Local Government Finance (No 2) Bill
Lords amendments considered.
Ordered,
That the Lords Amendments to the Local Government Finance (No. 2) Bill be considered in the following order, namely, Nos. 5, 6, 31, 13, 32, 14, 25, 27, 29, 15 to 17, 20, 21, 24, 1 to 4, 7, 26, 28, 30, 8, 9, 11,10,12,18, 19, 22 and 23.—[Mr. King.]
Clause 3
Borrowing Powers
Lords amendment: No. 5, in page 2, line 29, leave out from "(2A)" to end of line 33 and insert
"The reference in sub-paragraph (1) above to money borrowed by a local authority includes a reference to the interest for the time being payable in respect of that money."
4.25 pm
I beg to move, That this House doth agree with the Lords in the said amendment.
The House will recall that the purpose of what was clause 3(1), when we last considered it, is to prevent any doubt arising about the creditworthiness of English and Welsh authorities once they no longer have unlimited ability to raise revenue at any time of the year. As originally drafted, the clause adopted the Scottish model of making the interest payable on a local authority's borrowing a first charge on its revenues. That was done by adding to schedule 13(11) of the Local Government Act 1972, in which money borrowed is already secured as a charge on the authority's revenues. However, the majority of prospectuses issued assume that money borrowed under the 1972 Act carries interest as well as principal and that that they are secured as equal charges on an authority's revenues. Therefore, the amendment makes it clear that the phrase "money borrowed" includes interest. That confirms what many people had already thought to be the position and avoids any problem of discrepancy between existing and future prospectuses. The amendment is an acceptable and welcome clarification for the lending institutions. Like the original provision, it meets any anxieties about the future creditworthiness of local authorities.We debated this matter at length in Committee. It is a tragedy that the debate in the other place was all about interest or capital as a first demand on local authorities.
Before the Bill, the first demand on a local authority was with those who were employed by it. In the event of a local authority going bankrupt, which was unthinkable until the Bill was introduced, the first charge on a local authority was in respect of those who served it, its employees. I thought that in the other place the substance of the Committee debate would have been picked up. There was great anxiety that for the first time in local government no thought is to be given to the employees. Provision is made for employees elsewhere. For instance, under companies Act legislation, when the receiver comes in, the first charge on the company is the employee. The debate in the other place concerned only whether capital or interest should be the first priority for the local authority. The Bill will force local authorities to borrow money from the City at extraordinary rates of interest. It gives no thought to the employees. 4.30 pm The Bill should be entitled "The Local Government Finance (No. 2)"—or any number up to eight—"Afterthought Bill". The Government are legislating by afterthought. In what he said about the title my hon. Friend the Member for Blaydon (Mr. McWilliam) might have suggested that the word "afterthought" should be included. The Lords amendment is yet another afterthought. It is disgraceful. It takes no account of the situation that existed before the Bill was introduced. Public sector employees were protected, as private sector employees are. The amendment deals only with money and not with people. I believed that we were elected to this House to protect people's interests, but, having read the amendment, it would appear that I am wrong and that we were sent here to protect capital to the detriment of local government employees. Will the Minister deal with that? The issue was neglected in Committee and again in the other place. We need a concrete answer so that the people who are fortunate—unfortunate, perhaps after the Bill is enacted—enough to be employed in local government know that they have the same protection as they had before the Bill was introduced.I am well aware of the point that the hon. Member for Newcastle upon Tyne, Central (Mr. Cowans) makes, but he would be the first to acknowledge that the amendment and the Government's general proposals in the Bill to add to local authorities' credit-worthiness are very much in the interests of their employees. It is in their interests that their employers' credit rating should be beyond doubt.
Question put and agreed to.
New Clause C
Rate Relief In Enterprise Zones
Lords amendment: No. 6, after clause 3, insert the following new clause:
"C.—(1) At the end of paragraph 27(1) of Schedule 32 to the Local Government, Planning and Land Act 1980 (exemption from rates of certain hereditaments situated in areas designated as enterprise zones) there shall be added the words "or in respect of any part of an exempt hereditament as regards any period during which the area in which that part is situated is so designated."
(2) In paragraph 28 of the said Schedule 32 (mixed hereditaments)—
"(b) the reference to the occupier or person treated as occupier of the hereditament being dissatisfied by the view taken by the rating authority included a reference to the occupier, the person aforesaid or the rating authority being dissatisfied by the view taken by the valuation officer; and".
(3) After the said paragraph 28 there shall be inserted—
"Hereditaments partially within enterprise zones
28A.—(1) As regards any period during which part only of an exempt hereditament (within the meaning of paragraph 27 above) is situated in an area designated as an enterprise zone, the valuation officer shall determine the portion of the rateable value of the hereditament attributable to the part of the hereditament situated outside the enterprise zone.
(2) Where a determination in respect of a hereditament has been made under sub-paragraph (1) above, the amount of any rates payable in respect of the hereditament shall (subject to sub-paragraph (3) (b) below) be the amount which would be payable in respect of it if its rateable value were equal to the portion of the rateable value which was determined under sub-paragraph (1) above.
(3) Where the hereditament in respect of which a determination has been so made is a mixed hereditament—
(4) Section 48(6) of the 1967 Act shall, with modifications corresponding to those contained in paragraph 28(3) above, apply also in relation to questions as to the portions mentioned in sub-paragraphs (1) and (3) (a) above.""
I beg to move, That this House doth agree with the Lords in the said amendment.
Amendment No. 6 involves privilege.
With this we may take Lords amendment No. 31.This is the item that we were discussing under the money resolution to deal with the anomaly about exemption from rates for certain hereditaments that straddle enterprise zone boundaries. It is a simple and easily comprehended point.
The Minister says that the point is simple. It is so simple that it did not arise in our Committee proceedings.
Let us examine this second afterthought—we may have many more. Setting up the enterprise zones has created many anomalies. The amendment will create yet another. Parts of a site or factory within an enterprise zone will qualify for a drastic reduction in rates. That will create serious difficulties. I am speaking for myself and my right hon. and hon. Friends may not agree, but I believe that it is nonsense to give only part of a site the advantage. The whole site should be included. There are many examples of sites straddling enterprise zone boundaries in my constituency and a number in the constituency of my hon. Friend the Member for Blaydon (Mr. McWilliam).Team Valley.
Team Valley, part of Blaydon, down to the Tyne and nearly as far as Walker and all the shipyards.
A problem arises if part of a site for a factory is on derelict land which comes just inside the enterprise zone. With my long experience of local government, I appreciate that difficulties are always created when lines are drawn on a map, but they can be got over. The firm may wish to develop the whole site. The land that comes inside the enterprise zone may not be developable, but it will get rate relief. If the whole site were included, it might encourage the firm to go ahead and thus create extra jobs, which is the aim of enterprise zones. The Minister will be creating more anomalies than already exist with enterprise zones. Why not go the whole way?I support my hon. Friend the Member for Newcastle upon Tyne, Central (Mr. Cowans). We share representation of the largest chunk of the biggest enterprise zone.
Let me give examples of the anomalies that occur. I well recall when the boundaries of the enterprise zone were set. I pointed out that they stopped at the wall of the existing building of T. I. Churchill Ltd. in Blaydon. When I protested about it, I received a letter from the Minister concerned, Lord Bellwin, saying that T. I. Churchill Ltd had the land beyond the factory within the enterprise zone and could develop it for the furtherance of its business. That letter did not go down at all well, because at that time T. I. Churchill Ltd was on a two-day week. In those circumstances, how on earth could it develop the land for the furtherance of its business? I could enumerate other problems. For example, GKN Galloway is not in the enterprise zone, although it is further in towards the zone than George Johnstone and Company. Both firms are steel stockholders, with plants of identical size, and they compete for the same customers. They are 500 yards apart, but one is in and the other is out. The problems with the enterprise zones are appalling and ought to be sorted out. I have a letter from Lord Bellwin's office in the Department of the Environment, signed by his private secretary. It says thatA copy is not available in the House of Commons Library. It is not in the catalogue of the House of Commons Library. I wrote to the Vote Office saying that I required a copy for my constituency interest, and I received a note eventually from the Stationery Office which said:"consultants commissioned by the Department to monitor the progress of the EZ experiment … will be conducting further interviews with a sample of firms in these areas and … there may well be a limited number of firms in your constituency … The results of the research undertaken last year have recently been published in the Year One Report of the Enterprise Zone Monitoring Study, a copy of which is available in the House of Commons Library".
