Local Government Finance Bill

Clause 1 – in the House of Commons at 10:30 pm on 19th January 1987.

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Photo of Mr Kenneth Hind Mr Kenneth Hind , West Lancashire 10:30 pm, 19th January 1987

It is ironic that an hon. Member representing Merseyside—the hon. Member for Bootle (Mr. Roberts)—should move a motion on proper accounting practices. I am sure that he is an expert on the financing practices of Liverpool, which seem to fall into line with many of the practices of some of the London boroughs immediately adjacent to the House of Commons. It is clear that proper accounting practices seem to have passed by most of those authorities. There are 5·8 million voters who live under these councils and it is our duty to protect them. That is why this clause and the others that follow it are necessary.

Photo of Mr Kenneth Hind Mr Kenneth Hind , West Lancashire

No doubt, the hon. Member for Bootle had an opportunity to scrutinise the leaked report by the Audit Commission which was published last Sunday in the Sunday Telegraph. The report considers the problems of Brent, Camden, Hackney, Haringey, Islington, Lambeth, Lewisham and Southwark and says that they are all cases for concern. The report states: The symptoms of poor management are clear: housing in poor condition, failure to act on opportunities to reduce waste, difficulty recruiting and keeping staff and generally poor industrial relations.The consequences are serious, with expenditure double that in similarly deprived areas even after allowing for the extra costs associated with employing people in London; poor services; a cash gap in prospect next year of £500 million—as much as 40 per cent. of current revenue expenditure in some places—and over £700 million of deferred purchase arrangements which will load on future generations of ratepayers the cost of some of today's management failures.

Photo of Mr Kenneth Hind Mr Kenneth Hind , West Lancashire

The hon. Member for Bootle seeks to give the Government advice on how local authorities should be run.

Hon. Members, especially Conservative Members, should bear in mind the report issued on 5 December this year which was headlined in The London Standard and said that London was going broke. It is going broke because Labour authorities throughout Britain are deferring payment on revenue in the hope, according to the leader of Islington council, that a Labour Government will bail them out.

Photo of Mr Kenneth Hind Mr Kenneth Hind , West Lancashire

I give way to the hon. Member for Leeds, West (Mr. Meadowcroft).

Photo of Mr Michael Meadowcroft Mr Michael Meadowcroft , Leeds West

I would express no particular love or support for the accounting practices of the local authorities mentioned by the hon. Gentleman. Perhaps he will answer the questions that I always want to ask Conservative Members who make this point. If these abuses are so blatant, why are the hon. Gentleman and his Conservative friends in those authorities incapable of persuading the voters to throw out the councillors? Why do these 5 million people still live under the type of political control that the hon. Gentleman regards as so reprehensible? Why do the hon. Gentleman and his political colleagues have such an inferiority complex that they believe that it is impossible to get rid of those authorities, except by Government diktat? Is the hon. Gentleman aware that in the Sefton metropolitan district, from which the hon. Member for Bootle (Mr. Roberts) comes, the Conservative party lost control last May? It is a matter not only of dislinking the accounting elsewhere but of the Conservative party not being able to cope locally.

Photo of Mr Kenneth Hind Mr Kenneth Hind , West Lancashire

The Liberal party has the same trouble in dislodging the Labour party in those areas as we do.

Photo of Mr Ron Leighton Mr Ron Leighton , Newham North East

Surely, the hon. Gentleman believes in democracy.

Photo of Mr Kenneth Hind Mr Kenneth Hind , West Lancashire

Of course, we believe in democracy. As I understand it, the hon. Member for Leeds, West (Mr. Meadowcroft) is saying that he deprecates the practices that are followed by those authorities.

Photo of Mr Kenneth Hind Mr Kenneth Hind , West Lancashire

I am glad that the hon. Gentleman agrees. Is he saying that he has the same difficulty in dislodging Labour councillors? Perhaps the hon. Gentleman would agree that by the use of the debating system in the House we shall at least have the opportunity to expose to a much wider audience the bad practices in those authorities.

Photo of Mr Kenneth Hind Mr Kenneth Hind , West Lancashire

If we sit back, do nothing about it and allow it to go on, it will be swept under the carpet by Opposition Front Bench spokesmen who have no control over the people in Labour-controlled local authorities. It is up to us to expose it. The hon. Member for Blackburn (Mr. Straw), who is in the Chamber, went to Liverpool to try to persuade Liverpool council to modify its policies. He was sent back to Westminster with his tail between his legs. That does not bode well for the future if a Labour Government are ever allowed to take office. Those are the factors we have to bear in mind.

Photo of Mr Kenneth Hind Mr Kenneth Hind , West Lancashire 10:45 pm, 19th January 1987

I have nearly finished. The hon. Gentleman can then say his piece.

In the light of the Auditor General's report and the other reports before us about the practices in the bad Left-wing Labour run authorities, how can anybody give Conservative Members a lecture on proper accounting practice?

