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Rate Support Grant Bill

– in the House of Commons at 6:55 pm on 23rd June 1986.

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Order for Second Reading read.

Photo of Mr William Waldegrave Mr William Waldegrave , Bristol West 7:23 pm, 23rd June 1986

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

With the best will in the world, it is difficult to make a speech of great oratorical note about this Bill. I can think of only one person who would have done this measure justice, and that is someone whom we all miss — Mr. Cowans, the late hon. Member for Tyne Bridge. I should have liked to hear a speech from Harry Cowans on this Bill, and I was almost tempted to deliver his speech for him. It would have had a great deal to do with throttles and accelerators, and it would have been a fine speech. Unfortunately, I cannot live up to Harry's standard on this matter as, doubtless, I cannot on other matters.

The Bill results from a challenge by a number of authorities to the way in which one particular aspect of the block grant system has operated, with the broad agreement of the local authority associations, since 1981.

Under section 59 of the Local Government, Planning and Land Act 1980, the Secretary of State has power to determine block grant multipliers to limit the change in the amount of block grant payable to an authority from one year to the next. We have taken this to mean that safety nets could be set to protect local authorities against losses in any one settlement and that caps could be set on increases to prevent undesirable gains by some authorities at the expense of all other authorities. Each year since 1981, these powers have been used to limit certain factors affecting grant entitlements but not others. It would clearly be nonsense if the powers were to be used in such a way that all the factors which can change an individual authority's grant entitlement from one year to the next were caught by these nets or caps. For example, authorities would not expect to be protected from grant losses resulting from an increase in their own rateable resources, or a reduction in school age children. In particular, authorities could not expect to be protected from the grant results of their own expenditure decisions which are an integral part of the present system.

On the other hand, we have thought it right to limit losses or restrict gains arising from certain kinds of changes which are made from time to time in the system. For example, nets have been set to protect authorities from losses resulting from changes in the way that grant-related expenditure assessments are calculated. In 1986–87 caps were set for a number of authorities because we concluded it was desirable to restrict the windfall gains resulting from our decision to abolish expenditure targets. The power was also used to ensure that the grant effects of abolishing the GLC and the metropolitan county councils would be neutral at ratepayer level.

This approach has had the general support of the local authority associations. It has been embodied in the RSG reports for each of the six years since 1981, all of which were approved by this House.

As a result of a legal challenge by Birmingham city council, the court has now ruled that to use the powers in this way is ultra vires. The Secretary of State, the court has now judged, cannot separate out single factors as he has in the past. The effect is that under the Local Government, Planning and Land Act 1980, the Secretary of State is restricted to limiting changes in the total amount of grant payable to an authority for one year compared to the previous year. I do not believe that the powers could be used in the real world in this way in a sensible fashion. The system is intended to limit the grant of those who deliberately overspend. If multipliers could limit only the change in the total amount payable to a local authority, we should also be limiting losses in grant due to that overspending. This would clearly contradict the will of the House in approving successive rate support grant settlements.

Photo of Mr Anthony Beaumont-Dark Mr Anthony Beaumont-Dark , Birmingham, Selly Oak

Believe it or not, I have considerable sympathy with the Government over the dilemma facing them. A law which the Government thought was a good law, as usual with lawyers, was written badly. The Government have a right to the law. However, does my hon. Friend understand the problems faced by cities like Birmingham when he speaks about overspending, and does he apreciate the special problems faced by Handsworth? We are likely to be caught and forced to do what the Government want. or we will be accused of overspending. Birmingham city council needs to spend a certain amount of money, and the Government are spending their share, but if Birmingham spends its share it can be penalised and lose millions of pounds simply becaue it has overspent by a few hundred thousand pounds. Will my hon. Friend accept that that makes the law—whether it is good or bad—rather odd in a compassionate and useful sense?

Photo of Mr William Waldegrave Mr William Waldegrave , Bristol West

I find it rather unnerving to have my hon. Friend's support on this matter. In the wider context of his points about urban programme spending, he has put forward an argument which he has made eloquently before, and he put forward that argument eloquently for the city of Birmingham. He stated that there are aspects of the fundamental system that he would like to see changed. However, today's debate is intended to confirm that the system, as passed by the House, should be as we thought it was. I note my hon. Friend's point, and I recognise that he would like to see more fundamental changes than it would be proper to make in the Bill.

Photo of Clare Short Clare Short , Birmingham, Ladywood

According to Birmingham city council, the Government are exaggerating the effects of the court ruling. The ruling referred only to caps that had been applied in the past financial year. The Government are pretending that the ruling also referred to safety nets that applied in previous years. Birmingham council has said that that is wrong and that the wording in the old legislation on the two issues is different. I hope that the Minister will justify this wide interpretation of the court ruling.

Photo of Mr William Waldegrave Mr William Waldegrave , Bristol West

I can well understand that Birmingham, having won its point, may wish to suggest that it is a small victory relevant only to Birmingham so that we do not correct the legislation. Our advice, however, is that the ultra vires effect is wider than the hon. Lady suggests, but no doubt we shall explore this further when she has made her speech.

In addition, the practical effect of the Birmingham judgment is to cast substantial doubt on the grant entitlements of every local authority, not only for 1986–87, but for every previous year back to 1981–82. If we did not have this Bill, we should have to start by recalculating grant entitlement for 1981 and roll the calculations forward cumulatively on the basis of the new rules for safety nets and caps until 1986–87. When I tell the House that since 1981 almost 1,500 safety nets and some 170 caps have been set, hon. Members will appreciate the enormous problems involved in disentangling precise grant entitlements for any local authority.

Photo of Mr Terry Davis Mr Terry Davis , Birmingham, Hodge Hill

Is the Minister saying that without the Bill the Government will have to revise calculations going back many years? How does he meet the point made by Birmingham and other authorities that it is not possible to reopen the grant settlement for previous years because of another court case in 1983?

Photo of Mr William Waldegrave Mr William Waldegrave , Bristol West

It would not be for us to reopen such settlements. They would simply be ultra vires. If the powers that the Secretary of State has been using since 1981 are ultra vires, they are ultra vires, and that is the end of the matter.

Photo of Mr Terry Davis Mr Terry Davis , Birmingham, Hodge Hill

Is it not correct that a decision must be regarded as valid unless it is challenged within a reasonable period?

Photo of Mr William Waldegrave Mr William Waldegrave , Bristol West

I think that if the use of a power is declared to be ultra vires, its use is ultra vires, but I am sure that my hon. Friend the Parliamentary Under-Secretary of State, who is to wind up the debate, will be interested to hear the hon. Gentleman's speech, because we shall have to return to these points.

It is abundantly clear that if recalculations had to be made they would involve unexpected and possibly unmanageable losses of grant for a large number of authorities. The Bill therefore has two main purposes. It validates the way in which the powers to determine block grant multipliers have been used since 1981, and it sets on the statute book the precise powers necessary to ensure that the previous practice can continue for the future. The new power will enable the Secretary of State to determine multipliers for the purpose of limiting or avoiding the effect on the amount of block grant payable to a local authority for any year, or the contribution made, or to be made, by ratepayers, of any difference between that year and the previous year in any of the matters relevant to the calculation of block grant. This will enable the Secretary of State to limit the effect of particular factors, as he has been doing.

The hon. Member for Blackburn (Mr. Straw), like all good lawyers, can argue the case from every side. He argued with panache last time that there was a very good precedent for retrospective legislation, if it worried the House, in that the Labour Government had indulged in a far more dramatic piece of retrospection with the War Damage Act 1965, but I do not think that we need go that far. As my right hon. Friend the Member for Wanstead and Woodford (Mr. Jenkin) said when the need for legislation was announced, there is a difference in that it is legitimate to legislate in this way to implement settled expectations, but unacceptable to legislate retrospectively to defeat settled expectations. I hope, therefore, that the point about retrospection will not delay us on this occasion.

Photo of Jack Straw Jack Straw Shadow Spokesperson (Environment, Food and Rural Affairs)

I am glad that the Minister raised that point, as it anticipates part of my speech. In the Chamber on 10 April he sought to distinguish between the Bill and the War Damage Act 1965 on the ground that the latter damaged people's rights retrospectively, whereas his proposition sought to maintain the status quo. Does he accept that Birmingham's rights are being changed retrospectively?

Photo of Mr William Waldegrave Mr William Waldegrave , Bristol West

I used the word "expectations" on this occasion, and I think that it is the better word. The moral point is that the House does not like the type of retrospection that leads to people getting something different from what they expected. Indeed, the House disliked it intensely when the Labour Government indulged in it in such spectacular fashion in 1965. That is not the situation today, but I know that my hon. Friend the Parliamentary Under-Secretary of State will be able to deploy a considerable number of examples of that type of retrospection by Labour Governments.

In addition to the main provision on multipliers, the Bill contains a small number of minor technical provisions which are either consequent upon the amendments to the powers on block grant multipliers, or where we consider it appropriate to confirm and clarify the use of other powers in the 1980 Act. I am sure that the House will agree with me that the more technical matters can be considered fully in Committee, but I should like to draw attention briefly to three of those provisions.

First, under sections 60 and 61 of the 1980 Act, RSG reports and supplementary reports are required to specify the considerations which led the Secretary of State to make all the particular determinations required by the Act. It would be totally impossible for reports to meet this requirement in respect of every determination. For example, a detailed description of the considerations underlying each of the grant-related expenditure determinations would alone require a document several times the size of the present RSG report. The Bill provides, therefore, in paragraphs 8 and 9 of the schedule, that reports will provide such explanations as the Secretary of State thinks desirable of the main features of determinations specified in the reports. I stress, however, that it is not our intention in any way to reduce the level of explanation currently provided by the RSG reports. We simply seek to confirm that the normal practice has been carried out on a proper basis and can continue unchallenged.

Photo of Simon Hughes Simon Hughes Shadow Spokesperson (Environment, Food and Rural Affairs)

Does the Minister accept that one of the complaints, especially from local government officers, is that it is difficult to discover all the considerations leading to the figure produced by the Department? One way to deal with that is to make the documents and considerations known. The wording of the Bill will make it possible for much less information to be produced by the Government, thus making the life of local government staff even more difficult.

Photo of Mr William Waldegrave Mr William Waldegrave , Bristol West

Rightly or wrongly, there is now far more litigation than in the past—for the benefit of the hon. Gentleman's profession—so we have to examine all legislation to see whether there are loopholes. I do not believe that it is possible philosophically or logically to have a complete description of anything—if the hon. Gentleman thinks about it he will find that that is true —but we are advised that the wording of the existing Act allows room for the type of litigation that we fear, and that is now more common than it used to be. I repeat, however, that it is not our intention to use the new legislation in any way to diminish the proper explanations given. I make that pledge here and now.

Photo of Jack Straw Jack Straw Shadow Spokesperson (Environment, Food and Rural Affairs)

I accept the Minister's philosophical statement, but does he accept that in the so-called real world of rate support grant the phrase as the Secretary of State thinks desirable in paragraph 8 of the schedule leaves a wholly subjective power in the hands of the Secretary of State? If the Minister means what he says about the way in which the legislation will be used, will he give an undertaking to consider favourably amendments in Committee seeking to amend that wording— for example, by substituting the words "as are reasonably necessary"?

Photo of Mr William Waldegrave Mr William Waldegrave , Bristol West

We are moving rather rapidly to Committee points. I cannot give a pledge now to accept detailed amendments in Committee, but I am sure I can pledge that any amendments put forward will be seriously considered at that stage.

Second—the hon. Member for Blackburn should like this — paragraph 10 of the schedule introduces a restriction on the Secretary of State's powers to redetermine block grant multipliers determined at the time of a rate support grant settlement. The present provisions of the 1980 Act give the Secretary of State discretion to redetermine all multipliers in a supplementary report in the light of later expenditure information which was not available at the time of the settlement, although the Secretary of State has never used the power in this way for net and cap multipliers. Had we done so, the result would have been, yet again, a completely unacceptable degree of uncertainty for local authorities as to their grant entitlements.

Local authorities will have set their rates in the light of their entitlements for the main RSG report. Accordingly, we thought it right to limit the Secretary of State's power to redetermine net and cap multipliers so that he may do so only when there has been an error in the application of the principles to the original determination on the basis of the information then available.

Thirdly, and finally, I come to the provisions in the schedule relating to the returns of expenditure information to the Secretary of State. At present there is no certainty for local authorities as to whether late information will be taken into account in the making of the supplementary report. We want to create more certainty. Some authorities have already been seeking to exploit the present uncertainty. The previous Secretary of State received a telex from one authority purporting to contain new information just as he entered the House for the settlement debate. The proposed changes will enable the Secretary of State to disregard information which it is not "reasonably practicable" to take into account and to make appropriate assumptions where no information is available. I assure the House that the Secretary of State will make crystal clear the date when it will no longer be reasonably practicable for further information to be taken into account.

Photo of Mr Anthony Beaumont-Dark Mr Anthony Beaumont-Dark , Birmingham, Selly Oak

I have had a hand in running a great authority which often has great problems because sometimes information comes late in the day. I am sure that most hon. Members will accept: that it is nonsense, as my hon. Friend the Minister pointed out, for someone to deliver a telegram as one is about to enter the House for the debate in question. Does my hon. Friend agree that it would be improper for the date to become too rigid? It would make it difficult for and unfair on local authorities if my hon. Friend were to lay down a time limit of a fortnight. What does he call fair and reasonable?

Photo of Mr William Waldegrave Mr William Waldegrave , Bristol West

It would be proper for the Secretary of State to discuss the matter with the local authority associations. He will be bound by the words "reasonable practice". If he took a decision which seemed unreasonable, it could and doubtless would be challenged in court.

This Bill is necessary to provide local authorities with certainty about their present and past grant entitlements. It validates a procedure which has been followed since 1981 with a broad measure of agreement from the local authority associations. The alternative to legislation would be total uncertainty for local councils about what their grant entitlements have been and could be. I hope that no reasonable hon. Member could seriously countenance that outcome. Therefore, I ask the House to support the Bill.

Photo of Jack Straw Jack Straw Shadow Spokesperson (Environment, Food and Rural Affairs) 7:41 pm, 23rd June 1986

On 10 April, the day of the Fulham by-election, when the words "Statement: Block Grant Multipliers" appeared on the television annunciators throughout the Palace of Westminster, many of my hon. Friends thought that the Government had finally taken leave of their senses. One or two of my more cynical hon. Friends thought that the Government had finally uncovered a secret weapon for stashing away millions of pounds of the then Conservative-controlled borough of Hammersmith and Fulham to stave off the near certainty of a humiliating defeat. Although the Government had no such luck, the announcement certainly ensured that the Benches were cleared for what turned out to be the announcement of an important but disreputable decision to introduce retrospective legislation to pre-empt the expected High Court decision the following Tuesday, and so to deny the ratepayers and the council of Birmingham of at least £7 million which was and remains rightfully theirs.

