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Rate Fund Revenue Accounts

Clause 1 – in the House of Commons at 4:30 pm on 19th January 1987.

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Photo of Dr Jack Cunningham Dr Jack Cunningham Shadow Secretary of State, Shadow Secretary of State for Environment 4:30 pm, 19th January 1987

I beg to move amendment No. 2A, in page 1, line 16, at end insert— (1A) 'Subsection 1 of this section shall come into effect after the making of an Order by the Secretary of State, and no such Order shall come into effect until any hearings in progress at the date of introduction of this Act (whether expedited or otherwise) have been completed in the courts in respect of applications for judicial review brought against the Secretary of State regarding the Rate Support Grant settlement for 1986–87 or previous financial years.'.

Photo of Mr Paul Dean Mr Paul Dean , Woodspring

With this it will be convenient to take the following amendments: No. 2B, in page 1, line 16, at end insert— '(1A) Subsection 1 of this section shall come into effect after the making of an Order by the Secretary of State. and no such Order shall come into effect until after the laying before Parliament by the Secretary of State of a report setting out the dates, and any other details which he may consider relevant, of the legal advice received by him prior to the introduction of this Act with respect to the legal interpretation of "relevant" and "total" expenditure for Rate Support Grant purposes.'. No. 81, in clause 4, page 5, line 5, leave out subsection (6).

No. 83, in page 5, line 6, leave out 'whether'.

No. 84, in page 5, line 6, leave out 'or after'.

No. 85, in page 5, line 7, at end add 'save those decisions of a court in respect of litigation before the courts on 12th January.'. No. 100, in clause 6, line 1, leave out subsection (4).

No. 102, in page 6, line 2, leave out 'whether'.

No. 103, in page 6, line 2, leave out 'or after'.

No. 104, in page 6, line 3, at end add 'save those decisions of a court in respect of litigation before the courts on 12th January 1987'.

Photo of Dr Jack Cunningham Dr Jack Cunningham Shadow Secretary of State, Shadow Secretary of State for Environment

This large group of amendments deals with the provisions in the Bill that seek to give the Secretary of State various legal immunities, that seek also to prevent legal challenges being pursued against the Secretary of State, as they have been in the past, and with matters associated with those general points.

The first group of amendments would delay the implementation of the Bill, pending the making of orders in the House of Commons. However, the Government's policies on local government finance and on the law governing it are now in such a complete shambles after almost eight years of legislative and administrative change, and are so confused and inexplicable—even from the Treasury Bench—that we should not rush ahead with the further powers contained in the Bill, as we are, but build some safeguards into the legislation so that Parliament can have a subsequent opportunity to scrutinise, discuss and debate those matters before confirming any actions by the Secretary of State.

From the outset, my hon. Friends and I have emphasised that the Bill is not simply confined to sorting out the mess that I have briefly described. It gives substantial additional powers to the Secretary of State to intervene in local authority accounting, introduces rate limitation in 1987–88 by formula, and excludes the courts from reviewing the Secretary of State's decisions.

There is such confusion over the current position that it is wrong for the Government to use the Bill to impose even more arbitrary decisions. We cannot take those matters lightly. I re-emphasise that, however technical, difficult and complex the Bill is, no part of our scrutiny of it will include talking for the sake of talking, or filibustering. We recognise that there are many amendments before the House—we have tabled many of them—and if we are satisfied with the explanations given by the Secretary of State or Ministers, we shall pass on quickly to the other matters before the House. That is a general statement of our position, and that has always been my position when dealing with legislation. We are not interested in talking and delaying the Committee just for the sake of it. Nor are we interested in putting tomorrow's debate in jeopardy because Opposition Members have deliberately chosen a debate on the failure of the Government's economic policies. I should like to make that absolutely clear at the outset.

Amendment No. 2A raises an issue that is especially important to the boroughs of Greenwich and Islington. Greenwich had challenged various aspects of the 1986–87 rates support grant settlement in the courts and was part way through those proceedings when the Bill had its Second Reading. The borough of Islington had also mounted a legal challenge against the Secretary of State's actions, but was at an earlier stage in its proceedings.

Apparently, the Government feared, or believed, that those legal challenges would be successful and that they would cause not only serious embarrassment to the Government, but serious difficulties for the Government's policy of rate limitation in the current financial year, let alone difficulties in the future.

The effect of the Bill, validating retrospectively all previous decisions under the Rates Act 1984 and rate support grant decisions by the Secretary of State and attempting to exclude those decisions from judicial scrutiny, is to terminate the legal proceedings that have been initiated by the London boroughs that I have mentioned. That is unacceptable.

In effect, Parliament is being asked to validate previous unlawful acts without knowing in what ways the Secretary of State may have acted unlawfully. His statement on 16 December 1986 admitted to one way in which we know that he has been acting outside the law in the definition of total and relevant expenditure. Opposition Members have continually emphasised that if it was simply that a correction would make the de jure situation accord with the de facto situation, I do not suppose that today's proceedings would have lasted even this long. We could all have agreed and gone on to debate the other urgent matters before us. However, as we have emphasised, that is not the ease.

The court cases to which I have referred sought to review other aspects of the Secretary of State's use of his discretion. The Bill excludes those matters from scrutiny, also. The Government should allow the implementation of that blanket exclusion from the courts to await the decisions of the cases that are currently in progress, if Parliament is not to be accused, as my hon. Friend the Member for Holborn and St. Pancras (Mr. Dobson) and other hon. Members have suggested, of taking a big leap in the dark, which is what the Secretary of' State is asking us to do.

Similarly, amendment No. 2B would delay the implementation of the Bill until the Secretary of State had laid a report setting out the dates of, and other background information relating to, the legal advice that he has received on the lawfulness, or otherwise, of block grant arrangements.

On Second Reading, on 12 January, the Secretary of State conceded that he first became aware of the problem in September. However, in December last year he suggested that he had first become aware of the problem in October. We have asked him to be specific about that but, so far, he has failed to do so. I should like to ask him now, since he has had the time to check his file, which is what he said that he did not have the time to do during the debate on Second Reading, exactly when he was told of that situation. What was the date? We are even entitled to ask the time of day when he was first advised of the problem. However, the Committee is certainly entitled to know the date on which the Secretary of State was first advised of the matter. That is important for several reasons.

The Secretary of State has repeatedly said that the matter should be clarified urgently, and my hon. Friends and I agree with him on that. However, it cannot be so urgent because he delayed for almost four months, certainly for three months, before coming to the House to advise hon. Members of the problem. Having told us about the problem, he still did not advise us about his intended solutions.

Therefore, we are now perfectly entitled to ask for a specific, clear and unequivocal answer, because the Secretary of State can no longer hide behind the excuse that the Bill has been treated in that way because of its urgency. The Secretary of State has had more than sufficient time to deal with the matter far more effectively, efficiently and candidly than he has to date. Other questions follow from that. Should the legal doubts raised have been sufficient to affect the issue of the first rate support grant consultation document on 3 October? I said the first consultation document, but I think that I probably mean the second. The first had come much earlier and the third, as we know, came in December. Why was there no reference to the problem at the date of issue of that consultation document and in subsequent consultation documents? Why did the Secretary of State proceed with the rate support grant settlement if he knew that he was not going to be able to legislate without a series of major changes to the law? On what specific date did the Attorney-General give his advice to the Secretary of State? Was that before or after his announcement of 3 December?

It seems that the Government did not move with undue haste or show any alacrity in seeking to find a solution to the problem. On the contrary, they are open to the charge that they have been very dilatory, at least in the early stages. They are now using a delay of their own making to argue that the Bill is urgent. How can the Bill be described as urgent if it has taken so long to bring it before the House and when it is still apparently taking a great deal of effort and energy to get the provisions right and to clarify the law? What the Secretary of State continues to present as a technical measure goes much further in terms of ministerial power. None of this would have been necessary and the normal, re-determined, processes in the Rates Act 1984 could have proceeded after, at most, a short delay if the Government had introduced a simple technical measure when they first became aware of the problem. We need a substantive answer to that question.

Amendments Nos. 82, 83, 84 and 85 relate to clause 4 of the Bill. They are pertinent to the exclusion of the courts from rate support grant cases. The amendments relate specifically to clause 4(6) which seeks to override any court decision and prevent it from having any effect where it is contrary to the Bill's intentions in respect of rate support grant settlements up to and including 1986–87. In previous exchanges the Secretary of State has indicated to me and the House that he thinks that we are misinterpreting those aspects of the Bill. He will have the opportunity to try to convince us of that this evening and perhaps in subsequent debates on these matters.

6 pm

Having discussed the issue since Second Reading, we are clearly and firmly advised from within local government that its interpretation of the proposals is as we suggested it was on Second Reading. However, the Bill does not provide for the circumstances in which a challenge is undertaken but the court's decision does not have a contrary effect to that intended by the Bill. Presumably, the decision will have effect in such cases. As my hon. Friend the Member for Blackburn (Mr. Straw) pointed out on Second Reading, it would still appear to be open to authorities to seek judicial review of decisions which are outside the exclusions in the Bill in order to shed light on legal interpretations in areas where demands are excluded.

Amendment No. 82 should remove the relevant words from the subsection and insert wording to restore the existing right of any council or ratepayer to seek judicial review of ministerial action. It appears to us that not only are councils' rights affected by the provisions of the Bill, but the rights of ratepayers as well. If that is so, it flies in the face of what Ministers have erroneously claimed again and again for their legislation, which is that it is aimed at being beneficial to individual ratepayers. That argument can certainly no longer be used with any credence in terms of the changes in rate support grant over the past seven years and we would argue that it cannot be used in respect of the provisions in the Bill because ratepayers would no longer have the right that they have had for a considerable time.

My understanding of amendments Nos. 83 and 84 is that they would have the more limited effect of removing the exclusion in respect of decisions taken after the passing of the Act. Perhaps we shall hear more about that from the hon. Member for Leeds, West (Mr. Meadowcroft).

Amendment No. 85 is more specific, although it would have a different effect. Decisions on cases before the courts by the date of Second Reading, 12 January 1987, would stand whether contrary to the Bill or not. That would mean that the case initiated by the London borough of Greenwich in particular would have the opportunity of obtaining a meaningful decision in the courts. It seems wrong to us for legislation to be rushed through after a case has started with the purpose being, at least in part, to negate the possible outcome of a case before a decision has even been reached. We have put that to the Secretary of State before. We have suggested that all this has happened because of such legal challenges. He has said that that is not the case. However, the implications of the provisions of the Bill are exactly that. They would obviate a decision being reached in the courts. We believe that that is being done to prevent further embarrassment to the Secretary of State because he has abused his existing powers.

I can well understand the right hon. Gentleman not wanting an accumulation of such events. After all, there have been one or two spectacular cases in the courts dealing with his abuse of powers and his misjudgment as to what the law says. He and the Government have been considerably embarrassed as a result. I can understand him not wanting too many more of those on the record. However, I cannot think of many Ministers in many Governments who have sought to introduce legislation to block cases that were halfway through their proceedings in the courts. It is an ingenious proposition. I give the Secretary of State high marks for—what would be the expression?—his nerve or entrepreneurial skills in blocking the decision of the courts.

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

Can my hon. Friend think of any decision by a Minister in recent years that would have been described, as one of the Secretary of State's decisions was described by the courts, as unlawful, irrational and procedurally improper"? Can my hon. Friend think of any other occasion when a Minister has been so castigated by a judge in a court?

Photo of Dr Jack Cunningham Dr Jack Cunningham Shadow Secretary of State, Shadow Secretary of State for Environment

I can remember many occasions when Ministers in this Government have acted irrationally. They have not always been castigated by a judge for doing so. However, we have just seen a combination of irrationality and irascibility on the part of the right hon. Gentleman in trying to bounce Government amendments through the Committee in this way. That has led to a debate which need not have taken place if the Secretary of State had acted more soberly in the first place.

My hon. Friend the Member for Newham, North-West (Mr. Banks) was referring to the judges' comments about the Secretary of State's actions in respect of the Greater London council and London Regional Transport. The Secretary of State had sought to misappropriate, or take unlawfully, £50 million from the Greater London council. At any rate, I believe that that was the figure.

Photo of Dr Jack Cunningham Dr Jack Cunningham Shadow Secretary of State, Shadow Secretary of State for Environment

I thought that my memory was accurate on that point. The Secretary of State is now presenting provisions that, in effect, mean that he will not wait for a judge to determine against him; he will legislate to prevent the case reaching the point when a judgment would be forthcoming.

The provisions relating to excluding the courts have serious constitutional implications. It is acknowledged that statute law has precedence over the decisions of judges and that matters to clarify law, or innovation by statute, are almost always preferable as instruments of policy to the common law. It is equally important, however, that a mechanism should exist for interpreting legislation in cases of disputes. Historically, the courts have always been able to do that in such matters.

Clause 4(1) makes it clear that the scope of the Secretary of State's actions, which are to be respectively validated, are very wide. It states: Anything done by the Secretary of State". The Secretary of State is giving himself an enormous and a wide-ranging administrative discretion in respect of rate support grant allocations and the formula from which the allocations are derived. We know why he wants to do that. Indeed, he has already done that, in effect, in the past three months in his series of three, unprecedented consultation documents. He has made proposals, withdrawn them, made new proposals and withdrawn them.

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

I want to make a small point which may not be relevant to the Bill. We must get away from this mistaken view of three attempts, which the hon. Gentleman has spoken of, in typical and inaccurate fashion. It is normal practice to issue a global RSG proposal and later to issue a detailed breakdown containing the details affecting each different authority. The only change that was made was that I issued two of the latter detailed statements. However, all previous settlements have contained the global and detailed statements.

Photo of Dr Jack Cunningham Dr Jack Cunningham Shadow Secretary of State, Shadow Secretary of State for Environment

I accept the Secretary of State's explanation. He has said that he issued a statement and two consultation documents. However, that action was without precedent as far as we can tell. He has already used a very loose interpretation of the position to redistribute money from authorities, such as Birmingham, to satisfy his hon. Friends in the southern, Tory-controlled shire counties.

Photo of Dr Jack Cunningham Dr Jack Cunningham Shadow Secretary of State, Shadow Secretary of State for Environment

They are not here because they are satisfied that the Secretary of State is a pushover and they have got what they wanted. In this legislation, the Secretary of State is trying to prevent other authorities, which may be dissatisfied, from mounting a legal challenge against him. Many authorities are already dissatisfied and my right hon. Friend the Member for Birmingham, Small Heath (Mr. Howell) represents one such authority, the city of Birmingham.

6.15 pm

We cannot accept that there are any proper grounds for seeking such a blanket exclusion of judicial review unless the Department and the Secretary of State are concerned at other aspects of the validity of past settlements. The only possible argument that the Government can mount is that they wish to preserve certainty over past and current settlements after the upheaval of discovering the illegality of their past allocations. We do not believe that that argument stands even the most cursory examination. The effect of the Government's promises will be to override cases in preparation or before the courts, for example, with respect to Islington and Greenwich.

That will preclude any other possible challenges, even for the current year which has not yet finished. The provision does not preserve a just position against opportunist challenges. It enforces what we and many local government authorities view as an unjust position in the face of challenges, which, as I have emphasised, have not yet been determined. In other words, the Secretary of State is taking one view of the law from his position and an entirely different view of the due processes of law in respect of the position of those who disagree with him.

Amendment No. 100 relates to clause 6. Clauses 4 and 6 are similar. The Secretary of State should be asked to cite the precedent for a provision to negate a judgment of the court made after the Royal Assent to a Bill and the various other aspects of the provisions. My understanding is that a judgment either has or has not a contrary effect to the Secretary of State's suggestion. The subsection seems to operate on the basis that the Government are uncertain about how the courts will interpret the provisions of the clauses. The clauses therefore reflect a lack of confidence in the legal advice and legal position and, consequently, the detailed drafting of the Bill that the Secretary of State has presented. If that is true, it is no wonder that there are already a whole clutch of new amendments, and, as I said earlier, we confidently anticipate even more amendments from the Department of the Environment.

Through amendment No. 100 we are trying to delete subsection (4) from clause 6, which seeks to deny access to the courts in the same way as subsection (6) of clause 4. We are trying to delete it because if the Bill was carried in its present form it would prevent access to the courts by any local authority aggrieved at being designated by the Secretary of State as being rate-capped or aggrieved at the precise decisions made on rate limitation. That prohibition of litigation with respect to rate-limited authorities applies to financial years 1985–86, 1986–87 and 1987–88. The same general arguments apply with regard to subsection (4) as those that I have used in respect of other amendments relating to the powers of the courts and the legal rights of local authorities which may wish to seek redress in the courts.

Amendment No. 104 is linked in terms of its purposes to amendment No. 100. It is a less satisfactory option but it nevertheless allows access to the courts if litigation was begun by local authorities and was still before the courts on the date of Second Reading of the Bill—12 January. That is the position with regard to Greenwich and Islington.

I want to consider the Greenwich case in more detail before I finish and my view of the case is shared by the legal advisers of Greenwich council. The Bill sought to quash the 1986–87 rate limitation order as it related to Greenwich. That part of the challenge has succeeded. The Secretary of State consented to judgment in favour of Greenwich and a consent order was made by the High Court on 17 December. That is why we think that there has always been some connection between the activities and the decisions—and even the timing—of the Secretary of State and what was going on in the courts with respect to the Greenwich challenge to his actions.

The challenge also tried to prohibit the Secretary of State from redetermining multipliers which were determined for the London boroughs in the rate support grant report for England in 1986–87, as proposed by the Department of the Environment consultation paper LGF(G)8650. This part of the challenge is yet to be heard. It would have come before the courts later this month. The proposals have now been embodied in the 1986–87 first supplementary report, which the Secretary of State announced to the House on 13 January. He anticipated the outcome of those proceedings and seems to have accepted that he would have lost there too.

All this is very complicated, but it boils down to the fact that, faced with one substantial legal challenge to his present actions, the Secretary of State decided that he would empower himself to set aside court decisions because he believed that he would lose. He has consistently said that he is not seeking retrospective powers and that we have misinterpreted the arguments about this part of the Bill. We still do not accept that. The Secretary of State may tell us that it is other arguments that we have advanced which are the misinterpretations. With Greenwich and, we suspect, with Islington and, for all I know, others, the Secretary of State was in danger of having the courts overturn what he had done, and he is now legislating to prevent any local authority from having an opportunity to challenge what he is proposing.