Photo of Mr Allan Roberts Mr Allan Roberts , Bootle

I do not know which of the practices of Liverpool city council to which the hon. Member for Lancashire, West (Mr. Hind) objects. I do not know whether it is the policy of refusing to put up the rates or its policy of selling off assets so that it can get money for capital receipts. However, may I point out to the hon. Gentleman that I do not represent a Liverpool constituency. I represent Bootle, which is in Sefton. I am concerned about proper practices in local government. However, proper practice in terms of these amendments is about how local authorities organise their accounts, especially those without the rate fund revenue account.

I would be happy to examine the practices of Sefton council when it was Conservative controlled. In the same year as it closed a school for the physically handicapped, it used ratepayers' money to build a statue of Red Rum in Southport.

Photo of Mr Martin Flannery Mr Martin Flannery , Sheffield, Hillsborough

In 1985 the controller of the Audit Commission spoke about Sheffield. He said: The city is well managed and other cities can learn from Sheffield which provides outstanding value for money. Does my hon. Friend think that Sheffield will get any mercy from the Government, no matter how good it was or how good the Audit Commission thought it was?

Photo of Mr Allan Roberts Mr Allan Roberts , Bootle

My hon. Friend is quite right. However, Sheffield Labour council is rewarded by the electors in Sheffield who continue to re-elect overwhelmingly a Labour council.

As I was saying, in the same year as the Sefton Tory council closed learner swimming pools it bought fairy lights for Lord street in Southport with ratepayers' money. In the same year as the school children were sharing text books in the schools the council refused to give discretionary grants to students who obtained places in colleges of further and higher education. Those discretionary grants were provided by every Labour controlled local authority in Merseyside. It was the lowest rated metropolitan district in the country with 30 per cent. unemployment levels. Did the low rates drive the jobs away as we are accused of driving them out of Liverpool and elsewhere.

Photo of Mr Allan Roberts Mr Allan Roberts , Bootle

No, I want to get back to the amendments. Let us have some sensible answers from the Minister. Will he tell us what proper accounting means? Why is it needed when district and other auditors cannot see the need and when there are already necessary checks and balances? Why have the Government got themselves into such a mess that they have to introduce this sort of legislation which takes more powers and rights away from local government and goes further by preventing it from using money it has raised through its own efforts. The Government are now taking control of how the rates are raised, what level they are raised to and how they are spent. In the legislation that we are trying to amend, the Government are taking control of the money raised by local authorities on every account that they run, from the housing revenue account to the money collected from the municipal laundries. Does not the Minister think that that is nonsense?

Photo of Mike Hancock Mike Hancock , Portsmouth South

Yet again we have come full circle to the words "proper practices". I hope that the Minister will now afford the House the pleasure of hearing his interpretation of the meaning of those words. The alliance will support the amendments and I hope that the "Labour" party will force a Division as these points are crucial to the essence of local democracy.

The hon. Member for Lancashire, West (Mr. Hind) referred to the problems that he envisaged would arise through the leaked report from the Audit Commission. He enthused about the ability of the House to talk a local authority out of existence. That was extreme folly. The only way in which local authorities should continue to be put out of power is through the ballot box. The Government's mistaken circus adventure involving the abolition of the metropolitan counties must never be repeated. The hon. Gentleman's "enthusiasm" for that form of local democracy—if that is the right word—is something that the Committee should oppose. I hope that this Conservative Government will learn that the mistake that they made previously by relieving people of a form of local government that they did not like, will ultimately cost more than the Government were hoping to save.

What is wrong with the present system? Why is it so bad that we have to go through this exercise? Time and again alliance Members have tried to get that message across and glean from the Minister what is wrong with local government finance. I am no supporter of the Labour party, but I know that the Under-Secretary of State for the Environment, the hon. Member for Southampton, Itchen (Mr. Chope), would find it difficult to fault the way in which the Labour-controlled authority in Southampton has acted. The people in Southampton find very little to condemn. As a member of the county council, I have strained very hard to find fault with the Labour party line. Undoubtedly it has pushed its credibility to extremes on occasions, but its main financial thrust and the way in which it has controlled expenditure in Southampton is a lesson for us all.

I draw the Under-Secretary of State's attention to the position in Hampshire. He may smile, but would he care to come to the Dispatch Box and tell us about that council which, year in year out, followed the Government's rules to the letter but in which there was a 14 per cent rate increase last year and in which there is predicted to be a 12 per cent. rise this year? Despite the best efforts of the Secretary of State to impose a form of local government on a Conservative-controlled local authority, he has failed miserably. The only way in which the people of Hampshire have benefited in the past 18 months is through the advent of a virtually balanced council. At least they have better services for the increased rates. However, for five or six years they suffered rate increases and received very little, if anything, in return.

The Minister must explain what "proper practices" means and tell us what practices he is so against which so mysteriously and at long last have warranted the Bill. What will the Minister abolish in schedule 1? What will he make it difficult for local authorities to achieve? Will he tell a local authority, which may have an enterprising activity such as a ferry port from which it may derive wide revenue and for which it may have put away money for development, that that reserve fund for future capital expenditure should not exist? Is he claiming that that money should go into the general rate fund and so erode the pressure to rekindle the enthusiasm for jobs in the dock areas or in the inner cities? Will that type of fund no longer be legal? We need to know, because many local authorities gain income from such activities which would no longer be able to go into so many useful things if the Bill were accepted.

