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

This is a modest new clause dealing with a modest but important matter which has a considerable history. Those of us who are veterans of the Local Government (Miscellaneous Provisions) (Scotland) Bill will remember that a new clause was moved in Committee—I think on 26 February 1981—in exactly the same terms as the one now before the House.

The new clause tries to place upon local authorities a duty to give some modest help with fire escape provisions in multi-occupancy properties and hostels.

The genesis of the clause is the long-term concern of a number of bodies that supply much of the hostel accommodation in Scotland. They have been co-ordinated by the Scottish Council for Single Homeless. Mr. Laurie Naumann of that organisation has argued the case with a great deal of care and proper persistence over a considerable time.

It is right that the House should spend a few minutes on the matter, because there is a great deal of anxiety on the subject in Scotland. It has been highlighted by the recent sad incident at the nurses' home in Kirkcaldy, where there was loss of life. There has been an exhaustive fatal accident inquiry into the circumstances. I have no special knowledge of the circumstances of the fire, and I am not for a moment suggesting that there was anything defective. I am not suggesting that the new clause has that sort of direct linkage or relevance, but that sad incident underlines the need to have adequate fire protection in hostels and in multi-occupancy buildings. It is to facilitate such a provision that we are anxious to have the new clause—or something that will achieve the same result—put on the statute book.

I understand that in England, in the Housing Act 1980—I think the relevant parts are paragraphs 16 and 17 of schedule 12, and schedule 24—there is a provision for mandatory grants to be made to people who are putting fire escape facilities into hostels and multi-occupancy buildings. The amount of money is comparatively small—a 75 per cent. grant, up to a maximum of £6,750, with a maximum of £9,000 in London.

Fire escape equipment can be extremely expensive. Therefore, I am not suggesting that the grants would revolutionise the position, but if there is such a mandatory duty on local authorities in England, and if we accept that there is a crying shortage of that kind of accommodation in Scotland, the same duty should, equally, be laid on local authorities in Scotland.

I know from personal experience in Scotland some years ago that sometimes very valuable projects for the provision of hostel accommodation can be laid low by the sudden realisation of the difficulties of meeting the fire regulations. In such circumstances, it is right that there should be some similar duty laid upon local authorities in Scotland to help. Therefore, we ought to be seeking legislation similar to that which is found in the schedules to the Housing Act 1980 to which I have referred.

The debate on the issue has taken place not only in the Local Government (Miscellaneous Provisions) (Scotland) Bill to which I have referred; it surfaced during the proceedings on the Tenants' Rights, Etc. (Scotland) Bill before that. I know that there have been a large number of approaches behind the scenes, and it is in the hope that there will be some good news from the Minister that I raise the matter today.

In the proceedings in Committee on the Local Government (Miscellaneous Provisions) (Scotland) Bill, I referred to letters from a Mr. Alan Fraser, who was Lord Mansfield's private secretary, and who at that time was saying that the Scottish Development Department was giving

"urgent consideration to this and other aspects of house s in multiple occupation with a view to identifying the future action which should be taken in Scotland."

I should like to quote from what was said in that debate by the hon. Member for Edinburgh, Pentlands (Mr. Rifkind). The Minister may get a little fed up with hearing quotations from the hon. Member for Pentlands, but the hon. Member left many hostages behind him when he finally bailed out to another Department. The hon. Member for Pentlands said that a review was taking place on the subject. He said:

"That review is going on now, and the work is expected to be completed some time later this year. It covers not only the question of fire escapes but standard amenities and a number of other matters of importance to properties involving multiple occupation of the kind referred to in this clause. The hon. Gentleman"——

the Minister was referring to me——

"is correct in saying that the statutory position in Scotland is less favourable than that south of the border, for various historical reasons … We hope that the review now in progress will come to a conclusion around October this year. It will almost certainly be necessary to consider some legislative change".—[Official Report, First Scottish Standing Committee, 26 February 1981; c. 739–41.]

That was a reference to October 1981. We are now seven months beyond that point. My information—it may be misleading—is that at the moment the contacts that have been made at official level have not been terribly encouraging in terms of suggesting that something is imminent. The hon. Member for Pentlands agreed that the situation was unsatisfactory, that there was a gap between provision in England and Scotland, and that it ought to be put right. He promised completion of the review by October 1981. What is happening, and when are we to see action?

The hon. Member for Glasgow, Garscadden (Mr. Dewar) has raised an important point. On technical grounds, I cannot accept his amendment. I do not think that he will dispute that. He has asked where we stand in terms of the review promised by my hon. Friend the Member for Edinburgh, Pentlands (Mr. Rifkind). I can give the hon. Member for Garscadden an unequivocal undertaking that we accept the principle of the new clause, and that in another place we shall table Government amendments to meet the principle of new clause 7.

Will the inquiries, and any legislation that is to be introduced, cover buildings that are let as lodgings or in the form of lodgings and which are at present owned by the Government?

I have in mind the student residences at Hamilton college of education, which the Government propose to close. Those premises have been used for many years as student lodgings and they do not have any fire escapes, despite the fact that they are multi-storey buildings. I do not know whether there are any other educational buildings used for students that are in the same situation. I should like to know whether the Government will put a statutory obligation upon local authorities to make proper fire provision in their own buildings which have multi-occupancy, and in regard to buildings that may belong to the Government directly or indirectly through boards of governors, as is the case with colleges of education.

Hamilton is the only such college that I know about, and it is proposed to board up the residences at the end of July and to have nothing more to do with them. That is because the Government cannot sell them—they are asking far too high a price. There may be other student buildings that are in the same position, and the Government have an obligation towards students who are in residences to ensure that there is a proper escape from fire if it should occur. That is the lesson of the fire in the nursing home in Fife. It must be the lesson that we must learn with regard to student residences as well.

If students are in residences not owned by the Secretary of State, clearly the provisions that I am proposing would apply to such residences. As for residences owned by the Secretary of State, there is a duty on the Secretary of State to provide appropriate fire escapes for such buildings. However, I shall examine that point to ensure that there are none of the technical difficulties to which the hon. Member has referred.

I welcome what the Minister has said—it would be ungracious of me not to do so. That was a helpful start to this evening's proceedings. The Minister has done well and I thank him. Therefore, I beg to ask leave to withdraw the clause.

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

With this it will be convenient to take the following amendments: No. 10, in page 4, line 24, leave out clause 4.

This is an extremely complicated matter, although the new clause is deceptively simple. I do not expect that the Government will be in favour of the new clause in principle, or in any other way, because they have made it plain that they intend to apply section 2 to the 1983 revaluation and that exempted from that revaluation in the quinquennial review will be domestic property. We had a debate on the matter when we discussed the Valuation (Scotland) Order 1982 in the Sixth Report from the Select Committee on Statutory Instruments on Wednesday 31 March.

On that occasion, the hon. Member for Edinburgh, Pentlands (Mr. Rifkind), who once again darkens our door, made it clear that the reason for the partial revaluation rather than for the revaluation was the publication of Cmnd. No. 8449, which deals with the alternatives to the rating system. I regard that as a dreek and drear document. It seems to analyse with gloomy relish the difficulties, but comes up with no helpful solution. If they postpone the revaluation of domestic properties on the basis of what is in that discussion document, the Government will be making a mistake. It will be a long time before any workable alternative is evolved.

The alternative with the most popular support is that of some form of local income tax. In terms of the Government's discussion paper, that would not be implemented before the 1990s. Postponement of the revaluation is bad because, as I have explained before, it means that distortions between domestic ratepayers remain. For example, someone living in a house that has suffered from a change of environment and therefore a change of property and rentable value, and is over valued, will, because there is no revaluation, have no way in which his rateable value can be adjusted as against other domestic properties in the section. The distortions and the ambiguities of the system will become more perceptible.

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It will be argued and feared that the whole thing may have been mounted for this whole reason. It will be argued that some people will imagine that the postponement of revaluation of domestic property will be in some way a help to domestic property owners as a whole. That is not true because, as we know, the percentage of the total money raised by rates that comes from domestic properties will have to remain the same. There is no way, as a result of this manoeuvre, that domestic ratepayers will pay a smaller percentage of the total rates.

I fear that in the domestic sector there will be a number of anomalies and inflexibilities, and a number of, perhaps minor but still irritating, injustices that cannot be put right as they would have been by the regular quinquennial revaluation. The Scottish assessors in local government have kept to these regularly. There was one small gap because of the reorganisation in 1975 and our record is infinitely better than that south of the border.

Would the hon. Gentleman say from his experience that the result of revaluation, on average, is to bring down or raise valuations? That is a salient point.

I do not think that that is a salient point. What frightens one is the amount of money that has to be raised from rates, which is a question of rate poundage.

At the moment the domestic ratepayer provides about 30 per cent. of the total rateable value and the non-domestic about 65 per cent. If we accept the premise that often comes from Conservative circles that the domestic ratepayer is paying too high a percentage at the moment, there is nothing in the proposals made by the Government that will help that. Exactly the same percentage will have to be raised from the domestic ratepayer as was raised last time. Therefore, that premise is fraudulent. The Under-Secretary of State for Scotland might not wish to do this, but some of his colleagues are less careful. It would be fraudulent to give the impression that in some way this will help the domestic ratepayer.

I wish to ask the Minister one or two simple questions. They are simple in that they are easy to ask but perhaps they are not so easy to answer. The Under-Secretary will have to introduce, following on the Valuation (Scotland) Order 1980, a further order. There will have to be a chance to discuss the machinery because we shall have to know the method by which the next annual value of specified land is to be adjusted and also the method by which the net values of unspecified lands and heritages are to be adjusted. That is a matter of a great deal of speculation and interest.

It will be helpful if the Minister will say a few words about how his thoughts are tending in this matter. It is mysterious and obscure. We know that the Scottish Valuation Advisory Council has already been consulted and that COSLA is being consulted now, although I am not sure whether that has been concluded. I hope that the Minister can give us some updating on that and explain how matters stand at the moment.

Perhaps the Minister can also tell us whether he is thinking about applying a multiplier to domestic values or a divider to non-domestic values. That is a simple proposition. There might be a combination of both, but the way in which this is done is a matter of real importance. It would also be helpful if the Minister could give us some indication in principle. There is also an important argument in which I am interested, and on which the House may be interested to hear the Minister's thoughts about the unit in which the ratio between non-domestic and domestic is to be preserved.

I understood—looking back on the previous debates I think that I am on good grounds—that as the statute had been drawn, the unit was based on the assessor's area. In Scotland this is usually the region, but the hon. Member for Pentlands poured some scorn on me for that. He suggested, during the statutory instrument debate, that he could not understand how I had got that idea and said that it could not be done on the basis of the responsibilities of the assessor and the area for which he is responsible, but might be done on a district basis alone.

It would be useful if the Minister would tell us whether he is going for the smaller unit or whether he would do it on the assessor's area—that is, on a regional basis. I should have thought that there was a case for going for the smaller area to avoid distortion. One can easily construct models, for example if one goes for the whole of Strathclyde, where the inflexibilities might become apparent and people might be victimised as a result. It will be important for the Minister to say a word or two about that.

Will the Minister also say a word about how the domestic element in the rate support grant will be affected? That will have a knock-on effect on the resources element. It will help if the Minister will say something on that subject.

I hope, too, that the Minister will give us a quick resume of the advice that is emerging at present and how his thoughts are crystallising—that is, if they are crystallising. What happens, for example, if new properties are built, or have been built since the last revaluation, or will appear on the roll for the first time? If properties previously on the roll had been demolished, how do we handle that in maintaining the ratio between domestic and non-domestic property?

Perhaps the Minister will also say something about the time scale. It is getting short. We all know that 1983 is close in terms of the amount of work that has to be done by assessors in preparing the new valuation roll. Appeals are still grinding on from the last quinquennial revaluation, and the time limit is constantly having to be extended on appeals. There is considerable anxiety about the time scale.

I am conscious of the enormous amount of business that we have to get through tonight. I realise that this is not an area of great interest and that we may soon see a specific order in this connection. However, if the Minister can help us, it will enable us to have a better informed discussion of the options and leave us better prepared to face the further orders when they ultimately materialise.

On a point of order, Mr. Deputy Speaker. Am I correct in saying that with new clause 8 we are also discussing amendments Nos. 10, 11 and 12 relating to clause 4?

I apologise to my hon. Friend the Member for Berwick and East Lothian (Mr. Home Robertson) and others who have a constituency interest. I think that my hon. Friend the Member for Clackmannan and East Stirlingshire (Mr. O'Neill) hopes to speak on that point.

I wish to return to the powers granted under the Bill to the Secretary of State to make orders de-rating outdoor plant and machinery. I have read the Committee proceedings, and I am convinced by the Government's own words that it is apparent that this power is unnecessary, pointless and damaging.

In Committee the hon. Member for Aberdeenshire, East (Mr. McQuarrie), speaking on behalf of himself, on my behalf and on behalf of my constituents, for which we are most grateful, asked that Orkney and Shetland should be omitted. To that, the well-known oracle, the hon. Member for Edinburgh, Pentlands (Mr. Rifkind), in his previous incarnation at that time, replied for the Government:

"That cannot seriously be considered for the obvious reason that Orkney and Shetland are the two areas where the anomaly is most apparent. The sums involved arise because of the high degree of external plant in those areas. If they are excluded from any such change, there will be little point in making that change".—[Official Report, First Scottish Standing Committee, 11 February 1982; c. 413.]

I repeat what the Minister said, that, apart from Orkney and Shetland, there is little point in making the change. It was clearly stated that the only part of Scotland to which this would make any significant difference was Orkney and Shetland. That is true. If the Government made an order now, over half of the total rateable value lost would be in Orkney and Shetland. They would lose about £17 million, and the whole of the rest of Scotland would lose only about £14 million.

What will the effect be? If Orkney and Shetland were large and rich areas with a substantial population and industry, it would, of course, be of considerable benefit to the industry that is derated—in this case, the oil industry—and the burden would be spread over a large rateable value and thus not be severely felt. In other parts of Scotland the effects will be felt to some extent, but to nothing like the same extent as in Orkney and Shetland, as the Government themselves say. Of course Orkney and Shetland are not large and rich rateable areas, and the effect will be the exact opposite of what it should be. The oil industries are the biggest contributors to the rates, and they themselves will have to make up a large percentage of the increase in rate poundage when necessary from the derating of their external plant and machinery. They are the only big ratepayers.

The remainder of the extra burden will be shared by the wretched Shetlanders and Orcadians who, by normal standards, are poor and few in numbers. The result will be a comparatively small benefit to the oil industry, which is not interested in the type of relief, which is small compared with their general revenue, but it will be a serious blow to the other industries and inhabitants of Orkney and Shetland. Unless remedial measures were taken the rates will rise by 141 per cent. in Orkney, or 97p in the pound, and by 45p in the pound in Shetland.

These areas have undertaken a lot of extra expenditure, not for the benefit of the Orkneys and Shetlands, but for the benefit of the British economy as a whole. The position would be intolerable. The Government now propose a scheme which will do something to offset the effect of their own legislation. We are, of course, grateful for that, but it is a strange way to govern the country to amend legislation that will have a significant effect in only one part of the country, and then bring in complicated measures to offset its effects in that particular part of the country.

I realise that the argument is that it brings it into line with England, but it is a highly bureaucratic and theoretical approach to legislation to bring in an extremely complicated scheme to offset a difficulty of the Government's own creation, which will have almost no beneficial effects on anyone and which will be very damaging to the people of Orkney and Shetland. Unfortunately, it is typical of the way in which much of our government is carried out.

I do not propose tonight to go into the Government's proposals in the discussion document. As I said, we are grateful that they are to discuss the matter, but there will have to be substantial help, or it will be a great blow to Orkney and Shetland at a time when employment there is declining and the outlook, as in the rest of Britain, is far from good.

The whole exercise appears pointless. The oil industry is not very interested. In other parts of Scotland, on the Government's own showing, it will have virtually no effect. In the one part of Scotland where it will be effective, the effect will be damaging, and so damaging that there will have to be a complicated scheme to set it right.

This is not the time to go into the proposals. I thank the Government for having sent me a copy of them. I emphasise that this is a very strange form of government, and I beseech the Government, when they implement the proposals, to take into account the extremely damaging effect that they will have on my constituency. In my view, it would be better to accept amendment No. 10 and withdraw the clause.

I wish to say a word or two about the postponement of revaluation for domestic properties. The Government owe the House an explanation of when the revaluation will take place and what their proposals are on rating reform. Several years ago the Government promised that the rating system would be abolished, yet we now have this postponement of the revaluation of domestic properties.

I agree with the hon. Member for Glasgow, Garscadden (Mr. Dewar) that the postponement of domestic revaluation will lead to distortions within the system. The whole object of regular revaluation is to iron out differences that may have appeared and to take into account changes that may have occurred in housing standards or in the environmental surroundings and to get equality between ratepayers. It serves no useful purpose to freeze valuations at a certain level and not change them after a period. One might just as well get rid of domestic rating altogether; otherwise one is perpetuating distortions in a system that benefits some ratepayers and has an adverse effect on others.

Does the hon. Gentleman think that perhaps a political calculation was made at the time of postponement because it was assumed that a general election would follow shortly after the revaluation? Revaluation is never popular.

It is true that revaluation can be unpopular. Valuation should not be confused with rate poundage, but many householders get a fright when they receive revaluation notices, although in relative terms some may be better off than others. We all know that some local authorities take advantage of new valuations to increase their rates, but give the impression of making reductions. If that happens, presumably they figure on the Government's hit list, because, as I see it, most of these gaps have already, in many cases unfortunately, been closed.

