My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.

My Lords, in so far as deliveries by the Post Office are concerned this falls within the day-to-day managerial responsibility of that organisation. Your Lordships will be aware that the Government will be seeking from Parliament powers to enable charities to deliver Christmas cards, for which there would be no fixed rate. At this stage I think the House would agree with me that we should wish to the noble and learned Lord who sits upon the Woolsack all the good wishes of your Lordships' House on his birthday today.

Hear, Hear!

My Lords, while certainly joining in the last part of what the Minister has to say, may I ask him whether an exception such as special Christmas stamps is hardly to be construed as the day-to-day work of the Post Office? I should have thought it was an annual one. May I move on from that and ask him whether the objection to cheaper stamps if letters are posted early obviously does not come from the users?—any such objection comes either from the Government or the unions.

My Lords, in answer to the noble Baroness's first question I think the Post Office does distinguish between a day and a year—at least, I hope they do in the delivery of personal and business mail! So far as the second part of the noble Baroness's question is concerned, I regret to say that I understand that the problem over the concessionary rates, which were mentioned by the noble Baroness, is that they were vetoed by the unions.

My Lords, is the Minister aware that I was afraid that that was the case? It happened last year. Is he aware that it happened as long ago as in 1951 over Olympic stamps? May I ask him whether, in all seriousness, this matter could be looked at again, because quite obviously it could mean the selling of many more stamps?

My Lords, this matter will be looked at again, but so far as the precise arrangements are concerned the Charities Commission is indeed in touch with the Government so far as the delivery of mail of this type is concerned in the future. I can assure the noble Baroness that this is being looked at, but it is part of the normal management matters for the Post Office.

My Lords, would not any competently and commercially-minded business seek to spread the load in the way suggested by the noble Baroness, and also maximise earnings in this way? As it is the taxpayer who has to make up the deficits on the postal side of the Post Office, has not Parliament some right to urge this rather strongly on the management of that corporation?

My Lords, Parliament may urge, but I would once again stress that the final decision has to be taken by the Post Office. So far as my noble friend was concerned about the generation of traffic, the concessionary rate would need to generate sufficient additional traffic to offset the lower revenue from each item.

My Lords, could the Minister say on what grounds the unions vetoed this proposal?

Possibly on another occasion, my Lords.

Why?

Answer!

I think, my Lords, that that is another question.

My Lords, does my noble friend know whether the Post Office are planning again this Christmas to spend many thousands of pounds on expensive television advertising exhorting people to send their friends Christmas cards?

My Lords, I was not aware of that, but if my noble friend would care to put down a Question perhaps he might find me or somebody attempting to give him an Answer.

My Lords, may I ask the Minister whether he could draw to the attention of the Post Office that members of unions are not necessarily anti-charities? I am quite certain they are not. Would he bring it to the attention of the unions of the Post Office that it is charities who suffer very seriously indeed, because most of them now have Christmas cards which are in aid of their charity and they will suffer considerably? May I ask the noble Lord whether he will bring this to their attention?

My Lords, I do not think that this House, or indeed the Government, can bring various points to the attention of the unions, but I am sure that the noble Baroness's comments will be read by the Post Office, and I have no doubt that the Post Office management, in discussions with the unions, could and will take note of my noble friend's comments.

My Lords, does the noble Lord regard the question of what the union's objection is as something for which he requires prior notice because of the fact that the reasons are not obvious to him?

I would require prior notice, my Lords. The reasons are extremely complicated, but if the noble Lord would put down a Question we could go into them on another occasion.

My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.

My Lords, the first tenders for this important programme have already been let. Further tenders will be let progressively over the next few years.

My Lords, while British air defence is dependent on some 80 fighters, may I ask my noble friend whether he agrees that it is vitally important that we should make the maximum progress in the modernisation of the radar and control network? In accord with that view, may I ask him to consider whether we could speed up the bureaucracy of the Property Services Agency to the maximum degree and put as much work as possible to civil contractors, who may be able to build speedily and therefore more cheaply and bring about the operational requirements which are so urgently needed?

My Lords, the PSA is something of a soft target in parliamentary debates, particularly defence debates. However, while a number of people feel that the PSA is unnecessarily bureaucratic, it is extremely difficult to get any evidence that that is in fact the case. I think I can reassure my noble friend that on the whole the practice would be to use local contractors as being the most cost-effective way of doing the job. As far as recognition of the urgency of the matter is concerned, I would make two further points. First, it has not been possible to get on as fast as one would wish until the tenders were let for the equipment that will go into these establishments, and my noble friend will be aware that, happily, a British consortium won the large contract for this equipment just before the Farnborough Show. Secondly, in recognition of the fact that this is an urgent programme, the work services and other contracts have been exempted from the moritorium which regrettably the Ministry of Defence have placed on new contracts.

My Lords, while welcoming the fact that many of these contracts may be put out to private contractors, may I ask the Minister to do what he can to ensure that all other minor works at RAF stations are put out to private contract as well as to the PSA?

That is a different question, my Lords, although it is a question, as I said, that crops up on a number of occasions. There should be no misunderstanding about this. I think it is likely that all these contracts will be put out to private contractors. I am not aware of a suitable Government contractor who would undertake the work, anyway, certainly so far as this work is concerned.

My Lords, can the Minister assure us that the British consortium to which he referred will arrange for the manufcature of this equipment to be in the United Kingdom?

I do not think I could give an assurance of that nature, my Lords; that would be a matter for the consortium and the manufacturers. But it is predominantly a British consortium and I would imagine that the basis on which they went into the tender was therefore a British manufacturing base.

My Lords, is my noble friend aware of the estimate that at least 70 per cent, of the equipment in connection with that tender will be made in Great Britain? Is he further aware that wherever these networks have been built in the free world, it has always been the work services and local post office which have held up progress, and therefore he might have been wise to have let the works contract even before letting the contract for the electronics that go inside? Will he therefore try to make up for lost time in view of the delay of 18 months while these tenders have been considered?

My Lords, what I tried to explain to my noble friend is that there is a difficulty about letting the works services until one knows the exact dimensions of the equipment one intends to put inside, and clearly one does not know the exact dimensions of the equipment until one has had the contract. I can confirm that, so far as the data processing equipment is concerned, it is my understanding that 70 per cent, of the equipment is British; but I have to remind my noble friend that regrettably some of the primary radar equipment will not be made in this country and that outside contractors have been successful.

My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.

My Lords, work is continuing in the Nine on the basis of M. Thorn's report and the principles set out in the Venice Declaration, which remain valid. Contacts with all interested parties will be maintained. The Nine remain determined to make a constructive contribution towards a settlement.

My Lords, may I press my noble friend to add to that somewhat negative reply by asking him, first, whether he can confirm that M. Gaston Thorn, on his return from his fact-finding mission in the Middle East, said that the second stage of the European initiative should be to explain how it is envisaged that the Palestine Liberation Organisation could join the negotiations for a peace settlement? And in more general terms, may I ask my noble friend whether he does not share the view that there is a real risk that unless there is a follow-up, and a positive one, fairly soon to the very welcome Venice Summit Statement made by the Community, if need be independently of the United States, the words used on that occasion are bound to have an increasingly hollow ring in the ears of moderate Jewish and Arab opinion which exists in far larger numbers than many people realise, and at the same time is bound to encourage extreme views on both sides?

My Lords, M. Thorn's mission has only just been completed. The results of his discussions are still being assessed, and it is too early to say what the next step will be. As for the position of the PLO, to which my noble friend referred, it is a significant element of Palestinian opinion, and it is not I think realistic to suggest that a settlement can be achieved without some participation from it.

My Lords, will the noble Lord not accept that it would be extremely unfortunate if this European initiative were in any way to confuse or undermine the Camp David arrangements that are already under way?

My Lords, I entirely agree with the noble Lord. The European initiative is designed to run in parallel with the Camp David process.

My Lords, following on from what the noble Lord, Lord Byers, has said, I should like to press the noble Lord to answer the question of whether it would not be better to give every support to the Camp David process and the Camp David signatories, since the United States, Israel, and Egypt have made it quite clear that they do not want a European intervention. Would it not be more productive to allow this process to continue without any further interference, especially at a time when the situation in the Gulf is as alarming as it is?

My Lords, the purpose of M. Thorn's recent mission was of course to determine the views of the various participants to the conflict in that part of the world, and I would not at all agree that this precludes progress on the Camp David process.

My Lords, are we deluding ourselves if we think that the European Community has a magic formula for success or progress in resolving the Middle East conflict? Surely we should still stick to the American views in this area.

My Lords, of course I agree that the European Community has no magic formula in this matter, but the Community is now a powerful political force in the world, and I believe that it can make an effective contribution on this problem.

My Lords, may I ask the noble Lord again to consider the position very seriously? Is he aware that the action that is being taken at present with regard to recognition, directly or indirectly, of the PLO cannot possibly be accepted, particularly in view of the fact that the PLO is continuing to state that it is out for the destruction of Israel? —and any help, in the nature of recognition of the PLO, is obviously a stab at Israel itself. May I ask the noble Lord to realise that while from time to time many arguments have been used to the effect that the main and important subject in so far as peace in the Middle East is concerned is Israel, present circumstances will, I think, show to the world as a whole, and to us in particular, that that is not the case and that Israel has nothing at all to do, for example, with what is happening at present. In those circumstances, will the noble Lord please revise his attitude towards the situation?

My Lords, the noble Lord has on many occasions in your Lordships' House complained about what we propose in this matter, but I would say again to him that a unilateral solution to this problem is not possible. We believe that it is necessary to take account of the views of all the interested parties.

My Lords, are not the Government aware that there is a strong section of opinion that feels that the Camp David process has slightly run into the sands (if your Lordships will excuse a metaphor) because the Palestinians have to all intents and purposes been excluded from this? Is the noble Lord not aware that for Israel to survive in the long term and in peace a solution must be found with the Palestinians, who at present seem to be represented by the Palestine Liberation Organisation, whether we like it or not?

My Lords, it is true that the Camp David process has not of late made as much progress as we would have hoped, but it is far from dead. Certainly what my noble friend said in the remainder of his supplementary question is true.

My Lords, is it not undeniable that the European Community has at least as great a moral obligation, and at least as many vested interests, in seeking a workable and peaceful solution to the problems of the Middle East as has the United States? Why should we hang back in trying to further this initiative, bearing in mind in particular that President Sadat has said that he would welcome a European initiative in parallel with the Camp David one?

