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

My Lords, United Kingdom cost competitiveness (as measured by the IMF index of relative normalised unit labout costs) improved by about 10 per cent. between the first and fourth quarters of 1981. This reflects a change in the path of the exchange rate but also a considerable reduction in the rate of growth of United Kingdom unit wage and salary costs last year. The latter stemmed from increased productivity and continued moderation in pay settlements.

My Lords, while thanking the noble Viscount very much for that most encouraging reply, may I also ask whether he welcomes the fact that productivity in manufacturing is rising at record levels and that over-manning has been virtually eliminated in much of British industry?

My Lords, I agree with my noble friend. Compared with the fourth quarter of 1980, the first quarter of 1982 shows a 12 per cent. increase in productivity in manufacturing industry. This is indeed at a record level for all time, and it is in spite of volume having improved only a little in the second half of last year and still being at roughly the same level as in the first quarter of this year. As the House will know, increasing productivity by those amounts without a volume increase of a substantial order is a remarkable achievement for British industry.

My Lords, as we are doing so well, can the noble Viscount say why we cannot afford to give more than 4 per cent. to the hospital workers?

My Lords, the noble Lord does not, I think, need to be reminded of the amount of competitiveness that we have lost over many recent years and of the need to regain that in comparison with other countries. We still have a long way to go, but we are certainly moving, and moving in a real way.

My Lords, is the noble Viscount aware that these figures about competitiveness and improved productivity are very welcome but that what concerns us on this side of the House, and indeed throughout the House, is that while we have these record levels in one field, there is a record level of high unemployment in another field? Can he say whether these encouraging figures mean a prospect of high unemployment being brought down, and can he say what plans the Government now have, on the basis of these good figures, to bring down unemployment?

My Lords, indeed it is a fact that employment levels inevitably follow levels of competitiveness and shares of world markets that this country wins. If we can keep these trends up there is no doubt but that unemployment will also turn, but at a distance behind the economic factors. I would add, as one factor not yet mentioned, the extremely good progress (though it has not yet reached levels of which we should be really proud) in the fight against the basic causes of inflation.

My Lords, will the noble Lord comment on the fact that over-manning was believed to be somewhat over 20 per cent. and that unemployment is by no means at such a height, so it would appear that a lot of those who have lost their jobs have subsequently become employed in a better manner elsewhere?

My Lords, although there has been rising unemployment in some industries, particularly those where we have been uncompetitive for a long while, there is solid evidence of rising employment in those industries which are competitive.

My Lords, would the noble Viscount the Minister not agree that, if we could take some real action against the cheats and the spivs who make multi-millions from the black economy, the picture he has described this afternoon would be even better?

My Lords, I believe that if the economy becomes fully healthy again, as it is now beginning to do, the advantages of any black economy will be less and it will decline.

My Lords, would the noble Minister agree that the question put to him by the noble Lord, Lord Beswick—namely, that he would like to see an increase in wages for the public sector higher than that which has been offered by the Government—denotes that he has learnt nothing from what has happened in the last few years and that he would like to go back to all the bad old practices which the last Government pursued?

My Lords, I agree with my noble friend, and his point enables me to add that, while our unit labour cost last year rose by only 22½ per cent., which was better than the figures for the United States or France, it was still behind those for Germany and Japan. We have therefore a major backlog of uncompetitiveness which we still have to make up.

My Lords, if workers in the public sector, and particularly those in the health service, are expected to set a good example in exercising restraint, why have the Government recently approved enormous increases for judges and generals? Does the Minister not think that the Top Salaries Review Body has set an appallingly bad example, of which workers in the health service will have taken note and which they cannot be expected to ignore?

My Lords, the Question refers to the competitiveness of British industry and I take that to be both the private sector and the competitive part of the public sector. I think the noble Lord's question is largely on other matters.

My Lords, would the noble Viscount the Minister tell us the figures on which he bases his optimism? The figures do not show any improvement; on the contrary, the trend is still to higher unemployment.

My Lords, I am afraid that my affliction always makes it slightly difficult to hear the noble Lord, Lord Balogh. But I think that the balance of economic points which I have already mentioned is an indication that, although slow, the foundations have been laid for a real economic recovery for this country.

My Lords, the noble Viscount the Minister merely asserts, but I am asking a direct question. He should give us the basis of his assertion that improvement is obvious. It certainly is not at all obvious here.

My Lords, I note that the noble Lord does not find the signs that I have mentioned as obvious as I believe we on this side of the House do.

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

My Lords, information is not available in the precise form requested by my noble friend. However, under approved profit sharing schemes, shares were appropriated to 145,000 employees in the tax year 1979–80, which was the first year of operation of the legislation, and to 270,000 in the tax year 1980–81. For approved share option schemes, which were introduced by the Government in the 1980 Finance Act, the first full year of operation was the tax year 1981–82. Reliable estimates of the number of employees granted options in that year are that they are believed to exceed 50,000.

My Lords, I thank my noble friend for that reply. May I ask him whether he is reasonably satisfied with the degree of increase in profit sharing that we have seen, bearing in mind the difficult time it has been for profits worldwide? Does he agree, now that we have better fiscal incentives, that care and thought are still necessary before the introduction of schemes which are tailored properly to the interests of the individual businesses concerned? May I also ask whether he can tell us how many profit sharing schemes were approved in 1979 and how many there are now in 1981–82?

My Lords, the answer to my noble friend's first supplementary question is, yes. I very much agree with the contents of his second question. In reply to my noble friend's third question, I understand that there were 30 approved schemes in 1979 and the latest total that we have is in excess of 440.

My Lords, are the Government prepared to consider suggestions as to how, through appropriate legislative means, still more share ownership schemes can be encouraged?

My Lords, we shall always be pleased to receive any comments, or any possible ameliorations, in respect of this scheme.

My Lords, can my noble friend consider seriously the suggestion from the Liberal Benches that the Government of the day should really look at the disincentives and the complexities, which are now necessary in share option schemes, and which appear to be derived from a desire by the Treasury to make sure that nobody gains anything worthwhile? Is it not an important part of industrial relations that share option schemes should be encouraged in every possible way, so that people have a greater interest in the company for which they work?

My Lords, we are seeking every possible way in which to publicise the ease of share option schemes for all employees in their own companies. Indeed, there are two very useful leaflets which are freely available from the Inland Revenue, one for the employees and one for the employers.

My Lords, would my noble friend the Minister agree that it is appropriate that the Government should take a positive initative, not only as regards share option schemes but also as to guidelines for voluntary worker participation?

My Lords, the purpose of all profit sharing provisions, be they profit sharing schemes or share option schemes, is to encourage all employees to identify their own interests with those of the company employing them. This is the major objective of the Government.

My Lords, are the Government prepared to study the Loi Monory scheme in France, which would make a very considerable extension of share ownership throughout industry to people who do not at present have the advantages of sharing in the profits of industry?

My Lords, we are prepared to make further studies in the direction of the Loi Monory scheme, but we think that this concept breaks the essential link, in which we believe, between the employee and his own company. Nevertheless, we are prepared to study this French case to see whether there is anything which we could learn.

My Lords, while we should recognise that profit sharing schemes make some modest contribution to democracy in industry, may I ask whether it is not a mistake to believe that they can make any really significant contribution, since worker shareholders can all too readily be outvoted by other shareholders? Is it not the case that democracy in industry can be found only in those enterprises which are operating on the basis of one shareholder/one vote, rather than on the basis of one share/one vote?

My Lords, I do not wish to enter into a philosophical argument. Nevertheless, I believe that the figures which I quoted in my original Answer to my noble friend's Question are indicative of the great success of the schemes that we have in operation at the moment.