I should like to emphasise what my hon. Friend the Member for Blackburn and others have said about these being unprecedented powers. I look forward to hearing what the Secretary of State has to say. Several of my right hon. and hon. Friends want to ask questions about general issues and about the authorities that they represent.

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

It may be for the convenience of the Committee if I speak fairly briefly now to state the case as I see it in regard to matters which the hon. Member for Copeland (Dr. Cunningham) has raised. That does not exclude me from replying to arguments that are made later in the debate.

The hon. Member for Copeland has not quite understood the legal provisions in relation to court cases and I shall try to put the record straight on what the Bill does. The hon. Gentleman is in a bit of a muddle today. Having agreed the procedure motion, he voted against it. It is not quite clear to me how he would like it changed. There seems to be a great deal of steam and emotion about the Bill, which is not based, as far as I can see, on the facts of what it would do. Perhaps, therefore, it would be helpful if I set out what it would do.

I should like to put one irrelevant point aside first. It is amendment No. 2B, which proposes that the Bill should not come into effect until an order has been made and I have published practically the whole history of my dealings with this matter and said when I had received legal advice. I should like to make it absolutely clear what happened.

I first heard that there was a problem towards the end of September—as I said to the House earlier. The problem was discussed, and we sought legal advice as it was not clear whether the problem was real. I eventually decided to refer the matter to my right hon. and learned Friend the Attorney-General. His advice was finally received in late October—as I have previously told the House. That was the first moment when the Government decided that it was necessary to tackle the problem. Before we received that advice, we were not clear whether we had to tackle the problem.

Photo of Dr Jack Cunningham Dr Jack Cunningham Shadow Secretary of State, Shadow Secretary of State for Environment

Bearing in mind the seriousness of the problem—it affected rate support grant for all local authorities—why did the right hon. Gentleman allow the Attorney-General to take such an apparently leisurely view of his second opinion? Why did it take so many weeks for the Attorney-General to confirm that there was a problem? If it was as urgent as the right hon. Gentleman says, why did he or his officials not telephone the Attorney-General every day saying that they must have an answer or rate support grant would be jeopardised?

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

The hon. Gentleman is getting rather silly. He must ask my right hon. and learned Friend that question. I received proper legal advice from my right hon. and learned Friend and immediately set in train the complex planning and negotiations with my colleagues which were necessary to have the Bill brought to the stage at which it could be published just before Christmas, and about six weeks after we received legal advice. I should have thought that, in view of the complexity of the Bill, about which Opposition Members have been free with their criticism, it was a remarkable effort to get a Bill of this difficulty drafted in such a short time. I have no desire to apologise for that, let alone to accede to the hon. Gentleman's suggestion that I should publish my daily timetables.

Photo of Mr Michael Meadowcroft Mr Michael Meadowcroft , Leeds West

Does the Secretary of State agree that the procedures would have been speeded up if the Bill had been confined to rectifying the problem and if there had been no other clauses?

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

That is where the Committee has not quite understood the Bill. That is what the Bill does. I concede immediately that the Bill goes further in regard to rate limitations. As I said on Second Reading and have said in statements, it was not possible to use Rates Act procedures to bring rate and precept limitations into effect for the coming financial year in time. I plead guilty, if guilt is involved, in that the Bill goes further than pure validation in regard to rate limitation.

As for the power of the courts, I hope to show the hon. Member for Copeland that nothing is done other than to validate the past in relation to matters of rate support grant.

Photo of Clare Short Clare Short , Birmingham, Ladywood

The Secretary of State will know that his officials have written to Birmingham city council saying that they are calling into question the 1984–85 settlement. Surely that is retrospective and not just validating the past and therefore goes further than the explanation that he has just given.

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury 6:30 pm, 19th January 1987

We could have a debate on the Birmingham situation without trying to bring it into this amendment. When we decide upon the best amendment under which we can discuss the problems of Birmingham, I shall look forward to listening to the hon. Lady.

The Bill seeks to validate all past decisions and to protect them from legal challenge but not to validate any future decisions. It is perfectly possible——

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

The hon. Gentleman need not get excited. I have to go through several statements before I reach the justification for that remark.

If anything Birmingham or I may do in the future is subject to a legal challenge, such a challenge can take place. It is not a question of going back, as argued by the hon. Member for Birmingham, Ladywood (Ms. Short). First of all, it is necessary to validate all past decisions relating to RSG. Secondly, there will be some interference with court cases relating to rate limitation and precept limitation, for the very good reason that those limitations are decided in the Bill and that normal procedures are set aside. One could not have a situation where a court found on some rate limitation issues before Royal Assent to the Bill. Such a court decision could be immediately overruled by the Bill because statute law overrides any decision of the courts. That is why the situation is different.

I now wish to discuss amendment No. 2A, to which the hon. Member for Copeland has referred. The hon. Gentleman suggests that any cases to do with rate support grant that were before the courts before the introduction of the Bill should be allowed to run their full course. The hon. Gentleman should consider the practicalities. It is possible that in the one or two cases that fall into this category—that is about all there are—a case could be decided, go to appeal and finally to the House of Lords. Before such a case could be finally cleared up, one way or another, it could well take until the end of this year.

The hon. Member for Copeland is aware that it is necessary to get the Bill enacted as soon as possible, and certainly before the start of the new financial year. The whole operation of the Bill would be held up if a court case took as long as I have described. That is not a criticism of the judiciary—it must do its work properly—but if such delays occurred it is possible that that would lead to procrastination in the Bill coming into effect and local authorities would not know where they were and could not have grants paid to them.

Photo of Dr Jack Cunningham Dr Jack Cunningham Shadow Secretary of State, Shadow Secretary of State for Environment

I am very anxious to understand exactly what the Secretary of State is saying and its implications. The right hon. Gentleman has said that our interpretation is wrong—that the Bill, if passed, would retrospectively validate action he has taken and make such action immune from legal challenge. I would be happy if the right hon. Gentleman could clarify that, because it is very important. Is he saying that the provisions of the Bill mean that local authorities could challenge past decisions, but not on the grounds on which they may challenge them at the moment?

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

It would be better if the hon. Gentleman would allow me to develop my argument. I am simply dealing with amendment No. 2A that requests that the Bill does not come into effect until all current cases which were before the courts before the Bill was introduced are cleared up. My argument is that that would lead to such a long delay that it would be intolerable.

Allow me to deal with the two cases raised by the hon. Member for Copeland. The first case, the Greenwich case, has two legs to it. First of all, it challenges what I intend to do in the first supplementary report for 1986–87. That is what the hon. Gentleman said. The Bill is not concerned—as suggested by some hon. Members—with validating future decisions taken in accordance with the provisions of the Bill and related legislation. Local authorities will be quite free to challenge those decisions. Any court decisions on those legal proceedings brought by Greenwich, but yet to be heard, will not be affected by the Bill. The Greenwich case concerns a decision that has not been taken and that is the first supplementary report for 1986–87. Once the Bill is enacted, it will be perfectly possible for that particular legal argument to be resumed. It will not be affected by the passage of the Bill.

The other leg of the Greenwich case is in a different category.

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

If I may just finish this sentence, I shall gladly give way.

The other leg of the argument concerns the rate limit for 1986–87. I conceded that part of the case because of the total expenditure problem. I could not have defended my case in court because I discovered that the definition of total expenditure was not as we all thought it was. There was no point in fighting a case when the law was suspect. That was not the grounds on which Greenwich fought its case—it was totally incidental to it.

On the other hand, the case could not be fought without the law being clarified as to what was meant by total expenditure. Thus, the limit will be validated by clause 6 in this case, and the amendment will not affect it.

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

I am grateful to the right hon. Gentleman for giving way because I want to understand exactly what he is saying. I hope he will bear with me if I repeat once again what he said. Is he telling the House, as I understood that he was, that the challenge made by Greenwich to prohibit him from redetermining multipliers, determined for London boroughs in the rate support grant report 1986–87—I understand that that challenge is due to be heard on 29 and 30 January—can still go ahead? If the court decides that, in redetermining the multipliers, the Secretary of State has acted unlawfully or whatever, he must abide by the decision of the court with regard to that part of Greenwich's challenge. Would that still be allowed even under this legislation?

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

Subject to not knowing the dates of the court proceedings, the hon. Gentleman is correct. All the Bill does is validate the definition of total expenditure. The case that Greenwich is bringing cannot be fought and will not make any sense unless that is an accepted legal definition of total expenditure. Once there is such a definition, any extraneous matters can be considered by the court.

It is not possible to fight a case, assuming that the old definition of total expenditure was in existence, and win that case on the basis that the definition of total and relevant expenditure, on which we were all working, was invalid. The Bill substitutes a new definition of total expenditure so that there is no going back over the old argument.

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

The Opposition are genuinely trying to follow the Secretary of State's argument.

On the face of it, the powers that the Secretary of State is taking under clauses 4(6) and 6(4) are extraordinary. I can understand why the Secretary of State is seeking to validate past acts under clause 4(1). I do not understand why, having taken the power to validate past acts, which is consistent with what the rest of the Bill is seeking to do, the right hon. Gentleman still thinks it is necessary, having got the deemed validation of past acts, to say that, notwithstanding the decision of any court, whether before or after the passing of the Act, purporting to have a contrary effect, his decision will stand.

From reading the Bill, one concludes that any decisions made by the right hon. Gentleman under the powers of the Rates Act 1984, right up to the date when this Bill goes to Royal Assent—that includes future acts of his—are deemed validated by this Bill and are then made judge-proof. It is the judge-proof part to which we take exception.

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

I would be grateful if the hon. Gentleman and the hon. Lady would allow me to get to this point. I want to move to it but hon. Members keep asking in advance about the logical exposition of my speech. As the hon. Member for Blackburn (Mr. Straw) says, clause 4(1) and clause 6(1), (2), (3) set out the definitions of total expenditure and rate capping, and clause 4(6) validates that for the past in relation to rate support grant and total expenditure, and clause 6(4) validates all past rate support grant decisions. As I understand the hon. Gentleman, he is saying that he accepts that in the context of being necessary to what the Bill is seeking to do.

I shall now turn to the phrase which has excited the Opposition so much, the phrase before or after the passing of this Act. The situation is simple, and the solution is easy. Obviously, a decision taken by a court before the passing of this Act would be overridden by the validation. Therefore, there is no point in a court coming to such a decision. We might as well say in the legislation that that is what will happen. If a court considers a case which is concluded before the passing of this Act but does not give judgment until after the passing of this Act, then of course the court would give its decision after the passing of the Act. That is why the phrase is there. It catches the case, if one should occur, of a court concluding its business before the passing of the Bill but not giving its decision until after the passing of the Bill.

After the Bill is passed it has no effect at all upon judicial review or on any other action which might be brought against me. After the Act is passed, the definition of total expenditure and relevant expenditure contained in the Bill becomes the law. That definition takes over from the holding provisions about which the hon. Gentleman is complaining, that court decisions are invalid until the Bill is passed. I hope that that clears up this little bit of trouble.

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

It is important for us to be clear. It is true that in respect of decisions which the Secretary of State makes after the passing of the Bill, these two subsections have no specific effect. We are complaining about the fact that decisions that he may make up until the passing of the Bill will not be subject to judicial review because of these two subsections. That is wrong, and the Secretary of State has not so far explained why he thinks that is right.

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

It depends on the subject of the litigation. If it has to do with total expenditure or involves the definition of total expenditure, the Act will prevail over any decision of the court. The hon. Gentleman must realise that any authority could go to court and claim that the definition of total and relevant expenditure is not the one that we have all been working on but was the one in the original 1980 Act. On that basis, authorities would win every case and in order to discourage them from doing that, it must be right—[Interruption.] If hon. Gentlemen do not understand, it would be wiser for them not to giggle. It must be right to say that none of those decisions can be upheld because they are validated by the Bill.

If a matter has nothing to do with the definition of total expenditure or with the rate support grant calculation based on it, it is judiciable but it might be better for the court to await the passage of the Bill so that it knows the definition of total expenditure. If the court prefers not to do that, it is perfectly possible for the case to proceed, but it will do so in the light of the fact that any decision which contravenes the definition of total expenditure in this Bill will later be proved invalid. However, if the matter is totally extraneous to total expenditure and is about something totally different like multipliers, which are not affected, it will be possible for the court to continue to determine the issue, just as it is possible for a court to decide that I was not wearing a seat belt when I should have been.

Photo of Mr Chris Smith Mr Chris Smith , Islington South and Finsbury 6:45 pm, 19th January 1987

I follow the Secretary of State's argument on the definitions of total expenditure and the impact of the Bill. However, a point also arises from clause 6 about the designation of authorities for rate limitation and the setting of limits under the rate limitation proposals. The Secretary of State is commending to us a Bill which clearly says that any designation and any determination and notification of total expenditure under the Act for the financial year beginning in 1987—which is not yet upon us—cannot be challenged in the courts. Those are decisions which the Secretary of State has said he is likely to take, but he has not yet taken them and presumably he will not make them in final form until after the Royal Assent has been given to the Bill. Surely that is prospective and not retrospective legislation.

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

That is the counterpart of what I said earlier, that it is necessary to put the rate and precept limitation proposals on the face of the Bill. I think they are in schedule 2 and the hon. Gentleman will have seen the complicated formula. As I have said, that is necessary because it will not be possible to complete the procedures after Royal Assent to the Bill and before authorities need to know what the rate limit is to be. I admit that this is a departure from straight validation, but it was the only course open to the Government and we have adopted the procedure of specifying the rate limits. They can be debated and amended in the House if hon. Members do not think that we have got it right.

The statute law which the Bill will become when it receives Royal Assent overrides any decision of the judiciary. If we did not include this provision and if there was a rate limit court case this month which the Government lost, it would still be overridden by the Bill when it received Royal Assent because the Bill specifies the rate limits. In a sense clause 6(4) is helpful to the court because it is perfectly obvious in common logic that it must be right to include that clause. I hope that that helps hon. Members to understand why these powers are here.

I concede that the powers about rate limitation are slightly different from pure validation, but I hope that the Opposition will concede that the parts of the Bill relating to rate support grant and total expenditure are no more than pure validation of the past and a necessary legal protection to stop the lacuna in the law being exploited in cases brought before the Bill becomes law. None of the Opposition amendments is necessary—indeed, some of them weaken the provisions that I have described—and I invite the Committee to reject them.

Photo of Mr Michael Meadowcroft Mr Michael Meadowcroft , Leeds West

I have listened carefully to the Secretary of State, and I shall try to return in detail to some of the points about validation and retrospection because they are the nub of this group of amendments. I should like to concentrate on amendments Nos. 83, 84, 102 and 103 because they are about retrospection. It is rather odd that the Secretary of State keeps on talking about the need for parliamentary haste. For so long there has been Government delay. It is quite apparent from the explanations that the Secretary of State has endeavoured to give us that the matter is so complex that there is no way in which, if we are to get this right this time, the matter should be pushed on without adequate clarification.

I appreciate the Government's dilemma in this matter. I appreciate that they are endeavouring to safeguard their position in the law, both before and after the passage of the Bill. The problem in trying to accept that dilemma and in endeavouring to assist the Government in coping with it is whether the terms of the Bill are drawn so widely that even in those matters in which they are endeavouring only to validate their past actions they take the provisions well beyond what would simply be validation. If the Bill is drawn too widely simply to be validation in these clauses, a misreading would simply mean that future legal safeguards would not be required. In other words, if the Secretary of State says that we who believe that the words "future clearance" and "future immunity" are required and are misreading the clause, then I suspect that we need to he persuaded further that a possible legal challenge to the Government's position could not be taken afterwards, rather than simply by the court's decision being announced afterwards.

I cannot conceive of a court commencing an action, when the Bill goes on to the statute book, before its decision is announced, not being able to take account of the fact that the law was changed before the decision is announced. Presumably the law will become different at that point.

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

At the time a court hears the evidence and considers the issue, the law will be as it is now. The law comes to its own conclusion on the basis of the current law, and if between then and Royal Assent there is a change in the law, the whole matter is nonsense. The hon. Gentleman might well say that this is unlikely to happen, but good draftmanship and carefully prepared Bills guard against that unlikely event. That is why it has taken a little time to put the Bill together.

Photo of Mr Michael Meadowcroft Mr Michael Meadowcroft , Leeds West

The temptation to accept the Secretary of State's interpretation and the desire to rely on good draftmanship is hardly borne out by the past. It is because we have not had good draftmanship that we are here today, wasting parliamentary time which could be better spent on a host of issues that will affect the future and deal with many of the crises that we face in far better ways than simply trying to get past legislation right for the sake of the Government's own face saving.

The issue of how widely drawn the Bill should be to avoid legal challenge is complicated. Even if the law had the effect that is intended, presumably the law would still be open to legal challenge. The problem is whether the Bill as drafted now will permit the continuation of legal challenges that were possible in the past as opposed to cutting out those as well. That is a matter of opinion. I accept that the Secretary of State has tried to convince us that they will still be allowed, but looking at the Bill as drafted I am unconvinced that it would not catch actions which would have been legitimate if they had been able to be brought under the law as it was thought to be, as opposed to what it turned out to be. Therefore, there is a real difficulty in accepting that interpretation.

I accept also that the Secretary of State is trying to do a belt-and-braces job. The Committee would abdicate its responsibility to protect not only the rights of individuals but the rights of councils if it allowed a too open-ended future power. It is tempting to accept the Secretary of State's interpretation, but he is saying that, in the context of legislation in this complex field of rate support grant, definitions of central financing of local government and so on, we want an enabling power for the future to catch challenges that we believe would not have been possible had the law been as we thought it was. I heard the right hon. Member for Birmingham, Small Heath (Mr. Howell) say that it would be a useful precedent if ever there were a Government of a Left-wing colour.

Photo of Mr Allan Roberts Mr Allan Roberts , Bootle

Is the hon. Gentleman aware that the Secretary of State for the Environment made the same case as Derek Hatton and the Clay Cross councillors made for retrospective legislation to indemnify them for actions which were illegal at the time they took them and which were resisted by the Labour party because of the nature of that legislation, for which the Government are now setting a precedent?