The Bill seeks to implement that decision, and the Benches are not much fuller today than they were on 10 April, for the same reasons. On the surface these matters are complex and technical, but that should not obscure from us the fact that, behind the smokescreen of obscurity that the Government have created, they must stand condemned for the chaos to which they have reduced the rate support grant system, not least for the way in which they have perverted and distorted the system to aid their political allies in local authorities and to hit their opponents.

First, I shall make some general observations about the system of central support for local government. Inherent in all systems of such support has been the idea that central Government should seek to compensate for different levels of need and resources, so that for a standard level of service the impact on ratepayers should be roughly the same in all authorities. We support such objectives. It follows that we also accept that any system which seeks to be fair is bound to be complex and apparently technical, since involved in such a system are mathematical assessments of need and resources area by area. We may and do argue about the methods used, about the extraneous objectives that the Government have introduced through mechanisms, such as penalty and target, and about the overall percentage of the rate support grant. We do not complain in principle that any rate support grant system is bound to be complicated if it is to be fair.

As so often in the past, our objection is that the Government have used the complexity of the system to make it not fair, but unfair. That is the burden of our case. When the Minister made his statement on 10 April he asserted, as he did tonight, that he had adopted this position for the calculation of caps because it was the only sensible and practical way. Implicit in what he and other Conservative Members said was the suggestion that somehow Birmingham had late in the day and unexpectedly found a legal loophole to embarrass the Department and to obtain for itself some gratuitous, unanticipated advantage. That was also implicit in the Minister's remarks this evening when he spoke about the settled expectations, as if Birmingham were making use of a loophole in poorly drafted legislation. That is not correct.

First, since the day when the provisional announcement of the 1986–87 rate support grant settlement was made in July 1985, Birmingham has been making representations about what it felt to be the unfair and harmful way in which it had been treated.

Secondly, my hon. Friend the Member for Copeland (Dr. Cunningham) raised that issue in the debate on the rate support grant order on 20 January in his speech, at column 57, and again in an intervention in the speech of the Minister, at column 127, who made light of his objections.

Thirdly, Birmingham is correct to consider that it has been ill-treated because, contrary to what the Minister has suggested about settled expectations of the law, on the face of the language used in the relevant legislation the Minister had clearly not followed what Parliament plainly intended. Both section 8 of the Local Government Finance Act 1982 and section 59 of the Local Government, Planning and Land Act 1980 speak of the requirement for the Secretary of State to compare the grants payable to an authority in the current year with the "amount payable" to it in the previous year. The key words are the "amount payable", and for Birmingham those words meant the amount due to it. What else can they mean?

It is no good the Minister suggesting that the legislation is poorly drafted. It has been perfectly adequately drafted. The language is clear, and so is the intention of Parliament. Parliament passed that legislation, knowing what it meant, and it was on that basis that Birmingham went to court.

Photo of Mr Anthony Beaumont-Dark Mr Anthony Beaumont-Dark , Birmingham, Selly Oak

I have found myself agreeing and disagreeing with the hon. Gentleman. He knows that I thought that Birmingham should have a better grant. Bearing in mind the problems that we face, the system is rarely fair to our great cities. However, although I believe that Birmingham should have a larger grant, I still contend that the Government's intention at the time was that Birmingham should not have more grant, despite the fact that many hon. Members thought it should. As the hon. Gentleman knows, I have had one or two stand-up disagreements with my colleagues on local government legislation in the House, and, indeed, about the rate support grant system. Does he agree that the Government have a right to the law as they thought it genuinely existed? It my be wrong, but it is not sharp practice.

Photo of Jack Straw Jack Straw Shadow Spokesperson (Environment, Food and Rural Affairs)

I believe that Birmingham is right to consider that it has been the subject of sharp practice, as I shall show.

Photo of Jack Straw Jack Straw Shadow Spokesperson (Environment, Food and Rural Affairs)

As ever, my hon. Friend is correct.

I am not suggesting that Ministers were presented with a paper from their lawyers saying that the course that they were about to pursue was plainly unlawful, yet they chose to follow that course. However, the Ministers were wrong. If they received any advice, that was wrong, and Birmingham was right. It is no good the Minister talking about settled expectations or the fact that the system had broad support from local authority associations. They have thoroughly opposed what the Government have done in this rate support grant settlement.

A major point made by the Minister in support of the Bill was that if the judgment of the court was allowed to stand, although Birmingham and some authorities could benefit, other authorities would be bound to lose. That is inherent in the nature of a system that is close-ended. It cannot be a sufficient argument to justify what is proposed. First, Birmingham can rightly claim that it has suffered in the latest settlement significantly more than other authorities. We are told that the penalty system has been abolished. Technically, the target and penalty system has been abolished. Every £1 of extra expenditure over GREA costs Birmingham ratepayers £2·08. That compares with £1·47 for Liverpool, £1·83 for Manchester and £1·38 for Leeds. There can be no question but that Birmingham ratepayers have been unfairly treated.

Secondly, it must be said that, in the past, Birmingham and other authorities have suffered from redistribution. All hon. Members remember the second or third supplementary report of 1982–83 when the Greater London council obtained £100 million of rate support grant because the Department discovered that it had budgeted by about £170 million less than it thought it would. Because that was taken from a close-ended system, other authorities, including Birmingham and Lancashire, suffered. They did not scream about that; they accepted that that was how the system operated.

Nor does it lie in the mouth of the Government to make that point, because the reduction in the overall rate support grant has resulted in all authorities suffering and the effect of any redistribution being much worse than it otherwise would be.

The Minister said that those caps were introduced in 1986–87 to prevent gratuitous gains from the ending of targets in 1985–86. But the Government and the Minister do not come to the House with clean hands. No such considerations affected the decision that they made in 1983–84. My hon. Friends who represent Birmingham constituencies especially will recall that, in that year, the Conservatives were struggling to maintain their control of Birmingham city council. The response of the then Secretary of State, the right hon. Member for Wanstead and Woodford (Mr. Jenkin), and the Minister, who was at his side then, was to stuff money Birmingham's way by fiddling the target system in Birmingham's favour. The then Secretary of State made little pretence about his motives. On 14 December 1983, he said: The third change"— in the target mechanism— will give authorities such as Birmingham, which budget well below target, an incentive to continue to do so."—[Official Report, 14 December 1983: Vol. 50, c. 996.] The result was that Birmingham Conservatives could cut the rate by 10 per cent.—

Photo of Jack Straw Jack Straw Shadow Spokesperson (Environment, Food and Rural Affairs)

Indeed, it did them no good. I shall come to that point in a moment.

They could cut the rate by 10 per cent., despite budgeting for an increase in expenditure of, as it turned out, £40 million, or 12 per cent. In that year, Birmingham alone— if anyone suggests that I am wrong to maintain that there was a fiddle, he should consider this— took 19 per cent. of the increase in target available for the entire country. That was made clear in a reply given on 21 December 1983.

As my hon. Friend the Member for Birmingham, Erdington (Mr. Corbett) asserted, the bribe did not work and the electors of Birmingham tipped out the Tories in the municipal elections in May 1984. Birmingham has been punished by the Government ever since for so doing. The city was forced to increase its rate by 43 per cent. in 1985–86, despite increasing spending by only 6 per cent. —half the increase in 1983–84 by the Conservatives. The Bill is part two of that punishment.

Birmingham is not the only authority which rightly is aggrieved by the way in which multipliers have been used. I have been in correspondence with the Minister about the London borough of Greenwich relating to a matter which deeply worries my hon. Friend the Member for Greenwich (Mr. Barnett) and which he has discussed with me in detail. I need not detain the House on the complexities of that issue, but I hope that—

Photo of Jack Straw Jack Straw Shadow Spokesperson (Environment, Food and Rural Affairs)

The hon. Gentleman asks where my hon. Friend is. He sends his apologies and has asked me to raise the matter in his absence. I hope that the Under-Secretary of State will respond to the Greenwich issue when she replies.

There are many detailed objections to the Bill and its drafting which can he pursued in Committee, but four of them must be raised here. The first is retrospection. I do not deny the fact that Governments of all complexions sometimes consider it necessary to introduce retrospective legislation. We are promised a catalogue from the Under-Secretary of State when she replies. The present Government have one of the worst records of any Government for retrospective legislation. Retrospective legislation is, as the right hon. Member for Wanstead and Woodford said on the Second Reading of the War Damage Bill 1965 —

Photo of Jack Straw Jack Straw Shadow Spokesperson (Environment, Food and Rural Affairs)

He has not sent his apologies to me. However, he said— and for once I am happy to quote his remarks with approval—that retrospective legislation was "a damned slippery slope". As I said in an intervention, it is no good the Minister pretending that there is a difference in principle between what happened in 1965 and what the Bill does. He spoke about "settled expectations", or whatever the phrase was. Those were the words he used today, but I remind him that the words he used were: Our proposition would maintain the status quo."— [Official Report, 10 April 1986; Vol. 95, c. 362.] The idea that there is a status quo in rate support grant is a contradiction in terms, because there is no certainty from day to day. The Minister has taken back those words. Of course, the Bill changes Birmingham's rights retrospectively.

Photo of Mr William Waldegrave Mr William Waldegrave , Bristol West

I have not taken back anything. The hon. Gentleman is making heavy weather of this. If someone passed a law saying that his salary my salary or anyone else's salary for the past 10 years was to be cut by 5 per cent., and took away the money, that sort of retrospection would be deplorable; but if someone said, "Owing to a mistake by the computer, which has now been discovered, you should have been paid that much less, but we confirm what you have been paid," such retrospection, of the type contained in the Bill, is tolerable.

Photo of Jack Straw Jack Straw Shadow Spokesperson (Environment, Food and Rural Affairs)

I am glad to hear that the Minister now accepts that, in both cases, the individuals or institution involved would end up with less than they thought. That is the connection between them.

Photo of Clare Short Clare Short , Birmingham, Ladywood

Birmingham was shocked and worried by its previous rate support grant settlement. The city is in great difficulty and has received less money than it expected. That is universally agreed. Birmingham Labour Members have been on delegations to the Secretary of State. Let there be no doubt that the legal fight for £7 million was part of our enormous anxiety to get back some of the resources we considered were taken from us in that settlement. There is no argument about settled expectations being fulfilled; rather the reverse.

Photo of Jack Straw Jack Straw Shadow Spokesperson (Environment, Food and Rural Affairs)

I am grateful to my hon. Friend. She makes the point again that the Bill will adversely change the expectations of Birmingham and several other authorities.

Ministers would be on better ground if they said that retrospective legislation which seeks to make lawful that which was previously unlawful is one thing — to put people in a better position than they were before. In the 18th century, there were plenty of examples of acts of indemnity which sought to do that. But to do the reverse, to make things unlawful which were previously lawful—to put people in a worse position— is not acceptable, and there would have to be strong grounds for doing it. Those grounds have not been adduced today.

The Government have become slap happy in the use of retrospective legislation. There have been examples in the Local Government Finance Act 1982 and the Local Government Act 1985 where the Government made unlawful grants to voluntary organisations from the GLC and the metropolitan counties, and in the Local Government Act 1986, where they changed the law relating to the sale of local authority mortgages after a due date when previously they had encouraged it. Of course, the new Secretary of State for the Environment, whom we welcome to the Front Bench tonight, has a good pedigree in retrospective legislation. His track record of overturning the courts' rulings is unsurpassed. We all remember what he did when the court found that what he had done on London Transport was unlawful. At least he waited until the court had made a decision. However, the Minister has, in a breathtaking way, announced, three days before the case was to go to court, that, no matter what the court decided, the Government would legislate to change the law.

Photo of Mr Robin Corbett Mr Robin Corbett Opposition Whip (Commons)

My hon. Friend is mistaken. The matter is much worse than he is describing. When the matter first went to court, the Department of the Environment caved in. It knew, when the Minister made his statement, that it had been acting illegally because its legal advice was to that effect, and it knew that it had no defence. It knew that it would surrender in court, and then the Government would change the law.

Photo of Jack Straw Jack Straw Shadow Spokesperson (Environment, Food and Rural Affairs)

I stand corrected for being too soft on the Government.

A second objection is that the retrospection goes too wide. This point was raised in interventions to the Minister, and we shall have to deal with it again upstairs. I find it odd that, because in a particular case that affects the settlement this year the law has been found to be defective, Ministers believe that they have to change the law for every decision made back to 1980. The decision of the Law Lords in the case of O'Reilly v. Machman in 1983 was that decisions made by Ministers or public institutions could be challenged only under the judicial review procedure.

That decision caught the Labour party. It was pursuing a case in the Chancery division against the Boundary Commission and it would probably have won, with Vice-Chancellor Megarry's interest in the case, when the decision was suddenly announced and it had to take it through the judicial review procedure, where it lost, for a variety of reasons. Order 53 laid down time limits for taking issue with ministerial and other public decisions. There is no question about challenging the decisions of previous years. Even if there is a case for retrospection, the Bill goes too wide.

Thirdly, it leads to an undesirable increase of the power of the Secretary of State under clause 2.

Fourthly, it will deny Parliament information on which to base its decisions. Paragraph 8 has already been discussed in interventions. I have great personal respect for the Minister, but, on the experience of the past six years, we have to bear in mind that we should treat with a pinch of salt ministerial undertakings that they will be reasonable and take everything into account. If the Minister were in charge of the Government, that might be fine, but he has to think about the Secretary of State and the Treasury. The Treasury does not give a fig for undertakings given to the House. If it thinks that it can get away with something, it will try to do so. Paragraph 8 gives the Minister powers to give the House only that information that he thinks is desirable, and that is unacceptable.

The Government now find themselves in a bog of their own making by seeking, in successive years, further to control local authority spending in an undemocratic and impractical way. We now see that, for all the pain that has been inflicted on local authorities, Ministers are unable to work out what it has all been for. Before he was translated to the Department of Education and Science, the previous Secretary of State was reported as saying that he had had a look at this mad system and could not work out what it was there for.