"Dear Mr. McWilliam,
I do not have £31.57 to spare to pay for a study undertaken by the Government. Copies of it should be available for hon. Members so that they can make up their minds on the success or otherwise of the policy. I am fairly certain that most other hon. Members—particularly those on the Opposition Benches—do not have £31.57 to spare to pay for a copy of the study. Yet it is impossible to evaluate the Lords amendment or the subject under consideration unless one has taken the trouble to read the study. I do not wish to mislead the House, so it is right that I should say that I have tracked down a copy of the report. There is one in the economic research section of the Library. A copy was bought by it, but it is not available to hon. Members on the same basis as other publications. I could go to that section of the Library and read the report. Unfortunately, I discovered that fact only five minutes before the debate. Therefore, the fact that there is a copy of the report in a section of the Library does not seem to be of great relevance or benefit to hon. Members. I protest most strongly that the Minister's own Department is misleading hon. Members in saying that information is available when it is not. I also protest because we are having to consider amendments to the Bill, inviting us to do things which may or may not be sensible, when we have no basis on which to judge them. I ask the Minister to go back to his Department and make inquiries about how in future relevant information may be made available to hon. Members. I do not approve of privatisation which deprives hon. Members of the necessary information on which to base the crucial decisions which must be made now and in the future about enterprise zones.On your demand dated 16 June you have asked for a copy of Year One Report of the Enterprise Zone Monitoring Study. This book is not available from Her Majesty's Stationery Office but is published by Roger Tym and Partners, price £31.57, and is available from 26 Craven Street".
4.45 pm
The amendment demonstrates not only that in the past the Government have made a mess of their legislation and have not anticipated problems that might arise, but the inadequate nature of enterprise zones. If the amendment is an attempt to rectify the problems that exist on the boundaries of enterprise zones, it will not succeed.
It enables firms, factories and concerns that straddle the boundary of an enterprise zone to receive, at least to some extent, the benefits of the enterprise zone that are now received by factories, concerns or firms that are inside the enterprise zone. That will not solve the problems that exist for firms that fall inside and outside enterprise zones. It will not rectify the anomalies that exist in the areas where enterprise zones have been established, as I hope to illustrate. There are two enterprise zones of which I have some knowledge—those in Manchester and Liverpool. When the enterprise zone concept was being proposed and the zones were established, Labour Members told the Government that the zones would not work and would create more problems than they would solve. That was said not only by Labour Members and by members of the Labour Party. Amazingly, most entrepreneurs, business men and industrialists in areas where the zones were to be established also made the point very strongly to the Government. I have a letter that was sent to me on 29 June 1981 by a body calling itself the Enterprise Zone Action Group. It is based in Manchester and consists of business men, industrialists and people who own enterprises in warehousing, retailing and wholesaling. They wrote to me objecting to the concept of the enterprise zones. The first of the "principal objections" outlined in the letter was "unfair competition". The letter says thatThe second "principal objection" put forward by the group related to property values, and the letter says that"In the Service sector, rates amount to a substantial proportion of total costs; the ten years rates 'holiday' therefore enables the beneficiary to significantly undercut the charges of established businesses."
The letter then deals with the crux of the matter—employment prospects. It questions whether enterprise zones—spending initially £1·4 billion—would do anything for employment prospects in the areas where they are to be situated. The letter says that"There is already clear evidence that the capital values of properties outside the Zone have been dramatically reduced as a direct consequence of the proposed Enterprise Zone."
That is interesting, because many firms have moved only a few hundred yards or a mile within the same area. The amendment would clear up only a small part of the boundary problem. The letter goes on to say that"Existing firms are closing their operation in one location and moving into the Enterprise Zone, throwing people out of work in areas of already high unemployment."
That is what the group said on 29 June 1981. The Manchester enterprise zone has been in existence for a considerable time. I spoke to people in the area, asking them what progress has been made with the enterprise zone and what exactly is happening in Manchester. The people there tell me that the zone is beginning to attract companies, but that the vast majority are local moves, due to boundary problems. No new employment seems to be being created. Most of the companies moving in are warehouses or wholesalers, not manufacturing industries. I spoke to the city estates officer and the director of industrial development in the city of Manchester. They say that they have attended recent meetings where leases from the council for advance factories and other premises outside the zone are being surrendered by firms so that they can move into the zone. What is happening is a redistribution of employment, not a creation of employment, and the Government are subsidising that redistribution."Trafford Park already has an abundant supply of Service industries; newcomers can only trade at the expense of existing businesses. In consequence, we do not believe that Enterprise Zones are any answer to the problem of unemployment and suggest that the concept be abandoned."
Surely it is not redistribution of employment, but redistribution of lack of employment. Is that not particularly insulting, in view of the Government's disgraceful decision this week not to allow Manchester to continue with its intermediate area status, which has clearly been a party political decision?
I entirely agree wih my right hon. Friend, who has a greater vested interest in Manchester than I. My concern for the people there stems from the fact that I was born and bred there, and I hate to see my fellow Mancunians unemployed and suffering as a result of this Government's policies.
Let us consider what the Government have done to justify their enterprise zone policy. They have set up a national study of enterprise zones, and commissioned Roger Tym and Partners, consultants, but they have made sure that the efforts of those consultants will produce a self-fulfilling prophesy by giving them narrow terms of reference. The consultants can judge only what happens inside the enterprise zone, how many jobs come there, and how many are created there. They have not been given terms of reference whereby they could consider the effect of the enterprise zone on the areas in which it is situated. They will not be in a position to produce a report which will prove—if they could—that no new jobs are being generated, or that the number of jobs in general has not been increased by the enterprise zones. Let us take another enterprise zone, in which I am directly concerned as a Merseyside Member, and that is the enterprise zone in Liverpool, which was established at Speke and which probably covers the largest area of land of any of the enterprise zones. Again, it was not only I and other Merseyside Members who told the Government that it would not work, that it was a peripheral palliative, and that it would not create jobs. Surprisingly, business men and industrialists in Merseyside were also opposed to the Government's proposals. I received a letter at the time when the enterprise zones were being established from McGregor Cory Warehousing, which has an industrial complex on Dunnings Bridge Road in Bootle in my constituency. The letter was written by a Mr. Singleton, the Liverpool area manager, and it said:"The Public Warehousing Industry is under a serious threat by reason of its inclusion in the Enterprise Zone concept which, amongst other attractions, allows ten years rates free tenure of property. This leaves established businesses outside the Zones at a serious disadvantage.
Local Authority Rates are increasing well beyond general inflation levels … Public Warehouses are affected by the Enterprise Zones legislation more than most other industries because:—Rates account for some 23 per cent. of total costs or just under £5,000 per employee.
Detailed representations have been made to the Minister who has simply brushed aside our arguments despite our having proved quite conclusively that his Officials made serious errors of judgement and fact when they looked into the costs of Public Warehousing.
this is what the amendment is about—We do not believe"—
the Labour Party believes that; apparently, the Conservative Party does not—"that arbitrary lines drawn on maps by Officials in any Government or Public Department should determine the success or failure of an established business. We believe in fair competition"—
Let us look at the Liverpool enterprise zone. I spoke to the Merseyside county council, the Liverpool district council, and others involved in the Merseyside Speke enterprise zone. I was told that, in general terms, the enterprise zone seems to have had no impact on Liverpool. At a meeting of the AMA on 2 April, the Liverpool city council wrote a report which said:"—we thought that a Government which introduced the Competition Act did also, but we have a Minister who believes we should 'wait and see' what the effect will be 'after' the Zones have been started".
To give the Minister his due, the zone is a strange area. It should never have been declared in Speke. It is in the wrong place, because it is away from the problems of the inner city and the docklands. It is out near the airport. If it works at all, it will detract considerably from the work that is being done in partnership schemes and by the Merseyside development corporation. As well as being in the wrong area, the make-up of the enterprise zone is strange. It consists of three main parcels of land in three different ownerships. First, there are the closed British Leyland factories—which, if the Government's policies had been different, might not have closed in the first place. Secondly, there are the closed Dunlop factories—which Dunlop, as a multinational company, took away so as to manufacture tyres in Europe as a result of the Common Market's proposals for free movement of capital. Thirdly, there is the airport land. There is also the English Industrial Estates Corporation which was there before the enterprise zone was declared and is still there. It builds advance factories and tries to let them. Some of the advance factories have been let—some of them were let before the enterprise zone was declared—but many of them are still empty and unlet. Since the declaration of the enterprise zone, there has been a deafening silence. There have been a few rumours. There has been a rumour of a bid for the British Leyland plant, but that is merely a rumour. I hope that the Minister will confirm or deny it. Does he know what is happening to that plant? Part of the site of the Dunlop factory has been cleared, and other parts have been made available for the storage of containers—that is hardly likely to produce many jobs—used on the docks."There have been no lettings to report".
My constituency suffers the same problems. What has exercised my mind, and will no doubt exercise that of my hon. Friend, is that outside an enterprise zone even empty buildings are rated, but, as I understand the arrangement, within an enterprise zone a saving in rates can be made by emptying the building and doing away with the jobs. Is that not counterproductive, or is it one way in which the Government help unemployment by increasing unemployment?
I am interested to hear what my hon. Friend says. Although I have evidence of much inactivity in the Speke enterprise zone, I have no evidence of factories being emptied to avoid payment of rates because they are exempt from the empty property levy. That is something that I should investigate.