Photo of Mr Michael Meadowcroft Mr Michael Meadowcroft , Leeds West

I agree only partly with the hon. Gentleman's remarks. The difference in the case that he puts is that there is no sense in which the challenge that was made by, for instance, the Clay Cross councillors was even thought to be legal at the time. The Clay Cross councillors were well aware of what they were doing and relied on possible future indemnity, even in relation to the fact that their action was illegal. That is very different from the fact that the Secretary of State believes that what he did was legal, and turned out not to be.

Photo of Mr Allan Roberts Mr Allan Roberts , Bootle

Many councillors who were surcharged under the Government's legislation for not setting a rate on time believed that they were not breaking the law at the time they set that rate.

Photo of Mr Michael Meadowcroft Mr Michael Meadowcroft , Leeds West

I accept that. Later in the debate we shall refer to some aspects of accounting procedures that are much more akin to what the hon. Gentleman said. Efforts to stop local authorities doing what they rightly believed to be legal, whether it was prudent or otherwise, is a different matter, but it was legal. Perhaps the hon. Gentleman's charge would be more appropriate at that point. The analogy is much nearer to the kind of enabling Act that the right hon. Member for Chesterfield (Mr. Benn) proposed, as was proposed by other Labour politicians in times past, to give powers in future for indemnity from the law. Indeed, it is a useful but dangerous precedent.

The danger is that if there is no consensus, not on the political values but on the procedures for democracy, we shall open up the same powers to be used or abused by parties of different colours. That danger is inherent in this process. The amendments have been tabled in the names of my hon. Friends and myself because, if the Bill's intention is a narrow definition of the ground of challenge—I do not believe that there is a need for blanket future protection—and if the Bill allows a wider interpretation, clauses 4(6) and 6(4) must not remain unamended. That is the nub of the argument. It demonstrates how vulnerable the Government believe they are that they have to take such powers to themselves for future as well as past validation. It shows also how polarised central-local government relationships now are. The Government are trying to pre-empt future legal challenge which they believe will come about simply because they have so offended and embittered that relationship.

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

I thought I had explained to the hon. Gentleman that the only circumstances in which a decision in the future will be upset by the Bill when it becomes an Act is when judgment is delivered after Royal Assent. If a case is heard after Royal Assent, it will be able to subject to judicial review any decision that I have made, together with any action or disputed point in law. The law will be changed by the Bill. In no sense does the Bill prejudice the courts in taking any future action of any sort in this field or in any other.

Photo of Mr Michael Meadowcroft Mr Michael Meadowcroft , Leeds West

I hope that the Secretary of State is right about that point. The difficulty that Opposition Members face is that the Secretary of State has said to us time and again that this measure covers certain things and now we find that it does not. If that is what the right hon. Gentleman means, he has not expressed it or drafted it well. It does not clearly say that. Those who are examining the legislation, with the limited time available, and trying to get some advice as to what it means, believe that it covers something which is not simply retrospective in this sense.

If the Secretary of State is endeavouring only to put that point and he is giving an undertaking to the House that things which would not have been caught before but were open to legal challenge will still be available to challenge by the council, then I accept his genuine wish for that to be the case. The measure is not well drafted. The amendments should carefully be considered. It is right that these matters should be discussed. At least the Secretary of State has given us a clear undertaking about his intentions. Nevertheless, far too many powers are being given away. That is why these amendments have been tabled.

7 pm

Photo of Mr Chris Smith Mr Chris Smith , Islington South and Finsbury

I listened carefully to the Secretary of State's speech, and I wish to address my remarks to the authority that I represent, Islington, that is contesting this matter in the courts. However, before doing so I wish to make a few general points.

I begin by picking up from where the hon. Member for Leeds, West (Mr. Meadowcroft) has just left off. Even if we accept the Secretary of State's intention to validate the decisions of previous Secretaries of State relating to total expenditure, two questions immediately arise. First, is the Secretary of State's interpretation of the limited nature of the restrictions on the future action of the courts right? I fear that this Secretary of State does not have a very good track record. Therefore, we are entitled to ask whether the Secretary of State's interpretation of what the Bill says about the future actions of the courts is right. Secondly, even if the Secretary of State is right and all that the Bill does is validate actions that have been taken illegally by previous Secretaries of State, the Committee should not regard that matter lightly. Retrospectively it puts Secretaries of State above the law.

Furthermore, when I referred to clause 6 and the effect of rate limitation and rate capping under the Rates Act 1984, the Secretary of State admitted that the Bill gives him carte blanche to make decisions on rate limitation and designation under the Rates Act for the financial year 1987–88. The complicated formulae set out in schedule 2 to the Bill—which would be laughable if their implications were not so serious for the services that are provided for the millions of people in this country—relate to classes of authorities, not to individual local authorities.

As a Member of Parliament who represents an area that has been designated for rate capping by this Government—a point to which I shall return, because I believe that it has been wrongly designated—there is no way under the Bill for me to question in detail the reasoning, thinking, logic and preparation that led the Secretary of State to declare that he would rate-cap my authority. I am unable to raise questions on that issue under the Bill. I can raise questions on a collectivity of authorities, because that is what the Bill deals with, but I cannot do so in relation to one authority alone.

The Bill gives the Secretary of State a decision-making power that cannot be challenged in the courts to designate my local authority for the financial year 1987–88. That is not just a retrospective setting of the Secretary of State above the law; it is a prospective setting of the Secretary of State above the law, because it relates to next year's financial expenditure by my local authority on services that deeply affect thousands of my constituents. The Secretary of State says that he will designate and determine the rate-capping limit for my local authority, and it will be impossible for the designation or for the rate-capping limit to be challenged by the authority in the courts.

If in the dense morass of words to which the Secretary of State treated us earlier today he meant to say that he did not mean that at all but that the London borough of Islington would be able to challenge his intended rate-capping limit in the courts, I should be partially satisfied. I say "partially" because there are other matters with which I wish to deal later. If the Secretary of State intends to speak again before we reach a decision on the amendment, I should be grateful if he would tell us what the position will be of an individual local authority that is rate capped under clause 6 and schedule 2 if it seeks to challenge his determination of its rate-capped limit.

The Secretary of State rightly said that statute law overrides any court decision. The traditional, constitutional principle is that Parliament makes the laws and that the courts interpret them. It is accepted that the interpretation process is secondary to the making of statute law. However, we are dealing not so much with the passing of statute law as with the administrative decisions of Secretaries of State that are enabled by statute law. Increasingly, this Government has passed enabling legislation that lays down general powers for a Secretary of State which allow him to go ahead and make administrative decisions with, at most, a debate on an order at 11 o'clock at night. By that process, statute law is modified and court decisions become ever more important to the interpretation of the law.

The Secretary of State claims that we are dealing with the priority of statute law over the interpretation of statute law in the courts, but he is not telling the whole story. In many cases we are dealing with the administrative interpretation of statute law as opposed to the legal interpretation of statute law.

Amendments Nos. 2A and 100 relate specifically to court actions that are now in progress relating to rate limitation designation under the Rates Act 1984. One of those actions has been brought by the London borough of Islington. On 17 July 1986 the Secretary of State designated 20 local authorities, including the London borough of Islington, under section 2(1) of the Rates Act. As he was required to do by legislation, the Secretary of State stated at that time the principles upon which those councils had been chosen for rate capping. Islington was designated because, amongst other things, it appeared to the Secretary of State, from best information available to him at 17 July 1986, that Islington's total expenditure for 1986–87 was likely to exceed its grant-related expenditure figure for that year by at least 12·5 per cent.

The Secretary of State, and previous Secretaries of State, have played around with the percentage increase over grant-related expenditure figures. In previous years, the figure had been 20 per cent., which was the figure that the former Secretary of State, the right hon. Member for Wanstead and Woodford (Mr. Jenkin), gave in the middle of the night in Committee on the Rates Bill.

That figure of 20 per cent. was modified by this Secretary of State in his announcement of July 1986 to 12·5 per cent. That was the benchmark. Local authorities that were 12·5 per cent. over the grant-related expenditure were profligate, overspending and acting to the detriment of their ratepayers, according to the Secretary of State.

The London borough of Islington was caught by that provision on the basis of the information available to the Secretary of State at that time. It would appear, from the way that he made that decision, that the figure of 12·5 per cent. was specifically chosen to catch the London borough of Islington, because its expenditure above grant-related expenditure figure was 12·52 per cent—a difference of 0·02 per cent. or £15,000. In terms of the millions of pounds that form the London borough of Islington's budget, that was a marginal figure. One has to ask whether the figure of 12·5 per cent. was selected specifically to ensure that Islington was included. I suspect that the answer to that question is yes.

On the basis of the figures that the Secretary of State had at that time, Islington was marginally above the rate-cap limit that he had set of 12·5 per cent. The next most marginal of the other rate-capped authorities on the list was Brighton, which was 13·31 per cent. over grant-related expenditure.

Soon after being designated, and soon after the announcement of July 1986, Islington informed the Secretary of State that, owing to an over-estimate of at least £100,000 of the precepts and levies elements of the rates on its own properties, its expenditure for 1986–87 would be reduced to only 12·42 per cent. above the grant-related expenditure. That was not changed by any definition of proposed expenditure or actual expenditure; it was a purely technical matter in so far as it related to the precepts and levies elements of the rates on council properties.

The information that the Secretary of State had available when he made that decision was inadequate and incorrect. The expenditure that he should have been looking at for the London borough of Islington was not 12·52 per cent. over the grant-related expenditure, but 12·42 per cent. over the grant-related expenditure. Therefore, the expenditure was below the 12·5 per cent. figure that the Secretary of State had decided upon as the principle for designation.

7.15 pm

As a result of the discovery of that mistake on the part of the Secretary of State, Islington asked the Secretary of State to withdraw the designation but he refused to do so. Even though he had set the principle at 12·5 per cent., and Islington clearly and specifically demonstrated to him subsequently that it fell below that threshold criterion, the Secretary of State decided that Islington should remain rate-capped.

On that specific point, Islington then asked for judicial review of the Secretary of State's decision. It took that decision on counsel's advice, believing that it had an extremely good case to seek an order of certiorari, quashing the decision to designate, and an order of mandamus requiring him to consider, in accordance with the law, Islington's request that he withdraw or not proceed with the designation. The hearing is due to start on 21 January 1987.

However, subsequent to that, the Secretary of State has discovered that, for completely different reasons, many of the decisions on which he and many previous Secretaries of State have been basing their decisions in relation to rate support grants—definitions of total expenditure and rate limitations—have been ultra vires in the past.

The Secretary of State has brought the Bill before the House seeking to validate both previous decisions and intended future decisions. In so doing, he has effectively conceded that the judicial review which the London borough of Islington has sought against his original decision is now not needed, because his designation of last July was rendered illegal and nugatory. What he has therefore done, through the Treasury solicitor—there is considerable correspondence between the Treasury solicitor acting for the Secretary of State and the borough solicitor of the London borough of Islington acting for the borough—is to concede that the Secretary of State's July decision was wrong, and therefore there is no contest to be made in the court.

By so conceding, the Secretary of State has conceded the more general principles that form part of the content of the Bill. He has not conceded the specific point about the expenditure over grant-related expenditure which formed the nub of the London borough of Islington's case in relation to its designation under the rate-capping.

The Local Government Finance Bill seeks, in effect, to prevent the courts from quashing designations that have been challenged on any grounds, whether or not they are to do with an error in relation to rate support grant or total expenditure. What is effectively happening in this legislation is that the Secretary of State is saying that he will take powers under this Bill to render all existing court actions invalid, whether or not they are specifically related to the point of the Bill.

The challenge that has been mounted by the London borough of Islington does not have to do principally with the point of the Bill. It relates to the amount that the Secretary of State is calculating with regard to the London borough of Islington's expenditure over and above the grant-related expenditure assessment.

I should like the Secretary of State not only to answer the first question that I put to him about the general position of rate-capped authorities in seeking to challenge the 1987–88 rate determination, but also to answer the specific question whether he accepts, having had the figures from the London borough of Islington, that the figure of 12·42 per cent. above GRE is the figure that relates to Islington's expenditure rather than the figure of 12·52 per cent., which he had in front of him when he made his original decision to determine a figure for Islington in July 1986.

If the right hon. Gentleman accepts that, and if his intention is still to catch only those authorities on 12·5 per cent. and above, will he now agree to seek a means of excluding the London borough of Islington from rate determination and a rate-cap limit, because it clearly does not fall above the threshold that he had originally intended and set in July last year?

If the right hon. Gentleman does not give that assurance, will he accept that, by bringing the Bill before the House, he is effectively including a borough for rate-capping which, under his original intention of last July, he would have had to exclude because it would not have fallen on the wrong side of his own threshold?

If the right hon. Gentleman accepts that point, is not the effect of the Bill to ensure that he brings the London borough of Islington into rate-capping whereas otherwise it would have fallen outside rate-capping? The Secretary of State will know that the borough had an extremely good chance of ensuring that his original inclusion of the borough was quashed by the court because he was acting on incorrect information.

If that is the case, the Secretary of State's plea at the Dispatch Box that all he is doing is validating previous decisions and, of course, that he has no intention of setting himself above the law sounds, I am afraid, rather hollow. By bringing the Bill before the House, he will, if it is passed, have included my borough for rate-capping when previously, by action of the court, the borough would have been able to avoid the rate-cap limit. If that is the case, I am afraid that services to thousands of my constituents will be put at risk.

I should be grateful for answers to those specific questions when the Secretary of State replies. I fear that my borough and my constituents will be badly hit by the Bill. They at least had a chance of representation through the courts and an escape from rate-capping before the Bill was laid before us.

Photo of Clare Short Clare Short , Birmingham, Ladywood

I, like most Labour Members, listened with great care to the Secretary of State's explanation of the extraordinary powers that we are debating. I referred previously, in an intervention, to Birmingham. The Secretary of State said that he was happy to debate the situation there. Amendment No. 87, which we shall come to later, relates specifically to Birmingham, but I want to examine what the Secretary of State said about the powers that are taken under the Bill in relation to Birmingham. I cannot understand how what the right hon. Gentleman is threatening to do to Birmingham can be legalised by the Bill or how the explanation that he gave us today can be correct.

The Secretary of State made it clear repeatedly that the Bill does nothing more than validate the past and put right for the future the position that the House and local government thought obtained in the past. The treasurer of Birmingham denies that, and suggests that the definitions given by the Secretary of State in the Bill are contrary to what everyone in local government has believed and practised.

In Birmingham, the Secretary of State intends retrospectively to invalidate some fund contributions legally made by Birmingham as far back as 1983–84—decisions that were certified by the Audit Commission. Birmingham's auditors, Price Waterhouse, wrote to the Department in May 1986 in relation to the 1984–85 accounts and said: We have considered this issue in some detail and have concluded that the contribution is a lawful charge. On 16 December 1986 a Mr. A. C. B. Ramsay from the Secretary of State's Department wrote to Birmingham's chief executive saying that it was likely, because of the new Bill, that actions taken in the past would be called into question. It does not say that it is certain, but that the new Bill may have implications for Birmingham as from its outturn return for 1984–85. The letter says: The outturn information for 1984–85 submitted on your authority's RSIB Form covered by an auditor's certificate dated 2 October 1985 and reissued on 16 May 1986, shows unallocated net contributions from the rate fund revenue account to special funds of £15,417,652 and a closing deficit on that account of £7,450,980. The letter goes on to say: It may be that these contributions or some part of them fall within the category of contributions which the Secretary of State proposes to specify"— that is an action in the future— should not be included in 'relevant' and therefore 'total expenditure'. The net effect on Birmingham of that possible proposition—it seems that it is not decided, yet we have been told that the legislation is all about putting right what everybody knew was the case in the past—is to cost the people of Birmingham £8 million. We have done rather badly out of the Secretary of State because we recently also lost some £30 million because of other decisions that he has made. That amount is a considerable sum. For the average family it is about £12 a year.

I am asking the Secretary of State specifically, please, to explain how he can suggest that the clauses and the powers simply validate the past. How can they possibly give him power to make a decision in the case of Birmingham that has not yet been made about how much of a notional sum that was spent in 1983–84 might be taken away from the citizens of Birmingham? Can he give us any possible explanation that ties in with the explanation that he gave previously suggesting that no future decision of the Secretary of State would be covered by the vast powers that he is taking to make decisions that cannot be challenged in the courts?

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

I want to talk specifically about amendment No. 2A and make sure as far as I can—I am afraid that I cannot be at all certain—that at the end I shall understand exactly what the Bill means.

The amendment has particular relevance to Islington, for which my hon. Friend the Member for Islington, South and Finsbury (Mr. Smith) has just spoken, and Greenwich. If our good and late colleague, Guy Barnett, were here, I am sure that he would want to raise in great detail the Bill's impact on his borough of Greenwich, which he served so well. He would certainly do it a lot better than ever I could. I am sure that for one brief moment tonight the Committee will be united in saying that we wish that Guy Barnett were here, participating, as he normally would have done, in a Bill of this sort.

I want to deal with the question of the Greenwich challenge because it seems to be the borough that is most caught by the Bill, although I shall show later how badly Newham will be affected by the Bill. Cases that are already in the courts, Greenwich and Islington, are directly affected.

As I understand it, the Greenwich challenge sought to quash the 1986–87 rating order on it. In this part of the challenge, the Secretary of State has now consented to judgment in favour of Greenwich, and the order was made by the High Court on 17 December. That is affected by the Bill, because clause 6 will re-ratecap Greenwich for 1986–87 and reverse the High Court decision. Perhaps the Secretary of State can confirm this. He is shaking his head. Does he mean that that is not the situation? I am not making cheap debating points. I am merely asking him for information. Even if we disagree, we should at least understand what is going on, so that we can make progress. I understood that the Secretary of State had consented to judgment in favour of Greenwich in the High Court on 17 December, but is now seeking to reverse that High Court decision by the Bill. The Secretary of State is not saying anything, so I shall push on.

