong and growing concern that there is against punitive rates which some councils are imposing, but I must advise your Lordships not to accept this new clause. Although at first sight it may appear to have some attraction, a closer inspection shows the clause to be undesirable and possibly likely to have the opposite effect from that intended. It would certainly have significant implications for local democratic responsibility for determining levels of expenditure and the tax burden that must be imposed to finance it.
There are some possibly fatal flaws in this proposition. To begin with, would not a ceiling become a national norm? We have all seen what happens with pay norms in incomes policies when they tend to become pay minima. A ceiling on rates of the kind proposed would be interpreted by some local authorities as a recommendation, and we could actually see authorities rating up to the 1979 level where otherwise they might have rated lower.
This effect is likely to be strengthened by the knowledge that in the following year the discipline would be repeated. Treasurers would advise their councils to stoke up balances to guard against any shortfall in income in the next year or the year after. Worse still, a ceiling would be discriminatory and would penalise all those authorities that in 1979 had low rate poundages, while favouring any that rated highly in that year. And this discrimination would continue indefinitely, for year after year. This is not to say
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that we are not deeply concerned about the overall level of local government expenditure. No one following the press this year could accuse us of that. But we believe authorities should retain discretion and remain accountable locally for spending and rating decisions.
Block grant, plus full information to ratepayers, should together bring a new dimension to the local taxation issue because it will highlight and focus on what local councils are doing. Let me advise your Lordships to have confidence in that and to give it a chance without resorting to the severe step of central Government taking over the rate-making of local government, because that would be the effect of this amendment. I could speak at some length on this and, in other circumstances, would dearly love to do so, but I hardly think that this is the appropriate moment and I hope it will be felt that the points I have made may encourage the noble Lord to withdraw his amendment.
Lord MONSON: I readily acknowledge that the amendment as drafted has flaws, but I do not accept that they are fatal flaws. I take some of the points made by the noble Lord, but I think he has overlooked subsections (2) and (3) which introduce that degree of flexibility which would enable some of the difficulties to be overcome in practice. The fatal flaw in the Government's argument is the noble Lord's mention of democratic control, because where there is a situation where most of the electors in a given local authority area do not pay any rates, or pay rates which are so heavily subsidised as to be negligible, in practice you do not get that control in a fair way. Of course, I would not think of pressing the amendment tonight, but I want to take it back and look at it again before the next stage. At the moment, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 36 [Clerks of local valuation panels]:
On Question, Whether Clause 36 shall stand part of the Bill?
12.6 a.m.
Lord PONSONBY of SHULBREDE: At this hour I intend to be very brief.

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This clause enables the Secretary of State to impose on any two or more local valuation panels a clerk of his choice who is not their choice. The present provision is that every local valuation panel appoints its own clerk, and these provisions have been operating satisfactorily since 1949 and joint staffing arrangements have been agreed for a number of valuation panels by arrangement. The effect of this clause could be to undermine the independence of local valuation panels and that could be against the interests of justice. It is essential that a local valuation panel or court must have complete confidence in their clerk, and that could be lacking if the appointment of the clerk were to be made by the Secretary of State.
It is impracticable to provide that a joint clerk be appointed without the cooperation of the panelsconcerned and in my view this provision should not be made. Valuation panels have shown that they can work by agreement and there seems to be no reason for amending the present law.
Earl FERRERS: I will deal with this as quickly as I can. All I will say to the noble Lord, Lord Ponsonby, is that there is a severe problem for the organisation of rating panels because the nature of the work is cyclical owing to the revaluation of rates which takes place every so often. Then there is a great bulge after a general revaluation, falling off to a much lower level in between. Because of the cancellation of the 1982 revaluation the workload of the service is currently at a low level and there is no prospect of it picking up significantly in the next two years. The panels and the Department of the Environment are looking for staff saving and economies and in some cases that can be achieved within an individual panel; but with a small service—and in this service there are only 227 staff in the whole country—that is not always possible and in some cases mergers of offices and staff between neighbouring panels can provide a better answer.
The proposal in this Bill is that these mergers should come about if necessary and I can only give the assurance to the noble Lord, Lord Ponsonby, that the clause would only be used as a last resort and only after full discussion and persuasion had been attempted first. I hope that will satisfy the noble Lord as to the reasons for the inclusion of this part in
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the Bill, although the expression on the noble Lord's face does not lead me to believe that he is satisfied. If he wishes me to go into greater detail I shall be quite happy to do so.
Lord MOTTISTONE Lord MOTTISTONE moved Amendment No. 76:
After Clause 36, insert the following new clause:
"Removal of local authorities' rights to be a party to valuation appeals for their own properties.
(".—(1) In section 69 of the 1967 Act (proposals for alteration of current valuation list)—

