§ Again considered in Committee.
§ Question again proposed, That the amendment be made.
§ Sir Kenneth Lewis (Stamford and Spalding)
On a point of order. I have been watching the progress of the Bill with some interest. The Order Paper carries about 130 amendments. In a normal parliamentary day we deal with 10 such amendments. I have worked out that if we go on at this rate it will take us about 20 normal parliamentary days to deal with this Bill. Will you, Miss Boothroyd, ask 686 the Leader of the House, either tonight or tomorrow, to bring in a timetable motion on this Bill and announce it tomorrow so that we may start it on Wednesday when we are supposed to discuss this Bill again?
I want to avoid on Wednesday a repetition of tonight's obvious filibuster so that the Committee can make progress. I remind the Committee and you, Miss Boothroyd, that a Select Committee has already said there should be timetabling of all Bills. I may not go as far as that, but the time has come to limit the kind of nonsense we are seeing today on a Bill that is basically non-controversial.
§ Mr. Allan Roberts
Further to that point of order. It was made clear at the beginning of the debate by my hon. Friend the Member for Copeland (Dr. Cunningham) that the Opposition have no intention of filibustering or of attempting to talk out tomorrow's business. Tomorrow is an Opposition Supply day.
The hon. Member for Stamford and Spalding (Sir. K. Lewis) has hardly been in his place during the debate. If he had been, he would know that the issues have been debated quite succinctly without any closure motion having to be moved, and that the progress we are making is the kind of progress that one would normally make in Committee. The hon. Gentleman has merely drawn attention to the fact that the Government who accuse the Opposition of not scrutinishing legislation and who do not notice illegalities in their legislation have not provided enough time to debate this serious and complicated Bill.
§ The Temporary Chairman (Miss Betty Boothroyd)
I shall respond to the point of order raised by the hon. Member for Stamford and Spalding (Sir. K. Lewis). He will understand that I am not as expert as he is in mathematics. Therefore, I have not calculated how long it may take to get through these amendments. My job is to deal not with the timetabling of the Bill but with the proceedings. I am sure that the hon. Gentleman's points have been noted in the correct place.
§ Mr. Hancock
I am sure that the Minister is grateful for the point of order raised by his colleague the hon. Member for Stamford and Spalding (Sir. K. Lewis). Contributions from the Government Benches in support of the Minister's stance have been sadly lacking. A contribution, even in the form of a point of order by a Conservative Member, is to be welcomed by the Minister. The hon. Gentleman can now leave the Chamber with some grace, knowing that the Conservative party has done its bit by the Minister this evening in raising the point of order.
If the Minister does not think that the auditors are doing a proper job now, how will he define proper practice with regard to the future auditing of local government expenditure? The introduction to the report of the Chartered Institute of Public Finance and Accountancy refers to the background papers of the Local Government Finance Act 1982. It states:The Secretary of State is empowered to make regulations which 'make provision with respect to the keeping, form, preparation and certification of accounts and statements of accounts, and the publication of information relating to accounts and to the publication of statements of account'.What more could possibly be needed that is not covered already? What wider definition of the role of local government and its responsibility and accountability with regard to relating its finances to the wider populace, its electorate, the Government or whatever is needed than 687 those words that are already in an Act and to which local government must respond? Does the Minister suggest that those powers are not draconian enough for his benefit, or is there something else about which we still do not know that the Government want to do?
That matter draws me back to what was said by an hon. Member earlier about the role of the local authority member. Is this a back-door way of finally eroding what is left of public accountability in the role of the local councillor? In the end, will this role be slashed away by various pieces of legislation—this being yet another example of it—in that we shall have appointed commissioners rather than councillors to run local authorities? If we adopt what is contained in the Bill, particularly in these clauses, we shall go down a dangerous path. We now ask the impossible of local authorities. I do not know what the Minister is trying to achieve, but, from my past and present experience in local government, I know the difficult task that we now have in trying to put across to our electorates the reasons for matters such as rate capping.
It was impossible for the city council in Portsmouth to get an answer about why it was rate capped and what it did wrong. If it was impossible for that council to get an answer, how on earth will it be possible in future for local councillors to know what the Government are thinking in terms of the financial constraints that the Bill will place on them? How on earth do we expect the people who foot the bill, either as taxpayers or ratepayers, to understand what is happening in local government and in finance?
This is a difficult matter. It is being clouded even more by a complete waste of time and energy directed towards achieving little. At the end of the day, we do not know—the Minister has not told us and the Secretary of State did not tell us when he introduced the Second Reading debate—what the Government hope to achieve. We were told that the thrust of the Bill is to rectify past mistakes. The Bill now appears to be more concerned with turning the screw for the future as opposed to redressing what happened in the past. That is something about which we should all be wary.