7.30 pm

I am assuming that the Secretary of State knows what is going on. If he does not, we are in an even worse mess than the most pessimistic of us thought that we were in to start with That is how byzantine and obscurantist the legislation is becoming. Before I completely lose patience with the Bill, I point out that it demonstrates like no other just how unwise and ludicrous it is for the Committee to try to get itself involved in the detailed minutiae of local government finance. This is absurd. Ten years ago, I was the chairman of a finance committee, and I understood local government finance. We did not get ourselves into the mess which local government now unfortunately gets itself because the Government keep changing the rules and moving the goalposts. However, there is no way that I can pretend that I understand, in the detail that I feel that I should if I am asked to make a decision, the Bill or the position of local government finance.

When I asked the Secretary of State about the second leg of the Greenwich approach in the courts—the redetermining of the multipliers—he said that that part of the Greenwich challenge could still go ahead in the courts. I assume that when he said that he was not saying that it could go ahead in the courts if it has enough money to pay for the lawyers. I assume that there will be some valid reason for proceeding with the court case of Greenwich's challenge to the redetermination of multipliers.

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

I can help the hon. Gentleman on this. If and when I make a first supplementary report for 1986–87—which I cannot do before the passing of the Bill—I shall be making a new decision in that supplementary report, which will be challengeable in the courts. If Greenwich wishes to challenge that, it can, but it is not possible to do that on the basis of the definition in the Bill until the Bill has reached the statute book.

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

As I understand it from my information, Greenwich is pursuing redetermination of the multipliers in the courts at a hearing on 29 and 30 January. It would be helpful to everyone if the Secretary of State would further advise the Committee as to whether it is even remotely possible that, if the courts were to find in favour of Greenwich, he would be prepared to accept that judgment. I am sure that he does not want the resources of the ratepayers of Greenwich to be wasted by what would, in effect, become an idle and useless challenge in the courts because, under this legislation, the Secretary of State will be able to set aside any decision made by the High Court on the redetermination of multipliers.

Photo of Mr Chris Smith Mr Chris Smith , Islington South and Finsbury

I have been following my hon. Friend's argument carefully. I am particularly concerned about multipliers. In the complex formula included in schedule 2, in relation to a category of boroughs that includes Greenwich, there is a specific point about the multiplier on page 13. It says that "M", which is part of the crucial formula, is the figure shown as the multiplier in relation to the authority in the relevant Report. We have no knowledge for certain of what the relevant report will say about the multiplier for Greenwich. However, clause 6 says: any designation of an authority…and…any determination…for an authority's total expenditure…shall…be deemed to have been in compliance and that shall not be challengeable.

How can it be that the Secretary of State can determine a multiplier for Greenwich through the formula in schedule 2 and apply it in the relevant report to which it refers to determine a ratecap limit, and then not be challengeable? That question must be asked.

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

That question must be asked, but not of me. The Secretary of State must answer it. I do not understand how this will operate. If Greenwich is successful in its challenge in the courts over the redetermination of multipliers, that will affect the 1986–87 rate support grant settlement. As I understand it, that will then be caught up within the Act, as it will become, so any decision made by the courts in respect of the multipliers for Greenwich will not be to the benefit of Greenwich because it will be set aside by this legislation.

However, earlier, the Secretary of State clearly implied that Greenwich could go to the courts and proceed with its challenge to the multipliers. I would be prepared to give way if the Secretary of State could throw a little more light on this part of the Bill.

The redetermination of multipliers is a highly complicated subject. Greenwich came to the challenge in the courts for the following reason. In simple terms, the previous Secretary of State received a complaint from Bromley that it did not get an adequate allowance in rate support grant terms for taking over additional highways on the abolition of the GLC. I am advised that the Secretary of State agreed, and proposed to give Bromley more grant. He decided to find this money by penalising other local authorities, and inner London boroughs in particular. Greenwich is the largest potential loser with an envisaged loss of £3·822 million grant in the 1986–87 entitlement.

Greenwich objected that the Secretary of State had no powers to do this, and this he now acknowledges. However, although we know that the Secretary of State is the only person who is absolutely certain what the law is, Greenwich still maintains that he has no powers to redetermine multipliers and penalise Greenwich as proposed.

The stated intention of the 1986–87 RSG report was to avoid losses or gains to ratepayers as a result of the GLC abolition. There was much talk about that during the passage of the Local Government Act 1985. The Government sought to ensure that there were no losses or gains to ratepayers as a result of abolition by determining multipliers to adjust the rate support grant entitlement of successor authorities.

As a preliminary, it was necessary to make an expenditure assumption to reflect the transfer of functions from the GLC to successor authorities. In other words, the Secretary of State had to divide the GLC budget roughly between all the successor bodies. This division of the GLC budget was notified to Greenwich and other successor bodies by a Department of the Environment letter of 20 December 1985 which purported to give the final allocations—I emphasise "final"—of the GLC budget. Multipliers were determined in the RSG report using that allocation.

The allocation for Greenwich was £22·779 million. But Greenwich has to spend £24 million on ex-GLC services and estimates that expenditure of not less than £26 million is required. It does not have the resources to spend at that level. The Secretary of State now proposes to change his final allocation for Greenwich and to reduce it to about £20·513 million. Greenwich is complaining that it is extraordinarily difficult to get accurate information from the Secretary of State and the Department. The original allocation, which Greenwich maintains is inadequate, will be further reduced.

As the original allocation was inadequate, there were losses for Greenwich ratepayers as a result of GLC abolition, contrary to the stated intention of various Secretaries of State. It is those losses that the Secretary of State now proposes to increase. The effect of his proposals is to withdraw £3·822 million of Greenwich's 1986–87 block grant entitlement, leaving a net figure of £49·286 million. Greenwich ratepayers will have to find a further £3·822 million. This is in addition to the losses which they have already suffered as a result of GLC abolition.

Grant is, in effect, being taken away from Greenwich and other inner London boroughs and given to Bromley, Barnet, Sutton and other outer London boroughs. We understand that process and we appreciate the politics involved. Those boroughs are either Tory boroughs or boroughs in which the Conservative Government believe that they stand a chance of gaining control. Richmond is one of the obvious examples. The Government believe that they can fiddle the rate support grant settlement in such a way as to benefit themselves politically. That is fair enough. Let us all be open about it. That is part of the pork barrel. The pork barrel is attractive, if one's snout is in it, but is not much fun if one sees someone else snuffling up all one's resources. That is why Greenwich and Newham are complaining. But the wheel will turn and our snouts will be in the pork barrel before long.

Greenwich is complaining bitterly about its treatment and will challenge the redetermination of the multipliers by the Secretary of State in court on 29 January. If the courts decide that the Secretary of State has acted unreasonably or unlawfully in the redetermination of multipliers for the 1986–87 rate support grant settlement, will Greenwich be able to benefit from that judgment? If so, Greenwich can proceed happily with this case because, as in the first part of its case, the borough feels that it is on strong ground.

Photo of Mr Bill Michie Mr Bill Michie , Sheffield, Heeley

Once again, we are trying to defend the local government system which has suffered seriously for many years. Fear about the Secretary of State's powers worries us all, whatever our political persuasion. As our amendments show, we are trying to take away the tremendous powers of the Secretary of State. He will be not only above local authorities, but above the law. That is against what I believe to be natural justice.

Places such as Sheffield could be wronged. I believe that they will be. It may be put in a position in which it cannot carry out its statutory obligations. That will certainly be the case with the south Yorkshire fire service.

7.45 pm

If those circumstances arise and the Secretary of State is given so much power, they will act against the natural justice of people who are trying not only to defend services but to carry out the duties vested in them by central Government.

The Secretary of State wishes to ignore the statistics that have been given by local government on its needs and obligations. He wishes to ignore the massive unemployment in Sheffield, the fact that it has the highest number of old-age pensioners, and the fact that it cannot carry out its statutory duties. Are we to understand that, whatever judgment is made by the Secretary of State, there will not be the right of appeal to the courts? That is what I understand to be the position.

The Sheffield city council told the Secretary of State that his expenditure limit implies "unachieveable economies". It predicted "disastrous cuts" in services. It asked him to raise its spending capacity from £258,915,000 to £295,832,000. In its case for appeal the council made many points, most of which have been ignored.

What should the council do in those circumstances? Does it just say, "OK. We shall just sit down and let things happen". No, of course not. Local authorities are just as responsible for carrying out their duties as any other organisation, especially this House of Commons.

Sheffield's GRE for 1986–87 is £33·2 per head below the metropolitan district per capita average leading to a GRE reduced by £17·9 million and a loss of grant of £31·4 million on budgeted spending in 1986–87. Was that taken into account? No, it was not.

Does not the Secretary of State believe that we can appeal against such judgments, which are made on an irrational basis? Does it mean that, despite the fact that the European Parliament, in a recent study, found that of the 102 largest urban areas in Europe the Sheffield-Rotherham conurbation ranked as one of the lowest in terms of social and economic health, it is not recognised by the Secretary of State? Does that mean that local authorities should not have the right to appeal somewhere, to try to put their case before a court in another area, to determine that they can carry out their duties? Is that what the Bill is all about? Is that what the Secretary of State wants? If a local authority has the highest youth unemployment, does that mean that it does not have the right to appeal and argue a case? Such powers are dangerous not only for the Secretary of State, because sooner or later he will drop another danger and when he gets a problem will have to change his policy yet again, but for democracy generally.

Therefore, I hope that the Secretary of State will not take the powers proposed in the Bill because he does not need them unless, as someone once suggested to me, the Conservative Government cannot abide the freedom of local authorities because it frustrates their ultimate policy. That is to pay the rich and to take from the poor. Unfortunately for the Government, many local authorities are prepared to take from the rich and defend the poor. More and more power is taken away and there is much more centralism and dictatorship. I hope that the amendment is successful.

Photo of Mr Nigel Spearing Mr Nigel Spearing , Newham South

These amendments seek to ameliorate the draconian powers that the Secretary of State is taking for himself in the Bill. I cannot see any reason why these relatively mild ameliorations should not be accepted. I do not think that the Secretary of State has understood the powers that he is taking in clause 1.

Some years ago, I was involved in the hearings of a railway closure tribunal. The chairman of the tribunal gave a ruling on what an Act of Parliament meant. He said, "The Minister of Transport says that that part of the Act does not mean what counsel says it means". Someone said, "That is nonsense. The Secretary of State cannot interpret the Act. Only the court can do that." As I understand it—the Secretary of State will correct me if I am wrong—that is not true in relation to this legislation. I thought that that constitutional principle applied to the liberties of the individual—in this case, a ratepayer in respect of certainty of local government, its efficiency and effectiveness. The Minister for Local Government knows from his experience that, unless one plans ahead in local government, there will not be the consistency and efficiency of operation which we all want. The liberty of the subject and of the bodies corporate is under threat. That interpretation has not been breached—my hon. Friend the Member for Copeland (Dr. Cunningham) mentioned 1668, an important year—except, conceivably, in time of war, and I doubt whether even then it has been breached. But that happens in the Bill.

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

I do not know whether the hon. Gentleman was here when I spoke to the amendment, but, even if he was, he does not seem to have heard me. I think that, if he had listened, he would agree that he has the wrong brief.

Photo of Mr Nigel Spearing Mr Nigel Spearing , Newham South

I shall certainly read what the Secretary of State said. But I am not speaking from a brief. I am speaking from the heart and from common sense about what concerns the majority of people in recipient areas.

The Secretary of State is trying to operate a system which was initiated under the Local Government, Planning and Land Act 1980. The hon. Member for Eastbourne (Mr. Gow) is wrong. In Committee, we made it clear that this system would not work. The multipliers, which have been mentioned by my hon. Friend the Member for Islington, South and Finsbury (Mr. Smith), were introduced. We said that the combination of the operations introduced by that legislation would be impractical.

Year by year, Act by Act, the Secretary of State has tried not only to make the legislation work but to operate it politically. My hon. Friend the Member for Newham, North-West (Mr. Banks) has made that clear. We can understand that approach up to a point. But in trying to operate those two desiderata, one clearly comes up against court judgments. The local authorities, in trying to get out of the lobster pot into which the Secretary of State put them, clearly used their constitutional rights to go to the courts. Over a period, there is greater and greater court activity over a wider interface of statutes. The more statutes there are, the wider the interface and the greater the potential for appeal to the courts. That is what has happened. There have been court cases because of that.

Now there is only one way out, and the Secretary of State has taken it. The right hon. Gentleman says that this is not just a rate-capping measure; it is a court-capping measure. He says, "I am going to stop the nonsense of the continuous appeals and proliferation of legislation. I shall determine what the law is in future." That is the purpose of clause 1. In these amendments we are saying that we do not like that, but it should not apply at least in respect of those cases which are already in train. I should have thought that anyone with any common sense would say, "Even if we agree, as the Minister for Local Government clearly does, with the general principle of court capping, it should not be done retrospectively in those cases already in train."

Of course, there is a consquential problem. Let us suppose that the court cases in train decide in favour of the local authorities and not in favour of the Secretary of State—which would not surprise any of us in view of the history of these matters. The Secretary of State is then left with an anomaly. The law is interpreted by the courts, and that may be contrary to the contents of the Bill. One borough—perhaps Greenwich or Islington—may have an apparent undue advantage in terms of the law. The Secretary of State says, "We cannot have that because the new laws which I am imposing on local authorities are meant to be uniform." He is left with only one alternative—he must make not only prospective determinations of the law, which is bad enough, but determinations in respect of cases that are in train. We say that at least there should be some amelioration by including these amendments in the Bill to protect the rights of the subjects involved in cases already in train in the courts.

Photo of Mr Bill O'Brien Mr Bill O'Brien , Normanton

I wish to speak to this group of amendments because of my experience in local government and the problems of those serving local government—officers and members—who are trying to provide services for the people in their communities. The laws that govern local authorities handicap and hinder their work. If the Bill is passed in its present form, there will be further problems for those who serve local government. We must ensure that legislation is so framed that it gives local authorities and those who serve them the best possible chance to make sure that the service which they provide is in the best interests of their communities.

I refer especially to amendment No. 2A. The Government are trying to take from local authorities the opportunity to obtain justice. The Secretary of State wants to make decisions which would not be permitted by a court.

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

I do not think that the hon. Gentleman can have heard my speech on the amendment when I made it clear that that is not the case. Did he hear what I said?

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Mr. O' Brien:

We all heard what the Secretary of State said. If what he said was true, why does he not accept the amendment which would clearly show that his intention is not what we believe it to be? If the Secretary of State is saying that we are wrong, I put it to him that the amendment would clear away all elements of doubt. Therefore, I ask him to accept amendment No. 2A.

It is a fact that the Government's policy of controlling local government finance is now a complete shambles and a complete mess. As a result of the Government's proposals for controlling rate contributions through the rate support grant, the fire and civil defence authority in west Yorkshire is experiencing great problems in trying to provide adequate services and protection in the coming year. The Secretary of State is fully aware of the problems facing that authority and also of the tremendous shortfall in the resources that are needed for the coming year if the local authority is to provide adequate services.

If the legislation is allowed to continue in its present form, and if this group of amendments is not accepted, the problems that face the authorities in west Yorkshire—especially the police authority—will intensify and the services that are provided to the local communities will be reduced.

If this group of amendments is accepted, the problems that face my colleagues who serve those various authorities, including the police authority, will be eased. It would also give them a ray of hope and lighten the problems that they have reported to the Secretary of State.

If the Bill is enacted, the services that they are expected to provide will no longer be available. The Bill comes from a Government who talk about reducing crime and providing better services and protection to local communities, but those things are not happening in west Yorkshire because of the Secretary of State's attempts to rate-cap and control the finances of local authorities.

As I have said, the Government's control of local authority finance is a complete mess, but the Bill is not confined to sorting out that mess. It gives substantial additional powers to the Secretary of State to intervene in local authority accounting, to introduce rate capping for 1987–88 by formula, and to exclude the courts from reviewing those decisions.

Transport authorities in west Yorkshire are being affected and elderly and infirm people who rely on public transport will also be affected by the proposals that are at present under consideration. The Bill will worsen the conditions under which the transport authorities in west Yorkshire have to provide public transport. If this group of amendments is not accepted, my colleagues who try to provide those services in west Yorkshire will encounter greater difficulties in ensuring that a continuous service is provided to the communities in the five metropolitan districts of west Yorkshire.

A recent announcement referred to the amount of money that would be available for highway and road purposes in my area, and especially in the metropolitan district of Wakefield. Rate capping and cuts in resources will mean that local authorities will be unable to provide the necessary protection and services to the community. That is why we believe that the powers that the Secretary of State is taking further control the services that local government wishes to provide. On more than one occasion local electors have demonstrated through the ballot box that they require those services that the Labour groups on local authorities have included in their manifestos, I refer especially to Leeds and Wakefield. However, the Secretary of State wishes to take unto himself powers to intervene in local authority accounting, and to introduce rate capping for the current year.

There is such confusion about the current position that it is wrong for the Government to use the Bill to impose even more arbitrary solutions. The Secretary of State should think carefully about the issues raised in the Bill and about the points raised by my hon. Friends on this group of amendments because those comments are relevant to the services that local authorities wish to provide.

In the area that I represent, and especially in Wakefield, we wish to help the 16 per cent. of the population who are unemployed. In this legislation, the Secretary of State is causing further problems to those authorities that are trying to provide jobs and job opportunities for the unemployed, and especially for the young unemployed who have never had a job, by trying to take substantial additional powers to intervene in local authority accounting.

Amendment No. 2B states that the Secretary of State should report, setting out the dates, and any other details which he may consider relevant, of the legal advice that was received by him prior to the introduction of this Act with respect to the legal interpretation of 'relevant' and 'total' expenditure for Rate Support Grant purposes. As a Member of Parliament representing an area of high unemployment, with public transport problems and facing the danger of a lack of proper protection and of police forces being unable to carry out their full responsibilities and duties to communities, I believe that Members of Parliament should have an opportunity to make representations on behalf of the people that we represent and our local authorities. We should be able to give a full and concise report of how those authorities will be affected by the "relevant" and "total" expenditure for rate support grant purposes.