(a) in subsection (1) for the words "including a rating authority" there shall be substituted the words "not being a rating authority unless it is the occupier or tenant of the hereditament in question";

(b) subsection (3) shall be deleted.

(2) In section 70 of the 1967 Act (provision for objections to proposals)—

(a) in subsection (1) paragraph (b) shall be deleted;

(b) in subsection (2) the words "or the rating authority for the area in which the hereditament is situated" and the words "or, in the case of the rating authority (where they are not the occupier) on the rating authority" shall be deleted.

(3) (a) In section 72 of the 1967 Act (agreed alterations after proposals) paragraph (e) shall cease to have effect.
(b) This subsection has effect in relation to proposals made after the passing of this Act.
(4) In section 76 of the 1967 Act (appeals to local valuation courts against objections to proposals) paragraph (d) of subsection (4) shall be deleted.").
The noble Lord said: With the permission of the Committee, I would speak also to Amendment No. 316. It gives me great pleasure to take your Lordships practically right to the end of the Marshalled List. Where a proposal is made to alter the valuation list a procedure is laid down under Sections 70 to 78 of the 1967 General Rate Act for determining whether the proposal should be accepted. As an initial step in that procedure the valuation officer gives notice of the proposal to various interested parties. Those parties then have the right to object to the proposal. Where there has been an objection, or if there is no objection but the valuation officer does not consider the proposal to be well-founded, the matter can be resolved by agreement before it goes to the local valuation court. Section 72 of the General Rate Act 1967 provides for this agreement. Subsection (2)

