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Local Government Finance (No 2) Bill

Volume 21: debated on Monday 5 April 1982

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As amended (in the Standing Committee), considered.

New Clause 1

Water Authorities And National Water Council

'Schedule 3 to the Water Act 1973 shall have effect with the substitution for paragraphs 38 and 39 of that Schedule (accounts and audit of water authorities and National Water Council) of the paragraphs set out in Schedule ( New paragraphs for Schedule 3 to the Water Act 1973) to this Act. '.— [Mr. Giles Shaw.]

Brought up, and read the First time

4.44 pm

I beg to move, That the new clause be read a Second time.

With this it will be convenient to take amendments Nos. 19, 20, 21, amendment (a), to amendment 21, and amendments Nos. 23, 24 and 25.

The Bill has been fully considered in Committee. Hon. Members who served on that Committee will recognise that one of the matters that caused substantial concern was the position of water authorities under the Bill, particularly public rights of access to water authorities' accounts. During the Committee stage I tried to place an amendment before the Committee for discussion, but I was unable to do that. However, we have now tabled an amendment in the shape of new clause 1, which seeks to meet the points that were brought to the attention of the Committee.

We received numerous representations about the auditing of water authorities, but nearly all made one point—that it is wrong to deny the public access to the books of water authorities when they already have those rights. That is largely because of the system under which water authorities have been audited to date. That system is similar—and identical in most respects—to that applied to local authorities. Under the Bill the audit commission will be the vehicle by which local authorities will be audited, whereas the Secretary of State will appoint auditors, thus bringing them closer to the position of nationalised undertakings.

It was apparent from that move that the traditional rights enjoyed by ratepayers and electors in being able to make representations to auditors would be lost during the passage of the Bill unless it was amended. Therefore, right hon. and hon. Members may be surprised that such a short and comparatively simple new clause, which refers to new paragraphs for schedule 3 to the Water Act 1973 should have taken four pages to achieve. I hasten to assure the House that there is nothing sinister about that. There is no surreptitious attempt to smuggle in new provisions. Tinkering with schedule 2 in order to introduce our amendments on public rights would have led to an unwieldy set of provisions and would have involved extra cross-referencing. Therefore, we considered it better to replace schedule 2 with a new schedule to include the full set of accounting and auditing arrangements for water authorities. That is the purpose of the new schedule.

Most of what the new schedule contains is already in existing legislation or in schedule 2 to the Bill. The only changes of substance relate to the public inspection of accounts and rights to make representations, which are found in paragraph 39C. Paragraph 39A refers to the provisions about general duties of auditors.

In Committee I endeavoured to meet hon. Members by committing the Government to bring forward these amendments. By the amendments, a local government elector is given rights to inspect and copy the accounts, books and deeds relating to the accounts of a water authority, which are the rights that he presently enjoys under section 159 of the Local Government Act 1972. Under 39C(2) he is given the right to question the auditor. The right to challenge an item in the accounts is modelled on the existing provision, although it differs from it in one or two respects. The existing right to make objections is closely tied to the possibility that there has been illegality or wilful misconduct in the incurring of expenditure. There are provisions for the district auditor to follow up any such cases. That is an essential part of his duties under local government legislation.

Therefore, in future the water authority auditor will have two general duties, which are spelt out in paragraph 39A. The first is to ensure that there are proper accounting practices and that any ministerial requirements have been observed in the compilation of the accounts. The second general duty is for the auditor to consider whether he should make a report in the public interest on anything coming to his notice in carrying out the audit. Those duties are connected with existing duties under local government legislation. A useful means of conferring a right of challenge upon the public is also provided. Under paragraph 39C(2) the public will be given the right to draw the auditor's attention to any matter on which he might make a report in the public interest.

That is a full and adequate set of rights that preserves the public's present position in relation to the audit of water authorities. It extends those rights somewhat in that it extends them to the full range of water authorities, not just those which, historically, have been audited by the district auditor process. However, the public rights will not extend to the accounts of the National Water Council. They are inappropriate for such a national body. There has never been any objection to the accounts of the National Water Council.

The remaining amendments in the group—amendments Nos. 19, 20, 21(a), 23, 24 and 25—are consequential. They do not call for comment from me. I commend new clause 1 and those amendments to the House.

We shall be pleased to support the new clause because it is in accordance with an undertaking that the Minister gave after a long debate in Committee—one of the longest debates on one issue. The Minister said that it might appear that a short amendment would be required, but as there are many dovetailing procedures amendment No. 21 has had to be long. It is right that the House should be reminded that the Government substantially changed their attitude to this matter during a four or five hour debate. That was due largely to pressure from both sides of the Committee. That needs to be put on the record.

The House should be aware that the Government's original view was set out during the debate in Committee on 2 March, when the Minister said:
"It is our view, which is why the Bill is so drafted, that there is a sufficiently strong case for saying that, in the vital services with which the water authorities provide the consumer; in their structure and regional organisation; in the way in which Government have used the mechanisms of MMC and other ministerial intervention and the way in which Ministers are perhaps more directly responsible in Parliament to what water authorities do than is the case with individual local authorities, it seemed sensible to us that the regional water authority, in auditing terms, should be treated more as a nationalised undertaking than as a local authority."
That was the point at which the Government, quite fairly, defended the existing provisions in Committee. However, the Minister said:
"I take the point absolutely that in the Bill as drafted, and without amendment No. 143"—
that amendment added water authorities to the other list and was tabled by my hon. Friend the Member for Blaydon (Mr. McWilliam)—
"individual ratepayers would lose their right of access to water authorities' accounts."
I want the Minister to make it absolutely clear that exactly the same rights as now exist will be preserved in the changes. The Minister also said:
"We shall introduce an amendment to the Bill at the appropriate stage which, subject to consultation, we foresee as providing for existing rights to continue so that consumers will have access to water authority accounts and will be able to question the auditor in the manner sought by the hon. Member for Edmonton and my hon. Friend the Member for Reading, North."—[Official Report, Standing Committee D, 2 March 1982; c. 515–519.]
I have received reports from The National Farmers Union, as no doubt, have other members of the Committee. It is not cavilling at the intention of the new clause but draws attention to one or two points. In a letter to me the NTU states:
"At present under the Water Act 1973 water authority audits are regulated by Part VIII of the Local Government Act 1972. By virtue of section 159 of that Act, where the audit is conducted by a district auditor a local government elector may attend before the auditor and make objections"
That is the first point. It must be made clear that the right to make objections to the accounts is preserved. The letter continues:
"an elector may also question the auditor about the accounts, and where the audit is conducted by an approved auditor may request the Secretary of State to direct a district auditor to hold an extraordinary audit"
I want the Minister to confirm that all those existing rights are preserved. The letter adds:
"The elector seems to be losing a right of objection, and a right to request the direction of an extraordinary audit."
The Opposition will raise no objection to the new clause if the Minister can assure us that the provisions of the Water Act 1973, and in particular section 159 of the Local Government Act 1972, are contained and preserved in their entirety. In fact, we shall congratulate the Government on their change in attitude.

I welcome the new clause. I strongly pushed for this change to be made in Committee. I place on record my appreciation of the Reading ratepayers who initiated this move, involving myself as the local Member of Parliament. They ran a successful campaign, contacting about 60 Members of Parliament who had an interest in the subject. They deserve credit for their efforts. I know that they are pleased with the new clause.

The Government are right to leave out the National Water Council. I take a jaundiced view of the water council. I hope that it will be included in the consideration of water authorities now in hand following the recent Green Paper on the future of the water authorities. I am not convinced that the water council does as good a job as it should. In anticipation of the possibility of the water council being abolished, I am not worried about its exclusion from the new clause. It is right that the powers should be extended beyond two water authorities and that the new powers will now cover all water authorities. That is to be widely welcomed.

A promise was given in Committee to table an amendment dealing with the powers and duties of rating authorities to reduce a rate, make refunds to ratepayers, recover sums paid to precepting authorities and to deal with the resultant costs to rating authorities. An amendment has not been tabled. I hope the Government have not changed their mind. My own county council is in some difficulty because no one is in charge at the moment. It would help the county council if such an amendment became law. Some London boroughs would welcome the opportunity to reduce their rate during the year. The Minister will remember that I withdrew an amendment on the understanding that the Government would table an amendment to deal with this matter of a rate reduction or rate refund during a year. I realise that there are legal problems but I urge my hon. Friend to tell us that the matter has not been forgotten.

I believe that my hon. Friend is referring to the cause celebre in Bedfordshire. We had the problem of a supplementary precept before the beginning of the financial year. I agree with my hon. Friend and I hope the Government will make it clear, absolutely clear that a supplementary rate precept, although started in the previous financial year, is void for the financial year beginning 1 April 1982.

My hon. Friend is right. We debated Bedfordshire at great length in Committee. I was avoiding the use of the word "Bedfordshire" for fear of starting an exchange. I am grateful that my hon. Friend has reminded me of the case although it was in my mind. However, I consciously decided not to mention Bedfordshire on this occasion.

I urge the Minister to tell the House that this matter is not forgotten and that in the other place an amendment will be tabled that will give relief to those authorities that are in difficulty.

I welcome the new clause and pay tribute to the Reading ratepayers for their initiative. It meets the points raised and I am delighted that it goes further than existing legislation. I support the new clause and schedule.

I refer to amendment (a) to Government amendment No. 21. This concerns a small but important aspect of the amendments tabled by the Government—the nature of those who are enabled to audit the water authorities. I speak on behalf of the Chartered Institute of Public Finance and Accountancy, which feels strongly on this point. Its members audit water authorities as employees of the district audit service. They are also employees of private firms, which also audit water authorities. Under the Bill none of these members would be allowed to act as auditors in their own right. CIPFA is concerned with public sector accounting and audit and its members have considerable expertise. The exclusion of these members from the list of auditors would, therefore, exclude as principals people with specialist public sector expertise. That exclusion is wrong. The amendment is designed to remedy that.

In the past there has been some opposition from the Institute of Chartered Accountants in England and Wales to the inclusion of CIPFA names in this context. However, negotiations have taken place and agreement has been reached. I shall quote from two letters.

5.0 pm.

The first letter is from the secretary of the Institute of Chartered Accountants to the secretary of CIPFA. It states:
"As you know the Local Government Finance (No. 2) Bill provides, at Schedule 2, Paragraph 2, that a person shall not be qualified for appointment as auditor of a water authority unless he is a member of a body of accountants established in the United Kingdom and recognised for the purpose of section 161(1)(a) of the Companies Act 1948.
We understand that CIPFA intends to suggest to the Department of the Environment that, in addition to members of those bodies recognised by the Department of Trade in accordance with section 161(1)(a) of the Companies Act 1948, members of CIPFA should be qualified to audit water authorities…The object of this letter is to advise you that the Institute of Chartered Accountants in England and Wales will not oppose such an amendment as long as it is understood to be subject to the following qualification … it is agreed by this exchange of correspondence that a member of CIPFA will not, in practice, be eligible to undertake the audit of a water authority unless either:
in the case of a member admitted before 1 January 1974, he has completed three years' experience engaged principally on auditing work in a practising office; or in the case of a member admitted after 31 December 1973, he has completed five years' experience engaged principally on auditing work in a practising office."
CIPFA replied:
"We accept the conditions set out in your letter and this exchange of letters will constitute an agreement between us as to the practical effect of the addition of the name of this Institute."
The two bodies most affected by this small but important aspect are in agreement. It would be in their interest and in the interests of the auditing of water authorities generally if the small amendment were accepted.

I, too, welcome new clause 1. The Bill as published would have taken away the right of ratepayers to examine water authority accounts.

The hon. Member for Reading, North (Mr. Durant) is right to praise the Reading ratepayers, but it was a little churlish of him not to acknowledge the support of right hon. and hon. Members on the Opposition Benches in the debate which brought about the new clause. I do not make a party political point, but together we forced common sense on the Government. Right hon. and hon. Members on the Government Benches repeatedly asked for greater speed, but had we proceeded faster such points would have been missed, to the detriment of ratepayers.

I hope that the Minister will acknowledge the part that we played. Had we gone faster we may not have had the new clause.

I do not wish to be churlish, but the main thrust of the Opposition's argument was that the water authorities were being shifted to a different audit status. The question of the involvement of ratepayers came later.

The hon. Gentleman is partly right. That was part of our argument, but, equally forcefully, we argued that ratepayers would lose their right to review water authority accounts. I could quote from our Committee debates to prove that I am correct, but I am sure that, being an honourable man, the hon. Gentleman will accept my word. I believe that it is vitally important to place that fact on the record.

In Committee, I joined my hon. Friend the Member for Reading, North (Mr. Durant) in tabling the amendment to encourage the Government to rectify this mistake. I join him this afternoon in welcoming the new clause and thanking the Government. I thank my hon. Friend the Minister For fulfilling, in the spirit and tha letter, the assurance that the new clause would be drafted in time for it to be examined, so that, if it was not acceptable other amendments could be tabled.

There is no intention to be churlish. The Opposition made a contribution. The hon. Member for Newcastle upon Tyne, Central (Mr. Cowans) and his right hon. and hon. Friends argued this and many other cases in Committee. They argued them well but not always with conspicuous results. Had it not been for the interest of my hon. Friend and myself they might have argued another case well but with no conspicuous result. We should all thank the Government for responding to cross-party pressures in Committee.

I, too, participated in the Committee debate on 26 March, but I shall not take part in the self-congratulation. I am grateful to the Minister for fulfilling the obligation that he gave, but I agree with the hon. Member for Newcastle upon Tyne, Central (Mr. Cowans) that the new clause does not go far enough. The right of access to information has been restored, but the right of objection should have been enhanced.

I quote again from the letter from the National Association of Local Councils, which states:
"Our Association has been much exercised all last year about the lack of local control over the operations and charges of Water Authorities and we have just settled a policy paper seeking more influence in their decision for those they serve. It seems very wrong that a revision of audit procedures should take away an opportunity for the local public to query the accounts of the Water Authorities."
That association, too, put pressure on the Government. It has been all-party pressure. The debate in Committee helped to bring about the new clause.

There is also general concern about the size of water bills. Many ratepayers have a feeling of futility because they cannot go to an elected representative and gain access to the water authority. Following the consultation paper "The Membership of Regional Water Authorities" and the Department of Trade's paper "Consumers' Interests and the Nationalised Industries", I hope that the Government will bring forward radical proposals for the greater democratisation and accountability of water authorities.

The water rate system needs to be reformed. It is iniquitous that an elderly person living alone can pay the same water rate as a family next door purely because of arbitrary property valuations. I and other Liberal colleagues made representations to the Secretary of State for the Environment about the matter last week in response to his Green Paper on rating.

I hope that we shall see radical proposals to change the way that water authorities operate and to ensure that they become far more responsive to consumers and more accountable. The purpose of the Bill was to get value for ratepayers' money. I hope that we shall not lose sight of that purpose when considering the role of water authorities.

I shall respond briefly to some of the points that have been raised. The hon. Member for Edmonton (Mr. Graham) asked for an assurance, as did the hon. Member for Liverpool, Edge Hill (Mr. Alton), that the rights being embodied in new clause 1 were identical to those that now exist. They are not identical in words although they are in design.

An objector has the right to challenge the auditor but not in precisely the same way as the district auditor accepted those rights under the local authority legislation. The district auditor's response to an objection is in relation to illegality, the rule of the courts and so on, closely allied to procedure in the courts. This is a much wider power. We are providing an open right of challenge linked to the auditor's duty to report matters in the public interest. That meets the request of the NFU. It will continue to have the right to object. That is an appropriate right for the water industry in its new guise.

My hon. Friend the Member for Reading, North (Mr. Durant) welcomed the proposed change. I, too, recognise the part played by the ratepayers of Reading and the other ratepayers' associations that raised this issue. My hon. Friend made a further and extremely important point. He pointed out that there is not as yet an amendment dealing with the powers to reduce a rate. My hon. Friend the Member for Bedfordshire, South (Mr. Madel) also referred to that matter. I assure both my hon. Friends that the matter will be dealt with in another place. My right hon. Friend intends to bring forward an amendment for that purpose. Its omission from the Order Paper today indicates the complexity of dealing with the matter, not a lack of intention that it should be dealt with.

My hon. Friend the Member for Hornchurch (Mr. Squire) spoke in support of amendment (a) to the new schedule, which we are pleased to accept. It allows CIPFA members to join the audit team in the same way as other qualified members. From what I have heard, I believe that there is general acceptance of new clause 1 and the amendments. I welcome that view and I commend the amendments to the House.

Question put and agreed to

Clause read a Second time, and added to the Bill.

On a point of order, Mr. Deputy Speaker. I am unclear whether you have disposed of my amendment (a).

We work through the Amendment Paper, of which the hon. Gentleman has a copy.

New Clause 2

Duration Of Part I Of Act

`(1) The provisions of Part I of this Act shall cease to have effect at the expiration of one year from the date on which it comes into force unless extended by order of the Secretary of State made by statutory instrument

(2) No statutory instrument containing such an order shall take effect until it has been approved by resolution of the House of Commons.'.— [Mr. Oakes.]

Brought up, and read the First time.

I beg to move, That the clause be read a Second time.

New clause 2 is short and would simply limit the duration of part Ito 12 months from the date on which the legislation comes into force, giving the Government an opportunity to renew part I by statutory instrument approved by the affirmative procedure of the House.

There are three principal reasons why the Opposition want to discuss the new clause in the House. First, the Secretary of State himself, the Minister for Local Government and Environmental Services and the Under-Secretaries of State have repeatedly, on Second Reading and throughout the Committee stage, referred to this as an interim measure. The Opposition believe that if it is to be enacted at all, it should be enacted as interim legislation. At the penultimate sitting of the Committee, the Minister made it clear at that late stage that the Government intended to operate clauses 1 and 2 retrospectively. Because of that, the Opposition wanted the House to have the opportunity to debate what the Committee did not have the opportunity to debate as a result of that extremely late intervention by the Minister.

5.15 pm.

Ministers have continually said that this is interim legislation. It is detested by all local authority associations. They would be mollified a little if they knew that the Government would treat the legislation as being an interim measure.

Our second reason might interest Conservative Members, if they were here in sufficient numbers to be interested. They often express concern about reform of the rating procedure, on which the Government introduced a Green Paper. The final date for representations to be made on the Green Paper was 31 March this year. The Minister—indeed, all Ministers—continually tell the country that they intend to act on the rating system. If they intend to do something, why are they introducing this measure as primary legislation for all time? Our new clause will strengthen the arm of those who want something done about the rating system, as it will give the Government only 12 months to operate the Act—by which time, presumably, they will have done something about the Green Paper and put proposals before the House to deal with the reform of the rating system.

Thirdly, throughout the Committee stage we were presented with a kaleidoscope. It is a pity that the hon. Member for Bedfordshire, South (Mr. Madel) has left the Chamber, as the matter is apposite to Bedfordshire. Matters changed from week to week, and the Government changed the Bill from week to week. The issue of Bedfordshire is apposite to clauses 1 and 2. We believe that it is wrong for the Government to have introduced retrospection in primary legislation, which is intended to remain for all time. Were the legislation intended to be interim, we could understand that, but the House should not allow the Government to introduce retrospection in primary legislation.

My right hon. Friend the Member for Manchester, Ardwick (Mr. Kaufman) will speak about clause 4 and part II which are intimately connected with part I. During the weekend, we witnessed an international shambles created by the Government. Members of the Committee were not surprised, as a permanent shambles was presented to us by the Government. We understand that there is likely to be a major change to clause 4, which in itself was a major change to the original Bill, which in turn was a change to the Local Government Finance (No. 1) Bill. In such circumstances, it is wrong for the House to pass part I as primary legislation. The Government should at least partly rectify the position by saying that this is interim legislation, that it is for only one year and that the House will have the opportunity annually to review it.

I rise briefly to support the new clause. As the right hon. Member for Widnes (Mr. Oakes) has said, we are here stepping into very dangerous and uncertain waters. I certainly do not wish to explore the Bedfordshire case at this point, but it highlights the fact that unanticipated events have occurred even during the passage of the Bill. If it can happen in Bedfordshire, it can happen elsewhere and it is clear that other problems may crop up that even the Government have not anticipated or expected. In that situation, it seems sensible to review the application of part I annually.

The right hon. Member for Widnes referred to the situation as a kaleidoscope. That is a colourful term, but I should have thought that the present situation for local government was more like a switchback, with considerable ups and downs and some very nasty turns and bends, not to mention jolts, for some local authorities. It would therefore be sensible for Parliament to review this major change. The removal of the right to levy supplementary rates, which has existed for many years, is a major and extremely important change that should not be lightly made, and it is right that it should be reviewed annually. I therefore support the new clause

It seems to me that in Committee we covered, if not exactly this ground, at least very similar ground, as well as what I might describe as allied ground. In other words, the new clause represents yet another attempt by the Opposition to prevent the Government from banning supplementary rates.

This is in no way a temporary expedient. Reference has been made to the comments on Second Reading of my right hon. Friends the Secretary of State for the Environment and the Minister for Local Government and Environmental Services. I see no contradiction whatever between the two statements. My right hon. Friend the Secretary of State said:
"In all it is an important measure to carry us forward to the next stage which will follow the consultation we have now begun on the reform of local government finance itself."—[Official Report, 18 January 1982; Vol. 16, c. 58.]
It is in that context that we must see the total ban that the Government intend to impose on supplementary rates.

I assure the House that this measure is not intended to avoid the need for the fundamental reform of the domestic rating system to which we are committed. As the House knows, consultation on this finished at the end of last month. We must now consider the results of that consultation. The ban on supplementary rates and precepts is an interim measure, at least in the domestic sector, pending our proposals for the reform of the domestic rating system. In the commercial and industrial sector, in which rates may well remain for the foreseeable future, the ban is likely to continue.

I think that I have explained to the House why we oppose some of the arguments advanced in favour of the new clause in relation to our proposals for rating reform.

The real reason behind our banning of supplementary rates was stated by my right hon. Friend the Secretary of State for the Environment on Second Reading, when he said:
"What the House clearly has to face, and what is at the centre of the controversy about so much of local government today, is that parts of local government are determined to scrap the traditional relationship between central Government and local government whereby local government recognised and accepted the right of central Government to set the level of local expenditure."—[Official Report, 18 January 1982; Vol. 16, c. 49.]
Last year, a situation developed in which 30 local authorities levied supplementary rates. That was something of a novelty, and the Government are not prepared to allow it to continue.

In further justification of our decision to abolish supplementary rates, I must point out yet again that they have never been allowed in Scotland. We have come to the conclusion that ratepayers in England and Wales have the right to seek the protection of the Government from the depredations of irresponsible local authorities, as large numbers of ratepayers have done in the past six months. Our objective in banning supplementary rates and precepts is to give ratepayers that protection and to prevent hasty and ill-considered increases in spending after the financial year has begun and both domestic and non-domestic ratepayers have made their financial plans for the year.

I repeat that there is nothing temporary about the measure that we propose to abolish supplementary rates. Therefore, I must ask the House to reject the new clause.

All that the Minister has really said in reply is that in the vocabulary of Her Majesty's Ministers "interim" means "permanent" and "permanent" may mean "interim". In the words of a famous comedian, there is no answer to that. There is no point in debating the matter further. I therefore ask my right hon. and hon. Friends to divide the House on the new clause.

Question put, That the clause be read a Second time:—

The House divided: Ayes 206, Noes 262.

Division No. 118]

[5.25 pm


Abse, LeoCohen, Stanley
Allaun, FrankConlan,Bernard
Alton,DavidCook, Robin F.
Archer, Rt Hon PeterCowans, Harry
Ashley, Rt Hon JackCox, T. (W'dsw'th, Toot'g)
Ashton,JoeCraigen, J. M. (G'gow, M' hill)
Atkinson,N, (H' gey,)Crowther,Stan
Bagier, Gordon A.T.Cryer, Bob
Barnett, Guy (Greenwich)Cunliffe,Lawrence
Barnett, Rt Hon Joel (H'wd)Cunningham, DrJ.(W'h'n)
Benn, Rt Hon TonyDalyell, Tam
Booth, Rt Hon AlbertDavies, Rt Hon Denzil (L'lli)
Boothroyd, Miss BettyDavies, Ifor (Gower)
Bottomley, Rt HonA.(M'b'ro)Davis, Clinton (HackneyC)
Bradley, TomDavis, Terry (B'ham, Stechf'd)
Bray, Dr JeremyDeakins,Eric
Brown, Hugh D. (Provan)Dean, Joseph (Leeds West)
Brown, R. C. (N' castle W)Dewar,Donald
Brown, Ronald W. (H' ckn 'yS)Dixon,Donald
Brown, Ron (E'burgh, Leith)Dobson,Frank
Callaghan, Rt Hon J.Douglas,Dick
Callaghan, Jim (Midd't 'n& P)Dubs,Alfred
Campbell,IanDunn, James A.
Canavan,DennisDunwoody, Hon MrsG.
Cartwright,JohnEastham, Ken
Cocks, Rt Hon M. (B'stolS)Edwards, R. (W'hampt'nS E)

Ellis, H.(NE D'bysh're)Oakes, Rt Hon Gordon
Evans, loan (Aberdare)Neill,Martin
Evans, John (Newton)Orme, Rt Hon Stanley
Fletcher,Ted (Darlington)Pendry,Tom
Foot, Rt Hon MichaelPenhaligon,David
Foster,DerekPrice, C. (Lewisham W)
Foulkes,GeorgeRace, Reg
Fraser, J. (Lamb'th, N'w'd)Radice,Giles
Freeson,Rt Hon ReginaldRees, Rt Hon M (Leeds S)
Garrett, John (NorwichS)Richardson,Jo
Gilbert, Rt Hon Dr JohnRoberts,Allan(Bootle)
Ginsburg,DavidRoberts, Ernest (HackneyN)
Graham, TedRobertson,George
Grimond, Rt Hon J.Robinson, G. (CoventryNW)
Hamilton,James (Bothwell)Rooker, J. W.
Hamilton, W. W. (C'tral Fife)Ross, Ernest (Dundee West)
Harrison, RtHon WalterRowlands,Ted
Haynes, FrankSandelson,Neville
Heffer, Eric S.Sever, John
Hooley,FrankSheldon, Rt Hon R.
Howell, Rt Hon D.Silkin, Rt Hon J. (Deptford)
Howells,GeraintSilkin, Rt Hon S. C. (Dulwich)
Hughes, Robert (Aberdeen N)Smith, Rt Hon J. (N Lanark)
Hughes, Roy (Newport)Snape, Peter
Jay, Rt Hon DouglasSpearing,Nigel
Johnson, Walter (Derby S)Stallard, A. W.
Johnston,Russell (Inverness)Stoddart,David
Jones, Rt Hon Alec (Rh'dda)Stott,Roger
Jones, Barry (East Flint)Strang, Gavin
Kaufman, Rt Hon GeraldStraw,Jack
Kilfedder, JamesA.Summerskill,HonDrShirley
Kilroy-Silk,RobertTaylor, Mrs Ann (Bolton W)
Lamborn,HarryThomas, DrR.(Carmarthen)
Leadbitter,TedThorne, Stan (PrestonSouth)
Lestor, MissJoanTinn, James
Lewis, Arthur (N'ham NW)Torney,Tom
Litherland,RobertVarley, RtHon Eric G.
Lofthouse,GeoffreyWainwright,E. (DearneV)
McCartney,HughWalker, Rt Hon H.(D'caster)
MacKenzie, RtHonGregorWellbeloved,James
McTaggart,RobertWhite, Frank R.
McWilliam,JohnWhite, J. (G'gowPollok)
Magee, BryanWhitehead,Phillip
Marshall, Jim (LeicesterS)Willey,RtHon Frederick
Maynard, Miss JoanWilliams, Rt Hon K(S'sea W)
Meacher, MichaelWilson,William (C'trySE)
Mellish,Rt Hon RobertWinnick,David
Miller, DrM.S. (E Kilbride)Wright,Sheila
Mitchell,Austin (Grimsby)Young, David (Bolton E)
Mitchell, R.C. (Soton Itchen)
Morris, Rt Hon C. (O'shaw)Tellers for the Ayes:
Moyle, Rt Hon RolandMr. Allen McKay and Mr. George Morton.
Newens, Stanley


Aitken,JonathanArnold, Tom
Alison,Rt Hon MichaelAtkins,Robert(PrestonN)

Baker,Kenneth(St.M'bone,)Gow, Ian
Baker, Nicholas (N Dorset)Grant, Anthony (HarrowC)
Banks,RobertGray, Hamish
Bendall,VivianGreenway, Harry
Benyon, W. (Buckingham)Griffiths,E.(B'ySt.Edm'ds)
Berry,HonAnthonyGriffiths,Peter Portsm'thN
Best, KeithGrist, Ian
Bevan, DavidGilroyGummer,JohnSelwyn
Biffen, Rt Hon JohnHamilton, Hon A.
Blackburn,JohnHampson, DrKeith
Bonsor,SirNicholasHavers, Rt Hon Sir Michael
Bottomley, Peter (W'wich W)Hawksley,Warren
Boyson,Dr RhodesHeddle,John
Brinton,TimHiggins, Rt Hon Terence L.
Brown,Michael(Brigg&Sc'n)Hooson, Tom
Browne, John (Winchester)Hordern,Peter
Bruce-Gardyne,JohnHowe, Rt Hon SirGeoffrey
Bryan,Sir PaulHowell, Rt Hon D.(G'ldf'd)
Buchanan-Smith, Rt. Hon. A.Howell, Ralph(N Norfolk)
Buck,AntonyHunt,David (Wirral)
Burden,SirFrederickHurd, Rt Hon Douglas
Butcher,JohnJenkin, Rt Hon Patrick
Cadbury,JocelynJessel, Toby
Carlisle, John (Luton West)JohnsonSmith,Geoffrey
Carlisle,Kenneth(Lincoln)Jopling,Rt Hon Michael
Carlisle, Rt Hon M. (R'c'n)Joseph, Rt Hon Sir Keith
Channon, Rt. Hon. PaulKershaw,SirAnthony
Clark, Hon A. (Plym 'th, S'n)King, Rt Hon Tom
Clark, Sir W. (CroydonS)Kitson,SirTimothy
Clarke,Kenneth(Rushcliffe)Knight, MrsJill
Cormack,PatrickLawrence, Ivan
Costain,SirAlbertLawson, Rt Hon Nigel
Cranborne,ViscountLee, John
Dean, Paul (NorthSomerset)Lester, Jim (Beeston)
du Cann, Rt Hon EdwardLloyd, Ian (Havant& W'loo)
Dunn,Robert(Dartford)Lloyd, Peter (Fareham)
Durant, TonyLoveridge,John
Eden, Rt Hon Sir JohnLyell,Nicholas
Eggar, TimMcCrindle,Robert
Emery, Sir PeterMacfarlane,Neil
Fairgrieve,SirRussellMacKay, John (Argyll)
Farr,JohnMacmillan, Rt Hon M.
Fell, Sir AnthonyMcNair-Wilson,M. (N'bury)
Fenner, Mrs PeggyMcNair-Wilson, P. (NewF'st)
Fletcher,A.(Ed'nb'gh N)Major,John
Fookes, Miss JanetMarshall,Michael(Arundel)
Forman,NigelMarten, Rt Hon Neil
Fowler, Rt Hon NormanMates,Michael
Fry, PeterMaude, Rt Hon Sir Angus
Gardiner,George(Reigate)Mawby, Ray
Garel-Jones, TristanMaxwell-Hyslop,Robin
Gilmour, Rt Hon Sir IanMayhew,Patrick

Mills, Peter (West Devon)Shepherd,Richard
Moore,JohnSkeet, T. H. H.
Morris, M. (N'hamptonS)Speller,Tony
Morrison, Hon P. (Chester)Spicer, Jim (West Dorset)
Myles, DavidStewart,A.(E Renfrewshire)
Needham,RichardStewart, Ian (Hitchin)
Neubert,MichaelStradling Thomas,J.
Newton, TonyTaylor, Teddy (S'end E)
Oppenheim, Rt Hon Mrs S.Thompson,Donald
Page, Richard (SW Herts)Thorne, Neil (IlfordSouth)
Parkinson, Rt Hon CecilThornton,Malcolm
Parris,MatthewTownend,John (Bridlington)
Patten, John (Oxford)Trippier,David
Pawsey, Jamesvan Straubenzee, SirW.
Percival,Sir IanViggers,Peter
Peyton, Rt Hon JohnWaddington,David
Pink, R.BonnerWakeham,John
Porter,BarryWalker, B. (Perth)
Prentice, Rt Hon RegWalker-Smith, Rt Hon Sir D.
Prior, Rt Hon JamesWaller,Gary
Proctor, K. HarveyWard,John
Pym, Rt Hon FrancisWarren,Kenneth
Raison, Rt Hon TimothyWatson,John
Rhodes James, RobertWells,John(Maidstone)
Rifkind,MalcolmWhitelaw, Rt Hon William
Rippon, Rt Hon GeoffreyWhitney,Raymond
Roberts, Wyn (Conway)Wickenden,Keith
Rost, PeterWilkinson,John
Royle, Sir AnthonyWilliams,D. (Montgomery)
Sainsbury, Hon TimothyWolfson,Mark
St. John-Stevas, Rt Hon N.Young,SirGeorge (Acton)
Scott,NicholasYounger, Rt Hon George
Shaw, Giles (Pudsey)
Shaw,Michael (Scarborough)Tellers for the Noes:
Shelton,William (Streatham)Mr. Peter Brooke and Mr. Robert Boscawen.
Shepherd,Colin (Hereford)

Question accordingly negatived.