If the House does not accept the amendments that we propose, the facilities available to local authorities will be worsened. The relationship between the communities and the local authorities which serve them will deteriorate because the necessary services will not be provided. Therefore, this group of amendments should be given serious consideration. The Secretary of State should take on board all the points that have been made by those hon. Members with local authorities that are experiencing difficulties. Every week, hon. Members meet their constituents and hear their complaints about lack of services. The lack of services is due to the attitude of the Secretary of State. He will not provide the resources necessary to enable local authorities to carry out the services. I ask the Secretary of State to consider seriously the group of amendments and to support the amendments that have been proposed by my colleagues.

Photo of Mr Andrew Bennett Mr Andrew Bennett , Denton and Reddish

I apologise to the Committee for not having heard the Secretary of State. I wish to pursue the question of the relationship between the Bill, the amendments, and the work of the Select Committee and the Joint Committee on Statutory Instruments. I have looked with some care at the sections dealing with the question of the Secretary of State taking additional powers. I can understand that he is trying to stop judges making decisions that he might not like. Since he has got the law wrong on several occasions, I can appreciate that he may want to eliminate judges. However, will he explain whether he also intends to eliminate the scrutiny of the House? Most of the rate support grant legislation is implemented by orders. The first line of clause 6 says: For the purposes of any order made before the passing of this Act". As I understand it, the orders are normally scrutinised by the Joint Committee or the Select Committee, depending on whether they are affirmative money orders or whether they are simply enabling——

Photo of Mr Chris Smith Mr Chris Smith , Islington South and Finsbury

Is it not the case that that applies not only to orders made before the enactment of the Bill, and that it may well include orders made after the enactment of the Bill under clause 6(3) which relates to the designation of an authority for rate capping for the financial year 1987–88? The Secretary of State will have to make orders to implement the formula contained in schedule 2 as part of that exercise of rate designation, and those orders will, by their very nature, have to be after the passing of the Act because they will have to enshrine the formula that is before us for the first time as part of the Bill.

Photo of Mr Andrew Bennett Mr Andrew Bennett , Denton and Reddish

As I have said, the problem is that implementation of the legislation has to be done by orders and the orders are scrutinised by the Select Committee or the Joint Committee. Our terms of reference as a Committee are very narrow. We are supposed to see whether the legislation is legal. We are entitled to see whether it needs elucidation. We do not usually take that too far, especially in this sort of area since it is difficult to find an order on rates that is easy to understand. The Committee also has various other powers.

Having looked at the order, especially on the basis of advice from Speaker's Counsel and others, we are then entitled to make a report to the House and, if it is the Joint Committee, to the House of Lords. It is the normal procedure that if we draw the House's attention to something that is ultra vires, the Government withdraw it and bring in a new order, usually with an an apology. We have very little power to force the Government to do that but it would be foolish for the Government to continue with an order that has been pointed out to be ultra vires because they know that it could be subject to a challenge in the courts fairly quickly and that the courts would cause far more trouble for the Minister than we as a Committee. Therefore, the back-up for the Select Committee and the Joint Committee is the fact that, although we can produce reports, anyone who is aggrieved can challenge the order in the courts.

8.15 pm

As I understand the Bill, especially clause 4(6) and clause 6(4), the Government are taking away the powers of judges to overturn decisions. If the Government had made it clear by saying that anything that was deemed to be illegal was in fact legal, which is in effect what they are trying to do, it would have bound the Select Committee and the Joint Committee. However, the Government are not saying that anything that is ultra vires shall be intra vires. They say that that will apply only if they are challenged in the courts. Therefore, the Government are taking away from us the back-up power of the courts.

The Secretary of State may say that that does not apply because the Government will be able to quote this Bill and be able to make all the orders as a result of this legislation. I accept that the citations for statutory instruments that will be prepared in the future will include previous legislation plus this legislation. However, I am not sure how one would put this legislation into the citations if the statutory instruments are made before the Bill is enacted. That presents problems with the orders that have been laid this year insofar as they will be made legal by the legislation. It will be the duty of the Select Committee or the Joint Committee to report on the orders if they are ultra vires.

I should like an explanation from the Secretary of State as to how this Bill makes the statutory instruments legal as opposed to taking away the power of the courts to rule that they are illegal. The problem of the statutory instruments is another illustration of the way in which the Government now seem to want to go beyond any legal framework that we have been used to in the House and to be able to say, "This is the money we are giving out and we do not want to face any challenge." If that is the procedure that the Government want, why shroud it in complications?

The Secretary of State should say honestly, "This is the way I am going to dish out the money. It has nothing to do with any principles of need or resources within a community. It is purely my arbitrary decision as Secretary of State. These are the authorities I like and these are the authorities I dislike." Why put so much mumbo-jumbo and confusion into the system when that is basically what the Secretary of State is doing? Why does he not come clean and make it clear that he is handing out the money to the authorities he likes, that he is not giving it to the authorities he dislikes, that it is purely arbitrary and that there is no rhyme or reason to it? Perhaps then he will go a little further and say that part of the reason for the legislation, as I suggested previously, is that he is doing his best to discredit the system of rates in Britain. He wants to demonstrate that it is complicated and absurd, so that he will build up more pressure for the abolition of rates.

I am not a great enthusiast for the rates, but I suggest that, until the Secretary of State finds an alternative way of raising local finance, he is setting out to undermine local democracy. As long as he cannot come up with a better alternative that retains the democratic right of local people to raise money and to receive an allocation of national resources to meet the needs of their locality, he is continuing to undermine local democracy. The more he undermines local democracy, the more he is paving the way for the undermining of national democracy.

The Government seem to be claiming that they cannot trust local politicians and that appears to be the basis of the Secretary of State's allocation of resources. He seems to disapprove of some local authorities. He does not trust some local politicians and he is critical of them. As long as the Secretary of State continues to undermine local politicians in that way, he is claiming that the electorate cannot be trusted. The logic of that is that, if one cannot trust the electorate to elect local councillors, why should the electorate be trusted to elect anyone else?

The Secretary of State is undermining democracy. He will have a great deal to account for in future in the way in which he has damaged the whole concept of local democracy. When the Secretary of State replies, I hope that he will make it clear that he believes in local democracy and the rights of people to elect people with whom he disagrees. I hope that he will state that he believes that some people must put up with decisions that they do not like and that, on occasion, local authorities will want to spend money in ways that do not meet with his approval; yet they have every right to do that, because they have been elected.

As the Secretary of State is seeking to make the legislation bypass the courts, can he tell us whether he is trying to make it bypass the Standing Orders of the House that ensure the proper scrutiny of statutory instruments? If he is removing the back-up power of the courts, what power does he intend the Joint Committee on Statutory Instruments to have to draw attention to the fact that some of his regulations will be ultra vires? I hope that the Minister can satisfy me at least on my second point, if not on my first.

Photo of Mr Allen McKay Mr Allen McKay , Barnsley West and Penistone

I want to reinforce the argument by introducing a voice from south Yorkshire. I will come later to such items as the fire service and transport in south Yorkshire.

Like my hon. Friend the Member for Denton and Reddish (Mr. Bennett), I want to refer to the erosion of democracy that has taken place in the House over the past five or six years. A main theme of our debates recently has been the erosion of democracy—the centralisation of power through the removal of power from local government to central Government. The Bill is a further step in that direction.

The Secretary of State believes that he is above the law. Indeed, if he is not already above the law, he seeks to make himself so. Under the provisions in the Bill, those local authorities which believe that they have been wronged will no longer have the opportunity to take the Secretary of State to court.

Photo of Mr Allen McKay Mr Allen McKay , Barnsley West and Penistone

The Secretary of State is shaking his head. However, the fact remains that we could not have conceived of this situation 12 months ago. However, it has happened because the Secretary of State and his predecessors decided for, some reason or other, that central Government know best. They decided not to trust the local electorate who choose the people to look after their area. Central Government are now determining what should happen in the areas.

I have no argument with a Government of any political persuasion deciding that they have a certain amount of money to give to local government. That is a decision for central Government. However, I would probably argue about the sum that they allocated, but that is a different matter. Not only have the Government decided that they will not allocate the money to local government; they have decided that local government will not be able to raise the money to make up for what it has lost.

The Government have gone a step further. If local government decides to challenge the Secretary of State in court, the Secretary of State has refused to allow local government that right. The Bill will make unlawful what was a lawful procedure before it was introduced. It is only a short step for the Secretary of State to carry on from that position and make a similar provision in future. The Government have taken away local government redress against central Government diktat.

I have always believed, and will always believe, that the law of this country is divorced and separate from any entity. It must be so to act impartially. I may not agree with some of the conclusions reached by the law, but I agree that the law should have the ability and the right to act impartially. However, the Bill contains provisions which will niggle at the edges of that right and the Committee should consider what is happening.

Any Secretary of State may adopt the kind of powers included in the Bill. However, I am concerned about the principle and why the Secretary of State has chosen to use the power. He has chosen to adopt these powers simply because he was wrong in the past, was challenged and lost. He has determined that certain decisions will not be taken.

I want to consider a sample from my local authority in respect of the determination of the figures. The figures are determined wrongly. Under the provisions in the Bill, a local authority will not be able to take the Secretary of State to court over the cuts that he has caused. I will consider the figures in detail later because I want to highlight the way in which the figures have gone wrong. However, we must accept the amendments because, by not accepting them, we accept a dilution of the present free and democratic structure.

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

The hon. Gentleman has spoken before.

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

Yes; this is the second time that I have addressed the Committee and I understand that I am in order. The Secretary of State seems to imply that it is surprising for an hon. Member to speak twice. I am not speaking twice because I want to drone on or because I am enamoured by the sound of my own voice. When I spoke previously I referred specifically to the Greenwich case. I do not want to tax the Committee, but I want to make some general points about this part of the Bill and amendment No. 85 will enable me to to that.

Photo of Mr Allan Roberts Mr Allan Roberts , Bootle

It might make for a better debate if some Conservative Members spoke for the first time or if Tory Members attended this important Committee. Only the hon. Member for Cheltenham (Mr. Irving), with his particular interest and passion for local government and local government democracy, who is not famous for supporting the Government, is in attendance. The only other Conservative Members present are Ministers and their parliamentary private secretaries. That is how lightly the Conservatives treat this important Bill.

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

I entirely agree with my hon. Friend. However, it is clear from the languid pose adopted by the hon. Member for Cheltenham (Mr. Irving) that he is not evincing much passion in respect of the Bill. However, my hon. Friend the Member for Bootle (Mr. Roberts) has made the point. This Bill is not the most fascinating topic that we could come to grips with. The empty Conservative Benches and the not too full Opposition Benches bear witness to that. We should speak the truth in Committee as we should in the House. The truth is that this is pretty boring stuff—and that includes my speech.

Photo of Mr Bill Michie Mr Bill Michie , Sheffield, Heeley

I agree with my hon. Friend's last point. However, does he agree that it is not really fair to criticise Conservative Back-Bench Members for not being present as they do not really agree with the Bill but are frightened to say so?

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

I wish that that was the case. The truth is that we simply do not have the expertise in the House to deal with the constant interferences in the day-to-day affairs of town halls, nor do we have the interest.

The Conservative Benches are devoid of human life form. I exclude, of course, those on the Front Bench. It would be too unkind to say that they did not correspond with a known life form. When amendment No. 2A is decided on, hundreds of hon. Members will flood in, but none of them will know what has been discussed. They will not have the foggiest idea.

Photo of Miss Betty Boothroyd Miss Betty Boothroyd Member, Labour Party National Executive Committee

Order. This is an abuse of the Committee when there are so many amendments under consideration. I understand that the hon. Member wishes to speak to amendment No. 85.

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

I do, but I was tempted into a far more interesting area of discourse and speculation. If my hon. Friends do not expose me to the one thing which I cannot resist, which is temptation, I shall deal with amendment No. 85 which proposes, in clause 4, page 5, line 7, at end add 'save those decisions of a court in respect of litigation before the courts on 12th January.'. We are asking the Secretary of State to make exceptions of local authorities which have already started litigation in respect of previous decisions made by the Secretary of State. That seems perfectly reasonable.

Ministers and Conservative Members always say that local authorities should be aware of the sums of money that they spend on behalf of their ratepayers and that they have a fiduciary responsibility and should not waste money. That takes us into political opinion and speculation. No responsible lawyer in a local authority encourages a local authority to proceed in the courts if it is a complete waste of time because there is no chance of success. No legal department was aware that the Secretary of State would introduce the Bill and change the name of the game in respect of previous rate support grant settlements.

In fairness to the legal advice given by legal officers, and in fairness to ratepayers, who have already committed a great deal of money to briefing counsel and preparing the necessary documents—we know how much that costs—it would seem fair that local authorities should be allowed to proceed. They might get some advantage from the amendments whereas others might not. I do not know whether that takes us into arguments about hybridity, but it seems only equitable that local authorities should be able to proceed with the litigation that they started before 12 January—the date of the Bill's Second Reading.

Photo of Jack Straw Jack Straw Shadow Spokesperson (Environment, Food and Rural Affairs) 8:30 pm, 19th January 1987

I congratulate my hon. Friend the Member for Newham, North-West (Mr. Banks) on introducing some humour into the debate—a difficult task bearing in mind the subject matter. Amendment No. 2A addresses the proceedings that Greenwich has brought against the Secretary of State. My hon. Friend the Member for Newham, North-West went into some detail about how Greenwich would be adversely affected if the Bill went through unamended. I do not want to repeat everything that he said in his first speech but I should like to put some points on the record.

First, Greenwich is a relatively low-spending authority. Its expenditure per head—I speak from memory—was £331 in 1985–86, some £150 per head less than Hammersmith and Fulham, which was then Conservative-controlled. It was always a grave injustice to Greenwich that it should have been so rate-capped. As my hon. Friend the Member for Newham, North-West said, Greenwich was rate-capped and suffered some quite gratuitous penalties. The first concerned Bromley, which complained to the Secretary of State about one year ago that it was not getting enough allowance in rate support grant terms for taking over additional highways on abolition of the Greater London council. The then Secretary of State decided to give Bromley the money and take it away from other authorities. Greenwich lost £3,828,000 of grant in 1986–87.

Secondly, Greenwich received much less for the, GLC services that it took over than the cost of those services. It estimates the cost at £24 million whereas it has received only £20·5 million in grant. There have been other problems, including an allowance of only £138,000 for expenditure in respect of land drainage, whereas it has had to pay out £769,000 over which it has had absolutely no control.

Greenwich made its rate-cap challenge. The Secretary of State said that Greenwich won the rate-cap challenge on something that was not central to the points that it was taking to court. That is the nature of court action. One sends out about five shots and scores one hit. It is not for the Secretary of State to complain about that as it is entirely legitimate and how the courts work. Greenwich won its action as, we believe, Islington would. The Secretary of State consented to judgment.

I hope that when we debate schedule 2 and clause 7, the Secretary of State will have the grace to accept that it was wrong to rate-limit Greenwich under the legislation, as everybody else thought it was. If the legislation had stood, the Secretary of State would not have been able to continue to rate-cap Greenwich. He has said that the only purpose of the Bill is to make the law what everybody thought it was, so it must be wrong to continue to rate-cap Greenwich.

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

That is an absurd argument. Does the hon. Gentleman not realise that, on that analogy, I could not rate-cap anybody or pay any rate support grant? He is asking whether, just because he is chummy with Greenwich, I make an exception for it.

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

I am saying that Greenwich took a court action against the Secretary of State on a perfectly sound point and the courts found in favour of Greenwich and that that decision ought to be allowed to stand.

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

The courts would have found that there was no basis whatever for the definition of total expenditure, and therefore any case which was brought on the subject of total expenditure would have failed. The hon. Gentleman does not realise that Greenwich did not bring a case on the total expenditure point—it just happened to come up.

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

Greenwich could not possibly have won the point unless it pleaded it. There is no way in which the court could have made a decision on a point unless it was argued before the judge. Judges do not normally tell plaintiffs that they disagree with the points that they have raised and that there is a better one, and this is what it is. Greenwich was well advised, took a point and won.

Photo of Mr Chris Smith Mr Chris Smith , Islington South and Finsbury

I apologise for interrupting my hon. Friend in his flow but is not the precise point as it applies to both Greenwich and Islington the fact that in the one case the Secretary of State was found to be at fault by the court and in the other case would have been found to be at fault because of the problem relating to total expenditure? However, the nub of both cases is different from the point relating to total expenditure. The real issue in relation to Greenwich was multipliers and in relation to Islington it was the 12·5 per cent. figure above GREA. Introducing this legislation, which the Secretary of State claims has to do with total expenditure, the Secretary of State has managed to include both authorities under the legislation and ignore those other points which the authorities legitimately raised.

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

I think that the implication of my hon. Friend's point is that if Greenwich had had the chance to argue properly the multiplier issue it might have won. Similarly, if Islington had had the chance to argue that its GRE is below the 12·5 per cent. trigger point, it, too, would have won. I agree with my hon. Friend that if the two cases had been allowed to be argued on the central merits that the plaintiffs have raised, those authorities would have won.

Let us turn to the more serious aspects of this group of amendments as it relates to clauses 4 and 6 of the Bill. Clause 4, in respect of the rate support grant, and clause 6, in respect of the Rates Act 1984, seek to validate decisions which are taken by the Secretary of State before the passing of this Act and to exclude the Secretary of State from any subsequent court action in respect of decisions that he has made. Given that the ostensible and innocent purpose of the Bill is to clear up a legislative mess—a mess of the Government's making going back over seven years—one can understand why the Secretary of State is seeking to validate decisions which had been made on the basis of the law as everybody thought it was but, as it turns out, was not. Even if we do not agree with the detail of the Bill, we can understand why the Secretary of State is seeking to do that.

However, having validated such decisions, the Secretary of State then seeks to exclude the courts from checking whether the newly validated decisions have been made in accordance with the law. The Secretary of State seeks to make light of the decisions which he can make under clauses 4 and 6 of the Bill. It is important for us to understand the wide nature of the powers which the Secretary of State can exercise under these clauses and in respect of which he is not subject—as he hopes—to any kind of check from the courts.