Some activities in the Speke enterprise zone do not need a planning application to the local planning authority, but some do. There has been only one planning applicaton to the local planning authority, and that was for shops on the frontage of the British Leyland plant. The success of the Liverpool enterprise zone can be judged by the fact that a Mr. Jackson was appointed as the man in charge of the enterprise zone. I believe that he came from Littlewoods. He was straight out of the Heseltine task force, a Whiz kid, appointed to run the enterprise zone. My information is that Mr. Jackson is thoroughly disillusioned and has given up his job, because he has seen that the project has had no impact. It has been an absolute shambles and a waste of time. At least we have some palliatives, which appear to be doing something, in the Government's other initiatives. The Government should withdraw the amendment and abandon the whole idea of enterprise zones before they waste more taxpayers' and ratepayers' money. It was an exercise that did not provide jobs, and it detracts from the work that other agencies are trying to do in the areas where they are situated in trying to create jobs and improve the environment. 5 pm Britain and Merseyside should be one vast enterprise zone. Enterprise zones would not be needed if we had the right economic and industrial policies. Merseyside does not need an enterprise zone out at Speke. It needs action in the dock and inner city areas. There is need for more money to be given to the urban development corporation which should have a bigger area, especially in my constituency of Bootle, to look after. We want development area grants for dock and dock related activities now denied because those areas are not involved in manufacturing. There is also need for the Stanley district plan area of Sefton, which has the same problems as the inner cities, to be brought within the inner city area partnership. The whole attitude of Merseysiders to the enterprise zone, the garden festival and other palliatives of the Secretary of State that do not solve any problems is summarised in a poem sent to me by a constituent. My constituent writes:"'No crock of gold', the city's told,
But plants and shrubs and trees;
To help assuage the people's rage
And social conflict ease.
What shall we do with violets blue,
My dearest Heseltine?
Shall Merseyside regain her pride
With creeping columbine?
Love-in-a-mist from monetarist
Shall not relieve our pain,
Nor blaze of green espouse the scene
Of all your party's shame.
It's work we quest, not dogma dres't
To ambush and waylay;
With Antoinette—'twas cake they ate,
With you, 'tis blossoms gay!"
The Minister has been left in no doubt that among Opposition Members there are many caustic critics of the concept of the enterprise zone. I believe that the hon. Member for Ripon (Dr. Hampson) and the hon. Member for Hornchurch (Mr. Squire), who has the scars, are the only Conservative Members present who served on the Local Government, Planning and Land (No. 2) Bill. I understand that the hon. Member for Hornchurch intends later in our proceedings to seek success where he has so far failed. My right hon. Friend the Member for Widnes (Mr. Oakes) and myself also served on that Bill.
As the Minister has pointed out, the issue before the House is not perhaps of massive importance, but the issue of enterprise zones is important. I hope that the Minister will take the opportunity not only to answer some of the questions that have been asked but to expand upon the standing of enterprise zones in the armoury of weapons that the Government have fashioned to carry forward their brand of entrepreneurial philosophy. My right hon. Friend the Member for Manchester, Ardwick (Mr. Kaufman) was right to point out that this Government's local government and local government finance legislation has been one of the saddest and shabbiest attempts to change the face of local government since the war and probably over an even longer period. My right hon. Friend referred to the shambles of the Local Government, Planning and Land (No. 2) Bill. The hon. Member for Woolwich, East (Mr. Cartwright) may have served on the Committee which considered that Bill.No.
It is significant that the concept of the enterprise zone reached the Local Government, Planning and Land (No. 2) Bill only at the thirty-ninth Committee sitting. It was not contained in the Bill as drafted. This was not one of those Bills that was added to, chopped about or mucked about in the other place. The enterprise zone, when it saw the light of day, appeared as amendment No. 831 but amounted, in fact, to a schedule of six pages that covered six pages of Hansard. It was a massive injection into the Bill.
The Opposition had already taken the view that the Local Government, Planning and Land (No. 2) Bill was not merely one Bill but a number of Bills. There was sufficient material in the Bill relating to direct labour organisations to merit separate legislation. It also dealt with the whole concept of local government finance, particularly rates reform. That would also have merited a separate Bill. The Bill's provisions relating to planning legislation and the responsibilities to be allocated to districts and counties would also have merited separate legislation. If my hon. Friend the Member for Newham, South (Mr. Spearing) had been in his place, he would have argued that the part of the Bill relating to urban development areas would have merited a separate measure. Another example was the section of the Bill that related to new towns. Miscellaneous aspects of the Bill related to caravans, derelict land, allotments, allowances and the publication of information. In all, there was sufficient in the Local Government, Planning and Land (No. 2) Bill to merit six or seven separate Bills. This was the state into which the Government's legislation and thinking on local government had stumbled in 1979 and 1980. It was not the Chancellor of the Exchequer who conceived the idea of the enterprise zone. The concept already existed in a number of countries. It is possible that the name of Professor Hall will be mentioned. The name was pleaded in aid by the Minister in Committee. There is, however, no doubt that the Government were seeking to find initiatives that might cost some money but also portray the Government as an enterprising, energising and galvanising Administration full of good intentions. Two years later, having heard the experiences related to the House by my hon. Friends the Members for Newcastle upon Tyne, Central (Mr. Cowans), for Blaydon (Mr. McWilliam) and for Bootle (Mr. Roberts), the Opposition are entitled to examine what the amendment that we are asked to approve means. There is no doubt that the enterprise zone concept was seen by some as providing opportunities to many people to build and to take on extra responsibilities. It emerges that activities have not moved from one part of the country to another but from one local area to another or even from one street to another. I hope that the Minister will respond sensibly to the difficulty revealed in the document to which reference has been made. I remind the Minister that we are discussing the first report of the enterprise zone monitoring study. My hon. Friends the Members for Bootle and Blaydon rightly pointed out that if helpful experience is available they would like to be able to read it. I understand that copies are available but they cost more than £30. If the Minister wishes to educate hon. Members and the public, he should ensure that that document is available in the normal green form system. We should ensure that relevant experience is well known. If hon. Members are to carry out their duties efficiently and effectively with regard to enterprise zones, we must have the latest information. Will the Minister spend a little more time than his colleague when he was recently invited to answer questions about rent levels and their relationship to rates in enterprise zones? No doubt the Minister will tell us that people were induced to take their business, money and skill to enterprise zones because it would be cheaper to operate there because of allowances, relief, speed with regard to planning, a reduction in bureaucracy and, above all, because they would not have to pay rates. I am sure that the Minister is aware of that. The hon. Member for Essex, South-East (Sir B. Braine) asked"how many enterprise zones have been designated; how many are operative; and how many representations he has received in respect of all zones, whether designated or operational, for firms located just outside zone borders about the difference in rate burden borne by them and by firms within the zones."
5.15 pm
I am grateful to my hon. Friend for giving way. I know that the Minister has received representations, both from me on behalf of most firms that are just outside enterprise zones and directly from GKN Galloway, T.I. Churchill Ltd. and the Federation brewery whose products occasion some delight among hon. Members. I know also that he has received representations through party political affiliations. GKN used to make a large contribution to Conservative Party funds. It has stopped doing so and has made strong representations.
I am grateful to my hon. Friend. I am sure that the Minister will not deny that he has received representations. It is a question of the weight that the Minister is prepared to attach to those representations and whether he is prepared to acknowledge the problem.
In his reply on 11 June to the hon. Member for Essex, South-East, the Minister of State said:I do not suggest that the Minister is unaware of the anxieties or that he suggested that problems would not arise when the matter went through Committee two years ago. Now that the Minister's foresight has been borne out and the problems are obvious to the affected firms, what does he intend to do? Only last week the hon. Member for Ealing, North (Mr. Greenway) said:"An exact figure for the number of representations about the rates exemption cannot be given, but we are well aware of the concern which has been expressed, particularly by the public warehousing industry."—[Official Report, 11 June 1982; Vol. 25, c. 165.]
The Under-Secretary replied:"It is senseless that people should be encouraged to move out of one area into an enterprise zone thereby causing the loss of jobs in one area and the creation of jobs in another. Is that not silly?
It may not be silly if the Government's economic management results in that type of circumstance but we are entitled to some explanations."That inference cannot yet be drawn."—[Official Report, 23 June 1982; Vol. 25, c. 286.]
The Under-Secretary said that that inference could not be drawn. It can, as there are two firms in my area that wish to expand. However, they have discovered that because of the enterprise zone, a national concern that trades in the same type of commodity has moved into that enterprise zone and looks set to cause the closure of existing local businesses because it enjoys the advantages of being in the enterprise zone. The Minister freely admitted that there were problems. Not only could he have accepted that the entire site should have its rates reduced; he could also have insisted that the rates of firms in the same line of business, whether inside or on the outskirts of an enterprise zone, should be reduced to equalise competition. I understood that to be his policy.
Although the matter has been expressed in a partisan way, the Minister should be aware that the Opposition recognise that there are Labour-controlled authorities that, in their desperate search for jobs, have been willing to grasp at almost any straw. The enterprise zone concept appeared two years ago to give them an advantage. They wanted that advantage. It should be borne in mind that many zones have not been operating for two years—many have been in existence for only a matter of months. The Minister should say something helpful about the problem.