New Clause 3

Supplementary Reports

`In section 61 of the Local Government, Planning and Land Act 1980 at the end of subsection (6) there shall be inserted—

"(7) Subject to subsection (8) below, where, during a financial year, the level of prices, costs and remuneration is higher than the level taken into account, through the application of section 54(4)(d) above, for the purpose of determining the amounts payable the Secretary of State shall, during the financial year, make one or more supplementary reports.
(8) A supplementary report made in accordance with the provision of subsection (7) above shall—
  • (a) contain the details set out in (i) to (iii) below which said details shall have been agreed by the Secretary of Slate and such Associations of Local Authorities as appear to him to be appropriate, and
  • (b) specify—
  • (i) the level taken into account for the purpose:, of the said section 54(4)(d) as a percentage of the higher level; and
  • (ii) the additional amount of Block Grant payable to each local authority; and
  • (iii) the method of calculation of the said additional amount of Block Grant".'.—[Mr. Kaufman.]
  • Brought up, and read the First time.

    5.30 pm

    I beg to move, That the clause be read a Second time.

    I first offer an apology in advance. I must attend a meeting of the Shadow Cabinet at 6 o'clock. Therefore, after I have spoken, I shall be unable to remain for much of the first part of the debate. I hope that the House will forgive me in the special circumstances.

    We have tabled this new clause because of the chaos into which the whole business of rate, target and penalty fixing has fallen as a result of the Government's inability to manage these matters and the Bill.

    Since last year, the Government have involved local government in a series of targets and penalties by which the Secretary of State seeks to control local authority expenditure. I shall not go into the basis of the right hon. Gentleman's unfounded allegations that local authority spending is out of control, but, looking at these various operations, one sees that last year's hold-back exercise was written off by the Secretary of State as disastrous. This year's exercise—that is, the targets announced with the rate support grant report—is based on criteria which, as I have tried to point out in previous debates, are not only new and different from the criteria introduced during the last hold-back exercise, but are also irrational and, to many, incomprehensible. They are also riddled with flaws. Last year volume targets were imposed on local government, which led to many local authorities being subjected to penalty. When the Secretary of State considered the outcome of the hold-back exercise he thought that too many local authorities had been subjected to penalties. From his point of view, too many Conservative authorities had been penalised.

    When the exercise had been completed the right hon. Gentleman introduced the alternative criterion of grant-related expenditure assessment. He introduced that belatedly as a way of reprieving some Conservative authorities. Forty-six authorities were relieved of penalty by the introduction of the alternative criterion despite the fact that there was an aggregate overspend of over £70 million on the basis of the Secretary of State's criterion. That episode was described by the right hon. Gentleman as disastrous.

    This year the Secretary of State has attempted to retrieve the disaster by introducing new targets and from the start assigning grant-related expenditure assessment as an alternative ceiling. He has said that any local authority that spends up to but not beyond the GREA will not be subjected to penalty, even if the authority is above its expenditure target.

    In our debates last year we forecast that the optional target fixing would lead to many councils spending well over the target in the knowledge that they could not be penalised. We estimated that it could lead to an overspend—this is on the Secretary of State's criterion because we do not acknowledge that there is such a thing as an overspend—of about £790 million.

    At present we have incomplete information about local authority budgets but the information that is available shows that council after council has decided to budget precisely up to its grant-related expenditure assessment where that assessment is above the target. Among the metropolitan authorities five local authorities have budgeted to spend up to their GREAs—Oldham, Birmingham, Wolverhampton, Kirklees and Leeds. Each authority is spending over its target and in some instances well beyond it. However, the authorities will be free of penalty.

    As I have said, the relevant information is incomplete but that which is available has brought some crazy anomalies to light. For example, Salford, a Labour-controlled authority, is budgeting to spend 2·5 per cent. over its target and will be subject to penalty as a result. Wirral, a Conservative authority, is budgeting to spend 2·5 per cent. over its target but will not be subject to penalty because it will not exceed the GREA. Gateshead, a Labour authority, is budgeting to spend 3·7 per cent. above its expenditure target and will be subject to penalty. Oldham, which is also a Labour-controlled authority, is budgeting likewise to spend 3·7 per cent. above its target but it will be subject to no penalty because, although it is spending precisely as much over its target as Gateshead, it will be below its GREA.

    Bury, a Conservative-controlled authority, is budgeting to spend 4·9 per cent. over its target and will be subject to penalty. Bolton, a Labour authority, is budgeting to spend 5·2 per cent. over its target but will be subject to no penalty because it is spending below the GREA.

    5.45 pm.

    The anomalies become even more bizarre the more we examine them. Tyne and Wear, which is a Labour authority, is budgeting to spend 13·9 per cent. over its target, and the House will not be surprised to hear that in these circumstances it will be subject to penalty. However, Leeds, which is also a Labour authority, is budgeting to spend not 13·9 per cent. but 16·4 per cent. above its target, and will not be subject to penalty because it is spending within its GREA.

    I have chosen these examples to show the demented nature of the irrationality and to demonstrate that it does not exclude Conservative councils. The Government are so bad at the way in which they connive that they cannot even do a political fiddle. If a Government cannot manage that, they are failing in what is expected of them.

    The counties provide an interesting example. If there is one group of authorities which is responsible for overspending beyond targets, it is Conservative-controlled county authorities, which are spending more than their targets but seeking to escape penalty by remaining below their GREAs. The unreasonableness of the targets combined with the GREA loophole is estimated—this is based on the latest information that is available—to have led not to the £790 million overspend that we anticipated but to an overspend of £1,460 million. The shire counties are responsible for 41 per cent. of that huge overspend. The House should remember that the shire counties number only 45 out of the 411 local authorities in England.

    I know that the right hon. Gentleman does not want to mislead the House with his ingenious use of statistics. I think that he said that the shire counties are responsible for 40 per cent. of the overspend. Perhaps he will tell us the level of expenditure that is represented by the shire counties. If he does not have the figure readily to hand, let me tell him that it is about 50 per cent.

    I realise that. However, the Government have rigged the rate support grant. Last year the counties received an increase in RSG. It was increased from 32 per cent. of the total to 53 per cent. We do not have the figures for this year. That increase is one of the reasons for their high level of expenditure. They are buttressed by RSG.

    No, it is mildly right. The right hon. Gentleman has a tendency to blurt things out. He must take great care. These statistics are based on figures that he supplied to me. A simple pocket calculator—I shall be ready to supply him with one—will allow the right hon. Gentleman to arrive at the same conclusion. In the circumstances, it is no wonder that the condemnation of the Government is spreading far more widely than was previously the case. Last week there was a leading article in The Daily Telegraph which stated:

    "For all his grand gestures Mr. Heseltine has worse confounded the confusion. Mr. Heseltine has imposed somewhat arbitrary limits on spending and still more arbitrary penalties on offenders. The result has been litigation, bad tempers and no real brake to extravagance. The fundamental problems relating to tiers of Government and the welter of unnecessary statutory duties remain untouched."
    It is true that the Secretary of State's alleged controls have not led to reduced rate burdens. The average rate increase, so far as it is known for the financial year that began last week, is higher than inflation. In London, it is Conservative-controlled councils which have the highest rating. Of the 15 councils that plan to increase their general rate by more than 11 per cent., the current rate of inflation, only one is Labour controlled. Although some Conservative authorities, including the authority to which I pay rates in London, Westminster, are blaming the precepts from the GLC and the ILEA, the fact is that Labour authorities have had also to bear those precepts. Yet, on average, Labour authorities in London are rating much below Conservative-controlled authorities.

    I think, on any understanding of the English language, "rating" means the amount of rates that are charged. Does the right hon. Gentleman accept that the rates charged consistently by Labour authorities in London are higher than those charged by Conservative authorities when one considers the rate in the pound?

    I am sorry that the right hon. Gentleman has fallen so easily into that trap. He will now have to withdraw everything that he said about the figures issued by my hon. Friend the Member for Blackburn (Mr. Straw) in which my hon. Friend showed that people living in Labour authorities were paying less in rates than people living in Conservative authorities. The Minister stood his own argument on its head and said that this was not true: it was not what one paid in rates but the rate poundage that counted. Now he says precisely the reverse. The right hon. Gentleman had better make up his mind where he stands. My hon. Friend the Member for Blackburn has proved conclusively that people living in Labour areas are paying less in rates than people in Conservative areas.

    Is the right hon. Gentleman advancing the theory that a large department store in Oxford Street should pay no more rates than a corner tobacconist in Newcastle?

    I am very much in favour of a large department store in Oxford Street paying more in rates. I am not, however, a large department store in Oxford Street; I am a householder living in Westminster. I am paying vast rate increases because of the profligacy of Westminster city council on things that are unimportant, including the sending out of wasteful, expensive and politically motivated leaflets for which I, as a Westminster ratepayer, have to pay. In the end, as The Daily Telegraph among others has pointed out, it is the sheer irrationality of the grant that is the most onerous factor. That is one reason for the Opposition moving the new clause.

    We refer to the level of prices, costs and remuneration. Those factors are among the reasons for the irrationality of the basis upon which the Secretary of State has approached the rate support grant. We say that if such costs rise above the level laid down in the rate support grant report, as they already have, the Secretary of State should move a supplementary report to compensate local authorities.

    As well as those factors, there is also the question of the lawfulness of the targets and the penalties being laid down by the Secretary of State. All hon. Members know—the Minister has admitted it—that the targets and penalties of last year's hold-back exercise were unlawful and that the penalties cannot be imposed until this Bill becomes law. The Minister has said—it is in the rate support grant report—that clause 4 clarifies the situation. Now that we have produced for the House and the country the Anglo-Heseltinese dictionary that is necessary for people who study rating matters, we know that "clarify" means to make lawful retrospectively that which was unlawful when originally done by the Secretary of State for the Environment.

    We knew that the targets and penalties of the hold-back exercise were unlawful. We thought that we knew that the targets for the financial year that began last week were equally unlawful but that they would be made lawful when this Bill becomes law. It is now said that the targets will not become lawful even when the Bill, as drafted, becomes law.

    The Government have had three shots at drafting clause 4. They tabled it; they amended it; they reamended it. We are now told—this requires clarification frome the Minister—that clause 4 as it is before the House is still wrong. We are now told that the targets referred to as guidance in the clause will remain unlawful if the Bill is carried in its present form because they are constructed with the PESC figures. We have had brought to our notice that it is considered that targets constructed on PESC figures will not be targets that are stated in clause 4(1) as being
    "in accordance with principles applicable to all local authorities."
    Because of the phraseology of guidance issued
    "in accordance with principles applicable to all local authorities"
    we are told that not only are the spending targets for the current financial year unlawful in the Bill as at present drafted but that the exclusions from the targets—the limits—of spending on urban aid and riot damage will be unlawful despite the fact that the Government say that these elements will be excluded from the spending limits.

    It is essential that we should hear a statement from the Minister clarifying the position—a statement that will tell the House whether, five months after the Bill was originally introduced, after the withdrawal of the Bill, after its reintroduction, after the amendment of clause 4, after the withdrawal of the amendments on clause 4, after the tabling of new amendments on clause 4 and after the incorporation into the Bill of the new amendments on clause 4, this Bill still contains a basic flaw at its heart and that clause 4, as drafted at present, is not fulfilling what the Government say it will fulfil. If that is so, I tell the Government here and now that this House, which has spent many months on the Bill, will regard it as intolerable if they seek to remedy their further mistakes by slipping in amendments for passage in the House of Lords. It is the House of Commons that has been put to prolonged inconvenience by the Government's incompetence in drafting the Bill.

    The Government would be treating the House with discourtesy if they were to seek to pass the Bill in a form—it is for them to tell us whether this is so—that they knew themselves to be faulty. If the Government treat the House with any respect, they should abandon this debate until they are ready with new amendments to clause 4 which they can present to the House so that hon. Members may consider them carefully, debate them and decide whether to seek to amend them. I am assuming that when the Government draft the amendments they will get them right at the fifth attempt. They cannot be relied upon to do so. They have made four attempts so far and have got it wrong every time. We want to know now whether the Government think that they have got it right this time. if they have got it wrong, we want to know that they are sure that when they amend the Bill again they will get it right. There is a procedure whereby Bills can go backwards between the House of Commons and the House of Lords, but if it is done too frequently it is likely to get noticed.

    My right hon. Friend makes too many assumptions for my liking because he seems to say that the Government have clause 4 right. May I cast my right hon. Friend's memory back to when this No. 6, 7, 8, 9 or 10 Bill was first introduced? The Government assumed then that they had clause 4 right and argued that they had. They subsequently brought in an amendment to clause 4 and argued that that was correct. Later they brought in another amendment to the amended clause 4 and argued that that was correct. We now understand that this is clause 4 mark 58, and this one is correct. However, my right hon. Friend has just told us that there is another clause mark 59 coming up which again will presumably be right. If all those clauses were supposed to be right, how can my right hon. Friend assume that the latest effort will be right?

    I accept my hon. Friend's correction. It was an act of impertinence on my part to believe that the Government were likely to get it right on this attempt, the next one, or the one after that.

    The Opposition want a categoric statement from the Government on the position on clause 4. If the case is not as I have started it, we will be corrected, although only if the Government are 100 per cent. sure. If what we are saying is right, the best thing that the Government can do is to abandon this botched-up and ill-starred Bill altogether. It has brought them nothing but trouble since they so unthinkingly launched it.

    6 pm

    I support the new clause for a number of reasons. First, in many ways local councillors are having to fulfil a dual capacity of not only serving their constituents in their wards but having to immerse themselves in the detail of law and becoming Philadelphia lawyers. At the same time they are having to find out the details of how chartered accountancy works. It is not the job of a local councillor to become a professional in either of those capacities. Yet, as a result of this legislation introduced by the Secretary of State and the Government, it is becoming a nightmare for people to become local councillors.

    In Committee, I suggested that it would be appropriate for the Government to bring forward and amendment to clause 4 so that we could be made aware of the Government's true intentions, after they had got the Committee in the mess that they had. Now we hear that there is to be a further new clause 4—probably to be introduced in the House of Lords—and we are being asked to vote for legislation that the Government must think is inadequate. That seems to be a crazy way of going about things.

    As I said before, it is a nightmare for people to work in local government. They do not know whether they are coming or going, and this legislation makes things worse. Rate support grant settlements are more complicated to understand these days than the Rubik cube. Local councillors can be seen muddling through pages and pages of circulars from central Government and diktats and new amended pieces of legislation, all of which lead to the complete bewilderment of those who are there to serve their local constituents.

    Local councils should have the inalienable right to levy a supplementary rate. I do not see why it should be a matter for central Government to interfere in these matters. If local authorities make a mess of things, local electors can throw them out. Why should the Government constantly interfere with the work of the local administration?

    I think it was Disraeli who coined a phrase to the effect that centralisation is the death blow of freedom. He must be turning in his grave today considering the things that the Government have introduced within the past three years. There was the Local Government, Planning and Land Act, then the Housing Act and now this latest legislation. All three pieces of legislation add up to the same thing—the reducing of powers of local authorities and the taking of more power to the centre.

    In many ways the approach being adopted towards local authorities is similar to the approach that Cromwell adopted towards the monasteries—first list them, then bust them. Clearly, the Secretary of State's intentions have been at all times to thwart the democratic will of local electors in electing councillors to serve them.

    The right hon. Member for Manchester, Ardwick (Mr. Kaufman) referred to a specific local authority where already great chaos has been caused as a result of the proposals in this legislation. It is worth looking again at the example of Bedfordshire county council. In Committee, the Minister accused me of maligning the leader of the Conservative group on the county council because I suggested that he had told local ratepayers not to pay their supplementary rates bills. It comes ill from the party that calls iself the party of law and order to go round telling people to defy the legitimate rights of the local council to levy a rate or a supplementary rate. That is still the law as it stands today.

    However, the Government intend, retrospectively and against every tenet of natural justice, to enact legislation that will bust that local authority and undo what a local authority quite legitimately decided to do in a democratic meeting of its council. It is interesting to examine the legal opinion given to the members of the Bedfordshire county council. It stated that it is a general rule of English law that no statute can be construed so as to have retrospective operation, unless such a construction appears clearly in the terms of the Act or arises by necessary and distinct implication. On the basis of that advice, the county council stood by its original decision to go for a relatively small increase in rates to ensure that it could continue running local services.

    It is worth noting that Bedfordshire county council has suffered badly as a result of the decisions taken by the Government. For instance, over the past three years it has lost more than £12 million in central funds. In 1981, prior to the county council elections, the Conservatives used the balance of £11 million in a desperate bid to retain their seats on the council. While opposing the cuts in the council's police budget, the same Conservative leaders have been urging people not to pay the supplementary rates that have been levied in an attempt to retain the level of services provided by the county council.

    The hon. Gentleman is giving us a great lecture about Bedfordshire county council and the difficulties in the county. Will he address his mind to the difficulties that face industry in that county and how the proposed supplementary precept and rate would affect it and disturb its employment base?

    Yes, I shall do so. It is relevant to the amendment.

    It is worth noting precisely what it is that the Bedfordshire county council is attempting to do. It is trying to maintain services and at the same time to improve certain things that it promised to do in the mandate it asked for at the election. It is not doing anything that it did not say it would do at the time. It would be dishonest of it now to run away from the commitment that it gave to the electors. Equally, the Labour Party has a majority on that council and, therefore, a right to implement its policies.

    The hon. Gentleman is not answering my question. I referred not to services but to industry in Bedfordshire and the effect that the supplementary rate would have on it. Will the hon. Gentleman get his nose out of community politics and address himself to the problems of Bedfordshire industry?

    I am aware of the effects of massive rate increases on local businesses. That is why the Liberals on Bedfordshire county council attempted to introduce rates that they regarded as being reasonable to maintain services without at the same time hitting local industry unduly.

    The county council now has to levy a 31 per cent. rate increase simply to stand still and provide the same services. The Liberals and the Labour Party were characterised on that county council by the Conservatives as being wicked. The extra spending that the Liberals proposed amounted to another 2 per cent.

    Two per cent. of the 33½ per cent. increase is our responsibility. The rest of the increase is the responsibility of the Conservative Party.

    The Conservatives have reduced central Government funds to Bedfordshire county council by £12 million over the past three years.

    I am grateful to the hon. Member for Liverpool, Edge Hill (Mr. Alton) for making such a good case for the Bedfordshire county council supplementary rate. I hope that he is prepared to apply similar arguments to the supplementary rate levied by the Merseyside county council.

    My argument is that it should be a matter for local authorities to decide for themselves. If hon. Members had listened, they would have heard me say that councillors were elected on the basis of the programme that they offered to the electorate. The programme that the Bedfordshire county council Liberal group offered was to maintain services and to improve them in certain areas. On Merseyside, the county council is Labour-controlled and dominated by Left-wing elements. That has led to the resignation of the leader and deputy leader of that county council's Labour group, because they could no longer stomach the decisions made in the name of the old Labour Party. Under its Labour leadership, the county council made such profligate proposals that they had to be opposed. For example, Labour councillors wanted to open a resources centre, which is a total waste of ratepayers' money.

    These matters must be looked at on their merits by local councillors. They should not be matters for Parliament to decide. This legislation is ill-conceived, because it takes away power from local councillors.

    I think that everyone agrees that the whole of local government finance, especially the rates, is now in chaos. It was not an easy task to get it into this state, but the Secretary of State has spent three long years working hard at it. The right hon. Gentleman reminds me of a certain Left-wing Labour leader in Liverpool who has vowed publicly to grind the city to a halt. Both are part of that other alliance that uses local government, local money and local people for its own selfish and dogmatic ends.

    I support the new clause.

    I agree with much that the hon. Member for Liverpool, Edge Hill (Mr. Alton) has said. I am amazed by Government supporters who appear. though one can never be certain because there have been many cartwheels performed before, to be about to oppose new clause 3.

    The new clause would at last put some sanity, though not enough, into this nonsensical Bill. The ability to raise a supplementary rate is being taken away from local authorities, and new clause 3 is proposed as an alternative. Obviously it is not the full alternative, but it will help. The advent of the Bill has left officers in local government in a complete void. They do not know what advice they can give, and they look to the new clause to provide some sense at last.

    6.15 pm.

    I assume that the Government will be totally opposed to the new clause. However, I remind them that it is taken from their own Act. The new clause refers to the Local Government, Planning and Land Act, a Conservative Act. I should have thought that they would support their own Act. The clause mentions section 61, which refers to
    "supplementary reports for that year."
    In the new clause, we seek to put some bones on what the Government have said in the interests of local authorities. The Government agree that supplementary reports are necessary. That is provided for in their 1980 Act. However, they seem reluctant to spell out clearly and precisely, so that those in local government know exactly where they are going and what they are about, what should be contained in these supplementary reports.

    My right hon. Friend the Member for Manchester, Ardwick (Mr. Kaufman) spoke of the penalties and targets. I do not want to go over that ground. But there are other aspects dealt with in the clause, apart from the penalties and targets. Any hon. Member who has served in local government will agree about the uncertainty of the finances of local government. At best they are based mainly on guesstimates.

    Again there seems to be agreement between the Government's Act and our new clause. The Government provide in section 54(4)(d) that
    "the current level of prices, costs and remuneration and any future variation in that level which in the opinion of the Secretary of State will result from decisions which appear to him to be final and which will have the effect of increasing any particular prices, costs or remuneration."
    So it is agreed that prices, costs and remuneration are relevant. The difference is that the Government believe that the dictatorial hand of the Secretary of State is the only one that shall decide what prices, costs and remuneration are to be considered.

    That is absolute nonsense. One has only to consider the time when the Secretary of State decides prices, costs and remuneration. There is a gap in the financial year when the financial position changes, sometimes as a result of Government policies. The Government are well aware of the disastrous policy changes that there have been. Interest rates change, prices go up, costs go up and wages go up from the time that the Secretary of State makes his guesstimate of the rate support grant.

    The Opposition say that that is reasonably fair. No one can foresee the future, though one gets that impression from reading the Act. But no one can see into the future, and it is reasonable that the Secretary of State shall make supplementary reports. That is the fundamental difference between the Opposition and the Government. The Opposition say that the Minister "shall", whereas the Local Government, Planning and Land Act 1980 says that he "may". Having said that he should make supplementary reports bearing in mind that during the year prices, costs and wages change, we should try to spell out exactly what is to be done in those supplementary reports. If the Secretary of State makes a supplementary report—and up to now there has been no disagreement about a supplementary report being made—it seems reasonable to spell out what is to be contained in it and what the method of that supplementary report shall be. If we do not do that, we achieve nothing.

    We do that by stating what shall be contained in the supplementary report and the matters of which it should take account. But we go even further, because we do not see the Secretary of State as the be-all and end-all of knowledge. The right hon. Gentleman's track record lets him down too much even to think of giving him that dictatorial power. The Opposition are not prepared to say that one man, whether it be a Conservative or a Labour Secretary of State, should be in a position to make these decisions.

    When the Secretary of State makes his supplementary report, the Opposition say that he should make it to the people at the sharp end—those in local government—and agree the data and agree the prices, costs and wages which are to be considered. Only when they have been agreed is the right hon. Gentleman in a position to publish that report. In addition, he must state the amount of the block grant that is payable to each local authority, and, more important—something that the Government always manage to hide—the method of calculation. Nothing in the Bill has confused local authorities more. It even makes them hanker for the old method. People working in local government did not like that method, but the implications of this Bill make them nostalgic for it.

    Does my hon. Friend really have confidence in the ability of this Secretary of State or this Government to forecast accurately, for instance, the levels of inflation and wages, when the built-in figures in this year's settlements are woefully inadequate—4 per cent. for wages and 9 per cent. for inflation? They seem to be totally out of touch with reality.

    By no stretch of the imagination do I consider that this Secretary of State is capable of forecasting anything. One of the problems for local government is that the Government do not make truthful forecasts or view matters in their proper perspective. Many Government actions create inflation, but then the Government profess not to have created inflation. They fix a low rate support grant, with disastrous consequences for local government.

    The new clause is necessary because this measure has created more confusion in local government than any other legislation before has done. The Government have been successful in one respect: they are the only Government that I recall who have united all local authority associations of all political colours against what they seek to do. Worse than that, they have put local government officers who are employed to give legal and professional advice in an impossible position. I do not come from Bedford, but that area is a monitor of what is happening in local government throughout the country. Something which at present is lawful and on which chief executives have to pronounce suddenly becomes retrospectively unlawful. Local authorities are in a mess. What a chief executive says today will be illegal when the Bill comes into force, although it is legal when he says it. New clause 3 is an attempt to clear the mist that is slowly descending on local authorities.

    I want to highlight what I am saying by quoting a letter which, although it relates to Bedfordshire, applies throughout the country. I do not seek to make a political point. I want to show the utter confusion that now exists in local government. The chief executive says in his report to the council:
    "In what is undoubtedly a very complex and difficult situation,"—
    without new clause 3 it will be worse—
    "and probably one without precedent, any advice which is tendered to Members can only be a personal judgment. Again, as has been the position for some months, the easier course for any officer would be merely to present the issues to the Members and conclude 'the committee's instructions are requested."'
    That is what the Bill is doing to local officers who, because they now have to look at their own legal position, may have to opt out. The chief executive goes on:
    "I would see this as an inadequate discharge of a professional responsibility and propose therefore to put forward a recommendation. It is my opinion"—
    it should be noted that it is his opinion; the way the Bill is drafted, that is all that he has to rely on, because the legal validity is changing day by day—
    "that the Council should continue to maintain the validity of the supplementary precept and should take whatever measures are necessary to see that its validity is established but that, at the same time,"—
    this is where local government is in complete confusion—
    "some restraint should be applied to the commitment of expenditure so as to reduce the difficulties which would occur if that argument should fail and the income from the supplementary precept should be lost after all".
    That is what the Bill is doing to local government—apart from the many other ways in which councils are being placed in utter confusion.

    I do not claim that the new clause will solve every difficulty. The letter refers to other matters which are relevant to later amendments, but I shall not refer to them now because they are not germane to this new clause. New clause 3 may not be the be-all and end-all. All I claim is that it would make this nonsensical and obnoxious Bill a little better than it is. If the Government have the interests of local government at heart, they will accept it because it will help to clarify the situation.

    New clause 3 is particularly relevant to this legislation and to the Government's administrative and executive action in determining the rate support grant for the financial year 1982–83. I shall describe how the new clause and the Government's actions in that respect affect Merseyside and the metropolitan district of Sefton, in which my constituency lies.

    New clause 3 puts back into statute law the provision for a supplementary report to be made by central Government during the course of a financial year. Traditionally, the purpose of a supplementary report is to enable the Government to put right mistakes, errors of judgment or miscalculations made when the original rate support grant settlement was decided and implemented. It has always been felt advisable that central Government should have the power to correct, adjust or change the original rate support grant settlement as the financial year progressed because no Government—no matter how successful they may be at predicting economic trends, inflation, unemployment or wage settlements—always get it exactly right. This Government are no better at assessing the likely outcome of economic trends than any other Government. For that reason, we feel that they should retain the power to produce a supplementary report and to alter the rate support grant settlement originally decided at the beginning of the year.

    New clause 3 is particularly important because the Bill takes away all the other options for correcting mistakes that have been made in the rate support grant settlement. It takes away the options that were previously available to local government to correct the mistakes. For instance, the assumptions made in the Government's rate support grant settlement of 4 per cent. for wage settlements and 9 per cent. for inflation are totally inaccurate, but local government is landed with a block grant rate support grant settlement dependent on those two assumptions.

    6.30 pm

    The Government must introduce a supplementary report during the current financial year—we have passed 1 April—to rectify that mistake, but, according to the Bill, the Government do not have the power to do so. Local government does not have the power to make up the deficit that every local authority in the country will face as a result of the Government's miscalculations. We have already pointed out that the Bill takes away from local authorities the power to levy a supplementary rate to put right the mistakes and to close the gap between the assumed and actual rates of inflation and wage increases.

    In addition, if there is a crisis within a local authority and the grant is withdrawn, or if there is not enough rate support grant available and the local authority cannot raise the extra revenue from the rates because it is not allowed to levy a supplementary rate, it cannot pass on a deficit to the following year. If it does, it will be penalised by the Secretary of State for overspending and for passing on overspending from one financial year to the next.