I am sorry that the hon. Member for Stamford and Spalding intervened to defend the Government on the Bill and to criticise the length of time that it might take. It is important that, at the end of the day, we all remember that local government is important. It means a lot to people. Local councillors have an even more almighty task because of the distressing matters that have occurred over the past seven years. Their job is being made increasingly more difficult by the sort of interference that this and other Bills have forced upon them. I hope that the House will reject the Government's local government finance policies. The way to do that would be wholeheartedly to support the amendments.
§ Dr. John Marek (Wrexham)
I support these excellent amendments. The Bill would be much better if they were passed. A consistent thread has run through this Government's policies for the last six or seven years. It is to make the poor poorer and the rich richer. Unemployment has increased from 1 million to 4 million; houses have not been built, resulting in the worst housing programme since the 1920s; there have been social security 688 cuts; the National Health Service is unable to provide the services that everyone who works in it would like it to provide.
Local authorities are not completely run by Conservative party members. Therein the Government saw opposition. Therefore, they have introduced various local government Acts. I do not know how many local government Bills they have introduced, but there has been at least one every year and in some years there have been two. They have been introduced because the Government do not like what some local authorities do. With their large majority, therefore, the Government have introduced Bills to try to stop what they do.
This Bill is the latest example of what the Government are trying to do. They are trying to bring local authorities to heel in such a way that their accounts will be transparent to the Government, who will then be able to say how the accounts should be organised and which sums ought to be put into the various local authority accounts.
The Government are not introducing this Bill because they have at heart the general welfare of the people. They have introduced the Bill because they want to cut the income tax of those who are already employed. They have already cut income tax from 83p to 60p in the pound. Recently there has been talk of the Government cutting income tax even further. They have also cut unearned income tax. The philosophy is that more should be given to those who are already rich and well-heeled but that those who are not rich and well-heeled should suffer.
This Government and their supporters are well-heeled. They do not understand what many electors, including those who live in Lambeth, have to undergo. The Minister referred to Lambeth about 20 minutes ago and said that Lambeth's expenditure is 33 per cent. above the grant-related expenditure assessment. My hon. Friend the Member for Norwood (Mr. Fraser) dealt with that point. He told the Minister that the electors of Lambeth have particular problems that the local authority is trying to overcome.
If the Bill is not amended, it will increase the problems that electors have to face. Administration will be increased; yet again local authorities will have to put their accounts in a different form. Clause 1(1) deals with rate fund revenue accounts. They will have to be kept in a particular way. The Minister will be able to say what should be and what should not be included in them. Clause 2(4) says:The Secretary of State may specify in respect of any year kinds of expenditure or income which are to be regarded as of a revenue nature for the purpose of debiting or crediting items of account to a rate fund revenue account.The Government are taking almost complete powers over the presentation of these types of accounts. The only accounts that will not be included in the general rate fund revenue accounts are those that are listed in schedule 1. If the Bill is passed, local authorities will be unable to do other than bow to Ministers' wishes. The Minister likes to blame councils for many of the country's ills, when that is not true. Nobody is perfect, and I would not support every action by every local authority in the land. I disagree with many actions of parsimonious and mean-minded Tory local councils. However, if they are elected as Tory councils I respect their right to do as their electors wish. It is up to the electors to change the complexion of that council when the time comes to vote.
§ Mr. Meadowcroft
Will the hon. Member explain why it is that his hon. Friend the Member for Oldham, West (Mr. Meacher) talks about a future Labour Government insisting on local authorities spending according to priorities determined nationally by a Labour Government? What is the difference?
§ Dr. Marek
I was slightly led astray by a mischievous intervention.
There is a difference between minimum standards designed to ensure that people do receive services and what I have been talking about.
The Government make many mistakes. I wonder how many millions of pounds they wasted on Nimrod. Hon. Members might think about Nimrod and AWACS and the many hundreds of millions of pounds that have been spent on that.
What annoys me most is the way in which the Minister introduced this amendment. He said that this Bill is a result—this is the impression that he wanted to make—of the Government being weak in accepting the local authorities' suggested changes some years ago. The Minister said that it was not the Government who defined relevant expenditure and that the definition was suggested by local authorities. Whatever the Government do, it is never their fault. Where does the buck stop? Does it stop at the local authorities? The Government cannot blame it on the local authorities. The Government could blame it on their advisers sitting in the Box over there. Why do the Government not do that? I understand that there are protocols to stop the Government from doing that, but the Government could have done that, because they are the executive in the country and are responsible for legislation. It is because the Government are responsible for legislation that we have the Bill before us. The Government made a mess of it. Time and time again the Government will not admit that they have made a mistake, it does not matter what is under discussion. I can give examples from different spheres—the cause of the Falklands conflict—but I will not dwell on that because I would be ruled out of order by you, Mr. Cormack. The Government do not say that they are to blame for any of these matters.