There remains the vexed question of the possibility of landlords and developers, recognising the attraction of enterprise zones because companies must pay no rates, increasing rent. For example, if the rent for a factory is £50,000 a year and the rates that must normally be paid are £20,000 a year, the combined cost to the entrepreneur is £70,000. Because rates are not paid the cost is only £50,000. It is only human nature that the landlord may ask for more—say £60,000 or £65,000—as that is still less than would otherwise be the case. I hope that the Minister will say that there is no evidence—although I believe that there is—that taxpayers' money in the form of rate relief is being exploited in that way. The Under-Secretary said that £10 million was likely to be given to local authorities in England in compensation for gainsaid rates in 1982–83. I hope that that sum will encourage people to move into enterprise zones and that it will not merely be a hidden subsidy to developers or landlords who rake in money in the way that I have outlined. The Minister may well say that evidence is being sought. I picked up in The Economist earlier this year a piece of evidence from the Trafford Park zone, showing that property values inside the zone had risen by 30 per cent. while those outside had fallen by 25 per cent. in the 12 months just ended. Perhaps it is facile to argue that property values are depressed outside and inflated inside the zone—and rents will reflect those values—because there are so many inducements, but we are certainly entitled to an answer from the Minister on that. The Minister should also give us some idea of the job situation. To be fair to the Minister, in Standing Committee he told us what he hoped would happen and in the past two years a great deal has happened in the economy that he perhaps could not have anticipated. Nevertheless, he should tell us not only how many jobs it was hoped would be created but whether the jobs created by the factories that were opened were merely transfers from factories outside to factories inside an enterprise zone because it was cheaper to operate there. Secondly, how many firms went into the enterprise zones but have now either gone out of existence or moved out of the enterprise zones because they have not turned out to be so attractive as was hoped? In this short debate, the Minister has the opportunity to set our minds at rest on that. I attended a conference recently at which representatives of the new towns of the North-East were greatly concerned that Government money was simply chasing itself all over the place. The public are investing money in new towns, in enterprise zones and in special development areas, all of which are advertising and trying to attract business to themselves. The new towns were seriously asking what was the point of the Government encouraging, for instance, an enterprise zone in Hartlepool with inducements to industrialists to go there when they would be tapping the same source of firms which might bring jobs to the new towns. I had not noticed my hon. Friend the Member for Hartlepool (Mr. Leadbitter) sitting behind me, but I am delighted to see him as he has taken a keen interest in the concept of enterprise zones. Nevertheless, a dilemma that the history of enterprise zones has now revealed is that, however good may be the Government's intentions in trying to find an answer to some of the regional problems, other people within the regions, if they are not actually looking upon them with a jaundiced eye, are certainly wondering what is the point of one area benefiting if it is to the disbenefit of another. As has been mentioned, the concept of enterprise zones comes from Hong Kong and the Far East. It was believed that if the climate in which successful enterprises had flourished in the Far East could be translated to some of our regions they, too, would succeed. That completely misses the point. Our argument is that if resources are available to sustain industry there is a massive job for the Government to do throughout the economy. That means not merely shifting a few hundred jobs around some part of the North-East, the North-West or Scotland, but an economic and employment initiative that will really solve the problems. We do not believe that the Government's efforts with enterprise zones are anything like what is required. We shall not oppose the amendment as it attempts to deal with an anomaly, but the Minister will have to give some very satisfactory answers to the other problems that have been exposed in the debate.With the leave of the House, I wish to reply briefly to the points raised. I think that the House will have some sympathy with the last example chosen by the hon. Member for Edmonton (Mr. Graham). He was no doubt quoting when he asked what was the point of helping Hartlepool, only to turn around and find his hon. Friend the Member for Hartlepool (Mr. Leadbitter) sitting behind him, no doubt well able to deliver a short, sharp answer to that. I think that some of the points that I shall develop will make the situation clear.
The hon. Member for Edmonton is always extremely fair and it was honourable of him to accept partial responsibility for the need for the amendment. He acknowledged that he was a member of the Standing Committee on the Local Government, Planning and Land Bill and we all failed to spot a point that should have been covered and which could have been raised by any member of the Committee.The Minister must recognise that the problem now is where the line was drawn on the map. The designations were not known to the Committee. If proper care had been taken with the precise designation of the area, the problem would have been foreseen.
I think that the hon. Gentleman has answered his own point. In designating enterprise zones, lines must be drawn somewhere. That is inevitable. One then runs into the problems that we now see. Any hon. Member could have spotted the difficulty, but none of us did. I fully accept, of course, that the Government have the ultimate responsibility. We are now seeking to put this right and to overcome this small technical point.
I could take exception and say that this is a very narrow debate concerned merely with the straddling of boundaries, but if the House is to consider this narrow point properly, it is perfectly fair to ask certain questions about enterprise zones. Therefore, so long as I do not stray outside your tolerance, Mr. Deputy Speaker, I shall seek to reply to some of the points that have been raised. It was clear that the hon. Members for Newcastle upon Tyne, Central (Mr. Cowans) and Blaydon (Mr. McWilliam) felt considerable hostility towards the enterprise zones and that they regret them. That is interesting. No doubt it would interest the workers of Scotswood at the new Vickers factory in Newcastle which I had the pleasure of visiting. That will now be the largest enclosed manufacturing construction in Europe. Vickers faced a very difficult situation at its old, awkward, rundown site at Elswick, and the whole future of the plant was very much in doubt. I have it on very good authority that the project might never have gone ahead and that it was the introduction of the enterprise zone as much as any other factor which resulted not in the loss of all those jobs but in their re-establishment in the most modem new facility which is the best hope for the future of those people. I am sure that those people, whether or not they are the hon. Gentleman's constituents, will note with interest his condemnation of the enterprise zone and the criticism and hostility that he has expressed.The Minister must not mislead the House and people outside, as he now seeks to do. As Hansard will show—if he had listened, he might not be making such statements now—I was pointing out the anomalies that had been created, and I asked three specific questions because the Minister now has the opportunity to clear up some of the anomalies. Of course I welcome Elswick, but the Minister must also remember another aspect.
This may be new knowledge to him. When Scotswood closed, Vickers intended to develop the Elswick site. Since the establishment of the enterprise zone, Vickers has moved back to Scotswood. I welcome that, but it leaves a vacant site inside the enterprise zone. The Minister must not mislead the House. He knows that there are anomalies. He has an opportunity to put them right. No one suggests that the enterprise zones should be washed out, but the Minister must inform the House of exactly what is said, and not his interpretation of it.5.30 pm
I listened to the hon. Gentleman's speech, but by the time he had finished with the anomalies one was left with the feeling that he has a strong distaste for the whole experiment. That was certainly my impression, and why I made my comments. If he is now saying that he supports the enterprise zones, I welcome that.
I agree that there are anomalies. I told the Committee on the Local Government, Planning and Land Bill that there would be difficulties. The country is in economic difficulty and, as a Minister, I am endeavouring to get things going. But, here we go again. We have the "do nothing" brigade who advocate doing nothing because to do something will mean problems, difficulties and anomalies. There always will be such problems, but for some that is a reason for doing nothing. I do not know whether the hon. Gentleman supports regional policy. Regional policy in the North-East is based on the whole concept that there will be discrimination. Some areas will receive benefits and advantages. That is accepted. My constituency is next door to an assisted area. Ever since I came into the House I have lived with exactly those criticisms. Just over the boundary there are advantages in benefits, investment grants and regional development grants, all enjoyed by companies. There was also the regional employment premium, although that has now gone. I have lost employment for my constituents because firms could go elsewhere and get greater benefits. I have the problem of firms being set up in the hon. Gentleman's constituency, or close to it, in competition with firms in my constituency and enjoying regional development grants for the full capital investment of new plant. Those grants are not available to my constituents. That bias, if one can call it that, has always been built in to regional policy. With enterprise zones that same concept and approach is heightened because the areas are that much closer. The disparity is all the more visible. Enterprise zones are an experiment to tackle some of the most deep-seated problems in the areas that need such zones. One need only look at some of the problems in the sites contained in the enterprise zones. I have had the pleasure of visiting Hartlepool, as the hon. Member for Hartlepool knows, and seeing the enterprise zone and the possibilities that exist there. One of the most difficult tasks that I have had to undertake as a Minister is to traverse the Trafford Park enterprise zone in Manchester to find fair boundaries. It is arbitrary and difficult. We tried to find the fairest possible basis. I accept that the scheme is not perfect, but it is a determined attempt to achieve a fair balance in a difficult area.My constituency is in exactly the same position as my right hon. Friend's. We have competition from new towns and areas receiving special grants, and so on. An enterprise zone is not too far away. I agree that the Government must have a range of options in seeking to help the worst areas. However, as unemployment has spread throughout the country there are some areas, and parts of some areas, where unemployment was low but is now increasing. In some of the good areas certain parts have an unemployment rate approaching 12 or 13 per cent. Does my right hon. Friend agree that his Department, and the Government as a whole, must now look at the rating system and the possibility of derating the parts of industry that even in the good areas may be feeling the draught? Should they receive a reduction in rates to help them to compete with the assisted areas?