My understanding is that the Government are seeking to freeze values at certain rates. They will not allow for any difference in weight to be placed on commercial and industrial properties vis-a-vis domestic properties. En each quinquennial revaluation there are shifts within the overall values between one class of property and another, so it makes no sense for the Government to take that view. I assume that they have deliberately done so because of the proximity of the revaluation date to a general election, as the hon. Member for Glasgow, Maryhill (Mr. Craigen) said.

The report of the Public Expenditure Committee and the public expenditure White Paper show that the Secretary of State's share of public expenditure in the United Kingdom will drop from the 1980 figure of 5·65 per cent. to 5·05 per cent. by 1985. Whatever other complicated calculations the Government have in mind, there will be less money available at central level for the unfortunate councils, who will have to bear much of the blame for the rate increases. However, that is an argument separate from what the Government intend to do.

Therefore, I put this simple question to the Government: when do they propose to resume the revaluation of domestic properties? If they do not propose to do so, when do they expect to come forward with a more equitable alternative to the rating system for bearing the appropriate proportion of public expenditure incurred by local authorities?

I speak to amendment No. 10. The right hon. Member for Orkney and Shetland (Mr. Grimond) was not correct in assuming that his constituency would be the only part of Scotland to be affected by clause 4. Central region and the Falkirk district will be affected. The state of the economy in Falkirk is a great deal more parlous than the relatively buoyant situation that prevails in Orkney and Shetland.

The Minister kindly circulated the consultative document just in time for our previous debate, which was so rudely interrupted. The document covers most of the points that were raised in Committee. It provides a useful outline for discussion. The provisions for derating are clearly stated and the compensation for loss of rate income is covered in a manner that I believe will be intelligible to those who wish to take the time to read it.

However, we must recognise that the derating of plant and machinery will cause considerable headaches in the local authorities concerned. The Minister gives options for local authorities and the CBI. As regards the 11·3 per cent. drop for Falkirk district, the 57 per cent. drop for Shetland and the 141 per cent. drop for Orkney, I hasten to add that in some respects these figures mask a slightly different reality. None of the three authorities concerned—the islands authority, Falkirk district and Central region—will be very happy with any of the options open to them. Tapering arrangements, similar to past arrangements where there have been major readjustments, would depend on the length of taper—the length of time that the transitional arrangements take to be carried through.

The option of rerating would create considerable problems for existing ratepayers and is, perhaps, the option that has been least well documented as regards its impact. I know that in Central region, on a simple basis of comparison between one side of the Forth and the other, it was suggested that there would be difficulties for people who are not at present affected. Rerating might well create difficulties of a kind that the present anomaly already creates. I am not too happy about that.

Raising funds by means of a taper, perhaps by redistribution within the whole of Scotland, would not commend itself too much to the other authorities and ratepayers who will be affected. It would in some respects disadvantage areas that already have problems and that would not take kindly to rate increases.

The Minister has not raised an increase in rate support grant as an option. I should have thought that that would be considered somewhere along the line. There should have been at least a mention of the possibility of an increase in rate support grant to meet this anomaly. The Labour Party's position has always been clear. We are not opposed to correcting the anomaly. We recognise that some industrial enterprises are at a disadvantage. However, if there is no increase in rate support grant, someone else will have to pay. The Government are apparently anxious to help the firms involved and I freely concede that in many instances the total area of operation of those firms is not great.

Indeed, the Minister has been heavily lobbied in the past by the organisations concerned and there has been a campaign to have the anomaly removed.

The Minister should look again at the last, missing, option from his paper. The paper goes a long way towards covering most of the points raised in Committee, but the last option, of increases in the rate support grant, has not been considered. It would go some way towards allaying the fears of Scottish local authorities and at the same satisfy the firms concerned. Until the Minister is prepared to consider that option, I would not wish to prejudge the outcome of the consultative processes. We are not happy about the gap. The appropriate step would be to vote against any order that arises. Therefore, we shall not press the amendment to a vote.

We are grateful to the Minister for having produced the document. If the amendment had not been tabled the Minister might not have been so quick to publish it. However, I might be doing him an injustice. I know that this is the fourth or fifth time that we have had an opportunity to discuss the matter. If the issue is of such great concern to the right hon. Member for Orkney and Shetland he could have tabled amendments accordingly. We shall not press our amendment to a Division, but we hope that the Minister will not lose sight of the point that if the anomaly is to be corrected, the Government must consider the last option—which they have chosen to ignore so far—of compensating local authorities that suffer a reduction in rate income by an increase in rate support grant, that is not made at the expense of any other local authority in Scotland. Until the Minister is prepared to consider and accept that, we shall not be prepared to support the correction of the anomaly as outlined in the paper.

Many of us realised that my hon. Friend the Member for Clackmannan and East Stirlingshire (Mr. O'Neill) was moving to the right, but it caused great alarm when he moved an amendment calling on us to leave out clause 4. However, the penny has now dropped and we realise that he is seeking not to water down the basic principles of Socialism, but to avoid giving any additional power to the Secretary of State. Clause 4 gives the Secretary of State further powers to place orders before the House concerning the definition of "lands and heritages" in respect of fixed machinery for rating purposes in Scotland.

Far be it from me to defend any aspect of the rating system. It is a fairly ludicrous way of raising revenue. However, the rating system is the only independent source of revenue for local authorities in Scotland. Therefore, all industries, individuals and businesses should be liable to contribute towards that revenue. I speak on behalf of an area that is largely concerned with agriculture. The derating of agriculture puts a considerable additional burden on other ratepayers in the area. It stands to reason that the derating of one industry throws an additional burden on other ratepayers in the area.

If the clause is accepted, any further exemption would presumably impose further burdens on other ratepayers. We know that the oil industry is very rich. A couple of weeks ago we received the report of BNOC, which stated that the operating profit in 1981 was £465·2 million. Much of that went to the Government in the form of petroleum revenue tax and so on, but it is surely only fair that local authorities that have to deal with some of the burdens imposed should receive some share of that revenue. Offshore installations are already exempted. I think that Fife tried to collect rates for offshore installations, but discovered that for some legal reason or other they were exempt.

We are given to understand that the Secretary of State for Scotland intends to extend exemption from rating to fixed equipment and pipework outside buildings. What sort of precedent are we setting? We recognise that the Government want to reduce the level of rates charged on BP at Grangemouth for external plant and machinery. However, external plant and machinery are not the exclusive preserve of the oil industry. All hon. Members can think of industries that have external plant and machinery. I think immediately of mines, quarries and breweries, where there is a great deal of external plant and machinery. How will the orders that the Secretary of State proposes to lay in pursuance of clause 4 be drafted? Will there be a whole series of exemptions for umpteen factories all over the place? What impact will that have on the rating resources of local authorities that have many factories or businesses within their boundaries with significant amounts of external plant and machinery? If the Secretary of State does not intend to increase rate support grant for areas affected in that way, I doubt whether we should accept the clause or any of the consequential orders.

I shall deal first with the points raised on new clause 8. As the hon. Member for Glasgow, Garscadden (Mr. Dewar) said, the background to the partial revaluation proposals is the Government's wish to reform domestic rates. It would not be sensible to go ahead with the revaluation of domestic rates if the system is likely to be reformed in the near future. However, I entirely accept his general point about the advantages and desirability of regular revaluations. I agree with the tribute that he paid to the work done in Scotland.

I should like to pick up a point made by the hon. Member for Dundee, East (Mr. Wilson) about what the Conservative Party said before the last election. It was before the 1974 election that the Conservative Party had a clear commitment to abolish the domestic rating system in the following Parliament. As the hon. Gentleman will recall, the Conservative Party did not win that election. Before the last election, we made it clear that reform of domestic rates had to take second place to the need to improve incentives and to reduce direct taxation—[Interruption.]—during the period of a Parliament.

Will my hon. Friend give an assurance that his remarks do not in any way diminish the intention of the Conservative Party and the Government to find a way of reforming rates to make them more equitable?

I am happy to give my hon. Friend that assurance. I sought to make clear to the hon. Member for Dundee, East what the Conservative Party said before the last election and what it said before the 1974 election.

Technically, new clause 8 would create a nonsensical situation, because a partial revaluation in 1983 has been prescribed in the Valuation (Scotland) Order 1982. If the provision were approved, my right hon. Friend the Secretary of State could not revoke the present order or deal with matters consequential to it. Obviously, that would be an unsatisfactory state of affairs. It seems to have been suggested that new clause 8 will not be pressed to a Division and that the purpose of moving it was to discover the position on several technical matters and the position on timing for the partial revaluation.

The question asked by the hon. Member for Glasgow, Garscadden (Mr. Dewar) and me was about the timetable for the changes. in view of the interesting discourse between the Minister and the chairman of his party, what is the Government's programme for making those changes and how long will the frozen revaluation system last?

The hon. Member for Dundee, East is referring to the decisions on the alternatives to the domestic rating system. The position on that is clear. We issued a Green Paper setting out the facts, figures and options and the arguments for and against. A period of consultation has just been completed and we are now considering the many responses to the Green Paper. Obviously, the Government wish to reach conclusions as soon as they reasonably can.

It would be helpful to the House, although we know that the Minister cannot predict what the Government will say, if he could tell us whether, in all the representations that have been received about the Green Paper, any new suggestions or ideas have been submitted that were not included in the evidence to Layfield.

I have not recently read all the evidence to the Layfield committee, but I can tell the hon. Member for South Ayrshire (Mr. Foulkes) that a wide variety of proposals were put forward by those who responded to the Green Paper.

The hon. Member for Garscadden asked me where we were on some technical points in relation to partial revaluation. He asked me about the region or district basis and the multiplier on domestic values or the divisor on non-domestic values as the appropriate method of adjusting net annual values to preserve the balance between domestic and non-domestic values. My right hon. Friend and I recently consulted the convention on that matter. The convention asked the Government to reconsider the decision to hold a partial revaluation and postpone it to a later date, when a complete revaluation should be held. I cannot answer the hon. Gentleman's question on the details. They were put to the convention.

That information is extremely interesting. According to the Minister, CoSLA asked that the partial revaluation should be abandoned in favour of postponement. Is the Minister considering that option? If he is not, I do not see why the fact that that point of view was raised should have delayed consideration of the practical matters that I raised with him.

It has not delayed consideration of the practical matters because I put the paper to the statutory meeting of the convention on 23 April. There seem to be strong arguments for the divisor as being less disruptive than the multiplier for domestic values.

Amendment No. 10 was tabled by the hon. Member for Clackmannan and East Stirlingshire (Mr. O'Neill). May I say to the right hon. Member for Orkney and Shetland (Mr. Grimond) that there is a clear anomaly in the rating of plant and machinery, whereby external plant in Scotland carries a heavy rate burden that is not carried by similar indoor plant in Scotland or outdoor plant in England. It is widely accepted that that anomaly is serious. The right hon. Gentleman rightly talked about the position in Orkney and Shetland, but the point also applies to Moss Morran. As the hon. Member for Berwick and East Lothian (Mr. Home Robertson) said, it does not apply solely to the petrochemical industry. The hon. Member for Dunbartonshire, East (Mr. Hogg) will confirm that there is a firm in his constituency whose problems he drew to the attention of the Committee during discussions on local government legislation last year. In fairness to industry, there is a clear anomaly that could discourage investment in Scotland as against investment in England. We must try to remove that anomaly. This enabling clause would give the Secretary of State the right to bring forward an order to do that.

We are not only discussing an enabling order. As soon as an order comes forward, the House can discuss the details. We are now consulting the convention, the CBI and the assessors about the complex questions of the definition of plant to be derated. However, I can tell the hon. Member for Berwick and East Lothian that a draft definition has been put forward in the consultative document by the Scottish Assessors Association to meet the anomaly, which is purely historic.

The special position of Orkney and Shetland is recognised in the consultative document and is dealt with in paragraph 5.7. Certainly the Government recognise the position in that area and we are anxious to achieve a generally acceptable solution to the problem. However, the problem is not unique to Orkney and Shetland. That area would have the highest value of such plant and machinery of any local authority in Scotland, but the point applies to Moss Morran and many other places. It also applies to potential investment that might take place anywhere in Scotland.

The hon. Member for Clackmannan and East Stirlingshire suggested that any loss of rate income suffered by a local authority should be made good by an increase in the rate support grant. The loss of rating resources from derating plant and machinery cannot be considered in isolation. We must consider many factors, to some of which he referred in his constructive remarks.

The first point is that the rating resources available to authorities are already taken into consideration in fixing the level of rate support grant annually. The calculation includes the normal annual growth of rateable value due to new developments, which is the same as the prospective loss of rateable value from derating external plant. Secondly, derating of external plant may logically result in some rerating of internal plant, much of which is at present exempt from valuation. The hon. Gentleman made that point and we are anxious to receive the views of those concerned.

Thirdly, by the use of industrial derating the rate burden on Scottish industry is kept in balance with that of industry in England and Wales. If the rate burden on Scottish industry were to rise or fall significantly relative to England and Wales, the Secretary of State must take that into consideration when fixing the level of derating. It is possible that the derating of external plant and machinery would not result in a net loss of rated income but in a redistribution of the same rate burden in the industrial sector.

The Minister said that there may not be a reduction in rate income. Does he know what the reaction of the Scottish CBI to that would be, because its support has always been conditional on the fact that some of its members would receive a reduction while others would be left untouched? That would add a dimension of which I am sure that it was not aware.

The matter is clear in the consultation document. We have not yet received the CBI's response to that document. The CBI is one of the main bodies that we are consulting. I cannot anticipate what it will say.

It is likely that a few local authorities in areas with much plant and machinery may not qualify for the resources element of the rate support grant. They may suffer a significant drop in rate income from derating external plant. For that reason we shall discuss possible transitional arrangements with the convention to ensure that no authority suffers unduly from sudden change.

We have circulated the consultation document to which the hon. Member for Clackmannan and East Stirlingshire referred. The matter is complex and has been considered a number of times. We now await the reactions of the convention and the CBI to the complex issues before we take a further step by introducing a specific order to deal with the important problem.

I beg to move amendment No. 1, in page 1, line 7, leave out clause 1.

With this it will be convenient to take the following amendments: No. 2, in page 2, line 4, at end insert—

`(aA) In subsection (I A)(a)(iii) at end add "and he shall have specific regard for the principles and protection of local democracy in reaching any such decision and".'.

We have objected to clause 1 all the way through. We continue to object to the clause as a further attack on local democracy. We take the view that the Secretary of State already has not just sufficient power but excessive power over the actions of local authorities under the Local Government (Miscellaneous Provisions) (Scotland) Act 1981. That Act gave the Secretary of State the power, which he has exercised in a number of cases, to reduce the rate support grant payable to any individual local authority as well as to impose penalties on local authorities generally. In effect, it forced local authorities, against their better judgment, and contrary, in our view, to the principles of local democracy, to reduce their expenditure and, in effect, to substitute the Secretary of State's judgment for their judgment about what is right in terms of services and rates for their areas.

The 1981 Act was unprecedented in local authority legislation. Until the Government introduced the measure it was always recognised that Governments of the day had a responsibility, and certainly the right, to take a view about local government expenditure, and in particular to take a view about the Government's contribution through the rate support grant to local authority expenditure.

It was also recognised before the 1981 Act that local authorities had the right, once the Government had taken their view, to determine the overall level of their expenditure and what they would levy by way of rates. If that sort of power is not available to local authorities, it is difficult to understand why we have them. Local authorities should exercise their judgment on the most important issues that face them as duly elected bodies.

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Clause 1 extends centralisation. It gives the Secretary of State power to reduce local authority expenditure and the rate support grant. More important, it gives him the power, in effect, to determine the local authority rate, over the head of the local authority and against its wishes. The clause will enable the Secretary of State to substitute a rate that has been fixed by him for the rate fixed previously by the authority. Once we have this power in the hands of the Secretary of State, local democracy as we have known it will disappear. That view is also held by CoSLA. It is not confined to the Labour members of CoSLA. It is held also by the Tory members.

Amendment No. 1, which is the principal amendment, would remove clause 1 from the Bill. However, if that does not happen, certain amendments can be made that will provide some protection for local authorities against the Secretary of State's dictatorial powers.

Amendment No. 2 would ensure that the Secretary of State had regard to the principles and protection of local democracy in exercising his powers when the Bill became law. If the right hon. Gentleman were interested in the least in protecting local democracy the Government would have no difficulty in accepting the amendment. I am not optimistic that he will accept the amendment, because in exercising his powers under the 1981 Act he has demonstrated that he has little regard for the protection of local democracy. However, if we are to have sweeping and unprecedented powers in legislation, qualifications and conditions should be written into it to which the right hon. Gentleman should have regard before exercising his powers, and amendment No. 2 would do just that.

Amendment No. 3 would represent a reduction in the sweeping and untrammelled powers that the Secretary of State has given himself in the clause. When deciding whether to exercise his powers he can decide to leave out certain categories of expenditure and to have regard to other categories. Those decisions will not be subject to any control. When we discussed certain orders under the 1981 Act it was striking that the right hon. Gentleman failed adequately to explain the basis on which he had exercised his powers.

If one reads the local authority answers to the Secretary of State when he first intimated that he proposed to use his powers, one can see—apart from the principle of the thing—that there were considerable differences of opinion between the Secretary of State and the local authorities over what was happening in a particular local authority and why expenditure was on one level rather than another. There were many detailed refutations by the local authorities of the Secretary of State's case, but not one of those arguments was answered by the Secretary of State either in the orders or in the speech that he made in the House.

The right hon. Gentleman has untrammelled powers and he exercised them in a more than capricious, if not malicious, way in 1981. Amendment No. 3 would reduce to some extent the sweeping nature of the right hon. Gentleman's powers.