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of Section 72 lists the persons whose agreement must be obtained before the matter can be resolved in this way. Under subsection (2) the rating authority's agreement must always be obtained, whether or not it made the original proposal and whether or not it lodged an objection to the proposal, and that point is the nub of the amendment.
The rating authority's overriding right to be included in any agreement under Section 72 is a relic of the days before 1948 when the authority actually prepared the valuation list itself. The authority now has no powers to inspect the property or to determine its value. We therefore believe it should not have the power to block an agreement between the valuation officer and the other parties concerned, both of whom will have inspected the property and valued it professionally.
The amendment would not affect the rating authority's rights if it has made the proposal or has made a formal objection to the proposal, or it is the owner of the property concerned. The whole matter has been highlighted recently by appeals concerning oil refineries at Ellesmere Port which have been to the Court of Appeal on a preliminary point of law and are now referred back to the Lands Tribunal to be heard in detail. The eventual cost of these proceedings will be very substantial for all parties, regardless of the eventual outcome. The valuation officer is now the duly appointed person who is under a statutory duty to prepare and defend the valuation list. As a result of the present rights given to local authorities there is needless duplication of effort which in extreme cases, as instanced above, results in inordinate expenditure of public and private money in contesting appeals before the courts. I beg to move.
Earl FERRERS: My noble friend wants to remove the rights of a rating authority to be involved with proposals to alter various rates on properties. I suppose that rating authorities can add to the delays and costs of valuation proceedings, but I am sure it does not happen a great deal. I know a few cases where rating authority intervention has been greatly resented by ratepayers, and sometimes justly. On the other hand, there is an
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argument which is not often heard but which is, I suggest, quite legitimate, that the rating authority is representing other ratepayers when it intervenes to question or contest a proposed reduction; because reductions in rateable value can in theory add to other ratepayers' rate bills. I say "in theory" because in most areas, after a short delay of about a year, losses in rateable value are usually compensated for by increases in the rate support grant allocation which compensate for differences in rateable value.
The Government have not yet reached a firm view on the balance of arguments here. Your Lordships may like to know that Sir Derek Rayner has been conducting a review of procedures governing valuation lists and the statutory position of rating authorities is being covered in that review. I would not want to reach a premature conclusion about this subject and the Government will want to consult widely on this point and examine the evidence. I am quite sure on reflection my noble friend would not want to reach a premature conclusion either, and in that respect I hope he would not be prompted to take this amendment any further.
Lord MOTTISTONE: It is very tempting, my Lords! Yes, I get a certain amount of reassurance from my noble friend's remarks. Could my noble friend possibly say whether the Government would be able to reach a conclusion before the Bill completes its passage through Parliament, so that we could bring the matter up at a later stage?
Earl FERRERS: My noble friend can certainly bring the matter up at a later stage if he wishes, and then he will be able to discover whether the Government have reached a conclusion by then; but I cannot anticipate that they will have done so.
Lord MOTTISTONE: With that very unsatisfactory closing remark, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clauses 37 to 39 agreed to.
12.16 a.m.
Viscount THURSO Viscount THURSO moved Amendment No. 77:

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After Clause 39, insert the following new clause:
Agricultural premises
(".—(1) In section 26 of the 1967 Act (agricultural premises) in subsection (3) after the word "farming" there shall be inserted the words ",land used for the purposes of fish farming,".
(2) In subsection (4) of that section after the words "market garden" there shall be inserted the words "or fish farm".")
The noble Viscount said: I beg to move Amendment No. 77. At this late hour I shall be as brief as possible and it will probably be for the convenience of the Committee if I speak to Amendments Nos. 77, 78 and 82 together. I am sure that those who support me in moving these amendments will also be as brief as they possibly can. I should also declare an interest in that I am responsible for the management of a salmon hatchery in Scotland, which I hope your Lordships will find entitles me to be knowledgeable on the subject without being unduly interested.
What we are trying to do with these amendments is to put right an anomaly which has become more apparent over the past nine years since the Rating Act 1971 came into force, when the noble Lord, Lord Sandford, speaking in the Second Reading debate pointed out that fish farming was not included in the de-rating proposals which were then being applied to all other forms of intensive farming.
During the past nine years fish farming has developed enormously. It has taken big strides forward in quantity, quality, know-how and so forth. We are now producing in this country some 6,000 tonnes of farmed trout every year as well as salmon, turbot, eels, crayfish, sole, carp and various other forms of fish which are being farmed. We have considerable know-how in this country and yet we are competing with foreign imports—which are increasing the whole time—from competitors on the Continent who are being very well helped and subsidised by the Governments in their own countries. In fact, the imports of trout alone into this country rose by some 40 per cent. in the last year for which we have figures, and clearly the demand is not yet being totally met by the fish farming industry in this country. It is a very high risk business and it is one where we need to do what we can to encourage people
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both to set up and to expand their existing operations.
In moving these amendments, we feel that by bringing fish farming on to the same level as all other forms of farming of livestock, we would be not only putting right an anomaly, but encouraging a very important source of protein food and we would be not only putting right an injustice within the agricultural industry, but we would be doing something which would be of benefit to the public and to the community at large. I beg to move.
The Earl of RADNOR: I should like to support the noble Viscount, Lord Thurso, and at the same time to declare an interest as I am a fish farmer of some size. I shall not cover any of the points which the noble Viscount has covered so eloquently and so well. I am a farmer as well as a fish farmer, and to one who is a farmer it is quite obvious that fish farming is an extension of husbandry; there is no difference at all. It seems quite illogical that just because fish farming has come into being since 1971 it should not be treated in the same way as other facets of the farming industry.
I should like to mention very briefly a few points which, if in the future fish farmers have to pay back rates, might be spoilt, because I believe that fish farming is on this plateau at the moment of about 6,000 tonnes a year. It is a period when they might go forward and make a real contribution to the country's wealth, and if they are rated and things go against them, perhaps they will stay on that plateau or even slip back a little.
The brief points that I should like to make, admitting that it is a small industry, are, first, that the industry employs some people where people have not been employed before, and once more—it may sound a little unfair to say it—it is an industry particularly suitable to the modern educated school leaver and the lively person. Secondly, it has prevented a certain amount of imported fish, although this matter seems to be going wrong at the moment.
Thirdly—and this is a point which I think is worth bearing in mind—it uses up land which, on the whole, is not very profitably used for other purposes. There is one final point that I should like to