My Lords, may I ask my noble friend whether or not it is vital to achieve a proper balance in these matters: to preserve employees' security, which is the first thing they need, then to improve employee involvement and then to be careful to avoid discouraging the risk taker? Without the risk taker we are nowhere. Does not this necessitate the continuation of voluntary schemes, with fiscal aid, upon which the Government have embarked?

My Lords, the main thrust of all these profit sharing schemes is directed towards associating employees with their own companies. If there is any fiscal benefit, we believe that this is by-the-by. It is possibly an associate benefit. But the main thrust should be that the employee may associate himself and his savings with his own company.

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

My Lords, in accordance with the Community treaties, which require member states to adopt a uniform electoral procedure if it is unanimously recommended by the Council of Ministers, consideration is currently being given by the Council to proposals which have recently been recommended by the European Parliament and which cover the issue of extending the franchise to Community nationals resident in other Community countries. It would therefore be premature to legislate on this issue in isolation before agreement has been reached on the package as a whole.

My Lords, I am grateful to my noble friend for his Answer. May I ask him whether he is aware that the Government's continued prevarication is making many people wonder whether the Government are in favour, even in principle, of giving the vote to some 300,000 British subjects living in other Community countries? If the Government are in favour, why on earth should we wait for the Council of Ministers to make up their mind—something which they are not at all good at doing and about which they are most unlikely to be unanimous—rather than following in the footsteps of seven out of nine of the other Community countries which have already acted in this field?

My Lords, the footsteps of the seven out of nine do lead in slightly divergent directions and will have to be brought back to the same path when the Council of Ministers agrees. When the Council of Ministers agrees it will have been a waste of parliamentary time if we spend time now legislating upon something which immediately we have to undo and replace with something else.

My Lords, would not the noble Lord agree that it is unwise to make a very important electoral change of this kind just for one series of elections, that this matter would affect the Representation of the People Act and that it ought to he considered by a Speaker's Conference—and not just for one election?

My Lords, as to the process by which we reach agreement within this country, I should not like to commit the Government. However, the noble Lord will have noticed the strength of feeling among my noble friends. I agree that it is important that we should get it right and that it would be a mistake to legislate twice upon it.

My Lords, is it not true that the unanimity of voting procedure is supposed to be in force by the second parliamentary election to the European Parliament? Judging by my noble friend's comment, that the seven feet of the different Ministers are all going in different paths—

Fourteen feet, surely!

Fourteen feet my noble friend tells me, this is unlikely. Surely, therefore, it would be wise to disabuse people of this injustice which is happening by reason of the 300,000 people who are disfranchised?

My Lords, I am tempted to follow my own image a little further and to go metric. The feet in question are the feet of the populations of the seven countries. The Ministers are trying to converge. Then their populations will have to follow them. How long this will take I cannot honestly undertake to let your Lordships know, because it is not in the power of the British Government to deliver decisions among the Council of Ministers. When that decision is delivered we shall know what to do.

My Lords, is it not a fact that some of our citizens are suffering an injustice which the citizens of seven countries in the Community have been delivered from by the action of their Governments in one way or another? In view of that and in view of the fact that agreement among all the countries in the Community at the time of the next election is unlikely, would it not be reasonable at least to have some draft legislation ready?

My Lords, with the greatest respect to the noble Lord, I am not confident that there is quite such a discrepancy between what binds our own citizens and that which relates to the citizens of other countries. Our own citizens can vote when abroad in exactly the same way in a European election as they can in a general parliamentary election. I see that the Luxembourgeois, to start with the smallest, have to attend in Luxembourg in order to vote. I see that the provisions in Belgium relate to citizens of 18 or over whose principal residence is still in Belgium, and that in Denmark the power to vote again relates to citizens temporarily resident abroad who maintain close links with Denmark and who are registered there. I believe that the concern which my noble friend has expressed stretches much wider than those people—to people who are resident permanently abroad, some of whom, if we are not careful with definitions, will have never resided in the United Kingdom.

My Lords, having asked a very similar Question to this of an earlier Government before the earlier European elections, I have fewer questions to ask than my noble friend who has put down the Question today. There seems to me to be less reason for delay now than there was then. Does not my noble friend the Minister agree that those who by circumstance are residents and who tend to know more about the subjects in hand than do the residents of this country should not be excluded, as they are at present being excluded, from the possession of the vote in our elections?

My Lords, I am grateful to my noble friend for his patient exposition of his very impatient feelings. As to the ability of residents in other countries who are citizens of this country to affect the tide of opinion in this country about affairs which relate, as to nine parts to ten, to other countries, I would not wish to take issue with him. However, the Government are aware that there is a desire for a movement in this direction. I undertake to bring the strong feelings of my noble friends to the attention of my right honourable friend, but I cannot be more encouraging than that.

My Lords, I am very grateful for what my noble friend has just said, but is he aware that so far as I am concerned I have absolutely no patience whatsoever so far as this matter is concerned? May I ask him to answer a question which I find it hard to know the answer to: Why are the Government so very keen, apparently, to do exactly the same thing as our Community partners in this one particular field where the election is concerned, whereas they have not the slightest intention of falling into line with the other Community countries where the general electoral procedures and systems are concerned

My Lords, without pursuing my noble friend into too much detail, this is an area upon which from the outset it was agreed that there should be uniformity.

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

My Lords, I understand from the Commissioner of Police of the Metropolis that the police acted under difficult circumtances and in accordance with their duty to prevent a breach of the peace.

My Lords, I thank the noble Lord for his Answer. Is it not, however, deplorable that our flag and our National Anthem should be banned merely because they annoy communists and members of the Socialist Workers' Party, particularly when these latter parties, together with other pro-Argentinian and pro-IRA groups, have complete freedom to demonstrate noisily as often as they wish and, what is more, can evidently get away with burning and trampling upon the Union Jack with complete impunity?

My Lords, the Union Jack was neither burned nor trampled upon on this occasion. The police were acting under difficult circumstances and had to act to prevent what appeared to be an imminent and considerable breach of the peace. We should recall that the actions of the police were based solely on the need to keep the peace. It is not their business to weigh the merits of one cause against another. Neither did they do so. Noble Lords will recognise that this degree of impartiality requires considerable self-discipline, and they will realise from the events to which the noble Lord has referred that the police are fully able to command it.

My Lords, will the noble Lord the Minister tell the House what happened?

My Lords, if I may summarise for the benefit of the noble and learned Lord, at the point we are considering the head of the procession had passed—

What procession?

My Lords, I had assumed a greater degree of knowledge among my noble friends and others than there appears to be. There was a procession and a rally organised by something calling itself the Ad Hoc Committee for Peace in the Falkland Islands numbering about 4,000 people. It assembled in one place and marched to another, and the latter place was Trafalgar Square. As the marchers approached Trafalgar Square, the head of the procession passed, I believe, No. 21 Whitehall—although I am not sure of the number.

My Lords, while respecting—

My Lords, I think I should complete the account for which many noble Lords have asked me, even if it makes a longer answer. As the procession passed this point, things were thrown on the people in the street below. As this section of the procession arrived outside that building, windows were thrown open, banners with proclamations upon them were hung out of the windows, as was the Union Jack, and music was played. The procession began to slow down. At that point, about eight people appeared on the roof and started shouting at the people below. They were joined by the crowd surrounding the procession. The procession began to halt and events became extremely tricky. The police decided, rightly in my view, that the only catalytic factor they could remove was the people on the roof. They did so and they also removed their belongings, which were t he banners and also the flag to which the noble Lord has referred—and that is normal practice. As the police left they also turned off the electric switches, as they should have done, and that silenced the music.

My Lords, while not uttering a word of offence or criticism of the general conduct of the police, of whom we are, generally speaking, proud, may I ask whether this event seems to indicate that some sections of the police force are now yielding to the hypocritical pacifism and so-called humanitarianism that has disgraced our society recently during our troubles?