Amendment No. 4 would insert a requirement to have some regard to the quality of the local services. That is a matter which the Secretary of State continually omits to take into consideration, and which he has omitted all the time to take into consideration in his dealings with local authorities over the past two or three years. We are not talking about some and financial argument which has no effect on the way that ordinary people live. We are dealing with the quality of important, essential services such as education and housing.

In the exercise of the Secretary of State's powers in all the dictatorial legislation that is being put through by the right hon. Gentleman there is no mention of the quality or the level of services and the effect that his action might have on reducing the quality of those services. The Opposition feel strongly that the ultimate decision making in those matters should be at local level, instead of the powers being taken away and arrogated to the Secretary of State, who certainly does not know the local circumstances in the way that the duly elected local authorities do.

Amendment No. 5 would limit the Secretary of State's powers. Under the clause he will have a double power—a power both to reduce the RSG and to redetermine the rate. He can do one or the other, but he can also do both. It seems to me monstrous that with those new powers being taken in the clause all the existing powers will continue and from 1983 onwards the Secretary of State could both redetermine the rate and reduce the rate support grant.

That is a double use of power which I believe is intolerable. Amendment No. 5 would say "If you are to have those dictatorial powers, at least you should use only one and not be able to use them both simultaneously."

Those are the effects of the individual amendments.

I return to some of the more general arguments. The Secretary of State always justified the powers that he tock under the previous legislation—and he is using the same argument for the new powers under this legislation—by saying that local authority expenditure was wildly out of control. It was said that a responsible Government and a responsible Secretary of State were doing the best that they could with Government expenditure, but local government expenditure was out of control.

The Government have a paranoia about local government expediture. According to The Scotsman, Councillor Proudfoot, Tory leader of the Perth and Kinross district council, said at a meeting with the hon. Member for Edinburgh, Pentlands (Mr. Rifkind), who was then Under-Secretary of State for Scotland:

"I think central government has become paranoid as far as local government is concerned".

I am sorry that the hon. and learned Member for Kinross and West Perthshire (Mr. Fairbairn) is not present to hear the comments of the Conservative leader of his district council. I do not know where the hon. Gentleman is. He is probably invading the Falklands.

The Secretary of State told us in the RSG debate in February that in 1980–81 local government expenditure increased by 1·6 per cent. in real terms. The spending may not be at a level that the right hon. Gentleman finds acceptable, but it could hardly be said to be wildly out of control. In 1981–82 local government expenditure was planned to rise by only 0·2 per cent. in real terms.

There is no question of local authority expenditure being out of control. However, with increase of 1·6 per cent. in one year and 0·2 per cent. the next year, we have to ask why rates went up by 32 per cent. and 36 per cent. respectively during those years.

The Secretary of State tries to pretend that massive rate increases, about which we warned ratepayers on numerous occasions, were the result of local authority extravagance. The truth is that the rate increases have been largely due to inflation and the fact that the Government have cut the RSG in a number of ways, sometimes by cutting the percentage rate and sometimes by inserting phoney figures for inflation and so on.

My hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) was told in a recent parliamentary reply that local authorities were budgeting for about £200 million above the Secretary of State's guidelines for 1982–83—about 8·3 per cent. over the guidelines. The ultimate figures may be slightly different, and I understand that, in accordance with what has happened in earlier years, the budgets are likely to be nearer the guidelines.

However, the guidelines are unrealistic. The figures for local government expenditure look so high only because the guidelines are unrealistic. As we and CoSLA pointed out earlier this year, even if local authorities collectively had introduced standstill budgets for 1982–83, compared with 1981–82, taking into account the Government's assumptions of 4 per cent. inflation in wages and salaries and 9 per cent. inflation for other costs, those standstill budgets would be £152 million above the RSG guidelines and settlement.

At that time CoSLA calculated that to reduce its budget to what the Secretary of State wanted in the rate support grant, using his assumptions about inflation, there would have to be a 6·3 per cent. reduction in local government expenditure in real terms in 1982–83. As we said during the rate support grant debate, that will not happen. There is no chance of its happening. The figures have never been denied. If the Secretary of State disputes them, he can deny their correctness later. We said that there was not the slightest hope that the local authority budgets for 1982–83 would come anywhere near the figures that the Secretary of State had assumed for rate support grant purposes.

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While preparing their budgets, local authorities often do not use the Secretary of State's assumptions about inflation. It is just as well that they have not done so. We already know that they have been falsified by events. There is a 4 per cent. rise in rate support grant for salary increases. Manual workers have already been awarded a wage increase of 6·9 per cent. Teachers are to have a salary increase. Of course, the Secretary of State can stop that if he is really serious. We shall see what he does. A 6 per cent. increase has been recommended. If the Secretary of State's rate support grant settlement allows for only 4 per cent. and manual workers have been awarded a 6·9 per cent. increase and teachers a 6 per cent. increase, the additional burden falls exclusively on the rates.

The Secretary of State normally says that the cost can be offset by reducing the number of people employed. Perhaps he will say specifically either that he will not allow the teacher's salary increase to go through or that he will tell local authorities to reduce their teaching staff. That would be monstrous. I do not believe that he will do that. It would be extremely foolish. But if he does not want local authorities to spend money he should tell them to trim their teaching staff accordingly. He does not do that. He and his sidekick the hon. Member for Edinburgh, North (Mr. Fletcher) who is not present, constantly boast about the wonderful teacher-pupil ratios. They fail to point out that we have them only because local authorities sensibly ignore what he tells them to do about education expenditure.

When one takes into account realistic inflation figures, one finds that in 1982–83 local authorities will spend no more in real terms than they spent 1981–82. As I have said, in 1981–82, according to the Secretary of State's own figures, the real increase in expenditure by local authorities was only 0·2 per cent.

All the talk about local government being extravagant and expenditure being out of control is absolute nonsense. In fact, it is more than nonsense. It is a deliberate attempt to put the blame of the Government's failure on to the shoulders of local authorities and to confuse electors into believing that they are suffering because of the inadequacies of local government. Unfortunately, there are hundreds of thousands, indeed millions, of people in Scotland who are suffering. They are suffering from the inadequacies of the Secretary of State and the Government, not from the inadequacies of local authorities.

The paranoia about local authorities goes on. There is talk of a crisis in local government relationships with central Government. There is much talk about alternatives to the rates. We heard from the Under-Secretary of State that the Government have got no further on that matter. He seemed to think that that was all right because before the 1974 general election they only promised to abolish domestic rates. Apparently it is acceptable to say eight years later that they have made no progress. It is a curious argument.

Moreover, the Bill is a further attack on local democracy. Let us consider how the previous powers have been operated by the Secretary of State and what success he has had after all his great—in my view, completely misguided—efforts to make local authorities obey his dictates and act as poodles of the Secretary of State rather than as independent authorities making their own decisions.

In 1981–82, 59 out of the 65 local authorities were above the guidelines by 8·93 per cent. There was a marginal improvement in 1982–83. As we predicted—there is no difficulty in making these predictions as the results are obvious—56 out of 65 local authorities were above the guidelines, so there is not a great deal of difference there.

The Secretary of State has singled out two authorities—Lothian region and Stirling district. I am extremely interested in what will happen in Lothian region over the next few weeks. I see that the Conservative administration there is asking for a meeting with the Secretary of State. I do not know why a meeting should be needed. If the guidelines are perfectly fair and reasonable and the previous Lothian council was rating for £66 million in excess of the guidelines, I do not understand why the new Conservative administration is not aiming not just for £45 million but for £66 million savings. If the guidelines are right, it should be able to achieve that saving.

Even if the Conservative councillors in Lothian achieved a reduction of £45 million, however, according to the guidelines the overspending would be reduced from 22·6 per cent. to 7·3 per cent. Moreover, I do not think that even that saving will be achieved. Now that the Conservatives are trying to run the council rather than just criticising from the sidelines, they will have found that the Labour administration was absolutely right about the effect on services and so on if such massive savings were made. Nevertheless, even if it made £45 million savings, Lothian region would still be 7·3 per cent. above the guidelines whereas the Strathclyde Labour administration is only 4·9 per cent. above the guidelines. Perhaps the Secretary of State will explain how justice operates in that odd circumstance. When the matter was raised at Question Time recently, he said that the penalties had nothing to do with the guidelines. In that case, what are the penalties to do with? And what do the guidelines mean? Will he explain the anomalies in those figures?

I hope that the Secretary of State will not make the claim that he made in Perth at the weekend. We all understand the atmosphere there, of course.

It was like a zoo.

Yes, we all understand what it was like. The Secretary of State—or perhaps it was the hon. Member for Edinburgh, South (Mr. Ancram), the non-Minister who is with us tonight—was explaining how the Tories won the election in Scotland on 6 May. If they keep winning elections like that, we shall be delighted. In the country as a whole, the percentage vote for Labour rose from a margin of 9 per cent. in our favour in 1978 to 12 per cent. in 1982. Even in Lothian region, the Labour share of the vote was 2 per cent. higher than the Tory share—29 per cent. for the Tories and 31 per cent. for Labour. That is no great victory. Nevertheless, the Tories have taken the administration in Lothian. We shall see what they will do with the reduction that the Secretary of State has asked for. I shall be surprised if they can make a reduction anything like that which the Secretary of State has asked for.

My hon. Friend referred to the Secretary of State's address to the Tory conference at Perth. I saw a snippet of that on the television and the message seemed to be that we should not be grumbling because the re t of the United Kingdom is doing even worse than Scotland.

That is an uplifting message. It is so uplifting that I avoid watching the Secretary of State on television, in case I am carried away with enthusiasm over all the benefits that the Government are giving Scotland. The fact is, as we know, that the situation in Scotland, in terms of the economy, employment and the rest is disastrous. I find it extremely offensive, even in the ambience of a Tory Party conference, to have the Secretary of State boasting about what he has done for Scotland when there are 330,000 Scottish people unemployed at the present time.

As I have said, CoSLA has condemned these further interferences in local authority power and we have condemned them as well. We have said, and I repeat, that what has happened in relation to Lothian, Stirling and the rest, cannot even be justified on the basis of the Secretary of State's guidelines. I put on the record once again that if Lothian is 22 per cent. above the guidelines, Orkney is 25 per cent. The right hon. Member for Orkney and Shetland (Mr. Grimond) complained about the situation. He has conveniently disappeared. Orkney council is 25·8 per cent. above the guidelines. The Scottish record is held by Shetland. It is 79·5 per cent. above the guidelines. I shall be interested to know when the penalties will be imposed on Orkney and Shetland. I wager that there will be no penalties on Orkney and Shetland. The Secretary of State would not dare. Why not? I do not want penalties on Orkney and Shetland, or on anyone, but if they are to be justified on the basis of the guidelines, it is scandalous fiat authorities—one could quote many—that are substantially above the guidelines are apparently escaping unscathed. At the moment, Tory authorities are escaping unscathed whereas there is a continued vendetta against the Lothian region. The figures do not justify it.

We are objecting not just to the exercise of the powers but to the possession of the powers. We have been against them from the beginning. We have already committed ourselves to repealing the powers that the Secretary of State took in the 1981 Act. If clause 1 goes through, we shall repeal that as well. This is another scandalous accretion to the Secretary of State's powers and we are absolutely opposed to it. That is why we tabled the amendments.

I am pleased to participate in the debate and to speak after my right hon. Friend the Member for Glasgow, Craigton (Mr. Millan).

I had the great privilege to be a local authority councillor from 1970 until I entered the House in 1979. It grieves me to see some of my former colleagues in local government, who have striven valiantly over the years, many of them working in a voluntary capacity without pay and with a great sense of duty and mission, being beaten down, undermined and thrashed by the Secretary of State. They are still there, working hard and striving to provide decent services.

Surely the hon. Gentleman is not right in that respect. They are not being beaten down; they are being beaten. Was it not the electorate who beat them?

I think that the right hon. Member lives in the Central region. He certainly does not live in Ayr, his own constituency. I can assure him that if he comes to Strathclyde occasionally he will see that the huge majority that the Labour group in Strathclyde had has now been increased very substantially. He will also find that to be so if he looks in Fife and in Central. With the assistance of the Tory press, he went out of his way to attack and to vilify the Lothian region, yet the Labour Party still managed to get as many seats as the Conservatives. The Labour Party did very creditably in the circumstances. [Interruption.] I maintain that that is so, whatever guffawing we may have from the Tory Benches.

The situation grieves me greatly. There are many people who have gone into local government to do a job and to do it well, but they have been constantly undermined by the Secretary of State, who knows nothing about local government. I do not think that he has had the opportunity of serving in local government. I do not think that he understands it. There are many other Conservative Members who do not understand how local government works.

When I say that people have gone into local government to do a job of work, I am not referring only to Labour representatives. Many of the Conservatives, the independents and others have gone into local government to help build up services. That is why, as my right hon. Friend the Member for Craigton has said, many of the Conservative representatives in local government are greatly disturbed by the way in which their position has been undermined.

This is an important debate, and before I continue my attack on the Secretary of State and his tribe, I want to propose a toast to absent friends. None of the members of the middle party—the odds and sods—was prepared to serve on the Committee. I have noticed that in this debate, apart from an odd Liberal—a very odd Liberal—from time to time, none of the Social Democrats has been present.

The right hon. Member for Glasgow, Hillhead (Mr. Jenkins) was supposed, at the time of the by-election, to be the great saviour of Scotland. I award him the title of damp squib of the decade. Not only has he failed to make any impression on national or United Kingdom issues; we have seen no evidence of him in Scottish debates speaking for the people of Glasgow or the people of Scotland—except on one issue. In the Scottish Grand Committee he made a fantastic, wonderful speech about taxis. That is the only contribution that we have had from the right hon. Member for Hillhead—the man who sets himself up and who was set up by the media as the great saviour of Scotland. He was to be the symbol of the new renaissance in Scotland. Before the month was out, we were all to be drinking claret till the cows came home. What have we seen from him? Nothing. He is the damp squib of the decade.

My right hon. Friend was right in what he said about Lothian. We shall watch very carefully, over the next few weeks, the actions of Convenor Meek and his colleagues. It will be very interesting to see what happens. I know Brian Meek very well. He has already asked for a meeting with the Secretary of State. My right hon. Friend asked "Why does he need a meeting? Why does he not do his master's bidding? Why does he not do what the Secretary of State is telling him?" We know why Brian Meek is not doing it. Brian Meek knows as well as everyone else that the guidelines are unrealistic, arbitrary and meaningless. He knows that as well as the hon. Member for Edinburgh, South (Mr. Ancram), who is sitting there on the Tory Benches grinning. Brian Meek knows that these are arbitrary guidelines. That is why he needs a meeting.

Brian Meek needs a meeting in order to say to the Secretary of State "You asked us what we were doing. We have to tell you truthfully"—probably the meeting will be in private—"that what the Labour administration said to you was pretty well right—that in order to achieve your guidelines we shall have to have major reductions in services, we shall have to increase fares in Lothian regional transport substantially, and we shall have to have redundancies. They will not be just voluntary redundancies. If you press us to follow your guidelines there will have to be forced sackings as well."

The hon. Gentleman speaks of enforced redundancies. Can he say, when £30 million was removed from the Lothian budget last year in November within a six month period, how many redundancies, enforced or voluntary, were caused? I think that he will find that there were none.

If the hon. Member examines the facts he will find that there were redundancies and cuts in the number of services.

As my hon. Friend knows, the cuts were made last year by allocating only £6 million in respect of staff cuts. It was therefore possible to meet the figure by natural wastage of over 2,000 jobs. That was only because Lothian confined its cut on staff to £6 million. There is no chance of that this year.

I am grateful to my hon. Friend. I want to go on to deal with that £30 million cut. I shall do so not by quoting myself, or by making statements which Conservatives might believe were politically motivitated, even should they give me the benefit of the doubt. I shall quote from an old sparring partner of mine, a chap with whom I have disagreed on many occasions. He used to sit across the table from me in the discussions that we had in the Lothian regional council when I was there, about teachers, salaries, conditions of service and all the questions of education.

The person concerned is Mr. Henry Philip, the well-respected head teacher of Liberton high school in the constituency of the hon. Member for Edinburgh, South. The hon. Member will know how well-respected Mr. Philip is. He will know that Mr. Philip is the chairman of the Lothian Educational Institute of Scotland regional executive and has been active on the national EIS as well. He talks about the Lothian cuts in a letter that he wrote to The Scotsman on 4 May. He says:

"Because there has been no replacement of staff … headteachers have been unable to guarantee class continuity of teaching … children have been deprived of certain subjects".

One of the great deprivations has been in language teaching. There are now serious inadequacies in language teaching in most of our local authority schools. Most of the minority languages are almost extinct because of the cuts.

The letter goes on to say:

"Children have had to learn without textbooks and teachers have had to scrounge old computer paper when stocks and jotters ran out. Windows have not been replaced, damaged roofs and ceilings have gone unrepaired, heating has been substandard, rooms have gone uncleaned and there has been no routine maintenance which, as all householders know, will result sooner or later in a massive bill for serious structural defects".

That is what is happening with the cuts that have already been imposed, before we get to the cuts that will be imposed this year. There will be great damage to the fabric of our educational establishments.

Mr. Philip goes on to give some of the facts and figures that have already been given about the inadequacy of the allowance for inflation, and to criticise what the Government have done. This is outside criticism, not from the Labour Party but from somebody desperately concerned about the educational service. Mr. Philip finishes by saying:

"Sadly, I have come to the conclusion that Mr. Younger thinks that the education of ordinary children is not important and, because the excellent educational provision in Lothian has shown up the serious inadequancies in other regions which have tried to follow his dictate, he has decided to cut Lothian down to their level.