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make to your Lordships, because I do not know a great deal about industry outside the country. However, so far as I can see, this is an industry that has immensely increased the mass of its product in the last few years without spoiling the quality in any way whatever—improving it if anything—and the unit price to the farm has gone down and not gone up. I hope that the Government will be able to accept this amendment because I believe that the fish farming industry has something to add to the gross national product, or whatever you like to call it, of this country.
12.23 a.m.
Lord CLEDWYN of PENRHOS: I warmly support the new clause that has been ably moved by the noble Viscount, Lord Thurso. This is not an hour of the day on which to dilate on any subject, even one as important as this, so I propose to be very brief and to make two points. First, we have as a country suffered a severe blow in the curtailment of our traditional fishing grounds, and fish farming needs to be encouraged both by the Government and by Parliament. Of course, we know that there are imponderables in relation to fish farming and one wishes that one had more time to talk about these. But the industry is now well based, with production at about 5,000 tonnes per annum. I think that one should pay a tribute to the Government, and to successive Governments, for the contribution that they have made, and will make, towards research in fish farming. I do not think that this small industry, in fact, is asking for grants and subsidies.
The decision referred to by the noble Lord in Creswell v. BOC is, I think, very serious for the fish farming industry because fish is excluded from the definition of "livestock", and many fish farmers now face substantial rate demands which they were not anticipating. It is important to realise that these are rate demands which go back to 1974. Therefore, the sums involved are really very substantial.
This seems to me to be manifestly unfair and the new clause has the effect of putting this right. The Government's acceptance would indicate that they are determined to support fish farming. As
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the Committee is aware, other countries do so on a much wider scale than we do. If we are not careful, we shall once more see imports kill a British industry. This is something that we must avoid at all costs. The money involved in all this is negligible overall for the Government, but it is crucial to the fish farming industry.
There is a good deal of expertise and a high standard of technology in the United Kingdom in fish farming. Many other countries envy this. These other countries may gain commercial benefits from our own developments in fish farming. I most earnestly appeal to the Government for their acceptance of this new clause.
Baroness VICKERS: I should like to support this amendment. I should like to begin with a quotation from Dryden, which says:
"Damned neuters in their middle way of steering,
Are neither fish nor fowl nor good red herring".
I think this really describes what we are trying to get at tonight. I am also interested to notice that the House of Commons Expenditure Committee has said that there is a definite need for a change in the law.
Fish farming is an extremely important industry because our seas are really overfished. It is not very well supported at the moment by the consumer because only 0·5 per cent. goes into our normal diet. Therefore, we should encourage more fish eating. It would also be very important in time of war, should we be unfortunate enough to have another war. I understand that at present there are about 150 farms for fish and that the average price fell by 12 per cent. in 1977–78, so there is not much profit. It has been remarked that consumption in Denmark, France and Italy is higher than it is here, but also we have the Japanese importing trout which have been gutted and tinned. There is the feeling that when they are washed some of the effluents might be injurious to people. The fish themselves, I gather, are quite safe to eat.
The average time to produce the first harvest is 15 years starting from scratch, and the cost to set up one of these farms can be as much, at the present time, as