Treasury Ministers, according to the usually authoritative Financial Times, are now questioning what this vast edifice of insanity is for. The newspaper says: Expenditure funded by the rates, rather than centrally, does not affect the public sector borrowing requirement.Some Treasury officials also support this view and Mr. Nigel Lawson, the Chancellor, feels that the Government's persistent rows with local councils over their finances are more political trouble than they are worth. The Chancellor is right about that, if about nothing else. Although the Government have perceived that the system is mad and is doing nothing for them, they will not follow their perceptions through to a logical conclusion. If they had any sense, they would withdraw the Bill, destroy the rest of this appalling edifice, and start again.

This Bill is unworthy. By its unnecessary retrospection it shows scant regard by the Government for the rule of law and respect for the courts that they claim to hold so dear. The Bill denies the ratepayers of Birmingham £7 million, which is rightfully theirs, and further sours relations with local authorities. We shall oppose it.

Photo of Simon Hughes Simon Hughes Shadow Spokesperson (Environment, Food and Rural Affairs) 8:05 pm, 23rd June 1986

My colleagues and I shall also oppose the Bill for some of the reasons enunciated by the hon. Member for Blackburn (Mr. Straw), and for other reasons. I shall state our objections to the Bill and then ask the Minister one or two questions on which he has not touched, although I do not criticise him for that.

As the House has heard, the announcement of this Bill was made to pre-empt the court hearing on the following Tuesday, as the Government had been told that the court was likely to find against them, which would undermine the basis of the last few years of rate support grant calculation. I understand the Minister's point that, if that decision had been upheld, there could have been many legal actions challenging all the rate support grant settlements and multipliers of many local authorities for several years. That could have brought in more uncertainty and more cost than would have doing something quickly.

Photo of Clare Short Clare Short , Birmingham, Ladywood

I intervened in the Ministers's speech to make this point, although he did not react to it. Birmingham's view is that the judgment affects only caps and not safety measures. The language of the legislation is different in both cases. Caps have been set only in 1981–82 and 1986–87, so the Minister is exaggerating. The case for the Bill is weakened if this point is true, but the Minister did not answer it. No legislation on safety nets has been called into question, and that practice has been adopted much more frequently than have caps.

Photo of Simon Hughes Simon Hughes Shadow Spokesperson (Environment, Food and Rural Affairs)

The hon. Lady is right in the sense that two mechanisms have recently featured in the multiplier. One has come to be called the cap and the other the safety net. The hon. Lady is correct to say that Birmingham was advised that the probability was that the direct effect of the judgment would be only to challenge one of those, so that it would not have applied in more than certain cases for a limited number of years. The difficulty is that undermining the nature of ministerial calculations, which we have all criticised because they are plucked out of the air by the Government as their method of adjusting the formula, left open to others, whether they were ultimately vindicated or not, the possibility of challenging the multipliers in court, and being upheld. We do not know about the result of that for sure, and we never shall. I accept that there was, however, a possibility that there might have been a substantial undermining of the system, but it might have been reduced to just one or two cases.

I understand, and I would be grateful if the Minister would confirm this, that four identified authorities stood to benefit in the same way as Birmingham had the Bill not come before us, rather than one, as had previously been thought. I understand that Nottingham was one of them, and that it became a well known and accepted fact between the Department and officials in the Nottingham city council. It would be helpful to know, because we have not talked about any example other than Birmingham, whether it was clear that certain other authorities fell in the same category.

It would be useful to clarify whether there are vested interests in the result of this legislation. If Birmingham and Nottingham will lose what they calculated they would gain, and if the total pool of money were always the same, other authorities will gain. I have received a briefing, as other hon. Members have, from the Association of London Authorities. It says that for them it will not be disadvantageous for the Bill to go through because London authorities will be the beneficiaries of the system as readjusted. If the pool is the same and if one is altering the formula by which it is distributed, inevitably there will he winners and losers. It would be fair both to the House and to local authorities if the Government were to tell us which authorities they were advised would have stood substantially to benefit, in the way that it was made clear that Birmingham would have benefited.

I was about to turn to the more important matter concerning retrospection when the hon. Member for Birmingham, Ladywood (Ms. Short) intervened. Rather than that the Government should have to amend the law, thereby validating the payment of rate support grant and the multiplier formula and their right to use the multiplier since its introduction in the Local Government, Planning and Land Act 1980, it would have been possible to legislate to prevent any challenge on those matters, although the Birmingham case could have stood. There is some justice in an argument that acknowledges that the case is deficient, but that because money is limited the system must not be perpetually undermined and uncertainty increased.

One of local government's complaints is about uncertainty and the complexity of the system. It would be possible for the Government to agree to stop the clock and prevent any challenge, to say that after a certain time challenges cannot be made on certain grounds. That would have been a much less dangerous course for the Government to pursue rather than retrospectively to legislate generally. There are occasions when one can legislate retrospectively to correct something that has been to somebody's disadvantage, but it is completely different to legislate retrospectively when people have worked on the premise that they will obtain an advantage — in Birmingham's case £7 million—that they are then told they cannot have.

Photo of Clare Short Clare Short , Birmingham, Ladywood

Will the hon. Gentleman give way again?

Photo of Simon Hughes Simon Hughes Shadow Spokesperson (Environment, Food and Rural Affairs)

There is a difference. I hope that the Minister will accept that if retrospection is acceptable in this case, the argument is invalid because this is retrospective legislation which will be to somebody's disadvantage. I give way to the hon. Lady.

Photo of Clare Short Clare Short , Birmingham, Ladywood

I am grateful to the hon. Gentleman for giving way. He might like to know Birmingham's calculation. It thinks that the court ruling potentially affected 30 shire counties, 121 shire districts, eight metropolitan districts and one outer London borough. We are probably talking about £150 million. The low spending authorities were capped under the new settlement. That is the figure that Birmingham puts on the hon. Gentleman's proposition that nobody should be denied money retrospectively.

Photo of Simon Hughes Simon Hughes Shadow Spokesperson (Environment, Food and Rural Affairs)

That is helpful. Although local government financial legislation is technical, it is not at all technical to local government treasurers, and local government ratepayers are not concerned with technicalities. They are concerned about the services that are provided for them. Substantial amounts of money —perhaps one-tenth of the total budget, in terms of rate support grant from the Government—are involved.

I intend to make two or three further general points of criticism and then to ask a few questions. One of the complaints is that there is a perpetual moving of the goal posts relating to local government finance. If the rules are to be changed halfway through the planning process, it is horrendously difficult for anybody to plan ahead. There is a year-by-year allocation of funds. There is to be a recycling of money this year because of the new system. Furthermore, I understand that the preliminary announcement about next year's rate support grant will not be made in July, as has been the case in recent years, because of complications—including the one before us now. That makes it increasingly difficult for local authorities to plan their budgets. Local government says to central Government, "You are treating us unfairly. You set down a system. We go to court and we are upheld by the court. You then say that we cannot have our victory, and you perpetually change the rules. When we play by them and win by them, you tell us that that is unfair." That cannot be a fair balance.

We accept that the courts have a role to play if people feel that the law has been misinterpreted. Therefore it is unfair to local government to say that if it is clever enough, intelligent enough or needy enough to go to court and find ways round the law, that will be rendered unlawful, and the Government reserve the right to change the rules whenever they find that that is to their advantage.

The Bill purports to clarify the law. I do not believe that anybody can say that by this legislation the Government are fundamentally clarifying the law. Having started on the road of seeking to clarify the law and getting rid of penalties, I hope that under the new regime we shall be able to get to grips this year with the need to make local government finance clear so that local authorities can plan ahead. If the Minister takes on board the Chancellors point that there is not now the same view in the Treasury about local government expenditure having a direct effect on general public expenditure, perhaps local government can be given the freedom and planning ability for which they have been clamouring for so long.

Photo of Mr Tony Banks Mr Tony Banks , Newham North West

Is the hon. Gentleman seriously suggesting that this Government are in any way interested in making local authority finance clear? Is he not aware that this question has very little to do with economics but that it has a great deal to do with politics?

Photo of Simon Hughes Simon Hughes Shadow Spokesperson (Environment, Food and Rural Affairs)

My earlier intervention, which challenged the Government's plan to change schedule 1 to allow the Secretary of State to supply information under a new definition only if he thinks that such explanations are desirable, will, I hope, answer the hon. Gentleman's question. I have always believed that the view of the people in Marsham Street and their Ministers is to retain as much control as possible, to make everything as obscure as possible and to make life in local government as dependent upon central Government as possible. My party has long fought against that.

There have even been rebellions by Government Back-Benchers. They complain bitterly that the system is suspectible to gerrymandering. That complaint was made last year when the counties were screaming because London was getting more money. Why was that? It was because there were local government elections in London —as there were in Birmingham in 1983, although that did not do the Government much good there. The system is perpetually susceptible to gerrymandering. However, it did no good in London, as it did no good in Birmingham three years earlier.

That is why we must be suspicious and say to the Government that we want a categoric undertaking that in future we shall be given not one jot less of information than we are given now. If this legislation is passed, it will allow the Government to give considerably less information to local government than they do now. It also provides the Secretary of State with considerably greater powers than he currently enjoys.

The perpetual battle in this House is for the legislature to have more power over the Executive. However, the Government keep on insisting that they should have more and more power. When that power is abused, the Government immediately introduce new laws to change what the courts say is wrong.

My last point is that there are certain authorities—one of them, about which I am most concerned, is Avon — that are themselves concerned about whether their grant for the current year is to be redetermined. The Minister knows that an all-party deputation from Avon was due to meet the Secretary of State tomorrow afternoon. However, the meeting was postponed at the last minute by the Secretary of State, and no further date for the meeting has been set. That all-party delegation includes Conservative councillors. They had intended to ask the Secretary of State to redetermine Avon's grant, and they wished to be sure that this legislation would not impede that. They had done what everybody else was doing, and as they were supplied more information about their figures they realised that they were entitled to a substantial amount of money through a redetermined grant at a higher level, which would be to the advantage of the people of Avon.

I have specifically raised the case of Avon, but my question also applies more generally. Will the Minister assure me that nothing in the legislation will prevent Avon and other such authorities which have perfectly good grounds for arguing for a redetermination of grant, and were led to believe by the Government that that was possible, from, first, being able to argue the case and, secondly, from being able to have that redetermination? I also ask the Minister for a specific undertaking that the postponed meeting with the all-party Avon delegation will be rescheduled in the near future so that it can put its case, have it listened to sympathetically and possibly benefit from the Government's response.

The House is becoming used to many debates each year on local government finance — rate support grant preliminary announcements, actual announcements, supplementary announcements, correcting announcements and matters being put right after appeals to courts when the Government have misunderstood their own legislation. As this is the first occasion under the regime of the new Secretary of State, I hope—although I have little grounds on the Government's record over the past seven years for doing so — that the Government will remember that without fundamental reform and clarification of the structure of local government there will be more and more such difficulties. The Government are lying on a bed of nails of their own making, but those who really suffer are, tragically, not the Ministers in Whitehall but those trying to run our local authorities and who have a very difficult job under current Government policies.

Photo of Mr Michael Portillo Mr Michael Portillo , Enfield, Southgate 8:21 pm, 23rd June 1986

I have some sympathy with the closing remarks of the hon. Member for Southwark and Bermondsey (Mr. Hughes) when he called for a more simplified system. After many years of unchallenged operation of the law on block grant multipliers, it has now been challenged, found to be defective and different from what we had assumed, which leaves the Government with the practical problem of what to do about it.

The hon. Gentleman acknowledged that the uncertainty caused by the court case could be widespread and could undermine the system back to 1981. Although it is possible to hold different views on that, the Government must recognise that there is uncertainty. The hon. Gentleman also said that the matter did not relate only to Birmingham, although it is understandable that many Birmingham Members are present this evening to put their views.

There was a little inconsistency in the hon. Gentleman's comments. For example, although he said that uncertainty was damaging to local government, he did not make clear his proposals to deal with that. I am not sure whether I agree that capping the challenges to courts would be better than retrospective legislation, even though that can cause great disquiet. The hon. Gentleman suggested that we should allow Birmingham's case and make sure that there were no further challenges, but I am not sure that, as a matter of principle, that is the better solution.

Photo of Simon Hughes Simon Hughes Shadow Spokesperson (Environment, Food and Rural Affairs)

I thought that by a combination of that process and adjustment in the coming year it would be a matter for the future that would not involve the unravelling of the whole package for four or five previous years.

Photo of Mr Michael Portillo Mr Michael Portillo , Enfield, Southgate

I understand that, and I share the hon. Gentleman's views on retrospective legislation. However, later in my speech I shall explain why, on this occasion, I think that the Government are right.

I unfortunately missed the Minister's statement on 10 April because I was helping the excellent Conservative candidate in Fulham on that day. I was sorry that I was not here, because I was not able to enjoy the remarks of the hon. Members for Blackburn (Mr. Straw) and for Bolsover (Mr. Skinner), and those of hon. Members representing several Birmingham constituencies. I use the word "enjoy" advisedly, because when a Government operate a law that is challenged in the courts and found to be otherwise than what was supposed, it is a cause of considerable mirth and enjoyment on the Opposition Benches. Some years ago I worked in the Conservative research department, supporting the then Conservative Opposition. I remember how very much we enjoyed those occasions when the Labour Government ran foul of the courts.

On 10 April the hon. Member for Blackburn did not disappoint us — he was clearly enjoying himself. He referred to a serious constitutional issue—a bare-faced attempt by the Government to interfere with the judicial process." — [Official Report, 10 April 1986; Vol. 95, c. 360.] Today, his remarks did not follow in the same vein. The intervening weeks have moderated his tone.

When the Conservative party was in opposition we had all sorts of opportunities to enjoy ourselves, and we certainly did. For example, when the right hon. Member for Bethnal Green and Stepney (Mr. Shore) was Secretary of State for Trade he found himself in the unfortunate position of having revoked licences granted by the Civil Aviation Authority to Laker Airways for a low-fare service between London and New York. On appeal, the High Court ruled that he had acted beyond the powers conferred upon him by the Civil Aviation Act 1971. In December 1976 the Court of Appeal overturned the appeal of the Department of Trade. Lord Denning, who was then Master of the Rolls, said that there came a time when the courts had to declare that a Minister of the Crown had exceeded his powers. On that occasion Mr. John Nott said: at least one Socialist Minister accepts that the rule of law applies to Labour Ministers as well as to every other citizen of this country."—[0fficial Report, 14 February 1977; Vol. 926, c. 32.] Lord Mulley, when he was Secretary of State for Education and Science, was unfortunate enough to interfere with the Conservative-controlled Tameside authority in Greater Manchester. He was taken to court and found to have been unreasonable in his actions. Lord Denning referred to him as having misdirected himself on whether it was unreasonable for Tameside to retain some form of selective education.