We have a nasty lie being told by the Government to the effect that this was nothing to do with them, it was the local authorities saying that relevant expenditure had to be defined in this way, and because of that the Government have had all this trouble. It has been going on for three, four, five years and the Government have not found that the original definition was legally imperfect. This is an important point.
We are debating an amendment that seeks to improve the Bill in an important way by deleting clauses 3, 4 and 5. But lo and behold, the next group of amendments are Government amendments Nos. 6, 8 and 12. The Government are already seeking to amend a Bill which was published only a few weeks ago. Is that likely to 690 inspire confidence among the public? The Government can calmly go on for three or four years before saying that what has happened has been illegal but that it is not their fault but that of those nasty local authorities.
The definition of proper practices has been mentioned. It does not look as though proper practices will appear in the Bill. That is the subject of the next group of amendments. I certainly have no confidence in the Government, given the way in which they are thrusting forth to the left and the right, trying to find some way of keeping local authorities to heel so that they can contain their expenditure so that the Government can continue to give money to the rich, which is what they have been doing for the past seven years. [Interruption.] If the hon. Member for Norwich, South (Mr. Powley) does not agree, he should intervene and I shall be glad to give way.
The amendment will improve the Bill. I hope that we shall be able to discuss Government amendment No. 76 and those grouped with it. I would, in common with my hon. Friends, like to understand what proper practices are. If those words are not now to appear in the Bill, will there be another amendment and shall we have a different definition? I would be interested to hear why the Government now think that their new definition will be watertight and transparent, and why it will not continually be challenged in the courts. I suspect that that will not happen and that the Government have got things all wrong and that is why I support the amendment.
§ Amendment negatived.
§ Dr. Boyson
I beg to move amendment No. 6, in page 2, line 3, leave out from 'The' to 'and' in line 6 and insert:'items of account debited to the rate fund revenue account of an authority shall include all items of defined revenue expenditure, and the items of account credited to the rate fund revenue account of an authority shall include all items of defined revenue income;'.
§ The Temporary Chairman
With this it will be convenient to discuss the following: Government amendments Nos. 8 and 12.
Amendment No. 29, in page 2, line 36, at end add—'() The following items of account shall be debited or credited to a rate fund revenue account, namely, items which are not items of expenditure or income but which in accordance with the proper practices to be observed in compiling accounts are to be debited or credited to the rate fund revenue account.'.Amendment No. 188, in clause 13, page 9, line 40, at end add— '(f) "expenditure" includes all expenditure which is payable by a local authority to another person, but does not include any financial transfer between funds kept by a local authority.(g)"income" includes all income which is payable to a local authority by another person, but does not include any financial transfer between funds kept by a local authority.'.
§ Dr. Boyson
These amendments are designed to make it clear that, in addition to revenue expenditure and income, other items of account can be included in the rate fund revenue account when this conforms to proper practice.
The starting point is that the rate fund revenue account is identified as the account to which all revenue expenditure and income must be debited or credited, except revenue expenditure or income which is properly debited or credited to certain other accounts. The revenue expenditure and income to be excluded is not simply that which is properly debited or credited to any other account 691 than the rate fund revenue account, since expenditure and income included in memorandum accounts—such as the account for section 137 expenditure—should also be included in the rate fund revenue account. Hence the main accounts, the expenditure and income of which are to be excluded from the rate fund revenue account, are specified in schedule 1. The power for my right hon. Friend to make specification under clause 1(6)(b) will enable us to cope with any other such accounts, including any such accounts established by local Acts.
In addition to revenue expenditure and income, other items of account can be included in the rate fund revenue account, such as contributions to special funds or special capital expenditure, where this conforms to proper accountancy practices.
Clause 2 provides that those practices are any practices drawn from the practices applicable to the traditional non-statutory rate fund revenue accounts in 1986–87, but taking into account variations in practice occurring from time to time. The new rate fund revenue accounts are those knitted into the traditional rate fund revenue accounts which authorities have generally kept in the past.