I would hope that all those who realise that the future of this country depends on the education of the young would not let him get away with it."

I hope that when we have the next opportunity to ensure that the Secretary of State does not get away with it, Henry Philip and all the other teachers, all the social workers, the dustmen and the old people who rely on the services that Lothian and other regions provide will not let him get away with it, and will ensure that the Secretary of State and his tribe will not return.

The Secretary of State and his tribe look after their own. While these cuts are taking place, because of the dictate of the Secretary of State and the Conservative Government, affecting ordinary children in local authority schools, his children and their children are well looked after. Their children in the private schools are getting more and more money. Their children are getting £800,000 extra in the assisted places scheme. Their children are getting £2 million in rate relief assistance. Their children are well looked after in their schools. No cuts are being made in the private schools because of the extra assistance given by the Government.

I find it appalling to see the penny pinching that is going on. We are talking about only hundreds of millions of pounds. In normal parlance, in the budgets of individuals, that is a great deal of money, but it is not a great deal of money in national budgets. After all, it seems to be perfectly possible to find out of thin air, not hundreds of millions of pounds, but thousands of millions of pounds to send the infernal task force to the South Atlantic in pursuit of some way to mend the hurt pride of the right hon. Lady the Prime Minister. That, basically, is what it is about. Even in the ordinary Budget, the latest predictions for the public sector borrowing requirement show that it will be £2 billion below the estimate that the Government gave. Why then does the Secretary of State continue to squeeze these vital services in the local authorities? On that basis, there is no justification for it.

I want to deal with a local authority that is a little nearer my home and my constituency, and a little nearer the constituency of the Secretary of State. Last year, the Secretary of State and his advisers made a bloomer. They put Cumnock and Doon Valley district council on the hit list. When they went into the matter in detail, instead of just looking at the league table, they found that they were wrong, and discovered that Cumnock and Doon Valley was not an overspending authority. Cumnock and Doon Valley gave the Secretary of State a detailed answer. In the end, the Secretary of State had to admit that he was wrong, and he withdrew the authority from the hit list.

On the basis of the guidelines published the other day in The Scotsman, there appears to be a prima facie case for Cumnock and Doon Valley to be on the hit list again. The Secretary of State would be equally wrong, equally misguided and equally stupid if he put it on the list, and at the end of the day he would again have to retract. He misunderstands the way in which the budget is drawn up by Cumnock and Doon Valley. Its budget is drawn up slightly differently from the method adopted by Lothian region and in most other authorities. The apparent figures of excess over guidelines, given in the article in The Scotsman, is therefore misleading. If the Secretary of State examines the accounts and projected figures of Cumnock and Doon Valley, as I have done, he will find that they are far from being over the guidelines. The authority is extremely prudent and reasonable. In fact, it seems almost too reasonable and prudent in its budget for the current year. So I hope that the Secretary of State will proceed carefully, and not act just on the basis of raw figures of excess over guidelines, as shown in the table.

The Secretary of State continually tells us, on some kind of spurious basis, that he has the support of the public for this vicious attack on local authorities, and that somehow he has a mandate for it, because at the last election the Conservative Government were elected on this as part of their platform. Apart from the important fact that the Conservative Government obtained no mandate in Scotland—the hon. Member for Dundee, East (Mr. Wilson) wanted me to make this point, but I make it because I want to do so—if we had had the Scottish Assembly that we should have had, the Government would not have had the opportunity to introduce this Bill. There would be none of this ridiculous unauthorised pushing of local authorities in Scotland.

We must look at what might be considered a fairly reasonable analysis of whether the Government will have any support at a general election, or even at local elections. We know that there are many factors that decided the way people vote. I am sure that many people did not vote in the general election or, I fear, in the recent local elections, on the effects of this clause or on the Government's general policy towards local authorities.

9 pm

The Scotsman did us all a favour in producing the MORI poll on Tuesday 4 May. The poll showed that the Government does not have the support of the people for their policy of bashing local authorities. The article states:

"It does not seem either that the Government have won overwhelming support for themselves in their battle to control the spending of local councils. Over Scotland as a whole, 48 per cent. of voters disapprove of the Government's actions, against 39 per cent. who approve."

The article continues that the poll did not find approval even in the Lothian region, where the issue is perhaps heightened more than anywhere else. We were talking earlier about raising money for the funding of local government. I therefore draw to the Under-Secretary of State's attention the next extract from the article. It states:

"There is, however, a persistently high degree of popular loyalty to the concept of local government—82 per cent. of Scots say they prefer local services to be controlled by elected local council rather than by central government."

The vast majority of people believe in local government and want decisions regarding their services to be made locally. That is the message that comes strongly from the poll, and on every other occasion. Since that is the message, we should accept my right hon. Friend's amendments and defeat the Government who are constantly berating, undermining, and attacking the local authorities and councillors who are elected to uphold services and local democracy and whom the Opposition support.

I always hate to question The Scotsman, or, indeed, opinion polls, but I should have thought that the hon. Member for South Ayrshire (Mr. Foulkes) might have decided that the most conclusive opinion given in Lothian region over the past three months was not that of the opinion polls but the result of the elections. It is amazing to hear his claim of victory. There is almost a cry of "We wuz robbed" from the Opposition. One fact was absolutely clear from the result in Lothian. The total vote against Labour in that region shows that Labour was comprehensively rejected. The electors of Lothian made certain that the type of confrontation that we have seen in local government, deliberately motivated by a Left-wing band of councillors, was conclusively ended.

Will the hon. Gentleman confirm that the Labour Party polled 2 per cent. more votes than the Conservative Party in the Lothian region?

This is a semantic argument. I was elected to the House in February 1974 in the seat presently held by the hon. Gentleman. I was faced by a Labour Government when the Conservative vote at that election was 1 million more than the Labour vote. We can argue until the cows come home, but the simple conclusion drawn by the electorate at Lothian—I shall not be drawn into the argument for electoral reform by the minor parties who have returned to the fray—is that they have had enough of that type of confrontation and they voted accordingly.

I had not intended to speak, because I thought that I had already spoken often enough on this subject. However, I was provoked into speaking by some of the remarks made by the hon. Member for South Ayrshire. I was provoked not by his totally unworthy remark about the Prime Minister's motives in sending the task force, but by other remarks that he knows—as an ex-Lothian regional councillor—are so selective as to be unworthy of rational discussion.

The hon. Member for South Ayrshire said that in addition to last year's cuts, more cuts would be imposed this year, which would make the position worse. He knows as well as I do that the cuts are made within the annual budget and that the cuts made last year were made for that year. They are not additional to the cuts to be made this year. If £30 million was taken off last year, and if £30 million is taken off again this year, on an equivalent budget—which it is not, because there was a degree of increase in it—the expenditure would be the same. The cut is not additional and will not create more difficulties than last year.

The hon. Member for South Ayrshire cited a headmaster in my constituency, Mr. Philip. I know him well and I have had many discussions with him about educational cuts. The hon. Gentleman quoted a letter that Mr. Philip had written to The Scotsman, which was another interesting bit of special pleading. I do not know why the hon. Gentleman decided to set up Mr. Philip as someone who was, if anything, across the table from him. To suggest that Mr. Philip, as the chairman of the Lothian Educational Institute of Scotland, is somehow apolitical, is to suggest that Mr. John Pollock, the general secretary of the EIS, is a Conservative. I am sure that the hon. Gentleman would not suggest that.

In that letter, Mr. Philip was selective because, although he spoke about the effects of the reductions made last year on educational provision within his school, he did not mention educational administration. He failed to mention that Lothian region still, amazingly, has more people administering education than teaching in the classrooms.

That is not true. The EIS is not affiliated to the Labour Party. Many people, at all levels of its ranks, are members of parties other than the Labour Party. Regrettably, far too many are members of that funny Social Democrat lot. The hon. Gentleman keeps repeating an error. I have corrected him before and I can only assume that he is repeating it mischievously. He claims that those in administration outnumber those teaching. That includes cleaning ladies, dinner ladies, technicians, janitors and so on. They are not administering education, but are providing essential services in our schools. They are fed up with being denigrated by the hon. Gentleman.

I am not surprised that the hon. Gentleman should take that line. After all, he was the architect of that system within Lothian and it is he—and not the regional councillors, of whom he spoke so highly, and who were recently defeated—who bears responsibility for the situation that existed within the education authority in Lothian region. He bears as much responsibility as anyone else for the high rates imposed on Lothian region in the past four years, even if he was not there. It falls ill from his mouth to make such comments. He knows that anyone who has had the responsibility that he has had should be careful about how they later apportion responsibility for the things that go wrong. Therefore, I hope that we shall hear no more from the hon. Gentleman on that matter.

rose——

I shall not give way. I shall conclude on a more serious point. The right hon. Member for Glasgow, Craigton (Mr. Millan) described the legislation as dictatorial. It is not mandatory, but enabling. If the Secretary of State wishes to impose an order under the clause, he must return to the House to seek its approval. That will not happen automatically and now that the one highly irresponsible authority in Scotland has changed, the Secretary of State is less likely to have to return to the House. I am thankful about that because I have never enjoyed the confrontation between local and national government during the past three years.

It is important for us to realise that the Secretary of State, quite rightly, is asking for a power to be made available—for which he must receive the consent of the House of Commons—so that the electors of a local authority area need never again suffer rate rise after rate rise as the people of Lothian have suffered during the past four years.

I hope that one thing that will happen as a result of the local elections last week is that, during the next four years, local government in Scotland can once again enjoy the general co-operation with national Governments that it enjoyed previously with Governments of both parties and as a majority of local authorities have enjoyed cooperation with the Secretary of State during the past three years. I hope that it will remove the confrontation and allow local authorities to know that if they go too far, deliberately seek confrontation or put party politics above their electors, this Secretary of State and this Government will not stand by idly and see the electors suffer. For that reason, I welcome this legislation and I hope that the House rejects the amendment.

My hon. Friend the Member for South Ayrshire (Mr. Foulkes) pointed out earlier that the Secretary of State for Scotland has never served on a local authority. The same is true of the hon. Member for Edinburgh, South (Mr. Ancram). His idea of a public school is somewhat different from mine. I went to a State school and I suspect that, when the hon. Gentleman talks about public education, he is referring to the private sector.

I wish to return to the substance of the amendments moved by my right hon. Friend the Member for Glasgow, Craigton (Mr. Millan). If the Government are so keen to do good for the ratepayers as they keep telling us, it would be far better to sustain a higher measure of central Government support for local authorities. For example, if we take Glasgow district, had the rate support grant remained at its 1979–80 level of 41 per cent. in 1982–83 the ratepayer would be 13p better off. That is the measure of the shift in the allocation that is given by central Government to local authorities. In Glasgow during that period there has been a reduction in central Government support from 41 per cent. to 33 per cent., which means that the ratepayers must pay a larger proportion of the burden of sustaining local authority services.

The Secretary of State appears to wish to have a double-edged razor. With one cut, he wishes to lower the rate support grant, as many of his predecessors wished. But he now wishes to have a second blade, so that he can reduce the rate that is levied by the local authority. That is a significant intrusion into the powers of local authorities. Had the Government really been keen to improve the position of ratepayers, they would have produced a much more positive Green Paper before the new year. As it is, the consultative document offers very little prospect of improving the position for industrial firms and commercial organisations and little prospect of assisting domestic ratepayers.

9.15 pm

When I examined a previous Conservative Government Green Paper, published in 1971, it struck me that one significant difference was that there was less emphasis on the prospect of agricultural rerating because, of course, the Government do not want to upset the farmers. If the Government persist in seeking rigidly to control local authorities they will get into as big a mess as they have with their national housekeeping. The Government provide little cause for believing that their ability to handle expenditure and services at the local level will be any better.

This is information technology year and we spent most of the afternoon discussing new technologies. It seems that the Secretary of State wants the newly elected regional councillors and the existing district councillors to sit at the computer terminals and more or less approve all the printouts from New St. Andrew;s House. This is his idea of how local government in Scotland should operate. He wants, more or less, to put the words into the mouths of councillors.

One can see all the usual moves toward quick-spend projects as the Government become a little more nervous about unemployment increasing. In the meantime, we have to go through this Gilbertian phase when the Secretary of State assumes the role of the Lord High Commissioner. He has a little list and no doubt——

Lord High Executioner.

Perhaps the events this week at the General Assembly caused me to make that inadvertent slip. There might come a time when the Secretary of State becomes the Lord High Commissioner—we cannot tell.

Moderator.

At any rate, the Secretary of State is not thinking of ecumenical matters now. He is more concerned with clobbering the local authorities. I suggest that when the Manpower Services Commission has just published its youth group report and when the Government are seriously considering how they will cope with the employment training of the 16 to 17-year-old age group the way in which the Government are examining manpower is developing into a nonsense. On the one hand, they are telling local authorities that they should reduce the level of their manpower and decrease the number of permanent jobs—either through natural wastage or, as is likely;to happen, through the "wedge" of redundancy. On the other hand, they are saying that we should spend more money on special programmes to sustain projects that would often rank as lesser priorities were it left to the local authorities to draw up the priorities. At the end of the day, the jobs created are only temporary jobs; they are not permanent.

There exists an inconsistency in the Government s manpower policy and it is one that the Secretary of State, wearing his other hat as the Minister responsible for employment in Scotland, should seriously consider. We cannot go on destroying permanent jobs to create the illusion of employment through impermanent jobs on special programmes.

When talking of guidelines we give the impression that we are discussing scientific measurements, understood by central Government, local authority officials and elected councillors. Nothing could be further from the truth. Apart from the creation of the new client groups under the new formula for rate support grant, a new language is developing. I understand from people who are informed in these matters that "smoothing", "stability" and "specific cost variations" are involved. That is the new terminology introduced so that the Government achieve their required result. There can be no statistical error by which a local authority is able to scoop out of the pool. According to the new terminology the Government must be able to alter the figures so that they suit them.

We spend much time bandying words about local authorities. We tell them what they should do but Scotland has been relatively well served over the generations by its local government system. In Scotland local government matters more than it does south of the border simply because of the range of services that local government is obliged to provide.

I hope that the Government will address themselves more to a reform of the way that resources are allocated to local authorities. Too often we consider only the structure of change in local government. The Labour Government were mistaken in simply asking the Wheatley commission to examine the structure of local government, thinking that that could be compartmentalised without taking into account the equally important aspect of ensuring that the resources are available to local authorities.

Local authorities will be able to master the services that they provide and operate them more effectively and in a more stable way only if the Government ensure that they are sufficiently funded so that they can raise the bulk of the cash themselves instead of relying on Government arbitrarily determining each year the amount of rate support grant and the way that it is funded. The Government promise a reform of local government in the foreseeable future. They should, therefore, withdraw clause 1 in the meantime.

I am grateful to my hon. Friend the Member for Glasgow, Maryhill (Mr. Craigen) for mentioning the link between the cuts imposed on local government by the Secretary of State and jobs. It makes a farce of the Government's exercise in local government expenditure. In real terms local government expenditure is not wildly out of control, but, increasingly, Government expenditure is wildly out of control. One of the reasons is rising unemployment. Each time that the Government cut local government services, despite what the hon. Member for Edinburgh, South (Mr. Ancram) said, further unemployment is created, even if it is by natural wastage or voluntary redundancy. The Conservatives have consistently failed to recognise that every time a person leaves a job, and the job disappears, someone in the pipeline does not get that job. It means that someone is unemployed. It may not be the person who has lost the job, but someone down the line who has lost a job as a result of natural wastage.

The Government are cutting essential services in local government. Those who operated those services are being declared redundant or are leaving and are not being replaced. The Government are transferring that expenditure into the national purse for the payment of unemployment and social security benefit. The Government are not saving any money by cutting local government expenditure. They are transferring it to another part of the public purse.

The hon. Member for Edinburgh, South attacked my hon. Friend the Member for South Ayrshire (Mr. Foulkes). He thought that he was attacking my hon. Friend for what he did as convenor of education in Lothian region. Most of my hon. Friends think that he did a remarkably good job.

Hear, hear.

I did not hear my right hon. Friend the Member for Glasgow, Craigton (Mr. Millan) say "Hear, hear."

My right hon. Friend the Member for Glasgow, Craigton (Mr. Millian) may, when he was Secretary of State, have had difficulty with my hon. Friend when he was convenor.

The hon. Member for Edinburgh, South used that attack on my hon. Friend to get out of answering the question that he had asked. When the hon Gentleman says that there are more people in administration in Lothian region than there are teachers, he includes in those figures large numbers of essential workers. If the hon. Gentleman was referring to middle management in industry, would he tell his voters who work in management in private industry that they are administrators and quite useless in the general running of industry? Of course he would not. The hon. Gentleman is using false figures to try to create a gain and to build and feed upon his paranoia about a Labour-controlled Lothian region.

I assure the hon. Gentleman that I had no intention of attacking his hon. Friend. The day that that happens he will know about it. In view of what he says about the necessity to have more non-teaching staff than teaching staff in Lothian region, is he making strong representations to the Labour-controlled education authority in Strathclyde region, where the figures are very different?

I am not. Different education authorities work in different ways. I have heard the same complaint made by the hon. Gentleman;s Conservative colleagues in Strathclyde region about the administration of education in Strathclyde. It does not stand up to close examination. One must have administration. One must have cleaners, janitors, school meals ladies and so on if an education system is to operate. Lothian region has one of the best—probably the best—teacher-pupil ratios in the whole of Scotland and probably in the whole of Britain.

rose——

It was the hon. Gentleman who complained about the lack of teachers in Lothian region, not I.