If we take on the whole subject of industrial derating I am sure that we shall go sharply out of order.
The phrase "fair competition" has been used. I accept that it is not fair competition in the sense that regional policy has not been fair competition. There is a deliberate tilt. The view has been taken by Governments of both parties that there is a need deliberately to distort the basis to encourage particular areas.Before the Minister dismisses that point so sharply, does he accept that, although there is an argument for a regional distortion in competition, there is no argument for two factories—GKN Galloway and George Johnstone—that are 500 yards apart and producing the same product when one enjoys the advantages of regional policy and the other does not? That has happened.
That is the point I have made. It has accentuated a state of affairs that exists under regional policy. For example, there is a company in my constituency making central heating pumps. It is competing with a company making the same product—a foreign company at that—that has been set in a new town in the North East that received regional development aid. It would not matter whether those companies were 500 yards apart or 300 miles apart. That distortion of competition is keenly felt by the company in my constituency. It is unable to get the subsidy on its investment that is available to its competitor.
The hon. Member for Blaydon made a very serious allegation against the Library that has caused me some confusion. I understand that a copy of the report was deposited in the Library. The hon. Gentleman said that someone in the economic affairs section has a copy for which he paid. There appears to be something curious that must be investigated. This is the first time that I have heard that if a document is owned by the economic affairs unit in the Library it is not available to Members—that it is a private copy. However, I am assured that a copy of the report was deposited with the Library. This is the first report. It does not deal with the progress of enterprise zones. It records what happened before the enterprise zones came into operation. The subsequent monitoring reports, the first of which will be produced in the autumn, will show what changes have occurred. The reports will not be limited to the enterprise zones. We are also looking at what is happening outside them. That is important. That is one of the obvious aspects to consider and it has not come as a blinding revelation. We want to know whether firms are moving in from elsewhere or whether new firms are being set up. A rough check has been kept for the Clydebank enterprise zone. It shows that half the firms are new firms. We are in the early stages. I remind the House that the most recent enterprise zone to be set up is on the Isle of Dogs. That was opened by the Chancellor of the Exchequer as recently as 21 May. My hon. Friend the Member for Rutland and Stamford (Mr. Lewis) said that his constituency was close to an enterprise zone. The enterprise zone at Corby was one of the first to get under way and it has moved extremely fast. We do not have detailed monitored results at this stage, but we are trying to keep a rough idea of progress. The results vary in different parts of the country. Corby is probably in the lead at the moment, but there are encouraging signs of activity in a number of enterprise zones. The Isle of Dogs zone, being the most recent, has hardly got under way. I understand that things are afoot with regard to the Leyland factory at Speke. It is possible that contracts will shortly be exchanged with the developer who proposes to split the factory into smaller units that can be brought back into more effective use. Rents present a difficult problem. In a sense, one could say that that is sufficient objection not to do this at all. We cannot prevent some leakage or slippage of enhancing rents in such areas. A gentleman much involved in an enterprise zone told me that it was not a bad thing if some of the rents did rise, thereby encouraging more construction and activity by making these areas economically more viable. That is a slightly circular argument. The point is that there is a time pressure on developers and owners to get these enterprise zones into development. If they hike the prices too high and do not attract people to take advantage of these benefits, time will slip away. We must remember that this is a 10-year exemption benefit. Therefore, the longer it takes to being these areas into development, the more people will lose some of the benefit that flows from them. That is the principle upon which the rate concession has been established.The Minister referred to Corby. My information is that the rental values in the Corby zone have gone up from £1·80 to £2·20, an increase of about 25 per cent. I appreciate that the problem is complex. However, if we are trying to induce people to come into such zones and the total package of non-rates and grants equates with what exists outside the zones, what incentive is there if the rents eat up the benefit of not paying the rates?
I am not sure whether the hon. Gentleman understood the point that I made. Property owners in the enterprise zones have a diminishing asset. They must attract people fast, otherwise the assets steadily become worthless. Independent market forces will, therefore, drive people to let the properties and get them occupied, because that is where the benefit lies, otherwise they will lose the benefit of their rates exemption. That is a judgment that they will have to make.
In certain areas, the rents went up but have now come down simply because of the failure to attract tenants. It is for the developers to worry about whether they attract the tenants. If they do not, they will not get the rents and it is very much in their interests to do so. It is still too early to give a clear picture about the enterprise zones, but there are some encouraging signs. My visit to the new Vickers factory was one of the most encouraging that I have made. Developments in respect of a number of enterprise zones hold real prospects. The House will understand that this is an experiment that the Government believe was well worth trying. It is an alternative approach for precisely the reasons that I am sure the hon. Member for Hartlepool would have given had he intervened. New towns have enjoyed considerable benefits over the years. That has been a form of incentive attraction. Some of the old towns that want help to revive their inner city or derelict areas are entitled to these enterprise zones. The Government believe that this is a further sensible weapon in the armoury of assistance to help tackle some very difficult problems. I have strayed wide of the amendment, but I hope that my comments have been of interest and I hope that the House will support the Lords amendment.5.45 pm
The Minister has coaxed me to say a few words, but I shall not be critical of any attempt to attract employment to areas where work is badly needed. All Governments have suffered the dilemma of finding an adequate solution to this problem. It has been a very costly business ever since the war, beginning with the Hailsham report, to obtain work in the depressed areas.
I made a personal approach to the Prime Minister about private enterprise zones and received an immediate answer within 24 hours. It pleased the county council and the Hartlepool district council when an enterprise zone for that area was added to the list. I have also received co-operation from the Minister with regard to boundaries. Although I was not successful in persuading him of my case, I accepted the strength of his argument. The potent factor was that this was a high-cost job provision. That must be borne in mind when we consider the armoury of aids to the regions. I apologise for intervening, but I do so only because my constituency has been mentioned. There is understandable and reasoned anxiety about existing industries in the enterprise zone areas. I do not intend to name companies, because that is not the way that I wish to proceed. I deal merely with the principles and the general evidence and urge the Minister to give some indication, which he has more than partly given, that monitoring must accompany a new idea such as this. My experience is that even in the short term there are fly-by-night developers, such as the high-risk entrepreneurs, who love to play with other people's money and who attempt to produce employment in constituencies such as mine where there is 25 per cent. male unemployment and 2,000 young people without a full-time job. To me, such people are more nauseating than muggers or drug pushers because they deliberately throw a spanner into the efforts and work of Ministers. I know from experience that certain people have talked glibly of developments worth millions of pounds and that within months they have skived off and left a trail of company debris behind, not to mention £1½ million of unsecured loans. Small companies have been crippled by such action. I know of a company that moved only eight or nine miles into an enterprise zone and told the workers "Unless you travel here, you are finished." That has been followed by a change in the rate for the job. As a result, low income workers with transport problems are in understandable difficulty. An employer can move only a short distance and enjoy the benefits of the rent moratorium, the rate rebates and all the rest that goes with the frills of the enterprise zone initiative. A company in my constituency closed with £1 million worth of engineering orders. A nationalised industry closed it, yet another company was given £¼ million of public money from British Steel Industries Ltd., from the National Westminster Bank, from the English Industrial Estates Corporation and the county authority. I shall not identify the company in the House, but I shall write to the Minister about it because what I have to say is serious. The company received more than £200,000 without any examination of the entrepreneur's previous background, or where he had been in the past five years. The House might think that incredible, but it happened because I have had the officers of the lending bodies before me and they have had to admit it.The hon. Gentleman gave a list of names of the institutions which supported the company, including a bank and a county council. Is he saying that the representatives of the bank and the county council did not examine the facts, or were not able to ask the kind of questions that would give them an impression of the status of this man?
Order. The hon. Member for Hartlepool (Mr. Leadbitter) should not be led astray. If we go down that road we shall be led far away from the Lords amendment.
I say no more than I have said, Mr. Deputy Speaker, because I shall be writing to the Minister.
I can confirm that there was no knowledge of the past professional background over a period of five years of the person who benefited. It is important to bear that in mind. I say this with some feeling because in the House there are hon. Members on both sides who have spent much of their public lives trying to solve the problem of unemployment in depressed areas. The examples that I have given are but a few. They emphasise the need for the Government to say to those responsible for enterprise zones that it is now time to monitor and to set down guidelines. Existing industries must not be put at risk. Companies should not be allowed to move short distances, discarding employees and taking on others at less cost because of the benefit of a new deal. Many of us are anxious to help the Government. Harsher criticisms could have been offered to the Minister on the subject on enterprise zones than those that I have offered. However, we have the enterprise zones and it is our job to try to make them work. Therefore, the Minister will have the full support of hon. Members so that together we can make the enterprise zones more viable and less of a worry to other industries.Question put and agreed to.—[Special Entry.]