My Lords, I think that the noble Lord is reinforcing what I have said; namely, that the European initiative should run in parallel with the Camp David process.

My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.

My Lords, in order to ascertain average fuel prices paid by industry, the Department of Energy conducts a quarterly survey of some 900 large industrial consumers. The results of this survey are published in the department's statistical bulletin Energy Trends. The department obtains from the British Gas Corporation the average unit price realised in new and renewed contracts, and, on a quarterly basis, the volume of gas sales to industry. These also are published in Energy Trends, together with a gas price index.

My Lords, I am grateful to the noble Earl for his Answer. Will he recall that he gave an undertaking to me that there would be a proper monitoring process? May I ask him whether it is being undertaken, and whether it has not been handed over to the CBI?—because that would perhaps be unwise, and even unfair, since it would still leave him in a position to question the facts, as he has been doing in the past. Is the noble Earl aware that not just the paper industry, but 10 or 12 major manufacturing industries are now convinced that the high prices charged in this country for gas, as against those charged in other countries, are a serious impediment to the competitive position and in many cases represent the difference between profitability and non-profitability? In view of the urgency of this matter, can the noble Earl tell me when this exercise will be complete?

My Lords, with regard to the first part of the noble Lord's supplementary question, it is because the CBI has been anxious along the grounds expressed in the second part of the noble Lord's supplementary question, that at the NEDC meeting on 6th August it volu-teered to collect more reliable price data in its view, so that the discussion could begin from common assumptions. My right honourable friend the Secretary of State welcomed that. Nevertheless, as I said in my initial Answer, the department has of course its own monitoring service, and we shall now be able to compare the two.

My Lords, is it not a fact that the gas industry is making an enormous surplus every year?

My Lords, the Government have been criticised for adding to inflation by putting up energy prices—

Hear! Hear!

but despite the chorus of "Hear, hear", I am afraid I must say that that is an entirely false assumption, for the following reasons. Unless energy prices are related to world market clearing levels, effectively a subsidy is being provided for them. If a subsidy is being provided for them, it will have to be paid for by the taxpayer in one form or another, and that will add to inflation.

My Lords, will the noble Earl please answer my question? It was as follows: Is it not a fact that the gas industry is making an enormous surplus year by year?

My Lords, the gas industry is certainly not making an enormous surplus on gas. Nevertheless, gas is an expensive form of energy, and naturally the nation as a whole benefits from that price.

My Lords, is it not a fact that the gas industry is making a profit of about £450 million a year?

My Lords, I would hope that the gas industry would soon make more profits than that.

My Lords, is it not true that today the cost of gas is not based on any economic standards at all, but is based entirely upon the decision of the Government to raise the price of gas? Would not the noble Earl also agree that there are in the country many industries that suffer very gravely from this rise in the cost of gas? These are the energy-intensive industries. Would the noble Earl not agree that this has nothing to do with the question of equating the cost of energy throughout the whole sector?—because it is impossible to equate the cost of energy.

My Lords, there is a sharp difference of view between the Government and the noble Lord, Lord Wynne-Jones, and indeed between his view and that of the Governments of most of our competitor countries. In the view of nearly all Western Governments you cannot dissociate the clearing prices of gas from the clearing prices of oil. Both are highly valuable national assets, and to sell either asset at below its market clearing level is denying the country, which in the long run owns these assets, the benefit of them.

But, my Lords, would not the noble Earl concede that current energy pricing policies account, at least partly, for so many of our best exporting companies finding it increasingly difficult to compete against countries in which energy is much less costly?

My Lords, the evidence available to my right honourable friend's department is that the averages of cost between this country and competitor countries are about the same. I concede to the noble Lord, Lord Rochester, that some of our competitor countries had negotiated contracts before the recent high increases in the price of oil, but the moment those contracts come to an end, as the Dutch are now finding, for example, the prices of gas have been rising fairly considerably. So I do not think that this country will find itself, overall, in an adverse competitive position.

My Lords, in case the noble Earl did not hear me before, may I ask him whether it is a fact that the gas industry is making a profit of about £450 million a year?

My Lords, if I am to give a precise figure as to the profits of the gas industry, the noble Lord, Lord Leatherland, will have to put down another Question; but I can say to him that the distinction between the profits of the gas industry and the national assets of this country really is a false distinction.

My Lords, may I ask the noble Earl whether he and the Secretary of State for Energy are familiar with the law of comparative advantage in international trade, according to which, if a country is fortunate enough to be able to produce gas much more cheaply than other countries, then it should be able to take advantage of that fact, either directly or indirectly, by selling more cheaply those things for which gas is an important element of production?

My Lords, I think the noble Lord, Lord Kaldor, has put the matter, as I would expect, very clearly. What he is saying, effectively, is that it would be good and desirable for British industry to have a subsidy on energy costs.

No.

My Lords, that is a difference of view between us.

My Lords, if I may make it clear, in economics the common term "subsidy"—and I am sure the noble Lord, Lord Robbins, will confirm this—means selling things below their cost of production. It is not a subsidy if you sell gas at a price which is very much greater than the cost, as has just been shown, and involves the gas industry having quite an inordinate profit.

My Lords, I would have thought that, to most people, if you sell an article in your possession at below what it will fetch an element of subsidy is involved.

My Lords, how can that be when there is a profit of £425 million a year? This cannot be logically correct.

My Lords, there is, of course, a profit, but the profit devolves to the nation.

My Lords, would not the noble Earl agree that the profit might be more usefully employed by manufacturing industry than by the nation?

My Lords, I think that would be true if my right honourable friend were convinced that British industry is in an adverse competitive position, but in fact that is not the view of my right honourable friend. I have to relay that: that is not his view. But I do have to say, as I have said in this House in the past—and I am well aware of the strong feelings in British industry as well as in Parliament about this issue—that industry all over the Western world is having to adjust most painfully to high energy costs, and it will not in any way help the competitive position of this country if we, too, do not make that adjustment.

My Lords, will the noble Earl bear in mind that while this argument is going on a number of our industries are being very severely damaged, and will he make sure that he comes to a policy decision very early in this matter?

My Lords, the Government have come to a policy decision, as the noble Lord knows; but, as I said, I am aware of the strong feelings about this issue, and I understand that the noble Lord, Lord Irving, has an Unstarred Question down for debate. To my great sorrow, I cannot be here myself, but my noble friend Lord Strathcona may be able to give the House rather more satisfaction on that occasion than I have been able to do on this.

My Lords, is the Government's proposition that a monopolist who fails to extract the maximum price from his monopoly position is subsidising the public?

No, my Lords. The Government are maintaining two propositions, which I can put very simply—and I have put them before, so I will try not to detain the House on them. Fundamentally, the national gas assets, as the noble Lord, Lord Balogh, sitting beside the noble Lord, is well aware, accrue to this nation. If they are sold at below their market clearing levels, whatever other advantages there may be, or the rights or wrongs of that policy, an element of subsidy will be given ultimately by the nation towards those assets.

My Lords, I think it may be helpful in more ways than one if I choose this moment to tell your Lordships that dinner will be available tonight. At approximately—and I repeat "approxinately"—seven o'clock, the Committee stage of the Local Government, Planning and Land (No. 2) Bill will be adjourned approximately for an hour.

My Lords, on behalf of my noble friend Lord Mansfield, I beg to introduce a Bill to provide for authorisation by the Secretary of State for Scotland of refusal to sell certain dwelling-houses, provided for elderly persons, under the Tenants' Rights, Etc. (Scotland) Act 1980; and to make minor amendments to that Act. I beg to move that this Bill be now read a first time.

My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.

I understand that the noble Lord, Lord Evans of Claughton, intended his Amendments Nos. 82A to 82J to come after Clause 45, and not after Clause 41, as printed in the Marshalled List. The first amendment before the Committee this afternoon, therefore, is Amendment No. 83.

moved Amendment No. 83:

Page 38, line 10, after ("may") insert ("after consultations with that authority")?

I must congratulate the noble Baroness on that very excellent introduction to this debate. It might actually help some of us who will be speaking on this side to cut down the length of our own speeches because it was so compendious and said so much that is absolutely right. I do not think any of us would want to leave this debate thinking that all is absolutely well in the field of local government and the level of spending. There is overspending; there is waste. I think we all know and can think of examples, even in our own authorities, where there is overspending and waste. Some authorities have a more responsible attitude to the ratepayers than others. But I suspect that the method which the Secretary of State has adopted to try to deal with what are a very small minority is really quite outrageous and contrary to the whole basis of democratic local government.

I gather that the Secretary of State said in his speech at Brighton this week that central Government are no more efficient than local government. I wonder what steps he is taking to put things right there. He seems to have chosen the pick of local government as the stalking horse to cover up what in my admittedly limited experience I can agree with the noble Baroness is an area where, on the whole, local government has kept within very considerable restraint—much better restraint than some public departments which are not supervised by elected people. Another quotation from the Secretary of State in the same speech which I find very difficult to understand is where he said that a massive shift of power from local government to central Government would be wholly incompatible with our wish to entrust people personally and directly with the maximum responsibility for their own lives. He could have kidded me!

Though the transitional legislation is not actually retrospective, it has a smell of retrospectiveness about it, in that local authorities which made a perfectly legal budgetary decision in April 1980 are now being penalised for passing above a totally unspecified amount, above a notional uniform rate of 119p about which they could not have known. Though not actually retrospective, that makes it almost impossible for local government to look ahead, plan ahead or to have any serious form of budgeting in the future.

This is particularly so when one considers that this Government and previous Governments have actually encouraged many of the authorities that they are now penalising to increase their spending on main programmes of education, housing and social services. Having taken that encouragement at face value and increased their expenditure, the authorities are now being clobbered for doing precisely what the Government asked and requested them to do. Those of us who are engaged in local government can hardly be blamed if we are more than a little confused and punch-drunk as a result of the way the present Government are behaving in this particular area.