That is the sort of myth that is being perpetuated. It is paranoia. My right hon. Friend the Member for Craigton was right when he said that the Secretary of State was suffering from paranoia about the Lothian region to the extent that we had a remarkable Conservative Party political broadcast—I did not see it, but I have been told about it—on the eve of the local elections in Scotland on 6 May. I gather that the Secretary of State spent the first few minutes of his broadcast praising a Labour-controlled authority in Strathclyde region. He did that so that he could make his usual attack on Lothian region.

The party political broadcast was not about Conservative aims in local government or what they were trying to achieve. I gather that it was merely another paranoic attack upon Lothian region. It must be accepted that paranoia is a mental illness and that those who suffer from it should not hold high offices of State.

What about the Prime Minister?

I agree with my hon. Friend. The right hon. Lady should not be holding a high office of State, especially when she finds it more exciting to talk about war than providing services for the British people, which is what she did at the Conservative Party conference at Perth. It is disgusting that anyone finds war more exciting than the welfare of the people. However, that is the impression that the right hon. Lady gave on Friday night. Some of us heard her while watching television and know exactly what she said.

The hon. Gentleman should have heard the whole of my right hon. Friend's speech.

Fortunately, I am not a member of the Conservative Party.

Order. I think that the debate is running rather wider than the contents of clause 1. I think that we should return to the amendment.

I was about to say, Mr. Deputy Speaker, that the clause constitutes another attack upon local democracy in Scotland. Throughout the three years that the Government have been in office there has been a continuous attack upon those who run local government in Scotland. Local councillors of all parties, including the very few Social Democrats in Scotland, all feel that the Government are attacking them and removing their powers. They have introduced a series of Bills to try to curb the power of local government.

It is clear that the Government's intention is to curb one region within Scotland. Now that the Secretary of State's party has gained control of Lothian region, following a small change as a result of the recent local elections, the right hon. Gentleman might start to withdraw some of the legislation that the Government have introduced. He may feel that he has achieved his ends.

Many of us feel that Lothian Conservatives will overspend. If that happens they, too, will face the risk of being penalised by the right hon. Gentleman by means of clause 1. They will find that they cannot cut expenditure to the extent that the right hon. Gentleman wishes. If they do not cut it to the same level as other regions, the right hon. Gentleman will find it extremely difficult—I hope that his hon. Friends will take this into account—to penalise any other district authority in Scotland.

Today The Scotsman has issued a list of the excess over guidelines spending of authorities. The Secretary of State issues the guidelines and the local authorities do not have much of a say. Which authorities will the right hon. Gentleman penalise? I have already referred to Stirling and Lothian. Presumably Lothian will come off the hit list following the change of control as a result of the local elections.

The Lothian region's excess over guidelines spending was 22·5 per cent. There are other district authorities—for example, Aberdeen, with an excess over guidelines spending of 22·1 per cent.—which run Lothian close. The spending of Skye and Lochalsh amounted to an excess of 21·6 per cent., which again was very close to the Lothian figure. Sutherland's expenditure amounted to an excess of 22·6 per cent., which was even higher than the excess of the Lothian region.

I note that the right hon. Member for Greenock and Port Glasgow (Dr. Mabon), an SDP Member, has joined us. Surely the hon. Member for Caithness and Sutherland (Mr. Maclennan), who is also an SDP Member, should be here. It is clear that the Caithness and Sutherland district council might be on the right hon. Gentleman's next hit list of the local authorities that he is to penalise.

The right hon. Members for Glasgow, Hillhead (Mr. Jenkins) and for Greenock and Port Glasgow manage to pop in for a moment or two. They are not interested in local government in Scotland. They do not seem to care what happens. It is no wonder that the people of Scotland voted for so few of their colleagues in the local elections. It is apparent that they do not really care about local government. Aberdeen is one of the local authorities that it is suggested might be on the hit list. If one hits Aberdeen, why not Orkney and Shetland? The excuse given for Shetland in particular is that the oil related industries create problems. It has to spend over the guidelines to cope with the problem. That is true of Aberdeen also. It has problems of coping with the oil industry, housing and other services that it has to provide. Which one of those is now on the hit list? If the clause goes through, what rates will be decided by the Secretary of State?

I have heard many people—journalists and even some people in local government—say, "What a charming man the Secretary of State is. He always sits and listens to what we say. He smiles gently and quietly at us." He apparently occasionally gives them a drink or a cup of tea. There is a Shakespearean quotation that I think fits the Secretary of State to a T. It is that

"one may smile, and smile, and be a villain".

That is the Secretary of State for Scotland in terms of local government. He is taking dictatorial powers. He is determining what local government shall be. It is no longer a matter of local democracy with the people of the areas deciding. It is down to him—a tinpot dictator of the worst order.

A number of hon. Members have addressed themselves to the position in Lothian in the light of the local government elections. I wish to comment on that, but I should like to preface what I say with the observation that I think that it is a sad debate in the sense that we are debating something important, the clauses that provide for the suppression of local government in Scotland. I choose those words with care. Since we had the Second Reading debate, there has been published a historic document in the context of Scotland's social development, "A time to listen—a time to speak out" by CoSLA. I have no doubt that it has been quoted frequently in Committee, but I should like to mention two sentences from it.

"The Scottish Office is no longer prepared to undertake meaningful discussions with the Convention. In recent years, there has been a systematic devaluation of the role of consultations. These have now in many cases been reduced to pointless ritual."

That is a terrible indictment of any Government since it is a document that is representative of Scottish local government and is endorsed by representatives of the Tory Party as well as the Labour Party. It is time for the, Government and the Secretary of State to think carefully about the road that they are determined to tread. I say unequivocally that the Tory Party will live to regret what it has done with the legislation. I hope that we shall see the early return of a Labour Government, because the Labour Party and my right hon. Friend the Leader of the Opposition have made it clear that they will repeal the legislation and restore democracy to local government.

I return to what has happened in Lothian. I suppose that the Secretary of State feels that his party has achieved a victory and that he deserves a share of the credit. As the Labour Party no longer controls the regional council the right hon. Gentleman's feeling may be justified.

However, we are only at the beginning. The conclusions to be drawn from the confrontation between the council and the Government will be assessed only after we have seen what happens between the Government and the new council which is controlled by the Conservatives and their allies.

There is no doubt that cuts will be made. I regret that the Labour Party no longer controls the council, but, given that councillors have no scope to take independent decision, it is as well that the cuts will be made by Conservatives rather than by Labour councillors. I assume that the council has complete freedom to decide where to make the cuts, that there is no change in that regard and that there will be no suggestions or guidance from the Secretary of State.

Much nonsense has been spoken about the regional council being unreasonably alarmist about the Secretary of State's cuts. That is not true. The Labour Party has had thrown at it the accusation that we claimed that thousands would be made redundant if the Secretary of State went ahead with his policies. In fact, no one has been made redundant and staff savings have been achieved by natural wastage.

When the council submitted its considered response, which was debated in the House, it was on the basis of the Secretary of State's initial proposal of £53 million of cuts. Secondly, the council's officials made the reasonable assumption that the cuts would be made pro rata across the board and that as staff costs represented 70 per cent. of total costs the staff would bear 70 per cent. of the cuts.

In the event, neither assumption applied. The £53 million was reduced to £30 million. I am glad that the Secretary of State agreed to that reduction, but it must be accepted that there is an enormous difference between the two figures and that the final £5 million or £10 million of cuts are the hardest to make. The second assumption was not fulfilled, because the council, to its credit, went to great lengths to avoid redundancies. I hope that the new council will do the same and that there will be no compulsory redundancies.

It is unfair to criticise the council in that regard. It had to make cuts and we are now paying the price for them. I hope that Conservative Members in Edinburgh are getting as many complaints as I receive from my constituents whose children are having their education dislocated because of the freeze on staffing in Lothian.

I put another point to the Secretary of State and I hope that he will answer it squarely. I assume that the considerations that led the Secretary of State to conclude that Lothian region should cut its expenditure by £45 million are not altered by the result of the election. I assume, therefore, that the magnitude of that cut has nothing to do with the means by which Lothian regional council chooses to make that cut. I assume also that the size of the cut will not be altered in any way because the council now happens to be controlled by his Conservative allies, supported by the Liberals and the SDP.

It was quite wrong of the Secretary of State to intervene and make his announcement during the elections. Perhaps he felt that the Labour Party had a good chance of retaining control and that it was essential to get the matter on the record before the election. Perhaps he felt that he could influence the outcome. I am not sure that it did.

9.45 pm

We want two assurances from the Secretary of State—first, that Lothian regional council will be free to make the cuts in the way that it chooses; secondly, that the magnitude of the cuts will not be influenced by the political complexion of the council.

There will be a real reduction in the level of services in the region. Many of the electorate, some of whom voted for Conservative councillors, will resent and oppose that. There is no way that anything like £45 million can be cut from the Lothian regional council's budget without there being severe effects on both the staffing of the council and, above all, the level of services provided for the benefit of the people in the region.

I was not fortunate—or unfortunate—enough to be selected for the Standing Committee that dealt with the Bill. If I had, I should have been tempted to table at least one amendment to change the title of the Bill to the Destruction of Local Government (Scotland) Bill. If the Bill is passed, it will be another nail in the coffin of local government in Scotland and another nail in the coffin of local democracy in Scotland.

I intervene simply to say that I tabled an amendment in Committee on the lines that my hon. Friend suggested. It was that the short title of the Bill should be altered to the Abolition of Local Government (Scotland) Bill. Unfortunately, the Chairman did not select it.

I am grateful to my hon. Friend for that information. It just goes to show how unfair so-called parliamentary democracy is. Whatever unfairnesses exist in this place and in the Committees of the House, they are as nothing compared with the unfairnesses and injustices that the Secretary of State is now trying to inflict on local government in Scotland. Nowhere is that more clearly seen than in clause 1, which we seek to delete.

Traditionally, central Government, either through the Secretary of State for Scotland or, south of the border, through the Secretary of State for the Environment has had powers to influence local government or even to intervene to some extent in local government decisions. That is not new. However, since the Tory Government came to power there has been an erosion of the freedom of duly elected councillors, representatives of the people, many of whom have a better mandate than the Secretary of State and his colleagues. They now find themselves being bulldozed and streamrollered so that, if the Secretary of State has his way, they will be reduced to mere puppets with himself as the central dictator.

At about this time last year, we were discussing the Local Government (Miscellaneous Provisions) (Scotland) Bill. We saw then what many Opposition Members described as a very dangerous precedent. Previously, Government, with parliamentary approval, had the right to influence local government finance by determining not just the overall level of rate support grant but the distribution of rate support grant in consultation with the local authorities through CoSLA. Last year, however, an unfortunate precedent was created. The Secretary of State not only took extra powers to propose to Parliament at the beginning the amounts of rate support grant to be allocated both totally and to individual authorities but thereafter took extraordinary powers selectively to reduce the amount of rate support grant for local authorities that he decided were guilty of excessive spending.

We warned at that time that this might be the first phase in the Secretary of State's quest for additional powers. In other words, the Tories are adopting new tactics. Instead of clobbering the trade union movement all at once, they are bringing forward a series of anti-trade union measures. In the same way, instead of clobbering or indeed killing off local authorities with one blow, they are inflicting what could almost be described as death by slow torture. Last year we had the Local Government (Miscellaneous Provisions) (Scotland) Bill and now we have the Local Government and Planning (Scotland) Bill. If the Secretary of State manages to get this on to the statute book, no doubt he will try to come back next year with further measures to erode what little freedom remains to local authorities.

Fortunately, however, the Secretary of State is unlikely to have the chance to do that next year. It is to be hoped that a general election will take place before then, and no doubt my right hon. Friend the Member for Glasgow, Craigton (Mr. Millan) will then be Secretary of State for Scotland—that is, if I do not get the job myself. At any rate, there will be a Labour Secretary of State who will be able to undo much of the damage caused by this rotten legislation.

As my hon. Friend the Member for South Ayrshire (Mr. Foulkes) and others whose experience in local government in Scotland has been far greater than my own have said, many people who have given a lifetime of service to local government in Scotland are now absolutely sick to the teeth. Initially, they thought that they were elected to maintain and improve services, but they now find themselves in an almost hopeless position in which the Secretary of State is trying to turn them into puppets who will simply administer cuts in essential services rather than maintaining or improving them.

The ever-worsening effects of Government dictatorship is apparent in this legislation. Not content with the extraordinary powers that he took last year to interfere with the level of rate support grant, the Secretary of State, through clause 1 which we seek to delete, is now taking power virtually to determine the level of local authority rates. I challenge him to suggest a greater infringement of the power of local government.

What is the point of giving local government the power to raise revenue and to decide how that revenue is to be spent if the Secretary of State stands over it like a big brother saying "You cannot do this, you must do that. You must not spend your money on this, you must spend it on that. You must sell your houses, irrespective of the needs of the local community."? That kind of dictatorship, by means of legislation that forces councils to sell their houses or that interferes in local finance, makes it almost impossible in many instances for people in local government to continue to do the job that they were elected to do.

What is the point of having local authority elections? Soon there may be almost no point at all in having local government. In the elections held earlier this month it was interesting to see that many seats went uncontested. Is it any wonder, when the Secretary of State does not give people who serve in local government enough elbow room to fight for the people that they are elected to represent? Some good people might have been inclined to enter local government but, because of the discouragement of the Secretary of State, they now say that it is not worth the candle. They may decide to work hard behind the scenes and perhaps even to use extra-parliamentary means to get rid of the Tory Government.

Will my hon. Friend agree that the argument that local government democracy has little appeal to the Government has some validity if one looks at the election results? They clearly demonstrate that nobody votes for the Government, anyway.

Certainly very few. Even in Lothian, which the Secretary of State hoped to win by an overall majority because of his cheap electioneering gimmick prior to the election, the Tory Party got only a minority of seats and a minority of the votes cast.

May I turn nearer home, to Stirling district council, which covers part of my constituency? The same day that the Secretary of State announced a cut of £45 million in the rate support grant for Lothian, he also announced a cut of £1·5 million in the rate support grant for the Stirling district. That comes over and above what happened last year when Lothian regional council was one of those singled out for special hatchet treatment by the Secretary of State. Stirling district council was also one of those singled out for special hatchet treatment. At that time the Secretary of State reduced the rate support grant to Stirling district council by £700,000.

I remember trying desperately to organise meetings to have some form of negotiation and consultation on the matter between the Secretary of State and the council representatives. My hon. Friend the Member for Stirling, Falkirk and Grangemouth (Mr. Ewing) joined me. However, despite the Secretary of State's local knowledge—he lives there, or at least he has one of his houses there—he refused to meet council representatives to discuss what he intended doing regarding the council's finance. Eventually, after much persuasion from my hon. Friend the Member for Stirling, Falkirk and Grangemouth and myself, we managed to arrange a meeting in Dover House with elected council representatives, at least one council official and the junior Minister. The junior Minister—the office boy—was at that time the hon. Member for Edinburgh, Pentlands (Mr. Rifkind). He has since been sent to the Foreign Office where I believe he is in charge of Siberia, among other places. If he makes a close study of Siberia he might find that Scotland is becoming even worse than Siberia for local democracy. We have a Secretary of State who is assuming centralist dictatorial powers that even Stalin and the Stalinists would envy. That is the kind of Secretary of State for Scotland that we have. He is trampling all over the wishes of the local people, whether in Stirling, Lothian, Dundee or wherever.

In Stirling—perhaps the Secretary of State would stop giggling about the misfortunes of the people in Stirling district—the local authority accounts commission has, I understand, recently referred to the Court of Session the report of the local authority controller of audit to the effect that Stirling district council had, in his opinion, broken the law by refusing to hand back the £700,000 to the——

I refer the Secretary of State to the relevant part of the controller's report, where he said:

"In my opinion, a local authority owes a fiduciary (held or given in trust) duty to the ratepayers from whom it obtains the monies needed to carry out its statutory duties. The council was acting within its discretionary power in not returning money to the ratepayers by means of a lower rate but by its failure to take the steps open to it to avoid a reduction of rate support grant it was in breach of the fiduciary duty which it owes to the ratepayers and therefore acted unlawfully".

I do not know whether the particular case is sub judice as the referral has been made to the Court of Session, and I do not want the Secretary of State to comment on that aspect of the matter if he feels that it would be against the traditions of the House to do so. But if the refusal of the local authority to hand back the money to the ratepayers is illegal, what is the need for this clause? Who is it in St. Andrew's House that advises the Secretary of State that his powers under last year's legislation are so inadequate that he has to come forward with even more draconian measures, which he hopes to take under the terms of the clause?

My hon. Friend the Member for Edinburgh, East (Mr. Strang) and others have referred to the specific case of Lothian regional council, and I do not want to add a great deal about that, except that it is not just a question of a proposed reduction of £45 million. It is a question of a possible massive reduction in educational opportunities for children, in the standards of social work services for the elderly, the sick and the disabled, as well as the creation of more unemployment. That is what is at stake. It is not just a reduction in financial terms; it means job loss and the loss of essential services. The Secretary of State hoped to achieve victory in Lothian region, but the Tories, with the help of the SDP-Liberal Alliance, defectors and what have you, managed only by the skin of their teeth to cobble together some form of administration. I wonder what will happen now.

The chairman of the Tory Party in Scotland is the man who, every time a ministerial vacancy crops up, hopes that he will be the lucky one. Unfortunately for him, the Prime Minister wants him to do the kind of essential job that only a blue-blooded member of the Scottish aristocracy is fit to do. That job is to rally the party faithful in Scotland—the few that are left.