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£200,000. Of course the United Kingdom is rather behind in starting this industry. I should like to say too that there are experimental farms for turbot, Dover sole, and Atlantic salmon. When I had the opportunity of going to China I saw fish farming which was providing fish for 22,000 people in the rural commune, and they were also able to sell some at a profit.
The buildings are rated, and I should like to give one example. There is an old mill which has a roof which is two acres, and that now has rates of £13,000 a year because it is all under one roof. I think this is very detrimental to the hopes of people who are setting up these things and they have to put up new buildings. I should like to support this amendment. My noble friend Lady Emmet, who regrettably cannot be here tonight, has done so much to arouse interest in this work, and I am sure that if she had been been here she would have supported this amendment tonight.
Lord MOTTISTONE: I should like briefly to support this amendment. This is an area where not only have we got a new source of food but it is an exciting one for development, for all the reasons that noble Lords have so eloquently told us about.
Lord FERRIER: I also should like to support this amendment entirely on the grounds of the nation's food supply. It is a matter which I raised in this House nearly 20 years ago. As the noble Lord, Lord Sandford, will recall, we had a debate, to which the noble Viscount referred, on 3rd May 1971, when I moved an amendment to this effect. I hope that the Government will accept it. I agree with what the noble Baroness has said. If only the noble Baroness Lady Emmet were here, she would remind your Lordships of the case which she has so persistently put.
Viscount HANWORTH: I should also like to support this amendment. What I was going to say has been said more ably by the last speaker. It seems to me extraordinary, when we have to import so much food and at a tine when there are difficulties financially in doing so, that we should not do everything we possibly can to increase our own production.
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I shall be very interested to see whether the Government have any possible reasons against agreeing to this amendment.
Lord de CLIFFORD: May I also support this amendment. This is a young industry, and is one which should be encouraged. This is a Government who, I hope, will encourage young industries and all forms of exploration into the provision of jobs; and if we can do anything to encourage a young industry like this, we should do so. It would benefit the whole country.
Earl FERRERS: The noble Lord, Lord Cledwyn of Penrhos, said he did not wish to dilate at this hour of night on an important subject like this, and I would not wish to do so either. Equally, however, I would not wish to be so intolerably brief as not to do justice to an important matter, and I agree it is a pity that the noble Baroness, Lady Emmet of Amberley, is not here because in your Lordships' House she has been one of the greatest protagonists for fish farming. I have certainly noted the enthusiasm with which everyone has spoken in favour of the amendment.
The exemption of certain agricultural land and buildings in England and Wales is achieved by Section 26 of the General Rate Act 1967, which was extended by the Rating Act 1971. Fish farms are a relatively recent development and at the time of the 1971 Act it was thought that fish farms were generally concerned more with producing stock for fishing for sport than with food production, and the Government's intention in drafting the 1971 Act was that fish farms should be rated.
Since then the food production side of the business has grown rapidly in importance, which was not anticipated at the time. No fish farms have yet been rated effectively in England, though they have been in Scotland. The attempts of the Inland Revenue's valuers to assess the installations and make entries in the valuation lists for rating have led to litigation, to which the noble Viscount, Lord Thurso, particularly referred. The test case was that between Creswell and BOC, a case which took some three years to go through the courts. The Lands Tribunal interpreted the Rating Act 1971 and held that fish farms were exempt from