It also is very difficult to understand how the Government have defined this and by what criteria or criterion they have decided to penalise the particular authorities to which the noble Baroness referred. There is a very good article in the Municipal Journal of 26th September in which the authors challenge the Secretary of State over the penalty assessment method. It appears to them—and they are experts—as it appears to many of us, that it is almost impossible to understand why the Secretary of State has picked on a particular 14 rather than another 30 local authorities. This uncertainty is no basis upon which one can organise sensible and progressive local government. All sides of the Committee should take this opportunity of challenging the enshrining in legislation of actions which are uncertain, arbitrary and grossly unfair.

I should like to accept the suggestion of the noble Baroness that we should have a fairly wide-ranging debate on her amendment, covering Part VI of the Bill as a whole. I was going to speak fairly extensively on my Amendment No. 100A, but it would be much better to do it now. I should like to start from the point that the noble Baroness mentioned as an aside—namely, that the 400 or 500 units of local government are responsible for an annual expenditure of no less than £14,000 million. That being so, I should have thought there was absolutely no question that in times of acute national economic difficulty somebody in the Cabinet must have the powers to control that expenditure in some way, if need be. It would therefore not be surprising if the Secretary of State was either using powers that he had or, if he was not satisfied that he had the necessary powers, seeking them from Parliament, as he is doing.

So there are two matters to be examined: the first is whether he really needs the powers. The second is whether he is seeking the appropriate powers. There were earlier this year three possibilities open to him: he could have accepted as a basis for further work the proposals offered to him by all three associations of local government together for doing what they all agreed needed to be done by him. Unfortunately, that agreed set of proposals was pushed to one side in terms which I have to say discouraged any of the associations from doing any further work on them.

Even if they had not been discouraged, it rapidly became impracticable for any more work to be done on them because all the manpower resources available in the associations were soon absorbed in working on the proposals of central Government which neither then nor since have been accepted by any of the associations. These consisted of the transitional scheme incorporated in Clauses 41 to 45 and the block grant scheme incorporated in Clauses 46 to 59. That is where we stand at the moment, with the best of the three possibilities regrettably abandoned.

The first question to ask before going any further is whether local government expenditure as a whole is so badly out of control that the Secretary of State needs to have and to exercise powers to bring it under control. The noble Baroness is perfectly right when she quotes figures—and I will quote a few more—to indicate that so far from being out of control, local government expenditure—all £14,000 million of it—is under control and has been for several years. In 1976–77 local government spent —0.3 per cent, of what was budgeted; in the next year it was —2.7 per cent, and the year after that —0.8 per cent. The year 1979–80 was exactly on target.

That seems a pretty precise piece of expenditure control. It is the result of the aggregate efforts of each unit of local government. If there were serious signs that things were going awry this year, it would be a different case. But the indications are such that all the Secretary of State has had to do, apart from dealing with these 14 local authorities—and I will come on to that in a moment—is to hold back and not cut out £200 million of the £14,000 million. There is a measure of caution and control there, but nobody can say that there is a massive overrunning by local government as a whole.

One could say: "Well, the national expenditure is, generally speaking, out of control and something has to be done about it. When local governments are spending £14,000 million they ought to be asked to contribute". However, if one looks at expenditure by central Government and local government since 1974, at a time when central Government expenditure has increased by 8 per cent., local government expenditure has fallen by 14 per cent. That shows fairly clearly where the trouble is occurring. If one takes another comparison and compares the state of affairs in local government with the state of affairs in some of the nationalised and publicly-owned organisations, looking back over six years when the cumulative effect of inflation has been to raise expenditure by 110 per cent., the district rates have gone up by only 85 per cent., electricity by 214 per cent, and railway fares by 183 per cent. It simply is not true to say that local government expenditure is out of control or that it is the main factor in getting us into the economic condition that we are in now. However, of course, local government has to play its part in getting things right. That is undoubtedly the case. Where there has been waste, that must be corrected; where there have been cases of extravagance, that has to be rebuked and possibly penalised. But the main trouble which local government is left grappling with arises from the constant addition of duties, obligations and powers which are loaded upon it.

Here I am afraid we have to say that Parliament must share the blame with central Government. It is we who pass the legislation and we are not strict and vigilant enough in seeing what the effect will be on local government which is left having to enact it. Let me quote a few examples, The Housing and Homeless Persons Act 1977 which we passed and which was strongly urged by bodies like CHAR and SHELTER and so on, has had the effect of presenting the borough of Hillingdon with an absolute open-ended commitment to house anybody who arrives at Heathrow and cannot find anywhere to lay his head for the night. It has induced an enormous amount of queue jumping all over the place. A good case could be made for it, but we ought not to have allowed it through without being certain that the resources would be available to implement it.

To take a much smaller case, the Homes Insulation Act, there is a good case for insulating houses under present circumstances, but nearly all the local authorities whose job it is to do that have run out of the cash to implement it. With the Chronically Sick and Disabled Persons Act, to go back a bit further, we had tremendous debates, if your Lordships will remember, about whether or not there should be an open-ended survey by the local authorities concerned of where disabled people were in their areas and what ought to be done for them. A very strong case was argued by the "mobile Bench" that this should be done and we were all greatly moved by it and let it through. However, the cost, the burden and expectations that were raised by that have been quite impossible for local government to implement thoroughly and properly, because we did not properly foresee what would be involved, or not all of us did.

There is another item for which there is great public support and that is public participation. This involves enormous amounts of staff time, mostly overtime, long evening meetings all over the place. It all has to be paid for, it all makes the rest of the work of the authority take a longer not a shorter time and it just adds to the burdens of local government. In spite of all that, the cost of local government in relation to the totality of national expenditure has fallen. The annual expenditure by local government has been held steady, and all of this at a time when inflation is rising and the price of fares and electricity has increased two or three times.

So the noble Baroness is absolutely right: the record of local government bears very good comparison with that of central Government and with all other public authorities. We really cannot accept that the blame for the troubles now besetting the national economy can be pinned on local government alone. What we must do is to play the best part we can in trying to put things right. In order to do that, there may be a need to curb a few individual authorities, or the Secretary of State seems to think there is a need to be able to curb local government expenditure as a whole.

I hope I have shown that there is no evidence of the need to do the second thing for the moment. There are very grave objections to the transitional arrangements included in Clauses 41 to 45. They fall very unfairly and arbitrarily, and the noble Baroness has mentioned a number of these. However, in the circumstances that I have just described, it seems to me that if the Secretary of State does not think that he has adequate powers, it would be much better to use the transitional scheme in Clauses 41 to 45 this year, and if necessary next year, while we are looking at the block grant system as a whole in much more detail than is possible.

So I must ask my noble friend if he will explain why this transitional scheme in Clauses 41 to 45 cannot continue to be used, If he satisfies us on that, why is it necessary to introduce the block grant Clauses 46 to 59, with all their complexities, most of which have yet to be discerned, and to introduce it all with such tremendous haste? A good deal of the antagonism and opposition to the block grant is caused by almost total ignorance among the treasurers and so on up and down the country as to what will be involved in operating it and what the effects will be on individual local authorities.

I should like to support my noble friend from an entirely non-expert but political point of view. I agree wholly with the speeches of my noble friend Lady Stedman and the noble Lord, Lord Evans. I have three points to make, as usual. First of all, the Bill seems to me a completely outrageous attack, not only an attack but an assault on our democratic Government. That is one point I should like to make. I am afraid that only a very ingénue Secretary of State could have brought forward or thought up these clauses. I go further. I think it is not only an ingénue Secretary of State but a political Peter Pan who could have produced this Bill and tried to get it through and get it across in the country generally.

We heard from the noble Lord, Lord Sandford, a most impressive and disturbing speech which fitted in extremely well with the excellent speech of my noble friend Lady Stedman and that of the noble Lord, Lord Evans of Claughton, I take very much the same view as the noble Lord, Lord Sandford, and I am trying to look at this on a non-party basis. First of all, remembering that the bulk of the metropolitan districts are Labour, may I join the noble Lord, Lord Sandford, in denying completely the suggestion that local authorities as a whole are over-spending. The noble Lord gave most interesting figures, I thought: national expenditure up by 8 per cent.; local government expenditure down by 15 per cent. He mentioned that local government spending has been below the Government target for the last three years and in the current year should be on target. In those circumstances, I think it is preposterous for the Secretary of State to introduce changes of this kind which apparently are not needed on the financial facts of the situation.

What the Secretary of State is doing in these clauses is repairing some of the damage or preparing for the introduction of the block grant, something which throughout local government has been anathema for a very long time. I do not think that there is a case for rushing into this legislation at the moment. I think it is a very great pity that a Bill which has other attractive features should be so severely marred by the provisions in respect of the transitional arrangements and also the block grant.

We must not forget that this is the first time that a Secretary of State has taken or tried to take powers to intervene directly in the financial policies of individual councils.

It may be—and I would not argue with this—that the Secretary of State's motives are wholly good. I do not want to get into the realm of bashing at him. But we must remember the precedent that is being created in this Bill, and it does not follow that we shall always have a Secretary of State who is dedicated to the strengthening of democracy. If a future Secretary of State wants a precedent for interfering in local government, the present Secretary of State has given him the fullest scope.

It may be that these provisions are technically not retrospective, but I feel very much as the noble Lord, Lord Evans, does about this. The Secretary of State is taking powers which can be, and are being, used to punish individual councils for what were perfectly legitimate decisions at the time that they made them. We do not know the criteria on which the Secretary of State is acting. We do not know the basis on which he is reaching a figure. But it must be emphasised that he is not taking account of the problems of the historically high spenders, for the reasons that other speakers have given.

I live in the borough of Camden. We pay very high rates in the borough of Camden. We are being punished at the moment as a big spender. I should be most unhappy if we were not big spenders in the borough of Camden. We have the most serious problems in almost every field of local government and social activity, and unless we were spending a great deal of money we should be failing to discharge our responsibility as a metropolitan district.

I have just two other brief points. First, the Secretary of State fixes the notional uniform rate for the purpose of resources element. He fixes that himself. Secondly, he can fix the expenditure threshold to catch individual councils as he wishes to do it. This is no basis upon which to legislate. There is uncertainty throughout the whole field of local government at the moment. That uncertainty is intensified by the lack of clarity and, what seems to some, the lack of real preparedness behind this legislation. I believe that the Government and the Secretary of State would earn nothing but respect if, at this stage, they would say: We will postpone discussion of the financial provisions of the Bill and go ahead with the other most important provisions which the Bill contains.