Almost since he was returned to this House at the last general election, the hon. Member for Edinburgh, South (Mr. Ancram) has campaigned to get rid of the Labour administration in Lothian region. I suppose that the hon. Member is patting himself on the back now that that man Brian Meek has the convenorship, with the help of the defectors to the SDP and their collaborators in the Liberal Party, who managed to climb into bed with the Tory Party to form this administration.

Not so long ago I saw a film called "Life of Brian". There was an extract taken from the Sermon on the Mount which said:

"Blessed are the meek: for they shall inherit the earth."

I wonder what kind of earth Brian Meek will inherit from his pal the Secretary of State. I know that all that the people in Lothian region will get are more and more savage cuts in the education of their children and in the essential services that are required for the elderly, the sick and the disabled. That is what the Secretary of State has to offer to the people of Lothian, and if he gets his way he will try to shove it down the throats of all the councils in Scotland. I hope that the councils that are still fortunate enough to have a Labour majority will stand up and fight against the Secretary of State.

It will not be just Lothian and Stirling which have been singled out. If the Secretary of State can clobber them, who will it be next? My hon. Friend the Member for Glasgow, Cathcart (Mr. Maxton) referred to the list in The Scotsman today, and to the fact that Lothian and Stirling were by no means the worst in terms of percentage expenditure over the Secretary of State's guidelines.

How on earth does the Secretary of State arrive at these guidelines? As far as I know, he has never given any detailed mathematical calculation as to how he decides on the guideline for each local authority. I hope that he will be good enough to tell us how he decides that a certain local authority is £X or £Y million over his guidelines. On what criteria are the guidelines drawn up? Can he give us an example of the effect of the calculation of the guidelines on one authority? If it were not for the time, he could go through all the local authorities to tell us how this is done.

Looking through the list, it appears to me that there were only about half a dozen councils that did not breach the so-called guidelines. The two that were singled out—Lothian and Stirling—were by no means the worst. Orkney is 35 per cent. and Shetland 70·8 per cent. over the guidelines. Reference has been made to the special problems created by the oil development in Shetland. I remind the House that Shetland still has special powers to raise extra revenue from the oil development under the Zetland County Council Act 1974. Under the terms of that legislation the then Shetland county council, now the Shetland islands council, can raise revenue from the oil companies. I do not grudge Shetland that power, but has the Secretary of State taken that into account when assessing the guidelines? Oil development can be a bit of a help as well as a bit of a hindrance at times for local government.

Who else will be singled out? Aberdeen district council, is 22·1 per cent. over the guidelines. Skye and Lochalsh is not exactly Left-wing revolutionary territory. Perhaps the hon. Member for Inverness (Mr. Johnston) will give us the benefit of his views. His district council is 21·6 per cent. over the Secretary of State's guidelines. Sutherland district council is 22·6 per cent. over the guidelines, which is even worse than Lothian, if "worse" is the operative word. Cumnock and Doon Valley is 25 per cent. over the guidelines.

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I shall give way to the hon. Member who represents Cumnock and Doon Valley.

I assure my hon. Friend that before he came into the Chamber I argued, I hope successfully, that the Secretary of State should not try to penalise Cumnock and Doon Valley again, as he did last year, because the guidelines were proved totally arbitrary and incorrect last year. I hope that the Secretary of State will bear that in mind in singling out authorities, many of whom challenge very vociferously the misleading figures that are put forward.

I was in the Chamber and heard my hon. Friend say that. The Secretary of State made some terrible blunders last year, not just with Cumnock and Doon Valley but with many other Scottish local authorities. I hope that he bears all this in mind when he considers the strong representations which no doubt have been made, not only by Cumnock and Doon Valley district council, but by my hon. Friend the Member for South Ayrshire.

My hon. Friend the Member for West Stirlingshire (Mr. Canavan) jumped to Cumnock and Doon Valley, but he missed out Bearsden and Milngavie, that other hotbed of Left-wing revolutionary Socialism, represented by my hon. Friend the Member for Dunbartonshire, East (Mr. Hogg), which is 18 per cent. over the guidelines. That is a remarkable figure for a totally Tory-controlled council—in fact, I do not believe that it has a member of another party represented on it.

I thank my hon. Friend the Member for Cathcart for drawing that fact to my attention. I was about to come to the authorities that lie partly in my constituency, and Bearsden and Milngavie district is one of them. There are fewer than six of my constituents in that district, but nevertheless they are very important people. There are also several hundred acres of land in my constituency that come into the Bearsden and Milngavie district. According to The Scotsman league table, that district is 18 per cent. over the Secretary of State's guidelines. As my hon. Friend the Member for Cathcart said, the political complexion of Bearsden and Milngavie district council, to my knowledge, has never been red revolutionary—perhaps extremist, but extremist to the right, not to the left of the political spectrum.

Then there is Strathkelvin district council, which also lies partly in my constituency. It is 18·8 per cent. over the Secretary of State's guidelines. Strathkelvin district council has the advantage of being Labour-controlled at this time, but I am sure that the people there would be horrified at the prospect of the Secretary of State singling them out for a savage reduction in the rate support grant that will affect many of their local government services.

I am therefore forced to the conclusion that this Government and this Bill are not motivated by reason, logic or accurate statistics. The motivation, if any, behind this legislation is sheer doctrinaire prejudice on the part of the Secretary of State and the Tory Party in Scotland. They claim that one of the greatest evils in public life today is over spending. By that, they mean too much public expenditure. They accuse local authorities, particularly Labour-controlled local authorities, of being almost the devil in disguise when it comes to overspending.

I do not want to make a party political point here, because it is more a matter of central Government vis-à-vis local government. Historically, central Government have been far more guilty of failing to keep within their target, their expenditure guidelines. They are far more guilty. if guilty is the right word, than local government.

I hope that the Secretary of State will at least admit that that is the truth. It will be an even bigger truth when we receive the bill for the armada that we have sent to the South Atlantic. That bill is increasing daily and the Government will have to meet billions of pounds of extra expenditure. That money will have to come from somewhere. The Government will, rightly, be criticised for overspending in that respect. Let the Government not point their finger at local authorities who are seeking to preserve far more essential services affecting people in their areas.

10.15 pm

The Secretary of State and other Ministers continually harp on about rate increases destroying jobs and say that the burden of rates is crippling industry, particularly manufacturing industry, to such an extent that it is leaving higher rated areas for the lower rated areas, or disappearing from the industrial scene altogether, thereby leading to a significant reduction in jobs. That is a myth that I shall expose. In a question for written answer my hon. Friend the Member for Blackburn (Mr. Straw) asked the Secretary of State for the Environment

"if he will publish in the Official Report a table giving the best estimate of rate payments by manufacturing industry, in £s million and as a proportion of manufacturing costs, excluding rates and taxes, for each year from 1978 to date."—[Official Report, 23 April 1982; Vol. 22, c. 163.]

The Under-Secretary could give only the figures to 1979. He said that the rates paid by manufacturing industry in 1979 totalled £925 million. Expressed as a percentage of manufacturing costs, the figure is 0·66 per cent. Less than 1 per cent. of the manufacturing costs of industry are taken up by rates.

How can the Secretary of State, or anyone else, argue that rate increases are a huge burden on manufacturing industry, that they are causing the de-industrialisation of Scotland and destroying jobs and industry. The truth is that the insane economic policies of the Prime Minister, the Chancellor of the Exchequer, and the Secretary of State are destroying industries of all sizes almost day by day in Scotland, and everwhere else. But the Government have the brass neck to try to pass the buck on to local authorities, particularly Labour-controlled authorities, who are fighting desperately to save and create jobs and to preserve essential services.

ar from destroying jobs, local authorities are often desperately trying to maintain services even if that means some increase in rates. Indeed, they are trying not only to maintain and improve those services but to improve employment opportunities. I am talking, not about meaningless, worthless jobs, but about worthwhile jobs. I mean not only jobs for teachers, lecturers and social workers as well as the important jobs of janitors, schoolcleaners and dinner ladies, but jobs in the private sector and in the construction industry.

As the result of massive cuts in local government expenditure the Secretary of State has thrown more and more construction companies out of business and has put more and more construction workers on the dole. What possible justification can there be for that? They are on the dole although their skills could be used to maintain and improve essential services.

What percentage of retailing and distributive costs do the rates represent?

If the hon. Gentleman tables a question to the appropriate Minister, he might get an answer. I gave the figure for manufacturing industry—[Interruption.] Indeed, 0·66 per cent.—a wee bit over one half of one per cent.—of the total costs of manufacturing industry are taken up by rates. Therefore, it is nonsense to complain that the rates drive industries away and destroy jobs.

I reiterate that the Government seem hell-bent on destroying local government and local democracy in Scotland. The Government have little, if any, mandate to impose such measures on the people of Scotland. They gained the support of only a tiny minority of the people of Scotland at the last general election, and they have become increasingly discredited in the eyes of the local people. That has been demonstrated by successive local government elections. It is a tragedy that when the Conservative Party was elected to Government—I hope that the truth is now beginning to dawn on those on both sides of the House who had their doubts—one of its first acts was to repeal the Scotland Act. They wanted to start with a clean slate so that they could bring forward more repressive measures with which to hammer the people of Scotland.

This is the type of legislation that would have been devolved to a Scottish Assembly under the Scotland Act. If we have meaningful devolution—as I am sure we shall have some day—it will be the end of such rubbishy, discredited legislation. With a Tory Whipped majority, the Government are shoving this legislation through the House against the wishes of the majority of the elected representatives of the people of Scotland. If we had real devolution, we should see real local democracy for the people of Scotland.

The hon. Member for Glasgow, Cathcart (Mr. Maxton) started the fashion of quoting Shakespeare. The only comment that I can make about his speech is that it was

"full of sound and fury, signifying nothing"

because there spoke the representative of a party which, in the local elections nine days ago, ended up by controlling three out of 12 regions, if one includes the three island authorities. [Interruption.]

Order. All other hon. Members have been heard in relative silence. We must give the Secretary of State a fair hearing.

If the Labour Party considers that three out of 12 is a great victory, I hope that it has many more such victories.

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The hon. Member for West Stirlingshire (Mr. Canavan) has already done very well this evening.

The debate has come a little later than was intended, and some of the speeches drawn up by Labour Members had been planned as part of a great election victory. Unfortunately, that victory was removed and the debate has been a prime example of the Aunt Sally technique of debate, which is that if the subject matter is not interesting enough or does not have enough content to give one something to talk about, one must put up a new set of subjects and talk about them. We have not spent much time talking about the amendments, although the right hon. Member for Glasgow, Craigton (Mr. Millan) spent about one-eighth of his speech on them.

The debate is not about whether the Secretary of State should have the powers to curb the excessive and unreasonable spending of local authorities, and it is certainly not about the rate support grant settlement. We had a debate about that in February. I believed at one time that the Labour Party had purchased a video machine and that we were seeing a re-run of the right hon. Gentleman's speech on that occasion. However, it was not quite the same, for some very interesting reasons. In the brief time that I have available, I shall try to answer questions about the amendment and the questions that I was asked about rather wider matters, although I shall not go into the question of the Scotland Act 1978, at the request of the hon. Member for West Stirlingshire, because that would require a little more time.

If it were the case that the powers could be used against every local authority on every occasion for ever more, of course the Secretary of State of the day would more or less determine all the details of local authority expenditure. But I wonder whether anyone, including the right hon. Member for Craigton, has taken on board the extent of the powers. No Secretary of State can act against any local authority under the powers unless he can put forward a case and convince the House that that authority is incurring expenditure which is excessive and unreasonable. That is the point, as I am sure the right hon. Gentleman knows, that I made during an exchange at Question Time a few weeks ago. It is not sufficient that an authority has spent or is planning to spend over the guideline. No Secretary of State would persuade the House that an authority that is merely over its guideline was incurring excessive and unreasonable expenditure. If that point is once understood and taken on board, the remainder of the arguments that were made by Labour Members fall to the ground as being irrelevant. They do not apply.

Do I understand the Secretary of State to say that when, if he feels it necessary, he brings such orders to the House, no Whip will be applied?

That is not a matter for me. I would not wish to rely upon that anyway, because I always rely upon the power of my argument. If I may say so, modestly, I have never had any difficulty and I assume that my arguments are effective.

The right hon. Member for Craigton made several comments, having said that he was not clear about the nature of the powers. He commented on the rate support grant settlement. I cannot discuss all that now, but I shall try to answer briefly many of his questions.

The right hon. Gentleman said that it was ridiculous to suggest that local government expenditure was out of control because the increases in the last two years were 1·6 per cent. and 0·2 per cent. It depends what one means by out of control. The guidelines and the requirements of the national economy worked out by the Government envisaged a reduction in spending. That is not surprising since we have been through a deep recession and the amount of money raised has had to be cut. Every business, family and individual in the country has had to reduce spending one way or another. Local government expenditure continues to move up when everyone else has to reduce expenditure. That means that local government expenditure is out of control.

I was interested that the right hon. Gentleman should mention rate increases. He said that massive rate increases were due to inflation factors not being correctly calculated in the rate support grant settlement. In a business, a family or in any body handling finances, if inflation is higher than the rate envisaged there is less money to spend. Anyone who has tried to run finances knows that. One reason why Britain's position has worsened over the years is that the public sector has been largely insulated from that essential discipline.

There is a more interesting side to the matter, which makes me wonder how much we should believe the right hon. Gentleman and his calculations. He does not appear to have them right. The right hon. Gentleman has made some categorical statements and forecasts. He said:

"The result is that there will be a considerable increase in rates in 1982–83."

That is a fairly safe suggestion.

He continued:

"However, I should be astonished if the overall increase in rates in 1982–83 is not over 20 per cent. or 25 per cent. I stand by that figure."—[Official Report, 10 February 1982; Vol. 17, c. 992.]

Very impressive. The right hon. Gentleman made his forecast, but how can he stand by it? What was the figure? The average increase in Scotland was only 15 per cent. [Hon. Members: "Only?"] That is a large discrepancy. I do not expect the right hon. Gentleman to get everything right, but some of what he says should be taken with a pinch of salt. and is what I usually do.

The right hon. Gentleman and hon. Member for South Ayrshire (Mr. Foulkes) talked of pupil-teacher ratios and schools being short of jotters, exercise books and rubbers. If that is so, it means that the local authority has decided to spend the money allocated to it on something else. The amount that is laid aside in the rate support grant settlement for these matters is the highest per head expenditure so allowed ever in real terms.

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No one can get around that fact. If shortages of essential educational items exist, it is because the money is being spent on something else. That should be clearly understood.

The Secretary of State has allowed 4 per cent. for teachers salary increases in the current year. The actual award is 6 per cent. If that goes through, as I trust it will, it will cost the local authorities another £9 million not provided for. How does he expect the local authorities to save that money? If they save it by reducing teachers, another 1,000 teachers would be sacked. Is that what he wants them to do?

The right hon. Gentleman has raised just the point. The negotiations for those sort of salary increases are conducted on different bases according to the group. The right hon. Gentleman must bear in mind that those concerned with taking decisions on these matters must consider what money they have available. The right hon. Gentleman may have noticed that in that case the arbitrator mentioned, as one of the reasons for the decision taken, that he had to bear in mind what the local authorities were likely to have available to spend. That is exactly the point. The awards of the local employees are considerably above the 4 per cent. factor. Who on earth does the right hon. Gentleman think is going to pay for it, if those who are negotiating think that they can get away with incurring extra expenditure that they cannot afford? Until all those concerned in such negotiations realise that there is a finite amount of money available to pay for these things, and to make their decisions accordingly, we will have financial irresponsibility and the ratepayers and, ultimately, the taxpayers will be continually called upon to find sums that they know they cannot afford. The right hon. Gentleman found that to be the case when he was in office and he topic action on it. He has forgotten about it now and he will have a lot longer in Opposition to forget about it still further.

The Secretary of State is not answering the question. The matter went to arbitration. It is an arbitrator's award which the Secretary of State can ask the House to set aside. But if he does not ask the House to set it aside, £9 million must be found. How should the local authorities find that money? Should they cut the number of teachers? What should they do?

The right hon. Gentleman would be the first to object if I tried to lay down how individual local authorities should make their budget decisions. The right hon. Gentleman must not talk humbug about this. He knows that if I did that, he would be the first to complain.

The right hon. Gentleman also asked about a possible meeting with the new administration in Lothian region. there is nothing unusual about that. On several occasions, the previous administration asked for meetings with me and it got them. I had meetings with it and we discussed its problems. It was a helpful thing to do. The new administration asked for such a meeting, and we had it this morning. It was very useful. the hon. Member for Edinburgh, East asked what was the position now that there was a new administration. I told the new administration exactly what I told the old one. I said that the budgeted plans for expenditure are much too high and that I am awaiting a response to the letter that I sent to the council for its views on that matter.

What did it say?

I can assure the hon. Gentleman that there is no change in that position yet. The representative s of Lothian region explained to me that they understood that position and that they would be producing a reply to me as I have requested. That is a perfectly straightforward position and I hope that the hon. Gentleman will be satisfied about that.

The hon. Gentleman also asked whether the council would have absolute freedom to decide on the way it made its financial decisions on cuts and so on. I can confirm that that is exactly so. I have no intention of interfering in that sort of detail. The hon. Gentleman recounted some rather inaccurate memories of the calculations of posssible redundancies last year. The then administration did net refer only to the huge number of possible redundancies following on the initial suggestion that there might haw, to be a grant reduction of £53 million. I recall that when the reduction of grant was down to about £30 million, the then administration calculated that it would be necessary to create 15,000 redundancies. In fact, when the grant was reduced by £30 million the Lothian regional council achieved reductions of that order without introducing compulsory redundancies, which was much to its credit. However, it means that the scare stories were a load of rubbish.