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rating. However, a recent judgment in the Court of Appeal held that fish farms were in law liable to be rated. As I say, in Scotland fish farms always have been.
That is the background to the picture and I now come to the amendment, which as drafted is not entirely acceptable because it has certain loopholes, though I understand completely the intentions behind it. I would tell the noble Viscount that it can be said that fish farming, being principally for food production, should be treated in rating, as your Lordships have said, like agriculture generally and therefore exempted. The recent development of fish farming, after all, is very similar to, and analogous with, technological developments in food production such as in broiler keeping, which was derated under the 1971 Act, and it can be said that in most other respects fish farming for food should be treated equivalently with agriculture. On the other hand, it can be said that some fish farming for stock raising, for instance, does not merit agricultural treatment.
The Government are at present considering very carefully all the implications, as a result of the decision of the Court of Appeal, of the new situation which this judgment has brought about and are considering, for instance, the need to make the law clear beyond peradventure; the desire to encourage and not to penalise a young industry engaged in food production and the logic in seeking to bring one form of food production in line with others. I can assure the Committee that this matter is under active consideration at the present time. I personally have a great deal of sympathy with the amendment, but I am not in a position to recommend its acceptance here and now. If the noble Viscount would be good enough to withdraw the amendment at this stage, I will undertake either to put down an amendment on Report or, if that is not possible, the noble Viscount could put down an amendment himself and then I would be able to give him a clear understanding of the Government's position. I can assure the noble Viscount that that is not a "fob-off", if I may use such a vulgarly unparliamentary expression, but it is a definite desire to see that the noble Viscount's case is met if it is possible.
Viscount THURSO: I am most grateful to the noble Earl for his assurance. I would state at once that I know I will be supported in this by noble Lords who have subscribed to my amendments. In these circumstances I would be delighted to discuss this further with the noble Earl. I think it is essential that we deal with the matter at this juncture. When I say "at this juncture" I mean while this Bill is going through your Lordships' House, because the opportunity may not arise conveniently again. But on the assurance that I have been given I am very happy to accept the noble Earl's advice and to withdraw my amendment.
Amendment, by leave, withdrawn.
[Amendment No. 78 not moved.]
Clause 40 [Commencement and extent]:
Earl FERRERS Earl FERRERS moved Amendments Nos. 79 to 81:
Page 37, line 28, leave out ("words in")
Page 37, leave out line 39 and insert—
("(b) paragraphs 4(2) and 6 of Schedule 29 to this Act;
(c) in paragraph 5A of that Schedule—

(i)sub-paragraph (2); and

(ii) sub-paragraph (3), in so far as it inserts subsections (5A) to (5C) in section 78 of the Housing Act 1964; and")

Page 37, line 45, at end insert—
("(3A) The provisions of Schedule 29 to this Act which give the Secretary of State power by order to prescribe multipliers and which are specified in subsection (3B)(a)(b) and (c) below shall not have effect until he exercises the power conferred by them.
(3B) The provisions of Schedule 29 mentioned in subsection (3A) above are—

(a) paragraph 2A; and

(b) in paragraph 5A—

(i) sub-paragraph (1);

(ii) sub-paragraph (3), in so far as it inserts subsections (5D) and (5E) in section 78 of the Housing Act 1964; and

(c) paragraph 9A.").

The noble Earl said: There are three amendments in the name of my noble friend—Nos. 79, 80 and 81. They are not consequential amendments. They are mostly technical, but not wholly. If it met with the approval of the Committee I should be quite happy to move these formally, in view of the time, but if any noble Lord wishes for an explanation I

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would be willing to give it. I beg to move Amendment No. 79.
The DEPUTY CHAIRMAN of COMMITTEES (Lord Alport): With your Lordships' permission, I will put Amendments Nos. 79, 80 and 81 together.
[Amendment No. 82 not moved.]
Clause 40, as amended, agreed to.
Lord DENHAM: I think this might possibly be the moment when we should resume the House. I beg to move that the House do now resume.
House resumed.
House adjourned at twenty-two minutes before one o'clock.