It is undoubtedly the case, as was said by the noble Lord, Lord Greenwood of Rossen-dale, who speaks in this House with the great experience of a former Minister in charge of the department, that the powers under the whole of this Part of the Bill are drastic. But I am bound to say—and I hope that I shall cause no offence to any other noble Lord or noble Lady—that for that reason I welcome them.

I say that because it seems to me, with very great respect to all of those on both sides who have taken part in this debate, that their speeches, though full of knowledge of the problems and difficulties and successes of local government, have not given sufficient weight to the overriding circumstances of the state of our national economy today.

It is difficult for all of us, whether in this direction or in any other, to adjust our minds, after years in which the national product rose and it was possible to finance ever-increased provision in all directions, central and local, to the fact that the failure of the British economy even to maintain, never mind increase, its product and to produce wealth means that drastic action has to be taken right across the board, if the national economy is again to recover and we are to get the growth which can sustain the improvements that all of us on both sides of the Committee would wish to see.

I must make a plea, however briefly, to the Committee not to let the background of the state of our economy be overlooked in our concern for the well-being of local government. With great respect, my noble friend Lord Sandford, with his great experience of, and close experience in, local government, seemed not to give sufficient weight to this aspect of the problem. With respect to him, it is really not sufficient to say, as he said and demonstrated with great skill, that local government expenditure is under control. The question is not whether it is under control. The question is whether given the whole picture of the national economy, it is higher than we can sustain and therefore requires to be restrained.

With great respect to him, too, it is no answer to the attempt of the Secretary of State to restrain expenditure in this direction—and here I take issue with the noble Baroness, Lady Gaitskell, because I think that we have a most able Secretary of State who is doing an extremely effective job in his great department—to point out, as my noble friend perfectly legitimately did, that there are other areas in which expenditure also requires restraint. Indeed, I would join him in urging upon my noble friend on the Front Bench that in the area of nationalised industries much greater restraint is required. I would join him in urging, for example, that the handing out of large sums of money to the Steel Corporation at this juncture, in the absence of any real effort by that Corporation to restore its viability, is very questionable. I would join him in urging far greater reductions in the staff of central Government than Her Majesty's Government so far appear to have been able to achieve. I am with him on all those things.

But where I differ from him is in this respect. The fact that there is expenditure which could, and should, be curtailed in other directions is no answer to the request now made in this Bill for powers to achieve authority to restrain expenditure in this enormous area of local government. We are talking of very nearly one-third of the totality of public expenditure. This is a very large area and, with respect to the state of our economy—and I hope that your Lordships will bear with me if I appear to be repetitious on this point—it is impossible for any major area of expenditure not to be subject to restraint.

We can debate, and we shall no doubt debate, the precise impact of these proposals. A later amendment of, I think, my noble friend raises the question of the date. Here I must say that I am completely on the side of my noble friend on the Front Bench, because if I have a criticism of Her Majesty's Government it is that, so far, they have not taken steps early enough to restrain public expenditure, both in this area and in other areas, and time is not on their side in this respect.

I realise that what I say is disagreeable to many of those who have far greater knowledge of local government than I have, but it seems to me that when the Government of the day come forward—I think a little belatedly—with an intention to take drastic action, not only to control but to curtail expenditure, it would be wrong of us to criticise that too far. We shall certainly wish to see that it is done in a civilised and an effective manner; Parliament will have adequate powers under this measure so to do. But on the basic issue raised not only in this Part of the Bill, I must say to my noble friend on the Front Bench that I am sure Her Majesty's Government are right to proceed. I would say to my noble friend who has spoken from the Back-Benches—and I also say this to noble Lords and noble Baronesses opposite—that although we all have a great concern for the well-being and success of local government, there is one more important cause and that is the salvation of this nation's economy.

The noble Lord who has just spoken described the powers that have been undertaken by the Secretary of State in these clauses as "drastic". We would call them arbitrary. What is complained about by those who have spoken on both sides of the Committee is the arbitrary nature of the selection process and the fact that it would appear to hit the most deprived areas of our community. I had the honour of representing a dockland constituency for 29 years and I have recent close familiarity with one of the constituencies which is to be directly penalised; namely, Tower Hamlets. If one thinks of the social harm that what is proposed will do to that harassed community it really becomes quite intolerable.

Let me take that little community as an example. It is certainly one of the most deprived areas in the country. It has a large number of one-parent families. There are more children in care there per thousand of the juvenile population than in any other local authority in the country. There is a very high proportion of old people. The average wage is lower than that of almost any surrounding community. With the decline of dockland, it has lost a large proportion of its middle-aged group. They have moved away and left behind the old and the needy. In the last 15 years, the population has dropped from 200,000 to under 150,000.

There are special difficulties like the situation in the Spitalfields area where we have seen the collapse of the clothing industry—we would venture to say because of the policy of the Government. The Bengali community, dependent upon that industry, is in desperate straits. This is the community which is to be penalised. There was a sudden demand after the budgetary arrangements had been prepared that they should toe the line or suffer the penalty. So far as deserts are concerned, my understanding is that the local authority has behaved responsibily and that in the last five years the rate increases there have been far lower than in many surrounding boroughs. They have engaged on a policy of increasing the rate base by encouraging industry and commerce to come into the borough. So here is a classic example not only of the exercise of arbitrary power by the Secretary of State but of achieving a very unjust purpose in a very unfair way.

I do nope that the noble Lord the Minister who listens very carefully to the debate will understand the feelings that we on this side of the Committee have about the matter. He is not an unsympathetic man; I know that well. But here he is hitting the poorest and the most needy by what is proposed. I hope that the Government will think again.

There has been much mention in the argument about the Bill, both within this House and beyond, of extravagance, overspending, danger to the national economy. I think that we all accept that what is extravagant and what is overspending is a matter for legitimate difference of opinion among sensible people. Expenditure which some citizens will regard as extravagant others will regard as necessary, or generous, or worthy of the dignity of their borough.

How have we tried to deal with that situation up to now? We have done so by dividing the expenditure of local government into that which is borne by the ratepayers and that which is borne by central Government, with the approval of Parliament. If we feel, as the noble Lord, Lord Boyd-Carpenter, argued, that these are grave times and that we must economise in all directions, not to mention having to pay not only for real needs but for quite unnecessary tax concessions to very rich people at the beginning of this Government's tenure of power—if it is felt that we have got to do that for local government, one could accept, even if one did not agree, that the Government were entitled to say, "The amount of help which we shall give to local government, whether it is called rate support grant, block grant, or whatever, shall be reduced and shall be made in ways which discourage what we fear may be extravagance". That is one thing which is within central Government's and Parliament's power. But what is inherent in Clause 41 is that the Secretary of State is saying, "I am going to say what I think the rate poundage in different local authorities ought to be, and I am going to penalise those who do not agree with me".

This is a very serious invasion of what we regarded as an essential part of the way our democracy worked. It is important, if democracy is to work, that the decision should be made not merely by a central parliament, speaking for the nation as a whole, but by every locality and village. People should feel that they have some control over the decisions that affect them. It is that which this is invading. It is not safe to say, "Oh, it is merely a temporary transitional arrangement". It is not safe for two reasons, one of which my noble friend Lady Stedman has pointed out: that this transitional arrangement goes on until the commencing year.

We now understand that the commencing year is to be what the Secretary of State says it is. We have all assumed that it was going to be next year and that assumption may still be true, but in fact the commencing year is to be what the Secretary of State says it is. That is true, by the way, of nearly everything in the Bill. If you look at the definition of anything, what it comes down to in the end is that it is what the Secretary of State thinks it is, or ought to be. An overspending borough is one which is spending more than a notional rate, and a notional rate is what the Secretary of State thinks that rate ought to be. All this is wrapped up in the verbiage of the clauses, but this is what comes down to in the end.

I invite noble Lords to consider Clause 51, which makes provision, even when the transitional period is over and the block grant is in operation, for the Secretary of State in certain circumstances, which again he will have power within certain limits to define, to reduce the amount of grant if he thinks that it is unreasonable compared with what it was in the previous year. So we are not discussing merely a temporary and transitional threat.

I have listened to the argument as to whether this is a retrospective clause and I agree that one can argue it this way or that, but it reminds me in some respects of a medieval Act of Attainder. Although the penalties are not so severe as those prescribed in an Act of Attainder, the principle is the same. In time past, if the Government wanted to "clobber" somebody and there was some danger that if he was put on trial he might be acquitted, they required Parliament to pass an Act saying that he was guilty and was to suffer certain penalties. That is in effect what is being done in this Act.

This idea of "notional rate", what your rate ought to be, has not been apparent before to local authorities. They are now told, "You are the guilty ones and you will suffer a penalty". But an ancient Act of Attainder had at least this limit on its injustice. The person whom it affected was actually named in the Act, but here we have the principle of attainder added to the principle of ministerial regulation. The persons to whom Clause 41 are applied are to be persons defined in ministerial regulations and are not to be precisely defined in the Act itself.

We have heard from the pronouncements of the Ministry and reports in the press who are to be the first 14. There is nothing in the Act as it stands to say that they will be the only ones. The Minister at one stage said that the sufferers would be those who were substantially above the notional rate. Well, the notional rate, in the first place, will be what he says it is, and "substantially" will mean what he thinks is substantial. So they are to be determined to be criminal and to be worthy of penalty on criteria which the Minister can lay down and which might hit much wider than they hit already.

I wish, without delaying your Lordships too long, to draw attention to one particular authority among the 14. It is the borough in which I live and which I used to represent in another place—the Borough of Hammersmith and Fulham—which is unique in that it is the only one of the victims which has not got a Labour majority on its council. It is governed by a Tory/Liberal coalition. The type of coalition may be exemplified by referring to that restaurant keeper who put on his menu a delicacy called "horse and rabbit pie" and when he was asked in what proportion he mixed the viands he replied "50/50—one horse, one rabbit". The last general election produced the result 24 Conservatives, 24 Labour, and 2 Liberals and in effect the Tories have been governing with the assent of the two Liberals ever since.

Now, why are they among the list? Everybody in our borough is asking this question and one suggestion which has been made to me is that it was to give the Secretary of State an appearance of impartiality. There was one period, before sex equality reached its present stage, where statutes required that on various public bodies there must be at any rate one woman, who was known as the statutory woman. That was to show how impartial and equal we were. It may be that Hammersmith and Fulham are statutory Tory, in order to demonstrate that there is no element of political animosity in selecting the 14. If that is true, it is not much comfort to the citizens of the Borough of Hammersmith and Fulham.