Absolutely not, my Lords. I should add that 13 people whose views were exactly contrary to those of the people to whom we have just referred were arrested on the same day.

My Lords, may I ask my noble friend—because I do not think he has yet made it clear—whose band this was and which was the building in Whitehall? While not disputing that the police have to make difficult decisions all the time, would he not agree that this was the sort of occasion about which, surely, Members of this House are entitled to seek information?

My Lords, I have given the House copious information. I will add to it by saying that the band was recorded and I do not know what was on the label of the disc. Now I have clean forgot what the second question was.

Whose building was it?

It was in Whitehall, and my recollection is that it passes under the address of Nos. 21 to 31.

Whose building is that?

The Home Office?

Well, my Lords, at least people not very friendly to the Ad Hoc Committee for Peace in the Falkland Islands.

My Lords, although this matter seems to have been treated with a certain amount of levity and amusement, may I ask the Minister whether it is not a bizarre state of affairs that, while the Armed Forces of the Crown arc engaged in hostilities in defence of Britain, it should he forbidden to display the Union Jack and to play the National Anthem, even allowing for the fact that great difficulties were confronting the police? If in future a choice has to be made between a demonstration of that kind and one which gives aid and comfort to the enemy, would it not be better to ban the latter and not the former?

My Lords, may I add to my previous reply that the building was Nos. 27 to 31 Whitehall. Although the arresting officers did not have occasion to make inquiries at the time of the people they arrested in that connection, I believe it is associated with something called the Coalition for Peace through Security. As to the noble Lord's separate question, I find myself in a difficult position because I think it a very glorious thing that in a democracy under stress it is still possible to allow those who criticise the defence of democracy to have their voice. If one resorts to absolutely silencing critical views, one is beginning to do what it is that one is trying to defeat. On the other hand, as, I hope, a not unpatriotic Member of your Lordships' House, I find some of the sentiments thus expressed extremely offensive to me personally. That is why I have such unbounded admiration for the police, who always determine these issues with strict impartiality; not on what the demonstration is about but on whether or not the Queen's peace is in danger.

My Lords, is the noble Lord the Minister encouraged by the fact that, either in preparation for this Question, which I believe he has answered so well, or because it is the natal day of the Commodore General of the Royal Marines, Whitehall is today lull of Union Jacks?

My Lords, I believe that is an admirable sentiment with which to conclude what has become rather a lengthy debate.

My Lords, at a convenient moment after 3.30 p.m. this afternoon my noble friend Lord Trenchard, with the leave of the House, will repeat a Statement which has been made in another place on the Falkland Islands. It may be for the convenience of the House if I announce that Dinner will be available this evening at the usual time. The Report stage of the Local Government Finance (No. 2) Bill will be adjourned at approximately 6.45 p.m. for approximately one hour, and during this adjournment the Third Reading of the Social Security and Housing Benefits Bill will be taken.

My Lords, may I ask the Chief Whip a question arising from his announcement that a Statement made this afternoon in another place on the events which have occurred in the past 24 hours will be repeated here? Does he consider it sufficient in the circumstances, because of what has happened and because of those who may be regarded as responsible for what has occurred, to content ourselves with a few questions from selected individuals in your Lordships' House? Would it not be better, in all the circumstances, because this is a most deplorable event which cannot be ignored or covered up in any sense, to have a debate on the matter? In the circumstances, why should we not meet tomorrow, or at least on Monday, for the purpose of discussing the matter in a full debate?

My Lords, I do not want to pre-empt anything that my noble friend will repeat by way of a Statement. The noble Lord, Lord Shinwell will be aware that normally such matters are discussed between the usual channels and not on the Floor of the House. However important the occasion is, I believe it would be a pity for the well-running of your Lordships' House if we should depart from this usual practice.

Hear, hear!

moved Amendment No. 1:

Page 2, line 22, leave out subsection (4) and insert—

(" (4) Where a precept is substituted by virtue of this section any authority which has made a rate by reference to the original precept—

(a) shall under subsection (1)(a) above make a substituted rate by reference to the substituted precept; and

(b) shall be entitled to recover from the precepting authority—

(i) its administrative expenses in making repayments and allowing credits under subsections (5) and (6) below in respect of the original rate; and

(ii) any increase attributable to paragraph (a) above in its rate collection expenses for the financial year;

and in relation to the substituted rate made pursuant to paragraph (a) above the estimated product of the original rate shall for the purposes of subsection (2) above be treated as reduced by the difference (if any) between the estimated products of the original and the substituted precepts.").

My Lords, as the noble Lord, Lord Hill, rightly reminds us, I said previously, when he originally raised this matter, that I was sympathetic to the point of view he then expressed, and I did undertake to look into the matter. May I say at once how much I applaud his assiduity in pursuing this? He has clearly given the most careful consideration to the matter, and I consider his approach to be most constructive. I think I would perhaps add to what he has said that the concern here is about the equity of additional costs falling on the rating authorities in the circumstances which he has outlined, and that that concern is clearly understood. I am very pleased, without more ado, to say that the Government entirely accept this and we are pleased to accept these amendments to the Bill.

My Lords, before this is entirely accepted as it is, it seems to me that it is not quite so clear and straightforward as appears. There are three questions I should like to ask the Minister which I think should be cleared up. First of all, on the question of definition, who is to say what are the increased costs incurred by the rating authority in issuing a revised rate as a result of a substituted precept? Secondly, how are the administrative expenses going to be defined? That is rather a wide phrase. Then, it would seem to me there is a problem in disentangling the rates and the precepts. For instance, what happens when both the rate made for the district council's own purposes and the precept are substituted? How will the extra costs be apportioned?

Earlier Government amendments resulting in Clause 4(3) of the Bill increased the likelihood of substituted rates and precepts. I think we all agreed that substituted precepts will be, Clause 4(3) not withstanding, a rare occurance, and that costs of rate collection are part of the district council's expenditure for block grant purposes. Therefore, the district council will receive grants on the extra costs anyway. On the other hand—and this might be the case in Bedfordshire—the expenditure might attract penalties.

Thirdly, if all the districts in the country have to go through this exercise, the cost to ratepayers remains the same; it is only a question of whether the cost is in the precept or the rate. I should have thought, therefore, that the amendment was not necessary. All it does is further to complicate this already complex Bill. I must tell the Minister that if I had had another day I would have given him notice of these points that I was going to raise, but no doubt he will have them in mind himself. We on this side of the House are very doubtful whether these amendments are necessary and whether they do not further complicate something which is already complicated enough.

My Lords, I think I would be expected, on behalf of the county councils, to oppose quite strongly this amendment, but I cannot do so because there is a great deal of merit in the equity, as the noble Lord, Lord Hill has said, and it is difficult to argue against principles. But I think it is a pity that this amendment has been brought forward very late in the day. The noble Baroness, Lady Birk, has given many of the objections to it, and I would endorse what she has said. Secondly, I think there could have been much more consultation on the detail. Finally, I would say that it only serves to highlight what we have pointed out so often: the totally unsatisfactory nature of the precepting system. I hope that this will be the last occasion w hen we have to debate it and that something can be put in its place so that it is not necessary. I have one further question. How it is it to be determined whether a supplementary precept is the fault of the county council or something beyond its control?

My Lords, if I may, with the leave of the House, speak again, may I say that if one looks at the basic intention behind what we are proposing, it is in any case to take up the very point that my noble friend Lord Ridley made—namely that, if we did not have supplementary rates and precepts, then there would not be a problem such as we are finding now to put the situation back into shape satisfactorily. Of course, that is the Government's intention and we make it quite clear that we wish to see the abolition of the right to impose supplementary rates and precepts. Once that has been done, presumably on this Bill receiving Royal Assent, then the problem will not arise.

We have a specific situation here which we looked into carefully after this matter was raised, as it was, by the noble Lord, Lord Hill; and, as I have said, we felt that there was equity in what he was saying, that it was right and that therefore we should be willing to accept it. That is why we are so doing.