    Therefore, the option of maintaining a deficit and carrying it forward and levying a rate for it in the following year is closed to local government. If a local authority, because of economic difficulties, faces the prospect of becoming insolvent—a prospect that never existed before the Government began legislating to prevent local authorities from raising revenue to make up for losses in grant—the first call on its moneys goes to those who have lent it money, not to its employees or anyone else. The first call on a local authority that has borrowed money is the interest that must be paid. That is another area where local government is in a Catch-22 situation and where it is important that the Government are at least in a position to move in to assist with a supplementary report.

    What will happen if new clause 3 is not accepted must be related to what is happening on the ground. This is not an academic debate. It matters in terms of the services provided by local authorities for local people. Before May 1981 a Conservative-controlled Merseyside county council overspent £16 million on its own Government's target and left a £5 million deficit to be carried forward into the financial year 1981–82. That £5 million deficit which was left by the Conservatives to an incoming Labour county council, led to a penalty being imposed by the Secretary of State for the Environment who withdrew grant for the current and the following financial years.

    When the Merseyside county council came to formulate its budget for 1982–83, it faced a number of choices. There was an aspiration budget of £180 million, which everyone would like to have seen. That would have provided the best possible services for Merseyside. A budget of £168·7 million was put forward by the various services committees of the council, which, having scrutinised their budgets, made cuts where it could. A budget of £157 million was proposed by the officers of the local authority, because they did not want to annoy the Government or the Secretary of State. They wanted to do what the Secretary of State asked them to do, but they could not quite make it, because the Secretary of State's target figure was £140 million. The Merseyside county council examined the services committees' request budget of £168·7 million and managed to reduce that to £165·5 million. The £140 million target required by the Secretary of State was deducted from the £165·5 million. That left £25·5 million above the Secretary of State's target. That was done 'to maintain essential services in Merseyside.

    The Labour group on the Merseyside county council knew that the Bill was going through Parliament, but its strong view was that it was acting legally and that the Secretary of State had no legal power of super holdback or clawback under the existing legislation when the budget was made or as it exists now as the precept goes out to the districts and the rate bills go out to the electors. The budget was drawn up in the knowledge that the councillors were acting legally.

    What is sad is that the Bill may or may not—the legal advice that the Minister offered in Committee does not clarify the position—retrospectively make the actions of Merseyside county council illegal. The advice given to the county council is "We do not think that it will retrospectively apply to you. You are certainly acting legally at the moment." The Minister's remarks in Committee lead us to believe that he has received advice which leads him to believe that the Bill is all right as it is because it will retrospectively make illegal the action taken by the Merseyside county council.

    I suggest to the hon. Member for Liverpool, Edge Hill (Mr. Alton) that his defence of Bedfordshire county council in its desire to fulfil its election commitments, to keep its promises to maintain services and, as a consequence, to raise a rate higher than the target set by the Secretary of State, applies equally to Merseyside county council.

    I rise simply to inform the hon. Member for Bootle (Mr. Roberts) and other hon. Members that I take that view and that it would be illogical not to do so. It is a matter for the Merseyside county council to determine. I accept that the Labour Party has a majority on Merseyside and, in many ways, is doing what it said that it would do when it was elected. If local electors do not like that, they should replace Labour councillors at the next local election.

    My objection to what Bedfordshire county council has now done is that it was intimidated into taking that action by decisions that were taken in Committee, because the Bill will apply retrospectively to that council. That goes against what the electors in that area wanted.

    I am grateful to the hon. Member for Edge Hill for his assurance that he supports what the Merseyside county council is doing to fulfil its election pledges.

    In Committee, I asked the Minister a specific question about local authorities receiving advice from various quarters about what was and was not legal?

    The Merseyside county council hopes to receive a supplementary report to help it make up the money lost because of extra inflation and wage increases, greater than anticipated expenditure on the police service and the expenditure—which the Government have still not met—to deal with the results of the rioting in Toxteth.

    The council also wants a supplementary report, which will give it a greater block grant allocation, so that it can provide bus passes for old-age pensioners in the Sefton area, which includes my constituency. The Sefton council—the only authority on Merseyside which is controlled by the Conservatives—is so measly that it will not give pensioners proper bus passes, but insults them by providing a handful of tokens, which run out within about three months, after which they cannot travel without paying the full fare.

    During the county council elections, the Labour Party promised to introduce a uniform bus pass for the whole of Merseyside and, in default of the Sefton council doing its duty, to provide passes for pensioners in Sefton. The council was advised that it might be illegal to provide bus passes for the elderly citizens of Sefton and elsewhere on Merseyside by other ratepayers and district councils. It was suggested that if the county council provided the service for Sefton, some ratepayers might be paying twice, which could be illegal.

    The county council consequently expressed its desire to establish arrangements, if lawful, for the concessionary travel system to be on a basis similar to that in Liverpool and other districts. We are still waiting to find out whether that is lawful. I hope that the Under-Secretary will give me an answer.

    I strongly support the latter part of the hon. Gentleman's argument. What is being done to local government is creating a licence for lawyers to make money. As a result of the legislation, more cases are going to court, and those who benefit are not the ratepayers but the legal profession.

    I welcome that intervention. I must be careful. If the hon. Gentleman and I continue to agree with each other, those on Merseyside will not understand what is happening.

    I hope that the Under-Secretary will accept the new clause, because it will give to him and his colleagues the flexibility that they need to deal with the rate support grant settlement as the year progresses. It need not commit them to extra expenditure, but it would show local authorities that the Government are not as vindicative as they appear to be.

    I wish to put the debate on the new clause into its proper context. New clause 2 sought to make the legislation temporary and we know from the result of the Division on that clause that the Green Paper on the replacement of the rates and the Government's stated intention to abolish the rates are nothing more than a vote-gathering sham and were never intended to be more than that. If they had been otherwise, the Government would have accepted the new clause.

    We now have to deal with the rest of the nonsenses in the Bill. It is clear that there will be nothing to replace the Bill in the foreseeable future, that the Government have no intention of treating it as temporary legislation—as was at least implied—and that the Bill will be the law for the lifetime of this Parliament and Government. Let us have no illusions about that.

    6.45 pm

    One of my problems with the Government is that they are like the Hapsburgs—they have remembered everything and learnt nothing.

    I am grateful for the results of the hon. Gentleman's classical education.

    Both the accurate quote and the quote used by my hon. Friend are applicable to the Government.

    I am grateful to my hon. Friend. The point that I am about to make is underlined by the interventions.

    The Government have had adequate time to study the Layfield report, which was published in 1976. Paragraph 46 of the report states:
    "Wages and salaries tend to rise faster than other costs in the economy. Between 1972 and the first half of 1975"—
    we did not have a Labour Government in power for most of that time—
    "this tendency was particularly marked. In those years the relative price effect, which we describe in paragraphs 29–32, was large, so putting local government finances under extra strain. Because of the relative price effect local authorities would have been obliged to increase their expenditure beyond the general rate of inflation even if'—
    and this is important—
    "they had only maintained their services at existing levels … and if the wages and salaries they paid had increased no faster than wages and salaries generally."
    It is bad enough that the Government have not taken that aspect into account, but that is compounded by Layfield's comment:
    "Wages and salaries in local government therefore increased faster than wages and salaries generally and so aggravated the problem."
    Why did those wages and salaries increase faster? The Layfield committee said:
    "the emphasis in national pay awards was on lower-paid workers, many of whom are employed in local government."
    The relative costs of local authorities are not directly related to the level of inflation and if the country decides that the low-paid deserve to keep up with inflation better than the higher paid the preponderance of low-paid workers in local authorities means that the costs of local government are higher than the general level of wage inflation at the time.

    Layfield goes on to say in paragraph 47:
    "Any misjudgement of the likely amount of inflation in the coming year could lead to a serious shortfall in the necessary income. In turn that required greater rate increases in the succeeding year than the spending in that year might demand."
    It is not as if the Government did not have any evidence before the matter was discussed in Committee. They had the considered opinion of an emiment Royal Commission and they ignored it.

    The situation becomes worse in paragraph 48. It says:
    "Within their normal provision for contingencies and reserves, local authorities have only limited scope for meeting increased expenditure once the rates for the year have been set."
    If that was true in 1976, given that supplementary rates are to be banned under this Bill, it is even more true now. In 1976 the Layfield committee gave the Government the benefit of its advice.

    The final crunch in the Layfield report comes in paragraph 49, which says:
    "Further difficulties were caused for some authorities by the increasing tendency of aggrieved ratepayers to withhold rate payments pending the outcome of appeals".
    Given the level of uncertainty which the Government are building in to this legislation, that seems to be much more likely in the future than it was in the period leading up to the Layfield report of 1976—the good old days which many Conservative Members try to hark back to.

    To be fair, all Governments tend, at least initially, to put relatively unrealistic figures upon the projected level of inflation for the coming year. My criticism of the Government is that the word "relatively" is inadequate to describe the misinformation which they have attempted to perpetrate upon the populace in general and upon local government in particular.

    I disagree fundamentally with my hon. Friend the Member for Bootle (Mr. Roberts) when he says that our proposal is intended to put right errors of judgment. It is intended to do no such thing. It is intended to set the law right, to make the Bill workable. If it is not accepted, the Bill will not be workable.

    A local authority has an absolute duty to levy an adequate rate. If it tries to levy that rate on the basis of 4 per cent. and 9 per cent., local authorities know—and if they are honest the Government will accept—that that level of rate is inadequate. The only way that that shortcoming can be made up is for the Government to accept the responsibility which our proposal lays upon them. This has always been the case in Scotland, where we did not have access to supplementary rates. It was only that kind of provision which enabled us to stay within the law in levying a rate.

    The Government might be trying to make a political point. They might have been trying to lead people down a certain path, and if people did not go down that path—even if the Government had tried their best and failed—at least they would bail out the local authorities in the sense of levying an adequate rate.

    It is impossible under the Bill for any local authority to carry out its legal duty to levy an adequate rate. I say most strongly to the Minister that if he will not accept the new clause how will he make up the shortfall which as a result of Government mis-estimates—deliberate mis-estimates in many cases—will occur in the income of local authorities to enable them to carry out their legal duty to levy an adequate rate?

    I rise, much to the sadness of Labour Members, to urge the House to oppose this new clause. As is so often the case with debates of this kind led by the right hon. Member for Manchester, Ardwick (Mr. Kaufman), a considerable amount of time has been spent, not on what the clause contains but on other matters which are considered germane to the discussion. That is understandable to those who served on the Committee.

    First, the right hon. Gentleman made some claims about the counties receiving substantially more recently than they should have done at the expense of other classes of authority. He probably missed the point that in the years prior to 1981–82 part of the counties' grant resources was paid as a resources element to the district, unlike block grant, that counted as part of the district's rate income and was therefore taken by the county through the precept.

    The simple arithmetic proposed by the right hon. Gentleman simply does not work. I suspect that that has happened once or twice during the Bill's progress. The relevant part of the resources element paid to the districts has to be added to the share received by the counties. When that is taken into account, it will be seen that there has been no major change in the counties' share of grant between 1980–81 and 1981–82. I sincerely hope that the right hon. Gentleman will accept that.

    The second matter raised concerned clause 4 and the question of the public expenditure control system and whether the Government were seeking to make further amendments to it. As a layman, looking at clause 4, I believe that the principles enacted, including the
    "principles applicable to all local authorities"
    are those that fairly operate.

    It is common in local authority financing to find that a number of local authorities do varying things with their income. Some are police authorities, some programme authorities and some education authorities. However, all authorities have to operate within budgets which relate to the principles of public expenditure. That is common to Governments of both parties. The detailed use of those words has been raised by my hon. Friend with the local authority associations.

    Discussions on the fine points of legal definition are continuing. If some clarification is recommended, it would be appropriate for an amendment to be made. That would be within the ambit of discussion. Clause 4 contains an acceptable definition of the principles applying to all local authorities. Indeed, a wide range of local authorities would seek to make exemptions anyway. Programme authorities are a typical case in point. Should there be any consequential change, an amendment will be tabled in another place.

    The hon. Member for Bootle (Mr. Roberts) slightly misconstrued the present position. He implied that there is no power to make a supplementary report in existing legislation. Under section 61 of the 1980 Act the Secretary of State has the power to make a supplementary report
    "at such time … as he thinks fit".
    However, neither the 1974 nor the 1980 Act makes it obligatory on him to use that power. I suspect that that is the point that the hon. Gentleman was wishing to make.

    7 pm

    The statutory basis for rate support grant settlements in the 1980 Act is the same as that in the 1974 Act. At any given time the Secretary of State has to take into account present and prospective levels of pay and price increases which affect local government. He must take a prospective view of trends in expenditure.

    My right hon. Friend the Secretary of State, like his predecessors, has made clear in each RSG report the rates of increase which he has taken into account. Most increases in costs are in the hands of the local authorities and not of the Department.

    Does the Minister agree that the legislative framework for the rate support grant is the same as it was in making the settlement on assumptions of inflation and wage settlements? Does he agree that the proposed legislation takes away the power of local authorities to adjust for discrepancies in the basis on which the rate support grant is calculated? Is that not why the new clause is necessary? If local authorities cannot adjust in the way in which they have been able to adjust, surely the Government must be required to adjust.

    I do not accept that. We are talking about the cash planning by which local authorities are controlled. That was the discipline used by the right hon. Member for Stepney and Poplar (Mr. Shore). The circular issued at the time of the last settlement promulgated by the right hon. Member for Stepney and Poplar incorporated a pay factor of 5 per cent. The circular stated:

    "Expenditure programmes should therefore be planned and managed on the basis that even if pay and prices increase faster than estimated, for the purposes of the cash limits, the grant will be held within the limits".

    I accept what the Minister has said, but I hope that he will accept that the difference between then and now is that my right hon. Friend the Member for Stepney and Poplar (Mr. Shore) had the opportunity to put the matter right, whereas under this legislation the Secretary of State will not have the opportunity to put right his mistakes.

    I accept that at that time the power of the supplementary rate was not available to the local authority and that that power was available to the Secretary of State. What is being suggested now is, in principle, identical. Local authorities are now budgeting for a full 12 months, just as Chancellors of the Exchequer and Governments must do. The discipline is no different. There is no reason why Opposition Members should assume that what is now required is an amendment to remove the cash control system.

    Opposition Members should bear in mind that the 1979 circular made it clear that the payment of additional grant to match the full increase in expenditure as a result of inflation is not automatic.

    I stress the message that even the Labour Government understood. The level of service provided by local government and elsewhere in the public sector must be determined by the finance available. It is the cash that counts. The new clause would run counter to a cash control policy and should be rejected.

    In the absence of my right hon. Friend the Member for Manchester, Ardwick (Mr. Kaufman), I must reply. The Minister has made an unsatisfactory defence. As a result of what the Government are doing in the Bill and in the Local Government, Planning and Land Act, local government is being made a nightmare not only for councillors but for ratepayers and the public in general. We are asking the Government to accept some reasonableness and flexibility in their control of local government. The Minister has demonstrated once again——

    Will my hon. Friend reflect on the Conservative manifesto in which there was a pledge to give more democracy to local government? Is this the Conservatives fulfilling that pledge?

    This is a demonstration of the way in which the Government fulfil their pledges. There is a mockery and a sham about it. Even the Conservative-controlled Enfield council is aghast at what is happening. Only this morning did the hon. Members for Enfield, North (Mr. Eggar) and Southgate (Mr. Berry) and I receive letters from the town clerk, who complained bitterly about the impost in the legislation.

    My hon. Friends the Members for Bootle (Mr. Roberts), Newcastle upon Tyne, Central (Mr. Cowans) and Blaydon (Mr. McWilliam) and the hon. Member for Liverpool, Edge Hill (Mr. Alton) have considerable experience of local government. They have tried to explain the anguish of councillors in their areas and their belief that damage will be done to local government if the new clause is not accepted.

    The forecasts on which the Government based their settlements were made in November and December 1981, but the Government are looking ahead to the costs to be borne by councils in 1982–83. There is a gap of between 15 and 18 months. As such forecasts are obviously far out of tilt, we ask the Government to introduce a supplementary report. That can be done only in consultation with the local authorities. In this Bill and in others the Secretary of State has taken unto himself more power than any other Secretary of State. The Minister has made a bad job of defending the proposition. I have no hesitation in inviting my right hon. and hon. Friends to press the new clause to a vote.

    Question put, That the clause be read a Second time:—

    The House divided: Ayes 227, Noes 276.

    Division No. 119]

    [7.09 pm


    Abse, LeoCallaghan, Rt Hon J.
    Adams, AllenCallaghan, Jim (Midd't'n &P)
    Allaun, FrankCampbell, Ian
    Alton, DavidCampbell-Savours, Dale
    Archer, Rt Hon PeterCanavan, Dennis
    Ashley, Rt Hon JackCarmichael, Neil
    Ashton, JoeCartwright, John
    Atkinson, N. (H'gey,)Clark, Dr David (S Shields)
    Bagier, Gordon A.T.Cocks, Rt Hon M. (B'stol S)
    Barnett, Guy (Greenwich)Cohen, Stanley
    Barnett, Rt Hon Joel (H'wd)Coleman, Donald
    Beith, A. J.Concannon, Rt Hon J. D.
    Benn, Rt Hon TonyConlan, Bernard
    Bidwell, SydneyCook, Robin F.
    Booth, Rt Hon AlbertCowans, Harry
    Boothroyd, Miss BettyCraigen, J. M. (G'gow, M'hill)
    Bottomley, Rt Hon A. (M'b'ro)Crowther, Stan
    Bradley, TomCryer, Bob
    Bray, Dr JeremyCunningham, DrJ.(W'h'n)
    Brocklebank-Fowler, C.Dalyell, Tam
    Brown, Hugh D. (Provan)Davidson, Arthur
    Brown, R. C. (N'castle W)Davies, Ifor (Gower)
    Brown, Ronald W. (H'ckn'yS)Davis, Clinton (Hackney C)
    Brown, Ron (E'burgh, Leith)Davis, Terry (B 'ham, Stechf'd)
    Buchan, NormanDeakins, Eric

    Dean, Joseph (Leeds West)Mc Namara, Kevin
    Dewar, DonaldMcTaggart, Robert
    Dixon, DonaldMc William, John
    Dobson, FrankMagee, Bryan
    Dormand, JackMarks, Kenneth
    Douglas, DickMarshall, Dr Edmund (Goole)
    Dubs, AlfredMarshall, Jim (Leicester S)
    Duffy, A. E. P.Martin, M (G'gowS'burn)
    Dunn, James A.Maynard, Miss Joan
    Dunnet, JackMeacher, Michael
    Dunwoody, Hon Mrs G.Mikardo, Ian
    Eadie, AlexMillan, Rt Hon Bruce
    Eastham, KenMiller, Dr M. S. (E Kilbride)
    Edwards, R. (W'hampt'n S E)Mitchell, Austin (Grimsby)
    Ellis, R. (NE D'bysh're)Mitchell, R. C. (Soton Itchen)
    English, MichaelMorris, Rt Hon C. (O'shaw)
    Evans, Ioan (Aberdare)Morton, George
    Evans, John (Newton)Moyle, Rt Hon Roland
    Faulds, AndrewNewens, Stanley
    Field, FrankOakes, Rt Hon Gordon
    Fitch, AlanO'Neill, Martin
    Flannery, MartinOrme, Rt Hon Stanley
    Fletcher, Ted (Darlington)Owen, Rt Hon Dr David
    Foot, Rt Hon MichaelPark, George
    Ford, BenParker, John
    Forrester, JohnParry, Robert
    Foster, DerekPendry, Tom
    Foulkes, GeorgePenhaligon, David
    Fraser, J. (Lamb'th, N'w'd)Pitt, William Henry
    Freeson, Rt Hon ReginaldPowell, Raymond (Ogmore)
    Garrett, John (Norwich S)Price, C. (Lewisham W)
    Gilbert, Rt Hon Dr JohnRace, Reg
    Ginsburg, DavidRadice, Giles
    Golding, JohnRees, Rt Hon M (Leeds S)
    Graham, TedRichardson, Jo
    Grant, George (Morpeth)Roberts, Albert (Normanton)
    Grant, John (Islington C)Roberts,Allan (Bootle)
    Grimond, Rt Hon J.Roberts, Ernest (Hackney N)
    Hamilton, W. W. (C'tral Fife)Roberts, Gwilym (Cannock)
    Harrison, Rt Hon WalterRobertson, George
    Hattersley, Rt Hon RoyRobinson, G. (Coventry NW)
    Haynes, FrankRodgers, Rt Hon William
    Heffer, Eric S.Rooker, J. W.
    Homewood, WilliamRoper, John
    Hooley, FrankRoss, Ernest (Dundee West)
    Horam, JohnRowlands, Ted
    Howell, Rt Hon D.Ryman, John
    Howells, GeraintSandelson, Neville
    Hoyle, DouglasSever, John
    Huckfield, LesSheerman, Barry
    Hughes, Mark (Durham)Sheldon, Rt Hon R.
    Hughes, Robert (Aberdeen N)Shore, Rt Hon Peter
    Hughes, Roy (Newport)Silkin, Rt Hon J. (Deptford)
    Janner, Hon GrevilleSilkin, Rt Hon S. C. (Dulwich)
    Jay, Rt Hon DouglasSilverman, Julius
    Jenkins, Rt Hon Roy (Hillhead)Skinner, Dennis
    John, BrynmorSmith, Rt Hon J. (N Lanark)
    Johnson, Walter (Derby S)Snape, Peter
    Johnston, Russell (Inverness)Soley, Clive
    Jones, Rt Hon Alec (Rh'dda)Spearing, Nigel
    Jones, Barry (East Flint)Spriggs, Leslie
    Kaufman, Rt Hon GeraldStallard, A.W.
    Kilfedder, James A.Stoddart, David
    Kilroy-Silk, RobertStott, Roger
    Kinnock, NeilStrang, Gavin
    Lamborn, HarryStraw, Jack
    Leadbitter, TedSummerskill, Hon Dr Shirley
    Leighton, RonaldTaylor, Mrs Ann (Bolton W)
    Lestor, Miss JoanThomas, Mike (Newcastle E)
    Lewis, Arthur (N'ham NW)Thomas, Dr R. (Carmarthen)
    Litherland, RobertThorne, Stan (Preston South)
    Lofthouse, GeoffreyTilley, John
    Lyon, Alexander (York)Tinn, James
    McCartney, HughTorney, Tom
    Mc Donald, DrOonaghVarley, Rt Hon Eric G.
    McKay, Allen (Penistone)Wainwright, E. (Dearne V)
    McKelvey, WilliamWainwright,R.(ColneV)
    MacKenzie, Rt Hon GregorWalker, Rt Hon H.(D'caster)
    Maclennan, RobertWatkins, David
    McNally, ThomasWeetch, Ken

    Wellbeloved, JamesWinnick, David
    Welsh, MichaelWoodall, Alec
    White, Frank R.Woolmer, Kenneth
    White, J. (G'gow Pollok)Wrigglesworth, Ian
    Whitehead,PhillipWright, Sheila
    Whitlock, WilliamYoung, David (Bolton E)
    Willey, Rt Hon Frederick
    Williams, Rt Hon A.(S'sea W)Tellers for the Ayes:
    Williams, Rt Hon Mrs (Crosby)Mr. J. Hamilton and Mr. L. Cunliffe.
    Wilson, Rt Hon SirH. (H'ton)
    Wilson, William (C'try SE)


    Adley, RobertDunn, Robert (Dartford)
    Aitken, JonathanDurant, Tony
    Alexander, RichardEden, Rt Hon Sir John
    Alison, Rt Hon MichaelEggar, Tim
    Amery, Rt Hon JulianElliott, Sir William
    Ancram, MichaelEmery, Sir Peter
    Arnold, TomFairbairn, Nicholas
    Aspinwall, JackFairgrieve, SirRussell
    Atkins, Robert (Presfon N)Farr, John
    Atkinson, David (B'm'th,E,)Fell, Sir Anthony
    Baker, Kenneth (St. M'bone)Fenner, Mrs Peggy
    Baker, Nicholas (N Dorset)Finsberg, Geoffrey
    Banks, RobertFisher, Sir Nigel
    Beaumont-Dark, AnthonyFletcher, A. (Ed'nb'gh N)
    Bendall, VivianFletcher-Cooke, SirCharles
    Benyon,W. (Buckingham)Fookes, Miss Janet
    Berry, Hon AnthonyForman, Nigel
    Best, KeithFox, Marcus
    Bevan, David GilroyFraser, Peter (South Angus)
    Biffen, Rt Hon JohnFry, Peter
    Biggs-Davison, SirJohnGardiner, George (Reigate)
    Blackburn, JohnGardner, Edward (S Fylde)
    Blaker, PeterGarel-Jones, Tristan
    Body, RichardGilmour, Rt Hon Sir Ian
    Bonsor, Sir NicholasGlyn, Dr Alan
    Bottomley, Peter(W'wich W)Goodhart, Sir Philip
    Bowden, AndrewGoodhew, Sir Victor
    Boyson, DrRhodesGoodlad, Alastair
    Braine, Sir BernardGorst, John
    Bright, GrahamGow, Ian
    Brinton, TimGrant, Anthony (Harrow C)
    Brittan, Rt.Hon.LeonGray, Hamish
    Brooke, Hon PeterGreenway, Harry
    Brotherton, MichaelGriffiths, E. (B'ySt.Edm'ds)
    Brown, Michael (Brigg &Sc'n)Griffiths, Peter Portsm'th N)
    Browne, John (Winchester)Grist, Ian
    Bruce-Gardyne, JohnGummer John Selwyn
    Bryan, Sir PaulHamilton, Hon A.
    Buchanan-Smith, Rt.Hon.A.Hamilton, Michael(Salisbury)
    Buck, AntonyHampson, DrKeith
    Budgen, NickHannam, John
    Burden, Sir FrederickHaselhurst, Alan
    Butcher, JohnHavers, Rt Hon Sir Michael
    Cadbury, JocelynHawksley, Warren
    Carlisle, John (Luton West)Hayhoe, Barney
    Carlisle, Kenneth (Lincoln)Heddle, John
    Carlisle, Rt Hon M. (R'c'n)Henderson, Barry
    Chalker, Mrs.LyndaHicks, Robert
    Channon, Rt. Hon. PaulHiggins, Rt Hon Terence L
    Chapman, SydneyHogg, HonDouglas (Gr'th'm)
    Clark, Hon A. (Plym'th, S'n)Holland, Philip (Carlton)
    Clark, Sir W. (Croydon S)Hooson, Tom
    Clarke, Kenneth(Rushcliffe)Hordern, Peter
    Clegg, Sir WalterHowe, Rt Hon Sir Geoffrey
    Cockeram, EricHowell, Rt Hon D. (G'ld'f'd)
    Colvin, MichaelHowell, Ralph (N Norfolk)
    Cope, JohnHunt, David (Wirral)
    Cormack, PatrickHunt, John(Ravensbourne)
    Costain, SirAlbertHurd, Rt Hon Douglas
    Cranborne, ViscountJenkin, Rt Hon Patrick
    Critchley, JulianJessel, Toby
    Crouch, DavidJohnsonSmith, Geoffrey
    Dean, Paul (North Somerset)Jopling, RtHon Michael
    Dickens, GeoffreyKellett-Bowman, MrsElaine
    Dorrell, StephenKershaw, Sir Anthony
    du Cann, Rt Hon EdwardKimball,Sir Marcus
    Dunlop, JohnKing, Rt Hon Tom

    Kitson,SirTimothyRhodesJames, Robert
    Lang, IanRippon, Rt Hon Geoffrey
    Latham,MichaelRoberts, M. (Cardiff NW)
    Lawrence,IvanRoberts, Wyn (Conway)
    Lawson, Rt HonNigelRossi,Hugh
    Lee,JohnRost, Peter
    Lester, Jim (Beeston)St. John-Stevas, Rt Hon N.
    Lewis,Kenneth (Rutland)Scott,Nicholas
    Lloyd, Ian (Havant& W'loo)Shaw, Giles (Pudsey)
    Lloyd, Peter (Fareham)Shaw,Michael(Scarborough)
    MacKay, John (Argyll)Sims,Roger
    Macmillan,Rt Hon M.Skeet, T. H. H.
    McNair-Wilson, P. (NewF'st)Speller,Tony
    Major,JohnSpicer, Jim (West Dorset)
    Marlow,AntonySpicer, Michael (S Worcs)
    Marten, Rt Hon NeilSquire,Robin
    Maude, Rt Hon Sir AngusStewart,A. (E Renfrewshire)
    Mawby, RayStewart Ian (Hitchin)
    Mayhew,PatrickTaylor, Teddy (S'end E)
    Meyer,Sir AnthonyThorne, Neil (IlfordSouth)
    Mills,Iain(Meriden)Townend,John (Bridlington)
    Mills, Peter (West Devon)Townsend, Cyril D, (B'heath)
    Montgomery,Fergusvan Straubenzee,Sir W.
    Moore,JohnVaughan, DrGerard
    Morris, M. (N'hamptonS)Viggers,Peter
    Morrison, Hon C. (Devizes)Waddington,David
    Morrison, Hon P. (Chester)Wakeham,John
    Murphy,ChristopherWalker, Rt Hon P.(W'cester)
    Myles, DavidWalker, B. (Perth)
    Neale,GerrardWalker-Smith, Rt Hon Sir D.
    Oppenheim, Rt Hon Mrs S.Wells,John(Maidstone)
    Page, Richard (SW Herts)Whitelaw,RtHon William
    Patten,John (Oxford)Wiggin,Jerry
    Pawsey, JamesWilliams, D. (Montgomery)
    Percival,Sir IanWolfson,Mark
    Pink,R.BonnerYoung,SirGeorge (Acton)
    Prentice, Rt Hon Reg
    Proctor, K. HarveyTellers for the Noes:
    Raison, Rt Hon TimothyMr. R. Boscawen and Mr. D. Thompson.
    Rees, Peter (Dover and Deal)

    Question accordingly negatived.

    New Clause 5

    Accountability To Parliament

    "(1) The Commission shall undertake or promote studies of the impact on economy, efficiency and effectiveness in the provision of local authority services and in the financial management of local authorities of statutory provisions and of guidance and instructions issued to them by Ministers of the Crown.

    (2) The Comptroller and Auditor General shall have access to all documents and records held by the Commission relating to any such studies.

    (3) The Comptroller and Auditor General shall report to Parliament the results of his examination of any such documents and records, provided that he shall not in any such report refer to the affairs of any individual authority in a way which identifies that authority by name or otherwise.".— [Mr. Joel Barnett.]

    Brought up, and read the First time.

    I beg to move, That the clause be read a Second time.

    With this it will be convenient to take amendment No. 16, in clause 21, page 16, line 17 after "20", insert "or section (Accountability to Parliament)".