There was another suggestion—that Mr. Heseltine was actually under the impression at the time when he made the decision that the council was still governed by a Labour majority. That would be a pardonable error, because we have had a Labour majority on the council since the year 1944 except for two brief periods which the citizens did not take long to repent. But it is very odd that it is not until after so many years, when they have a Tory-Liberal majority on their council, that they are publicly pilloried as being extravagant over-spenders. What can they have done? What have they failed to do?

Let us look at some of the things that they have done. They have closed one of the public baths in the most thickly populated part of the borough; they have cut down such services as home helps, meals on wheels and old people's clubs, and where it has been possible for them to increase the charge for anything, they have done so. They have restricted the opening hours of the public libraries; they have raised the rental charge for the hiring of rooms in the Town Hall, to the great distress of certain local charitable bodies. They have raised the rents of council dwellings once and were about to do it again until at last the two Liberals called a halt and said that really to raise the council rents twice in one calendar year was a bit too much. It may be that that occurred to them after they had been pilloried by the Minister for extravagance. Consequently, it may be that the citizens of Hammersmith and Fulham are being penalised because they were not diligent enough to elect an all-Tory authority and there appeared to be two spendthrift Liberals among them.

Then, despite the existence of a very considerable housing waiting list, which is a grim and serious problem, they have in effect abolished the programme of the building of council dwellings altogether. That was a very large act of sabotage but, in order to demonstrate that just as no act of sabotage would be too large for them or no act of meanness too little, they have proceeded to reduce the number of public lavatories. In particular in one very pleasant open space they closed down the public lavatory. When representations were made to them on behalf of elderly people about the difficulties this caused, a spokesman for the council pointed out that after all there was another some 20 minutes walk away. I mention this because they have been most diligent in behaving as good Tories should behave and one would have thought that Mr. Heseltine would have presented them with a medal. What on earth are they doing in this galère?

It looks as though there has been a bit of a muddle somewhere, quite apart from far more serious general objections to the clause. My chief objection to this clause is that it is arbitrary, it is extremely harsh, and it makes absolute nonsense of the first words in the title of this Bill, "An Act to relax controls on Local Government".

I should like to associate myself with a large part of the remarks made by my noble friend Lord Sandford in his very spirited defence of local government. I quarrel with him only because he has stolen all the statistics that I intended to use myself; statistics which are in themselves of course the direct answer to the noble Lord, Lord Boyd-Carpenter's good speech. Local government expenditure is falling and central Government expenditure is rising and the wrong target is being aimed at. The only statistic I would add is that I think it is true to say that the cost of local government is going up a great deal less quickly than the cost of the newspapers which are habitually criticising local government at every possible opportunity.

I spoke at length on Second Reading about the block grant and I have no intention of saying anything further now although when we reach Clause 46 I should like to join in the debate on that. The complications of that block grant seem to me to be getting worse and more frightening each time and indeed some of my own later amendments may make them more complicated still, but with the best possible intent, like all amendments. What I should like the Minister to say, in quite clear terms is whether or not it is possible that the introduction of the block grant can be postponed (as has been suggested, I think, by all the associations) until we really understand it and have some opportunity of getting rid of the serious difficulties which attend it. Perhaps he can also say whether the transitional arrangements can or cannot be made to last for one year, and if not, why not, and if so, why so.

We in local government are fundamentally opposed to providing the Secretary of State with penalty clauses in the shape of transitional clauses which would enable him to withhold supplementary grant from those local authorities judged to have marginally exceeded the rate which he believes is appropriate.

I should like to refer to the amendments which are on the Marshalled List, because we are taking a general debate on this. It is clear that we dislike transitional arrangements; however, the noble Lord the Minister has tabled an amendment which, in practice, would allow the transitional period to be lengthened. At the moment it is confined to a year. At the ninth sitting in the Committee stage in another place the Minister of State gave what we thought was an undertaking that it would last only a year. This was repeated by the Parliamentary Secretary at the eleventh sitting and it seemed fairly clear but it is also the case that the assurance that a year would be the length of the transitional arrangements was the one fact which prevented a revolt on the Tory Benches in another place on the Second Reading. The Minister is now providing for it to continue and we believe that this is a retreat from the assurances and ought to be resisted.

I should like to refer to Amendment No. 86, which very much concerns the transitional arrangements. This was an amendment which was asked for by at least one local authority association at the Committee stage in another place. It requires the Secretary of State to compare one year with another when contemplating the use of the penalty clauses. This is to ensure that allowance is made for what are traditionally high-spending authorities. This term has nothing to do with profligacy, otherwise the local authority association concerned would have had nothing to do with it. Often the traditionally high-spending authorities have perfectly sound reasons for doing so and in the main it has nothing to do with the political complexion of the council concerned. It has to do with two things: the problems that those authorities have to face and the encouragement that has been given by successive Ministers over a period of almost 10 years to do specific things in their own areas. Newcastle is a case in point; the London boroughs are also similarly situated. I am talking about partnership schemes, I am talking about the desperately difficult inner city problems of decay with which the London boroughs particularly are faced.

Some noble Lords on this side of the Committee, as indeed the Secretary of State, had the privilege of touring the dockland areas from Tower Bridge to Greenwich only a fortnight ago. We saw there a great deal of first-class redevelopment of a very high order. It was a most stimulating experience. One of these boroughs, Tower Hamlets, is going to be penalised to the extent of something like £1,055,000 or—such are the vagaries of the whole system—it could be as high as £4½ million. The local authority itself has no idea whether it will be one or the other. They are told by the Department that if they make an exceptional effort they might escape the penalty clause. I believe that that authority and many others have made an extraordinary effort. If noble Lords have not seen what has been done in dockland it is time they went down and had a look. In my view they should not be penalised, they should be further assisted to deal with the intractable problems that face them and other authorities of the same kind.

What we question is the right and the wisdom of allowing the Secretary of State to impose his will on local authorities. This has nothing to do with the question of whether they are spending too much, because, as the noble Lord, Lord Sandford, and others will recall, the local authority associations at the invitation of the Secretary of State offered to produce a scheme based entirely on the criteria and aims of the Minister, a scheme that would achieve his objectives, and indeed it was refused. So there is no question of intransigence or obstruction in this at all; it is for us a matter of principle. We believe that Whitehall does not know best, and I should have thought that slogan ought to be engraved on the hearts of many Members on the other side of the Chamber.

I think this threat to local government is particularly unacceptable when it appears to be retrospective. I am sure the Minister will object to the term "retor-spective", but I am in good company; even the Spectator, The Times, the Financial Times, agreed that this was a retrospective act and as such was highly undesirable. What the Secretary of State is doing is penalising local authorities for doing what, as Lord Evans said, was perfectly legal when they did it. It is clear that the Secretary of State decided some time ago that he was going to penalise—hammer, if you like—a number of local authorities and he has spent the last few months trying to find a way to do it. That accounts for the whole vagaries of the system and why some authorities expecting to be penalised under the criteria are not going to be penalised and others with enormous problems facing them are going to have to suffer. They will be penalised in 1980–81, presumably by the rate support grant order which is to be published on 21st November.

Not only is this action, as we believe, retrospective; it is entirely arbitrary. I believe it is necessary when the Minister takes action of this kind that we in Parliament should know a great deal more about it than we are being told in this legislation. I hope noble Lords will accept that three principles are involved—one against retrospection, one against arbitrary action, and the third, being properly accountable and putting to Parliament clearer indication of the Minister's intentions. They are not just matters relating to these 14 authorities; they are principles of constitutional propriety which ought to be taken account of.

As chairman of the finance committee of a local authority, I am very strongly aware of the stresses and strains being put on local government. They are so severe that it will be intolerably difficult for many councils—and I am talking about councils which are seeking to support the Minister in what he is doing—to meet his requirements. The truth of the matter is (I say this to the noble Lord, Lord Boyd-Carpenter) that it is not just a question of local government. Local government is being sacrificed deliberately more than many other elements in the community on the altar of monetary economics, because, as I think the noble Lord, Lord Sandford, pointed out, as did Lord Ridley, local government has a very good record. Its expenditure is going down while that of central Government is going up; it has been fairly consistent proportion of the gross disposable income of the country for 40 years. I think that is hardly true of any Government of whichever party.

Indeed, in the last five years the LDS allocation—that is, the locally determined schemes from which authorities get their capital permission—has dropped to one-sixth of what it was, and it really is one of the most crippling restrictions that we have faced for a very long time. That is already part of the financial discipline that local authorities have been existing under over the last few years. We say this is not a reason for taking the massive Draconian measures to reduce the expenditure of local government or to penalise local authorities whose expenditure can be justified on the facts. As I said, local government has a consistently good record of matching closely the capital and revenue targets laid down nationally; and who can ask for better than that?

I think one of the difficulties is that often the Secretary of State and some of his staff do not understand very clearly what happens in local government. Every now and then halfway through the year the Secretary of State gets up and says local government are overspending. Each Secretary of State for the last five years has done this. What they do not realise is that it is in the nature of local government to over-estimate. It is very difficult to predict, and therefore the expenditure rate in the mid-term is often proportionately much higher than it should be at the end of the year, but in almost every year by the end of the year, either from balances or underspending, or for other reasons, the actual financial balance has been achieved and the record maintained.

The guidelines which have been laid down by the Government have been adhered to by most authorities. Those like my own authority which followed the Minister's advice for 1980–81 and allowed 13 per cent, inflation find that that is wholly inadequate. Are we to be penalised because we accepted the Government's advice and included a 13 per cent, rate, because the rest of that cost will have to be paid for. A short-term money market rate of 20 per cent, was not of local government making. Yet we shall have to meet the very considerable additional cost involved in financing that money. Then there is the implication of comparability payments, again nothing that local government was directly responsible for. The burden to be placed on local government is intolerable. The Government are imposing cuts of nearly 5 per cent. already in the pronouncements made by the Secretary of State. At no time in the history of local government at the most crucial time of economy has it ever been possible to provide more than a 2 per cent, reduction in the actual expenditure.