The right hon. Member for Glasgow, Hillhead (Mr. Jenkins), when he was Home Secretary, found himself in some difficulty over television licences. Some people had bought new licences at the old rate after the new rate had been announced, which was perfectly legal. However, the right hon. Gentleman refused to accept that and threatening letters were sent to people demanding payment at the new rate on the pain of having their licences revoked. The ombudsman stepped in, reported that there had been muddle and inefficiency in the handling of the cases by both the Home Office and the Post Office, and the right hon. Gentleman was forced to apologise. The Court of Appeal decided that his attempt to revoke licences was unlawful, invalid and had no effect. That was the case of Congreve v. The Home Office and was reported in The Times on 4 December 1975. On that occasion my right hon. Friend the Member for Chesham and Amersham (Sir I. Gilmour) weighed into the debate and said that it was the first time a Home Secretary had been censured by the Ombudsman for maladministration and then condemned by the Court of Appeal for contravening the Bill of Rights."—[Official Report, 8 December 1975; Vol. 902, c. 235.]

Photo of Mr William Waldegrave Mr William Waldegrave , Bristol West

May I remind my hon. Friend of one other case? Does he remember when the former Labour Prime Minister, now Lord Wilson, threatened to revoke dog licences, and all his colleagues started yapping at the same time? Was that another example of the revocation of licences?

Photo of Mr Michael Portillo Mr Michael Portillo , Enfield, Southgate

I remember that case, although my hon. Friend will forgive me if I say that I had not thought of including it in this particular catalogue.

This is not the first time that a Government have found themselves in difficulties with the way that the law stood, despite its interpretation.

Photo of Mr Terry Davis Mr Terry Davis , Birmingham, Hodge Hill

Can the lion. Gentleman tell us from memory, or as a result of his researches, whether the Labour Governments of those times introduced Bills in the House of Commons to revoke people's licences, and so forth?

Photo of Mr Michael Portillo Mr Michael Portillo , Enfield, Southgate

The hon. Gentleman anticipates my remarks, or perhaps I anticipated his intervention. I shall come to that point shortly.

I am not suggesting that the hon. Member for Blackburn, whose remarks of 10 April I have already quoted, is the first Opposition spokesman to go over the top in criticising a Government who find themselves in this position. Nor am I saying that those Labour Ministers— the Home Secretary, the Secretary of State for Education and Science and the Secretary of State for Trade— were in any way acting dishonourably. They were clearly interpreting the law as they saw it. They were certainly doing things with which I strongly and wholeheartedly disagree, but I am sure they were honourable in interpreting the law as they saw it, and I am sure also that they were acting in accordance with the advice that they were given, which I am sure was given in good faith by the officials who were paid to give that advice.

Photo of Mr Tony Banks Mr Tony Banks , Newham North West

Does the hon. Gentleman recall that when the GLC introduced its "Fares Fair" policy and thought that it was operating under the Transport (London) Act 1969, unfortunately, as a result of the Bromley court case, it was revealed that it was not doing so, and the Prime Minister refused point blank to introduce any legislation to enable that council to carry on in a lawful manner? There seems to be one law for a Government and another for a local council.

Photo of Mr Michael Portillo Mr Michael Portillo , Enfield, Southgate

I do not share the hon. Gentleman's familiarity with that case. I remember it dimly, and I feel sure that there are a number of points which he may have rather selectively failed to make about it. I am in some danger of wearing your patience rather thin, Mr. Deputy Speaker, so may I return to the case in point?

We are discussing a rather special and particular case, because we are not dealing with a single administrative act, which I think we were doing in the three examples that I have quoted, which dealt with television licences, a licence to an airline and a problem which had arisen with a local education authority. In this case my hon. Friend the Minister has run into a problem with a practice which has been going on over five or six years. During that time there have been frequent opportunities to question that practice. There have been frequent references to block grant multipliers in the House. Annual rate support grant reports have been made available to the House. The hon. Member for Blackburn could not be accused by any hon. Member of being anything but assiduous in the way in which he conducts his duties, but, as far as I am aware, he has not campaigned actively over a period of five or six years on this issue, saying that the Government have got the law wrong and that it is clear that the thing should not operate in this way. He has not, as far I know, been stirring up local authorities, which might have a grievance, to take the matter to court, to make sure that the law was tested and to bring the matter back to the House if further legislation was necessary.

As far as I know, the hon. Gentleman, like the rest of us, has woken up to this rather late in the day. Indeed, he rather gave himself away when he said that my hon. Friend the Minister's statement appeared on the Annunciator on 10 April 1986. It was clear from the way in which he referred to it that he had been taken entirely by surprise. So far from campaiging, or feeling a great grievance on the issue, he and his hon. Friends were not aware that the point had arisen at all. For five or six years they acquiesced in an understanding of how the law operated.

Photo of Mr Patrick Thompson Mr Patrick Thompson , Norwich North

Does my hon. Friend agree that the reason why hon. Members on both sides of the House did not wake up to the fact over many years is that the complexity of the matters surrounding the rate support grant is notorious? It is well known that the number of people who understand it is so few that it is difficult to find them.

Photo of Mr Michael Portillo Mr Michael Portillo , Enfield, Southgate

My hon. Friend is characteristically kind to the Opposition, and he is right to be so. I started that passage of my speech by saying that I made no criticism whatever of the assiduous way in which the hon. Member for Blackburn approaches his duties.

Once we have got over the bogus indignation that has been expressed by the Opposition, once we have got over the exaggerated mirth, which I understand, with which the Opposition have greeted the sight of a certain amount of egg on the faces of a few Ministers, there is the serious matter of what should be done. I share with the hon. Member for Southwark and Bermondsey, and certain other hon. Members, a natural dislike of retrospective legislation. It is right that we in the House should be suspicious of that, but the principle that we dislike retrospective legislation cannot be applied entirely without regard to the particular circumstances.

The particular circumstances in this case are that since 1981 there has been a common perception of how the law stood. All the years in which the block grant multipilier has applied it has been determined, settled and closed. In one particular year one particular local authority thought that it was doing badly out of the system and challenged it. It did so successfully in the sense that the law has been shown to be flawed, but it would be absurd to suggest from that that the whole shooting match should now be undone. It is not at all clear to me in whose interests that would be. It cannot even be clear to any local authority in whose interests that would be, because the calculations are simply too complicated for us to work out who would stand to gain or lose. However, I am sure that the chaos which would ensue would be in no one's interest.

It is interesting that the hon. Members for Southwark and Bermondsey and for Blackburn both referred to the difficult situation in which local authoritites find themselves anyway, operating in a situation of uncertainty. Therefore, I am sure that on consideration both those hon. Gentlemen will feel that they would not wish that the uncertainty be made even greater. Indeed, I think that the hon. Member for Blackburn said something to the effect that a certain amount of retrospection would be justified in this case—

Photo of Mr Michael Portillo Mr Michael Portillo , Enfield, Southgate

I am sorry if have misquoted the hon. Gentleman. I thought that he was coming close to saying that there might be some case for retrospection, but that he thought it went too widely.

Photo of Jack Straw Jack Straw Shadow Spokesperson (Environment, Food and Rural Affairs)

I think that the record will show tomorrow morning that I said no such thing.

Photo of Mr Michael Portillo Mr Michael Portillo , Enfield, Southgate

We shall rely on the record, and if I have misquoted the hon. Gentleman I shall apologise to him unreservedly.

It cannot seriously be wished by anyone that uncertainty and chaos should be the result. It is for that reason that I am pleased to give my support to the Government on this occasion. However, I want to return to the point made by the hon. Member for Southwark and Bermondsey that simplification of the system is desirable. I do not think that there is any disagreement on that. My hon. Friend the Minister has said that he wishes the matter to be simplified, and I know that that will be forthcoming in due course. All I can say is, the sooner the better.

Photo of Mr Terry Davis Mr Terry Davis , Birmingham, Hodge Hill 8:37 pm, 23rd June 1986

The Minister began by describing the Bill as dealing with a most complicated matter. I agree with that point, but the issues involved are straightforward in fact. Before dealing with those issues, I must first deal with two of the Minister's points which I regard as red herrings.

First, the hon. Gentleman referred to the system having been introduced to limit grants as a result of overspending. Birmingham city council, whether Conservative or Labour, has never overspent. On the contrary, under both the Labour party and the Conservative party, it has kept within the rules. I repeat that it has always played the game according to the rules.

The second red herring referred to "settled expectations". There were never any settled expectations in Birmingham about the present level of the rate support grant. From the beginning — indeed, before the rate support grant was announced—Members of Parliament from Birmingham went on deputations to see the Secretary of State for the Environment to complain about the way in which Birmingham was being treated as a result of the consultation announcements and the information which the city council had gleaned from the local authority associations. We complained to the Secretary of State then, and we continued to complain, about the way in which Birmingham was being treated. At no time did the city council or Birmingham Members of Parliament accept that the city was being treated fairly, and at no time did we accept the settlement as announced by the Secretary of State.

Turning to the real point, I must tell the Minister that he has clearly not understood the depth of feeling among Birmingham Members of Parliament and the Birmingham public over what we regard as a grossly unfair decision. I refer not to the decision about the amount of the RSG but to the decision to introduce this Bill tonight. It is a most unfair piece of legislation.

The point about retrospection is simply another of the Minister's red herrings. Indeed, the hon. Member for Enfield, Southgate (Mr. Portillo)) has also misunderstood the point. No one is questioning the RSG settlement for previous years. We are advised that it is unnecessary for two reasons to introduce a Bill in order to leave those settlements untouched. The hon. Member for Southgate has obviously not appreciated that caps—as distinct from safety nets— have only applied in two years. No one has raised the question of the use of multipliers for safety nets. The only issue has been the use of the multiplier for caps. Yet the cap has applied in only two years—1981–82 and the current year, 1986–87.

Photo of Mr John Watts Mr John Watts , Slough

Can the hon. Gentleman give an undertaking that no authority would wish to challenge the use of multipliers for safety nets? That is the contingency against which this Bill must provide. The fact that only caps have been challenged in the courts thus far is no guarantee that there will never be a challenge over the use of safety nets.

Photo of Mr Terry Davis Mr Terry Davis , Birmingham, Hodge Hill

If the Government are concerned about being challenged in future about the use of multipliers for safety nets or caps, they can introduce a Bill to deal with the future. I object not so much to the introduction of a Bill to deal with future years as to moving the goalposts this year. I will come to that point in a moment, but first I want to emphasise that there cannot be a challenge to the rate support grant settlements of previous years.

The Minister had no answer earlier to the legal point that I raised. I look forward to a reply from his hon. Friend the Under-Secretary of State. We are advised that, as a general principle of public law, the determinations of rate support grants are treated in all respects as valid unless challenged speedily and within the time applicable for a judicial review. That was established in the case of O'Reilly v. Mackman in 1983. At present, there are no outstanding challenges to any previous year's RSG settlement—the only year in question is 1986–87—so it is not open to any aggrieved local authority to go to court and to ask for a judicial review for previous years. That is water under the bridge and a local authority could not do that, even if it wished to do so. That is a matter of fact. Thus, the Bill is unnecessary in respect of previous years.

As for the future, the Opposition might disagree with or vote against a Bill that introduced the use of multipliers in this way for safety nets or caps, but that is not the main challenge to the Government tonight. Our objection to this Bill is that it deals with 1986–87. That is what is unfair. Birmingham city council went to court and obtained a decision in its favour and against the Department of the Environment. In court, counsel for the Department of the Environment admitted that the Department had acted illegally. Now the Government want to change the law, and that is what is unfair. That is what we object to. It is a matter not simply of retrospection but of changing the rules.

The hon. Member for Southwark and Bermondsey (Mr. Hughes) referred to moving the goalposts. In this case, Birmingham city council scored a goal, and then it was announced that the goalposts had been moved. The objectionable thing is that the goalposts were moved after we had scored. Perhaps I can put it another way. If a footballer knocks the ball into the net with his hand, instead of heading it in—we can all think of examples like that — and the referee blows his whistle and discounts the goal, the football authority does not then say that it will change the rules. It will not say that it was a goal. Indeed, if that happened, we would all say that it was grossly unfair. Yet that is how the Government have behaved. That is what the Government are doing, and I am amazed that any democratic Government should behave in that way.

The hon. Member for Southgate did not respond to my intervention as to whether Labour Ministers had changed the rules in this way. I do not believe that the right hon. Member for Glasgow, Hillhead (Mr. Jenkins), for example, changed the law so that he could revoke those television licences. We do not expect Governments of any party to behave like that when dealing with the rights of individuals or of citizens collectively.

I shall deal with the remarks of the hon. Member for Slough (Mr. Watts) in a moment, but I shall give way first to the hon. Member for Southgate.

Photo of Mr Michael Portillo Mr Michael Portillo , Enfield, Southgate

In the case of television licences, a limited number of people were affected for a limited number of weeks. But in this instance the law was thought to be one thing for five or six years. Although the hon. Gentleman and the hon. Member for Birmingham, Ladywood (Ms. Short) have argued strongly that the advice received by them is that this does not unstitch the whole package, we cannot rely on that advice. The whole package may be unstitched, and that is why we need to make the situation clear.

Photo of Mr Terry Davis Mr Terry Davis , Birmingham, Hodge Hill

If, for the purpose of argument, the Government said that they did not want any doubts or any uncertainty or any more court cases covering the years from, say, 1981 to 1985, and if they said that they could not reopen the question of all the RSG settlements made in the past, there might be a certain amount of mirth, teasing and even opposition, but the argument would be qualitatively different.

In this instance, a council went to court and challenged this year's RSG. It succeeded and obtained a judgment saying that it was right, and that the Secretary of State for the Environment had been acting illegally. It even obtained a judgment that the Secretary of State should pay the council's costs. Yet, despite that, the Secretary of State and his junior Ministers have introuduced a Bill to change the rules. That is wrong.