The phrase "proper practices" can be defined in many ways, and I hope that the Minister will give us the benefit of his interpretation.

Photo of Dr Rhodes Boyson Dr Rhodes Boyson , Brent North

I do not think that the two and a half sides of the Committee are as far apart here as some speeches have implied.

We all enjoyed listening to my hon. Friend the Member for Lancashire, West (Mr. Hind), who drew attention to the importance of the Audit Commission report, which we will all read carefully when it is published.

Clauses 1 and 2 and schedule 1 set up the rate fund revenue account. The aim is that rate fund revenue accounts should conform to the way in which authorities have generally kept their traditional, but non-statutory, rate fund revenue accounts. Our intention is not to change current practice but, as far as possible, to make the traditional methods more common so that they can be checked. The amendments have that intention as well.

Rate fund revenue accounts might, however, differ from the traditional way in which authorities have kept their main revenue accounts. The amendments would reduce authorities' freedom to keep accounts as they want. I do not believe that that is their intention, and it is not the Government's aim. I ask the Committee to reject the amendment, not because it increases authorities' freedom but because it restricts it. Clauses 1 and 2 and schedule 1 are, as far as possible, based on the best methods used by local authorities.

Question put, That the amendment be made:—

The Committee divided: Ayes 167, Noes 219.

Division No. 60][10.57 pm
Abse, LeoEvans, John (St. Helens N)
Adams, Allen (Paisley N)Fatchett, Derek
Alton, DavidField, Frank (Birkenhead)
Anderson, DonaldFields, T. (L'pool Broad Gn)
Archer, Rt Hon PeterFisher, Mark
Ashley, Rt Hon JackFlannery, Martin
Atkinson, N. (Tottenham)Foot, Rt Hon Michael
Banks, Tony (Newham NW)Forrester, John
Barron, KevinFoster, Derek
Beckett, Mrs MargaretFraser, J. (Norwood)
Bell, StuartFreeson, Rt Hon Reginald
Benn, Rt Hon TonyFreud, Clement
Bidwell, SydneyGarrett, W. E.
Blair, AnthonyGeorge, Bruce
Boyes, RolandGilbert, Rt Hon Dr John
Bray, Dr JeremyGolding, Mrs Llin
Brown, Gordon (D'f'mline E)Gould, Bryan
Brown, Hugh D. (Provan)Hamilton, James (M'well N)
Brown, N. (N'c'tle-u-Tyne E)Hancock, Michael
Brown, R. (N'c'tle-u-Tyne N)Hardy, Peter
Brown, Ron (E'burgh, Leith)Harrison, Rt Hon Walter
Buchan, NormanHart, Rt Hon Dame Judith
Caborn, RichardHeffer, Eric S.
Callaghan, Jim (Heyw'd & M)Hogg, N. (C'nauld & Kilsyth)
Campbell, IanHolland, Stuart (Vauxhall)
Campbell-Savours, DaleHome Robertson, John
Canavan, DennisHowells, Geraint
Carter-Jones, LewisHoyle, Douglas
Clark, Dr David (S Shields)Hughes, Robert (Aberdeen N)
Clarke, ThomasHughes, Roy (Newport East)
Clay, RobertHughes, Sean (Knowsley S)
Clelland, David GordonJohn, Brynmor
Clwyd, Mrs AnnJones, Barry (Alyn & Deeside)
Cocks, Rt Hon M. (Bristol S)Kaufman, Rt Hon Gerald
Cohen, HarryKirkwood, Archy
Coleman, DonaldLambie, David
Conlan, BernardLamond, James
Cook, Frank (Stockton North)Leadbitter, Ted
Corbyn, JeremyLeighton, Ronald
Cox, Thomas (Tooting)Lewis, Terence (Worsley)
Crowther, StanLitherland, Robert
Cunliffe, LawrenceLivsey, Richard
Cunningham, Dr JohnLloyd, Tony (Stretford)
Dalyell, TamLofthouse, Geoffrey
Davis, Terry (B'ham, H'ge H'l)Loyden, Edward
Deakins, EricMcCartney, Hugh
Dewar, DonaldMcDonald, Dr Oonagh
Dixon, DonaldMcGuire, Michael
Dobson, FrankMcKay, Allen (Penistone)
Dormand, JackMcNamara, Kevin
Douglas, DickMcTaggart, Robert
Dubs, AlfredMcWilliam, John
Dunwoody, Hon Mrs G.Madden, Max
Eadie, AlexMarek, Dr John
Eastham, KenMarshall, David (Shettleston)
Martin, MichaelRowlands, Ted
Mason, Rt Hon RoySheerman, Barry
Maxton, JohnSheldon, Rt Hon R.
Maynard, Miss JoanShields, Mrs Elizabeth
Meacher, MichaelShore, Rt Hon Peter
Meadowcroft, MichaelShort, Ms Clare (Ladywood)
Michie, WilliamShort, Mrs R.(W'hampt'n NE)
Mitchell, Austin (G't Grimsby)Silkin, Rt Hon J.
Morris, Rt Hon J. (Aberavon)Skinner, Dennis
Nellist, DavidSmith, C.(Isl'ton S & F'bury)
Oakes, Rt Hon GordonSnape, Peter
O'Brien, WilliamSoley, Clive
O'Neill, MartinSpearing, Nigel
Park, GeorgeSteel, Rt Hon David
Parry, RobertStott, Roger
Patchett, TerryStraw, Jack
Pavitt, LaurieThompson, J. (Wansbeck)
Pendry, TomThorne, Stan (Preston)
Powell, Raymond (Ogmore)Wallace, James
Radice, GilesWardell, Gareth (Gower)
Randall, StuartWelsh, Michael
Raynsford, NickWhite, James
Redmond, MartinWilliams, Rt Hon A.