The basic criterion for determining which authorities should be penalised appears to be rate poundage levied in 1980–81 but the criterion is most unclear. As the noble Baroness, Lady Stedman, has said, one of the 13 metropolitan authorities singled out by the Secretary of State had an adjusted rate of 155 pence in 1978–79, and therefore by no stretch of imagination could it have come to the level required of it, having already been in the year before at the adjusted notional rate. A number of other anomalies are here; seven of the 13 authorities had a uniform rate of between 121 and 152 pence in 1979–80, and equally there are authorities high up in the list who have had the waiver produced for them who on all reasonable reckoning ought to have been in the class of those authorities penalised. I am talking not about recalcitrant authorities, but about authorities—both Conservative and Labour—which may be trying desperately to do what the Minister wants. The present rate poundage is often historical fact with little to do with the present councillors, but they will be required to conform or be penalised without any real consideration, despite the circumstances that have brought them to that level.

It is clear that not only is this unjust but, if the costs continue as they are at present, the Secretary of State will have to penalise a much larger number of authorities if they are going to get the money to meet the bills that I have been talking about, whether of inflation, comparability or something else. As I have said, it is not only unjust; it destroys the relationship between central and local government and it is weakening a system that we believe is the envy of the world.

What many people, particularly those being penalised, will find so unfair is that pressure has been put on local authorities over several years—not just this year but in earlier years—while certain other authorities, and I refer particularly to the regional water authorities, have been able to make massive increases without restriction. I do not think that, as long as these authorities are allowed to continue to make such massive increases, the penalties placed on local government can really be fair or acceptable.

I said that the system of penalising local authorities is unfair and unacceptable. However, the base under which it is established is highly suspect. I should like to demonstrate that briefly before I close my remarks. Newcastle-upon-Tyne is one of the towns to be penalised. The block grant is designed to make recalcitrant authorities toe the line. But, in fact, when the block grant proposals operate Newcastle will not be an over-spender—it will come off very favourably indeed. Surely that is a nonsensical situation which makes the Government's system both highly suspect and arbitrary. We urge the Minister to abandon the transitional arrangements.

We have been hearing from all sorts of people who seem to hate the new proposals for rate support grant. I come from the Isle of Wight, a part of the world where, in point of fact, the present system is so dreadful that anything that replaces it is bound to be better. In 1979–80 we had two-thirds of the grant per head of population of the average for England and Wales, and we are reasonably confident that the new plans will be an improvement.

We think it sensible that there should be a form of rate support grant which looks at needs and looks, as it were, into the future instead of into the past. We think it very reasonable to have a new system on the lines that the Government propose. It would perhaps be more helpful, while we are having this debate, to know rather more of the detail and I would agree with anyone who criticised what is proposed on those grounds. But basically nothing can be worse than what we have at present; and so I would welcome, on behalf of my county, not only the new system, but also its implementation at the earliest possible occasion.

Having said that, I should like to make another point. Having listened to this debate, it seems to me that people are saying that the system which is being adopted or the Government's attitude in bringing it into force, somehow is breaking down the good relationship which has existed in the past between central Government and local government. I have not noticed that that relationship has always been of the highest order. We have been grumbling with central Government in my part of the world for certainly the last 10 years about unfair treatment, and in a way our grumbles have been very much those that one might have as an individual with one's bank manager.

I have noticed that if I have an overdraft my relationship with my bank manager is quite different from when my account is in surplus. It would seem to me that if one is going to have to be supplied with money, and one is not self-sufficient, it is reasonable that the supplier of money should have some sort of a say as to how that money is being used. After all, the British Government had rather distasteful experiences with the International Monetary Fund some five years ago when the party opposite were in power, and they grumbled like mad and felt that the International Monetary Fund comprised a dreadful lot of people. It seems to me that whenever there is a superior body, whether one is an individual, a local government authority or a great nation, and whenever one is in debt to somebody else, one rather resents the interference that is inevitably applied to one. It would seem to me that a great deal of what has been said, particularly by noble Lords opposite, has been a resentment of that sort which, after all, will happen in any case. So I should like to say to the Government that I am sure that their system is better than the one we have at present and I hope that they will introduce it as soon as possible.

The noble Lord, Lord Mottistone, is far too optimistic: nothing is ever so bad that the ingenuity of man cannot make it worse! The question that I should like to ask—and it really is a question, and I have given the noble Lord the Minister the opportunity to see a letter that I have received—arises from a council that is concerned that there is a retrospective element that is punitive, and it is also concerned that arrangements might have been arrived at that are now to its detriment. It asked me to ask whether it is true that four concessions have been granted by the Government to the Association of County Councils in return for not, as it quotes:

"fighting the main penalty provisions and plans to introduce a new block grant system to control spending".

It says that if that is so, then it would wish to make it clear for its part that such an agreement does not carry the approval of that authority and that the association has been so advised. Is the Minister able to comment?

I wonder whether I might reply to the debate. We have been speaking at great length and I feel that now is the time to respond. I should like first to deal with the point about the future of the transitional arrangements. I think I can clear this up by saying that there is absolutely no question of the transitional arrangements and block grant running simultaneously, as was suggested.

The transitional arrangements modify the existing system of rate support grant pending the introduction of the new block grant system and will lapse automatically with the introduction of block grant. It was suggested by my noble friend Lord Ridley that the implementation of block grant should be deferred until 1982–83 to enable further development work to take place and to allow for further consultation with the local authority associations on the mechanics of the new system. I fully acknowledge that we have had to develop the system at a fast pace, but I could not accept any suggestion, as has been made, about inadequate consultation.

The fact is that we believe—and this is a matter which we shall debate, soon I hope—that a workable system has been developed, one which will allow an equitable grant system to be made for the next financial year and, of course, development work will continue. But, as with any new system, there will be some rough edges which will need improvement once the system is in operation. But, to defer the introduction of block grant would, in my view, be running away from the problem. The present rate support grant system suffers from serious defects; it is unfair, and by the encouragement it gives to ever higher levels of expenditure it conflicts fundamentally with our commitment to sustain reductions in public expenditure. It must, therefore, be replaced at the earliest practical moment and I submit that that moment has now arrived.

Perhaps I may answer the point made by the noble Lord, Lord Irving. The reason for Amendment No. 84 to Clause 41 is simple, but it is important. It is normal practice that legislation runs until such time as other legislation is brought in to repeal it. This Bill has been so constructed that block grant commences by order rather than at a specified date, because naturally the Government are firmly wedded to the democratic process for them to take parliamentary assent to the Bill for granted. It is, therefore, logical for there to be no terminal date for the transitional arrangements, but I repeat that they will automatically lapse on the introduction of block grant by order. There is no intention on the part of the Government for this to go on beyond that point in time.

We shall be debating the provisions on block grant shortly, but, in considering what are generally described as the transitional arrangements for 1980–81, I ask the Committee to note that they are designed to apply so far as possible the principles of block grant through adjustment of grants' entitlements under existing legislation at the first increase order under the 1980–81 RSG settlement. The notional uniform rate is the pivot of the transitional arrangements, the figure around which they revolve.

I hope that I can put this in a few words, but I think that it is necessary to say exactly what it is because from what I heard from noble Lords opposite, it seems that they really do not know. The notional uniform rate is the rate in the pound which all authorities could levy if they spent at the level of their assessed expenditure needs after payment of needs element and taking account of resources element. It is calculated by subtracting from total relevant expenditure, first, specific and supplementary grants, secondly, total needs element, and, thirdly, what is known as "London clawback". I am sorry, but it is necessary to explain this in detail to make the point to which I shall come in a moment.

The result is then divided by the total population of England and Wales, multiplied by the national standard rateable value. The subtraction of London claw-back is a technical adjustment to take account of the above-standard rateable resources of London. I want to stress that the notional uniform rate, which is 119p for 1980–81, is not, as has been suggested, an arbitrary figure. It is not, as the noble Lords, Lord Stewart of Fulham, and Lord Greenwood of Rossen-dale, said, what the Secretary of State thinks it should be. It is implicit in every annual rate support grant system, and it is the product of arithmetic, not of judgment.

I turn to the uniform rate of local authorities. The uniform rate is that part of a local authority's total expenditure which is to be met by rates, divided by the total rateable value of its area as enhanced by the operation of the resources element. It is thus a true measure of an authority's intentions on expenditure and balances. A comparison of an authority's uniform rate with the notional uniform rate is a fair comparison of what an authority intends to spend with what it needs to spend in terms of the RSG needs assessment.

Before the noble Lord leaves that point, as he is so emphatic about this, how does he understand the words in Clause 41(2) which state that:

"'The notional uniform rate' means the rate which … the Secretary of State considers that each rating authority … would need to levy in order to finance [its] spending needs"?

I follow all about calculating the needs, but in the last resort it is what the Secretary of State considers that they would need.

I wonder whether I may be allowed to complete what I have to say, because I shall come to other such figures and I think that they may give the noble Lord the answer he wants. If they do not, of course I shall be glad to return to his point later on. After all, this is a Committee stage.

A comparison of notional and uniform rates thus enables a judgment to be formed about relative levels of spending. As the Committee knows, the Secretary of State for the Environment announced on 18th September that in the face of a potential overspend by local government in 1980–81, the Government had decided that it was only right to take action against those authorities which had blatantly disregarded the Government's exhortations to reduce expenditure and, subject—and I stress this—to parliamentary approval, to reduce grant to those authorities with uniform rates above a threshold level of 155p.

Perhaps I can now deal with the specific argument about retrospection and unconstitutionality, unfairness and arbitrariness. I confess that I find it difficult to understand the charge that these provisions are retrospective or unconstitutional. Certainly they can hardly have come as a surprise to anyone. Perhaps we could look at the chronology of events. As long ago as November 1979 the Secretary of State for the Environment announced in the context of the rate support grant settlement for 1980–81 that the Government would introduce legislation to provide for the transitional arrangements. A circular letter was issued to all local authorities last December describing the basic framework of the proposed scheme. The scheme was outlined in the Rate Support Grant Order 1980–81, which was debated in another place last January. Provisions were then included in the Bill presented to Parliament.

It has always been made clear that there can be no abatement of grant unless Parliament approves the provisions of the Bill. In another place the Government agreed that there should be an order setting out the general principles of the scheme, subject to no less than an Affirmative Resolution. Some argue that retrospection lies in announcing the intention to apply transitional arrangements before legislative approval. But it is surely not uncommon—it is absolutely normal practice—for the Government of the day to spell out their detailed intentions on specific legislation well before enactment. Indeed, the Opposition have been pressing the Government to explain exactly how the transitional arrangements would work and, if necessary—and I have them with me—I can give many quotations to prove that that is so.