Amendments Nos. 6, 8 and 12 will make that clear and I commend them to the Committee. Amendments Nos. 29 and 188 would seem to be directed towards the same end, but they are defective in their purpose. Amendment Nos 29 introduces the concept of proper practices without initially anchoring the concept of the practices applicable to traditional rate fund revenue accounts in 1986–87.
Amendment No. 188 would require all the authorities to complete their accounts exclusively on the accruals basis, which I understand is not the case at the moment. I agree that this would be desirable, but it is not the intention in the Bill to regulate the way in which local authorities keep their accounts; hon. Members spoke about this in a previous debate. It is not the wish of the Government to tie down the way in which local authorities keep their accounts more than is necessary to keep it within the definitions that we need on both net and total expenditure, and other definitions that have been mentioned tonight.
Accordingly, I recommend the Committee to reject amendments Nos. 29 and 188 and to accept amendments Nos. 6, 8 and 12.
§ Mr. John Fraser
If I were suffering from insomnia and I had to choose between Horlicks and the Minister's speech, I would choose the Minister's speech. It dealt with some of the ground over which we went in the previous debate. I shall not take those matters further. However, I wish to draw attention to our amendment No. 29, which says that, if an item is not traditionally an item of income or expenditure, but, according to the proper practices that are observed in the accountancy profession, is, as a matter of proper practice, debited or credited to the rate revenue account, it should continue so to be debited or credited.
There is a conflict in the Bill between that which is a proper practice and that which is defined as an income or expenditure. The Minister mentioned a number of local funds, set up perhaps by local legislation or otherwise. There may be certain capital accruals to the income of the local authority. It is certainly the case that the City of London has a number of private funds—in fact, so many that clause 1 has special provisions for it. There may 692 be smaller endowment type funds available to local authorities or other forms of money traditionally paid into the rate revenue account. Amendment No. 29 says that, if that is defined as a proper practice, it should continue to be observed, as local authorities should not be penalised thereby.
§ Mr. Meadowcroft
I shall raise with the Minister a point raised in the previous debate by my hon. Friend the Member for Portsmouth, South (Mr. Hancock) which is relevant to this debate as well.
The Government are not content to rely on the provisions of the Local Government Finance Act 1982. Under section 23 of that Act, the Secretary of State is empowered to make provision with respect tothe keeping…form, preparation and certification of accounts".If the Minister is prepared to accept the good will of the local authority associations and the chartered institute, which, in agreement with the Government, are working on a code of practice for local authority accounting that will have to pass the test of section 22, why is he introducing separate wording? Presumably the Government are trying to catch those who they do not like who are trying to shift around money in an attempt to defeat the Government's purpose of controlling local government expenditure.
The Second Reading debate has finished, and we are now debating the Bill line by line. The various provisions of the code of practice under consideration seem to me as a lay person with 15 years' experience of local government to cover all the points that the Minister is trying to put through in the Bill. The Committee deserve a response showing why it is thought that the section 23 provision is not satisfactory when local authorities are working to put together an enforceable code of practice.
§ Dr. Boyson
I shall reply briefly to the hon. Member for Leeds, West (Mr. Meadowcroft). This Bill is before the House because the definitions which we presumed were the definitions intended under the Local Government, Planning and Land Act 1980 had been found to be defective. That is why we have to be so careful of the wording here. I have already said that there is no intention to define more than necessary how local authorities keep their accounts. Indeed, I shall resist later certain amendments which would constrain local authorities further in the way in which they keep their accounts.
§ Amendment agreed to.10.30 pm
§ Mr. Allan Roberts
I beg to move amendment No. 7, in page, 2 line 6, leave out from 'authority' to end of line 7.
§ The Temporary Chairman
With this it will be convenient to discuss the following amendments:
No. 9, in page 2, line 12, leave out'an account mentioned in subsection (6) below'and insert'another account kept by that authority'.No. 10, in page 2, line 14, after 'to', insert 'such'.
No. 11, in page 2, line 14, leave out 'so mentioned'.
No. 13, in page 2, line 19, leave out'an account mentioned in subsection (b) below',and insert'another account kept by that authority'.No. 14, in page 2, line 21, after 'to', insert 'such'.
No. 15, in page 2, line 21, leave out 'so mentioned'.
No. 16, in page 2, line 22, leave out subsection (6).
No. 30, in page 11, line 2, leave out Schedule 1.
693 No. 31, in clause 2, page 2, line 46, leave out from 'income' to end of line 47.
No. 32, in clause 2, page 3, line 3, leave out from 'year' to end of line 5.
No. 149, in clause 9, page 7, line 29, leave out '1(6)'.