Clause 4(2) defines the relevant provisions which are set out in 4(1) as: Anything done by the Secretary of State before the passing of this Act for the purpose of the relevant provisions in relation to any of the initial years or intermediate years shall be deemed to have been done in compliance with those provisions. The relevant provisions are part VI of the 1980 Act, section 8 of and schedule 2 to the Local Government Finance Act 1982, sections 2 and 3 of the Education Act 1986 and section 2 of the Rate Support Grants Act 1986. The Secretary of State is aware that part VI of the Local Government, Planning and Land Act 1980 and a further substantial chunk of that Act deal with the whole structure of the present rate support grant. They deal with matters such as clause 53. Introduction of new system of rate support grants. Clause 54 The aggregate amount of rate support grants. Clause 55 The domestic rate relief grant. Clause 56 The block grant. There is a great chunk on the block grant.

Clause 57 Determination of grant-related poundage and grant-related expenditure. Clause 58 Principles for determination of grant-related poundage. Clause 59 Adjustments of distribution of block grant. Clause 60 The Rate Support Grant Report. Clause 61 Supplementary reports. Clause 62 Adjustment of block grant total. Clause 63 Adjustment of block grant in connection with education, etc. Clause 64 Special provisions for Metropolitan Police District. I have read those titles out to illustrate to the Secretary of State and my hon. Friends the breadth of powers concerning which the Secretary of State is having separate provisions written into the Bill to validate all past acts.

8.45 pm

The other powers are included in section 8 and schedule to the Local Government Finance Act 1982. Schedule 2 is all to do with the block grant for the receiver of the Metropolitan police. Other powers are contained in sections 2 and 3 of the Education Act 1986 and, to cap it all, section 2 of the Rate Support Grants Act 1986. My hon. Friends will recall that that Act was supposed to be the final solution to the unlawfulness and the lacunae of the 1980 Act. That Act states As respects determinations made under section 59 I have just read out that section— of the said Act of 1980 after the passing of this Act the following provisions shall have effect instead of subsection (6)(a) of that section and section 8(3)(a) of the Local Government Finance Act 1982. Under clause 6 of the Bill the Secretary of State is seeking to validate any decision which he makes in respect of the Rates Act until the passing of this Bill, which may take place in March or April. The Secretary of State has sought to suggest that as far as clause 4 is concerned the decisions which are being validated are decisions which he has already made but he must accept that as far as the Rate Acts are concerned these decisions could be prospective as well. In clause 6(2) and (3) it states: (2) Anything done by the Secretary of State before the passing of this Act for the purposes of Part I of the 1984 Act in relation to the financial year beginning in 1985 or that beginning in 1986 shall be deemed to have been done in compliance with the provisions of that Part.(3) For the purposes of section 7 below and Schedule 2 to this Act—

  1. (a) any designation of an authority under section 2 of the 1984 Act in relation to the financial year beginning in 1987, and
  2. (b) any determination and notification under section 3(1) and (3) of that Act of a level for an authority's total expenditure in that year,
shall, if made before the passing of this Act, be deemed to have been made in compliance with the provisions of Part I of the 1984 Act. Clause 4 states that the judge-proof limit relates only to 4(1) but in clause 6 the judge-proof limit relates to all the powers which the Secretary of State has taken. In clause 6(4) it states: (4) This section shall have effect notwithstanding any decision of a court (whether before or after the passing of this Act) purporting to have a contrary effect. It is extremely dangerous and unnecessary for the Secretary of State to take the powers provided under clause 4(6) but at least I half understand his arguments. But what is his argument for taking the powers under clause 6(4)? It does not relate to past Acts but relates to the designation of individual authorities. Do individual authorities that have been rate-capped have a right to go to the court if they believe the Secretary of State has exercised his power unlawfully? Rate-capping has an adverse effect upon individual authorities and it is possible that the Secretary of State or his legal advisers may have made a wrong decision in respect of designation, the determination of the expenditure limit or total expenditure.

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

In those circumstances, is it not right that the authority should be able to go to court? What possible administrative mischief is the Secretary of State seeking to avoid by preventing authorities from going to court? What is he scared of, given that he says that in other respects he is ready and willing to let local authorities go to court to challenge his decisions?

On the general issue of these judge-proof clauses the Secretary of State wants to brush aside the enormity of what he is doing. I cannot examine the inner workings of his mind and it may be that he believes that what he is doing in clauses 4(6) and 6(4) is innocent and trivial. It is neither innocent nor trivial. The only ways in which the rule of law can be protected—and all of us live by the rule of law—is first by an elected Parliament and secondly by having courts to supervise the decisions of the Executive to ensure that the decisions that they make are made fairly and within the law.

I should like to quote from Wade on administrative law. It talks of a leading case called the anisminic case, and says that that case and it sequels were: The culmination of the judicial insistence, so often emphasised in this work, that administrative agencies and tribunals"— that includes Ministers— must at all costs be prevented from being sole judges of the validity of their own acts. If this were allowed, to quote Denning Lord Justice again, 'the rule of law would be at an end. It then goes on to quote Lord Wilberforce expressing the same idea in different words. In a case in 1933 Lord Atkin said in objecting to what he described as finality clauses in legislation: Finality is a good thing but justice is better. Essentially, that is the view that we hold. I should like to quote again from Lord Denning from his work, "What Next in the Law?" In that work he discusses the discretion of Ministers and says that Ministers may sometimes say: The statute gives me an unfettered discretion. It cannot he challenged in the courts of law. If I should exercise it wrongly, I can be questioned in the House. But the courts cannot restrain me. Lord Denning goes on to explain how the courts have indeed taken powers to supervise the work of Ministers even where Ministers have sought to preclude that supervision. He quotes what he said in Laker's case in 1977 which was an action taken against a Labour Minister. It is right that Labour as well as Conservative Ministers should be subject to the courts no matter how uncomfortable the court decisions may be. In that case the court said: These courts have the authority—and I would add the duty—in a proper case, when called upon, to inquire into the exercising of a discretionary power by a minister or his department. If it is found that this power has been exercised improperly or mistakenly so as to infringe unjustly on the legitimate rights and interests of the subject, then these courts must so declare. They stand, as ever, between the executive and the subject, as Lord Atkin said in a famous passage, alert to see that any coercive action is justified in law. To which I would add: be alert to see that a discretionary power is not exceeded or misused. The rate support grant legislation contains page after page of discretionary power in the hands of Ministers. Parliament has accepted that that discretion should be given to Ministers. It is a powerful weapon, but as Lord Denning and Wade have said it should be subject to the supervision of the courts.

The Secretary of State is breaching a major constitutional principle. He is not breaching it for very much because he seems to be saying that this Bill has now got the law straight. If the law is straight, there need not be any legal challenges and he need not not make a judgment. If the law is not straight it is essential that the courts should be able to intervene and protect local authorities, the subject, from unjust and arbitrary discretion by Ministers. That is why we object to these provisions and why we shall force them to a vote.

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

I shall be brief because I have spoken already and I do not want to take up the time of the Committee. As I said to the hon. Member for Birmingham, Ladywood (Ms. Short), I should prefer to deal with the Birmingham point separately. There are amendments relating to it and I shall return to that when the time is reached. I see that the hon. Member for Leeds, West (Mr. Meadowcroft) is not in his place. Many speakers in the debate come and go, but not many listened to what I said on the first occasion. Practically the only one who did so was the hon. Member for Blackburn (Mr. Straw).

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

It is not a matter of whether the hon. Member for Newham, North-West (Mr. Banks) or the hon. Member for Ladywood were here but whether in their speeches they showed the faintest recognition of the points that I have sought to make. The Committee does not have too good a record on that. The hon. Member for Leeds, West and a number of hon. Members missed the point that if one looks at clause 4(1) which must be read in relation to the powers contained in clause 4(6) about judge-proof past actions, one sees that it says: Anything done by the Secretary of State before the passing of this Act". It is only in relation to actions taken before this Act was published that anything I do escapes challenge.

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

The hon. Gentleman is wrong, because since the Act was published I have done nothing nor will I do anything in the sense of this clause. I have taken no actions whatever in relation to the rate support grant settlement since the time that I realised it would be illegal for me to do so.

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

It is the Bill which has been published, not an Act, and although the Secretary of State has taken no decisions he must get it quite clear that one publishes a Bill, not an Act.

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

This does not give me the powers that hon. Members thought it did, that I could affect future things without my decisions being subject to review by the courts. That is not the case because it is only what I have done hitherto which is validated, not what I might do in future.

9 pm

Photo of Mr Nigel Spearing Mr Nigel Spearing , Newham South

This is the needle point which the Secretary of State picked up during my remarks. Has the right hon. Gentleman not taken the point on board? Will he reply to the point raised by my hon. Friend the Member for Blackburn (Mr. Straw) that clause 6(4) is prospective? The wording of that subsection makes it clear: before or after the passing of this Act, purporting to have a contrary effect in respect of the effects of the whole of clause 6 which relates to the complicated provisions in schedule 2. Is that not prospective?

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

Hitherto, I have been talking about clause 4. I was about to refer to clause 6, which is a rather different point, as I said on the first occasion. I must make it clear to the House that the Bill proposes that rate limitation and a pre-set limitation should be instituted by the schedule, which specifies both the authorities and the rate limits by reference to clause 6(3). That makes the Government's intention absolutely clear.

If the House passes the Bill to become an Act, those authorities and those expenditure limits, as amended or not by Parliament, will indeed be the statute law on rate limitation. Therefore, any concept that there can be a challenge to decisions in the courts is a challenge to Parliament because Parliament will have enacted the legislation and these will be the provisions.

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

Let me complete my point. Any challenge may or may not take place both as to the designation—the Islington case—and as to any other matter to do with rate capping—the Greenwich case. Whatever happens in those cases, it must be superimposed by the statute power in the Bill to limit the rates or precepts of those authorities, and that must override any court action that takes place beforehand.

Photo of Mr Chris Smith Mr Chris Smith , Islington South and Finsbury

With respect, the Secretary of State is talking nonsense. Any subsequent challenge to the designation or rate capping of a specific authority would be a challenge not to Parliament but to the exercise by the Secretary of State of general powers that are given to him by this statute and, in part, included in schedule 2, which does not specify individual authorities, except in a number of specific cases. It does not specify actual figures but it specifies formulae that will be subject to a report or an order to be tabled by the Secretary of State giving his administrative decision.

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

The hon. Gentleman is right. The point made by the hon. Member for Denton and Reddish (Mr. Bennett) is valid, too. Orders will be made after the passage of the Bill, which will be subject to the statutory instruments scrutiny procedures and will have the back-up of the courts, but they will be made under the Act—if, by then, it is an Act—and, therefore, the powers in the Act will enable those orders to be legal, and the courts will have to interpret them, if there is a challenge. They will be made under the powers of this legislation and not under the Rates Act 1984.

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

I refer the Secretary of State to the point that he made a moment ago. He said that the Bill had to be made judge-proof because a challenge to the courts would be a challenge not to Ministers but to Parliament. With great respect, it is a challenge, as it were, to the authority or to the nature of decisions made by Parliament and embodied in statute that forms the basis of every single application for judicial review. If what the Secretary of State said is right, he should argue that there should be no judicial review. Does the Secretary of State not understand that judicial review is about challenging the use of statutes, either by Ministers or by other people who have powers under statute?

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

The hon. Gentleman still does not seem to understand. If the Bill becomes an Act, the provisions about rate limitations will have statutory force. Does the hon. Gentleman agree with that? If, in some way, there is to be a challenge to the present proposals on rate limitation, it will be prohibited only if the Bill becomes law. Clause 6 will not come into effect until the Bill becomes law. If, on the other hand, the Bill does not become law, there will be no restriction to the right to challenge. If the Bill becomes law, the rate-capping procedures will be as they are in the Bill, and the limits are there, so there is no conceivable point in a challenge that will be overtuned by the Bill. If the Bill does not become law, the challenge will not be upset. Of those Opposition Members who spoke in Committee——

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

No, I shall not give way. I have already given way a great deal. A respectable number of Opposition Members did not hear my first speech and can be forgiven for having got it wrong. A less respectable number of Opposition Members heard my first speech but they have persisted in getting it wrong. Furthermore, the hon. Member for Blackburn realised that the Opposition were making a completely bogus point and climbed down.

Question put, That the amendment be made:—

The Committee divided: Ayes 177, Noes 232.

Division No. 58][9.05 pm
AYES
Abse, LeoBenn, Rt Hon Tony
Adams, Allen (Paisley N)Bennett, A. (Dent'n & Red'sh)
Alton, DavidBermingham, Gerald
Anderson, DonaldBidwell, Sydney
Archer, Rt Hon PeterBlair, Anthony
Ashley, Rt Hon JackBoyes, Roland
Ashton, JoeBray, Dr Jeremy
Atkinson, N. (Tottenham)Brown, Gordon (D'f'mline E)
Bagier, Gordon A. T.Brown, Hugh D. (Pro van)
Banks, Tony (Newham NW)Brown, N. (N'c'tle-u-Tyne E)
Barron, KevinBrown, R. (N'c'tle-u-Tyne N)
Beckett, Mrs MargaretBruce, Malcolm
Bell, StuartBuchan, Norman
Caborn, RichardMcCartney, Hugh
Callaghan, Jim (Heyw'd & M)McDonald, Dr Oonagh
Campbell, IanMcKay, Allen (Penistone)
Canavan, DennisMcNamara, Kevin
Carter-Jones, LewisMcTaggart, Robert
Cartwright, JohnMcWilliam, John
Clark, Dr David (S Shields)Madden, Max
Clarke, ThomasMarek, Dr John
Clelland, David GordonMarshall, David (Shettleston)
Clwyd, Mrs AnnMartin, Michael
Cocks, Rt Hon M. (Bristol S)Mason, Rt Hon Roy
Cohen, HarryMaxton, John
Coleman, DonaldMaynard, Miss Joan
Conlan, BernardMeacher, Michael
Cook, Frank (Stockton North)Meadowcroft, Michael
Cox, Thomas (Tooting)Michie, William
Crowther, StanMikardo, Ian
Cunliffe, LawrenceMitchell, Austin (G't Grimsby)
Cunningham, Dr JohnNellist, David
Dalyell, TamOakes, Rt Hon Gordon
Davies, Ronald (Caerphilly)O'Brien, William
Davis, Terry (B'ham, H'ge H'l)O'Neill, Martin
Deakins, EricOrme, Rt Hon Stanley
Dewar, DonaldPark, George
Dixon, DonaldParry, Robert
Dobson, FrankPatchett, Terry
Dormand, JackPavitt, Laurie
Douglas, DickPendry, Tom
Dubs, AlfredPowell, Raymond (Ogmore)
Dunwoody, Hon Mrs G.Prescott, John
Eadie, AlexRadice, Giles
Eastham, KenRandall, Stuart
Evans, John (St. Helens N)Raynsford, Nick
Fatchett, DerekRedmond, Martin
Field, Frank (Birkenhead)Rees, Rt Hon M. (Leeds S)
Fields, T. (L'pool Broad Gn)Richardson, Ms Jo
Fisher, MarkRoberts, Allan (Bootle)
Flannery, MartinRobinson, G. (Coventry NW)
Foot, Rt Hon MichaelRogers, Allan
Forrester, JohnRooker, J. W.
Foster, DerekRoss, Ernest (Dundee W)
Fraser, J. (Norwood)Rowlands, Ted
Freeson, Rt Hon ReginaldSheerman, Barry
Freud, ClementSheldon, Rt Hon R.
Garrett, W. E.Shields, Mrs Elizabeth
George, BruceShore, Rt Hon Peter
Gilbert, Rt Hon Dr JohnShort, Ms Clare (Ladywood)
Golding, Mrs LlinShort, Mrs R.(W'hampt'n NE)
Gould, BryanSilkin, Rt Hon J.
Gourlay, HarrySkinner, Dennis
Hamilton, James (M'well N)Smith, C.(Isl'ton S & F'bury)
Hancock, MichaelSmith, Rt Hon J. (M'ds E)
Hardy, PeterSnape, Peter
Harrison, Rt Hon WalterSoley, Clive
Hart, Rt Hon Dame JudithSpearing, Nigel
Hattersley, Rt Hon RoySteel, Rt Hon David
Heffer, Eric S.Stewart, Rt Hon D. (W Isles)
Hogg, N. (C'nauld & Kilsyth)Stott, Roger
Holland, Stuart (Vauxhall)Straw, Jack
Home Robertson, JohnThomas, Dr R. (Carmarthen)
Howell, Rt Hon D. (S'heath)Thompson, J. (Wansbeck)
Howells, GeraintThorne, Stan (Preston)
Hoyle, DouglasTorney, Tom
Hughes, Robert (Aberdeen N)Wainwright, R.
Hughes, Roy (Newport East)Wallace, James
John, BrynmorWardell, Gareth (Gower)
Jones, Barry (Alyn & Deeside)Weetch, Ken
Kaufman, Rt Hon GeraldWelsh, Michael
Lambie, DavidWhite, James
Lamond, JamesWilliams, Rt Hon A.
Leadbitter, TedWilson, Gordon
Leighton, RonaldWinnick, David
Lewis, Terence (Worsley)Woodall, Alec
Litherland, RobertYoung, David (Bolton SE)
Livsey, Richard
Lloyd, Tony (Stretford)Tellers for the Ayes:
Lofthouse, GeoffreyMr. Frank Haynes and
Loyden, EdwardMr. Sean Hughes.
NOES
Alexander, RichardHunt, David (Wirral W)
Ancram, MichaelHunt, John (Ravensbourne)
Aspinwall, JackHunter, Andrew
Baker, Rt Hon K. (Mole Vall'y)Irving, Charles
Best, KeithJackson, Robert
Biffen, Rt Hon JohnJessel, Toby
Body, Sir RichardJones, Gwilym (Cardiff N)
Bottomley, PeterJones, Robert (Herts W)
Boyson, Dr RhodesJoseph, Rt Hon Sir Keith
Brown, M. (Brigg & Cl'thpes)Kershaw, Sir Anthony
Browne, JohnKey, Robert
Bruinvels, PeterKing, Roger (B'ham N'field)
Buchanan-Smith, Rt Hon A.Knight, Greg (Derby N)
Butler, Rt Hon Sir AdamKnight, Dame Jill (Edgbaston)
Chope, ChristopherKnowles, Michael
Cockeram, EricKnox, David
Coombs, SimonLamont, Rt Hon Norman
Cope, JohnLang, Ian
Currie, Mrs EdwinaLatham, Michael
Dorrell, StephenLawler, Geoffrey
Douglas-Hamilton, Lord J.Lawrence, Ivan
Fallon, MichaelLee, John (Pendle)
Farr, Sir JohnLeigh, Edward (Gainsbor'gh)
Fenner, Dame PeggyLennox-Boyd, Hon Mark
Finsberg, Sir GeoffreyLester, Jim
Fletcher, Sir AlexanderLewis, Sir Kenneth (Stamf'd)
Fookes, Miss JanetLightbown, David
Forman, NigelLilley, Peter
Forsyth, Michael (Stirling)Lloyd, Sir Ian (Havant)
Forth, EricLloyd, Peter (Fareham)
Fox, Sir MarcusLord, Michael
Franks, CecilLyell, Nicholas
Fraser, Peter (Angus East)McCrindle, Robert
Freeman, RogerMacfarlane, Neil
Gale, RogerMacGregor, Rt Hon John
Galley, RoyMaclean, David John
Gardiner, George (Reigate)McLoughlin, Patrick
Glyn, Dr AlanMcNair-Wilson, M. (N'bury)
Goodlad, AlastairMcNair-Wilson, P. (New F'st)
Gow, IanMcQuarrie, Albert
Gower, Sir RaymondMadel, David
Grant, Sir AnthonyMajor, John
Greenway, HarryMalins, Humfrey
Griffiths, Sir EldonMalone, Gerald
Griffiths, Peter (Portsm'th N)Maples, John
Grist, IanMarland, Paul
Ground, PatrickMarlow, Antony
Grylls, MichaelMarshall, Michael (Arundel)
Hamilton, Hon A. (Epsom)Mates, Michael
Hamilton, Neil (Tatton)Mather, Sir Carol
Hampson, Dr KeithMaude, Hon Francis
Hanley, JeremyMaxwell-Hyslop, Robin
Hannam, JohnMerchant, Piers
Hargreaves, KennethMeyer, Sir Anthony
Harris, DavidMills, Iain (Meriden)
Haselhurst, AlanMills, Sir Peter (West Devon)
Havers, Rt Hon Sir MichaelMoate, Roger
Hawkins, C. (High Peak)Monro, Sir Hector
Hawkins, Sir Paul (N'folk SW)Montgomery, Sir Fergus
Hawksley, WarrenMorris, M. (N'hampton S)
Hayes, J.Morrison, Hon P. (Chester)
Hayhoe, Rt Hon Sir BarneyMoynihan, Hon C.
Hayward, RobertMudd, David
Heathcoat-Amory, DavidNeale, Gerrard
Henderson, BarryNelson, Anthony
Hickmet, RichardNicholls, Patrick
Hicks, RobertOnslow, Cranley
Higgins, Rt Hon Terence L.Oppenheim, Phillip
Hill, JamesOttaway, Richard
Hind, KennethPage, Sir John (Harrow W)
Hirst, MichaelPage, Richard (Herts SW)
Hogg, Hon Douglas (Gr'th'm)Parkinson, Rt Hon Cecil
Holland, Sir Philip (Gedling)Patten, J. (Oxf W & Abgdn)
Holt, RichardPawsey, James
Howarth, Alan (Stratf'd-on-A)Pollock, Alexander
Howarth, Gerald (Cannock)Porter, Barry
Howell, Rt Hon D. (G'ldford)Portillo, Michael
Howell, Ralph (Norfolk, N)Powell, William (Corby)
Hubbard-Miles, PeterPowley, John
Price, Sir DavidSumberg, David
Proctor, K. HarveyTapsell, Sir Peter
Raffan, KeithTaylor, John (Solihull)
Raison, Rt Hon TimothyTebbit, Rt Hon Norman
Rathbone, TimTemple-Morris, Peter
Rhodes James, RobertTerlezki, Stefan
Ridley, Rt Hon NicholasThomas, Rt Hon Peter
Ridsdale, Sir JulianThompson, Donald (Calder V)
Rippon, Rt Hon GeoffreyThompson, Patrick (N'ich N)
Roberts, Wyn (Conwy)Thornton, Malcolm
Robinson, Mark (N'port W)Thurnham, Peter
Roe, Mrs MarionTownend, John (Bridlington)
Rossi, Sir HughTownsend, Cyril D. (B'heath)
Rost, PeterTrippier, David
Rowe, AndrewTwinn, Dr Ian
Ryder, Richardvan Straubenzee, Sir W.
Sackville, Hon ThomasVaughan, Sir Gerard
Sainsbury, Hon TimothyWaddington, Rt Hon David
Sayeed, JonathanWaldegrave, Hon William
Shaw, Giles (Pudsey)Walker, Bill (T'side N)
Shaw, Sir Michael (Scarb')Waller, Gary
Shelton, William (Streatham)Wardle, C. (Bexhill)
Shepherd, Richard (Aldridge)Watson, John
Shersby, MichaelWatts, John
Silvester, FredWells, Sir John (Maidstone)
Skeet, Sir TrevorWheeler, John
Smith, Sir Dudley (Warwick)Whitfield, John
Smith, Tim (Beaconsfield)Whitney, Raymond
Speed, KeithWiggin, Jerry
Spencer, DerekWilkinson, John
Spicer, Jim (Dorset W)Wolfson, Mark
Spicer, Michael (S Worcs)Wood, Timothy
Squire, RobinWoodcock, Michael
Stevens, Lewis (Nuneaton)Yeo, Tim
Stewart, Allan (Eastwood)Young, Sir George (Acton)
Stewart, Andrew (Sherwood)
Stewart, Ian (Hertf'dshire N)Tellers for the Noes:
Stokes, JohnMr. Michael Neubert and
Stradling Thomas, Sir JohnMr. Tony Durant.