The noble Lord, Lord Evans of Claugh-ton, said that it was difficult to understand. He asked "Why the 14? What is the criterion?" Let me try to enlighten him. As I have explained, the list of overspending is a comparison of notional and uniform rates. The Government chose a figure of 155p—and this may be the point to which the noble Lord, Lord Stewart, refers—which is well above the notional uniform arithmetically-calculated rate of 119p—30 per cent, above. We did that because such an enormous extra percentage makes ample allowance for what everyone knows is the unsatisfactory character of existing needs assessment.

The noble Baroness, Lady Stedman, asked why some over 155p were excused. From the outset it was made clear that a waiver would be applied if authorities with historically high levels of expenditure—and this is also the point upon which the noble Lord, Lord Irving, touched—too high to be reduced below any threshold in one year, had nevertheless made exceptional reductions in expenditure. The Government, therefore, constructed two tests: either that an authority should have contained its expenditure in the current year by providing for a cash increase in rate and RSG-borne budgeted expenditure between 1979–80 and 1980–81 of at least three percentage points below the average for the class; or that an authority should have achieved the target under the recent revision of 1980–81 budgets requested by the Government of at least a 2 per cent, reduction in current expenditure volumes in real terms between 1980–81 and 1978–79.

If the noble Lord will give way (I am sorry to interrupt him), he said that the Government looked at the ones which were over the 155p, and introduced the waiver where they felt that the traditional high-spending authorities had done something about it—they could not, perhaps, reduce it in the one year. Did the Government also make any direct contact with the local authority representatives of the 14 authorities that are on the list to be penalised to find out what they had done, and, if they had not done it, the reasons behind why they had not felt that they could reduce it?

If I may be allowed to finish, I cover that point as well in what I am about to say. I did try to be very patient and I listened to everything that everyone else said, so perhaps I could put in my plea now. Nine out of the 23 authorities with uniform rates above 155p qualify for one or the other of the two waivers which I have just mentioned. The Government have made it clear—and this is the point—that it is still open to any of the remaining 14 authorities to qualify under one or other waiver by making further relevant changes in their finances before the order is presented to Parliament later this year. So much for the accusation of unfairness. The test of overspending and the basis of the waivers have been logically constructed and will be consistently applied. There is nothing arbitrary about it. I repeat that nothing can be done unless Parliament approves the provisions of the Bill and endorses the principles on which the scheme is based in an order subsequently presented to Parliament.

One last point. The Government in no sense gain from the transitional arrangements. The money withheld from the profligate authorities is redistributed to all other authorities. The transitional arrangements, like block grant, are concerned not with controlling the total of local authority grant but with its fair distribution between authorities. Today we have heard much overheated rhetoric about taking over local government, about central Government wanting to fix local rates and central Government deciding local spending. Well, really! With how it has turned out, we are talking of only 14 out of some 450 authorities.

The nub of the whole argument is that the Government are simply refusing to give national support to excessive levels of local expenditure. Let me say again that the local authorities affected can still decide even now for themselves whether and how to reduce their expenditure. That is their decision. Noble Lords may be interested to know that I have good reason to believe that some of them are already trying to do just that.

We have talked these transitional arrangements through and it is time to consider what we are trying to achieve. Surely it is right for the Government to spotlight those authorities who are not willing to conform to national policy objectives. I am sure that the country I at large thinks it right and proper that those authorities who refuse to co-operate should bear the cost. The Government are entitled to expect the co-operation of local authorities whose individual local objectives must be subordinate to the national interest.

I have here in front of me a whole string of comments and notes I have made on points raised by your Lordships through the debate. I feel that you would not want me to try to cover them one by one at this stage. We shall be having, I assume, a lengthy debate on block grants soon. I fear that many of the points will be made again. I would only say that I do respect—even though I disagree strongly with the points made by noble Lords opposite—the sincerity of their belief in the points they have made. Likewise, I am deeply grateful to my noble friends Lord Boyd-Carpenter and Lord Mottistone for their support on this. But if they and all your Lordships will excuse me I will not at this time in this debate go into the details of what has been said. I can cover them all, I assure you, and would like to do, but I think we have to take some cognisance of the time.

To summarise, the proposal to withhold money from authorities which by objective criteria—and that is the point—are spending at excessive levels is an integral part of Government strategy for the public sector. The grant to be withdrawn will not go back to the Exchequer but will be redistributed to other authorities. The policy is to be carried out in a way that is neither retrospective nor arbitrary. On the contrary, it is both just and reasonable, and I commend this clause to your Lordships.

Before the noble Lord sits down, I accept that he was asked a lot of questions, and I am quite sure that with him the Committee does not want wearying at this stage with all the detailed answers. There was one question that I asked which I think is of some importance. What right of appeal have authorities got, and to whom will they have a right of appeal, if the Secretary of State decides that they are on the penalised list? They ought to have some right of appeal. They ought to be able to make their case as to why their rates are high, why they cannot reduce their spending. To whom will they make it, and when they will be able to make it.

I thought I had touched on that too when I said that already some of the local authorities concerned have been along, if you like, to say, "Here is our case. This is what we think. This is what we can do. This is why we feel"—et cetera. The door is wide open. The door is open all the time, and I hope they will come along, as some have already done, and talk to us about it and we shall gladly look at that.

In inviting your Lordships to reject the transitional arrangements and particularly Clause 51, I want to challenge the Government's objective criteria. I will start with the claw-back in so far as London is concerned. Your Lordships heard me comment before on the harm and unfairness to London through this claw-back in the rate support grant. It is not without some interest that 11 of the 14 authorities to be penalised are London authorities. They are London authorities because what happens all the time is that the social needs of London are ignored.

The fact that some authorities in London have a high rateable value is given undue prominence. The consequence of that claw-back is that inevitably London authorities have to levy higher rates than authorities outside London. That is one of the basic points, and that is again why we cannot accept this objective criteria. They are based on this claw-back which affects London quite seriously and is a major factor in what has now happened.

In inviting the Committee to reject this, I want to say that the objective criteria needs to be looked at again. I also want to illustrate, supporting some of the remarks that other Members have made, the consequences of the power that the Secretary of State has taken and the way he intends to use it. Three of the boroughs to be penalised are boroughs with which I have a relationship. I practise in the Family Practitioners Committee of Camden and Islington. I represented a part of Hackney for 16 years in County Hall and the whole of it for nine of those 16 years. I have patients in Islington as well as Camden.

Hackney is one of the most deprived areas in London. It has been accepted by the Government that it is one of the most deprived areas in the country, because as a consequence the Government have entered into a partnership with Hackney and Islington. By all the criteria on which deprivation is judged Hackney is regarded as deprived. The funny thing about it is that in terms of per capita expenditure of each London borough Hackney is below the average. It is the fifth lowest of the 12 inner London boroughs in spite of the problems that it has.

What is more, Hackney is now threatened not only with a withdrawal of some of its rate support grant but a withdrawal of some of the grants that it was supposed to get under the partnership arrangement. The whole point about these partnership arrangements is that central Government are encouraging certain local authorities to spend on certain projects because central Government feel that there is great social need in the area. Yet the same central Government turns round and includes these expenditures as part of the expenditure of this borough to which it objects. How absurd can you be?

It is either that you want these boroughs to do these things, in which case it is not appropriate that expenditure under these partnership schemes should be included in their overall expenditure, or you do not want them to do it in which case do not pretend that you want them to. It is quite wrong for central Government in one breath to encourage a local authority to enter into partnership with it for certain expenditure and then to penalise that authority for that additional expenditure.

I am a Camden ratepayer and if the rate support grant is reduced my rates will have to go up, and I face that squarely. It may be that there is an appearance of wellbeing about Camden which fools Government as it fools so many others. The truth of the matter is that there is a high proportion of both the very rich and the very poor in the borough of Camden, and numerically the latter are much more extensive, and therefore central and local government social support is much more necessary. We also have the problem of unemployment; but as everybody else has that I will not stress it. Camden has high environment costs, with three railway termini and heavy road usage; it is also one of those areas which for one reason or another attracts tourists, and because of its business grouping and high multiple occupation the question of refuse collection and street cleaning is of the highest importance. What is more, Camden is one of those boroughs the daytime population of which is double its normal number of residents.

All these things have a bearing on the way in which the borough is affected in terms of the amenities it needs to provide and the consequences of meeting those needs. Moreover, as most noble Lords will be aware, Camden has a considerable architectural heritage which imposes costs of upkeep and makes more costly the need to maintain those hereditaments; but the rateable values of those properties are not very high. And because Camden is a central London borough with a great deal of business, land costs are very high, and therefore to deal with its housing problems Camden must spend a lot more than many other boroughs because, despite what I have said, Camden today, in the light of figures that have been produced, has the highest degree of homelessness in London with the highest number of people having been accepted as priority cases for rehousing.

I confess from my own knowledge that Camden has a high degree of vagrants in terms of drug addicts and alcoholics, and it ranks with Hackney and Westminster as having the third highest number of one-parent families. It also has the second highest number of single elderly people in London. In addition, as the Committee will be aware, there are several major hospitals in the borough of Camden. That has consequences in that Camden must provide social services and workers, social workers who work for many people who do not live in the borough, but the cost has to be met locally. I have mentioned the number of people who come into Camden, and that has an effect in terms of library amenities and things of that sort, and I spoke about the architectural heritage. The problem is that we have 4,000 listed buildings and 15 conservation areas to protect; so when all those matters are borne in mind one can understand why Camden is a high-spending borough.

It strikes me that the Government, in their attempt at objectivity—I am not suggesting they are doing otherwise—are missing many of those points, and therefore I return to where I started: that basic to all the trouble is the fact that London never gets its fair share of rate support grant. That happens every time, and it will happen again because I have been reading of a proposal that a larger proportion of the rate support grant should be shifted from inner London, with all the problems the area has, to the outer areas. I have therefore used this occasion to illustrate why the Secretary of State should not be given the powers for which he is asking, because there is ample evidence that the power is being abused.