Rees, Rt Hon M. (Leeds S)Winnick, David
Richardson, Ms JoWoodall, Alec
Roberts, Allan (Bootle)Young, David (Bolton SE)
Roberts, Ernest (Hackney N)
Robinson, G. (Coventry NW)Tellers for the Ayes:
Rogers, AllanMr. Ron Davies and
Rooker, J. W.Mr. Frank Haynes.
Ross, Ernest (Dundee W)
Ancram, MichaelHavers, Rt Hon Sir Michael
Best, KeithHawkins, Sir Paul (N'folk SW)
Biffen, Rt Hon JohnHawksley, Warren
Body, Sir RichardHayes, J.
Bottomley, PeterHayhoe, Rt Hon Sir Barney
Boyson, Dr RhodesHeathcoat-Amory, David
Chope, ChristopherHenderson, Barry
Cockeram, EricHeseltine, Rt Hon Michael
Coombs, SimonHickmet, Richard
Cope, JohnHicks, Robert
Currie, Mrs EdwinaHiggins, Rt Hon Terence L.
Dorrell, StephenHind, Kenneth
Douglas-Hamilton, Lord J.Hirst, Michael
Fallon, MichaelHolland, Sir Philip (Gedling)
Farr, Sir JohnHolt, Richard
Favell, AnthonyHowarth, Alan (Stratf'd-on-A)
Fenner, Dame PeggyHowarth, Gerald (Cannock)
Finsberg, Sir GeoffreyHowell, Rt Hon D. (G'ldford)
Fletcher, Sir AlexanderHowell, Ralph (Norfolk, N)
Fookes, Miss JanetHubbard-Miles, Peter
Forman, NigelHunt, David (Wirral W)
Forsyth, Michael (Stirling)Hunt, John (Ravensbourne)
Forth, EricIrving, Charles
Fox, Sir MarcusJackson, Robert
Franks, CecilJessel, Toby
Fraser, Peter (Angus East)Johnson Smith, Sir Geoffrey
Freeman, RogerJones, Gwilym (Cardiff N)
Gale, RogerJones, Robert (Herts W)
Galley, RoyJoseph, Rt Hon Sir Keith
Gardiner, George (Reigate)Kershaw, Sir Anthony
Glyn, Dr AlanKey, Robert
Goodlad, AlastairKing, Roger (B'ham N'field)
Gow, IanKnight, Greg (Derby N)
Grant, Sir AnthonyKnight, Dame Jill (Edgbaston)
Greenway, HarryKnowles, Michael
Griffiths, Sir EldonKnox, David
Griffiths, Peter (Portsm'th N)Lamont, Rt Hon Norman
Grist, IanLang, Ian
Ground, PatrickLatham, Michael
Grylls, MichaelLawler, Geoffrey
Hamilton, Hon A. (Epsom)Lawrence, Ivan
Hamilton, Neil (Tatton)Lee, John (Pendle)
Hanley, JeremyLeigh, Edward (Gainsbor'gh)
Hannam, JohnLester, Jim
Hargreaves, KennethLightbown, David
Harris, DavidLilley, Peter
Haselhurst, AlanLloyd, Sir Ian (Havant)
Lloyd, Peter (Fareham)Shaw, Giles (Pudsey)
Lord, MichaelShaw, Sir Michael (Scarb')
Lyell, NicholasShelton, William (Streatham)
McCrindle, RobertShepherd, Richard (Aldridge)
Macfarlane, NeilShersby, Michael
MacGregor, Rt Hon JohnSilvester, Fred
Maclean, David JohnSkeet, Sir Trevor
McLoughlin, PatrickSmith, Sir Dudley (Warwick)
McNair-Wilson, M. (N'bury)Smith, Tim (Beaconsfield)
McNair-Wilson, P. (New F'st)Soames, Hon Nicholas
McQuarrie, AlbertSpeed, Keith
Madel, DavidSpencer, Derek
Major, JohnSpicer, Jim (Dorset W)
Malins, HumfreySpicer, Michael (S Worcs)
Malone, GeraldSquire, Robin
Maples, JohnSteen, Anthony
Marland, PaulStevens, Lewis (Nuneaton)
Marlow, AntonyStewart, Allan (Eastwood)
Marshall, Michael (Arundel)Stewart, Andrew (Sherwood)
Mates, MichaelStewart, Ian (Hertf'dshire N)
Mather, Sir CarolStokes, John
Maude, Hon FrancisStradling Thomas, Sir John
Maxwell-Hyslop, RobinSumberg, David
Merchant, PiersTaylor, John (Solihull)
Meyer, Sir AnthonyTaylor, Teddy (S'end E)
Miller, Hal (B'grove)Tebbit, Rt Hon Norman
Mills, Iain (Meriden)Temple-Morris, Peter
Moate, RogerTerlezki, Stefan
Montgomery, Sir FergusThomas, Rt Hon Peter
Morris, M. (N'hampton S)Thompson, Donald (Calder V)
Morrison, Hon P. (Chester)Thompson, Patrick (N'ich N)
Moynihan, Hon C.Thorne, Neil (Ilford S)
Nelson, AnthonyThornton, Malcolm
Neubert, MichaelThurnham, Peter
Nicholls, PatrickTownend, John (Bridlington)
Onslow, CranleyTrippier, David
Oppenheim, Rt Hon Mrs S.Trotter, Neville
Ottaway, RichardTwinn, Dr Ian
Page, Sir John (Harrow W)van Straubenzee, Sir W.
Page, Richard (Herts SW)Vaughan, Sir Gerard
Parkinson, Rt Hon CecilWaddington, Rt Hon David
Patten, J. (Oxf W & Abgdn)Waldegrave, Hon William
Pawsey, JamesWalker, Bill (T'side N)
Pollock, AlexanderWaller, Gary
Porter, BarryWard, John
Powell, William (Corby)Wardle, C. (Bexhill)
Powley, JohnWatts, John
Price, Sir DavidWells, Bowen (Hertford)
Proctor, K. HarveyWells, Sir John (Maidstone)
Raffan, KeithWheeler, John
Rathbone, TimWhitfield, John
Rhodes James, RobertWhitney, Raymond
Rhys Williams, Sir BrandonWiggin, Jerry
Ridley, Rt Hon NicholasWilkinson, John
Ridsdale, Sir JulianWolfson, Mark
Roberts, Wyn (Conwy)Wood, Timothy
Robinson, Mark (N'port W)Woodcock, Michael
Roe, Mrs MarionYeo, Tim
Rossi, Sir HughYoung, Sir George (Acton)
Rost, PeterYounger, Rt Hon George
Rowe, Andrew
Ryder, RichardTellers for the Noes:
Sackville, Hon ThomasMr. Tony Durant and
Sainsbury, Hon TimothyMr. Mark Lennox-Boyd.
Sayeed, Jonathan