As to cost, unhappily at the end of the day the costs will fall on the ratepayers anyway, as they always do, but it seems fair to us that in this instance the expenditure should be borne by the precepting authority rather than the rating authority and count against the block grant target of the former rather than the latter. We feel that it would not be right to penalise the rating authority in such cases. Clearly there will have to be some discussion with the parties on the way in which the nuts and bolts of this will be sorted out.

The noble Baroness, Lady Birk, is right to raise the question of how exactly we shall deal with it, and she clearly says that that is something into which I cannot go. At least, I cannot give her a satisfactory answer today, but I am sure she knows that we will pursue it and, when we get further clarification on this, we will make sure that she is kept informed.

My Lords, may I ask the noble Lord a question, through I am not sure whether or not it is relevant? There is now a tendency for local authorities to borrow from overseas. Would this Motion that we have had put before us, which seems to have been accepted, in any way affect borrowing from overseas? No local authority in history has ever reneged on paying. How would this affect foreign borrowing by local authorities? If it does, or if it has nothing at all to do with that, will the noble Lord please let me know?

My Lords, I do not know whether I come to speak yet a third time, other than to say that to the best of my knowledge in no way would that be a problem.

My Lords, may I question the noble Lord a little further on this point? It will be only a very short point. My noble friend asked him how he was going to define "administrative expense", a term which will appear in the Bill in due course; and of course under Clause 12 of the Bill the auditors will require some specific particulars on how this is defined. I wonder if the noble Lord could deal with that, or would he prefer to leave it until Third Reading?

I rise for the fourth time, my Lords, to say that quite clearly I would prefer this to be dealt with at Third Reading.

moved Amendment No. 2:

Page 3, line 11, at end insert—

(" ( ) Where a person as tenant or licensee of any premises—

(a) is liable to make payments (whether as part of his rent or otherwise) which vary or may vary according to the rates chargeable in respect of those premises; or

(b) is entitled to make deductions from his rent in respect of those rates,

he shall, where a rate affecting those premises is substituted by virtue of this section, be entitled to recover or, as the case may be, liable to make good so much of any payment or deduction as he would not have been liable or entitled to make if the original rate had corresponded to the substituted rate; and any sum which he is entitled to recover as aforesaid may, without prejudice to any other method of recovery, be deducted by him from any rent payable by him to the person by whom that sum was received").

My Lords, we on this side of the House are generally in support of the sentiments which have been expressed by the noble Lord, Lord Gainford, in moving, but we have some questions to ask which I am quite sure the noble Lord will be able to answer. Could it be the case that is given by the noble Lord who moved the amendment that the tenant would have his own rights under common law in any event if excessive deductions had been made or, on the other hand, the authority would have the right on the basis of the deductions being insufficient? I just wonder whether the noble Lord could answer that point and say that it may perhaps depend upon the nature of the contract between the landlord and tenant anyway.

My Lords, may I say first of all that we consider this is a helpful proposal and I am grateful to my noble friend Lord Gainford. The intention here extends the protection afforded by Clause 3 and Schedule 1 to those ratepayers who do not pay their rates directly to the rating authority but pay them instead as an addition to, or as part of, the rent payment to their landlord. Clearly since the Bill as it stands gives the landlord, if he is a direct ratepayer, a right to recover excess payments, it is only fair that these should be passed on to the tenant if he originally footed the Bill. I agree with my noble friend that there can be no contention over that.

I would hope that in nearly all cases where this is necessary the refunds would come about by voluntary agreement between landlord and tenant. Nevertheless, I accept that if there are problems without the amendment it is not clear that the tenant would have the right to make good his loss either by deduction from future rent payments or in some other way by making deductions; for example, he might put his contract with the landlord at risk because the circumstances in which rent may be withheld are extremely limited.

The area of landlord and tenant law is extremely complicated, and so I am relieved to find that the amendment proposed is so simple. It merely states the entitlement of the person who originally paid a sum towards the rates to receive any excess refundable and ensures that, if necessary, rent may be withheld to make good the excess. This is, of course, without prejudice to any more agreeable method of achieving a satisfactory refund.

The amendment also deals satisfactorily with the situation where a rate has to be replaced, or falls on Royal Assent. The amendment to Clause 3 deals with the case where the rate has to be replaced and the addition to the transitional schedule deals with other cases. With regard to the point which the noble Lord, Lord Bruce of Donington, made about whether the tenant in any case would not have certain rights under common law, I point out that of course tenants do have rights under common law, but it can do no harm to make it explicit in this way on this point, and I am sure that the noble Lord would be happy about that. My officials have looked carefully at the amendments and I am content that they add to the provisions of the Bill without further complicating unnecessarily the whole difficult area of landlord and tenant law. Therefore, I am happy to tell my noble friend that the Government are willing to accept these amendments.

moved Amendment No. 3:

My Lords, I am sorry that the noble Baroness wishes to wreck the package of amendments which the Government tabled—tabled may I remind her after full consultation with the local authority associations—at Committee stage. I do not propose to repeat all that I said when the House discussed the issues on that occasion, but I thought 1 made it clear that the package was designed to clarify the position of rating and precepting authorities and of ratepayers, especially where a rate or precept was found to be unlawful.

Our aim was and is an entirely constructive one: to resolve doubts over such matters as the powers of rating authorities to reduce their rates and to make refunds. The noble Baroness, however, is clearly anxious that these doubts should remain by deleting the provisions concerned. Indeed, if Clause 3 were deleted, precepting authorities, because of the time limits on the issue of precepts, would not be able to issue a new precept at all to replace an invalid precept. The precepting authority would be left entirely without any way of financing their expenditure for the year in question.

The noble Baroness complains that Clause 3 would enable an authority to substitute a lower rate but not a higher one. She talked of political chicanery. Let me make it absolutely clear, as I hope your Lordships are now aware, that the ban on supplementary rates and precepts is designed to protect ratepayers from the further depredations of irresponsible local authorities after the start of the financial year. As I indicated at Committee on 10th May, it would hardly be consistent with that basic policy objective to let authorities substitute a higher rate part-way through the year. The noble Baroness and the House will not be surprised to know that as far as we are concerned this amendment is quite unacceptable to the Government.

My Lords, I do not know how long the noble Baroness may be in her reply, but I think that probably the House would wish the Statement to be taken now.

My Lords, I should like to repeat the Statement made by my right honourable friend the Secretary of State in the other place. It reads as follows:

" Since I reported to the House on 26th May British forces have moved forward to positions surrounding Port Stanley and are in firm control of high ground on an arc surrounding the town.

" Earlier on 29th May, 2 Battalion the Parachute Regiment supported by units from the Royal Marines, Royal Artillery and the Royal Engineers captured Darwin and Goose Green. This action against a greatly superior force was a remarkable feat and our forces displayed great determination, valour and fighting skill. At the same time units of 3 Commando Brigade liberated the settlements at Teal and Douglas. Whilst these actions were in progress 5 Infantry Brigade came ashore without incident and the QE2 which carried them is due back in Southampton tomorrow.

" In order to move forward elements of 5 Infantry Brigade as rapidly as possible to the Port Stanley area and given the appalling weather which was making the logistic problems difficult for helicopters, the force commander moved some forces with heavy stores and equipment around the coast by landing ships.

" When the weather cleared on 8th June all but the last elements had moved forward successfully. But the sea movement coincided with better weather and the Argentines at this time renewed their air attacks on our forces. Our latest assessment is that during these attacks at least seven Argentine aircraft were destroyed and maybe another four, making 11 in all.

" One air attack was launched against two landing ships, 'Sir Galahad' and 'Sir Tristram'. Both ships were hit. The 'Sir Tristram' had virtually completed off-loading, and she was not severely damaged. The 'Sir Galahad' had already started unloading but still had some men embarked.