I have an example that should be fresh in the memory of the hon. Members for Southgate and for Slough. I believe that both of them serve on the Finance Bill Committee. As good attenders, they will remember that the Government moved a new clause in Committee only 12 days ago designed to deal with the taxation of golden handshakes. After all, this Rate Support Grant Bill is not the only example of messy draftsmanship. In 1981, the Government introduced a change in the taxation arrangements for golden handshakes. We are talking about the tax levied on very big golden handshakes—the sort given not to people in the city of Birmingham but to those in the City of London. The Government agreed that a special tax should be imposed on handshakes in excess of £50,000. However, it recently came to light that they had made a mess of the legislation. The Government rightly said that they would have to change the law. The Labour party supported the original introduction of that tax and also agreed that the law should now be changed. Thus, at a very late stage the Government have added a clause to this year's Finance Bill; but they have not said that they will collect all the tax that they thought they would collect. They have not said that they would get the tax back from those few hundred people whom the Financial Times estimated had escaped £10 million of tax. The Treasury rightly said that it would have to pay that. Indeed, it is going further than that. Those who should not have paid tax will be encouraged to apply for a refund. The Government are going to advertise saying, "Come and get your money back." Correctly, the Government are paying the cost of the mistake estimated by the Financial Times to be over £10 million, but wrongly they are legislating to take £7 million away from 1 million citizens in Birmingham. That is objectionable. The Government are changing the rules. In Birmingham that action is seen to be close to cheating or legalised robbery.

When the Conservatives were in opposition they made great play of what the present Lord Chancellor called "elective dictatorship". Now the Conservatives in government say that if they make a mistake there is no point in bothering to go to court because they will introduce another Bill to take away the court's decision. That is truly an elective dictatorship.

Conservative Members will he whipped into the Lobbies tonight to support the Government and to support legislation which is grossly unfair. Indeed, it comes close to cheating. The Bill is both shabby and squalid. Conservative Members should be ashamed of voting for it.

Photo of Mr Patrick Thompson Mr Patrick Thompson , Norwich North 8:51 pm, 23rd June 1986

I shall certainly support the Bill because it is common sense that one must regularise the law to bring about something which is already a de facto occurrence. I shall not he misled by the hon. Member for Birmingham, Hodge Hill (Mr. Davis) who over-emphasised his case.

The Bill validates the distribution of rate support grant and clarifies or amends the law on rate support grant. With respect to parliamentary draftsmen and others, I have to say that on my reading of the Bill I cannot regard it as a clarification. However, I defer to those who are more expert than me, and I shall continue on another occasion my campaign for plainer English in legislation. I hope that the Bill will prove to be a clarification of the law, and I shall comment on the effect that block grant determinations will have on my constituency. The Bill directs the arrangements and they will have an effect in Norfolk.

My constituents are affected by Norfolk county council and by two district authorities — Broadland district council and Norwich city council. I am in a unique position to see the anomalies caused by the complexity of the rate support grant system. Broadland district council is well known as being one of the lowest spending local authorities in East Anglia. Norwich city council has a different reputation and is controlled by the Labour party. That is a distinction that I recognise more than do many of my hon. Friends.

The result of recent rate support grant decisions was as follows. In Labour-controlled Norwich, business and domestic ratepayers face an increase from 184·7p to 211·9p. In Tory-controlled Broadland the increase is from 159·1p to 187·8p. That means that although the settlement had an adverse effect on the lower-spending Norfolk and Broadland district councils, business and domestic ratepayers benefit most from Tory control.

I can illustrate that. A business in Norwich this year faces an increase of 14·7 per cent. A total of 19 per cent. of that is due to the county rate increase, whereas zero per cent. is due to the lack of change in the rates announced by Norwich city council.

Let us compare that with what happens in Cambridge. A business there faces a rate increase of 30·4 per cent. —double that of Norwich. The county — under alliance control— is responsible for 33 per cent. of that increase and the city for 9 per cent. Nationally, it is evident that hung councils, or councils under alliance or any other Opposition control, impose higher rates and spend more, to the disadvantage of business and industry. It is becoming apparent that alliance councillors in Norwich and Broadland are pressing for more spending, so that the situation I have described will become even more serious in future.

The low spending shire counties had a raw deal in the rate support grant settlement because of the change in the formula in favour of the inner cities. With my East Anglian colleagues I resisted that change. We fought hard, and continue to fight, for the lower spending councils. Norwich city council received a generous settlement and was well placed to reduce rates, if it had been so minded.

Some correspondence has taken place between my hon. Friends and the Under-Secretary of State. I have letters about Norfolk county council and Norwich city council to which I shall refer briefly. One letter says: In 1985/86 Norfolk budgeted to spend £225·416m and therefore received £92·705m in grant. In 1986/87 they would have received £89·370m in grant if they had increased their expenditure by 3·4 per cent., i.e. the settlement spending assumption. This slight reduction in grant of £.3·335m is mainly due to the reduction in the overall amount of central money available to support local authority spending. Norfolk also lose slightly from changes made to the Government's methodology for assessing a standard need for spending on services. I could read more from the letter, but that would try your patience even further, Mr. Deputy Speaker. Having read that explanation, it is still no clearer to me why Norfolk ratepayers face a 19 per cent. increase this year. The Eastern Daily Press dated 14 June carries an article headed "County careful spenders." The article states: Norfolk County Council services are among the most economical in the country, according to an independent report published yesterday. My point is simple. If that is so, it is difficult to reconcile it to the way in which the recent rate support grant settlement has worked for Norfolk. I shall not develop that further, but will refer to what is happening in Norwich, one of the two district councils. According to my hon. Friend the Under-Secretary of State, Norwich budgeted to spend £10·253 million, and therefore received £2·019 million in grants. In 1986–87, the following year, it would have received £2·921 million in grant if they had increased their expenditure by 3·4 per cent. in line with the settlement spending assumption. This increase in grant of £0·902 million is mainly due to the new assessments of the standard need for spending on services. (Grant Related Expenditure). Norwich's gain from this is partially offset by the effects of the reduction in the amount of central government money available to support local authority spending and the introduction of new grant mechanisms". The layman— I include myself—finds it difficult to ascertain exactly what this all means for Norfolk, Norwich city council or Broadland district council. I remain convinced of two main points, however. First, Tory-controlled authorities spend carefully, which leads to low rates, while alliance and Labour-controlled authorities lead to pressures for high spending and high rates. Secondly, I am convinced that there is a strong case—I shall deploy it whenever the opportunity arises — for giving a fairer deal to authorities that try their utmost to contain their spending and to eliminate waste. I accept that there is waste in Norfolk county council spending and in Broadland district council spending, but at least they are making some attempt to contain wasteful spending, and more account should be taken of that.

There is no doubt that the system of GREAs and targets is already discredited. I have a letter dated 28 January from the then Secretary of State for the Environment, my right hon. Friend the Member for Mole Valley (Mr. Baker). It states: the unstable and complex way in which Government grants are paid, which obscures local accountability". That is not a complete sentence, but it makes the point that the system is discredited. In future, there must be greater incentive for councils to spend carefully and wisely. Local government finance desperately needs reform, and for a number of reasons. For example, many of us who are interested in education are concerned about the effect of local government finance on the workings of the education system.

I hope that this evening my hon. Friend the Minister will give the House an assurance that active consideration is being given to a simpler and fairer system of local government finance as foreshadowed in the Green Paper. Let us hope that that is merely a start. It is my hope that from there we shall try to simplify the system to make it better and fairer, especially as it affects my constituents in Norwich, North.

Photo of Clare Short Clare Short , Birmingham, Ladywood 9:02 pm, 23rd June 1986

The Bill is all about the Government legalising what would otherwise be illegal underpayment of moneys. For example, the Government owe Birmingham £7 million. When discussing local government finance we talk about so many millions of pounds and billions and it might not be appreciated how large the sums really are. For example, the House will be authorising tonight the loss of £7 to every man, woman and child who lives in Birmingham. That is what it is all about. Birmingham is suffering badly, and £7 for every man, woman and child is a large sum overall. The effect of removing that money from Birmingham is that many people have lived in enormously grotty housing. There are many homes that have black mould on the walls, and we know that this has an effect on children's lungs and their breathing.

Conservative Members really are mice. Other authorities which have suffered as a result of the underpayment are almost all Tory controlled. The authorities which have been so affected do not come within the exaggerated argument that has been advanced by the Government and by Conservative Back Benchers who, presumably, have been briefed by them. They have not been in that position as a result of the rate support grant settlements over the past five or six years. I am talking instead about the effect of the cap. We cannot go back to the 1981–82 cap because of the legal authority which was referred to by my hon. Friend the Member for Birmingham, Hodge Hill (Mr. Davis). This means that we are talking about the effect of the cap this year.

It should be understood that there has been a change in the way in which money is allocated by central Government to local government this year. The policy used to be "You cannot spend more than you always spent in the past and there will be a penalty if your expenditure increases, whatever the level of that expenditure, with no objective standard of fairness being applied." There has been a move to try to achieve an objective standard so that everyone is in an equal position according to the needs of the various areas. That means that traditionally low-spending authorities, most of which are Tory controlled —Tories tend not to attend to the public spending needs of those who live in their areas, but the list, to our shame, includes Birmingham—stand to gain under the change in the formula, and the cap is all about restricting the speed at which they gain.

Birmingham is suffering and the other authorities which are suffering are Tory controlled. They are the same Tory authorities that screamed when the settlement was made. The shire counties and others were screaming because they said that they were being penalised to help the inner cities. That is a joke. Birmingham is the largest area of poverty and squalor in western Europe, yet we were told that the previous RSG would help the inner cities. Birmingham has more inner city areas than anywhere else in the country, yet it is being penalised and hurt by the RSG settlement.

Conservative Members who are not in the Chamber do not do the work, do not know or do not dare to criticise their Government. They fail to represent the interests of the authorities, which would stand to gain if the Government did not legislate in such a retrospective way. It is a fairly limited group of authorities—a maximum figure of £150 million is involved — and where are Conservative Members? The mice are not here. They will not even protest on behalf of the people who live in their areas. A large proportion of Labour Members from Birmingham have been and are present in the Chamber tonight.

Let us not let the Government off the hook by the pretence that somehow, if the Rill is not passed, the whole of the past 10 years of rate support grant settlements will be unravelled. That is false and misleading. It is wrong for anyone to suggest that that is the case. Let us put that decision and the legislation in context in terms of the Government's strategy on local authority spending.

The Government were elected in 1979 on a promise to cut public expenditure and to cut taxes. They have failed on both counts. Taxes are up. More taxation is being paid now than was paid in 1979. Central Government expenditure is up significantly. It is up most significantly because unemployment is up so massively. Unemployment is costly in terms of dole money, lost production and taxes and national insurance that the unemployed would pay if they were in work. Central Government spending is also up for defence and law and order, although we live with more crime and uncertainty than ever before in my lifetime.

The answer that the Government give to deal with the absolute failure of their economic strategy is to pass the buck to someone else. They have said to local authorities, "You will make the cut. You can keep our promises for us. You might have been elected on other manifestos and on promises to improve the quality of public services in your area, but it is too bad, we will stop you. We will change the law and fiddle the formula so that you cannot do what you promised, and so that we can pretend we are keeping in line with our promises."

All that is hidden under a smokescreen of pretence of extremism and excess in Labour local authorities. They are all full of loony Lefties spending masses of money on unnecessary things. Birmingham gives the lie to that. Birmingham is a low-spending authority, and it is being penalised by the legislation, which shows just how clearly the Government are looking for scapegoats, looking to pass the buck and looking to blame local authorities for the failures of their own economic strategies.

There are many ways in which Birmingham and low-spending Tory authorities which are not represented here tonight are being penalised. I shall run through those penalties briefly. As I have said, the Government have changed the rate support grant formula and moved away from a system of preventing growth — wherever the starting point was arbitrarily in previous years—to some kind of objective assessment of need throughout the country. Under this changed formula, Birmingham is being underpaid by £43 million. If £7 million is a lot for the people of Birmingham, £43 million is an awful lot for a city that is suffering desperately from the effects of a massive rise in unemployment and poverty.

The Government have taken powers and are using the cap and the safety net to phase in the introduction of the changed system so as not to allow cities such as Birmingham suddenly to have an increase of £43 million and to prevent other places from losing rapidly. The r j 108measure of Birmingham's objective need and loss is £43 million. That is bad enough, but the Government did not even use an objective calculation in deciding how to phase that change. They fiddled the figures. They fiddled Birmingham out of £7 million.

Birmingham took the Government to court, which said, "That is right, it is a fiddle. There is no objective foundation. It is not in line with the words of the legislation. That £7 million should not be taken away from Birmingham." The Government are trying to legalise that fiddle. That is no exaggeration. Birmingham has suffered the loss of £7 million and £43 million as a result of the Government's underpayment, on their own figures, of need.

I refer also to the scandal and the effect of the abolition of the West Midlands county council. It was claimed that it would save money, yet it has hurt Birmingham. The cost of the services transferred to Birmingham is £43 million, and the increased allocation to Birmingham to pay for those services is £6 million. We shall face an inevitable rates increase simply to maintain the services of the West Midlands county council. That is another of the problems imposed by the Government on Birmingham, with all their fiddling of local authorities, trying to pass the buck and blaming them for the failure of their economic strategy.

Birmingham faces another problem. It has not had a rating revaluation since 1973. It has suffered savagely since 1979 because of the Government's economic policy of destroying Britain's manufacturing base. Birmingham is a manufacturing city and our capacity to pay rates has been massively reduced by increased poverty. It is assumed that our rateable values are higher than they are and that we can afford to pay amounts that we really cannot afford. The Government give us no relief but simply introduce special legislation to take away the £7 million that is owed to us under current legislation.

If we enter into the technicalities of the formula we can find worse defects, and I am sure that hon. Members will do so in Committee. Because of the way in which the Government have set the multiplier, if it overshoots at all, Birmingham — low-spending authority that it is — will suffer more than most other big cities which are spending more and looking after their people better. For example, a £1 million increase in spending in Birmingham would cost the city in penalty £1·08 million, whereas Sheffield —a city which spends well and has been complimented by the auditors on running itself efficiently—would lose only £280,000. It appears that there is a conspiracy against Birmingham, perhaps to penalise it for not having reacted to the bribe in the rate support grant in 1983–84 and for having dared to elect a Labour council.

The effect of all this on a city with the greatest geographic area of poverty in western Europe is that the Ladywood ward in the Ladywood constituency, which was redeveloped in the 1950s and 1960s, has maisonettes and tower blocks which were badly built and not properly insulated. There is a danger of pieces of those buildings falling on people as they walk along the streets. The black mould on those flats and maisonettes, which has grown because of the lack of insulation, affects the lungs of my constituents. In that part of Birmingham, a disproportionate number of children go into and out of hospital because of the effect on their lungs. There is not enough money in Birmingham to do anything about it. That is the effect of this measure and of the other cuts imposed on Birmingham. Some of my people live in squalor. Some of the children's lungs have been permanently damaged because there is not the money to put right the housing in which they live. Conservative Members should be ashamed of themselves for supporting this retrospective measure and for not being conscious of the real needs of our cities and people.