Question accordingly negatived.

Amendments made: No. 8, in page 2, line 8, leave out 'The' and insert 'For the purposes of subsection (3) above defined revenue'.

No. 12, in page 2, line 15, leave out 'The' and insert 'For the purposes of subsection (3) above defined revenue'.—[Dr. Boyson.]

Photo of Mr Allan Roberts Mr Allan Roberts , Bootle

I beg to move amendment No. 18, in page 2, line 25, leave out paragraph (b).

To some extent it relates to the debate on the previous amendments on which the Committee has just voted. The amendments that were not accepted—they were defeated in the Lobbies—would have removed the way in which the Government wish local authorities to calculate their proper expenditure. This amendment is even more necessary. It attempts to rectify the legislation. It is not a wrecking amendment, but one that will improve the legislation, and the Government should accept it in that spirit. However, the amendment draws attention to the fact that the Secretary of State is taking even more powers. Clause 1(6)(b) states: any other account specified in respect of the year concerned by the Secretary of State. In other words, again referring to schedule 1, the Secretary of State lists in his legislation 13 accounts that local authorities keep, other than the rate fund account. Schedule 1 starts with the housing revenue account and it includes the housing repairs account. It refers to such accounts as a trading undertaking (whether the undertaking is owned by the authority concerned individually or as a member of a joint committee). It takes account of any trading that can take place not only by the local authority alone but as a member of a joint committee. Such matters as local authority-owned airports are covered. Paragraph 4 refers to Any account of any fund established under section 15(1) of the Public Libraries and Museums Act 1964. Paragraph 5 refers to anything done in regard to goods and services under the Local Authorities (Goods and Services) Act 1970. Paragraph 6 refers to Any account of any fund known as a superannuation fund and maintained under regulations made under section 7 of the Superannuation Act 1972. All that is covered. Paragraph 7 refers to Any account of a loans fund established under paragraph 15 of Schedule 13 to the Local Government Act 1972. It covers a range of accounts that local authorities keep. Paragraph 8 deals with Any account of any fund established under paragraph 16 of Schedule 13 to the Local Government Act 1972. The paragraph covers many other accounts that local authorities keep. Paragraph 9 refers to lottery funds. Sefton council holds a lottery to raise money. From the proceeds of that lottery, the council is able to fund all types of worthwhile, mainly voluntary joint efforts. That will be controlled and proper accounts will have to be kept. Any money raised from a lottery will count against a local authority's expenditure of it. As with money raised from rates, the Government will count money for penalty or for claw-back. Any pound raised from a lottery fund will mean that the local authority could lose another £1 or £2 in rate support grant. That is iniquitous. Paragraph 10 relates to

Any account kept by virtue of section 10(1)(i) of the 1980 Act (direct labour organisations). Any profits made by a direct labour organisation that are spent by a local authority can be clawed hack by way of the grant claw back or penalties. Paragraph 11 relates to Any account kept by virtue of section 55(1) of the Road Traffic Regulation Act 1984 (parking places). Any money raised by virtue of a sensible policy to get revenue from parking will be subject to the penalties, the clawbacks and the block grant controls—the detailed controls of central Government interfering even with money raised in a parking account.