    I hope and believe that the objectives of the new clause are the same for the Government, local authorities and the House of Commons—to ensure better value for money in public spending and also proper and more effective parliamentary control. The new clause is a limited, but important, step to take the House in some way in the direction that the Public Accounts Committee unanimously recommended in its report last year. That report commanded all-party support among nearly 300 hon. Members in early-day motion 252.

    The purpose of the new clause is to enable the Public Accounts Committee, through reports from the Comptroller and Auditor General, to report to Parliament on the spending of large sums of money that the House votes. For example, there is the 1982–83 rate support grant voted by the House, which will be over £10 billion. I believe that we can do that under the terms of the new clause without infringing the proper democratic rights of local authorities. I shall want to say a word or two about local authorities and their fears, which I recognise they have.

    New clause 5(1) states:
    "The Commission shall undertake or promote studies of the impact on economy, efficiency and effectiveness in the provision of local authority services and in the financial management of local authorities"—
    this is the important part—
    "of statutory provisions and of guidance and instructions issued to them by Ministers of the Crown."
    Therefore, that is a fairly narrow subsection.

    I make it clear that the subsection is narrow. I would have preferred to go further, but we have deliberately written the new clause in a way that should be acceptable. It seeks to ensure that the House has the opportunity to consider whether Government measures and guidance encourage efficient local administration or the reverse. That is what the new clause is about. That is why I say that it should command acceptance on both sides of the House. It is a question whether the financial arrangements set by Government are well designed to meet what Parliament and the Government have approved.

    The work does not have to be carried out by public sector or private sector auditors or by this or that type of consultant. That is not an issue. The Public Accounts Committee has never argued that the work must be done by public sector or private sector auditors. I hope that we can remove that question from any argument.

    Personally, I very much regret the fact that, unfortunately, the way in which the debate has been conducted has given the impression that auditors are being treated as a sort of political football. Local authorities are being left, wrongly, with the impression that the auditors, whether private or public sector, are intent on intervening on policy issues. That is not what we are talking about. Auditors, consultants and others, who have specific skills, have the abilities to help local authorities, not to work against them and not to take political decisions that are rightly the responsibility of local authorities.

    My right hon. Friend did not have the benefit of attending umpteen sessions of the Committee. Is he aware that it has been made clear by private as well as public auditors that they would very much resent being brought into this situation, so much so that they might refuse outright to be compulsorily appointed to audit a local authority if there were the slightest implication that they were there to do a political hatchet job on that local authority?

    I cannot say that I am sorry that I did not sit through those sessions, day and night in Committee, having done too much of that on Finance Bill Committees over the years. I am glad to hear my hon. Friend's comments because I know from colleagues in the profession that they do not want to become involved in policy-making decisions.

    The difficulty is that local authorities feel that achieving greater efficiency in the spending of money is synonymous with cutting expenditure in total. That does not follow. The total level of expenditure is a matter for Government and local authorities. Within a certain level of expenditure better value for money will help local authorities that want more expenditure. More expenditure will be available through the proper and more efficient use of the money at their disposal. I hope and believe that local authorities will welcome the new clause and the direction in which we are seeking to move.

    I am sorry that we are not going further. This will be borne out by my colleagues on the Public Accounts Committee. When witnesses from the local authorities came before the Committee it was clear to us that they were under the misapprehension that the Comptroller and Auditor General was part of the Executive. They did not see him as the independent figure that he is, although the Public Accounts Committee would prefer it if he were appointed in a different way. He is wholly independent of the Executive and of Parliament. He is an independent man—one day that person may be an independent woman—who would not intevene on policy matters affecting local authorities.

    For the reasons that I have given I believe that local authorities will benefit from the studies that the Comptroller and Auditor General would be enabled to undertake under the terms of the new clause. In that way a Department's actions vis-a-vis local authorities—that is to say its statutory provisions or guidance—will be able to be properly checked by the Comptroller and Auditor General. Reports will be made to the House of Commons through the Public Accounts Committee. That can only be to the benefit of local authorities rather than to their disadvantage.

    Therefore, new clause 5(2) provides access to documents for the Comptroller and Auditor General. Again I make it clear that it is nothing like a broad and general access. Subsection (2) states that that access is severely restricted to documents related to the studies that have been referred to in subsection (1). It is not general access either to the books and records of the local authority's auditors, or to the books and records of the local authority. Therefore it is narrow and restricted access.

    New clause 5(3) specifically provides that the Comptroller and Auditor General will not be able to report on any individual local authority. That is rightly a matter for the audit commission and local authority auditors. That is their function, and not that of the House, or the Comptroller and Auditor General. I know from my experience as chairman of the PAC that the obligation of the Comptroller and Auditor General to report to the House of Commons, by convention through the Public Accounts Committee, will ensure that the report will not be treated in a manner that would harm local authorities. I know that my predecessor, the right hon. Member for Taunton, (Mr. du Cann), will agree.

    7.30 pm

    Having said that, I understand the worries of local authorities, whatever their politics. I have frequently said, both in this Chamber and outside the House, that their fears are very much misplaced. We seek to help them achieve greater efficiency, not to hinder them or involve ourselves with their policy-making decisions. No one is suggesting that the Comptroller and Auditor General and his staff should duplicate the work of the audit commission and its staff. The new clause does not suggest that. It is designed to help local authorities, and in so doing, help the taxpayer and ratepayer.

    The new clause does not go as far as I know that ray colleagues on the PAC would like. I should like it to go much further. However, it is a modest but important step in the right direction.

    The right hon. Gentleman said that he would like to go much further. Does he mean much further in the direction of local authorities or in other aspects of the possible role of the Comptroller and Auditor General? It is important to put that on record.

    There are two separate issues. First, as the right hon. Gentleman knows, there is the wider question of general access for the Comptroller and Auditor General to wherever public money goes. That is strongly supported by myself and nearly 300 members on both sides of the House. Secondly, although this is a limited new clause, I would much prefer that this House should go along with our recommendations in relation to local authorities. If the whole aspect were covered by a national audit office there would be better opportunities for pooling and sharing ideas and training, and for ensuring that the House was better advised and better able to obtain effective control of public money. However, I make it clear that that is not in the new clause. It is a narrow new clause.

    I hope that the House and the Government will accept the new clause as a useful first step. However, I do not intend to stop here, although I must do so as it is a local government Bill with limited opportunities for amendment. The PAC believe that there is much more still to be done. It is an important step for two reasons. It will help local authorities and Governments to obtain better value for money, as the House intended. It will provide better accountability to the House of Commons. I hope that that is not a party political issue but one that all hon. Members will support as a means of proper and effective control over the Executive. The new clause does not undermine the principles of the Bill—which some of us may not like for other reasons—or the Government's plans on policy. Therefore, I ask the House to support the new clause, and the Government to accept it.

    In the course of his admirable and lucid explanation of the new clause, the right hon. Member for Heywood and Royton (Mr. Barnett) laid strong emphasis on its constructive purpose. I am sure that that was entirely appropriate and right. He was also right to make the point that we are dealing with a relatively limited aspect of a campaign about which he feels, I know, as strongly as I do—the opportunity to make certain that the House has, on a continuous basis, adequate information with which to supervise the activities of the Executive.

    I am pleased to be able make common cause with the right hon. Gentleman about this limited matter. It involves a principle that I believe to be important—that the House of Commons, which is accountable to the public, should be able to follow public money wherever it is spent, to decide how well it is spent and to publish its findings so that the public in general may judge the situation. I believe that that is essentially a practical and constitutional principle about which we have been too careless in the past. The process is essential for economy and efficiency in public expenditure, as the right hon. Gentleman also argued.

    Total expenditure in 1982–83, as the Chancellor announced recently, is planned to rise to £114,900 million in cash terms—9 per cent. higher than the outturn for the previous year, 1981–82, when the figure was £105,000 million. Provisional planning totals shown in the White Paper show that spending in cash terms for 1983–84 will rise to £121,000 million and in 1984–85 to £128,000 million. The House will no doubt be astonished if the figures are as low as that. There is a downward pressure on public expenditure as a percentage of gross domestic product over this period—at any rate, that is forecast, but we shall see. Some may applaud that tendency but that is the matter, in truth, that divides us, or should be the chief argument between the two parties. However, We can all agree that the absolute figures are formidable, and so is the amount voted by the House for local government.

    Volume 2 of the Government's expenditure plans shows that in 1982–83, this current financial year, it is estimated that the total local authority expenditure will amount to no less than £23,300 million and the aggregate Exchequer grant for the same year will be no less than £14,000 million. The rate support grant will be over £10,000 million. Those are huge figures.

    I quote one sentence from the recently published report of the Treasury and Civil Service Select Committee on efficiency in the Civil Service. This passage is worth quoting and underlining:
    "Very few areas of public expenditure are currently subject to accurate measurement of output."
    The burgeoning expenditure of central Government makes for extreme difficulty in making judgments on the competence of that expenditure. There are always physical difficulties. There is the obvious difficulty of time. That is why a number of us have argued that we should make opportunities now in different ways, hence the establishment of the Select Committees to provide Members of Parliament with better advice than hitherto. That is possible through the Select Committees with the appointment of professional advisers of one sort or another. That is precisely why hon. Members on both sides have argued so strongly, and will continue to do so, for an extension of the remit of the Comptroller and Auditor General. The House will then have better and more catholic information about what is happening. In parenthesis, I cannot resist saying, and I make no apology for doing so, that it is an impertinence that almost three years should have passed since the then Leader of the House on 26 June 1979 undertook that the Chancellor of the Exchequer would examine that proposal as a matter of urgency. Nothing has been heard since. That is why the right hon. Member for Heywood and Royton and I thought fit to table an early-day motion arguing for the extension of that remit, a motion that has been signed, as the right hon. Gentleman pointed out, by more Back Bench Members than any other motion so far in this Parliament. It is time that we received an announcement from the Government.

    Returning to the matter of judgments on the competence of expenditure, we know that in any event judgments on some items are bound to be subjective. Judgment on some items also is bound to be bedevilled by party views or prejudices. But other items in the catalogue of expenditure are competent. Their effectiveness can be accurately measured. I suggest that there are more such matters in the total of central Government expenditure than are currently accurately measured. In general, the same is true of local government. Of course there is a problem. To some extent local authorities are creatures of central Government—that is to say, much of what they must do is dictated by Whitehall. To a large extent they are prisoners of Whitehall, but not entirely. In any case, it must be right as a matter of habit to ensure that outturn is compared with forecasts to ensure that one local authority's costings and competence are compared with another' s.

    I dare say that right hon. and hon. Members can think of many other examples where it is right that better comparative information should be available. What I and the right hon. Member for Heywood and Royton complain about is that, in general, that is never available. Nor do the public—the ratepayers—see value for money obtained on specific projects as a general rule. I truly believe that if there were a better examination of what local government is doing with the money that Parliament votes, a considerable sum could be saved with, no doubt, considerable relief to the individual and the corporate taxpayer.

    I cite one example relating to the assertion that I have just made. It came into my hands just last week. It is a report published by a ratepayers' group about the activities of one local authority. I shall not give its name, as it might be assumed that I was making a party point, which I am not. It is a matter of general interest.

    In the memorandum accompanying the report, the following assertions are made. The report shows that the authority concerned spends far more proportionately than any other council, yet the social need is less than that in many other council areas. It points to items of wasted expenditure which, in the several areas examined, might be cut by about one-third without any disadvantage to deprived persons. It goes on to say that the area concerned spends 50 per cent. more per head on services than the average inner borough. Last, but by no means least, if all local authorities were staffed at the level of this local authority, there would be a further 1¼ million council employees. Those examples show clearly the need for a more searching examination of what local authorities spend in the public's name and what is done with the money that Parliament votes to them.

    7.45 pm

    Does the right hon. Gentleman agree that he has quoted an extremely one-sided example which is typical of "studies" carried out by ratepayers' associations? Such studies should also take account of the effectiveness of local authorities—the extent to which the local communities' needs are met. If the purport of the new clause is not simply to find cuts in the administration of local government but to enable local government to give better service to the community for which it is supposed to be providing services, that is one of the best points in the clause.

    I agree with the thrust of the hon. Gentleman's intervention. My right hon. Friends the Minister for Local Government and Environmental Services and the Secretary of State have made substantial attempts to control expenditure. Unfortunately, what they have done has inevitably been a fairly crude operation. As the hon. Member for Norwich, South (Mr. Garrett) argued, it is possible to suggest that that type of exercise may result in a diminution or a decrease in services. That is quite possible, and it may happen. In any case, many of us, while agreeing in general with the argument of my right hon. Friend the Secretary of State that central Government cannot be indifferent to what local authorities are doing in the context of the economy in general, feel some unease as to whether local democracy is being interferred with.

    Like the hon. Member for Norwich, South, I would say that there is a more scientific method of proceeding. It is right to argue for value for money studies. It is right to expose what is being done. It is right to make certain that there is a real evaluation of needs and an accurate scientific measurement of whether those needs are being satisfied economically or extravagantly, well or badly.

    That is the object of the new clause. It fits exactly with the idea that the hon. Member for Norwich, South has just advanced. Above all, those who spend money voted by the House of Commons must be accountable to the House. That is the whole purpose of the new clause. I very much hope that my right hon. Friend the Minister of State, my neighbour and friend for whose qualities I have such admiration, will think that what we are endeavouring to do through the new clause is prudent, right and wise. I hope that he will accept the amendment or at least the principle behind it.

    I am happy to join in with the remarks of my right hon. Friend the Member for Heywood and Royton (Mr. Barnett) and the right hon. Member for Taunton (Mr. du Cann). I am a passionate believer in the independence of local government, and it is essential for Parliament to retain this antibody in the body politic and to ensure that we do not swallow local government whole and deprive it of any sense of independence that it has. Nevertheless, we must vest in Parliament some broad control, rather than detailed control, of the effective spending of the money voted by Parliament.

    The new clause is the right compromise for the time being. It seems that the Government will bow gracefully to the clear feeling of the House that this is the right compromise. I am pleased that that will happen. One has to admit that it is a difficult area. There will always be tension between central Government and local government.

    It is a fact of political life in the United Kingdom that when one party takes control of central Government, the instinctive reaction—I believe it is a good instinctive reaction—of the thoroughly nonconformist, in the nonreligious sense, British people is to say, "The Tories are in Whitehall, so we shall put a different lot in our town hall just to stop that lot getting slightly too big for their rather substantial boots". We should do nothing in auditing and efficiency studies to invalidate that very good instinct of the British people which has been shown in succeeding elections since the Second World War.

    There is, however, a caveat which I put forward in Committee and wish briefly to reiterate now. I very much favour proper auditing. I also very much favour studies of the impact on the economy of efficiency and effectiveness in the provision of local government services. But I believe that those are wholly different jobs. One is the professional auditing of the local authority's accounts. The other is the making of studies. They must be kept separate.

    I say that in the context of the letter that the Standing Committee finally revealed to the public and had placed in the Library. Mr. Ken Sharp, head of the Government Accountancy Service, wrote about what he described under the heading of "soliciting" but referred to in the body of his letter as "touting". Mr. Sharp wrote in December 1981 to the 13 big accountancy firms in Britain:
    "I am writing to express my deep concern at a developing practice within the profession to 'tout' for public sector business. Recently two cases have been brought to my attention of quite unsolicited approaches by leading firms to Government Departments."
    In Committee, I cited a number of cases, including one in Birmingham in which one of the big 13 firms had moved from its auditing function to its study function, as it were, without anything going out to tender, giving the impression that the Government's desire to bring the private sector into public sector auditing in Britain was a method of introducing a further element of privatisation—I do not say that that was the Government's intention, but that was the impression given—and assisting the great accountancy firms in Britain to secure more business than they would otherwise obtain.

    I shall not go into the matter again at length, but it is worth quoting from a recent article in the magazine Management Today entitled "Accountancy's Golden Goose" just to put the situation in context in relation to the big 13 private accounting firms, because the House should be aware of the types of person with whom it is dealing. The article says of the big accountancy firms:
    "Their current prosperity is breathtaking. The earnings of the upper tier of partners are of the order of £100,000 a year (some deemed to be earned abroad and so bearing tax benefits); an annual income of £1 million has been achieved by the managing partner of at least one of the four largest firms."
    We are therefore talking of moving into an area that has hitherto been dealt with by the district auditing services, none of whose members could ever have boasted an income of £1 million and most of whom live modestly in Petts Wood, if I may so put it. We are moving into this area a sector which is used to getting very substantial rewards from the private sector for its services.

    I say no more than that, but if the Comptroller and Auditor General is to have general supervision of the studies department of the new audit commission, I hope that that will prove something of a check on these characters—I know that most of them are solely devoted to their professional purposes, but some are keener on raising their incomes—so that the studies of local government do not bleed so much money out of local government that they do not give value for money. There was a spate of such studies in the 1960s when I was in local government and on many occasions I felt that ordinary councillors could have taken better decisions than highly paid accountants. That point should certainly be borne in mind.

    Broadly, I welcome the new clause and I hope that the Comptroller and Auditor General will monitor not only the studies but the degree to which they are necessary. I very much agree with my right hon. Friend the Member for Heywood and Royton. I hope that the Comptroller and Auditor General and the audit commission will show local government how to make spaces in its expenditure—not to make cuts in expenditure, but to create areas in which it can spend money more usefully.

    The Select Committee on Education, Science and Arts, of which I am Chairman, has just toured various areas of the country in an attempt to find ways of spending a little money on funding the arts in Great Britain. I believe that if the rest of local government expenditure were better supervised, the arts—the Cinderella, or poor relation of local government expenditure—could be better served within local government. I cite that as just one example.

    I welcome the new clause and I hope that if the Government cannot accept it as it stands they will give cast-iron pledges that they believe in the spirit of it.

    I shall not follow the hon. Member for Lewisham, West (Mr. Price) except to say that his Select Committee might take a leaf out of the Public Accounts Committee's book and recognise that we do not have to travel anywhere to carry out our studies.

    As one who put his name to new clause 5 and who worked very closely with the Chairman of the Public Accounts Committee, the right hon. Member for Heywood and Royton (Mr. Barnett), I wish to emphasise certain points about the relationship between local government and Parliament. I do so as one who believes fervently in strong, effective and responsible local government—perhaps because for one period of my career I had the privilege of being leader of the London borough of Islington, which by any yardstick is a difficult area to look after. I thought then, and I still think today, that there are two vital dimensions to successful local government.

    First, local government must recognise that it must work within the economic framework laid down by the Government of the day, whatever the policies of that Government. Secondly, however, the individual councillor is ultimately responsible to his own electorate within his own ward. The new clause violates neither of those two dimensions, but builds upon them.

    We have already listened to contributions from my right hon. Friend the Member for Taunton (Mr. du Cann) and the right hon. Member for Heywood and Royton. The House owes a great deal to both right hon. Members for the persistence with which they have followed this course and the progress that we slowly make along that path.

    When looking at the new clause, and recognising that our friends in local government have certain worries, it is worth reminding ourselves of what was contained in the first special report of the Public Accounts Committee. It is worth drawing to their attention appendix XXXIX of the Minutes of Evidence, where, in his memorandum, the Comptroller and Auditor General listed in paragraphs 14 to 18 what he called "Legitimate Parliamentary Interests".

    8 pm

    In paragraph 14, he reminds us that local authority expenditure comes from powers derived from statutes from the Houses of Parliament. In paragraph 15, he reminds us that the Government have rightly taken an interest in "both efficiency and effectiveness" auditing but that equally no Government have to be accountable to Parliament for the effects of whatever intervention they choose to make. In paragraph 16, he reminds us that there is no threat to local democracy as Parliament is not suggesting that individual authorities should be accountable, rather the collective whole or a large section of it.

    The essential issues for Parliament are, first, whether the Government have taken appropriate and adequate measures to encourage efficient local administration of services that Parliament has empowered local authorities to run and, secondly, whether the financial arrangements and the Government's control of them will ensure that the money Parliament has voted is spent as approved.

    If my friends in local government are worried, I urge them to read that appendix. They will find 10 examples listed, the majority of which suggest that it would be to the benefit of local government if studies such as that were undertaken.

    How often have we who have served in local government reflected that Parliament—and this is true of all Parliaments—produces a Bill, gets it on the statute book and never adequately provides sufficient resources for local government to undertake the activity involved? How often have we complained about that? That would be a perfectly proper area for investigation.

    I do not intend to speak for long because the issue is clear. It is fair to say that in the evidence he gave to the PAC, my right hon. Friend the Secretary of State for the Environment concurred with the points raised in paragraphs 17 and 18 of appendix XXXIX. He agrees that they are the legitimate interests of Parliament.

    The aim of every hon. Member should be better accountability to Parliament and improved efficiency in local government. I do not believe that anyone would quarrel with that as an objective.

    There is nothing in the new clause as presently drafted that affects ministerial accountability to Parliament. I readily admit that while the scope of the new clause is limited, it is an important step in the direction of the PAC's recommendations on the role of the C and AG and, indirectly, on Parliament's control of expenditure.

    I also note that for many months my right hon. Friend the former Leader of the House, now Foreign Secretary, has been wrestling with the response that the Government should make to the totality of our report. This is an advance on a small front. I hope that my right hon. Friend the Member for Oswestry (Mr. Biffen), in his new role, will urgently look at the remaining outstanding dimensions and come forward with some recommendations at an early date.

    I shall be brief. I speak only out of sentiment, because for me this represents the first crack in the Government's position after 10 years of campaigning. I did not originate this campaign. That began with a Dr. Normanton, who wrote a scholarly study showing that ours was the least progressive State audit system in the Western world. I was much impressed by what he said.

    I am glad to say that over the years our little caravan has grown. First, my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) joined me to write a pamphlet about it in 1972. Later, we received the support of my right hon. Friend the Member for Heywood and Royton (Mr. Barnett) and the right hon. Member for Taunton (Mr. du Cann). Today, 280 hon. Members from both sides of the House support the reform of the Exchequer and Audit Department system.

    I congratulate my right hon. Friend the Member for Heywood and Royton and the right hon. Member for Taunton on tabling the new clause. It is modest, but they know as well as I do that it contains two important principles which are the beginning of a wedge to be driven into the Treasury's position. The first principle is:
    "The Commission shall undertake or promote studies of the impact on economy, efficiency and effectiveness."
    If the new clause is accepted, or if the Government bring forward another new clause that includes those words, it will be the first time that they have been included in a public stature. The economy provision has been there since 1861, but what really matters are the words "efficiency and effectiveness". The economy provision simply minimises spending and exercises good housekeeping. That is fairly innocuous. That is why our Comptroller and Auditor General and our Exchequer and Audit system are so innocuous. However, "efficiency" means examining costs in relation to output. That is interesting. The crucial provision is "effectiveness", which means studying costs in relation to output and ascertaining the effect on the community of providing or not providing a service. That information will be extremely useful to the Opposition. I believe that time and again we shall discover that while cuts may have made local authorities more efficient, they have destroyed the effectiveness of local government to provide for the local community. Therefore, the inclusion of "effectiveness" is crucial.

    The second principle is:
    "The Comptroller and Auditor General shall have access to all documents and records held by the Commission relating to any such studies."
    That means that for the first time since 1861, audit can go outside Supply. The C and AG and his department can venture beyond money provided by the Supply procedure. Although all public expenditure came within the Supply procedure when the post of Comptroller was introduced in the 1860s, today only half of public expenditure is covered by the Comptroller, because non-Supply expenditure by local authorities, nationalised industries, quangos and so on has grown so much, particularly in the last 50 years.

    Once we have established that, it is difficult to deny the Comptroller access to other non-Supply expenditure, such as spending by private contractors, nationalised industries and others. This is a useful first step towards parliamentary accountability for all public expenditure.

    Next, we must follow the recommendations of no fewer than four Select Committees which said that the Comptroller and his staff should have the power to follow public expenditure wherever it may happen. After that, we need better information so that we can establish whether or not central Government, local authority and other public spending is effective. For that purpose, we need a change in the form of the accounts.

    Lo and behold, we have the Procedure (Finance) Committee sitting on that subject. I have no doubt that it will come forward with some fairly positive recommendations in the fullness of time. The Government may not want that, because they established the Committee for only one Session. That is a matter that we can deal with as we go along.

    The crucial thing is to make the Comptroller a servant of the House, as was intended by Gladstone. Over the years, the Treasury has drawn that power away from the House until, in the end, the Comptroller was virtually a servant of the Treasury, even though it was intended that he should be an Officer of the House. This is the first step towards a mass of reform that the House desperately needs if it is effectively to call the Government to account, and I welcome it.

    I am glad to take up the remarks of the hon. Member for Norwich, South (Mr. Garrett). Those of us who are members of the Public Accounts Committee have had the benefit of his views and we welcome and value them. He said that he was speaking only out of sentiment, but it quickly became apparent that he was speaking mainly out of enthusiasm. We must not rebuke him for that. However, I wondered whether he might be causing the Government to run away with the feeling that there is more in the new clause than they thought. I hope that my right hon. Friend will see nothing sinister in the clause. It is merely a small step forward and part of a steady progression.

    I wish to add my good wishes and congratulations to the Chairman of the PAC committee, the right hon. Member for Heywood and Royton (Mr. Barnett), and to my right hon. Friend the Member for Taunton (Mr. du Cann), who have worked happily together. This augurs well for the work of the Select Committees. Clearly they should work in harmony rather than go off on their own courses and sometimes crossing each other without proper consultation. It is good that consultation and joint purpose obviously exist.

    I welcome the new clause because I believe it right that the role of the Comptroller and Auditor General should be extended. The hon. Member for Lewisham, West (Mr. Price) said that there would always be tension between local authorities and the Government. I think that that is true. However, the Bill seeks to make the auditor much more independent than he has been hitherto and it will be improved if the new clause is accepted. If local authorities understand that the purpose of the Bill is in part to give the auditor greater independence, they should welcome the measure. I see nothing in the new clause to frighten local authorities. The right hon. Member for Heywood and Royton has clearly outlined the restrictions and the limiting factors that feature in the clause.

    We do not wish to interfere with local government. However, I acknowledge that there are some who are still fearful about part III. They come to my surgeries and express the fear that there will be some form of political interference. I have sought to tell them on every occasion that that is not true, could not be true and is not intended to be true. That cannot be said too often.

    The House should be able to follow much more than it has in the past what happens to the money that it spends. It is not enough merely to follow inquiries along lines that have been laid down by the Departments. Obviously the Departments may not have been doing their job. If we examine only the Department's records, we shall often find it impossible to tell whether the job has been properly done.

    The new clause is a modest but important step and can do nothing but good. Local government need not have the slightest fear about it. There will be benefits for central Government, local authorities and Parliament from the new clause, which I hope my right hon. Friend will accept. Alternatively, he may see fit to table a similar proposal at a later stage.

    8.15 pm

    I agree with much of what my hon. Friend the Member for Scarborough (Mr. Shaw) has said. However, I have some anxieties and I think that they should be expressed. I agree with the first two terms that appear in the first subsection of the new clause, which are "economy" and "efficiency". It is the inclusion of "effectiveness" that brings us into the political arena. The determination of what is effective is a question of judgment and this is quite a delicate area. Local government has a slight anxiety about the inclusion of "effectiveness".

    If a Minister performs services for the State that we consider are ineffective, we have the right of redress at Question Time and in debate. If a local authority is found to be ineffective, it might be possible through the method set out in the new clause to produce arguments that the actions have not been effective, but there will be little redress. We are moving away from the parliamentary arena and the governmental arena to a statutory agent created by Parliament and, I accept, operated under laws passed by Parliament, but it remains a separate agency. That being so, it may make a political judgment of effectiveness.

    The hon. Member for Norwich, South (Mr. Garrett) expressed worry in an intervention that we might be getting rather near political decisions. He observed that a local authority might decide to do much more in one area of policy because of a political decision and might be ineffective. He said that its actions might have the wrong effect and that they might be taken because of political decisions.

    Surely it is of interest to the House if a service that is provided widely throughout the country—for example, a service that is provided by local authorities to help the elderly—is ineffective. That might say something about the legislation under which it is being operated, or the capacity of local government or central government to manage. It is important for us to know whether a particular service is being managed ineffectively throughout the country. The purpose of the new clause is to make these matters comparative, which will be of great value.

    I agree with what the hon. Gentleman says, but we are still entering an area of political judgment. I am not attacking the clause, but I feel that we might be bringing in party political judgments.

    As the hon. Gentleman knows, I was not a member of the Committee that considered the Bill, so I do not know whether he supported the Bill as it stood. However, clause 9(1)(c) refers to "effectiveness" in the use of resources. I assumed that he agreed with that concept.

    We are in debate and I think that I have the right to raise an anxiety. I did not say that I intended to vote against the new clause. I was merely expressing anxieties that have been put to me by people in local government. I thought it right and proper that they should be brought to light. I do not wish to go to the stake on the matter or to move an amendment to the clause. It is not my intention to try to eliminate "effectiveness". I am merely saying that the anxieties to which I have referred should be considered by the Government as part of their reaction to the clause. It is "effectiveness" that gives rise to some anxiety. The other parts of the clause are apposite to what we are trying to do.

    The anxiety to which I have referred featured in debates in Committee. There was considerable debate about the political implications. The Opposition rightly probed the issue deeply and obtained pledges from the Government that they would table amendments to overcome the political implications. The Opposition pressed extremely hard. They felt that the audit commission would become involved politically. One or two Opposition Members referred to instances of the district auditor making pronouncements that they felt were political. This is a matter over which we shall have to exercise care. A large element of judgment is involved. I am in favour of the words "economy" and "efficiency", but I am slightly nervous of the word "effectiveness" and its implications.

    I wish to intervene briefly from the Opposition Front Bench to express our gratitude to my right hon. Friend the Member for Heywood and Royton (Mr. Barnett), the right hon. Member for Taunton (Mr. du Cann) and right hon. and hon. Members on both sides who have seized the opportunity presented at this stage of the Bill to demonstrate the need for the new clause. It remains to be seen whether the new clause eventually sees the light of day in its present form. I await the observations of the Minister. I wish also to see in what form the new clause returns to the House from the other place.

    What has been demonstrated in a non-party manner is the genuine desire of right hon. and hon. Members to provide value for money in the oversight of public accounts. Political control in the House and in local councils changes frequently. It is clear, therefore, that the desire to provide value for money is genuine. Some good sense has been displayed by hon. Members on both sides. The Minister's words in Committee have already been translated into concrete deeds. I am sure that the right hon. Gentleman will have taken careful note of the feeling of the House that existing opportunities, which appear not to have been fully exercised, could be more effectively exercised instead of relying on the new role for the audit commission that appears to be in the mind of the Government.

    I have been impressed by the constant reminders to the Government to carry forward the commitments made—I believe in June 1979—by the then Leader of the House. Hon. Members on both sides are anxious to ensure that they provide value for money to their constituents and to the House. The title of the new clause "Accountability to Parliament" says it all. We want to be satisfied that, on those matters for which the House is accountable, the opportunity exists for hon. Members to scrutinise and improve the situation. Members of the PAC and of the Select Committee have demonstrated their complete grasp of the underlying themes that have run through the debate. I am pleased that hon. Members have stressed that there is no party animus in the matter. I know the Minister well enough to believe that he will take this opportunity to refashion the words of the new clause so that, when it returns to the House from the other place, it will serve our aims as Members of Parliament.