I feel I share some responsibility with the noble Baroness, Lady Stedman, for having suggested to my noble friend Lord Bellwin that we

I share the view of the noble Lord and think it might be appropriate to put the amendment formally and test the opinion of the Committee.

In calling Amendment No. 84, I should advise the Committee that if this amendment is agreed to, I cannot call Amendment No. 85.

moved amendment No. 84:

Page 38, line 11, leave out ("any year") and insert ("the year 1980–81 and any subsequent year before the commencing year").

moved Amendment No. 86:

Page 38, line 13, at end insert ("and if the percentage increase in that authority's uniform rate compared with its uniform rate for previous years exceeds the percentage increase in the National uniform rate between the same two years by more than such percentage as may be determined by the Secretary of State and be applicable to all local authorities.").

This amendment is identical to one that was put down by the Opposition in another place. It might be helpful if I were to say that I have taken "national uniform rate" as it appears in the amendment to mean "notional uniform rate"; I am sure that that is right. The notional uniform rate for 1979–80 cannot be denned in a report under Section 3(3) of the Local Government Act 1974, as required by subsection (3) of this clause, because that report was made in December 1978. The amendment is therefore expressed in terms that are impossible to fulfil.

I am grateful to the noble Lord for putting this point right. I beg leave to withdraw the amendment.

moved amendment No. 87:

I beg formally to move that Clause 41 be left out of the Bill.

moved Amendment No. 88:

Page 39, line 16, at end insert—

("( ) In making a determination under this section the Secretary of State must demonstrate that those authorities whose grant is to be reduced have acted unreasonably.").

I do not know what the noble Baroness means by "proper answer". To explain the position, I gave an answer which was factually correct and really there is nothing that I wish to add to it.

Perhaps I should have said "unsatisfactory answer".

I will take that point. Unsatisfactory it may be to the noble Baroness, and for that I apologise, but I fear that the only answer that I can give is the correct one even if that be unsatisfactory. Again, whatever I say on this amendment will be something that I have said already. The fact is that there is a concern that the Secretary of State might act arbitrarily, but the wording of the amendment is ill-defined.

The particular areas in which a Secretary of State would have to demonstrate that an authority had acted unreasonably would presumably be in overall levels of spending. This is determined by a comparison of the notional uniform rate and the individual authority's uniform rate. For me to go over again what I have said before on that would not be helpful. I am therefore satisfied, not least when bearing in mind that the order is subject to an Affirmative Resolution in the other place, that there is no question of the arbitrary use of these provisions. I fear that we cannot accept the amendment.

I am sorry that the noble Lord feels that he cannot go further. Perhaps he could take it back and have a look at it. I think that it would clear the air considerably for local authorities who get themselves on the "hit list" by one means or another if within the notice to them that they are above the rate and will lose some money they could be told more than just the fact that they are over the rate limit. I think they would want to know about it in more detail and have it demonstrated that they were acting unreasonably. Perhaps they would take it more kindly if they were told that they were acting unreasonably because they were doing this or that or spending too much, say, on their social services and so on. That would open the door for them to come to see the Minister. I do not think that a right of appeal is quite met by the fact that the authority might say to the Minister, "May we come and talk to you?" That is not quite what is normally meant by a right of appeal.

I think that what the noble Baroness is suggesting is really not a starter. You cannot say, "Let me look through your accounts" and then, having done so, say, "You are spending too much on this or that". That would be bitterly resented. I do not think that it is practicable or desirable that the Government should do that. The criteria are set down. That is the first thing. The waivers are there. I myself have seen local authorities since this announcement, and there is provision which allows them to come and talk. It is not for me to predict what will happen, but there may be those within the "hit list" (although I personally prefer the term "penalty area") who will be able to show that they ought perhaps to come off the list. Nothing would please the Government more. We do not keep the money. It is not money that we want. All we want is a level of spending. I should like to be helpful. It is easy to say that I will look at it again but it would not be fair or frank of me to do so, and I fear that I cannot do so.

Would the Minister indicate to what extent, in arriving at these objective criteria, the Government have consulted the local authorities and their associations and to what extent there has been an agreement?

It is an arithmetical calculation. I read out the chronology of events leading up to this. We took a figure, we specified 119p but said at the same time that we were not seeking to do merely that, and we asked that people should do what they could. In the event we made it 30 per cent, above 119p. Again this is an arithmetical figure. There is nothing I can add to that. By all means let the local authorities feel that they may come to see us.

My concern was with the claw-back. Has there been an agreement with, say, the London Boroughs' Association about that?

I refrained from responding to the great temptation to discuss the London claw-back. I have spent years discussing it. It is technical and it is complicated. There are those who think that it should be greater and those who think it should be less. There can be no better case to justify the block grant than by saying that this will not be the kind of lever that will exist in the future. There will be a single grant and the whole thing will come into the centre. If I were in a London authority, I should welcome the fact that anything different might be better for them.

The Minister keeps repeating the phrase "arithmetical figure". Is it that or is it a fanciful figure? What kind of figure is it? "Arithmetical" tells us nothing.

I went to a lot of trouble to spell out how the arithmetic was done. I did it slowly and carefully I am sure that when the noble Baroness reads Hansard she will see it all there. If the noble Baroness would like more information, I shall gladly write to her.

We are not happy with the Minister's answer, nor with the situation, but, as he has criticised the wording of the amendment we shall now withdraw it and consider putting down something slightly different in wording but in the same sense as this amendment at Report stage.

Amendment, by leave, withdrawn.

Clause 42 agreed to.

Clause 43 [Reduction of needs element for authorities in Greater London]:

had given notice of her intention to move Amendment No.: 89

Page 39, line 40, at end insert—

("( ) In making a determination under this section the Secretary of State must demonstrate that those authorities whose grant is to be reduced have acted unreasonably.").

moved Amendment No. 90:

Page 40, line 5, after ("exercised") insert ("separately and").

In dealing with this amendment, I should like to speak also to Amendment No. 91, because if Amendment No. 90 is carried there is no point in considering Amendment No. 91. Subsection (1) to which this amendment refers was not in the original Bill. It was inserted during the Committee stage in another place. In my innocence I thought it was just a mistake in the use of the word "differently". When that amendment was introduced in the other place the Under-Secretary said it was a mistake in view of the different responsibilities of the Ministry of Transport in England and, in Wales, the Secretary of State for Wales. The Minister added:

"These amendments are all purely technical and are intended to correct the drafting".

As I have said, I thought the use of the word "differently" was a mistake, and therefore in my Amendment No. 91 I sought to change this to "separately". Now we see it was not actually a mistake, because the Government, in their Amendment No. 90, which the Minister has just moved, wish to insert the word "separately" but to leave in "differently". Thus it is not just a matter of a technicality. Naturally subsection (1) is necessary because of the different respective powers of the two Ministers in England and in Wales. But the wording of the subsection goes beyond that. Surely the transport supplementary grant cannot be administered differently in the two countries? Does it mean that there could be different levels and different criteria? How could that be, seeing that the provisions of Section 6 of the Local Government Act 1974 are applicable to both Wales and England? Also, from the subsequent wording of this clause it would seem that the transport supplementary grant could be abolished, say, in Wales but continue in England. I would suggest that that is what the clause actually says.

I have looked through the report of the Standing Committee in another place and I cannot see anywhere that the Minister concerned dealt with this matter adequately. What he did say, as reported at column 628 of the Standing Committee of 19th March this year, was:

"If the right honourable gentleman is correct in saying the words of the amendments that I am now speaking to are wrong, I give him the assurance that we shall certainly alter them if they go further than my original description of purely technical amendments".

The point had been made in the Standing Committee that these were not technical amendments, and the points that I am making now have been made in the Standing Committee. So far as the other place was concerned, despite that statement by the Under-Secretary, that was the last we heard of the matter. Now we have the Government's Amendment No. 90, which seems to reinforce the fact that this is not just technical but could introduce different formulae and different criteria in Wales and in England. Therefore, I oppose the amendment proposed by the Minister.

The fact is that transport supplementary grant and national parks supplementary grant are an integral part of the overall rate support grant system. At present that system is administered on a combined England and Wales basis by the Secretary of State for the Environment and the Minister of Transport. This arrangement is inconsistent with the Secretary of State for Wales's general responsibility for local government in Wales. It is right, therefore, that he should be able to administer the rate support grant system for Welsh local authorities and take account of the particular circumstances in Wales. This Bill will enable him to do so. Amendment No. 91 would require separate TSG arrangements in England and in Wales to be identical in every respect. Such a requirement really would make no sense of the separate ministerial responsibilities for England and Wales and takes no account of the differing circumstances in the two countries. It is only by allowing for different treatment that the different needs, circumstances and priorities of the two countries can be taken fully into account. I wonder whether, with that, the noble Lord may feel able, perhaps with some reluctance, to withdraw the amendment.

I am still not satisfied with the explanation because the two Ministers must adhere to the provisions of the Local Government Act. Naturally they will take into account the terms of that Act. But I can see that the Minister is adamant about this and I shall not move Amendment No. 91.

moved Amendment No. 92:

Page 40, line 7, leave out subsection (2).

Any decision to abolish or amend the scope of TSG will depend on the ability of block grant to reflect the need for transport expenditure. No such decision has yet been taken. TSG will, in any event, continue unchanged in England for the 1981–82 grant settlement. In Wales the Secretary of State is currently considering the matter following consultations with Welsh local authorities. For the future, however, subsection (2) provides a power to discontinue TSG by order, should this prove justified. Without such a power in this Bill, further primary legislation would be necessary to do so. However, the Committee will have noticed that, under subsection (7), any order made would be subject to Affirmative Resolution procedure. This will provide the opportunity for discussion of any order which is put forward.

I say again that nothing will be done to abolish TSG until and unless we are sure it can be absorbed into the RSG. If a power to abolish or amend the scope of TSG is to be included in this Bill, it is obviously sensible that it should also include the power to make all the necessary changes. These might include, for example, transitional provisions or amendments to other legislation covering Government grants to local authorities. This part of Clause 44 provides those powers and it should therefore remain in the Bill.

The Minister has in effect said that he wants this as a reserve power. It must be clearly appreciated that the incorporation of TSG in a block grant system could have an adverse effect on our transportation policies, it could have an adverse effect on the co-ordination or integration of county transport policies with finances and other measures. I therefore consider