§ Mr. Roberts
I shall refer to amendments 7 and 9 specifically. On Second Reading my hon. Friend the Member for Copeland (Dr. Cunningham) said:Clause 2 talks of 'proper practices' in connection with local government rate fund revenue account matters, but offers no definition of them. In finance law, auditors are already under a duty to ensure that councils use proper practices in their accounts. The new proposals need detailed explanation and examination of their effects on the rate support grant system."—[Official Report, 12 January 1987; Vol. 108, c. 50.]Those amendments would do away with the need for the concept of so-called proper practices in that sense and require the Secretary of State to explain what is meant by proper practices, because he has not yet responded to the request made on Second Reading by my hon. Friend the Member for Copeland.
If we look behind the amendments, and behind the purpose of the legislation we see why this concept of so-called proper practices is being enshrined in legislation. I served on the Standing Committee that considered the 1980 Bill which became the Local Government, Planning and Land Act 1980. That Act was improperly framed and interpreted, and that has led to all this trouble. At that time, Ministers took decisions for political purposes, which have meant that during the past six or seven years they have been implementing their own legislation illegally. In fact, it was the right hon. Member for Tonbridge and Mailing (Mr. Stanley), the then Minister for Housing, who, for political purposes—because the Government had just introduced an Act encouraging local authorities to make profits on housing revenue accounts out of council tenants-was quite happy to encourage local authorities to put up rents and to make profits and use them to subsidise the ratepayers and reduce the need for central Government grant.
It was as a result of that political desire, not from any representations by Labour local authorities, that the right hon. Member for Tonbridge and Malling took the decision that any surpluses, in the housing revenue account or others—could be used as expenditure and, unlike the rate fund account, could not be treated for purposes of block grant settlements as money that was to attract penalties or clawback. That was the real position. The right hon. Member—the then Minister for Housing—made housing starts an official secret and then went off to the Ministry of Defence. He was followed by the hon. Member for Eastbourne (Mr. Gow), whom we heard earlier pleading how important the Bill was. He was another guilty Minister in the Department of the Environment who carried out the legislation in an illegal manner. He was a lawyer, yet he blames us for not realising that the legislation was illegal. All the time it was in the Government's interest to work the system in that way. That is what the Bill is all about—to allow local authorities to make profits on certain trading and other accounts, and to use that money oustide the rate fund account and without it being considered for the purposes of block grant and rate support grant penalties.
The Government found that that practice was illegal and they want to rectify the position and retrospectively 694 validate the money that they have given to local authorities outside the block grant. However, they now also want local authorities to follow a different procedure in running their trading and other accounts and adopt a new concept of so-called proper practices.
These amendments would remove that requirement and restore to local authorities their current discretion about items that count as expenditure and income for block grant purposes. The so-called proper practices concept is another attempt by the Government to enshrine in legislation more central Government control and restrictions over local government resources. The amendments would, quite blatantly, return to local authorities the freedom that they have always enjoyed, even under this Government, to raise revenue through the housing revenue and other accounts and not be penalised for so doing through central Government grant. If the Government would accept our amendments, many of the problems that they and local government face would be removed.
Amendment No. 9 refers to schedule 1, which lists all the different accounts that are administered by local authorities. However, the Government have also included a provision for the Secretary of State to determine any other sort of account that might not be listed in the schedule. That shows that central Government cannot control local government expenditure and examine all the details of it. Having listed 13 different accounts, separate from the rate fund account, that local authorities can administer and control, the Bill then has a catch-all provision for any other account which the Secretary of State has forgotten and which is not, therefore, listed in the schedule. That shows how inadequate the Bill is.
Amendment No. 7 would remove the requirement for local authorities to observe the so-called proper practices in compiling accounts. Those practices are not defined in the Bill, although they are effectively linked in clause 2(3) to the procedure of debits and credits laid down by the Bill for the calculation of rate fund revenue. That will be subject to specification by the Secretary of State. Again, that is more power for the Minister and less for democratically elected local government.
There is a clear danger that accounting practices, hitherto almost exclusively a professional preserve, will be determined by the Secretary of State in a political and arbitrary manner, so that once again those local authorities that the Tory Minister does not like are penalised and others let off scot free. Tammany Hall would be operating from Whitehall rather than from the town hall.
There is widespread concern about the implications of these changes, not just among people in local government but among accountants and professional auditors in the private sector and public and district auditors who work with local government. Urgent clarification is required. Our amendments should be accepted and freedom given to local government. The law must be put right.
We must not go along the road of more central control and less local government freedom. Local government must have control of their resources so that it can spend what it raises locally on services for the people without being penalised by central Government through clawback and surcharges.