    I am grateful to the hon. Member for Edmonton (Mr. Graham) for his last comment. Had his right hon. Friend the Member for Manchester, Ardwick (Mr. Kaufman) been speaking, he would no doubt have said that he knows the Minister well enough to know that when the words came back from the other place, they would need further amendment. Aside from that point, I am grateful to the right hon. Member for Heywood and Royton (Mr. Barnett) and to my right hon. Friend the Member for Taunton (Mr. du Cann) for the way in which both of them, as present and past Chairmen of the Public Accounts Committee, have presented the new clause to the House. I believe that the whole House is aware of the keen interest that the right hon. Member for Heywood and Royton has taken in the issues of accountability and the proper pursuit of the control of public money. The House is also aware of the interest taken by my right hon. Friend the Member for Taunton, his predecessor, in these matters. They are both keen campaigners.

    I am grateful to my right hon. Friend the Member for Taunton for his courtesy in informing me that he has to leave the Chamber early to chair a further meeting of the Treasury and Civil Service Committee. I wanted to get that on the record in case any hon. Members thought that my right hon. Friend had walked out in the middle of my speech in disgust or some other form of disapprobation. I am not sure whether what I intend to say now will not make him walk out even faster in genuine disapprobation so that no one will know whether he is going to his Committee. I understand, however, that my right hon. and learned Friend the Chancellor of the Exchequer hopes to respond shortly to the points that my right hon. Friend has pressed on me together with other points. I hope that this will be possible.

    I agree with the remarks of the hon. Member for Edmonton that we are concerned about value for money. All hon. Members who served on the Committee are, I think, flattered by the distinguished presence of other hon. Members interested in issues of public accountability. We have been seeking to deploy the argument that these are not party political issues. The hon. Member for Norwich, South (Mr. Garrett) made the point that they are as much in the interest of an authority that is anxious to minimise the demands on its ratepayers as in the interest of an authority wishing to seek how it can expand its services for a given sum of money. Value for money is an issue in which all hon. Members should take an equal interest.

    I should like to refer to the original proposals of the Public Accounts Committee, the hearings it held and the local government evidence that was given. The right hon. Member for Heywood and Royton made the point that he thought that many local authorities or the associations may have been under a misapprehension that the Comptroller and Auditor General was in some way part of executive Government. That may be a misunderstanding among some representatives of local authorities. There are others who are under no illusion about what the Comptroller and Auditor General represents. They see him as being associated with the Public Accounts Committee and with Parliament and unacceptable on that basis. I say this straight. The right hon. Gentleman will know that this is a view advanced by local authorities. I shall refer to it later. They feel that there is a constitutional implication and that their position is in some way compromised through the Comptroller and Auditor General.

    The right hon. Member for Heywood and Royton referred to his interest in this matter and called the new clause modest. I thought that some of his case was damaged by his hon. Friend the Member for Norwich, South who had me really worried and I was almost inclined to take the advice to leave the Chamber in a hurry. The right hon. Member for Heywood and Royton added that he would have preferred to go further. I picked him up on that because it is important, if we are to find an acceptable solution to the problem—and we cannot ignore the attitude of the local authorities—that the issue of "the thin end of the wedge" and "seeking to go much further in this direction" is put on record. It obviously behoves the Government to make it quite clear what they feel is acceptable so that we do not arouse further concerns. I am talking specifically about local authorities and local government and I am leaving aside certain other targets that it would not be proper for me to comment about, although the right hon. Gentleman might have had them in mind.

    8.30 pm

    We listened to the background of the debate, which has been much worked in the past. We had a historical summary from the hon. Member for Norwich, South, who said that he was speaking out of sentiment. I was struck by the fact that this was not a sentiment shared by the previous Labour Government who made it clear that they rejected the approach of the Comptroller and Auditor General having a responsibility to local government.

    I know that we have to be careful about making party political points these days but I am intrigued to see that the official Opposition are supporting this amendment. The hon. Member for Edinburgh, Central (Mr. Cook) seemed to make it abundantly clear in the early debates on the previous report of the Public Accounts Committee that this was in no sense the view of the Opposition, and I understood that he was speaking for them. They did not seem to think that this was a proper position. It may be that speaking from the Opposition Front Bench is not necessarily speaking for the official Opposition, although that can lead to misunderstanding.

    The hon. Member for Edinburgh, Central said:
    "I do not deny that there is a role for more efficiency and effectiveness audits of local authorities, but if we attempt to achieve that effectiveness audit through an official operating in a closer relationship to Parliament and therefore to the Government, it will be resented by local authorities."
    That is correct and no hon. Member need be in any doubt about the extent to which that would be resented. He went on:
    "Nothing is more likely to cause resentment within local authorities than the suggestion that Parliament should ultimately be in charge of an efficiency and effectiveness audit of local authorities."

    I take the statement as a whole but the Minister can take it from me that it is the "and therefore to the Government" bit that worries local authorities because they have hitherto associated Parliament with Government. I agree with him that if it were true that the Comptroller and Auditor General were an agent of Government I would not be in favour of the amendment. It is the hope of some of us that we can settle this with Parliament and Government. That gives us, who know people in local government, the conviction that we could persuade them that a parliamentary C and AG would be acceptable, whereas a governmental one would not.

    That may be the hope. I do not want to rehearse all the columns of this Official Report but the right hon. Member for Heywood and Royton tried to make that point to his hon. Friend, who said later:

    "I think my right hon. Friend will admit that he has failed to persuade the local authority associations of that view."
    It would be simplistic to suggest that that is the sole concern of local authorities. I agree with the hon. Member for Lewisham, West (Mr. Price) that they see a constitutional issue in the role of Parliament being distinct from the role of Government in this matter.

    I am not advancing any of the arguments. I happened to notice earlier that, in an intervention by my hon. Friend the Member for Northampton, South (Mr. Morris) in that debate, he asked whether the hon. Gentleman did not think there was
    "something strange in a situation where the chief inspector of audit prepares an annual report of two-thirds of the finance which is voted by Parliament and that report is not even laid before the House?"—[Official Report, 30 November 1981; Vol. 14, c. 105–6.]
    I think that will strike a chord with the hon. Member for Lewisham, West. Perhaps he will understand why I am not sympathetic to efforts to try to improve the arrangements when I say that I sent that report to the chairman or leader of every local authority in the country. I am sure many of them read it and studied it with care but the only acknowledgment that I had came from one chairman, out of 413 authorities, who complained about the cost and the quality of the envelope in which I sent it. That sometimes leads Ministers to believe that there are possible changes in the arrangements that might be made.

    This is a much-rehearsed route. The previous Government rejected the approach. This Government considered representations and in the report on "The Role of the Comptroller and Auditor General" presented to Parliament in July 1981, rejected that role. They made it clear that in the case of local authorities they preferred the route of the audit commission. This is the route that we have put forward in the Bill. We rejected the route of the Comptroller and Auditor General.

    Nothing daunted—and anyone who knows the right hon. Member for Heywood and Royton knows that he is not often daunted—he has returned with a variant to involve the Comptroller and Auditor General. With his usual courtesy, the right hon. Gentleman informed my right hon. Friend and me by letter on Tuesday of last week that he would be tabling this amendment. We received it on Wednesday, and only now are we beginning to get the responses of the local authority associations to it. Obviously the right hon. Gentleman would have expected us to consult them.

    Hon. Members will have received a briefing from the Association of Metropolitan Authorities saying, effectively, that the first subsection is welcomed by the association but that the next two are not. The association says in effect that it is a good idea for there to be studies by the audit commission of the impact of Government policies on the effectiveness, efficiency and economy of local government, but a very bad idea if the Comptroller and Auditor General is then allowed access to those studies. That is the provision about which the association is concerned.

    I have a letter, which I think may have gone to other hon. Members who served on previous Standing Committees, from the Association of District Councils, which is rather more hostile to the clause. I understand that the Association of County Councils has not formed a view other than that the proposal is novel and that it needs time to consider it. It may be attracted by subsection (1) if not by the other parts of the clause.

    Right hon. and hon. Members will appreciate that the Government have certain problems in knowing how to deal with the new clause. We understand the concern about these issues and the arguments that have been advanced about Parliament's proper concern with the expenditure of public money and the proportion of public expenditure voted by the House that is involved in local government expenditure. That concern is real, and my right hon. Friend the Member for Taunton quoted the figures. Obviously there is some substance in this and a principle to which the Government are not unsympathetic. However, there are details in the new clause that need attention.

    I say immediately that it is an important new clause. It breaks new ground. It provides in statute for outside appraisal of the effects of Government policies and it gives the Comptroller and Auditor General a role in relation to local authorities which he has not had previously.

    We did not discuss these aspects in Committee, and we have not had an opportunity for any detailed consultations with the local authority associations. The Government have some sympathy with the suggestion that the Comptroller and Auditor General should have the right to examine the commission's studies showing the effect of Government policies on value for money, but our concern is partly about subsection (2).

    The right hon. Gentleman has just said that this principle had not been put forward in Committee. However, he has to accept that I tabled detailed amendments covering this principle and extending it all the way through the Bill. We discussed the matter in detail in Committee.

    The proposals are well rehearsed about the Comptroller and Auditor General as an alternative to the audit commission. If the hon. Gentleman says that he moved specific amendments providing that the audit commission should have a duty to prepare studies on the impact of Government policies and that the Comptroller and Auditor General should have access to those studies, I withdraw what I said. But I am not aware that the matter was raised, and I think there must be some misunderstanding about it. I do not want to mislead the House. However, it is not a crucial part of my argument.

    The concern that arises is about access to documents, and that is dealt with in subsection (2). As the new clause is drafted, it could give the Comptroller and Auditor General access to the detailed papers of individual local authorities. This clearly could give rise to considerable concern. The hon. Member for Edinburgh, Central referred to the attitude of local government to the role of Parliament and the Comptroller and Auditor General.

    Secondly, there is the problem that the Secretary of State specifically precludes himself in schedule 1(3) from access to the detailed information. That paragraph precludes him from obtaining from the commission information relating to the discharge of its functions in respect of any local authority. An important point about accountability in the House is raised if the Comptroller and Auditor General is to have access to more detailed information than is available to Ministers, who may be accountable to Select Committees. We shall have to decide the right level at which informaion and access to documents would be appropriate.

    Another technical point is involved in the new clause. As it now reads, it would apply concurrent access to all the working papers. Clearly, that does not make sense. We believe that it should be consecutive. However, that is a point of detail.

    A further point is that we accepted an Opposition amendment to clause 20 stating that we should accept consultation not only with local authority associations but with organisations of workers, on the studies that would be done on economy, efficiency and effectiveness in local government, and comparative studies. If that were made a duty, there should be parallel consultation in this new clause, and it would be sensible to inquire into the provisions, guidance and instructions issued by Ministers, which might include consultation with Ministers by the audit commission.

    This is an important new clause, because it breaks new ground. It is a significant new step. However, I cannot recommend the House to accept it as it stands. If the right hon. and hon. Members who tabled the amendment were not to press it, I would give an undertaking that the Government see merit in its principle, but believe that it is inappropriate in its present form. I therefore propose that the new clause be withdrawn, on the understanding that the Government will then enter into immediate discussions in the light both of the substance of the new clause and of the further points raised in the debate, with a view to tabling our own amendment in another place that will achieve the main principle of this new clause but will cover the points of difficulty that I have mentioned.

    I want to get the matter absolutely clear and on the record. I note what the Minister of State said about the need for consultations and discussions. I understand that perfectly. However, the Minister of State then used the words "with a view to". I am very conscious of the use of language in these matters, as I know the right hon. Gentleman is. I should like from him a clear commitment—not "with a view to"—that he will give an undertaking. We are going through difficult times. By the time he has in mind, he may be Foreign Secretary. I do not know what he may be. This is a serious point. I want a clear commitment, not only on his own behalf but on behalf of the Government that, after his consultations, a new clause or an amendment that will achieve the main principles of this new clause will be tabled in another place. Without that, I am sure that all the right hon. and hon. Members who support the new clause—and the Public Accounts Committee—realise that there will be no other opportunity to take action, once the Bill leaves this place. I therefore want clearly on the record a firm Government commitment that after the consultations they will come back to this House, after amendments have been tabled in another place to achieve the main principles of this new clause.

    I am grateful to the right hon. Gentleman. As he said, I chose my words carefully. I entirely understand why he picked me up on the phrase "with a view to". Important issues, particularly about the degree of access to documents, have to be established, on which I hope to have full discussions with the right hon. Gentleman and other interested parties. Certainly, there will need to be consultations with local authority associations on the matter. If we can achieve agreement, so much the better.

    I hope that we shall reach agreement on the amendment that will be tabled. If we fail to reach complete agreement, we shall undertake to table an amendment that embodies the principle and approach of new clause 5. That will afford both to another place and to the House the opportunity to re-examine the question and to vote upon it. That is the most appropriate way. I understand the right hon. Member's concern that if nothing emerged there would be no further opportunity to deal with the matter. There is a timing problem. This is a major issue and we have been faced with a difficulty about time. I do not wish to deny the House the opportunity for a considered approach to what we believe is the right solution to the problem.

    8.45 pm

    I thank the Minister for those remarks. I think that it is now crystal clear that we shall have another opportunity to deal with the matter and that the Government—whoever is in charge at the time—will table an amendment or a new clause to ensure that.

    I hope that the consultations will win the local authorities' agreement. I understand their anxieties, but I think that they are misplaced. I hope that the debate will have assured local authorities that we have no wish for them to continue to be anxious. I hope that we have been able to persuade them on that score. It must be borne in mind that the Government have not always accepted everything that local authorities have wanted or not wanted to do. I hope that the consultations will go smoothly and I shall be happy to take part in them with the Minister. I know that the right hon. Member for Taunton (Mr. du Cann) would do likewise.

    However, the responsibility for the new clause is not only mine. A number of right hon. and hon. Members on both sides of the House support it, because of the importance of the role of the Comptroller and Auditor General. Therefore, I do not wish lightly to withdraw such an important new clause. I should be willing to do so on the clear understanding and commitments that the Minister has given on behalf of the Government that he will table a new clause or amendments in another place to achieve the main principles of new clause 5. That is my understanding of the Minister's assurance. I hope that that will be acceptable to the House.

    Will my right hon. Friend accept that new clause 5. is a compromise on a compromise and that right hon. and hon. Members on both sides of the House who put their names to the new clause would be unwilling to compromise much further?

    I am obliged to my hon. Friend. I am sure that the Minister will have noted his remark. We shall have an opportunity to debate the matter again. That is the important firm commitment that we now have. I made it clear that new clause 5 does not go anywhere near as far as the Public Accounts Committee or those who signed early-day motion 252 wanted. We are dealing with a fairly narrow point, although, as my hon. Friend the Member for Norwich, South (Mr. Garrett) rightly said, it is an important first step. It is on the clear understanding that there is a Government commitment to table an amendment in another place to achieve the main principles that are set out in the new clause that——

    I do not wish to mislead the House or resile from anything that I have said, but the right hon. Gentleman has referred to "main principles". The difficulty is that we shall need to have discussions, and we shall have to say what we think has been established. If we do not reach total agreement, we shall table an amendment setting out what we think will meet the purposes of the new clause. It will then be possible for the House to consider and debate the amendment.

    I deliberately used the words "achieve the main principles", because the Minister used them. I hope that after the discussions, whether or not the right hon. Gentleman is able to get agreement with the local authority associations—I hope that he will, because I believe that their fears are misplaced—the House will have an opportunity to discuss the main principles of the new clause again. There is a substantial majority of hon. Members on both sides of the House in favour of not only the narrow new clause, but much more than that.

    On the basis of the clear undertaking and commitment from the Government, I beg to ask leave to withdraw the motion.

    Motion and clause, by leave, withdrawn.

    New Clause 6

    Special Charging Orders

    '(1) In section 147 of the Local Government Act 1972 (expenses of principal councils) the following subsections shall be inserted after subsection (3):—

    "(3A) If in any part of a district the district council is exercising as principal one or more of the statutory functions held by the parish or community councils (as the case may be) in its district, and such function or functions is elsewhere in that district being exercised by one or more parish or community councils (as the case may be) the district council shall make such charging resolution as is described in subsection (3) above as is appropriate in all the circumstances of the situation.
    (3B) The Secretary of State may by order made by statutory instrument prescribe (a) the factors to be taken into account by the district council in making any charging order under subsection (3A) above and (b) the procedure by which any parish or community councils desirous that any such charging order be made may secure the making of an appropriate order.
    (3C) Subsection (3A) of this section shall not come into force until the first day of April in the year next after the year in which the Secretary of State shall have made the first order under subsection (3B) above."

    (2) In section 54 of the Local Government Planning and Land Act 1980 after subsection (8) there shall be inserted the following subsection—

    "8A Where 'relevant expenditure' includes sums payable under precept to the councils of parishes or communities the Secretary of State may by regulations made under section 113 of the General Rate Act 1967, provide for the transfer of the amount of block grant attributable to an such precept from the local authority to the council of the parish or community as the case may be.".'.—[Mr. Alton.]

    Brought up, and read the First time.

    I beg to move, That the clause be read a Second time.

    The new clause seeks to amend the Local Government Act 1972 and the Local Government, Planning and Land Act 1980. Its intentions are well known to hon. Members and they have been debated in Committee, on the Floor of the House and in another place. The objective is to give parish councils the opportunity of receiving some of the rate support grant which the Government give to district councils, but which is not always passed on to the parishes.

    The clause is similar to one moved during the passage of the 1980 Act. At that time Lord Bellwin gave various assurances and, bearing in mind the assurances that have just been given by the Minister for Local Government and Environmental Services, I hope that hon. Members will realise that ministerial assurances are not always what they appear to be. However, I hope that the assurance just given by the right hon. Gentleman will result in an amendment being incorporated in the Bill.

    Lord Bellwin said that the problem of parish councils would be considered. Unfortunately, no results have appeared and the Under-Secretary of State for Wales said in Committee that the objective of the new clause was an impossible task. That contradicts Lord Bellwin's assurances.

    I refute the suggestion that the proposal in the new clause is an impossible task. Perhaps the best reason for my view is that some district councils already do what the new clause suggests. They pass on part of the rate support grant to parish councils, and if it is possible for some to do that I do not see why it should not be possible for others to do it. Therefore, I do not accept that it is an impossible task, though I agree that it is difficult and is not as easy as was suggested by the hon. Member for Bootle (Mr. Roberts), who proposed a similar new clause in Committee.

    The new clause would apply to many parish, town and community councils which have continued to press for changes in the law. The precepts of the 8,600 parish, town and community councils, which are wholly met from rates levied on the ratepayers of those councils, are taken into account in determining the block grant payable to the local district councils, but none of that relevant grant has to be paid to the parish council and it is not credited to the parochial council to enable the parish ratepayers to benefit. Instead, the district ratepayers benefit, even though they did not have to bear the initial expenditure. That is grossly unfair.

    There have been many previous calls to amend the legislation. My hon. Friend the Member for Berwick-upon-Tweed (Mr. Beith) on 12 March 1979 asked the then Minister:
    "How can the hon. Gentleman possibly defend an arrangement under which expenditure earned by the decision of ratepayers in a parish to pay an additional rate should incur grant-aid on a general basis to the district council that does not need to be passed on to the parish? Does he recognise that a few district councils—fortunately, only a few—are actively opposed to the concept of parish councils and would much prefer parish councils to entrust all their functions to them and enable them, the district councils, to control all the grant-aid and for the parish councils to disappear?"—[Official Report, 12 March 1979; Vol. 964, c. 228.]
    The Minister said that he would consider that argument. However, since then, little has been done.

    My hon. Friend the Member for Colne Valley (Mr. Wainwright) wrote to me last week to say:
    "No Minister has ever attempted to defend this unfair situation, but the attitude has been 'wait till we have other legislation and we will include it then'."
    I have had more representations on this aspect of the Bill than on any of the other horrors perpertuated by the legislation. I have had representations from parish councils throughout the country.

    The Sussex Association of Parish Councils said:
    "Parish Councils have been inhibited from taking an initiative on local enterprises and spending money on them, because they know that although the amounts of their precepts are included in the calculation for Rate Support Grant, none of the Grant will be passed on to them."
    The Great Wyrley parish council said:
    "We … urge you to support the amendment"
    which I am proposing today
    "on the grounds of justice, as the precepts by Parish Councils are taken into account when calculating the District Council's entitlement to the Grant but the District is not compelled to pass on the Grant. Only a very few Districts do so under voluntary arrangements."
    The honorary secretary of the Derbyshire Association of Local Councils said:
    The Town and Parish Councils have fought long and hard since even before the 1972 Act for the grant to be paid to town and parish councils on the grounds of justice—their precepts, which are wholly met by parish ratepayers, are taken into account in calculating the district councils entitlement to grant but districts are not compelled to pass on the grant. Only a very few districts do so, under voluntary arrangements."
    The Yorkshire and Cleveland Councils' Association said:
    "Parish and Town Councils are the smallest tier of Local Government and without doubt the most economically efficient. With relatively modest calls on ratepayers' money they achieve marvellous results for those living within their area."
    Mr. P. R. A. Newell, the secretary of the Wiltshire Association of Local Councils—it is interesting to note that the president of that association is the hon. Member for Devizes (Mr. Morrison)—said:
    "I have been asked to draw your attention to an amendment put down to the above Bill which would entitle Parish and Town Councils to receive an appropriate share of the rate support or block grant on their precepts."
    He hopes that I would support that. It is because of such representations, and those of my hon. Friends, that I decided to pursue this matter today.

    The Government have said that they have much sympathy with this general idea, but no Minister has ever tried to justify not doing anything about it. Therefore, I have, albeit reluctantly, picked up a suggestion made in the other place 18 months ago that the Secretary of State should make regulations as to how rate support grant attracted to district councils for parish councils expenditure should be passed on to the parish council. That is something which has been debated in the passage of successive local government Bills both by this and previous Governments.

    It is apparent, for example, in Wiltshire, that the district council will agree to make the appropriate payment only if there is legislation to force it to do so. The obvious iniquity of the present system is that parish councils are double rated. Parish ratepayers pay their parish rate and the district rate, and the rate support grant element designed for the parish is used to alleviate district council expenditure generally. Areas with active parish councils are subsidising those without them. This injustice works as a deterrent both to the initiative and the establishment of parish councils.

    Particularly now, when communities are breaking up for lack of community oriented work, the Government should respond to ensure that these efficient, locally based organisations receive adequate resources and encouragement. As one letter put it:
    "No Parish Council will eagerly undertake (in the low key and economic way which is their trade mark) new valuable local initiatives if the expenditure attracts rate support grant from which the Parish and its ratepayers get no benefit."
    9 pm

    The most recent survey by the National Association of Local Councils conducted in October 1979 produced 157 answers from 328 district councils with parish or community councils. The Association of District Councils advised its members not to reply to the questionnaire. Of the 157 which answered, 16 said that they paid the amount requested, 42 said that they gave grants of more than rate support grant resource element, 61 said that they gave less than their rate support grant resource element, two gave rate support grant resource and needs element and 38 gave nothing.

    There is no reason to suppose that the figures have changed in favour of parish councils. With the present squeeze the money is even less likely to be paid out. In Treasury terms what I am asking for is a small sum. For 1981–82 it represents about 0·16 per cent. of a total local government expenditure of about £36 million.

    The Government said in Committee that, if a way could be devised to force district councils to pay, they would adopt it. There is a solution in my proposal. It will allow the Secretary of State to make enabling regulations. Even if the Government will not accept the new clause, I hope that they will assure the House that a more acceptable amendment will be introduced in the other place.

    I commend the new clause. Its purpose is to make parish, town and community councils masters in their own homes, to ensure that funds intended for their use are passed to them and to demonstrate that Parliament fully appreciates the valuable work of small councils which are rooted in their neighbourhoods.

    I have sympathy with what the hon. Member for Liverpool, Edge Hill (Mr. Alton) said. Parish councils have tended to be the Cinderella of local authorities since 1972, but they are important.

    When a parish council expresses an opinion to a Member of Parliament, one knows that is the opinion of elected representatives, not a pressure group. Some parish councils have been adversely affected because the parish rate does not always go to the parish but is absorbed by a district council, in much the same way as some EEC grants go into the Treasury maw rather than into the areas to which they should be directed. Parish councils feel that acutely.

    The parish of Halewood in my constituency is big and rich. Ford operates there. The parish calls itself the town council and is regarded as such by many inhabitants. It does a tremendous amount of work in Halewood. It does more than Knowsley district council can do, because it is closer to the inhabitants and more akin to their needs.

    I listened carefully to the debate. I am not sure that the new clause is the appropriate way to deal with the difficulty. I accept the Minister's view on that aspect. However, it is not beyond the wit of Her Majesty's Government to introduce an amendment in another place if the new clause is unsatisfactory.

    The clause was drafted by laymen, not by Government draftsmen. Nevertheless, the Government should accept that there is a problem and that, if possible, it should be dealt with in another place. If not, the Government may be assured that hon. Members on both sides of the House will come back to this matter to do right by parish councils, whether they call themselves parish or town councils. Parish, town or community councils are often much nearer to the wishes of an area's inhabitants than the gigantic district councils created by the Local Government Act 1972.

    Many urban and rural district councils, which were councils in their own right until 1972, opted to become parish or town councils. The hon. Member for Edge Hill referred to an urban area. Halewood has a population of between 20,000 and 30,000. If it were not in the sort of urban areas that the hon. Gentleman and I represent, it would be regarded as a major county town.

    I accept that this may not be the right new clause, but I hope that the Government will listen carefully to what the hon. Member for Edge Hill said about it. I hope that the Government will introduce a new clause in another place which will do effectively what the hon. Gentleman wants. I assure the Government that if they do not do that, the Opposition—including the Liberal and Social Democratic Parties—will put considerable pressure on them. There will also be pressure from the Government's supporters because many of these parish councils are controlled by them. Such councils do an extremely good job, no matter who controls them.

    I hope that the Minister will assure the whole House that an attempt will be made in another place to remedy the defects in the present system that have existed since 1972.

    I knew that, in moving the new clause, the hon. Member for Liverpool, Edge Hill (Mr. Alton) would deploy strong arguments in favour of making this rearrangement to improve the lot of parish councils.

    Two points arise at the outset. First, the Government, and I suspect hon. Members of all parties, were aware for some considerable time of the anxieties of district councils and parish councils on this matter. Secondly, Governments of both parties, for a considerable time, have tried to find an equitable and sensible way to resolve the matter.

    I spoke at the local councils association's national conference in Harrogate recently when this matter was obviously of major concern and a topic for debate. I explained that under the existing RSG procedure the formula, albeit not entirely accepted on both sides of the House, but at least designed to provide a system of local financing based on a careful assessment of need, and spread over a national network of a substantial number of districts, is not capable of being redesigned to deal with 10,500 parish councils.

    The hon. Member for Edge Hill will understand that if some of those parish or community councils have zero ratepayers—as I believe they do—several hundred have small numbers of ratepayers or electors. Therefore, it is beyond administrative possibility to extrapolate from the present RSG system to deal with each and every parish or community precept or requirement, given that they have such variable calculations and requirements.

    I admit that that does not alter the fact that parishes and community councils exist and that where they have the right to precept against district councils, in all fairness, they should be able to obtain from the precepting authority the correct sums of money to spend on the matters for which they have statutory power. I suggest to the hon. Member for Edge Hill and to the right hon. Member for Widnes (Mr. Oakes) that it is a major obstacle to try to redefine the rate support grant and GREA systems in order to make an equitable settlement for 10,500 additional authorities, given the substantial number of authorities currently covered by the mechanism. Therefore, it is not for want of seeking to find a way, but I must say to the hon. Member for Edge Hill that I do not believe that the existing mechanism works in that way.

    We come to the question of how the parish or community council can obtain satisfaction to do what is seeks to do on behalf of its parishioners or ratepayers. In that matter we have traditionally relied on the relationship between the parish or community council and its district. There is plenty of evidence that in most cases there is an amicable arrangement whereby under precept the district will provide the required sums. The parish seeks to say that the discounted amount, not the full amount, should be levied. It regards what it does as a second rate levied on individual persons. That is the burden of the remarks made by the hon. Member for Edge Hill.

    It is true that there is a double rating point for the individual elector, who is at one and the same time a ratepayer of the parish, a ratepayer of the district and a ratepayer of the county. That is not a new position for the ratepayer. Equally it is true that in many district council areas there is now a mechanism whereby the council can take out from its formula for charging the rate the parishes over which it has rating authority and can rate differentially. That provides part of the solution to the problem of double rating. However, there is no mechanism at the moment that will prevent the possibility of an individual community or parish being double rated if the district seeks so to do.

    The question is whether we should amend in the manner laid down by the hon. Gentleman. Should we amend the Bill at this time to achieve that objective? We shall not be able to draft an amendment that will allow the RSG mechanism to go through to the 10,500 individual communities or parish councils in such a way that it will become an effective local authority financing mechanism. I do not believe that we can do that. It would not be right for me to seek to mislead the House by assuring it that we can design an amendment in another place that will carry out that intention.

    We must rely on the relationship between the parish or community council and its precepting district. In a number of cases that is an effective instrument whereby the parish can obtain what it wishes. That is the correct way to deal with the matter.

    9.15 pm

    We are not prepared to accept the amendment. I invite hon. Members to vote against it. That is not because what the hon. Member for Edge Hill asks is so controversial and unacceptable in political terms that we would not wish to meet it. With our system of local government financing it is not possible for us to design a mechanism, based on the RSG system, which would effectively deal with every community, parish or town council requirement.

    That cannot be a satisfactory answer for the hon. Member for Edge Hill. However, I suspect that a vast majority of local authorities and their associations feel, as the Government do, that with the present system that is as far as it can be taken. It would be wrong for us to seek to legislate further by enacting the new clause so eloquently moved by the hon. Member for Edge Hill.

    I am disappointed and depressed by the Minister's reply. My hon. Friend the Member for Liverpool, Edge Hill (Mr. Alton) will no doubt wish to reply to the Minister. However, as vice-president of the National Association of Local Councils, and having been concerned about this issue for a long time, I am amazed that Ministers in successive Governments are still unable to devise a solution to what is a relatively simple problem. It cannot be an insoluble problem, otherwise those district authorities—they are not in the majority—which now transmit the earned element of the rate support grant to their parishes would be unable to do so.

    If a district council can devise a way of calculating the right amount of money and transmitting it to the authority, surely the Department of the Environment can find a way of doing so. Heaven knows, it has overturned, changed, modified and refined the system of rate support grant so many times over the past few years that its officers must have been able to address their otherwise overburdened minds to this relatively limited but specific problem.