Schedule 1 also includes any account kept by virtue of section 3(4)(a)(i) of the Further Education Act 1985. The schedule is all-embracing. Finally, the schedule includes Any account of any fund known as a metropolitan debt administration fund and operated under any order made under section 66 of the Local Government Act 1985. 11.15 pm

I have gone through the list of accounts to demonstrate that the schedule is comprehensive. However, even after keeping proper accounts, money spent by local authorities will be controlled by the Government and treated as rate fund expenditure. They will apply penalties and clawback. Clause 1(6)(b) refers to any other account specified in respect of the year concerned by the Secretary of State. If the Department of the Environment gets it wrong again and does not include every account, however small—perhaps the petty cash that teachers use to buy equipment that is not provided by the education authority because the rate support grant has been slashed—the authority could be designated by the Secretary of State. He will be able to ensure in the minutest detail that the revenue of local authorities is controlled by him and central Government. Big brother knows best. No local authority resources will be allowed to escape the net.

This Government have encouraged profit-making on the housing revenue account. They have raised money through increasing council house rents. Under the 1980 Act the Government introduced a system whereby the Secretary of State designated the contribution to the housing revenue account by means of rent levels. Since 1980, rent increases have been determined by the Secretary of State. If a Labour-controlled council did not increase its council house rents by the amount determined by the Secretary of State or by the Department of the Environment's computer, the Secretary of State deemed that rents had been increased by that amount and reduced accordingly the housing revenue account subsidy. The system was designed to encourage housing revenue account surpluses which could be used to subsidise the rate fund account.

The housing revenue account surpluses have been used by many authorities. For example, Sefton was under Tory control until May 1986, when they were thrown out. Until then they increased rents to such an extent that they had a housing revenue account surplus of £2 million. In previous years that money was used to subsidise the rate fund. This year, with the Liberals supporting the larger Labour group on Sefton council, it will be used for the benefit of council tenants. It is their money. At last some repairs may be done, now that the Tories are not controlling that council. Money has been taken away from council tenants and used to subsidise the rate fund, but under the Bill it will also be used to calculate block grant. Whereas previously, in conjunction with local authorities after representations from the Tory local authority associations, it was excluded from the calculations, and every pound that was spent from a surplus on the housing revenue account did not attract penalties, it will now attract them. That is the intent and the purpose, all because the Government claim that these trading accounts, these revenue accounts which are not rate fund accounts, have been used by local authorities "to avoid penalties." All the local authorities have been doing is using the money that they have made locally for the purposes that they thought fit to benefit their electors and the citizens who live in their areas.

The Department of the Environment and the combined brains of Ministers have come up with this catch-all list in schedule 1. It is not unreasonable for us not to give the Secretary of State power to specify anything else in respect of the year concerned. If the Bill becomes an Act and that schedule applies without the provision that we are trying to take out by our amendment, at least local authorities will know where they stand. They will not have an account with moneys coming in from capital receipts or from a residual body that they think, because of the way that the schedule is written, can be used without attracting penalty, and then halfway through the year somebody—perhaps a councillor of an opposition party—telephones the Secretary of State and says "Do you know that they have this account? They have made some money in this way and are spending it for the benefit of the ratepayers or citizens of their area, but we think it should attract grant. Designate it; specify it in this specific year." That is an intolerable situation of the kind that the Government continually put local government into.

The Department of the Environment says that the purpose of clause 1(6)(b) is to allow the Secretary of State to add any account that may have escaped his attention because it is found in local legislation, but there are byelaws that allow for it. If that is so, this paragraph is drafted too widely, and before Parliament approves such a power the Secretary of State should give examples of what he has in mind. We could put another amendment down, and perhaps the Minister would on Report table an amendment that applies to a specific authority because of a local byelaw which affects them. That might be an improvement, because local authorities could look at the local Acts and would know what accounts were involved. That would be fairer than this, but why it is necessary we do not know.

We have now reached a parlous situation where there is detailed legislation to take control of the day-to-day running of administration of local authority accounts. When that is necessary, it shows the state that the Government have got into with this legislation, and it proves that it is impossible for the Government, Whitehall or computers run by the Department of the Environment civil servants to know more about a local community, its needs, revenue and affairs than the councillors elected by the local people.

Photo of Mr Michael Meadowcroft Mr Michael Meadowcroft , Leeds West

Does the wording of the clause encompass any new account that the Minister might devise, name or list, which is peculiar to one authority, or does it have to be one that is common to all authorities in a particular category? The clause, as drafted, is ambiguous and could apply to one authority. We may then have the problems outlined by the hon. Member for Bootle (Mr. Roberts), and a local authority may be singled out by the Government because they dislike how the authority runs its accounts, and may try to find one aspect to delineate.