Photo of Mr Robin Corbett Mr Robin Corbett Opposition Whip (Commons)

Does my hon. Friend recall that at the present rate of improvement of degenerating housing stock in Birmingham, because of the limits on what the city is allowed to spend, it will take the city council 604 years to deal with the houses, let alone the flats and the tower blocks?

Today, the Paymaster General and Minister for Employment made a speech in Birmingham in which he told us how the Government's wonderful new task forces were helping the inner cities. He told us how they were implementing the strategy of ensuring that local labour was employed on urban renewal projects. We would support that in Handsworth, because it would mean some of our young black people could get jobs, but the truth is that the right hon. and learned Gentleman gave a lie to the Birmingham people— there is no money any more for urban renewal. The only time that we had the money was when the Government gave the bribe. We had lots of enveloping and we built lots of walls. That was the period when none of our local young black people were employed in fixing up the houses in which they lived. We now get an announcement from the Government that they will get employment, but there is no money or projects to employ them. The Government have done very badly by the city of Birmingham in all the moves and changes they have made that I have described. The removal of the £7 million that belongs to us is a sordid marker of that history of neglect of our city.

Photo of Mr John Watts Mr John Watts , Slough 9:15 pm, 23rd June 1986

This evening we have witnessed one of our periodical constitutional outrage, rituals. These occur whenever there is a timetable motion before the House or whenever there is anything that can he called retrospective legislation. I think that there has been overmuch protest from the Opposition about the retrospection involved in this measure. In reality this is a fairly modest little Bill, not a major constitutional outrage, and it does nothing more than make some small and necessary running repairs to the increasingly ramshackle structure of our rate support grant system, which has proved most unsatisfactory since it first came off the production line in 1980.

One of the major problems with the existing system of grants has been the lack of certainty over grant entitlement. I know from my own experience, as the leader of a large London authority for six years, how difficult it is to indulge in any sensible long-term financial planning when, as Opposition Members have said, the goalposts can be moved so quickly and so many times within one financial year. The proposal that we should not remedy this flaw in the statute which has been detected would be to make that worse.

There is clearly a dispute between my hon. Friends on the Front Bench and Opposition Members as to whether the effect of the judgment could be to upset all rate support grant settlements back to 1981. The hon. Member for Birmingham, Hodge Hill (Mr. Davis) gave us a categorical assurance that that is not the case because he had legal advice to that effect. I would say to the hon. Gentleman that all points of law are fixed and certain until they are challenged and overturned in court. I think that that could apply just as well to the advice he has received as it must apply to the advice which my hon. Friends in the Department of the Environment had in drafting the original legislation and in its application.

Photo of Simon Hughes Simon Hughes Shadow Spokesperson (Environment, Food and Rural Affairs)

Would it not do more for the Goverment's credibility with local government — I respect the hon. Gentleman's involvement in it—if on a matter such as this the Government sought to agree with local government and the perfectly respectable associations for local authorities what the legal effects of certain things would be instead of seeking to draft legislation behind their own closed doors resulting in alienation and a conflict of opinion with local government which they should be seeking to serve?

Photo of Mr John Watts Mr John Watts , Slough

There are certain attractions in that idea. I think that the major flaw would he that there would be no way in which the associations of local authorities could bind their individual member authorities not to pursue whatever rights they thought they had through the courts. I remind the hon. Gentleman that local authorities have operated within the Government's understanding of the law for six years. It was not until this year that there had been any challenge to the use of caps, even though, as the hon. Member for Birmingham, Ladywood (Ms. Short) reminded us, caps were also applied in 1981. Therefore, I am in favour of a more co-operative attitude between central and local government, but I do not believe that that can provide the solution in an instance such as this because there could be no way of binding all authorities to observe any agreement which might have been reached.

I accept the advice of my hon. Friend the Minister that previous years' settlements could be in doubt even though I would acknowledge that perhaps he is relying on the same legal advice as his predecessors relied upon in drafting the original Bill. Therefore, that advice may also be defective. However, on balance, I am prepared to accept my hon. Friend's advice and accept that there is a need for us to remedy this flaw in the law. After all, the Bill does no more than to confirm the situation as authorities thought it to be for six years.

The hon. Member for Hodge Hill drew an interesting analogy with the sad outcome of the England-Argentina football match last night, but he drew the wrong conclusion from it. As I see it, the situation that we face in local government finance is that, for six years, everyone has known that one cannot score a goal by bashing the ball in with one's hand, but suddenly in one match along comes a player, in this case Birmingham, who bangs the ball into the net by hand and appeals to the referee, and the latter says "Yes, that is a goal." The purpose of the legislation is to restore the rules of football as we thought they were, that one cannot score a goal by bashing the ball in by hand.

The need for the Bill provides further proof of the inadequacies of the present system. Let me mention just one of its absurdities. My Labour-controlled borough council of Slough was rewarded for having increased the borough rate by 300 per cent., from 5p in the pound in 1983 to 20p in the pound in 1985, by an increase in its rate support grant from £1·6 million to £4·6 million in the current year. I had to applaud the generosity of my right hon. Friend the Secretary of State on behalf of the minority of my constituents who are ratepayers, although, regrettably, only part of that beneficence was passed back to the ratepayers to whom it belonged. None the less, I could not try to defend the logic of a system that rewarded an authority that had been overspending, and increasing its spending at a rapid rate, particularly when that was at the expense of authorities that had sought to keep their expenditure under control, especially Conservative-controlled shire counties.

The present system is oversophisticated without being able to produce any sensible results. If, as some Opposition Members have argued, the system could be manipulated to reward the Government's political friends, I would criticise it less. If we could reward people who have the good sense to vote Conservative in general and local elections, perhaps such a system would have something to commend it. But the reality is that we have a system which, certainly this year, has rewarded the Conservative party's enemies and penalised its friends. That is what I mean by a system that is oversophisticated but incapable of producing any sensible results.

Photo of Simon Hughes Simon Hughes Shadow Spokesperson (Environment, Food and Rural Affairs)

The hon. Gentleman knows the fallacy of his argument. This year the system was used to try to reward people whom the Conservatives hoped would vote Conservative. They gave them the money and then they failed to respond. That shows how fallacious the hon. Gentleman's argument is.

Photo of Mr John Watts Mr John Watts , Slough

If the hon. Gentleman looks at the figures for this year's settlement, he will see that the authorities that had most to gain in grant were those that were already under Labour control, not those that we were seeking to retain. However, perhaps we can pursue that matter on another occasion.

The system has also had the effect of weakening accountability because it has distorted the link between spending levels set by local authorities and the size of the rate bill that lands on the doormat. Therefore, there is an urgent need for the system to be swept away and replaced by something that would be cruder but much more readily understood. We must get away from oversophistication and go for something that is simple and certain.

The Green Paper entitled "Paying for Local Government" proposes that grant would be distributed mainly on a per capita basis. I recognise that that is not perfect, but by and large the costs that are involved in providing services are related to the total head count. In some cases, however, the major burden will be in supporting the elderly, and in other authorities it will be in providing services to the young. None the less, a per capita system would provide a fairly sensible way of distributing grant. Also, importantly, it is a system in which grant entitlement would be set before the beginning of the financial year and would not be changed, so that there could be sensible financial planning by local authorities.

Frankly, I would have preferred to see such proposals in the Bill rather than these minor running repairs which have, in the event, been presented to us. A patch here and there will hold the system together for a little while longer, but not for very much longer. Therefore, I hope that in the Gracious Speech this autumn we shall hear that the proposals to enact the changes set out in the Green Paper will be brought before us.

Photo of David Clelland David Clelland , Tyne Bridge 9:25 pm, 23rd June 1986

In view of the time that is available to me, I shall not try to emulate my predecessor, the late Harry Cowans, who, as the Minister implied in his opening address, had an ability to speak at great length on almost any subject. He was also very humorous.

In a recent statement to the House, the Minister referred to block grant multipliers as a complex, technical matter. That was one of many measures brought in by the Government to replace and simplify the present complex technical system of local government finance which contained such quaint features as multiple regression analysis. While "multipliers" might be a simpler expression than "multiple regression analysis", the system is no less complex than hitherto. Indeed, there are few, if any, who understand it in its entirety.

Apart from the complexity of the system, the number of changes brought about and their regularity over the past seven years has further complicated an already complex situation. It is not surprising, therefore, that, not for the first time, the Government have got it wrong and are now trying to correct the error by retrospective legislation. If this was being carried out purely in the interests of protecting councils from the damaging effects of the legal implementation of the new interpretation—it seems from what the Minister and others have said that there is some doubt about that—that, in itself, would be laudable. Even so, the Government would still stand condemned for making such a costly error in the first place and for abusing their legislative power by once again backdating the law.

The Government now intend not merely to rectify the error but to introduce new measures which further increase the already dictatorial powers of the Secretary of State and to deny Parliament and local authorities access to information which might clarify the reasons for the Secretary of State's decisions. For a Government who have recently introduced measures to allow access to information at local level, that smacks of hypocrisy of the first order. If it is fair and reasonable for local government to be open and accessible, and for people to have access to information held by local authorities, it is equally fair and reasonable for local authorities to have access to the information on which their rate support grant is calculated and the reasons behind the decisions taken by Ministers.

In paragraphs 8 and 9 of schedule 1 to the Bill, we see that the Secretary of State will be required to provide only such explanation as the Secretary of State thinks desirable". The Minister said that the intention is not to reduce the present levels of explanation. I assume that the Minister is aware that the Secretary of State is already inclined to release only such information as he sees fit.

Newcastle upon Tyne city council has been trying for more than a year now to extract from the Secretary of State his reasons for refusing to grant disregards to the authority in respect of the years 1983–84, 1984–85 and 1985–86. As Member of Parliament for a Newcastle constituency, I have written to the Secretary of State asking for the information requested—the Minister is present and will recall it—only to be told: The Secretary of State does not consider that he is under any duty to explain his reasons for refusing to grant Newcastle a disregard. The city council is convinced that its argument is fair and reasonable and is not without precedent. Therefore, it is anxious to know why its request was refused. However, the Secretary of State has refused to explain his decision. I have now tabled a parliamentary question on the matter and await a response. Should the Secretary of State persist and refuse to answer a simple question from a Member of this House, I shall he asking whether his dictatorial powers over local authorities also extend to Parliament.

This new measure may get the Government off the hook, and it will certainly increase the power of the Secretary of State, but it will do nothing to restore the lost and damaged services resulting from the Government's treatment of local government. It is an exercise in damage limitation, not restoration. It is an attempt to deny elected Members of Parliament access to information, and it will clarify little or nothing. It is a further demonstration of the Government's arrogance in assuming that they are always right, even when they are proved wrong. It will make things even more difficult for the local authorities and increase the already unprecedented powers of the Secretary of State. For all those reasons, it deserves to be defeated.

Photo of Mr Tony Banks Mr Tony Banks , Newham North West 9:30 pm, 23rd June 1986

I shall be exceedingly brief, as I know that it will not be long before yet another local government Bill comes before the House. We have had almost as many Bills as we have had Secretaries of State, who also seem to come and go in the night.

It is singularly appropriate that the first major Bill brought forward by the Department under the leadership of the new Secretary of State should be a piece of retrospective legislation. The Secretary of State is uniquely qualified in this respect. Indeed, he is in danger of becoming a recidivist and should perhaps appear at the Dispatch Box in a striped jersey rather than a pin-striped suit. I remind those who do not know the Secretary of State's record on restrospective legislation of the words of Mr. Justice McNeill on the question of the GLC and payments to London Regional Transport. He said that the right hon. Gentleman, then Secretary of State for Transport, had acted "unlawfully, irrationally and … improperly". To legalise his unlawful position, the Secretary of State brought in retrospective legislation, so he has some experience in this respect.

It falls to the Department of the Environment to bring in retrospective legislation quite regularly. A previous incumbent of the office of Secretary of State, the right hon. Member for Wanstead and Woodford (Mr. Jenkin), was caught out on planning law. Whenever the Government get into bad odour as a result of poor drafting or because they wish to move the goal posts or make political capital out of a particular situation, they can use their massive majority in the House to bring in retrospective legislation to legalise their previously unlawful position.

Let hon. Members on both sides of the House contrast that attitude with the position of elected local councillors doing their job in extremely difficult circumstances. If they are found to have acted incorrectly or unlawfully, they are pilloried in the press, dragged before the courts, surcharged and have their careers and personal positions jeopardised, while Ministers simply use parliamentary sovereignty to get themselves off the hook. The hon. Member for Enfield, Southgate (Mr. Portillo) mentioned earlier cases and I referred him to the GLC "Fares Fair" policy. Everyone thought that the GLC had acted lawfully under the Transport (London) Act 1969, but when that was found not to be the case the Prime Minister refused to allow any retrospective legislation and said that the GLC would have to live with the position in which it found itself. No sympathy was shown there, but when the Secretary of State is in trouble he can come to the House and get the legislation that he needs.

The Government pledged to take Whitehall off the backs of town halls, but since 1979 there has been increasing interference in local government affairs, centralisation all the way and the constant withdrawal of central Government funds. The Government's behaviour offends all the laws of natural justice, but natural justice has no place in the ways of the Conservatives. This is yet another example of the way in which they have managed to mess up the whole of local government. The sooner we are shot of them and can get back to some certainty in local government, the better it will be for all elected councillors and for the House of Commons.

Photo of Mr Roland Boyes Mr Roland Boyes , Houghton and Washington 9:34 pm, 23rd June 1986

We have heard some excellent speeches from my hon. Friends the Members for Birmingham, Hodge Hill (Mr. Davis), for Birmingham, Ladywood (Ms. Short), for Tyne Bridge (Mr. Clelland) and for Newham, North-West (Mr. Banks) about this squalid little Bill.

During my period as a councillor local government matters were becoming increasingly complex towards the latter end of the 1970s and money was beginning to be tight, but there is no doubt that what was happening then was as different from what is happening today as suffering from a dormant pimple is compared with a malignant cancer. Councils are under continuous assault from the Government, because of their interference in the decision-making processes of local authorities in a way that has never been known before. A great deal of that has been achieved by the introduction of mechanisms to control council spending policy and decision making. That is done by the manipulation of the rate support grant and by direct control, through rate capping and penalties on the sums that can be raised from rates in the community.