Lords amendment No. 31 agreed to.
New Clause E
Information For Purposes Of Block Grant
Lords amendment: No. 13, insert the following new clause—
"E. — (1) The Secretary of State shall have power to require any information submitted to him by a local authority under section 65(1) of the Local Government, Planning and Land Act 1980 (information for purposes of block grant) to be certified under arrangements made by the Audit Commission established under Part III of this Act.
(2) The said section 65(1) shall have effect with the substitution for the words "the total expenditure to be incurred" of the words "the expenditure incurred or to be incurred" and as if section 4 above were included in the provisions there mentioned.
(3) Subsection (2) above has effect in relation to any year beginning on or after 1st April 1981."
I beg to move, That this House doth agree with the Lords in the said amendment.
With this we may take Lords amendment No. 32.
Subsection (1) of the new clause is designed to allow the present arrangements for the certification of block grant claims to continue under the audit commission. In the past, as the House will know, administrative arrangements have been made for the district auditor to certify rate support grant claims. This has provided the necessary independent check on the figures and has ensured consistency between authorities in the calculation of grants. I think that we are all agreed that consistency is of great value in this context.
The same can be achieved in future by providing for the audit commission to make arrangements for the certification of claims. We actually envisaged the certification being done by whoever the commission has appointed to audit the local authority's main accounts. That seems sensible, and the House would certainly agree that the Secretary of State should require a formal certificate for a claim for such significant amounts of central Government grant. That takes care of subsection (1) of the new clause. Subsections (2) and (3) correct a deficiency in drafting of section 65(1) of the Local Government, Planning and Land Act 1980 which was taken directly from regulations made under the 1974 Act, and which was not wholly appropriate to block grant. The opportunity has also been taken to extend the scope of section 65(1) to include the information required for the purposes of clause 4, which, if the Bill is passed, will be as much a part of the grant calculation as the sections of the 1980 Act referred to in section 65(1). In short, the amendment dots the "i's" and crosses the "t's" of a procedure that has already been accepted in substance. Therefore, I ask the House to agree to it. Amendment No. 32 is consequential on amendments Nos. 13 and 14, which I hope that we shall discuss in a few moments.I am grateful to the Under-Secretary of State for Wales for his short explanation, but we ought to consider the importance of the amendment first in relation to amendment No. 32. The Under-Secretary of State said that the amendment is consequential. It may be consequential, but it severely alters the long title of the Bill in an important way. I stress that, as did my right hon. Friend the Member for Manchester, Ardwick (Mr. Kaufman) earlier, when he was talking about the money resolution, because of the power of the House, and hon. Members who make up a Committee examining a Bill.
Were an amendment of this nature to be submitted by a member of the Committee, the Chairman, who would come under your authority, Mr. Deputy Speaker, and the Clerks advising him, would advise that that amendment was out of order. The amendment would not be selected, so it could not be considered. In certain circumstances, and with difficulty, the Government can introduce an amendment to alter the long title of the Bill, but it is done with great forethought. If one is alerted by an amendment to the long title of the Bill a row takes place about why it should be done and why the Government had not had the foresight to present the Bill properly in the first place with the proper title. However, in the other place, the Government seem to have complete immunity to introduce almost anything into a Bill and, in a cavalier fashion, amend the long title of a Bill subsequently. The amendment is drastic. According to the original long title, the intention of the Bill isThat is one thing, but as amended that will read"to amend the provisions relating to adjustments of the distribution of block grant".
That is wide and sweeping. It is necessary for the Government to amend the long title to achieve their objective. The amendment goes futher than the Under-Secretary described. Amendment No. 13 states that the provision shall have effect"to amend the provisions relating to block grant."
That gives powers to the audit commission, which is not yet in existence, to make arrangements for the presentation of information to the Government in respect of last year's block grant. Why is that necessary? An error or lack of foresight cannot be the answer because of the words in new clause E(2). The Bill uses the words"in relation to any year beginning on or after 1st April 1981."
That is understandable because the information relates to that year and the block grant can be determined for that year. The amendment substitutes the words"the total expenditure to be incurred".
That takes into account what happened in 1981 before the audit commission operated. The Under-Secretary said that the information was supplied by the district auditor. That may be true, but the suspicion is that local authorities do not submit the correct information to the Minister. I hope that the Minister will deny that vociferously, but there is scintilla of a suspicion. 6 pm The audit commission is a contentious body. Even though it has been watered down from its original concept, local authorities are suspicious that the commission could turn out to be "Her Majesty's Inspectors' Department for the Scourging of Local Authorities". Both Labour and Conservative authorities fear that. Why does the audit commission have to interfere with information supplied to the Department of the Environment in relation to last year's block grant? Why does the whole of section 65 of the old Act have to be amended to take care of that? Why is it necessary for the long title of the Bill to be amended in an underhand fashion in another place?"the expenditure incurred or to be incurred".
My right hon. Friend the Member for Widnes (Mr. Oakes) caught me out when he triggered my mind to an aspect that the Under-Secretary of State for Wales did not mention. We shall not vote against Lords amendment No. 13, but if the Government were serious in their intention to reduce public expenditure they would not press the amendment. I do not believe that Ministers have understood the financial consequences of the amendment. We are talking not about the local government audit service, but expensive private auditors, whose time costs a great deal.
They are probably members of the Tory Party.
They probably are members of the Tory Party, and perhaps not too worried about expenditure. A total audit and valuation has to be made for an effective certification of claims for block grant. Some auditors work on a £50 per day basis, at least, so it will cost a great deal of money.
I invite the Minister to explain where the money will come from. Will it be reckonable for rate support grant purposes so that only half comes from the ratepayers, or will it all come from the ratepayers? Let us be clear. We are talking of unnecessary expenditure, which the Government intend to ram down the throats of hard-pressed ratepayers. I hope that the Minister will reconsider the amendment. I accept that the wording in the 1980 Act is deficient, but I do not accept that the Minister has any right to introduce the provision before 1 April 1983. We are now well into the financial year beginning 1 April 1982. I dislike retrospective legislation, whether it is to clear up yet another blunder by the Government or whether it has more sinister purposes. I believe that the amendment is intended to clear up another blunder. I urge the Minister to reconsider Lords amendment No. 13. It will cost a lot of money. It will lead to claims taking longer. Perhaps that is why he agrees with the amendment. Perhaps he does not want block grant claims to be submitted on a timeless basis. Perhaps he wants another half-year system. If claims do not reach his Department in time, local authorities will not receive the money. How can the Government ensure that the proposal will not interfere with claims being submitted timelessly? I have read Lords amendment No. 32 carefully and I approve of it. I give it my unqualified support. It states:That relates to block grant. Clause 4 says:"leave out 'adjustments of the distribution of".
Neither on Second Reading nor in Committee have we made any secret of our abhorrence of everything that is in clause 4, which includes powers to adjust the distribution of block grant. I welcome amendment No. 32 wholeheartedly because if it is carried I shall raise a point of order asking that clause 4 be ruled out of order since its import will not be contained within the long title of the Bill. The amendment is entirely different from amendments No. 13 and 32 on which the Government had to resort to the subterfuge of introducing a second money resolution. The amendment changes the long title of the Bill in such a way as to eliminate the disgusting effects of clause 4 and the attempts to impose holdback. Therefore, I hope that the Minister will accept that amendment No. 13 is unnecessary and will cost a lot of money and that amendment No. 32 is the best thing that could have happened. I hope that he rejects everything that he said about clause 4 and withdraws it before the Chair has to rule it out of order."In subsection (6) of section 59 of the Local Government, Planning and Land Act 1980 (purposes for which the amount of block grant payable to a local authority may be adjusted under that section) after paragraph (c) there shall be inserted" the guidance and so on.
These fairly simple amendments have aroused unexpected and surprising debate. I shall deal with the points as they were made. The right hon. Member for Widnes (Mr. Oakes) made a great deal of amendment No. 32—the amendment to the long title—which is designed to cover amendments Nos. 13 and 14.
The hon. Member for Blaydon (Mr. McWilliam put his finger on the reason why subsection (3) of the new clause goes back to 1 April 1981. The reason has nothing to do with the audit commission. There is a drafting error in the 1980 Act in section 65(1), which is about the provision of information and it is because of the drafting error that we must have this change. Amendment No. 13 affects subsections (2) and (3) of the new clause, and the change that we are envisaging will enable not just total spending, but current expenditure or any other item of expenditure to be considered. It was suggested that we might be casting aspersions on the reliability of the information provided by the local authorities. I assure the right hon. Member for Widnes that there is no suggestion that authorities might deliberately mislead the Department. Audit certification is necessary to ensure that all claims are consistent. I have already emphasised the need for consistency and I stress too the need for continuity. 6.15 pm The hon. Member for Blaydon referred to the cost of audits. My noble Friend Lord Bellwin said in another place that the total cost is less than £100,000. Considering the number of authorities involved, that is not too large a sum. I do not agree that the amendment will place further significant demands on local authorities. There are wide powers in section 65(1) of the 1980 Act to enable my right hon. Friend the Secretary of State to obtain information for block grant purposes. The Lords amendment would oblige local authorities to furnish expenditure statistics so that holdback can be calculated accurately. It was always envisaged that the conclusive calculation of block grant would be based on outturn figures and these will also be used for holdback. Since the clause will be as much a part of the grant calculation as are the sections of the 1980 Act referred to in section 65(1), it is only right that subsection (1) should be tidied up as the amendment proposes. I am happy to reassure the hon. Member for Blaydon that the cost of certifying grant claims will be relevant expenditure for rate support grant purposes.I am grateful for that assurance, but will the Under-Secretary tell us a little more about Lord Bellwin's estimate of £100,000? There are more than 400 local authorities and £100,000 would not pay for much auditors' time. I estimate that it works out at about half a day's work by a partly qualified assistant for each local authority, which would be less than adequate in the light of the duty that the House is about to place on the audit commission.