Amendment proposed: No. 2B, in page 1, line 16, at end insert— '(1A) Subsection 1 of this section shall come into effect after the making of an Order by the Secretary of State, and no such Order shall come into effect until after the laying before Parliament by the Secretary of State of a report setting out the dates, and any other details which he may consider relevant, of the legal advice received by him prior to the introduction of this Act with respect to the legal interpretation of "relevant" and "total" expenditure for Rate Support Grant purposes.'.—[Dr. Cunningham.]

Question put, That the amendment be made:—

The Committee divided: Ayes 180, Noes 230.

Division No. 59][9.18 pm
AYES
Abse, LeoBrown, R. (N'c'tle-u-Tyne N)
Adams, Allen (Paisley N)Bruce, Malcolm
Alton, DavidBuchan, Norman
Anderson, DonaldCaborn, Richard
Archer, Rt Hon PeterCallaghan, Jim (Heyw'd & M)
Ashley, Rt Hon JackCampbell, Ian
Ashton, JoeCanavan, Dennis
Atkinson, N. (Tottenham)Carter-Jones, Lewis
Bagier, Gordon A. T.Cartwright, John
Banks, Tony (Newham NW)Clark, Dr David (S Shields)
Barron, KevinClarke, Thomas
Beckett, Mrs MargaretClay, Robert
Bell, StuartClelland, David Gordon
Benn, Rt Hon TonyClwyd, Mrs Ann
Bennett, A. (Dent'n & Red'sh)Cocks, Rt Hon M. (Bristol S)
Bermingham, GeraldCohen, Harry
Bidwell, SydneyColeman, Donald
Blair, AnthonyConlan, Bernard
Boyes, RolandCook, Frank (Stockton North)
Bray, Dr JeremyCorbyn, Jeremy
Brown, Gordon (D'f'mline E)Cox, Thomas (Tooting)
Brown, Hugh D. (Provan)Crowther, Stan
Brown, N. (N'c'tle-u-Tyne E)Cunliffe, Lawrence
Cunningham, Dr JohnMarshall, David (Shettleston)
Dalyell, TamMartin, Michael
Davies, Ronald (Caerphilly)Mason, Rt Hon Roy
Davis, Terry (B'ham, H'ge H'l)Maxton, John
Deakins, EricMaynard, Miss Joan
Dewar, DonaldMeacher, Michael
Dixon, DonaldMeadowcroft, Michael
Dobson, FrankMichie, William
Dormand, JackMikardo, Ian
Douglas, DickMitchell, Austin (G't Grimsby)
Dubs, AlfredNellist, David
Dunwoody, Hon Mrs G.Oakes, Rt Hon Gordon
Eadie, AlexO'Brien, William
Eastham, KenO'Neill, Martin
Evans, John (St. Helens N)Orme, Rt Hon Stanley
Fatchett, DerekPark, George
Field, Frank (Birkenhead)Parry, Robert
Fields, T. (L'pool Broad Gn)Patchett, Terry
Fisher, MarkPavitt, Laurie
Flannery, MartinPendry, Tom
Foot, Rt Hon MichaelPowell, Raymond (Ogmore)
Forrester, JohnPrescott, John
Foster, DerekRadice, Giles
Fraser, J. (Norwood)Randall, Stuart
Freeson, Rt Hon ReginaldRaynsford, Nick
Freud, ClementRedmond, Martin
Garrett, W. E.Rees, Rt Hon M. (Leeds S)
George, BruceRichardson, Ms Jo
Gilbert, Rt Hon Dr JohnRoberts, Allan (Bootle)
Golding, Mrs LlinRobinson, G. (Coventry NW)
Gould, BryanRogers, Allan
Gourlay, HarryRooker, J. W.
Hamilton, James (M'well N)Ross, Ernest (Dundee W)
Hancock, MichaelRowlands, Ted
Hardy, PeterSheerman, Barry
Harrison, Rt Hon WalterSheldon, Rt Hon R.
Hart, Rt Hon Dame JudithShields, Mrs Elizabeth
Hattersley, Rt Hon RoyShore, Rt Hon Peter
Heffer, Eric S.Short, Ms Clare (Ladywood)
Hogg, N. (C'nauld & Kilsyth)Short, Mrs R.(W'hampt'n NE)
Holland, Stuart (Vauxhall)Silkin, Rt Hon J.
Home Robertson, JohnSkinner, Dennis
Howell, Rt Hon D. (S'heath)Smith, Rt Hon J. (M'ds E)
Howells, GeraintSnape, Peter
Hoyle, DouglasSoley, Clive
Hughes, Robert (Aberdeen N)Spearing, Nigel
Hughes, Roy (Newport East)Steel, Rt Hon David
Hughes, Sean (Knowsley S)Stewart, Rt Hon D. (W Isles)
John, BrynmorStott, Roger
Jones, Barry (Alyn & Deeside)Straw, Jack
Kaufman, Rt Hon GeraldThomas, Dr R. (Carmarthen)
Lambie, DavidThompson, J. (Wansbeck)
Lamond, JamesThorne, Stan (Preston)
Leadbitter, TedTorney, Tom
Leighton, RonaldWainwright, R.
Lewis, Terence (Worsley)Wallace, James
Litherland, RobertWardell, Gareth (Gower)
Livsey, RichardWeetch, Ken
Lloyd, Tony (Stretford)Welsh, Michael
Lofthouse, GeoffreyWhite, James
Loyden, EdwardWilliams, Rt Hon A.
McCartney, HughWilson, Gordon
McDonald, Dr OonaghWinnick, David
McKay, Allen (Penistone)Woodall, Alec
McNamara, KevinYoung, David (Bolton SE)
McTaggart, Robert
McWilliam, JohnTellers for the Ayes:
Madden, MaxMr. Frank Haynes and
Marek, Dr JohnMr. Chris Smith.
NOES
Alexander, RichardBrowne, John
Ancram, MichaelBruinvels, Peter
Baker, Rt Hon K. (Mole Vall'y)Buchanan-Smith, Rt Hon A.
Best, KeithButler, Rt Hon Sir Adam
Biffen, Rt Hon JohnChope, Christopher
Body, Sir RichardCockeram, Eric
Bottomley, PeterCoombs, Simon
Boyson, Dr RhodesCope, John
Brown, M. (Brigg & Cl'thpes)Currie, Mrs Edwina
Dorrell, StephenLawrence, Ivan
Douglas-Hamilton, Lord J.Lee, John (Pendle)
Durant, TonyLeigh, Edward (Gainsbor'gh)
Fallon, MichaelLester, Jim
Farr, Sir JohnLewis, Sir Kenneth (Stamf'd)
Fenner, Dame PeggyLilley, Peter
Finsberg, Sir GeoffreyLloyd, Sir Ian (Havant)
Fletcher, Sir AlexanderLloyd, Peter (Fareham)
Fookes, Miss JanetLord, Michael
Forman, NigelLyell, Nicholas
Forsyth, Michael (Stirling)McCrindle, Robert
Forth, EricMacfarlane, Neil
Fox, Sir MarcusMacGregor, Rt Hon John
Franks, CecilMaclean, David John
Fraser, Peter (Angus East)McLoughlin, Patrick
Freeman, RogerMcNair-Wilson, M. (N'bury)
Gale, RogerMcNair-Wilson, P. (New F'st)
Galley, RoyMcQuarrie, Albert
Gardiner, George (Reigate)Madel, David
Glyn, Dr AlanMajor, John
Goodlad, AlastairMalins, Humfrey
Gow, IanMalone, Gerald
Gower, Sir RaymondMaples, John
Grant, Sir AnthonyMarland, Paul
Greenway, HarryMarlow, Antony
Griffiths, Sir EldonMarshall, Michael (Arundel)
Griffiths, Peter (Portsm'th N)Mates, Michael
Grist, IanMather, Sir Carol
Ground, PatrickMaude, Hon Francis
Grylls, MichaelMaxwell-Hyslop, Robin
Hamilton, Hon A. (Epsom)Merchant, Piers
Hamilton, Neil (Tatton)Meyer, Sir Anthony
Hampson, Dr KeithMills, Iain (Meriden)
Hanley, JeremyMills, Sir Peter (West Devon)
Hannam, JohnMoate, Roger
Hargreaves, KennethMonro, Sir Hector
Harris, DavidMontgomery, Sir Fergus
Haselhurst, AlanMorris, M. (N'hampton S)
Havers, Rt Hon Sir MichaelMorrison, Hon P. (Chester)
Hawkins, C. (High Peak)Moynihan, Hon C.
Hawkins, Sir Paul (N'folk SW)Mudd, David
Hawksley, WarrenNeale, Gerrard
Hayes, J.Nelson, Anthony
Hayhoe, Rt Hon Sir BarneyNeubert, Michael
Hayward, RobertNicholls, Patrick
Heathcoat-Amory, DavidOnslow, Cranley
Henderson, BarryOppenheim, Rt Hon Mrs S.
Hickmet, RichardOttaway, Richard
Hicks, RobertPage, Sir John (Harrow W)
Higgins, Rt Hon Terence L.Page, Richard (Herts SW)
Hill, JamesParkinson, Rt Hon Cecil
Hind, KennethPawsey, James
Hogg, Hon Douglas (Gr'th'm)Pollock, Alexander
Holland, Sir Philip (Gedling)Porter, Barry
Holt, RichardPortillo, Michael
Howarth, Alan (Stratf'd-on-A)Powell, William (Corby)
Howarth, Gerald (Cannock)Powley, John
Howell, Rt Hon D. (G'ldford)Price, Sir David
Howell, Ralph (Norfolk, N)Proctor, K. Harvey
Hubbard-Miles, PeterRaffan, Keith
Hunt, David (Wirral W)Raison, Rt Hon Timothy
Hunt, John (Ravensbourne)Rathbone, Tim
Hunter, AndrewRhodes James, Robert
Irving, CharlesRidley, Rt Hon Nicholas
Jackson, RobertRidsdale, Sir Julian
Jessel, TobyRippon, Rt Hon Geoffrey
Jones, Gwilym (Cardiff N)Roberts, Wyn (Conwy)
Jones, Robert (Herts W)Robinson, Mark (N'port W)
Joseph, Rt Hon Sir KeithRoe, Mrs Marion
Kershaw, Sir AnthonyRossi, Sir Hugh
Key, RobertRost, Peter
King, Roger (B'ham N'field)Rowe, Andrew
Knight, Greg (Derby N)Ryder, Richard
Knight, Dame Jill (Edgbaston)Sackville, Hon Thomas
Knowles, MichaelSainsbury, Hon Timothy
Knox, DavidSayeed, Jonathan
Lamont, Rt Hon NormanShaw, Giles (Pudsey)
Lang, IanShaw, Sir Michael (Scarb')
Latham, MichaelShelton, William (Streatham)
Lawler, GeoffreyShepherd, Richard (Aldridge)
Shersby, MichaelTownend, John (Bridlington)
Silvester, FredTownsend, Cyril D. (B'heath)
Skeet, Sir TrevorTrippier, David
Smith, Sir Dudley (Warwick)Twinn, Dr Ian
Smith, Tim (Beaconsfield)van Straubenzee, Sir W.
Speed, KeithVaughan, Sir Gerard
Spencer, DerekWaddington, Rt Hon David
Spicer, Jim (Dorset W)Waldegrave, Hon William
Spicer, Michael (S Worcs)Walker, Bill (T'side N)
Squire, RobinWaller, Gary
Stanley, Rt Hon JohnWardle, C. (Bexhill)
Stevens, Lewis (Nuneaton)Watson, John
Stewart, Allan (Eastwood)Watts, John
Stewart, Andrew (Sherwood)Wells, Sir John (Maidstone)
Stewart, Ian (Hertf'dshire N)Wheeler, John
Stokes, JohnWhitfield, John
Stradling Thomas, Sir JohnWhitney, Raymond
Sumberg, DavidWiggin, Jerry
Tapsell, Sir PeterWilkinson, John
Taylor, John (Solihull)Wolfson, Mark
Tebbit, Rt Hon NormanWood, Timothy
Temple-Morris, PeterWoodcock, Michael
Terlezki, StefanYeo, Tim
Thomas, Rt Hon PeterYoung, Sir George (Acton)
Thompson, Donald (Calder V)
Thompson, Patrick (N'ich N)Tellers for the Noes:
Thornton, MalcolmMr. Mark Lennox-Boyd and
Thurnham, PeterMr. David Lightbown.

Question accordingly negatived.

Photo of Mr John Fraser Mr John Fraser , Norwood 9:30 pm, 19th January 1987

I beg to move amendment No. 5, in page 2, line 3, leave out subsections (3), (4) and (5).