If that is the case, the Government's problem is twofold. First, if the clause specifies a particular council, that puts the Bill in difficulty with regard to hybridity. It would single out one authority from another. On the other hand, if the Government wished to catch a particular local authority of whose practices they did not approve by trying to set up a particular type of account, it would probably be impossible to find a form which would cover all the different ones.

The hon. Gentleman talked about the different accounts listed in the schedule. But there are other kinds of accounts which at present, legitimately and openly, local authorities keep. Let me give one example. In 1969 or 1970 the Leeds council took over the theatre. For tax purposes, and because of the way in which it wanted to run the theatre, the council established the Leeds Grand Theatre and Opera Co. Ltd. All the directors are appointed by the council, but nevertheless it is a separate corporate entity and as such it has separate accounting procedures. As far as I can see, that instance is not covered in the schedule. At present, there are no difficulties and because the theatre, like virtually every theatre, makes a loss, although not a huge loss, it is subsidised out of the rates and the rate fund shows that particular subsidy.

If there were such an entity, in the category of a separate body, but nevertheless in association with the council, the effect of what the Government are trying to do might well he to encourage secrecy. That is the ironic thing. Because a council might be worried about what might happen in the next year or the year after, it might seek to turn away from the open road of publishing all its accounts so that it could put money in its back pocket to put money back into the rate fund account in future years. Once the trust that has existed in local government for so many years is destroyed, the secrecy and problems with which the Government seek to deal are bred.

Clause 1(6)(b) is particularly dangerous in further damaging that kind of relationship. It sets aside the exercise now going on with the Chartered Institute of Public Finance and Accountancy to try to work out a code of practice for accountants between all the local authority associations in conjunction with the Minister's officials which it would then be incumbent on all local authorities to follow. That is the better road down which to go, and so the amendment is worthy of support.

Photo of Mr Gordon Oakes Mr Gordon Oakes , Halton

I have not so far burdened the Committee with my views, but I want to take two minutes of the Committee's time. I entirely agree with my hon. Friend the Member for Bootle (Mr. Roberts) and the hon. Member for Leeds, West (Mr. Meadowcroft).

I have two objections to the clause. One is that it is sloppy. If the Government intend to take all accounts into consideration, why do not they say so? Why have a schedule to the Bill? Why not merely say in the clause that all accounts are subject to the Secretary of State? In effect, that is what clause 1(6)(b) does.

I speak as vice-president of the Association of County Councils, which is most concerned about this because it does not know which accounts will be affected. The Secretary of State can jump anywhere he likes on a particular account at any time he likes. Accountants and county and local authority treasurers will bear the Bill in mind. They are law-abiding citizens. They will try to operate within its terms. But suddenly the Secretary of State can, under subsection (6)(b), designate an account as one that must come to his attention. The treasurers, councillors and others involved will not be aware of that when they set up an account. The Government are creating confusion.

If the Government want to do this, they should say "all accounts", and do without schedule 1. Anything that local government does can come within the purview of the Minister, and he should have the guts to say that that is so. I disagree with it, but the Government are trying to create a schedule on particular accounts, and then saying that they can jump anywhere else that they like.

11.30 pm

The hon. Member for Leeds, West mentioned accounts in his city. In my constituency, another example springs to mind. We are instituting a chemical industry museum. We have a lot of money from the Government, for which we are grateful, and it is going into an industrial archaeological site. My authority would never believe that the account for that project would come under the provisions of the Bill, but the Secretary of State could say that it would, even though it is a charity, because he wants it to. This is a charity well supported by industry. It is the only museum of its type in western Europe, and it is run by the council. Why should this provision apply to such a project?

If the Government want a catch-all, they should have the guts to say so, and make the Bill apply to all accounts. If they do not mean that, they should not put local government in the position that they do not know what will happen to a particular account, as the Bill does.

Photo of Dr Rhodes Boyson Dr Rhodes Boyson , Brent North

I am glad to respond to the debate, because we can put at rest the minds of those who have spoken. I know that both the right hon. Member for Halton (Mr. Oakes) and the hon. Member for Leeds, West (Mr. Meadowcroft) have much experience in local government.

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

So does my hon. Friend the Member for Bootle (Mr. Roberts).

Photo of Dr Rhodes Boyson Dr Rhodes Boyson , Brent North

I am grateful for that intervention. The hon. member for Bootle (Mr. Roberts) also has great experience.

The expenditure in the accounts specified will not be taken into account for block grant. The list is there to ensure that is will not be counted as relevant expenditure. It is to the advantage, not to the disadvantage, of local authorities that this schedule exists. I know that hon. Members did not wish to imply that the provisions of the schedule will mean that the profits of, for example, direct labour organisations, will lead to grant clawback. The point of specifying these accounts is to ensure that expenditure and income debited or credited to them is not included in the rate fund revenue account. If this expenditure and income were so excluded, the rate Fund revenue account would differ from that traditionally held by authorities, and would not be maintaining the status quo. We want to retain the status quo and exclude the specified items from the block grant account related expenditure.

Photo of Mr Allan Roberts Mr Allan Roberts , Bootle

I understand that if the money that is collected in these accounts, whether they are in surplus or not, is spent within the account so that, for example, money within the housing revenue account is spent for housing revenue account purposes, it does not count for block grant penalties. If the money is transferred from the account to be spent on purposes that otherwise rate fund income would be spent on, would it then be counted in terms of block grant calculation?