Perhaps there was an element of inaccuracy in my recollection, but I am certain that there is in the right hon. Gentleman's remarks. I hope that he will recognise that even if there are no compulsory or even voluntary redundancies, there are between 2,000 and 3,000 fewer jobs in the Lothian regional council. I hope that he will recognise also that he will reduce still further the number of jobs available within the council.

Secondly, the Lothian regional council saved only £6 million through staff reductions following the cut of £30 million. Does he recognise that it will not be possible for the new administration to take up such a small proportion of the cut in staff costs?

That might be true. We are seeking to reverse the trend of over-spending that has been taking place for about seven years. The Lothian regional council's spending caused equal problems when the right hon. Member for Craigton was Secretary of State for Scotland. The reversal will be much more difficult and painful because it has been so long delayed. If action had been taken three years ago when it was first suggested, the council's spending could have been brought under control without large-scale redundancies.

The hon. Member for West Stirlingshire referred to the local accounts commission. That is an issue that relates to a later amendment and I shall not deal with it now. Secondly, he suggested that we are seeking to introduce new powers. The powers to penalise local authorities for excessive and unreasonable expenditure have existed for many years. I think that the right hon. Member for Greenock and Port Glasgow (Dr. Mabon) was one of those who introduced them in the Local Government (Scotland) Act 1966. In fact, the powers go back as far as 1929.

The original powers never needed to be used because until recently local authorities had not spent excessively and unreasonably. Secondly, the powers were retrospective and could be used only after excessive spending had taken place, which was unsatisfactory and unfair.

The Labour Party is saying that it is much more interested in helping to keep local authority expenditure up than it is in helping to keep rates down for those who have to pay them. That is a fair stance, but it is firmly ensconced in that position. I am content that that should be known as widely as possible. If that is known, there will continue to be election results that are favourable from my point of view.

If no amendment to the original powers had been made, the penalties—assuming that we have to have them—would have been unfair on the majority of local authorities in Scotland. They would be wholly unfair in view of the penalties imposed by the right hon. Member for Craigton. He had a general abatement in one of his years of office. That had to be operated by a straight across-the-board abatement. In such a case each local authority suffers a penalty, not in accordance with the amount it has overspent, but according to the formula by which rate support grant is distributed. It produces extremely unfair results. The advantage of the powers that I was granted by the House last year, which have a small amendment made to them in the clause we are debating, is that it enables there to be some element of fairness. It enables the big overspenders—when there are big overspenders—to be called upon to make an appropriate contribution towards the overall overspending.

10.45 pm

If Labour Members can accept for the moment that there have to be penalties they should address themselves to the unfairness of doing it across the board. In that case authorities suffer a penalty without direct regard to the degree of their overspending. Hon. Members should consider whether it is much better that we take action against the authorities which are the main overspending offenders. That seems to be much fairer and I believe that that would be the general view, although not very often expressed, among those involved in local government. I hope that the House will accept that as being a genuine point worthy of consideration.

Accepting the Secretary of State's argument that he now wants to be more selective and penalise the authorities that are the largest overspenders, can he tell us why he has taken and proposes to take no action against Shetland?

It is usually a mistake to give way to the hon. Member for South Ayrshire. I have made no such decision. I have made it perfectly clear that I am looking at the spending pattern of local authorities, and that there may be more authorities against whom I may have to ask the House to give me power to take action. I have not decided to exclude any authority. The two that I have mentioned are the only ones about which decisions have been taken.

On the Secretary of State's quite cogent argument on the question of equity, what is singularly lacking to buttress it is the fact that there has been no request from local authorities generally, including his own, for this kind of mechanism to be introduced.

I think that that is true. In the discussions that I have had with local authorities they have been much more concerned with trying to deal with the difficult problem of reducing expenditure. There has been no general request for such powers and most local authorities have said that they would rather not have such powers, but I have the responsibility of trying to be fair in the way that we have to reduce spending. That is not new. It has been done by all Governments in the past. the right hon. Member for Craigton had to do it. I am not sure whether the right hon. Member for Greenock and Port Glasgow had to, but if not he was fortunate. I maintain that if it has to be done it is better that it should be done fairly. The amendments are on a narrow point. The House will realise that if that provision in the Bill were removed, we should remove the clause that gives the Secretary of State the option—where a reduction has to be made in respect of a local authority—of returning that money to the ratepayers.

If that provision is removed it is another clear example of the Opposition's view that it is not important for the ratepayers to be relieved of excessive burdens when there is overspending. That is what the amendment means. If they vote on that all ratepayers in Scotland will be able to see clearly that the Opposition are not in favour of helping them with lower rates.

The second amendment would write in a requirement that local democracy should be taken into account, but most of those who voted in the recent local elections would agree that those who look after ratepayers are more on the side of local democracy than are those who continually want greater spending.

The third amendment questions what my Department does every year in sending to local authorities circulars explaining that certain detailed matters of account are left out of considerations of overspending. That is a technical matter. For example, housing is left out because it has its own support grant system. I see no advantage in introducing a muscle-bound procedure for something that is done simply by circular.

The fourth amendment deals with the quality of services. That is important, but much rubbish has been talked on this subject. It has been suggested by the right hon. Member for Craigton and others that no one can keep to the guidelines. Really? How did the Borders council manage to keep to them? How did Dumfries and Galloway keep very near to them? How did Grampian, a large region with heavy expenditure, manage to keep within 0·9 per cent. of the guidelines? How did Liddesdale manage to keep to them? How did Banff and Buchan and Gordon keep to them? How did Moray keep to them? How did Caithness keep to them? How did Ross and Cromarty keep within 2·9 per cent. of them?

How did Cunninghame keep to them?

Cunninghame did very well. It was only 3·1 per cent. above the guidelines.

Cunninghame has a good Member of Parliament.

Of course it has a good Member of Parliament. If those authorities can keep, or virtually keep, to the guidelines, how can the right hon. Member for Craigton argue that it is impossible? Several hon. Members argued that the level of services would be decimated, but I can give comparisons to show that that claim is also rubbish.

Expenditure per head per year is £394·13 in Tayside, £398 in Fife, £370 in Grampian and £371 in Central. All those authorities provide reasonable levels of services. Yet the Lothian figure for 1982–83 is £454. That is so far out of line that it brings me back to my main point.

It is ridiculous to describe the powers as destroying local democracy, ending local government, making it not worthwhile for people to stand for councils and so on. None of the powers applies to any council unless it comes into the category not of being over the guidelines or being a bit extravagant, but of incurring expenditure that can be described under statute as excessive and unreasonable and which the House can be persuaded is so. The powers apply to only the small minority of authorities that incur such expenditure.

There have been no such authorities in most years, but in the past two or three years a certain madness has gripped some local authorities that have gone over the top. I suspect that many Labour Members disapprove of that in private, though they do not like to say so. It is because of the exceptional cases that the exceptional powers have had to be introduced. I look forward to the day when they never have to be used again because local authorities think of their ratepayers' interests and keep expenditure under control.

The Secretary of State has just given a completely inadequate answer to the amendments that have been proposed by the Opposition. For him to argue that the powers that he is trying to take by the Bill are not unprecedented is absolute nonsense. If the necessary powers have existed since 1929, why has the Bill been introduced? Why did we have last year's Bill? Why did we have the Bill in the year before that?

Only the present Secretary of State has treated Scottish local authorities in the way in which they have been treated in the past two or three years. Not even previous Conservative Secretaries of State have taken such a dictatorial attitude. What is more, the right hon. Gentleman and his Conservative friends in local government in Scotland know it.

The Secretary of State said that the Borders had bee n doing well. In the election last week one of the leading Tories in the Border region quit the party because of the way in which the Secretary of State has been treating both that and every other region in Scotland. Moreover, the quality of the services has worsened, yet we must pay considerably more in rates for those inadequate services.

As to the Secretary of State's claim that he is being selective, last year there was both a selective reduction of rate support grant for and an overall penalty on every local authority in Scotland. This is being done not merely to the rate support grant. The housing support grant is receiving the same treatment. Every district council in Scotland is suffering a major reduction in housing support grant. That is why, in addition to rates being increased last year, there was a massive increase in rents.

It is hardly worth answering the Secretary of State with regard to individual local authorities. He knows that there is no justification, apart from political spite and prejudice, for singling out the two local authorities that he has so far chosen to penalise in 1982–83. He has not answered the points about Orkney and Shetland or about Lochaber and the rest. He has not the slightest intention of penalising Orkney and Shetland. If, for once in his life, he were honest with the House, he would tell us that now.

The Secretary of State held out Tayside as an example of a reasonable authority. It is 7·6 per cent. above his guidelines for this year. Moreover, it provides an inadequate range of services. That figure is considerably above the overspending which, according to the Secretary of State, there has been in the Strathclyde region. We know that he has not the slightest intention of penalising Tayside during the coming year under the powers of the 1981 legislation.

The existing powers are a major attack on local government in Scotland. They have been used with the maximum of political prejudice. The Secretary of State has shown that he cannot be trusted with the powers that he already has. That is why we are not prepared to give him the additional powers that he now seeks. I therefore ask my right hon. and hon. Friends to vote for the amendment.

I beg to move amendment No. 128, in page 3, line 40, at end insert—

'(10) For the avoidance of doubt it is hereby declared that any refusal by a local authority to reduce that authority's estimated expenditure following a report proposing a reduction in rate support grant approved by Parliament in terms of section 5 of the Local Government (Scotland) Act 1966 as amended by the Local Government (Miscellaneous Provisions) (Scotland) Act 1981 shall not be an unlawful breach of fiduciary duty on the part of that local authority and shall not be the subject of a special report by the Controller of Audit under section 102(3) of the Local Government (Scotland) Act 1973 and no action by the Secretary of State under section 104 of the said Act of 1973 shall follow from any such failure.'

We had a wide-ranging debate on the last group of amendments. This amendment is much more specialised and narrow in its range, although, strangely, it deals with a matter that my hon. Friend the Member for West Stirlingshire (Mr. Canavan) happened upon during his remarks.

We are dealing not so much with the future as in a sense with the past, because the amendment looks back at the year 1981–82, and in particular at the situation which has arisen in respect of the Lothian, Stirling and Dundee local authorities. It is a familiar series of events and one that I do not need to rehearse in any detail in this debate. Suffice it to say that the Secretary of State took it upon himself to decide that those local authorities had estimates that were excessive and unreasonable. He came to the House with the relevant and necessary orders and it was decided, against the fierce opposition of Labour Members, that those local authorities should be faced with the prospect of a clawback from their rate support grant during the financial year, or they would have to cut their estimated expenditure.

It is important to emphasise something which I certainly understood to be the position; that is, that the authorities had a choice. It was a weighted choice. The Secretary of State was under the impression that they would exercise that choice in a way that was acceptable to him, by making repayment or reimbursement to the ratepayers. As the hon. Member for Edinburgh, Pentlands (Mr. Rifkind) said during many a weary hour of the proceedings on the Local Government (Miscellaneous Provisions) (Scotland) Bill, it was a choice that was to be left to local authorities. But what happened was that when local authorities exercised that choice and decided not to pay back, they discovered that they were to be penalized by the Secretary of State. There was no option of holding on to the grant which was not now to be used to fund the expenditure which had been cut, and there was no way in which that could be held against future rates in 1982–83.

I say that this is all of historical interest because the whole point of the first part of the Bill is to close that loophole and to ensure, in the view of the Secretary of State, that it will not happen again, because in future he will be able to make a direct rate reduction.

What worries Labour Members is that the Secretary of State decided, when there was no reimbursement of the ratepayers, to make a clawback out of the rate support grant in any event, and it is now being suggested that the failure to follow what the Secretary of State thought was the right course amounted to a breach of fiduciary duty. We have had a report from the controller of audit which suggests that there has been a breach of fiduciary duty by the Lothian, Stirling and Dundee local authorities, and that report has been passed to the accounts commission.

One of the byproducts of arbitrary and oppressive legislation is that it encourages a trudge to the courts. We have seen a deal of it south of the border and I fear that we may see a lot of it north of the border. We have seen people going to the courts for a decision on whether various actions by local authorities or by the Government have been ultra vires or in disregard of their statutory duties. I take no particular pleasure in that situation, but I am afraid that it will be a recurring and increasingly common theme.

The amendment is tabled in simple—almost narrative—terms. We are suggesting that, for the avoidance of doubt, the refusal by a local authority to reduce its estimated expenditure, following a report proposing a reduction in rate support grant, should not be taken as an unlawful breach of fiduciary duty and should not be the subject of a special report by the controller of audit and ultimately of action by the Secretary of State under section 104 of the Local Government (Scotland) Act 1973.

11.15 pm

It may be that this is all a bit academic because, as the House will know, we have had a special report by the controller of audit, which has already been passed to the accounts commission. Whether that is a difficulty with regard to the amendment is of little importance. We are anxious to know what will happen and what is in the Secretary of State's mind. As I understand it, there has been a special report, and now reference to the Court of Session for a judgment, presumably to try to establish in general terms what, under the law of Scotland, constitutes the fiduciary duty of a local authority to the ratepayers.

This is an extremely complex business, as we know from the English precedents. We have been following from afar, and are relieved that it is from afar, the complicated arguments that have resulted from the Bromley v GLC case, the transport case. Many of us are aware of some of the better known earlier English judgments, such as Prescott v Birmingham Corporation. There have been endless arguments, for example in the Prescott case, about whether a free bus travel scheme constitutes a gift to one section of the population at the expense of another and is therefore a breach of fiduciary duty, or something that is almost analogous to a trustee relationship between a local authority and its ratepayers who supply at least a percentage of the cash.

I have very little sympathy with the argument, which is based on a misunderstanding, about how much of the finance of a local authority comes from the domestic ratepayers. It is particularly the question of ratepayers that worries the Secretary of State and the House. As I understand the figures, the total percentage of local authority expense that comes from domestic rates in Scotland is about 13·5. All the rest comes either in. Government grant—55 to 56 per cent.—or from non-domestic ratepayers of one kind or another.

In any event, it seems to us—and this is the point of the amendment—monstrous that we should have a special. report from the controller of audit to the accounts. commission. There will then be an application to the Court of Session and there is a clear possibility, presumably under section 103, that there could be a surcharge on councillors as a result of the proceedings. I recognise that under section 104 it is possible for the Secretary of State to take no action if he believes that the council has acted reasonably. No doubt we could spend many hours, here and up and down the length and breadth of Scotland, arguing about what the word "reasonably" means in this context.

It would be an extremely damaging, embittering, decisive and counter-productive exercise to go down this road and get to a conclusion that might be logical, but might become inevitable, because of the entrenched prejudices that the Secretary of State has shown in his handling of local government affairs over the past three years. We want to save him from that. The amendment deals with a small group of councils which were faced with a force majeure and put in a position where they were told that they were spending excessively and unreasonably, despite the fact that they genuinely felt—and I have no doubt about the genuineness of their feeling—that they represented the interests of the electorate that had put them into power.

Those councils, having been told that they were spending excessively and unreasonably, were forced to cut that expenditure. They then found that the money that was saved could not be retained against expenditure in a future financial year. The noney disappeared back into the maw of the Treasury. If the Secretary of State is correct in saying that there was some sort of robbery of the domestic ratepayer, or of ratepayers generally, then the Secretary of State, who owes Lothian £30 million and who owes money taken from other local authorities, is guilty of a form of fiscal reset in terms of the local authority financial system.

After all the bitterness, friction and confusion, it would be a manifest tragedy and a dreadful mistake if we were to go ahead with a long and difficult legal process, involving Court of Session judgments, ultimately surcharge and all that that means in personal misery of the individuals concerned, and the removal from the realms of possibility of a return to the co-operation which the hon. Member for Edinburgh, South (Mr. Ancram), the chairman of the Scottish Conservative Party, hoped would soon return to Scottish local government.

If we were to do any of the things that are potentially involved in continuing the surcharge and the penal provisions of the 1973 Act we would make a great mistake, which would not be in the interests of the Secretary of State and certainly not in the interests of local government machinery. It is to avoid that that we have tabled the amendment. We seek to ensure that in the special and rather unusual circumstances that arose in the confusion of the use for the first time of the penal engine constructed in the Local Government (Miscellaneous Provisions) (Scotland) Act the matter should go no further. I believe that we are justified in doing so.

I want to mention briefly the case of Stirling district council, which lies partly in my constituency and which was one of the local authorities referred to in the report by the local government controller of audit.

The Secretary of State knows the details of the long story of the confrontation that he engineered against Stirling district council, going back a year ago when he singled out that council for special treatment under the Local Government (Miscellaneous Provisions) (Scotland) Act. He claimed that it had been guilty of overspending to an excessive degree. He refused to say in detail why it had been guilty of excessive overspending. He did not put up a good case to justify the penal measures that he attempted to impose on the council.

As I said on the last amendment, my hon. Friend the Member for Stirling, Falkirk and Grangemouth (Mr. Ewing) and I made repeated submissions to the Secretary of State and the junior Ministers at the Scottish Office. We tried to mediate as reasonable men, but we found that the Secretary of State and his Ministers were very irrational people. It became increasingly obvious during the drawn-out confrontation that the Secretary of State was not interested in reaching a reasonable compromise.

The Stirling district council produced a reasonable alternative, which would have gone some way to meet the targets of the Secretary of State but which would not have necessitated the reduction in rate support grant that the Secretary of State seemed hell-bent on imposing. Despite meetings at ministerial level and at other levels, which my hon. Friend the Member for Stirling, Falkirk and Grangemouth and I helped to initiate, the Secretary of State stood firm. He imposed what was, in effect, a kind of fine, by withdrawing £700,000 in rate support grant from Stirling district council.