" Having consulted the military authorities, I am not prepared at this stage to give the total numbers of our casualties and indeed to do so could be of assistance to the enemy and put our own men at greater risk. Meanwhile next of kin are being informed and I will give further information as soon as reasonably possible.

" In another incident, Argentine aircraft attacked a small landing craft. Four Royal Marines and two Naval personnel were killed; their next of kin are being informed. In this incident, all four attacking Mirage aircraft were intercepted by our Sea Harriers and were shot down.

"HMS 'Plymouth' sustained an attack on the other side of East Falkland, in the Sound. Five Royal Naval personnel were injured and their next of kin have been informed. The ship was damaged but she remains operational.

The losses which we have sustained in these incidents are tragic ones and as soon as we can give further information to the families we will do so. I would like to express my tribute to the bravery and skill of those who were involved in the rescue of our men, particularly the helocipter pilots and crews who, in extremely hazardous conditions, were responsible for saving a great many lives by removing men from the damaged ships.

" I must tell the House that the task force commander's plans have not been prejudiced by these attacks, and the losses of stores and equipment are already being made good from other stocks held ashore".

My Lords, we are all grateful to the noble Viscount for repeating the Statement. First, of course, the whole House joins with the noble Viscount in expressing our deepest sympathy to the relatives and friends of those who lost their lives on Tuesday. I should also like to pay our warm tribute to the great courage and resourcefulness of all our troops, on land, on sea and in the air.

I should like to ask some questions on this grave incident. In the light of these serious new attacks by the Argentine Air Force, have the Government reassessed the quality of our troops' equipment to deal with such attacks? Secondly, in view of the persistent rumours in the press, is it possible that the Argentines have been reinforced by sophisticated weapons from elsewhere? We were glad to have the noble Viscount's assurance that some losses were made good from stocks ashore, and this we welcome. However, to what extent does the damage to the ships and the equipment affect the progress of operations and the plans to bring hostilities to an end by taking Port Stanley?

As the Government also promised military, economic and diplomatic means to ensure a cessation of hostilities with minimum loss of life, is this not the time for the British Government to table a new resolution to the Security Council? This should be designed to achieve a cease-fire linked with the implementation of the Security Council's Resolution 502, indicating our willingness to achieve a negotiated settlement linked with the withdrawal of Argentine forces and with future negotiations.

My Lords, is the noble Viscount aware that my noble friends and I share to the full the sympathy that he and the noble Lord, Lord Peart, have expressed? I think that we also feel for the Force Commander who, up to this point, had handled these difficult disembarkations with brilliant success in spite of a failing of aircraft early warning for which he himself cannot possibly be blamed.

On the subject of the announcement of casualties, only the Government can judge the operational wisdom or unwisdom of making such an announcement at this time. Is the noble Viscount aware that the whole House would, I am sure, wish that information to be handled so as to minimise distress, not only to next of kin but to relatives and families of all those operationally involved in the Falkland Islands? Nevertheless, I am sure that no one would press the Government to release any information which might in any way increase the dangers to which our servicemen are exposed in the Falkland Islands.

Finally, the task force and the Ministry have sustained a setback operationally and administratively, but this should not lessen our admiration for the magnificent success overall of the military and logistic achievements out there in the Falkland Islands.

My Lords, I thank both noble Lords for the support which they have given to the task force in their remarks and will, when he has a moment, draw them to the attention of the commander. I believe that we are satisfied, in the main, with the equipment that we have on our ships. It is true to say that in a wide area and outside the range of support from land-based aircraft, prevention against the possibility of sneak attacks by determined pilots in the three dimensions of the air is not really a possibility.

We have followed all the information and all the speculation about the movements of weapons. I do not think that the noble Lord would expect me to say anything in public on that, and we have taken every step that we can to ensure that the weapons of the aggressor are not replaced.

I think that the Statement makes clear the answer to the question asked by the noble Lord, Lord Peart, as to the degree of setback in two respects: first, that this imaginative move, which was surprised only in its last stages, was designed to cut down the time required in the appalling weather conditions and, I think it is no secret to say, mud that exist in the Falkland Islands.

I doubt whether the House would agree with the thought that this is the moment for a new resolution at the Security Council, though this, of course, is in the field of my right honourable friends the Prime Minister and the Foreign Secretary. But that in the end there has to be a settlement, after hostilities, is something that we still all know, and we have talked before in this House with, I think, a good degree of unanimity about the need. It is a question of timing.

I understand and, if I may say so, I would fully endorse the noble Lord, Lord Mayhew's, balance of sentiments in relation to the need to cause the minimum distress to the families who are related to those taking part in the task force, but I am obliged to say that it is the Government's view that, where there is a clash for a period of between that and any possible military disadvantage, with the risk of further casualties, then the latter has to be supreme.

My Lords, we on these Benches associate ourselves with what has been said about the loss of life on this occasion, and of course respect the reasons why the Government do not wish to specify in any detail the extent of what appears to have been a rather grave setback. The noble Viscount is always very generous in giving the House information about what are strictly Foreign Office affairs as well, and since this is the first time we have been able to address the matter, even briefly, since the Recess, I should like to raise the question, possibly for pursuit at a later date, about the veto that Britain placed on the UN resolution last weekend.

The reason given out for this was that it did not clearly link an Argentinian withdrawal with the ceasefire, or not clearly enough. But if one reads that resolution the link does appear to be rather clear. While I would not go so far as the noble Lord, Lord Peart, in calling for a British resolution to be introduced at this point, yet I hope that the Government will he careful not needlessly to veto resolutions coming from other quarters when they do quite clearly link a cease-fire with Argentinian withdrawal, as did the last one they vetoed.

My Lords, I thank the noble Lord, Lord Kennet, for his understanding about the comparatively small amount of detail that we can release at this stage. So far as his point is concerned about the recent veto at the United Nations, yes, indeed, the reason was the lack of a link with Argentine withdrawal. I think I would be able to go further without in any way stepping out of line with my right honourable friend the Foreign Secretary by saying that one needs, particularly when dealing with the Argentine, a degree of feeling of guarantee that words will be turned into action; and to get that in the time available and at the speed necessary, bearing in mind the weather and conditions in which our forces are operating, is not an easy task. I can only ask the noble Lord to believe, first, that we know that in the end we need settlement and peace in the South Atlantic, but, secondly, that we have to put first the security of our task force and take account of the reliability, in terms of turning words into action, of the people who have invaded the Falklands.

My Lords, is the noble Viscount aware that a large number of people outside your Lordships' House do not share the welcome given by the noble Lord, Lord Peart, and others to the Statement which has just been made? And neither do I. It is my judgment, and that of many other people outside the House, that too many such Statements have been made. I would ask the noble Viscount if he would discuss with his right honourable friends whether perhaps we are not overdoing the amount of information we give, and the amount of opportunity we give for words to be spoken which are deeply resented by those in the task force who have been given a military job to do, and should be given the opportunity to carry it out without constant threats that their efforts may have proved in vain.

My Lords, I have decided that it is quite impossible for my right honourable friend the Secretary of State to please everybody in relation to information in a state of hostilities when the country is not at war. There are those who ask him for more; there are those who ask him for more earlier. There are those who tell him to give less, and to give it later. I am certain that whatever my right honourable friend does he will be open to criticism. There are important factors of every kind. The military ones are supreme, and the safety of the task force is supreme; but there are factors which affect the backing for the operation in this country and abroad, and they are important, and they have to be taken into account in terms of the kind of information that is given.