    The Minister has confused some aspects of the situation. He referred to parish council requirements and needs as if local councils were seeking additional government finance with which to support their services. That is not the case. We are talking about simple justice and ensuring that Government grant already paid to district councils on the basis of parish council precepts actually gets to the parish councils, whose precept earned it in the first place. We want to ensure that the money that the Treasury allows for local government goes to the people who should get it. We are not talking about additional resources.

    Nor are we talking about 10,500 parish councils. There are only 8,600, many of which do not levy a rate. We are referring to the active parish councils. We are not even including some councils who raise ½p and 1p rates. We are concerned with councils that raise a larger sum. I ask the Minister to consider the injustice and ludicrousness of the position. For example, the inhabitants of a parish might decide that they need a desirable amenity in their village—perhaps a bus shelter or playing fields. A combination of voluntary effort and public funds brings that about. That is the unique feature of parish councils. They draw together voluntary effort and public funds. Ministers should be encouraging, not discouraging, that. The council gets its playing fields but has to raise a 4p or 5p precept to do so. That inevitably affects the rate support grant calculations that bring grant to the district council. Meanwhile, a neighbouring parish, which has an inactive parish council, does nothing.

    However, the district council decides that it does not want other people running the playing fields in its areas and that it would rather be in charge of them itself. When the rate support grant arrives in the treasurer's office the district council duly pockets the whole amount that was effectively earned by the precepting of the active parish. At the end of the day the district council says "By the way, we shall have a district council playing fields project", and the parish that was not prepared to lift a finger to help itself also benefits. The district council will say that it will provide the playing fields, with district council funds, using the precept that was earned by the parish that was helping itself. By that process it will believe that it is teaching the council that it would be far better off if it did not have a parish council at all.

    I remind the Minister that some district councils inherited parishes from rural parts of the districts that made them up in the first place, and some district councils do not like the elements of local democracy, especially mixed urban and rural areas where the urban centre calls the tune, not the parish that was formerly in the rural area. Some district councils are determined to depress and shut out parish councils altogether.

    That is a ludicrous thing to do to the very element in local government that can minimise rate-borne expenditure and can combine voluntary and rate-borne efforts effectively to provide community services. It is ludicrous that after years of examining the problem, civil servants in the Department of the Environment, numerous though they are, have still not produced a worthwhile basis for a solution satisfactory to Ministers. It is ludicrous that Ministers have been so dilatory that they have not demanded, before the next local government Bill comes before the House, a solution in the form of an amendment that will be acceptable to all.

    I cannot help reflecting that while the hon. Member for Berwick-upon-Tweed (Mr. Beith) wants central Government support to solve the problem it is extraordinary that a parish in the district council community cannot prevail on the district council to see that the matter is voluntarily put right.

    The Minister betrays scant understanding of the relationship between parish and district councils in many areas. Some district councils are opposed to the very concept of the parish council. They do not welcome parish councils but wish to see district-run services right across their area. The district councils can pursue that policy with the Minister's aid and money and can find more expensive ways of providing services, and of using the money that he has provided instead of handing over the proper grant share to the parish councils, which are trying to do things as cheaply as possible.

    With his knowledge of various parts of the country, the Minister should know better. He should know that some authorities have a definite and strong objection to parish councils and would prefer that services were centralised and run on a grand and expensive scale. That does not make good local government. Good local government is where the community is able to contribute its effort and support, where public services are used sparingly in conjunction with the voluntary resources of the local community. The Minister is penalising such people to the benefit of authorities that want to run matters centrally.

    I cannot understand why the Minister wants to do that. That is why I am sorry that he has not applied his mind and made his civil servants apply theirs to this relatively simple problem.

    The Minister may now understand the strength of feeling of the Liberal Party on the matter and why I moved the new clause. I suppose that I am unlucky to represent an inner city constituency, which is not so beautiful as those of my right hon. and hon. Friends. I am equally unlucky that my constituency does not have any town councils. That is not the fault of the city council, as some of its members tried to introduce town councils but the mover was turned down by other members of the city council. That is unfortunate as there is a role in cities for the same form of authority that my hon. Friend the Member for Berwick-upon-Tweed (Mr. Beith) described.

    It is regrettable that parish, town and community councils are treated with some disdain and contempt merely because they operate on a small scale. I am disappointed that the Government have not found a formula, or even shown themselves prepared to find a formula in another place, to rectify the obvious injustice whereby parish councils desperately doing their best are penalised because rate support is not handed on to them or because other parish councils in the area are not doing the same job and so they are being discriminated against.

    It cannot be beyond the wit of the officials in Marsham Street and the people who have given us rate support grant settlements, block grants, county councils, housing investment programmes, housing revenue accounts and the rest, to find some way to ensure that parish councils receive a fair return for the efforts that they put in, usually on a purely voluntary basis. People further on in local government, on district and county councils, are often reasonably well remunerated for their services, but members of parish, town and community councils usually serve in an entirely voluntary capacity, giving their time free to the local community in the very best traditions of local government in this country.

    I am therefore glad that the right hon. Member for Widnes (Mr. Oakes) and my hon. Friend the Member for Berwick-upon-Tweed both supported the new clause and accepted that there is a desperate need to do something about this, but I am disappointed that the Minister could not give the assurances that we sought. I do not intend to press the matter to a Division today, but I hope that the Minister will understand the anger that is felt, not just by many Members of Parliament but by members of the National Association of Local Councils. I conclude by reading to the House the first paragraph of a letter from the secretary of that association. He says:
    "I hope you may feel able to support the new clause, whose effect is to entitle the 8,600 parish, town and community councils in England and Wales to their fair share of the block grant paid to the district councils."
    That is what the new clause is about—a fair deal for parish, community and town councils.

    I beg to ask leave to withdraw the new clause.

    Motion and clause, by leave, withdrawn.

    New Clause 11

    Metropolitan Police Block Grant

    '1980 c.65. Section 64 of and Schedule 11 to the Local Government, Planning and Land Act 1980 (Special provision for Metropolitan Police District) shall be repealed and replaced by the following—

    "64(1) Block grant shall be payable to the Receiver for the Metropolitan Police District as if the Metropolitan Police were a local authority and, subject to subsections (2) and (3) below, any reference in this Part of this Act to the method of determining a local authority's entitlement to block grant shall be deemed to apply also to the Metropolitan Police.
  • (2) Section 57 shall not apply to the Metropolitan Police.
  • (3) The grant-related poundage and grant-related expenditure of the Metropolitan Police shall be determined by the Secretary of State.".'—[Mr. Squire.]
  • Brought up, and read the First time.

    I beg to move, That the clause be read a Second time.

    It is not unusual for me to move an amendment concerning block grant—those with long memories will remember other occasions—but the House will be relieved to hear that my remarks today will be brief.

    One of the basic principles is that the block grant is paid to each authority—notwithstanding the comments made in relation to the previous new clause—so that the accountability of each authority to its ratepayers and electors is as clear as possible.

    However, there are two anomalies in the Local Government, Planning and Land Act which weaken the application of that principle. Under subsections (2) to (5) of section 56, the possibility is admitted of block grant for the GLC, a local education authority or a county council being paid to the rating authorities in the area. Those provisions were invoked in 1981–82 in favour of the GLC and the ILEA, but they are not to be invoked in 1982–83 in favour of those authorities or of any county council. The prospect of their use in future appears, at least at the moment, to be remote.

    The other anomaly which the new clause seeks to tackle is in section 64 and schedule 11, in which provision is made for block grants in respect of the Metropolitan Police to be paid to the rating authorities in the Metropolitan Police district. That provision reduces the accountability of the rating authorities and of the Metropolitan Police. It also causes serious accounting problems for the rating authorities. They have to include in their budgets an estimate of the block grant that they are likely to receive in respect of the Metropolitan Police, but there is no way in which they can accurately estimate what that grant will be.

    At the time of the rate support grant settlement, the Secretary of State publishes his initial estimate of the block grant entitlement of each authority, given certain assumptions, but the amount that each authority actually receives depends not only upon various determinations made by the Secretary of State, which may change, and what the authority itself spends, but on what all other authorities spend. Estimates of block grant entitlement are thus continually revised during the grant year and cannot finally be known until some months after the grant year has ended, when the actual expenditure of all authorities and the final determination of the Secretary of State are known. The latter process has become known as clawback.

    Of course, all authorities have to suffer that uncertainty in respect of their own block grant entitlement, but rating authorities in the Metropolitan Police district have to suffer it not only on their own account but in respect of the block grant entitlement of the Metropolitan Police. This is unfair, and it can have either of two results. If the rating authority takes a pessimistic view of the ultimate block grant entitlement of the Metropolitan Police, it must rate higher than it would otherwise need to do to cover any possible shortfall in that entitlement. That is not only unfair on the authority's ratepayers, but contrary to public policy which requires rate increases to be kept as low as possible. It is at least contrary to the Government's declared policy in this respect.

    9.30 pm

    The second, obvious, alternative is that, if the rating authority takes an optimistic view, it may have to dip into its own reserves to cover any shortfall in the Metropolitan Police block grant, with the real possibility that those reserves may prove inadequate to meet this and other calls upon them.

    With part I of the Local Government Finance (No. 2) Bill enacted, and local authorities losing the power to levy a supplementary rate, an authority would have to ask the Secretary of State's permission to borrow to cover a revenue shortfall, thus putting itself—through no fault of its own—under the direct control of the Secretary of State.

    The London Boroughs Association considers that section 64 and schedule 11 of the 1980 Act should be repealed and replaced by the proposed new clause. Representations to this effect have been made to the Department of the Environment, which has undertaken to consider the point. However, the association is anxious that the present legislative opportunity should not be lost.

    The proposed section 64(2) provides that section 57 of the 1980 Act
    "shall not apply to the Metropolitan Police"
    as it deals with the method of determining the grant-related poundage and expenditure of local authorities in accordance with principles to be applied to all local authorities. Those principles would not be relevant to the Metropolitan Police. The proposed section 64(3) provides for the Secretary of State to make the necessary determinations in respect of the Metropolitan Police, thus replacing the equivalent provision in schedule 11.

    I listened with care to what my hon. Friend the Member for Hornchurch (Mr. Squire) said. He has moved a new clause on behalf of the London Boroughs Association, which I know has expressed concern. My hon. Friend will understand that the existing system derives from discussions that we had with the association during the passage of the 1980 Act, when it was agreed that this system should be used.

    The 1980 Act also specified that the block grant to the Metropolitan Police should reach them indirectly through the authorities on which they precepted. That was similar to the way in which all the precepting authorities in London obtained their rate support grant under the old grant system. At that time, it was not thought necessary to change it.

    We have had a year's experience of the new system, and clearly the boroughs are less than happy with the original proposals. Now that the grant entitlements are based on expenditure, it is true that they are likely to fluctuate more than they did under the old system. However, I cannot accept the new clause, although I certainly promise to look at it closely and, more important, to consider the problem that my hon. Friend has raised.

    The association and the Department had a preliminary discussion at the meeting of the grant working group on 1 April and agreed to hold further and more detailed discussions on this proposal. It undoubtedly raises technical questions of considerable complexity that could easily have repercussions outside the confines of the Metropolitan Police district.

    If there is a problem to which there is a straightforward and acceptable solution—from what my hon. Friend has said, I am by no means sure that there is—it is possible that we shall be able to do something about it. Perhaps my hon. Friend will allow me to discuss this matter more fully. We are already having discussions with the association, and I believe that it would be best to leave the matter there for the time being.

    I am grateful for my hon. Friend's expression of opinion. He is in danger of breaking my run, to which the right hon. Member for Manchester, Ardwick (Mr. Kaufman) referred in Committee, whereby it was expected that I would get my amendments accepted. My hon. Friend will therefore understand my feeling of shock and horror as a result of his answer.

    In the light of what has been said, I hope that the Government will keep these matters under review. I think that the clause would reduce uncertainty if it formed part of the Bill. However, having had the chance to air my views, I beg to ask leave to withdraw the motion.

    Motion and clause, by leave, withdrawn.

    Clause 4

    Adjustments Of Distribution Of Block Grant

    I beg to move amendment No. 1, in page 3, line 44, at end insert—

    "(d) shall not be exercised for the purpose specified in paragraph (cc)of that subsection so as to decrease the amount of block grant payable to a local authority where the local authority notify the Secretary of State that any such decreases will not enable them to maintain at an acceptable level the services which the local authority are by statute required to provide".
    The hon. Member for Hornchurch (Mr. Squire) referred to the Minister's response as a concession. I think that he was stretching the English language. I hope that this amendment will not be met with a similar concession.

    The Minister was not using "concession" in the normal way. He was using the definition on the Anglo-Heseltinese dictionary.

    However the word was used, the hon. Member for Hornchurch had to ask to withdraw his new clause because the Minister would not accept it.

    At one stage new clause 4 and the amendment were to be linked. However, for technical reasons which I fully understand it has not been possible to link the clause and the amendment. That is unfortunate, because the clause sought to put responsibility at the door of the Secretary of State, where it should properly lie. The amendment goes some way in that direction.

    It is recognised that central Government must have some control over local authorities. There is no argument about that. However, there is a limit and if we go beyond it, the aim of central Government becomes self-defeating. Year in and year out the House places statutory duties on local authorities. The Bill takes a somewhat different approach because it will remove a financial tool from local authorities. I refer to their ability to raise a supplementary rate. The Bill replaces that tool with a piece of nonsense that states that the Secretary of State may or may not allow an authority to borrow if an approach is made to him. That is a fundamental change.

    The Bill would have been more important if Labour Members had not forced the Government to rethink their approach. At one stage the Bill would have made it possible for the Government to cut finances at any time during the financial year. That would have been much worse. It was the pressure that was mounted on the Opposition Benches that caused the Government to think again.

    On 18 January, when the Bill was given a Second Reading, I intervened in the Secretary of State's speech to tell him that he was taking away the right of local authorities to levy supplementary rates and was conferring upon himself or other Secretaries of State the right to alter grants during the financial year. At the same time, Parliament is imposing statutory duties on local authorities. It is unfortunate that the Secretary of State has not graced the Chamber with his presence today. We have been told that the Bill is vital. Surely we should have seen the right hon. Gentleman at some stage during the day.

    It seems that we have reached the stage where the Secretary of State could make it impossible, through financial restrictions, for local authorities to carry out statutory duties imposed by this Parliament or any other Parliament. It also seems that local authorities, through no fault of their own, find themselves in conflict with laws and Acts that this Parliament seeks to impose on them. One could read out a list as long as one's arm, both arms or the arms of every hon. Member, of the many duties imposed on local authorities. They include standards of social services, housing provisions, educational standards and provisions, provision of efficient and adequate transport, local highways maintenance provisions and provision for children, police, planning and fire services. The list is endless. All those provisions are placed upon a local authority by statute of the House of Commons. No one complains about that.

    I am the first to agree that certain elements of grant contribute towards carrying out those statutory undertakings. I hope, however, that the Minister recognises that a burden is imposed on local authorities by Parliament in carrying out those statutory undertakings. The dead hand of a dictatorial Secretary of State seeks to cut back in such a manner that even the statutory duties placed upon local authorities are put at risk. I referred in Committee to some of the afflictions forced upon Newcastle city council by hidden costs. This translates into effects on the statutory duties that the council must carry out. There can be no other term than "cutback" for the actions of the Secretary of State. Again, in the case of the Tyne and Wear county council, these statutory duties are at risk.

    It was interesting during the debate on new clause 5 to discover the number of hon. Members who seemed to agree on certain matters. One issue germane to the amendment now under discussion was mentioned by the right hon. Member for Taunton (Mr. du Cann), other Conservative Members and a number of Opposition Members. Most agreed that there was inadequate central Government funding to carry out statutory duties placed upon local authorities by the House. There was a call for an exercise to be conducted to see how matters worked out. I submit that the Minister does not need to wait for the exercise. The wording of the amendment now before the House is precise. It is not an open cheque. The words proposed to be inserted are that the powers
    "shall not be exercised for the purpose specified in paragraph (cc) of that subsection so as to decrease the amount of block grant payable to a local authority"—
    and this is the nub—
    "where the local authority notify the Secretary of State that any such decreases will not enable them to maintain at an acceptable level the services which the local authority are by statute required to provide".
    The amendment is by no means an open cheque. It insists that local authorities notify the Secretary of State—rightly—when they cannot carry out the duties that the House has laid upon them. There can be nothing fairer than that. It seems nonsense and grossly unfair that the House should place a statutory duty on local authorities to perform functions but then withdraw funds to such an extent that that duty becomes at risk. The Secretary of State should have in the Bill a clause that allows a local authority to come to him and say that it cannot carry out his will if he carries on with decreased public expenditure at that level. That is fair, square, honest and open-handed.

    9.45 pm

    In Committee I heard one thing said many times—as I am sure did my hon. Friends—particularly from the Government Back Benches. I am drawing to a close so that I can give the Minister a chance to leap to his feet and accept the amendment, as I am sure that he will in a spirit of fairness and open-handedness. I think he is waiting to do so. In Committee Conservative Members will remember that they frequently used the phrase "He who pays the piper calls the tune." I am sure my hon. Friend will recall this vividly because it was like an everlasting gramophone record—we heard it morning, noon and night at every Committee meeting. I will not argue against that, but the converse is equally true—he who calls the tune pays the piper. This is what the amendment is asking the Government to do.

    Where a statutory duty is placed on local authorities but the wherewithal to carry it out is taken away, it should at least, in all honesty and fairness, be open to a local authority to come to the Government and say that it can no longer carry out that statutory duty if the level of expenditure is decreased to that extent. To help local government to carry out duties imposed on it by the House, the Minister should accept the amendment.

    The essence of the amendment is law and order. The Government talk about law and order, but there are other sorts of laws such as those passed by the House in a social context that we ask the local authorities to guarantee to implement. The Government, if they refuse to accept the amendment, are saying that monetarism comes before the law and that monetarism is more important than law and order. The Opposition are saying in the amendment that law and order is more important than the monetarist policies of the Government. That is what it boils down to.

    As my hon. Friend the Member for Newcastle upon Tyne, Central (Mr. Cowans) said, many statutes simply are not being adequately implemented by local authorities because there is not the money for them to do so. Some of the duties that are being overlooked are small but I am sure that as they build up scandals will develop. An example is trading standards legislation, which was passed by the House because we wanted to protect the consumer. It is falling into disuse in local authority after local authority because the authorities do not have the money to enforce it. As so often happens the House will wake up to this only when some tragedy occurs. We shall discover that we have passed laws but have not provided local government with the money to make them effective.

    I am concerned especially about education legislation. In many local authority areas, education takes up more than half the expenditure of the authority. As was shown by the report of Her Majesty's inspector which was issued today by the Department of Education and Science, the standards which have been normal in the past and which have been assumed to exist under section 8 of the Education Act 1944 are not being kept up adequately, and we need some provision in the law to prevent ministerial interference to depress standards even further than they are at present.

    I say that only because I want to warn the House. I know that this is not a matter affecting the Department of the Environment. However, the Department of Education and Science is deep in discussion about so-called methods of reforming the rating system which will involve taking 80 per cent. of education expenditure clean out of the rate support grant and into some sort of direct grant of the kind foreshadowed in one of the appendices to the Government's Green Paper on the future of the rates.

    There are differences between the two sides of the House about this proposal. If it were put forward seriously, I should oppose it with all the power in me, because I am sure that it will not do any good and that it could do a great deal of harm. In my view, local authorities can run education a great deal better than the right hon. Member fo Leeds, North-East (Sir K. Joseph) can from Whitehall. In principle, that must be true.

    I say that to emphasise that traditionally the way that we have upheld standards in local government services is by passing legislation laying down minimum standards, with the Government providing local authorities with the money to make it possible to maintain those standards. Under this Government, during the past few years we have seen that the money is no longer being provided and that the Government are conniving at the law being broken. They know it. The Department of the Environment is more and more ashamed about it but, because it is not specifically its responsibility as each block of legislation may be in some other Department, if feels able to connive at these breaches of the law.

    The amendment is essential if further breaches of the law are not to take place. I commend it to the House.

    In many ways, this is the most important amendment to come before the House. It is not about audit. It is not about local government accounts. It is about the will of Parliament.

    As my hon. Friends the Members for Lewisham, West (Mr. Price) and Newcastle upon Tyne, Central (Mr. Cowans) reminded us, the will of Parliament has been expressed in a great many statutes, some of which are systematically and callously being ignored.

    Assuredly this Bill will pass into law. The Government have made it clear that they are not willing to listen to reason. They respond only to brute force. They have resisted all our amendments. They see them as getting in the way of the overriding financial responsibility which they seem to regard as their first priority.

    This amendment involves a deeply held principle. It provides that the law of the land will be implemented by local authorities, despite the prejudices and predilections of any given Secretary of State. It says no more than that. It says that a Secretary of State, simply because he cannot argue sufficiently strongly with the Treasury, will be able to say to local authorities "We will give you this amount of money and if you have to break the law, you do so, but you do so at your own peril, and in my view you can manage without breaking the law". That is only his view as an individual, and ratepayers may take issue with it at some time in the future.

    Far more fundamental is the fact that, instead of the Government coming to the House with amending legislation on education, social services and housing measures—the measures that affect people in local government—they are saying "They are all very well, but we shall set them on one side, and we shall decide whether they are to be implemented. That decision will be the sole property of the Secretary of State, as advised by his civil servants". The amendment is the only way to save this legislation from becoming an unconstitutional nonsense. If the Government had the guts to say that they wanted to amend education legislation because it was too generous, or that the social services legislation needed amending because it was too generous, or that the housing legislation should be amended because it was too generous, that would be entirely acceptable. It is their right, because they are the democratically elected Government. However, they should also take the public odium for what they do. Instead of that, they hide behind this tawdry legislation—as it was accurately described by my hon. Friend the Member for Lewisham, West (Mr. Price).

    Far worse than that, in constitutional terms, is the fact that a sweeping measure of this nature, in which vast powers are taken by an individual, the Secretary of State, is surely alien to the concept of the way in which we try to run the affairs of this country. It is alien to the democratic principles of which we say we are proud. It is utterly alien and against the wishes, freely expressed, of the House of Commons on many occasions in the passage of many Acts of Parliament.

    If the House does not accept this amendment, the Government are saying "We are quite prepared to put up an illusion of what we would like to do, but with these reserve powers we can take it all back again". Thus, what they say about providing services for people is not worth the paper that the Bill is written on.

    I do not know about following the speech of the hon. Member for Blaydon (Mr. Mc William), but I certainly have the guts to ask the House to reject the amendment.

    Clause 4 is concerned with a situation which has arisen from time to time under both Labour and Conservative Governments when, for overriding reasons of national economy, the Government have found it necessary to seek expenditure reductions or restraints.

    I was reminded by the way in which the amendment was moved by the hon. Member for Newcastle upon Tyne, Central (Mr. Cowans) of the debate in Committee on amendment No. 102. We had a fairly long joust on this matter of principle. The House is certainly familiar with the arguments that have been deployed on this subject in the past.

    How best can reductions be secured? The Government's best instrument is the best rate support grant. That is why we propose hold-back schemes for 1981–82 and for 1982–83. We have told each authority what expenditure reductions we expect. We propose to reduce the grants to authorities that overspend. The amendment would prevent hold-back applying to authorities that claim that they will not be able to provide an acceptable level of service. What in any circumstances would be an acceptable definition of "an acceptable level of service"? It is the length of a piece of string, and it is incapable of simple definition.

    I do not say that the Government are deaf to representations. We shall listen to local authorities that feel that there are good reasons why they cannot meet targets——

    It being Ten o'clock, the debate stood adjourned.

    Business Of The House


    That, at this day's sitting, the Local Government Finance (No. 2) Bill and the Reserve Forces Bill [Lords] may be proceeded with, though opposed, until any hour.—[Mr. David Hunt.]

    Question again proposed, That the amendment be made.

    As I was saying, this does not mean that the Government are deaf to representations except, that is, to those from the hon. Member for Lewisham, West (Mr. Price). Of course, we shall listen to local authorities that feel that there are good reasons why they cannot meet targets. If there is a case that raises a general principle, it may be possible to consider exemptions. Indeed, exemptions were considered in the financial year 1981–82. Authorities will know how hold-back will be calculated before they set their rates. This is the main burden of the Bill. The abolition of the supplementary rate will mean that authorities will know exactly where they stand in relation to their main rate.

    If an authority chose to ignore targets that others had been able to meet without disastrous effects on their services, it would not be able to claim in the middle of the year that hold-back came as a surprise. Provided that the authorities keep within the law, they will be able to maintain services at an acceptable level, but whether their ratepayers and electors will agree is another matter.

    I urge the House to reject the amendment.

    Not for the first time, I am totally disappointed with the Minister's reply. To be honest, he has not given any reply. As the hon. Member for Woolwich, East (Mr. Cartwright) said earlier, by no stretch of the imagination can I now shout "Eureka!" What the Minister has said must concern every right hon. and hon. Member in the House. The Minister has said that when the dead hand of the Secretary of State touches local authorities, the will of the House and any legislation is at risk. If that is not a negation of democracy, I do not know what is.

    It is good of my hon. Friend to give way to me. The Minister churlishly refused to do so. It would be right to put the record straight. When the Minister says that the adequacy of services is the length of a piece of string, the proper judge of whether services are adequate according to the law would, in the final resort, be the House of Lords, in a case brought to decide what that adequacy was. If the courts decided, for instance, that a local authority was not providing adequate education, there would be a problem if the Government had cut back grant to the local authority and prevented it from doing what the House of Lords told it to do.

    My hon. Friend has put the case much better than I could have done. I do not need to comment further on that except to say that sometimes local government wished that it had something as long as a piece of string. It is important that the Government have not seen fit even to examine the wording of the amendment or to consider the implications. It is a sad reflection on a Government who came to power on a manifesto that promised more democracy to local government and, by every successive word and deed, have made sure that that is impossible.

    I hope that my right hon. and hon. Friends will join me in pressing the amendment to a Division, because it is a fundamental issue that should be included in the Bill. The Minister has not given one inkling of the depth of sincerity with which the amendment was tabled or the importance of it.

    Question put, That the amendment be made:—

    The House divided: Ayes 217, Noes 279.

    Division No. 120]

    [10.04 pm


    Abse, LeoCallaghan, Jim (Midd't'n&P)
    Adams, AllenCampbell, Ian
    Allaun, FrankCampbell-Savours, Dale
    Alton, DavidCanavan, Dennis
    Archer, Rt Hon PeterCarmichael, Neil
    Ashley, Rt Hon JackCartwright, John
    Ashton, JoeClark, Dr David (S Shields)
    Atkinson, N.(H'gey,)Cocks, Rt Hon M. (B'stol S)
    Bagier, Gordon A.T.Cohen, Stanley
    Barnett, Guy (Greenwich)Coleman, Donald
    Barnett, Rt Hon Joel (H'wd)Concannon, Rt Hon J. D.
    Beith, A.J.Conlan, Bernard
    Benn, Rt Hon TonyCook, Robin F.
    Bidwell, SydneyCowans, Harry
    Booth,Rt Hon AlbertCraigen, J. M. (G'gow, M'hill)
    Bottomley, Rt Hon A. (M'b'ro)Crowther, Stan
    Bray, Dr JeremyCryer, Bob
    Brocklebank-Fowler, C.Cunliffe, Lawrence
    Brown, Hugh D. (Provan)Cunningham, Dr J. (W'h'n)
    Brown, R. C. (N'castle W)Dalyell, Tam
    Brown, Ronald W. (H'ckn'y S)Davidson, Arthur
    Brown, Ron (E'burgh, Leith)Davies, Rt Hon Denzil (L'lli)
    Buchan, NormanDavies, Ifor (Gower)
    Callaghan, Rt Hon J.Davis, Clinton (Hackney C)

    Davis, Terry (B'ham, Stechf'd)Mc Taggart, Robert
    Deakins, EricMcWilliam, John
    Dean, Joseph (Leeds West)Marks, Kenneth
    Dewar, DonaldMarshall, Jim (Leicester S)
    Dixon, DonaldMartin, M (G'gowS'burn)
    Dobson, FrankMaynard, Miss Joan
    Dormand, JackMeacher, Michael
    Douglas, DickMikardo, Ian
    Duffy, A. E. P.Millan, Rt Hon Bruce
    Dunn, James A.Miller, Dr M.S. (E Kilbride)
    Dunnett, JackMitchell, R.C. (Soton Itchen)
    Dunwoody, Hon Mrs G.Morris, Rt Hon C. (O'shaw)
    Eadie, AlexMorton, George
    Eastham, KenMoyle, Rt Hon Roland
    Edwards, R. (W'hampt'n S E)Newens, Stanley
    Ellis, R. (NE D' bysh're)Oakes, Rt Hon Gordon
    English, MichaelO' Neill, Martin
    Evans, loan (Aberdare)Orme, Rt Hon Stanley
    Faulds,AndrewOwen, Rt Hon Dr David
    Field, FrankPark, George
    Fitch, AlanParker, John
    Flannery, MartinParry, Robert
    Fletcher, Ted (Darlington)Pendry, Tom
    Ford, BenPenhaligon, David
    Forrester, JohnPitt, William Henry
    Foster, DerekPowel, Raymond (Ogmore)
    Foulkes, GeorgePrice, C. (Lewisham W)
    Fraser, J. (Lamb'th,N'w'd)Race, Reg
    Freeson, Rt Hon ReginaldRadice, Giles
    Freud, ClementRees, Rt Hon M (Leeds S)
    Garrett, John (Norwich S)Richardson, Jo
    Gilbert, Rt Hon Dr JohnRoberts, Albert (Normanton)
    Golding, JohnRoberts,Allan (Bootle)
    Graham, TedRoberts, Ernest (Hackney N)
    Grant, George (Morpeth)Roberts,Gwilym (Cannock)
    Grant, John (Islington C)Robertson, George
    Hamilton, James (Bothwell)Robinson, G. (Coventry NW)
    Hamilton, W. W. (C'tral Fife)Rooker, J. W.
    Harrison, Rt Hon WalterRoss, Ernest (Dundee West)
    Hattersley, Rt Hon RoyRowlands, Ted
    Haynes, FrankRyman, John
    Heffer, Eric S.Sandelson, Neville
    Holland, S. (L'b'th, Vauxh'll)Sever, John
    Homewood, WilliamSheerman, Barry
    Hooley, FrankSheldon, Rt Hon R.
    Horam, JohnShore, Rt Hon Peter
    Howell, Rt Hon D.Silkin, Rt Hon J. (Deptford)
    Howells, GeraintSilkin, Rt Hon S. C. (Dulwich)
    Hoyle, DouglasSilvermanjulius
    Huckfield, LesSkinner, Dennis
    Hughes, Mark(Durham)Smith, Rt Hon J. (N Lanark)
    Hughes, Robert (Aberdeen N)Snape, Peter
    Hughes, Roy (Newport)Soley, Clive
    Janner, Hon GrevilleSpearing, Nigel
    Jay, Rt Hon DouglasSpriggs, Leslie
    John, BrynmorStallard, A.W.
    Johnson, Walter (Derby S)Steel, Rt Hon David
    Johnston, Russel (Inverness,)Stoddart, David
    Jones, Rt Hon Alec (Rh'dda)Stott,Roger
    Jones, Barry (East Flint)Strang, Gavin
    Kaufman, Rt Hon GeraldStraw, Jack
    Kilfedder, James A.Summerskill, Hon Dr Shirley
    Kilroy-Silk, RobertTaylor, Mrs Ann (Bolton W)
    Kinnock, NeilThomas, Dr R. (Carmarthen)
    Lamborn, HarryThorne, Stan (Preston South)
    Leadbitter, TedTilley, John
    Leighton, RonaldTinn, James
    Lestor, MissJoanTorney, Tom
    Lewis, Arthur (N'ham NW)Varley, Rt Hon Eric G.
    Litherland, RobertWainwright, E. (Dearne V)
    Lofthouse, GeoffreyWainwright,R. (Colne V)
    Lyon,Alexander (York)Walker, Rt Hon H. (D' caster)
    Lyons, Edward (Bradf'd W)Watkins, David
    McCartney, HughWeetch, Ken
    McDonald, DrOonaghWellbeloved, James
    McKay, Allen (Penistone)Welsh, Michael
    McKelvey,WilliamWheeler, John
    MacKenzie, Rt Hon GregorWhite, Frank R.
    Maclennan, RobertWhite, J. (G'gow Pollok)
    McNamara, KevinWhitehead, Phillip

    Whitlock, WilliamWoolmer, Kenneth
    Willey, Rt Hon FrederickWright, Sheila
    Williams, Rt Hon A. (S'sea W)Young, David (Bolton E)
    Wilson, R Hon Sir H. (H'ton;)
    Wilson, William (C'try SE)Tellers for the Ayes:
    Winnick,DavidMr. Austin Mitchell and Dr. Edmund Marshall.