Photo of Dr Rhodes Boyson Dr Rhodes Boyson , Brent North

If the specified money is in the separate accounts, it is not part of the block grant, but if it is transferred and spent as block grant, another situation arises. If it were not established in this way, it would be to the disadvantage of the local authorities. For the advantage of local authorities, and to continue traditional practices, we have framed the clause and the schedule as they are. If we accepted the amendment, it would be to the serious disadvantage of local authorities.

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

I wanted to wait until I heard the Minister to see whether I could better understand this part of the Bill. Amendment No. 18 seeks to remove subsection (6)(b). Although I appreciate that subsection (6)(a), referring to a schedule, gives a list of accounts, how can this protect local authorities? To give the Secretary of State the ability to specify any account in respect of any year cannot protect a local authority. I do not understand that argument.

That must mean that if the local authority came up with an account, or if another account was discovered of which the Department of the Environment was unaware, the Secretary of State could be advised by his civil servants to specify that account. How does that protect local authorities? It is simply another catch-all so that, if the Secretary of State or his advisers have missed something—it is a fair bet that they might have done, given the complexity of the legislation—the advisers can come along and say, "By the way, Minister, it appears that we have missed this account which the authority is using for this purpose. We are sure you do not agree with it and we think that you should specify it using the powers that you have in the Act."

Will the Minister explain how that can be to the benefit of a local authority desperately trying to protect its jobs and services? How will it do anything to add to the understanding of local government finance? How can it bring consistency to the advice that local councillors will be receiving from their officers? Whatever the legislation does, it is not specific in this respect. How will this part of subsection (6)(b) be to the advantage of a local authority?

Photo of Mr Allan Roberts Mr Allan Roberts , Bootle

I am glad to have the Minister's confirmation that any money from the housing revenue account, upwards or downwards, which is transferred to the rate fund account and is spent on services on which, otherwise, rate income would be spent, would qualify in terms of the block grant calculations and would be included in the calculations for penalties. Will Conservative Members vote for legislation that will discourage Tory local authorities from taking surpluses from housing revenue and other trading accounts and spending that money on services which, if not provided with that money, would either not be provided at all or would be provided through an increase in the rates? That is what the Minister has just said. He is introducing a disincentive for a Labour or Conservative local authority to make a profit on its housing revenue account and use the surplus for purposes for which otherwise the rate fund would have to pay. It seems that I was right. The Government have got themselves in a topsy-turvey world of legislation to try to control the day-to-day, detailed affairs of local government.

If the amendment is not accepted, my advice to Conservative as well as Labour local authorities is not to make surpluses on their housing revenue accounts. If they do, they should spend the money on their council tenants so that they will not be penalised. If they spend it on subsidising the rate fund, they will be penalised. I would like all councils to do the former, anyway.

Photo of Dr Rhodes Boyson Dr Rhodes Boyson , Brent North

As I explained in the debate on an earlier group of amendments relating to clauses 1 and 2, the power of my right hon. Friend the Secretary of State to make specifications under clause 1(6)(b) will enable us to deal with accounts other than those in schedule 1, expenditure on and income from which should not be included in rate fund revenue accounts. Expenditure in accounts which are specified in the schedule will not be taken into account for block grant because it will not be counted as relevant expenditure.

I must say how delightful it is to see the hon. Member for Newham, North-West (Mr. Banks) with a copy of the Daily Telegraph. That makes us believe in the forgiveness of sins and the salvation of all men. What a glorious sight is the hon. Gentleman. That is the sort of scene from which a postcard could be made. Whether that postcard should count as relevant expenditure or come under a non-total——

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

The Minister has commendable eyesight. I am sure that I could not have seen that newspaper had it appeared on the Conservative Benches. I am reading a story on the front page of the Sunday Telegraph, which is nothing more than Tory party propaganda—as one would expect from the Sunday Telegraph and the Daily Telegraph. I hope that we shall have a chance to refer to it later.

Photo of Dr Rhodes Boyson Dr Rhodes Boyson , Brent North

I must not be diverted by the hon. Gentleman with his usual skill. However, one may be redeemed on one day of the week, and what holier day is there than Sunday? If there is redemption on Sunday, it could come on Monday and Tuesday. I shall bring my own Daily Telegraph in future and offer it to the hon. Gentleman, and all hon. Members may watch his progress as he slowly moves towards the Conservative Benches. Such conversions have happened in history, such as on the road to Damascus.

We have had a good debate on the amendment and I realise the honesty and concern of all hon. Members. I advise the House to reject the amendment because I do not believe that, if it were accepted, it would be to the advantage of local authorities.

Photo of Mr Allan Roberts Mr Allan Roberts , Bootle

In the light of the clear explanation that the Minister has given, I am happy that advice will go out from the Minister to Conservative and Labour councils not to spend surpluses or money raised from housing revenue and other accounts on the ratepayers, but to spend it for the purpose for which it was raised.

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

To report Progress and ask leave to sit again.—[Dr. Boyson.]

Committee report Progress; to sit again tomorrow.