I take this opportunity of saying that the much publicised suggestion by certain correspondents with the Second Battalion of the Parachute Regiment that the Ministry of Defence revealed a forthcoming attack on Darwin and Goose Green, as far as I can see, is completely without foundation. My right honourable friend caused an inquiry to be made immediately and we can find no evidence of any such revelation. It is true that in all areas of the media, in a situation of free media, there was speculation that the most likely place for a first attack, which one look at the map would reveal, was Darwin and Goose Green, and there was a great deal of speculation, including a World Services BBC programme. I believe that the correspondents concerned have confused speculation with what was issued by the MoD, which in fact was late, was after the event, and we were criticised for the fact that it was late.

My Lords, would not the Minister agree that in view of the frequent statements issued by the Ministry of Defence about an imminent assault on Port Stanley and the surrounding area, the events recorded in the last 24 hours are unexpected and exceedingly disturbing? Would he not agree that much of the trouble has occurred because of political intervention not only in the United Kingdom but in the Security Council and the United Nations, and from oscillations in American attitude, and also the frequent mischievous statements that have appeared in the press media?

Although every one of us is agreed that casualties are bound to have occurred in the circumstances, although naturally we do not ask for details, would he not agree that those of us who are disturbed by what has happened and expected events to be other than those that have occurred, would prefer, until the Ministry of Defence inquiry into the circumstances that occurred, the unexpected appearance of sophisticated aircraft, and the like, to refrain from asking questions, however important? Although in the opinion of some of us those questions have to be asked at some time, in the circumstances we had better let the thing pass for the next 24 hours.

My Lords, may I start by fully agreeing with, and thanking, the noble Lord, Lord Shinwell, for his call for restraint in questions, which I very much appreciate. I do not think, however, that the Ministry of Defence has ever issued statements of imminent assault. I do, however, understand, I believe, what is in his mind when he talks about political intervention and mentions the media also. Certainly we have discussed, both my noble friend and I in this House following these statements, the movements of international opinion and the logicality, or lack of logicality, for them. I do not think it would be helpful for me to go over that ground again today. I should like to say to the noble Lord that although, as the Statement makes clear, this is a setback, my right honourable friend has always warned that there would be casualties, that there would be setbacks, but that we will achieve our objective; and that is still his view and our view.

My Lords, may I ask the noble Viscount some questions and assure him that I ask them in the full knowledge of their implications? Is it not a fact that some of the tragedies which have taken place in the Falkland Islands have been the result of setting aside, for one reason or another, the fundamental military principle that every effort should be made to protect those in the operational area from attack by the enemy by air? May I ask Her Majesty's Government—I ask this in all seriousness and solemnity —for how long they can sustain a policy which appears to grant total immunity to the bases from which those air attacks are made?

My Lords, it is not accurate for the noble Lord to say that the military advisers to the Secretary of State, the Secretary of State himself or the Government have for one moment set aside the principle of the need to get the greatest degree of air superiority that is possible in any area of conflict. Indeed, the noble Lord will recall not only the aircraft casualties of the Argentine but the percentages; up to 70 per cent. of the aeroplanes sent out by the Argentines in a day destroyed. I believe it is true to say that, even beyond the range of support from land-based aircraft, we have achieved a very high degree of air superiority. But it is never, or very rarely, total, and, as I have said, an aircraft can always get through. May I ask the noble Lord to remind me of the second part of his supplementary, which was important?

The second part contained the whole point of the question, my Lords; namely, that one of the elementary ways of achieving air superiority is to attack the bases from which the air attacks are made. I recognise that there are difficulties but I am asking a serious question. For how long can Her Majesty's Government sustain that policy?

My Lords, my right honourable friend and I have replied to a similar question before and I really have nothing to add to the statement that we shall keep all military options open, and we shall continue to do that. The practicality of the course of putting an airfield of any kind, even a small one with one airstrip, out of action is well known to the military experts on each side. It is not an easy task. Thus, the military practicalities of the course, leaving out any question of an extension of the conflict, have to be very carefully considered.

My Lords, it is only as a former wartime pilot in the Fleet Air Arm that I presume to ask the noble Viscount some questions. Are not the disasters of Tuesday one more piece of evidence of the folly of sending the task force to the Falklands with the protection of no more than 20 fighter aircraft?—no more than I personally commanded on one small carrier in 1945. Apparently those were the only aircraft available for the purpose in the Fleet Air Arm, and they have now had to be supplemented by RAF planes. Is he aware of the extraordinary stresses under which the pilots of those planes have been operating and the extremely high rate of casualties they have suffered—perhaps two dozen, I do not know how many; two dozen pilots to fly 20 aircraft was about what we used to have—and that those casualties are now approaching perhaps 50 per cent? Can he assure the House that he is fully appreciative of the extreme gallantry and devotion to duty shown by the pilots of the Fleet Air Arm who flew those Harriers, which was in the highest tradition of the service?

My Lords, the noble Lord does not have his facts right, and I am not prepared to put them right. There has been mention of reinforcement of Harriers by one ship or another going to the South Atlantic. We have never given total numbers and I assure the noble Lord that his facts are not right in terms of numbers. Furthermore, he will be aware that these days aerial warfare is fought not only by aeroplanes but by missiles also, and we have inflicted very heavy losses on the enemy by surface to air missiles. I would remind him that we have not lost a single Harrier in air combat, although the Harriers have shot down the greatest proportion of over 60 combat aircraft which the Argentines have lost. My previous statement—that we have achieved a fair measure of air superiority—is accurate. Of course, we do pay, and always have paid, the highest tribute to the pilots of the Harriers and to all of those who have been manning the missile systems under attack on Her Majesty's ships.

Whether or not we are making too many statements, my Lords, would my noble friend agree that we should leave the task force in no shadow of doubt of our deep and profound admiration for the manner in which they have conducted their affairs, the hardships they have endured, the courage they have shown and the skill of the commander in carrying out an extremely difficult campaign, as well as of our profound assurance that they will be supplied with all they require in order to bring the campaign to a successful conclusion?

My Lords, I would merely say, "Hear, hear".

My Lords, may we assume that, before any decision is taken, if it should be taken, to bomb the bases on the mainland of the Argentine, Parliament will be consulted as to the advisability of so extending the war?

My Lords, I have nothing to add to what my right honourable friend the Secretary of State and I have said before on the subject.

My Lords, what steps, if any, have been taken to seek out and destroy the Argentine aircraft carrier, the "Vienticinco de Mayo"? If we are not to attack the mainland bases, is it not possible that a good many aircraft are flying from that carrier?

Again, my Lords, I would rather not go into military details. I believe we have taken every practical step to date to safeguard our task force in all practical ways that the military have advised.

My Lords, before we leave—

My Lords, I know the House would not grudge any time to the seriousness of this occasion, but I wonder whether any more questions would be helpful to the task force, and whether possibly we might leave it there?

Returning to a more local matter, my Lords, I am speaking following the Minister's reply to my moving of Amendment No. 3, and I must at the outset apologise for omitting to say that it would he convenient to discuss at the same time Amendment No. 49 and Manuscript Amendment No. 8A. I do not think that omission on my part caused the Minister any difficulty because we have an agreed grouping of amendments. No. 49 seeks the deletion of Schedule 1 and the manuscript amendment is necessary because a small subsection which was overlooked must be deleted if Schedule 1 is to be removed.

I suspect that whatever I say in response to the Minister's comments will not make much difference to his view, so I shall not delay the House on the matter. Although Schedule 1 concerns Bedfordshire, it could be used against other authorities which, between now and Royal Assent, attempted to do something similar. Other amendments are down which deal specifically with the Bedfordshire problem, and so here I am dealing with the wider-ranging aspects of Schedule 1 and the reasons why it should be deleted in its entirety.

What I might call the "non-Bedfordshire" objections to the schedule centre on the concentration of powers being given to the Secretary of State, as in so many instances in the Bill. Paragraph 5 of Schedule 1 gives the Secretary of State sweeping powers to adjust a rate or precept to be made in substitution for one made illegal by the schedule. There does not seem to be any real reason why that should be done, except again the giving to and the retention by the Secretary of State of the powers. We do not know what criteria the Secretary of State will adopt in making the adjustment, and similarly paragraph 6(3) gives the Secretary of State powers to adjust the rates.