My noble Friend Lord Bellwin said that at present the audit of rate support grant claims costs less than £100,000 for the whole country and that he did not expect that the cost would be significantly, if at all, greater in future. I cannot add to that or provide details of the auditors' time involved.
Block grant certification payments will be made by local authorities. Clause 22 makes it clear that the audit commission must undertake grant certification work if required by a local authority and that it is to charge the authority concerned. That seems reasonable since certification is a service to the body that receives the grant.Question put and agreed to.
Lords amendment No. 32 agreed to.
New Clause F
Block Grant For Receiver For The Metropolitan Police District
Lords amendment: No. 14, after clause 4, after the words last inserted, insert the following new Clause F—
"F.—(1) Schedule (Block grant: Receiver for the Metropolitan Police District) to this Act shall have effect for enabling block grant to be paid to the Receiver for the Metropolitan Police District.
(2) This section has effect for any year beginning on or after 1st April 1983."
I beg to move, That this House doth agree with the Lords in the said amendment.
With this amendment it will be convenient to take Lords amendments Nos. 25, 27 and 29.
The amendments and the schedule which accompanies them deal with a point that was raised originally by my hon. Friend the Member for Hornchurch (Mr. Squire) and to which we responded as positively as we could. We said at that time that we would see whether it was possible to work along these lines. Subsequently, we had the unanimous approach of the London Boroughs Association. Indeed, an amendment was tabled in the other place on behalf of the London Boroughs Association and was also supported by representatives of the Association of District Councils. It is a sensible provision to ensure that rating authorities in the Metropolitan Police district do not suffer unexpected losses or gains as a result of the changes in the Metropolitan Police's expenditure over which they might have no control. The London Boroughs Association has pressed the provision strongly. My hon. Friend the Member for Hornchurch left us in no doubt about where he stood on the matter and urged this course on us. After due consideration we thought it was the right course to take. I apologise to the House if the amendments are somewhat lengthy but the principle is simple. It enables block grant to be paid direct to the receiver.
I should like to welcome the amendments because, as the Minister said, they tidy up an anomaly. They are sensible amendments. I am one of the few hon. Members taking part in our discussions today who was not on the Standing Committee of the Local Government, Planning and Land (No. 2) Bill. Therefore, I do not know why section 64 and schedule 11 of that Bill proposed to pay Metropolitan Police block grant to the rating authorities. It was not a good idea. It breaches the basic principle that block grant should be paid to the authorities providing the service. It undermines the accountability of the local authorities concerned because they are receiving funds for services that they are not providing. More importantly, it undermines the accountability of the Metropolitan Police. I am always arguing that we should be increasing the financial accountability of the Metropolitan Police. I have always been unhappy that the receiver of the Metropolitan Police can precept on the authorities in the Metropolitan Police district who must pay over the money that he requires. That has always seemed to me to be taxation without representation.
Apart from the problem of accountability, there are serious accounting problems to which the Minister referred. Local authorities in the Metropolitan Police district have to make some estimate in their budgets of the amount of block grant that the Metropolitan Police will receive. It is a difficult operation given the current ways in which block grant is calculated. It depends now to some extent on the decisions of the Secretary of State. It depends to some extent on the authority's own spending and on the spending of other authorities. Therefore, the calculation will be changing throughout the period of the grant year. It cannot be definite until the grant year is completed. If a local authority takes a pessimistic view about the level of block grant it will levy a higher rate than it should in order to protect itself against unexpected demands. That would harm the ratepayers and would be against the policy of rating as tightly as possible, for which the Government argue. If an authority takes an optimistic view it runs the risk of having to cover an underestimate from its reserves. If those reserves are not sufficient, the authority will now have to go to the Secretary of State and ask for borrowing powers. In other words, it will be placing itself in jeopardy as a result of factors that are outside its control. As the Minister said, the London Boroughs Association has pressed amendment No. 14 for some time. I am glad to hear that the Government are accepting the amendments because they tidy up sensibly an anomaly which should never have existed, and remove practical problems. I welcome the amendments.I introduced the amendment in Committee and I should like to congratulate my right hon. Friend the Minister and the Government on the action they have taken. I do not intend to make a long contribution. The reasoning behind the amendment was given in Committee and has been reiterated today by the hon. Member for Woolwich, East (Mr. Cartwright). I should like to use a football vernacular which I have used in the context of more than one amendment on this subject in the past two or three years. I feel like the man who thinks he has scored a goal, has been ruled offside and then had the decision changed by a friendly Russian referee who has allowed the goal to stand after due discussion and the odd protest. I welcome that goal warmly.
All the local authorities in the greater Metropolitan area will appreciate the amendment. It will simplify what is still a complicated procedure, but to the extent that it makes it marginally less complicated we should welcome it and I am sure that they will.I do not pretend to understand the depths of complication that the hon. Member for Hornchurch (Mr. Squire) explained so carefully in Committee, but, like everyone else, I welcome the amendment.
The problem of the accountability of the Metropolitan Police has been raised in a small way in our debates on the Bill. Earlier speeches have referred to the complications and to the guessing game that individual local authorities now have to play to try to find out what the eventual grant will be. But the guessing game has coincided with much wider arguments about how one achieves accountability for a large amount of money from an organisation that is provided with money through the rates, and that so far has been wholly unaccountable except in the sense that from time to time we can ask the Home Secretary questions about it in the House. The London borough of Lewisham, part of which I represent, did a great service to the public 18 months ago by threatening—it did not carry out the threat—that it would not pay its precept to the Metropolitan Police under certain circumstances unless it, Lewisham, achieved a great deal more accountability than it had until then. For Lewisham, that was a perfectly reasonable thing to do. In 1978, because of the sheer obstinacy of the Commissioner, Sir David McNee, we were subjected to a great deal of physical damage and harassment as a result of a National Front march. The march could have been avoided if the Metropolitan Police had been more accountable and had advised the Home Secretary that the march should be called off, as the Home Secretary has been advised in similar circumstances ever since. The people of London saw what happened in Lewisham in 1978, and finally the Metropolitan Police came to their senses and realised that on balance National Front marches had to be banned. The amendments have come to us because the Government have been introducing more and more centralised and complicated ways of paying rate support grant. Every time they make a change they find that they have made a mistake and so they have to introduce an amendment in Committee. Every time they do that they find that they have made another mistake and so they have to introduce an amendment on Report, and so the process continues until we are called upon to consider Lords amendments. We should not imagine that we are at the end of the road and that the Government now have it right. Our experience since the 1980 Act is that the Department of the Environment's legislation throws up more anomalies than it solves, and so it will be with the Metropolitan Police. 6.30 pm The Government have acceded to a reasonable request from the London Boroughs Association, which was supported moderately and eloquently by the hon. Member for Hornchurch (Mr. Squire). The Government have responded by producing this "solution". If the Government are to pay the block grant direct to the Metropolitan Police, that is even more reason for saying that that has not satisfied financial accountability. I suppose that the audit commission might be able to investigate whether the Metropolitan Police needs all the riot shields that it has and then to make a judgment on whether it is getting value for money from the riot shields, fire hoses and water cannon that it buys. The audit commission might have a right to do that but it must go beyond that. The House must establish a system under which the Commissioner of Police of the Metropolis and the receiver of the Metropolitan Police must come before democratic representatives, whether that is under the aegis of the GLC, as some of my colleagues on that body want, through the London Boroughs Association, or through the procedures of the Public Accounts Committee in the House. Under such a system they should be called on to provide far more answers than they are willing now to give. I am talking about the money that has been spent, and especially the policies that underpin their demands for money to be made available. Financial accountability on its own is meaningless. There is no point in asking "How have you spent the money?" The tone of the Bill is that it is silly to put in auditors merely to ascertain whether there is a receipt for a cheque that has been paid out. The thrust of the Government's policies within the Bill is what the Government call value for money. We are talking about value for money audits. We have seen how local authorities are to be subjected to value for money audits. How does the Minister propose that the Metropolitan Police is to be subjected to a value-for-money audit under the new block grant direct payment arrangement which is laid in the amendment? If the Minister proposes to change the system, he should not present the amendment to the House by saying "This is a small amendment that was agreed to in another place to help this body". He should explain what impact the new audit commission will have, with its private auditors—Mr. Ian Hay-Davidson, Mr. Arthur Anderson and other great and wonderful individuals who will be brought from the Conservative Party and other parties, but substantially from the Conservative Party—in providing value for money for the great public services of Britain. How does the Minister propose that the Metropolitan Police will be subject to value-for-money auditing? When a service such as the Metropolitan Police is comparatively well funded compared with education or housing, and when the money is flowing fairly easily because the Government have decided to make a priority of the police, there is a great danger that the money will start to be wasted. For example, there may be a desperate attempt to spend everything by 1 April to ensure that funding will continue at the same level. The police are comparatively well funded and they should be under stronger rather than weaker scrutiny exactly for that reason. The Minister has explained the effect of the Lords amendments and we all welcome them, but I want to know rather more. For example, I want to know whether the Minister is willing to apply to the Metropolitan Police the stringent value-for-money audit that he says he wants to apply to so-called overspending local authorities such as the Greater London Council and the London borough of Lewisham. Will it be one law for the Metropolitan Police and another for Labour local authorities? That is the question that I want the right hon. Gentleman to answer. The Metropolitan Police is just as capable of overspending as local authorities.The amendment is good sense and long overdue. There may have been some unease about the manner in which the Metropolitan Police received its money partly by direct grant and partly by means of a precept. The amendment comes before us because of the unhappy experience of local government over the past two years, which has been the direct result of the Government's financial policies and methods aggravating a difficult situation. No more money will find its way to the Metropolitan Police than that which it already receives. However, the money will be funded to it more directly. It should be possible to be much more precise about who is responsible for the various elements within the total bill. Nothing is more irritating to a local council than to be responsible for what it has spent and to be answerable for what it has not spent.