The council refused to hand money back to the ratepayers. The Secretary of State criticised that decision, in the House and elsewhere. We thought that that was the end of the matter. The Secretary of State never claimed that the district council was acting illegally. Never in the course of private or public discussions did the Secretary of State claim that the district council, by following either of the options open to it, was in danger of acting against the law. We thought that that was another unfortunate chapter in the sad history of local government, written mainly by the Secretary of State for Scotland. We thought that it was over and done with, that it was water under the bridge.

However, a report was then produced by the controller of local government audit in Scotland criticising the district council. Everyone has a right to criticise local government in general, or for certain decisions taken by a local authority, but in criticising the Stirling, Lothian, and Dundee councils the controller of local government audit said that in his opinion the councils had acted illegally. The matter has now gone to the Court of Session for a judgment. I hope that the Secretary of State, despite the sub judice rules, can give a helpful reply.

We all know who was Solicitor-General for Scotland at the time—the hon. and learned Member for Kinross and West Perthshire (Mr. Fairbairn). He should have been involved in fighting the case for Stirling district council because part of his constituency lies in the Stirling district. His standing in legal circles in Scotland is so low at the moment that he has to look for jobs in South Africa or defend mercenaries who attempt a coup in the Seychelles. Nevertheless, there must be someone in the Crown Office or the Scottish Office who should have advised the Secretary of State on what is legal and what is illegal, and given local authorities the appropriate advice. Why is it only at this late stage that the controller of local government audit in Scotland has reported that in his opinion the local authority was in breach of a fiduciary duty and was breaking the law?

The repercussions are extremely serious. If the Court of Session gives a judgment against the council it is not merely a question of publicly declaring that Stirling, Dundee, and Lothian councils acted illegally. My understanding is that the councillors who were party to the decision could be surcharged. Immediately the decision was announced by the controller of local government audit, the leader of the Tory opposition in Stirling district council made desperate inquiries to ascertain whether she and her colleagues could be surcharged. Apparently she was advised that the councillors who voted against the decision were not liable to be surcharged. That means that only 10 of the 20 councillors could be surcharged. Every Labour district councillor in Stirling district could be surcharged to the tune of £70,000.

Is the Secretary of State serious? Is that possible or likely? Is that the encouragement that he will give to those who often sacrifice much to offer themselves for public service? All the time they felt that they were acting in the best interests of those whom they were elected to serve. At this late stage they find that they could be surcharged £70,000 each. They probably could not raise £70,000 between them, let alone £70,000 each.

11.30 pm

Therefore, those people could be driven out of local government. Is that what the Secretary of State wants? Is he so thrawn, stubborn and vengeful that he wants to use the law to drive Labour councillors out of the positions to which they have been elected? As a result of the Bill, local democracy is at stake. We are not here to debate the rights and wrongs of the decision taken by Stirling district council, Dundee district council or Lothian regional council. However, if, as the Secretary of State argues, their decisions were against the interests of those who elected them—the ratepayers—the solution lies in the hands of those ratepayers or electors, through the system of local government election. The solution should not lie in the Secretary of State's dictatorial edict or with High Court judges or judges sitting in the Court of Session.

As my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar), who has far more experience and knowledge of the law than I, said, it is unfortunate that both north and south of the border there is an increase in litigation on matters of local government. People run to the courts. There is something wrong with the legislation enacted by the House if an increasing number of local authorities or individuals run to the courts to get judgments about this, that and the other. It is surely indicative of the undue haste and lack of preparation by the Scottish Office, and the various departments within it, that such tatty, unclear legislation should reach the statute book. Some bloke who reads about it in the office of the controller of audit will then say "Aha, these people may have been acting illegally and may be liable to surcharge. Let us refer the matter to the Court of Session and see what the judiciary has to say."

Those are all important matters of principle and important matters for local democracy. The Secretary of State dodged a question in our last debate, but I hope that he will now give a considered reply. Where on earth do we go from here? Is not local government legislation in a hopeless mess, particularly that introduced by this Government? Yet the Government seem intent on introducing even worse legislation, which will make local government even less democratic.

With respect to the hon. Member for West Stirlingshire (Mr. Canavan), I did not dodge the question last time. I merely did not answer it because he asked it under the wrong amendment. However, I believe that I can reassure him.

We cannot accept the amendment, because it would pre-empt the function of the Court of Session in relation to a question of law quite properly arising under the existing statutory provisions. The controller of audit is under a statutory duty to make a special report if he is of the opinion that any item of account is contrary to law. His duty is contained in section 102(3)(a)(i) of the Local Government (Scotland) Act 1973. Having formed such an opinion, he has no option but to make a special report to the commission.

The commission's functions in relation to a special report are detailed in section 103 of the 1973 Act. In particular, the commission may

"if they think fit, and shall if so directed by the Court of Session, state a case on any question of law arising on the special report for the opinion of the Court of Session."

The commission has decided to state a case on the question of law raised and it is now for the Court of Session to determine it.

However, I hope that I can reassure the hon. Gentleman on one point about which he expressed some concern. I know only what I have read in the press about the matter. The Controller of Audit has questioned an item of account, not an item of expenditure. If that is so, I am advised that in any case a surcharge could not arise because it is questioning an item of account and not an item of expenditure. I hope that that reassures some hon. Members who may be worrried about the point.

We are all feeling our way a little on this, but it is a matter of some importance. The Secretary of State has obviously received advice on the matter and I appreciate the care with which he is informing the House. Can he tell us what action is open to him, because that is the key question? I can see that, by using section 103, we can get an opinion of the Court of Session, which may be of some general interest in terms of defining the law and the fiduciary nature of the relationship between the ratepayer and the local authority. The important point is that at some stage, under section 103, a report will come to the right hon. Gentleman and under section 104 some action can flow from that, which I understand can include an order that payments be made by the councillors to the local authority. Is the Secretary of State saying that that will not arise because of his presupposition of the nature of the Controller of Audit's report? If it cannot arise, whit action is open to him as Secretary of State under section 104, because presumably the process does not just run into the sand and come to a dead stop? Some options must be open to him.

I appreciate the hon. Gentleman's point. I must be a little careful in what I say because I have not seen the detail of the document. I have seen only what I read in the press and anything that I say this evening must be qualified by the fact that it cannot be absolutely definitive. The action that is open to the Secretary of State, assuming all the matters that the hon. Gentleman said that we should assume, depends on whether the Commission makes any recommendations to the Secretary of State. I am advised that if the position is as we believe from the press, surcharge could not arise.

However, I shall be grateful if the hon. Gentleman will not hold me to every detail because I am in the dark and I do not know the precise details of the present position. I certainly do not know what sort of report might be produced and whether the Commission would make any recommendations to the Secretary of State.

I have the Accounts Commission's press release, which was helpfully circulated. It says at the top:

"Special reports: Lothian regional council—rate support grant … Dundee district … Stirling district"

and so on. I went confidently to the House of Commons Library and discovered that those special reports do not appear to be available. I do not know whether that is normal, but it is unfortunate. Perhaps I could obtain them by begging copies from individual councillors, but it might be for the convenience of everyone if some effort could be made to provide those reports. No one would be prejudiced if we knew what we were debating.

I am not happy about the substantive point. The Secretary of State says that if a recommendation is made by the Accounts Commission action can be taken. On a cursory reading of the statute it appears that it is possible for a recommendation to be made for an order requiring any person found responsible for incurring or authorising expenditure over the period of the loss or deficiency,

"to pay to the local authority concerned an amount not exceeding the amount of the said expenditure … directing the authority to make such rectification of their account as appears to the Commission to be necessary."

Is the Secretary of State saying that that is not a matter of expenditure, but that the only option open to him is a direction to the authority to rectify its accounts, which would not have an impact on the individual councillors?

I am advised that such an event cannot lead to surcharge. If the Commission makes a recommendation to the Secretary of State, he has to decide how to respond, but there is no statutory obligation on him to carry out the recommendation in whole or in part. He has discretion. I understand that it could not lead to surcharge. I shall examine that more closely when I see the details of the recommendations.

The Controller has a duty to serve a copy of the recommendations on the authority or on any other person affected. The Secretary of State would be involved only later, if at all. The matter is for the controller of audit, the Court of Session and the interested parties.

It would not be right to legislate as suggested. I appreciate that we are discussing a probing amendment. The court must determine whether the Controller's opinion is well founded in law. That is right. There may be room for argument about whether the controller is right, but the judicial process and not an avoidance of doubt provision is the correct way to deal with the matter.

Whatever the nuances and complexities, it is clear that under section 104(2) of the 1973 Act the Secretary of State's power is discretionary. The Act states that before he can move against councillors or an authority he must be satisfied that the person or persons acted reasonably or in the belief that their action was authorised by law. In the case that we have in mind there was no intention to defy the law in relation, at least, to the payment back to ratepayers. There may have been a political decision, but we saw it as a political division and argument. It was not a matter of knowingly defying the law. In such circumstances, the use of the power under section 104(2) is inappropriate.

I note what the hon. Gentleman says. I wish to make no comment. I am not involved at this point. The Court of Session must decide whether the matter is within the law.

It is up to me to wait and see whether a report is given to me. If so, I shall carry it out according to statute in whatever way is appropriate when I see the nature of the report. I hope that the hon. Gentleman will be prepared to withdraw the amendment.

I beg to move amendment No. 7, in page 4, line 6 after 'been' insert 'wilfully'.

This is a narrower matter in the sense that it deals with the motivation of someone who may find himself in difficulties under clause 2. Clause 2 refers to the prohibition of using sums from loans fund to offset the effect of the determination of new rate.

Clause 2(2) states:

"If the Secretary of State is of the opinion that subsection (1) above, or any term or condition imposed under the proviso thereto, has been contravened the local authority shall, on such opinion being intimated to them, reimburse their loans fund forthwith or within such time as the Secretary of State may allow."

I accept that it is important to have machinery in clause 2 to force reimbursement where there has been sharp practice in the view of the Secretary of State in that there has been a deliberate attempt to borrow to offset the loss of revenue that has resulted from an order limiting the rate poundage and reducing the rate poundage that had been determined by the local authority.

One of the problems is that—I am sure that the Under-Secretary of State will accept this because it has been much canvassed not only in Committee but by local authority officials—there are sometimes substantial difficulties in determining when exactly borrowing is being done for that purpose. There is a cyclical pattern of borrowing in most major local authorities which is dictated by and is a response to the varying pattern in the collection of rates revenue. All major local authorities have to borrow on the revenue account to make up for the delay in collecting their rates.

An argument could arise over whether the borrowing had been an attempt to get around the shortfall following after an order had been made under the powers in part I, or whether it was merely an attempt to maintain a proper flow of revenue against the somewhat uneven collection of moneys from rates.

The amendment is an elementary precaution which in no way damages the Government's central approach. It is not a wrecking amendment and is not of great political significance, but it would put into the Bill a little safety for the local authority if it was made clear in subsection 2 that before a repayment had to be made the contravention of the ban on borrowing had been willfully breached by the local authority concerned, and not inadvertently through error, confusion or a lack of administrative tightness.

The amendment is merely designed to make it clear that before the Government can move in and order repayment in this way they should be satisfied that there was an element of wilfulness about the breach and that it would be on that basis only that the repayment could be ordered. That is a clear and helpful suggestion, and I hope that it commends itself to the Minister.

I fully understand the point that the hon. Member for Glasgow, Garscadden (Mr. Dewar) is making. He said clearly and fairly that the purpose of the clause is to prevent an authority from borrowing to make up the whole or part of the difference between the original rate and the redetermined rate, so compelling it to reduce expenditure. The hon. Gentleman has asked whether the Secretary of State will be able to distinguish between borrowing that is necessary for the day-to-day management of an authority's finances—I accept his contention that that is cyclical—and that which is intended to make good the loss of revenue that is caused by a rate reduction.

There are several reasons why the Secretary of State will be able satisfactorily to monitor borrowing under the powers provided in the clause. First, such action will require a deliberate decision by the council. Finance officers will be aware of the statutory position and will advise their councils accordingly. If a council were to persist in its instructions to its officers, the officials involved would no doubt seek explicit instructions to safeguard their position. In the extremely unlikely event that the council and the officials connived to contravene the prohibition, that would come to light through the auditors; scrutiny of the accounts.

The sums required to offset a rate reduction would be substantial and would no doubt attract attention. For these reasons there can be little room for doubt if an authority has contravened the prohibition or borrowing conditions. It must not do so wilfully and the hon. Gentleman accepts that. It is the authorities; business to ensure that they do not do so negligently or incompetently. I understand the hon. Gentleman's argument, but the amendment would create a loophole in the provisions and I fear that I cannot recommend its acceptance to the House.

I beg to ask leave to withdraw the amendment.

I beg to move amendment No. 9, in page 4, line 23, leave out from 'Act' to end. of line and insert

'only that amount for that year which is necessary to meet increases in loan charges'.

This amendment is an attempt to clarify the meaning of the clause. The amendment was introduced towards the end of our consideration of the Bill in Committee in response to the considerable anxiety of local authorities. There was only limited time available to consult the Convention of Scottish Local Authorities. In a letter to all hon. Members the secretary of the convention stated that the new system of cash planning would not afford to the Government the flexibility that the previous rate support grant arrangements had made available. He said that the loan charges, which were one of the variables in the old rate support grant arrangements, were anticipated for the year and the moneys were made available. He explained that if the loan charges were not as great as had been anticipated, there was a degree of flexibility and some money was available for the local authorities.

The Government maintained that the purpose of the clause was to take account of any variation in loan charges. The convention felt that there were sinister undertones in the powers that the Minister was taking to himself. Since the Minister gave his explanation in Committee there h as been nothing else to suggest that his intentions are anything other than sinister. I refer to the hon. Member for Edinburgh, Pentlands (Mr. Rifkind), the then Under-Secretary of State, who is now the Under-Secretary of State for Foreign and Commonwealth Affairs. No one was convinced by the arguments that he advanced. We are trying to state explicitly in the amendment that, if any powers of this nature are to be contained in the clause, they shall refer only to loan charges within the year concerned. It is well nigh self-explanatory. It is intended to make the Government's intentions more specific. If the Government do not accept the amendment, one can only assume that there were other intentions behind the clause. If there is no other intention and the amendment is defective I am sure that the Government will take the opportunity to correct the omission in another place. Despite their enthusiasm to amend the Bill they have not sought to do so. One can only assume—until the Minister speaks—that it is because of the clarity and the succinctness of the amendment. If that is not the case the intentions of the Government remain obscure. The suspicion was expressed by many local government finance officers—they are not politicians, they are the specialists, whose responsibility it is to guide officials in local government, including the finance officer of Central region, the senior official of Lothian region, and the finance officer of Strathclyde—that that clause went further than the Government's intentions.

I hope that the Government will take the opportunity to clarify the position because there is a great deal of confusion in local government as to what the intentions are. We hope that this modest amendment will clarify the position. If it is defective there are other means open to the Government.

I hope that I can clarify the position for the hon. Member for Clackmannan and East Stirlingshire (Mr. O'Neill). The amendment would remove the Secretary of State's powers to redetermine the rate support grant except in the event of an increase interest rates. The power to redetermine the aggregate amount of grant in the course of the grant year is an essential element of the cash planning system provided by clause No. 3.

Under the former system of rate support grant the Secretary of State could adjust the cash paid by an increase order to take account of cost and price increases. Under cash planning the maximum amount of grant will be determined at the main order. There will no longer be a need for an increase order because the cash figure will include an allowance for cost and price increases. The Secretary of State will still need the power to review grant during the course of the year and redetermine it if necessary. As presently drafted the clause allows the Secretary of State to increase the amount to take account of increases in loan charges resulting from changes in the interest rate. That has not been questioned, and is generally accepted. However, the Secretary of Stale cannot be limited to that power alone. He must also have the power to vary grant for other reasons. He may wish for policy reasons to reduce the grant where he is satisfied that the level of expenditure planned by local authorities is damaging to the public interest. A reduction of that nature has been made by successive Governments. It was made by the Labour Government in 1976–1977. The Secretary of State may wish to reduce grant to take account of a drop in interest charges. He must have the power to vary grant to take account of changes in local authority responsibilities or unforeseen circumstances. To remove that power except in relation to interest rates, as the amendment would do, would take away essential flexibility. We cannot accept the amendment tabled by the hon. Member for Clackmannan and East Stirlingshire, but I hope that that explanation makes the position clear.

The debate has served a purpose, because the Under-Secretary has made it clear that the aim of the clause is to give the Secretary of State power to reduce the amount available and not only in respect of changes in interest rates. That was not made clear to us in Committee and the hon. Gentleman's predecessor sought to hide behind the argument that general abatement powers had been exercised by previous Secretaries of State.

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It is obvious that the power can go far wider and, therefore, the fears expressed by CoSLA and local government financial officials, are justified. The power is yet another turn of the screw by the Government. It restores to the Government powers which, it was imagined, they would no longer need to have to hand. Such is the Government's fear that a local authority may exercise discretion in a way that they consider unacceptable for policy reasons that they take power to curtail, cabin and confine local democracy. It was never suggested that the powers would be used in that way. They are another weapon for the Secretary of State in his efforts to control local democracy.

I beg to move amendment No. 118, in page 5, line 15, leave out

'incur, or contribute towards defraying, expenditure'

and insert—

'(a).incur; or

(b) unless invited to do so by the other authority, contribute towards defraying expenditure'.