In answer to what the Minister said a little while ago —before we embarked upon the Statement—to the effect that all of this was not necessary in the past, I would say that the balances were more generous in the past and there was proportionately more money for local authorities to spend on social services, education and other services. The reason that we seek the deletion of the clause and the schedule is that they are really so bad that short of doing an enormous reparation job, which I cannot see the Government doing, it seems better to delete them entirely.

There is one small point that I wish to add. So far as Schedule 1 is concerned, it seems that the proof readers have rather thrown up their hands about it all. Part of line 18 on page 25 reads: "for a supplementary rate of precept", but I imagine that that is meant to read: supplementary rate or precept ". I should like to feel, though without a great deal of foundation, that whoever was reading it by then thought, "God! I can't read any more of this", and so the error crept in. Of course, that is no reason for deleting the whole clause. However, the purpose of the three amendments is the deletion of Clause 3, together with the deletion of Schedule 1, and I should like to test the feeling of your Lordships by dividing the House.

moved Amendment No. 4:

Page 3, line 31, after (" rate ") insert (" on any of the grounds mentioned in subsection (2) above or in respect of a ").

My Lords, as the noble Lord has indicated, this matter was discussed in Committee and the noble Lord gave some explanation of the position then. We are most grateful for the further explanation he has given today, and for his additional clarification. We feel that the amendment he has made adds to clarity. We are most grateful to him for it, and we on this side of the House will support the amendment.

moved Amendment No. 5:

After Clause 5, insert the following new clause:

My Lords, I think there is a certain amount of merit in this amendment because, as the Minister pointed out, there has been a problem in some enterprise zones where factories have straddled boundaries. Reaching agreement on the amount of relief, if any, for these straddling hereditaments has, it is true, become a problem, albeit a minor problem, and this amendment, I think quite sensibly, leaves it to the judgment of the valuation officer. This seems to make more sense.

But, of course, it still does not alter the basic fact about enterprise zones and the argument that still continues about them. It is more and more felt that they are probably a misguided experiment—and this is not thought only on party political grounds—and I should like to ask the Minister to tell us when he replies whether he knows what has been the impact on rent levels in enterprise zones of the fact that there are no rates. They should, practically speaking, not be any higher, or be lower, because there are no rates; but economic theory (and, I understand, some of the practice) suggests that they rise to offset any advantage to industrialists—in other words, the rent will fill up the vacuum that is caused by the reduction of rates—and this seems to negate what has been considered to be the inducement to people to set up in enterprise zones.

Nevertheless, these amendments tidy up the administrative problems that have occurred in the granting of rate relief; but if the Minister has any knowledge on that (I am sorry; this is something that occurred to me while he was speaking, so I could not give him any prior notice of it) I would be very interested to know.

My Lords, with the leave of the House, I could say that there is some evidence of what the noble Baroness says: that, in some instances, rents in some zones have tended in some cases to be higher than one might have expected or one might have anticipated. We shall have to watch this. It is all part of the monitoring that we consider so vital in everything to do with enterprise zones. The noble Baroness will know that we have expressly set up people to do just that and as soon as they are able to report, I am sure that the particular point that she mentioned will be included in the monitoring and report.

moved Amendment No. 6:

Page 4, line 42, after (" 3 ") insert (" and (Rate relief in enterprise zones) (1) and (3) ").

moved Amendment No. 7:

Page 4, line 42, leave out ("relation to").

My Lords, from these Benches, I support the amendments moved by the noble Baroness. I think she indicated the position that democratically the majority of the council in Bedfordshire wanted a certain kind of rate to be levied. By an unfortunate accident at an earlier meeting of the council, because of the absence of certain members for curious reasons, the Conservative minority managed to carry a rate which did not represent the views of the majority of the councillors, namely, the Labour and the Liberal councillors. What they did was to restore what was the view of the minority. Therefore, I think it would be inappropriate and contrary to democratic practices, which I am sure the noble Lord the Minister himself supports, if the majority of the councillors are not allowed to have the rate that they require. This would ensure that this happened and, therefore, this amendment in all equity, fairness and democratic practice should be carried so that the wishes of the majority of the elected members of Bedfordshire should carry the day.

My Lords, the first amendment that we dealt with today, the one by the noble Lord, Lord Hill of Luton, touched on this area. I then made the Government position clear and I think I indicated our attitude to this Bedfordshire situation by the decision we took to accept that amendment. Amendments Nos. 7 and 45 are designed to ensure that the anomalous situation—and that is what it is—in Bedfordshire persists after Royal Assent. As the House is aware, the county council issued this supplementary precept in March for 1982–83. As the Bill stands, it will be invalidated on Royal Assent and the rating authorities and the Bedfordshire ratepayers will get their money back. Under the amendments, it will remain valid and the rating authorities and the ratepayers will be unable to get their money back. At least, I am pleased to see that noble Lords opposite have at last acknowledged that these words that they wish to delete (and which I must say have been in the Bill from the beginning, although originally part of Clauses 1 and 2) make it clear that the Bill applies to any actions taken in relation to the financial year 1982–83 whether or not they took place before 1st April 1982. That must be right.

We made it clear that our policy is to ban supplementary rates and precepts for 1982–83 and subsequent financial years. This means what it says. This is what the Bill does. There can be no question of exceptions. We believe that Amendments Nos. 7 and 45 are inconsistent with our policy objective and that is why they are not acceptable. The noble Baroness referred to Amendment No. 8. I am not sure whether the noble Lord, Lord Hill of Luton, wishes to deal separately with that. I hope I am not treading on his territory if I may refer to that now. The noble Baroness touched on the point and it is fundamental to the argument put forward. No doubt the noble Lord will tell me—

My Lords, the noble Lord is giving the explanation which I sought in my amendment. In due course, at the appropriate time, I propose to withdraw my amendment.

My Lords, I am most grateful to the noble Lord. I thought that was so; but perhaps I should say a word on the point now because the noble Baroness raised it and the noble Lord, Lord Evans, also touched on the principles. We have made it clear on a number of occasions that Clauses 1 and 2 will retrospectively invalidate any supplementary rates and precepts made for 1982–83, whether before or after 1st April, and therefore Bedfordshire's supplementary precept will fall on Royal Assent.

I can also confirm that Clause 3 and Schedule 1 will apply to all actions taken in relation to 1982–83. In view of what has transpired, I know the noble Lord will not want to proceed. He has given us that intimation. I know precisely what noble Lords opposite are concerned about. The noble Baroness wonders whether I can tell her how many county councils have issued supplementary precepts before the start of the year. I do not know whether any others have done so. It is clearly unusual. It arises from unusual circumstances that the noble Lord, Lord Evans, reminded us took place. I have known situations of that kind to happen, with other matters, not specifically to do with rates, in those kinds of circumstances.

It is true that usually—but not always—the authority in question takes the first available opportunity to put it right. Here we are talking about something which is a fundamental concept of what the Government believe has to be done; that is, to ban the making of supplementary rates. Therefore, whether there were others who have done it before does not bascially alter our position in the matter. That is why we cannot accept the amendment.

My Lords, the Minister started off by saying on Amendment No. 1 that the Government had made the postion quite clear. It was not clear. There were a number of points that I, the noble Viscount, Lord Ridley, and my noble friend Lord Bruce raised. It was put to the Minister that it would be better to come back on Third Reading. What we meant was that the amendment would not be accepted but would be brought forward in a clearer form on Third Reading. He grasped that branch and said he would like to explain it on Third Reading. That itself was not good enough.