There is no doubt in the minds of many elected local government representatives that the Government's major objective is to influence and intrude in the processes for the determination of local government spending priorities. The Government are attempting through financial manipulation to impose their political will and philosophy on councillors who have been elected through the ballot box, especially on those from political parties who do not share their unproven monetarist economic theories.

The level of services provided by local government for housing, social services, recreation, education and a host of other functions is important for the vast majority of people, but is vital for the poor and the deprived. However, many councils cannot deliver the level of services which they consider necessary because of cuts in income. Since 1979 some £17·5 billion of rate support grant has been withheld, and there is uncertainty about future spending.

Local government officers, elected representatives and the community need a system which is equitable and straightforward, instead of the present controls, cuts, complexities and uncertainties. The Bill could have served to clarify rather than to confuse further, as it surely will.

As many hon. Members have said, local government finance is becoming so complex that the number who can understand all its aspects is rapidly being reduced to a small handful. Indeed, on 11 December 1984 the then Secretary of State for the Environment, who had told the hon. Member for Staffordshire, South (Mr. Cormack) that he would send him "A child's guide to the rate support grant system", said: Yes, it has been very helpful to me. It has helped me to understand the system, and I am not ashamed to admit it. I think that I now understand most of it. Later in the same answer he said: Obviously it is complex, but my right hon. Friend the Minister for Local Government is studying its complexity." —[Official Report, 11 December 1984; Vol. 69, c. 921.] Local government finance is becoming unintelligible because of the continual interference of successive Secretaries of State, who keep changing the rules. The Bill is a further contribution to the problem. It is already extremely difficult to challenge decisions because of a lack of information, and the Bill gives the Secretary of State the right to make even less information available. It seeks retrospectively to correct the way in which the Government have used multipliers to minimise the effect on an authority's grant entitlement, arising from rate support grant settlements.

In principle we do not object to the use of multipliers, provided they facilitate long-term planning. As I have said, this is becoming increasingly difficult, but it is important if local authorities are to be able to be as effective and efficient as they desire. To achieve that it is essential that future income can be depended upon not to fluctuate violently up or down. The fact that there is a need within the rate support grant system for mechanisms to be devised to stabilise the inherent major fluctuations from year to year points to a fundamental defect in the system.

In the report of the Comptroller and Auditor General on the operation of the rate support grant system, paragraph 4.50 states: The Audit Commission considered that there were too many unnecessary uncertainties in the grant system and that these had inhibited local government from planning ahead … The main uncertainties identified were the absence of forward projections of the level of grant support. It goes on to say that the major Fluctuations can arise for a number of reasons and in 1986/1987 multipliers were needed for the following:

  1. (1) to limit grant losses arising from the removal of 1985/86 safety net multipliers;
  2. (2) to limit grant gains and losses arising from the abolition of penalties and targets;
  3. (3) to limit grant gains and losses arising from abolition, and;
  4. (4) to limit grant losses arising from changes in GRE methodology."
That such changes in the rate support grant settlement each year produce major changes in grant entitlement has been a constant, and criticised, weakness in the system. What is required is a process that is simple but responsive to the needs of local authorities in different areas, and stable. The need to resort to multipliers, which are difficult to understand or justify, both to local authorities and the community, complicates still further the increasingly illogical and indefensible allocation of resources between authorities.

On pages 20 and 21 the report of the Comptroller and Auditor General says: The multipliers are calculated by complex formulae, the broad purpose of which is to limit the effect on block grants of some, but not all, changes in authorities GREAs. The consequences are erratic … Because of the way in which targets have been determined over the years since 1981–82 they have no consistent relationship with current spending needs as measured by GREAs. Three constituencies, one of which is mine, are conterminous with the borough of Sunderland, and I shall deal with an example of the consequences of using the multipliers to cap grant gains. First, I ask why the Bill is necessary. The city of Birmingham case convinced the courts that the Secretary of State had exceeded his powers in the use that he made of multipliers. The Bill gives retrospective approval to the multipliers used in the years 1982–83 to 1986–87. However, some local authorities have explained that there will he a problem in 1986–87 because of the introduction, for the first time, of grant caps. This matter should be resolved before any further action is taken. Before the Minister tells me that to redetermine the 1986–87 multipliers will cause disruption because of the need to change the grant entitlement of all local authorities, I must tell him that, due to other Government decisions, large variations have regrettably become a fact of life to local government.

This might be a suitable point to raise a question that needs urgent consideration. The Minister will recall that in 1985 some local authorities submitted to the Department of the Environment revised figures for 1985–86. These were not requested by the Department from local authorities, but, more important, no sign was given of the consequences of not sending in the revised estimates. The Department of the Environment determined grant caps for 1986–87 on the latest available information from local authorities. Those that had not submitted revised figures for 1985–86 were found to be at a disadvantage compared to those who had submitted new data. Why and how did this occur?

If the Department of the Environment knew that this would happen, why did it not invite all local authorities to submit revised figures? Does this not mean that some local authorities are being treated more favourably than others? Will the Secretary of State invite all local authorities that have not yet done so to submit revised figures and, in addition, when he has them to hand, will he recalculate the multipliers for 1986–87? If this is not done, is there not a possibility that we might have to face further retrospective legislation because of local authorities taking action in the courts?

The fine details in the Bill will be contested in Committee. In this debate, my hon. Friends and I have simply set out our dissatisfaction with the fact that the law is being amended in this way, because retrospective legislation is, in itself, unsatisfactory, especially as it has been done, as I illustrated, during a period when multiplier calculations are being made. It is also unsatisfactory because the Bill does not do what it seeks to do— to clarify what is a far too complicated system.

Because the Bill involves retrospective legislation and will lead to greater confusion rather than to greater clarification, and because we are concerned about the fact that the Secretary of State is seeking wider powers to reduce the amount of explanation that is to be included in rate support grant reports, we shall oppose the Bill this evening.

Photo of Mrs Angela Rumbold Mrs Angela Rumbold , Mitcham and Morden 9:44 pm, 23rd June 1986

Predictably, this evening's debate has ranged around a number of subjects. We have had a good go at the horrors of block grant, although the hon. Members for Blackburn (Mr. Straw) and for Tyne Bridge (Mr. Clelland) did not suggest that we should begin all over again with regression analysis. At least they were willing to accept that the present system has brought about some improvements. Nevertheless, they went on to tell us of immense horrors.

My hon. Friends the Members for Enfield, Southgate (Mr. Portillo), for Norwich, North (Mr. Thompson) and for Slough (Mr. Watts) said that they thought that the Government could have done better on the block grant arrangements. There was also an interesting discussion of retrospective legislation. That evoked a large number of memories on both sides of the House. It was, if I may so describe it, a navel examination of our past mishaps regarding retrospective legislation.

A great deal of indignation has been expressed about the introduction of the Bill because of its effect on local government. Indignation was voiced by the hon. Member for Houghton and Washington (Mr. Boyes), and by the hon. Member for Newham, North-West (Mr. Banks) in his usual explicit manner. However, I shall deal with what the Bill is trying to achieve by the block grant multipliers.

Multipliers have been used in every rate support grant settlement since 1981–82 to protect local authorities from sharp losses of grant resulting from certain factors. We have always thought it right to set a limit on grant losses — I stress losses — resulting from our own decisions about the way in which grant-related expenditure assessments are calculated. In two years when there were exceptional changes in grant arrangements we have also put a limit on gains, using cap multipliers. We did that in 1981–82 when the block grant was introduced. We used caps again in the 1986–87 settlement when targets and holdback were removed to help to mitigate the results of the abolition of the Greater London council and the metropolitan county councils.

The hon. Member for Southwark and Bermondsey (Mr. Hughes) suggested that we might be legislating for the sake of it, but that is not the case. I would not want to claim that local government has always accepted the precise safety nets and caps that we have applied, but there has always been a good deal of agreement over the way in which caps and nets should be set. We have been fairly proud of this.

I intend to deal in more detail with some of the points that have been raised on caps, safety nets, retrospection and other matters. It has been suggested by a number of hon. Members that the reason for the 1986–87 multipliers being challenged is that the cap on grant gains operated unfairly on some authorities, especially Birmingham. I do not accept that argument. There are two sorts of caps.

First, we made it clear in July 1985 that we thought it was right to limit windfall gains resulting from our decision to dispense with targets and holdback for 1986–87. I remind the House that that decision was welcomed. That was surely perfectly reasonable. I see no reason why some authorities should be allowed to benefit from unlimited gains at the expense of all other authorities.

The second type of cap applied to the effects of abolishing the GLC and the metropolitan county councils. We made it clear on many occasions that we thought that abolition should be neutral in its effect on ratepayers. Again, I can see no argument why ratepayers in some areas should have benefited from the fact of abolition, while others suffered losses.

The hon. Member for Birmingham, Ladywood (Ms. Short) asked whether Birmingham would receive the additional grant that it was seeking for 1986–87. Birmingham challenged the cap multiplier determined for it in the 1986–87 settlement. The main grounds for the challenge were in the legal shortcomings in the existing legislation, which this Bill is designed to correct. There was no challenge to the reasonableness of the cap.

I want to explain the point that the hon. Lady tried to make during a number of interventions about the way that the cap operates. Section 59(6)(a) contains the power to determine cap and net multipliers and provides that they may he determined for limiting the change in the amount of block grant payable to an authority for the year from the amount payable in the previous year. Before the Secretary of State can exercise the power to cap, he must be satisfied that there would have been an unreasonable increase in the amount of grant payable unless he exercised that power. Whether he nets or caps, the Secretary of State is limiting the amount of grant payable year on year and there is no difference in the nature of the power. If it was not exercised properly for Birmingham on the basis of a year by year comparison for caps, it was not exercised properly for nets. Therefore, the power is exercisable on the basis of the principles applicable to all authorities. If it is invalid for one authority, it is equally invalid for any other authority that has had a cap or net multiplier determined for it.

Photo of Nick Raynsford Nick Raynsford , Fulham

Does the Minister accept that this extraordinary complexity, with a need for all these parentheses and adjustments, simply illustrates the total nonsense of the framework for local government finance operated by this Government?

Photo of Mrs Angela Rumbold Mrs Angela Rumbold , Mitcham and Morden

I am sorry that the hon. Gentleman finds this so difficult. It is a complex matter. I am sure he understands that it needs careful explanation to the House.

Photo of Clare Short Clare Short , Birmingham, Ladywood

I am sure that the Minister does not mean to obfuscate about how the £7 million figure arises for Birmingham. The Secretary of State estimated a base grant of £158 million for 1985–86 using contrived assumptions, whereas his own projected grant entitlement for 1985–86 was expected to be £165·2 million. The difference between those two amounts means that Birmingham has lost £7 million. It is to do with reasonableness. It is not simply an accident in calculation such as the Minister appeared to imply.

Photo of Mrs Angela Rumbold Mrs Angela Rumbold , Mitcham and Morden

I shall come to the detail of that in a moment. The fact is that in the settlement Birmingham stood to gain substantially from the removal of targets and holdback. Birmingham ratepayers also stood to gain from the abolition of the West Midlands county council. If no cap had been applied, Birmingham's grant would have soared from the £165 million it was being paid for 1985–86 to as much as £224 million. That gain, of course, would have been at the expense of all other authorities.

We took the view that windfall gains were undesirable, and we therefore put a limit on those gains, with the result that Birmingham's grant settlement was about £185 million, but that was still about £20 million more than it was actually being paid for 1985–86.

Photo of Jack Straw Jack Straw Shadow Spokesperson (Environment, Food and Rural Affairs)

Does the Minister accept that, while it is generally accepted by local authorities and the Department that for the purpose of setting safety nets notional spending is acceptable, for the purpose of setting caps the Department has previously always taken the difference between actual spending in one year and actual spending in the following year?

Photo of Mrs Angela Rumbold Mrs Angela Rumbold , Mitcham and Morden

I can explain to the hon. Gentleman why we did it a little differently this year.

I wish to deal now with the matter of safety nets. We tried to achieve a balanced package of nets and caps. The safety net protected individual authorities that would otherwise have suffered sharp losses, and the caps prevented large gains for individual authorities at the expense of all other authorities. The hon. Member for Southwark and Bermondsey asked me to name other authorities that would have had large gains. I shall turn that question around because, while attention has been focused understandably on the authorities that have been capped, it is also important to remember the other side of the coin. If we had not applied the safety nets, Bedfordshire county council would have lost a further £8 million of grant, Surrey county council would have lost a further £10 million of grant, in London, Greenwich borough council would have lost a further £20 million and Tower Hamlets would have lost no less than £59 million. If we had done nothing to correct the shortcomings of the law, the basis of this protection would have gone and those authorities would have faced unmanageable losses of grant, as I am sure the hon. Gentleman will acknowledge.

Photo of Mrs Angela Rumbold Mrs Angela Rumbold , Mitcham and Morden

No, I shall not give way. I must get on.

The hon. Gentleman also asked whether the 1986–87 safety net and cap multipliers would be redetermined in the light of later information. The hon. Member for Houghton and Washington also mentioned that matter. That point has also been raised by other people and authorities. Since the budgets for 1985–86 have been revised, it is believed that if the settlement multipliers were recalculated on the new figures the authorities would get more grant than they are currently receiving in 1986–87, as the hon. Gentleman said. Therefore, the Bill makes it completely clear that safety nets and caps are to be calculated once and for all at settlement time. The Secretary of State will no longer have the power to redetermine multipliers and to set nets and caps, except to correct errors in the original calculations. Of course, Ministers will be prepared to meet representatives of Avon county council at a mutually convenient time.

As my hon. Friend the Minister mentioned, there are a number of cases where one could quote retrospective law: the Law of Property (Joint Tenants) Act 1964, which amended the law with respect to land invested in joint tenants, the Housing Finance (Special Provisions) Act 1975 — all introduced by a Labour Government — the Aircraft and Shipbuilding Industries Act 1977, and the one I like the best, the Indian Divorces (Validity) Act 1921. That was passed to remedy the consequences of the decision in the case of Keyes v Keyes. A number of persons who thought they had been divorced in India were not divorced at all, so those who subsequently remarried were guilty of bigamy. The Act retrospectively validated such divorces. As the hon. Member for Blackburn talked about expectations, I ask him whether those expectations might have been dashed—

Photo of Mrs Angela Rumbold Mrs Angela Rumbold , Mitcham and Morden

No, I shall not give way.