Every hon. Member who has participated in the debate has had only good things to say about the police generally but, as my hon. Friend the Member for Lewisham, West (Mr. Price) said, the raison d'etre of the Bill is not merely value for money but accountability. The Minister must explain to the House the system that he will operate to ensure that every penny that is provided from the public purse, centrally or locally, is accountable. The amendment is necessary because of the uncertainty and instability that have faced local government over the past two years. The amendment will mean additional work for the Government and additional bureaucracy, but it would be churlish not to acknowledge that the Government have responded to the pressures from the LBA and all the metropolitan authorities. I understand that there has been some opposition from one or two authorities that are covered only indirectly by the London boroughs. I hope that the Minister will say something about that. Those people have been trying to act on behalf of their ratepayers and they must feel aggrieved, or perhaps they misunderstand what is happening. However, the Opposition appreciate and welcome the Lords amendment.I shall pick up the final point that the hon. Member for Edmonton (Mr. Graham) made about one or two authorities that were concerned about the changes. One example has been drawn to my attention recently, which involved presentation. The previous presentation was not the most helpful. The Metropolitan Police grant was debited against the borough rate and the gross amount of Metropolitan Police expenditure was shown separately. The effect is that the same net result is produced, but it is misleading. That is not the best way to act. The authority was concerned about the changes involved, but, with that one exception, the change has universal support.
I now turn to the remarks made by the hon. Member for Woolwich, East (Mr. Cartwright). The background to the system that we are changing is that previously things were done in the way in which they had always been done. As we are a Government who never make a change for the sake of making a change and who are always anxious to move with the grain in society, we left the arrangement as it was. It is now clear, on a logical analysis, that that was not the most sensible way to act. Therefore, after we had listened carefully to the arguments we were persuaded that the changes should be made. The hon. Member for Lewisham, West (Mr. Price) took me a little wider than the issue of the payment of block grant direct to the Metropolitan Police. I noted his words carefully when he said "We cannot leave it there." I thought that he never did. The hon. Gentleman then gave a short dissertation on the subject of the accountability of the Metropolitan Police. He asked whether there was to be one law for the Metropolitan Police in terms of value-for-money auditing and another for local authorities. The answer is "No." The Metropolitan Police will be the subject of proper value-for-money examination auditing, not under the audit commission. The list of bodies that will be covered by the audit commission includes combined police authorities but the Metropolitan Police, with the police authority being the Home Secretary, must come under the Comptroller and Auditor General, and are subject to his rigorous value-for-money studies. There are certainly no tighter regimes.Question put and agreed to.
Lords amendments Nos. 25, 27 and 29 agreed to.
Clause 5
Establishment Of Audit Commission
Lords amendment: No. 15, in page 5, line 15, after "shall" insert ", after the like consultation,"
I beg to move, That this House doth agree with the Lords in the said amendment.
Amendment No. 15 provides that the Secretary of State must consult the organisation specified in clause 5(2)—the local authority associations, the accountancy and the employees bodies—not only about the membership of the commission but about the chairmanship and the deputy chairmanship. The chairman and deputy chairman must be members of the commission. I have no doubt that there would be consultation with those bodies anyway before the appointments were made. These are extremely important posts. We accept that it should be made clear in the legislation that appropriate consultation must take place before the chairman and his deputy are appointed. Therefore, we were happy to respond to Opposition pressure in the other place for an amendment to this effect to clause 5.The Minister fairly said that the Government had responded to pressure from the Opposition in another place. That opposition was exactly the same as the opposition expressed to the Minister and his colleagues in the House. There is no difference. Opposition Members had a constant battle about consultation. There was not much of a concrete response in Committee. However, the Government said that they were willing to consider the matter. Somehow, the Minister was unable to concede to Opposition Members in Committee that the force of the arguments that we deployed merited some concessions.
We always need a little time to think about that.
If what we have tonight is the product of a little time, I hope that it gets a lot of time in the future.
I, too, welcome the sinners back from repentance. I am pleased that they have come round to consulting the bodies that are laid down in the clause about the chairman, deputy chairman and other members of the commission. I still think that the proof of this stodgy pudding will be in the eating.
I notice that the words "Conservative Party" do not appear among the bodies that are to be consulted before the chairman of the audit commission is appointed.—[Interruption.] I shall not table an amendment, but if the Minister tabled a manuscript amendment to insert the words "Conservative Party" that might accord more with reality. It is right that the Government have tabled the amendment. Who eventually becomes the chairman and deputy chairman of the audit commission will decide whether it is a credible body. It is extremely important that the Government get this matter right and do not go in for a "jobs for the boys" policy, as they recently did over health authorities. If the health authorities are any guide to the mood that the Conservative Party is in for quango appointments, it augurs badly for the audit commission. I hope that the Government take great care, not only with the chairman and deputy chairman, but with all the other members of the commission, to keep at arm's length from their mates in the private accountancy firms. I hope that they try to arrive at some names for chairman and deputy chairman that command general assent across the House and throughout the whole of local government. What the Government have recently done in the Health Service has been extremely damaging in its impact on people's ability to run that service. I have put down that marker with no real confidence that it will be adhered to. I hope that the Government will take it on board. To that extent, the amendment is welcome.Question put and agreed to.
Clause 20
Studies For Improving Economy Etc In Local Authority Services
Lords amendment: No. 16, in page 16, line 25, after "services" insert
"and of other services provided by bodies whose accounts are required to be audited in accordance with this Part of this Act,"
I beg to move, That this House doth agree with the Lords in the said amendment.
With this we shall take Lords amendments Nos. 17, 20, 21 and 24.
The amendment will ensure that clause 20, which refers only to "local authorities", encompasses all the other bodies listed in the original clause 6 which, although not encompassed by the term "local authorities", come within the ambit of the audit commission. They include port health authorities, combined police authorities, fire authorities, internal drainage boards and so on. The amendment is self-explanatory.
Amendment No. 24 appears innocuous. The words to be left out include:
Clause 20 is titled:"section 20 above shall apply in relation to Passenger Transport Executives and the London Transport Executive".
If the Minister is arguing that studies should be undertaken of passenger transport executives, the audit commission is the wrong body to do so. It does not have the necessary expertise. In Committee we objected to the wholesale introduction of studies, and the matter will come up again later. It appears that the Minister has overstepped the mark. A more appropriate body should look at the efficiency of transport undertakings. I need hardly remind the Minister of the problems that already exist in some of the undertakings. I should hate to think that a body composed largely of accountants appointed by the Minister and his hon. Friends would be asked to attempt to make a helpful study to produce the desired effect. I invite the Minister to reconsider this."Studies for improving economy etc. in local authority services".
There is nothing sinister about the omission of lines 40 to 44 on page 18. They become redundant because of the other amendments. The hon. Member for Blaydon (Mr. McWilliam) widened the issue to cover the question of the inclusion of clause 24. It is appropriate for the audit commission to cover passenger transport executives. There is no change in our attitude.
Question put and agreed to.
Lords amendments Nos. 17, 20, 21 and 24 agreed to.
Further consideration of Lords amendments adjourned.— [Mr. Brooke.]
To be further considered tomorrow.