Now to say that the position was made quite clear on Amendment No. 1 is not right. It was not made clear. The noble Lord, Lord Hill of Luton, thanked the department for the help in drafting Amendment No. 1. That was grasped with gratitude by the Government. We find the Minister's reply to the amendments moved by myself and my friends, joined by the noble Lord, Lord Evans, extremely unsatisfactory. I shall not rehearse the arguments.

We discussed this in Committee, and I have put forward the case again now. In Committee, my noble friend Lady David put forward an extremely detailed and well-argued case. She did not get much of a convincing reply, either. We seem to have taken this argument and discussion as far as we can go. Therefore, the only course left now is for us to divide the House on this amendment.

moved Amendment No. 15:

Page 6, line 1, leave out subsection (4).

My Lords, I should point out to your Lordships that, if this amendment is agreed to, I cannot call Amendments Nos. 16, 17 and 18.

My Lords, of course, I welcome the grouping together in this way, although I think that Amendment No. 17, of my noble friend Lord Ridley is slightly different. Therefore, the noble Baroness will understand if I do not touch on that, but reserve my remarks on it until my noble friend moves it. While I will gladly comment upon Amendments Nos. 15, 16 and 18 together, I suppose it ought fairly to be said that, in a way, the amendments are alternatives, as I am sure the noble Baroness appreciates.

The Government have already made it clear that without subsection (4) it will be impossible to give any exemptions from holdback—including the GRE exemption. I cannot believe that this is what your Lordships—or, indeed, the local authorities themselves—actually want. I have said before that there is no question of the Government's going back on their intention to implement holdback. The question is whether or not we can grant the exemptions which the authorities themselves have asked us to make. Anyone who voted in favour of this amendment would horrify a great many authorities who stood to benefit from the exemptions which we have already announced.

Your Lordships will not imagine that without this subsection the Government will abandon their holdback proposals. It will still be necessary for the Government to act, in face of the undeniable failure of local government to comply with our public expenditure guidelines. We cannot ignore or minimise the amounts involved. I repeat that the total over spend in 1982–83 is about £1½ billion; the Government cannot continue to support overspending on this scale with the taxpayer's money. The Government certainly hope that the effects of any overall reduction in grant will be distributed in as fair a manner as possible; and subsection (4), by ensuring that the Government can respond to representations about holdback, provides one way in which that can be achieved.

Deleting the subsection might appear, at first sight, as an attractive political gesture, but it would have disastrous consequences for many authorities, and I hope that noble Lords will consider very carefully the consequences of that. If the Government are prevented from responding to the representations about holdback, and if the necessary grant reductions have, in consequence, to be made in a comparatively undiscriminating way, then it will be clear where the responsibility lies.

Amendments Nos. 16 and 18 are interesting ones. As the noble Baroness, Lady Birk, said, they would restrict the power of the Government to respond in the future to representations about holdback. Admittedly they would take effect only from the year 1983–84, and so would not prevent the Government from giving the exemptions which we have already announced for 1981–82 and 1982–83. But for 1983–84 and future years they would prevent the Government from exempting any expenditure, other than that incurred as a result of emergencies or disasters involving destruction of or danger to life or property.

This is a very narrow discretion. It would prevent us from giving a GRE exemption, or an exemption for some urban programme expenditure, as we have agreed to do in respect of 1981–82. There are many similar exemptions that have been urged upon us, which we have been able to consider, even though, in the end, we have felt unable to accept them. But these amendments would rule them out altogether.

The most important consequence would be the end of the GRE exemption. This was first announced in September, 1981, as a response to the argument, strongly expressed by many authorities, that it was unfair to treat authorities, which, on objective criteria, had comparatively low levels of expenditure, in the same way as those which, on the same criteria, appeared as overspenders. This argument commended itself to the Government, and the GRE exemption for 1981–82 was the result. The Government have since proposed extending the same principle to 1982–83, and in the current year as many as 141 authorities may gain partial or complete exemption from holdback as a result.

I can see no good reason for preventing the Government from granting such exemptions in the future. Subsection (4) of the clause makes it clear that the power to respond to representations can be used only to disregard expenditure; in other words, it can be used only to the benefit of authorities. Subsection (6) ensures that holdback will have to be done in accordance with principles to be applied to all local authorities; in other words a Government would not be able to single out a particular authority for special treatment. Subsection (8) of the clause ensures that the principles on which any differential holdback scheme would operate will have to be spelled out in the rate support grant report for the year in question. So there is no question of differential holdbacks being increased mid-year, when it is too late for an authority to reflect it in its rates. That is a point which the noble Baroness, Lady Birk, touched upon, when we were talking originally about super-holdback and so on. But we have taken care of that.

So in that context —when the discretion of the Government is already severely limited—I do not think that the power to respond to representations is drawn too widely, or that it can be said to give the Government too broad a discretion. Noble Lords opposite are worrying too much about this. Subsection (4) cannot be used to impose additional differential holdback. It is simply a power to give exemptions in response to representations. We have already shown how—in respect to 1981–82 and 1982–83—this power can be used in a reasonable way to the benefit of a considerable number of authorities. These amendments would prevent it from being used in the same way in the future. That is why we cannot accept the amendments.

My Lords, I have listened with great interest to what the noble Lord the Minister has said, and, while we do not approve of the penalty system, if there is a penalty system one must welcome the exclusion of rioting and so on. But what concerns people in local government is the uncertainty about what will be exempted in the future when they are making their arrangements. They will be totally uncertain, because, as I understand it, the Secretary of State has given no indication of what his proposals will be for the present year. He has indicated—and it is very acceptable—what he will be exempting or disregarding in the last year. It is the uncertainty which concerns us. The Minister has gone some way towards reassuring me, but there is a fear in local government, of which the Minister is probably aware, that this clause will be used to manipulate the grant system in a way which might at some point be used—not by the noble Lord the Minister or, indeed, by his right honourable friends but by some future Government—in an irresponsible, divisive and selective way. It is those two points—first, the uncertainty and, secondly, the fear of manipulation—which concerns many of us about the effect of this clause.

:My Lords, may I, with the leave of the House, say that I understand absolutely what the noble Lord, Lord Evans of Claughton, has said. In an attempt to try to get the kind of certainty to which he refers, I submit that one would have to give up the flexibility to manoeuvre which would be of benefit to local authorities. What the noble Lord has said is true: it could be abused. I believe, however, that it is vitally important that the flexibility should be retained. The examples of the exemptions which have been given illustrate what would happen if we were to specify only those things. There may even be changes to those exemptions, which I agree adds to the uncertainty. Nevertheless, so long as local government knows the position before it starts its rate-making procedure—my right honourable friend in another place conceded this point, and that is why we made the changes which we did—I feel that there is no need to be concerned. The converse is the point which I have already made: that to forgo the right to make exemptions would be far too much to give up. As I see it, this would he to the disadvantage of local government.

My Lords, out of this group of amendments to which I spoke originally and to which the Minister has replied, by far the most important is the amendment which I moved; namely, Amendment No. 15. At the end of the Committee stage we had a very general discussion on what was the old Clause 4. Clause 4 was dealt with separately because it appeared so late. The answers given then were very unsatisfactory. There was a great deal of disquiet about the exemptions which were proposed by the Government to alter Clause 4. Much as we disliked Clause 4 originally, we disliked even more the amendments put forward by the Government.

We feel that the only way to deal with the matter is to dig out the core, which is embodied in Amendment No. 15. If Amendment No. 15 were to be accepted by the House, some of the other amendments which for the moment I have not moved but which lead up to it—to insert again the other pieces—and the amendments which follow would not be so necessary, because the central point, which was argued so well just now by the noble Lord, Lord Evans of Claughton, would be covered. The Government's reply is unequivocal. There is nothing ambiguous in what the Minister has said. He quite firmly turned it down. Therefore, I shall have to ask the House to divide on the amendment.