On a more serious note, I do understand that retrospective legislation always smacks of moving the goalposts after the start of the game. But I must tell the hon. Member for Birmingham, Hodge Hill (Mr. Davis) and my hon. Friend the Member for Slough, who pinched my point about moving the goalposts, that the RSG settlements for each year between 1981–82 and 1986–87 were made according to an interpretation of the law which was widely accepted.

Grant entitlements for previous years are at risk because we still have to make supplementary reports for the rest of the years in question. Those reports would necessarily involve the use of the multiplier powers which, as we have explained, would have to be recalculated in the way required by the Birmingham judgment and thus create total uncertainty as to grant entitlements if we did not have the Bill.

The rules for judicial review provide that proceedings must be commenced as soon as possible, and in any case within three months of the decision complained of. A decision on a multiplier in, for example, the fourth supplementary report for 1983, to be laid at a future date, could enable a local authority to challenge the original determination of the multiplier in the main report for that year.

I was asked about the London borough of Greenwich. That error arose from a misallocation in the RSG settlement for 1986–87 of inherited highways expenditure. [Interruption.] We have suggested that a safety net of 2p at ratepayer level would be appropriate—the equivalent of about £290,000 for Greenwich. No final decision has been taken on the level at which the safety net should be set and we shall consider all representations, including those from Greenwich, before reaching a final decision —[Interruption.]

Photo of Mrs Angela Rumbold Mrs Angela Rumbold , Mitcham and Morden

As my hon. Friend the Member for Slough has said, unfortunately serious shortcomings have been identified in the existing law on block grant multipliers. It is for that reason we have brought the Bill before the House this evening. I ask the House to support the Bill.

Photo of Mr Tony Banks Mr Tony Banks , Newham North West

On a point of order, Mr. Speaker. Is it in order for hon. Members who have not attended the debate to come into the Chamber late and to spend all their time talking and gossiping during the Minister's concluding speech?

Photo of Mr Bernard Weatherill Mr Bernard Weatherill , Croydon North East

There was as much noise inside the Chamber as at the Bar of the House.

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

The House divided: Ayes 246, Noes 180.

Division No. 231][10.00 pm
AYES
Adley, RobertBoscawen, Hon Robert
Aitken, JonathanBottomley, Peter
Alexander, RichardBottomley, Mrs Virginia
Ancram, MichaelBowden, A. (Brighton K'to'n)
Arnold, TomBowden, Gerald (Dulwich)
Ashby, DavidBoyson, Dr Rhodes
Atkins, Robert (South Ribble)Braine, Rt Hon Sir Bernard
Baker, Nicholas (Dorset N)Bright, Graham
Banks, Robert (Harrogate)Brinton, Tim
Batiste, SpencerBrooke, Hon Peter
Beaumont-Dark, AnthonyBrown, M. (Brigg & Cl'thpes)
Bellingham, HenryBruinvels, Peter
Bendall, VivianBryan, Sir Paul
Benyon, WilliamBuchanan-Smith, Rt Hon A.
Biffen, Rt Hon JohnBuck, Sir Antony
Biggs-Davison, Sir JohnBudgen, Nick
Blackburn, JohnBulmer, Esmond
Blaker, Rt Hon Sir PeterBurt, Alistair
Bonsor, Sir NicholasButcher, John
Butler, Rt Hon Sir AdamLloyd, Peter (Fareham)
Carlisle, John (Luton N)Lord, Michael
Carlisle, Kenneth (Lincoln)Luce, Rt Hon Richard
Carttiss, MichaelLyell, Nicholas
Cash, WilliamMcCrindle, Robert
Chalker, Mrs LyndaMcCurley, Mrs Anna
Chapman, SydneyMacfarlane, Neil
Chope, ChristopherMacGregor, Rt Hon John
Clark, Dr Michael (Rochford)Madel, David
Clark, Sir W. (Croydon S)Major, John
Clarke, Rt Hon K. (Rushcliffe)Malins, Humfrey
Clegg, Sir WalterMaples, John
Cockeram, EricMarland, Paul
Colvin, MichaelMarlow, Antony
Conway, DerekMarshall, Michael (Arundel)
Cope, JohnMates, Michael
Corrie, JohnMawhinney, Dr Brian
Couchman, JamesMaxwell-Hyslop, Robin
Cranborne, ViscountMayhew, Sir Patrick
Currie, Mrs EdwinaMellor, David
Dickens, GeoffreyMeyer, Sir Anthony
Dicks, TerryMiller, Hal (B'grove)
Dorrell, StephenMills, Iain (Meriden)
Douglas-Hamilton, Lord J.Miscampbell, Norman
Dover, DenMitchell, David (Hants NW)
du Cann, Rt Hon Sir EdwardMoate, Roger
Dunn, RobertMontgomery, Sir Fergus
Durant, TonyMorris, M. (N'hampton S)
Dykes, HughMoynihan, Hon C.
Edwards, Rt Hon N. (P'broke)Mudd, David
Eggar, TimMurphy, Christopher
Emery, Sir PeterNeale, Gerrard
Evennett, DavidNeedham, Richard
Eyre, Sir ReginaldNelson, Anthony
Fallon, MichaelNeubert, Michael
Farr, Sir JohnNewton, Tony
Fletcher, AlexanderNicholls, Patrick
Fookes, Miss JanetNorris, Steven
Forman, NigelOnslow, Cranley
Forsyth, Michael (Stirling)Oppenheim, Phillip
Forth, EricOppenheim, Rt Hon Mrs S.
Fox, Sir MarcusOsborn, Sir John
Fraser, Peter (Angus East)Ottaway, Richard
Garel-Jones, TristanPage, Sir John (Harrow W)
Glyn, Dr AlanPage, Richard (Herts SW)
Gorst, JohnPatten, Christopher (Bath)
Gow, IanPatten, J. (Oxf W & Abgdn)
Gower, Sir RaymondPawsey, James
Grant, Sir AnthonyPercival, Rt Hon Sir Ian
Greenway, HarryPorter, Barry
Griffiths, Sir EldonPortillo, Michael
Gummer, Rt Hon John SPowell, William (Corby)
Hamilton, Hon A. (Epsom)Powley, John
Hanley, JeremyPrice, Sir David
Hawkins, Sir Paul (N'folk SW)Proctor, K. Harvey
Heddle, JohnRaffan, Keith
Heseltine, Rt Hon MichaelRathbone, Tim
Higgins, Rt Hon Terence L.Rees, Rt Hon Peter (Dover)
Hill, JamesRhodes James, Robert
Hind, KennethRhys Williams, Sir Brandon
Hogg, Hon Douglas (Gr'th'm)Ridley, Rt Hon Nicholas
Holland, Sir Philip (Gedling)Ridsdale, Sir Julian
Hordern, Sir PeterRippon, Rt Hon Geoffrey
Howarth, Gerald (Cannock)Roberts, Wyn (Conwy)
Howell, Rt Hon D. (G'ldford)Robinson, Mark (N'port W)
Hunter, AndrewRossi, Sir Hugh
Jackson, RobertRost, Peter
Jessel, TobyRowe, Andrew
Joseph, Rt Hon Sir KeithRumbold, Mrs Angela
Key, RobertRyder, Richard
Knowles, MichaelSackville, Hon Thomas
Latham, MichaelSainsbury, Hon Timothy
Lawrence, IvanShaw, Giles (Pudsey)
Lee, John (Pendle)Shelton, William (Streatham)
Leigh, Edward (Gainsbor'gh)Shepherd, Richard (Aldridge)
Lennox-Boyd, Hon MarkSims, Roger
Lester, JimSkeet, Sir Trevor
Lewis, Sir Kenneth (Stamf'd)Smith, Sir Dudley (Warwick)
Lilley, PeterSoames, Hon Nicholas
Lloyd, Sir Ian (Havant)Speed, Keith
Speller, TonyVan Straubenzee, Sir W.
Spencer, DerekVaughan, Sir Gerard
Spicer, Jim (Dorset W)Viggers, Peter
Squire, RobinWaddington, David
Stanbrook, IvorWaldegrave, Hon William
Steen, AnthonyWalker, Bill (T'side N)
Stern, MichaelWall, Sir Patrick
Stevens, Lewis (Nuneaton)Waller, Gary
Stewart, Allan (Eastwood)Wardle, C. (Bexhill)
Stewart, Andrew (Sherwood)Warren, Kenneth
Sumberg, DavidWatson, John
Taylor, John (Solihull)Watts, John
Taylor, Teddy (S'end E)Wells, Bowen (Hertford)
Tebbit, Rt Hon NormanWells, Sir John (Maidstone)
Temple-Morris, PeterWheeler, John
Terlezki, StefanWhitney, Raymond
Thomas, Rt Hon PeterWilkinson, John
Thompson, Donald (Calder V)Winterton, Mrs Ann
Thompson, Patrick (N'ich N)Winterton, Nicholas
Thorne, Neil (Ilford S)Wood, Timothy
Thornton, MalcolmYeo, Tim
Thurnham, PeterYoung, Sir George (Acton)
Townend, John (Bridlington)
Tracey, RichardTellers for the Ayes:
Trippier, DavidMr. Francis Maude and
Twinn, Dr IanMr. Gerald Malone.
NOES
Abse, LeoDormand, Jack
Adams, Allen (Paisley N)Douglas. Dick
Alton, DavidDuffy, A. E. P.
Archer, Rt Hon PeterEadie, Alex
Ashdown, PaddyEastham, Ken
Ashley, Rt Hon JackEdwards, Bob (W'h'mpt'n SE)
Ashton, JoeEvans, John (St. Helens N)
Atkinson, N. (Tottenham)Fatchett, Derek
Bagier, Gordon A. T.Faulds, Andrew
Banks, Tony (Newham NW)Field, Frank (Birkenhead)
Barnett, GuyFields, T. (L'pool Broad Gn)
Barren, KevinFisher, Mark
Beckett, Mrs MargaretFlannery, Martin
Beith, A. J.Forrester, John
Benn, Rt Hon TonyFoster, Derek
Bennett, A. (Dent'n & Red'sh)Fraser, J. (Norwood)
Bermingham, GeraldFreeson, Rt Hon Reginald
Bidwell, SydneyGarrett, W. E.
Blair, AnthonyGeorge, Bruce
Boothroyd, Miss BettyGilbert, Rt Hon Dr John
Boyes, RolandGolding, John
Bray, Dr JeremyGould, Bryan
Brown, Gordon (D'f'mline E)Gourlay, Harry
Brown, N. (N'c'tle-u-Tyne E)Hancock, Michael
Brown, Ron (E'burgh, Leith)Hardy, Peter
Bruce, MalcolmHarman, Ms Harriet
Buchan, NormanHarrison, Rt Hon Walter
Callaghan, Jim (Heyw'd & M)Hart, Rt Hon Dame Judith
Campbell, IanHattersley, Rt Hon Roy
Carlile, Alexander (Montg'y)Heffer, Eric S.
Carter-Jones, LewisHogg, N. (C'nauld & Kilsyth)
Clark, Dr David (S Shields)Home Robertson, John
Clarke, ThomasHoweils, Geraint
Clay, RobertHoyle, Douglas
Clelland, David GordonHughes, Robert (Aberdeen N)
Clwyd, Mrs AnnHughes, Roy (Newport East)
Cocks, Rt Hon M. (Bristol S)Hughes, Simon (Southwark)
Cohen, HarryJanner, Hon Greville
Conlan, BernardJenkins, Rt Hon Roy (Hillh'd)
Cook, Frank (Stockton North)John, Brynmor
Corbett, RobinJones, Barry (Alyn & Deeside)
Corbyn, JeremyKaufman, Rt Hon Gerald
Cox, Thomas (Tooting)Kilroy-Silk, Robert
Craigen, J. M.Kirkwood, Archy
Crowther, StanLambie, David
Cunliffe, LawrenceLeadbitter, Ted
Cunningham, Dr JohnLeighton, Ronald
Davis, Terry (B'ham, H'ge H'I)Lewis, Ron (Carlisle)
Deakins, EricLewis, Terence (Worsley)
Dewar, DonaldLitherland, Robert
Dixon, DonaldLloyd, Tony (Stretford)
Dobson, FrankLofthouse, Geoffrey
Loyden, EdwardRobertson, George
McCartney, HughRobinson, G. (Coventry NW)
McDonald, Dr OonaghRowlands, Ted
McGuire, MichaelRyman, John
McKelvey, WilliamSedgemore, Brian
MacKenzie, Rt Hon GregorSheerman, Barry
McNamara, KevinSheldon, Rt Hon R.
McTaggart, RobertShore, Rt Hon Peter
McWilliam, JohnShort, Ms Clare (Ladywood)
Madden, MaxShort, Mrs R.(W'hampt'n NE)
Marek, Dr JohnSilkin, Rt Hon J.
Marshall, David (Shettleston)Skinner, Dennis
Martin, MichaelSmith, Cyril (Rochdale)
Mason, Rt Hon RoySnape, Peter
Maxton, JohnSoley, Clive
Maynard, Miss JoanSpearing, Nigel
Meadowcroft, MichaelStott, Roger
Michie, WilliamStrang, Gavin
Millan, Rt Hon BruceStraw, Jack
Miller, Dr M. S. (E Kilbride)Thomas, Dafydd (Merioneth)
Morris, Rt Hon A. (W'shawe)Thomas, Dr R. (Carmarthen)
Morris, Rt Hon J. (Aberavon)Thompson, J. (Wansbeck)
Nellist, DavidThorne, Stan (Preston)
O'Brien, WilliamTorney, Tom
O'Neill, MartinWainwright, R.
Orme, Rt Hon StanleyWallace, James
Park, GeorgeWareing, Robert
Parry, RobertWeetch, Ken
Patchett, TerryWelsh, Michael
Pavitt, LaurieWhite, James
Penhaligon, DavidWigley, Dafydd
Pike, PeterWilliams, Rt Hon A.
Powell, Raymond (Ogmore)Winnick, David
Prescott, JohnWoodall, Alec
Radice, GilesWrigglesworth, Ian
Randall, StuartYoung, David (Bolton SE)
Raynsford, Nick
Rees, Rt Hon M. (Leeds S)Tellers for the Noes:
Richardson, Ms JoMr. Chris Smith and
Roberts, Ernest (Hackney N)Mr. Ron Davies.

Question accordingly agreed to.

Bill read a Second time, and committed to a Standing Committee pursuant to Standing Order No. 42 (Committal of Bills).