This is not a mere probing amendment. If we are not satisfied with the Government's explanation for the presence of the subsections, we reserve the right to call a Division on it.

These are complex matters. Clause 1 is largely to do with the accountancy aspect of block grant and rate support grant. It may be helpful if I say something about what I understand to be the background to this matter. Since 1980, especially since the passage of the Rates Act 1984, the Government have had the notion that the more a council spends above a defined limit on the care, protection and welfare of its citizens, the more it should be penalised in the withdrawal of central Government assistance.

This has happened in my borough. I am sorry that I cannot give other examples, but there was not time to gather the facts on them. The time available has been extremely limited. On the principle of the more one needs, the less one gets, between 1979 and 1985, Lambeth lost grant totalling £113 million. In my borough—this is repeated in other places, such as Liverpool—in some years the penalty suffered has exceeded the inner city partnership allocation received by it. Despite the fact that the borough has been racked by unemployment, riot, homelessness and poverty, we are penalised for facing our responsibilities. The same is true of many other hard-pressed inner-city boroughs.

The measure of a council's profligacy in dealing with the problems which it faces—according to the Government, at any rate—is the rate revenue account. The Secretary of State is saying that some councils have invented an artificial income to disguise the true level of their expenditure. The clause will give the Secretary of State the power to regulate the contents of the income and the expenditure sides of the rate revenue account.

This is an odd development. If a person on supplementary benefit came into our advice bureaux and exaggerated his income and minimised his expenditure as a supplementary benefit claimant, we would think that he was taking leave of his senses. But such is the Alice-in-Wonderland world of local government finance that ostensible parsimony is rewarded. We are told that local authorities have been disguising their budgets by adding income to show that they are spending less money than they are. The Secretary of State should reward not notional parsimony but real parsimony by taking out what he regards as artificial items of income.

Subsections (3), (4) and (5), which we propose to leave out of the Bill, have not yet been amended by Government amendments. The Government amendments talk about "defined revenue expenditure" and "defined revenue income". It would be helpful during the debate on this amendment or on the next group of amendments if the Government told us what they mean by those terms.

Clause 2 gives the Secretary of State the power to specify what is and is not income and expenditure. In other words, he can alter the rules. Indeed, clause 2(4) states that he can define income and expenditure for "any" year. I presume that clause 2(4) means that he can act retrospectively or prospectively in specifying income and expenditure.

The wording of the Government amendments is curious. They do not use the phrase "specified expenditure" or "specified income", but "defined revenue income" or "defined revenue expenditure". It would be helpful to know why the word "defined" has been chosen. Do we need to consider some other statute or another part of the Bill to discover why the words "defined revenue expenditure" have been used?

Photo of Mr Alf Morris Mr Alf Morris , Manchester Wythenshawe

The Secretary of State does not know, but clearly they mean what he says they mean.

Photo of Mr John Fraser Mr John Fraser , Norwood

My hon. Friend says that they mean what the Secretary of State says they mean. Clause 2(4) makes it clear that income and expenditure are exactly what the Secretary of State chooses to specify. In choosing to specify their meaning in that way, the Secretary of State is not subject to any sort of parliamentary challenge, and is not obliged to submit any kind of order or regulation to the House, and the matter is therefore removed entirely from the control of this House.

I should like to ask the Government several questions about the accountancy provisions because, although they refer to "defined revenue expenditure" and "defined revenue income", they leave the Minister to decide exactly what is income and what is expenditure. The Government already have the power to prescribe forms for accounting and block grant purposes in the Local Government, Planning and Land Act 1980.

Will the Minister tell the House why the Secretary of State is creating new powers to define or specify what is income and expenditure when, for other accounting purposes, those powers already exist in the Local Government, Planning and Land Act?

Secondly, if the Minister is saying that those provisions apply only to the calculation of block grants, can he demonstrate that safeguards exist in the Bill to limit the power of specifying—contained in clause 2(4)—for block grant purposes only, rather than for widely interfering or defining local government accounting?

Thirdly, what assurances can the Minister give concerning the Government's intention to use their powers? Will they be used solely for prescription for block grant purposes, and if they are to be used only for prescribing accountancy provisions for block grant purposes, will the Government accept an amendment providing that the powers are to be limited only to those purposes?

Fourthly, what assurance can the Minister give that the accounting provisions will not be used to pursue a policy of penalising the poor, because clause 2(4) makes it clear that they can be used retrospectively in that way? Clause 1 applies to accountancy provisions for any year, but the definition of expenditure and income given in clause 2(4) can apply to any year.

The provisions of clause 1 are obnoxious because they vest enormous discretion in the Minister without requiring parliamentary approval. That would not be tolerated in any other area of law. It certainly would not be tolerated in company law. If one wants to know what one has to put in one's income and expenditure accounts for the purposes of company law, one can turn to schedule 4 of the Companies Act 1985, where page after page states what should be contained in a balance sheet and what should be put in the income and expenditure or profit and loss accounts. Those matters are clearly defined and are not open, as far as I can see, to amendment by Ministers. They are well-established practices for commercial purposes and that is quite right because, if a Minister had the power to alter the definition of income and expenditure in Companies Acts, that could have a catastrophic effect on the company's tax position, on the profits on which it must pay tax, and on the view taken of the company by shareholders or creditors.

In exactly the same way, the alteration of the definition of income and expenditure under the Bill could well have a catastrophic effect on local authority finances, if the result of those definitions robbed local authorities of the block grant and support that they deserve for their citizens. That would not be tolerated under company law, and it would certainly not be tolerated under tax law because such provisions could be used for punitive purposes.

Let us imagine what would happen if the Treasury took the power to specify proper practices, accounting definitions or definitions of payment in deeds of covenant. Under a deed of convenant, one person promises to pay another person a certain amount of money and, if the recipient does not have any other form of taxable income, the Government subsidises him or her to the tune of 29p in every pound. That is a common arrangement between grandparents and children and especially between parents and adult children in order to provide for them during further education.

Let us imagine that the Treasury had the sort of power that the Department of the Environment is seeking in the Bill. It might say, "Although the deed of covenant has been concluded, the Government have decided that the cost of meeting the deed of covenant is so high that we are proposing that the Government will reimburse only those deeds of covenant that are made for the benefit of children attending public schools rather than for children attending state schools." If anybody were to suggest such a thing, we would all recoil in horror and we would not be willing to accept it.

Photo of Mr John Fraser Mr John Fraser , Norwood

That is no different in principle from what the Government are proposing in the Bill.

The proposals, which, on the face of it, are mainly to do with accountancy, leave far too much discretion to Ministers and allow them to decide the way in which local authorities' accounts turn out and the sort of support they get from the Government. I understand that the Secretary of State was once a Treasury Minister. I suppose that being able to deem things as expenditure, income or otherwise may be a habit that he picked up from the Treasury by dealing with, for example, inheritance tax or capital transfer tax.

There is a story about a senior Treasury draftsman who bought his child a train set for Christmas. When the train set was set up, he found that he had failed to buy a transformer. His child was disappointed at not seeing the trains running. He said, "Don't worry, we do it all the time in the Treasury. These trains are deemed to pass in this direction and the others are deemed to pass in that direction. You should have an enjoyable time."

We object to the Secretary of State's proposition that he should be able to deem various items of expenditure. We do that for serious reasons. It is to do not with dry accountancy but with the needs and requirements of the poor, dispossessed, unemployed and homeless of the boroughs that many of us represent. That is the reason why we oppose the Bill and have tabled our amendments.

Photo of Mr Clive Soley Mr Clive Soley , Hammersmith

I should like to follow up the comments made by my hon. Friend the Member for Norwood (Mr. Fraser). The provisions will affect my council, as I suspect they will affect councils up and down the country. What does the Minister intend to do with the discretion he is given in this clause about the local authorities which, as a result of the recent chaotic weather conditions, will have greatly increased expenditure? Will the Minister compensate the local authorities for the vast amounts of money they have had to pay out as a result of the flooding of houses, burst pipes and emergency services provided day and night?

The Minister tells us in other circumstances that the Government are providing a service that local people want. The truth is that they are not. They have put on to local authorities an increasingly chaotic and manic way of calculating rate support grant. The clause perpetuates that method and, as I understand it, and as my hon. Friend the Member for Norwood has suggested, it gives a degree of discretion to the Minister who must now decide whether he will allow certain extra revenue expenditure.

Let us look at what has happened to some local authorities. I went round my own area yesterday. In one case, 300 houses are available which, largely because of cuts in the housing revenue, have not had satisfactory lagging and have therefore suffered burst pipes with water coming through. There are blocks of flats facing similar problems. The chairman of the housing committee, Councillor Jeff Kenner, has opened certain emergency accommodation. A school was opened and various other emergency measures have been taken. Standpipes were erected when pipes burst and people were taken into emergency accommodation.

At the same time, largely because of the crisis facing homeless people generally, the local authority opened up certain areas to accommodate single homeless people in the London borough of Hammersmith and Fulham. I know that such action has been taken by other local authorities. That will not be cost-free. The Government want such action to be taken and they gave an undertaking in the House to examine the possibility of opening up the tube stations in London to homeless people. If the Government take the position that seriously, presumably they expect local authorities to take precisely the kind of action taken by my local authority and others.

9.45 pm

Will the Minister give me a commitment that expenditure of this type, whether incurred by the borough of Hammersmith and Fulham or by any other local authority, will not be taken into account in any other cuts that the Government may impose on authorities? In other words, will he give a commitment that the Government will make an exception of the special payments being invoked by local authorities at present to pay for the emergency services?

Will the Minister come forward with real money to enable local authorities to absorb the shock that has been imposed upon them by the severe weather and the homeless crisis facing London?

Photo of Dr Rhodes Boyson Dr Rhodes Boyson , Brent North

The comments by the hon. Member for Hammersmith (Mr. Soley) have nothing to do with the clause under consideration. If the hon. Gentleman wants to write to me, he can do so. However, if I were to answer his points, other hon. Members would raise similar questions about their local swimming pools, roofs and the rest. This is not on.

Photo of Dr Rhodes Boyson Dr Rhodes Boyson , Brent North

The hon. Gentleman's comments had nothing to do with the amendment. He has had a good try, he will have earned a mention in the local press and he has done his job. Obviously, he has earned five more votes for the next general election.

Photo of Mr Clive Soley Mr Clive Soley , Hammersmith

The Minister has made a stupid outburst. I have heard the Minister say some stupid things before, but the outburst that he has just made takes some beating.

Local authorities from one end of the country to another are suffering from the problems I have described. I have seen the problems that I have described in my area. However, my area is not unique, unless the Minister believes that the sun does not shine in Hammersmith and Fulham but it does in the rest of the country.

Photo of Dr Rhodes Boyson Dr Rhodes Boyson , Brent North

If the hon. Gentleman wishes to write to me on that point, which has nothing to do with my reply to the clause, he can do so. I am aware of the problems with regard to the weather that exists the length and breadth of the country, in the hon. Gentleman's constituency and in practically every other constituency.

Amendment No. 5 removes three parts of the clause. As the hon. Member for Norwood (Mr. Fraser) said, the provision relates back to the Local Government, Planning and Land Act 1980. The definitions were brought in in the 1981–82 settlement. The definitions of total and relevant expenditure that were accepted were those suggested by the local authority associations as against the recommendations of the Department. The Ministers accepted the recommendations of the local authority associations and they were included. They stood the test of time until the situation arose in which there were certain court cases and different definitions that put at risk not all of the 1980 Act but simply the definitions of relevant and total expenditure.

The hon. Gentleman asked what was defined income. In essence, defined income is all revenue income except items credited to such other accounts as the housing revenue account and defined expenditure is all revenue expenditure except items debited to accounts such as the housing revenue account dealing with housing expenditure. Similarly, we could define total and relevant expenditure——

Photo of Mr John Fraser Mr John Fraser , Norwood

If there is a dispute about what is defined expenditure and income, who decides that dispute, the courts or the Minister?

Photo of Dr Rhodes Boyson Dr Rhodes Boyson , Brent North

If it is not in my brief, I shall reply just the same. I have explained what the Government hold to be the definition of defined expenditure, but if people do not agree with it, it will be challenged. Such words have to be built into the Bill carefully as people have gone over previous legislation with magnifying glasses, and they will do so again.

Clause 1 does not enable the Secretary of State to control what local authorities spend. There is simply a requirement to keep an account. We have defined how the accounts should be kept working within the definitions that I have mentioned.

The hon. Member for Norwood said that this is a probing amendment. If it were accepted, it would be a wrecking amendment and the definitions would be destroyed. We are trying to make the definitions as watertight as possible. The amendment would delete that part of clause 1 which shows the nature of the rate fund revenue account. If amended, clause 1 would no longer serve its purpose of setting up the rate fund revenue account, which is the foundation of the definitions of relevant and total expenditure. The amendment would destroy the very basis of what we are doing, which is to incorporate in statute a method of calculating relevant and total capital expenditure which would allow us to maintain the status quo.

The hon. Member mentioned Lambeth. It spends 33 per cent. above grant-related expenditure. Its rate is 46 per cent. more than its class average. Rent arrears are 39 per cent. of what could be collected in one year, and the Lambeth laundry costs ratepayers £8 a wash as compared with the payment received of £1·50. The hon. Gentleman said that the Bill was Alice in Wonderland. I suggest that such economics is Alice in Wonderland.

Photo of Mr John Fraser Mr John Fraser , Norwood

Now will the Minister reply to the debate?

I asked him who settles the issue if there is a difference of opinion about what is to be defined expenditure for the purpose of income expenditure. We have the word "defined" without any definition.

The Minister asked me why expenditure in Lambeth is rather higher than in some adjoining and more affluent boroughs. The answer has been provided by an independent urban research centre called CES Ltd. It has described what has happened to the inhabitants of Lambeth during the past few years. I can tell the Minister what has gone wrong—we have had a Tory Government.

The average standard of living of 96,000 households in Lambeth, as measured by their gross income before tax, decreased by 5 per cent., allowing for inflation, between 1979 and 1984. During the same period, average income in the country as a whole rose by 4 per cent. There is a 9 per cent. difference between average incomes in Lambeth and the rest of the country.

Unemployment in Lambeth increased from about 5 per cent. in 1979 to 20 per cent. in 1985. There is 25 per cent. male unemployment in the borough. That also has happened since 1979. Lower income households have experienced a decline of 10 per cent. in their income before tax since 1979 and some other groups have experienced a 7 per cent. increase in income. In the category of households of working age that support families, 45 per cent. are represented in the poorest 25 per cent. of the national average. They have experienced a great drop in their incomes. The Minister asked why Lambeth is different. It is because it has been continually impoverished and penalised since we have had a Tory Government. Perhaps the Minister will reply to the real point that I raised in the debate.

Photo of Dr Rhodes Boyson Dr Rhodes Boyson , Brent North

The answer is perfectly straightforward—ultimately it rests with the courts. We have defined what we believe to be the answer in the Bill. The Bill, once it becomes an Act, is dependent for its ultimate analysis on court definitions.

Photo of Mr John Fraser Mr John Fraser , Norwood

Does that mean that the Government will not use clause 2(4) to specify what is income and expenditure? Will it be left to the courts, and will the Minister drop clause 2(4)?

Photo of Dr Rhodes Boyson Dr Rhodes Boyson , Brent North

It is certainly obvious to the dispassionate observer that any Government who are putting a Bill together do so on the basis of the intentions that they wish to achieve. The Bill has come together as a whole and includes the two clauses referred to by the hon. Gentleman. They are part and parcel of the Bill and obviously intended in the way the Bill was drafted by the Government and we hope that the Bill becomes an Act.

Photo of Mike Hancock Mike Hancock , Portsmouth South

We have to ask ourselves whether, before too long, we shall have one local authority after another queueing up to take the Government to court to test the definitions in the Bill. No one would suggest that that was right, and that cannot be the Minister's ambition in his wish to see the Bill pushed through.

I take the Minister back two years when Portsmouth city council was rate-capped. It was the only Conservative local authority to be rate-capped in that year and it was absolutely bewildered. I remember the heartache and crocodile tears of Portsmouth's Conservative politicians. It could not possibly be that the council had spent too much on creating jobs because it had not. It could not be that it had spent too much on creating better housing because it had not. It could not be that it had provided better services for the elderly because it had not. What the council had done, and it was repeated time and time again, was that it had followed, virtually to the letter, the Government's instructions about the way in which local government financing should be accounted for.

It was a bewildering situation wherein the local authority was caught in a net cast out by the Government. Despite repeated attempts by hon. Members representing Portsmouth, the leader of the council, and the Conservative Association of Portsmouth to find out why the council had been rate-capped, a satisfactory explanation has never been received.

The suggestion is that Portsmouth was only caught in that net because the Government had missed Sheffield the first time round. The only way in which they would get Sheffield in the rate-cap net was to extend that net slightly further and in doing so they embraced Portsmouth. Thus the Government killed two birds with one stone and claimed that rate capping was an impartial, unbiased selection of local authorities—Labour-controlled Sheffield and Conservative-controlled Portsmouth. It was to be seen as the Government's bipartisan approach to local government finance.

Why do we need further controls? The clauses use the words "proper practices". I would be interested if the Minister could explain what proper practice means. What is intended by those words? How will that phrase be defined in Government terms?

Under existing law auditors are already required to make sure that local councils conduct their accounting in a proper way. Is the Minister saying that that law is inefficient? If so, surely the Government should get their own house in order. Very few hon. Members would disagree that Government accounting leaves a lot to be desired. Creative accountability is not solely in the domain of local government.

Surely over the past two years we have recognised that the Government are extremely clever in their creative accounting when it comes to trying to hide or shift responsibility. They have tried privatisation and contracting out various types of work, and shifting capital to revenue is a classic example. If they were subjected to the same scrutiny as that which is suggested for local government, the Committee would be surprised at some of the results. I hope that at some other time the Minister will try to use what influence he has to suggest that a similar exercise could be carried out.

What is wrong with the current system and the accountability and the way in which local government finance is put together and checked? If the Minister thinks that auditors are not doing a proper job now, how will he define——

It being Ten o'clock, The CHAIRMAN left the Chair to report progress and ask leave to sit again.

Committee report Progress.