    Adley, RobertFairbairn, Nicholas
    Aitken, JonathanFairgrieve, Sir Russell
    Alexander, RichardFarr, John
    Alison, Rt Hon MichaelFenner, Mrs Peggy
    Amery, Rt Hon JulianFinsberg, Geoffrey
    Ancram, MichaelFisher, Sir Nigel
    Aspinwall, JackFletcher, A. (Ed'nb'gh N)
    Atkins, Robert (Preston N)Fletcher-Cooke, Sir Charles
    Atkinson, David (B'm'th, E)Fookes, Miss Janet
    Baker, Kenneth (St M'bone)Forman, Nigel
    Baker, Nicholas (N Dorset)Fowler, Rt Hon Norman
    Banks, RobertFox, Marcus
    Beaumont-Dark, AnthonyFraser, Peter (South Angus)
    Bendall, VivianFry, Peter
    Benyon, W. (Buckingham)Gardiner, George (Reigate)
    Berry, Hon AnthonyGardner, Edward (S Fylde)
    Best, KeithGarel-Jones, Tristan
    Bevan, David GilroyGilmour, Rt Hon Sir Ian
    Biggs-Davison, Sir JohnGlyn, Dr Alan
    Blackburn, JohnGoodhart, Sir Philip
    Blaker, PeterGoodhew, Sir Victor
    Body, RichardGoodlad, Alastair
    Bonsor, Sir NicholasGorst, John
    Bottomley, Peter (W'wich W)Gow, Ian
    Bowden, AndrewGrant, Anthony (Harrow C)
    Boyson, Dr RhodesGray, Hamish
    Braine, Sir BernardGreenway, Harry
    Bright, GrahamGriffiths, E. (B'y St. Edm'ds)
    Brinton, TimGriffiths, Peter Portsm'th N)
    Brittan, Rt. Hon. LeonGrist, Ian
    Brotherton, MichaelGrylls, Michael
    Brown, Michael (Brigg&Sc'n)Gummer, John Selwyn
    Browne, John (Winchester)Hamilton, Hon A.
    Bruce-Gardyne, JohnHamilton, Michael (Salisbury)
    Bryan, Sir PaulHampson, Dr Keith
    Buchanan-Smith, Rt. Hon. A.Hannam, John
    Buck, AntonyHaselhurst, Alan
    Budgen, NickHavers, Rt Hon Sir Michael
    Burden, Sir FrederickHawksley, Warren
    Butcher, JohnHayhoe, Barney
    Cadbury, JocelynHeddle, John
    Carlisle, John (Luton West)Henderson,Barry
    Carlisle, Kenneth (Lincoln)Hicks, Robert
    Carlisle, Rt Hon M. (R'c'n)Higgins, Rt Hon Terence L.
    Chalker, Mrs. LyndaHogg, Hon Douglas (Gr'th'm)
    Chapman, SydneyHolland, Philip (Carlton)
    Clark, Hon A. (Plym'th, S'n)Hooson, Tom
    Clark, Sir W. (Croydon S)Hordern, Peter
    Clarke, Kenneth (Rushcliffe)Howell,Rt Hon D. (G'ldf'd)
    Clegg, Sir WalterHowell, Ralph (N Norfolk)
    Cockeram, EricHunt, David (Wirral)
    Colvin, MichaelHunt, John (Ravensbourne)
    Cope, JohnHurd, Rt Hon Douglas
    Cormack, PatrickIrving, Charles (Cheltenham)
    Costain, Sir AlbertJenkin, Rt Hon Patrick
    Cranborne, ViscountJessel, Toby
    Critchley, JulianJohnson Smith, Geoffrey
    Crouch, DavidJopling, Rt Hon Michael
    Dean, Paul (North Somerset)Joseph, Rt Hon Sir Keith
    Dickens, GeoffreyKellett-Bowman, Mrs Elaine
    Dorrell, StephenKershaw, Sir Anthony
    du Cann, Rt Hon EdwardKing, Rt Hon Tom
    Dunlop, JohnKitson, Sir Timothy
    Dunn, Robert (Dartford)Knight, Mrs Jill
    Durant, TonyKnox, David
    Dykes, HughLamont, Norman
    Eden, Rt Hon Sir JohnLang, Ian
    Eggar, TimLatham, Michael
    Elliott, Sir WilliamLawrence, Ivan
    Emery, Sir PeterLawson, Rt Hon Nigel
    Eyre, ReginaldLee, John

    LeMarchant, SpencerRoberts, M. (Cardiff NW)
    Lennox-Boyd, Hon MarkRoberts, Wyn (Conway)
    Lester, Jim (Beeston)Rossi, Hugh
    Lewis, Kenneth (Rutland)Rost, Peter
    Lloyd, Ian (Havant & W'loo)Royle, Sir Anthony
    Lloyd, Peter (Fareham)Sainsbury, Hon Timothy
    Loveridge, JohnSt. John-Stevas, Rt Hon N.
    Lyell, NicholasScott, Nicholas
    McCrindle, RobertShaw, Giles (Pudsey)
    Macfarlane, NeilShaw, Michael (Scarborough)
    MacKay, John (Argyll)Shelton, William (Streatham)
    Macmillan, Rt Hon M.Shepherd, Colin (Hereford)
    McNair-Wilson, M. (N'bury)Shepherd, Richard
    McNair-Wilson, P. (New F'st)Shersby, Michael
    Madel, DavidSilvester, Fred
    Major, JohnSims, Roger
    Marlow, AntonySkeet, T. H. H.
    Marshall, Michael (Arundel)Speed, Keith
    Marten, Rt Hon NeilSpeller, Tony
    Mates, MichaelSpence, John
    Mather, CarolSpicer, Jim (West Dorset)
    Maude, Rt Hon Sir AngusSpicer, Michael (S Worcs)
    Mawby, RaySproat, Iain
    Mawhinney, DrBrianSquire, Robin
    Maxwell-Hyslop, RobinStanbrook, Ivor
    Mayhew, PatrickStevens, Martin
    Mellor, DavidStewart, A. (E Renfrewshire)
    Meyer, Sir AnthonyStewart, Ian (Hitchin)
    Miller, Hal (B'grove)Stokes, John
    Mills, Iain (Meriden)Stradling Thomas, J.
    Mills, Pete (West Devon)Taylor, Teddy (S' end E)
    Moate, RogerTemple-Morris, Peter
    Monro, SirHectorThatcher, Rt Hon Mrs M.
    Montgomery, FergusThompson, Donald
    Moore, JohnThorne, Neil (Ilford South)
    Morgan,GeraintThornton, Malcolm
    Morris, M. (N'hampton S)Townend, John (Bridlington)
    Morrison, Hon C. (Devizes)Townsend, Cyril D, (B'heath)
    Morrison, Hon P. (Chester)Trippier, David
    Mudd, DavidTrotter, Neville
    Murphy, Christophervan Straubenzee, Sir W.
    Myles, DavidVaughan, Dr Gerard
    Neale, GerrardViggers, Peter
    Needham, RichardWaddington, David
    Nelson, AnthonyWakeham, John
    Neubert, MichaelWaldegrave, Hon William
    Newton, TonyWalker, Rt Hon P.(W'cester)
    Normanton, TomWalker, B. (Perth)
    Onslow, CranleyWalker-Smith, Rt Hon Sir D.
    Oppenheim, Rt Hon Mrs S.Wall, Sir Patrick
    Page, Richard (SW Herts)Waller, Gary
    Parkinson, Rt Hon CecilWard, John
    Parris, MatthewWarren, Kenneth
    Patten, Christopher (Bath)Watson, John
    Patten, John (Oxford)Wells, Bowen
    Pattie, GeoffreyWells, John (Maidstone)
    Pawsey, JamesWheeler, John
    Percival, Sir IanWhitelaw, Rt Hon William
    Pink, R. BonnerWhitney, Raymond
    Porter, BarryWickenden, Keith
    Prentice, Rt Hon RegWiggin, Jerry
    Prior, Rt Hon JamesWilkinson, John
    Proctor, K. HarveyWilliams, D. (Montgomery)
    Raison, Rt Hon TimothyWolfson, Mark
    Rathbone, TimYoung, Sir George (Acton)
    Rees, Peter (Dover and Deal)Younger, Rt Hon George
    Rhodes James, Robert
    Rhys Williams, Sir BrandonTellers for the Noes:
    Ridley, Hon NicholasMr. Robert Boscawen and Mr. Peter Brooke.
    Rifkind, Malcolm
    Rippon, Rt Hon Geoffrey

    Question accordingly negatived.

    Clause 5

    Establishment Of Audit Commission

    10.15 pm

    I beg to move amendment No. 2, in page 5, line 9, after `with', insert `(a).

    With this we shall discuss Government amendment No. 3.

    Amendments Nos. 2 and 3 fulfil commitments given in Committee to make mandatory consultation on membership with the appropriate professional bodies and unions. It is important for such bodies to be consulted. The accountancy profession has an obvious interest in the Commissions's work and will have valuable views on possible membership. It is also important to have the views of local authority trade unions. Such consultation will help to ensure that the audit commission has the necessary confidence of all involved in local government. The Committee believed that consultation with such bodies should be spelt out in the Bill. We are happy to agree to that.

    The amendments, which have been moved in response to pressure from the Opposition, represent a remarkable achievement. Local authority trade unions will be consulted about appointments to the audit commission. That is satisfactory. We support the amendments.

    Amendment agreed to.

    Amendment made: No. 3, in page 5, line 10, leave out from 'and' to end of line 11 and insert—

    '(b) such bodies of accountants, such bodies representing local authority employees, and such other organisations or persons as appear to him to be appropriate.'.—[Mr. Wyn Roberts.]

    Clause 8

    Code Of Audit Practice

    I beg to move amendment No. 4, in page 7, line 26, after 'prepare' insert, and keep under review'

    The amendment fulfils an undertaking given in Committee. Hon. Members stressed the importance of a code of audit practice and said that it should be subject to parliamentary approval. The Government accept that. The code is the framework in which auditors will work and we therefore tabled the amendment. The amendment provides that the code must be approved by both Houses before it comes into force and approved again at intervals of not more than five years. The hon. Member for Edmonton (Mr. Graham) in particular asked for the five-year provision. Although much of the code may be technical, I am sure that this is a sensible way to proceed with what is an important part of the commission's work. I commend the amendments to the House.

    It may be a sensible way, but the Government did not see that it was a sensible way until we told them that it was. We proposed that it should be a sensible way and they accepted that it was. This is yet another Government response to pressure from the Opposition. We have achieved a major improvement in the Bill. We support the amendment.

    Amendment agreed to.

    Amendments made: No. 5, in page 7, line 32, leave out subsection (3) and insert—

    '(3) The code shall not come into force until approved by a resolution of each House of Parliament, and its continuation in force shall be subject to its being so approved at intervals of not more than five years.
    (3A) Subsection (3) above shall not preclude alterations to the code being made by the Commission in the intervals between its being approved as aforesaid.
    (3B) The Commission shall send copies of the code and of any alterations made to the code to the Secretary of State who shall lay them before Parliament; and the Commission shall from time to time publish the code as for the time being in force.'.

    No. 6, in page 7, line 34, leave out 'or revising the code' and insert

    `the code or making any alteration in it'.—[Mr. Giles Shaw.]

    Clause 11

    Public Inspection Of Accounts And Right Of Challenge

    I beg to move amendment No. 7, in page 9, line 15, after '(3)', insert

    'Subject to subsection (4) below,'.

    With this it will be convenient to take Government amendment No. 8.

    These amendments, yet again, fulfil an undertaking given in Committee to various hon. Members, especially the hon. Members for Blaydon (Mr. McWilliam) and Newcastle upon Tyne, Central (Mr. Cowans), whose tuneful voices could charm the birds off the trees.

    In the light of arguments put forward in Committee, the Government accept that local electoral objections to a council should be made in writing and sent not only to the auditor but also to the local authority concerned. It seems only right that the body being complained about should have a written record of the complaint. We also accept the point made in Committee by the hon. Member for Newcastle upon Tyne, Central that the written statement should include the grounds on which the objection was made. We hope that the hon. Members concerned will feel that these amendments meet their objectives.

    This is a remarkable Report stage, because practically every amendment proposed by the Government is in response to commitments made to my hon. Friends. I congratulate my hon. Friends on that achievement and congratulate, retrospectively, my hen. Friend the Member for Lewisham, West (Mr. Price) on the fact that the previous amendments involved the code being referred back to the House because of his suggestion. The Labour Party has made a constructive contribution to an unconstructive Bill.

    Amendment agreed to.

    Amendment made: No. 8, in page 9, line 21, at end insert—

    '(4) No objection may be made under subsection (3) above by or on behalf of a local government elector unless the auditor has previously received written notice of the proposed objection and of the grounds on which it is to be made.
    (5) Where an elector sends a notice to an auditor for the purposes of subsection (4) above he shall at the same time send a copy of the notice to the body whose accounts are the subject of the audit.'.—[Mr. Wyn Roberts.]

    Clause 12

    Auditor's Reports

    I beg to move amendment No. 9, in page 9, line 30, leave out 'either' and insert

    , subject to subsection (1A) below,'.

    With this it will be convenient to take amendments Nos. 10 to 15.

    These six amendments are of major importance. The Opposition were totally incapable of suggesting them to the Government. We had to work with extreme care. All of the amendments were designed to clarify the workings of clause 12. However, we had the assistance of the hon. Member for Blaydon (Mr. McWilliam) on one amendment whose purpose is to meet a point he raised in Committee. He stated that, when the auditor made an immediate report to the body being audited, there was nothing to say how quickly he must send a copy to the audit commission.

    Amendment No. 14 makes it clear that such reports, which should be immediate, must be sent to the commission forthwith. That is the sort of constructive, important and monumental contribution that the Opposition have made to many aspects of the Bill. I am delighted to think that such amendments give the right hon. Member for Manchester, Ardwick (Mr. Kaufman) the satisfaction of being where he is. I commend the amendments to the House.

    In Committee we had to put up with a great deal of clap-trap from the Under-Secretary of State. It is a pity that the Chamber should be burdened with such rubbish. When we proposed amendments similar to amendments Nos. 13 and 14 in Committee, the Minister said that they were not necessary. He was full of derision, but he crept away into a corner and tabled precisely the amendments that he said were not necessary when we debated them in Committee. We shall not shame the Minister in public, so we shall not refer further to the matter. We shall vote for these good amendments.

    Amendment agreed to.

    Amendments made: No. 10, in page 9, line 31, leave out from 'accounts)' to end of line 32.

    No. 11, in page 9, line 32, at end insert—

    `(1A) Where an auditor makes a report to the body concerned under section 9(3) above at the conclusion of the audit, the certificate and opinion referred to in subsection (1) above may be included by him in that report.'.

    No. 12, in page 9, line 33, leave out 'subsection (1) above or section 9' and insert 'section 9(3)'.

    No. 13, in page 9, line 35, after `chairman,', insert

    'and (except in the case of an immediate report) shall be so sent not later than fourteen days after the conclusion of the audit'.

    No. 14, in page 9, line 39, at end insert

    `forthwith, if the report is an immediate report, and otherwise not later than fourteen days after the conclusion of the audit. '.

    No. 15, in page 10, line 5, leave out subsection (5).— [Mr. Giles Shaw.]

    Clause 22

    Miscellaneous Functions Of Commission

    I beg to move amendment No. 17, in page 16, line 42, at end insert

    ', but before making a request under this subsection a body shall consult such associations of employees as appear to the body to be appropriate. '
    This amendment requires a body to consult its unions before requesting the commission to carry out a study into its value for money arrangements under clause 22(2). It is likely that the body concerned would consult the unions anyway, but we accept the view expressed by the Opposition in Committee that the Bill should safeguard the position by requiring such bodies to do so.

    This is another Labour gain. This is an important amendment that was proposed to us by one of the principal local authority trade unions. We have delivered. We hope that the unions will.

    Amendment agreed to.

    I beg to move amendment No. 18, in page 17, line 4, at end insert "being a body which appears to the Secretary of State to be connected with local government.".

    This amendment is a response to concern voiced in Committee by hon. Members on both sides. It was suggested that the scope of the clause was too wide. There was concern that it would be open to future Secretaries of State to extend unduly the role of the commission.

    It is the Government's intention that clause 22(3) should apply only to bodies in local government. We stress that audits under that provision depend on the agreement of the body concerned. The clause is intended merely to permit the continuation of existing practice whereby the district audit service audits, by agreement, books of people such as the local government Ombudsman or bodies such as the regional tourist board.

    We recognise the merit of the point that was made in Committee. Therefore, the Government have tabled this simple amendment to restrict the scope of the clause. We hope that the House will agree that it is a sensible and desirable change.

    Yet another one of ours that we shall vote for with great satisfaction.

    Amendment agreed to.

    Clause 25

    Water Authorities

    Amendment made: No. 19, in page 18, line 41, leave out clause 25.— [Mr. King.]

    Clause 26

    Commencement Of Part Iii And Transitional Provisions

    Amendment made: No. 20, in page 19, line 8, leave out "Schedule 2" and insert

    "section (Water authorities and National Water Council) and Schedule (New paragraphs for Schedule 3 to the Water Act 1973)".—[Mr. King.]

    New Schedule

    New Paragraphs For Schedule 3 To The Water Act I973

    Accounts Of Water Authorities And Council

    38.—(1) It shall be the duty of a water authority and of the Council—

  • (a) to keep proper accounts and proper records in relation to the accounts; and
  • (b) to prepare in respect of each accounting year a statement of accounts giving a true and fair view of the state of affairs and profit or loss of the body preparing the statement
  • (2) Every statement of accounts prepared by a body in accordance with this paragraph shall comply with any requirement which the Ministers have, with the consent of the Treasury, notified in writing to that body and which relates to any of the following matters, namely—

  • (a) the information to be contained in the statement;
  • (b) the manner in which that information is to be presented;
  • (c) the methods and principles according to which the statement is to be prepared.
  • (3) Subject to any requirement notified to it under subparagraph (2) above, in preparing any statement of accounts in accordance with this paragraph a body shall follow, with respect to each of the matters referred to in that sub-paragraph, such course as may be for the time being approved by the Ministers with the consent of the Treasury.

    (4) Without prejudice to the foregoing provisions of this paragraph, the Minister may direct a water authority to keep such accounts and records and to prepare such statements with regard to money expended in the performance of their land drainage functions as he may think fit.

    (5) In this paragraph "accounting year", in relation to a water authority or the Council, means subject to sub-paragraph (6) below, a period of twelve months ending on 31st March.

    (6) If the Ministers so direct in relation to any accounting year of a water authority or the Council, that accounting year shall end on such other date may be specified in the direction.

    Audit Of Water Authorities And Council

    39.—(1) The accounts of a water authority or the Council, including all statements prepared by them under paragraph 38 above, shall be audited in accordance with this Schedule by auditors appointed for each accounting year (within the meaning of that paragraph) by the Secretary of State.

    (2) A person shall not be qualified for appointment under this paragraph unless he is a member of a body of accountants established in the United Kingdom and recognised for the purposes of section 161 (1) (a) of the Companies Act 1948; but a firm may be so appointed if each of its members is qualified to be so appointed.

    General Duties Of Auditors

    39A.—(1) In auditing any accounts in accordance with this Schedule, an auditor shall by examination of the accounts and otherwise satisfy himself that the body concerned has complied with the requirements of paragraph 38 above.

    (2) The auditor shall consider whether, in the public interest, he should make a report on any matter coming to his notice in the course of the audit in order that it may be considered by the body concerned or brought to the attention of the public, and shall consider whether the public interest requires any such matter to be made the subject of an immediate report rather than of a report to be made at the conclusion of the audit.

    Auditor's Right To Obtain Documents And Information

    39B. —(1) An auditor shall have a right of access at all reasonable times to all such documents relating to a body whose accounts are required to be audited in accordance with this Schedule as appear to him necessary for the purposes of the audit and shall be entitled to require from any person holding or accountable for any such document such information and information and explanation as he thinks necessary for those purposes and, if he thinks it necessary, to require any such person to attend before him in person to give the information or explanation or to produce any such document.

    (2) Without prejudice to sub-paragraph (1) above the auditor shall be entitled to require any officer or member of the body concerned to give him such information or explanation as he thinks necessary for the purposes of the audit and, if he thinks it necessary, to require any such officer or member to attend before him in person to give the information or explanation.

    (3) Without prejudice to sub-paragraphs (1) and (2) above, the body concerned shall provide the auditor with every facility and all information which he may reasonably require for the purposes of the audit.

    (4) Any person who without reasonable excuse fails to comply with any requirement of an auditor under sub-paragraph (1) or

    (2) above shall be liable on summary conviction to a fine not exceeding £200 and to an additional fine not exceeding £20 for each day on which the offence continues after conviction thereof.

    (5) Any expenses incurred by an auditor in connection with proceedings for an offence under sub-paragraph (4) above alleged to have been committed in relation to the audit of the accounts of any body shall, so far as not recovered from any other source, be recoverable from that body.

    Public Inspection Of Accounts And Right To Make Representations

    39C. — (1) At each audit or the accounts of a water authority under this Schedule any local government elector for any area to which the accounts to be audited relate may inspect those accounts and all books, deeds, contracts, bills, vouchers and receipts relating to them and make copies of all or any part of the accounts and those other documents.

    (2) At the request of any such local government elector, the auditor shall give the elector, or any representative of his, an opportunity to question the auditor about those accounts or to draw the auditor's attention to any matter on which he could make a report under paragraph 39A above.

    Transmission Of Documents To Ministers And Local Authority

    39D.—(1) As soon as the audit of the accounts of any body under this Schedule has been concluded a copy of any statement prepared by the body for the accounting year in question under paragraph 38 above, together with a copy of any report made by the auditor on the statement or on the accounts, shall be sent by the body—

  • (a) to the Ministers; and
  • (b) in the case of a water authority, in addition to every local authority whose area is wholly or partly situated in the area of the water authority.
  • (2) The Ministers shall lay a copy of every statement and report of which a copy is received by them in pursuance of sub-paragraph (1) above before each House of Parliament.

    Right To Inspect Statements Of Accounts And Auditor's Reports

    39E.—(1) Any person, on application to a water authority or to the Council, shall be entitled—

  • (a) to inspect and make copies of any statement prepared by them under paragraph 38 above and any report made by an auditor on the statement or on their accounts and
  • (b) to be furnished with copies of any such statement or report on payment of such reasonable sum as the authority or the Council may determine.
  • Regulations As To Accounts

    39F.—(1) The Ministers may by regulations applying to water authorities and the Council make regulations with respect to—

  • (a) the deposit of the accounts of a water authority or the Council at their offices or at any other place;
  • (b) the publication of information relating to accounts and the publication of statements of accounts;
  • (c) the exercise of any rights of inspection or making representations conferred by paragraph 39C or 39E above, and the steps to be taken for informing persons entitled to exercise them of those rights.
  • (2) Regulations under this paragraph may make different provision in relation to water authorities and the Council respectively.

    (3) The power to make regulations under this paragraph shall be exercisable by statutory instrument subject to annulment in pursuance of a resolution of either House of Parliament.

    Restriction On Disclosure Of Information

    39G.—(1) No information relating to a particular body or other person and obtained by any auditor, or by a person acting on behalf of an auditor, in the course of any audit under this Schedule shall be disclosed except—

  • (a) with the consent of the body or person to whom the information relates; or
  • (b) for the purposes of any functions of an auditor under this Schedule; or
  • (c) for the purposes of any criminal proceedings.
  • (2) Any person who discloses any information in contravention of sub-paragraph (1) above shall be guilty of an offence and liable—

  • (a) on summary conviction, to imprisonment for a term not exceeding six months or to a fine not exceeding the prescribed sum (as defined in section 32(9) of the magistrates' Courts Act 1980) or to both; or
  • (b) on conviction on indictment, to imprisonment for a term not exceeding two years or to a fine or to both.'.—[Mr. King.]
  • Brought up, and read the First and Second time.

    Amendment made: Leave out paragraph 39(2) and insert:

    `(2) A person shall not be qualified for appointment under this paragraph unless he is—
  • (a) a member of a body of accountants established in the United Kingdom and recognised for the purposes of section 161(1)(a) of the Companies Act 1948; or
  • (b) a member of the Chartered Institute of Public Finance and Accountancy; but a firm may be so appointed if each of its members is qualified to be so appointed. '.—[Mr. Squire.]
  • Schedule, as amended, added to the Bill.

    Schedule 1

    The Audit Commission

    I beg to move amendment No. 22, in page 24, line 13, at end insert—

    '(7) Notwithstanding sub-paragraphs (1) and (3) above, the first Controller of Audit shall be appointed by the Secretary of State who shall determine the terms and conditions on which he is to be employed by the Commission.'.
    This amendment was not suggested by the Opposition but was foreshadowed by my hon. Friend the Under-Secretary of State for Wales, who told the Committee that the Government intended to table an amendment whereby the Secretary of State would appoint the first controller of audit. The Committee understood the reasons for that, and the amendment is tabled to discharge that undertaking.

    Schedule 2

    Water Authorities

    Amendment made: No. 23, in page 27, line 7, leave out Schedule 2.— [Mr. King.]

    Schedule 3

    Consequential Amendments

    Amendments made: No. 24, in page 30, line 2, before `In' insert '(1)'.

    No. 25, in page 30, line 5 at end insert—

    '(2) For paragraph 40(1) of that Schedule there shall be substituted—
    "(1) There shall be made to the Ministers—
  • (a) by each water authority and the Council as soon as possible after the end of each accounting year (within the meaning of paragraph 38 above); and
  • (b) by the Water Space Amenity Commission as soon as possible after 31st March in each year,
  • a report on the discharge by them of their functions during that year and of their policy and programme."'.—[Mr. King.]

    10.30 pm

    10.31 pm

    I understand why the Minister should wish to say no more than that about the Bill. He said about as much in favour of it in those words as can be found. It has gone through more adventures than Dick Barton or James Bond. People talk about "The Perils of Pauline". The Bill should be entitled "The Perils of Heseltine".

    The Bill was introduced with great blasts on ministerial trumpets. It was then withdrawn, reintroduced, amended and reamended. The referendums—originally the centrepiece of the Bill—have gone. Selected mid-year hold-back, to which the Treasury attaches such immense importance has also gone. As the House had heard in the past few minutes, major amendments have been both in Committee and on Report in response to pressure from the Opposition. There have been important steps towards the depoliticisation of the audit.

    The words
    "and in the carrying out of its policies"
    in clause 9(1)(c)—a form of words that I told the House on Second Reading was exceptionally dangerous—have now been removed. In addition, the Minister has made an important statement on the non-political nature of the audit. We now have several amendments which provide for consultations with trade unions on the appointment of members of the audit commission. We have restored what was being taken away—public access to the accounts of water authorities.

    The Committee stage of the Bill was truly meaningful. I congratulate my right hon. and hon. Friends who served on the Committee on the way in which they worked and on the amendments that they obtained through 1,000 columns of achievement.

    It would be churlish of me not to acknowledge that our pressure met with response, from time to time at any rate, from the Minister who has now laboured three grim years in the salt mines of the Department of the Environment. We shall watch his future with interest. Moreover, we take our leave of the Bill knowing that it will not be enacted as it is now amended.

    We are still to have what may be described as the `Bedfordshire amendments", which the Government have extremely sensibly decided not to rush through, because they will get them wrong even if they do not. We are still to have the amendments in response to the new clause proposed by my right hon. Friend the Member for Heywood and Royton (Mr. Barnett), and we may still have the Government's fourth thoughts on clause 4.

    I give the Government notice now that the House can look forward to long and fruitful debates when the Bill returns after being considered in another place.

    The Bill has been mangled, changed and improved, but I say clearly on behalf of Her Majesty's Opposition that it is still unacceptable. It is unacceptable in setting up an audit commission, which we join the local authorities and their associations in opposing. It is unacceptable in banning supplementary rates, which have existed for nearly four centuries. It is unacceptable in imposing arbitrary and unfair spending limits and penalties on local authorities. It is unacceptable in its unprecedented interference with the freedom of local authorities.

    Whether the next Labour Government will repeal part III of the Bill will depend upon how the audit commission operates in the short time between its being set up and the next general election, but I state unequivocally and categorically that we shall certainly repeal parts I and II—and we shall demonstrate that by voting against the Third Reading.

    10.37 pm

    The position of Bedfordshire county council has been the subject of much comment and debate. As one of the county's five Members of Parliament who was not on the Committee, I should like to deal briefly with the present position.

    When the Bill was launched and announcements were made, it was stated that supplementary precepts and rates would be banned as from 1 April 1982. In Bedfordshire, however, the actual rate for 1982–83 was fixed at the end of February. Every county councillor knew that that decision was to be made then. About 10 days later, a supplementary precept was issued, because it was clearly known by county councillors at the meeting at the end of February that they could not throw out what they had done then and the only way in which they could top it up was to bring in a supplementary precept. They were told that if they did that they would bring themselves into a major collision with the Government as a result of the Bill, and that is certainly what has happened.

    I understand from the Government that, even if supplementary precepts were agreed in the year 1981–82, if they refer to a period after 1 April 1982 they will be invalidated when this legislation receives the Royal Assent. I am glad to see that the Government are further taking care of Bedfordshire's case—we have four district councils, of which two are in exceptional difficulty over this—by making amendments in the House of Lords.

    I am glad that the hon. Member for Liverpool, Edge Hill (Mr. Alton) is present on behalf of the Liberal Party. He had quite a bit to say about Bedfordshire, but he did not answer my point about the damage that supplementary precepts and rates will do to industry and commerce in the county. There will be plenty of time for debate when we have elections later, but the hon. Gentleman did not answer that point. He merely talked about services in the county. I can only point out to him that Bedfordshire is one of the highest spending authorities in the land, especially on education, as a close look at the facts will prove. The supplementary precept with which we are now threatened will be very damaging to industry.

    As I understand it, until the Bill becomes law, supplementary precepts and rates are lawful and must be paid.

    Does the hon. Gentleman support the course of action urged upon the ratepayers of Bedfordshire by the leader of the Conservative group—not to pay their supplementary rates bills and thus to break the law?

    I do not wish to become involved in a county council argument in this Chamber. I merely restate what I have just said as one of the Members of Parliament for the county. As I understand it—I know that my hon. Friend the Member for Bedford (Mr. Skeet) agrees with me on this—until the Bill becomes law, supplementary precepts and rates are lawful and must be paid.

    I hope that two things will flow from this legislation. First, Bedfordshire county council should not start spending money now that it will have to return to the districts when the Bill receives Royal Assent and becomes law. Secondly, a large amount of supplementary precept and rate money will soon start to move around Bedfordshire. When the Bill becomes law, it will have to be returned whence it came—to districts, ratepayers, industry and commerce. All I urge is that, when the Bill becomes law, the money which must now be lawfully paid will be swiftly returned whence it came.

    I hope that Bedfordshire county council will never again get itself into such a position that it knew that, by pushing this supplementary precept, it would collide with the Government and land itself in great difficulties. Bedfordshire has enough difficulties without certain county councillors pushing their luck over this Bill.

    10.40 pm

    Despite the changes referred to by the right hon. Member for Manchester, Ardwick (Mr. Kaufman), the Bill is still a considerable step along the road to central Government control and domination of local authorities. The removal of the power to levy a supplementary rate is a crude use of a sledgehammer to reduce the freedom of manoeuvre of local authorities. As to part II, I regard the whole concept of spending targets imposed by central Government as resting on the unacceptable idea that the man in Marsham Street knows best. That approach goes against the whole tradition and spirit of local government, which has always been based on the idea of diversity, innovation and widely differing policies reflecting differing needs and views in local communities. It is a great sadness that that will now be crushed in the dull, grey, centralised uniformity of grant-related expenditure assessments and centrally imposed spending targets backed up by the penal threat of the witholding of grant.

    It is against that background that I suggest that Ministers should not underestimate the suspicion with which local government will face the audit commission. That suspicion was underlined to me again this morning when I received a letter from the treasurer of the London borough of Greenwich expressing a personal view. He says:
    "I am convinced that the intention of the Secretary of State for the Environment in creating the Audit Commission is to have another means of controlling local government from the centre".
    That is not a wild, extremist councillor or a politician with an axe to grind. It is an experienced local government treasurer—one of those prudent treasurers about whom we heard a great deal in Committee. He ends his personal letter to me as follows:
    "I am thus very apprehensive that the proposed arrangements are yet another nail in the coffin of the independence of local government".
    I underline that as a reminder to Ministers that they will meet considerable suspicion from local government when it comes to the operations of the audit commission.

    As other hon. Members have pointed out, the Bill contains a major element of retrospection, sanctifying action that has already been taken by Ministers. It still leaves considerable grey areas about the legality of some of the measures affecting targets and grant systems. Its complex and complicated nature will create a field day for lawyers. It will not provide the stability that local authorities need to operate prudently and to run efficient and effective services.

    Despite the changes that have been made, the Bill is based on a philosophy of centralism and on the belief that it is right for central Government to set the levels of spending of individual local authorities. It is based on a belief that the only defence of local ratepayers against unreasonable rate demands is in central Government direction.

    My hon. Friends in the Liberal Party and the SDP totally reject that approach. We believe that local government should be made more accountable, but downwards to the electors and not upwards to the Secretary of State. The Bill is not a blueprint for self-confident, lively, democratic local government. It is a charter for central Government bureaucracy, and we shall vote against Third Reading tonight.

    10.45 pm

    The right hon. Member for Manchester, Ardwick (Mr. Kaufman) is adept at looking the most responsive gift horse in the mouth. It would be churlish if someone such as myself, who voted against the Bill on Second Reading, did not congratulate my right hon. Friends on the changes made in Committee, especially to the provisions that allow the level of grant to be changed after the beginning of the financial year. That was the feature that stuck in my gullet more than anything else.

    I do not pretend that I regard the Bill as a particularly happy one, even in its present state. It is essentially a temporary Bill. The difficulties that we have experienced over the Bill underline more than ever the need to change the basis of local government finance so that local government becomes much more responsive to the electors and to those who actually pay the Bill. If the difficulties that we have gone through contribute in some way to bring that about and to develop a sense of urgency to produce that result, all the discussion will not have been in vain.

    10.46 pm

    I much appreciate the contribution of my hon. Friend the Member for Buckingham (Mr. Benyon) who, having made his views clear on Second Reading, was characteristically generous on Third Reading. I am glad that his gullet is now a little freer and that he has been able to recognise the changes that have been made. My hon. Friend will understand that the Bill consists of three parts. I hope that part III will survive and become a lasting addition to the sensible arrangement of local government affairs.

    I profoundly disagreed with one of the least valuable contributions that the hon. Member for Woolwich, East (Mr. Cartwright) has made. I have respected a number of his earlier contributions but he was far too facile tonight in his treatment of the potential contribution of the audit commission.

    I am grateful to the right hon. Member for Manchester, Ardwick (Mr. Kaufman) and his hon. Friends for their contributions in Committee. The right hon. Gentleman made some play on the number of amendments that were made in response to contributions from the Opposition. He will recall that he said on Second Reading that he hoped that it would be a constructive debate to which the Government would listen. I express my appreciation of the part that my hon. Friends played in an important and constructive consideration of the Bill in Committee. My hon. Friends were subject to the difficult quaisi-Trappist role that has to be played by Government Back Benchers in Committee. They discharged their responsibilities excellently. They reserved their comments with te ling effect for the matters where they thought that improvements were needed and supported the areas where they thought that the Government were working on the right lines.

    I think that our proceedings in Committee were responsible. We have produced a Bill that commends itself to the House and I hope that the House will support it. The Bill will ban supplementary rates and supplementary precepts, and high time too. I am satisfied from the advice that I have been given that the supplementary precept mentioned by my hon. Friend the Member for Bedfordshire, South (Mr. Madel) will be valid if it is levied now and will prove on Royal Assent, which I trust will be achieved before too long, to be invalid. It is the responsibility of Bedfordshire ratepayers to honour their responsibilities and to pay such precepts and rate demands as they receive.

    I wish to allay the surprise of the right hon. Member for Birmingham, Small Heath (Mr. Howell). Clause 4 is very different now from the clause that he had in mind when he woke up to an intervention to discover that we were proposing a fourth amendment to the clause when he probably thought that it was unamended. It is a different amendment to the clause 4 that he had in mind. This is a sensible approach to the problem of trying to reverse the process of a progressive and continuous increase in local government expenditure and to recognise that, at a time of public expenditure restraint, it is necessary to ensure that individual local authorities to do not pre-empt resources from the more prudent.

    I welcome what the right hon. Member for Ardwick said about the proposals for the audit commission. At the time of Second Reading and in Committee, the debates on the Bill began with a knee-jerk reaction by the Opposition to the effect that the audit commission was unlikely to receive any support from them. That was my impression. I do not wish to make any political point. I believe that the audit commission has a valuable role to play.

    The hon. Member for Woolwich, East suggested that the Bill was another example of centralism. It is, therefore, odd that its introduction should be supported by the president of NALGO, by the Labour leader of the Camden authority, by Conservative leaders of local authorities and also by independent accountants and others with experience of local government. They believe that the audit commission, standing at one remove from the present district audit service, which is, in effect, part of the Department of the Environment, occupies an independent position that the House should support.

    The interesting amendments proposed by the right hon. Member for Heywood and Royton (Mr. Barnett), speaking, I think, with the full support of the PAC, may further extend the new role that may be played in this respect. I believe that the Bill will make an important contribution to local authority expenditure, its proper examination and the better pursuit of value for money, one of the most important responsibilities of central and local government. Against that background, with the greatest of enthusiasm, I commend the Bill to the House.

    Question put, That the Bill be now read the Third time:—

    The House divided: Ayes 273, Noes 212.


    Aitken, JonathanBanks, Robert
    Alexander, RichardBeaumont-Dark, Anthony
    Alison, Rt Hon MichaelBendall, Vivian
    Amery, Rt Hon JulianBenyon, W. (Buckingham)
    Ancram, MichaelBest, Keith
    Aspinwall, JackBevan, David Gilroy
    Atkins, Robert (Preston N)Biggs-Davison, Sir John
    Atkinson, David (S'm'th, E)Blackburn, John
    Baker, Kenneth (St.M'bone)Blaker, Peter
    Baker, Nicholas (N Dorset)Body, Richard

    Bonsor, Sir NicholasHampson, Dr Keith
    Bottomley, Peter (W'wich W)Hannam, John
    Bowden, AndrewHaselhurst, Alan
    Boyson, Dr RhodesHavers, Rt Hon Sir Michael
    Braine, Sir BernardHawksley, Warren
    Bright, GrahamHayhoe, Barney
    Brinton, TimHeddle, John
    Brittan, Rt. Hon. LeonHenderson, Barry
    Brooke, Hon PeterHicks, Robert
    Brotherton, MichaelHiggins, Rt Hon Terence L.
    Brown, Michael (Brigg &Sc'n)Hogg, Hon Douglas (Gr'th'm)
    Browne, John (Winchester)Holland, Philip (Carlton)
    Bruce-Gardyne, JohnHooson, Tom
    Bryan, SirPaulHordern, Peter
    Buchanan-Smith, Rt. Hon. A.Howe, Rt Hon Sir Geoffrey
    Buck, AntonyHowell, Rt Hon D. (G'ldf'd)
    Budgen, NickHowell, Ralph (N Norfolk)
    Burden, Sir FrederickHunt, David (Wirral)
    Butcher, JohnHunt, John (Ravensbourne)
    Cadbury, JocelynHurd, Rt Hon Douglas
    Carlisle, John (Luton West)Irving, Charles (Cheltenham)
    Carlisle, Kenneth (Lincoln)Jenkin, Rt Hon Patrick
    Carlisle, Rt Hon M. (R'c'n)Jessel, Toby
    Chalker, Mrs. LyndaJohnsonSmith, Geoffrey
    Chapman, SydneyJopling, Rt Hon Michael
    Clark, SirW. (Croydon S)Joseph, Rt Hon Sir Keith
    Clarke, Kenneth (Rushcliffe)Kellett-Bowman, MrsElaine
    Clegg, Sir WalterKershaw, Sir Anthony
    Cockeram, EricKing, Rt Hon Tom
    Colvin, MichaelKitson, Sir Timothy
    Cope, JohnKnight, Mrs Jill
    Cormack, PatrickKnox, David
    Costain, Sir AlbertLamont, Norman
    Cranborne, ViscountLang, Ian
    Crouch, DavidLatham, Michael
    Dean, Paul (North Somerset)Lawrence, Ivan
    Dickens, GeoffreyLawson, Rt Hon Nigel
    Dorrell, StephenLee, John
    du Cann, Rt Hon EdwardLeMarchant, Spencer
    Dunn, Robert (Dartford)Lennox-Boyd, Hon Mark
    Durant, TonyLester, Jim (Beeston)
    Dykes, HughLewis, Kenneth (Rutland)
    Eggar, TimLloyd, Ian (Havant & W'loo)
    Elliott, Sir WilliamLloyd, Peter (Fareham)
    Emery, Sir PeterLoveridge, John
    Eyre, ReginaldLyell, Nicholas
    Fairbairn, NicholasMcCrindle, Robert
    Fairgrieve, SirRussellMacfarlane, Neil
    Farr, JohnMacKay, John (Argyll)
    Fenner, MrsPeggyMacmillan, Rt Hon M.
    Finsberg, GeoffreyMcNair-Wilson, M. (N'bury)
    Fisher, Sir NigelMcNair-Wilson, P. (New F'st)
    Fletcher, A. (Ed'nb'gh N)Madel, David
    Fletcher-Cooke, SirCharlesMajor, John
    Fookes, Miss JanetMarlow, Antony
    Forman, NigelMarshall, Michael (Arundel)
    Fowler, Rt Hon NormanMarten, Rt Hon Neil
    Fox, MarcusMates, Michael
    Fraser, Peter (South Angus)Mather, Carol
    Fry, PeterMaude, Rt Hon Sir Angus
    Gardiner, George (Reigate)Mawby, Ray
    Gardner, Edward (S Fylde)Mawhinney,DrBrian
    Garel-Jones, TristanMaxwell-Hyslop, Robin
    Gilmour, Rt Hon Sir IanMayhew, Patrick
    Glyn, Dr AlanMellor, David
    Goodhart, Sir PhilipMeyer, Sir Anthony
    Goodhew, SirVictorMiller, Hal (B'grove)
    Goodlad, AlastairMills, Iain (Meriden)
    Gorst, JohnMills, Peter (West Devon)
    Gow, IanMoate, Roger
    Grant, Anthony (Harrow C)Monro, Sir Hector
    Gray, HamishMontgomery, Fergus
    Greenway, HarryMoore, John
    Griffiths, E.(B'ySt.Edm'ds)Morgan, Geraint
    Griffiths, Peter Portsm'th N)Morris, M. (N' hampton S)
    Grist, IanMorrison, Hon C. (Devizes)
    Grylls, MichaelMorrison, Hon P. (Chester)
    Gummer, John SelwynMudd, David
    Hamilton, Hon A.Murphy, Christopher
    Hamilton, Michael (Salisbury)Myles, David

    Neale, GerrardSpicer, Michael (S Worcs)
    Needham, RichardSproat, Iain
    Nelson, AnthonySquire, Robin
    Neubert, MichaelStanbrook, Ivor
    Newton, TonyStevens, Martin
    Normanton, TomStewart, A.(ERenfrewshire)
    Onslow, CranleyStewart, Ian (Hitchin)
    Oppenheim, Rt Hon Mrs S.Stokes, John
    Page, Richard (SW Herts)Stradling Thomas,J.
    Parkinson, Rt Hon CecilTaylor, Teddy (S'end E)
    Parris, MatthewTemple-Morris, Peter
    Patten, Christopher (Bath)Thatcher, Rt Hon Mrs M.
    Patten, John (Oxford)Thompson, Donald
    Pattie, GeoffreyThorne, Neil (Ilford South)
    Pawsey, JamesThornton, Malcolm
    Percival, Sir IanTownend, John (Bridlington)
    Pink, R. BonnerTownsend, Cyril D, (B'heath)
    Porter, BarryTrippier, David
    Prentice, Rt Hon RegTrotter, Neville
    Prior, Rt Hon Jamesvan Straubenzee, Sir W.
    Proctor, K. HarveyVaughan, Dr Gerard
    Raison, Rt Hon TimothyViggers, Peter
    Rathbone, TimWaddington, David
    Rees, Peter (Dover and Deal)Wakeham, John
    Rhys Williams, Sir BrandonWaldegrave, Hon William
    Ridley, Hon NicholasWalker, Rt Hon P. (W'cester)
    Rifkind, MalcolmWalker, B. (Perth)
    Rippon, Rt Hon GeoffreyWall, Sir Patrick
    Roberts, M. (Cardiff NW)Waller, Gary
    Roberts, Wyn (Conway)Ward, John
    Rossi, HughWarren, Kenneth
    Rost, PeterWatson, John
    Royle, Sir AnthonyWells, Bowen
    Sainsbury, Hon TimothyWells, John (Maidstone)
    St. John-Stevas, Rt Hon N.Wheeler, John
    Scott, NicholasWhitelaw, Rt Hon William
    Shaw, Giles (Pudsey)Whitney, Raymond
    Shaw, Michael (Scarborough)Wickenden, Keith
    Shelton, William(Streatham)Wiggin, Jerry
    Shepherd, Colin(Hereford)Wilkinson, John
    Shepherd, RichardWilliams, D. (Montgomery)
    Shersby, MichaelWolfson, Mark
    Silvester, FredYoung, SirGeorge (Acton)
    Sims, RogerYounger, Rt Hon George
    Skeet, T. H. H.
    Speed, KeithTellers for the Ayes:
    Speller, TonyMr. Anthony Berry and Mr. Robert Boscawen.
    Spence, John
    Spicer, Jim (West Dorset)


    Abse, LeoCartwright, John
    Adams, AllenClark, Dr David (S Shields)
    Allaun, FrankCocks, Rt Hon M. (B'stol S)
    Alton, DavidCohen, Stanley
    Archer, Rt Hon PeterColeman, Donald
    Ashley, Rt Hon JackConcannon, Rt Hon J.D.
    Ashton, JoeConlan, Bernard
    Atkinson, N.[(H'gey,)Cook, Robin F.
    Bagier, Gordon A.T.Cowans, Harry
    Barnett, Guy (Greenwich)Craigen, J. M. (G'gow, M'hill)
    Barnett, Rt Hon Joel (H'wd)Crowther, Stan
    Beith, A. J.Cryer, Bob
    Benn, Rt Hon TonyCunliffe, Lawrence
    Bidwell, SydneyCunningham, Dr J. (W'h 'n)
    Booth, Rt Hon AlbertDalyell, Tam
    Boothroyd, MissBettyDavidson, Arthur
    Bray, Dr JeremyDavies, Ifor (Gower)
    Brocklebank-Fowler, C.Davis, Clinton (Hackney C)
    Brown, Hugh D. (Provan)Davis, Terry (B'ham, Stechf'd)
    Brown, R. C. (N'castle W)Deakins, Eric
    Brown, Ronald W. (H'ckn'y S)Dean, Joseph (Leeds West)
    Brown,Ron(E'burgh, Leith)Dewar, Donald
    Buchan, NormanDixon, Donald
    Callaghan, Rt Hon J.Dobson, Frank
    Callaghan, Jim (Midd't'n &P)Dormand, Jack
    Campbell, IanDouglas, Dick
    Campbell-Savours, DaleDuffy, A. E. P.
    Canavan, DennisDunn, James A.
    Carmichael, NeilDunnett, Jack

    Dunwoody, Hon Mrs G.Jay, Rt Hon Douglas
    Eastham, KenJohnson, Walter (DerbyS)
    Ellis. R. (NE D'bysh're)Johnston, Russell (Inverness)
    English,MichaelJones, Rt Hon Alec (Rh'dda)
    Evans, loan (Aberdare)Jones, Barry (East Flint)
    Faulds,AndrewKaufman, Rt Hon Gerald
    Field,FrankKilfedder, JamesA.
    Fletcherjed (Darlington)Lamborn,Harry
    Foster, DerekLestor, Miss Joan
    Foulkes,GeorgeLewis, Arthur (N'ham NW)
    Fraser, J. (Lamb'th,N'w'd)Litherland,Robert
    Freeson, Rt Hon ReginaldLofthouse,Geoffrey
    Garrett, John (Norwich S)Lyons, Edward (Bradf'dW)
    Gilbert, Rt Hon Dr JohnMcCartney,Hugh
    Grant,George(Morpeth)MacKenzie,Rt Hon Gregor
    Grant, John (IslingtonC)McNamara,Kevin
    Hamilton, W. W. (C'tral Fife)McWilliam,John
    Harrison, RtHonWalterMarks,Kenneth
    Hattersley, Rt Hon RoyMarshall,DrEdmund (Goole)
    Haynes, FrankMarshall, Jim (LeicesterS)
    Heffer, Eric S.Martin,M(G'gowS'burn)
    Holland,S.(L'b'th,Vauxh'll)Maynard, Miss Joan
    Howell,Rt Hon D.Miller, Dr M.S.(E Kilbride)
    Hoyle,DouglasMitchell, R. C. (Soton Itchen)
    Huckfield,LesMorris, Rt Hon C. (O'shaw)
    Hughes,Mark(Durham)Moyle, Rt Hon Roland
    Hughes, Robert (Aberdeen N)Newens,Stanley
    Hughes,Roy (Newport)Oakes, Rt Hon Gordon

    Orme, Rt Hon StanleyStallard, A. W.
    Owen, Rt Hon Dr DavidStoddart,David
    Pitt,WilliamHenryTaylor, MrsAnn (Bolton W)
    Powell,Raymond(Ogmore)Thomas, DrR. (Carmarthen)
    Price, C. (Lewisham W)Jhorne,Stan(PrestonSouth)
    Race, RegTilley,John
    Rees, Rt Hon M (Leeds S)Tomey,Tom
    Richardson,JoVarley, Rt Hon Eric G.
    Roberts,Allan(Boote)Wai nwrig ht, R. (Colne V)
    Roberts, Ernest (HackneyN)Walker, RtHon H.(D'caster)
    Roberts, Gwilym (Cannock)Watkins,David
    Robinson, G. (CoventryNW)Welsh,Michael
    Rooker, J. W.White, Frank R.
    Ross, Ernest (Dundee West)White,J. (G'gowPollok)
    Sever,JohnWilliams, Rt Hon A.(S'sea W)
    Sheerman,BarryWilliams, Rt Hon Mrs (Crosby)
    Sheldon,Rt Hon R.Wilson, Rt Hon Sir H.(H'ton)
    Shore, Rt Hon PeterWilson,William (C'try SE)
    Silkin, Rt Hon S. C. (Dulwich)Woodall,Alec
    Smith, Rt Hon J. (N Lanark)Young, David (Bolton E,)
    Snape, Peter
    Soley,CliveTellers for the Noes:
    Spearing,NigelMr. Allen McKay and Mr. George Morton.

    Question accordingly agreed to.

    Bill read the Third time and passed.

    Reserve Forces Bill Lords

    Not amended (in the Standing Committee), considered.

    Motion made, and Question, That the Bill be now read the Third time, put forthwith pursuant to Standing Order No. 56 (Third Reading), and agreed to.

    Bill accordingly read the Third time and passed, without amendment.

    Statutory Instruments, &C

    On a point of order, Mr. Deputy Speaker. I had risen, seeking to catch your eye.

    Motion made, and Question put forthwith pursuant to Standing Order No. 73A(5) (Standing Committee on Statutory Instruments, &c.).

    Rating And Valuation

    That the Valuation (Scotland) Order 1982, a copy of which was laid before this House on 25th February, be approved.— [Mr. Boscawen.]

    Question agreed to.

    Police Accountability

    Motion made, and Question proposed, That this House do now adjourn.— [Mr. Boscawen.]

    11.4 pm

    I wish to raise the issue of police accountability, which at present is clouded in a good deal of political controversy. In the short time that is available to me, I hope to clarify some aspects of the matter and take them out of the area of political controversy.

    The way in which we are policed and the effectiveness of the police force are matters of serious concern to all who are interested in the good of our society. The mere fact that the Labour Party has adopted a policy about police accountability should not make it the subject of political controversy. I hope that the Minister will judge the arguments on their merits rather than try to score points in a political debate. This is, after all, a serious matter.

    The Royal Commission on the police in 1959 said that it thought that chief constables needed to be more accountable to their police authorities, and it made recommendations about the way in which that should be done. The Police Act 1964 was designed to implement those recommendations, albeit with some changes. In his Second Reading speech, the then Home Secretary, Mr. Henry Brooke, said:
    "The Bill does not give the police authority power to issue instructions to the chief constable, but it has not got that power now. Its general responsibility is to secure the maintenance of an efficient force, and it will have every right to discuss with: its chief constable how the men and equipment with which it has provided him can be most effectively used in conducting police operations. I have no doubt that every chief constable who is up to his job welcomes discussion of this kind".—[Official Report, 26 November 1963; Vol. 685, c. 87.]
    That shows that it was intended that the powers in the 1964 Act should be used with the intention of bringing a chief constable more under the control of the police authority not by giving the police authority decisive power to make decisions, but by ensuring that the chief constable would not make decisions without consultation and be influenced by the pressure that was brought to bear on him in the course of those discussions.

    Therefore, it is not in any way wrong, either morally or politically, for people now to call for the greater exercise of the power of the police authority. There are 43 police authorities in England and Wales outside the metropolis, and in the metropolis the police authority is the Home Secretary. Outside the metropolis, those police authorities are committees of the local county council. They are not subject to the decision of the county council, even though they report to it. They are composed of one- third of magistrates and two-thirds of locally elected councillors. They are constantly told by chief officers throughout the country that they are not in any way entitled to consider the policing policy of the chief constables; they are simply to provide the finance and resources for chief officers to carry out their policies.

    That is where I take issue with chief officers and to some extent with the Home Office, which tends to support their attitude. In my view, that is not what the Police Act either said or intended. It is clear from the Home Secretary's speech at the time that he did not intend that either. Section 4 of the Act says that the police authority shall
    "secure the maintenance of an adequate and efficient police force for the area".
    It is quite impossible to see how it can do that unless it has some discussion about the policing policy of the area.

    For instance, is it right that the police should be used on the beat or simply in a reactive position in panda cars? How can the police authority decide whether it has an efficient police force unless it can determine that central issue of policing policy, which is an area of serious contention between different chief officers. How can the authority decide whether it is operating an adequate and efficient police force if it does not determine whether officers should be investigating burglaries and criminal damage or should be policing traffic or football crowds? Choices have to be made in the allocation of resources. The police authority can only determine whether it has an efficient and adequate police force in its area if it is involved in policy decisions.

    Section 5 of the Act states that the police force
    "shall be under the direction and control of the chief constable."
    It is on those words that most chief constables lay their claim to be solely responsible for policing policy in their areas. The interesting provision is section 12, which was the result of the recommendations of the Royal Commission. Section 12(2) states:
    "The chief constable of a police force shall, whenever so required by the police authority, submit to that authority a report in writing on such matters as may be specified in the requirement, being matters connected with the policing of the area for which the force is maintained."
    There is no indication that the chief constable has any discretion in the matter at all. Indeed, the next subsection makes it clear that, if he does not like the request and thinks that it is not needed for the discharge of the functions of the police authority, he may request authority to refer the requirement to the Secretary of State. In other words, if the chief constable does not like it, he cannot refuse, but he can refer the matter to the Secretary of State. Only once since 1964 has any chief constable done that. The then Home Secretary turned down his request and backed the police authority.

    Therefore, the position in Manchester at a recent meeting of the police authority is a little surprising. The chairman of the police authority asked the chief constable certain questions about a policing operation at Laurence Scott. He was told by the chief constable that he had no right to ask the questions. Under section 12, in my view the chief constable was without the law. In those circumstances, he was acting illegally, not the chairman of the police authority. Nevertheless, in order to restore amity, the chairman of the police authority withdrew the questions. The chief constable then had the cheek to go out and tell the press that he was perfectly right in the attitude that he had taken, and that it was the chairman of the police authority who did not have the legal power to ask the questions. I believe that that is a breach of section 12.

    The handling of complaints from the public has now become a central feature of the argument about the police. In section 50, the police authority is responsible for ensuring that the police complaints system is adequately policed. Nevertheless, most police authorities fail to do anything more than look at the book occasionally to ensure that the complaints are recorded, but they have no machinery by which complaints can be properly monitored. That has recently been started by the Merseyside authority, and it was considered to be something of a revolution. Nevertheless, that is part of the powers of the Police Act. I maintain that the powers, although they are not as extensive as I would wish, allow a police authority to exercise a proper degree of control of policing policy in its area as long as the chief constable recognises that he is subject to those powers.

    The Minister of State should make that perfectly plain and tell chief officers that they are not isolated dictators who can determine the policing policy in their areas without let or hindrance from police authorities. They are required by the Act to be accountable, in a general sense, to their local communities.

    However, that is not enough. The hon. Member for Bury St. Edmunds (Mr. Griffiths), who represents the Police Federation in the House, said in a recent debate that about 21 chief constables are responsible for the fate of police-community relations in our inner cities. He is right, and that is far too great a responsibility to put on the shoulders of such a small number of men. It is only right that the community should have a far greater say in what goes on in police-community relations in the inner cities. The right people for that are locally elected councillors.

    I expect the next Labour Government to ensure that police authorities have an absolute say in the control of policing policy. That is not to say that the authorities will deal with day-to-day minutiae, any more than education committees deal with the day-to-day minutiae in our schools. It is for the director of education to apply the general policy. However, police authorities would be responsible for overall policy.

    The authorities would not have a say in who should or should not be prosecuted. I should prefer to put that in the hands of a public prosecutor, but if it is to stay with the police, there is no reason why such decisions should be in the hands of a police authority.

    However, in the way that we are policed, how the police react to us and how we react to the police, there should be a focus of control—determined by the public and not by an independent official, however prestigious—so that if the people do not like the way things are going they can get rid of the decision makers and put in someone else. That is the answer on the GLC and its contemporary leadership. If people do not like Ken Livingstone they can get rid of him at the next election. If people do not like Sir Kenneth Newman they cannot get rid of him by an election. Surely that is what democracy is all about.

    London poses a special problem, because there is no police authority in the capital at the moment. It is only right that London should have such an authority. The question is: What sort of authority? Should we have a GLC police authority for the whole metropolis? I suspect that the Metropolitan Police is far too big for its own good or for our good and that we ought to carve up the force into four forces, which would be accountable to the boroughs that they policed. Perhaps we need four police authorities of a similar nature and size to the police authorities outside London. Perhaps the Home Secretary should retain the residual powers over the Special Branch and the policing of the Palace of Westminster; that is a matter for discussion.

    However, it makes no sense that those who pay for the policing of London have no say in how London is policed. It is a considerable injustice and that is not the view only of councillors Boateng and Livingstone. In 1978, Lord Marshall, a distinguished scion of the Tory Benches in another place said in a report on the GLC that the council ought to have a police committee. Anyone who considers the justice of the matter will agree that that is the proper thing to do. It is wrong to say that the Home Secretary is adequate as a police authority, because the Home Office has less control over Scotland Yard than police authorities have over their police forces at the moment.

    The Home Office has a great many other responsibilities. It simply does not have the time to worry about what Scotland Yard is doing, unless there is a crisis, and then it can and does come in. For that reason, London should have a police authority, and it should have the powers that I have mentioned.

    I stress again that, even if the Minister does not go that far with me, he should make it clear to those chief officers who are getting just a bit too big for their boots that they have to be accountable to their police authorities in the way described by Henry Brooke in the passage that I read at the beginning of my speech.

    11.20 pm

    The Minister of State, Home Office
    (Mr. Patrick Mayhew)